STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNIVERSITY HOSPITAL, LTD., )

operating UNIVERSITY HOSPITAL ) and UNIVERSITY PAVILION HOSPITAL, )

)

Petitioners, )

)

vs. ) CASE NO. 95-0632RP

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

) SEBASTIAN HOSPITAL, INC., d/b/a ) SEBASTIAN HOSPITAL; and SEBASTIAN ) HOSPITAL, INC., d/b/a SANDYPINES ) HOSPITAL; HAINES CITY HMA, INC. ) d/b/a HEART OF FLORIDA HOSPITAL; ) and HAINES CITY HMA, INC. d/b/a ) PALMVIEW HOSPITAL, )

)

Petitioners, )

)

vs. ) CASE NO. 95-0634RP

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

FINAL ORDER

Pursuant to Notice, the Division of Administrative Hearings, by its duly designated hearing officer, Mary Clark, held a formal hearing in the above- styled cases on March 15, 1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner: R. David Prescott, Esquire University Thomas W. Konrad, Esquire Hospital, Ltd. Rutledge, Ecenia, Underwood,

Purnell & Hoffman, P.A.

215 South Monroe Street, Suite 420 Tallahassee, Florida 32301

For Petitioners: James C. Hauser, Esquire Sebastian Carl Peterson, Esquire Hospital, Inc. Parker, Skelding, Labasky, and Haines City Corry, Eastman & Hauser, P.A. HMA, Inc. 318 North Monroe Street

Tallahassee, Florida 32301

For Respondent: Michael O. Mathis, Esquire AHCA 2727 Mahan Drive, Suite 200

Tallahassee, Florida 32308 STATEMENT OF THE ISSUES

The issue for resolution in these consolidated cases is whether the Agency for Health Care Administration (AHCA)'s proposed rules 59A-3.203(2)(e), (2)(i), and (6) (proposed rules) constitute an invalid exercise of delegated legislative authority. By stipulation, the petitioners have standing as substantially affected parties.

PRELIMINARY STATEMENT

On February 10, 1995, University Hospital, Ltd. filed a petition to determine the invalidity of proposed rules challenging AHCA proposed rules 59A- 3.203(2)(e), (2)(i), and (6), as published in the January 20, 1995, Florida Administrative Weekly, Vol. 21, No. 3, as an invalid exercise of delegated legislative authority. The case is designated as DOAH Case No. 95-0632RP.

On February 10, 1995, Sebastian Hospital, et al filed a petition to determine the invalidity of proposed rules challenging the same proposed rules. The case is designated as DOAH Case No. 95-0634RP.

Case Nos. 95-0632RP and 95-0634RP, and a third case, 95-0633RP, were consolidated for hearing pursuant to an order dated February 17, 1995. Case No. 95-0633RP was severed in an order entered March 2, 1995, and will be heard and decided separately, as it relates to a different portion of the proposed rules and a different issue.

Prior to the final hearing, all parties submitted a joint prehearing stipulation containing stipulated facts which are reflected in the findings of fact below.

At hearing, Petitioners submitted joint exhibits numbered 1 through 28, which were admitted into evidence. AHCA submitted exhibits numbered 1 through 3, which were admitted into evidence.

Petitioners presented the testimony of Tanya Williams, Unit Manager of the Hospital and Outpatient Services Unit of AHCA's Office of Health Facility Regulation. Ms. Williams was designated as AHCA's representative to testify as to the proposed rules. AHCA presented the testimony of Risa Fogel, a Health Services and Facilities Consultant in the AHCA's Hospital and Outpatient Services Unit of the Office of Health Facility Regulation.

The transcript of the Final Hearing was filed on March 29, 1995, and the parties timely filed their proposed final orders on April 14, 1995. Specific rulings on the findings of fact proposed by the parties are found in the attached appendix.

FINDINGS OF FACT

1. The following facts were stipulated by the parties and required no proof at hearing:

   
   

   1. Petitioner, University Hospital, Ltd., is a Florida limited partnership and is the licensee of University Hospital and University Pavilion Hospital, both located on North University Drive, Tamarac, Florida.

   2. Petitioner Sebastian Hospital, Inc., is a Florida corporation, and is the licensee of Sebastian Hospital and SandyPines Hospital.

      Both hospitals are located on separate premises.

   3. Petitioner Haines City HMA, Inc., is a Florida corporation, and is the licensee of Heart of Florida Hospital, Inc. and Palmview Hospital. Both hospitals are located on separate premises.

   4. Petitioners timely filed their respective Petitions to determine the invalidity of the proposed rules at issue.

   5. Petitioners would be regulated by the proposed rules and are substantially affected parties with standing to challenge the proposed rules at issue. No proof is necessary to prove the standing of these Petitioners.

   6. Prior Rule 59C-1.004(2)(i) (the "License Consolidation Rule") required CON application and approval for license consolidations pursuant to Section 395.003, F.S. It was declared invalid

      in University Hospital, Ltd., et al. v. AHCA, 16

      F.A.L.R. 3312 (final order dated July 22, 1994). [This decision is referenced throughout as University Hospital.]

   7. Prior to invalidation of the License Consolidation Rule, six CON applicants sought issuance of a single, or consolidated, license to replace former separate licenses held by the same licensee for facilities located on separate premises.

   8. Each of these six prior applicants involved a general acute care hospital and a specialty psychiatric hospital.

   9. Those applicants resulted in an issuance of CON numbers 7303, 6954, 7712, 7311, 7167, and 7047. Each of those six applications was ulti- mately approved in the form of a single license.

   10. When the single licenses were issued, no restrictions were placed on the licensees regarding eligibility for Medicaid reimbursement.

   11. As reflected in the respective SAARS, a significant result of approval of each of these applications was that the formerly separately licensed psychiatric hospital became eligible for Medicaid reimbursement for treatment of

       Medicaid patients. All of these prior applicants

       had licenses issued and became eligible for Medicaid.

   12. Such Medicaid reimbursement was not available to the separately licensed psychiatric facilities prior to issuance of a single, or consolidated, license.

   13. Aside from the rules under challenge, there has been no change in pertinent state statutes or rules subsequent to the final order in University Hospital Ltd., v. AHCA 16 F.A.L.R. 3312.

   14. After invalidation of the Consolidated License Rule, AHCA's interpretation is that issuance of a single, or consolidated, license

       for a general acute care hospital and a psychiatric hospital does not result in Medicaid eligibility.

   15. Petitioners did not participate in any of the rule workshops conducted on June 22, July 7, and November 2, 1994 or the public hearing held on February 13, 1995.

   16. Petitioners did not send in any written comments, questions, or materials, or request an economic impact statement.

   17. A holding of the Final Order in University Hospital, was that a Certificate of Need was not required prior to the issuance of a single consol- idated license for multiple premises. University Hospital, 16 F.A.L.R. at 3321.

   18. The Agency has no discretion regarding rule- making pursuant to Section 120.535.

       (Joint Prehearing Stipulation, filed 3/14/95)

       
       

2. Approximately eighteen months ago and well before the University Hospital decision, the Agency for Health Care Administration (AHCA) commenced a major rewrite of the hospital license rules that had been promulgated by its predecessor agency, the Department of Health and Rehabilitative Services (HRS). After a series of public workshops, the revisions were noticed in the January 20, 1995, Florida Administrative Weekly. These substantial revisions of rule chapter 59A-3 comprise about fifty pages of the Florida Administrative Weekly. The challenged portions comprise only several paragraphs of the revisions.

3. The challenged portions of the proposed rules are: 59A-3.203 Licensure Procedure.

   (2) All persons requesting licensure for

   the operation of a hospital under the provisions of Chapter 395, F.S., shall make application to the Agency, on forms provided, AHCA Form 3130- 8003-January 1995, and AHCA Form 3130-8001-January 1995, and shall receive a regular or provisional license prior to the acceptance of patients for care or treatment.

   * * *

   (e) An application for the addition of beds or off-site outpatient facilities to a hospital's license must include:

   1. A valid certificate of need or letter of exemption as required by ss. 488.041 - 408.045, F.S., and

   2. Approval from the Agency's Office of Plans and Construction.

   * * *

   (i) A single license will be issued to a licensee for facilities located on separate premises, upon request of the applicant. The license will specifically state the location of the facilities, their services, and the licensed beds available on each separate premises. Such a license shall also specifically identify the general or specialty classification of hospitals located on separate premises.

   (6) Each license shall specifically state the name of the licensed operator of the hospital, the class of hospital, and the name and location of the hospital. Any beds in the hospital which are regulated under the certificate of need program,

   as specified in Chapter 59C-1, F.A.C., shall be listed, including the number of licensed beds by type. The license for hospitals having facilities on more than one premises shall specifically state the location of each facility, their general or specialty classification, their services, and the licensed beds available on each separate premises.

   * * *

   Specific Authority 395.003, 395.004, 455.239, F.S.

   Law Implemented, 395.001, 395.003, 395.004, 395.1005,

   408.035, 408.036, 455.239, F.S. History New.

   (emphasis added)

   
   

4. Prior to the decision in the University Hospital case in July 1994, the proposed revisions did not include the requirement that the license for facilities on separate premises identify separately the general or specialty classification of each. That provision was added by the agency because it concluded that when it could no longer require a CON for "consolidated" licenses, then general acute care beds and free-standing psychiatric beds could not be "consolidated" on a single license.

   
   

5. It is uncontroverted that the substantial effect of the requirement that each facility retain its prior classification is that a facility classified as a class III (specialty) facility is not eligible for Medicaid reimbursement.

   
   

6. The agency agrees that proposed rule is based on, and is compelled by section 395.003(2)(d), F.S., which provides as follows:

   
   

   (d) The Agency shall, at the request of a licensee, issue a single license to a licensee for facilities located on separate premises. Such a license shall specifically state the location of the facilities, the services, and the licensed beds available on each separate premises. If a licensee requests a single license, the licensee shall designate which facility or office is responsible for receipt of information, payment of fees, service of

   process, and all other activities necessary for

   the Agency to carry out the provision of this part. (Emphasis supplied).

   
   

7. It is immediately obvious from a comparison of the text of the proposed rule and the text of the law implemented that the law does not require that the license state the general or specialty classification for the separate facilities. This distinction was not lost on the agency since it included in its legislative package for the 1995 legislative session a proposed amendment to section 395.003(2)(d), F.S. that would cure the inconsistency by adding the proposed rule language to the statute. (Petitioner's exhibit number 16, p. 25)

   
   

8. There is a statute which restricts Medicaid reimbursement for treatment in free-standing psychiatric hospitals. The agency argues that the proposed rules give effect to that statute, section 409.905(5), F.S., which provides, in pertinent part:

   
   

   . . . A licensed hospital maintained primarily for the care and treatment of patients having mental disorders or mental diseases is not eligible to participate in the hospital inpatient portion of the Medicaid program except as provided in federal law. . . .

   (emphasis supplied).

   
   

9. Reliance on Section 409.905(5) is misplaced, however, because it is nowhere cited in the proposed rules as authority or law implemented. Moreover, evidence presented at hearing describes federal policy that when two hospitals are consolidated under one license and have a total capacity that is less than

   50 percent psychiatric in nature, the premises are both eligible for Medicaid reimbursement, even though one remains primarily for the treatment of mental disorders. (Petitioners' exhibits number 20-22)

   
   

10. The federal policy on Medicaid reimbursement was in effect in 1993, prior to the University Hospital decision and prior to the current version of the proposed rules. Section 409.905(5), F.S. has been in effect since 1991, before the six consolidated licenses referenced in paragraph 1, above, were issued. Section 395.003(2)(d), F.S. has been in effect in its current form at all times material. Nothing in the law has changed to support the agency's contention that, after the University Hospital decision, it can no longer issue a single license with a single license classification for separate premises.

    
    

11. No evidence nor specific argument was presented with regard to the alleged invalidity of proposed rule 59A-3.203(2)(e), which on its face relates to the addition of beds or an outpatient facility to a hospital's license. Issues related to that portion of the proposed rule are not the issues invoked in this proceeding with regard to Petitioner's facilities. (See Petitioners' exhibit 26, p. 71, deposition of Tanya Williams)

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties in this proceeding pursuant to sections 120.54 and 120.57(1), F.S.

    
    

13. Pursuant to section 120.54(4)(a), F.S., Petitioners seek an administrative determination of the invalidity of the proposed rules on the

    ground that the proposed rule provisions are an invalid exercise of delegated legislative authority. Section 120.52(8), F.S. defines "invalid exercise of delegated legislative authority" as:

    
    

    . . . action which goes beyond the powers, functions and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54;

    2. The agency has exceeded its grant of rule- making authority, citation to which is required by s. 120.54(7);

    3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

    
    

14. Section 395.003(2)(d), F.S., is clear and unambiguous on its face. Pursuant to the statute, the agency must issue a single license at the request of a licensee. The statute itself dictates what the license must include. Proposed rules 59A-3.203(2)(i) and (6) embellish the statute by requiring more: a separate classification for each facility.

    
    

15. Section 395.003(2)(d) was interpreted and construed in University Hospital. That Final Order was not appealed. That decision's construction of the statute is binding precedent, particularly as to the parties in that proceeding, including University and AHCA. Pertinent interpretations and constructions of section 395.003(2)(d) from University Hospital, include:

    
    

    Section 395.003(2)(d) unequivocally mandates the issuance of a single license for facilities located on separate premises on request of a licensee.

    * * *

    The AHCA's assertion that there is a type or kind of licensing procedure or "consolidation" other than as addressed in Chapter 395 finds no support or authority expressed in any other statute or rule

    . . . As a matter of law, there is only one kind of license "consolidation" and it is expressed in section 395.003. (p. 3322)

    
    

    Any present AHCA interpretation of the statute which conflicts with University Hospital cannot support the validity of the proposed rules.

    
    

16. Here, it is clear that the proposed rules contravene and are not reasonably related to section 395.003(2)(d). The proposed rules absolutely frustrate a licensee's entitlement by insisting that the separate facilities retain their separate license classifications. AHCA frankly concedes that the intended purpose and effect of the proposed rules is to totally eliminate "consolidated" licenses and to prohibit Medicaid reimbursement eligibility for

    treatment of Medicaid psychiatric patients at hospitals which have previously been able to obtain such reimbursement through receipt of a consolidated license.

    
    

17. It does not matter that the rules and section 395.003(2)(d), F.S. do not use the term "consolidate", the effect is the same: two licenses become one under section 395.003(2)(d), at the request of the licensee. The contention that somehow former rule 59C-1.004(2)(i), the rule invalidated in University Hospital, created a separate and distinct license consolidation procedure from that authorized by section 395.003(2)(d). F.S. was specifically asserted by AHCA and was expressly considered and rejected in University Hospital, which noted:

    
    

    At hearing, AHCA's representative, Elizabeth Dudek, asserted that there are two kinds of license consolidations for premises owned by

    the same licensee, the kind under Section 395.003, F.S., and something else. However, this assertion was not supported by any reference to any other provision of law which expressly addresses licenses, and no such reference has been found. Further, Ms. Dudek admitted that Section 395.003 was the only reference they had when the rule was promulgated.

    
    

18. Section 395.003(2)(d) F.S., has remained unchanged since the decision in University Hospital. The interpretation of that statute now asserted by AHCA is not a permissible one. In effect, the proposed rules attempt to amend section 395.003(2)(d). See, Gaines v. Florida Parole and Probation Commission 463 So.2d 1181, 1183 (Fla. 4th DCA 1985).

    
    

19. Although an agency's interpretation of its own rules, or the construction of a statute by an agency charged with its administration is generally entitled to great weight,

    
    

    . . . the statutory construction must be a permis- sible one and the agency cannot implement "any conceivable construction of a statute . . . irrespective of how strained or ingeniously reliant on implied authority it might be." State, Board of Optometry v. Florida Society of Ophthalmology, 538 So.2d 878, 885 (Fla. 1st DCA 1988), review denied,

    542 So.2d 1333 (Fla. 1989). The deference is granted an agency's interpretation is not absolute. "When the agency's construction clearly contradicts the unambiguous language of the rule, the construction cannot stand." Woodley v. Dept. of Health and Rehabilitative Services, 505 So.2d 676, 678 (Fla.

    1st DCA 1987).

    
    

    Department of Natural Resources v. Wingfield Development Company, 581 So.2d 193,

    197 (Fla. 1st DCA 1991). Here, the evidence shows AHCA's construction of section 395.003(2)(d) cannot stand.

    
    

20. As the court stated in Prospective Tenant Report, Inc. v. Dept. of State, Division of Licensing, 629 So.2d 894, 895 (Fla. 2nd DCA 1993):

    
    

    Generally, an administrative agency's construction of the statute under which it operates is given

    great deference. Ball v. Florida Podiatrist Trust, 620 So.2d 1018 (Fla. 1st DCA 1993). However, whether the statute at issue here confers jurisdiction to

    the Department at all is purely a matter of law.

    
    

21. "An agency cannot enlarge, reduce or modify its jurisdiction by its own action." Saddlebrook Resorts, Inc. v. Wire Grass Ranch, Inc., 630 So.2d 1123, 1128 (Fla. 2d DCA 1993). Regulatory jurisdiction by an agency may only be exercised when authorized by law. Any rule which extends or enlarges an agency's jurisdiction beyond its statutory authority is invalid. Cataract Surgery Center v. Health Care, 581 So.2d 1359 (Fla. 1st DCA 1991).

    
    

22. A rule is vague or fails to establish adequate standards for agency decisions when its terms are so vague that persons of common intelligence must guess as to its meaning, and if persons affected by the proposed rule are not properly apprised of the effect on them. DHRS v. Health Care and Retirement Corp., 593 So.2d 539, 541 (Fla. 1st DCA 1992).

    
    

23. The proposed rule language addressing hospital classification information on a license does not mention license consolidations, impact on Medicaid reimbursement, or the like. Yet, the intended purpose and effect of the proposed rule language is, by AHCA's own testimony, to directly impact those matters. Persons of common intelligence can not detect the intended meaning of the proposed rules from their language.

    
    

24. A proposed rule is arbitrary and capricious, and therefore invalid, if it is not supported by fact or logic, or it was adopted without thought or reason. Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759 at 763. The proposed rules reflect AHCA's rejection of statutory interpretations found in binding precedent. AHCA has offered no legally cognizable explanation for such rejection. Previously, the agency allowed at least some hospitals to obtain, through an illegally-required CON review, a single consolidated license pursuant to 395.003(2)(d). AHCA now attempts through its proposed rules to entirely foreclose any hospitals, including Petitioners, from obtaining the type of license to which they are entitled under the unequivocal dictates of 395.003(2)(d), F.S.

    
    

25. The agency insists that a single license granted to health care facilities located on two separate premises with the same licensee is distinct from a consolidated license granted to health care facilities located on two separate premises with the same licensee. Reference to a single license necessarily denotes a consolidated or combined license. The notion that completely independent hospitals, with separate staffs, records, billings and other administrative functions might share a single license is contrived.

    
    

    SUMMARY

    
    

26. A hospital license is more than a mere piece of paper; it is instead a bundle of rights and responsibilities defined by law. The proposed rules purport to alter rights granted in section 395.003(2)(d), F.S. As found in the University Hospital decision, that regulatory overreaching is invalid.

ORDER

Based on the foregoing it is hereby ORDERED:

Petitioners' challenge to the proposed rules is sustained as to rules 59A- 3.203(2)(i) and (6), and those proposed rules are invalid. Petitioners' challenge to proposed rule 59A-3.203(2)(e) is DISMISSED.

DONE AND ENTERED this 1st day of May, 1995, in Tallahassee, Florida.

MARY W. CLARK, 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 1st day of May, 1995.

APPENDIX

The material issues of fact have been stipulated by the parties, as reflected in paragraph number 1, above. The following findings proposed by Petitioners are rejected as argument or unnecessary and cumulative: 13, 14, 16, 18, 20, 21, 22, 28. The following findings proposed by Respondent are rejected as argument, restatement of testimony, or unnecessary and cumulative: 13, 14, 15, 16, 17, 18, 19, 20 (three separate paragraphs numbered "20"), 21, 22, 23,

24, 25.

COPIES FURNISHED:

R. David Prescott, Esquire Thomas W. Konrad, Esquire Rutledge, Encenia, Underwood,

Purnell & Hoffman, P.A.

215 South Monroe Street, Suite 420 Tallahassee, Florida 32301

James C. Hauser, Esquire

Carl R. Peterson, Jr., Esquire Parker, Skelding, et al

318 North Monroe Street Tallahassee, Florida 32302

Liz Cloud, Chief

Bureau of Administrative Code The Elliott Building Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300

Sam Power, Agency Clerk Agency for Health Care

Administration

The Atrium, Suite 301

325 John Knox Road Tallahassee, Florida 32303

Jerome W. Hoffman, General Counsel The Atrium, Suite 301

325 John Knox Road Tallahassee, Florida 32303

Michael O. Mathis, Esquire AHCA

2727 Mahan Drive, Suite 200

Tallahassee, Florida 32308

NOTICE OF RIGHT TO APPEAL

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 Rule 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.

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

DISTRICT COURT OPINION

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

IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

AGENCY FOR HEALTH CARE NOT FINAL UNTIL TIME EXPIRES TO ADMINISTRATION, FILE MOTION FOR REHEARING AND

DISPOSITION THEREOF IF FILED

Appellant,

CASE NO. 95-1530

v. DOAH CASE NO. 95-0632RP

95-0634RP

UNIVERSITY HOSPITAL, LTD.,

et al.,

Appellees.

/ Opinion filed March 11, 1996.

An appeal from an order of the Division of Administrative Hearings. Michael O. Mathis and Richard M. Ellis, Tallahassee, for Appellant.

Harold F. X. Purnell and Stephen A. Ecenia of Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A., Tallahassee, for University Hospital, Ltd.;

James C. Hauser and Carl R. Peterson, Jr. of Skelding, Labasky, Corry, Eastman, Hauser & Jolly, P.A., Tallahassee, for Sebastian Hospital, Inc. and Haines City HMA, Inc., for Appellees.

PER CURIAM.

The Agency for Health Care Administration (Agency) appeals a final order which invalidated proposed Rules 59A-3.203(2)(i) and (6). We reverse.

Section 395.003(2)(d), Florida Statutes (1993), provides, in part:

(d) The agency shall, at the request of a licensee, issue a single license to a licensee for facilities located on separate premises. Such a license shall specifically state the location of the facilities, the ser- vices, and the licensed beds available on each separate premises.

Section 409.905(5), Florida Statutes (Supp. 1994), provides in part:

A licensed hospital maintained primarily for the care and treatment of patients having mental disorders or mental diseases is not eligible to participate in the hospital inpatient portion of the Medicaid program except as provided in federal law.

The Agency had a prior practice of reviewing applications for single licenses under the Certificate of Need (CON) law. Under this prior practice, at least six entities which operated a Class I general hospital at one location and a Class III specialty psychiatric hospital, at another location were issued a single Class I general hospital license, after filing CON applications. The agency noted, in state agency action reports issued during the CON review process, that the single Class I licenses would enable the entities to receive Medicaid reimbursement for services rendered at the psychiatric hospitals.

University Hospital, Ltd. (University) challenged the rule requiring an applicant for a single license to go through the CON process. In a final DOAH

order (University I) 1/ , the rule was found to be invalid and in excess of the legislative directive of section 395.003(2)(d)1 which unequivocally mandates the issuance of a single license to a licensee for facilities located on separate premises on request of a licensee. The Agency did not appeal the order.

After issuance of the order in University I, the Agency issued proposed rules regarding issuance of a single license under section 395.003(2)(d).

Proposed rule 59A-3.203(2)(i) provides:

(i) A single license will be issued to a licensee for facilities located on separate premises, upon request of the applicant. The license will specifically state the location of the facilities, their services, and the licensed beds available on each separate premises. Such a license shall also specifi- cally identify the general or specialty class- ification of hospitals located on separate premises.

Proposed rule 59A-3.203(6) provides:

(6) Each license shall specifically the the name of the licensed operator of the hospital, the class of hospital, and the name and loca- tion of the hospital. Any beds in the hospital which are regulated under the certificate of need program, as specified in Chapter 59C-1, F.A.C., shall be listed, in- cluding the number of licensed beds by type.

The license for hospitals having facilities on more than one premises shall specifically state the location of each facility, their general or specialty classification, their services, and the licensed beds available on each separate premises.

Cited as law implemented by the proposed rules were sections 395.001, 395.003, 395.004, 395.1005, 408.035, 408.036, and 455.239, Florida Statutes.

Appellees are entities that have a Class I general hospital at one location and a Class III specialty psychiatric hospital at a separate location. Appellee filed petitions to determine the invalidity of the proposed rules. Appellees argued that a license issued pursuant to the proposed rules would not result in the consolidation of a psychiatric hospital under the Class I general license of the general hospital. It was argued that section 395.003(2)(d), in clear and mandatory terms, directs the agency to issue a single license and that no legislative enactment or change has occurred that would alter the benefits that flow from obtaining a single license. Appellees contended that the proposed rules directly conflict with section 395.003(2)(d) and also directly conflict with the order in University I. Appellees also contended that the sole purpose of the proposed rules was to prevent Medicaid reimbursement for services rendered at Class III specialty psychiatric hospitals, but there was nothing in the proposed rules to put the public on notice of that purpose or effect.

The hearing officer found the proposed rules to be invalid. The hearing officer noted that it was obvious that the law does not require the license to state the general or specialty classification for the separate facilities. The hearing officer concluded that section 395.003(2)(d) dictates what the license must include and the proposed rules embellish the statute by requiring more.

The hearing officer also concluded that section 395.003(2)(d) was interpreted and construed in University I, and because that final order was not appealed the construction of the statute in that order was binding precedent. Portions of the University I order relied on by the hearing officer included:

Section 395.003(2)(d) unequivocally mandates the issuance of a single license for facilities located on separate premises on request of a licensee.

* * *

The AHCA's assertion that there is a type or kind of licensing procedure or "consolidation" other than as addressed in chapter 395 finds no support or authority expressed in any other

statute or rule . . . As a matter of law, there is only one kind of, license consolidation and it is expressed in section 395.003.

The hearing officer stated that any present agency interpretation of the statute which conflicted with University I could not support the validity of the proposed rules.

We agree with the Agency that the proposed rules constitute a permissible interpretation of section 395.003. We also agree with the Agency that the order in University I did not set forth a considered interpretation of the form and effect of a single license issued pursuant to section 395.003(2)(d)

Section 395.003(2)(d) requires the license to specifically state the location, the services, and the licensed beds available on each separate premises. As noted in Agency for Health Care Administration v. Sebastian Hospital, Inc., Case No. 95-586/95- 1231, nothing in the language of section 395.003(2)(d) requires that the license consolidate each facility under the same classification of hospital. Section 395.003(4) provides that the agency shall issue a license which specifies the services categories and the number of hospital beds in each category for which a license is issued. Section 395.003(6) provides that no specialty hospital shall provide any service or regularly serve any population group beyond those services or groups specified in its license.

The Agency indicated that section 395.003 was one of the statutory provisions implemented by the proposed rules. Any entity that has or wants a single license for facilities located on separate premises would be on notice that issuance of a single license would be affected by the proposed rule. Any entity that wanted to receive Medicaid reimbursement for a Class III specialty psychiatric hospital would be aware that a single license setting forth only a Class I general hospital classification was required in order to do so.

REVERSED.

BARFIELD, ALLEN, and DAVIS, JJ., CONCUR.

ENDNOTE

1/ University Hospital, Ltd. v. Agency for Health Care Administration, 16

F.A.L.R. 3312.

MANDATE

From

DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT

To the Honorable Mary Clark, Hearing Officer

Division of Administrative Hearings WHEREAS, in that certain cause filed in this Court styled:

UNIVERSITY HOSPITAL, LTD.,

operating UNIVERSITY HOSPITAL

and UNIVERSITY PAVILION HOSPITAL,

Petitioners,

vs. CASE NO. 95-0632RP

AGENCY FOR HEALTH CARE ADMINISTRATION,

/ SEBASTIAN HOSPITAL, INC., d/b/a SEBASTIAN HOSPITAL, et al.

vs. CASE NO. 95-0634RP

AGENCY FOR HEALTH CARE ADMINISTRATION,

/

The attached opinion was rendered on March 11, 1996.

YOU ARE HEREBY COMMANDED that further proceedings be had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.

WITNESS the Honorable E. Earle Zehmer

Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 2nd day of May, 1996.

(Seal) John L. Wheeler

Clerk, District Court of Appeal of Florida, First District

Docket for Case No: 95-000632RP

Orders for Case No: 95-000632RP