STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE HOSPICE OF THE FLORIDA SUNCOAST, INC., d/b/a SUNCOAST HOSPICE,

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent,

and

BROOKDALE HOSPICE, LLC; CHAPTERS HOSPICE OF PINELLAS COUNTY, INC.; VITAS HEALTHCARE CORPORATION OF FLORIDA; and COVENANT HOSPICE, INC.,

Intervenors.

/

Case No. 15-3656RX

FINAL ORDER

Pursuant to notice, the final hearing was held in this case on July 24, 2015, and August 28, 2015, in Tallahassee, Florida, before Elizabeth W. McArthur, Administrative Law Judge, Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Jeffrey L. Frehn, Esquire

Christopher B. Lunny, Esquire Radey Law Firm, P.A.

301 South Bronough Street, Suite 200 Tallahassee, Florida 32301

Michael Igel, Esquire

Johnson, Pope, Bokor, Ruppel and Burns, LLP

333 Third Avenue North, Suite 200 St. Petersburg, Florida 33701

For Respondent: Richard Joseph Saliba, Esquire

Kevin Marker, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 For Intervenor Brookdale Hospice, LLC:

John M. Lockwood, Esquire Kala Kelly, Esquire

The Lockwood Law Firm

106 East College Avenue, Suite 810 Tallahassee, Florida 32301

For Intervenor Chapters Hospice of Pinellas County, Inc.: Seann M. Frazier, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

215 South Monroe Street, Suite 750 Tallahassee, Florida 32301

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower

285 Peachtree Center Avenue, Northeast Atlanta, Georgia 30303

For Intervenor VITAS Healthcare Corporation of Florida:

R. Terry Rigsby, Esquire Pennington, P.A.

Post Office Drawer 10095

215 South Monroe Street, Second Floor Tallahassee, Florida 32302-2095

For Intervenor Covenant Hospice, Inc.:

John F. Gilroy, III, Esquire John F. Gilroy, III, P.A.

1695 Metropolitan Circle, Suite 2

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue in this existing rule challenge filed pursuant to section 120.56(3), Florida Statutes (2015),1/ is whether Florida Administrative Code Rule subparagraphs 59C-1.008(2)(a)2. and (2)(a)3. are invalid exercises of delegated legislative authority for the reasons alleged by Petitioner.

PRELIMINARY STATEMENT

On July 24, 2015, Petitioner, The Hospice of Florida Suncoast, Inc., d/b/a Suncoast Hospice (Petitioner or Suncoast), initiated this proceeding by filing a Petition to Determine the Invalidity of Existing Rule 59C-1.008(2)(a)2. and (2)(a)3. (Petition), pursuant to section 120.56(3). The Petition alleged that two subparagraphs of existing rule 59C-1.008 (collectively referred to for convenience as the fixed need pool rule or FNP rule) are invalid exercises of delegated legislative authority according to section 120.52(8)(b) and (c), Florida Statutes, and the “flush-left” paragraph following the lettered sub-paragraphs in section 120.52(8). In addition, the Petition contended that the FNP rule is an improper procedural rule in violation of section 120.54(5).

The case was assigned to the undersigned on June 25, 2015.

A Notice of Hearing and an Order of Pre-Hearing Instructions were issued on June 26, 2015, setting the final hearing for July 24,

2015, and establishing expedited procedures for discovery and other pre-hearing matters.

Between June 30 and July 9, 2015, four motions to intervene were filed and granted, without opposition. Discovery ensued; a single motion to compel filed by Petitioner was denied without prejudice for failure to comply with the Order of Pre-Hearing Instructions, but was not renewed. Respondent, the Agency for Health Care Administration (Respondent or AHCA), and the four Intervenors filed a joint motion to strike allegations in the Petition as outside the scope of a facial challenge to an existing rule, and a joint motion to dismiss the Petition based on the assertion that Petitioner lacks standing. Petitioner filed responses to these motions shortly before the final hearing, and the motions were addressed on the record at the July 24, 2015, hearing, as reflected in the Transcript.

On July 23, 2015, the parties filed a bare-bones joint pre- hearing stipulation, acknowledging that the issues to be determined are those set forth in the Petition, described therein as primarily legal in nature. The parties stipulated to a few basic facts, which are incorporated below. The filing also contained the parties’ witness lists and exhibit lists, which included several joint exhibits.

The final hearing was convened on July 24, 2015. At the outset, the undersigned summarized the issues raised by the

Petition, and shared with the parties certain statutory and decisional authority found in preliminary research, which appeared to be responsive to those issues and which the parties should address in their proposed orders.

Joint Exhibits 1 through 6 were offered and admitted.

The pre-hearing stipulation reflected that Petitioner proposed another 23 exhibits in addition to the joint exhibits, and two witnesses, one of whom was designated as an expert in health planning and health care finance. The undersigned expressed concern with Petitioner’s extensive proposed evidence, which seemed to lend credence to the notion in the joint motion to strike that Petitioner was seeking to transform its facial rule challenge into a different kind of proceeding. Discussion ensued as to what if any evidence was needed, in addition to the joint exhibits, to allow for a determination of the issues raised, which all agreed were primarily legal in nature, and to provide the factual predicate to address Petitioner’s standing. As reflected in the July 24, 2015, Transcript (filed on July 30, 2015), it was determined that virtually all of the necessary facts could be found from the joint exhibits. In addition, Petitioner offered the deposition of AHCA’s representative, with deposition exhibits. Respondent and Intervenors objected to the extent that the deposition covered issued deemed beyond the jurisdiction of this facial rule challenge proceeding. It was

agreed that Petitioner would be afforded the chance to designate portions of the deposition that did not go beyond the jurisdictional confines of this proceeding.

The parties gave their opening statements. After the opening statements, the undersigned observed that Petitioner and at least one Intervenor had referred to the historic timeline of the challenged rule provisions--when the provisions were adopted as compared to when changes were made in the procedural law, and how long the challenged provisions had been on the books--yet no party had listed as an exhibit or requested official recognition of the history of the two subparagraphs at issue. Since the challenged provisions are a small part of a larger rule with extensive history notes, it was impossible to substantiate the opening statements of Petitioner and others from the record offered. To provide the missing predicate, the undersigned suggested that the parties work together to submit for official recognition the challenged rule provisions as originally adopted and as amended over the years, so that the history of just these two subparagraphs could be discerned.

Finally, Petitioner requested an opportunity to be heard on the legal issues, after both sides had exchanged briefing.

Respondent and Intervenors objected if Petitioner was requesting the last word, since the procedural rules call for simultaneous filing of post-hearing proposed final orders with no responses.

The undersigned suggested an atypical procedure that all parties agreed was appropriate for this case. Deadlines were established for the completion of the record with the designation and cross-designation of excerpts from the deposition of AHCA’s representative, and the submission for official recognition of the challenged rule provisions as originally adopted and as amended over the years. Once the record was completed and closed, the parties agreed to submit their proposed final orders (PFOs). Finally, a continuation of the final hearing was scheduled for August 28, 2015, shortly after the PFOs were filed, for the purpose of allowing argument on the legal issues presented. These matters were detailed in an Order Continuing and Scheduling Continuation of Final Hearing, and Memorializing Deadlines, issued on July 27, 2015.

The record reflects that the agreed process was followed, with some variations that were acceptable and others that were not. For example, Petitioner was permitted to designate portions of the AHCA representative’s deposition transcript and exhibits by a certain deadline. Petitioner’s designation filing contained two pages of argument, with an inaccurate representation describing a proffer of testimony that was never made; the actual designations began on the third page. An Order Ruling on Objections to Deposition Designations, issued on August 13, 2015, determined that Petitioner’s filing would not be considered to

the extent it contained matters straying from the task at hand of designating deposition excerpts in accordance with the rulings previously made. However, Petitioner’s motion to correct scrivener’s error, asking to change the page references for certain designated deposition testimony, was permitted. As a result of the designations, objections, counter-designations, responses, and rulings, the deposition transcript excerpts and deposition exhibits that were not objectionable were assembled as Petitioner’s Exhibit 1, and admitted in evidence.

AHCA filed a motion for official recognition of two pleadings filed by Petitioner in a prior administrative proceeding, which had been identified as proposed exhibits in the pre-hearing stipulation. Although the motion represented that Petitioner objected and would be filing a response, no response was filed. By Order issued on August 13, 2015, the undersigned took official recognition of the two pleadings, as party admissions that appeared relevant. The two officially recognized pleadings are designated AHCA OR-1 and AHCA OR-2.

Petitioner filed a motion for official recognition of rule history, attached as exhibits A through H. While exhibits A, B, and C contained rulemaking history for the two challenged FNP rule provisions (as suggested and agreed), the remaining exhibits contained excerpts of the rulemaking history for other non- challenged parts of rule 59C-1.008. Respondent and Intervenors

objected to Petitioner’s attempt to add to the record material that had neither been disclosed in the joint pre-hearing stipulation nor specifically agreed to at the July 24, 2015, hearing. The August 13, 2015, Order took official recognition of the rulemaking history of the two challenged FNP rule provisions contained in exhibits A through C of Petitioner’s motion, and denied official recognition of exhibits D through H.

Petitioner’s subsequent motion for reconsideration as to exhibits D through H was denied by Order dated August 24, 2015.

To complete the record of the rule chronology for the two challenged provisions, Respondent and Intervenors offered exhibit I, which changed a reference in the challenged rule provisions from Florida Administrative Weekly to Florida Administrative Register by a technical amendment permitted to be accomplished by letter. See Fla. Admin. Code R. 1-1.010(1). The August 13, 2015, Order took official recognition of exhibit I.

Exhibits A, B, and C provided by Petitioner and exhibit I provided by Respondent and Intervenors have been combined into one composite document identified as Joint OR-1. This composite document shows the challenged FNP rule provisions as originally adopted and as changed over the years.

Petitioner filed another motion for official recognition on August 12, 2015, directed to an AHCA Final Order entered on

July 29, 2015. The body of the Final Order was attached, but

exhibits to the Final Order were omitted from Petitioner’s submission. Respondent and Intervenors opposed the motion. Petitioner filed a request for leave to reply, attaching a proposed reply. By Order dated August 24, 2015, the motion for official recognition and request for leave to reply were denied.2/

Following Petitioner’s unopposed motion for an extension of the deadline to file PFOs, which was granted, the parties timely filed their PFOs on August 25, 2015. The hearing was reconvened on August 28, 2015, when the parties presented their arguments on the legal issues and responded to questions about those issues.

A Transcript of the August 28, 2015, hearing was filed on September 11, 2015. The PFOs and the hearing record (Joint Exhibits 1 through 6, Joint OR-1, AHCA OR-1, AHCA OR-2, Petitioner’s Exhibit 1, and the two hearing Transcripts), have been considered in preparing this Final Order.

FINDINGS OF FACT

The Parties

1. Petitioner is the sole existing provider of hospice services in hospice service area 5B, Pinellas County.

2. Respondent AHCA is the state agency responsible for administering the Health Facility and Services Development Act (the Act), codified at sections 408.031 through 408.0455, Florida Statutes. The Act sets forth Florida’s certificate of need (CON) regulatory program, pursuant to which AHCA determines whether

   
   

   there is a community need for regulated health care facilities and services as a prerequisite to licensure and operation.

3. As part of its responsibilities under the Act, AHCA is required to establish, by rule, uniform need methodologies for CON-regulated health facilities and services. One such need methodology, for new hospice programs, is set forth in rule 59C- 1.0355. The rule defines 27 service areas, and AHCA uses the numeric formula in rule 59C-1.0355(4)(a) to calculate numeric need for each of the 27 service areas. Other rules in chapter 59C-1 establish need methodologies for other regulated services and facilities, such as for nursing facility beds (rule 59C- 1.036), inpatient comprehensive medical rehabilitation services (rule 59C-1.039), hospital inpatient psychiatric services (rule 59C-1.040), and hospital inpatient substance abuse services (rule 59C-1.041).

4. Intervenors Brookdale Hospice, LLC; Chapters Hospice of Pinellas County, Inc.; VITAS Healthcare Corporation of Florida; and Covenant Hospice, Inc. (collectively Intervenors), each filed a CON application to establish a new hospice program in Pinellas County, in the first batching cycle in 2015 for “other beds and programs.”

   The FNP Rule--What is Challenged; What is Not Challenged

   
   

5. Rule 59C-1.008 is a lengthy rule, titled “Certificate of Need Application Procedures.” “Fixed Need Pools” is the subject

   
   

   of rule 59C-1.008(2). Within the “Fixed Need Pools” rule paragraph, sub-paragraph (a) addresses “Publication of Fixed Need Pools.” In its current form, it provides as follows:

   1. The Agency shall publish in the Florida Administrative Register at least 15 days prior to the letter of intent deadline for a particular batching cycle the Fixed Need Pools for the applicable planning horizon specified for each service in applicable Agency rules contained in Rules 59C-1.031-

      .044, F.A.C.

      
      

   2. Any person who identifies an error in the Fixed Need Pool numbers must advise the Agency of the error within 10 days of the date the Fixed Need Pool was published in the Florida Administrative Register. If the Agency concurs in the error, the Fixed Need Pool number will be adjusted and re-published in the first available edition of the Florida Administrative Register. Failure to notify the Agency of the error during this time period will result in no adjustment to the Fixed Need Pool number for that batching cycle.

      
      

   3. Except as provided in subparagraph 2. above, the batching cycle specific Fixed Need Pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied.

      
      

6. Petitioner has not challenged the validity of rule 59C- 1.008(2)(a)1., nor has Petitioner challenged the rest of rule 59C-1.008(2). The challenge is directed only to rule 59C- 1.008(2)(a)2. and 3. Thus, although the challenged provisions are collectively referred to for convenience as the FNP rule, in

   
   

   fact, the challenged provisions are only a very small part of the actual rule provisions on fixed need pools.

7. Also not challenged by Petitioner is Florida Administrative Code Rule 59C-1.002(19), defining “fixed need pool” as follows:

   “Fixed Need Pool” means the identified numerical need, as published in the Florida Administrative Register, for new beds or services for the applicable planning horizon established by the Agency in accordance with need methodologies which are in effect by rule at the time of publication of the Fixed Need Pools for the applicable batching cycle.

   
   

8. Petitioner did not challenge the validity of the fixed need pool rule provision addressing comparative review. Rule 59C-1.008(2)(e) provides in pertinent part:

   Comparative Review. Applications submitted to the Agency in the same batching cycle for the same service or beds having the same Certificate of Need methodology in the same district or subdistrict, as defined in applicable rules, shall be comparatively reviewed through final Agency action against the same Fixed Need Pools in existence at the initial review. The Fixed Need Pools and other relevant planning information shall be used by the Agency to review the application against all applicable statutory review criteria contained in Section 408.035, F.S., and applicable rules, and policies.

   
   

9. Finally, Petitioner has not challenged the FNP rule on the ground that the rule is arbitrary or capricious. Although Petitioner made a few references on the record to suggest that the 10-day period to notify AHCA of a fixed need pool errors is

   
   

   too short, the Petition does not contend that the FNP rule is invalid because it is unreasonable, arbitrary, or capricious.

10. Indeed, in a prior proceeding, Petitioner lauded the reasonableness of the 10-day notice period, and the importance of closing the door to any attempt to change fixed need pools for a batching cycle based on errors discovered after the 10-day period. In Petitioner’s words, the FNP rule procedures are “crafted to rapidly identify errors in the initial publication of the Fixed Need Pool so there is closure and finality. Subparagraph 3 of the rule works to ‘close the books’ on the current batching cycle so that would-be applicants have certainty: hence the term ‘Fixed’ Need.”3/ (AHCA OR-2 at 7).

11. To address Petitioner’s legal position that the challenged FNP rule is invalid under section 120.52(8)(b), (8)(c), and the flush-left paragraph, it is helpful to consider the background evolution of the concept of comparative review under the CON program and the role of fixed need pools in carrying out that concept.

    Background--Evolution of Comparative Review and Fixed Need Pools

    
    

12. Prior to 1979, the CON program, then mandated by federal law, was administered by AHCA’s predecessor, the Department of Health and Rehabilitative Services (HRS). Need was considered both at the state level and regionally, first by health systems agencies (HSAs) and later, by local health

    
    

    councils. HRS would make decisions on applications after considering the recommendations, if any, of the HSAs, and then applicants were entitled to “fair hearings” to contest the decision on their applications. However, there was no procedural mechanism to group together multiple pending applications seeking to address the need in the same service area for the same service, so that the competing proposals could be reviewed comparatively, in relation to each other. In the landmark case of Bio-Medical Applications of Clearwater v. Department of Health & Rehabilitative Services, 370 So. 2d 19 (Fla. 2d DCA 1979) (Bio-

    Medical), the court described the fundamental principle embodied in the Ashbacker doctrine, pronounced in Ashbacker Radio

    Corporation v. Federal Communications Commission, 326 U.S. 327, 66 S. Ct. 148, 90 L. Ed. 108 (1945):

    In Ashbacker, the Supreme Court laid down a general principle that an administrative agency is not to grant one application for a license without some appropriate consideration of another bona fide and timely filed application to render the same service; the principle, therefore, constitutes a fundamental doctrine of fair play which administrative agencies must diligently respect and courts must be ever alert to enforce.

    
    

    Bio-Medical, 370 So. 2d at 23. The court then held that this

    
    

    same principle required application of the Ashbacker doctrine to state CON proceedings:

    
    

    We are not the first to observe that where need is determined in accordance with a quantitative standard; that is, by number of units, a fixed pool of needed investments is thereby created. Opposing applicants necessarily become competitors for that fixed pool. . . . The Ashbacker court held that a comparative hearing was required where there were two applications pending . . . .

    Similarly, we hold that Ashbacker applies in proceedings for a certificate of need[.]

    
    

    Id. at 23-24. The court rejected the argument that whether

    
    

    applicants are entitled to comparative hearings should be addressed under the general administrative rule on consolidation (then in the model rules of procedure), requiring a motion to consolidate and vesting discretion in the hearing officer to grant or deny the motion. Instead, the court admonished:

    [T]he burden of initiating comparative review does not lie solely with an interested applicant. There should be a self-starting mechanism within HRS. . . . [I]t is for an administrative agency to devise means of achieving comparative consideration, including an appropriate mechanism for determination by the agency whether Ashbacker requires a comparative hearing in a particular case.[4/] . . . Neither the federal law, nor the state law (including the Administrative Procedure Act), nor the HRS rules, contain provisions establishing specific procedures for accommodating the need for comparative hearings in certificate of need proceedings. We are confident that administrative procedures will be promulgated to deal with administrative problems in affording comparative hearings, if any such problems are anticipated.

    
    

    Id. at 24-25.

    
    

13. After Bio-Medical, the CON laws were amended to direct

    
    

    HRS to provide by rule for “applications to be submitted on a timetable or cycle basis; provide for review on a timely basis; and provide for all completed applications pertaining to similar types of services, facilities, or equipment affecting the same service area to be considered in relation to each other no less often than two times per year.” Ch. 80-187, § 4, Laws of

    Fla. (1980). With minor changes (to delete the reference to equipment and change the minimum cycle frequency to once yearly), this language remains intact. See § 409.039(1), Fla. Stat.

14. Although the timetable basis for application filing helped bring about initial comparative review by HRS of similar applications, serious problems developed after HRS’s initial decisions, when administrative hearings were requested and multiple batches could be pending at the same time, with later batches sometimes being finally decided before earlier batches. In another landmark case, Gulf Court Nursing Center v. Department

    of Health and Rehabilitative Services, 483 So. 2d 700 (Fla. 1st DCA 1985) (Gulf Court), the court described the problems sorting

    out comparative review rights, which had not been well anticipated by HRS. Gulf Court held that in order to stay true

    to the right to comparative review in the context of the CON laws, HRS had to require that CON applications filed in a batching cycle address a specific need projection, which would be

    
    

    the “fixed” need pool applicable to that batching cycle.5/ Id. at

    
    

    706-707.

    
    

15. As the first step to respond to Gulf Court, HRS

    
    

    immediately began to interpret its need methodology rules to “fix” the data ingredients used to calculate numeric need as of HRS’s initial review of the applications, so that the numeric need could not be changed through updated data offered in administrative hearings. This interpretation, applied immediately after Gulf Court to applications reviewed in 1985, was challenged on appeal in Meridian, Inc. v. Department of

    Health and Rehabilitative Services, 548 So. 2d 1169 (Fla. 1st DCA 1989). The court endorsed HRS’s implementation of Gulf Court:

    We conclude that the construction given [the nursing facility bed need methodology rule] by HRS is neither arbitrary nor capricious, but is completely in accord with the purposes of the act and the principles of comparative review espoused in Gulf Court. The logic of HRS’s position is unassailable. It gives effect to the notion that, pursuant to applicable principles of comparative review, the number of beds in the fixed pool in the July 1985 planning cycle (July 1988) to which the applicants’ applications were addressed (as shown by the formula) would become set at July 1985 for purposes of comparative review, even though new data coming to light in later months or years might reflect a different bed need when factored into the formula. If the number of beds in the fixed pool could be altered by new information developed after the initial applications were filed, there would be no basis for ever fixing the number in the pool, and the evils in the system addressed in Gulf Court would be perpetuated.

    
    

    Id. at 1170-1171. As the court observed, “[T]he underlying

    
    

    organic statutory authority contemplates comparative review based upon a fixed pool of bed need set at the time of the initial applications.” Id. at 1171.

16. HRS’s interpretation endorsed by the court in Meridian

    
    

    was refined through rule promulgation. Effective March 2, 1987, HRS adopted a “Fixed Need Pools” rule subsection, which was added to the Certificate of Need Application Procedures rule (then rule 10-5.008). The new “Fixed Need Pools” rule provided:

    1. Definition. A fixed need pool is defined as the identified need for new beds or services for the applicable planning horizon established by the department in accordance with need methodologies which are in effect by rule at the time of publication of the fixed need pools for the applicable batching cycle.

       
       

    2. Publication of Fixed Need Pools. The department shall publish in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service in applicable departmental rules contained in 10-5.011,

       F.A.C. These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied.

       
       

    3. Comparative Review. Applications submitted to the department in the same batching cycle for the same services in the same district or subdistrict, as defined in

    
    

    applicable rules, shall be comparatively reviewed through final agency action against the same fixed need pools in existence at the initial review. The fixed need pools and other relevant planning information shall be used by the department to review the application against all statutory review criteria contained in F.S. 381.494(6)(c), applicable rules, and policies.

    
    

17. As Petitioner acknowledges, the reason why the FNP rule was adopted was to more completely “fix” the numeric need before the start of a batching cycle:

    Prior to the adoption of the Fixed Need Pool Rule, need was not “immutable” or a mere “historic artifact” that could not be revised after the start of a batching cycle. Instead, if AHCA preliminarily approved an application based on an erroneous need calculation, AHCA’s approval could be challenged on the basis that there is in fact no need under the rule methodology. Indeed, absent a stipulation, need would not become “fixed” (that is, not subject to correction) until the issuance of the final order and the exhaustion of any appeal.

    
    

    Suncoast’s Response in Opposition to the Joint Motion to Dismiss at 1 (emphasis added).

18. The 1987 codification of the FNP rule is similar to the current provisions now found in rule 59C-1.002(19); rule 59C- 1.008(2)(a)1., 2., and 3.; and rule 59C-1.008(2)(e), quoted in paragraphs 5, 7, and 8 above. However, unlike the current FNP rule, the original FNP rule did not provide any window of time for errors to be called to HRS’s attention and corrected. The

    10-day window to notify HRS of errors, as a limited exception to

    
    

    the “fixing” of the published numeric need, was first offered as a matter of policy and practice, as described in Health Quest Corp. v. Department of Health and Rehabilitative Services,

    Case No. 89-2623RX (Fla. DOAH Oct. 4, 1989), aff’d per curiam,

    
    

    564 So. 2d 491 (Fla. 1st DCA 1990) (Health Quest). Health Quest

    
    

    determined that the original FNP rule was valid, as against a multi-faceted challenge described in more detail below.

19. The practice of offering a 10-day window for notice of errors, initiated by HRS, was continued by AHCA as HRS’s successor beginning in 1992. When the practice was challenged as an unadopted rule, AHCA adopted the practice as a rule and the challenge was dismissed. Martin Memorial Med. Ctr. v. Ag. for

    Health Care Admin., Case No. 94-2917RU (Fla. DOAH Jan. 4, 1995).

    
    

20. The codification of the 10-day window for notice of errors as a limited exception to the “fixing” of published need pools took effect October 12, 1994. The “Publication of Fixed Need Pools” rule was divided in three parts--the current form--as follows (rule changes shown in underline/strike-through format):

    1. The agency shall publish in the Florida Administrative Weekly at least 15 days prior to the letter of intent deadline for a particular batching cycle the fixed need pools for the applicable planning horizon specified for each service in applicable agency rules contained in 59C-1.031 to 59C-1.044, F.A.C.

       
       

    2. Any person who identifies an error in the fixed need pool numbers must advise the agency of the error within 10 days of publication of

       
       

       the number. If the agency concurs in the error, the fixed need pool number will be adjusted and re-published in the first available edition of the Florida Administrative Weekly. Failure to notify the agency of the error during this time period will result in no adjustment to the fixed need pool number for that batching cycle. Any other adjustments will be made in the first cycle subsequent to identification of an error, including those errors identified through administrative hearings or final judicial review.

       
       

    3. Except as provided in subparagraph 2. above, the These batching cycle specific fixed need pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projections of need, if retroactively applied.

       
       

21. The FNP rule remained unchanged for the next ten years.

    
    

    In 2004, when rule 59C-1.008 was amended to reflect legislative changes (e.g., eliminating the requirement to file CON applications with local health councils, and increasing the CON application filing fee), AHCA also made two changes to rule 59C- 1.008(2)(a)2. In the first sentence, the language providing that a person must notify the agency “within 10 days of publication of the number” was changed to “within 10 days of the date the fixed need pool was published in the Florida Administrative Weekly.” This change was non-substantive, simply improving the language to make it clearer without changing the meaning.

    
    

22. The other 2004 change was to delete the last sentence that had been in rule 59C-1.008(2)(a)2. (“Any other adjustments will be made in the first cycle subsequent to identification of an error, including those errors identified through administrative hearings or final judicial review.”). The deletion of this sentence appears to be another clean-up step, as the deleted sentence did not appear to add anything to the existing language that was left unchanged.

23. Another 11 years have passed, with no changes to the FNP rule, except for a technical change made in 2012 when the name of the publication where fixed need pool notices would be published was changed from Florida Administrative Weekly to the Florida Administrative Register.

    Facts Related to Standing

    
    

24. On April 3, 2015, AHCA published in the Florida Administrative Register the numeric fixed need pools for the review cycle with an April 20, 2015, letter-of-intent deadline.

25. The published fixed need pool for hospice programs showed a need for one new hospice program in service area 5B.

26. The published notice provided in pertinent part:

    
    

    Any person who identifies an error in the fixed need pool numbers must advise the agency of the error within ten (10) days of the publication. If the agency concurs with the error, the fixed need pool number will be adjusted and republished in the first available edition of the Florida

    
    

    Administrative Register. Failure to notify the agency of the error during this ten-day period waives a person’s right to raise the error at subsequent proceedings. Any other adjustments will be made in the first cycle subsequent to identification of the error including those errors identified through administrative hearings or final judicial review.

    
    

    Any person whose substantial interest is affected by this action and who timely advised the agency of an error in the action has a right to request an administrative hearing pursuant to Section 120.57, F.S. In order to request a proceeding under Section 120.57, F.S., a request for an administrative hearing must state with specificity which issues of material fact or law are in dispute. All requests for hearing shall be made to the Agency for Health Care Administration and must be filed with the agency clerk at 2727 Mahan Drive, Building 3, Room 3431, MS 3, Tallahassee, Florida 32308. All requests for hearing must be filed with the agency clerk within 21 days of this publication or the right to a hearing is waived.

    
    

27. The deadline according to the notice and the challenged FNP rule to notify AHCA of alleged errors in the published fixed need pool numbers was April 13, 2015. Petitioner did not notify AHCA of an alleged error by that 10-day deadline.

28. One other person timely notified AHCA of an alleged error, but that person withdrew the notice before AHCA made any determination. Accordingly, the 10-day deadline expired with no timely-filed pending notices of alleged errors.

    
    

29. Intervenors timely filed letters of intent on or before the deadline of April 20, 2015, indicating their intent to file CON applications for new hospice programs in service area 5B.

30. The deadline according to the notice and the Uniform Rules of Procedure, Florida Administrative Code Rule 28- 106.111(2), to file a request for an administrative hearing with regard to the published fixed need pools was April 24, 2015. Petitioner did not file a petition for an administrative hearing by the 21-day deadline of April 24, 2015.

31. No evidence was presented that any other petition for administrative hearing was filed on or before April 24, 2015, to contest AHCA’s numeric need determinations set forth in the published fixed need pool notice.

32. On May 7, 2015, AHCA issued a Final Order by which AHCA changed its interpretation of the hospice numeric need rule. Hernando-Pasco Hospice, Inc. v. Ag. for Health Care Admin., Case

    No. 14-5121CON (Fla. DOAH Mar. 11, 2015; Fla. AHCA May 7, 2015)

    
    

    (HPH). The HPH Final Order resulted from a hospice fixed need pool challenge that had been timely filed to contest the numeric need published in October 2014.

33. The deadline to file initial CON applications addressing the fixed need pools published on April 3, 2015, was May 20, 2015. The minimum base filing fee that must be paid with the initial application filing is $10,000.00. Fla. Admin. Code

    
    

    R. 59C-1.008(3). Intervenors each filed initial applications, with the required filing fees, by the May 20, 2015, deadline.

34. On June 1, 2015, Petitioner delivered a letter to AHCA notifying it of an alleged error in the hospice fixed need pool for service area 5B that had been published 59 days earlier, and requesting AHCA to correct the error. The alleged error was predicated on AHCA’s changed interpretation of the hospice numeric need rule in the May 7, 2015, HPH Final Order.

35. While Petitioner’s June 1, 2015, letter acknowledged that notice of the alleged error was being given well outside of the 10-day window, Petitioner asserted that the 10-day period was not applicable, because AHCA was on notice by virtue of the HPH

    Recommended Order that its interpretation of the hospice numeric need rule was erroneous. Incongruously, Petitioner also claimed that third parties may have relied on AHCA’s position in the HPH litigation that the argument about how the hospice need rule should be interpreted did not involve an “error” cognizable in a fixed need pool challenge. The HPH Recommended Order did not accept AHCA’s litigation position in HPH that the matter was not

    a proper fixed need pool challenge, nor did it accept AHCA’s interpretation of the hospice need rule. But the status of the Recommended Order was just that--a recommendation, to which the parties were entitled to file exceptions for AHCA’s consideration prior to any final determination.

    
    

36. On June 2, 2015, AHCA denied Petitioner’s request to correct the alleged error because the request was not timely filed pursuant to the challenged FNP rule.

37. The grounds for the alleged error asserted by Petitioner did not arise until after the published fixed need pool, after the 10-day window to identify errors, and after the 21-day window to file a petition for an administrative hearing to contest the published fixed need pool.

38. By the time the HPH Final Order established a new interpretation of the hospice need rule, with the deadlines for notifying AHCA of errors and for requesting an administrative hearing having passed with no timely-filed challenge to the published fixed need pool, applicants seeking to address the published fixed need pool reasonably relied on the existing FNP rule as having fixed for that batching cycle the numeric need published on April 3, 2015.

    CONCLUSIONS OF LAW

    
    

39. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding.

    §§ 120.56(1), (3), 120.569, and 120.57(1), Fla. Stat.

    
    

40. Petitioner initiated this proceeding pursuant to section 120.56, to challenge the validity of existing rule provisions 59C- 1.008(2)(a)2. and (2)(a)3.

    
    

41. Pursuant to section 120.56(1)(a), “Any person substantially affected by a rule . . . may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority.” For challenges to existing rules, section 120.56(3)(a) provides:

    A substantially affected person may seek an administrative determination of the invalidity of an existing rule at any time during the existence of the rule. The petitioner has a burden of proving by a preponderance of the evidence that the existing rule is an invalid exercise of delegated legislative authority as to the objections raised.

    
    

42. As a threshold matter, AHCA and Intervenors contend that Petitioner has failed to prove that it is substantially affected by the FNP rule.

43. To prove standing as a “substantially affected person,” Petitioner must show that the challenged rule will cause a real and immediate injury in fact, and that the alleged interest is within the zone of interest to be protected or regulated. Off. of Ins. Reg. v. Secure Enters., LLC, 124 So. 3d 332, 336 (Fla.

    1st DCA 2013). A real and immediate injury in fact sufficient to support standing must not be based on pure speculation or conjecture. Id.; Lanoue v. Fla. Dep’t of Law Enforcement, 751

    So. 2d 94, 97 (Fla. 1st DCA 1999).

    
    

44. That Petitioner’s interests are within the zone of interest of the challenged FNP rule is not contested. However, AHCA and Intervenors contend that Petitioner has not shown an injury in fact caused by the challenged rule.

45. Petitioner relies solely on its failed attempt in June 2015 to convince AHCA to change the hospice fixed need pool for service area 5B, published on April 3, 2015. Petitioner’s

    belated notice to AHCA plainly did not meet the 10-day window in the challenged rule. However, Petitioner also did not meet the 21-day window provided for requests for administrative hearing with regard to the FNP publication.6/

46. Petitioner argues that the FNP publication did not provide a sufficiently clear point of entry, because in one sentence, it referred to the right of a substantially affected person who gave timely notice of the error to request an administrative hearing. However, three separate sentences that follow provide the information required by section 120.569(1): how to request an administrative hearing under section 120.57, what must be in the request, where to file the request, and the time limits that apply.

47. Nonetheless, the narrow issue presented here is not whether Petitioner waived a clear point of entry to an administrative hearing; the issue is whether Petitioner’s inaction until 59 days after the published fixed need pool makes

    
    

    Petitioner’s claim of injury from the FNP rule too attenuated, indirect, and speculative. Simply put, it is Petitioner’s burden to prove that the challenged 10-day notice requirement in the FNP rule is the direct and immediate cause of injury to Petitioner.

48. The evidence established that the predicate for Petitioner’s asserted error in the April 3, 2015, published fixed need pool was AHCA’s new interpretation of the hospice numeric need rule by Final Order rendered May 7, 2015, in HPH, supra.

    Even then, Petitioner did not notify AHCA until nearly four weeks later, after applications were filed and filing fees were paid in reliance on the fixed need pools being “fixed” by application of the existing FNP rule.

49. At this point, the existing FNP rule has already been applied to close the door to corrections of errors for the April 2015 review cycle. By operation of the existing rule, any

    factors such as the newly announced interpretation of the hospice rule cannot be applied to the current cycle. See, e.g., Central

    Fla. Reg’l Hosp. v. Dep’t of Health & Rehab. Servs., 582 So. 2d 1193, 1196 (Fla. 5th DCA 1991) (in reversing a CON decision that applied a new interpretation of a need methodology rule, established by final order in a separate unadopted rule challenge issued after the review cycle at issue began, but before the conclusion of administrative hearings, the court determined that that need “must be fixed by HRS as of the application filing date

    
    

    and as such, HRS is precluded from changing the needs standard for a review cycle once the applications are filed The

    Lakeland Regional interpretation [of the numeric need methodology

    
    

    rule] should not have been applied to this review cycle.”).

    
    

50. If the FNP rule were successfully invalidated in this proceeding, the result would be that the challenged provisions would be invalidated prospectively (and if there were an appeal, not until an appeal is resolved). That would mean that for future FNP publications, there would be no 10-day error- notification requirement; there would just be a 21-day window provided in future publications to petition for a hearing. The fixed need pools would still be published; the definition of “fixed need pool” would still “fix” the published numeric need for the cycle; and the comparative review rule would still require that applications be comparatively reviewed through final agency action against the same fix need pools in existence at the initial review. Not only is it not clear that Petitioner’s asserted injury is caused by the challenged FNP rule distinct from the foregoing rules, but it also seems that Petitioner’s asserted injury would not be redressed by the prospective invalidation of the FNP rule.

51. Accordingly, Petitioner’s asserted standing is questionable. Nonetheless, the standing issue is narrowly resolved in Petitioner’s favor, in recognition of the somewhat

    
    

    more generous standing test in rule challenge proceedings, if for no other reason than that AHCA applied the challenged FNP rule to deny Petitioner’s belated error notice as untimely.

52. Less difficult is the conclusion that Intervenors have demonstrated their standing to intervene. Just as Petitioner staunchly defended the FNP rule to close the door to changing a fixed need pool for the then-current review cycle, Intervenors have standing to argue against Petitioner’s attempt to un-fix the fixed need for the April 2015 cycle in which they have applied.

53. Turning to the merits of Petitioner’s self-styled existing rule challenge, the only basis upon which the FNP rule can be invalidated in this proceeding is “on the ground that the rule is an invalid exercise of delegated legislative authority.”

    § 120.56(1)(a), Fla. Stat.

    
    

54. An existing rule challenge pursuant to section 120.56 is directed to the facial validity of the challenged rule, and not to its validity as interpreted or applied in specific factual scenarios. See Fairfield Communities v. Fla. Land & Water Adjudicatory Comm’n, 522 So. 2d 1012, 1014 (Fla. 1st DCA 1988).

55. Petitioner has the burden of proving that the challenged FNP rule, facially, is an “invalid exercise of delegated legislative authority as to the objections raised [in the Petition].” § 120.56(3)(a), Fla. Stat.

    
    

56. An “invalid exercise of delegated legislative authority” is defined in section 120.52(8). The Petition contends that the FNP rule as an invalid exercise of delegated legislative authority as defined in section 120.52(8)(b) and (c), and the flush-left paragraph, which provide as follows:

    1. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)1.;

       
       

       * * *

       
       

    2. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.;

    
    

    * * *

    
    

    A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. No agency shall have authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious or is within the agency’s class of powers and duties, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of an agency shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the enabling statute.

    
    

57. An agency may adopt rules “only where the Legislature has enacted a specific statute, and authorized the agency to implement it, and then only if the (proposed) rule implements or interprets specific powers or duties[.]” State, Bd. of Trustees of the Int. Imp. Trust Fund v. Day Cruise Ass’n, 794 So. 2d 696,

700 (Fla. 1st DCA 2001). In considering an agency’s statutory authority to adopt a rule, “[t]he question is whether the statute contains a specific grant of legislative authority for the rule, not whether the grant of authority is specific enough.” SW Fla. Water Mgmt. Dist. v. Save the Manatee Club, Inc., 773 So. 2d 594,

599 (Fla. 1st DCA 2000).

58. Rule 59C-1.008 cites sections 408.034(8) and 408.15(8), Florida Statutes, as the sources of AHCA’s rulemaking authority.

1. Section 408.034(8) provides: “The agency may adopt rules necessary to implement ss. 408.031-408.045.” Section 408.15(8) provides that in addition to other powers granted elsewhere in chapter 408, AHCA is authorized to: “Adopt rules pursuant to ss. 120.536(1) and 120.54 to implement the provisions of this chapter.”

2. Both of these statutes provide general grants of rulemaking authority. However, as the flush-left paragraph makes clear, these general grants of rulemaking authority are, alone, insufficient to authorize the adoption of the FNP rule. Instead, the next inquiry required by the flush-left paragraph is whether

   
   

   the challenged rule provisions “implement or interpret the specific powers and duties granted by the enabling statute.”

   § 120.52(8), Fla. Stat. (flush-left paragraph).

   
   

3. Petitioner argues that the FNP rule does not implement or interpret specific powers or duties granted by the enabling statute; instead, the FNP rule enlarges, contravenes, or modifies the specific laws implemented. According to Petitioner, “a review of the so-called implemented statutes confirms that none of the specific powers and duties conveyed to AHCA by these statutes is implemented by [the FNP rule].” (Pet. PFO at 14).

4. Petitioner’s argument is not persuasive. Most notably, section 408.039, one of the statutes cited as implemented by rule 59C-1.008, puts AHCA at the helm of implementing a precise and fast-paced review process. Starting with section 408.039(1):

   The agency by rule shall provide for applications to be submitted on a timetable or cycle basis; provide for review on a timely basis; and provide for all completed applications pertaining to similar types of services or facilities affecting the same service district to be considered in relation to each other no less often than annually.

   
   

   This statute gives AHCA the specific power and duty to provide by rule for the batching cycle and comparative review process required by Bio-Medical. The rulemaking directive in section 408.039(1) was born of the need for the agency to create “a self- starting mechanism . . . to devise means of achieving comparative

   
   

   consideration, including an appropriate mechanism for determination by the agency whether Ashbacker requires a comparative hearing in a particular case[,]” as directed by the court in Bio-Medical, supra, 370 So. 2d at 24-25. The FNP rule is the means by which the agency tackled the problems identified with the initial attempts to implement such a process, as discussed in Gulf Court, which were thwarting fair comparative

   review by impeding the ability to identify and group together the applications entitled to comparative review.

5. The nexus between Bio-Medical, section 408.039(1), and

   
   

   Gulf Court cannot be ignored. Section 408.039(1) was enacted in the legislative session following Bio-Medical. Ch. 80-187, § 4,

   Laws of Fla. (1980). “The legislature is presumed to have been aware of the ruling case law as it relates to the subject matter of a statute, and to have drawn it with those cases in mind.” Times Pub. Co. v. Williams, 222 So. 2d 470, 472 (Fla. 2d DCA

   1969), disapproved on other grounds sub nom., Neu v. Miami Herald

   
   

   Pub. Co., 462 So. 2d 821 (Fla. 1985). Moreover, the wording of section 408.039(1) has remained essentially unchanged for

   25 years, while the CON laws have been reenacted and other provisions have been changed. “[T]he legislature is presumed to know the judicial constructions of a law when enacting a new version of that law. Furthermore, the legislature is presumed to have adopted prior judicial constructions of a law unless a

   
   

   contrary intention is expressed in the new version.” City of

   
   

   Hollywood v. Lombardi, 770 So. 2d 1196, 1202 (Fla. 2000) (citations and internal quotes omitted); accord Sarasota Cnty.

   Sch. Bd. v. Roberson, 135 So. 3d 587, 589 (Fla. 1st DCA 2014).

   
   

6. Although much has changed in the CON laws since the 1979 Bio-Medical decision, what has not changed is the consistent interpretation of the CON laws, imbued with constitutional principles of due process and fundamental fairness, to require comparative review of competing applications when they are vying to fill the same fixed need pool. Bio-Medical, supra; Gulf

   Court, supra; Central Fla. Reg’l Hosp., supra; Univ. Med. Ctr., Inc. v. Dep’t of Health & Rehab. Servs., 483 So. 2d 712 (Fla. 1st

   DCA 1985) (recognizing that comparative review of pending, competing, mutually exclusive applications is mandated by due process principles in Ashbacker, applied to Florida CON program by Bio-Medical). “Fixing” the numeric need in the manner

   provided in the FNP rule is the means to implement this specific duty. See, e.g., Univ. Med Ctr., supra (where the record failed to establish if applicants are competing for the same fixed need pool, it is impossible to determine comparative hearing rights); Meridian, supra (recognizing that “the underlying organic

   statutory authority contemplates comparative review based upon a fixed pool of bed need[.]”).7/

   
   

7. Petitioner offers one case, St. Joseph Hospital of

   
   

   Charlotte, Florida, Inc. v. Department of Health and Rehabilitative Services, 559 So. 2d 595 (Fla. 1st DCA 1989), for

   the proposition that the FNP rule is not necessary to implement comparative review required under the CON laws. St. Joseph does

   not establish any such principle. There, a hospital that did not file an application in an earlier batching cycle tried to obtain a comparative hearing between the earlier applications and its application filed in a later batching cycle. Although the first cycle began after the original FNP rule was adopted, HRS failed to publish a fixed need pool, a fact which St. Joseph used to argue for a collapsing of the batching cycles. But the court rejected St. Joseph’s argument that HRS’s failure to publish the fixed need pool was a violation of Gulf Court of such proportions

   that the batching cycles should disintegrate and its later application should be comparatively reviewed with the prior cycle’s applications. Instead, the court, in essence, held that without the published fixed need pool, the proper course was to revert to the pre-FNP rule process approved in Meridian, whereby

   the data used to calculate need for each batch was fixed as of the initial application submission. Not only does St. Joseph not

   detract from the conclusion that the FNP rule, when adhered to, better implements the requirement for comparative review through administrative hearings than the partial fixing achieved by

   
   

   Meridian, but the court even acknowledged, with tacit approval,

   
   

   the 10-day error notice practice that was described in the Health Quest rule challenge final order. Id. at n.2.

8. Petitioner complains that no statute “gives AHCA an express power or duty to create a separate, informal administrative process for addressing alleged errors in a fixed need pool that includes a 10-day time limit for advising AHCA of errors in the published need that, if missed, cuts off section 120.57(1) rights.” (Pet. PFO at 14-15). Petitioner’s complaint is that the specific power and duty in section 408.039(1) is not specific enough. However, if that level of detail were contained in the statute, there would be no need for rulemaking authority directing implementation by rule.

9. Petitioner’s argument is like the one recently rejected in United Faculty of Florida v. Florida State Board of Education,

   157 So. 3d 514 (Fla. 1st DCA 2015). In that case, the court looked to general statutory rulemaking authority, augmented by specific references for the Board to adopt rules establishing standards for personnel and contracting, and making personnel subject to Board rules relative to tenure. Collectively, these statutes provided a specific grant of legislative authority for Board rules that substantially revised prior rule requirements, such as by increasing the period of service necessary to obtain a continuing contract (tenure) from three years to five years. The

   
   

   majority opinion held that “it is not necessary under Save the

   
   

   Manatee Club and its progeny for the statutes to delineate every aspect of tenure that the Board is authorized to address by rule; instead, all that is necessary is for the statutes to specifically authorize the Board to adopt rules for college faculty contracts and tenure[.]” Id. at 517-518.

10. Similarly, AHCA is specifically directed in section 408.039(1) to provide by rule for a review process on a timetable or cycle basis, for review on a timely basis, and for the required comparative review of like applications.8/ Instead of dictating specific details for AHCA’s implementation of the statutory directive, section 408.039(1) specifically gives AHCA the power and duty to provide by rule for a process that follows the court’s directives in Bio-Medical and its progeny. That the

    FNP rule does so has been recognized since the rule was promulgated.

11. In Health Quest, supra, the original FNP rule, as

    
    

    promulgated by HRS in 1987, was challenged on the grounds that the rule was arbitrary and capricious by precluding the correction of errors under certain circumstances; that the rule exceeded HRS’s rulemaking authority; and that the rule enlarged, modified, or contravened the specific provisions of the law implemented. In contrast, this rule challenge does not lodge an “arbitrary and capricious” attack, although the latter two grounds are raised.

    
    

    While it is recognized that these issues in 2015 are subject to substantially more rigorous standards, nonetheless, the Health Quest Final Order bears consideration, both in explaining the

    rationale for the rule and in describing the statutory authority and the specific laws implemented by the FNP rule, as follows:

    The following statutory provisions have been cited by the Department as specific authority for [the FNP rule:] Sections 381.031(1)(g)11 [general rulemaking power of AHCA’s predecessor, HRS; now section 408.15(8) for general rulemaking power of AHCA] and 381.704(4) [now 408.034(8)], Florida Statutes. Additionally, the Department has cited the following laws implemented by this Rule: Sections 381.707 through 381.709, Florida Statutes. . . . The Rule here at issue was adopted by the Department to increase predictability and fairness in the CON process, and also to reduce frivolous applications, encourage competition, provide for a meaningful comparative review of competing applications, and make better use of the Department’s resources. [FO at ¶ 13].

    
    

    * * *

    
    

    [T]he Department adopted [the FNP rule] in response to, and as a means of correcting, the problems found to exist in the prior CON review process in [Gulf Court.] Prior to the fixed need pool rule, continuous changes in projections of need based upon updated data, corrections of errors and the application of different need methodologies caused providers to file multiple applications in successive batching cycles in order to ensure they would have an application pending whenever need arose. [FO at ¶ 22].

    
    

    * * *

    
    

    Subsequent to [Gulf Court], the Department sought to establish a CON review process which affords a meaningful opportunity for comparative review of competing applications. Applicants have a reasonable assurance under the fixed need pool process that the Department’s projection of fixed need for the planning horizon year to which their application is addressed will not change after that projection is published, except if an error is found and a corrected need number is also published prior to the application deadline. Existing providers that do not intend to file an application, but seek to challenge the issuance of a CON in their same Service District, also know that the published need projection will not change without republication. This brings certainty to the CON review process, obviates the need for applicants to file in each batching cycle due to ever changing numeric need projections, and allows health care providers to truly compete, on a comparative basis, for an established fixed pool of beds. [FO at ¶ 23].

    
    

    [The FNP rule] is consistent with the reasoning of Gulf Court and Meridian, and is authorized by the above cited statutes. In order to have a meaningful comparative review of competing applications, and to implement a CON review process consistent with the purposes and intent of the CON law in Florida, numeric need projections must be fixed so that the need considered at comparative hearing is the same numeric need published to initiate a batching cycle, even though information is uncovered later which would result in a different projection of need. It has been shown that the Rule infuses the CON review process with predictability and fairness, and results in a better allocation of the Department’s resources, by reducing frivolous applications and unnecessary litigation. This Rule is necessary for the proper implementation of the “Health Facility and Services Development Act,” . . . and therefore, is a proper exercise of the

    
    

    Department’s general rulemaking authority under Sections 381.031(1)(g)11 and 381.704(4), and implements the specific provisions of Section 381.709, Florida Statutes. [FO at

    ¶ 25, emphasis added].

    
    

    * * *

    
    

    The record establishes that this Rule was the well-reasoned response of the agency to criticisms and problems with the previous CON review process addressed by the Court in Gulf Court. While there is the recognized potential under this Rule and its interpretation for errors to occur which may not be able to be corrected for the batching cycle in which the error occurred, the Department considered this, and in the exercise of its discretion determined that the risk of such error actually resulting in the approval of excess beds is outweighed by the need for fairness and predictability in the CON process. A reasonable opportunity to timely notify the Department of errors is provided, and if notice of corrections can be published in a manner which will give all prospective applicants an equal opportunity to compete, such errors can be corrected in that same batching cycle. If such republication cannot be accomplished, corrections will be made in the subsequent batch. The Rule is supported by both fact and logic, and is a reasonable means of implementing the CON law in Florida. [FO at ¶ 31].

    
    

12. The Health Quest determinations regarding rulemaking authority and implementation of specific statutory powers and duties remain applicable, and meet the more rigorous rulemaking standards adopted in 1996 and 1999. Indeed, as discussed below, the Legislature declared that the CON rules in effect on June 30, 2004, including the FNP rule, shall remain in effect and are

    
    

    enforceable until amended or repealed by AHCA. § 408.0455, Fla. Stat. (2004).

13. Petitioner’s final argument is that the FNP rule is “an illegal, and therefore void, procedural rule” (Pet. PFO at 1), that was legislatively repealed when the uniform rules of procedure were adopted and no exemption was obtained by AHCA for its procedural rule from the Administration Commission.

14. As a threshold point, Petitioner has not shown that this challenge is cognizable in a section 120.56 existing rule challenge. Petitioner’s argument is that the rule has been void for nearly 20 years, whereas its challenge is expressly directed to “existing rule” provisions. Petitioner failed to reconcile these concepts that seem at odds with each other. Nor has Petitioner linked this argument to any part of the definition of “invalid exercise of delegated legislative authority,” which is the ground upon which existing rules are subject to invalidation in a section 120.56 proceeding.

15. Beyond that threshold problem, assuming this argument is cognizable in an existing rule challenge proceeding, Petitioner has failed to meet its burden of proving the FNP rule’s invalidity on this ground.

16. Section 120.54(5), Florida Statutes (1996), required the Administration Commission to adopt uniform rules of procedure by July 1, 1997, and provided that “[on] filing with the

    
    

    department [of State], the uniform rules of procedure shall be the rules of procedure for each agency subject to this chapter unless the Administration Commission grants an exception to the agency under this subsection.”

17. All state agencies were given until July 1, 1998, to either comply with the uniform rules or seek an exception to their requirements. § 120.54(5)(a), Fla. Stat. (1996).

18. While it is difficult to argue that the 10-day error notice rule is not procedural, it would seem impossible to implement the statutory mandate in section 408.039(1) to provide by rule for a review process with batching cycles and comparative review, without adopting rules that smack of procedure.

19. On a substantial evidentiary record of the 1996 legislative history not replicated in this case, the legal argument made by Petitioner here was addressed exhaustively and rejected in Southern Baptist Hospital of Florida, Inc. v. Agency

    for Health Care Administration, Case No. 02-0575RX (Fla. DOAH

    
    

    April 30, 2002), appeal dismissed, No. 1D02-2146 (Fla. 1st DCA Feb. 11, 2004) (Southern Baptist).

20. Southern Baptist noted, based on evidence presented in that case, that the 1996 procedural rule directive does not extend to an agency’s procedural rules applicable to the agency’s preliminary free-form proceedings. The internal process to notify AHCA of errors in time for a correction to the fixed need

    
    

    pool for the current review cycle could be viewed as part of the preliminary agency review process.

21. The uniform rules adopted by the Administration Commission include rule 28-106.111(2), which provides for a 21- day window to petition an agency for an administrative hearing to contest proposed agency action. AHCA utilizes that procedural rule to provide the requisite 21-day window for hearing requests.

22. The FNP rule does not, by its terms, address the 21-day window to petition for an administrative hearing following publication of fixed need pools.

23. Petitioner’s argument that the FNP rule is an unlawful procedural rule that fell or should have fallen by 1998 ignores the fact that twice since the 1996 legislation, the Legislature declared that AHCA’s existing rules, including the FNP rule language challenged here, “shall remain in effect and shall be enforceable by the agency with respect to [the CON laws] until such rules are repealed or amended by the agency.” §§ 408.0455, Fla. Stat. (1997), and 408.0455, Fla. Stat. (2004).

24. In a challenge to a provision in a CON rule addressing “administrative hearing procedures,” Southern Baptist considered the impact of the 1997 version of section 408.0455. The rule challenged there, more clearly a procedural rule affecting the administrative hearing process as opposed to preliminary agency review processes, is similar to the FNP rule in that it was a

    
    

    mechanism to effectuate the Ashbacker doctrine’s comparative

    
    

    review principle, applied to the CON proceedings in Bio-Medical and Gulf Court. As observed in Southern Baptist:

    A determination that section 408.0455, Florida Statutes [1997], did not save [the challenged rule] from the legislative repeal worked by section 120.54(5) produces the undesirable consequence of the loss of a sensible method for invoking the constitutional and statutorily-recognized right to comparative review. [FO at 46].

    
    

25. Rather than reaching that undesirable determination, the Southern Baptist Final Order concluded: “Section 408.0455 should be taken literally to have validated all CON rules in effect on June 30, 1997, and to continue the existence of the rules ‘until such rules are repealed or amended by the agency,’ (emphasis

    supplied) rather than until incurring a ‘legislative repeal[.]’” Id. Applying the literal words of section 408.0455, Florida Statutes (1997), the Southern Baptist Final Order concluded that

    the challenged CON administrative hearing procedures rule “remains valid notwithstanding the expiration of the time for approval as an exception to the Uniform Rules.” Id.

26. After Southern Baptist, section 408.0455 was amended in

    
    

    2004 to provide:

    
    

    The rules of the agency in effect on June 30, 2004, shall remain in effect and shall be enforceable by the agency with respect to

    ss. 408.031-408.045 until such rules are repealed or amended by the agency.

    
    

27. The FNP rule language in place today and challenged by Petitioner has not been amended or repealed by AHCA at any time since twice being deemed in effect and enforceable by section 408.0455.

28. Petitioner argues that as a result of a minor clarifying language change and the deletion of the last sentence in rule 59C- 1.008(2)(a)2. in 2004, the saving protection from the 1997 validation and the 2004 validation “vanished.” (Pet. PFO at 2).

29. The undersigned disagrees. As recognized in Southern Baptist, the timing of the 1997 legislative validation of the CON

    rules (including the FNP rule) was significant, in that it came after the 1996 enactment of section 120.54(5), and after the adoption by the Administration Commission of the Uniform Rules of Procedure. The 1997 validation of the then-existing CON rules refutes Petitioner’s argument that the FNP rule was legislatively repealed when no exemption was obtained by 1998, for the reasons well laid out in Southern Baptist. And the revalidation in 2004

    of what in all material respects is the same FNP rule challenged here reinforces the conclusion that the FNP rule remains valid.9/

30. The legislative acknowledgement that AHCA’s CON rules in effect in 1997 and in 2004 were valid and enforceable until the agency acted to amend or repeal them necessarily means that to the extent rule language is not amended by the agency, it remains valid and enforceable. While the legislative validation would not

    
    

    extend to rule provisions that are substantively changed by amendment or repeal, to the extent rule provisions remain unchanged substantively, the validation should not “vanish.”

31. Petitioner asserts, without explanation or support, that the 2004 changes to one part of the FNP rule were “substantive.” But Petitioner could not seriously contend that the rewording of rule 59C-1.008(2)(a)2. to provide that the 10-day notice period runs from “the date the fixed need pool is published in the Florida Administrative Weekly[,]” instead of from “publication of the number[,]” was a change in substance. Nor has Petitioner explained how deleting the last sentence of rule 59C-1.008(2)(a)2. altered the meaning of the FNP rule that was not changed.

32. Conceding that the statutory language in section 408.0455 must be given effect, Petitioner suggested during argument on these legal issues that when the Legislature said in 2004 that the existing CON rules remain in effect until amended or repealed, the Legislature was giving AHCA the opportunity to go through its rules to see what rules are consistent or not consistent with the legislation that was just passed. However, Petitioner has not identified any change in the CON laws in 2004, or thereafter, that would have given rise to an inconsistency with the existing FNP rule language. Accordingly, under Petitioner’s own interpretation of section 408.0455, the FNP rule provisions in effect on July 1, 2004, remain valid and enforceable.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Petition to Determine the Invalidity of Existing Rule 59C-1.008(2)(a)2. and (2)(a)3. is hereby DISMISSED.

DONE AND ORDERED this 28th day of September, 2015, in Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHUR

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

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

Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 2015.

ENDNOTES

1/ References to Florida Statutes are to the 2015 codification, unless otherwise noted.

2/ Despite the Order Denying Motion for Official Recognition of an AHCA Final Order, Petitioner, in its PFO, nonetheless selectively quoted from the document for which official recognition was denied. This was troubling, although the undersigned denied an ore tenus motion at the August 28, 2015, hearing to impose sanctions for the improper reference. Although Petitioner argued that the Final Order has precedential value, the selective quote by Petitioner omits other considerations apparent from the Final Order that reflect a more complicated situation than represented. Moreover, it is impossible to

understand what the Final Order does and does not do without the exhibits which are part of the Final Order, but which were not provided. Thus, in denying official recognition, the undersigned concluded that the Final Order was not shown to stand for the isolated proposition for which it was offered, and as such, was not shown to have precedential value for purposes of the determinations to be made in this case. Indeed, Petitioner itself previously argued that the resolution reflected in the Final Order would be “simply irrelevant” to this proceeding. See Suncoast Response in Opposition to Joint Motion to Dismiss, at 4.

3/ In a 2009 administrative proceeding, in response to a published fixed need pool showing a need for one new hospice program in service area 5B, Petitioner used the 10-day notice period to correct errors in Petitioner’s own data used to calculate the numeric need. As a result of Petitioner’s 10-day error notice, AHCA recalculated and re-published the fixed need pool to show no numeric need for service area 5B. When a would- be applicant sought to dispute the corrected fixed need pool of zero, claiming that Petitioner’s “corrected” data had been falsified, Petitioner invoked the 10-day deadline in the FNP rule as grounds to foreclose any further consideration of the correctness of the fixed need pool for that batching cycle.

Petitioner asserted that after the 10-day window closed, the re- published fixed need pool was fixed and binding for that batching cycle; if a problem could be shown with the data used to recalculate numeric need and change the fixed need pool from one to zero, then that was a matter to be taken into account in the next batching cycle.

4/ The Ashbacker doctrine is grounded in due process principles to ensure that where there is a recognized right to a hearing, the hearing should be fair and meaningful. As the Court observed in Ashbacker, without a comparative hearing, the right of an applicant to a hearing may be preserved in form, but is substantially nullified as a practical matter.

5/ In Gulf Court, the “fixed need pool” was created by a health systems plan that specified the number of beds needed for particular planning horizons. At that time, state and federal law required that CON applications address the need for their proposal in relation to the state health plan and the local health systems plan. The court held that HRS’s practice of not holding a group of applicants to the fixed need pool addressed by their applications violated the comparative review principles dictated by Bio-Medical. There is no longer a federal law component to the CON program, nor do CON applications address

need in relation to state or local health plans anymore.

However, the principles in Bio-Medical and Gulf Court endure, and the “fixed need pool” concept identified as the means to sort out comparative review rights still applies where need is determined under an AHCA numeric need methodology. See, e.g., Ag. for Health Care Admin. v. Mt. Sinai Med. Ctr., 690 So. 2d 689, 693 (Fla. 1st DCA 1997) (“In [Gulf Court], this court held that the pool of beds for a pending CON is fixed and not subject to dispute in an administrative hearing. That rationale, however, is not applicable in the instant situation where the agency does not have a valid rule to compute need for the different types of nursing home beds in issue. . . . There is precedent for litigating CON bed need in cases decided before [Gulf Court].”).

6/ Petitioner argues that whether it timely petitioned for an administrative hearing is irrelevant to whether it has standing to challenge the FNP rule, offering as authority State v. Harvey,

356 So. 2d 323 (Fla. 1st DCA 1977). Harvey does not support Petitioner’s argument. In Harvey, the petitioner was found to have standing in a section 120.56 proceeding to challenge, as unadopted rules, numerous “minimum training and experience requirements” used by the Department of State, Division of Personnel, for various state job classifications. The court agreed that the petitioner had standing: “The effect of the Division’s action is that Harvey is not eligible for employment by State agencies in any of the 30 job classifications in which she expressed interest. . . . The hearing officer held, and we agree, that the denial of avenues of employment substantially affected Harvey[.]” Id. at 325. That is why the court deemed it irrelevant whether the petitioner, who had been denied for one position based on one of the unadopted requirements, had sought an internal review by the Career Service Commission or had filed a petition for an administrative hearing to contest the denial. Though the court noted that she did file a petition and had a section 120.57 proceeding pending, the court was rightly not concerned with the outcome of that proceeding.

7/ While Petitioner has not challenged the rule providing for publication of fixed need pool numbers before batching cycles, Petitioner objects to advancing the final determination on fixed need. Nonetheless, the publication constitutes notice of proposed agency action, and with the clear point of entry provided, is the standard way for agencies to reach final determinations. See § 120.569(1), Fla. Stat.; Fla. Admin. Code

R. 28-6.111(2). Nothing in the CON laws prevent the separation of the numeric need determination from the subsequent decision on applications. Thus, the only other question is whether the FNP

rule validly provides an internal mechanism for quick notice of errors, with possible correction, prior to “fixing” the need for the current cycle so that prospective applicants can rely on the numeric need pronouncement before determining whether to invest substantial resources to submit an application and pay the filing fee. The 10-day error notice coupled with the requisite window to petition for an administrative hearing have been determined to provide the requisite notice, so that a party’s failure to timely avail itself of the opportunity provided has been deemed to result in the “fixing” of numeric need pursuant to the FNP rule, such that numeric need was not subject to dispute in a subsequent CON case. See Martin Mem. Med. Ctr. v. AHCA, Case No. 93-4868 (Fla. DOAH Jan. 4, 1995; Fla. AHCA Mar. 17, 1995).

8/ This case is more like United Faculty than the case relied on by Petitioner, Subirats v. Fidelity National Property, 106 So. 3d 997 (Fla. 3d DCA 2013). In Subirats, the court affirmed a trial court order staying a policyholder’s breach of contract action against an insurer pending completion of arbitration. The court rejected the policyholder’s argument that the insurer waived arbitration by failing to give notice of mediation rights until after a five-day deadline imposed by a Department of Financial Services (DFS) rule, because the court determined the rule was not authorized by statute. The statute directed the insurer to give notice of mediation rights when it received a claim; no power or duty was given to DFS regarding the notice. The statute also provided that the insurer’s failure to give notice of mediation rights waived the insurer’s right to arbitration.

Separately, the same statute directed DFS to provide for a mediation program by rule and specified the subjects to be addressed by rule, which were to be based on the mediation rules of procedure adopted by the Supreme Court. None of the detailed subjects enumerated for rulemaking related to the notice requirement imposed on insurers.

In contrast, here the statute specifically directs rulemaking to provide for applications on a timetable or cycle basis; to provide for review on a timely basis; and to provide for comparative review. § 408.039(1), Fla. Stat. The FNP rule implements this specific rulemaking duty; fixing the need pool as the first step of a review cycle is part and parcel of the appropriate provision of comparative review, and providing short time frames in that first step is a necessary part of the strict timetable contemplated. Indeed, Petitioner has not challenged the requirement that fixed need pool numbers be published in advance of review cycles, apparently conceding that this part of the rule is supported by rulemaking authority.

9/ Petitioner argues that Southern Baptist should not be followed because the Legislature in section 408.0455 did not “ratify” the rules, and that ratification would be necessary to make the rules like statutes that are not subject to challenge. Petitioner cites Occidental Chemical Agricultural Products, Inc. v. State, Department of Environmental Regulation, 501 So. 2d 674 (Fla. 1st DCA 1987). Occidental is a case of very limited significance beyond the context presented there. In Occidental, the court held that, where a statute required legislative ratification before certain rules could be effective, those rules had the status of statutes. As such, because of the “unique nature” of a legislatively-ratified rule, the court held that a circuit court action challenging a ratified rule should not be dismissed for failure to exhaust administrative remedies, because the rule, more like a statute, was not subject to challenge in a section

120.56 proceeding. No one has suggested that the FNP rule is tantamount to a statute that cannot be challenged as an invalid exercise of delegated legislative authority. Instead, the issue considered and resolved in a persuasive manner in Southern Baptist is whether the legislative validation of existing CON rules in 1997 and again in 2004 forecloses Petitioner’s argument that the FNP rule was legislatively repealed, and undermines Petitioner’s argument that the FNP rule does not meet the stricter rulemaking standards adopted in 1996 and 1999.

COPIES FURNISHED:

Elizabeth Dudek, Secretary Health Quality Assurance

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308 (eServed)

Stuart Fraser Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

Jeffrey L. Frehn, Esquire Radey Law Firm, P.A.

301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed)

Christopher B. Lunny, Esquire Radey Law Firm, P.A.

301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed)

Michael A. Igel, Esquire

Johnson, Pope, Bokor, Ruppel and Burns, LLP

333 Third Avenue North, Suite 200 St. Petersburg, Florida 33701 (eServed)

Richard Joseph Saliba, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

Kevin Marker, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

John M. Lockwood, Esquire The Lockwood Law Firm

106 East College Avenue, Suite 810 Tallahassee, Florida 32301 (eServed)

Kala Kelly, Esquire The Lockwood Law Firm

106 East College Avenue, Suite 810 Tallahassee, Florida 32301 (eServed)

Seann M. Frazier, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

215 South Monroe Street, Suite 750 Tallahassee, Florida 32301 (eServed)

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower

285 Peachtree Center Avenue, Northeast Atlanta, Georgia 30303

(eServed)

1. Terry Rigsby, Esquire Pennington, P.A.

   Post Office Drawer 10095

   215 South Monroe Street, Second Floor Tallahassee, Florida 32302-2095 (eServed)

   
   

   John F. Gilroy, III, Esquire John F. Gilroy III, P.A.

   1695 Metropolitan Circle, Suite 2

   Tallahassee, Florida 32308 (eServed)

   
   

   Ken Plante, Coordinator

   Joint Administrative Procedures Committee Room 680, Pepper Building

   111 West Madison Street Tallahassee, Florida 32399-1400 (eServed)

   
   

   Ernest Reddick, Chief Department of State

   1. Gray Building

500 South Bronough Street Tallahassee, Florida 32399-0250 (eServed)

Alexandra Nam Department of State

R.A. Gray Building

500 South Bronough Street Tallahassee, Florida 32399-0250 (eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of administrative appeal with the agency clerk of the Division of Administrative Hearings within 30 days of rendition of the order to be reviewed, and a copy of the notice, accompanied by any filing fees prescribed by law, with the clerk of the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides or as otherwise provided by law.

Docket for Case No: 15-003656RX

Orders for Case No: 15-003656RX