STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NATIONAL HEALTHCORP, L.P., )

)

Petitioner, )

)

vs. ) CASE No. 88-4080RU

) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William R. Cave, held a public hearing in the above- styled case, on August 31, 1988, at Tallahassee, Florida.

APPEARANCES

For Petitioner: Gerald B. Sternstein, Esquire

Darrell White, Esquire McFarlain, Sternstein, Wiley & Cassedy

Post Office Box 2174 Tallahassee, Florida 32316-2174

For Respondent: Theodore E. Mack, Esquire

Assistant General Counsel Department of Health and Rehabilitative services Regulation & Health Facilities 2727 Mahan Drive

Tallahassee, Florida 32308

By a Petition to Invalidate Agency Non-Rule Policy, dated August 24, 1988, Petitioner, National Healthcorp, L.P., contends that the unpromulgated policy of the Respondent, Department of Health and Rehabilitative Service to reject a Certificate of Need (CON) application without further review when the CON application specifies capital expenditures in excess of the proposed capital expenditures specified in the letter of intent is a rule and invalid by reason of not being properly promulgated as a rule.

This petition was filed pursuant to Section 120.56, Florida Statutes, and consolidated for the purpose of formal hearing with National Healthcorp, L.P. v. Department of Health and Rehabilitative Services, Case No. 88-3490.

In support of its contention, Petitioner presented the testimony of Bruce Duncan, Amy Jones, Sharon Gordon-Girvin and Gene Nelson. Petitioner's Exhibits

1 through 18 were received into evidence. Respondent presented the testimony of

Sharon Gordon-Girvin. Respondent's Exhibits 1 through 4 were received into evidence.

The parties submitted post-hearing Proposed Findings of Fact and Conclusions of Law. A ruling on each proposed Finding of Fact has been made as reflected in the Appendix to this Final Order.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. On May 12, 1988, Petitioner, in accordance with Section 381.709(2), Florida Statutes, and Rule 10-5.008, Florida Administrative Code, timely filed four separate letters of intent (LOIs) reflecting its intent to file applications for certificates of need (CONs) for the development of nursing homes in Lee, Flagler/Volusia, Gadsden and Bay Counties.

   
   

2. The LOIs set forth the following "proposed capital expenditure" in accordance with Section 381.709(2)(c), Florida Statutes:

   
   

   Lee County	$3,800,000.00
   Flagler/Volusia County	$4,600,000.00
   Gadsden County	$3,800,000.00
   Bay County	$3,800,000.00

   
   

3. As required by Section 381.709, Florida Statutes, each of the LOIs contained a resolution by Petitioner's board of directors authorizing and approving the filing of a CON Application for the Project, and the expenditure of such funds as are necessary to accomplish the project anticipated for the CON and within the cost guidelines specifically indicated in the CON.

   
   

4. On June 1, 1988, Petitioned timely filed its CON application on each of the proposed projects in the prescribed format with Respondent for the four counties in question. In the documentation filed on June 1, 1988, Petitioner indicated the following "needed capital expenditures" for the proposed projects:

   
   

   Lee County		$4,369,206.00
   Flagler/Volusia	Counties	$5,165,930.00
   Gadsden County		$4,002,500.00
   Bay County		$4,005,000.00

   
   

   The CON applications were mailed on May 31, 1988 by "UPS Overnight Mail" and received by Respondent on June 1, 1988.

   
   

5. By letter dated May 25, 1988, signed by Amy Jones and received by Petitioner June 1, 1988, after the mailing of the CON applications, Respondent informed Petitioner that its CON applications would not be accepted and would be returned without further review "if the proposed project costs [needed capital expenditures] in the application exceeds the proposed project costs [proposed capital expenditures] set forth in your letter of intent." This policy would apply to a CON application regardless of the excess, even one dollar.

   
   

6. It is clear from the record that the letter of May 25, 1988 is the first time the Respondent had expressed its "policy", either verbally or written, concerning the summary rejection of CON applications without further

   review where the CON "needed capital expenditures" set forth in a application exceed the "proposed capital expenditures" set forth in the LOI.

   
   

7. A letter similar to Amy Jones letter dated May 25, 1988, which set forth the Respondent's "policy" in regard to summarily rejecting a CON application where the "needed capital expenditure" set forth in the CON application where the exceeds the "proposed capital expenditure" set forth in the LOI, was mailed to all CON applicants and is generally applicable to all CON applicants.

   
   

8. Petitioner learned of the Respondent's policy too late to submit timely conforming CON applications.

   
   

9. On June 3, 1988, Petitioner filed documents with Respondent to reflect changes in "needed capital expenditure" of the four CON applicants to conform with the Respondent's "policy."

   
   

10. By letter dated June 9, 1988, Respondent rejected Petitioner's application on the basis that the "proposed capital expenditures" set forth in the LOIs were exceeded by the "needed capital expenditures" set forth in the CON applications.

    
    

11. The board resolution referred to in Section 381.709(2)(c), Florida Statutes, that is required to be filed with the LOI is the same board resolution referred to in Section 381.707(4), Florida Statutes that is required to be filed with the CON application.

    
    

12. The proposed costs of the project must be shown in the public notification of the applicant's intent to file a CON application, pursuant to Rule 10-5.008(1)(c), Florida Administrative Code.

    
    

13. There is currently no statute or rule which specifically prohibits the "needed capital expenditures" in the CON application from exceeding the "proposed capital expenditures" in the LOI. Likewise, there is no statutory or rule requirement that the Respondent summarily reject a CON application where the "needed capital expenditures" in the CON application exceed the "proposed capital expenditures" in the LOI.

    
    

14. Although a copy of the pertinent statutes and rules are enclosed with the packet of materials furnished to a CON applicant, there is no mention of the Respondent's "policy" in this information package.

    
    

15. The Respondent's "policy" concerning the summary rejection of a CON application when the "needed capital expenditures" set forth in the CON application exceeds the "proposed capital expenditure" set forth in the LOI implements, interprets, and prescribes law and policy and is generally applicable to all CON applicants but has not beers promulgated as a rule.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings pursuant to Section

    120.56 Florida Statutes.

    
    

17. Section 381.707, Florida Statutes, establishes the content requirement for a CON application that is to be filed with the Respondent. Pertinent to this case, that section provides:

    Application content - An application for a certificate of need shall contain:

    * * *

    (2) A statement of the financial resources needed by and available to the applicant to accomplish the proposed project. This statement shall include:

    * * *

    (b) A detailed listing of the needed capital expenditures, including sources of funds.

    * * *

    (4) A certified copy of a resolution by the

    board of directors of the applicant... authorizing the filing of the application; authorizing the applicant to incur the expenditures necessary to accomplish the proposed project; certifying that if issued a certificate, the applicant shall accomplish the proposed project within the time allowed by law and at or below the costs contained in the appli- cation....

    
    

18. Rule 10-5.008(5), Florida Administrative Code, provides that the "application for certificate of need shall meet the content requirement in section 381.707, F.S. "

    
    

19. Section 381.709, Florida Statutes, establishes the process for certificate of need review. Pertinent to this case, that section provides:

    
    

    Review process. - The review process for certificates of need shall be as follows:

    * * *

    1. LETTERS OF INTENT. -

       (a) At least 30 days prior to filing an application, a letter of intent shall be filed by the applicant with the local health council and the department respecting the development of a proposal subject to review (e.s.)

       * * *

       (c) Letters of intent shall describe the proposal with specificity, including proposed

       capital expenditures... The letter of intent shall contain a certified copy of resolution by the

       board of directors of the applicant. authorizing

       the filing of the application described in the letter of intent... certifying that if issued a certificate, the applicant shall accomplish the the proposed project within the time allowed by law and at or below the costs contained in the application.

       * * *

    2. APPLICATION PROCESSING. -

       1. An applicant shall file an application

    with the department, and shall furnish a copy of the application to the local health council and the department. Within 15 days after the applicable application deadline established by

    department rule, the staff of the department shall determine if the application is complete. If the application is incomplete, the staff shall request specific information from the applicant necessary for the application to be complete; however, the staff may make only one such request. If the requested information is not filed with the department within 21 days of the receipt of the staff's request, the application shall be deemed withdrawn from consideration. (e.s.)

    
    

20. Respondent's "policy" described in finding of fact #5 above requires an interpretation, referred to as an "understanding" by the Respondent, of the above statutory language that: (a) the "proposed capital expenditures" in the LOI must be described with specificity, not that the LOI shall describe the proposal with specificity; (b) the LOI is an essential part of the application and, therefore, the "proposed capital expenditures in the LOI must be identical to the "needed capital expenditures" in the application; (c) since the board certification in the LOI is the same as the board certification in the application, the certification "at or below the costs contained in the application" means at or below the "proposed capital expenditures" in the LOI and; (d) the publication of the proposed costs of the project set out in the LOI as required by Rule 10-5.008(1)(c), Florida Administrative Code, would not allow an upward adjustment of the proposed costs [needed capital expenditures] in the application since the purpose of the publication is to put other potential applicants on notice and allowing such an upward adjustment would not only defeat the purpose of the publication but would be unfair to competing applicants. Using this interpretation, the Respondent rejects and returns the application without making any further determination as to completeness and, without allowing the applicant any opportunity to make any corrections or additions as seems to be required by Section 381.709(3)(a), Florida Statutes.

    
    

21. That "policy" is a "rule", based upon the plain reading of Section 120.52(16), Florida Statutes, which defines a "rule" to mean "each agency statement of general applicability that implements, interprets, or prescribes law or policy..."

    
    

22. Respondent's failure to promulgate its policy as a rule is not fatal to its application of that policy on a case by case basis. Agencies are given the choice of properly promulgating policies as rules and applying them with the force and effect of law, or of fully explicating those policies and exposing them to challenge every time they are applied in an adjudicatory procedure. McDonald v. Department of Banking and Finance, 346 So.2d 569 (1st DCA Fla. 1977); Gulf Coast Home Health Service of Florida Inc. v. Department of Health and Rehabilitative Services, 513 So.2d 704 (1st DCA Fla. 1987). The opportunity for exposure and challenge to the policy is available in a Section 120.57(1), Florida Statutes, proceeding, in lieu of the Section 120.54, Florida Statutes, rule-making process.

    
    

23. This is what transpired in the Section 120.57(1), Florida Statutes, challenge to that policy by National Healthcorp, L. P. v. Department of Health and Rehabilitative Services, Case No. 88-3490.

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that Respondent, Department of Health and Rehabilitative Services'

policy regarding the summary rejection of a CON application without further

review where the "needed capital expenditures" [project costs] set out in the application exceed the "proposed capital expenditures set out in the LOI is invalid as a rule for failure to promulgate pursuant to Section 120.54, Florida Statutes.

DONE and ORDERED this 4th day of January, 1989, at Tallahassee, Florida.

WILLIAM R. CAVE

Hearing Officer

Division of Administrative Hearings The Oakland Building

2900 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 4th day of January, 1989.

APPENDIX TO FINAL ORDER IN CASE No. 88-4080RU

The following constitutes my specific rulings pursuant

to Section 120.59(2), Florida Statutes, on the proposed Findings of Fact submitted by the parties in this case.

Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, NATIONAL HELTHCORP, L.P.

1. Adopted in Findings of Fact 1, 2 and 4.

2. Adopted in Findings of act 5 and 6.

3. Adopted in Findings of Fact 6 and 9.

4. Adopted in Findings of Fact 6, 13, and 14.

5. Adopted in Finding of Fact 15.

6. The first two sentences are rejected as being a restatement of Respondent's assertions or conclusions and are not a finding of fact. The balance of proposed Finding of Fact 6 IS adopted in Findings of Fact 7 and 15.

Specific Rulings on Proposed Findings of Fact Submitted by, Respondent, DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES.

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 2.

3. Adopted in Finding of Fact 3.

4. Adopted in Finding of Fact 4.

5. Adopted in Finding of Fact 10.

6. Adopted in Findings of Fact stand 6.

7. The applicability to all applicants of the May 25, 1988 letter is adopted in Finding of Fact 7. The balance of Finding of Fact 7 is rejected as being unsupported by competent, substantial evidence in the record.

8. Adopted in Finding of Fact 11.

9. Adopted in Findings of Fact 11 and 12.

COPIES FURNISHED:

Gerald B. Sternstein, Esquire Darrell White, Esquire

McFarlain, Sternstein, Wiley & Cassedy Post Office Box 2174

Tallahassee, Florida 32316-2174

Theodore E. Mack, Esquire Assistant General Counsel

Department of Health and Rehabilitative Services

Regulation and Health Facilities 2727 Mahan Drive

Tallahassee, Florida 32308

Liz Cloud, Chief

Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32399-1300

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

(904) 488-7721

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED, TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 88-004080RU

Orders for Case No: 88-004080RU