STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OCALA HEALTHCARE ASSOCIATES, )

)

Petitioner, )

)

vs. ) CASE NO. 89-0103

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was held in Tallahassee, Florida on March 16, 1989, in the above-styled proceeding before P. Michael Ruff, duly designated Hearing Officer.

APPEARANCES

For Petitioner: R. Bruce McKibben, Jr.,

DEMPSEY AND GOLDSMITH

Post Office Box 10651 Tallahassee, Florida 32302

For Respondent: Richard H. Patterson,

Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32308 BACKGROUND

This cause involves a rejection of a certificate of need application for nursing home beds by the Department of Health and Rehabilitative Services (HRS) on the grounds that "the applicant submitting the application was not the same as the applicant identified in the letter of intent." The Department had received a letter of intent (LOI) dated October 21, 1988 from the Petitioner regarding its intent to seek a certificate of need for 25 community home nursing beds for Marion County, Florida. An application therefor was received on November 23, 1988 by the Department. That application was rejected for review because the applicant entity named in the application was Ocala Health Care Associates General Partnership whereas the indicated applicant in the letter of intent was Ocala Health Care Associates Joint Venture. The Department took the position, then as well as in the de novo hearing, that the application indicated that a different entity was applying for the certificate of need than had been indicated, and publicly noticed, through the letter of intent process and that therefore the application should be rejected because of that inconsistency with the letter of intent. In effect, the Department takes the position that the applicant has failed to provide a minimum requirement specified by the

Department on its application form with the result that the application " ... shall not be accepted by the Department." See Rule 10-5.008(1)(d), Florida Administrative Code.

The cause thus became at issue and proceeded to hearing on that basis. The Petitioner presented its evidence at the final hearing through witness Winston

1. Porter, the owner of the applicant's parent corporation Healthcare Concepts, Inc. The Petitioner also offered six exhibits, all of which were admitted into evidence. The Respondent, Department, presented its evidence through the testimony of witness Sharon A. Gordon-Girvin and presented two exhibits which were admitted into evidence. The issues are as stated above. The parties obtained a transcript of the proceeding and availed themselves of the right to file proposed findings of fact and conclusions of law in the formal proposed recommended orders. Pursuant to motion and agreement of the parties an extension on the filing date of the pleadings was granted by Order of April 10, 1989 such that the proposed recommended orders were timely filed on April 17, 1989. They have been considered in this Recommended Order and are treated again in the Appendix attached hereto and incorporated by reference herein.

   
   

   FINDINGS OF FACT

   
   

   1. The Department of Health and Rehabilitative Services (HRS) received a letter of intent (LOI) dated October 21, 1988 from "Ocala Healthcare Associates Joint Venture." That letter of intent provided that the proposed applicant sought to add twenty-five community nursing home beds to its 35 bed facility then under construction, in HRS District 3 in Marion County, Florida. The letter of intent was a prerequisite to filing an application for a certificate of need (CON) authorizing those beds. The October 21, 1988 LOI was accompanied by a "certificate of resolution" of Ocala Healthcare Associates Joint Venture of even date. That resolution was certified by Winston A. Porter.

      
      

   2. HRS generally does not recognize a joint venture as a legal person or entity capable of applying for and holding a certificate of need, based upon an opinion of its legal counsel and based upon the fact that Chapter 10-5 Florida Administrative Code, at its definition of "applicant" does not include the entity known as a "joint venture." There is no specific prohibition, by statute or rule, against joint ventures holding certificates of need, however, and the Department's witness, Ms. Gordon-Girven also acknowledged that the Department has no specific policy prohibiting issuance of a CON to a joint venture.

      
      

   3. In any event, on November 23, 1988, "Ocala Healthcare Associates General Partnership" filed an application for a certificate of need pursuant to the previously filed letter of intent. In its letter of December 2, 1988, HRS rejected that application on the basis that "the applicant submitting the application was not the same as the applicant identified in the letter of intent." Upon learning of this, Mr. Winston A. Porter, the owner of the parent entity and chief operating officer of the applicant entity, or general partner, immediately notified HRS that the joint venture named in the letter of intent and the general partnership named in the application were actually one and the same entity and that the use of the term "joint venture" in the letter of intent and resolution was a mere clerical error. In corroboration of this position, in fact, Ocala Healthcare Associates general Partnership (Ocala) had already altered its form from a joint venture to a general partnership by way of "an amendment and conversion of Ocala Healthcare Associates Joint Venture to General Partnership Agreement" entered into and dated December 10, 1987. That conversion agreement had been done at the behest of HRS, based upon its advice to Mr. Porter and Ocala Healthcare Associates, Inc. that the Department did not

      recognize joint ventures as capable of holding certificates of need. It was thus done to comply with HRS' own requirements. HRS does not license joint ventures to operate nursing homes but does license general partnerships for that purpose.

      
      

   4. The minimum requirements for the certificate of need application require that the legal name of the applicant and parent corporation be given. Rule 10-5.008(1)(d), Florida Administrative Code quoted below, contains no specific "minimum requirements" regarding how the name of an applicant should be listed on an application nor that it should agree or be the same in all cases as that depicted on the letter of intent. The Rule merely incorporates the application form as to "minimum requirements" by reference. The form, in turn, requires only that the applicant's name be entered, not that the name be the same as that on the letter of intent. Ocala, on its certificate of need application listed its legal name just as it truly is, that is, Ocala Healthcare Associate General Partnership. It, of course, had listed its name by mistake, on the letter of intent as "Ocala Healthcare Associates, Joint Venture." The CON application, however, also indicated that the current general partnership, Ocala Healthcare Associates General Partnership, was indeed the same entity as the former joint venture. Further, HRS was on constructive and actual notice of the change in business form undergone by Ocala at HRS' behest in December, 1987.

      
      

   5. Be that as it may, however, no rule or policy of the Department specifically states that an application for a CON and the related letter of intent must be filed by exactly the same entity. In fact, however, here the evidence shows that the letter of intent and the application were actually filed by the same entity. The controlling and owning members or partners of Ocala Healthcare Associates General Partnership were listed in the letter of intent, even though it was mistakenly called a joint venture, and were also listed in the application. They were named as, and are, one and the same entities.

      
      

   6. Further, the minimum requirements depicted in the application form say nothing about the applicant's name and the name depicted in the letter of intent being identical. HRS' position that the letter of intent and the application be identical or filed by the same entity is designed to put potential competitors on notice of who the new attempted market entrant is. Here that purpose was accomplished anyway. Ocala never attempted to mislead anyone by its filing of the letter of intent under the "joint venture" name. The joint venture is owned and controlled by the same entities as the general partnership and the component parts of the joint venture and general partnership are identical. Further, HRS personnel involved with this matter were on notice, both constructively and actually, that the joint venture had been dispensed with and the general partnership had supplanted it. Finally, the agency was not prohibited from notifying Ocala of the apparent discrepancy in the names depicted on the letter of intent and on the application, but it took no such action, even though its certificate of need review personnel were on actual notice that Ocala had altered its business form from that of joint venture to general partnership.

      CONCLUSIONS OF LAW

      
      

   7. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes (1987).

      
      

   8. Rule 10-5.008(1)(d), Florida Administrative Code provides:

      
      

      (d) Certificate of need applications submission. An application for certificate of need shall be submitted on HRS form 1455,

      August 1985, incorporated by reference herein, and shall be provided by the office of regulation and health facilities upon request. An application shall not be deemed complete by the department unless all information requested by the Department and provided for in the application form has been submitted on the form by the applicant. An application submitted to the office of Regulation and health facilities on a incorrect form, or which omits the minimum requirements specified by the department on the application form, and does not include documentation that the notice of filing has been published in a newspaper of general circulation in the applicable district or subdistrict affected by the proposal on the form specified in paragraphs (1) and (c) of this rule, shall not be accepted by the department.

      
      

   9. The certificate of need application submitted by Ocala Healthcare Associates General Partnership in fact does contain the minimum requirements specified by the department in the above rule and in the application form 1455 that the rule incorporates by reference. There was a valid, timely, letter of intent which was accepted by the Department. There was the required Board resolution and proof of publication. The proof of publication followed the format and provided the information contained in paragraphs (1) and (c) of the above-referenced rule. The applicant, in the letter of intent, merely mistakenly used the joint venture name on the letter, the resolution and the proof of publication. As required by paragraphs (1) and (c), however, the proof of publication contained the names of the entities with "controlling interest in the applicant" which entities were also listed in the application as the controlling entities. Thus, the notice requirement as to competitors, the department and all the world was complied with because any person viewing the application and the letter of intent could see that the same controlling business entities were involved. Further, the proof at hearing shows that HRS was on actual and constructive notice that the joint venture had been dispensed with and that Ocala Healthcare Associates was a general partnership and that the general partnership had been substituted by appropriate business agreement for the former joint venture.

      
      

   10. The Department takes the position, apparently, that an applicant cannot rehabilitate its CON application during a Section 120.57(1) proceeding in order to remedy defects which rendered the application unreviewable and improper, in this instance for allegedly failing to contain the minimum requirements. That position is incorrect. Firstly, these proceedings are de

       novo proceedings at which a party whose substantial interests are affected by proposed or intended agency action has the opportunity to protect those interests by putting on evidence to show that the proposed action is incorrect or prejudicial to its substantial interests or that some other action is appropriate. This proceeding does not involve simply a review of the HRS' "freeform" decision. Rather the agency's intended action has at law, been halted by the filing of this formal proceeding and this proceeding is designed to take evidence find facts and conclude law in order to recommend an appropriate course of action for the agency to take, whether it be the agency's originally intended action or some other course. Here, if the department's own rules state that it has no discretion but to reject an application if the minimum requirements are not contained therein and the failure to contain the minimum requirements is proven, then indeed the application should properly be rejected for review. Here, however, in this de novo proceeding, the applicant certainly has the right to present evidence to show that that rule mandate is not applicable because the minimum requirements were indeed contained in the application. Here, that proof has been established and indeed the minimum requirements were met.

       
       

   11. The applicant established that the department knew that the joint venture entity had been changed to the general partnership and that the joint venture name had, due to haste in meeting the filing deadline for the letter of intent, been placed in the letter of intent with its accompanying resolution and proof of publication by pure mistake or clerical error. More importantly, however, there is no statute or rule which states that the letter of intent and the application have to be identical in these particulars. Rather, the minimum requirements of the application have to be met and the name in the application was the appropriate name of Ocala Healthcare Associates General Partnership.

       The application also indicated directly that the same entities referenced in the letter of intent as having the controlling interest in the applicant were the ones having the controlling interest in the Ocala Healthcare Associates General Partnership. Thus the true name of the applicant was properly placed in the application in compliance with the minimum requirements in that regard and, by showing that the controlling entities were the same, the proof of publication and resolution required to accompany the letter of intent were shown to be in agreement and related to the same applicant entity referenced in the application.

       
       

   12. Further, there is no evidence before this Hearing Officer that the proof of publication and the board resolution has to be included in the application as a "minimum requirement." In fact, the only germane "minimum requirement" contained in the application form the Hearing Officer finds, under the only logically applicable heading of "identification of principal parties," is the category for the name and address of the applicant, its authorized representative, the facility or project name, its chief executive officer and address, as well as the health planning area or subdistrict. The application certainly contains the correct name of Ocala Healthcare Associates General Partnership and so that minimum requirement has been met. No statute or rule has been cited, as mentioned above, which requires that the letter of intent and application be in agreement. Further, as found above, to the extent that HRS may have a policy to that effect, the "joint venture" name on the letter of intent, the board resolution and proof of publication was adequately explained by the fact that the same controlling interest entities were indicated in the published notice as were indicated in the application and so the purpose of the policy, to alert all potential competitors, the department and other interested persons, has been served.

   13. Finally, aside from the fact that the minimum requirement has been met, the proof shows that the department personnel involved with this applicant historically, and as to the current pending application and its processing, were aware that the joint venture name had been supplanted and that the business entity had been amended to that of a general partnership. Thus, the rejection of this application based upon the use of the joint venture terminology in the LOI documents, when a careful reading of those items, together with the application, reveals that the applicant entities are really the same, would amount to the elevation of form over substance to the level of absurdity.

       
       

   14. The department has cited a number of cases where it has repeatedly rejected certificate of need applications for failure to meet the minimum requirements specified by the department. Here, however, the proof establishes that the minimum requirements were met and so such cases are inapplicable and rejection should not result.

       
       

   15. In summary, it has been established that the letter of intent was timely filed, giving Ocala the right to file its CON application in the November, 1988 batching cycle, which it did. The rejection of that application was improper because the general partnership which filed it is the same entity, in reality, which filed the letter of intent and the department was on notice that it was the same. The joint venture had already legally altered its form to that of a general partnership prior to filing the letter of intent and the department was aware of that. Despite actual knowledge of the fact that the joint venture no longer existed, but was rather changed to the general partnership (and related name) and despite there being no prohibition against its contacting the applicant, the involved department personnel did not attempt to contact Ocala about the apparent discrepancy before rejecting its application. Finally, Ocala's substantial interests are affected in this proceeding because the rejection of its application precludes it from competing for the fixed pool of nursing home beds in the November 1988 batching cycle.

RECOMMENDATION

Having considered the foregoing findings of fact and conclusions of law, the evidence of record and the candor and demeanor of the witnesses, it is therefore,

RECOMMENDED that a Final Order be entered accepting Ocala's application for a certificate of need for comparative review with other applicants in the November 1988 batching cycle.

DONE AND ORDERED this 2nd day of June, 1989, in Tallahassee, Leon County, Florida.

P. MICHAEL RUFF Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 1989.

APPENDIX

Petitioner's Proposed Findings of Fact: Paragraph 1: Accepted.

Paragraphs 2-16: Accepted.

Respondent's Proposed Findings of Fact: Paragraph 1: Accepted.

Paragraph 2: Accepted.

Paragraph 3: Accepted.

Paragraph 4: Accepted.

Paragraph 5: Accepted.

Paragraph 6: Accepted.

Paragraph 7: Rejected as contrary to the preponderant weight of the evidence and as subordinate to the hearing officers findings of fact on this subject matter.

Paragraph 8: Rejected as to its' material import and as contrary to the preponderant evidence and subordinate to the hearing officers findings of fact.

Paragraph 9: Rejected as not material to resolution of the narrow range of issues in this proceeding.

COPIES FURNISHED:

R. Bruce McKibben, Jr., DEMPSEY AND GOLDSMITH Post Office Box 10651 Tallahassee, FL 32302

Richard H. Patterson, Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive

Tallahassee, FL 32308

Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Docket for Case No: 89-000103

Orders for Case No: 89-000103