STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEALTH QUEST REALTY, d/b/a ) FOUNTAINVIEW PLACE CORPORATION ) OF DAYTONA BEACH, )

)

Petitioner, )

)

vs. ) CASE NO. 82-3311

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was conducted in this matter on May 26, 1983, in Orlando, Florida. The following appearances were entered: John M. Laird and Charles M. Loeser, South Bend, Indiana, appeared on behalf of the Petitioner, Health Quest Realty, d/b/a Fountainview Place, Corporation of Daytona Beach; and James M. Barclay, Tallahassee, Florida, appeared on behalf of the Respondent, Department of Health and Rehabilitative Services.

On or about June 28, 1982, the Petitioner filed an Application for Certificate of Need with the Office of Community Medical Facilities of the Florida Department of Health and Rehabilitative Services. By letter dated November 8, 1982, the Department denied the application and advised Petitioner of its right to request a formal administrative hearing. Petitioner requested a hearing, and the matter was forwarded to the office of the Division of Administrative Hearings on December 7, 1982. The hearing was originally scheduled to be conducted on February 17, 1983. Petitioner filed a Motion for Continuance, which was granted, and the hearing was rescheduled to be conducted as set out above.

At the hearing, the Petitioner called the following witnesses: Theodore J. Foti, the Petitioner's Vice President of Corporate Planning; Thomas J. Konrad, the administrator of the Department's Office of Community Medical Facilities; Thomas Serio, a health administration intern at the Orlando Medical Center; and Robert H. Weller, a college professor and consultant in the area of population studies. The Department called the following witnesses: Thomas Konrad; and Phillip C. Rond, a health planner in the Department's Office of Comprehensive Health Planning. Petitioner's Exhibits 1 through 13 were offered into evidence and received.

The parties have submitted posthearing legal memoranda which include proposed findings of fact and conclusions of law. The proposed findings and conclusions have been adopted only to the extent that they are expressly set out in the Findings of Fact and Conclusions of Law which follow. They have been otherwise rejected as not supported by the evidence, contrary to the better weight of the evidence, irrelevant to the issues, or legally erroneous.

ISSUES

The ultimate issue to be resolved in this proceeding is whether the Petitioner should be granted a Certificate of Need to construct a 120-bed nursing home in Volusia County, Florida. Petitioner contends that there is a need for such a facility; that the Department's rule do not apply in determining need; and that to the extent the Department's rules do apply, they are not a reasonable measure of the need for a nursing home facility. The Department contends that its rules are reasonable and applicable to this proceeding, and that there is no need for the proposed facility.

FINDINGS OF FACT

1. Petitioner is seeking a Certificate of Need authorizing the construction of a 120-bed nursing home facility in Daytona Beach, Volusia County, Florida. At the time that the Application for Certificate of Need was filed, the total project cost was estimated at $3,688,523. Cost estimates have been revised since that time, and at the time of the hearing, it was estimated that the total capital expenditure required would be $5.3 million. Petitioner proposes to provide intermediate and skilled care facilities and to secure Medicare and Medicaid approval. Petitioner has built and operated numerous nursing home facilities in states other than Florida. Petitioner has the necessary resources, competence and experience to build and operate the proposed nursing home facility.

   
   

2. Prior to the adoption of Rule 1( -5.11(21), Florida Administrative Code, the Department utilized health services plans adopted by local health services agencies to determine the need for nursing home facilities. There was no evidence offered at the hearing from which it could be concluded that there is a need for the proposed facility under any such plan.

   
   

3. In determining the need and demand for nursing home facilities, the Department now utilizes a formula set out in its Rule 10-5.11(,21), Florida Administrative Code. Under the rule, the Department will not normally approve applications for additional nursing home beds in any service district unless a need for the beds is demonstrated by application of a formula set out in the rule. Under the formula, a ratio of 27 nursing home beds per 1,000 persons age

   65 or older in the population is utilized. This formula historically allows for construction of nursing home beds which exceeds need. Persons who live in poverty have a historic need for nursing home services that exceeds that for the remainder of the population. The Department's formula thus applies a poverty ratio to the 27 beds per 1,000 formula. The percentage of poverty in Volusia County exceeds the state average. The bed need ratio for Volusia County under the Department's rule is therefore 32.6 beds per 1,000 of aged population.

   Under its rule, the Department utilizes the most recent mid-range population projections published by the Bureau of Economic and Business Research at the University of Florida to determine the population of the service district. In Volusia County, the population age 65 and above was estimated by that bureau for 1986 to be 69,157. Applying the 32.6 beds per 1,000 ratio, the theoretical bed need for Volusia County for 1986 is 2,225 beds. Only 1,988 beds have actually been licensed or approved for Certificates of Need, however. Under this circumstance, the Department, utilizing its rule would then consider whether there is an "actual demand" for nursing home beds. Under the rule, new beds are authorized beyond those currently licensed so that the current daily occupancy would equal 80 percent of the authorized beds. Accordingly, there could be as many as 1,960 beds eligible for licensure in Volusia County 1,568 (current daily

   occupancy assuming 100 percent occupancy of currently licensed beds) divided by 0.803. In addition to the 1,568 currently licensed beds, the Department has issued Certificates of Need for 420 additional beds that are not yet on line.

   There have thus been 1,988 beds licensed or approved for licensure more than 1,960, which is the most that could possibly be approved. There is, therefore, no actual demand for new beds under the Department's rule. The rule does not operate to foreclose placing new beds in an area where theoretical demand exceeds the number of licensed beds. Instead, the rule, which is applied to new projections quarterly, serves to bring new beds into an area gradually.

   
   

4. The Department's Rule 10-5.11(21), Florida Administrative Code, is a reasonable method of determining theoretical need and actual demand for nursing home beds. There are other reasonable methodologies that could be followed. The Department's methodology is not, however, unreasonable, arbitrary, or capricious.

   
   

5. Even if application of the formula does not demonstrate any need or demand for nursing home services, the Department can grant a Certificate of Need if other circumstances exist that would justify the addition of new nursing home beds. The applicant has failed to establish that any such conditions exist in Volusia County. It has not been established that persons who live in poverty, Medicaid or Medicare patients, or any segment of the population are unable to obtain nursing home services. It has not been established that existing facilities are providing inferior services.

   
   

6. The Department's Rule 10-5.11(21), Florida Administrative Code, allows for the construction of more nursing home beds in districts with a high degree of poverty than would be allowed in districts where there is a lesser degree of poverty. This factor has been placed in the formula because it has been established that persons who live in poverty have a greater need for nursing home facilities than do other segments of the population. The formula does not operate to discriminate against persons who do not live in poverty. Rather, it serves to allow the placement of facilities where they are needed.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Sections 120.57(1), 120.60, Florida Statutes.

   
   

8. Petitioner has failed to establish that there is a need for the 120-bed nursing home facility that it has proposed either under the Department's rules or under the Health Services Plan that preceded the Department's rules. Under the rules and the Health Services Plan, there is no need for such a facility.

   
   

9. Petitioner has contended that the Department's rule has no applicability to this proceeding because it was declared invalid by the First District Court of Appeal in Farmworker Rights Organization, Inc. v. Department of Health and Rehabilitative Services, 430 So.2d 1 (1 DCA Fla. 1983). This contention is without merit. In the Farmworker Rights case, the court concluded that Rule 10-5.11 allowed the Department to ignore criteria mandated by federal statutes and regulations. The court invalidated the rule only to that extent.

   430 So.2d at p. 7. Rule 10-5.11(21) was not involved in the court's decision and was not expressly nor by any proper implication invalidated.

   
   

10. Petitioner has contended that the Department's rule should not be applied because it is unreasonable. Petitioner presented evidence that

    population projections accepted under the rule tend to understate aged population in some counties and that other projections would be preferable. The evidence establishes, however, that the Department's methods for estimating population, need and demand ratios are reasonable. While other population estimates and ratios might have been used, it has not been established that the Department's formula is unreasonable, arbitrary, or capricious. In any event, the Petitioner has not challenged the Department's rule in a Section 120.56, Florida Statutes, proceeding.

    
    

11. Petitioner has failed to establish that there is a need for the nursing home facility that is proposed for Volusia County. Petitioner's Application for Certificate of Need should accordingly be denied.

RECOMMENDED ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, hereby,

RECOMMENDED:

That a final order be entered by the Department of Health and Rehabilitative services denying the Application for Certificate of Need filed by the Petitioner to construct a 120-bed nursing home in Volusia County, Florida.

RECOMMENDED this 19th day of September, 1983, in Tallahassee, Florida.

G. STEVEN PFEIFFER Assistant Director

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 19th day of September, 1983.

COPIES FURNISHED:

John M. Laird, Esquire Charles M. Loeser, Esquire Health Quest Corporation

315 West Jefferson Boulevard South Bend, Indiana 46601-1586

James M. Barclay, Esquire Health Planning and Development Department of Health and

Rehabilitative Services

1317 Winewood Blvd., Suite 256

Tallahassee, Florida 32301

Mr. David Pingree Secretary

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 82-003311

Orders for Case No: 82-003311