STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Petitioner, )

)

vs. ) CASE NO. 93-4313

) DAYTONA BEACH GENERAL HOSPITAL, ) INC. d/b/a UNIVERSITY HOSPITAL )

c/o Andrea Ruff, Bankruptcy ) Trustee, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, the Hearing Officer designated for the Division of Administrative Hearings, on December 9, 1993, in Tallahassee, Florida.

APPEARANCES

For AHCA: J. Robert Griffin, Esquire

Agency for Health Care Administration

325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131

For Daytona Beach General Hospital, Inc. d/b/a University

Hospital c/o Andrea Steven W. Huss, Esquire Ruff , Bankruptcy 1017-C Thomasville Road Trustee: Tallahassee, Florida 32303

STATEMENT OF THE ISSUES

In their prehearing stipulation, the parties agreed that the following issues of law are disputed and remain to be litigated:

1. Whether proceedings in the United States Bankruptcy Court for the Middle District of Florida, Orlando Division are res judicata to the Administrative Complaint filed by the Agency to terminate CON 2313.

   
   

2. Whether DBGH has violated provisions of law cited in the Agency's Administrative Complaint and prefiled expert testimony.

3. Whether delicensure of DBGH affects validity of CON 2313.

   
   

4. Whether AHCA is estopped from claiming CON 2313 is invalid. AHCA did not agree that the fourth issue is a relevant disputed issue of law.

PRELIMINARY STATEMENT

On July 19, 1993, the Agency For Health Care Administration ("AHCA"), filed an Administrative Complaint for Revocation of Certificate of Need ("CON") 2313, which authorized construction of 100-bed satellite hospital by Daytona Beach General Hospital, Inc. ("DBGH"). DBGH filed a Petition For Formal Administrative Hearing on July 26, 1993, and the case was forwarded, on August 4, 1993, to the Division of Administrative Hearings.

On October 7, 1993, Orlando Regional Healthcare System, Inc. filed a Petition to Intervene, which was granted and then withdrawn by Notice of Voluntary Dismissal prior to the formal hearing. In compliance with the Prehearing Order, the two remaining parties prefiled the direct testimony of their expert witnesses.

At the formal hearing, AHCA presented the testimony of Elizabeth Dudek, expert in health planning and administration of the CON program, Tanya Williams, Amy Jones, and Andrea Ruff . AHCA's exhibits 1-4 were received in evidence.

Judicial Notice was taken of documents marked for identification as AHCA's exhibits 5-9. Ruling was reserved on AHCA exhibit 10. AHCA proffered the transcript of a March 2, 1992 hearing before Arthur B. Briskman, Bankruptcy Judge in the Middle District of Florida, Orlando Division. The objection was based on relevancy and on AHCA's failure to list the transcript on its exhibit list.

Daytona Beach General Hospital (DBGH") presented the testimony of Joel Duhl, Roy Wright, and Thomas Konrad, expert in health care planning. DBGH's exhibit 1 was moved and is received in evidence. DBGH's exhibits 2-6 were received in evidence.

In view of DBGH's having raised no objection to the motion for judicial notice of the record in the bankruptcy proceedings, its introduction in evidence of Exhibits 2-6, which are the Pretrial Order, Trustees Amended Complaint For Preliminary and Permanent Injunction, Memorandum Opinion filed August 12, 1991, Order of August 12, 1991, and trial transcript of June 13, 1991, all from the bankruptcy proceedings, DBGH's objection to the admissibility of AHCA exhibit 10, the transcript from March 2, 1992 proceedings in the same case, is not sustained.

FINDINGS OF FACT

1. The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of the certificate of need (CON) program for health care facilities and services. That responsibility was transferred from the Department of Health and Rehabilitative Services ("DHRS") in July, 1993. In this Recommended Order, "agency" refers to either AHCA, or its predecessor HRS.

2. Daytona Beach General Hospital ("DBGH") was a 297-bed licensed acute care facility which was issued a provisional one year license in 1986, but was not relicensed in November 1987. After one 90-day extension, DBGH was notified of the expiration of its license on February 28, 1988.

   
   

3. In 1982, DBGH filed an application for a CON to transfer 100 of its then existing beds to a satellite hospital, called Saxon General Hospital, which was to be constructed near Deltona. CON 2313, authorizing construction of Saxon General was issued in 1985, following administrative and appellate litigation culminating in the decision in Central Florida Regional Hospital v. Daytona Beach General Hospital, 475 So.2d 974 (Fla. 1st DCA 1985)

   
   

4. Saxon General was deemed under construction on May 20, 1987, following a site visit by agency personnel on May 18, 1987. Construction was terminated after initial foundation work and the expenditure of $1.4 million on the project.

   
   

5. DBGH filed a Chapter 11 bankruptcy petition in the Middle District of Florida, Middle Division, Orlando, on September 4, 1986, which was subsequently converted to a Chapter 7 petition.

   
   

6. On April 4, 1988, the agency attempted to terminate CON 2313, giving as its reason, DBGH's failure to maintain a viable license.

   
   

7. In response to the Agency's action to terminate CON 2313, the Trustee for DBGH filed a bankruptcy court action seeking to invalidate the attempted termination.

   
   

8. A Pretrial Order, addressing the issues to be tried in bankruptcy court, was entered on August 31, 1990, and provided that the issues were, among others, as follows:

   
   

   Whether Certificate of Need 2313 remains effective and viable, that is:

   1. Whether the Florida Department of Health and Rehabilitative Services had

      authority under Florida (statute, rule, or order) to terminate the certificate of need in these circumstances. See, DBGH exhibit 2.

      
      

9. In the bankruptcy court, the parties addressed the issue of the effect of the expiration of licensed beds at Daytona Beach General Hospital.

   
   

10. In his Order and Memorandum Opinion of August 12, 1991, Bankruptcy Judge Arthur B. Briskman made the following written conclusions of law:

    
    

    1. that CON 2313 is property of the estate subject to the control of the Trustee and protected by the automatic stay;

       
       

    2. that the action of HRS was not exempt from provisions of the automatic stay as government action which constitutes police or regulatory powers used to protect public health and safety under Section 362(a)(4), Florida Statutes; and

    3. that HRS' unilateral decision to terminate CON 2313 was an attempt to control property of the estate, and therefore was violative of the automatic stay.

    
    

11. As a result of the Order of August 12, 1991, DBGH maintains that CON 2313 is valid and not subject to termination, precluded from further agency action based on the doctrine of res judicata.

    
    

12. There was uncontroverted testimony by the Agency's expert witness, Elizabeth Dudek, that the automatic stay was terminated on April 9, 1993, (with the bankruptcy court's order attached), which led to the Agency's filing of the Administrative Complaint to revoke CON 2313. In an Order dated November 30, 1992, Bankruptcy Judge George L. Proctor provided that the automatic stay "shall remain in effect until April 9, 1993, at 5:00 p.m." without further court order. On June 2, 1993, Judge Proctor denied the Trustee's Motion To Extend the Automatic Stay.

    
    

13. The bankruptcy trustee for DBGH entered into an agreement to sell CON 2313 to Orlando Regional Medical Center ("ORMC"). ORMC applied to the agency for a transfer CON, which was preliminarily denied. ORMC challenged the Agency's preliminary denial of the transfer CON at a formal hearing and in part, in an interlocutory appeal. In AHCA v. Orlando Regional Healthcare System, Inc., (Fla. 1st DCA 1993), the court resolved the issue of the criteria applicable to the review of the ORMC transfer application. That case (Case No. 92-4793) is pending on remand and in abeyance at the Division of Administrative Hearings, upon joint motion of counsel for the agency, ORMC, and DBGH.

    
    

14. In the February 4, 1988 inventory, the Agency listed the 100 beds as approved for Deltona and a 150 bed reduction in the number of beds at DBGH. DBGH claimed that the beds were subsequently omitted from the inventories until August 1992.

    
    

15. In August 1992, CON 2313 for Deltona was listed on the inventory. The agency contends that the delicensure of DBGH eliminated the availability of DBGH's licensed and approved beds from the inventory.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding, pursuant to Subsections 120.57(1) and 408.039(5)(b), Florida Statutes.

    
    

17. In this action, the agency seeks to terminate CON 2313 for DBGH's failure to comply with certain statutory provisions. Subsection 408.040(2)(a), Florida Statutes (1993), which provides in pertinent part:

    
    

    The department shall monitor the

    progress of the holder of the certificate of need in meeting the timetable for project development specified in the application with the assistance of the local health council and may revoke the certificate of need,

    if the holder of the certificate of need, is not meeting such timetable and is not making a good faith effort, as defined by rule, to meet it.

18. Pursuant to the statute, the following rules also apply:

    
    

    (a) Interim Cost Reports. The agency shall require all certificate of need

    projects deemed to have met the requirements for commencement of construction or capital expenditure, to submit a status report every

    6 months until project completion.

    
    

    Rule 59C-1.013(4) (a), Florida Administrative Code

    
    

    a. If deemed to have commenced

    construction, continuous construction must be maintained. For purposes of monitoring compliance, "continuous construction" refers to work performed under the authority of an architect to whom the contractor is responsible and which advances the project towards completion in accordance with the project timetable and standard, acceptable construction procedures. Any return to site preparation as defined in sub-subparagraph 59C-1.02l(a) and (b), F.A.C., of the agency 7 is strictly prohibited and is deemed not to be continuous construction.

    
    

    Rule 59C-1.018(2)(a)3.a., Florida Administrative Code

    
    

    (2) Certificate of Need Revocation.

    The agency shall issue an administrative complaint seeking revocation of a certificate of need if the agency determines that the certificate of need holder has not made a good faith effort to undertake the project approved or to meet the approved project timetables. A holder shall be deemed to have bade a "good faith effort" if the following requirements are met.

    
    

    (a) Projects which cease continuous construction for a period in excess of 30 calendar days shall perform the following steps:

    
    

    1. Within 25 calendar days of work stoppage, notify the agency in writing of a break in construction and submit for approval, documentation verifying the holder's inability to control the break in construction.

       
       

    2. Within 45 calendar days of work stoppage, submit to the agency for approval,

       a plan for recommencement of construction not to exceed 90 calendar days. The revised dates may increase the amount of time elapsed

       within and among the steps set forth in the original application for completion of the project.

       
       

    3. Within 15 calendar days of the projected restart time, the holder shall submit to the agency a letter from the project's architect certifying that the project has restarted construction in accordance with the approved plan submitted under this paragraph.

    
    

    Rule 59C-1.021(2), Florida Administrative Code Res Judicata

    
    

19. The Trustee's Amended Complaint For Preliminary and Permanent Injunction in the United States Bankruptcy Court, 8 Middle District of Florida, Orlando Division, sought "a declaration that the CON is valid, and an injunction restraining HRS from denying the validity of the CON, reinstating the CON, and prohibiting HRS taking any action to invalidate the CON." In addition, the Complaint assert that:

    
    

    55. HRS' alleged rationale for revoking Plaintiff's CON, was HRS' argument the CON was invalid because Plaintiff's hospital license expired. There is no case law, statutory law, nor public policy ground for requiring an existing hospital license held by the CON holder be retained and kept valid in order to retain a valid CON. On the contrary, good health planning would indicate surrender or release of the underlying licensed beds by the CON holder when, as in this case, the CON was premised on existing beds being phased out. Because HRS's grounds for revoking the CON are unlawful. Under State law, the Court should declare the CON to be in full force and effect as a matter of State law, and issue an injunction reinstating the CON.

    
    

20. The Trustee did not claim compliance with applicable statutes and rules requiring interim reports, continuous construction, or good faith efforts to maintain continuous construction.

    
    

21. The Memorandum Opinion and Order issued following the hearing on the Trustee's Complaint includes Findings of Fact that:

    
    

    Daytona Beach's third provisional license expired on February 28, 1988. HRS

    terminated CON 2313 on April 4, 1988 on grounds that Daytona Beach had failed to maintain an operating license. The Trustee objected to the termination of CON 2313 as a violation of the automatic stay imposed by 11

    U.S.C. Section 362(a) and sought an invalidation of HRS' termination.

22. Although the Judge stated the fact of the expiration of DBGH's license, there is no conclusion of law in the Opinion on the effect of the license expiration. On the contrary, the explicit conclusion of law is as follows:

    
    

    Without obtaining relief from the automatic stay, the Defendant's unilateral decision to terminate CON 2313 was an attempt to control property of the estate, and therefore was violative of the automatic stay. Based on the foregoing, the relief sought by the Trustee for a violation of the automatic stay imposed by 11 U.S.C. [Section]362(a) is due to be granted.

    
    

23. The bankruptcy court's order is as follows:

    
    

    Ordered, Adjudged and Decreed that the termination [by] the Defendant, Department of Health and Rehabilitative Services of the State of Florida, of Certificate of Need 2313, property of the estate herein, violated the automatic stay under 11 U.S.C. [Section]362(a); and is further

    
    

    Ordered, Adjudged and Decreed that the relief sought by the Trustee, Andrea A. Ruff, for violation of the automatic stay imposed by 11

    U.S.C. [Section] 362(a)(1988) by the Defendant, the Department of Health and Rehabilitative Services of the State of Florida, is Granted; and it is further Ordered, Adjudged and Decreed that the termination of Certificate of Need 2313 by the Defendant, the Department of Health and Rehabilitative Services of the State of Florida, is Null and Void.

    
    

24. The necessary elements of res judicata include the litigation of identical issues based on identical facts necessary to maintain the action.

    See, Mobile Oil Corporation v. Shevin, 354 So.2d 372, 374 (Fla. 1978). The particular matter claimed to be in re-litigation must have been fully and fairly litigated in the prior action. See, Prudential Insurance Company of America v. Turkal, 528 So.2d 487, 488 (Fla. 3d DCA 1988).

    
    

25. The absence of evidence that the factual basis and issues to be resolved in this case are identical to those litigated and resolved in the bankruptcy court, and the actions of a subsequent bankruptcy judge in denying the trustee's motion to extend the automatic stay support the conclusion that the doctrine of res judicata is not applicable to bar this proceeding.

    
    

26. There is competent, substantial evidence that DBGH has submitted no reports, notices or plans for the construction of the project authorized by CON 2313, for CON holders.

27. There is also competent, substantial evidence that DBGH has failed to maintain continuous construction and has failed to take any steps to demonstrate a good faith effort to maintain continuous construction, as provided by rule. The agency has, by competent substantial evidence, met its burden of proof in establishing facts necessary for revocation of CON 2313.

    
    

28. DBGH maintains that the First District Court of Appeal ruled that the continuous construction requirements were stayed by the bankruptcy proceeding, citing Agency For Health Care Administration v. Orlando Regional Health Care System, Case No. 92-4081 (April 20, 1993) as follows:

    
    

    In the case at bar, these provisions (381.710) are inapplicable because the stay provisions of 11 USC 362(a) precluded AHCA's right to terminate DBGH's inactive certificate . . . (Emphasis supplied)

    
    

29. Because they are taken out of context, DBGH's assertions are not supported by a review of the entire opinion or the entire paragraph in which the excerpt appears. The court said:

    
    

    We emphasize that our conclusion is based upon the particular facts of this case and does not constitute a broad holding that AHCA is prohibited from considering need in a case involving a CON transfer application, where, due to construction inactivity, the CON could be terminated pursuant to the provisions of Section 381.710. In the case at bar, these provisions are inapplicable because, as stated, the stay provisions of 11 U.S.C. Section 362(a) precluded AHCA's right to terminate the DBGH's inactive certificate and nothing in the record shows that AHCA obtained relief from the stay entered. Under the circumstances existing, we hold that ORHS presented competent, substantial evidence to support a limited scope of administrative review in this case.

    
    

    This case is completely distinguishable form the current facts, because the agency has obtained relief from the automatic stay. DBGH asserts that the automatic stay provisions of 11 U.S.C. Section 362(a), in effect at the time the CON was issued, stayed the requirements for submitting reports and maintaining continuous construction. Assuming, arguendo, that the stay applied to the applicable rules, there is competent, substantial evidence to conclude that DBGH has not complied with the rules subsequent to the June 2, 1993, Order Denying Trustee's Motion To Extend the Automatic Stay.

    
    

    Effect of Delicensure

    
    

30. The issue of the necessity of maintaining a valid license in order to maintain a valid CON to transfer beds is not reached, in view of the failure of DBGH to comply with reporting and continuous construction requirements.

    Estoppel

    
    

31. DBGH claims that the agency's actions in consistently maintaining that CON 2313 is invalid precluded compliance with the requirements of the rule. According to DBGH, the agency's position, first asserted in April 1988, made it impossible to develop CON 2313. The agency's legal conclusion that it could terminate CON 2313 despite the effect of the automatic stay was erroneous.

    There is no claim by DBGH of any erroneous factual information which resulted in its reliance on the validity of CON 2313. The facts of this case are largely undisputed.

    
    

32. Equitable estoppel is only rarely applied against the government. In Dolphin Outdoor Advertising v. DOT, 582 So.2d 709 (Fla. 1st DCA 1991), an agency staff person made a factual error resulting in the issuance of permits and, on that basis, the agency attempted to revoke the permits. The agency's factual errors justified the application of the doctrine of estoppel.

    
    

33. In this case, the agency has not prevented the trustee from complying with the applicable rules. There was no evidence of any factual representations which would induce the trustee into failing to file reports and in not complying with the continuous construction requirements.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that certificate of need number 2313 be revoked.

DONE AND ENTERED this 30th day of June, 1994, in Tallahassee, Leon County, Florida.

ELEANOR M. HUNTER

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 30th day of June, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4313

To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact:

AHCA's Proposed Findings of Fact.

1. Accepted in Finding of Fact 1.

2. Accepted in Finding of Fact 5.

3. Accepted in Preliminary Statement.

4. Accepted in Preliminary Statement and Finding of Fact 4. 5-12. Accepted in Conclusions of Law.

1. Accepted in Finding of Fact 2.

2. Accepted in Finding of Fact 3.

3. Legal issue not reached.

4. Accepted in Findings of Fact 14 and 15.

5. Accepted in Finding of Fact 6.

6. Accepted in Finding of Fact 7.

7. Subordinate to Findings of Fact 8 and 10.

20-21. Subordinate to Finding of Fact 10 and Conclusions of Law.

DBGH's Proposed Findings of Fact.

1-2. Accepted in Finding of Fact 3.

1. Accepted in Preliminary Statement.

2. Accepted in Finding of Fact 4.

3. Accepted in Finding of Fact 6.

   
   

   14

4. Accepted in Finding of Fact 7.

5. Subordinate to Finding of Fact 7. 8-9. Accepted in Finding of Fact 8.

10-11. Accepted in Finding of Fact 9.

12. Accepted in Finding of Fact 10.

13-16. Subordinate to Finding of Fact 10.

1. Accepted in Finding of Fact 4.

2. Subordinate to Finding of Fact 10.

3. Accepted in Finding of Fact 13.

4. Subordinate to Finding of Fact 10.

5. Accepted in Finding of Fact 13.

6. Subordinate to Finding of Fact 12. 23-25. Accepted in Finding of Fact 14.

1. Accepted in Finding of Fact 15.

2. Accepted in Conclusions of Law.

3. Accepted in Finding of Fact 16.

COPIES FURNISHED:

J. Robert Griffin, Esquire

Agency for Health Care Administration

325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131

Steven W. Huss, Esquire 1017-C Thomasville Road Tallahassee, Florida 32303

R. S. Power, Agency Clerk

Agency for Health Care Administration Atrium Building, Suite 301

325 John Knox Road Tallahassee, Florida 32303

Harold D. Lewis, Esquire The Atrium, Suite 301

325 John Knox Road Tallahassee, Florida 32303

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this recommended order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 93-004313CON

Orders for Case No: 93-004313CON