Judges: K. N. AYERS
Agency: Agency for Health Care Administration
Latest Update: Oct. 31, 1984
Summary: Applications to construct hospitals in Lake County should be denied.
84-0228STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA LIVING CARE, INC., )
(Mount Dora), )
)
Petitioner, )
)
vs. ) CASE NO. 84-0228
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
) HEALTH CARE AND RETIREMENT ) CORPORATION OF AMERICA, d/b/a ) HEARTLAND OF LAKE COUNTY, )
)
Petitioner, )
)
vs. ) CASE NO. 84-0254
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a comparative hearing in the above-styled cases, which were consolidated for hearing, on August 21, 22, and 31, 1984, at Eustis and Tallahassee, Florida.
APPEARANCES
For Petitioner: Karen L. Goldsmith, Esquire (FLC) and
Timothy H. Bendin, Esquire Post Office Box 1980 Orlando, Florida 32802
For Petitioner: G. Steven Pfeiffer, Esquire (HCR) and
Jean Laramore, Esquire
325 North Calhoun Street Tallahassee, Florida 32301
For Respondent: Theodore E. Mack, Esquire
Department of Health and Rehabilitative Services
1323 Winewood Boulevard
Tallahassee, Florida 32301
By Petition dated January 9, 1984, Florida Living Care, Inc. (FLC), Petitioner in Case 84-0228, requested an administrative hearing to contest the denial by the Department of Health and Rehabilitative Services (DHRS), Respondent, of its application for a certificate of need to construct and operate a 120-bed skilled nursing facility in Lake County, Florida.
By Petition dated January 4, 1984, Health Care and Retirement Corporation of America (HCR), Petitioner in Case 84-0254, requested an administrative hearing to contest the denial of its application by DHRS, Respondent, for a certificate of need to construct and operate a 120-bed skilled nursing home in Lake County, Florida. Both applications were considered in the same batch and were consolidated for a comparative hearing.
At this consolidated hearing both FLC and HCR filed amended applications for certificates of need to construct and operate a 60-bed nursing facility. Thereafter, FLC called three witnesses, HCR called five witnesses, DHRS called one witness, and 30 exhibits were admitted into evidence.
Proposed findings submitted by the parties, to the extent incorporated herein, are adopted; otherwise, they are rejected as not supported by the evidence, immaterial, or unnecessary to the results reached.
The issues for resolution are:
Is there a need for a 60-bed skilled nursing facility in the subdistrict
of Lake and Sumter Counties? and
If so, which of the Petitioners is better qualified to provide the proposed service?
All facts relating to need will be stated before facts are shown which compare the applicants. Although both FLC and HCR applied for certificates to operate a 120-bed nursing facility, both amended their applications and these applications will be treated as applications for 60-bed nursing facilities.
FINDINGS OF FACT
Lake and Sumter Counties comprise a subdistrict of District III. Both the district and subdistrict have a sufficiently high occupancy rate of nursing homes to indicate a need for additional bed capacity considering both licensed and approved beds.
This subdistrict has an above average percentage of elderly (over age
65) living in poverty and thereby qualifying for Medicaid. This increases the bed need ratio from 27 per 1,000 to 35.6 per 1,000 in this subdistrict.
Applying the provisions of Rule 10-5.11(21), Florida Administrative Code, to the projected population over age 65 of this subdistrict results in a need for 1,522 beds in 1987. There are 931 licensed and approved beds in this
subdistrict including the 15 beds approved for Eustis Limited Partnership in June, 1984. Since the current utilization of nursing home beds in the subdistrict exceeds 85 percent and both subdistrict and district indicate a need for additional bed capacity, the prospective base rate of utilization is 80 percent.
From January through March, 1984, there were 684 licensed nursing home beds in this subdistrict. From April through June, this number increased by 120 to 804 licensed beds. In July 35 licensed beds were added and in August an additional 17 licensed beds were added.
From these undisputed figures Respondent contends there is no need for additional beds, although its witness testified to a need for 41 additional beds when the bed need methodology of Rule 10-5.21 was applied to the latest data available (TR. Vol. II, page 253, 270) , and Petitioners contend that the application of this formula indicates a need from 41 to 85 additional beds.
The formula in the rule which is used to determine prospective utilization and number of additional beds needed is:
Up = PC where: Eb + Pb
Up is prospective utilization of community nursing home beds (in this case not less than
80 percent) PC is the average patient census within the area during the T.est recent six months' period prior to the filing of the CON application(s) under consideration for which the Department has data available.
Eb is the current number of licensed and approved community nursing home beds within the area (here 931).
Pb is the number of additional beds being pro posed. (Pb must be low enough to keep Up at or above 0.80).
Nursing homes submit monthly census reports to DHRS showing the number of patients in the nursing home on the first day of the month. A summary of those reports for this subdistrict is shown in Exhibit 30.
The only factor in the formula on which there is any dispute is PC, the average census for the preceding six months. At the hearing DHRS contended that the definition in the rule respecting the census during the most recent six- month period prior to the filing of the CON application was controlling in
this case; however, this position has now been abandoned by DHRS as not consistent with the concept of de novo proceedings and their customary practice of using the latest six-month data available prior to the hearing.
If we use the latest six months data of patient census in this subdistrict available to DHRS to determine the average patient census for this period, those figures are shown on Exhibit 30 for 1/1/84 through 6/1/84. The average patient census for these six months is 4289 divided by 6 or 715. Since the latest nursing home beds approved in this subdistrict was the 15 approved in
June, 1984, these 15 should be deducted from the 931 beds currently licensed and approved because they were authorized after this six-month period for which the average patient census is determined. Therefore, when using this average census figure, the beds licensed and authorized should be 916. Applying these figures to the prospective utilization formula in Finding of Fact No. 6 above, we have
.80 = 715
916 + Pb
Pb = 893-916 = 0
If, as proposed by Petitioners, we use the average patient census for the six-month period for which Petitioners submitted data, viz., 3/1/84 through 8/1/84, the average patient census is 4556 divided by 6 or 759. When this figure for PC is used in the utilization formula, we have
.80 = 759
931 + Pb
Pb = 949-931 = 18
Although it does not affect the total number of beds licensed and approved, during the month of July, 1984, 35 more beds were licensed and in August, 1984, an additional 17 beds were licensed.
Petitioners obtain a different number for Pb by ignoring the definition of PC as given in Rule 10-5.11(21). To determine PC they would take the latest number of licensed beds, here 856, and multiply this by the occupancy rate of 93.3 percent to arrive at a patient census of 799 which, by reason of the arithmetic used to get the percentage of licensed beds occupied, is exactly equal to the patient census submitted by Petitioner for August 1, 1984.
Applying this one-month patient census to the prospective utilization formula, they would show 67 additional beds are needed as follows:
.80 = 799
931 + Pb
Pb = 998.75 - 931 = 67
The methodology used by DHRS's witness to obtain a bed need of 41 from the data available to DHRS was not shown. However, during the six-month period January-June 1984, the occupancy rate in this subdistrict was 96 percent. If the average census for the six-month period can be determined by taking 96 percent of the 804 licensed beds, this number (PC) is 772. Applying a PC of 772 to the prospective utilization formula we have
.80 = 772
916 + Pb
Pb = 965 - 916 = 49
(Again, 916 is used instead of 931 because the additional 15 beds were not authorized until after June 1, 1984.)
QUALIFICATIONS OF PETITIONERS
Although no need for additional beds has been shown, the following facts are found respecting the Petitioners' qualifications.
Both FLC and HCR are qualified to provide the proposed service.
FLC is a management company owned by six individuals comprising two groups, each of which own one-half. FLC is a Subchapter S corporation which means all earnings flow to the shareholders and are taxable to these shareholders. Each nursing home built to be operated by FLC is also a Subchapter S corporation owned by the owners of FLC.
Construction of nursing homes to be managed by Florida is done by Living Care Constructors, a partnership comprised of the same six investors.
FLC plans to finance construction of the proposed facility by conventional financing from Barnett Bank or through industrial revenue bonds. Barnett Bank will provide the necessary financing. The net worth of the six investors is in excess of $37 million dollars. Four of the six investors are Harold Puckett and his three sons, Hal, Thomas, and James. Each of these own 12-1/2 percent of the nursing homes operated by FLC in Florida while John Cather and E.R.N. Kuzendorf own the other 50 percent.
FLC currently operates 10 nursing homes in Florida all of which were constructed by Living Care Contructors. The Puckett family owns some 20 nursing homes in states other than Florida which they have operated for many years.
FLC has received citations and has been fined by DHRS for violations of various regulations at the nursing homes it operates in Florida. FLC has also received superior ratings for the nursing homes it operates in Florida.
FLC estimated total cost of construction for the 60-bed facility proposed is $1,342,000.
Both FLC and HCR propose to have a patient mix comprising approximately 50 percent Medicaid.
HCR is a public corporation which, for many years before going public, constructed nursing homes in Indiana, Ohio, Missouri, and West Virginia before moving some operations to Florida. Most of those were built for others or sold to others after construction. HCR currently has three nursing homes under construction in Florida but, to date, none is operational.
HCR plans to finance the proposed facility with industrial development bonds. No evidence was presented relative to alternate financing if industrial revenue bonds are not available although evidence was presented that, if desired, HCR is sufficiently liquid to finance these construction costs.
HCR's estimated costs to construct and furnish the proposed nursing home is $1,645,000. Its pro forma estimated interest costs are 12 percent.
Most of the nursing homes built by HCR were built for or sold to others. Those nursing homes presently under construction by HCR in Florida are intended to be operated by HCR. HCR has several other applications pending for certificates of need to construct nursing homes in Florida. Some of these, if approved, may be sold by HCR rather than be operated by HCR.
HCR presented witnesses who extolled the virtues of HCR's program for training personnel and the operating procedures to be followed by HCR in operating the proposed nursing home. However, HCR has no track record in Florida and the management of HCR is certainly no more, and probably less, qualified by experience to operate nursing homes than is the management of FLC.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.
The primary issue in these proceedings is the interpretation of the definition of PC as given in Rule 10-5.11(21)(g) Florida Administrative Code, viz., "The average patient census within the area during the most recent six months period prior to the filing of the CON application(s) under consideration for which the Department has data available."
In construction of rule, like construction of statutes, one cardinal principle is when the rule is clear and unambiguous on its face there is no necessity for any interpretation or construction of the rule and the courts need only give effect to the plain meaning of its terms. State v. Egan, 287 So.2d 1 (Fla. 1973). The intent of an agency promulgating a rule is determined primarily from the language of the rule; and the agency is assumed to know the meaning of the words and to have expressed its intent by using them in the rule. Cf. SRG Corporation v. Department of Revenue, 365 So.2d 687 (Fla. 1978). The starting point for interpreting a rule is the language of the rule itself; absent a clearly expressed agency intent to the contrary, that language must ordinarily be regarded as conclusive. Cf.Consumer Products Safety Commission v. GTE Sylvania, 447 U.S. 102, 100 S.Ct. 2051, 64 L.Ed. 2d 766 (1980).
Because this hearing is de novo, the words in the definition of PC "prior to the filing of the CON application(s) under consideration" are inapplicable and their inapplicability is recognized by DHRS and the Petitioners. Although this interpretation appears to conflict with the language of the rule, agencies are afforded a wide discretion in the interpretation of their rules and will not be overturned on appeal unless clearly erroneous. The reviewing court will defer to any interpretation within the range of possible interpretations. Natelson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984)
At a de novo hearing, the situation at the time of the hearing is the criteria; therefore, data current to the date of the hearing should be utilized in determining need. This leaves the operative language of the definition of PC as "the average patient census during the most recent six months period... for which the Department has data available." The most recent six-month period for which the department had data available at the time of this hearing was the six- month period January through June, 1984. The average patient census of the nursing homes in this subdistrict during this six-month period was 715.
In this definition of PC, "average" is used as an adjective. Webster's New Intercollegiate Dictionary (1977) defines average, adj. to mean "equaling an arithmetic mean." The arithmetic mean of the patient census in this subdistrict for the period January 1, 1984, through June 1, 1984, is the sum of the monthly patient census divided by six. This average is 715. The average census is not the percentage of occupancy for the six-month period multiplied by the licensed beds at the end of the period. Bad this been the number intended to be used in the prospective utilization formula, the rule could readily have so defined PC.
From the foregoing it is concluded that, using the latest six-month data on occupancy of nursing homes in the subdistrict of Lake and Sumter Counties at the commencement of the hearing, there is insufficient need under the bed need methodology contained in Rule 10-5.11(21) to justify awarding a certificate of need to either FLC or HCR. Using the latest six-month patient census available to DHRS at the time of the hearing, there is no need under this bed need methodology. It is
RECOMMENDED that a Final Order be entered denying the applications of Florida Living Care, Inc., and Health Care Corporation of America for certificates of need to construct and operate 60-bed skilled nursing facilities in Lake County.
ENTERED this 31st day of October, 1984, at Tallahassee, Florida.
K.N. AYERS, 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 31st day of October, 1984.
COPIES FURNISHED:
Karen Goldsmith, Esquire Timothy B. Bendin, Esquire Post Office Box 1980 Orlando, Florida 32802
G. Steven Pfeiffer, Esquire Jean Laramore, Esquire
325 North Calhoun Street Tallahassee, Florida 32301
Theodore E. Mack, Esquire Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
David H. Pingee, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
Docket for Case No: 84-000228
Orders for Case No: 84-000228
