STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

INVERNESS HEALTH CARE, )

a limited partnership, )

)

Petitioner, )

)

vs. ) CASE NO. 90-0043

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES; ) JOHN A. McCOY, FLORIDA SNF TRUST; ) and STARKE NURSING HOME, INC., )

)

Respondents. )

) SUWANNE HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 90-0045

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES; ) REGENCY HEALTH CARE CENTER, INC.; ) JOHN A. McCOY, FLORIDA SNF TRUST; ) and STARKE NURSING HOME, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Following the provision of notice a formal hearing was held in these cases in Tallahassee, Florida, on March 7 and 8, May 10, 11, 24 and 25 and June 11, 1990. Authority for the conduct of the hearing is set forth in Section 120.57(1), Florida Statutes. Charles C. Adams was the Hearing Officer.

APPEARANCES

For Inverness Health Care, a limited partnership (Inverness): Elizabeth McArthur, Esquire

Jeffrey Frehn, Esquire

Aurell, Radey, Hinkle and Thomas

101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302

For Suwanne Hospital, Inc. (Suwannee):

W. David Watkins, Esquire

Oertel, Hoffman, Fernaadez and Cole, P.A. Post Office Box 6507

2700 Blair Stone Road Tallahasee, Florida 32314-6507

For State of Florida, Department of Health and Rehabilitative Services (HRS):

Leslie Mendelson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, Florida 32308

For John A. McCoy, Florida SNF Trust (McCoy): James C. Hauser, Esquire

F. Phillip Blank, Esquire

R. Terry Rigsby, Esquire Julie Gallagher, Esquire

F. Philip Blank, P.A.

204-B South Monroe Street Tallahassee, Florida 32301

For Starke Nursing Home, Inc. (Starke):

Grafton B. Wilson, II, Esquire 711 North 23rd Avenue, Suite 4 Post Office Box 1292 Gainesville, Florida 32602

For Regency Health Care Centers, Inc. (Regency):

R. Bruce McKibben, Esquire Dempsey and Goldsmith, P.A.

307 West Park Avenue Tallahassee, Florida 32301

STATEMENT OF ISSUES

The issues under consideration are those associated with applications filed by the aforementioned private parties seeking certificates of need for skilled nursing home beds based on a fixed need pool of May, 1989, which identified 261 beds for the January, 1992 planning horizon. The beds are available in HRS District III. The applications are for: CON Action No. 5987 Inverness--20 beds; CON Action No. 5912 Suwannee--60 beds; CON Action No. 5913 McCoy-- 60 beds; CON Action No. 5962 Starke--120 or 60 beds; and CON Action N. 5905 Regency--120 beds.

PRELIMINARY STATEMENT

This Recommended Order is being entered following the receipt and review of the transcript of hearing filed July 3, 1990. The proposed recommended orders of the parties have also been considered together with a memorandum of law by Suwannee. The submissions were provided no later than July 30, 1990, the deadline for such filings. The parties requested more than 10 days to prepare and file proposed recommended orders and associated memoranda beyond the transcript filing date. As a consequence the parties have waived their entitlement to have a recommended order entered within 30 days of the date of filing of the transcript. See Rule 22I-6.031, Florida Administrative Code. The facts found in the proposed recommended orders are commented on in an Appendix to this Recommended Order.

The exhibits offered by the parties have also been examined. Stipulations regarding the Inverness CON Action N. 5987 and Regency CON

Action No. 5905, were received. These stipulations agreed to the addition of 20 beds to the existing Inverness facility and the construction of a 120 bed nursing home facility by Regency.

Adventist Health System-Sunbelt Health Care Corporation had petitioned for nursing home beds in the batching cycle under CON Action No. 5908 and in opposition to the grant of a certificate of need to Regency, DOAH Case No. 90- 0041. That applicant voluntarily dismissed its petition as acknowledged by the order of February 27, 1990 which closed that case and returned the matter to the referring agency for disposition.

Similarly, Ocala Health Care Associates, Inc. had filed a petition seeking nursing home beds in the planning cycle under CON Action No. 5911 which stated opposition to the grant of a certificate of need to McCoy. This case was DOAH Case No. 90-0044. The applicant noticed a voluntarily dismissal which was responded to by an order of March 9, 1990, closing out the Division of Administrative Hearings' file and returning the case to the referring agency for disposition.

Finally, Health Care and Retirement Corporation of America and Heartland of Brooksville, under CON Action No. 5909 petitioned for a certificate of need in the batching cycle and stated opposition to the grant of certificates of need to Starke, McCoy and Regency. This petition was under DOAH Case No. 90-0042. The applicant voluntarily dismissed this petition for administrative hearing as acknowledged by the order of May 7, 1990 and commented on in the course of the final hearing. A final order was entered on August 10, 1990 which accepted the dismissal and denied the application. In the order of May 7, 1990, acknowledgment was made of the partial voluntary dismissal of the portion of the petition by Inverness which challenged the grant of a certificate of need to Regency. This was confirmed through this stipulation agreeing to the grant of beds which had been requested by Regency.

Ruling was reserved on the question of the admission of Suwannee Exhibits

18 and 19. Those exhibits are admitted as they depict the years 1992 and 1993. There are denied admission for the years 1994-1996.

In the course of the final hearing consideration was made of the motion for official recognition dated April 24, 1990, made by Suwannee regarding the final and recommended orders in Health Quest Corporation v. Department of Health and Rehabilitative Services, Florida Convalescent Center-Columbia and Florida

Convalescent Centers-Marion, DOAH Case No. 87-3503 and the order of the First District Court of Appeal dated January 3, 1990, Case No. 89-02400. That request was accepted in the course of the final hearing.

By motion of July 30, 1990, Suwannee had requested official recognition of Volume 16, No. 30, Florida Administrative Weekly, dated July 27, 1990, which referred to the approval of CON 6179 effective July 13, 1990. That reference was attached to the motion commenting on delicensure of 30 acute care beds by the applicant Suwannee at an approved cost of $6,752,824. In that same motion reference was made to Volume 16, No. 26, Florida Administrative Weekly, dated June 29, 1990, a copy of which was attached to the motion referring to the enactment of the emergency rule 10CER90-28, Payment Methodology for Nursing Home Services. It states that "reimbursement to participating nursing bomes for services provided shall be in accord with Florida Title XIX Long-term Care Reimbursement Plan Version II and incorporated herein by reference." A copy of the Plan as revised may be obtained by writing to the Assistant Secretary for Medicaid, 1317 Winewood Boulevard, Tallahassee, Florida 32301. The effective date of the rule is said to be July 1, 1990. No opposition was stated to grant of the motion.

Contrary to the motion's suggestion the notice in the Administrative Weekly did not refer to the fact that the acute care hospital has been downsized from

60 beds to 30 beds and would be located adjacent to the proposed nursing home facility which is at issue here. Official recognition is made of delicensure of

30 acute care beds pursuant to CON 6179 and to the costs reflected. On the subject of the emergency rule's allowing increases in Medicaid rates to be paid to nursing home providers, the stated reasons for finding an immediate danger to the public health, safety and welfare as announced in the emergency rule remarks about an increase in rates being paid to the nursing home providers and a change to the target rate of inflation from two times the rate of national nursing home inflation to 1.786 times the rate of inflation. The essence is stated to be that the rule would serve to increase reimbursement to nursing home providers and at the same time control the rate of growth allowed in operating and patient care per diems and ceilings. The exact amount of rate increase is not known in that a copy of the Plan as revised was not provided with the request for official recognition. Upon consideration, official recognition is made of these two items within the limitations described.

FINDINGS OF FACT

1. Related to the May, 1989 batching cycle HRS has identified a need for

   261 nursing home beds in District III. The applicants accept that determination of the pool of beds, that is to say no applicant has sought beds over and above the 261 beds identified by HRS. Further, the parties have expressed their agreement to allow Regency to be granted CON 5905 to construct a new nursing home facility in Lake County, Florida, which will have 120 beds. The written stipulation sets out the parties belief that all applicable criteria for obtaining a certificate of need as set out in Section 381.705, Florida Statutes, have been met. That stipulation is accepted, provided the following conditions are met in issuing the certificate of need:

   
   

   1. The annual resident population of the facility shall include at least 62% of Medicaid patient days.

   2. Two beds shall be dedicated to the care of Alzheimer and respite care residents.

   3. The facility shall be a one story design consisting of 43,000 square feet in size.

   
   

2. Likewise, the parties have agreed to allow the issuance of CON 5987 to Inverness to add 20 community nursing beds to its existing facility in Inverness, Florida. That written stipulation points out the agreement by the parties concerning the Inverness compliance with all applicable criteria set out in Section 381.705, Florida Statutes as well as any implementing rules set forth in Chapter 10-5, Florida Administrative Code. The arrangement is one by which existing ACLF beds are converted to nursing home beds. That stipulation is accepted, upon condition that Inverness commit to provide a minimum of 75.2% of total patient days for Medicaid patients.

   
   

3. The Inverness stipulation which reiterates Inverness' lack of opposition to the grant of a certificate of need to Regency also withdraws its opposition to McCoy, Starke and Suwannee.

   
   

4. By the terms of the stipulation's 140 of the 261 beds in the pool are spoken for. This leaves for consideration the applications of Suwannee, Starke and McCoy.

   
   

5. In the absence of subdistricting, District III is divided into seven planning areas. The planning areas are as established by the North Central Florida Health Planning Council, Inc. Planning Area l is constituted of Hamilton, Suwannee, Lafayette, Columbia, Union and Bradford counties. Suwannee intends to place its facility in Suwannee County. Starke intends to place its facility in Columbia County. The expansion of the McCoy facility would occur in Marion County which is the sole county in Planning Area 4.

   
   

6. By resort to the North Central Florida Health Planning Council District III Health Plan preferences can be seen concerning the allocation of beds among the applicants within the various planning areas. A copy of that plan is HRS Exhibit No. 2. Under this scheme the McCoy application to add 60 additional nursing home beds to its existing facility in Marion County, Florida, is considered a third priority. A third priority would allow the addition of at least 60 beds and no more than 120 beds. The Suwannee and Starke applications are a fourth priority under the local plan which allows for an addition of up to

   60 beds.

   
   

7. The McCoy application as presented at hearing responds adequately to all applicable criteria set out in Section 381.705, Florida Statutes, to include the State Health Plan and District III Health Plan. McCoy holds a superior license rating at present and has a proposed capital expenditure for this project of $1,568,000. Taking into consideration the proposed allocation of beds set forth in the local health plan, the distance between the McCoy facility and the proposed facilities in Suwannee and Columbia counties by the applicants Suwannee and Starke and absent proof which clearly identifies that Suwannee and Starke are meaningful competitors against McCoy and its attempt to gain a certificate of need calling for expansion of its facility, the McCoy application should be granted. That grant should be conditioned upon a willingness to serve Alzheimer patients in the proposed 14 bed unit and the commitment to provide Medicaid at a 60% level as a minimum commitment. This arrangement would bring the total number of nursing home beds at McCoy to 120, a desirable number when considering economies of scale.

8. What must be resolved by comparative analysis of the applications of Suwannee and Starke, is which of those competitors for 60 beds out of the 61 beds remaining in the pool should be granted a certificate of need, if any.

   
   

9. Starke had noticed its intention to apply for 120 beds and made application for 120 beds and in the alternative for 60 beds. The decision to notice its intent to apply for 120 beds was not misleading nor inconsistent with HRS policy in a circumstance where the application was stated in the alternative for 120 beds or 60 beds. The significant point is that Starke explained its alternatives of 120 beds or 60 beds in detail in the course of the application. HRS perceives that the 120 bed notice of intent took into account a lesser number of beds being applied for on the due date for applications and that perception is reasonable.

   
   

10. Suwannee noticed the intent to apply for 60 beds and applied for that many.

    
    

11. Both Suwannee and Starke met all procedural requirements for consideration of their applications for nursing home beds.

    
    

12. In determining the disposition of the 60 nursing home beds needed for Planning Area l within District III, it is noted that Suwannee and Columbia counties are contiguous. Columbia is east of Suwannee. While the main emphasis by these applicants is to serve the needs of residents within the two counties where the facilities would be located, given their contiguity there is a potential for either applicant to serve needs within both counties.

    
    

13. Columbia county is the more populous county. However, in the two counties the age cohorts in the 65 and over group and 75 and over group are similar, especially in the 75 and over group. Occupancy rates in the existing nursing homes within the two counties are also similar.

    
    

14. The J. Ralph Smith Health Center in Suwannee County has 107 existing beds and 54 beds approved. Those additional 54 beds were designated for residents of the Advent Christian Village exclusively; however, the residents of that village constitute part of the population base in Suwannee county. Therefore this limited utilization of that resource still benefits citizens within Suwannee county. Surrey Place in Suwannee county has 60 beds and the Suwannee Health Care Center has 120 beds with 60 more approved. The 60 additional beds may not be constructed in that the applicant failed to proceed to construction in the time contemplated by CON 3746 and may lose the beds.

    
    

15. Columbia County has Tanglewood Care Center with 95 beds. It has Lake City Medical Center with 5 beds associated with a hospital. Palm Garden of Columbia has approval for 60 beds.

    
    

16. On balance there would not appear to be an advantage to placing the 60 beds at issue in either Suwannee or Columbia counties when considering the population to be served, present occupancy rates for existing nursing bomes and geographic accessibility to the proposed nursing homes.

    
    

17. Suwannee is a wholly owned subsidiary of Santa Fe Health Care, Inc. The parent corporation filed the application with the permission of Suwannee. The 60 bed nursing home facility is part of an overall project which includes the replacement of an existing 60 bed acute care hospital with a 30 bed acute care hospital. If the proposals are accepted the hospital and 60 bed nursing home would be located on a common parcel. HRS has granted CON 6179 to decertify

    30 beds. The approved cost of the delicensure and establishment of the new hospital is $6,752,824. The nursing home component of this project is stated to cost $3,408,100 in the way of capital expenditures with an operating equity in the amount of $300,000. The overall health care delivery system contemplated in the hospital and nursing home project includes the replacement hospital, the new nursing home, an out patient diagnostic center, home health care, hospice and adult day care services. Suwannee has the financial backing of its parent corporation which owns a number of health care facilities including six hospitals, two health maintenance organizations and six other health related corporations. Both Suwannee and the parent corporation Santa Fe Health Care, Inc. are not for profit. The Santa Fe operations are in Florida and its hospital holdings include other rural hospitals in addition to Suwannee which is a rural hospital.

    
    

18. Before filing the application for the 60 bed nursing home neither Suwannee nor the Santa Fe parent corporation had any involvement in long term health care delivery.

    
    

19. Suwannee intends to serve the needs of Alzheimer patients and to provide services to persons needing subacute care.

    
    

20. In its present hospital facility in Suwannee County it has 24 swing beds with which it serves patients needing subacute care and which beds are seen as an alternative to nursing home beds. That alternative has limited utility. Although swing beds may serve nursing home patients they are not an alternative for long term care in lieu of community nursing home beds.

    
    

21. To the extent that Suwannee Hospital has tried to place patients in nursing homes needing a high level of skilled care, described as subacute care, it has experienced problems. Existing nursing homes in Suwannee County have not accepted the placement of those patients.

    
    

22. It is unclear from the record what portion of subacute care needed in the service area will continue to be met in the hospital proper with the advent of delicensure of 30 beds. There was testimony to the affect that the hospital has the option to request swing beds in its remaining 30 bed hospital facility, but it has not been shown that the hospital will avail itself of that opportunity and through the use of the swing beds be able to render subacute care.

    
    

23. The description by Suwannee of the subacute patients that it is contemplating serving through its nursing home are those who require a shorter stay in nursing facilities, who are said to have fragile medical condition and require intensive licensed nursing care. In the application, it states that the Medicare patients contemplated as being served by this prospective nursing home would be the principal users of the subacute care. There patients would have an average length of stay of 15 days with 12 patients per month being served. The Medicare per diem charge of $130 for the first year of operation is said to include the cost of care given to these patients who are said to be heavy users of subacute care. That per diem charge reflects ancillaries such as the various therapies as well. Having considered the explanation of this application, it is less than apparent what the difference would be between the subacute care services now being provided by the hospital in its swing beds and those contemplated by its nursing home application. In a similar vein, it is unclear what the distinction would be between the subacute care rendered in the proposed nursing home when contrasted with the subacute care being provided in swing beds that might be available in the 30 bed replacement hospital.

24. If granted a certificate of need Suwannee is committed to serving AIDS patients.

    
    

25. Suwannee intends to serve Medicaid patients and it projects a percentage of patient days attributable to Medicaid patients in the first two years of operation to approximate 73%. This is contrasted with experience statewide of 62%, within District III of 75% and within the planning area of 81%.

    
    

26. Projected per diem rate for Medicaid reimbursement within the first year of operation is $68. The financial expert presented by Suwannee said that the applicant could charge as much as $10 to $12 more, making the Medicaid rate

    $78 to $80 per day. This increase contemplates raising the present caps on reimbursement. The record does not support increases in the caps of $10 to $12 in the relevant planning period.

    
    

27. In the first year of operation the private room, private pay per diem rate at Suwannee reflects $97 as the charge and $80 as the charge for semiprivate room, private pay. This is as compared to $130 for Medicare per diem. Although it is unacceptable to charge more for Medicare than private pay, Schedule 12 within the application shows the inclusion of ancillaries for the Medicare patient and the exclusion of ancillaries for private pay. Under the circumstances it is difficult to tell whether the Medicare per diem charges exceed the private pay per diem charges as has been contended by Starke.

    
    

28. The inclusion of the therapies as ancillary costs is shown on page 39 at Schedule 12 of the application of Suwannee. On Schedule 17 in the first operating year the therapies as ancillary costs are not broken out as individual items such as physical therapy, speech therapy and occupational therapy separate and apart from routine services. Instead an aggregate figure is given. That precludes an understanding of what portion of the per diem charge for Medicare patients is attributable to those ancillary costs. The circumstance is made more bewildering in that the financial expert presented by Suwannee stated that the $130 per diem charge had application to residents who were receiving subacute care. What portion of the per diem charge for Medicare residents is attributable to the subacute care component is not revealed in the application. Neither, is it explained in the testimony.

    
    

29. Notwithstanding the assurance of the Suwannee financial planner that the Medicare rate projected for the first year of operation is in keeping with the Hospital Cost Containment Board's data on the average rate structure, that comment and his other explanations failed to establish the reasonableness of that charge. This is especially true when considering the fact that the Medicaid charges, even accepting an adjusted rate of $80 per day, are also indicated at Schedule 12 as including therapies and are far less than the Medicare per diem. Schedule 17 shows the Medicaid without reference to the therapies as an aggregate item in the same fashion as described with the Medicare category of reimbursement.

    
    

30. Further, evidence of the fact that private room, private pay, does not exceed the Medicare per diem charge is related at Schedule 12 where it describes the subacute private room, private pay patient as paying $150 and the semiprivate, room private pay as paying $130.

31. Again, in the Suwannee application in the first year of operation for both Medicaid and Medicare therapies are said to be included in the basic charges of $68 and $130 respectively shown at Schedule 12 and carried forward in the aggregate on Schedule 17. From the explanations stated by the financial planner, the projected costs for therapies by those two categories of patients is not reflected in the ancillary cost centers for physical therapy, speech therapy and occupational therapy found at lines 11-13 of Schedule 18. Instead, they are reflected at line 39 under other costs centers in the amount of

    $80,900. Moreover the $80,900 is said to include subacute services as well as the therapies. Having considered Schedules 12, 17 and 18 for the first operating year, together with the other evidence presented in the course of the hearing, the estimate at line 39 of Schedule 18 of $80,900 is unreliable.

    
    

32. The Suwannee project contemplates a facility of approximately 24,370 square feet. The construction cost estimate is $62.44 per square foot. The total project cost per bed is $56,802. That far exceeds the caps for the property cost component related to Medicaid residents which is presently $30,350 per bed. Put another way, that translates to a differential of $11.64 per patient day above present reimbursement levels for Medicaid residents. That differential cannot be made up by resort to payments for ancillary services for that category of resident. The shortfall attributable to the costs per bed differential in the application of $56,802 compared to $30,350 per bed plus ancillaries is not expected to be made up by resort to other revenue sources within this proposal either, nor can it be properly be. This is particularly true when approximately 70% of the patient days are expected to be provided by Medicaid residents. Even if Suwannee were able to obtain reimbursement for the per bed cost of $56,802, this is much more than the Starke cost per bed which is approximately $30,000 as built.

    
    

33. The cap that has been mentioned is the one effective July 1, 1990. Nothing in the testimony would suggest that the caps would approach $56,802 within the planning horizon for this review cycle.

    
    

34. In summary, the financial feasibility of the Suwannee proposal has not been established. While the parent corporation, Santa Fe Health Care, Inc., is strong financially and able to sustain Suwannee in its nursing home operation in the short term, even with expected losses, the losses will be extraordinary and the long term feasibility has not been demonstrated either. Simply stated, too much money is being expended to establish this facility and it may not be recouped by resort to the reimbursement scheme identified in the application.

    
    

35. Under the circumstances, the nursing home is not perceived as a means of promoting the financial well being of the overall project constituted of the nursing home, relocated hospital and associated services.

    
    

36. It is not accepted that the manner and quality of care proposed to be delivered by Suwannee is so superior that it justifies the inordinate expense in delivering the care.

    
    

37. In other particulars Suwannee has shown that it meets all applicable criteria for granting it a certificate of need, but the overall costs are so exorbitant that they preclude financial success in the project. In addition, even if the project met the criteria its costs compared to the Starke proposal are so much more that the Suwannee proposal should be rejected in favor of the Starke proposal.

38. It is not accepted that a hospital based nursing home is superior to a freestanding nursing home as urged by the presentation made by Suwannee.

    
    

39. Starke had applied for a 120 bed nursing home, with a separate request explaining its proposal to construct a 60 bed nursing home. It is that latter proposal that fits the need in Planning Area I of District III. The total capital expenditure for that alternative proposal is $1,882,713. The cost per square foot is approximately $60 in the 22,500 square foot facility. The per bed costs is in the neighborhood of $30,000.

    
    

40. In the first year of operation the private room, private pay is $89; the semiprivate room, private pay rate is $79; the Medicaid rate is $69.50 and the Medicare rate is $69.50. These rates do not include ancillary charges for therapies. The Starke proposal will include a unit for Alzheimer, subacute care, adult day care and respite care.

    
    

41. Starke will provide 80% of its patient days for Medicaid residents and 10% of its patient days for Medicare residents. The Medicaid performance exceeds that of Suwannee. That rate is consistent with the experience which Starke has in the operation of its Whispering Pines Care Center in Starke, Florida, a 120 bed nursing home facility which has held a superior license rating over the three years preceding the application. Starke as a corporation would own both the Starke, Florida facility and the proposed Lake City, Florida facility. The principals in that corporation with 50% ownership are J. D. Griffis and George R. Grosse, Jr.

    
    

42. The subacute care that is to be provided is in patient rooms which are directly adjacent to the nursing station. It is the intention of the applicant to build these rooms to allow support for medical equipment needed in the treatment of those residents.

    
    

43. Although some criticism has been directed to the architectural design of the proposed nursing home facility, Starke has committed itself to meet all applicable codes. Under the circumstances it does not appear that this application presents significant problems associated with resident safety or inordinate costs in making necessary adjustments to comply with applicable codes.

    
    

44. The Starke application was prepared by Jerry L. Keach, the then administrator for University Nursing Care Center in Gainesville, Florida, operated by Covenant Care Corporation. By the comments found in the application it was contemplated that the Covenant Care group would manage the Starke facility in Lake City, Florida, which would do business as Lake City Care Center. No contract has been executed between Starke and Covenant Care Corporation to allow the latter entity to manage the Lake City facility assuming the grant of the certificate of need to that applicant. At hearing the principals for Starke indicated that Covenant Care together with other unnamed organizations would be considered as management for the nursing home in Lake City. Although this issue of management is unresolved, reservations about the project are overcome in recognition of the success of the Starke corporation in the operation of the Whispering Pines Care Center in Starke, Florida. That suffices as an indication that Starke is capable of installing appropriate personnel to operate the Lake City facility, and provide quality care.

45. The assumptions concerning the various aspects of the proposals set forth in the Starke application are sufficiently explained in the course of the final hearing and those explanations are accepted. It is reasonable to expect that the nursing home could be constructed, staffed and operated in a manner consistent with the explanations found in the application and through testimony at hearing. A successful outcome is anticipated whether the Covenant Care Corporation is employed to operate the facility or not.

    
    

46. The favorable impression of the Starke proposal is held notwithstanding the criticism directed to the financial feasibility by remarks offered by Suwannee. In particular the Suwannee Exhibit No. 11 admitted into evidence questioning the assumptions of the Starke applicant concerning income projections for the first two years have been taken into account.

    
    

47. Whispering Pines Care Center presently offers care for Alzheimer patients and subacute services. Therefore problems are not anticipated in the provision of those services in the proposed facility.

    
    

48. With due regard for the criticisms that have been directed to the financial ability of Starke to maintain its Whispering Pines Nursing Center and the proposed project in Lake City, Florida, it is found that the applicant has the ability to conduct those businesses.

    
    

49. As with the matter of financial feasibility, Starke has satisfied all other applicable criteria for the grant of a certificate of need to construct the 60 bed nursing home.

    
    

    CONCLUSIONS OF LAW

    
    

50. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with Section 120.57(1), Florida Statutes.

    
    

51. This proceeding is a de novo proceeding. See MacDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).

    
    

52. The applicants bear the burden of proving "their entitlement to the grant of a certificate of need. See Florida Department of Transportation v.

    J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981) and Boca Raton AKC v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985).

    
    

53. In making the determination of compliance with applicable criteria and the selection among competitors, the criteria are weighed. See Collier Medical Center, Inc. v. Department of Transportation, 462 So. 2d 83 (Fla. 1st DCA 1985) and North Ridge General Hospital, Inc. v. NME Hospital, Inc., 478 So.2d 1128 (Fla. 1st DCA 1985).

    
    

54. Proof of the entitlement to the grant of a certificate of need must be by a preponderance of the evidence. See Boca Raton supra.

    
    

55. The applicant Starke was entitled to establish a letter of intent for

    120 nursing home beds and to apply in the alternative for 120 beds or 60 beds. This is in keeping with HRS policy and is not inconsistent with the holding of Humhosco, Inc. d/b/a Humana Hospital v. Department of Health and Rehabilitative Services, St. Joseph's Hospital and Hillsborough County Hospital Authority, 15

    F.L.W. 1227 (Fla. 1st DCA, May 7, 1990). Nor does this application in the

    alternative constitute any form of revision of the application that would be unacceptable. See Manor Care, Inc. v. Department of Health and Rehabilitative Services, 14 F.L.W. 2323 (Fla. 1st DCA, October 3, 1989).

    
    

56. This case limited itself to a consideration of the fixed need pool of

    261 beds. See Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1985)

    
    

57. The criteria which pertain to this review are set forth in Sections 381.705(1)(a) through (f), (1)(h) and (i), (1)(l) through (n), (2)(a) and (b) and (2)(d) and (e), Florida Statutes. Inverness, McCoy, Starke and Regency have met those criteria, Suwannee has not. The Suwannee project is not financially feasible in the immediate and long term periods thus it does not comply with Section 381.705(1)(i), Florida Statutes. Suwannee also is a less attractive candidate compared to Starke when examined pursuant to those criteria set forth in Section 381.705(1)(l) through (n) and 2(a), Florida Statutes.

RECOMMENDATION

Based upon consideration of the facts found and the conclusions of law reached, it is,

RECOMMENDED:

That a Final Order be entered which requires all CONs granted to be consistent with the applications and in keeping with that intention:

1. Grants CON 5987 to Inverness for the addition of 20 community nursing home beds to its existing facility upon condition that those beds be constituted of a minimum of 75.2% total patient days for Medicaid patients;

   
   

2. Grants CON 5962 to Starke for construction of a nursing home in Columbia County, Florida, constituted of a minimum of 80% total patient days for Medicaid patients, that provides Alzheimer services, subacute care, day care and respite care;

   
   

3. Grants CON 5910 to McCoy for the addition of 60 beds upon condition that 60% of the patient days be devoted to Medicaid patients;

   
   

4. Grants CON 5905 to Regency for construction of a 120 nursing home facility with 62% of its patient dads being devoted to Medicaid patients, 2 beds dedicated to Alzheimer patients, provision of respite care and that the facility shall be a one-story design consisting of 43,000 gross square feet in size; and

   
   

5. Denies the application for a 60 bed nursing home in Suwannee County made by Suwannee under CON Action No. 5912.

DONE and ENTERED this 19th day of September, 1990, in Tallahassee, Florida.

CHARLES C. ADAMS, 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 19th day of September, 1990.

APPENDIX

CASE NOS. 90-0043 and 90-0045

The following discussion is given concerning the proposed facts of the parties:

Inverness

Paragraphs 1 through 3 are subordinate to facts found. Paragraph 4 is not necessary to the resolution of the dispute.

Suwannee

Paragraphs 1 through 7 are subordinate to facts found.

Paragraph 8 is contrary to facts found in that the Starke application can be advanced without a resort to an affiliation with Covenant Care Corporation.

Paragraph 9 is accepted; however, those facts do not cause the rejection of the Starke proposal.

Paragraphs 10 and 11 are not necessary to the resolution of the dispute.

Paragraph 12 is accepted as factually correct; however, this is not crucial in determining the outcome of this case.

Concerning Paragraph 13, while the record reveals that Mr. Keach was responsible at a time moratorium had been placed on admissions into University Nursing Care Center in Gainesville, Florida, the record was not detailed enough to ascertain what influence that might have on his ability to act as an administrator at the Starke facility proposed in this instance or his competence in preparing the application.

The representations found in Paragraph 14 do not preclude the consideration of the Starke application.

Concerning Paragraph 15, the first sentence is rejected as fact. The second and third sentences are not necessary to the resolution of the dispute.

Concerning Paragraph 16, those items which are mentioned did not cause the rejection of the Starke application in that Starke is committed to abide by all applicable codes to insure control over the patients.

Paragraphs 17 through 21 are contrary to facts found.

Concerning Paragraphs 22-24, the Starke proposal is found to be financially feasible.

Paragraph 25-27 are subordinate to facts found.

Concerning Paragraph 28, notwithstanding economies of scale they will not overcome the inherent extravagance in the costs associated with bringing the Suwannee project on line.

Concerning Paragraph 29, while diversification for rural hospitals is desirable, the present attempt by Suwannee is unacceptable.

Paragraph 30 is subordinate to facts found. Concerning Paragraph 31 see comment on Paragraph 29. Paragraph 32 is subordinate to facts found.

Paragraph 33 is accepted; however, the principal service area would appear to be Suwannee County. The existence of service over to Hamilton, Madison, Lafayette and Columbia Counties does not change the perception of this case.

Paragraph 34 is subordinate to facts found.

Paragraph 35 is contrary to facts found as are Paragraphs 36 and 37. Concerning Paragraph 38, the affiliation of Suwannee with the Santa Fe

Health Care system does not overcome the lack of financial feasibility.

Paragraphs 39 and 40 are subordinate to facts found. Paragraph 41 is contrary to facts found.

Paragraph 42 is not necessary to the resolution of the dispute. Paragraph 43 is contrary to facts found.

Paragraphs 44 and 45 are subordinate to facts found. Paragraph 46 is contrary to facts found.

Paragraphs 47-55 are subordinate to facts found.

Paragraph 56 is not necessary to the resolution of the dispute. Paragraphs 57-60 are subordinate to facts found.

Paragraph 61 is contrary to facts found. Paragraph 62 is subordinate to facts found. Paragraph 63 is contrary to facts found.

Paragraph 64 is subordinate to facts found.

Concerning Paragraph 65, notwithstanding these observations they do not justify the rate structure or per diem charges set out in the Suwannee application.

Paragraph 66 is subordinate to facts found as are the first two sentences of Paragraph 67. The last sentence to Paragraph 67 is rejected.

Paragraphs 68 and 69 are contrary to facts found.

The first sentence of Paragraph 70 is subordinate to facts found. The second sentence is not relevant.

Paragraphs 71 through the first sentence of Paragraph 73 is contrary to facts found. Concerning the last sentence of Paragraph 73, Starke is found to be financially feasible and Suwannee is not.

Paragraph 74 is subordinate to facts found.

Paragraphs 75 and 76 have been taken into account in deciding that there are no particular advantages to placing the 60 beds in Columbia County as opposed to Suwannee County.

Paragraph 77 in all sentences save the last is accepted. The last sentence is contrary to facts found in that subacute care will be rendered in the Starke facility.

Paragraphs 78 through 80 are contrary to facts found. Paragraph 81 is subordinate to facts found.

Paragraph 82 is accepted in the premise, but use of Suwannee as the facility to serve this population is rejected based upon the lack of financial feasibility.

Paragraph 83 is subordinate to facts found with the exception that the subacute patients would not be best placed with Suwannee.

Paragraph 84 and 85 are subordinate to facts found. Paragraph 86 is contrary to facts found.

Paragraphs 1-5 with the exception of the last sentence in Paragraph 5 are subordinate to facts found. Concerning that latter sentence it is clear that Suwannee would intend to build the nursing home facility together with the hospital or exclusive of the hospital project.

Paragraphs 6-8 are not necessary to the resolution of the dispute. Paragraph 9 is subordinate to facts found.

Paragraph 10 is accepted and it is acknowledged that the applicants can approximate that average.

Paragraphs 11 and 12 are subordinate to facts found.

Concerning Paragraph 13 Suwannee did establish its percentage of commitment to Medicaid through proof at hearing.

Paragraphs 14 through 23 are subordinate to facts found.

Paragraph 24 is contrary to facts found in that Starke offers no greater enhancement than Suwannee in terms of geographic accessibility and is not really a competitor in this criterion with McCoy.

Paragraphs 25 through 27 are subordinate to facts found.

Paragraph 28 is contrary to facts found in that Suwannee did identify the programs that it intends to offer.

Paragraphs 29 through 36 are subordinate to facts found.

Paragraph 37 in the first sentence is subordinate to facts found. The second sentence is not necessary to the resolution of the dispute.

Paragraph 38 is subordinate to facts found.

Paragraph 39 is not necessary to the resolution of the dispute.

Concerning Paragraph 40 while it is agreed that swing beds are skilled level of nursing home care they do not constitute reasonable alternatives to long term care.

Paragraph 41 is subordinate to facts found in the first sentence. The second sentence in its suggestion that there is no significance to the lack of provision of these types of services under subacute care in area nursing homes is rejected.

Paragraph 42 is rejected.

Paragraph 43 is subordinate to facts found. Paragraph 44 is contrary to facts found.

Paragraphs 45 through 52 are subordinate to facts found. Paragraph 53 is contrary to facts found.

Paragraph 54 is subordinate to facts found with the exception that the reason that the Suwannee project is not found to be financially feasible does not include reference to a higher charge for Medicare patients than the charge to private pay patients.

Paragraphs 55 through 60 with the exception of the last sentence in Paragraph 60 are subordinate to facts found. The nursing home is intended to be built whether the replacement hospital is built or not.

Paragraphs 61 through 65 are subordinate to facts found.

Starke

Paragraphs 1 through 5 with the exception of the latter two sentences in Paragraph 5 are subordinate to facts found. Concerning the next to the last sentence, it was made clear that the intentions on the part of Suwannee were to build the nursing home. The last sentence to the extent that it is intended to suggest that this applicant is incapable of offering long term care services is rejected.

Paragraphs 6 through 8 are not necessary to the resolution of the dispute. Paragraphs 9 through 11 are subordinate to facts found.

Concerning Paragraph 12 to the extent that it suggests that Suwannee is not willing to provide services to Medicaid recipients, it is rejected.

Paragraphs 13 through 21 are subordinate to facts found.

Paragraph 22 is contrary to facts found in that Starke is not seen as enhancing geographic accessibility to a greater extent than Suwannee its true competitor.

Paragraphs 23 and 24 are subordinate to facts found.

Paragraph 25 is contrary to facts found ih that Suwannee has identified its special programs.

Paragraphs 26 through 33 are subordinate to facts found.

Paragraph 34 is subordinate to facts found in the first sentence. The second sentence is not necessary to the resolution of the dispute.

Paragraph 35 is subordinate to facts found.

Paragraph 36 is not necessary to the resolution of the dispute.

Concerning Paragraph 37 while it is agreed that swing beds are skilled level of nursing home care they do not constitute reasonable alternatives to long term care.

Paragraph 38 is subordinate to facts found in the first sentence. The second sentence in its suggestion than there is no significance to the lack of provision of these types of services under subacute care in area nursing homes is rejected.

Paragraph 39 is rejected.

Paragraphs 40 and 41 are subordinate to facts found. Paragraph 42 is contrary to facts found.

Paragraphs 43 through 50 are subordinate to facts found. Paragraph 51 is contrary to facts found.

Paragraph 52 is subordinate to facts found except as it suggests that the difference in rate between Medicaid patients and private pay patients in the Suwannee proposal forms the basis for the criticism that the Suwannee project is not financially sound.

Paragraphs 53 through the first two sentence of Paragraph 59 are subordinate to facts found. Related to the latter sentences in Paragraph 59 it is clear that the schematic pertains to the basic design of the Suwannee facility whether attached to a new hospital or free standing.

Paragraphs 60 through 64 are subordinate to facts found.

McCoy

Paragraph 1 is subordinate to facts found.

Paragraphs 2 and 3 are not necessary to the resolution of the dispute. Paragraph 4 is subordinate to facts found.

Paragraph 5 is not necessary to the resolution of the dispute. Paragraphs 6 through 83 are subordinate to facts found.

Regency

Paragraph 1 is subordinate to facts found.

Paragraph 2 is not necessary to the resolution of the dispute. Paragraphs 3 through 5 are subordinate to facts found.

COPIES FURNISHED:

Sam Power, Department Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Elizabeth McArthur, Esquire Jeffrey Frehn, Esquire

Aurell, Radey, Hinkle and Thomas

101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, FL 32302

W. David Watkins, Esquire Oertel, Hoffman, Fernandez

and Cole, P.A.

Post Office Box 6507

2700 Blair Stone Road Tallahasee, FL 32314-6507

Leslie Mendelson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, FL 32308

James C. Hauser, Esquire

F. Phillip Blank, Esquire

R. Terry Rigsby, Esquire Julie Gallagher, Esquire

F. Philip Blank, P.A. 204-B South Monroe Street Tallahassee, FL 32301

Grafton B. Wilson, II, Esquire 711 North 23rd Avenue, Suite 4 Post Office Box 1292 Gainesville, FL 32602

R. Bruce McKibben, Esquire Dempsey and Goldsmith, P.A.

307 West Park Avenue Tallahassee, FL 32301

Docket for Case No: 90-000043

Orders for Case No: 90-000043