STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEALTH CARE AND RETIREMENT )

CORPORATION OF AMERICA, )

)

Petitioner, )

)

vs. ) CASE NO. 83-2225RP

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) WHITEHALL BOCA, an Illinois ) Limited partnership, )

)

Petitioner, )

)

vs. ) CASE NO. 83-2226RP

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) HEALTH QUEST CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 83-2171RP

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, a final administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on August 19, 1983, in Tallahassee, Florida. The issue for determination in these consolidated proceedings is whether respondent's proposed Rule 10-5.11(3), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority.

APPEARANCES

For Petitioners: Jean Larramore, Esquire Health Care and 325 North Calhoun Street Retirement Corp- Tallahassee, Florida 32301 oration of America

and Whitehall Boca

For Petitioner: John M. Laird, Esquire Health Quest 315 West Jefferson Boulevard

South Bend, Indiana 46601

For Respondent: James M. Barclay, Esquire

1317 Winewood Boulevard

Building 2, Suite 256

Tallahassee, Florida 32301 INTRODUCTION

Pursuant to Section 120.54(4), Florida Statutes, the three petitioners in these consolidated proceedings seek a declaration that the respondent's proPosed Rule 10-5.11(3) Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority. In support of their contentions of invalidity, the petitioner, Health Care and Retirement Corporation of America, presented one exhibit and the testimony of Paul Hronjak, a project planner for that petitioner, and John S. Hardy and Helmit Becker, both of whom are with Raymond James and Associates which provides health care financing. An objection to petitioner's Exhibit 2 has been sustained. Petitioner Whitehall Boca presented the testimony of Steve Lulder, who owns and operates that facility. Its Exhibit

1 was received into evidence. Petitioner Health Quest Corporation presented the testimony of Thomas Konrad, the Administrator of the HRS Office of Community Medical Facilities. Respondent HRS presented the testimony of James M. McElreath and Elfie Stamm, both of whom are health planners with the HRS Office of Health Planning and Development, and Thomas Konrad, the Administrator of the HRS Office of Community Medical Facilities. Respondent's Exhibits 1 through 12 were received into evidence. The challenged rule and economic impact statement were received into evidence as Hearing Officer's Exhibits 1 and 2.

Subsequent to the hearing, all parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings of fact are not incorporated in this Order, they are rejected as being either not supported by competent, substantial evidence adduced at the hearing, irrelevant or immaterial to the issues in dispute or as constituting conclusions of law as opposed to findings of fact.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. Petitioner Health Care and Retirement Corporation of America owns and operates some forty nursing homes and retirement centers in approximately six states. It currently has twenty-six applications pending for Certificates of Need to establish new nursing homes in Florida. In preparing each application, it has been necessary to provide HRS with information regarding the accessibility of the proposed project to low income persons, racial and ethnic minorities, women, handicapped persons and other underserved groups. The

   Certificate of Need application also requires an applicant to project revenues and utilization on the basis of types of patients (i.e., Medicaid, Medicare, insurance, private pay, and indigent) which the applicant expects to serve.

   
   

2. Petitioner Whitehall Boca operates a nursing home located in Boca Raton, Florida. This facility is presently licensed for 69 skilled nursing home beds, and desires to expand the number of skilled beds. The patients at Whitehall Boca are 100 percent private pay patients. This petitioner has never served and does not intend to serve Medicare or Medicaid patients or the medically indigent. Its financing is conditioned upon serving only private pay patients. The entire concept of this facility is to provide services to those persons in the upper income bracket who wish to continue an elite life-style in their later years.

   
   

3. Petitioner Health Quest Corporation presently has several applications pending for Certificates of Need to establish and operate nursing homes in Florida.

   
   

4. It has been the practice and policy of HRS in the past to consider the issue of geographic and economic accessibility when reviewing applications for a Certificate of Need. As noted in Paragraph 1 above, the printed instruction and application form requires information from an applicant regarding the economic accessibility of the proposal to minorities and low income groups. In documenting the financial feasibility of a proposal, the applicant is required to include a projection of income and expenses on a pro forma basis for the first two years of operation. after completion of the project. In order to project income, an applicant would have to project the percent of its total revenue to be derived from Medicaid, Medicare, and indigent patients as opposed to private pay and third-party insurance pay patients. These projections are also required in providing information to HRS regarding the projected total facility utilization.

   
   

5. Rule 10-5.11, Florida Administrative Code, lists twelve general criteria against which applications for a Certificate of Need are to be evaluated. More specific criteria for specific health services are also provided in later portions of that Rule. The first twelve subsections of Rule 10-5.11 generally track the statutory criteria set forth in Section 381.494(6)(c), Florida Statutes. Prior to the challenged amendment, Rule 10- 5.11(3), Florida Administrative Code, read as follows

   
   

   "(3) The need that the population served or to be served has for such proposed health

   or hospice services."

   
   

6. As a result of another rule-challenge proceeding, the District Court of Appeal, First District, invalidated Rule 10-5.11, Florida Administrative Code, to the extent that it did not explicitly contain any criterion which addressed the extent to which an applicant could meet the needs of minority and low income persons. Farmworker Rights Organization, Inc. v. Department of Health and Rehabilitative Services, 430 So.2d 1 (Fla. 1st DCA, 1983). The court noted that Section 381.494(7)(a), Florida Statutes, (now Section 381.494(8)(a)) requires HRS rules to be in accordance with federal statutes, and that federal statutes and regulations require Certificate of Need agencies to consider the degree to which medically underserved persons, including low income and minorities, have access to the services under review. Comparing the federal "access" requirements with HRS's Rule 10-5.11(3) (cited in Paragraph 5 above), the Court concluded that that subsection was not broad enough to include consideration of

   the criteria mandated by federal regulation and allowed HRS to ignore the federally mandated "access" criterion. To that extent, the Court found Rule 10-

   5.11 to be inconsistent with federal regulations and statutes, and thus invalid.

   
   

7. In response to the Court's decision in Farmworker, supra, and in order to codify its prior policy and practice, respondent HRS seeks to amend Rule 10- 5.11(3), Florida Administrative Code, with the following language:

   
   

   "(3)(a) The need that the population served or to be served has for the health or hospice services proposed to be offered or changed, and the extent to which all resi- dents of the district, and in particular low

   income persons, racial and ethnic minorities, women, handicapped persons, other underserved groups and the elderly, are likely to have access to those services.

   1. The extent to which that need will be met adequately under a proposed reduction, elimination or relocation of a service, under a proposed substantial change in admissions policies or practices, or by alternative arrangements, and the effect of the proposed change on the ability of members of medically underserved groups which have traditionally experienced difficulties in obtaining equal access to health services to obtain needed health care.

   2. The contribution of the proposed service in meeting the health needs of members of

      such medically underserved groups, particu- larly those needs identified in the appli- cable district plan and State health plan as deserving of priority.

   3. In determining the extent to which a proposed service will be accessible, the following will be considered:

      1. The extent to which medically underserved individuals currently use the applicant's services as a proportion of the medically underserved population in the applicant's proposed service area(s), and the extent to which medically underserved individuals are expected to use the proposed services, if approved;

      2. The performance of the applicant in meeting any applicable Federal regulations requiring uncompensated care, community ser- vice, or access by minorities and handicapped persons to programs receiving Federal financial assistance, including the existence of any civil rights access complaints against the applicant;

      3. The extent to which Medicare, Medicaid and medically indigent patients are served by the applicant; and

      4. Tile extent to which the applicant offers

      a range of means by which a person will have access to its services.

   4. In any case where it is determined that an approved project does not satisfy the cri- teria specified in subparagraphs (3)(a) through (d), the Department may, if it approves the application, impose the condi- tion that the applicant must take affirmative steps to meet those criteria.

   5. In evaluating the accessibility of a proposed project, the accessibility of the current facility as a whole must be taken into consideration. If the proposed project is disapproved because it fails to meet the need and access criteria specified herein, the Department will so state in its written findings. In any case where a project does not satisfy the criteria specified in sub- paragraph (3)(a) through (d) above, the Department shall so notify in writing the applicant and the appropriate Regional Office of the United States Department of Health and Human Services."

      
      

      In preparing this proposed rule amendment, respondent reviewed and considered the "access" rules effective in eight other States, portions of the "Model Access Provisions for State Certificate of Need Statutes or Regulations" and the federal regulations and statutes. The language contained in subparagraphs 3(a)

      - (d)4 of the respondent's proposed rule substantially tracks the language contained in 42 C.F.R. Section 123.412(a)(5) and (6), with changes made only for clarity or to reflect the different terminology utilized in the Florida Certificate of Need program. The language contained in subparagraphs (e) and

      (f) of the respondent's proposed rule is substantially identical to the language in federal regulations 42 C.F.R. Section 123.413(b) - (d) and 42 C.F.R.

      Section 123.410(a)(6) (1982). The federal regulations require the States to adopt, and use as applicable, specific criteria based upon the general considerations set forth in 42 C.F.R. Section 123.412 (1982).

      
      

8. An economic impact statement was prepared by respondent for proposed Rule 10-5.11(3). The respondent concluded that, other than the normal costs to the agency of processing a rule amendment, no economic impact was expected as a result of the amendment's implementation. As the estimated costs or economic benefit to persons directly affected by the proposed amendment, the economic impact statement provides:

   
   

   "The proposed amendment is not expected to have an additional economic impact on existing health care providers, health care consumers, or certificate of need applicants who prepared applications under existing rules. Previous and current certificate

   of need decisions by the department have been made in consideration of existing Federal regulations and the criterion contained in

   10-5.11(3) has been interpreted in accordance with Federal regulations."

   It was noted that the proposed amendment would affect competition among providers and certificate of need applicants consistent with existing rules and the proposed amendments. After discussions with others charged with the responsibility of implementing the Certificate of Need program, and based upon her own experience as a health planner, the author of the economic impact statement explained the "data and method of estimating costs" as follows:

   
   

   "Immediate costs for implementing the pro- posed amendment were calculated based on cur- rent data available. Printing and distri- bution costs were based on similar experiences with HRS printing and distribution costs."

   
   

   This approach was utilized based upon the author's understanding that the proposed rule imposed no additional or new criteria for review of certificate of need applications.

   
   

   CONCLUSIONS OF LAW

   
   

9. As current and pending applicants for certificates of need to construct or add health care facilities and services in Florida, each of the three petitioners has demonstrated their substantial interest in a proposed rule regarding one of the criteria for evaluating their applications.

   
   

10. Petitioners' grounds for invalidation of proposed Rule 10-5.11(3), Florida Administrative Code, are several. It is alleged that the challenged rule exceeds both the Florida statutory criteria and the federal regulatory mandates regarding the adoption of criteria by the States. It is alleged that the proposed rule is vague and ambiguous because it does not notify an applicant as to the number of patients, or percentage of categories of patients such as minorities, women, Medicare or Medicaid, which an applicant would be required to provide access to health services. On the other hand, it is contended by petitioner Whitehall that the proposed rule is unconstitutional because it coerces and forces an applicant to admit minorities or medically underserved persons. Petitioner Health Quest alleges that Rule 10-5.11 may not be amended inasmuch as the entire body of that Rule was declared invalid in the case of Farmworker Rights Organization, Inc. v. Department of Health and Rehabilitative Services, 430 So.2d 1 (Fla. 1st DCA, 1983), prior to the initiation of rule amendment proceedings by the respondent HRS. Finally, each of the petitioners contend that the economic impact statement prepared for the challenged rule is inadequate inasmuch as it does not accurately address the rule's impact upon providers and applicants for a certificate of need.

    
    

11. The undersigned has carefully considered each of the contentions raised by the petitioners and finds them to be without merit. The accessibility criterion, both geographic and economic, is clearly embraced within the general statutory criteria set forth in Section 381.494(6)(c)1, 2, and 5, Florida Statutes. In addition, Section 381.494(8)(a), Florida Statutes, requires HRS to review certificate of need applications in accordance with present and future federal statutes. As clearly pointed out in the Farmworker case, supra, the federal statutes require the States to consider the extent to which the proposed service will be accessible to all residents of the service area, 42 U.S.C. Section 300n - 1(c)(6)(E), and to administer the certificate of need program in a manner consistent with standards established by federal regulations, 42 U.S.C. Section 3OOm - 2(a)(4)(B). The federal regulations contain the exact criteria as that set forth in the proposed rule with regard to both the evaluation of the

    accessibility of services for low income persons, racial and ethnic minorities, women, handicapped persons and other underserved groups and the requirements for written findings. 42 C.F.R. Sections 123.412(a)(5) and (6) and 123.413(a).

    Thus, it cannot be said that the proposed rules exceed either the statutory authority delegated to HRS by the Florida legislature or the federal regulations established by the Secretary of the United States Department of Health and Human Services. The fact that the respondent utilized in its proposed rule as its specific criteria relating to access to the medically underserved the identical "general" considerations set forth in the federal regulations does not violate or exceed its statutory authority or the requirements of federal law.

    
    

12. Neither the challenged proposed rule nor the almost identical federal regulations require an applicant for a certificate of need to provide a specified amount or a specified percentage of its offered services to patients who are medically underserved. (i.e., low income persons, racial and ethnic minorities, women, handicapped persons, and the elderly) Rather, the rules and regulations require an evaluation by HRS of the extent to which the applicant intends to serve those present and expected needs and uses in the future. A review is to be made of the extent to which the applicant currently serves the medically underserved, presumably as a means of evaluating its stated intent to serve those needs in the future. The rule does not require denial of an application for a certificate of need when an applicant does not satisfy the accessibility criteria alone. Indeed, subsection (e) of the proposed rule specifically recognizes that HRS may approve an application even where it is determined that an approved project does not satisfy the accessibility criteria. The proposed rule does not, in itself, require a denial when the accessibility criteria is not met. As is the case with the other statutory and regulatory criteria for evaluating certificate of need applications the accessibility standard must be balanced with the other standards for review. The challenged rule simply provides, in accordance and compliance with federal regulations, that if a project is disapproved because it fails to meet the need and access criteria, HRS will so state in its written findings and report those findings to the applicant and the appropriate Regional Office of the United States Department of Health and Human Services.

    
    

13. Whether or not a particular applicant meets or even attempts to meet the access criteria set forth in the challenged rule is an issue for determination based upon the specific facts regarding that application. The rule itself imposes no specific numerical requirements. It simply contains a listing of considerations which HRS will review in determining compliance with one of the many criteria for evaluation. The manner in which HRS may or may not apply the proposed rule to a specific application may be the proper subject for a challenge in a proceeding instituted pursuant to Section 120.57(1), Florida Statutes. The challenged rule itself does not mandate an erroneous application of the accessibility criterion, nor does it afford that criterion exclusive weight over other statutory criteria for review. In summary, the petitioners have failed to demonstrate that the proposed amendment to Rule 10-5.11(3) is arbitrary, vague, unconstitutional or otherwise exceeds either the Florida or federal statutory or regulatory criteria.

    
    

14. Rule 10-5.11, Florida Administrative Code, was declared invalid by the Court in the Farmworker case, supra, only to the extent that it did not address the access criteria mandated by federal regulation. The Rule's remaining provisions were neither addressed nor invalidated in that proceeding.

    
    

15. As to the economic impact statement, it is obvious from the statement itself that HRS did consider the costs and/or economic benefits to health care

providers, health care consumers and certificate of need applicants. It was concluded that such persons affected by the proposed rule would incur no additional costs or benefits because the rule's provisions embraced the past practice and policy of HRS to consider access problems for the medically underserved. This conclusion is justified by the testimony and evidence presented in this case, and petitioners have failed to adequately demonstrate a contrary conclusion. The information requested on an application for a certificate of need includes a projection of the types of patients an applicant intends to serve and the extent to which low income persons, racial minorities, women, handicapped persons and other underserved groups are likely to have access to the applicant's proposed services. The criterion of accessibility is a long-standing statutory and federal criterion for review. Thus, while a health care provider or applicant may well be affected by any specific or general criteria for review, it does not automatically follow that the amplification of an existing criterion will have an economic effect which is either positive or negative. This case is clearly distinguishable from the case of Westchester General Hospital v. Department of Health and Rehabilitative Services, 417 So.2d 261 (Fla. 1st DCA, 1982) In that case, the Court, affirming the Hearing Officer, found that the agency's economic impact statement was inadequate because it did not take into consideration or address the costs to regulated hospitals whose grandfather rights to exemption from certificate of need requirements had been repealed. In the instant proceedings, neither the petitioners nor other providers or certificate of need applicants are required to do anything different than what was required prior to the proposed rule amendment. Again, the petitioners have failed to demonstrate that the respondent either did not take providers, consumers or applicants into effect in preparing the economic impact statement or that HRS erroneously concluded that the proposed rule would have no adverse economic impact on providers, consumers, or certificate of need applicants.

FINAL ORDER

Based upon the findings of fact and conclusions of law recited above, IT IS ORDERED THAT respondent's proposed amendment to Rule 10-5.11(3),

Florida Administrative Code, constitutes a valid exercise of delegated legislative authority and that the three petitions filed in these proceedings are DISMISSED.

DONE and ORDERED this 6th day of October, 1983, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer 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 6th day of October, 1983.

COPIES FURNISHED:

Jean Larramore, Esquire David Pingree, Secretary

325 North Calhoun Street Department of Health & Rehabilitative Tallahassee, Florida 32301 Services

1323 Winewood Blvd.

John M. Laird, Esquire Tallahassee, Florida 32301

315 W. Jefferson Blvd.

South Bend, Indiana 46601 Carroll Webb, Executive Director

Administrative Procedures Committee James M. Barclay, Esquire 120 Holland Building

1317 Winewood Blvd. Tallahassee, Florida 32301

Building 2, Suite 256

Tallahassee, Florida 32301 Liz Cloud, Chief

Administrative Code Section Department of State

The Capitol

Tallahassee, Florida 32301

Docket for Case No: 83-002225RP

Orders for Case No: 83-002225RP