STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NME HOSPITALS, INC. d/b/a ) SEVEN RIVERS COMMUNITY HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 90-1869RX

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Upon due notice, this cause came on for formal hearing on April 18-19, 1990 in Tallahassee, Florida, before Ella Jane P. Davis, a duly assigned Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

FOR PETITIONER: C. Gary Williams, Esquire, and

Stephen C. Emmanuel, Esquire Ausley, McMullen, McGehee,

Carothers & Proctor

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

FOR RESPONDENT: Thomas R. Cooper

Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive, Suite 103

Tallahassee, Florida 32308 STATEMENT OF THE ISSUE

Does Rule 10-5.002(3) F.A.C. constitute an invalid exercise of delegated legislative authority?

PRELIMINARY STATEMENT

On March 27, 1990, Petitioner, NME Hospitals, Inc. d/b/a Seven Rivers Community Hospital, filed a petition with the Division of Administrative Hearings (DOAH) challenging the validity of Rule 10-5.002(3) F.A.C. The case was initially consolidated with another rule challenge petition filed by Petitioner, DOAH Case No. 90-0551R, and both cases were set for formal hearing; however, at the beginning of the final consolidated hearing, Petitioner voluntarily dismissed DOAH Case No. 90-0551R.

Petitioner presented the oral testimony of C. Edwin Carter, Robert Greene, and Sharon Gordon-Girvin and had six exhibits admitted in evidence. Respondent presented the oral testimony of Amy Jones and Sharon Gordon-Girvin and had fifteen exhibits admitted in evidence. Official recognition has been taken of certain Florida statutes, rules, and agency publications, as reflected in the record. The parties' Prehearing Stipulation was received in evidence as HO Exhibit A.

A transcript of the proceedings was filed, and all timely-filed proposed findings of fact have been ruled upon pursuant to Section 120.59(2) F.S. in the Appendix to this Final Order.

FINDINGS OF FACT

1. The rule in question, Rule 10-5.002(3) F.A.C., is an existing rule which became effective November 24, 1986.

   
   

2. The challenged rule is definitional in nature and provides as follows:

   
   

   (3) "Applicant" means any individual, partnership, corporation, or governmental entity which has filed an application for a certificate of need with the department.

   
   

   In the Florida Administrative Code the agency presently cites as "specific authority" for the rule Sections 381.704(4), 381.03(1)(g), and as "law implemented," Sections 381.701, 381.701, 381.703(1)(a) and (2), 381.706(1)(b),

   381.709(2), 400.6015, and 651.118(2) and (3) F.S., although the rule predates the repeal of Sections 381.493-381.499 F.S. (1986) and the advent of the current language of Sections 381.701-381.715 F.S.

3. Petitioner challenged the rule upon the following grounds: Rule 10-5.002(3), Florida Administrative

   Code, is an invalid exercise of delegated

   legislative authority in that:

   1. The rule conflicts with Section 381.707(3), Florida Statutes, and other sections of Chapters 381 and 395, Florida Statutes, by prohibiting existing health care facilities from being applicants for CONs;

   2. The rule limits those entities or persons who can apply for certificates of need more narrowly than the Florida Legislature has in Chapters 381 and 395, Florida Statutes;

   3. There is no specific statutory authority for limiting the types of entities and persons who can file CON applications to those listed in Rule 10-5.002(3), Florida Administrative Code; and

   4. The rule enlarges, modified and contravenes the requirements of Section 381.707(3), Florida Statutes.

4. Currently, Sections 381.701-381.715 F.S., Florida's "Health Facility and Services Development Act," requires a certificate of need (CON) before one may embark on certain enumerated health care related projects. That Act designates the Department of Health and Rehabilitative Services (HRS) as the state agency to issue, deny, or revoke CONs. That Act does not define the term "applicant" or otherwise limit who can file an application for a CON, but the statutory language employs the word "applicant" frequently throughout, and nowhere therein does the statutory context suggest that the legislative drafters envisioned the "applicant" as being any entity other than the entity filing the application for a CON.

   
   

5. Pursuant to the testimony of Amy Jones, Deputy Assistant Secretary for HRS' Office of Regulation and Health Facilities, it appears that prior to promulgating the definitional rule here under attack, HRS had experienced problems with entities being awarded CONs, which entities could not be held legally accountable for complying with CON and licensure statutes and regulations. Specifically, a practical purpose of HRS in promulgating its definitional rule in 1986 was to allow HRS to initiate legal action against regulated entities and to ensure a higher degree of monetary accountability than HRS reviewers were then experiencing.

   
   

6. The assertion of Petitioner, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, of its "standing" to bring the instant rule challenge is inexorably intertwined with its argument that the challenged definitional rule narrows the class of "persons" who may apply for a CON beyond that permitted by the organic legislation, Sections 381.701-381.715 F.S.

   
   

7. NME HOSPITALS, INC. is a Delaware corporation, which, in turn, is a wholly-owned subsidiary of NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation. Regardless of the use of the "d/b/a" abbreviation for "doing business as," several components of the CON application papers initiated by Petitioner NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL have clearly designated and acknowledged NME HOSPITALS, INC. as "the corporation." [See FOF 9-14, 18, infra]

   
   

8. SEVEN RIVERS COMMUNITY HOSPITAL is a corporate "doing business as" designation for NME HOSPITALS, INC., but the record is silent as to whether or not SEVEN RIVERS COMMUNITY HOSPITAL is legally registered under Section 865.09

   F.S. so as to be capable of maintaining any legal action in its own right as a "person." SEVEN RIVERS COMMUNITY HOSPITAL is a hospital currently licensed under Chapter 395 F.S., Part I, the "Hospital Licensing and Regulation Act," but on its Chapter 395 F.S. hospital license, the licensee name is NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL. SEVEN RIVERS COMMUNITY HOSPITAL is not, in and of itself, a corporation; rather, it is a division of NME HOSPITALS, INC. NME HOSPITALS, INC. owns SEVEN RIVERS COMMUNITY HOSPITAL. SEVEN RIVERS COMMUNITY HOSPITAL is not an individual, partnership, corporation, or governmental entity and does not hold a Chapter 395 F.S. hospital license in its own right. SEVEN RIVERS COMMUNITY HOSPITAL is only one of five Florida hospitals owned by the corporation, NME HOSPITALS, INC.

   
   

9. In the September 1989 batching cycle, Petitioner, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, filed an application for a CON. HRS subsequently numbered this application CON 6002.

10. Mr. Robert Greene, corporate representative of NME HOSPITALS, INC. testified that he prepared the application for NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, and that CON 6002 was applied for in the name of NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL.

    
    

11. With regard to CON 6002, the letter of intent portions of the application, including identification of principal parties, and the remittance form prepared by Mr. Greene, as well as the HRS omissions request [See FOF 15], all identify NME HOSPITALS INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, as the "applicant."

    
    

12. Section 381.709(2) F.S. (1989) requires that "the letter of intent shall contain a certified copy of a resolution by the board of directors of the applicant . . . certifying that the applicant shall license and operate the facility." [Emphasis supplied]

    
    

13. The letter of intent for CON 6002 states, "pursuant to section 381.709(2)(c), Florida Statutes, enclosed is a certified copy of a Resolution by the Board of Directors of NME HOSPITALS, INC. authorizing the filing of a CON application for the project described above . . . ." [Capitalization supplied for clarity]

    
    

14. For CON 6002, NME HOSPITALS, INC.'s Board of Directors' Resolution states, "The undersigned, being the sole director of NME HOSPITALS, INC. DOING BUSINESS AS SEVEN RIVERS COMMUNITY HOSPITAL (the "Corporation"), does hereby consent to and approve the following resolution." [Capitalization supplied for clarity] The resolution repeatedly refers to the "Corporation." NME HOSPITALS, INC. specifically included in its 6002 application a statement as to its commitment to the project at SEVEN RIVERS COMMUNITY HOSPITAL.

    
    

15. On October 12, 1989, HRS wrote NME HOSPITALS, INC. requesting, among other things, the submittal of an audited financial statement of the 6002 applicant, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, as required by Section 381.709(3)(a) F.S. This "omissions request" stated, in pertinent part as follows:

    
    

    Your application on behalf of NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL has

    been received. . . . Certain elements have been omitted from your proposal which are needed to implement formal review. . . .

    Section 381.709 Florida Statutes requires that you respond to the above omissions by November 13, 1989. Failure to provide responses by this date will result in your application being deemed incomplete and administratively withdrawn from further consideration "

    [Capitalization supplied for clarity]

    
    

16. Petitioner-applicant, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, submitted only an audited financial statement for SEVEN RIVERS COMMUNITY HOSPITAL (the facility/division), not an audited financial statement of the parent corporation, and an annual report of NATIONAL MEDICAL ENTERPRISES, INC., which annual report included a two-year audited financial statement of NATIONAL MEDICAL ENTERPRISES, INC. Because the applicant [the entity which filed the CON application and the entity which was also the "applicant" as defined by challenged Rule 10-5.002(3)] failed to provide its own audited

    financial statement, HRS deemed the application incomplete as of November 19, 1989 and further deemed it withdrawn from consideration. The agency's treatment of this significant omission of the applicant, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, was in conformity with Section 381.709(3)(a) F.S. and was essentially a quid pro quo function based on the failure of the initiator of the application to complete the application process when given an opportunity to do so. HRS' presumption of the applicant's withdrawal was based on the applicant's noncompliance with legitimate review concerns and not upon whether the corporate parent, NME HOSPITALS, INC., or its "division," SEVEN RIVERS COMMUNITY HOSPITAL, was a legitimate CON applicant. Nor did the agency make any presumption about whether NATIONAL MEDICAL ENTERPRISES, INC. had been a legitimate CON applicant in the past or could be an applicant in the future.

    This is found to be the fact despite HRS' issuance of CON 5674 to NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, after it had deemed CON Application 6002 had been withdrawn. [See FOF 17-19, infra]

    
    

17. Mr. Robert Greene, testifying on behalf of Petitioner, established that regardless of the rule, since 1986, he, personally, has always considered the respective subsidiary hospital to be the "applicant." However, all but one time since 1987 that Mr. Greene has filed CON applications for NME facilities in Florida, he has identified on each CON application the entity for which the CON is sought as it reads on the Chapter 395 F.S. license, e.g., "NME HOSPITALS, INC. d/b/a WHICHEVER THE SPECIFIC HOSPITAL NAME IS." [TR 97] In those foregoing CON applications, one of which actually involved NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, HRS had accepted the audited financial statements of the specific hospital facility as prepared for submission to the Healthcare Cost Containment Board, backed up by the audited financial statement of NATIONAL MEDICAL ENTERPRISES, INC. On a single occasion, the same situation resulted in litigation and a recommended order to the same effect. Petitioner NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL has also applied for a CON in the March 1990 batch.

    
    

18. With regard to CON 5674, the facts adduced at formal hearing are as follows: On August 25, 1988 NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, filed a letter of intent to add sixteen short-term psychiatric beds. In reviewing this prior letter of intent, HRS on August 30, 1988 listed the "applicant" as "NATIONAL MEDICAL ENTERPRISES, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL." Thus, HRS incorrectly identified the "applicant" for CON 5674 as being associated with NATIONAL MEDICAL ENTERPRISES, INC. before what was subsequently numbered CON Application 5674 was even filed. This error occurred because of a licensing error which had been initiated by NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL. The hospital licensure application form requires applicants to list the owner of the hospital. In filling out its last hospital licensure application, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, inadvertently listed its ultimate parent corporation, NATIONAL MEDICAL ENTERPRISES, INC., as the owner of the hospital rather than the true owner, NME HOSPITALS, INC. HRS did not catch this error and mistakenly initially issued NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL's hospital license in the name of "NATIONAL MEDICAL ENTERPRISES, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL." On September 2, 1988, HRS sent SEVEN RIVERS an acknowledgment of its letter of intent for CON 5674. Therein, HRS inadvertently listed the applicant solely as "SEVEN RIVERS COMMUNITY HOSPITAL." The Chapter 395 F.S. licensing error was brought to HRS' attention by a September 8, 1989 letter from counsel for NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL. In counsel's letter, NME HOSPITALS, INC. was identified as the correct corporate name of the owner of SEVEN RIVERS COMMUNITY HOSPITAL, and HRS issued a corrected Chapter 395

    F.S. license for NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL.

    Section I of HRS' CON application form requests that the applicant give the "Legal Name of Applicant/Parent Corporation." On this space in CON Application No. 5674, the applicant designated "NATIONAL MEDICAL ENTERPRISES, INC.," but also designated as the facility project name "NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL." On the fee remittance form filed with CON Application 5674, the applicant identified itself as "NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL." Nonetheless, in this instance, HRS had accepted 5674 corporate applicant NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL's submission of only an audited financial statement for SEVEN RIVERS COMMUNITY HOSPITAL (the facility/division) and an annual report of NATIONAL MEDICAL ENTERPRISES, INC. in place of an audited financial statement of the appropriate applicant parent corporation, NME HOSPITALS, INC. as HRS had insisted upon in CON 6002. [See FOF 9-16] Review procedures for CON 5674 overlapped those for CON 6002, and apparently different reviewers were involved to some degree. The CON application for psychiatric beds was approved and CON No. 5674 was issued to "NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY

    HOSPITAL" on December 5, 1989.

    
    

19. By any standard, Petitioner's own error as to what corporate hat it was wearing snowballed at HRS during review of CON 5674 until Petitioner clarified its status. In the best light for Petitioner, all that Petitioner has established by the foregoing facts as regard CON 5674 is that Respondent agency previously has been lax in adhering to its own rules and has currently begun to enforce them. Fallibility of agency personnel or prior lack of rule enforcement does not invalidate an otherwise valid rule. It simply behooves the agency to correctly apply its existing rule in the future. See, State Department of Transportation v. Clancy, 521 So.2d 376 (Fla. 2d DCA 1988), wherein even notice that rules would henceforth be adhered-to was not necessary, despite long practice contrary to the rules finally being enforced, and, see, by analogy, Boca Raton Artificial Kidney Center v. HRS, 493 So.2d 1055 (Fla. 1st DCA 1986), wherein the court held that HRS must administer its rules as written and may not depart therefrom for expediency's sake.

    
    

20. Section 381.707 F.S. specifies the contents of a CON application. One requirement is submission of an audited financial statement of the "applicant." In this regard, Section 381.707(3) F.S. provides:

    
    

    (3) An audited financial statement of the applicant. In an application submitted by an existing health care facility, health maintenance organization, or hospice, financial condition documentation shall

    include, but need not be limited to, a balance sheet and a profit-and-loss statement of the

    2 previous fiscal years' operation. [Emphasis supplied]

    
    

    Section 381.702(7) F.S. defines "health care facility" as:

    
    

    (7) "Health care facility" means a hospital, skilled nursing facility, or intermediate care facility. A facility relying solely on spiritual means through prayer for healing is not included as a health care facility. [Emphasis supplied]

21. Clearly, the foregoing statutory sections contemplate that CON applications may be submitted by an "existing health care facility" and that an "existing health care facility" may be a "hospital, skilled nursing facility, or intermediate care facility." In practice, HRS has interpreted these statutes to refer only to health care facilities licensed under Chapter 395 F.S. Also see, Section 381.702(12) F.S., defining "hospital" for purposes of Chapter 381 F.S. as a "health care facility licensed under Chapter 395 Florida Statutes."

    Section 395.003(1)(a) F.S. precludes anyone from operating a hospital without being licensed under Chapter 395 F.S., and pursuant to Section 381.704(2) F.S., HRS requires a health care facility (including a hospital) to have a CON number under Chapter 381 before it will license it under Chapter 395. There is no suggestion by either party that it is unreasonable, capricious, or in any manner perverse of HRS to consider for CONs under Chapter 381 F.S. only facilities licensed under Chapter 395 F.S. This issue has recently been resolved in Brookwood-Jackson County Convalescent Center et al. v. HRS, 12 FALR 1474 (Recommended Order February 7, 1990, Final Order March 12, 1990). Agency testimony which is accepted as competent, credible, and expert established herein that HRS must be able to look to the licenseholder as someone to hold accountable for the safe operation of a facility and as the entity responsible for compliance with licensure statutes and rules.

    
    

22. Consequently, it is HRS' practice to return the letter of intent which is required by Section 381.709(2) F.S. if the name of the CON applicant (author of the letter of intent) is not identical to its name as a licenseholder under Chapter 395 F.S.

    
    

23. The licenseholder of a hospital, for instance, is the owner of the business of running the hospital regardless of who owns the bricks and mortar of the facility. With regard to CONs 5674 and 6002, the licenseholder is NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, INC. [See FOF 8]

    
    

24. It is undisputed that CON applications are received by HRS from both existing providers seeking to expand and from potential new providers.

    
    

25. Petitioner did not demonstrate that any licensed, existing health care facility or hospital had been precluded by the rule in question from applying and being reviewed for a CON.

    
    

26. Petitioner could not demonstrate that because HRS seeks facility- specific information in certain parts of the CON application form and process, the agency is bound to view the "facility" as the CON "applicant" and to review all parts of a CON application as facility-specific, including the requirement of an audited financial report which is the issue upon which Petitioner's application for CON 6002 was deemed withdrawn.

27. Section 381.707(1) F.S. provides as follows: 381.707 Application content.--An

    application for a certificate of need shall

    contain:

    (1) A detailed description of the proposed project and statement of its purpose and need in relation to the applicant's long-range plan, the local health plan, and the state health plan.

    With regard to this provision, HRS accepts only facility-specific long-range plans. This HRS interpretation was not shown to be unreasonable or to be in any way contrary to statutory intent or agency mission. Moreover, it was not demonstrated to be beneficial for HRS to review long-range plans for each subsidiary/division/facility of a corporate parent applicant, rather than to proceed as it now does and review long-range plans for the specific facility which would finally implement the corporate plan for which the CON was sought.

    Petitioner contended that because HRS accepts only facility-specific information in this statutory category, it must, of necessity, view "the facility" as synonymous with "the applicant" or be operating in abrogation of the challenged rule. Assuming arguendo, but not ruling, that the foregoing assertion is true, that does not diminish the validity of the challenged rule, and the validity of the challenged rule is not diminished by the agency's past failure to exercise it. [See FOF 19]

    
    

28. Section 381.705 F.S. contains the criteria against which CON applications are reviewed. The review criteria contained in this statute are facility-specific and are geared to the service district of the facility to be expanded or created. Accordingly, HRS does not review the parent company's "service district"; it reviews the planned or existing facility's service district. Since individual hospitals, not parent corporations, are accredited by national health care provider quality assurance organizations, HRS also considers this element on a facility-specific basis.

    
    

29. HRS applies its uniform need methodologies (each of which is promulgated as a rule) against a facility's service district as opposed to making statewide assessments in the case of a corporate applicant such as NME HOSPITALS, INC. which is parent to five Florida subsidiaries/facilities, of which SEVEN RIVERS COMMUNITY HOSPITAL is only one. HRS also does not stoop to the ridiculous and apply its need methodologies at the corporate headquarters of the parent corporation.

    
    

30. HRS requests facility-specific information as necessary from the Health Care Cost Containment Board.

    
    

31. It was not demonstrated to be capricious or unreasonable for HRS to seek the foregoing facility-specific data. Indeed, it has been shown that such facility-specific data leads to better reviews which more accurately serve the legislative intent for the CON process. Even were this not the case and even if it had been shown, as it was not, that HRS' acceptance of such facility-specific information instead of corporate-applicant information somehow offends the statute's requirement of information from the applicant, that would be insufficient to invalidate the challenged rule which defines "applicant." More simply, had Petitioner been able to show HRS is required by statute to seek all its information from the corporate applicant instead of from the facility/subsidiary as it now does for certain criteria, such circumstance still would not militate against a reasonable definition of "applicant" by rule, nor should it logically or legally require the agency to wrongfully accept facility- specific information of other sorts when applicant information on all matters was, in fact, required.

    
    

32. Competent, credible, expert agency testimony supports a finding that in addition to facility-specific data, information about the parent corporation is necessary and proper. Challenged Rule 10-5.002(3) F.A.C. assists in this mission. Allowing a "d/b/a" entity to apply for a CON or to operate independently from the entity which holds the Chapter 395 health care license or independently from the financial entity which holds the project's purse strings

    perpetrates a shell game of responsibility shifted at the will of one or more "paper" entities and undermines HRS' ability to enforce compliance with its rules and regulations. For instance, information about the corporate mission and ongoing commitment to a specific project/division/facility/subsidiary assists HRS in assessing the applicant's ability to marshal the resources necessary to provide health care services in a particular community. In the vernacular, unless the agency can accurately assess how deep the backer's "deep pocket" is, and how thin its parental "wings" are spread over its many subsidiary "chicks," HRS has no valid method of assessing the vital criterion of "financial feasibility" of the proposed project, and if HRS has to follow a paper trail to determine the proper entity to be disciplined within an administrative forum or in circuit court, it is severely hampered in its agency function.

    
    

33. HRS' experience with the instant Petitioner as the applicant in CON 5674 is an example of just how hard it can be for a regulatory agency to rapidly "pierce the corporate veil."

    
    

34. The rule's definition of "applicant" helps to quickly identify the entities which can be held liable at law and held responsible for the delivery of health care services in the community. The rule assists HRS in reviewing competing applicants on a fair and equitable basis so as to select the applicant(s) most capable programmatically, administratively, financially, and operationally to successfully implement its proposed project(s).

    
    

35. HRS promulgated challenged Rule 10-5.002(3) F.A.C. in response to confusion that arose when CONs were issued to entities which HRS concluded were not capable of being licensed for the services for which they had been awarded a CON. Agency personnel also wanted to be sure that the entities capable of being licensed were also capable of being sued in case HRS needed to enforce licensure requirements against a licensee. Rule 10-5.002(3) F.A.C. was not intended to limit who could apply for a CON, and it has not been demonstrated in this proceeding that the rule has had that effect upon Petitioner or anyone else.

    
    

36. Under the facts of this case, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL and not SEVEN RIVERS COMMUNITY HOSPITAL was the CON "applicant" for CON 6002 under any definition that could reasonably be imagined. NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, is also the "applicant" for CON 6002 pursuant to the challenged rule definition. NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL is the licenseholder for the existing health care facility which will be the location of the proposed project. [See FOF 8]

    
    

37. Challenged Rule 10-5.002(3) F.A.C. became effective November 24, 1986. In 1987, the Florida Legislature made significant amendments to the CON statutes, none of which overruled the definition of "applicant" contained in the previously promulgated rule, now under challenge. There is no proof in this record that HRS has, before or after the 1987 statutory amendments, applied the challenged rule so as to prohibit existing health care facilities. This is so even though prior to CON 6002 no NME facility application was ever rejected due to failure to include an audited financial statement of the applicant. [TR 96- 98] [See FOF 1-2, 17-19, with regard to CON 5674, supra]

    CONCLUSIONS OF LAW

    
    

38. The Division of Administrative Hearings has jurisdiction of the parties and subject matter of this cause. See, Section 120.56(1) F.S.

    
    

39. The Petitioner herein is NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL. It is customary in CON proceedings before the Division of Administrative Hearings for litigants with lengthy names to refer to themselves in shorthand terms. In its Petition herein, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL has elected to call itself "SEVEN RIVERS" throughout the Petition after the paragraph initially alleging who and what type of entity the Petitioner is. Respondent first argued that by so doing Petitioner had failed to allege how it is substantially affected but has actually alleged only how SEVEN RIVERS COMMUNITY HOSPITAL is substantially affected, and since such would be a fatal flaw, the Petition should be dismissed. Such argument is legal hairsplitting and is rejected as without merit.

    
    

40. Petitioner herein, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL, was also the applicant for CON 6002, which application was deemed withdrawn because it did not contain the audited financial statement of the "applicant" as defined under the rule challenged in this proceeding, but NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL is not substantially affected by the challenged rule under any criteria developed in a long line of cases relating to standing, in that Petitioner has repeatedly been an applicant for CONs under the existing rule and has never been rejected or denied as an improper applicant. Nor is there any reason to even speculate that Petitioner will be rejected in the future if it files its own audited financial statement. See, Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 2d DCA 1981), certiorari denied, 415 So.2d 1359, 1361 (Fla. 1982); Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978); Board of Optometry v. Florida Society of Opthalmology, 538 So.2d 878 (Fla. 1st DCA 1989); Village Park Mobile Home Ass'n, Inc. v. State Department of Business Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes, 506 So.2d 426 (Fla. 1st DCA 1987).

    
    

41. In Agrico, at 482, the court held that before one can be considered to have a substantial interest in the outcome of the proceeding he must show 1) that he will suffer injury in fact which is of sufficient immediacy to entitle him to a Section 120.57 hearing, and 2) that his substantial injury is of a type or nature which the proceeding is designed to protect. Likewise, courts have recognized that for purposes of standing, there is no significant difference between the concepts of petitioners' "substantial interests" and petitioners being "substantially affected" persons. Board of Optometry, supra, at 881. See also, Farmworkers Rights Organization, Inc. v. Department of Health and Rehabilitative Services, 417 So.2d 753, 754 (Fla. 1st DCA 1982).

    
    

42. In Jerry, Board of Optometry, and Village Park, supra, the courts have discussed and delineated the appropriate standard to follow in determining standing in the context of a Section 120.56 rule challenge. In Jerry, the court held that to have standing under Section 120.56 F.S., the person challenging the validity of an adopted rule must show a direct injury in fact of sufficient immediacy and reality to the petitioner. Although the Florida Supreme Court in deciding a case concerning standing of an association in Florida Home Builders Association v. Department of Labor and Employment Security, 412 So.2d 351 (Fla. 1982) disapproved of Jerry to the extent it conflicted with the opinion in Florida Home Builders, the holding in Jerry has been followed repeatedly in

    subsequent decisions and is relevant here. Indeed, in Village Park, the court's discussion of Jerry on Motion for Rehearing has applicability to the instant case.

    
    

    As recognized by this Court in Jerry, abstract injury is not enough. The injury or threat of injury must be both real and immediate, not conjectural or hypothetical.

    A petitioner must allege that he has sustained or is immediately in danger of sustaining some direct injury as a result of the challenged official conduct.

    
    

    Village Park, supra, at 433.

    
    

43. In addition to the standard established in Jerry, the courts have articulated an analogous criteria. In Professional Firefighters of Florida, Inc. v. Department of Health and Rehabilitative Services, State of Florida, 396 So.2d 1194 (Fla. 1st DCA 1981), the court held that a party in a Section 120.56

    F.S. proceeding may demonstrate standing by showing that a rule has a real and immediate effect upon his case, as well as by proving injury-in-fact.

    
    

44. Here, Petitioner has not alleged any facts which prove that NME HOSPITALS, INC. has been or in any way stands to be injured by the application of the rule definition of "applicant." NME HOSPITALS, INC., by the plain language, is a corporation. See, Sections 607.024 and 607.041 F.S. (1989). A corporation is one of the entities listed in the challenged rule as those entities which can apply for a CON. Indeed, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL has applied for CONs while this rule has been in effect. HRS has withdrawn the application of NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL in regard to the most recent application, not because NME HOSPITALS, INC. was an improper applicant but because NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL failed to provide an audited financial statement of the applicant as required by Section 381.707(3) F.S. (1989) and applicable case law. See, Humhosco, Inc., d/b/a Humana Hospital Brandon v. Department of Health and Rehabilitative Services, So.2d , (Fla. 1st DCA, Case No. 89-1970, (Op. filed May 7, 1990, Motion for Rehearing Denied, June 13, 1990) (15 F.L.W. 1227) Therefore, following the rationale contained in the aforementioned cases, it is clear that Petitioner NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL has not sustained nor is it in immediate danger of sustaining some direct injury because of the challenged rule; nor has it shown that the rule has a real and immediate impact on NME HOSPITALS, INC.

    
    

45. Once an entity chooses the benefits of corporate status so as to limit liability and reap certain financial benefits, it cannot then be heard to complain of the inherent responsibility of operating in all respects in that corporate capacity. Thus, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL cannot now be heard to say its standing arises by virtue of its corporate division, SEVEN RIVERS COMMUNITY HOSPITAL. Even if it could have been shown, which it was not, that this "division" in its own right had ever been or would ever be a CON applicant, that "division" also is without standing here in that it holds no Chapter 395 F.S. license separate and apart from its parent corporation, NME HOSPITALS, INC., and there has been no demonstration of SEVEN RIVERS COMMUNITY HOSPITAL's separate "personhood" under the laws of Florida.

46. Accordingly, NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL is not a substantially affected person and is bereft of standing. It therefore cannot prevail herein.

    
    

47. However, assuming, arguendo, that standing had been shown, Petitioner has also not met its burden of proof on the merits. Upon the facts as found, supra, and given the presumptions of validity of an existing rule and of the agency's interpretation of statutes it administers, Petitioner has failed to demonstrate the invalidity of the challenged rule upon any of the allegations raised in its Petition. See, Florida Waterworks Ass'n v. Florida Public Service Commission, 473 So.2d 237 (Fla. 1st DCA 1985), cert. den. 486 So.2d 596 (Fla. 1986); General Telephone Company of Florida v. Florida Public Service Commission, 446 So.2d 1063 (Fla. 1984); Pan American World Airways, Inc. v. Public Service Commission and Florida Power and Light, 427 So.2d 716 (Fla. 1983); Department of Administration v. Nelson, 424 So.2d 852 (Fla. 1st DCA 1982); Jax Liquors, Inc. v. Division of Alcoholic Beverages and Tobacco Department of Business Regulation, 388 So.2d 1306 (Fla. 1st DCA 1980); Retail Grocers Ass'n of Florida Self Insurer's Fund v. Department of Labor and Employment Security, 374 So.2d 379 (Fla. 1st DCA 1985); Agrico Chemical Co. v. State, Department of Environmental Regulation, supra.

    
    

48. The Legislature also repealed and rewrote the CON statutes in 1987 after Rule 10-5.002(3) F.A.C. had been in effect for some time. Sections 38l.701-381.715 F.S. (1989) contain many references to the term "applicant," including passages in 381.707 requiring board resolutions and audited financial statements of the applicant. Moreover, Section 381.7155 F.S. (1989) provides, in pertinent part:

1. Nothing contained in ss.

   381.701-38.715 is intended to repeal or modify any of the existing rules of the Department

   of Health and Rehabilitative Services, . . . unless, and only to the extent that, there is a direct conflict with the provisions of ss. 381.701-381.715.

2. The rules of the Department of Health and Rehabilitative Services in effect on July 1, 1987, which implement the provisions of ss. 381.493-381.499, shall remain in effect and shall be enforceable by the department until such rules are repealed or amended by the department, and no judicial or administrative proceeding pending on July 1, 1987, shall be abated as a result of the provisions of ss. 381.701-381.713(1), (2), (3); s. 381.714; or s. 381.715.

Rule 10-5.002(3) F.A.C. was in effect on July 1, 1987, and it seems abundantly clear that the Legislature was fully aware of it and, in effect, gave the rule its seal of at least interim approval. See, State ex rel. Szabo Food Services, Inc. of North Carolina v. Dickinson, 286 So.2d 529 (Fla. 1973).

Upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED: The Petition is dismissed with prejudice.

DONE and ORDERED this 18th day of July, 1990, at Tallahassee, Florida.

ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 18th day of July, 1990.

APPENDIX TO FINAL ORDER

The following constitute specific rulings pursuant to Section 120.59(2)

F.S. upon the parties' respective proposed findings of fact (PFOF): Petitioner's PFOF:

1 - 6 Accepted.

1. Except as subordinate or unnecessary, accepted.

2. Accepted that this was alleged.

3. Sentence 1 is accepted. Sentence 2 is rejected as a misstatement of the record. See FOF 21-23.

4. Accepted that the evidence shows an application is subject to withdrawal.

5. - 13 Accepted.

1. Subordinate and unnecessary.

2. Accepted.

3. - 18 Except as subordinate, unnecessary, or cumulative to the facts found, accepted.

1. Sentences 1 and 2 are accepted except to the extent subordinate, unnecessary, or cumulative to the facts as found; sentence 3 is rejected as taken out of context, not representative of the record as a whole, and stating a conclusion of law or legal argument.

2. - 22 Accepted.

1. The legal argument and/or conclusion of law are rejected. Accepted that HRS reviews CON applications in part on facility- and district-specific bases as set forth in the RO. The record as a whole, however, does not support a finding that all HRS review and decisions are exclusively facility- and district-specific.

2. Accepted, up to the last clause, which expresses only one witness' viewpoint and which invades the province of the finder of fact.

3. Rejected as not supported by the record as a whole.

4. Accepted but subordinate, unnecessary, or cumulative to the facts as found.

5. Accepted.

6. Rejected as legal argument.

7. - 30 Accepted in part and rejected in part. To the extent rejected, it is subordinate, unnecessary, or cumulative to the facts as found or not supported by the record as a whole. See FOF 16-19.

31 - 33 Accepted, but immaterial so not adopted in any form.

1. Cumulative.

2. Accepted.

3. Immaterial; cumulative.

4. - 41 Immaterial and/or mere legal argument.

1. Accepted except where cumulative and except for the last sentence, which is legal argument.

2. - 49 Rejected as legal argument and to the limited extent facts are proposed, they are immaterial, subordinate, unnecessary, or cumulative to the facts as found.

1. Rejected. The Petitioner herein is NME Hospitals, Inc. d/b/a Seven Rivers Community Hospital.

2. - 56 Accepted.

1. Accepted up to the last sentence. With regard to the last sentence, it is a misstatement of the record, but it is accepted that the application in question would have been subject to withdrawal, and the RO states as much.

2. Cumulative and legal argument.

3. Sentence 1 is accepted. Sentence 2 is rejected as legal argument.

4. Accepted.

5. To the extent relevant, these proposed facts have been accepted absent the insinuated legal argument.

6. Cumulative because the TR 113 reference applies to CON 6002 and because it is mere legal argument. To the extent this may refer to the March 1990 batching cycle, it is unclear from the record at TR 129 which real or paper entity was the applicant. Assuming Petitioner proposes a finding of fact that NME HOSPITALS, INC. d/b/a SEVEN RIVERS COMMUNITY HOSPITAL is the applicant in the March 1990 batching cycle, that is covered in FOF 17.

7. Rejected as legal argument.

Respondent's PFOF:

1 - 33 Except to the extent subordinate or unnecessary or mere legal argument, accepted.

COPIES FURNISHED:

C. Gary Williams, Esq., and Stephen C. Emmanuel, Esq. Ausley, McMullen, McGehee,

Carothers & Proctor

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

Thomas R. Cooper Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive, Suite 103

Tallahassee, Florida 32308

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-

0700

Liz Cloud, Chief

Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32399-1300 Case No. 90-1869RX

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED, TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 90-001869RX

Orders for Case No: 90-001869RX