STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MANOR CARE, INC., (Sarasota), )

)

Petitioner, )

)

vs. ) CASE NO. 87-3471

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, and ) HEALTH CARE AND RETIREMENT ) CORPORATION, d/b/a KENSINGTON ) MANOR, )

)

Respondents. )

) HEALTH QUEST CORPORATION )

(Sarasota County), )

)

Petitioner, )

)

vs. ) CASE NO. 87-3473

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) MANOR CARE, INC. (Sarasota), )

)

Petitioner, )

)

vs. ) CASE NO. 87-3475

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) SARASOTA HEALTHCARE, LTD., ) d/b/a CONVALESCENT NURSING ) CENTER OF SARASOTA COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 87-3478

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) SISTERS OF BON SECOURS IN )

THE UNITED STATES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-3491

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, and ) HEALTH CARE AND RETIREMENT ) CORPORATION OF AMERICA, )

)

Respondents. )

)

RECOMMENDED ORDER

The final hearing was held in this consolidated case in Tallahassee, Florida, from March 28-30, April 4-8 and April 14-15, 1988 before Donald D. Conn, Hearing Officer, Division of Administrative Hearings. The parties were represented as follows:

Manor Care, Inc.: Donna H. Stinson, Esquire (CON 5050) The Perkins House, Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

Sarasota Healthcare W. David Watkins, Esquire Ltd.: Harry F. X. Purnell, Esquire

(CON 5025) Post Office Box 6507

Tallahassee, Florida 32314-6507

Health Quest Corp.: Steven W. Huss, Esquire

(CON 5046) 1017 Thomasville Road, Suite C

Tallahassee, Florida 32303

Health Care and Alfred W. Clark, Esquire Retirement Corp.: Post Office Box 623

(CON 5049) Tallahassee, Florida 32302

Sisters of Bon Byron B. Matthews, Jr., Esquire Secours: Vicki Gordon Kaufman, Esquire

(CON 5039) 700 Brickell Avenue

Miami, Florida 33131-2802

Department of Richard A. Patterson, Esquire Health and 2727 Mahan Drive, 3rd Floor

Rehabilitative Tallahassee, Florida 32308 Services:

This is a comparative certificate of need (CON) hearing in which the issue is whether the Department of Health and Rehabilitative Services should approve any of the CON applications for additional community nursing home beds in Sarasota County, Florida, from among the five applicants involved in this proceeding that filed their applications on or before January 15, 1987.

The parties called a total of 45 witnesses and introduced 140 exhibits, while 4 exhibits were rejected. Pursuant to Section 381.709(5)(b), Florida

Statutes, direct testimony of each parties' expert witnesses was prefiled, but cross-examination of experts, comparative, rebuttal, and non-expert fact testimony was offered at hearing. The transcript of testimony offered at hearing was filed on May 27, 1988, and by stipulation of the parties, proposed recommended orders, including proposed findings of fact, were filed on or before July 8, 1988. The Appendix to this Recommended Order contains a ruling on each timely filed proposed finding of fact.

FINDINGS OF FACT

1. The Parties Manor-Sarasota

   
   

   1. Manor Health Care Corporation operates 140 nursing centers throughout the country with nine nursing homes and three adult congregate living facilities (ACLF) in Florida. Seven of the nine Florida nursing homes are rated superior and two are standard. Manor-Sarasota is a wholly-owned subsidiary of Manor Health Care Corporation, and currently owns and operates a 120 bed nursing home, with a 120 bed ACLF, at 5511 Swift Road, Sarasota, Florida. The facility opened in December, 1983 and currently has a standard license, although for a period in 1986 its license was conditional.

      
      

   2. Manor-Sarasota is currently licensed as a skilled nursing home providing trach care, nasogastric feedings, wound care, physical, speech and occupational therapy, as well as Clinatron beds for patients with severe decubitus ulcers.

      
      

   3. On or about January 15, 1987, Manor-Sarasota filed CON application number 5050 for the addition of sixty community nursing home beds at its facility. The proposed additional beds will include a separate 30-bed specialized unit for elderly persons suffering from Alzheimer's Disease and related disorders. Manor Health Care Corporation currently operates 13 to 15 Alzheimer's units within their existing centers. Between 30 percent - 50 percent of Manor-Sarasota's current patients are diagnosed as having Alzheimer's or related disorders. There are no specialized facilities for Alzheimer's patients in Sarasota at the current time.

      
      

   4. The current facility is a two-story nursing home, and the additional beds would be configured in a two-story addition of thirty-five beds on the first floor and twenty-five beds on the second floor. The thirty-bed Alzheimer's unit would be located on the first floor. A separate dining room for Alzheimer's patients will also be provided. An additional nurse's station would be added to provide 4 nurse's stations for 180 beds.

      
      

   5. Total project costs are reasonably projected at $1.85 million, with construction costs of $1.26 million, equipment costs of approximately $170,000, professional services of approximately $137,000 and related costs of approximately $253,000.

      
      

   6. The proposal would add 16,683 gross square feet to the existing 49,454 gross square feet. The total project cost per additional bed would be $30,872, while the construction cost per square foot would be $55.00. The gross square footage per bed would be 278 feet.

      
      

   7. Manor-Sarasota projects a 40 percent Medicaid and 60 percent private pay utilization for the 60 bed addition, although its Medicaid utilization at the existing facility has only been between 15 percent and 24 percent. Since

      there is an upward trend in Medicaid utilization, Manor-Sarasota would accept a

      40 percent Medicaid condition on its CON, if approved. Medicare patients will continue to be served within the existing facility.

      
      

   8. The project will be funded through 25 percent equity and 75 percent financing. Manor Health Care Corporation will finance the project internally through the sale of assets, and the sale of senior subordinated notes and convertible subordinated debentures, and this financing proposal is reasonable and realistic.

      
      

   9. In Manor-Sarasota's original application, six 3-bed wards were proposed. As a result of criticism of 3-bed wards in the Department's State Agency Action Report (SAAR) concerning this application as well as other facilities, the applicant modified its proposed design to eliminate all 3-bed wards and to include 24 semiprivate and 12 private rooms. The square footage of the addition was also increased by 21 percent from 13,750 to 16,683 square feet. This modification was presented at hearing and was filed subsequent to the application being deemed complete, and the SAAR being prepared. Competent substantial evidence in support of the original application was not offered, but rather evidence was presented in support of the substantially modified proposal.

      
      

   10. The applicant's existing 120-bed nursing home has experienced over 90 percent occupancy for the months of November, 1987 to the date of hearing, and also experienced an average occupancy of approximately 86 percent for 1986 and the first ten months of 1987. During the first year of operation, 65 percent occupancy is projected for the 60 new beds which are now being sought, and 95 percent occupancy is projected for the second year of operation.

       
       

       Sarasota Healthcare

       
       

   11. Sarasota Healthcare, Ltd., is a Georgia limited partnership whose general partners are Stiles A. Kellett, Jr. and Samuel B. Kellett. Sarasota Healthcare proposes to enter into a management agreement with Convalescent Services, Inc., (CSI) for the operation and administration of their proposed facility. The Kelletts, as 100 percent owners, comprise the Board of Directors of CSI and also serve as its Chairman and President. CSI operates 21 nursing homes in seven states, and 85 percent of its beds have superior licenses. There are 6 CSI operated nursing homes in Florida, one of which, Pinebrook Place, is located in Sarasota County in the City of Venice. Pinebrook Place is a 120 bed nursing home and has a superior license. Sarasota Healthcare does not own or operate any other nursing homes.

       
       

   12. A new 120 bed freestanding nursing home is proposed by Sarasota Healthcare in CON application 5025, which was filed with the Department in January, 1987. The project would be located in Sarasota County at a specific site which has not yet been identified.

       
       

   13. Sarasota Healthcare projects a utilization of 40 percent Medicaid, 5 percent Medicare and 55 percent private pay at its proposed facility, and would accept a 40 percent Medicaid condition of this CON, if approved.

       
       

   14. The proposed facility would offer skilled, intermediate, respite and hospice care; specialized services for Alzheimer's patients; physical, occupational, speech and rehabilitative therapy; counseling; and social services. Alzheimer's patients will not be located in a separate unit but will be intermingled with other patients while receiving specialized services and protections for their disease.

   15. Sarasota Healthcare proposes a 120 bed nursing home comprised of 12 private and 54 semiprivate rooms, 37,7000 gross square feet and a total project cost of $3.9 million The proposed size and cost of this facility are reasonable. The cost per bed would be $32,500 and the construction cost per square foot would be $58.00. Total project costs are reasonable and consist of approximately $2.45 million in construction costs, $385,000 in equipment costs,

       $145,000 for professional services, land acquisition of $600,000 for 3 to 5 acres, and $324,000 in related costs. The gross square footage per bed would be

       314 feet.

       
       

   16. The project will be funded with 25 percent equity funding from the general partners, Stiles and Samuel Kellett, and 75 percent from a commercial bank, assuming a 9.5 percent interest rate with 1 percent discount point. The proposal is reasonable, but is dependent upon the general partners' ability to personally fund 25 percent of the costs of the project through an equity contribution, and on their ability to obtain commercial financing for the remaining project costs. Financial statements of the Kelletts provided in the record of this proceeding are unaudited, and were not prepared in accordance with generally accepted accounting principles. The Kelletts have 15 CON applications currently pending, and 4 have already been approved. They have a 6 to 1 debt to equity ratio.

       
       

       Health Quest

       
       

   17. On or about January 15, 1987, Health Quest corporation submitted an application for CON number 5046 on behalf of Regents Park of Lake Pointe Woods for the addition of 58 new beds to its existing 53 sheltered bed nursing home at a projected cost of approximately $1.29 million. The existing sheltered nursing home facility is known as Regents Park of Sarasota which is part of the Lake Point Woods Retirement Center containing a 110 bed ACLF and 212 retirement apartment units. The sheltered nursing home opened in November, 1986, and has achieved 90 percent occupancy since October, 1987. It is licensed under Chapter 651, Florida Statutes, as a continuing care facility.

       
       

   18. Health Quest owns and operates nine nursing centers in three states, and has received CON approval for 12 additional facilities in three states, including four in Florida. One of these Florida CONs is for 180 new community nursing home beds in Sarasota County. Health Quest's existing Regents Park of Sarasota nursing home is located at 7979 South Tamiami Trail, Sarasota, Florida. Although it is a sheltered nursing home, only one or two beds are generally occupied by Lake Point Woods residents at any one time. During 1987, only 26 admissions to Regents Park came from Lake Pointe Woods, and most of these admissions were for episodic illnesses of less than 30 days rather than for longer term care. Thus, the vast majority of admissions at Regents Park have been from the community, including admissions directly from home, hospitals and other nursing homes, rather than from the retirement center, Lake Pointe Woods, of which Regents Park is a part. However, since existing beds at Regents Park are sheltered, community patients will not be able to be admitted there beyond November, 1991, the expiration of five years from its opening. During its year and a half of operation, Regents Park has not shown a profit, despite original projections of profitability after only one year.

       
       

   19. In response to the Department's omissions letter dated February 19, 1987, Health Quest notified the Department, by letter dated March 27, 1987, of its amendment to CON application 5046. Rather than pursuing its request for 58 new community nursing home beds, Health Quest amended the application to seek

       conversion of the 53 sheltered beds to community beds and to add 7 new community nursing home beds. Since no new space is proposed for construction under the amendment, and since virtually all equipment is already in place, Health Quest projected no cost associated with the amended project. However, there would be some minor costs to equip seven new beds, as well as legal and consulting costs associated with this application and hearing. Currently, the Regents Park nursing home has approximately 31,000 total gross square feet, which would result in 520 gross square feet per bed if its application is approved.

       
       

   20. On April 10, 1987, the Department published its notice of completeness regarding Health Quest's amended CON application 5046 at Florida Administrative Weekly, Volume 13, No. 15, p. 1365. The Department reviewed and evaluated Health Quest's amended application, rather than the original application, in preparing its SAAR on the applications at issue in this case dated June 15, 1987. Despite this notice of completeness, the record shows that Health Quest's conversion proposal was incomplete since no balance sheet, profit and loss statement for precious fiscal years of operation, detailed statement of financial feasibility or pro forma were introduced.

       
       

   21. Although sheltered beds can be certified to accept Medicaid patients, Health Quest has not sought such certification for any of the 53 existing beds at Regents Park. Health Quest proposes to seek Medicaid certification for 5 beds, and to serve 8 percent Medicaid patients if CON 5046 is approved.

       
       

   22. Health Quest does not propose a separate unit for Alzheimer's patients, but would offer special outdoor activities for these patients as well as an Alzheimer's club for patients with this primary diagnosis. Health Quest specializes in caring for patients with hip fractures, and offers a wheelchair mobility and ambulation program, rehabilitation and occupational therapy, bowel and bladder rehabilitation, as well as physical and horticulture therapy. Regents Park has patients on intravenous therapy and who require hyperalimentation and total parenteral nutrition. LPN and nurse's aide students from Sarasota Vo/Tech School receive training at the Regents Park nursing home.

       
       

       HCR

       
       

   23. In 1986, HCR purchased, and currently owns and operates a 147 bed nursing home located at 3250 12th Street, Sarasota, Florida, known as Kensington Manor, which holds a standard license. HCR is a wholly owned subsidiary of Owens-Illinois, a publicly held corporation, and has built over 200 nursing homes in the last 25 years. At the present time, HCR operates approximately 125 facilities with approximately 16,000 beds in 19 States. HCR owns and operates a total of 9 nursing homes in Florida, and has about 10 nursing home projects under development which it intends to operate upon completion.

       
       

   24. On or about January 14, 1987, HCR filed CON application 5049 with the Department. This application seeks approval of 60 new community nursing home beds at Kensington Manor, at a currently projected cost of $1.82 million, which is a reasonable projection. The cost per new bed would be $30,030. HCR proposes to finance to project with a 25 percent equity contribution, and 75 percent internally financed by HCR through its parent company, Owens-Illinois, and this proposal is realistic and reasonable.

       
       

   25. Throughout 1986, Kensington Manor had an occupancy level of between 85 percent - 95 percent and is currently operating at 95 percent - 96 percent occupancy. HCR reasonably projects 95 percent occupancy for the 60 new beds in the second year of operation.

   26. HCR reasonably proposes a patient mix in the new addition of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay. Kensington Manor is currently 75 percent - 80 percent Medicaid, 1 percent Medicare, and the remainder is private pay, but its proposed patient mix for the new addition is realistic because there will be no three-bed wards in the addition, and sub- acute services will be provided, thereby increasing the Medicare percentage.

       
       

   27. The HCR proposed addition at Kensington Manor provides a distinct 29 bed wing for Alzheimer's patients where a special care program and special staffing can be made available. Additionally, a 12 person Alzheimer's adult day care center will be physically attached to the new addition where a less intense level of care outside the home can be made available to these patients. Respite care and sub-acute care will also be provided.

       
       

   28. The project will add a 60 bed, single story addition to Kensington Manor, with a special Alzheimer unit consisting of 1 private and 14 semiprivate rooms, an enclosed courtyard and porch. A second dining room will be added, as well as 2 central bathing areas, multipurpose and physical therapy rooms. The addition would total 18,000 gross square feet, or 267 gross square feet per bed in the new addition. Kensington Manor currently has approximately 30,000 gross square feet, with 1 private and 52 semiprivate rooms, and 14 three-bedroom wards. Therefore with the addition, Kensington Manor would have approximately 48,000 gross square feet which would be approximately 223 square feet per bed for the entire facility.

       
       

       Sisters of Bon Secours

       
       

   29. The Sisters of Bon Secours, a Catholic religious order, are currently responsible for the operation and ownership, through not-for-profit corporations, of a JCAH accredited 272 community bed nursing home in North Miami having a superior license, a nursing home in Port Charlotte, Charlotte County, and they also have a CON for an additional nursing home to be located in Collier County.

       
       

   30. On or about January 15, 1987, Sisters filed CON application 5039 for a new 120 community bed nursing home to be located in Sarasota County, and to be known as Villa Maria of Sarasota County. Sisters is the only applicant involved in this case which is not already providing services in Sarasota County. The proposal calls for the development of a teaching nursing home to be designated as a center for training and research in the study of gerontology and long term care. Affiliations with schools and universities will be developed to allow health care administrators, social workers, medical and nursing students, and practitioners interested in developing a specialization to fulfill their clinical studies and requirements. There will be an emphasis on restorative and rehabilitative care, with 20 percent of the beds being designated for sub-acute care patients who could return home after 30-45 days of therapy and transitional care. Sisters will develop a continuum of care by networking in the community. It is the only applicant that proposes to provide a site for education and research in Sarasota County.

       
       

   31. The proposed facility is intended to serve the needs of members of the Venice Diocese who reside in Sarasota County, where there is currently no Catholic nursing home. The Venice Diocese is now served by the Sisters' nursing home in Charlotte County, and will also be served by the facility to be located in Collier County, for which a CON has already been issued. However, treatment at these nursing homes, including the proposed Villa Maria of Sarasota County,

       is not limited to Catholics; the Sisters accept, treat and care for persons in need from all religions backgrounds and denominational affiliations.

       
       

   32. Total project costs are estimated at $6.64 million, including $3.86 million for construction, approximately $592,000 for equipment, $762,000 to acquire a seven acre site, $237,000 for professional services, $888,000 for financing costs and approximately $300,000 in other related costs.

       
       

   33. The project would encompass almost 60,000 gross square feet, and would cost approximately $55,300 per bed and $64.50 per square foot. Almost 500 gross square feet would be available per bed, which represents the most square footage per bed of any application under consideration. The proposed facility would have 8 private and 56 semiprivate rooms, with in-room tubs and showers, 3 patient lounges, and a 100 seat dining room. Due to the large size of the proposal, some patient rooms exceed 120 feet from nurse's stations. However, this licensure requirement can easily be met with minor design modifications during the licensure process.

       
       

   34. Sisters project a 33.3 percent Medicaid, 17.6 - 19.7 percent Medicare,

       4 percent indigent and 43 percent - 45 percent private pay utilization for the

       120 bed nursing home in its first two years of operation. While Medicaid utilization in Dade County during 1987 rose to 68 percent as a county-wide average, Sisters' Dade County nursing home experienced a drop in Medicaid to

       14.6 percent. The high Medicare utilization level which has been projected is consistent with, and based on, the experience of the Sisters at their Dade County nursing home which currently has 21 percent Medicare utilization. However, due to the greater number of hospital referral sources, as well as the larger population and fewer competing nursing homes in Dade County compared with Sarasota County, Medicare utilization projections may be overstated, and actually fall between the 3-4 percent historical utilization in the Sarasota area and Sisters' projection. It will be somewhat above 3-4 percent due to the fact that this will be a teaching nursing home which will attract more Medicare patients.

       
       

   35. The project will be funded with an equity contribution of 10.6 percent ($635,455) and the remaining 89.4 percent ($6 million) will be funded through the issuance of tax exempt bonds. This financing proposal is realistic and reasonable.

       
       

   36. The proposed nursing home is intended to offer services to AIDS patients, adult day care, and a meals-on-wheels program. However, it was not established at hearing that such patients would definitely be served, or that space would be available at this facility for these services until the Sisters can determine the actual level of need for these services in Sarasota County, if this CON is approved.

       
       

       Department of HRS

       
       

   37. On or before January 15, 1987, the Department received the CON applications at issue in this case for additional community nursing home beds in Sarasota County. As it relates to this case, the Department issued its SAAR on June 15, 1987, in which the application of HCR (CON 5049) for a 60 community nursing home bed addition to Kensington Manor was approved, and all other applications in this case were denied.

       
       

   38. In addition to the HCR application, the Department also supported at hearing the applications of Manor Care (CON 5050) for a 60 bed addition to

       Manor-Sarasota and Sisters of Bon Secours (CON 5039) for a new 120 bed community bed nursing home to be known as Villa Maria of Sarasota County. The Department opposed the issuance of a CON to the remaining applicants.

       
       

   39. It is the position of the Department that changes or updates to CON applications made after an application has been deemed complete and reviewed in a SAAR, cannot be considered at hearing if such changes or updates are the result of matters or events within the control of the applicant, and which therefore could have been foreseen and considered at the time the application or responses to omissions were filed. However, matters involving payor mix, salaries and charges could result from changes in demographics and economic factors outside of the applicants' control. In such instances, updates or changes to an application based upon current demographics or economics can, and should be, considered at hearing.

       
       

   40. The updated pro forma submitted by Sarasota Healthcare at hearing resulted from the applicant's desire to reflect current salaries in the Sarasota County labor market, which have increased dramatically since the original application was submitted. As a result of updating salary expense projections, Medicaid and Medicare rates also had to be updated. Associated projections throughout the pro forma which are dependent upon these reimbursement rates, as well as salary expense projections, also had to be updated. The updated pro forma presented by Sarasota Healthcare results from a factor outside of the control of the applicant, inflation, which could not have been foreseen or predicated with certainty in January, 1987. To ignore actual, current inflation data in Sarasota County is to ignore reality. This update is permissible and has been considered.

       
       

   41. Manor-Sarasota's application presented at hearing includes changes in its proposed payor mix, charges and salaries, as well as its pro forma. These updates are permissible since they result from changes in demographics and inflation outside of the applicant's control which could not have been foreseen in January 1987. However, a 21 percent increase in square footage and elimination of three-bed wards, with associated changes in proposed staffing, capital costs and equipment, while certainly having a positive effect on quality of care, is nevertheless a matter totally within the control of the applicant. The desireability of these changes could have been foreseen at the time the application was filed, and therefore these substantial changes in design represent impermissible amendments to Manor-Sarasota's application.

       
       

2. Stipulations

   
   

   1. The appropriate planning area for these applications is Sarasota County, and the appropriate planning horizon is January, 1990. Sarasota County is in subdistrict 6 of the Department's service district 8.

      
      

   2. The parties have stipulated that there is a need for 240 additional community nursing home beds in the January, 1990, planning horizon in Sarasota County, in accordance with the bed need formula in Rule 10-5.011(1)(k), Florida Administrative Code.

      
      

   3. The parties have agreed that Section 381.705(1)(d) and (j), Florida Statutes (1987), have been met, or are not applicable to this case. This statutory criteria deals with the adequacy and availability of alternative health care facilities and the special needs and circumstances of health maintenance organizations. All remaining criteria found at Section 381.705(1) and (2), Florida Statutes (1987), are at issue in this case.

   4. Further, the parties stipulate that 1987 amendments to Chapter 381, Florida Statutes, relating to the content of applications, are inapplicable in this proceeding since these applications were filed prior to the effective date of said law. Therefore, application content provisions of Section 381.494(4), Florida Statutes, govern.

      
      

3. State and Local Health Plans

   
   

   1. The 1985 Florida State Health Plan, Volume II, Chapter 8, identifies areas of concern relating to the provision of long-term care services in Florida, which traditionally has been synonymous with nursing home care. These concerns include resource supply, cost containment and resource access. The State Health Plan seeks a reduction in the fragmentation of services and encourages development of a continuum of care. These proposals are consistent with, or do not conflict with, the State Health Plan.

      
      

   2. The 1984 District Eight Local Health Plan for Nursing Home Care is applicable to these applications for community nursing home beds in Sarasota County. The Local Health Plan contains the following pertinent criteria and standards for review of these applications:

      
      

      Community nursing home services should be available to the residents of each county within District Eight.

      
      

      At a minimum community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services:

      1. pharmacy h. occupational therapy

      2. laboratory i. physical therapy

      3. x-ray j. speech therapy

      4. dental care k. mental health

      5. visual care counseling

      6. hearing care l. social services

      7. diet therapy m. medical services

         
         

         New and existing community nursing home bed developments should dedicate 33 1/3 percent of their beds to use for Medicaid patients.

         
         

         Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent.

         
         

         New community nursing home facilities may be considered for approval when existing facilities servicing comparable service areas cannot reasonably, economically, or geographically provide adequate service to these service areas.

         
         

         No new community nursing home facility should be constructed having less than 60

         beds. However, less than 60 beds may be approved as part of an established acute care hospital facility.

         
         

         Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community.

         
         

         The proposed project should have a formal discharge planning program as well as some type of patient follow-up services with discharge/transfer made available seven days a week.

         
         

         Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay.

         
         

         All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested.

         
         

   3. The specifically stated goal of the Local Health Plan is to develop new community nursing home facilities in which at least 33 1/3 percent of the total beds should be Medicaid. The impact of this long range recommended action is stated as follows:

      
      

      The provision of Medicaid care beds in existing nursing homes would assure continuity of care for nursing home patients, and should improve placement in appropriate levels of care by hospitals, physicians, social services, health departments, and other referral groups.

      The provision for Medicaid beds would reduce cost to patients, utilizing skilled care beds, who could adequately be served by Medicaid.

      
      

   4. With the exception of Health Quest's application, all other applicants meet the above stated standards and criteria contained in the Local Health Plan. Health Quest's application does not conform to the Local Health Plan.

      
      

   5. All applicants in this proceeding have indicated that they will provide therapies and services recommended in the Local Health Plan.

      
      

   6. All applicants, except Health Quest, indicate a commitment to dedicate at least 33 1/3 percent of their beds for Medicaid patients.

      
      

   7. The new nursing home facilities proposed by Sisters and Sarasota Healthcare would each be for 120 beds, consistent with the Local Health Plan standard that new facilities have at least 60 beds. Health Quest has proposed a

      60 bed community nursing home through conversion of 53 sheltered nursing home beds and the addition of 7 new community beds.

      
      

   8. As existing providers, Manor-Sarasota, HCR band Health Quest have patient transfer agreements with one or more hospitals, as well as formal discharge planning programs and patient follow-up services, as recommended in the Local Health Plan. The applications for new facilities of Sarasota Healthcare and Sisters indicate they will also comply with these priorities if approval is granted and their facilities are opened. By virtue of its existing service and transfer agreements through the CSI facility in Sarasota County, Pinebrook Place, Sarasota Healthcare will be able to obtain these necessary agreements. Based upon Sisters' experience in Dade County at Villa Maria, as well as the fact that this will be a teaching nursing home, Sisters will also be able to obtain such agreements.

      
      

   9. Data has been provided by the existing nursing homes (Manor-Sarasota, HCR and Health Quest) which documents the history of their participation in the Medicaid and Medicare programs. The other applicants (Sarasota Healthcare and Sisters) have provided Medicaid/Medicare data for other existing facilities with which they are affiliated or upon which their application at issue in this case is based. Based upon this data, Pinebrook Place in Sarasota County, which is owned and operated by Sarasota Healthcare's general partners has not met the Medicaid condition on its CON, and the existing Manor-Sarasota facility has had only 24.8 percent Medicaid utilization in fiscal year 1988:

      
      

4. Availability, Accessibility and Adequacy of Like and

   Existing Services

   
   

   1. HCR and Manor-Sarasota would increase the availability and adequacy of existing services they are now offering with the 60 bed additions each is seeking. The separate 30-bed specialized unit proposed by Manor-Sarasota and the 29-bed wing proposed by HCR for Alzheimer's patients will clearly increase the availability of specialized services for persons with Alzheimer's and related disorders, as well as their families. HCR will also dedicate 10 beds for sub-acute care, while Manor-Sarasota will offer community outreach, as well as respite care.

      
      

   2. Sarasota Healthcare, Sisters and Health Quest do not propose special units for Alzheimer's patients, but would offer special programs and services for them and their families.

      
      

   3. It was established that there is a need for additional services and programs to serve nursing home patients with Alzheimer's and related disorders in Sarasota County, as well as a special need for sub-acute, restorative, hospice, respite, and adult day care in the County. It was not established that there is a need for additional Medicare beds in Sarasota County.

      
      

   4. Sisters have indicated an interest in offering services to patients with AIDS and patients in need of adult day care, for which there is also a need in Sarasota County. In addition, their application will enhance the availability of sub-acute nursing home services, restorative and rehabilitative care, and respite care in Sarasota County. While it would serve patients of all denominations and religious affiliations, it would be the only Catholic nursing home in Sarasota County. The teaching component of the Sisters' application would provide access for students and other health professionals seeking to further their professional training.

   5. The Sarasota Healthcare proposal also places special emphasis on increasing the availability of sub-acute services in Sarasota County.

      
      

5. Quality of Care

   
   

   1. The Sisters will seek JCAH accreditation of the proposed facility if their CON is approved, just as their nursing home in North Miami is currently accredited. The proposed affiliation with a college of medicine and nursing school, and the intent to operate this facility as a teaching nursing home will insure quality of care at this nursing home by utilizing state-of-the-art treatment and therapy programs.

      
      

   2. Florida nursing homes currently owned or operated by each of the applicants or their affiliated corporations have standard or superior licenses which means they meet or exceed State Standards.

      
      

   3. Licensure status of facilities owned or operated in other states by the applicants, or their affiliated companies, has not been considered since it was not established that licensure standards in other states are similar, or even comparable, to those in Florida.

      
      

   4. Each applicant has significant experience rendering quality nursing home care, and each has proposed a reasonable and comprehensive quality assurance program which will insure that quality nursing home services will be provided to their residents. The architectural design proposed by each applicant is reasonable and sufficient to allow quality care to be provided at each facility. All instances where an applicant's design fails to meet final construction standards are relatively minor, and can easily be met during the licensure process with slight modifications and adaptations in design. Staffing proposals by each, while different, will all insure that adequate medical, nursing, counseling and therapeutic staff will be trained and available either on-staff or through contract, to implement quality care programs at each facility. Manor-Sarasota's past reliance on temporary nursing services is decreasing and this will have a positive effect on quality of care. HCR has just completed extensive repairs and renovations costing $350,000 at Kensington Manor which will improve the atmosphere, living conditions and overall quality of care at the facility. Sisters' educational affiliations will aid in recruiting and retaining well-trained staff for its facility. Each facility will be equipped to provide quality care.

      
      

   5. There was extensive testimony about the advantages and disadvantages of central bathing facilities compared with private baths or showers in patient rooms. Sisters and Health Quest would provide private bathing facilities in patient rooms, while the others would have central facilities. Obviously, individual bathing facilities in patient rooms offer more privacy than central facilities, but privacy can also be achieved in a central bathing area by taking only a single, or limited number of patients to a partitioned central facility at any one time. The central facility is less costly than bathing facilities in each room, and also requires less staff time and involvement to assist with, and insure safety in, the patients' bathing. It has not been shown that one type of bathing facility provided in a nursing home, to the exclusion of all others, affects the quality of care in a positive or adverse manner. Quality care can be, and is, provided under both designs.

      
      

   6. The elimination of 3-bed wards from Manor-Sarasota's application would have a positive impact on quality of care, and be consistent with the

      Department's position of discouraging the creation of additional 3-bed wards in nursing homes. However, such elimination was proposed after this application was deemed complete by the Department.

      
      

   7. Patients suffering from Alzheimer's and related disorders can benefit from programs and treatment conducted in separate units, or while comingled with other patients, particularly in the early and middle phases of the disease. In the later phase of the disease it may be less disruptive to other patients if Alzheimer patients reside in a separate wing or unit of the nursing home. Quality care can be rendered through separate or integrated programming, and all applicants in this case that propose to offer specialized services to these patients have proposed programs and facility designs which will provide quality care to persons with Alzheimer's and related disorders.

      
      

   8. While there are differences in facility design, such as the two-story construction of Manor-Sarasota compared with the single level construction of all other applicants, and the central heating and cooling proposed by Sisters compared with individual wall units to be used by Sarasota Healthcare, the proposed designs of all applicants allow for the rendering of quality care to patients.

      
      

6. Access for Chronically Underserved

   
   

   1. The Health Quest proposal is inconsistent with the Local Health Plan policy that 33 1/3 percent of all nursing home beds should be dedicated for Medicaid patients since it proposes that only 5 of its 60 beds (8 percent) will be certified for Medicaid patients if CON 5046 is approved.

      
      

   2. Although Medicaid utilization at Manor-Sarasota has not been consistent with the Local Health Plan, it is projected that if CON 5050 is approved Medicaid utilization will rise to 40 percent. Sarasota Healthcare, HCR and Sisters propose to meet or exceed this Local Health Plan policy.

      
      

   3. HCR has experienced a 75-80 percent Medicaid utilization at Kensington Manor, and proposes a 45 percent Medicaid level in the new addition if CON 5049 is approved.

      
      

7. Financial Feasibility

   
   

   1. The proposals of Manor-Sarasota, HCR and Sisters are financially feasible. Health Quest did not file a pro forma and has not shown a profit in its year and a half of operation at Regents Park. Based upon its actual per patient operating expense at Pinebrook Place, Sarasota Healthcare has underestimated expenses in its second year of operation by approximately $8 per patient day. Its projection of a profit in the second year of operation is questionable due to this underestimation.

      
      

   2. Manor-Sarasota, HCR and Sisters have established their ability to finance, through equity and debt, the construction, equipment, supplies, and start-up costs associated with their proposals. Health Quest will have no construction costs, and only very minor costs to equip and supply seven new beds it is requesting.

      
      

   3. The entire financial structure of CSI and Sarasota Healthcare is dependent upon the financial strength of their general partners, the Kelletts, who currently have $76 million in long term debt and $12 million in equity. This is a relatively high debt to equity ratio of 6 to 1 which makes them

      susceptible to adverse impacts from any downturn in the economy, especially since they have 15 additional CON applications pending in Florida, totaling $60 million in construction costs.

      
      

   4. In contrast to the Kelletts' high debt to equity ratio, Sisters have

      $159 million in long term debt and $160 million in equity for a very secure 1 to

      1 debt to equity ratio.

      
      

   5. Projections of revenue and expense, as well as assumptions concerning projected utilization, Medicaid and Medicare rates, private pay rates, and patient mix used by Manor-Sarasota, HCR and Sisters in their pro forma are reasonable, based upon that applicant's experience and the services proposed in their applications at issue.

      
      

8. Adequacy of Staffing

1. All proposals have adequate and reasonable staffing patterns, as well as staff training programs, to insure that quality care is provided.

   
   

2. Proposed salaries are reasonable and will allow qualified staff to be hired, based upon the recruiting experience and salaries currently offered by Sarasota nursing homes.

   
   

3. Adequate staff resources exist in the area.

   
   

   I. Most Effective and Less Costly Alternative

   
   

4. Since it is generally not necessary to construct support areas for storage, laundry, kitchen and administration, adding additional beds to existing facilities is a less costly alternative to an entirely new facility. Health Quest, HCR and Manor-Sarasota are, therefore, less costly per bed than Sarasota Healthcare and Sisters' proposals to construct new 120 bed nursing homes. Specifically, there are only minor costs associated with Health Quest's proposal, while the cost per bed of the Manor-Sarasota and HCR proposals are

   $30,872 and $30,030, respectively, compared with $32,500 per bed for Sarasota Healthcare and $55,295 for Sisters.

   
   

5. Health Quest's application is the least costly alternative since it involves no construction costs to add seven beds to the existing 53 sheltered beds which would be converted to community nursing home beds, although minor costs for equipping seven new beds would be incurred.

   
   

   1. Effect on Costs and Charges

      
      

6. Sisters and Health Quest have proposed, or actually experienced, the highest costs and charges of all applicants. Health Quest has not shown any basis upon which it can be reasonably expected that room rates will decrease, as it asserts, if this CON is approved.

   
   

7. Due to the large size of its proposed building, higher food costs and number of staff, Sisters projects the highest operating expense per patient day in the second year of operation. Sisters will provide almost 500 gross square feet per bed, while Manor-Sarasota, HCR, and Sarasota Healthcare will provide 278, 267 and 314 gross square feet per bed, respectively.

   1. Enhanced Competition

      
      

8. Since the other applicants are already represented in the service area, the approval of Sisters' application would enhance competition by adding another provider to Sarasota County. This will provide more choices to nursing home residents, and should increase the quality of long term care in the community with the added emphasis this proposal will place on rehabilitative programming.

   
   

   1. Costs and Methods of Construction

   
   

9. The costs and methods of construction proposed by the applicants are reasonable, as well as energy efficient.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this cause. Section 120.57(1), Florida Statutes. Applicants for CONs bear the burden of establishing their entitlement to the certificate of need they seek. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Specifically, they must meet the criteria set forth in Section 381.705, Florida Statutes, and Rule 10- 5.011(1)(k), Florida Administrative Code, based upon a balanced consideration of all criteria contained therein. Department of Health and Rehabilitative Services v. Johnson and Johnson, 447 So.2d 361 (Fla. 1st DCA 1984); NME Hospitals v. Department of Health and Rehabilitative Services, 494 So.2d 256 (Fla. 1st DCA 1986). The weight to be given to each factor is not fixed, but varies depending on the facts of each case. North Ridge General Hospital, Inc.

    v. NME Hospitals, 478 So.2d 1138 (Fla. 1st DCA 1985); Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985).

    
    

11. Substantial amendments to CON applications are prohibited after they have been deemed complete by the Department. See Rule 10-5.010(2)(b) and former Rule 10-5.008(3), Florida Administrative Code. To allow subsequent amendments, would deprive the Department of any opportunity to initially review the matters raised in such amendments and would result in the potential for endless changes to applications approaching, and during, a Section 120.57(1) hearing, thereby making the SAAR virtually meaningless and irrelevant to a changed application presented at hearing.

12. Although a CON application may not be substantially changed, updated, or amended after it has been deemed complete, certain new evidence can be considered at hearing which is relevant to the original application. In McDonald v. Department of Banking and Finance, 346 So.2d 569, at 584 (Fla. 1st DCA 1977) the District Court of Appeal held as follows:

    
    

    The agency may appropriately control the number and frequency of amendments to licensing applications and by the rule prevent substantial amendments of the application in mid proceeding. But the hearing officer or agency head conducting

    120.57 proceedings should freely consider relevant evidence of changed economic conditions and other current circumstance external to the application

    (Emphasis Added)

    
    

13. This holding was clarified by the District Court in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 783 So.2d 700 at 710 (Fla. 1st DCA 1986), when it stated that "the key to McDonald's holding that evidence of changed conditions or circumstances should be considered in a 120.57 hearing is its requirement that such evidence be 'relevant' to the application." The application being considered is the application reviewed by the Department. The Court has recently confirmed this limitation on de novo proceedings, when it affirmed per curiam a Final Order of the Department which, in discussing the Gulf Court decision, stated the following:

    
    

    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. (Emphasis Added)

    
    

    See Florida Health Facilities Corp. v. Department of Health and Rehabilitative Services, Case No. 87-503, opinion filed January 20, 1988, Fla. 1st DCA.

    
    

14. The Department has construed and applied its "no amendment" rule numerous times in Final Orders. In particular, the following excerpts from Final Orders of the Department are helpful in understanding Rule 10-5.010(2)(b), Florida Administrative Code:

    
    

    During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction cost, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Health Care and Retirement Corporation of

    America v. Department of Health and Rehabilitative Services, 8 FALR at 4651.

    
    

    The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at

    HRS... [Gulf Court] ... limited the

    de novo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 FALR at 2141-

    2142.

    
    

    It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Hialeah Hospital, Inc. v.

    Department of Health and Rehabilitative Services, 9 FALR at 2366.

    
    

15. Updated information submitted by an applicant at a Section 120.57 hearing is admissible if it results from events and developments outside of the control of the applicant. Inflation and economic factors present at the time of hearing cannot be foreseen with certainty when a CON application is filed, and these are certainly matters outside of the control of any applicant. Updates presented at hearing which account for actual rates of inflation and current economic conditions, as well as revisions to application tables which necessarily and directly result therefrom, have therefore, been admitted and considered.

    
    

    Impermissible Amendment

    
    

16. Manor-Sarasota presented an "amended" application at hearing which went beyond mere updating of its original application. The Manor-Sarasota amendments eliminated 3-bed wards that had been proposed in its original application, and increased the gross square footage of the proposed addition by

    21 percent. These changes were proposed after Manor-Sarasota's application was deemed complete and after this application was criticized in the SAAR for its proposal of 3-bed wards. These amendments were a reaction to, and an attempt to cure an undesirable aspect of this application. If applicants are allowed to change their applications in response to criticism in a SAAR, the CON application process will be never-ending, and the Department's completeness determination will be meaningless.

17. Surely, the basic design of a proposed nursing home is totally within the control of the applicant. It is the applicant alone who determines how many private, semiprivate or 3-bed wards its application will have, and how large the proposed facility will be. A 21 percent increase in square footage and elimination of 3-bed wards is a substantial change in a CON application since it affects not only the cost of the proposal, but also the basic types of, and manner in which, services will be rendered to patients.

    
    

18. The Manor-Sarasota application presented at hearing cannot be considered because it is not the application that was reviewed by the Department. It represents an impermissible and unauthorized amendment to this application. Since competent substantial evidence in support of Manor- Sarasota's original application was not introduced, the Manor-Sarasota application must be denied.

    
    

    Incomplete Application

    
    

19. The Department deemed the Health Quest amended application complete, and reviewed the amended application in its SAAR. However, the record in this case does not establish that Health Quest ever submitted a completed application to the Department for its amended proposal. Former Section 381.494(4), Florida Statutes, is applicable in this proceeding, and sets forth the contents of CON applications which were required in January, 1987, when the applications at issue in this case were filed. See also Rule 10-5.008(1)(d), Florida Administrative Code, and its predecessor Rule 10-5.08.

    
    

20. The Department did not receive from Health Quest a detailed statement of financial feasibility or pro forma for the amended proposal, and competent substantial evidence was not presented at hearing to establish that Health Quest ever submitted a detailed description of the amended project, as well as its need in relation to the applicable health system plans, or any analysis of the probable impact on health care costs for services rendered by existing providers. Broad, generalized statements that this is simply a conversion of sheltered beds to community nursing home beds, and that there will be only minor equipment costs associated with the addition of seven new beds, does not meet the application content requirements of Section 381.494(4).

    
    

21. Competent substantial evidence was not presented to support the Department's determination of completeness regarding this amended proposal, and therefore the Health Quest application must be denied as incomplete.

    
    

    Balanced Consideration of Criteria

    
    

22. For purposes of a balanced consideration of the CON criteria, all applications presented at hearing will be considered in order to present the Hearing Officer's evaluation and comparison of all five applications. If the Department concludes that the Manor-Sarasota application was not improperly amended at hearing, or that the Health Quest application was complete, it would be a needless waste of time and inconvenience to the parties to remand this case to Division of Administrative Hearings for consideration of one or both of these applications. Therefore, although the Hearing Officer has concluded these applications should be denied for the reasons stated above, they are presented here in order to obviate the need for remand if the Department disagrees with the Hearing Officer's conclusion.

    1. HCR

       
       

23. The HCR application meets the statutory criteria applicable to CON applications set forth at Section 381.705(1) and (2), Florida Statutes, and is superior to all other applications at issue in this case.

    
    

24. HCR has a proven record of providing quality care to nursing home residents and has proposed a program of quality care in its application. Its proposal is for an addition to an existing facility, which is a more cost efficient proposal than the construction of a new facility. HCR proposes a patient mix that includes 45 percent Medicaid, which meets the 33 1/3 percent goal in the Local Health Plan, and exceeds all other applicants.

    
    

25. A distinct 29-bed Alzheimer wing will be provided, as well as respite and sub-acute care. There is a special need for these services in Sarasota County. The HCR proposal is financially feasible, and estimated costs of construction, equipment and staffing for the proposal are reasonable. The applicant has the ability to finance its proposal.

    
    

26. For theme reasons, the HCR application for a 60 bed addition to Kensington Manor should be approved.

    
    

    1. Sisters

       
       

27. Sisters has presented a proposal for a new 120 bed nursing home which, upon a balanced consideration, meets the statutory criteria in Sections 381.705(1) and (2), and is the second most deserving of approval.

    
    

28. The nursing homes owned and operated by the Sisters of Bon Secours have an outstanding proven track record of providing quality care to residents. Their proposal is financially feasible and they clearly have the ability to finance this project. Sisters' application meets the goals of the state and local health plans, and also would meet the special need for services in Sarasota County for Alzheimer's programs, adult day care, sub-acute, restorative, and rehabilitative care. While patients of all faiths would be served, it would be the only Catholic nursing home in Sarasota County. The addition of a new provider in Sarasota County will enhance competition and offer residents another alternative for care.

    
    

29. The teaching component of this application makes it unique and will contribute to Sisters' ability to provide state-of-the-art care to patients. Sisters' ability to attract and retain qualified staff is also enhanced by this affiliation with a college of medicine and nursing school. Although this proposal is for the more costly alternative of a new facility rather than an addition to an existing nursing home, and although it is the more costly of the two proposals to construct new facilities, this application 45 superior to all others, except HCR, due to the quality of services to be offered which results in large measure from the educational affiliations it will have. Sisters' facilities also have a record of JCAH accreditation.

    
    

30. For these reasons, Sisters' application for a 120 bed nursing home should be approved.

    
    

    1. Manor-Sarasota

       
       

31. This applicant is the third most deserving of approval, if the Department disagrees with the Hearing Officer's conclusion, as stated above, and

    considers the proposal presented at hearing. Based upon a balanced consideration of criteria, Manor-Sarasota's updated proposal for a 60 bed addition to its current facility meets the statutory criteria in Sections 381.705(1) and (2), Florida Statutes.

    
    

32. The application is for the less costly alternative of a 60 bed addition to an existing nursing home, rather than the construction of a new facility. Manor-Sarasota has a proven record of providing quality care, and proposes a patient mix that will meet the Local Health Plan Medicaid goal of 33 1/3 percent. However, its existing facility is not meeting this goal in 1988. The applicant is willing to accept a 40 percent Medicaid condition on approval of this CON.

    
    

33. The applicant has considerable experience dealing with Alzheimer's patients and proposes a separate Alzheimer's unit in the proposed addition. The project is financially feasible, construction costs and proposed staffing are reasonable, and Manor-Sarasota has the ability to fund this project.

    
    

34. For these reasons, Manor-Sarasota's application for a 60 bed addition to its existing nursing home should be approved, if the Department disagrees with the Hearing Officer's conclusion, stated above.

    
    

    1. Sarasota Healthcare

       
       

35. The parties stipulated that there is a need for 240 additional beds in Sarasota County in January, 1990, the applicable planning horizon year. The recommendations set forth above regarding HCR, Sisters and Manor-Sarasota result in approval of 240 beds if Manor-Sarasota is included, and 180 beds if it is not included. This means that after consideration of the top three applicants, the new beds being sought by Sarasota Healthcare (120 beds) are not available. The evidence presented at hearing by Sarasota Healthcare concerned its 120 bed application; no evidence directed to any identifiable portion thereof was presented. Therefore, this application must be denied due to a lack of need because recommendations regarding superior applicants result in there being less beds available than are sought by this applicant.

    
    

36. This application must also be denied because Sarasota-Healthcare has failed to establish the financial feasibility of this project, or its ability to finance this project. Sarasota Healthcare and CSI are financially dependent upon the Kelletts, with their relatively high 6 to 1 debt to equity ratio. The patients in an area are not served by approval of a CON application for additional beds if that approved applicant has not established its ability to finance its proposed project, given its existing obligations and other pending CON applications. This applicant ranks last among the proposals in this case on the criteria of financial feasibility and the ability to finance its project.

    
    

37. Sarasota Healthcare, through CSI, does have a record of providing quality care. Its proposal will meet the need for specialized services in Sarasota County. Construction costs and expenses associated with this new 120 bed nursing home are significantly less than Sisters' proposal. Although Pinebrook Place, which is owned and operated in Sarasota County by the Kelletts has not met its Medicaid condition, Sarasota Healthcare proposes to meet the goals stated in the applicable health plans, and would accept a 40 percent Medicaid condition. However, unlike Sisters' application, approval of this application will not enhance competition since this provider, through Pinebrook Place, is already located in Sarasota County.

38. For these reasons, the application of Sarasota Healthcare for a new

    120 bed nursing home should be denied.

    
    

    1. Health Quest

    
    

39. Even if the Department disagrees with the Hearing Officer's conclusion, as stated above, and considers this application, it should be denied because it is the most deficient application under review in this case when it is given a balanced consideration against the criteria at Section 381.705(1) and (2), Florida Statutes.

    
    

40. Health Quest does not propose to meet the Local Health Plan goal of

    33 1/3 percent Medicaid patients. It is not presently Medicaid certified, and if this CON is approved, it only proposes to certify 5 of its 60 beds (8 percent) for Medicaid patients. This is, at best, a meager commitment to serve Medicaid patients.

    
    

41. No pro forma for this proposal was presented, and competent substantial evidence was not introduced to support the financial feasibility of this project, especially since the evidence does show that the existing Health Quest facility, Regents Park, has not shown a profit in its year and a half of operation.

    
    

42. Since this is a proposed conversion of 53 existing sheltered beds to community nursing home beds and the addition of only 7 new beds, the Health Quest proposal is the least costly project under consideration. There would be virtually no construction costs, and only minor costs to equip the new beds. However, the existing sheltered nursing home, Regents Park, has the highest room rates of all applicants in this case who have existing facilities in Sarasota County. There is no reasonable basis to conclude that approval of the Health Quest application would lower these room rates.

    
    

43. On March 4, 1988, a Motion to Dismiss Health Quest as a party in the proceeding was filed on behalf of Sisters. The Motion relies on Section 651.118(9), Florida Statutes, and urges that the conversion of sheltered beds to community beds can only take place when a provider is declared insolvent. Although Section 651.118(9) is not applicable in this case, an applicant can pursue conversion under Section 381.706(1)(d), Florida Statutes. See also Rule 10-5.011(1)(k), Florida Administrative Code. The Motion to Dismiss is therefore unfounded, as well as untimely. Rule 28-5.205, Florida Administrative Code. Thus, the Motion must be denied.

For the reasons set forth above, the Health Quest application to convert 53 sheltered beds to community nursing home beds, and to add 7 new nursing home beds, should be denied.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Respondent enter a Final Order, as follows:

1. Approving HCR's application for CON 5049;

   
   

2. Approving Sisters' application for CON 5039;

   
   

3. Denying the application of Manor-Sarasota, Sarasota Healthcare and Health Quest for CONs 5050, 5025 and 5046, respectively.

DONE AND ENTERED this 9th day of August, 1988, in Tallahassee, Florida.

DONALD D. CONN

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of August, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3471, 87-3473, 87-3475, 87-3478 and 87-3491

Rulings on the Department's Proposed Findings of Fact

1. Adopted in Findings of Fact 3, 12, 17, 19, 24, 30, 37.

2. Adopted in Finding of Fact 37.

3-4. Adopted in Finding of Fact 43.

5. Adopted in Finding of Fact 42.

6-10. Rejected as irrelevant and unnecessary since the parties have stipulated to need.

1. Adopted in Findings of Fact 37, 38.

2. Adopted in Findings of Fact 26, 27, 55, 69, 70.

3. Adopted in Findings of Fact 30, 56, 58, 60.

4. Adopted in Findings of Fact 3, 55.

5. Rejected as irrelevant since the parties have stipulated to need.

6. Rejected in Findings of Fact 48, 57.

Rulings on Manor-Sarasota's Proposed Findings of Fact:

1. Adopted in Findings of Fact 3, 12, 17, 19, 24, 30.

2. Adopted in Findings of Fact 37, 38, 43.

3. Adopted in Findings of Fact 15, 30, 32.

4. Rejected in Finding of Fact 17 and Adopted in Finding of Fact 19.

5. Adopted in Findings of Fact 3, 5, 24.

6. Adopted in Finding of Fact 38.

7. Adopted in Findings of Fact 13, 14 but Rejected in Findings of Fact 71,

   73.

8. Adopted in Findings of Fact 29, 31.

9. Adopted in Finding of Fact 34.

10. Adopted in part in Finding of Fact 35, but otherwise Rejected as

    unnecessary.

11. Adopted in Finding or Fact 2.

12. Rejected as unsupported and unnecessary.

13. Adopted in Findings of Fact 29, 60, 61 but also Rejected in part in Finding of Fact 60.

14. Adopted in Finding of Fact 31.

15. Adopted and. Rejected in Finding of Fact 60, and otherwise Rejected as irrelevant and unsupported in the record.

16. Adopted in Finding of Fact 29 but otherwise Rejected as unsupported argument on the evidence, without any citation to the record, rather than a proposed finding of fact.

17. Rejected in Findings of Fact 63, 76.

18. Adopted in Findings of Fact 32, 33, 82 but Rejected in part in Finding of Fact 33.

19. Rejected as unsupported by the record.

20. Adopted in Findings of Fact 33, 64 in part, but otherwise. Rejected in Finding of Fact 64 and as not supported by the record.

21. Rejected as unnecessary and without citation to the record.

22. Adopted and. Rejected in Findings of Fact 33, 63.

23. Rejected as cumulative and unnecessary.

24. Rejected in Findings of Fact 33, 63.

25. Rejected in Findings of Fact 17.

26. Adopted in Finding of Fact 17, but otherwise Rejected as irrelevant.

27. Adopted in Finding of Fact 18.

28. Rejected as irrelevant and unnecessary.

29. Adopted in Findings of Fact 17, 18.

30. Rejected as irrelevant and unnecessary.

31. Adopted in Findings of Fact 20, 71.

32. Rejected as cumulative and unnecessary.

33-34. Rejected as irrelevant and unnecessary. 35-36. Adopted in Finding of Fact 81.

1. Adopted in Finding of Fact 21.

2. Rejected as speculative.

3. Adopted in Finding of Fact 18 but otherwise Rejected as irrelevant and unnecessary.

4. Rejected as unnecessary and irrelevant.

41-43. Rejected as not supported by the record and speculative.

1. Adopted in Findings of Fact 19, 80.

2. Adopted in Findings of Fact 48, 51, but Rejected in Finding of Fact

   21.

3. Rejected in Findings of Fact 63, 76 and otherwise as unnecessary and

   irrelevant.

4. Adopted in Findings of Fact 24-26.

5. Adopted in Finding of Fact 23.

6. Adopted in Finding of Fact 79.

7. Adopted in Finding of Fact 27.

8. Adopted in Finding of Fact 1.

9. Adopted in Findings of Fact 61, 63 and otherwise Rejected as unnecessary.

10. Rejected as unnecessary.

11. Adopted in Findings of Fact 5, 81.

12. Adopted in Findings of Fact 71, 75.

56-57. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary.

58. Adopted in Findings of Fact 3, 55, 56.

59-61. Rejected as irrelevant, unnecessary and cumulative.

1. Rejected in Finding of Fact 66.

2. Rejected as irrelevant and unnecessary.

3. Adopted in Findings of Fact 63, 76.

4. Adopted in Findings of Fact 4, 6.

5. Adopted in Finding of Fact l.

6. Adopted in Finding of Fact 81 but otherwise Rejected as unnecessary.

Rulings on HCR's Proposed Findings of Fact:

1-2. Adopted in Findings of Fact 42, 43.

3-4. Rejected as unnecessary and irrelevant.

5. Adopted in Finding of Fact 57. 6-7. Rejected as unnecessary.

8-9. Adopted in Finding of Fact 57.

10-15. Rejected in Finding of Fact 66 and otherwise as unnecessary and cumulative.

1. Adopted in Finding of Fact 57.

2. Adopted in Findings of Fact 27, 55.

3. Rejected as unnecessary.

4. Adopted in Finding of Fact 57.

5. Adopted in Findings of Fact 23, 28, 63.

6. Adopted in Finding of Fact 23.

7. Adopted in Findings of Fact 25, 26, 28.

8. Adopted in Findings of Fact 24, 27, 28.

24-25. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary.

26-27. Adopted in Finding of Fact 27, but otherwise Rejected as unnecessary.

28-29. Adopted in Finding of Fact 66, but otherwise Rejected as unnecessary.

30. Adopted in Findings of Fact 46-49.

31-37. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary.

1. Rejected as unnecessary and irrelevant.

2. Adopted in Finding of Fact 24.

40-42. Adopted in Findings of Fact 25, 26, 71, 75.

1. Adopted in Finding of Fact 71.

2. Rejected as unnecessary.

45-46. Rejected as cumulative and unnecessary.

1. Adopted in Findings of Fact 63, 81.

2. Adopted in Finding of Fact 24.

3. Adopted in Finding of Fact 28, but otherwise Rejected as cumulative and unnecessary.

4. Adopted in Finding of Fact 79.

51-54. Adopted in part in Finding of Fact 24, but otherwise Rejected as unnecessary.

55. Adopted in Finding of Fact 37, but otherwise Rejected as unnecessary and cumulative.

56-57. Rejected as unnecessary.

1. Adopted in part in Finding of Fact 17, but otherwise Rejected as unnecessary.

2. Adopted in Finding of Fact 19.

3. Adopted in part in Findings of Fact 18, 42.

4. Adopted in Finding of Fact 18.

62-63. Adopted in Finding of Fact 20.

1. Adopted in Findings of Fact 22, 55.

2. Adopted in Findings of Fact 21, 49, 51.

3. Adopted in Findings of Fact 32, 33.

4. Adopted and. Rejected in Finding of Fact 33.

5. Adopted in Finding of Fact 82.

69-70. Adopted in Finding of Fact 63.

1. Adopted in Finding of Fact 56.

2. Adopted and Rejected in part in Finding of Fact 34.

Rulings on Sisters' Proposed Findings of Fact:

1. Adopted in Findings of Fact 3, 12, 17, 19, 24, 30.

2. Rejected as unnecessary as a Finding of Fact.

3. Adopted in Finding of Fact 43.

4. Rejected as unnecessary as a Finding of Fact.

5. Adopted in Finding of Fact 30.

6. Adopted in Findings of Fact 12, 14, but otherwise Rejected as irrelevant.

7. Adopted in Finding of Fact 3.

8. Adopted in Findings of Fact 24, 29.

9. Adopted in Finding of Fact 19, but otherwise Rejected as irrelevant and unnecessary.

10. Adopted in Findings of Fact 37, 38. 11-12. Adopted in Finding of Fact 46.

13-15. Adopted in Findings of Fact 47-54.

1. Rejected as unnecessary and not supported by the record.

2. Adopted in Finding of Fact 30.

18-22. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative.

23. Adopted in Finding of Fact 34.

24-26. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative.

1. Adopted in Finding of Fact 34.

2. Adopted in Finding of Fact 57, but Rejected in Finding of Fact 34.

3. Adopted in part in Finding of Fact 30, but otherwise Rejected as argument unsupported by any citation to the record.

30-38. Adopted in part in Finding of Fact 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact.

1. Adopted in Finding of Fact 40.

2. Rejected in Finding of Fact 40.

41-51. Adopted in Findings of fact 60, 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact.

52-58. Adopted in Findings of Fact 29, 60, 61, but otherwise Rejected as unnecessary and irrelevant.

59. Adopted in Finding of Fact 11, but otherwise Rejected as irrelevant. 60-75. Rejected as unnecessary irrelevant, and cumulative.

1. Rejected as unnecessary.

2. Adopted in Finding of Fact 82.

3. Rejected as unnecessary.

4. Adopted in Findings of Fact 33, 82.

5. Adopted in Findings of Fact 33, 82.

6. Adopted in Finding of Fact 33, but Rejected in Finding of Fact 64. 82-83. Rejected as unnecessary.

84. Adopted in Finding of Fact 9. 85-86. Rejected as unnecessary.

87-88. Adopted in Findings of Fact 9, 41.

89. Adopted in Finding of Fact 4, but otherwise Rejected as not supported by the record.

90-91. Rejected in Finding of Fact 63 and otherwise not supported by the record.

92-105. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary, cumulative and irrelevant.

1. Rejected as unsupported in the record and otherwise unnecessary.

2. Adopted in Finding of Fact 29.

3. Adopted in Finding of Fact 11.

4. Rejected as irrelevant, unnecessary and speculative.

5. Rejected as unnecessary.

111-112. Adopted in Finding of Fact 30.

113. Adopted in Finding of Fact 63.

114-115. Rejected as unnecessary and cumulative.

116-120. Adopted in Findings of Fact 60, 63, but otherwise Rejected as unnecessary and cumulative.

121. Adopted in Finding of Fact 30.

122-123. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative.

124. Adopted in Findings of Fact 31, 34, but otherwise Rejected as unsupported in the record.

125-126. Adopted in Finding of Fact 35.

127-129. Rejected as unnecessary and irrelevant since no applicant has locked in interest rates, and therefore these rates will vary and are speculative.

1. Rejected as speculative and irrelevant.

2. Rejected as irrelevant.

132-135. Adopted in Finding of Fact 73.

136. Adopted in Finding of Fact 74.

137-139. Adopted in Finding of Fact 71, but otherwise Rejected as unnecessary and cumulative.

140. Rejected as unnecessary and irrelevant. 141-145. Adopted in Finding of Fact 71.

146-147. Adopted in Finding of Fact 83.

1. Adopted in part in Finding of Fact 71, 84, but Rejected in Findings of Fact 81, 82.

2. Adopted in Finding of Fact 63.

3. Rejected in Finding of Fact 67.

4. Rejected as irrelevant and unnecessary.

5. Rejected as unnecessary and cumulative.

6. Adopted in Finding of Fact 34.

7. Rejected as cumulative and unsupported by the record. 155-158. Adopted in Finding of Fact 54.

159. Rejected as irrelevant and unnecessary.

Rulings on Sarasota Healthcare's Proposed Findings of Fact:

1. Adopted in Findings of Fact 3, 12, 17, 19, 24, 30.

2. Rejected as irrelevant and unnecessary.

3. Adopted in Findings of Fact 37, 38, 43.

4-6. Adopted in Finding of Fact 11, but otherwise Rejected as unnecessary and irrelevant.

7-13. Adopted in Findings of Fact 12-16, but otherwise Rejected as unnecessary and irrelevant.

14-17. Adopted in Finding of Fact 46.

1. Adopted in Finding of Fact 47.

2. Adopted in Finding of Fact 49.

3. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary.

4. Adopted in Findings of Fact 11, 61.

22-23. Rejected as cumulative and unnecessary.

24-41. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary.

1. Adopted in part in Findings of Fact 14, 57, but otherwise. Rejected in Finding of Fact 83 and as unsupported in the record.

2. Rejected in Finding of Fact 54, and otherwise as irrelevant.

3. Adopted in Findings of Fact 13, 51, but Rejected in Finding of Fact

   54.

4. Adopted in Finding of Fact 13.

5. Adopted in Findings of Fact 14, 57.

47-49. Adopted in Findings of Fact 56, 66.

1. Rejected as irrelevant and unnecessary.

2. Adopted in Finding of Fact 14.

3. Adopted in Finding of Fact 57.

53-58. Adopted in Finding of Fact 63, but otherwise Rejected as

irrelevant and unnecessary.

1. Adopted in Finding of Fact 14.

2. Adopted in Finding of Fact 57.

3. Adopted in Finding of Fact 14.

4. Adopted in Finding of Fact 53.

5. Adopted in Finding of Fact 81.

6. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary.

65-78. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative.

79-85. Adopted in Findings of Fact 76, 77, but otherwise Rejected as unnecessary and irrelevant.

86-97. Adopted in Findings of Fact 15, 63, 84, but otherwise Rejected as cumulative and unnecessary.

1. Adopted and. Rejected in Finding of Fact 64.

2. Rejected as unsupported in the record.

3. Rejected as cumulative and unnecessary. 101-103. Adopted in Findings of Fact 15, 84.

104. Rejected as unnecessary and cumulative.

105-109. Adopted in Findings of Fact 63, 84, but otherwise Rejected as irrelevant and unnecessary.

1. Rejected as unsupported in the record.

2. Adopted in part in Finding of Fact 16, but Rejected in Finding of Fact 73.

112-116. Adopted and Rejected in part in Findings of Fact

71, 73, 75, but otherwise. Rejected as irrelevant and unnecessary.

117. Adopted in Finding of Fact 16.

118-119. Adopted in Finding of Fact 75. 120-121. Rejected in Finding of Fact 71. 122-126. Adopted in Finding of Fact 40.

127-128. Adopted in Findings of Fact 30, 32.

1. Rejected as irrelevant and unnecessary.

2. Adopted in Finding of Fact 31.

3. Adopted in Finding of Fact 33.

4. Adopted and Rejected in Finding of Fact 67.

133-135. Adopted and Rejected in part in Findings of Fact 33, 63, and otherwise. Rejected as irrelevant since all licensure requirements can easily be met with minor modifications.

1. Adopted in Finding of Fact 36.

2. Rejected as unsupported in the record.

3. Adopted in Findings of Fact 15, 30, 32, 33.

4. Adopted in Finding of Fact 31, but otherwise Rejected as simply a summation of testimony.

140-142. Adopted in Finding of Fact 36.

1. Rejected as irrelevant.

2. Adopted in Finding of Fact 34, but Rejected in Finding of Fact 51.

145-146. Adopted in Finding of Fact 34, but otherwise Rejected as unnecessary.

147-148. Adopted in Finding of Fact 30, but Rejected in Finding of Fact

57 and as unsupported in the record.

149-150. Adopted in Finding of Fact 34.

1. Adopted in Finding of Fact 57.

2. Rejected as unnecessary and cumulative

153-156. Rejected in Findings of Fact 63, 76, 77 and otherwise not supported in the record.

1. Rejected as unnecessary.

2. Adopted in Finding of Fact 36.

3. Adopted in Finding of Fact 82.

4. Rejected as unnecessary.

5. Adopted in Finding of Fact s.

6. Adopted in Findings of Fact 17, 19.

7. Adopted in Finding of Fact 71, but otherwise Rejected as cumulative and unnecessary.

8. Rejected as cumulative and unnecessary.

9. Adopted in Finding of Fact 18, but otherwise Rejected as irrelevant and unsupported in the record.

10. Adopted in Findings of Fact 17, 18, but otherwise Rejected as cumulative and as argument on the evidence.

11. Adopted in Findings of Fact 48, 49, 51.

Rulings on Health Quest's Proposed Findings of Fact:

1. Adopted in Finding of Fact 24.

2. Adopted in Finding of Fact 3.

3. Adopted in Findings of Fact 17, 19.

4. Adopted in Finding of Fact 12.

5. Adopted in Finding of Fact 30.

6-10. Adopted in Finding of Fact 37.

1. Rejected as irrelevant and unnecessary.

2. Adopted in Findings of Fact 42, 43.

3. Adopted in Finding of Fact 20.

4. Adopted in Findings of Fact 19, 20, 39.

5. Adopted in Finding of Fact 18.

6. Adopted in Findings of Fact 61, 63.

7. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant and unnecessary.

8. Adopted in Finding of Fact 17.

9. Adopted in Finding of Fact 18.

10. Rejected as argument on the evidence rather than a proposed finding of fact.

11. Rejected as speculative and unsupported in the record.

12. Adopted in Findings of Fact 19, 80.

13. Rejected as argument on the evidence rather than a proposed finding of fact.

14. Adopted in Finding of Fact 80.

15. Rejected in Finding of Fact 71.

16. Rejected as irrelevant.

27-34. Adopted in Findings of Fact 22, 63, 76, but otherwise Rejected as unnecessary and cumulative.

35-39. Adopted in Finding of Fact 22.

40. Adopted in Finding of Fact 66.

41-58. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative.

1. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant.

2. Rejected as simply a statement on the evidence rather than a proposed finding of fact and otherwise irrelevant.

3. Adopted in Finding of Fact 17, but otherwise Rejected as unnecessary. 62-63. Adopted in Finding of Fact 18.

1. Rejected as unnecessary and cumulative.

2. Adopted in Finding of Fact 80.

3. Adopted in Finding of Fact 63.

4. Adopted in Findings of Fact 19, 80.

68-70. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative.

71. Adopted in Finding of Fact 21.

72-74. Rejected in Findings of Fact 48, 49, 51 and otherwise as irrelevant.

75-76. Rejected as unnecessary, although it is agreed that these matters are irrelevant and speculative.

1. Adopted in Findings of Fact 63, 80.

2. Adopted in Finding of Fact 9.

3. Rejected as argument on the evidence rather than a proposed finding of fact.

4. Adopted in Finding of Fact 9.

81-82. Adopted in Finding of Fact 39.

83. Rejected in Finding of Fact 39. 84-88. Adopted in Finding of Fact 41.

1. Adopted in Finding of Fact 9.

2. Rejected as argument on the evidence and as legal argument rather than a proposed finding of fact.

3. Rejected as unnecessary.

92-94. Adopted in Finding of Fact 41.

95. Adopted and. Rejected in part in Finding of Fact 41.

96-101. Rejected in Findings of Fact 63, 76 and otherwise as irrelevant.

102. Rejected as cumulative.

103-104. Adopted in Finding of Fact 1.

1. Rejected in Findings of Fact 61, 63.

2. Rejected as simply a summation of testimony. 107-109. Rejected in Finding of Fact 63.

110-111. Rejected as unsupported in the record and irrelevant. 112-114. Adopted in Finding of Fact 9, but otherwise Rejected as

unsupported by the record.

115. Adopted in Finding of Fact 41. 116-117. Rejected as unnecessary.

118-120. Rejected in Finding of Fact 66 and otherwise simply as a summation of testimony.

121-122. Rejected as irrelevant and as argument on the evidence.

1. Adopted in Finding of Fact 38.

2. Rejected as a conclusion of law rather than a proposed finding of fact.

125-127. Rejected as argument on the evidence and as a summation of testimony.

128. Rejected as cumulative.

129-131. Rejected as simply a summation of testimony rather than a proposed finding of fact.

132-134. Rejected in Findings of Fact 61, 63 and otherwise as irrelevant.

135. Rejected in Findings of Fact 43, 48, 57 and otherwise as irrelevant. 136-142. Rejected as irrelevant. The issue in this case is not the

accuracy of the SAAR, but rather whether applicants have sustained their burden

of establishing entitlement to a CON based on the record established at hearing.

COPIES FURNISHED:

Richard A. Patterson, Esquire Department of HRS

2727 Mahan Drive, 3rd Floor Tallahassee, Florida 32308

Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302

Donna H. Stinson, Esquire

The Perkins House - Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

1. David Watkins, Esquire Harry F. X. Purnell, Esquire Post Office Box 6507

   Tallahassee, Florida 32314-6507

   
   

   Byron B. Matthews, Jr., Esquire Vicki Gordon Kaufman, Esquire 700 Brickell Avenue

   Miami, Florida 33131-2802

   
   

   Steven W. Huss, Esquire

   1017 Thomasville Road, Suite C Tallahassee, Florida 32303

   
   

   Gregory Coler, Secretary Department of Health and

   Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

   Tallahassee, Florida 32399-0700

   
   

   John Miller, Acting General Counsel Department of Health and

   Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

   Tallahassee, Florida 32399-0700

   
   

   Sam Power, Clerk Department of Health and

   Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

   Tallahassee, Florida 32399-0700

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

   AGENCY FINAL ORDER

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

   
   

   STATE OF FLORIDA

   Petitioner,
   	CASE NO.:	87-3471
   vs.	CON NOS.:	5035
   		5049
   DEPARTMENT OF HEALTH AND
   REHABILITATIVE SERVICES,

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., (Sarasota),

   
   

   
   

   Respondent.

   / HEALTH QUEST CORPORATION

   (Sarasota County),

   
   

   Petitioner,

   CASE NO.: 87-3473

   vs. CON NO. : 5046

   
   

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

   
   

   Respondent.

   / MANOR CARE, INC. (Sarasota),

   
   

   Petitioner,

   CASE NO.: 87-3475

   vs. CON NO. : 5050

   
   

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

   
   

   Respondent.

   / SARASOTA HEALTHCARE, LTD., d/b/aCONVALESCENT NURSING

   CENTER OF SARASOTA COUNTY,

   
   

   Petitioner,

   CASE NO.: 87-3478

   vs. CON NO. : 5025

   
   

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

   
   

   Respondent.

   /

   SISTERS OF BON SECOURS IN THE UNITED STATES, INC.,

   
   

   Petitioner,

   CASE NO.: 87-3491

   vs. CON NO. : 5039

   
   

   DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA,

   
   

   Respondents.

   /

   
   

   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

   
   

   HRS excepts to the Hearing Officer's conclusion that Manor Care's application for a CON should be denied because it relied on an impermissibly amended application. Counsel maintains that the Hearing Officer is correct in finding that Manor Care's application violates the department's prohibition against amending applications during 120.57 proceedings, but that the department waived the irregularity. What counsel overlooks is that there were other parties to this proceeding.

   
   

   In its Motion to Strike the department's exception, Health Quest asserts that the argument advanced by counsel for the department would violate the rights of Health Quest and other competing applicants. Health Quest is correct. The exception is denied and Health Quest's Motion to Strike is granted.

   
   

   RULING ON EXCEPTIONS FILED BY MANOR CARE

   
   

   Manor Care asserts that the department is estopped from denying its application on the grounds that it was impermissibly amended. Manor Care overlooks the fact that there were parties to this proceeding in addition to itself and the department. Furthermore, there is no basis for an equitable estoppel. Manor Care could have relied on its original application, but instead it chose to rely on an amended application. The exception is denied. See Manor Care and Health Care & Retirement Corporation vs. HRS, 9 FALR 2139 (HRS 1987).

   
   

   RULING ON EXCEPTIONS FILED BY HEALTH QUEST

   
   

   1. Health Quest takes exception to finding of fact 5, 6, & 7 because they concern Manor Care's amendment, which was found to be improper and inadmissible. The Hearing Officer properly made findings of fact regarding the merits of the amended application to avoid the necessity of a remand for further fact finding should the department disagree with his conclusions of law that Manor Care relied on an impermissibly amended application. Because the department adopts

      in full the Hearing Officer's conclusions of law, the findings on the merits of Manor Care's proposal are now irrelevant; therefore, the exception is granted.

      
      

   2. Health Quest takes exception to the portion of finding of fact 17 in which the Hearing Officer asserts that Health Quest's nursing home ... is licensed under Chapter 651, Florida Statutes, as a continuing care facility. Nursing home facilities are licensed under Section 400.062, Florida Statutes, so presumably Health Quest's nursing home facility is licensed under that section. The exception is granted.

      
      

   3. Health Quest takes exception to finding of fact 18, in which it is asserted that "Health Quest owns and operates 9 nursing centers in 3 states". Health Quest noted in its proposed finding of fact 15, that it owns and operates

      11 nursing centers and 3 retirement housing developments. The Hearing Officer accepted Health Quest's proposed finding 15. The exception is granted.

      
      

   4. Health Quest takes exception to finding of fact 19 insofar as the Hearing Officer finds that there would be some minor costs associated with the conversion of Health Quest's existing nursing facility from sheltered bed status to community bed status. The finding is based on competent, substantial evidence; therefore, the exception is denied.

      
      

   5. Health Quest takes exception to finding of fact 20, and to the conclusion of law on pages 35-36 of the Recommended Order concerning the completeness of Health Quest's application. The finding is based on competent, substantial evidence; therefore, the exception is denied.

      
      

   6. Health Quest takes exception to finding of fact 38, in which the Hearing Officer states "the department also supported at hearing the applications of Manor Care ... and Sisters of Bon Secours. The finding is based on competent, substantial evidence; therefore, the exception is denied.

      
      

   7. Health Quest takes exception to findings of fact 48, 49, 51, and to that portion of finding of fact 47 and to the conclusion of law on page 42 which deals with the local health council's recommendations concerning Medicaid utilization. The finding is based on competent, substantial evidence; therefore, the exception is denied. It is noted that the need for a health care facility in relation to the district plan is a statutory review criteria. Section 381.705(1)(a), Florida Statutes.

      
      

   8. Health Quest takes exception to finding of fact 55 insofar as it does not also note that Health Quest's proposal would increase the availability and adequacy of existing services. Health Quest does not challenge the correctness of finding of fact 55; therefore, the exception is denied.

      
      

   9. Health Quest takes exception to finding of fact 63 insofar as it asserts that the architectural design and staffing proposal by Manor Care will be sufficient to allow the rendering of quality care. The finding is based on competent, substantial evidence; therefore, the exception is denied.

      
      

   10. Health Quest takes exception to the portion of finding of fact 63 and to the portion of conclusion of law C (page 39 of the Recommended Order) which state that "Manor-Sarasota has a proven record of providing quality care." The finding is based on competent, substantial evidence; therefore, the exception is denied.

   11. Health Quest takes exception to finding of fact 67 regarding the two- story design proposed by Manor Care. The finding is based on competent, substantial evidence; therefore, the exception is denied.

       
       

   12. Health Quest takes exception to finding of fact 68 to the extent that such finding is included in a section entitled "Access for Chronically Underserved." Health Quest does not challenge the correctness of the finding; therefore, the exception is denied.

       
       

   13. Health Quest takes exception to the third paragraph of Section E on page 42 of the Recommended Order regarding financial feasibility. The finding is based on competent, substantial evidence; therefore, the exception is denied.

       
       

   14. Health Quest takes exception to finding of fact 76. The finding is based on competent, substantial evidence; therefore, the exception is denied.

       
       

   15. Health Quest takes exception to finding of fact 77. The finding is based on competent, substantial evidence; therefore, the exception is denied.

       
       

   16. Health Quest takes exception to finding of fact 81 regarding its room rates. The Hearing Officer's finding may be based on an inference from the low implementation cost of Health Quest's proposal. The exception is denied.

       
       

   17. Health Quest takes exception to finding of fact 83 to the extent that it does not find that the approval of Health Quest's application will enhance competition in Sarasota County. The finding is based on competent, substantial evidence; therefore, the exception is denied.

       
       

   18. Health Quest takes exception to finding of fact 84. See the ruling on exception number one.

       
       

   19. Health Quest takes exception to all portions of conclusion of Law E adverse to its proposal. The factual findings are supported by competent, substantial evidence. The exception is denied.

       
       

   20. In exceptions 20 through 23 Health Quest excepts to all rulings of the Hearing Officer rejecting or modifying Health Quest's proposed findings of fact. The Hearing Officer properly ruled on Health Quest's proposed findings; therefore, the exceptions are denied.

RULING ON EXCEPTIONS FILED BY SARASOTA HEALTHCARE, LTD. (SHL)

1. SHL takes exception to finding of fact number 16, to the extent that this finding questions the financial feasibility of SHL's proposal. The finding is based on competent, substantial evidence; therefore, the exception is denied.

   
   

2. SHL takes exception to finding of fact number 16, to the extent that the finding finds the SHL financial statements lacking in credibility. The department lacks authority to reweigh the evidence; therefore, the exception is denied.

   
   

3. SHL takes exception to finding of fact number 30, last sentence. The finding is based on competent, substantial evidence; therefore, the exception is denied.

4. SHL takes exception to finding of fact number 33, last sentence. SHL cites no law which would preclude a minor modification during the licensure process; therefore, the exception is denied.

   
   

5. SHL takes exception to finding of fact number 34, last sentence. The finding is based on competent, substantial evidence; therefore, the exception is denied.

   
   

6. SHL takes exception to finding of fact no. 53, last sentence. The finding is based on competent, substantial evidence; therefore, the exception is denied.

   
   

7. SHL takes exception to finding of fact number 57, first sentence regarding a need for subacute and restorative care in Sarasota County. The finding is based on competent, substantial evidence; therefore, the exception is denied.

   
   

8. SHL takes exception to finding of fact number 54 regarding medicaid utilization at Pinebrook Place. The finding is based on competent, substantial evidence; therefore, the exception is denied.

   
   

9. SHL takes exception to finding of fact number 58 that there is currently no Catholic sponsored nursing homes in Sarasota County. The finding is supported by the record and is relevant to the issue of competition. The exception is denied.

   
   

10. SHL takes exception to finding of fact number 60 regarding Bon Secour's proposed affiliation with the University of Miami. The finding is based on competent, substantial evidence; therefore, the exception is denied.

    
    

11. SHL takes exception to finding of fact number 63 regarding minor modifications during the licensure process. SHL cites no law which would preclude a minor modification during the licensure process; therefore, the exception is denied.

    
    

12. SHL takes exception to finding of fact number 63, second to the last sentence. The finding is based on competent, substantial evidence; therefore, the exception is denied.

    
    

13. SHL takes exception to finding of fact number 71, second and third sentence. The finding is based on competent, substantial evidence; therefore, the exception is denied.

    
    

14. This exception to finding of fact number 73. This exception reiterates SHL exception number one. The exception is denied.

    
    

15. SHL takes exception to finding of fact number 84 regarding Bon Secours. The finding is based on competent, substantial evidence; therefore, the exception is denied.

    
    

16. SHL excepts at length to the conclusions of law stated in the Recommended Order. These exceptions are denied.

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 hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order.

Based upon the foregoing, it is

ADJUDGED, that the applications for certificates of need by Health Care and Retirement Corporation of America and Sisters of Bon Secours, numbered 5049 and 5039 respectively be approved. It is further adjudged that the applications of Manor Care, Inc., Sarasota Healthcare, Ltd., and Health Quest, numbered 5050, 5025, and 5046 respectively be denied.

DONE and ORDERED this 20th day of October, 1988, in Tallahassee, Florida.

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services

by Assistant Secretary for Programs

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

Copies furnished to:

W. David Watkins, Esquire Steven W. Huss, Esquire Harry F. X. Purnell, Esquire Attorney at Law

OERTEL & HOFFMAN, P.A. 1017 Thomasville Road Post Office Box 6507 Suite C

Tallahassee, FL 22314-6507 Tallahassee, FL 32303

Donald Conn, Hearing Officer Alfred W. Clark, Esquire DOAH, The Oakland Building 1725 Mahan Drive, Suite 300 2009 Apalachee Parkway Post Office Box 623 Tallahassee, FL 32299-1550 Tallahassee, FL 32308

Richard Patterson, Esquire INFORMATION COPIES: Assistant General Counsel

Department of Health and Theodore Mack, Esquire Rehabilitative Services Assistant General Counsel

2727 Mahan Drive Department of Health and Fort Knox Executive Center Rehabilitative Services Tallahassee, Florida 32308 2727 Mahan Drive

Fort Knox Executive Center Bryon B. Mathews, Jr., Esq. Tallahassee, Florida 32308 Vicki Gordon Kaufman, Esquire

700 Brickell Avenue FALR

Miami, Florida 33131-2802 Post Office Box 385

Gainesville, Florida 32602

Donna H. Stinson, Esquire

MOYLE, FLANIGAN, KATZ, Juanita Powell (PDDR) FITZGERALD & SHEEHAN, P.A.

The Perkins House - Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 25th day of October, 1988.

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

================================================================= DISTRICT COURT OPINION

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

IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

MANOR CARE, INC. (Sarasota), NOT FINAL UNTIL TIME EXPIRES and HEALTH QUEST CORP., TO FILE REHEARING MOTION ANDY

DISPOSITION THEREOF IF FILED

Appellants, CASE NOS. 88-2900 vs. 88-2921

DOAH CASE NO. 87-3471

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Appellee.

/ Opinion filed October 3, 1989.

An Appeal from an Order of the Department of Health and Rehabilitative Services.

Donna H. Stinson, of Moyle, Flanigan, Katz, Fitzgerald & Sheehan, Tallahassee, for appellant Manor Care; Steven W. Huss, Tallahassee, for appellant Health Quest.

Richard A. Patterson, Assistant General Counsel, HRS, for appellee.

WENTWORTH, J.

Appellants seek review of an administrative order denying their applications for a community nursing home certificate of need (CON). We find that the revised application of appellant Manor Care, Inc. was properly rejected as containing impermissible amendments. We also find that the application of appellant Health Quest Corporation was properly rejected upon a determination that it was incomplete, and that there were other permissible reasons for the denial of Health Quest's application. We therefore affirm the order appealed.

Appellants Manor Care and Health Quest, along with several other health care providers, filed competing applications for CONs for community nursing home beds. Manor Care and Health Quest each initially sought to construct additional facilities at existing care centers. Appellee Department of Health and Rehabilitative Services (HRS) advised Health Quest by letter that its application contained certain omissions. Health Quest responded by providing additional information, also noting that:

. . . we are amending this application so that it will entail a conversion of . . . existing . . . sheltered beds to community beds, plus an addition of . . . more community beds in existing space.

HRS subsequently published a "Notice of Completeness" listing various applications, including those of Manor Care and Health Quest as "deemed . . . complete for a batch review.

HRS thereafter reviewed the batched applications, and expressed an intent to deny the applications of Manor Care and Health Quest and award CONS to two competing applicants. Manor Care and Health Quest, along with certain other applicants, then requested an administrative hearing.

Manor Care submitted what it denominated as "updates" to its application, and at the hearing proceeded upon this revised application. Manor Care's initial application was based upon a facility design containing three beds per room, while the revised application design contained two beds per room. This change was accompanied by an increase in square footage, and an altered Medicaid commitment. After the various parties presented evidence, including the testimony of numerous witnesses addressing the criteria for comparative review, the hearing officer entered a recommended order. Determining that Manor Care's revised application was more than a mere updating," and was intended to overcome criticism expressed in HRS' initial review, the hearing officer concluded that Manor Care was attempting a "substantial change" in its application, constituting an "impermissible and unauthorized amendment" which could not be considered. Noting that evidence was not submitted in support of Manor Care's original application, the hearing officer recommended that it be denied.

As to the application of Health Quest, the hearing officer acknowledged that HRS had deemed its. amended application to be complete" for a batch review and had considered it accordingly. However, the hearing officer found that the amended Health Quest application lacked certain required information including a detailed statement of financial feasibility, a detailed description of the amended project, an assessment of need in relation to the applicable health system plan, and an analysis of the probable impact on costs. Concluding that the evidence did not support HRS' determination of completeness, the hearing officer recommended that Health Quest's amended application be denied as incomplete.

Despite these recommendations, the hearing officer detailed his consideration of the merits of all applications. Manor Care was ranked as the third most deserving applicant and based upon bed need computations the hearing officer suggested that Manor Care's revised application should be approved if HRS disagrees with the conclusion as to the impermissibility of Manor Care's revisions to its application. With regard to the merits of Health Quest's application, the hearing officer ranked it last and found it to be the most deficient among the competing applications, recommending that even if HRS should disagree with the conclusion that it is incomplete, the application should still be denied.

The various parties filed exceptions to the hearing officer's recommended- order. HRS submitted an exception to the conclusion that Manor Care's application should be denied because of the impermissible revisions. HRS maintained that although this was an improper amendment, the irregularity had been waived. Health Quest contested this exception, suggesting that HRS' position would violate the rights of the competing applicants. HRS entered a final order accepting Health Quest's argument and denying the HRS exception.

The final order also denied Manor Care's assertion that HRS should be estopped in this regard. The order details HRS' rulings as to numerous other exceptions submitted by the various parties, and adopted and incorporated the findings of

fact and conclusions of law contained in the hearing officer's recommended order. HRS accordingly approved the two CON applications which the hearing officer recommended, and denied the other applications including those of Manor Care and Health Quest.

The opinion in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986), indicates that strict adherence to rules precluding the amendment of completed applications is essential to the integrity of the batching concept for comparative review. Rule 10-5.010(2)(b), F.A.C., provides that after an application is "deemed complete .

. . no further application information or amendment will be accepted. "

HRS has interpreted its rules, in light of Gulf Court, as precluding the amendment of a completed application after initial agency review, except upon a change of circumstances beyond the applicant's control. See e.g., Good Samaritan Health Systems Inc. v. Department of Health and Rehabilitative Services, 9 FALR 2343, at 2365 (May 5, 1987). HRS adopted a similar approach in Health Care & Retirement Corporation of America v. Department of Health and Rehabilitative Services, 8 FALR 4650 (September 24, 1986). That decision was reversed on appeal in Health Care & Retirement Corporation v. Department of Health and Rehabilitative Services, 516 So.2d 292 (Fla. 1st DCA 1987), where the court emphasized that Gulf Court did not address the amendment of an application upon exceptional circumstances or prohibit the presentation of updated current information. In Health Care the court further indicated that the amended application involved in that case contained only an insignificant "new element" and had been recognized by HRS as "within the general scope" of the original application.

The changes which Manor Care sought to make in its application altered the basic design of the facility from three- bed rooms to two-bed rooms, with a corresponding increase in square footage of over 20 percent. While minor refinements to an application have been allowed in cases such as Health Care, supra, and Palms Residential Treatment Center Inc. v. Department of Health and Rehabilitative Services, 10 FALR 1425 (February 15, 1988), HRS has continued to maintain that as to matters within an applicant's control significant changes to a completed application are not permitted. See Charter Medical- Orange County Inc. v. Department of Health and Rehabilitative Services, 11 FALR 1087 (February 2, 1989). This approach is consistent with the plain language of Rule 10- 5.010(2)(b), which effectively ensures that all completed applications proceed through the review process on an equal basis. Even though HRS may have initially been willing to waive the strict requirements of Rule 10-5.010(2)(b), the presence of other competing applicants precludes any waiver or estoppel in the circumstances of this case. HRS was thus entitled to reject Manor Care's purported revisions as impermissible amendments to a completed application.

With regard to Health Quest's application as amended after HRS' initial request for additional information, the ensuing determination of completeness was revisited by the hearing officer and HRS after the administrative hearing. As Gulf Court acknowledges, comparative CON review under section 120.57, Florida Statutes, may be afforded only as to completed applications- but the hearing officer is not limited to consideration of the record made by HRS during its preliminary action. Section 381.494(4), Florida Statutes (1985), which is applicable in the present case, details the necessary contents of a CON application. The competing applicants are entitled to comparative review upon applications which satisfy these necessary minimum criteria. The hearing officer was thus entitled to consider the completeness of Health Quest's application in order to apply comparative review principles on an equal basis with the competing applicants.

Health Quest has not shown that it was prejudiced by surprise at the administrative hearing, or any other circumstance by which HRS may be estopped or deemed to have waived further review of the completeness issue. The presence of other competing applicants also precludes waiver or estoppel under the circumstances of this case. Due to our disposition in this regard we do not address the further determination below that Health Quest's application was the least deserving on the merits, as we conclude that it was properly rejected as incomplete.

The order appealed is affirmed.

ERVIN and ZEHMER, JJ., CONCUR.

Docket for Case No: 87-003471

Orders for Case No: 87-003471