STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted in these consolidated cases at Tallahassee, Florida, on January 21, 22, 23, 24, 28, 29, and 30, 1997, before Michael M. Parrish, an Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner, Jay Adams, Esquire

Beverly Savana Douglas L. Mannheimer, Esquire Cay Manor, Broad and Cassel

Inc.: Post Office Drawer 11300 Tallahassee, Florida 32302

For Petitioner, Theodore E. Mack, Esquire HealthPrime, Cobb, Cole and Bell

Inc.: 131 North Gadsden Street Tallahassee, Florida 32301

For Petitioner, R. Bruce McKibben, Jr., Esquire Life Care Holland & Knight

Centers of Post Office Drawer 810

America, Inc.: Tallahassee, Florida 32302-0810

For Respondent: Paul A. Vazquez, Esquire

Agency for Health Administration Fort Knox, Building III

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUES

This is a certificate of need proceeding in which each of the three Petitioners seeks to be awarded a certificate of need for the construction of a new 118-bed nursing home in AHCA District 1, Subdistrict 1, comprised of Escambia and Santa Rosa Counties. Each Petitioner asserts entitlement to the award on the basis that its application is, for a variety of reasons, the best of the three competing applications. The ultimate issue to be resolved is a determination as to which of these three applicants best meets the statutory and rule criteria for the issuance of a certificate of need in response to the projected numeric need of 118 beds.1

PRELIMINARY STATEMENT

This proceeding involves competing certificate of need applications for nursing home beds in AHCA District l, Subdistrict I, Escambia and Santa Rosa Counties. For the application cycle at issue (the July, 1998, planning horizon), AHCA published a fixed bed need pool of 118 available nursing home beds for Escambia and Santa Rosa Counties. Applications were received from BSH Health Services, Inc. (“BSH”), Life Care Centers of America, Inc. (“Life Care”), Beverly Savana Cay Manor, Inc. (“Beverly”),2 and HealthPrime, Inc. (“HealthPrime”). The

applications were assigned the following certificate of need numbers by the agency: BSH, CON 8267; Life Care, CON 8268; Beverly, CON 8270; and HealthPrime, CON 8271. Upon initial review, AHCA announced an initial agency action to approve the application of BSH and deny the applications of Life Care, Beverly, and HealthPrime. Each of the denied applicants timely requested a formal administrative hearing to contest the denial of its application, thereby initiating the instant administrative proceeding. Subsequently a Motion for Summary Recommended Order was filed against BSH. A Recommended Order of Dismissal and a Final Order adopting the Recommended Order have been entered. BSH has filed an appeal of that Final Order with the First District Court of Appeal. After receiving the Recommended Order of Dismissal against BSH, AHCA undertook a further review of the remaining applications and now supports issuance of CON 8270 to Beverly and denial of CON 8267 to Life Care and of CON 8271 to Health Prime.

On January 15, 1997, the parties filed a Prehearing Stipulation in which they stipulated to a number of factual and legal issues. At the final hearing, each of the parties offered numerous exhibits and presented the testimony of numerous witnesses.3 At the conclusion of the hearing, the parties requested, and were granted, four weeks from the filing of the transcript within which to file their proposed recommended orders. The transcript of the final hearing was filed with the

Division of Administrative Hearings on February 24, 1997. On March 19, 1997, a motion was filed, seeking an extension of the deadline for filing proposed recommended orders. The motion was granted and a new deadline of April 7, 1997, was established. On April 7, 1997, all parties filed proposed recommended orders, containing proposed findings of fact and conclusions of law.4

The parties’ proposed recommended orders have been carefully considered during the preparation of this recommended order.

FINDINGS OF FACT

Findings stipulated to by all parties

1. In their prehearing stipulation, the parties stipulated to the following factual matters:

   1. There is an available fixed bed need pool for 118 beds for the applicants in this proceeding. No party is asserting that there are special or unusual circumstances which justify the award of more than 118 beds to the applicants to this proceeding. Each of the applicants has applied to construct a new, 118-bed nursing home in District 1, Subdistrict 1. No applicant has applied for partial approval of its application.

      
      

   2. The letters of intent, corporate resolutions, and newspaper publications of each applicant were timely filed and legally adequate as to required content, format, and accuracy. The letters of intent, corporate resolutions, and newspaper publications are not at issue in this proceeding.

      
      

   3. The CON application and omissions responses of each applicant were timely filed with AHCA and with the local health council.

      
      

   4. Any party may introduce into evidence at the Final Hearing the following portions, pages, or sections of its respective CON

      application without a foundation, authenticity, or corroborating witness:

      (1) cover letter and cover page; (2) the “identification of the parties” page; (3) the certification of the applicant and the CON remittance form; (4) the check for the application fee; (5) the Corporate Resolution; (6) the newspaper publication;

      (7) the Letter of Intent; (8) the narrative description of the dietary program; and,

      (9) the narrative description of residents rights. The information contained on these pages is deemed to be true and correct.

      
      

   5. The following AHCA correspondence may be admitted into evidence without a foundation, authenticity, or corroborating witness: (1) the letters accepting the letter of intent for each applicant; (2) the omissions letter sent to each applicant;

      (3) the completeness letter sent to each applicant; the decision letter, not including the State Agency Action Report, sent to each applicant. The information contained in these documents is deemed to be true and correct.

      
      

   6. Each applicant may submit into evidence without a foundation, authenticity, or corroborating witness the audited financial statements included in its CON application or omissions response. The information contained in the audited financial statements is deemed to be true and correct.

      
      

   7. The information contained on Schedule 1 of each application, Estimated Project Cost, is correct and true and will require no proof at hearing. The data contained on Schedule 1 may form the basis for comparison between the applications.

      
      

   8. The information contained on Schedule 2 of each application, Capital Projects and Expenditures Approved, Under Development, or Planned, is correct and true and will require no proof at hearing. The data contained on Schedule 2 shall not form the basis for comparison between the applications, but may

      be considered in determining the financial feasibility of each applicant.

      
      

   9. Each applicant can achieve the total facility utilization projected on Schedule 5 of its application. The rate of fill and the steady state occupancy of the applicants shall not form the basis for comparison between the applications.

      
      

   10. Each applicant can hire the number of employees proposed in Schedule 6 of its application at the salary shown on

       Schedule 6.

       
       

   11. Each applicant’s architectural design meets the required design standards for licensure and operation as a nursing home. Each party may introduce the architectural plans and the narrative related to its architectural plans, including the Project Completion Forecast, into evidence without a foundation, authenticity, or corroborating witness. Architectural design may form the basis for comparison between the applications. (Emphasis added.)

       The Petitioners and their applications Beverly

2. Beverly is proposing to construct a 118-bed freestanding community nursing home to be located in Santa Rosa County. The facility will be 49,584 gross square feet in size and will have a total project cost of $6,512,338.00. Services to be provided include 20 Medicare certified and subacute care beds, a dedicated 20-bed Alzheimer's care unit, care to persons with AIDS, respite care, hospice care, outpatient therapy, comprehensive medical rehabilitation, and general and restorative care. As a part of its proposal, Beverly has made a commitment to provide

   0.2 percent of its gross revenues to charity/indigent care and

   will donate a $10,000 geriatric research fund to Florida A & M University School of Nursing if this project is approved.

3. The applicant in this proceeding is Beverly Savana Cay Manor, Inc., which is a wholly owned subsidiary of Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast-Florida, Inc., which is itself a wholly owned subsidiary of Beverly Health and Rehabilitation Services, Inc. There is no programmatic or operational distinction as to which subsidiary owns any particular nursing home in the Beverly family of nursing homes. Rather, all of the facilities are treated as being "a member of the Beverly family."

4. The Beverly family of nursing homes is the largest provider of nursing home care in America, owning and operating 625 nursing homes nationwide. It owns and operates 65 nursing homes in Florida. There are four main subsidiaries of the Beverly parent company: Beverly Health and Rehabilitation, which provides the core nursing home services; Pharmacy Corporation of America, which operates 65 pharmacies around the country; Spectrum, which is a provider of therapy services; and American Transitional Hospitals, which provides subacute care in both hospitals and nursing homes. Each of the nursing homes in the Beverly family benefits from the expertise brought to the corporation through these subsidiaries.

5. As a member of the Beverly family, a nursing home enjoys the benefits of central administration; support in the areas of

   accounting, legal, financial management, personnel, public relations; access to experts in nursing home administration, nursing, dietary services, therapy, and other areas; and central purchasing.

   HealthPrime

   
   

6. HealthPrime was founded in 1989 by Douglas Mittleider and Michael Foxworthy for the purpose of owning, operating, and managing long-term health care facilities.

7. HealthPrime was formed on the belief that there was a need in the industry for a company to deal with troubled health care facilities. HealthPrime initially targeted bankrupt facilities, distressed facilities, and facilities in receivership. HealthPrime later expanded its services to include approved facilities that were having trouble getting built or opened. In handling troubled facilities, HealthPrime has developed expertise in various areas of specialized care. HealthPrime is attempting to use that expertise in areas where available need is shown.

8. At the time of submission of its application, HealthPrime owned, operated, or managed 36 facilities in several states. Approximately two-thirds of those facilities are owned by HealthPrime. HealthPrime and its principals own only one facility in the State of Florida. Four other facilities in Florida are managed by HealthPrime. Based on its experience in acquiring troubled facilities and troubled certificates of need,

   HealthPrime hopes to take what it has learned and develop a quality nursing home program from beginning to end.

9. HealthPrime proposes to construct a 118-bed freestanding community nursing home in Santa Rosa County, Florida. HealthPrime’s facility will have 50,750 gross square feet and will cost $6,350.037.00. HealthPrime’s facility will have a 20- bed geriatric psychiatric unit and a 20-bed comprehensive rehabilitation unit. HealthPrime will not have a dedicated Alzheimer’s Disease unit, although it will treat patients with Alzheimer’s Disease in the general population. HealthPrime proposes to provide a wide range of services at the proposed facility. These services include subacute care, respite care, Alzheimer’s Disease and related dementia services, geriatric psychiatric services, and comprehensive medical rehabilitation services. HealthPrime is proposing to provide 0.1 percent of its gross revenue to charity/indigent care.

10. HealthPrime intends to own and manage the proposed facility. HealthPrime manages its facilities through a decentralized day-to-day operational structure, while utilizing the centralized financial services located at the company’s corporate office. Each facility develops its own autonomous identity in the community served, strengthening the bond between the facility and the community. An experienced corporate team provides the management direction and support which helps each facility develop and implement high quality programs.

    Life Care

    
    

11. Life Care is a Tennessee corporation authorized to do business in the State of Florida. Life Care is the largest privately owned nursing home company in the country, having over

    180 facilities in 27 states. It operates in a decentralized fashion, allowing each of its facilities to operate independently, yet with the overall support of a large company.

12. Life Care owns four nursing homes in the State of Florida. It also operates three other nursing homes in Florida. The first Life Care facility in Florida was licensed in 1979.

13. Life Care has grown continuously since its inception, adding nursing homes on a regular basis. It has never sold a facility; rather, it is committed to its projects for the long term.

14. A cornerstone of the Life Care operations is its “Missions and Values Statement.” This statement indicates a commitment by Life Care personnel to the company’s residents, its management, its associates, and to the community. Life Care personnel adopt the Missions and Values Statement and put it into practice. A visible example of this fact can be found in the “Whatever It Takes” campaign, a program that encourages employees to involve themselves personally in the lives of nursing home residents.

15. Life Care proposes to construct a 118-bed freestanding community nursing home to be located in Pensacola, Escambia

    County, Florida. Life Care’s project will have 49,777 gross square feet and will have a total project cost of $7,223,000.00. Life Care is proposing to have a 20-bed Alzheimer’s Disease unit, to provide care to persons with AIDS, to have a 10-patient adult day care center, to provide hospice care and respite care, to provide comprehensive rehabilitation, to provide general and restorative care, and to provide some subacute care. Life Care does not propose to provide charity or indigent care.

    The applicable review criteria

    
    

16. The paragraphs which follow address the extent to which each of the competing applications satisfies the applicable review criteria. To facilitate an understanding of the relationship of the facts to the numerous criteria, each of the applicable criteria are set forth in underscored text immediately before the findings of fact that relate to it.

    Section 408.035(1), Florida Statutes. The agency shall determine the reviewability of applications and shall review applications for certificate of need determinations for health care facilities and services, hospices, and health maintenance organizations in context with the following criteria:

    1. The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health.

       Local health plan provisions

       
       

       Allocation Factor I. Preference should be given in cases of otherwise equal CON applications within a subdistrict to the applicant serving the county with the greatest percentage of population aged 65 and over living in poverty.

       
       

17. According to the 1990 United States census data, which is the most recent available data, the percentage of the

    population aged 65 and over who live in poverty is 15.6 percent in Escambia County and 15.3 percent in Santa Rosa County. Life Care is the only applicant proposing a facility in Escambia County, so it is the only one of the Petitioners that meets the requirements of this allocation factor. However, because of the small difference in the two percentages and because of the age of the data,5 not a great deal of weight is given to this allocation factor.

    Allocation Factor II. Preference should be given in cases of otherwise equal CON applications within a subdistrict to the applicant agreeing to serve a percentage of Medicaid patients that is greater than or equal to the average percentage of Medicaid patients currently in nursing homes in that subdistrict. Such percentage to be measured by the ratio of Medicaid Patient Days to Total Patient Days for the subdistrict for the same six month period used by the state nursing home bed need methodology to determine the occupancy rate. These commitments should be included on the granted CON as a condition of that CON.

18. The applicable subdistrict Medicaid utilization rate was 70.16 percent. HealthPrime has committed to provide

    71 percent of its patient days to Medicaid patients. Life Care has committed to provide 70.5 percent of its patient days to Medicaid patients. Beverly has committed to provide only

    60 percent of its patient days to Medicaid patients. HealthPrime and Life Care meet the terms of this allocation factor; Beverly does not.

    Allocation Factor III. Within a subdistrict, preference should be given to a CON applicant for nursing home beds to be located in counties experiencing the highest occupancy if the applicant submits patient origin data indicating that 85 [percent] or more of current subdistrict nursing home patients originate from within the subdistrict.

19. None of the parties submitted patient origin data. Accordingly, none of the parties are eligible for the preference described in Allocation Factor III.

20. The parties have stipulated that the criteria described in Allocation Factor IV are not at issue in this proceeding.

    Allocation Factor V. Preference should be given to a CON applicant who has a history of providing care, or who will commit to provide care, to AIDS patients.

    
    

21. None of these three Petitioners have shown anything remarkable with regard to their history of providing care to AIDS patients. Most of the evidence of any such history was anecdotal or approximate and difficult to quantify or compare. Each of the Petitioners has committed to care for AIDS patients. None of such commitments are particularly remarkable when viewed in light of the fact that Federal law prohibits nursing homes from denying care to a patient on the basis that the patient has AIDS or an AIDS-related condition. By reason of their commitments, all three Petitioners meet the terms of this allocation factor more or less equally.

    Allocation Factor VI. Preference should be given to a CON applicant who has provided the greatest percentage of the facility’s available annual patient days to AIDS patients.

    
    

22. This preference cannot be applied literally to the Petitioners in this case, because each of the Petitioners is proposing to build a new facility. Thus, none of the proposed “facilities” has a history of providing any care. With regard to other nursing home facilities operated by each of the

    Petitioners, there is insufficient evidence upon which to determine which of the Petitioners has provided the greatest percentage of available annual patient days to AIDS patients in such facilities.6 Accordingly, none of the Petitioners meets the terms of Allocation Factor VI.

    Allocation Factor VII. Preference should be given to a CON applicant who agrees to accept AIDS patients referred by the public health unit serving the county in which the facility is or is proposed to be located.

    
    

23. All of the Petitioners agreed to accept AIDS patients referred by the local public health unit. Although the HealthPrime commitment was slightly qualified,7 there is no significant difference in the commitments of any of the parties in this regard. Accordingly, there is no basis to prefer one over the other on this factor.

    Allocation Factor VIII. Preference should be given to a CON applicant who is applying to develop beds exclusively for AIDS patients in the district, provided the number of nursing home beds proposed does not exceed the need documented by the applicable fixed bed need pool.

    
    

24. None of the parties is proposing to develop beds exclusively for AIDS patients. Accordingly, there is no basis to prefer one over the other on this factor.

25. The parties have stipulated that the preferences expressed in Allocation Factors IX and X of the Local Health Plan are not at issue in this proceeding.

    State health plan provisions

    
    

    Allocation Factor I. Preference shall be given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 [percent].

    
    

26. The occupancy rates for both Escambia and Santa Rosa Counties exceed the 90 percent threshold contained in this allocation factor. Therefore, each of the Petitioners meets the requirements of this allocation factor. Beverly and HealthPrime assert that they both meet this factor better than Life Care because the occupancy rate in Santa Rosa County is 97 percent, versus 94 percent in Escambia County. These differences in occupancy rates are too small to be given much weight, especially when viewed in light of the fact that the total patient numbers in Escambia County are substantially larger than the total patient numbers in Santa Rosa County.

    Allocation Factor II. Preference shall be given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level care systems.

    
    

27. The terms of this allocation factor are essentially the same as Allocation Factor II of the local health plan, which is discussed above. As noted above, HealthPrime and Life Care meet the terms of this allocation factor; Beverly does not.

    Allocation Factor III. Preference shall be given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents and the mentally ill.

28. Each of the Petitioners proposes to provide specialized services to special care residents. Accordingly, all of the Petitioners meet the requirements of this allocation factor.

    Each of the Petitioners argues that it does a better job than the others in meeting the requirements of this allocation factor.

    Although there are differences in the specialized services proposed by each Petitioner, on balance, none of the proposals appears to be remarkably superior to the others on this issue.

    Allocation Factor IV. Preference shall be given to applicants proposing to provide a continuum of services to community residents, including, but not limited to, respite care and adult day care.

    
    

29. On the whole, there is not much to discuss regarding this allocation factor. The parties have not proposed much in the way of the services described in this allocation factor, and there appears to be little need for what has been proposed. All three Petitioners meet the letter of this allocation factor.

    Life Care appears to do so better than the other two by reason of its proposed adult day care services, but any weight to be given to this allocation factor is diminished by serious doubts as to the need for such services.

    Allocation Factor V. Preference shall be given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual temperature control, visitors' rooms, recreation areas, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges.

    
    

30. Each of the Petitioners meets the terms of this allocation factor, because each of the proposed architectural

    designs are above average and incorporate features designed to provide maximum resident comfort and quality of care. Each of the three architectural designs incorporates some unique features, but on balance it cannot be said that any one of the three architectural designs is significantly superior to the others.

    Allocation Factor VI. Preference shall be given to applicants proposing to provide innovative therapeutic programs which have been proven to be effective in enhancing the residents' physical and mental functional level and which emphasize restorative care.

    
    

31. Each of the Petitioners proposes to provide comprehensive medical rehabilitation services. Accordingly, all three of the Petitioners meet the requirements of this allocation factor. The requirements of this allocation factor are best met by Beverly. This is because Beverly is the only one of the three that proposes to rely solely on in-house staff therapists, proposes to have a director of therapy services, proposes to provide therapy services six days per week, and has an express commitment to provide outpatient therapy.

    Allocation Factor VII. Preference shall be given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions shall be considered for facilities proposing to serve upper income residents.

    
    

32. The proposed Medicaid charges for each of the Petitioners in the second year of operations are these: for Beverly, $96.54; for Life Care, $111.13; and for HealthPrime,

    $106.07. The highest Medicaid rate in the district at the time the applications were filed was at Azalea Trace. The Azalea

    Trace Medicaid rate, inflated forward to the second year of operations of the Petitioners would be $113.00. Thus, all Petitioners meet this preference.

33. The extent to which each Petitioner meets this preference is at issue in this proceeding. Obviously, Medicaid is the largest projected payor source for each of the proposed facilities at issue in this proceeding. Also obvious is the need of the state to purchase necessary nursing home services at the lowest reasonable rate.8 Beverly is proposing the most economical delivery of Medicaid services. Beverly will be $9.53 less expensive per Medicaid patient day (more than 10 percent cheaper) than HealthPrime and will cost the state $14.59 less per Medicaid patient day than Life Care, a savings of over 15 percent. Under this allocation factor, Beverly’s proposal is to be preferred over the other two proposals.

    Allocation Factor VIII. Preference shall be given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. AHCA's evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida.

    
    

34. As a result of differences in the nature of the information each of the parties provided regarding this allocation factor, it is difficult to make an “apples to apples” comparison of the parties on this factor. On the basis of the incomplete evidence which is available,9 it appears that HealthPrime has the best and most consistent history of superior and standard licensure ratings. However, the validity of any

    comparison on this point is cast into doubt by, among other things, large differences in the sample sizes. In this regard it is perhaps sufficient to observe that all three applicants have the ability to provide high quality care, are motivated to provide high quality of care, and can reasonably be expected, with rare exceptions,10 to provide high quality of care.

    Allocation Factor IX. Preference shall be given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules.

    Applicants proposing higher ratios of RNs-and-LPNs-to residents than other applicants shall be given preference.

    
    

35. Beverly is proposing to provide 3.56 hours of nursing care per patient day; HealthPrime is proposing 3.6 hours of nursing care per patient day; Life Care is proposing 3.15 hours of nursing care per patient day. Although all three applicants propose staffing which exceeds minimum standards, this allocation factor goes on to give preference over other applicants to applicants proposing the higher levels of nursing care. In this regard, Beverly and HealthPrime are essentially equal, but both are notably better (approximately 15 percent) than Life Care.

36. The parties have stipulated that the preferences expressed in Allocation Factors X and XI of the State Health Plan are not at issue in this proceeding.

    Allocation Factor XII. Preference shall be given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district.

    
    

37. In the second year of operation, the administrative and patient care costs per patient day of each Petitioner will be as follows:

    Beverly Administrative Costs $23.81

    Patient Care Costs $65.37

    
    

    Life Care Administrative Costs $26.01

    Patient Care Costs $64.32

    
    

    HealthPrime Administrative Costs $27.33

    Patient Care Costs $65.18

    
    

38. Each of the Petitioners complies with the terms of this allocation factor. It is the goal of the state that dollars spent on nursing home reimbursement be used to the greatest extent for patient care and to the least extent on administrative and overhead costs. For that reason, lower administrative costs per patient day and higher patient care costs per patient day are preferable. Beverly’s administrative costs are notably lower than those of either Life Care or HealthPrime, and Beverly’s patient care costs are slightly higher than the other two Petitioners. Accordingly, Beverly best meets this preference.

    Further statutory criteria

    
    

    1. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.

       
       

39. For purposes of this proceeding, the parties have stipulated that existing nursing home providers provide adequate

    quality of care, are efficient, are appropriate, and are highly utilized. The availability and accessibility of specific services and the accessibility of services to specific patient groups is at issue.

40. Beverly and HealthPrime propose to locate their new nursing homes in the Milton/Pace area of Santa Rosa County. Life Care proposes to locate its new facility in north/northwest Escambia County. Witnesses for all of the applicants agreed that it is preferable for nursing home patients to receive nursing care close to their homes when possible.

41. There are twelve nursing homes and two hospital-based skilled nursing units in Escambia County. Of these, all but one nursing home are located in the Pensacola area, where Life Care proposes to locate. There are only three nursing homes and one hospital-based skilled nursing unit in Santa Rosa County. The vast majority of nursing homes in Escambia County are located within the area where Life Care proposes build its nursing home. There are no nursing homes in existence in Beverly's proposed location.

42. Occupancy of nursing homes in Escambia County was under

    
    

    94 percent. For the same period, the occupancy of nursing home beds in Santa Rosa County was 97 percent.

43. In Escambia County there are 42 nursing home beds per 1,000 persons over the age of 65 years. In Santa Rosa County, this ratio is 29.5 beds per 1,000 persons over the age of 65

    years. Thus, currently, there are almost one-and-one-half times as many nursing home beds per elderly person in Escambia County than in Santa Rosa County. It is reasonable to assume that the elderly residents of Santa Rosa County have the same per capita need for nursing home services as the residents of Escambia County.

44. If the Life Care application is approved, the ratio of nursing home beds per 1,000 elderly persons in Escambia County will increase to 45 beds/1,000. Santa Rosa's ratio would remain at 29.5 beds per 1,000. If the applications of Beverly or HealthPrime were approved, the Santa Rosa ratio would increase to

    39 beds per 1,000, still lower than Escambia County's current 42 beds per 1,000 persons.

45. The population over the age of 65 is projected to increase by 16.4 percent in Santa Rosa County between 1995 and 1998. During the same period, the population in that age group in Escambia County is projected to increase by only 6.5 percent. During the same period, the population over age 75 in Santa Rosa County is projected to increase by 26.9 percent, but only a

    16.6 percent increase in that age group is projected for Escambia County.

46. Historic Medicare utilization in Santa Rosa County is

    
    

    4 percent; in Escambia County Medicare utilization is 13 percent. There has been no HMO utilization in Santa Rosa County. This appears to be due in part to the fact that there currently are no

    subacute care beds in free-standing nursing homes in Santa Rosa County. The per capita need of Santa Rosa County residents for Medicare and HMO subacute care services would appear to be the same for residents of Santa Rosa County as for residents of Escambia County. This indicates that there is an unmet need for subacute care beds in Santa Rosa County. This unmet need would be fulfilled by Beverly's application, but not by HealthPrime's (because it will have no subacute care beds) or Life Care's (because it will be in Pensacola, Escambia County).

47. Based on the foregoing, it appears that the greatest need for additional nursing home beds in District 1, Subdistrict 1, is in Santa Rosa County, and that there is an unmet need for Medicare and subacute care beds in Santa Rosa County. These needs are best met by Beverly's application because it proposes both to locate in Santa Rosa County and to provide subacute care services.

48. Life Care is proposing to locate in Pensacola where there currently are already eleven freestanding nursing homes and two hospital-based skilled nursing units. Approval of the Life Care application will not improve availability or accessibility to nursing home services in the District 1, Subdistrict 1.

    1. The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care.

       
       

49. As noted above, in the findings of fact regarding Allocation Factor VIII of the State Health Plan, “all three applicants have the ability to provide high quality care, are

    motivated to provide high quality of care, and can reasonably be expected, with rare exceptions, to provide high quality of care.” On this issue, there is nothing that remarkably distinguishes one Petitioner from the other.

    1. The availability and adequacy of other health care facilities and services and hospices in the service district of the applicant, such as outpatient care and ambulatory or home care services, which may serve as alternatives for the health care facilities and services to be provided by the applicant.

    
    

50. There is no evidence in the record of this case of any available alternatives to the nursing home care these Petitioners seek to provide.

51. The parties have stipulated that the criteria described at Paragraphs (e) and (f) of Section 408.035(1), Florida Statutes, are not at issue in this proceeding.

    1. The need for research and educational facilities, including, but not limited to, institutional training programs and community training programs for health care practitioners and for doctors of osteopathy and medicine at the student, internship, and residency training levels.

       
       

52. Beverly and Life Care have both made substantial donations to institutions of higher learning to further research and education in health related fields. Beverly and Life Care both propose to make further donations. They also propose to establish training opportunities for students in health-related fields. Notably absent is any persuasive evidence of any need for such donations or training opportunities.11 In the absence of a showing of some identified need that is being addressed,

    these donations and training opportunities, commendable as they are, are irrelevant to the subject criterion.

    1. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district.

53. The availability of health manpower and management personnel and the availability of alternative uses of all resources for the provision of other health services are not in dispute and shall not form the basis for comparison between the applications. All other provisions of this criterion are in dispute.

54. Although there are sizable differences in the financial resources of each of the Petitioners, all three Petitioners have access to sufficient funds to be able to build and operate the proposed facilities.12

    1. The immediate and long-term financial feasibility of the proposal.

    
    

55. On balance, there are no significant differences in the immediate and long-term financial feasibility of any of these three competing proposals. It appears that all three are financially feasible, both short-term and long-term.

56. The parties have stipulated that the criteria set forth at Paragraphs (j) and (k) of Section 408.035(1), Florida Statutes, are not at issue in this proceeding.

    1. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and serve to promote quality assurance and cost-effectiveness.

       
       

57. The proposed revenues per patient day by payor class in the second year of operation are as follows:

    Beverly Life Care HealthPrime Private Pay $128.51 $142.76 $124.93 Semiprivate $125.63 $125.36 $108.83 Medicaid $96.54 $111.13 $106.07

    Medicare $316.77 $337.43 $305.60 HMO/Insurance $374.44 $391.10 $305.63

58. The figures immediately above show that Life Care would be the most expensive provider. Beverly would have the least expensive Medicaid rates, and HealthPrime would have the least expensive rates in all other payor classes. On the basis of their respective rates, Beverly and HealthPrime would do more to foster competition than would Life Care.

59. The proposed locations of the Beverly and the HealthPrime facilities would also do more to foster competition than would the proposed location of the Life Care facility. Beverly and HealthPrime propose to locate in an area in which

    there is presently very little competition. Life Care proposes to locate in an area in which a large amount of competition already exists.

    1. The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

       
       

60. There is no significant difference between the proposed project costs for the facilities proposed by Beverly and HealthPrime. Life Care’s proposed project costs are substantially higher than those of Beverly and HealthPrime.

    1. The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

       
       

61. With regard to past and proposed provision of health care services to Medicaid patients, Life Care and HealthPrime are to be preferred over Beverly, even though Beverly’s past provision of such services has been substantial. With regard to past services to the medically indigent, there is insufficient evidence to compare the three Petitioners. With regard to proposed services to the medically indigent, the amounts proposed by Beverly and HealthPrime are not great enough to warrant a preference over Life Care in this regard.

    1. The applicant's past and proposed provision of services which promote a continuum of care in a multilevel health care system, which may include, but is not limited to, acute care, skilled nursing care, home health care, and adult congregate living facilities.

    
    

62. This criterion is very similar to Allocation Factor IV in the State Health Plan, which has been discussed above. As

    noted in the discussion of Allocation Factor IV, the parties have not proposed much in the way of the services described in this criterion, and there appears to be little need for what has been proposed. All three Petitioners meet the letter of this criterion. Life Care appears to do so better than the other two by reason of its proposed day care services, but any weight to be given on the basis of this criterion is diminished by serious doubts as to the need for such services.

63. The parties have stipulated that the criteria set forth at Subsections (2) and (3) of Section 408.035(1), Florida Statutes, are not at issue in this proceeding.

    CONCLUSIONS OF LAW

    
    

64. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.57, Florida Statutes.

65. A numeric need exists for 118 additional community nursing home beds in AHCA District l, Subdistrict 1, comprised of Escambia and Santa Rosa Counties. There is no dispute over the numeric need in the subdistrict.

66. Each applicant bears the burden of proving its entitlement to a certificate of need, based on a balanced consideration of the criteria. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So. 2d 83 (Fla. 1st DCA 1985); Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So. 2d 260

    (Fla. 1st DCA 1985); Florida Department of Transportation v. J.W.C. Company, 396 So. 2d 788 (Fla. 1st DCA 1981).

67. A decision on whether to grant or deny a certificate of need must be made upon weighing and balancing all of the relevant criteria. See, e.g., Department of Health and Rehabilitative Services v. Johnson & Johnson Home Health Care, Inc., 447 So. 2d

    361 (Fla. 1st DCA 1984). No single criterion, except perhaps the applicant's financial inability, is outcome determinative. North Shore Medical Center, Inc., et al. v. State of Florida, Agency for Health Care Administration, 15 FALR 4661, (AHCA 11/08/93).

68. With regard to the majority of the relevant criteria, there are no significant differences in any of the three competing proposals and no useful purpose would be served by further discussion of those criteria. Some of the criteria where the differences appear to be of sufficient magnitude to be significant to the ultimate determination in this proceeding are addressed below.

69. Three of the criteria that warrant discussion are the three that address the applicants’ commitment to provide services to Medicaid patients; namely, Allocation Factor II of the Local Health Plan, Allocation Factor II of the State Health Plan, and Section 408.035(1)(n), Florida Statutes. On all three of these criteria the proposals of Life Care and HealthPrime are to be preferred over that of Beverly. However, the advantage of such preferences is overcome by the fact that at hearing Beverly

    clarified that its 60 percent Medicaid commitment was only a minimum and, more importantly, by the fact that Beverly proposes to provide services to Medicaid patients at rates substantially lower than the Medicaid rates proposed by Life Care and HealthPrime.

70. With regard to Allocation Factor VI of the State Health Plan, Beverly’s proposal best meets the requirements of this allocation factor because it is the only one of the three applicants that proposes to rely solely on in-house staff therapists, proposes to have a director of therapy services, proposes to provide therapy services six days per week, and has an express commitment to provide outpatient therapy.

71. With regard to Allocation Factor VII of the State Health Plan, Beverly’s proposal best meets the requirements of this allocation factor because Beverly is proposing the most economical delivery of Medicaid services. Beverly’s proposed charges for Medicaid services are substantially lower than those of Life Care and HealthPrime. This appears to be an especially significant factor in view of the purposes of the certificate of need program.

72. With regard to Allocation Factor XII of the State Health Plan, Beverly’s proposal best meets the requirements of this allocation factor because Beverly has the lowest administrative costs and the highest patient care costs of the three Petitioners. Like Allocation Factor VII discussed

    immediately above, this allocation factor also appears to be an especially important factor in view of the purposes of the certificate of need program.

73. With regard to the criteria described at Section 408.035(1)(b), Florida Statutes, Beverly’s proposal best meets those criteria because it would do more than either of the other two proposals to address unmet needs in the subject subdistrict and to more nearly equalize the bed to population ratios in the two counties that make up the subdistrict.

74. Upon consideration of all of the foregoing in light of all of the other criteria discussed in the findings of fact, it appears that, on balance, Beverly’s proposal is the best of three good proposals.

RECOMMENDATION

On the basis of all of the foregoing it is RECOMMENDED that a Final Order be issued in this case GRANTING the application of Beverly Savana Cay Manor, Inc., for certificate of need number 8270, DENYING the application of HealthPrime, Inc., for certificate of need number 8271, and DENYING the application of Life Care Centers of America, Inc., for certificate of need number 8268.

DONE AND ENTERED this 11th day of July, 1997, in Tallahassee, Leon County, Florida.

MICHAEL M. PARRISH

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Filed with the Clerk of the Division of Administrative Hearings this 11th day of July, 1997.

ENDNOTES

1/ The determination of this ultimate issue is especially difficult in this case by reason of the high quality of all three of the competing applications. All three applicants are responsible and successful providers of nursing home services.

All three applications propose the construction and operation of high quality facilities. Absent the competing applications, any one of the three applications would be granted without hesitation.

2/ The unqualified word “Beverly” is used in this document to refer to the applicant, Beverly Savana Cay Manor. References to other entities in the Beverly family of nursing homes include additional identifying information.

3/ All of the exhibits and witnesses are indexed in the transcript of the final hearing. No useful purpose would be served by listing them all again in this Recommended Order.

4/ Petitioners HealthPrime, Inc., and Life Care Centers of America, Inc., each filed their own separate proposed recommended orders. Petitioner Beverly Savana Cay Manor, Inc., and the Respondent, Agency For Health Care Administration, filed a joint proposed recommended order.

5/ The 1990 census information may no longer be accurate. The current Medicaid utilization rates in the two counties suggest that there may be a higher percentage of elderly living in poverty in Santa Rosa County.

6/ The record contains various examples of anecdotal and approximate information about care the Petitioners have provided in their other facilities to AIDS patients and HIV positive patients, but there is no reliable evidence sufficient to reach a conclusion as to which of the Petitioners has provided the greatest percentage of such care. On the basis of the limited evidence available in the record, it is unlikely that any such care comprises a large percentage of the care provided by any of these Petitioners.

7/ HealthPrime committed to accepting “an equitable assignment of AIDS patients from the county’s public health unit.”

8/ See, e.g. Section 409.912, Florida Statutes: “The department shall purchase goods and services for Medicaid recipients in the most cost-effective manner consistent with the delivery of quality medical care.”

9/ On the issue of the quality of care historically offered by Beverly, the other two parties requested that official recognition be taken of the following matters: an appellate court decision involving a Beverly facility in Florida and four final orders entered on uncontested administrative complaints against Beverly facilities in Florida. Official recognition of those documents was granted. The parties requesting official recognition have also requested that findings of fact be made based on the facts recited in those five documents. The fact finding requested in this regard has not been made. See Trucking Employees of North Jersey Welfare Fund, Inc. v. Romano, 450 So.

2d (Fla. 1984).

10/ All three of the Petitioners are major players in the nursing home business and can be counted on to make continuous efforts to provide high quality care. Based on human experience, it is reasonable to expect that in the future they will all from time to time fail in their efforts. But when such failures arise, it is also reasonable to expect that all three of these Petitioners will take appropriate corrective action. On the evidence in this case, there is no reason to expect that in the future any one of these Petitioners will provide remarkably better or worse care than the others.

11/ In this regard attention is directed especially to portions of the testimony of Dr. Roena Norman which reveal that the Florida A & M School of Nursing does not have any plans for most of the money it has received from Beverly (page 259) and has never used any of the Beverly facilities for student training (page 260).

12/ The fact that one of the Petitioners (Beverly) has substantially greater financial resources than the other two does not appear to be any great significance where, as here, each of the other two Petitioners has sufficient financial resources for project accomplishment.

COPIES FURNISHED:

Jay Adams, Esquire

Douglas L. Mannheimer, Esquire Broad & Cassel

Post Office Drawer 11300 Tallahassee, Florida 32302

Theodore E. Mack, Esquire Cobb, Cole & Bell

131 North Gadsden Street Tallahassee, Florida 32301

R. Bruce McKibben, Jr., Esquire Holland & Knight

Post Office Drawer 810 Tallahassee, Florida 32302-0810

Paul A. Vazquez, Esquire

Agency for Health Administration Fort Knox, Building III

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Sam Power, Agency Clerk

Agency for Health Care Administration Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5402

Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308-5402

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 96-002444CON

Orders for Case No: 96-002444CON