STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTH FLORIDA BAPTIST )

HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 90-0064

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, and ) JOHN A. MCCOY FLORIDA SNF TRUST, )

)

Respondents. )

)

RECOMMENDED ORDER

The final hearing in this case was held from June 11 through 15, 1990, in Tallahassee, Florida, before Donald D. Conn, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioner: Theodore E. Mack, Esquire

315 South Calhoun Street Suite 500

Tallahassee, FL 32301

For Respondents: Edgar Lee Elzie, Jr., Esquire

215 South Monroe Street Suite 804

Tallahassee, FL 32301 (Department of Health and Rehabilitative Services)

R. Terry Rigsby, Esquire

F. Philip Blank, Esquire

204 South Monroe Street Tallahassee, FL 32301 (John A. McCoy Florida SNF Trust)

STATEMENT OF THE ISSUE

The issue in this case is whether the Certificate of Need (CON) Application of either South Florida Baptist Hospital, Inc., (Hospital) or John A. McCoy Florida SNF Trust (Trust), or both, meet the statutory and rule criteria for a CON for nursing home beds in Hillsborough County, Florida, and whether the Department of Health and Rehabilitative Services (Department) should approve either, or both, of these CON Applications.

PRELIMINARY STATEMENT

At the hearing, the Hospital called seven witnesses, and introduced eighteen exhibits; the Department called one witness; and the Trust called six witnesses and introduced nine exhibits.

The transcript of the final hearing, consisting of nine volumes, was filed on July 5, 1990, and the parties requested and were granted an extension until August 6, 1990, for filing of proposed recommended orders. The Appendix to this Recommended Order contains a ruling on each timely filed proposed finding of fact.

FINDINGS OF FACT

1. The Parties

   
   

   1. The Trust

      
      

      1. The applicant for CON 5924 is John A. McCoy, Trustee, John A. McCoy Florida SNF Trust (Trust). This is the first application for a CON which has been filed on behalf of the Trust. The Trust has never filed income tax returns and has no federal employee identification number. It has never been the licensee, owner or manager of a nursing home. The Trust was formed on April 3, 1989, through a document signed by John A. McCoy, as trustee of the SNF Trust and as trustee of seven individual land trusts, primarily because John A. McCoy always considered himself the owner of all nursing home facilities associated with these various trusts, but felt the Department was not giving him credit for his previous CON approvals. The assets of the Trust are seven individual land trusts designated as:

         
         

         1. Florida Land Trust 4376, d/b/a Brandywyne Convalescent Center;

         2. Florida Land Trust 11, d/b/a/ Sutton Place Convalescent Center;

         3. Florida Land Trust 8, d/b/a Surrey Place of Live Oak;

         4. Florida Land Trust 9, d/b/a Surrey Place of Ocala;

         5. Florida Land Trust 32OR, d/b/a Surrey Place of Orlando;

         6. Florida Land Trust 33H, d/b/a Surrey Place of Hillsborough County; and

         7. Florida Land Trust 34SL, d/b/a Surrey Place of St. Lucie.

            
            

      2. The beneficiaries of these individual land trusts are John A. McCoy (47.5%), Stanford L. Hoye (47.5%), and James W. McCoy (5%). The formation of the Trust did not change the ownership of these individual land trusts in any way, and the interests of the beneficiaries of the individual trusts have not been sold, conveyed, or otherwise transferred to the Trust. There are no other documents transferring any beneficial interests to the Trust. Hoye has assigned his beneficial interest in these individual trusts to S&E Partnership.

         
         

      3. Under the terms of the Trust, the beneficiaries have the power to direct the Trustee, John A. McCoy, concerning the management and control of trust assets. The Trustee has the authority to convey assets of the Trust only when authorized in writing by the beneficiaries. There is no evidence in the

         record that the beneficiaries have authorized, in writing, the Trustee to convey assets of the Trust. The right to manage, sell, rent or otherwise handle assets of the Trust resides solely with the beneficiaries.

         
         

      4. Although the document forming the Trust on April 3, 1989, refers to John A. McCoy as trustee for individual land trust 4376, the trustee for this land trust is, in fact, the Bank of Palm Beach and Trust Company.

         
         

      5. Individual land trusts 32OR, 33H and 34SL do not hold any interest in real property. Land trust 32OR was established for a nursing home facility to be known as Surrey Place of Orlando, but the CON application for that facility has been denied. Land trust 33H was established for the nursing home facility in Hillsborough County that is the subject of this proceeding, and will only hold an interest in property if this application is approved. Land trust 34SL was established for another nursing home facility, the application for which is also pending at this time, and which will, therefore, only hold an interest in property if this other application is approved.

         
         

      6. John A. McCoy has executed a promissory note in the amount of

         $1,050,000 as part of the Trust's contribution to be used to develop the facility at issue in this case, as well as two others. However, payment of this note is contingent upon receiving approval of three CONs for facilities to be owned and operated through individual land trusts 32OR, 33H and 34SL.

         
         

      7. Individual land trusts 4376, 11, 8 and 9 all involve leasehold interests in existing nursing homes, and not interests involving fee simple ownership. There are four other individual land trusts which hold the ownership interest in the real property associated with these existing facilities. Land trust 4375 involves the land associated with the leasehold which is the subject of individual land trust 4376; land trust 10 involves the real property associated with the leasehold which is the subject of individual land trust 11; land trust 7 involves the property associated with the leasehold that is the subject of individual land trust 8; and land trust 6 relates to the real property associated with the leasehold that is the subject of individual land trust 9.

         
         

      8. Land trusts 4375, 10, 7 and 6 are not included within the Trust which is the applicant in this proceeding, although the Trust's purported audited financial statement that was included with its application included the combined accounts of these non-included land trusts, as well as the accounts of land trusts 4376, 11, 8 and 9 which are included within the Trust. The Trust's expert in nursing home accounting and reimbursement, Ray Bolt, testified that he included the accounts of all these land trusts because he assumed that McCoy, as Trustee, had absolute control over all of these various trusts. This was an erroneous assumption. He testified that it was consistent with generally accepted accounting principles to include the combined accounts of all individual land trusts in the Trust's audit, as long as a disclosure was included in the Trust's audited financial statement. However, the Department requires that the audited financial statements filed with a CON application be of the applicant alone, and if information about entities other than the applicant is included, the financial statement is not considered to be of the applicant. On the other hand, although individual land trusts 32OR, 33H and 34SL are included within the Trust, they were not included within the Trust's financial statement.

      9. John A. McCoy is the trustee of several additional land trusts not associated with, or a part of, the Trust which is the applicant in this case. These other trusts include land trust 17-CR and 16-B, to which CONs have previously been issued.

         
         

      10. At the time the Trust submitted its application for this CON, it included nursing home facilities associated with individual land trusts 4376, 11, 8 or 9, although it was not the licensee for any of these facilities. Subsequent to the submission of the Trust's CON application, the three facilities relating to individual land trusts 4376, 11 and 8 have been sold to National Health Care Affiliates, Inc., and there is no longer any real property interest in these land trusts. McCoy testified that the three facilities associated with these land trusts at the time this application was filed are no longer a part of the Trust.

          
          

      11. John A. McCoy is also the President of Health Care Associates (HCA), the ownership of which is common with that of the Trust. HCA will develop and manage the facility in Hillsborough County which is the subject of this case, if the Trust's CON application is approved. The Department allows the holder of an approved CON to contract with another entity for the day to day operation and management of a facility after it is licensed. Although its letter of intent did not specifically so state, this facility will be licensed in the name of the Trust, which will be ultimately responsible for its operations despite this common ownership and the contractual relationship which will exist between HCA and the Trust for the development and management of the facility in Hillsborough County. This will be in contrast with the facility associated with individual land trust 9 where HCA was the applicant for licensure and currently holds the license for said facility.

          
          

   2. The Hospital

      
      

      1. The Hospital is a 147 bed licensed acute care, not for profit, hospital located in Plant City, Hillsborough County, Florida. Fifteen of the Hospital's licensed beds are designated as skilled nursing beds.

         
         

      2. During 1989, the occupancy rate for the Hospital was 45-46%, which was a drop from 1988. The skilled nursing beds had an occupancy rate of only 37-38% in 1989 due to a lesser need for skilled care than anticipated, seasonal variation in the area, and the Hospital's failure to obtain a Medicaid provider number that would allow it to accept Medicaid patients.

         
         

      3. The Hospital provides care to residents outside its immediate service area and outside the service district. There is local community support for a nursing home at the Hospital.

         
         

      4. Other than its experience with the fifteen skilled nursing beds, the Hospital has no experience operating a nursing home.

         
         

   3. The Department

      
      

      1. The Department is the state agency responsible for reviewing CON applications in Florida under the provisions of Sections 381.701 - 381.715, Florida Statutes, in order to determine compliance with the criteria and standards for approval set forth therein, as well as in rules which it has adopted thereunder.

2. The Applications

   
   

   1. In order for an application for a CON to be valid, the applicant must be an existing entity at the time its application is filed. The Department has rejected CON applications because it has determined that the applicant shown on the application form was not in fact the actual applicant. The Department expects that if a CON is issued, the CON holder will be the licensee of the facility since it is the licensee that has control and is responsible for operations.

      
      

   2. The Fixed Need Pool published by the Department projected a need for

      99 nursing home beds in District VI, Subdistrict 1, Hillsborough County, for the January 1992 planning horizon. For the second half of 1988, occupancy rates for the Subdistrict were 95.45%, with 3076 licensed beds and 549 approved beds. The Subdistrict Medicaid average was 74.40%.

      
      

   3. In response to this published need, five applicants, including the Trust and the Hospital, timely filed CON applications. The Trust application was numbered CON 5924, and the Hospital application was designated as CON 5982. The other three applicants are not parties to this proceeding, and have not sought further consideration of their applications.

      
      

   4. The Trust proposes to construct a 90 bed community nursing home facility in Hillsborough County consisting of a single story structure of approximately 36,500 gross square feet, at a total cost of $3,650,500. It will also have an associated 58 bed ACLF and adult day care program.

      
      

   5. The Hospital proposes to construct a 99 bed nursing home to serve skilled and intermediate care patients, located adjacent to its existing hospital facility with a covered walkway connecting the nursing home with the hospital. The facility proposed by the Hospital would consist of approximately 26,256 gross square feet, at a cost of $3,688,044. Although its application is not for an addition to an existing facility, the Hospital proposes to share certain services and activities provided in its existing facility with its proposed nursing home, such as food preparation, some therapies, kitchen, laundry, housekeeping, chapel and gift shop. The site proposed by the Hospital in its application for the nursing home is not of adequate size since the foot print of the nursing home facility will encompass the entire site, without any allowance for parking, outside recreation, or view, other than what is already provided for the existing hospital facility. Instead of a .6 acre site as proposed by the Hospital, a site of from 4 to 5 acres is required for a 99 bed nursing home facility which meets minimum requirements for licensure. Additionally, the proposed square footage of this 99 bed facility is approximately 10% below what would be required to meet licensure standards, and the amendment of this proposal to add this additional square footage would be a substantial amendment which is not permitted at this stage of the CON application and review process.

      
      

   6. After review, the Department deemed both applications complete, and issued its SAAR on or about October 26, 1989, noticing its intent to approve the Trust's application for CON 5924 and to deny all other applications, including that of the Hospital, CON 5982. Therafter, the Hospital timely filed a petition for formal hearing to challenge the Department's notice of intent to deny its CON and to approve the Trust's, and this comparative hearing was subsequently held.

   7. The Department's determination that the Trust's application was complete is in error. First, the Trust has not been shown to be an existing entity with the capacity to file an application for CON 5924. Second, in order to be complete, an application must include an audited financial statement of the applicant, and the financial statement filed with the Trust's application contains information about other entities not included within the Trust. Thus, the Trust has not filed its own audited financial statement, but rather one containing the combined accounts of several individual land trusts, including some which do not comprise the Trust. The Department's determination that the Hospital's application was complete is also in error. It was not established that there was an authorized certification to the Hospital's board resolution that purportedly authorized the filing of this CON application and as a result, it was not shown that the Hospital's board of directors has consented to this filing. Additionally, the employee who signed the application was not the authorized representative of the applicant, as filed.

      
      

3. State Health Plan

   
   

   1. Based upon the testimony of Thomas Konrad, Sharon Gordon-Girvin, and Edward Perrine, who were accepted as experts in health planning, it is found that both applications are consistent with relevant portions of the State Health Plan. Specifically, the State Plan sets forth three generalized goals for nursing homes, including supply, appropriateness and adequacy of utilization. Supply is dealt with in the fixed need pool determination, and each application addresses and responds to the need for 99 beds which has been determined and published by the Department. Each applicant proposes the use of its facility to provide long-term nursing home services that are accessible, geographically and financially, to all residents.

      
      

4. Local Health Plan

   
   

   1. The 1988 District VI Local Health Plan identifies 9 recommendations for use in determining preference among CON applicants. The first recommendation is that the subdivision priority need rankings, set forth in the Local Plan, should be considered along with numeric bed need for the Subdistrict. Hillsborough County is a Subdistrict of District VI, and within District VI, northwest Hillsborough County is given the highest subdivision priority ranking, based upon the elderly poverty rate and the population 85 years of age and older in each subdivision. Although the Trust application does not specifically designate a site for its proposed facility, the record in this proceeding clearly reflects the Trust's commitment to locate a suitable site for its facility in northwest Hillsborough County. The Hospital is located in Plant City, in northeast Hillsborough County, and its proposed facility will be adjacent to its existing acute care hospital. Thus, the Trust application is consistent with this first recommendation of the Local Health Plan, while the Hospital's proposal is not. The Trust application is more accessible to the area of greatest need in Hillsborough County. A specific site does not have to be identified in a CON application, although a Subdistrict identification does have to be included.

      
      

   2. Both applications meet the provision of the Local Health Plan which recommends that beds in a Subdistrict have a 90% or greater occupancy rate for six continuous months before additional beds are approved. In Hillsborough County, the occupancy rate for 1988 exceeded 95%.

   3. Both applicants have committed to serve Medicaid patients in proportion to the representation of elderly poor in the Subdistrict, and both are, therefore, consistent in their application statements with this recommendation of the Local Plan. However, the Hospital has yet to serve one Medicaid patient in the fifteen skilled nursing home beds at its existing facility, and has not been successful in obtaining a Medicaid provider number. The Hospital has been consistently below the average among hospitals in Hillsborough County for Medicaid patient days.

      
      

   4. Neither applicant has a well documented history of implementing CONs within statutory timeframes and without cost overruns. As previously found, this is the first CON application filed by the Trust, although John A. McCoy, as trustee of other individual land trusts, has filed other CON applications. The Hospital has not filed a CON application for new nursing home beds prior to this one. The CON which it received in order to relocate its fifteen skilled nursing beds had to be amended to add additional square footage, increasing this unit from the 5,082 square feet in its application to 8,500 square feet. Neither applicant has previously applied for, and obtained, CONs and licensure for nursing homes which were rated as superior by the Department. For this reason, the Local Plan's recommendation that a well documented history of timely implementation of superior rated facilities should be given preference in review of CON applications does not pertain to either of these applications.

      
      

5. Quality of Care

   
   

   1. The Hospital's proposed design and floor plan raise serious questions about the quality of care which could be rendered at its facility. The floor plan and design which it submitted with its application would have to be substantially amended to meet minimum licensure requirements and to provide for quality of care to patients. Its proposal to share essential services between its existing hospital and the proposed nursing home, such as food preparation, laundry and housekeeping, nursing staff, administrators, janitorial services, and therapies is not well integrated, and as presented could reasonably be expected to impair the quality of care available for nursing home residents. As an example, the residents would not have separate rooms for recreation, dining, family visiting and patient lounges, but rather, the same room may serve several of these functions. No evidence was presented to establish that the Hospital's existing kitchen and food service facilities can accommodate the additional workload which would result from serving an additional 99 beds in the proposed nursing home. The atmosphere for residents of the Hospital's proposed facility would be more institutional than the atmosphere presented in the Trust's application. The Hospital's proposal to transfer patients from the nursing home to the existing hospital facility for therapies and some other services would require that they be regularly moved, via a covered walkway, from the nursing home to the hospital, and such an arrangement is not preferred from a health planning, architectural or quality of care perspective. It was not established that the Hospital has maintained a superior rating for its existing facility, although this assertion was included in its application. At the time of application, the Hospital had not finalized an Alzheimer's or AIDS program, although it states in its application that it is committed to serving these patients.

      
      

   2. In order to provide quality care to residents and to meet the minimum standards for licensure which are set forth in Chapter 10D-29, Florida Administrative Code, the Hospital's application would have to be substantially amended. For example, it would have to move and increase the size of the soiled and clean utility rooms, add storage rooms, move one wing of the proposed

      building in order to provide a sufficient view from patient rooms, enlarge its dining and medication rooms, and enclose the proposed covered walkway connecting the nursing home with the existing hospital.

      
      

   3. The Trust will seek a superior rating for its facility, and although the Trust does not have a documented history of superior ratings of nursing homes for which it has been the applicant, John A. McCoy has had approximately thirteen years experience in designing, developing and operating nursing homes. The Trust's proposed facility would provide an integrated, self-contained program for its residents in a residential atmosphere with natural lighting, wide corridors, and a separation of service areas from areas utilized by residents. The lounges, dining spaces, treatment rooms, 15,000 square foot courtyards, and public spaces in the Trust application all exceed those in the Hospital's. The visitor's lounge is designed to allow privacy while residents are visiting with family or friends. The size of the residents' rooms significantly exceed the minimum standard set forth in Chapter 10D-29. There are several lounges for residents with covered patios leading to the courtyard, and a large screened porch off the dining room. While each semi-private room has a residential toilet, rather than an institutional flush valve type, bathing facilities are centralized in order to provide greater supervision and less hazard for the residents. A safe and secure separate unit for Alzheimer patients, with safety fire doors, is proposed in the Trust application, and these residents will have their own dining facility and lounges which will lessen the stress that they tend to feel when in crowded dining rooms with other patients. The building which the Trust proposes to construct will be made of concrete, which offers greater fire resistence than a wooden structure, and will meet or exceed all Chapter 10D-29 requirements for life, fire and safety code regulations.

      
      

6. Availability and Access

   
   

   1. The addition of these two new programs would obviously increase the availability of services in the District. Existing nursing homes in the District are operating at a very high utilization rate, and demand for nursing home beds is significant.

      
      

   2. The Hospital has committed to provide 74% of its services to Medicaid recipients, while the Trust has committed to only 60% Medicaid utilization.

      
      

   3. The Hospital agreed, in its CON for fifteen skilled nursing home beds, to a condition to provide 5% Medicaid, but has yet to serve the first Medicaid patient. The reason for this failure is that it has been unable to obtain a Medicaid provider number from the Florida Medicaid program because its skilled nursing beds remain licensed as hospital beds.

      
      

   4. The Trust's location in northwest Hillsborough County will increase accessibility for patients in the highest priority area of the District.

      
      

   5. The Trust's proposed Alzheimer program is more complete in its presentation than that proposed by the Hospital. The Hospital's design plans do not adequately address the location and facilities for an Alzheimer or AIDS unit.

7. Alternatives Considered

   
   

   1. The Hospital's fifteen skilled nursing beds are not an alternative for the beds sought in this proceeding. Since Medicaid will not, at this time, pay for services to patients in these fifteen beds, they are not available for indigent care to nursing home patients.

      
      

   2. The construction of a new facility to meet the need determined by the Department to exist is the best alternative available since existing nursing homes in the District have experienced very high occupancy rates and no existing provider is proposing the expansion of an existing facility to meet this need.

      
      

8. Personnel Availability and Costs

   
   

   1. The Trust has not provided any revision of its FTE staffing data for the second year of its operation when compared with its FTE figures for year one, although for year one its proposal exceeds staffing requirements. It is reasonable to expect that a facility's occupancy rate will increase in its second year of operation, and that therefore, its staffing needs would also increase.

      
      

   2. In several instances, the Hospital has failed to include an estimate of expenses and supplies associated with various personnel, such as housekeeping, administration, nursing, and dietary. The Hospital's estimate of such expenses was understated by approximately $327,000. In its application, the Hospital proposes to pay its Director of Nursing a lower hourly wage than registered nurses on staff, an unrealistic and unreasonable proposal.

      
      

   3. The Hospital has not included sufficient staff in its application to provide quality care to residents, or to meet the minimum requirements for licensure found in Chapter 10D-29, Florida Administrative Code. The estimate of aids and LPNs required for a 99 bed facility is insufficient. It has failed to include a social services director or activities director. Where functions are proposed to be performed by existing hospital employees, the allocation of FTE's for these individuals to the proposed nursing home is unclear and incomplete.

      
      

   4. It was established that each applicant can identify and recruit sufficent personnel to staff its proposed facility. The Hospital has a record of successful staff recruitment and training for its existing facility, and has an extensive ongoing volunteer program which includes 150 volunteers who provided 35,000 hours of service to the Hospital last year.

      
      

9. Financial Feasibility

   
   

   1. Although there is no requirement that final architectural plans be included with a CON application, an applicant cannot increase square footage after CON approval. The deficiencies in the Hospital's proposed floor plan and design are substantial and would require extensive changes and increases in square footage in order to meet the licensure requirements of Chapter 10D-29, Florida Administrative Code. Specifically, the square footage of the proposed nursing home would have to be increased by approximately 10% according to Dennis O'Keefe, an expert in nursing home architecture, design and cost estimation, and this increase would add approximately $175,000 to the construction costs indicated in the Hospital's application. Further, in order to simply provide the services and facilities described in the Hospital's application narrative,

      the square footage of its proposal would have to be increased by 25%. Even the Hospital's architecture expert, Larry Fusaro, conceded that its proposal would have to be increased by 800 square feet.

      
      

   2. At $52.25 per square foot, the Hospital has underestimated the square footage costs to construct its facility, and was unable at hearing to establish that this estimate is reasonable.

      
      

   3. In its application, the Hospital proposes financing at least $600,000 more than is necessary for the capital expenditures associated with this project. Additionally, the Hospital is proposing to obtain a cash contribution from its existing hospital of $383,798 in funds over the amount of projected capital expenditures. This extra $600,000 financing and excess funding of

      $383,798 are significant factors in the Hospital's projection of financial feasibility in the first and second years of operation.

      
      

   4. The Hospital has failed to include an estimate of the cost to provide food to its residents. While there are a number of additional expense items that do not appear on the Hospital's expense statement because they are being provided through the existing hospital facility, it was not shown that the Hospital has specifically and completely accounted, through the existing facility's budget, for all such expense items which are missing from this proposal. Since the nursing home proposed by the Hospital will not be a cost center of the existing facility's operations, but will be a separate entity with its own financial records, these deficiencies and uncertainties in sharing arrangements are all the more significant.

      
      

   5. The income from private pay rooms was overstated in the Hospital's application by $82,000. Additionally, its non-nursing home revenue was overstated by $29,000, and "other revenue" was also overstated by approximately

      $110,000.

      
      

   6. When errors and underestimates in the Hospital's estimate of project costs, as well as its overestimates of revenue are considered, the Hospital's project is shown to lack financial feasibility.

      
      

   7. In its application, the Hospital's letter of commitment for financing only indicates an interest in studying the feasibility for financing the project, rather than setting forth an actual commitment for financing.

      
      

   8. There have been cost overruns in four CONs previously issued in which John A. McCoy was involved, and three of these overruns were significant, ranging from $399,000 to $496,000.

      
      

   9. The purported audited financial records upon which the Trust proposal is based include a $1,050,000 unsecured note from John A. McCoy, and $475,000 from this unsecured note is listed as a source of funds for the Trust project. It was not established that John A. McCoy has the financial ability to cover this note, which is contingent upon the approval of several CONs. Due to the unsecured, contingent nature of a significant portion of its financing, the Trust proposal is not financially feasible in the short-term.

      
      

   10. The current financial ratio reflected in the parties' applications is a measure of each applicant's ability to meet short term obligations. Based solely on the information presented by each applicant in their applications, the Hospital would be able to meet short term obligations, but the Trust's current ratio is such that it would be reasonable to expect that it would have

       difficulty meeting short term obligations. The Hospital would have a significantly lower long term debt to equity ratio than that reflected in the Trust's application. The Trust's application is highly leveraged, with a significant amount of debt in its balance sheet as compared to equity. This can reasonably be expected to make financing of this project more difficult. The times interest earned ratio for each applicant indicates that while the Hospital would be able to meet debt service payments, the Trust would not. Similarly, the Hospital's operating margin return on assets and return on equity ratios are all positive, indicating it would be able to generate profit on sales revenue from patients, return on assets and on equity. However, these ratios for the Trust's second year of operation indicate that it would experience a loss during this fiscal period. Thus, the Trust proposal has not been shown to be financially feasible in the long-term, according to the data supplied in its own application.

       
       

10. Effect on Competition and Costs

    
    

    1. It cannot be determined whether there will be a significant difference between the charges proposed by each of these applicants and the actual charges at existing providers.

       
       

    2. The Trust has indicated a charge of $81 for a private room and $72.34 for semi-private, while the Hospital has proposed a $92 private room charge and

       $79 for semi-private.

       
       

11. Comparison of Applicants

1. The Trust application is superior to that of the Hospital in terms of the applicable statutory and rule criteria against which these applications are reviewed. Specifically, the Trust application is superior in terms of structural design, ability to meet life, fire and safety code requirements, ability to provide quality care to residents, and in terms of its proposed programs, including its program for Alzheimer's patients. Its construction cost estimates and projected costs of fixed and movable equipment are reasonable and adequate. However, as set forth above, there are deficiencies in the completeness of this application, as well as its financial feasibility, which preclude its approval.

   
   

2. The Trust's projected capital expenditures are estimated at $3,630,500 for a facility of 36,500 gross square feet, while the Hospital's proposal is for 26,256 gross square feet at a capital cost of $3,688,044. Thus, while the Hospital is seeking 99 beds and the Trust is only seeking approval for 90 beds, the Hospital is proposing a facility that is substantially smaller, and yet more costly, than that which is proposed by the Trust. As stated above, the Hospital's cost estimates are substantially understated, and therefore, its proposal would be even more costly than is reflected simply by a comparison of the proposed cost estimates contained in these applications.

   
   

3. While the Hospital's proposal could provide for easier access to a hospital facility for nursing home residents requiring hospitalization, a balanced consideration of all criteria for approval establishes that the Hospital's application should not be approved, even if the Trust's application is denied. Specifically, its design is incomplete, inadequate, and institutional in nature. The site proposed for this facility is inadequate. It could not expand this facility to 120 beds at this site since the site is entirely encompassed by the footprint of the proposed nursing home. The Hospital's construction costs are unrealistically low, contributing to the

   understated nature of cost estimates in its application. The program and facility proposed by the Hospital is dependent upon the existing hospital facility for sharing of essential services, such as dietary and therapy programs, and it was not established that the existing hospital facility would be able to provide such services, or what their cost would be. In contrast, the Trust proposes an independent, self supporting, integrated facility and program. The Hospital does not propose to locate its facility in an area of priority need within the Subdistrict, as does the Trust.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over the parties, and the subject matter in this cause. Section 120.57(1), Florida Statutes.

   
   

5. As the applicants for a CON, the Hospital and the Trust bear the burden of establishing, by competent substantial evidence, their entitlement to a CON for nursing home beds in Hillsborough County. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Rainbow Community Hospital v. Department of Health and Rehabilitative Services, 453 So.2d 1200 (Fla. 1st DCA 1984). Specifically, they must meet the criteria set forth in Section 381.705, Florida Statutes, and Rule 10-5.011(1)(k), Florida Administrative Code, based on a balanced consideration of all matters enumerated therein. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services

   v. Johnson & Johnson, 447 So.2d 361, 363 (Fla. 1st DCA 1984). The weight to be given to each criteria is not fixed, but varies depending on the facts of each case. North Ridge General Hospital v. NME Hospitals, 478 So.2d 1138 (Fla. 1st DCA 1985); Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985).

   The Hospital's Application

   
   

6. It is well settled that substantial amendments to CON applications are prohibited after they have been deemed complete by the Department. See Rule 10- 5.010(2)(b) and former Rule 10-5.008(3), Florida Administrative Code. If an applicant were allowed to substantially amend its application at hearing, the Department would be deprived of an opportunity to initially review the material contained in such amendments, and this could result in the potential for an endless series of changes in CON applications after the preparation of the SAAR, rendering that document virtually meaningless. The changes to its floor plan and design presented by the Hospital at hearing constitute impermissible amendments because they substantially change the basic design and size of the proposed facility in an attempt to meet deficiencies identified in the SAAR. Manor Care, Inc. v. Department of Health and Rehabilitative Services, 558 So.2d

   26 (Fla. 1st DCA 1989). Therefore, in this consideration of the Hospital's application, the architectural design and floor plans contained within its application have been reviewed and considered, and not the amended design and plans presented at hearing.

   
   

7. Additionally, the Hospital's application did not include a board resolution that meets the requirements of Section 381.707(4), Florida Statutes, since it was not established that there was an authorized certification to the Hospital's board resolution that purportedly authorized the filing of this application. Additionally, the Hospital employee who signed the Hospital's CON application was not shown to be the Hospital's authorized representative.

   Therefore, the Hospital application is incomplete since it does not meet these basic requirements for the filing of CON applications set forth in Section 381.707.

   
   

   The Trust's Application

   
   

8. The evidence presented at hearing does not establish that the Trust is a viable legal entity. The beneficiaries of the individual land trusts which comprise the Trust never transferred any of their beneficial interests in these individual trusts to the Trust. Only the beneficiaries of the individual land trusts could transfer their interests, and there is no evidence that they ever did this, in writing, as required by the agreement forming the Trust. While John A. McCoy, as trustee of the individual land trusts, as well as of the Trust, believed that he had complete ownership and control of the assets of these individual trusts, and that there was, therefore, no need for a formal written transfer of beneficial interests to the Trust, there is no legal basis for such belief. The beneficiaries of these land trusts are the owners in fact who operate, manage and control the selling, renting and maintenance of trust property, and who exercise all of the rights of ownership, other than those dealing with the legal title. Datwani v. Netsch, 562 So.2d 721 (Fla. 3rd DCA 1990); Robinson v. Chicago National Bank, 176 NE 2d 659 (Ill. 1st District 1961). Since McCoy had no legal authority to transfer the assets of the individual land trusts to the Trust, the Trust never was effectuated, and is not a viable legal entity. As such, it cannot be an applicant in this case.

   
   

9. In any event, the evidence produced at hearing established that the assets of three of the individual land trusts which purportedly comprised the Trust have been sold. Thus, it appears that the assets of the Trust, if any ever existed, have been depleted.

   
   

10. Finally, the Trust application fails to include an audited financial statement of the Trust, as applicant, which is required by Section 381.707(3), Florida Statutes. Rather, the purported audited financial statement submitted by the Trust contains the combined accounts of individual land trusts, some of which were not identified as being part of the Trust. The Department only reviews the history and relevant data of the applicant, and information concerning other entities cannot be considered. Humhosco, Inc. v. Department of Health and Rehabilitative Services, 15 FLW D1227 (Fla. 1st DCA 1990). Thus, the Trust did not include its own audited financial statement, but rather, a compilation of financial information concerning various individual land trusts, some of which are not included within this Trust. The Trust's application is, therefore, incomplete.

    
    

11. The Department's determination that the Trust application was complete is in error. The Trust has not been shown to be a viable legal entity, and even if it is deemed to exist, a substantial portion of its assets have been sold, leaving it with an unsecured note as virtually its only asset. Therefore, the Trust is not a viable, proper applicant in this case. It has also failed to include with its application an "audited financial statement of the applicant", and on this basis alone its application should be deemed incomplete.

    Balanced Consideration of Criteria

    
    

12. In arriving at a recommendation on any application for a CON, all criteria enumerated in Sections 381.705(1) and (2), Florida Statutes, must be balanced. Although it has been concluded that there are deficiencies in each application which render them incomplete, these applications will be comparatively reviewed in relation to the applicable statutory criteria in order to provide a complete record for review by the Department.

    
    

13. Section 381.705(1)(a), Florida Statutes, requires that CON applicants demonstrate consistency with State and Local Health Plans. These applicants have established that they meet the three generalized goals set forth in the State Health Plan, and that their applications address a need for 99 additional nursing home beds which the Department has determined exists in District VI, Subdistrict 1, Hillsborough County for the January, 1992 planning horizon. However, the Trust application has been shown to more appropriately address the subdivision priority need rankings set forth in the Local Health Plan than does the Hospital's application, due to the proposed location of these two facilities. The Trust application presents a facility which would be more accessible to the greatest need in Hillsborough County. See also Section 381.705(2)(d), Florida Statutes. Neither applicant, however, meets the Local Plan's recommendation that applicants with a well documented history of implementing CONs be given a preference since neither applicant has previously applied for, and obtained, CONs and licensure for nursing homes which were rated by the Department as superior.

    
    

14. The applicants have established that approval of their applications will increase the accessibility and availability of needed services in the District with regard to the overall need for 99 additional beds identified by the Department. The Hospital has committed to provide 74% of its services to Medicaid recipients, while the Trust has committed to only 60% Medicaid utilization. Both of these commitments are consistent with the Local Health Plan. The Hospital has yet to serve its first Medicaid patient in its fifteen skilled nursing home beds, but this failure, as explained by the Hospital, is due to its inability to obtain a Medicaid provider number from the Florida Medicaid program office. Therefore, approval of these applications would be consistent with Section 381.705(1)(b), Florida Statutes.

    
    

15. While the Hospital has a record of providing quality care in its existing hospital facility, its proposed design and floor plan raise serious questions about its ability to render quality care at its proposed nursing home, if approved, without substantial amendments to meet minimum licensure standards and to avoid the wholly institutionalized atmosphere presented in its application. Its proposal to share essential services between the nursing home and existing facility is unclear, and lacks the specificity needed to determine if the existing facility has the capacity and resources to share such services with the nursing home. The transfer of nursing home patients to the hospital facility through a covered walkway for therapies and other services is not a preferred method of providing such care to nursing home residents. On the other hand, while this is the first CON application filed by the Trust, John A. McCoy has had approximately thirteen years experience in designing, developing and operating nursing homes. The design and floor plan of the Trust's proposed facility is superior to the Hospital's from a quality of care standpoint since it sets forth an integrated, self-contained program for residents in a residential atmosphere which would require minimal modification to meet the

    requirements of Chapter 10D-29, Florida Administrative Code. The Trust application is, therefore, more consistent with the criteria in Section 381.705(1)(c), than the application of the Hospital.

    
    

16. The Hospital's fifteen skilled nursing home beds are not a reasonable alternative to address the need for 99 additional nursing home beds identified by the Department, to which the applications at issue in this case are addressed. Existing facilities in the District are experiencing utilization rates exceeding 95%, and yet are not pursuing, in this proceeding, any proposal to expand their existing facilities to meet this need. Therefore, the construction of a new facility to meet this need is reasonable and appropriate, and is consistent with Sections 381.705(1)(d) and (e), Florida Statutes. See also Sections 381.705(2)(a),(b) and (c), Florida Statutes.

    
    

17. The Hospital has shown that it has a successful staff recruiting and training program at its existing facility, and the Trust presented evidence that it could staff its facility. However, the Hospital has not included sufficient staff, or a reasonable estimate of associated expenses, which would be needed to provide quality care to residents or to meet the minimum requirements for licensure. It represents that essential services and staff will be shared, but the allocation of FTE's and associated costs for individuals performing shared services is unclear and incomplete. The Trust has proposed adequate staffing for its first year of operation, but has not provided data concerning any increase in manpower needs and costs which would reasonably be expected to occur in its second year. Thus, while these applicants have established that necessary personnel resources and health manpower are available for these proposed new programs, it cannot be determined if these applicants have the financial resources to finance proposed project costs because their estimates of FTEs and associated costs are incomplete. Section 381.705(1)(h).

    
    

18. The record fails to establish the long-term financial feasibility of either program. The Hospital would have to substantially amend its application in order to provide a floor plan and design which meets the requirements of Chapter 10D-29 and provides quality care to its residents. When the costs associated with such changes in square footage and design, as well as costs associated with necessary expenses which have not been specifically identified and accounted for in the Hospital's application, and its overestimate of revenues is considered, the Hospital's proposal is shown to lack financial feasibility. The Trust's proposal is not financially feasible in the short term due to the contingent, unsecured nature of a significant portion of its financing through a promissory note from John A. McCoy. An examination of various financial ratios reflected in the Trust's application also shows that its proposal is not financially feasibile in the long-term. Thus, these applications are not consistent with the criteria found at Section 381.705(1)(i).

    
    

19. It has not been shown that approval of these applications will have a positive impact on the costs of providing nursing home services, since it was not shown that there would be a significant difference between the charges proposed by these applicants and the actual charges at existing providers. The Trust proposes lower charges than the Hospital for both private and semi-private rooms. Section 381.705(1)(l), Florida Statutes. However, the charges proposed by both applicants are consistent with allowable Medicaid rates. Section 381.705(2)(e), Florida Statutes.

20. The costs associated with the Hospital's proposal are unreasonable and understated, while project revenues are overstated. It was not established that the Hospital could construct this project at the cost of $52.25 per square foot set forth in its application, especially when the substantial design modifications which would have to be made to meet the requirements of Chapter 10D-29 are considered. On the other hand, the Trust proposal presents reasonable cost estimates and a design which would need only minimal modification in the licensure process. Thus, the Trust application is consistent with Section 381.705(1)(m), while the Hospital's proposal does not meet this criteria.

    
    

21. Section 381.705(1)(n) requires an assessment of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. As new applicants for nursing home beds, the applicants do not have a directly relevant record which can be assessed for consistency with this criteria. However, based upon its existing hospital facility, and the record at existing facilities with which John A. McCoy has been associated, both the Hospital and the Trust presented evidence to establish the reasonable likelihood that each would meet the commitments set forth in their applications and therefore, operate their facilities in a manner consistent with this criteria.

    
    

22. In conclusion, but without limiting that which is set forth above, the Trust application for CON 5924 should be denied because, (a) it has not been shown to be a viable entity and, therefore, cannot be an applicant for a CON,

(b) its application was incomplete and deficient with regard to its purported audited financial statement, and (c) while it is a superior applicant to the Hospital, it fails to meet several important criteria for approval, including financial feasibility. The Hospital application for CON 5982 should also be denied because, (a) it lacks an authorized board resolution and certification of filing, and is, therefore, incomplete, and (b) fails to meet the criteria for approval concerning consistency with the Local Health Plan, quality of care to residents, financial feasibility, costs of construction and of manpower needs.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Department enter a Final Order which denies the application of South Florida Baptist Hospital, Inc., for CON 5982, and of John A. McCoy Florida SNF Trust for CON 5924.

DONE AND ENTERED this 14th day of September 1990 in Tallahassee, Florida.

DONALD D. CONN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Filed with the Clerk of the Division of Administrative Hearings this

14th day of September 1990.

APPENDIX

Rulings on Proposed Findings of Fact filed by the Hospital

Findings 25, 28.

1. Adopted in Finding 24.

2. Rejected in Findings 25, 28.

3. Adopted in Findings 21, 46.

4. Rejected in Finding 25.

5. Adopted and Rejected in Finding 29.

65-67. Rejected in Finding 29, and as immaterial and irrelevant.

1. Adopted in Finding 18.

2. Adopted in Finding 21.

3. Adopted in Finding 13.

4. Adopted in Findings 18, 32.

5. Rejected in Findings 29, 30.

73-74. Rejected as irrelevant.

75. Rejected in Findings 29, 30. 76-77. Rejected in Finding 41.

1. Adopted in Finding 57.

2. Adopted and Rejected in Finding 39. 80-82. Adopted in Finding 37.

83-84. Adopted in Finding 38.

85. Rejected in Findings 29, 40, 41, 46. 86-87. Adopted in Findings 21, 29.

88. Adopted in Findings 14, 42. 89-90. Adopted in Findings 21, 29.

91. Adopted and Rejected in part in Findings 40, 41. 92-94. Adopted in Finding 41.

95. Adopted in Finding 46.

96-99. Rejected in Findings 40, 44-48.

100-101 Rejected as immaterial and unnecessary. 102-104 Adopted in Finding 51.

1. Rejected as immaterial and unnecessary.

2. Adopted in Finding 52.

3. Rejected in Findings 53, 54.

4. Adopted and Rejected in Finding 28.

109-112 Adopted and Rejected in Findings 21, 43.

1. Rejected as unnecessary and immaterial.

2. Adopted in part in Finding 43.

3. Rejected as immaterial.

116-117 Rejected as not based on competent substantial evidence.

118. Rejected as irrelevant.

119-121 Rejected in Findings 43, 44.

122-123 Rejected as unnecessary and immaterial. 124-125 Adopted in Finding 50.

1. Adopted in Finding 34.

2. Adopted in Finding 33. 128-129 Rejected in Finding 27.

1. Rejected in Finding 27, and as irrelevant and immaterial.

2. Rejected in Finding 57.

3. Rejected in Finding 36.

133-136 Rejected as unnecessary and cumulative.

137. Adopted in Finding 52.

138-141 Rejected as immaterial and irrelevant.

1. Adopted in Finding 39.

2. Rejected as unnecessary.

3. Adopted in Finding 57.

4. Adopted in Finding 25.

5. Adopted in Finding 33.

Rulings on Proposed Findings of Fact filed by the Trust:

1. Adopted in Finding 17.

2. Adopted in Finding 20.

3. Rejected in Findings 10, 11.

4. Adopted in Finding 25. 5-6. Adopted in Finding 11.

1. Adopted in Findings 1, 11.

2. Adopted in Finding 23.

3. Adopted in Finding 22.

4. Adopted in Finding 31.

5. Adopted and Rejected in Findings 1-3, 31.

6. Adopted in Finding 20.

7. Rejected in Finding 50, and as irrelevant.

8. Adopted in Findings 20, 51, but Rejected in Findings 51, 52.

9. Adopted and Rejected in Findings 8, 23.

10. Adopted in Findings 1, 5, 7, 8.

11. Adopted and Rejected in Finding 8.

12. Adopted in Finding 19.

13. Adopted in Finding 21.

14. Adopted in Finding 13.

15. Adopted in Finding 15.

16. Adopted in Findings 21, 45.

17. Adopted in Finding 21.

18. Adopted in Finding 12.

19. Adopted in Finding 46.

20. Rejected as irrelevant.

21. Adopted in Finding 23.

22. Adopted in Findings 22, 57.

23. Adopted in Finding 25.

24. Adopted in Finding 27.

25. Adopted in Finding 26.

26. Rejected as unnecessary.

27. Rejected in Finding 28.

28. Adopted in Finding 24.

29. Adopted in Finding 38.

30. Adopted in Finding 26.

31. Rejected as unnecessary.

32. Adopted in Finding 25.

33. Adopted in Finding 15.

34. Adopted in Findings 27, 34.

35. Rejected as irrelevant and not based on competent substantial evidence.

36. Adopted in Finding 28.

43 Adopted in Finding 15.

1. Adopted in Findings 24, 25.

2. Adopted in Findings 29, 55.

3. Adopted in Finding 25.

4. Adopted in Finding 26.

5. Adopted in Finding 21, but otherwise Rejected as irrelevant.

6. Adopted in Finding 25.

7. Adopted in Findings 29, 55. 51-54. Adopted in Finding 31.

55. Adopted and Rejected in part in Finding 39. 56-57. Adopted in Finding 31.

58-61. Adopted in Findings 21, 29, 30.

1. Adopted in Finding 40.

2. Adopted in Finding 29.

64-65. Adopted in Findings 40, 41.

1. Adopted in Finding 33, but otherwise Rejected as unnecessary.

2. Adopted in Findings 27, 34.

68-74. Rejected as unnecessary due to Finding 52.

75. Rejected in Findings 8, 23.

76-80. Rejected in Finding 52, and otherwise as immaterial and unnecessary.

1. Rejected in Findings 51, 52.

2. Adopted in Findings 40, 46.

3. Adopted in Finding 47.

4. Adopted in Finding 48.

85-87. Adopted and Rejected in part in Findings 39, 42. 88-91. Adopted in Findings 40, 41.

92-94. Adopted in Finding 56.

95-97. Adopted in Finding 54, but otherwise Rejected as unnecessary.

98-99. Rejected as cumulative.

100. Adopted in Finding 43.

101-115 Adopted in Finding 31, but otherwise Rejected as unnecessary and cumulative.

116-117 Adopted in Finding 55.

118-119 Rejected as unnecessary and cumulative.

120-145 Adopted in Findings 21, 29, 43, 44, 57, but otherwise Rejected as cumulative, immaterial and unnecessary.

1. Adopted in Finding 21.

2. Adopted in Finding 29.

3. Adopted in Finding 43.

4. Adopted in Finding 57.

5. Adopted in Finding 29.

Rulings on Proposed Findings of Fact filed by the Department: 1-2. Adopted in Finding 1.

3. Adopted in Findings 1, 2. 4-5. Adopted in Finding 2.

1. Adopted in Finding 3.

2. Adopted in Finding 2.

3. Adopted in Finding 3.

9-10. Rejected as immaterial. 11-13. Adopted in Finding 5.

14-18. Adopted in Finding 7.

19-20. Adopted in Finding 10.

21-23. Adopted in Finding 9.

1. Adopted in Finding 11.

2. Adopted in part in Finding 11. 26-31. Adopted in Finding 8.

32. Adopted in Finding 6.

33-35. Adopted in Findings 21, 29, 30, 43.

1. Adopted in Finding 44.

2. Adopted in Findings 21, 43. 38-39. Adopted in Finding 21.

1. Adopted in Findings 43-48.

2. Adopted in Findings 21, 43.

3. Adopted in Finding 29.

4. Adopted in Finding 28.

5. Adopted in Findings 40, 41.

6. Adopted in Finding 40.

7. Adopted in Finding 49.

8. Adopted in Finding 29. 48-53. Adopted in Finding 30.

54. Adopted in part in Finding 43. 55-56. Adopted in Finding 29.

1. Adopted in Finding 55.

2. Adopted in Finding 57.

3. Rejected as unnecessary and cumulative.

4. Adopted in Finding 29.

5. Adopted in Findings 21, 57.

6. Adopted in Findings 12, 29. 63-64. Adopted in Finding 45.

65-66. Adopted in Finding 40.

1. Adopted in Finding 47.

2. Adopted in Finding 45. 69-70. Adopted in Finding 40. 71-73. Adopted in Finding 41.

1. Adopted in Finding 55.

2. Adopted in Finding 57.

3. Rejected as unnecessary and immaterial. 77-78. Adopted in Finding 17.

79. Adopted in Findings 8, 23.

Copies furnished:

Theodore E. Mack, Esquire

315 South Calhoun Street Suite 500

Tallahassee, FL 32301

R. Terry Rigsby, Esquire

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

Edgar Lee Elzie, Jr., Esquire

P. O. Box 82 Tallahassee, FL 32302

R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700

Linda Harris, Acting General Counsel 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Gregory Coler, Secretary 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Docket for Case No: 90-000064

Orders for Case No: 90-000064