STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NATIONAL HEALTH CORPORATION ) and FMSC, INC., )

)

Petitioner, )

)

vs. ) Case No. 85-3013

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

) HEALTH CARE AND RETIREMENT ) CORP. OF AMERICA, d/b/a ) HEARTLAND OF INDIAN RIVER, )

)

Petitioner, )

)

vs. ) Case No. 85-3236

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

) BEVERLY ENTERPRISES-FLORIDA, ) INC., d/b/a BEVERLY-GULF COAST )

FLORIDA, INC., Indian River ) County, )

)

Petitioner, )

)

vs. ) Case No. 85-3315

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

) FORUM GROUP, INC., Sponsor of ) Retirement Living of Indian ) River, )

)

Petitioner, )

)

vs. ) Case No. 85-3360

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

) FLORIDA CONVALESCENT CENTERS, ) INC., )

)

Petitioner, )

)

vs. ) Case No. 86-0906

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Consistent with the Notice of Hearing furnished the parties, a hearing was held in this case before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings, in Tallahassee, Florida on September 25, 1986. The issue for consideration was whether a bed need exists in the January, 1988 planning horizon for community nursing home beds in Indian River County and if so, what is the extent of the need.

APPEARANCES

For National Health: Robert D. Newell, Jr.,

Corporation and Esquire FMSC (NHC) 200 S. Monroe St.

Tallahassee, Florida 32301

For Health Care: and Kenneth A. Hoffman, Esquire

Retirement Corp. of Alfred W. Clark, Esquire

America (HCR): Laramore & Clark, P.A.

325 N. Calhoun St. Tallahassee, Florida 32301

For Beverly

Enterprises: Stephen K. Boone, Esquire Florida, Inc.: Boone, Boone, Klingbeil

(Beverly) & Boone, P. A.

P.O. Box 1596

Venice, Florida 34284

For Forum Group,: R. Terry Rigsby, Esquire Inc., (Forum) Moffitt, Hart, Rigsby, &

Herron

First Florida Bank Bldg.

215 S. Monroe St.

P.O. Box 10555

Tallahassee, Florida 32302

For DHRS: John Rodriguez, Esquire DHRS

1323 Winewood Blvd.

Bldg 1, Suite 407

Tallahassee, Florida 32301 BACKGROUND INFORMATION

Subsequent to the Respondent, DHRS' denial of the applications of FMSC, Inc, HCR, Beverly, and Forum, and the grant of a Certificate of Need, (CON) to Florida Convalescent Centers, Inc., (FCC), for 91 community nursing home beds in Indian River County, Florida, the unsuccessful applicants filed petitions for administrative hearing in this case to contest the denial as stated. The hearing was set for September 25, 1986, by the hearing officer but prior to the convening of the hearing, counsel for all parties conferred and agreed that a bifurcated hearing would be beneficial and an expeditious way of resolving the issues in this case. Therefore, the parties requested the hearing officer to bifurcate the hearing which, upon argument, was done. An order was entered requiring that the first portion of the bifurcated hearing be limited to the consideration and determination of whether or not there exists a need for additional community nursing home beds in Indian River County and in making this determination,

whether it is appropriate for DHRS to include the beds issued to FCC under CON 2738 in its bed need calculation for the January, 1988 planning horizon. In the event that need was determined to exist, the parties agreed that a second portion of the hearing would be held to consider the comparative merits and qualifications of the applicants to determine who is best qualified to fill the need determined to exist. At the hearing, Petitioner, Forum, presented the testimony of Dr. David Warner, an expert in health care planning, need analysis, health care finance, and demographics and introduced Forum Exhibits 1 and 2. None of the other petitioners offered evidence in addition to that of Dr. Warner except HCR which offered into evidence an internal DHRS memo for the sole purpose of impeachment of DHRS' witness, Ms. Farr. The others chose instead to adopt the testimony given by Dr. Warner. Respondent, DHRS, presented the testimony of Joyce Farr, an expert in the area of CON review and state health planning, insofar as it relates to the analysis of applications for CONs and the application of state rules and policy to those applications. DHRS also introduced HRS Exhibits A, B, and

C. FCC, though the petitioner in DOAH Case No 86-0906 was not represented at the hearing and presented no evidence. Absent representation at the hearing, FCC was unable to adopt the testimony given by Dr. Warner and Forum Exhibits

1 and 2. Consequently, no evidence was received on behalf of FCC. Subsequent to the hearing, all parties except FCC submitted post hearing findings of fact. A ruling on each proposed finding of fact is contained in the appendix attached hereto.

FINDINGS OF FACT

1. The parties present at the hearing stipulated to the following facts which are hereby entered as findings of fact:

   
   

   1. All letters of intent submitted by the applicants involved herein with the exception of FCC were timely filed on or before December 15, 1984 and the relating applications by these applicants were timely filed on or before January 15, 1985. As a result, these applications addressed a January, 1988 bed need planning horizon.

   2. All applications, as mentioned above, were deemed complete by DHRS and were reviewed under a January, 1988 bed need planning horizon.

      
      

   3. All applications as cited above, were preliminarily denied by DHRS based on a lack of need and notice of these denials were timely published in the Florida Administrative Weekly.

      
      

   4. All unsuccessful applicants herein thereafter timely filed petitions for formal administrative hearing to contest the denial of their applications.

      
      

   5. The application filed by FCC for CON number 2738, filed by the applicant in July, 1983, and addressing a July, 1986 bed need was initially denied by DHRS in November, 1983. FCC thereafter timely filed a petition for formal, administrative hearing contesting the denial of this application and on January 10, 1985, DHRS and FCC entered into a stipulated settlement in which DHRS agreed to grant CON Number 2738 to FCC. This CON was issued to FCC on January 19, 1985, for 91 community nursing home beds and on March 15, 1985, a Final Order was entered by DHRS confirming the grant off CON Number 2738 to FCC.

      
      

   6. FCC's original application under CON Number 2738 was for a 120 bed community nursing home to be located in Indian River County, Florida.

1. DHRS's initial denial of FCC's application was based on a lack of bed need at the time. When DHRS entered into the stipulation with FCC reversing its position and granting a CON to FCC for 91 community nursing home beds, it did so on the basis of bed need figures utilizing statistics relating to the subsequent January, 1988 bed need planning horizon even though FCC's application did not pertain to that planning horizon. In fact the beds taken and awarded to FCC came from the fixed pool of beds that,

   under the DHRS rule in effect at the time, was reserved for applicants in the January, 1985 batching cycle with a planning horizon of January, 1988.

   
   

2. Rule 10-5.11(21)(b), F.A.C., sets out the bed need rule methodology for determining projected need for new or additional community nursing home beds. Pursuant to this rule, need is projected three years into the future. The methodology provided in this rule is clear and reasonable.

   
   

3. If this methodology is followed precisely as set forth in the rule and utilizing the DHRS statistics available to personnel in the health care professions, such as its semi-annual nursing home census report as well as the Florida population estimates and projections by DHRS district and county, a net bed need of 116 additional beds in Indian River County is established for the period January, 1988. This figure does not, however, include an award of 91 beds to FCC under CON Number 2738 by DHRS under the terms of its settlement and those 91 beds are included within the 116. The expert testifying for the applicants herein concluded that the award of the 91 beds to FCC outside its planning horizon was erroneous and improper and based on no calculation of bed need appropriate to the applicant's original July, 1986 planning horizon and it was so found. In this case, DHRS, by awarding beds to FCC from a subsequent planning horizon is implementing a bed need policy which establishes a "planning horizon" three years from the date the Petitioners' applications were filed but updating all available data to that existing as of the date of the final hearing. This would include July, 1986 population data, current licensed beds, current approved beds, and the latest occupancy rate.

   
   

4. The procedure followed by DHRS here is, however, a DHRS policy interpretation rather than a literal interpretation of the

   rule and the DHRS expert was unable to establish or in any way

   justify DHRS' policy of updating all data to the date of hearing

   in contravention of the terms of its own rule.

5. If the unjustified and unsubstantiated DHRS policy were accepted and utilized here, calculations would reflect a surplus

of 70 nursing home beds in Indian River County for the January,

1988 planning horizon as opposed to the more reasonable and rational bed need of 116.

CONCLUSIONS OF LAW

The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this case. Section 120.57(1), Florida Statutes.

The evidence presented at this hearing demonstrates that DHRS, which has promulgated a valid rule for the determination of

bed need in cases such as this, has here attempted to modify the

terms of this rule without going through the rule-making process

and without showing any bona fide basis in fact for its action.

The agency's representative was unable in any way to justify its

policy of updating all data to the most current information available rather than adhering to the terms set forth in the rule

methodology.

In a relatively recent case, this same rule was sustained by the District Court of Appeals in a case involving nursing home

bed need applications and in which the court rejected any deviation from the application of the DHRS methodology set forth

in the rule. HCR v. DHRS, 8 FALR 2774, May, 1986.

In other cases, the court has rejected the agency's attempt to change an existing rule by policy adjustments. Boca Raton

Artificial Kidney Center v. DHRS, FALR 3758 (Fla. 1st DCA 1986).

In that case the court held that if a rule was impractical in

generation, it might be amended by following established rule-making

procedures but until that is done, it must be applied as written and experience cannot be permitted to overcome the terms

of a rule.

Here, absent a showing of a bona fide reason to deviate from

the terms of the agency's existing and clearly written rule,

which has not been successfully done here, the rule must be followed as written and it is clear that in doing so, a bed need

is shown to exist.

Further, since the agency violated the terms its own rule in

granting the CON to FCC, as the proper application of the methodology, if applied, would not have resulted in a bed need

for that applicant within its planning horizon, the 91 beds granted should be returned to the January, 1988 fixed pool and

awarded on the basis of a comparative evaluation of the applicants within that batching cycle.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED THAT Certificate of Need Number 2733, previously

issued to Florida Convalescent Centers be rescinded and that the

91 beds relating thereto be returned to the January, 1988 planning horizon fixed pool.

It is further recommended that the Secretary, Department of Health and Rehabilitative Services remand the case to the Division of Administrative Hearings for the conduct of a comparative hearing to evaluate the pending applicants within

that batching cycle.

RECOMMENDED this 28th day of January, 1987, at Tallahassee,

Florida.

ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1987.

APPENDIX

The following constitutes my specific ruling pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case.

Rulings on Proposed Findings of Fact Submitted by National Health Corporation, FMSC and Forum

1. Incorporated in Finding of Fact 4 except for the actual calculations outlined in the formulas which are incomplete.

2 & 3 Incorporated in Finding of Fact 5. 4-6 Incorporated in Finding of Fact 5.

7-13 Incorporated in Finding of Fact 6.

14 Not a Finding of Fact.

Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation

1. Incorporated in Finding of Fact 4 except for the citation of the rule which is incomplete.

2. Accepted.

3. Accepted.

4. Accepted and incorporated. 5-9 Accepted.

10 & 11 Accepted.

12 Rejected as not the best analysis. Rulings on Proposed Findings of Fact Submitted by Beverly Enterprises

1-3 Accepted.

4-6 Incorporated into Findings of Fact.

7 & 8 Accepted.

1. Rejected as legal argument and not a Finding of Fact.

2. & 11 Accepted.

1. Rejected as legal argument and not a Finding of Fact.

2. Cumulative to other findings.

3. Rejected as legal argument and not a Finding of Fact.

4. Incorporated in Finding of Fact.

16-20 Legal Argument not a Finding of Fact.

21-22 Cumulative to other evidence of record.

Rulings on Proposed Findings of Fact Submitted by DHRS 1-3 Accepted.

4-8 Rejected as not supported by the weight of the evidence.

9 Accepted as to the calculation including the 91 beds available to FCC. Rejected as to the propriety of the award and the reason.

Copies Furnished: William Page, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire

200 South Monroe Street Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire Alfred W. Clark, Esquire

325 North Calhoun Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284

R. Terry Rigsby, Esquire Post Office Box 10555 Tallahassee, Florida 32302 John Rodriguez, Esquire, Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301

Docket for Case No: 85-003013

Orders for Case No: 85-003013