STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
BEVERLY ENTERPRISES-FLORIDA, ) INC., d/b/a BEVERLY GULF )
COAST FLORIDA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 88-4586
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a final hearing was held in this case on November 3, 1988, in Tallahassee, Florida, before Jose A. Diez-Arguelles, a Hearing Officer with the Division of Administrative Hearings.
APPEARANCES
For Petitioner: Stephen K. Boone, Esquire
Boone, Boone, Klingbeil, and Boone, P.A. Stephen K. Boone, Esquire
1001 Avenida del Circle Venice, Florida 34284
For Respondent: Lesley Mendelson, Esquire
Assistant General Counsel Department of Health and
Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive
Tallahassee, Florida 32328 BACKGROUND
This proceeding began on July 14, 1988, when Petitioner, Beverly Enterprises-Florida, Inc., filed an application for expedited review of a transfer of a Certificate of Need (CON). By letter dated August 11, 1988, Respondent, the Department of Health and Rehabilitative Services (HRS) returned Petitioner's application because it determined that the application because it determined that the application was not subject to expedited review. Petitioner filed a timely Petition for Formal Administrative Hearing which was forwarded to the Division of Administrative Hearings for further proceedings.
On October 3, 1988, Petitioner filed a Motion to Toll Running of Period of Validity of CON to which HRS filed a response. By Order issued October 25, 1988, Petitioner's motion was denied.
The Order of October 25, 1988 also addressed the issues to be considered at hearing. During the course of conferences which had taken place, Respondent argued that the only issue for the hearing was whether Petitioner's application for transfer was subject to expedited review. Petitioner argued that the issue was whether the transfer should be approved and that all issues which needed to be considered to approve the transfer should be considered.
The Order agreed with Petitioner's argument and stated that "the overall issue at the hearing will be whether Petitioner's application for a transfer of a certificate of need should be approved."
On November 1, 1988, HRS filed a Motion to Strike and Motion for Reconsideration. The motion asked for reconsideration of the portion of the October 25, 1988 Order which stated that the issue in the case was whether the transfer should be approved. Also, the motion asked that paragraph B. of the prayer for relief contained in Petitioner's Petition for Hearing be stricken. The motion was denied at the beginning of the hearing.
Prior to the hearing, the parties filed a Prehearing Stipulation which contained certain agreed-to facts. The relevant stipulated facts are incorporated in the Findings of Fact section of this Recommended Order.
At the hearing, Petitioner presented the testimony of Ms. Sharon Gordon- Girvin and Mr. John McCoy (by late-filed deposition), and offered ten exhibits which were admitted into evidence. HRS also presented the testimony of Ms.
Sharon Gordon-Girvin and offered two exhibits which were admitted into evidence.
After the hearing, the parties filed Proposed Recommended Orders containing proposed findings of fact. The proposed findings of facts are addressed in the Appendix which is attached to this Recommended Order.
FINDINGS OF FACT
On November 17, 1987, Petitioner was awarded CON 3746 to construct a 60-bed addition to its existing facility, Suwannee Health Care Center, in Live Oak, Florida.
On July 14, 1988, Petitioner filed the application in the instant case. Petitioner proposes to transfer the 60 beds authorized by CON 3746 to Florida Land Trust Number Seven (the Land Trust).
The Land Trust is the owner of a 60-bed nursing home in Live Oak, Florida, called Surrey Place Nursing Center of Live Oak (Surrey Place). Surrey Place is operated by Health Care Associates (HCA), which is owned by the beneficiaries of the Land Trust.
The construction of Surrey Place was authorized by CON 3395 and Surrey Place opened in January, 1988. The application for CON 3395 was filed on July 16, 1984.
Petitioner's proposal is for the 60 beds to be constructed as a 60-bed addition to Surrey Place.
By letter dated August 11, 1988, HRS returned the application for expedited review of the transfer to Petitioner. The letter states that the proposal by Petitioner "is not merely a transfer of a CON, but rather an addition of beds to an existing facility which would change the scope and
operation of the existing nursing home. Therefore, the addition of beds requires a full batched review." Petitioner's Exhibit 3.
HRS did not review the application on its merits prior to issuing the August 11, 1988 letter.
Suwannee Health Care Center and Surrey Place are both located in the same planning subdistrict and are located within one-half mile of each other.
Transfer
It is HRS's policy that a "transfer" occurs only when a new owner agrees to take over a project and implement it exactly as originally approved. Also, it is HRS's policy that the transferee should be the applicant for a transfer.
In the past, however, HRS has accepted for review and approved transfers where the application was filed by the transferrer.
Also, HRS in the past has approved transfers which involved more than just a mere change of ownership. These transfers resulted in the combination of the beds approved by the CON to be transferred with the beds approved by other CONs with the end result being the construction of a larger nursing home facility than was contemplated under either CON.
Combination
During the 1988 Session of the Florida Legislature, Health Quest Corporation (Health Quest) advocated to the Legislature that certain legislation amending Chapter 381, Florida Statutes, be enacted. Health Quest drafted the proposed legislation and lobbied for its enactment.
Health Quest wanted the amendment because it had a CON for a 180-bed nursing home to be built in Sarasota County which it wanted to divide into a 120-bed freestanding facility and a 60-bed addition to an existing facility in Sarasota County.
During the 1988 Legislative Session, HRS and Health Quest entered into an Agreement. The entire Agreement provides that:
AGREEMENT
This Agreement is made between Health Quest Corporation ("Health Quest") and the Department of Health and Rehabilitative Services ("HRS") this 31st day of May, 1988.
RECITALS
Health Quest holds CON No. 3278 ("the CON") authorizing a 180-bed nursing home in Sarasota County.
Health Quest operates a 53-bed nursing home ("the Facility") adjacent to the Lake Pointe Woods retirement complex in Sarasota.
On September 29, 1987, Health Quest filed with HRS an application seeking expedited
review for its proposal to divide the CON into a 60-bed component and a 120-bed component.
As set forth in the application, the 60-bed component is for an addition to the Facility and the 120-bed component is for a freestanding facility. Since on or before September 4, 1987, it has been the Department's position that such division or consolidation could be accomplished only through batched comparative review.
Currently pending before the Division of Administrative Hearings ("DOAH") is a Section 120.57(1) petition filed by Health Quest contesting the refusal of HRS to review Health Quest's September 29, 1987 application as a project subject to expedited review.
The Florida Legislature is considering the enactment of the Affordable Health Care Assurance Act of 1988 ("the Act"). The Act would amend Section 381.706(2), Florida Statutes, to add subsections (j) and (k), providing for expedited review of applications to divide a single approved facility or to consolidate two or more approved certificates
of need into a single facility. The Act would also add Section 381.705(3) to limit the criteria for review of certain applications filed under Section 381.706(2)(j) or 381.706(2)(k) and would add Section 381.710(2)(d) providing for extension of the validity period of CONs for which applications under Section 381.706(2)(j) or 381.706(2)(k) are filed.
Contingent upon passage of the Act, HRS and Health Quest wish to settle the DOAH proceeding and other litigation involving the September 29, 1987 application to divide CON 3278.
TERMS
HRS acknowledges that an applicant would be entitled, under the Act, to expedited review of applications not only to divide or consolidate CONs but to do both at the same time, e.g., divide 60 beds from CON 3278 and consolidate these beds into the existing beds at the Facility now operated by Health Quest.
At such time as the Act becomes law and Health Quest files an application substantially similar to its September 29, 1987 application, HRS agrees that the validity period of CON 3278 shall, due to litigation involving the division and consolidation of CON 3278 commenced on February 17, 1988, be extended 168 days to January 17, 1989. This Agreement does not constitute a waiver on the
part of Health Quest of any right to additional extension of the validity period after August 2, 1988 if the Department fails to approve the application on or before said date.
Upon approval of the application, Health Quest shall dismiss the DOAH proceeding and the District Court of Appeals proceeding involving the division of CON 3278.
The Agreement was signed by J. Robert Griffin, M.A., J.D., HRS's Deputy Assistant Secretary for Regulation and Health Facilities, and Charles M. Loeser, Health Quest's Vice President and General Counsel.
The amendments referred to in the Agreement were enacted by the Legislature and are now codified in Sections 381.706(2)(j) and (k), 381.705(3) and 381.710(2)(d), Florida Statutes (1988 Supp.).
On July 1, 1988, Health Quest submitted to HRS a second application for expedited review of its proposal to divide 60 beds from a 180-bed CON and add the 60 beds to an existing 53-bed facility which it owned.
HRS reviewed the application using the review criteria set forth in Section 381.705(3), Florida Statutes (1988 Supp.), approved it, and issued CON 5655 on August 5, 1988.
Notwithstanding the passage of the 1988 Amendments, the Agreement, and the issuance of CON 5655, HRS's interpretation of Section 381.706, Florida Statutes (1988 Supp.), is that the addition of beds to an existing facility requires full comparative batched review and, therefore, cannot be approved by expedited review.
HRS interprets the provisions of Section 381.706(2)(j) as requiring that at least two CONs be in existence at the time of the proposed combination. In HRS's view two CONs can only exist if the two facilities approved by the CONs have not been built, since it is HRS's policy that a CON ceases to exist when a license is issued for the facility to begin operation.
Review Criteria
The proposed addition of 60 beds to Surrey Place is financially feasible.
The Land Trust and its principals have the financial resources to complete the project and are capable of developing and managing the project.
The Land Trust and its principals have previous experience successfully operating nursing homes in Florida and have a history of providing quality care.
Surrey Place was built with the expectation that it would eventually consist of 120 beds. Except for the addition of the 60 beds, the scope and operation of Surrey Place will not change.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes.
Petitioner, being the applicant for a certificate of need, has the burden of proving its entitlement to the certificate. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985); Florida Department of Transportation v. J.W.C. Company, 396 So.2d 778 (Fla. 1st DCA 1981).
Scope Of The Proceeding
This proceeding deals with an application by Petitioner for expedited review and approval of its proposal to transfer a 60-bed CON for an addition to an existing facility it owns to another entity which will construct the 60-beds as an addition to its existing facility. HRS refused to grant expedited review because it did not consider the proposal to be a "transfer" under the relevant statutory provisions.
Prior to the hearing, an issue arose concerning the scope of the hearing. HRS argued, and still argues, that this proceeding is limited to the issue of whether expedited review should be granted. Petitioner argued that the issue was not only whether expedited review should be granted but whether the application should be approved. The Prehearing Order issued on October 25, 1988, states that the issue in this case is whether the application should be approved. HRS, however, chose not to present any evidence addressing the review criteria. Petitioner, however, did so, and this Recommended Order is based on all the evidence presented at the hearing.
Applicable Statutory Authority
The following provisions of Sections 351.705, .706 and .710, Florida Statutes (1988 Supp.), are applicable to this proceeding:
Review criteria.--
The department shall determine the reviewability of applications and shall review applications for certificate-of-need determinations for health care facilities and services, hospices, and health maintenance organization in context with the following criteria:
(3) For any application authorized by s.381.706(2)(j) or (k) involving an approved facility based on a certificate-of-need application filed prior to December 31, 1984, the department shall approve such application unless the proposed consolidation or division would result in a facility or facilities not meeting the criterion of financial feasibility or unless the consolidation or division would result in beds or services being moved more than 15 miles from their original certificated location.
Projects subject to review.--
APPLICABILITY.-Unless exempt pursuant to subsection (3), all health-care-related projects, as described in paragraphs (a)-(n), shall be subject to review and shall file an application for a certificate-of-need with the department. The department is exclusively responsible for determining whether a health-care-related project is subject to review under ss.381.701-381.715.
The addition of beds by new construction or alteration.
(e) Any change in licensed bed capacity.
PROJECTS SUBJECT TO EXPEDITED REVIEW. Unless exempt pursuant to subsection (3), projects subject to an expedited review shall include, but not be limited to:
(g) A transfer of a certificate of need.
(j) Combination within one nursing home facility of the beds or services authorized by two or more certificates of need issued in the same planning subdistrict.
381.710 Conditions and monitoring.-- (2)(d) If an application is filed to
consolidate two or more certificates as authorized by s.381.706(2)(j) or to divide a certificate of need into two or more facilities as authorized by s.381.706(2)(k), the validity period of the certificate or certificates of need to be consolidated or divided shall be extended for the period beginning upon submission of the application and ending when final agency action and any appeal from such action has been concluded. However, no such suspension shall be effected if the application is withdrawn by the applicant.
Discussion
Petitioner's application should be approved through expedited review, if it can show that its project is a "transfer" and a "combination" as those terms are used in Section 381.706, Florida Statutes (1988 Supp.), and if it can show that it meets the review criteria applicable to transfers and combinations.
HRS's Policy
HRS argues that Petitioner's proposal is not a "transfer" or "combination", and, therefore, the proposal is not subject to expedited review.
HRS's interpretation of the provisions of Section 381.706 Florida Statutes (1988 Supp.), is based on its belief that, if a project is listed in subsection (1) of the section, the project is subject to full batched comparative review. From this interpretation follows its interpretation of what transactions are proper "transfers" and "combinations". Since additions of beds and changes in licensed bed capacity are projects listed in subsection (1), then
HRS interprets "transfers" and "combinations" to be projects other than those, which add beds to an existing facility.
HRS's policy is that "transfers" occur only when a change in ownership occurs and the new owner agrees to undertake the project exactly as originally approved. In this case, HRS argues that the approved project is a 60-bed addition to Petitioner's facility and, since the proposal would result in a 60- bed addition to another facility, it is not the exact project as originally approved.
HRS interprets the provisions of subsection 381.706 (2)(j), Florida Statutes, as allowing only for the combination of CONs whose validity period has not expired. Since HRS's policy is that CON ceases to exist when a facility is built and licensed, then, in HRS's view, Petitioner's proposal is not a "combination," since only one CON is valid.
Discussion
For the reasons set forth below, HRS's interpretation of the statutes and the policies flowing from that interpretation are not persuasive.
For HRS's interpretation that any project listed in Sections 381.706(1)(a) or (e), Florida Statutes (1988 Supp.), requires full comparative batched review to be correct, the provisions of subsections (1), (2) and (3) of Section 381.706, Florida Statutes (1988 Supp.), would have to be mutually exclusive. That is, if a project is listed in subjection (1), it is not also listed in subsections (2) or (3). A reading of Section 381.706, Florida Statutes, however, reveals that the subsections are not mutually exclusive. Subsection (1) lists all the projects which are subject to review. Subsections
(2) and (3) list which of the projects listed in subsection (1) are subject to expedited review or are exempt from review, as the case may be. Once this interpretation of section 381.706, Florida Statutes, is accepted, the determination of what is a proper "transfer" or "combination", can be made.
The word "transfer" is not defined in Sections 381.701 - 381.715, Florida Statutes. HRS has defined "transfer of a certificate of need" to mean "an act which conveys possession or control of the certificate of need from one holder to another. A holder is defined as the entity to which the certificate of need is issued." Rule 10-5.002(42), Florida Administrative Code. Additionally, HRS's policy is that the transferee has to undertake and carry out the project as originally approved. A strict interpretation of this policy would mean that Petitioner's proposal is not a "transfer," since it calls for the beds to be added to a different facility than as originally approved. This strict interpretation, however, would conflict with HRS's past actions. In the past, HRS has approved the transfer of a CON for a freestanding facility which will be added to beds approved by a different CON, therefore ending up with a facility much larger than was contemplated under either CON. It is difficult to see the difference between the addition of beds to an existing facility and the addition of beds to a facility yet to be built.
In this case the proposal is for the transfer of a 60-bed CON for an addition to a 60-bed existing facility to the owner of an existing 60-bed facility to which the 60 beds will be added. The project is the same as originally approved, except for the owner. Therefore, it is a "transfer".
HRS interprets Section 381.706(2)(j), Florida Statutes (1988 Supp.), as requiring, at a minimum, the existence of two valid CONs for there to be a
"combination." Since HRS's policy is that a CON expires when a facility is built and licensed, HRS argues that, in this case, no "combination" is possible because only one valid CON exists. HRS's policy and interpretation are unpersuasive, for at least three reasons.
First, the policy that a CON expires when a facility is built and licensed does not appear to be based on the statutes. Section 381.710(2), Florida Statutes (1988 Supp.), sets forth the termination periods for CONs in situations where the applicant has not commenced construction or has not incurred expenditures. No mention is made of a termination date when the applicant commences construction and is meeting the construction timetable. Also, Section 381.710(1), Florida Statutes (1988 Supp.), allows HRS to condition the award of a CON on the applicant's complying with certain conditions in the future and provides for HRS to fine the certificateholder if it fails to comply with the conditions set forth in the certificate. If, as HRS argues, the CON no longer exists, it is difficult to see how the fine will be imposed.
Second, even if a CON ceases to exist upon construction and licensure as HRS argues, Section 381.706(2)(j), Florida Statutes (1988 Supp.) does not require that the CONs be valid. The section provides for "combination within one nursing home facility of the beds or services authorized by two or more (CONs). . .." In this case, the beds to be combined were authorized by two CONs.
Finally, the agreement entered into by HRS and Health Quest during the 1988 Session of the Florida Legislature is persuasive evidence of what the proper interpretation of Section 381.706(2)(j), Florida Statutes (1988 Supp.), should be. At the hearing, the HRS witness testified that the language contained in the statute may be different than the language HRS had before it when it entered into the agreement. HRS, however, offered no competent evidence to show that the language changed. In any event, whether the language changed or not is irrelevant in view of HRS's approval of Health Quest's application to do exactly what Petitioner proposes to do here (with the exception that here a transfer is also involved). HRS has offered no competent evidence to show why Petitioner should be treated differently than Health Quest.
Based on the foregoing, Petitioner's proposal is for a "transfer" and a "combination" and is subject to expedited review. If Petitioner's proposal did not involve a change of ownership it would fall under the provisions of Section 381.705(3), Florida Statutes (1988 Supp.) and the application would be approved, since the proposal is financially feasible and meets the distance requirements set forth in that section. However, since the application involves a transfer of ownership, Petitioner must also meet the review criteria for a "transfer." HRS's policy for reviewing transfers is to concentrate on the transferee's capability to complete the project. Therefore, HRS looks at the financial resources of the transferee, the transferee's capability to develop and manage the project, the transferee's capability to provide quality care, the transferee's previous experience with similar or like projects, and other applicable statutory review criteria, except need. In this case, the transferee has demonstrated that it meets all these criteria and Petitioner's application should be approved.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue a Final Order approving Petitioner's application.
DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Leon County, Florida.
JOSE DIEZ-ARGUELLES
Hearing Officer
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
FILED with the Clerk of the Division of Administrative Hearings this 14th day of March, 1989.
APPENDIX
Rulings on Petitioner's Proposed Findings of Fact
1.-10. Accepted. Some of these proposed findings of fact are subordinate to facts found.
11. Irrelevant.
12.-27. Accepted. Some of the proposed findings of fact are subordinate to facts found.
28.-30. Accepted, except to the extent they imply that the approval was for the addition of beds to an existing facility.
31-34. Rejected as irrelevant; what final action HRS would have taken is unknown.
Irrelevant.
True but irrelevant; HRS is free to change its policy if it can explicate it at hearing.
37.-39. Accepted.
40.-42. Accepted, except last sentence of 42 which is rejected.
The Careage transfer was for an addition of beds to a facility not yet built.
43.-47. Rejected as irrelevant. 48-54. Accepted.
55.-59. Accepted.
60.-61. Accepted, but the policy manual describes HRS's past unwritten policy.
62. Rejected as argument.
Rulings on HRS'S Proposed Findings of Fact
Accepted.
Accepted, but subordinate to facts found.
Accepted. However, there is sufficient evidence to conclude that the Land Trust through its trustee and beneficiaries will be able to fund the project.
Accepted.
5.-6. Accepted that this is HRS's policy and interpretation of the statutes. However, see Conclusions of Law.
Accepted.
Accepted that this is HRS's basis for its interpretation. However, in this case, the competitive environment is not changed.
Rejected. The Department was directed to issue the CON because there was need in the area and not because of the uniqueness of the facility.
First sentence accepted to the extent that Petitioner did not specifically mention Section 351.706 in its application. However, by the time of hearing the applicability of the statute was not in question and an issue in the case was whether the proposal met the language of the statute. Rest of paragraph accepted as HRS's policy.
11.-14. Accepted as HRS's policy.
True, but irrelevant.
Rejected as argument.
Irrelevant, since no final action on the merits was taken.
Accepted that this is HRS's policy, but see Conclusions of Law.
Accepted that this is HRS's current policy. However, HRS has in the recent past accepted and approved transfer applications filed by the transferee.
First two sentences accepted. Last sentence rejected; HRS knew enough to enter into the agreement and failed to present any evidence that what it knew then somehow changed.
Accepted.
Rejected as irrelevant and argument.
Rejected as argument.
COPIES FURNISHED:
Boone, Boone, Klingbeil and Boone, P.A. Stephen K. Boone, Esquire
1001 Avenida del Circle Venice, Florida 34284
Lesley Mendelson, Esquire Assistant General Counsel Department of Health and
Rehabilitative Services 2727 Mahan Drive
Tallahassee, Florida 32308
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
R. S. Power, Agency Clerk Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
BEVERLY ENTERPRISES-FLORIDA INC., d/b/a BEVERLY GULF COAST FLORIDA, INC.,
Petitioner, CASE NO.: 88-4586 CON NO.: 5655
vs.
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,
Respondent.
/
FINAL ORDER
This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.
FINDINGS OF FACT
The department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except for findings 20 through 23 which are rejected as irrelevant to the disposition of this case. The agency decision challenged by Beverly is the rejection, without consideration of its merits, of its application for expedited review of its proposal to transfer CON 3746. 1/ Over the department's objection, the Hearing Officer expanded the scope of the Section 120.57 proceeding to include not only the issue of whether Beverly's proposal was entitled to expedited review, but also the merits of Beverly's proposal.
A Section 120.57 proceeding is provided by law for the review of an agency's initial, free-form decision. 2/ In other words, there can be no
120.57 proceeding until there is an initial decision by the agency. Thus, the Hearing Officer in this case should have rendered a Recommended Order on whether Beverly was entitled to expedited review of its proposal and then returned the
case to the department. The Hearing Officer's decision to review the merits of Beverly's proposal does not comply with the essential requirements of law 3/ and is the basis for my conclusion that findings of 20 through 23 are irrelevant. The complete record was reviewed in reaching this decision.
CONCLUSIONS OF LAW
The department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the conclusions of law stated in this Final Order.
The issue is whether Beverly's proposal to transfer certificate of need 3746 to an unrelated entity, Surrey Place, and for the 60 beds authorized in CON 3746 to be added to Surrey Place's existing nursing home, is subject to expedited review or batched comparative review. Beverly maintains it is entitled to expedited review.
A CON applicant will in general prefer "expedited review" 4/ over batched comparative review 5/ because under the latter its proposal must compete with the proposals of other health care providers. In the typical situation of limited bed need, only the best applications will be approved after batched comparative review.
It is clear that the interest of public and health planning is better served by batched comparative review. Thus, the statutory provisions authorizing expedited review and exemptions should be strictly construed. Batched comparative review is presumptively favored.
Beverly's proposal is more than a simple transfer of a CON because if approved in expedited review, the beds will be added to a facility other than the facility which has already been approved after comparative batched review.
A proposal to transfer a CON entitled to expedited review under section 381.706(2)(g), Florida Statutes (1987), is a proposal to transfer the CON to a new owner who will complete the project which was approved after bathed comparative review. Because Beverly proposes more than a change of ownership, its proposal is not entitled to expedited review under Section 381.706(2)(g), Florida Statutes (1987). The addition of beds to Surrey Place is a new project and should only be considered in batched comparative review. Neither is Beverly's proposal entitled to expedited review under Section 381.706(2)(j), Florida Statutes (1988 Supp.), which authorizes expedited review of applications proposing the "combination within one nursing home facility of the beds or services authorized by two or more certificates of need issued in the same planning subdistrict." Beverly is not proposing the combination of two or more CONs rather, it is proposing to increase the number of licensed beds at Surrey Place, by adding the beds authorized in CON 3746. A CON authorizes a health care facility. When the authorized facility is built and licensed the CON expires. Expedited review under Section 381.706(2)(j), Florida Statutes (1988 Supp.) is proper only for proposals to combine two or more CONs. The proposal to add beds to Surrey Place, an existing nursing home should only be considered in batched comparative review.
One factor considered by the Hearing Officer in concluding that Beverly's proposal was entitled to expedited review was a settlement entered into by the department and Health Quest on May 31, 1988. See finding of fact number 14 and the last paragraph of the conclusions of law on page 15.
While a state agency may not arbitrarily disregard its past decisions, it is not required to blindly follow precedent. For the reasons expressed in this Order, I conclude that henceforth Section 381.706(2)(g), Florida Statutes (1987), and Section 381.706(2)(j), Florida Statutes (1988 Supp.) authorizing expedited review should be interpreted consistently with the conclusions reached in this Final Order.
Based upon the foregoing, it is
ADJUDGED, that Beverly's CON application 5655 for expedited review of its proposal to transfer CON 3746 to Surrey Place be DENIED.
DONE and ORDERED this 16th day of May 1989, in Tallahassee, Florida.
Gregory L. Coler Secretary
Department of Health and Rehabilitative Services
by Deputy Secretary for Programs
ENDNOTES
1/ See finding of fact numbers 2, 6, and 7.
2/ See Capeletti Brothers vs. Department of Transportation, 362 So.2d 246 (Fla. 1st DCA 1978), Graham vs. Department of General Services, 363 So.2d 810 (Fla.
1st DCA 1978), Krestview Nursing Home vs. HRS, 381 So.2d 240 (Fla. 1st DCA 1979), Dickerson vs. Rose, 398 So.2d 922 (Fla. 1st DCA 1981).
3/ Section 120.57(1)(b)10, Florida Statutes (1987).
4/ Defined in Section 381.702(6), Florida Statutes (1987). 5/ Defined in Section 381.709, Florida Statutes (1987).
COPIES FURNISHED TO:
STEPHEN K. BOONE, ESQUIRE BOONE, BOONE, KLINGBEIL
& BOONE, P.A.
POST OFFICE BOX 1596 VENICE, FLORIDA 34284
LESLEY MENDELSON, ESQUIRE ASSISTANT GENERAL COUNSEL DEPARTMENT OF HEALTH AND
REHABILITATIVE SERVICES 2727 MAHAN DRIVE
FORT KNOX EXECUTIVE CENTER TALLAHASSEE, FLORIDA 32308
JOSE A. DIEZ-ARGUELLES HEARING OFFICER
DIVISION OF ADMINISTRATIVE HEARINGS THE DESOTO BUILDING
1230 APALACHEE PARKWAY
TALLAHASSEE, FLORIDA 32399-1550
FALR
POST OFFICE BOX 385 GAINESVILLE, FLORIDA 32602
JANIE BLOCK (PDDR)
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 18th day of May, 1989.
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
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.
FO5/10/89
================================================================= DISTRICT COURT OPINION
=================================================================
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
BEVERLY ENTERPRISES-FLORIDA NOT FINAL UNTIL TIME EXPIRES TO INC., d/b/a BEVERLY-GULF FILE MOTION FOR REHEARING AND COAST FLORIDA, INC. DISPOSITION THEREOF IF FILED.
Appellant, DCA CASE NO.: 89-1569 DOAH CSAE NO.: 88-4586
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,
Appellee.
/ Opinion filed December 14, 1990.
An Appeal from a final order of the Department of Health and Rehabilitative Services. Stephen K. Boone of Boone, Boone, Klingbeil, Boone & Roberts, P.A., Venice for Appellant. Lesley Mendelson, Senior Attorney for the Department of Health and Rehabilitative Services, Tallahassee, for Appellee.
SMITH, J.
Beverly Enterprises-Florida, Inc. (Beverly) was awarded Certificate of Need (CON) number 3746 to construct a 60-bed addition to its existing facility, Suwannee Health Care Center, in Live Oak, Florida. Thereafter, Beverly filed an application for expedited review of its proposal to transfer the 60 beds authorized by CON 3746 to Florida Land Trust Number Seven, to be constructed as a 60-bed addition to the Land Trust's nursing home, Surrey Place Nursing Center of Live Oak, also located in Live Oak. The Department of Health and Rehabilitative Services (HRS) determined that this proposal was not merely a transfer of a CON which could be accomplished by expedited review, but was instead an addition of beds to an existing facility, which requires a full batched comparative review. We reverse.
Section 381.706(1), Florida Statutes (Supp. 1988), lists all the health- care-related projects which are subject to review and includes among them in paragraphs (a) and (e), those projects that add beds by new construction or alteration, or make any change in licensed bed capacity. Section 381.706(2) provides for expedited review of those projects involving, among other things, a transfer of a CON or a combination within one nursing home facility of the beds or services authorized by two or more CONs issued in the same planning subdistrict. 38l.706(2)(g) and (j), Fla. Stat. (Supp. 1988). Section 381.705(3) provides that for any application authorized by section 38l.706(2)(j) or (k) involving an approved facility based upon a CON application filed prior to December 31, 1984, HRS shall approve such application unless (1) the proposed consolidation or division would result in a facility or facilities not meeting
the criterion of financial feasibility or (2) unless the consolidation or division would result in beds or services being moved more than 15 miles from their original certificated location. 1/ The review criteria of section 381.705(3) is very abbreviated compared to the review criteria set forth in section 381.705(1) applying to other CON projects Surrey Place's application for a CON was filed on July 16, 1984.
According to findings made by the hearing officer, which are not challenged on appeal, sections 381.705(3) and 381.706(2)(j) and (k) were added to the statutes by the 1988 Legislature in response to lobbying efforts by Health Quest Corporation. See Ch. 88-294, 20 and 21, Laws of Fla. According to the findings, Health Quest sought the amendment because it had a CON for a 180-bed nursing home to be built in Sarasota County, and it desired expedited review of its application to divide the 180 bed CON into a 120-bed freestanding facility and a 60-bed addition to an existing facility in Sarasota County. Ultimately, HRS agreed that under these amendments, Health Quest would be entitled to expedited review of applications, not only to divide or combine CONs, but to do both at the same time; thus, Health Quest could divide its 120-bed CON and take
60 beds and add them to an existing facility operated by Health Quest.
Similarly, it was Beverly's contention that its proposal was subject to expedited review because its project was a "transfer" and/or "combination" as those terms are used in section 381.706(2)(g) and (j). When HRS disagreed, Beverly requested a formal administrative hearing, arguing that its application meets the applicable criteria and should be granted. Beverly further contended that HRS arbitrarily and capriciously denied its application while granting others which are substantially similar to Beverly's proposal.
In response, HRS argued that it had a policy that a "transfer" occurs only when a new owner agrees to take over the project and build the facility as intended by the original CON applicant. HRS interpreted section 381.706 to mean that if a project is listed in subsection (1) of that section, the project is subject to full batched review and cannot be given expedited review as provided for in section 381.706(2). Since additions of beds and changes in licensed bed capacity are projects listed in subsection (1) then HRS interpreted a "transfer" or "combination" to be projects other than those which add beds to an existing facility. Also, HRS interpreted the provisions of section 381.706(2)(j), as allowing only for the combination of CONs whose validity period has not expired. It was HRS's policy that a CON ceased to exist when a facility is built and licensed. Thus, reasoned HRS, Beverly's proposal was not a "combination" because since Surrey Place's CON ceased to exist when Surrey Place was opened in 1988 only CON 3746 was valid.
The hearing officer rejected HRS's interpretation of the applicable statutes, commenting that there is no support for HRS's contention that subsections (1), (2) and (3) of section 381.706 are mutually exclusive, and that inclusion in one subsection means automatic exclusion from the other subsections. Instead, concluded the hearing officer, subsection (1) lists all the projects which are subject to review, and subsections (2) and (3) list which of the projects set forth in subsection (1) are subject to expedited review or are exempt from review. This conclusion is supported by the fact that although section 381.706(1) specifically includes a transfer of a CON in paragraph (n), this paragraph clearly provides that expedited review--as opposed to full batched comparative review--shall be conducted of a transfer of a certificate of need. Moreover, the hearing officer concluded that HRS's two announced
policies--that a "transfer" is a mere change of ownership, and that a CON ceases to exist when a facility is built and licensed--had no record support. Finally,
the hearing officer noted that HRS's position in this case is contrary to the position taken by HRS in previous cases, most notably, the Health Quest application already discussed, and that HRS had offered no competent evidence to show why Beverly should be treated differently than Health Quest. Finding that Beverly's application sought a "transfer" and/or a "combination" subject to expedited review, and that Beverly's proposal met the review criteria, the hearing officer recommended that HRS issue a final order approving the application.
Nevertheless, contrary to the hearing officer's recommended order, HRS entered a final order concluding that Beverly's proposal to transfer its 60-bed CON to Surrey Place, was subject to batched comparative review rather than expedited review. We find this was error.
As this court recently stated in St. Francis Hospital. Inc. v. Department of Health and Rehabilitative Services, 553 So.2d 1351, 1354 (Fla. 1st DCA 1989):
When an agency seeks to validate agency action based upon a policy that is not recorded in rules or discoverable precedents, that policy must be established by expert testimony, documentary opinions, or other evidence appropriate to the nature of the issues involved and the agency must expose and elucidate its reasons for its discretionary action. E.M. Watkins & Co. v. Board of Regents, 414 So.2d 583, 588 (Fla.
1st DCA 1982), citing Florida Cities Water Co. v. Public Service Company, 384 So.2d 1280 (Fla. 1980), Anheuser-Busch, Inc. v.
Department of Business Regulations, 393 So.2d 1177 (Fla. 1st DCA 1981), and McDonald v.
Department of Banking & Finance, 346 So.2d
569 (Fla. 1st DCA 1977). Compare Meridian. Inc. v. Department of Health and Rehabilitative Services, 548 So.2d 1169 (Fla. 1st DCA 1989)(policy recorded in discoverable precedents). The agency may apply incipient or developing policy in a section 120.57 administrative hearing, provided the agency explicates, supports and defends such policy with competent, substantial evidence on the record in such proceedings. Gulf Coast Home Health Services v. Department of Health and Rehabilitative Services, 513 So.2d 704 (Fla. 1st DCA 1987).
We recognize that an agency interpretation of a statute which simply reiterates the legislature's statutory mandate and does not
place upon the statute an interpretation that is not readily apparent from its literal reading, nor in and of itself purport to create rights, or require compliance, or to otherwise have the direct and consistent effect of the law, is not an unpromulgated rule, and actions based upon such an
interpretation are permissible without requiring an agency to go through rule- making. However, in this case, HRS's policy does not simply reiterate a legislative mandate and is not readily apparent from a literal reading of the statutes involved and thus, HRS was required to show the reasonableness and factual accuracy of its policy.
In this case, HRS changed its interpretation of the controlling statutes without offering a sufficient record predicate or otherwise offering a reasonable explanation for its abandonment of its announced interpretation of sections 381.706(2)(j) and (k) and section 381.705(3). See St. Francis Hospital, 553 So.2d at 1354; see also, Health Care and Retirement Corporation of America, Inc. v. Department of Health and Rehabilitative Services, 559 So.2d 665 (Fla. 1st DCA 1990); and HCA Gulf Coast Hospital v. Department of Health and Rehabilitative Services, 10 F.A.L.R. 2807, 2809 (Fla. Dept. of Health and Rehabilitative Services 1988).
Beverly's CON was approved based on the need in the district, not on a facility-specific need; and as argued by Beverly, this need will be equally satisfied by the addition of 60 beds to Surrey Place. HRS offers no valid reason why this is not true, but simply urges that batched comparative review is preferable to permitting expedited review in this instance.
Finally, HRS urges that if this court determines that Beverly is entitled to expedited review, the proper remedy in this case is to remand to HRS for review of the application on an expedited basis. Resolution of this issue requires a brief recitation of the procedural steps taken in this case.
Immediately after Beverly requested a formal administrative hearing on HRS's decision to deny expedited review, a question arose as to the scope of the administrative hearing. HRS sought to confine the issue to be determined to whether Beverly's application for transfer was subject to expedited review. If it was determined that expedited review applies, HRS argued that it would then evaluate the merits of the application. On the other hand, Beverly argued that the issue should be whether the transfer should be approved, and that all the issues which needed to be considered for approval should be considered at the hearing. The hearing officer agreed that HRS's refusal to consider the application was tantamount to a denial of the transfer. Thus, this being a de novo proceeding intended to formulate agency action, the hearing officer reasoned it would be more appropriate and economical to deal with all the issues considering Beverly's application at one time rather than having the possibility of two hearings being held on this one application. We agree.
A request for a formal administrative hearing commences a de novo proceeding intended to formulate agency action, and not to review action taken earlier or preliminarily. Florida Department of Transportation v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). The CON review process is not designed to be piecemeal; rather, it is a unified process. HRS urges that there should be two acts of final agency action in this case: (1) the decision on whether or not to grant expedited review, and (2) a decision on whether the proposal meets the financial feasibility requirements of section 381.705(3). HRS offers no rationale for this two-tier review process and we can discern none.
At the hearing below, HRS was given the opportunity to be heard and to present evidence regarding the financial feasibility of Beverly's proposal. HRS chose not to present any evidence, and based upon the uncontradicted evidence presented by Beverly, the hearing officer found that Beverly's proposal was financially feasible. The hearing officer's findings in this regard are supported by competent, substantial evidence. Accordingly, HRS erroneously rejected these findings of fact, section 120.57(1)(b)10.
REVERSED and REMANDED for entry of an order consistent with this opinion.
NIMMONS and ALLEN, JJ., CONCUR.
ENDNOTE
1/ For convenience, the applicable statutory provisions are reproduced here: 381.705 Review criteria.--
The department shall determine the
reviewability of applications and shall review applications for certificate-of-need determinations for health care facilities and services, hospices, and health maintenance organizations in context with the following criteria:
(3) For any application authorized by s. 381.706(2)(j) or (k) involving an approved facility based on a certificate-of-need application filed prior to December 31, 1984, the department shall approve such application unless the proposed consolidation or division would result in a facility or facilities not meeting the criterion of financial feasibility or unless the consolidation or division would result in beds or services being moved more than IS miles from their original certificated location.
381.706 Projects subject to review.--
APPLICABILITY.--Unless exempt pursuant to subsection (3), all health-care-related projects, as described in paragraphs (a)-(n), shall be subject to review and shall file an application for a certificate of need with the department. The department is exclusively responsible for determining whether a health-care-related project is subject to review under ss. 381.701-381.715.
The addition of beds by new construction or alteration.
(e) Any change in licensed bed capacity.
PROJECTS SUBJECT TO EXPEDITED REVIEW. Unless exempt pursuant to subsection (3), projects subject to an expedited review shall include, but not be limited to:
(g) A transfer of a certificate of need.
(j) Combination within one nursing home facility of the beds or services authorized by two or more certificates of need issued in the same planning subdistrict.
EXEMPTIONS.--Upon request, supported by such documentation as the department may require, the department shall grant an exemption from the provisions of subsection
For any project which is specifically mandated by the Legislature to be undertaken by a specific provider and for which capital financing is funded by the Legislature.
For any expenditure by or on behalf of a health care facility for any part of the physical plant which is not to be directly utilized for providing health services or housing health care providers. This exemption shall apply to expenditures for parking facilities, meeting rooms, cafeterias, administrative data processing facilities, research buildings, landscaping, and similar projects, but shall not apply to expenditures for office facilities for health care providers.
For any expenditure to eliminate or prevent safety hazards as defined by federal,- state, or local codes.
For any expenditure to replace any part of a facility or equipment which is destroyed as a result of fire, civil
disturbance, or storm or any other act of God.
For any expenditure to acquire major medical equipment which is a substantially identical replacement for existing equipment being taken out of service.
For the initiation or expansion of obstetric services after July 1, 1988.
For any expenditure to replace or renovate any part of a licensed nursing facility, provided that the number of licensed beds will not increase and, in the case of a replacement facility, the project
site is the same as the facility being replaced.
For providing respite care services. "Respite care" means short-term care in a licensed health care facility which is personal or custodial in nature and is provided by reason of chronic illness, physical infirmity, or advanced age for the purpose of temporarily relieving family members of the burden of providing care and attendance in the home. In providing respite care, the health care facility shall become the primary care giver. An individual may be admitted to a respite care program in a hospital without regard to inpatient
requirements relating to admitting order and attendance of a member of a medical staff.
381.710 Conditions and monitoring.-- (2)(d) If an application is filed to
consolidate two or more certificates as authorized by S. 38l.706(2)(j) or to divide a certificate of need into two or more facilities as authorized by S. 381.706(2)(k), the validity period of the certificate or certificates of need to be consolidated or divided shall be extended for the period beginning upon submission of the application and ending when final agency action and any appeal from such action has been concluded.
However, no such suspension shall be effected
if the application is withdrawn by the applicant.
| Issue Date | Proceedings |
|---|---|
| Mar. 14, 1989 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Dec. 14, 1990 | Opinion | |
| May 16, 1989 | Agency Final Order | |
| Mar. 14, 1989 | Recommended Order | CON approval recommended. Petitioner met statutory criteria for expedited review. |
