STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA HEALTH FACILITIES CORP., ) (OF POLK COUNTY), d/b/a IMPERIAL ) VILLAGE CARE CENTER, )

)

Petitioner, )

)

vs. ) CASE NO. 86-0058

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Final Hearing in the above-styled action was held in Tallahassee, Florida on February 5 and 6, 1987, before Mary Clark, Hearing Officer. The parties were represented as follows:

For Petitioner: Robert D. Newell, Jr., Esquire

102 South Monroe Street Tallahassee, Florida 32301

For Respondent: Richard A. Patterson, Esquire

Robert L. Powell, Sr., Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700 BACKGROUND AND PROCEDURAL MATTERS

This proceeding commenced when Florida Health Facilities Corporation (of Polk County) "FHFC", timely filed its petition for review of the Department of Health and Rehabilitative Services "DHRS" denial of its application for CON 4158 for 60 additional nursing home beds.

The application had been reviewed simultaneously with the application of Gulf South Medical Enterprises for a 120 bed nursing home in Polk County. The two cases were initially consolidated for hearing as DOAH cases No. 86-0058/No. 86-0353. On February 5, 1987, Gulf South filed a voluntary dismissal of its petition, and the file in No. 86-0353 was closed by Order dated February 10, 1987.

At the hearing each party presented the testimony of one expert witness. Seven exhibits of the Petitioner were admitted, including the CON application, state agency action report and a break-out of the nursing home computation of need formula. Respondent submitted one exhibit, its break-out of the computation of need formula.

Official notice was taken of the Final Order in Manor Care of Hillsborough County, v. Department of Health and Rehabilitative Services, entered on February 6, 1987. Official notice was also taken of the renumbering of Rule 10-5.11

1. [now 10-5.011]. For convenience sake, witnesses referenced the prior numbering system throughout the hearing. The up-dated numbering system is used in this recommended order.

   
   

   Both parties submitted post-hearing proposed recommended orders. These have been considered and specific rulings on each proposed finding of fact are found in the attached appendix.

   
   

   ISSUES

   
   

   The broad issue for resolution is whether FHFC's application meets the criteria contained in Section 381.494(6)(c) F.S. and Rule 10-5.011 F.A.C. FHFC contends that its application meets all the criteria in Section 381.494(6)(c) F.S., and when (1)(k) of Rule 10-5.011 F.A.C. is properly applied, a net need for at least 93 beds results. DHRS contends that a need for only 17 beds exists when the numerical need methodology is applied consistent with its current policy. DHRS did not present any evidence on any criteria other than need.

   
   

   The more specific issue to be determined in this proceeding is focused on the data for current and future population used to calculate numerical need under Rule 10-5.011(1)(k) F.A.C. FHFC contends that the most recently released population estimates and projections should be used; DHRS asserts that the data available at the time of the application should be used. The parties' differing results in the net bed need (93 beds, as opposed to 17 beds) are based upon those separate theories for application of the rule.

   
   

   FINDINGS OF FACT

   
   

   1. FHFC currently operates a 120-bed nursing home in Polk County, on the northeastern outskirts of the City of Lakeland. Its application for an additional 60 beds was submitted in July 1985, in time for the July 1985 batching cycle. The application was deemed complete and was later denied in December 1985.

      
      

   2. The cover letter from HRS dated December 9, 1985, accompanying the State Agency Action Report, "SAAR", states the basis for denial: "There is insufficient need for the project proposed for this subdistrict at this time."

      
      

   3. Comments within the SAAR explain that the application of the methodology in Rule 10-5.011(1)(k) F.A.C. results in insufficient need for the project proposed by the applicant. "...Further, nursing home utilization within Polk County does not warrant the addition of nursing home beds at this time." (SAAR, P. 9, Petitioner's exhibit No. 2)

      
      

   4. Walter Eugene Nelson is a health planning consultant and former administrator of the HRS Office of Comprehensive Health Planning, the office responsible for administering the certificate of need program. He was tendered by Petitioner and was accepted, without objection, as an expert in health care planning and nursing home CON reviews.

      
      

   5. Mr. Nelson prepared a break-out of the need methodology described in Rule 10-5.011(1)(k) F.A.C. With one significant exception, his application of the methodology conforms to that of Herbert Straughn, HRS' expert witness.

   6. For the factors related to current and projected population (POPA, POPB, POSC and POSD), Mr. Nelson used data released from the Office of the Governor in January 1987. Mr. Straughn used data available as of the date of the application, that is, data released on July 1, 1985. Both parties agree that "current population" is that population at the time of application, July 1985. The projected horizon year population is three years later, or July 1988. Both parties agree that the source of the data is the official estimates and projections adopted by the Office of the Governor.

      
      

   7. Actual population census counts are made every ten years. During the decennium, population figures are extrapolated and updated through current data on utility hook-ups, building permits, employment, school enrollment and similar sources. When the data is applied to population in a future date, the resultant population count is called a "projection"; when the data is applied to population for a current or past date, the population count is called an "estimate".

      
      

   8. The Office of the Governor revises and updates its population estimates and projections every six months. Sometimes the figures are adjusted upward, sometimes downward. In the opinion of Eugene Nelson, the later-released figures are more accurate. In this instance, as to the figures released in July 1985, for the current (July 1985) population, the "estimates" were really projections since the data was collected in Spring 1985, before the relevant period. By January 1987, the estimates for the July 1985 population had the advantage of hindsight and the projections for the population in July 1988 had the advantage of data collected between July 1985 and January 1987.

      
      

   9. Herbert Straughn contends that the estimates and projections released in July 1985 are more appropriate. His explanation is best expressed in his own words:

      
      

      * * * [direct examination by Mr. Powell]

      Q What set of population figures did you use in your calculations?

      [response by Mr. Straughn]

      A I used the populations that were current at the time of the submission of the application, that being of July, 1985, and then the proper planning horizon of July, 1988.

      Q Why did you use those figures?

      A Because it more truly reflects the entire set of data that the Department sees fit to use on calculating bed need during or prior to, an administrative hearing.

      Q Why do you-all consider that to be more appropriate?

      A Because, well, because it more truly reflects the entire set of data by which to derive the methodology, that, you know, including the population, the occupancy, the number of licensed beds, and the number of approved beds.

      Q Well, just referring to the population,

      which Mr. Nelson has used a different set of figures, which set is the better set of figures to use, current as of the date of the application?

      A Well, I know it could be the current, or the date of the application, because then it truly reflects the input of the other set of data to derive the methodology to come up to the number of beds either needed, or not needed.

      Q Which figures do you consider more accurate, so far as population figures?

      A I would consider these that were current at the time that we did the analysis.

      Q Why?

      A Well, contrary, I think, to what Mr. Nelson says, that the closer that you can get to the population at the time you do the review, based on the ten-year span of when the population, or census, is taken, because it's taken every ten years, the further you get away from the base year, I think that the calculations that get further away from the base year, therefore, become less accurate.

      Q Would you say less reliable? A And less reliable.

      * * * (transcript, pgs. 89-90)

      
      

   10. As recently as September 1986, HRS used the most current available population data in its bed need methodology. Even now HRS still uses the approved bed figures available at the time the SAAR is signed, rather than at the time the application is submitted. Herbert Staughn's break-out of the methodology, Respondent's exhibit No. 1, reflects on its face the updated adjustment of another variable: "licensed beds" ("LBD" in the rule formula). His break-out initially included 1685 licensed beds, but shortly before the hearing this figure was adjusted downward to 1655 licensed beds after it was determined that Johnson Health Center's 30 beds were sheltered nursing home beds which are not applied in computing net need for community nursing home beds.

       
       

   11. Both parties apply an occupancy rate in the Polk County subdistrict of

       84.9 percent. Herbert Straughn contends that this rate indicates lack of need, as it is less than an alleged minimum standard of 90 percent occupancy. This "minimum standard" is not described by rule or statute, nor was it adequately explained by the HRS expert.

       
       

   12. The CON review criteria listed in the SAAR correspond, in substance, to the review criteria in Section 381.494(b)(c) F.S. and Rule 10-5.011 F.A.C. The SAAR is used by the agency as a convenient check list to inform an applicant of the extent to which the criteria are satisfied. There are criteria, other than need, identified in the checklist. In its case FHFC presented affirmative testimony that each criteria was met by the applicant. The only evidence presented by HRS related to need as addressed in paragraphs Nos. 8, 9 and 10, above.

   13. FHFC presented no evidence of special circumstances pursuant to Rule 10-5.011(1)(k)2.j. F.A.C. This provision applies in the event that the net bed allocation is zero. FHFC's break out of the bed need methodology yielded a net bed allocation of 93 beds for the planning horizon year 1988. HRS' break out yielded an allocation of 17 beds.

       
       

       CONCLUSIONS OF LAW

       
       

   14. The DOAH has jurisdiction over the subject matter and parties in this proceeding. Section 120.57(1) F.S.; Section 381.494(8)(e) F.S.

       
       

   15. The need methodology for community nursing home beds is found in Rule 10-5.011(1)(k) F.A.C. Within the formula are four population-related factors:

       
       

       POPA is the population age 65-74 years in the relevant departmental district projected three years into the future.

       POPB is the population age 75 years and older in the relevant departmental district projected three years into the future.

       POPC is the current population age 65-74 years.

       POPD is the current population age 75 years and over.

       
       

       The parties agree that "current" population is that estimated for July 1985, and the 3-year horizon population is July 1988. The rule dictates only that the data be based upon the official estimates and projections adopted by the Office of the Governor. Rule 10-5.011(1)(k) 2.h. F.A.C. The rule does not require that the data be frozen at the time the application is submitted. It should be presumed that the drafters of the rule were aware that the data is updated periodically.

       
       

   16. HRS' current policy of using data collected at the time of application is non-rule policy which must be clearly explicated in an adjudicative setting and supported by a record foundation. McDonald v. Department of Banking and Finance, 346 So. 2nd 569 (Fla. 1st DCA 1977); Home Health Professional Services, Inc. v. Department of Health and Rehabilitative Services, 463 So. 2nd 345 (Fla. 1st DCA 1985). The agency glossolalia in this record does not meet the test.

       
       

   17. Neither Boca Raton AKC v. Department of Health and Rehabilitative Services, 493 So.2nd 1055 (Fla. 1st DCA 1986) nor Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2nd 700 (Fla. 1st DCA 1985) compel the use of out-dated data for base year and planning horizon year populations. Those cases mandate that the base year and planning horizon year be fixed at the time of application to establish a "fixed pool of need". The propriety of applying accurate data to the methodology was tacitly acknowledged by HRS when it adjusted its LBD figure from 1685 licensed beds to 1655 licensed beds. (See Finding of Fact No. 9)

       
       

   18. Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, Case No. 86-0051, (Final Order filed on February 6, 1987) states without explanation its new policy of using population figures

       available at the time of application, and rejects as unsupported by substantial competent evidence the hearing officers's conclusion that 1986 estimates and projections of 1985 and 1988 populations are more accurate than 1985 estimates and projections for those same years. 1/

       
       

   19. In this case the testimony of FCFH's expert is rational and competent as to the accuracy of the later available data. He conceded that the population figures are sometimes revised downward, as well as upward, with the availability of more current information. If the later data is less reliable, as suggested by Herb Straughn, one questions why it is released every six months by the state demographers.

       
       

   20. The "minimum standard" of 90 percent occupancy is also a non-rule policy, wholly lacking in clear explication. Rule 10- 5.011(1)(k)2.i F.A.C. provides:

       
       

       The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number

       of licensed and 90 percent of the approved beds within the relevant departmental

       subdistrict from the bed allocation determined under subparagraphs a. through

       1. *unless the subdistrict's average estimated occupancy rate for the most

          recent six months is less than 80 percent, in which case the net bed allocation is zero.* (emphasis added between *)

          
          

          This language appears to establish 80 percent, not 90 percent, as a minimum occupancy rate.

          
          

          Further, the fourth step of the methodology in the rule accounts for the occupancy rate:

          
          

          SA = A x (LBD/LB) x (OR/.90)

          
          

          SA is the preliminary subdistrict allocation of community nursing home beds. A is the district's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made. LSD is the number of licensed community nursing home beds in the relevant subdistrict. LB is the number of licensed community nursing home beds in the relevant district. OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district.

          
          

          Obviously from this formula, the preliminary allocation (SA) is reduced if OR is less than .90, but there is no automatic zero allocation similar to that when the rate is less than 80 percent.

          
          

          HRS cited no other cases in which a subdistrict occupancy rate between 80 percent and 90 percent was an absolute bar to the grant of a certificate of need for nursing home beds.

   21. It is concluded that FHFC has properly utilized Rule 10-5.011(1)(k)

1. to demonstrate a numerical need for at least 60 nursing home beds in Polk County. FHFC has also demonstrated substantial compliance with all applicable criteria in Section 381.494(6)(c) F.S. and Rule 10-5.011 F.A.C.

   
   

   It is therefore, RECOMMENDED:

   That Certificate of Need NO. 4158 be issued to Florida Health Facilities Corporation (of Polk County) for the construction of 60 additional nursing home beds in Polk County Florida.

   
   

   DONE and RECOMMENDED this 13th day of April, 1987 in Tallahassee, Florida.

   
   

   MARY CLARK

   Hearing Officer

   Division of Administrative Hearings The Oakland Building

   2009 Apalachee Parkway

   Tallahassee, Florida 32301

   
   

   Filed with the Clerk of the Division of Administrative Hearings this 13th day of April, 1987.

   
   

   ENDNOTE

   
   

   1/ Although it does not apply in this case, HRS has addressed by rule amendment effective March 2, 1987, the often-litigated issue of shifting variables. Rule 10-5.008(6)(b) now provides:

   (b) 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.

   Fla. Administrative Weekly,

   Vol. 13, No. 8, P. 634 and P. 699.

   APPENDIX

   
   

   The following constitute only specific rulings on each proposed finding of fact submitted by the Petitioner:

   
   

   1. Adopted in paragraph No. 1.

   2. Adopted in paragraph No. 4.

3.-6. Rejected as cumulative and unnecessary.

1. Adopted in paragraph No. 5 and No. 11.

2. Adopted in paragraph No. 11.

9.-22. Adopted in summary form in paragraph No. 11.

23. Adopted in substance in paragraph No. 5. 24.-26. Addressed in paragraph No. 9.

1. Addressed in conclusion of law No. 2.

2. Adopted in paragraph No. 5.

29.-30. Addressed in conclusion of law No. 2.

1. Adopted in paragraph No. 9.

2. Addressed in conclusion of law No. 4.

33.-35. Adopted in substance in paragraph No. 6.

36. Adopted in substance in paragraph No. 9. 37.-39. Rejected as unnecessary.

40. Adopted in paragraph No. 8.

41.-43. Addressed in conclusion of law paragraph No. 3.

44.-45. Adopted, as to the date of approved bed inventory, in paragraph No. 9. Otherwise, rejected as unnecessary.

46.-52. Rejected as cumulative and unnecessary. The summary finding, that criteria other than need are met, is found in paragraph No. 11.

The following constitute my specific rulings on the proposed findings of fact submitted by the Respondent:

1. Adopted in paragraph No. 1.

2. Adopted in paragraph No. 2.

3. Addressed in conclusion of law No. 2.

4. Rejected based upon rejection of HRS' theory for application of the methodology related to available population data.

5. Rejected as contrary to the weight of evidence. See No. 4, above.

6. HRSs policy is addressed in paragraphs No. 5, 8 and 9. 7.-9. Rejected as unnecessary.

10. Adopted in paragraph No. 12.

COPIES FURNISHED:

Robert D. Newell, Jr., Esquire

102 South Monroe Street Tallahassee, Florida 32301

Richard A. Patterson, Esquire Robert L. Powell, Sr., Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407

Tallahassee, Florida 32399-0700

Gregory H. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407

Tallahassee, Florida 32399-0700

John Miller, Esquire Acting General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407

Tallahassee, Florida 32399-0700

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

FLORIDA HEALTH FACILITIES CORPORATION, (OF POLK COUNTY), d/b/a IMPERIAL VILLAGE CARE CENTER,

Petitioner,

CASE NO. 86-0058

vs. CON NO. 4158

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Respondent.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.

RULING ON EXCEPTIONS FILED BY HRS

The HRS exceptions are granted. See conclusions of law for discussion of issues raised in the exceptions.

FINDINGS OF FACT

The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order.

CONCLUSIONS OF LAW

The Department adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the following:

The Hearing Officer properly concluded that when an agency utilizes a non rule policy in the exercise of its authority granted by statute and the non rule policy is challenged in a 120.57 proceeding, the agency must establish by evidence the reasons for its policy. Florida Medical Center vs. Department of Health and Rehabilitative Services, 463 So2d 380 (Fla. 1st DCA 1985). The evidentiary foundation required for non rule policy is not applicable to an agency's interpretation of its rules. To the contrary, an "agency's interpretation of its own rule is entitled to great weight and persuasive force"...Humana vs. Department of Health and Rehabilitative Services, 492 So2d

388 (Fla. 4th DCA 1986) . An agency may reject a Hearing Officer's conclusions of law. Baptist Hospital vs. DHRS, 500 So2d 620 at 623 (Fla. 1st DCA 1987).

The Hearing Officer improperly rejected the HRS interpretation of "current" population data for purposes of computing numeric need under Chapter 10- 5.11(21)(b), F.A.C.; Manor Care of Hillsborough County vs. HRS, 9 FALR 1102.

The Rule demands current data and HRS construes the Rule requirement to mean data available at the time of the initial (free form) review. This interpretation should discourage health care providers from filing applications in every batching cycle and upon denial seeking continuances of the 120.57 hearing on the possibility that later population estimates will support a finding of need in their planning horizon. See Gulf Court Nursing Center vs.

HRS et al, 483 So2d 700 at 708 (Fla. 1st DCA 1986).

The quagmire into which administrative and judicial review of CON decisions has fallen has been the topic of considerable discussion by the bench, bar, and health care providers. HRS intends to take full advantage of the invitation to streamline the administrative process given by the First District Court of Appeal in Gulf Court.

At least three (3) important goals of Gulf Court are seen by HRS:

1. To discourage the filing of applications in every batching cycle on the chance that developments coming to light between the denial of an application and the 120.57 hearing would breath new life into a project, Gulf Court at page 708, and

   
   

2. To emphasize the importance of HRS' statutorily mandated role of initial investigation and review of CON applications. Chapters 120 and 381, Florida Statutes and Gulf Court at page 708.

3. To prohibit amendment during the 120.57 proceedings of the application reviewed by HRS. Hialeah Hospital, Inc. vs. HRS et al, Case #85-3998, Final Order entered May 1, 1987.

The court narrowed the scope of de novo review noting that it found no precedential authority requiring de novo review of a CON application in a 120.57 proceeding. Gulf Court at page 709. The de novo concept is applicable only to evidence relevant to the application initially reviewed at HRS. Gulf Court at page 710.

Returning to the present case, the only question is whether there is numeric need for petitioner's proposal under the methodology prescribed in Chapter 10-5.11(21)(b), F.A.C. When the computation is done pursuant to the HRS interpretation of the Rule the answer is no.

Based upon the foregoing, it is

ADJUDGED, that petitioner's application for CON #4158 for 60 nursing home beds in Polk County be denied.

DONE and ORDERED this 26th day of May, 1987, in Tallahassee, Florida.

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

by Assistant Secretary for Programs

Copies furnished to:

Robert D. Newell, Jr., Esquire

102 South Monroe Street Tallahassee, Florida 32301

Richard A. Patterson, Esquire Robert L. Powell, Sr., Esquire 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700

Mary Clark, Hearing Officer DOAH, The Oakland Building 2009 Apalachee Parkway

Tallahassee, Florida 32301 Nell Mitchem (PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 27th day of May, 1987.

R. S. Power, Agency Clerk Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700 904/488-2381

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled to judicial review which shall be instituted by filing one copy of a Notice of Appeal with the agency clerk of HRS, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the Appellate District where the agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida Appellate Rules.

The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 86-000058

Orders for Case No: 86-000058