STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FRANK P. FILBERT0, M.D., )

)

Petitioner, )

)

vs. ) CASE NO. 86-1471

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

A final hearing was held in this case in Tallahassee, Florida, on August 18, 1986, before Donald D. Conn, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented by:

For Petitioner: W. David Watkins

Post Office Box 9507 Tallahassee, Florida 32314

For Respondent: John Rodriguez

1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301

At the commencement of the hearing, John Rodriguez was accepted as a "qualified representative" on behalf of the Department of Health and Rehabilitative Services, Respondent, pursuant to Rules 28-5.1055 and 22I-6.08, Florida Administrative Code. Frank P. Filberto, M.D., Petitioner, testified on his own behalf and also called Walter Eugene Nelson to testify. Respondent called Reid Jaffe to testify. Petitioner introduced five exhibits, and Respondent introduced two exhibits. Official recognition was taken of Sections 381.493(2), 381.494(4)(b), (e), Florida Statutes, and Rule 10-5.08(5), Florida Administrative Code. A transcript of the hearing was filed on September 19, 1986, and the parties were given ten days thereafter to file proposed findings of fact and conclusions of law. A ruling on each timely filed proposed finding of fact is included in the Appendix to this Recommended Order.

The parties have stipulated that the sole issue presented in this case is whether Respondent correctly and legally withdrew Petitioner's application for a Certificate of Need from consideration.

FINDINGS OF FACT

The parties stipulated as follows:

1. On October 15, 1985, Petitioner filed with Respondent a Certificate of Need (CON) application to construct a 100-bed acute care hospital to be located in Brevard County. Petitioner's application was assigned CON Action Number 4302.

   
   

2. By letter dated January 8, 1986, Petitioner received written notice from Respondent that his application was being withdrawn from consideration for his alleged failure to respond satisfactorily to the written omissions request served by Respondent on him.

   
   

3. On March 24, 1986, Petitioner timely filed his petition for formal administrative hearing to contest the preliminary decision of Respondent to withdraw his CON application from consideration.

   
   

   The following findings of fact are based on the evidence presented, after considering the credibility and demeanor of the witnesses:

   
   

4. After receiving Petitioner's application on October 15, 1985, Respondent's health planning consultant supervisor, Reid Jaffe, sent Petitioner a letter on or about November 14, 1985, advising him of omissions in his application. Jaffe's letter required a response from Petitioner by December 30, 1985. Of particular significance were Jaffe's requests that Petitioner provide evidence of interest in the project by lending institutions, and also provide a pro forma projection of income and expense for the first two years of operation.

   
   

5. Petitioner's response to the omissions letter was timely received by Respondent. In response to the requested information about lending institution interest in the project, Petitioner wrote:

   
   

   There is not only interest in our project by lending institutions, attached is a letter from Hospital Corporation of America, who has been seeking a joint venture with our group. As you know, they represent the ability of our project to be well funded. Other institutions showing interest are:

   Sun Bank, Southeast Bank, Barnett Bank.

   
   

   In response to the requested pro forma, Petitioner provided a cash flow projection for the first two years of operation showing net income, depreciation and amortization, principal payments and ending balance for each quarter.

   
   

6. In his CON application, Petitioner had indicated that the proposed cost of the project was $14,984,650 and the immediate financial feasibility of the project was to be met with fifteen physician stockholders, all with financial statements in excess of one million dollars. Further, it was indicated that the project would be financed by "debt financing" from the various financial institutions in the local area, guaranteed by the major stockholders. The application also indicated that funds were being sought from Sun Bank, Southeast Bank, First Florida and Barnett Bank. However, neither the application nor the

   omissions response included letters or other evidence of interest in the project from lending institutions.

   
   

7. Reid Jaffe testified that CON applicants are not required to, and in fact do not, submit firm letters of commitment from lending institutions when they file their applications. Usually a preliminary letter of interest from such institution is included, but such letters are always conditioned on the applicant obtaining a CON before a financial commitment is given.

   
   

8. There is no statutory or rule guidance to applicants to explain what was meant by Jaffe's omissions letter requesting "evidence of interest in the project by lending institutions". This is not an express requirement of Section 381.494(4), Florida Statutes. Applicants are expected to call Respondent if they have questions about the application or the omissions letter. In fact, Petitioner did seek assistance from his local health council in the application process.

   
   

9. Similarly there is no statutory or rule guidance to applicants to explain what was meant by Jaffe's omissions letter requesting a pro forma projection of income and expense for the first two years of operation. Jaffe testified that in a pro forma he looks for an indication that the applicant has an idea of what will be generated in the first two years of operation from revenues, and also what expenses will be. Further, if the applicant can demonstrate cognizance of these projections in some manner other than a pro forma, he would find it acceptable. In his omissions response, Petitioner did project revenues for the first two years of operations, as well as salaries, fringe benefits, depreciation and amortization which represent 75 percent of a hospital's operating costs.

   
   

10. Petitioner's application, as well as his response to the omissions letter, does provide a statement of financial resources available to the applicant for the proposed project, and also does provide a statement of the financial feasibility of the project, although not by way of a pro forma.

    
    

11. Respondent withdrew Petitioners' application from Robert E. Maryanski, Administrator of Community Medical Facilities, by letter dated January 8, 1986. In his letter, Maryanski cited Petitioner's failure to provide "a statement of financial resources available to the applicant for accomplishment of the proposed project" and also his failure to provide a "pro forma projection of income and expense for the first two years of operation". These are the sole reasons for withdrawal.

    
    

12. It is extremely rare for a CON application to be deemed incomplete and therefore withdrawn from consideration. Jaffe could only recall one other instance. Walter Eugene Nelson, Maryanski's predecessor with Respondent who was accepted as an expert in health planning, CON review and program administration, agreed that withdrawal of an application is an extraordinary action, and he further testified that Petitioner's application meets the requirements of Section 381.494, Florida Statutes, and, thus, should have been deemed complete.

    
    

13. Evidence was received of other applications which were deemed complete, and which provided substantially the same information as Petitioner in his application. The Respondent acted unreasonably and arbitrarily in withdrawing Petitioner's application when the record indicates that other applications providing substantially the same information as Petitioner's were not withdrawn.

14. Respondent does allow applicants to supplement the application after they are deemed complete. It is typical, according to Jeff, for applicants to revise and update financial information and their pro forma, while their applications are in the Section 120.57, Florida Statutes, hearing process.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

16. In prescribing the content of CON applications, Section 381.494(4), Florida Statutes, requires, in pertinent part:

    
    

    (b) A statement of financial resources available to the applicant for accomplishment of the proposed project.

    * * *

    (e) A detailed statement of financial feasibility for the proposed project to include, but not to be limited to, a statement of the projected income and expense on a pro forma basis for the first

    2 years of operation after completion of the project, the probable impact on health care costs for services proposed by the applicant, and the probable impact on health care costs for services rendered by existing and like health care providers within the applicant's proposed service area.

    
    

    Guidance in interpreting these provisions is not provided by statute or rule. Therefore, the plain meaning of the words in this statute should be given effect, and the agency's interpretation upheld unless clearly erroneous or contrary to such plain meaning. Natelson v. Department of Insurance, 454 So.2d

    31 (Fla. 1st DCA 1984); School Board of Pinellas County v. Department of Administration, Division of Retirement, 492 So.2d 767 (Fla. 1st DCA 1986).

    
    

17. As the applicant for a CON, Petitioner has the burden of proving in this case that his application was complete and should not have been withdrawn. Florida Department of Transportation v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Ultimately, Petitioner will have to establish his entitlement to a CON if Respondent's withdrawal is determined to be in error. However, the merits of his application are not under review at this time, only the issue of completeness.

    
    

18. Petitioner has met his burden in this case of establishing that his application meets the requirements of Section 381.494(4), Florida Statutes, when the terms of that statute are given their plain meaning, and in doing so has further established that Respondent's interpretation of this statute, as herein applied, was clearly erroneous, arbitrary and unreasonable. Further,

Respondent's action to withdraw Petitioner's application is a clear deviation from past practice, without explanation, as established by the record. Florida City's Water Co. v. Public Service Commission, 384 So.2d 1280 (Fla. 1980); McDonald v. Department of Banking and Finance, 246 So.2d 569 (Fla. 1st DCA 1977).

RECOMMENDATION

Based on the foregoing, it is recommended that Respondent enter a Final Order reversing its prior decision and deeming Petitioner's application for CON 4302 complete so that it can be comparatively reviewed with other applications filed in the same batching cycle.

DONE AND ENTERED this 23rd day of October, 1986, in Tallahassee, Florida.

DONALD D. CONN

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 23rd day of October, 1986.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-1471

Rulings on Petitioner's Proposed Findings of Fact:

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 4.

3. Adopted in Finding of Fact 5. 4,5. Rejected as irrelevant

6-9. Adopted in part in Findings of Fact 2, 11 but otherwise rejected as irrelevant.

10,11. Rejected as cumulative and irrelevant.

1. Adopted in Finding of Fact 8.

2. Rejected as irrelevant.

3. Adopted in Finding of Fact 9.

4. Rejected as irrelevant.

16-23. Adopted in part in Findings of Fact 12, 23 but otherwise rejected as irrelevant or cumulative.

1. Adopted in Finding of Fact 7.

2. Adopted in Findings of Fact 7, 14. 26,27. Rejected as irrelevant and cumulative.

28. Adopted in Finding of Fact 13. 29-33. Adopted in Finding of Fact 1.

34-42. Rejected as cumulative and irrelevant.

43. Rejected as not a proper proposed Finding of Fact. 44-53. Rejected as cumulative and irrelevant.

54-58. Adopted in part in Finding of Fact 4 but otherwise rejected as irrelevant and cumulative.

1. Not a proposed Finding of Fact.

2. Rejected as cumulative and unnecessary.

Rulings on Respondent's Proposed Findings of Fact.

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 4.

3. Adopted in Findings of Fact 2, 11.

4. Adopted in Finding of Fact 8.

COPIES FURNISHED:

William Page, Jr., Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

W. David Watkins, Esquire Post Office Box 9507 Tallahassee, Florida 32314

John Rodriguez

1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301

Docket for Case No: 86-001471

Orders for Case No: 86-001471