STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LIFE CARE HEALTH RESOURCES, INC., )

)

Petitioner, )

)

vs. ) Case No. 97-5414

)

AGENCY FOR HEALTH CARE ) ADMINISTRATION and NATIONAL ) HEALTHCARE, L.P., )

)

Respondents. )

) NATIONAL HEALTHCARE, L.P., )

)

Petitioner, )

)

vs. ) Case No. 97-5701

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on August 24, 1998, through August 28, 1998, in Tallahassee, Florida, before the Division of Administrative Hearings, by its designated Administrative Law Judge, Suzanne F. Hood.

APPEARANCES

For Petitioner Life Care Health Resources, Inc.:

R. Bruce McKibben, Jr., Esquire Post Office Box 1798 Tallahassee, Florida 32302-1798

For Petitioner National Healthcare, L.P.:

Gerald B. Sternstein, Esquire

Frank P. Rainer, Esquire Sternstein, Rainer and Clarke, P.A.

314 North Calhoun Street Tallahassee, Florida 32301-7606

For Respondent Agency for Health Care Administration: Richard A. Patterson, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUE

Which Certificate of Need (CON) application for a new 120- bed community nursing home in Agency for Health Care Administration, Nursing Home District 1, Subdistrict 1, should be granted: Life Care Health Resources, Inc. (CON No. 8802) or National HealthCare L.P. (CON No. 8799).

PRELIMINARY STATEMENT

Petitioners Life Care Health Resources, Inc. (LCHRI) and National Healthcare, L.P. (NHC), submitted applications in the same batching cycle to the Agency for Health Care Administration (the Agency or AHCA) for a CON to construct and operate a new nursing home facility in AHCA's Nursing Home District 1, Subdistrict 1. The Agency preliminarily granted NCH's application, CON No. 8799 and denied LCHRI's application,

CON No. 8802. LCHRI filed a Petition for Formal Administrative Hearing in Case No. 97-5414. NHC also filed a petition in

Case No. 97-5701 as an "approved applicant."

The Agency referred the petitions to the Division of Administrative Hearings (DOAH), requesting the assignment of an

Administrative Law Judge. The petitions in Case Nos. 97-5414 and 97-5701 were consolidated with a number of other cases. Prior to the final hearing, DOAH relinquished jurisdiction in all of the consolidated cases except Case Nos. 97-5414 and 97-5701.

Prior to hearing, the parties stipulated to a number of facts and to each of the applicants' compliance with many of the statutory and regulatory criteria for the issuance of a CON. The following criteria remain at issue for compliance/comparison in the proceeding: District Health Plan Allocation Factors IV and VI; State Health Plan Allocation Factors III, V, VI, VIII, IX, and XII; and statutory review criteria located in Sections 408.035(1)(b), 408.035(1)(c), 408.035(1)(e), 408.035(1)(h),

408.035(1)(i) (only as to long-term financial feasibility), 408.035(1)(j), 408.035(1)(l), 408.035(1)(m), and 408.035(1)(n),

Florida Statutes.

LCHRI presented the testimony of seven witnesses at hearing.

LCHRI Exhibits 1 through 6 were admitted into evidence. NHC presented the testimony of seven witnesses. NHC Exhibits 1 through 15 were admitted into evidence.

The Agency presented the testimony of one witness. AHCA's Exhibits 1 through 3 were admitted into evidence.

The transcript was filed on September 17, 1998. Proposed Recommended Orders of the parties were filed November 16, 1998.

FINDINGS OF FACT THE APPLICANTS

1. The NHC Application

   
   

   1. NHC proposes to build a new 120-bed facility. The project will have approximately 63,104 gross square feet. NHC projects the total project cost to be $8,763,625.

   2. NHC agreed to condition its application on the following: (a) a 16-bed subacute unit; (b) a 30-bed Alzheimer/Dementia services unit; (c) provision of adult day care through an existing provider; (d) respite care; and (e) care for HIV/AIDS patients. NHC further agreed to accept as a condition a Medicaid commitment of 74.5 percent of patient days. Finally, NHC offered to condition its application on the acceptance of "patients with HIV/AIDs referred by the public health unit serving the County in which the facility is or is proposed to be located." NHC agrees to be subject to monitoring and fines in the event that any of the above conditions are not met.

   3. The late Carl E. Adams, M.D., a Tennessee physician, founded NHC in 1971. From the beginning, NHC adopted innovations in nursing care which are now standard in the care of the elderly, e.g., skilled care programs, 24-hour RN coverage, computerized patient care assessment programs, and physical, occupational, and speech therapy. It is currently adopting other innovative therapies such as pet and music therapy, as well as children's visits.

   4. NHC is one of the largest owners/managers of nursing homes and assisted living facilities in the country. It has operations in 107 centers located in ten states.

   5. NHC has been operating nursing centers in Florida since 1985. At the time of its application, NCH owned nine nursing homes in the State of Florida, including five that had a superior rating. NHC manages 32 other centers in the State of Florida, the majority of which have superior ratings.

   6. NHC manages a facility in Escambia County known as FCC Palm Garden of Pensacola. Palm Garden has 180 beds. NHC does not own any facilities in the health planning District I, Subdistrict 1, which includes Santa Rosa and Escambia Counties.

   7. NHC has a well-developed corporate and regional management structure. The management structure places a significant amount of responsibility for decision-making at the facility level. The corporate and regional staff support individual facilities in the delivery of health care services to patients.

   8. At the corporate level, the following people are available to assist the local nursing homes and regional personnel in delivering high quality service: Vice President of Patient Services, Corporate Dietitian, and Coordinator of Social Services. Also, there are support service personnel for medical records, accounting and all of the therapy services, including but not limited to physical, occupational, and physical therapy.

      NCH has separate departments, which support nursing home development, construction, interior design, and human resources, as well as the company's retirement and assisted living facilities.

   9. At the regional level, NHC has established the following directorships to provide support personnel for the individual facilities: Regional Administrator, Regional Nurse, Regional Dietitian, Regional Social Worker, Regional Activities Coordinator, Regional Medical Records Director, Regional Accountant, Regional Physical Therapist, Regional Occupational Therapist, and Regional Speech Therapist. In addition to providing support, regional personnel actively monitor the quality of care provided at each of the NHC facilities.

   10. Annually, the NHC regional team spends two to three days in each center doing a comprehensive assessment of the delivery of care. Once a year, the Regional Nurse performs a full patient-care survey for each patient in each facility. Quarterly, the Regional Nurse reviews portions of each patient's care, so that twice a year there is a complete review of each case file.

   11. The regional team conducts Consumer View Surveys, which were developed by NHS. These surveys determine patient satisfaction with the quality of care, quality of life, and matters of patient rights which extend to family members.

   12. All of NHC's patients receive a quality control card to mail back to the home office upon admission, ninety (90) days after admission, and on each anniversary. The regional team reviews all patient care outcomes on a monthly basis.

   13. NHC's management philosophy includes a strong commitment to provide quality of care to its patients. Management strives to ensure that NHC employees have the education, training, and experience to deliver that care. Extensive corporate resources and support are provided to enable all the employees in the corporation to educate and improve themselves in the provision of long-term care.

   14. NHC has extensive programs in place to train administrators (two-year program), directors of nursing (preceptor program), dietitians, and certified nursing assistants (three levels of in-house education beyond the normal certification requirements.) NHC provides incentives to its employees to encourage their participation in educational and training programs, i.e., tuition reimbursement for college courses, in-house seminars, and annual company seminars as an entire organization and along specialty lines.

   15. NHC has developed extensive, state-of-the-art quality assurance, patient assessment and utilization programs. NHC, through its Partners in Excellence (PIE) program, Presidential Excellence Awards and CNA Awards, provides strong financial incentives to staff to maintain and improve quality care.

   16. NHC is also directly involved in community education efforts in the area of long-term care research and geriatric education. NHC founded the Foundation for Geriatric Education. This foundation has funded numerous chairs at various colleges and promotes public education on geriatric issues. Also, NHC supports and contributes to the training of LPNs, CNAs, therapists, and dietitians at local vocational schools, junior colleges, and universities.

2. The LCHRI Application

1. LCHRI is a Tennessee corporation, which is wholly owned by Forest L. Preston. It is not a subsidiary or an affiliate of any other corporation. LCHRI is self-described in the application as "a Tennessee corporation whose purpose is to develop and acquire high quality skilled nursing facilities."

2. Mr. Preston is also the sole shareholder of Life Care Centers of America, Inc. (LCCA). LCCA is the largest privately held nursing home company in America. It operates approximately 25,000 nursing home beds in 200-plus facilities in 28 states. It also operates over 2,000 retirement center units.

3. LCCA operates nine nursing homes in Florida. LCHRI intends to enter into a management arrangement with LCCA for the operation of its proposed facility.

4. LCHRI is proposing to construct a 120-bed freestanding nursing home in the north/northeast portion of Escambia County. The facility will have approximately 57,600 gross square feet.

   LCHRI proposes to construct and equip the facility for the sum of

   
   

   $8,497,000.

   
   

5. LCHRI conditions its application on providing at least

   
   

   75 percent of its patient days to Medicaid patients. LCHRI also conditions its application on providing a 20-bed secured Alzheimer's/dementia unit and a ten-client adult day care center.

6. LCHRI's application states that it will serve Medicare/subacute patients and HIV/AIDS patients. It will provide respite care and care to hospice patients. LCHRI's program will include a wide range of therapies, including occupational therapy, speech therapy, and physical therapy. It will provide intravenous care, wound care, and ventilator/respiratory care. However, care to these patient populations and provision of these services is not a condition of LCHRI's application, which would be subject to subsequent monitoring by the Agency.

7. LCHRI will provide the required and necessary administrative services to its residents, including pre-admission screening services, utilization review, appropriateness review, care planning, and discharge planning services. The effectiveness of those services will be monitored through a Continuous Quality Improvement Program.

8. LCHRI will incorporate into its project all required dietary programs, activities programs, and programs for family and community involvement. It will assure that resident's rights

   are protected by implementation of a Residents' Rights Policy. Resident security will be assured via use of a security council, a safety committee, and a program designed to prevent accidents. A Resident's Council will provide for the expression of grievances, offer a means of making suggestions to the nursing home, and assist management in understanding the needs and concerns of residents.

   COMPARATIVE FACTORS BETWEEN NHC'S AND LCHRI'S APPLICATIONS

   
   

   1. Quality of Care: Level and Extent of Services

      
      

9. A significant comparative factor between the applicants is the level, quantity, and quality of care that both propose. The staffing and extent to which each applicant's proposal would serve various residents of the health planning district was left at issue by the parties. Likewise, the comparative quality of care of the applicants was left at issue.

10. The parties' prehearing stipulation states as follows regarding state health plan allocation factors:

    Allocation Factor VIII regarding history of providing superior resident care programs is at issue, provided, however, the parties shall only introduce evidence of licensure

    history, JCAHO accreditation, staffing, level of service, programs and architectural matters.

    
    

    Allocation Factor IX regarding proposed staffing levels, all applicants meet minimum staffing levels. However, the parties retain the right to contest whether the applicants have the ability to meet the proposed staffing levels and to use the proposed staffing levels as a comparative factor.

    
    

    Allocation Factor XII relating to the preference for applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district is at issue in this proceeding.

    
    

11. The parties' prehearing stipulation regarding the statutory review criteria located in Section 408.035(1)(c), Florida Statutes, states as follows:

    Subsection (c) relating to quality of care, all parties meet the criteria and it is not at issue as to past quality of care or quality of care proposed in the applications; provided, however, the parties may use this criteria as a comparative factor, but shall only introduce evidence as to licensure history, JCAHO accreditation, level of service, programs, staffing and architectural matters.

12. Both applicants will provide staffing levels which exceed minimum standards. NHC proposes a total of 115.87 full- time equivalent (FTE) positions, with 67.2 total nursing FTEs. LCHRI proposes a total of 109.3 FTE positions, with 62.2 total nursing FTEs.

13. Some of NHC's nursing staff will have administrative duties in addition to their direct patient care duties. The Assistant Director of Nursing, the Subacute Unit Director, and

    the Alzheimer's Unit Director will serve in dual roles. However,

    there is no persuasive evidence that serving as an RN and a unit director will detract from a nurse's direct patient care responsibilities.

14. NHC proposes 10.37 FTEs for ancillary care (therapy) using. LCHRI proposes 8.5 FTEs for ancillary care. Both parties presented evidence that they will provide therapists for eight hours a day, five days a week. LCHRI's statement that it will be able to stagger its staff to allow for therapies up to seven days per week is not persuasive.

15. NHC will have six more full-time persons serving its

    
    

    120 beds than LCHRI will have serving its 120 beds and ten person adult day care. Five of the additional persons who will staff the NHC facility are involved in direct patient nursing care.

16. Both applicants will provide a wide range of therapeutic programs necessary to the successful operation of a nursing home. LCHRI proposes to use in-house therapists to accentuate continuity of care. NCH's application states that it will contract with its wholly-owned subsidiary, National Health Rehab, for the services of therapists. In either case, the applicants will be able to provide patients with high-quality ancillary care.

17. Another method of determining the relative merits of an applicant's commitment to provide patient care services is a comparison of the applicant's expenditure for administrative and patient care costs to the district average.

18. The average administrative cost of the district is

    
    

    $27.91 a day per patient. NHC projects its administrative cost will be $23.37. LCHRI's administrative cost will be $24.32.

19. The average patient care cost of the district is $58.94 a day per patient. NHC's patient care cost will be $86.46 a day per patient. LCHRI will spend $61.97 a day per patient on patient care. NHC will spend $993,115 a year more than LCHRI on patient care. NHC's greater patient care cost will provide more nursing staff, better paid nursing staff, incentives and bonuses to nursing staff for quality service, higher dietary expenditures, and more recreational and social activities.

20. Another indicator of quality is the historical performance of an applicant pursuant to its licensure history. LCHRI has no operating history. Therefore, the operating history of LCCA, the projected operator of the LCHRI facility, must be examined here.

21. There are three (3) types of licensure awarded by the State of Florida: Conditional, Standard, and Superior. The license categories are awarded and/or changed upon the regular bi-annual survey for licensure renewal or after a complaint investigation survey. The survey process involves grading violations as Class I, II, or III. Class I violations are the most serious and require immediate correction. A facility that receives a conditional rating at the time of its re-licensure or other survey has Class I or II deficiencies.

22. Of the nine facilities owned and operated by NHC in Florida, seven had a superior rating and two had a standard ratings at the time of the final hearing. The facility managed by NCH in Escambia County, Palm Garden of Pensacola, was issued a conditional license on May 22, 1997. However, the Palm Garden facility corrected its deficiencies and subsequently received a standard license on June 11, 1997. As of May 5, 1998, the Palm Garden facility had a superior rating.

23. As of July 30, 1998, LCCA had five skilled nursing facilities in the state: two with a superior rating, and three with a standard rating. Additionally, LCCA operates three nursing homes for affiliated owners in the state: one with a superior rating and two with a conditional rating. The licensure history for the ninth nursing home operated by LCCA, Life Care of Orlando, is not included in the record.

24. At the time of the hearing, LCCA operated 60 facilities in the United States that were accredited by the Joint Commission on Accreditation of Health Care Organizations (JCAHO). LCCA operated 34 facilities nationally that had JCAHO applications pending.

25. NHC also has significant experience with JCAHO accreditation. It operates 16 facilities in its north Florida region. One of these facilities, which is owned by NCH, is JCAHO accredited. Five of the facilities, which are managed by NHC,

    are accredited. One of the latter has a special accreditation for its subacute unit.

26. Both parties have architectural features which promote quality of care. These architectural features are discussed in detail below.

27. As to State Health Plan Allocation Factor VIII, NHC has a comparatively better history of providing superior resident care programs as evidenced by its licensure history, staffing, level of service, and programs.

28. As to State Health Plan Allocation Factor IX, on a comparative basis, staffing levels proposed by NHC compare favorably to LCHRI's proposal.

29. As to State Health Plan Allocation Factor XII, both applicants propose lower administrative costs and higher resident care costs compared to the average nursing home in the District. NHC compares favorably as to LCHRI in all aspects of this review criteria. It is undisputed that NHC will spend $24 per patient per day more than LCHRI on patient care.

30. As to Statutory Review Criteria Section 408.035(1)(c), Florida Statutes, NHC's 120-bed proposal, when compared to LCHRI's 120 proposal, will provide a higher quality of care as to licensing history, level of service, programs, and staffing.

    1. Special Programs

    
    

31. The type and nature of special programs proposed by a nursing home applicant is at issue in this proceeding. The

    parties' prehearing stipulation states as follows regarding the state health plan allocation factors:

    Allocation Factor III relating to specialized services to special care patients is not at issue in this proceeding. All applicants meet this preference, but it can be a basis for comparison.

    
    

    Allocation Factor VI regarding proposals to provide innovative therapeutic programs is at issue in this proceeding.

    
    

32. The parties' prehearing stipulation states as follows regarding Section 408.035(1)(b), Florida Statutes:

    Subsection (b) is at issue to the extent the parties want to argue that their respective proposals better meet the need for health care services within the health planning district and as to any special programs proposed by the applicants.

    
    

    1. Alzheimer Units

       
       

33. NHC proposes to operate a secured Alzheimer's care unit with 30 beds. The implementation of this separate unit is a condition of NHC's application. The unit has numerous amenities such as a very large dining and lounging area for the Alzheimer's patients. The unit is also specially designed to accommodate the wandering characteristics of the Alzheimer's patient. None of the corridors end in a dead end. The design of the unit allows for the circular, wandering motion of the typical Alzheimer's patient, both inside the unit and from the building to the secured courtyard.

34. NHC's application proposes a large outdoor walled courtyard area for the Alzheimer's patients. The courtyard has a well landscaped gazebo area for the patients. NHC's staff in the Alzheimer's unit will receive specialized training for the care of this type of patient.

35. LCHRI's facility will include a 20-bed Alzheimer's and/or dementia unit. LCHRI's Alzheimer's unit has a smaller courtyard than the one proposed by NHC. The LCHRI unit has numerous dead end corridors, which hamper the circular wandering

    pattern of the typical Alzheimer's patient. The floor coverings (vinyl) have a shine, which is disruptive to the Alzheimer's patient.

36. Over the next few years, the health care planning district will need more beds for Alzheimer's patients than either of the applicants are proposing. Under these circumstances, NHC's 30-bed unit will best meet the growing need for beds that will serve people with dementia and Alzheimer's disease.

    1. Subacute Units

       
       

37. NHC proposes a comprehensive subacute unit. The subacute unit will handle medically complex patients who require the following services: TPN, dialysis, oncology treatment, cardiac rehabilitation, ventilator use, IV care, and respiratory therapy. NHC's subacute unit will have 16 beds; its implementation is a condition of NHC's application.

38. LCHRI asserts that it also will provide Medicare/subacute care. The LCHRI application describes a 20-bed unit. LCHRI does not condition its application on implementing this unit.

39. NHC's subacute unit will provide a higher level of care than the unit proposed by LCHRI.

    1. Adult Day Care

       
       

40. Both applicants condition their respective applications on the provision of adult day care. LCHRI offers to condition its CON on a 10-person in-house program which will focus on early

    stage Alzheimer's patients. NHC proposes to condition its CON on providing adult day care through existing providers.

41. The in-house adult day care program suggested by LCHRI will handle persons with Alzheimer's disease and dementia. The nursing staff from the Alzheimer's unit will make rounds to the adult day care unit and be responsible for the implementation of the program, even though the two units are at the extreme opposite ends of the building. The adult day care area does not appear to be a secured area.

42. The parties disputed whether there is a need for adult day care within the health planning district. NHC conditioned its application on the provision of adult day care services through existing providers to avoid duplication of services already in the district.

    1. Rehab and Restorative Nursing

    
    

43. NHC has extensive, existing rehabilitative and restorative nursing programs. The goal of NHC's rehabilitative programs is to achieve and maintain the residents' highest level of functioning. NHC uses the innovative recreational and treatment therapies of children contact, music therapy and pet therapy.

44. NHC proposes a total of 10.37 FTEs of therapists for rehabilitation care compared to 8.5 FTEs proposed by LCHRI. NHC proposes 2.8 FTEs for restorative nursing compared to 2.0 FTEs for LCHRI.

45. As discussed above, both applicants will provide a wide range of therapeutic programs. LCHRI's proposal includes several noteworthy features relating to these therapies. They include the following: (1) an outdoor textured walking area that provides different kinds of walking environments, e.g. steps, curbs, inclines, drop ramps for wheelchairs, rough stones, grass, etc; (2) a transitional unit that is akin to a small apartment, including a kitchenette, a dining area, a regular bed (as opposed to a standard nursing home bed), and a regular bathroom; and (3) a therapy suite which allows for individualized therapy treatments and which is equipped with offices for in-house therapy professionals. However, the physical therapy unit and the specialized therapy courtyard are separated by a significant distance.

46. The LCHRI application asserts that its facility will employ in-house therapists. Pursuant to a contract, LCCA will act as a consultant for LCHRI's therapists. However, LCCA will not be responsible for managing the clinical aspects of the LCHRI rehabilitation and restorative programs. LCCA will not be responsible for the results of the outcomes of these programs. LCHRI's claim of competency and proficiency in this area is therefore tentative.

47. On the other hand, NHC and its wholly-owned subsidiary, National Health Rehab, will have a high level of integration in the delivery of rehabilitation services. The close corporate

    relationship between the two entities will minimize any managerial or clinical territorial conflicts, which might otherwise exist with an outside third party rehabilitation company. Moreover, the rehabilitation staff assigned to NHC's proposed facility will be permanently located there and not rotated among other facilities.

48. As to State Health Plan Allocation Factor III, NHC provides superior specialized programs to residents of the health planning district. Based upon absolute numbers, NHC proposes ten

    (10) more Alzheimer's beds than LCHRI. NHC proposes to condition its application on the provision of Medicare subacute beds. NHC will provide a higher level in its subacute unit than LCHRI. NHC demonstrated that it has in the past, currently does, and will in the future provide care to HIV/AIDS patients.

49. As to State Health Plan Allocation Factor VI, NHC will provide superior innovative therapeutic programs.

50. As to Statutory Review Criteria Section 408.035(1)(b), Florida Statutes, NHC's specialized programs are superior in satisfying this requirement.

    ARCHITECTURAL DESIGN

    
    

51. Architectural design remains at issue in this proceeding. The parties' prehearing stipulation states as follows regarding one of the state health plan allocation factors:

    Allocation Factor V regarding proposals to construct facilities which provide maximum

    resident comfort and quality of care is at issue in this proceeding.

    
    

52. The parties' prehearing stipulation states as follows regarding statutory review criteria located in Sections 408.035(1)(c) and 408.035(1)(m), Florida Statutes:

    Subsection (c) relating to quality of care, all parties meet the criteria and it is not at issue as to past quality of care or quality of care proposed in the applications; provided however the parties may use this criteria as a comparative factor, but shall only introduce evidence as to licensure history, JCAHO accreditation, level of service, programs, and staffing and architectural matters.

    
    

    Subsection (m) relating to the costs and methods of proposed construction is at issue in this proceeding.

    
    

53. A miscellaneous section of the parties' prehearing stipulation states as follows:

    The architectural plans and narrative contained in each application may be accepted into evidence without the need for further authentication, corroboration, or foundation. The feasibility, validity and relative merits of each party's architectural plans is at issue and are a basis of comparison between the parties applications.

54. Architecturally, the proposed bathing facilities for residents distinguish the proposals of the applicants. NHC has

    58 bathing areas, a substantial majority of which are "in room" showers. LCHRI's proposed facility has 16 bathing facilities. Two of LCHRI's bathing facilities are centralized for the general population's use. Four of LCHRI's bathing facilities are located

    in areas designated for special programs or patients, i.e., physical therapy, Alzheimer care, adult day care and isolation room. Ten rooms in LCHRI's Medicare certified unit have showers in individual patient rooms. Except for the bathing facilities located in the isolation room and Medicare certified unit, all of LCHRI's bathing facilities are centralized.

55. NHC will have one bathing area for every two residents. LCHRI's ratio of bathing area per resident ranges from 1:2 to 1:40, depending on the type of unit.

56. One of the most important daily functions performed in a nursing home is daily bathing. Good nursing home design incorporates design features that allows residents to retain their dignity while bathing. Private showers in individual rooms are a superior design alternative to enhance patient dignity and quality of life in the nursing home.

57. A comparison of other architectural features between the two applicants is as follows: (a) NHC's total square footage for the entire facility is greater than LCHRI's total square footage; (b) NHC will have more square footage per resident than LCHRI, including LCHRI's adult day care clients; (c) NHC will have 22 private rooms compared to LCHRI's 11 private rooms; (d) NHC will have 49 semi-private rooms compared to LCHRI's 54 semi- private rooms; (e) NHC's resident rooms will be equal in size or larger than any of LCHRI's resident rooms; (f) NHC will have six dining areas compared to LCHRI's four dining areas; (g) LCHRI

    will have three courtyards compared to NHC's two courtyards; (h) NHC will have two screened porches compared to no screened porches for LCHRI; (i) LCHRI will have six dayrooms, activity rooms and/or lounges for residents compared to three for NCH; and

    (j) LCHRI will have four lounges, classrooms and/or conference rooms for staff compared to three for NHC.

58. NHC's facility provides for carpeting in the hallways, patient rooms, dining and other common areas. NHC uses wallpaper in patient rooms and ceramic tile in the bathrooms. NHC's corridors are 9 feet wide and have cart alcoves. For heating and air conditioning, NHC uses a water source heat pump, with individual controls in the rooms. NHC's two isolation rooms have a work area between the rooms and the corridors for more separation.

59. NHC's facility is designed to accommodate a future expansion of 120 beds. Therefore, its ancillary areas are on one side of the facility rather than in the middle. Some of NHC's resident rooms are up to 300 feet from the dining area.

60. LCHRI's facility also provides for carpets in the corridors, patient rooms, and many of the common areas. LCHRI uses vinyl in the bathroom. LCHRI has only one isolation room, which is a standard room, not specifically designed for this function. The walls in the patient rooms are painted, except for the patient room headwall and corridors. LCHRI's hallways do not

    have cart alcoves. For air conditioning, LCHRI uses through-wall heat pump units.

61. LCHRI's facility is not designed for future expansion. Therefore, its ancillary areas are located in the center of the complex, with a service corridor at the rear of the building.

62. The total square footage devoted to dining, recreation, activities, sun porches, ice cream parlors, living rooms for NHC is 7,489 square feet. LCHRI has 7,050 square feet devoted to such spaces.

63. The therapy areas in both plans are essentially the same size. Both facilities have an in-house classroom and training room. NHC's classroom is 888 square feet. LCHRI's classroom is 388 square feet.

64. NHC is proposing a Type 4 construction. LCHRI will use a Type 5 construction. Type 4 construction has a higher rating for fire safety.

65. As to State Health Plan Allocation Factor V, the NHC proposal will provide maximum resident comfort and, on a comparative basis, a better quality of care than LCHRI's proposal. The in-room showers in the NHC center are the superior alternative to the centralized bathing proposed by LCHRI.

66. The same is true in regards to Statutory Review Criteria Section 408.035(1)(c), Florida Statutes. NHC's proposal of in-room showers provides a better quality of care as compared to the LCHRI proposal for centralized bathing.

67. As to Statutory Review Criteria Section 408.035(1)(m), Florida Statutes, NHC's method of construction provides more resident comfort and superior amenities.

    SERVICE TO RESIDENTS OF THE DISTRICT (ACCESS)

    
    

68. The extent to which the services and beds provided by each applicant are available to residents of the district is at issue in this proceeding. The parties' prehearing stipulation states as follows regarding the district health plan allocation factors:

    Preference should be given to a CON applicant who has a history of providing care, or who will commit to provide care for patients with HIV/AIDS . . . . [This preference, District Health Plan Allocation Factor IV is at issue.]

    
    

    Preference should be given to a CON applicant who agrees to accept patients with HIV/AIDS referred by the public health unit serving the county in which the facility is or is

    proposed to be located [This

    preference, District Health Plan Allocation Factor VI is at issue.]

    
    

69. The parties prehearing stipulation states as follows regarding statutory review criteria located in Sections 408.035(1)(b), 408.035(1)(h), 408.035(1)(j), 408.035(1)(l), and 408.035(1)(n), Florida Statutes.

    Subsection (b) is at issue to the extent the parties want to argue that their respective proposals better meet the need for health care services within the health planning district and as to any special programs proposed by the applicants.

    
    

    Subsection (h) relating [to] the effects [that] the project will have on clinical needs of health professional training programs in the service district; and 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; [and] 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, are at issue in this proceeding.

    
    

    Subsection (j) relating to the special needs of and circumstances of health maintenance organizations is at issue.

    
    

    Subsection (l) relating to the probable impact of the proposed project on the costs of providing health care 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 service to promote quality assurance and cost effectiveness, is at issue in this proceeding.

    Subsection (n) relating to the applicant's past and proposed provision of health care

    services to Medicaid patients and the medically indigent, is at issue in this proceeding.

    
    

    1. HIV/AIDS

       
       

70. The local health plan includes two preferences which seek to foster the commitment of nursing homes to admit and care for HIV/AIDS patients. LCHRI relies upon the LCCA's history of providing care to patients with HIV/AIDS. LCCA provides approximately 1400 patient days of care per year to HIV/AIDS patients in its Orange Grove Rehabilitation Hospital. LCCA also has a facility in Tennessee that cares for HIV/AIDS patients.

71. In contrast, NHC offers to condition its application on the acceptance of HIV/AIDS patients which are referred by the public health unit serving the Escambia County. In addition, NHC has served at least four HIV/AIDS patients in its Florida nursing homes over the past three years. At the time of the Final Hearing, NHC was providing nursing home care to one HIV/AIDS patient.

    1. Medicaid

       
       

72. In its Florida facilities, NHC provides 47.84 percent of its patient days to Medicaid patients. Most of NHC's facilities provide more patient days of care to Medicaid patients than is required as a condition of their respective CONs. One of its facilities provides a significant number of Medicaid patient days of care even though there is no such condition on its CON.

    NHC conditions its application on the provision of 74.5 percent of patient days for care of Medicaid patients.

73. LCCA has Medicaid conditions at other facilities it operates. Only one of the facilities that it is currently operating does not meet the Medicaid condition on its CON. LCHRI conditions its application on the provision of 75 percent of patient days for care of Medicaid patients.

    1. Medicare

       
       

74. Pursuant to Schedule 7 of the respective applications, NHC proposes to provide 6,058 Medicare days in its second year of operation. LCHRI will provide 4,654 Medicare days in its second year of operation.

75. In addition, NHC proposes to condition its application on implementing a separate subacute unit, which will take care of higher acuity patients. LCHRI's subacute and Medicare patients will be served in a combined unit.

    1. Private Pay

       
       

76. LCHRI raised concerns over NHC's lack of semi-private rooms for private pay patients. NHC's proformas do not reflect any semi-private room revenue for private pay patients because these patients generally require private rooms. Nevertheless, NHC will make semi-private rooms available to private pay patients.

    1. HMO/Insurance

77. NHC proposes to charge health maintenance organizations (HMOs) and insurance companies a rate of $315 a day in the second year of operation. During the same period of time, LCHRI proposes to charge HMOs and insurance companies at the rate of

    $372.69 per day. NHC has specialized regional case managers to handle HMO patients.

    1. Location

       
       

78. LCHRI asserts that its facility will be located in north/northeast Escambia County to better serve the whole district. However, LCHRI does not offer to condition its application upon locating in this area. The north/northeast section of Escambia County is already well served with other nursing homes. Many of the nursing homes currently located in the county are clustered in this area.

79. NHC may elect to locate its facility in the same geographic area as proposed by LCHRI if the market and demand conditions continue to justify such a location. As an applicant which is not bound to a site, NHC has the greater ability to respond to existing market demand at construction time.

    1. Corporate Resources and Personnel

    
    

80. Both applicants have corporate resources to recruit and train personnel to insure quality of patient care. NHC has experience in recruiting personnel in the district through its operation of the Palm Garden of Pensacola facility. LCHRI will

    utilize its experience at a recently opened Florida facility to recruit personnel.

81. In summary, District Health Plan Factors IV and VI indicate a strong preference for the applicant which indicates a commitment to HIV/AIDS patients. NHC agreed to condition its CON on the provision of care for HIV/AIDS patients. Therefore, NHC is entitled to credit for these preferences.

82. As to Section 408.035(1)(b), Florida Statutes, NHC better meets this statutory review criteria. NHC is proposing to provide two new special programs to residents of the health planning district, a subacute care unit for medically complex patients and a dedicated Alzheimer's care unit.

83. With respect to Section 408.035(1)(h), Florida Statutes, both applicants rely on extensive corporate resources to meet this criterion. They both have well-developed programs for the recruitment and training of qualified associates. However, NHC better meets the statutory review criteria because it will provide the residents of the district with a broader range of accessible service.

84. With respect to Statutory Review Criteria Section 408.035(1)(j), Florida Statutes, NHC demonstrated that it will better meet the needs of HMOs because it will charge the lowest rate.

85. With respect to Statutory Review Criteria Section 408.035(1)(l), Florida Statutes, an award of a CON to either

    applicant will foster competition in the district by establishing the presence of a new nursing home provider. NHC has a presence in the district through its operation of the Palm Garden of Pensacola facility, but not as an owner.

86. With respect to Statutory Review Criteria Section 408.035(1)(n), Florida Statutes, the parties are essentially equal on this point. Both have comparable past histories in providing Medicaid and charity care. Furthermore, both propose to provide Medicaid care at essentially the subdistrict average.

    ECONOMIC MATTERS

    
    

87. A few economic issues as to project costs, long-term financial feasibility, and economies of scale are at issue. These economic issues clearly distinguish the two applicants.

    1. Economies of Scale

       
       

88. The parties' prehearing stipulation states as follows regarding Section 408.035(1)(e), Florida Statutes:

    Subsection (e) relating to probable economies and improvements in service that may be derived from operation of joint, cooperative or shared health care resources is at issue in this proceeding.

    
    

89. NHC is the superior applicant as to the statutory review criteria located in Section 408.035(1)(e), Florida Statutes. Adding a facility to NHC's strong regional structure will result in economies and improvements in service in the joint operation of all of its facilities. NHC also demonstrated significant economies of scale in the joint and cooperative

    clinical ventures with third party health care practitioners and providers.

90. LCCA, which will be the manager for LCHRI's project, does not claim to have a centralized or focused regional management team. Its application specifically describes a decentralized management with the focus on the individual center. LCCA's recently formed regional staff is comprised of only six individuals.

    1. Project Costs

       
       

91. Project costs remain at issue in this proceeding. The parties' stipulation states as follows regarding estimated project costs, Schedule I:

    The information contained on each Schedule 1 of the applications is deemed to be correct and true and will not require further proof at hearing; provided, however, the parties may contest individual line items.

    
    

92. The parties' stipulation regarding Section 408.035(1)(m), Florida Statutes, states as follows:

    Subsection (m) relating to the costs and methods of proposed construction is at issue in this proceeding.

    
    

93. Line 12 of LCHRI's Schedule I indicates that the construction costs for its project is $5,079,000. In the notes which accompany LCHRI's Schedule 1, the cost of construction per square foot is $95.51 and the square footage is 57,576. When one multiplies these numbers, the result is $5,499,083.76, which is approximately $420,083 higher than the number on line 12 in LCHRI's Schedule 1. LCHRI's witnesses gave no explanation or reconciliation of this obvious arithmetical error.

94. LCHRI criticized NHC's costs in Schedule 1: land costs, site preparation, moveable equipment, financing costs, and start-up costs. These criticisms are not persuasive for the following reasons:

    1. Historical Cost

95. LCHRI's criticism is based on a comparison with LCCA's historical costs for these items. NHC provided competent evidence to verify that the costs contained in its Schedule 1 are based on NHC's actual historical costs over dozens of projects. Utilizing past cost experience of an organization is a valid technique for estimating project costs.

    1. Land Cost

       
       

96. LCHRI plans to pay approximately $125,000 per acre for its land. NHC will pay considerable less at $75,000 per acre. LCHRI's claim that NHC's land cost is low is without merit. NHC demonstrated that its land cost is reasonable. They were determined by obtaining cost estimates from a qualified real estate broker from the Pensacola area.

    1. Site Preparation

       
       

97. LCHRI will spend $420,000 on site preparation. NHC will spend $17,000 for the same expense. NHC included a substantial portion of its site development costs in its construction cost; these costs are reasonable and appropriate.

    1. Movable Equipment

       
       

98. The cost of NHC's movable equipment is appropriate based upon its historical experience and as delineated in the notes and assumptions.

    1. Financing Costs

99. By virtue of its financing affiliate, NHC is able to achieve savings in the financing of its project. The amount it projects is appropriate based upon NHC's historical experience.

    1. Start-up Costs

    
    

100. NHC demonstrated that its start-up costs are adequately estimated based on its relevant historical experience. NHC is able to manage this cost efficiently because it uses its regional managerial and clinical staff to do many of the start-up functions and work.

101. As to project costs, NHC demonstrated by substantial competent evidence that its project costs were reasonably determined and appropriate. In contrast, LCHRI's costs contained in arithmetic error, which remains unexplained.

     1. Long-Term Financial Feasibility

     
     

102. The parties' prehearing stipulation states as follows regarding the statutory review criteria located in Section 408.035(1)(I), Florida Statutes:

     Subsection (i) relating to the long-term financial feasibility (defined as the ability to operate the facility profitably after the start-up period) is at issue.

     
     

     For purposes of comparative review, AHCA defines financial feasibility as having a positive net profit at the end of the second year operations.

     1. Schedule 6 (Staffing)

        
        

103. LCHRI's proposed salaries on Schedule 6 are significantly lower than the prevailing market conditions in

     Escambia County. Therefore, LCHRI has underestimated its labor expense by approximately $435,868. In contrast, NHC has based its proposed salaries on its actual operating experience in the county.

104. As stated above, NHC's Alzheimer unit director, subacute unit director and assistant director of nursing (ADON) are essentially dual designations with RNs or LPNs who are found on the staffing schedule. NHC's staff development coordinator and admissions director are included as administrative staff and the activities director. LCHRS's application does not designate any of these positions except for its ADON who will also serve as the subacute unit director.

105. Additionally, LCHRI intends to retain a dietitian pursuant to a contract on an as-needed basis. LCHRI does not include the dietitian's salary on its Schedule 6. NHC's Schedule

     6 includes an annual salary for a registered dietitian in the amount of $43,290.

     1. Routine Costs

        
        

106. Based on the amount that each applicant will spend on nursing, dietary, other patient care, NHC proposes to spend

     $993,115 more on patient care than LCHRI. At a minimum, this analysis demonstrates that NHC will provide a higher level of patient care.

     1. Medicare Prospective Payment System

107. When the parties filed their applications, the Federal Medicare Program was operating under a "cost-based" reimbursement system. On May 12, 1998, Medicare's reimbursement system changed to a Prospective Payment System (PPS). The PPS system became effective for new nursing homes in the country on July 1, 1998.

108. Under the new system, there are 44 resource utilization groupings (RUGs), which are based upon the level of services consumed by different types of patients. Nursing homes will be required to assess their patients under a diagnostic tool containing questions. Responses to the questions will lead to the assignment of a RUG category for each patient. Each of the RUG categories correlate to a level of reimbursement received per day, regardless of the costs actually incurred by the nursing home.

109. It is undisputed that every new project's Medicare reimbursement will be less under PPS than what it would be under the old system. It is also undisputed that the facility at issue will operate under PPS.

110. LCHRI has been monitoring the development of the PPS system for a number of years. It has voluntarily participated in pilot projects, which utilized the PPS system. As of August 11, 1998, LCHRI had 15 facilities operating under PPS, with another

     40 facilities scheduled to change over to PPS by October 1998.

     
     

111. LCHRI proposes to use in-house therapists as a cost saving measure under PPS. NHC's application proposes to contract

     with a subsidiary corporation for therapeutic services. Contracting with a third party provider for rehabilitation services is more costly.

112. LCHRI proposes less Medicare and subacute care to reduce the negative impact of PPS. LCHRI projects that

     27.1 percent of its revenue will be from Medicare. NHC projects that 41.79 percent of its revenue will be from Medicare.

113. LCHRI asserted that NHC will not achieve its pro forma Medicare rate under PPS. In response to these claims, NHC presented evidence of ways to adjust its practices to meet the requirements of PPS.

114. NHC intends to transfer therapists currently employed by its rehabilitation subsidiary to the individual center's payroll. This change results in the same level of therapy services, yet provides enough cost savings to comply with PPS. NHC estimates the cost savings at $940,000.

115. PPS will result in providers putting more equity into their projects. Under the cost-based reimbursement system, providers had strong incentives to finance projects with debt so that interest costs could be included in their reimbursement. However, under PPS, there is a strong incentive for providers to reduce their interest expense in projects and use more equity. NHC under this method could save $300,000 in interest expense and still achieve very competitive rates of return on the invested

     equity. NHC has a history of putting the needed levels of equity into its projects.

116. The strategies of switching rehabilitation staff in- house and the funding of project costs by equity are the primary techniques by which all providers, including NHC, will meet the cost containment required by PPS. NHC will also accrue smaller cost savings available in inhalation therapy, medical supplies and other areas.

117. NHC's project has a significant cash flow cushion before its project becomes financially unfeasible. The cushion is $600,000. Under PPS, NHC will still make a total facility profit of $16,630 and have cash flow of $283,000. It would be unreasonable to assume that NHC will do nothing to reduce costs to comply with PPS. Moreover, LCHRI's financial analysis on this point only reduced the revenue for NHC, but did not allow for any corresponding reduction in expenses.

118. PPS is a new reimbursement system, which will have an impact only on Medicare reimbursement. Medicare is only 15 percent of NHC's anticipated patient days and only 11.6 percent of LCHRI's anticipated patient days.

119. NHC is a financially strong company. Furthermore, NHC has been able to consistently operate its facilities profitably for over 20 years in all environments. NHC has never closed a nursing home and has only sold two or three nursing homes. NHC demonstrated here that it has the necessary management expertise

     and experience to construct, open, and operate its proposed nursing home after the start-up period.

120. NHC management is aware of PPS and its impact. It is preparing a comprehensive financial analysis and response to the new realities of PPS. Regardless of what a nursing home may have assumed or anticipated during the development of PPS, the earliest that any provider could have prepared a response to the impact of PPS with any certainty was not until May of 1998. NHC began making all of its management and operations personnel aware of the potential impact of PPS in the fall of 1997. Over the course of the winter of 1997 and the spring of 1998, NHC provided several seminars to its personnel to begin preparing for PPS. By contrast, LCCA did not begin holding its formal seminars for its management and operations personnel until May of 1998.

121. While it is undeniable that PPS will effect all providers of nursing home services, NCH demonstrated that it has several viable strategies for responding to PPS. NHC, is a

     financially strong and well-financed nursing home provider, with the managerial, financial ability and talent to successfully respond to PPS.

122. LCHRI raised the issue of financial feasibility with respect to PPS. It claims that the PPS impact on its proposal will only be $4,000 compared to over a $1,000,000 on NHC. However, further examination reveals that LCHRI has underestimated the impact of PPS as to this particular project.

123. The parties agree that bringing rehabilitation staff in-house is the most effective cost-saving technique under PPS. LCHRI has already taken this step in its application, which was filed under the old Medicare reimbursement program. Therefore, this cost-saving measure under PPS is not available to the LCHRI proposal.

124. LCHRI does not have the ability to put more equity into this project. LCHRI is a thinly capitalized corporation with little or no borrowing ability other than reliance upon LCCA. LCCA is highly mortgaged; it engages in a scheme of financing by which it pulls all of its equity out of its facilities as quickly as it can.

125. LCHRI presented evidence it will be able to achieve RUG reimbursement at the highest level for vitually all of its patients over the entire length of stay at the facility. In contrast, NHC reviewed the anticipated average Medicare reimbursement under the RUGs category. NHC utilized a

     distribution which is currently being experienced in the FCC Palm Garden of Pensacola facility and also compared it against the national distribution under the pilot project.

126. NHC realistically expects to receive an average Medicare reimbursement under PPS of $262.20. LCHRI's expectation of receiving an average reimbursement of $352.66, which is essentially at the highest RUGs category for all patients for the entire length of stay, is not realistic. According to the anticipated national average, not more than 13 percent of the patient days will be at the highest RUGs category. LCHRI's projection does not demonstrate sufficient verification to allow the LCHRI proposal to be feasible under PPS.

     CONCLUSIONS OF LAW

     
     

127. The Division of Administrative Hearings has jurisdiction over this subject matter and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

128. The applicants carry the burden of proving that their applications meet the statutory and rule criteria for approval of the CONs that they seek. Boca Raton Artificial Kidney v. Department of Health and Rehabilitative Services, 475 So. 2d 260 (Fla. 1st DCA 1985). The award of a CON must be based upon balanced consideration of the criteria applicable by law, including the preferences expressed in the state and local health plans. Department of Health and Rehabilitative Services v. Johnson Home Health Care, Inc., 447 So. 2d 361 (Fla. 1st DCA

     1984); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1988). The weight to be given each criterion is not fixed but varies depending on the facts of the case. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So. 2d 83 (Fla. 1st DCA 1985).

129. Upon a balanced consideration of all the applicable review criteria, NHC is the preferable choice for a new 120-bed facility in the health planning district. The primary criterion by which LCHRI seeks to distinguish itself from NHC is economic. As to other criteria, including but not limited to, relative quality, levels of service, programs and access, NHC is the superior alternative.

130. NHC will provide a high level of staffing in its facility. It will spend more money rendering direct patient care. NHC will provide better pay to its patient care givers and provide them strong financial incentives to render quality care.

131. NHC proposes to condition its application on providing specialized care to Alzheimer's patients, medically complex/subacute patients, HIV/AIDS patients, and respite patients. LCHRI only agrees to provide specialized care to Alzheimer's and adult day care patients. Therefore, NHC's proposal will guarantee the health planning district a greater spectrum of services and access than the LCHRI proposal.

132. NHC proposes to render all of these services in its facility which is architecturally superior to the LCHRI facility. NHC's proposed facility is larger overall. It provides more square footage per patient, in both the individual rooms and in the patient activity areas, than the LCHRI proposal.

133. The most distinguishing architectural feature between the two proposals is the method in which they propose to provide daily personal hygiene. NHC provides virtually all of its residents with in-room showers. LCHRI essentially proposes to engage in centralized bathing of its residents. In-room showering leads to better care and a significant enhancement to the individual patients' privacy and dignity rights.

134. Finally, as to financial matters, NHC and LCHRI both adequately meet the requirement of this review criteria. Both applicants are large, well-run, national nursing home chains. They both have numerous years of experience in the industry. Both applicants have demonstrated that they know how to run a facility after the start-up period.

135. An applicant for a CON is precluded from amending its application after it has been deemed complete by the agency. Rule 59C-1.010(2)(b), Florida Administrative Code. However,

     changes to an application may be made in the limited circumstance where new events beyond an applicant's control have taken place. Manor Care, Inc. v. Department of Health and Rehabilitative Services, 558 So. 2d 26, 29 (Fla. 1st DCA 1989) (as to matters

     within an applicant's control, significant changes to an application are not permitted); Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach V. Dept. of Health & Rehab. Serv., 8 F.A.L.R. 4650, 4651 (September 24, 1986); Hialeah Hospital, Inc. v. Dept. of Health and Rehab.

     Serv., 9 F.A.L.R. 2363, 2366 (May 1, 1987); Palms Residential Treatment Center, Inc. v. Department of Health and Rehabilitative Services, 10 F.A.L.R. 7058 (HRS 1988); RHPC, Inc. v. Department of Health and Rehabilitative Services, 14, F.A.L.R. 1324, 1335

     (HRS 1992).

     
     

136. The admission of new evidence has been limited to matters which do not constitute a material change or about which the applicant had no knowledge at the time of filing its application. Health Care, 8 F.A.L.R. at 4651; Hillsborough County Hospital Authority d/b/a Tampa General Hospital v. Dept. of Health & Rehab. Services, 12 F.A.L.R. 785, 818 (December 7, 1989).

137. It is undisputed that the new Medicare reimbursement system will have a significant impact on all nursing homes. The ability of all providers to react to the new system will mean the difference in whether new and existing facilities will be financially feasible now and in the future.

138. Baptist Manor, Inc., a former party to this proceeding, initially raised the PPS issue in a pretrial Motion in Limine. Baptist Manor, Inc.'s argument was twofold: (1) PPS

     evidence was admissible as a change in circumstances not within an applicant's control; and (2) NHC's expert should be precluded from testifying about the effects of PPS on NHC's application because he had not disclosed his opinions in deposition.

139. NHC filed a written response in opposition to the Motion in Limine. NHC argued that evidence regarding the impact of PPS should be precluded as an amendment to the applications at issue here. In the alternative, NHC argued that it should be

     permitted to present rebuttal testimony regarding PPS if other parties presented evidence on the expected impact of PPS on NHC's proposal.

140. In a prehearing telephone conference, the undersigned ruled ore tenus that the parties could present new evidence regarding PPS. The new reimbursement system represented a change in circumstances beyond their control and about which they were unaware at the time they filed their applications. Even if they were tracking the development of the new program and/or participating in a PPS pilot program, they could not have anticipated the impact of the new reimbursement scheme with any degree of certainty until after the filing of the instant applications. The undersigned's ruling is hereby affirmed.

141. LCHRI's claim that NHC will not meet the challenge of PPS is unfounded. NHC demonstrated that it has been actively monitoring, responding and preparing for PPS. NHC has several viable and well-recognized strategies for responding to PPS. Furthermore, NHC is a financially strong, historically profitable company. The most persuasive evidence indicates that NHC "has the ability to operate the facility after the start up period."

142. By contrast, LCHRI, having raised the PPS issue, did not provide a well-reasoned, viable response as to how its project will be long-term financially feasible under PPS.

143. Overall, NHC is the comparatively superior applicant in this proceeding. It has a demonstrated history of providing

quality of care in its facilities. NHC has demonstrated that its entire business philosophy, methods and techniques are focused on delivering high quality patient care with superior levels of staffing, expenditures on patient care and specialized programs in an architecturally superior building. NHC has demonstrated that it has done so for over twenty years while remaining profitable, well capitalized and with manageable growth. By contrast, LCHRI, is a company with no experience or history. It relies upon the experience and history of LCCA which, in the past and currently, has a licensure history which indicates it will not provide as high a level of quality care as proposed by NHC.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is,

RECOMMENDED:

That the Agency for Health Care Administration issue a Final

Order deeming the application of NHC superior based upon a comparative review and awarding CON No. 8799 for 120 community nursing home bed to NHC.

DONE AND ENTERED this 5th day of February, 1999, in Tallahassee, Leon County, Florida.

SUZANNE F. HOOD

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1999.

COPIES FURNISHED:

Gerald B. Sternstein, Esquire Sternstein, Rainer and Clarke, P.A.

314 North Calhoun Street Tallahassee, Florida 32301

Richard A. Patterson, Esquire Agency for Health

Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308-5403

R. Bruce McKibben, Jr., Esquire Post Office Box 1798 Tallahassee, Florida 32302-1798

Sam Power, Agency Clerk Agency for Health

Care Administration Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Paul J. Martin, General Counsel Agency for Health

Care Administration Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Ruben J. King-Shaw, Jr., Director Agency for Health

Care Administration Suite 3116

2727 Mahan Drive

Tallahassee, Florida 32308

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: 97-005414CON

Orders for Case No: 97-005414CON