Petitioner: VENICE HOSPITAL, INC.
Respondent: DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
Judges: DIANE K. KIESLING
Agency: Department of Health
Locations: Tallahassee, Florida
Filed: Apr. 20, 1990
Status: Closed
DOAH Final Order on Wednesday, October 31, 1990.
Latest Update: Oct. 31, 1990
Summary: The ultimate issue is whether proposed Rules 10-5.002, 10-5.0025, 10-5.003, 10-5.004, 10-5.005, 10-5.008, 10-5.0085, 10-5.010, 10-5.0105, 10-5.020, and 10- 5.024, published in Volume 16, Number 13, Florida Administrative Weekly, are invalid exercises of delegated legislative authority.Various proposed rule amendments to HRS chapter 10-5 (regarding Certificate Of Need reviews are invalid.) Economic Impact Statement not defective.
90-2383.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
VENICE HOSPITAL, INC. )
)
Petitioner, )
)
vs. ) CASE NO. 90-2383RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) ADVENTIST HEALTH SYSTEM/SUNBELT, ) INC. d/b/a FLORIDA HOSPITAL )
)
Petitioner, )
)
vs. ) CASE NO. 90-2384RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) FLORIDA HOSPITAL, ASSOCIATION, ) INC. )
)
Petitioner, )
)
vs. ) CASE NO. 90-2385RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
)
HUMANA, INC., HUMHOSCO, INC.; ) AND HUMANA OF FLORIDA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 90-2386RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) PIA PSYCHIATRIC HOSPITALS, INC., ) AND PIA SARASOTA PALMS, INC., ) d/b/a SARASOTA PALMS HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 90-2393RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) NME HOSPITALS, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 90-2394RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
)
SARASOTA COUNTY PUBLIC HOSPITAL ) BOARD, d/b/a MEMORIAL HOSPITAL, ) SARASOTA, )
)
Petitioner, )
)
vs. ) CASE NO. 90-2395RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) MTR-SEFLA and MTR-CENFLA, )
)
Petitioners, )
)
vs. ) CASE NO. 90-2430RP
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
)
FINAL ORDER
Pursuant to notice, a formal hearing was held in this case on May 21-23, June 7, July 30-31, and August 1, 1990, in Tallahassee, Florida, before the Division of Administrative Hearings, by its designated Hearing Officer, Diane K. Kiesling.
APPEARANCES
For Petitioners Jeffery A. Boone and Robert P. Mudge VENICE HOSPITAL Attorneys at Law
ADVENTIST: 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284
For Petitioner Kenneth F. Hoffman FLORIDA HOSPITAL Robert Downie ASSOCIATION: Attorneys at Law
2700 Blair Stone Road Post Office Box 6507
Tallahassee, Florida 32314-6507
For Petitioner James C. Hauser HUMANA: Attorney at Law
204-B South Monroe Street Tallahassee, Florida 32301
For Petitioners C. Gary Williams PIA and NME: Stephen C. Emmanuel
Attorneys at Law Post Office Box 391
Tallahassee, Florida 32302
For Petitioner Robert A. Weiss SARASOTA: John M. Knight
Attorneys at Law
The Perkins House, Suite 101
118 North Gadsden Street Tallahassee, Florida 32301
Theodore C. Eastmoore Attorney at Law
1550 Ringling Boulevard Post Office Box 3258 Sarasota, Florida 34230
For Petitioners Donna H. Stinson MTR-SEFLA and Attorney at Law
MTR-CENFLA: The Perkins House, Suite 100
118 North Gadsden Street Tallahassee, Florida 32301
For Respondent Thomas R. Cooper DEPARTMENT Edward G. Labrador
OF HEALTH AND Assistant General Counsel REHABILITATIVE 2727 Mahan Drive, Suite 103 SERVICES: Tallahassee, Florida 32399-0700
For Intervenor John Radey
HCA DOCTORS: Elizabeth W. McArthur
Attorneys at Law
Suite 1000, Monroe Park Tower
101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
STATEMENT OF ISSUE
The ultimate issue is whether proposed Rules 10-5.002, 10-5.0025, 10-5.003, 10-5.004, 10-5.005, 10-5.008, 10-5.0085, 10-5.010, 10-5.0105, 10-5.020, and 10-
5.024, published in Volume 16, Number 13, Florida Administrative Weekly, are invalid exercises of delegated legislative authority.
PRELIMINARY STATEMENT
Venice Hospital, Inc., (Venice Hospital); Adventist Health System/Sunbelt, Inc., d/b/a Florida Hospital (Adventist); Florida Hospital Association, Inc., (FHA); Humana, Inc., Humhosco, Inc., and Humana of Florida, Inc., (Humana); PIA Psychiatric Hospitals, Inc., and PIA Sarasota Palms, Inc., d/b/a Sarasota Palms Hospital (PIA); NME Hospitals, Inc., (NME); Sarasota County Public Hospital Board, d/b/a Memorial Hospital, Sarasota, (Sarasota); Charter Hospital St.
Louis, d/b/a Charter Hospital of Kissimmee (Charter); and MTR-SEFLA and MTR- CENFLA filed petitions challenging various portions of the proposed amendments
to Chapter 10-5. Charter voluntarily dismissed its petition at the beginning of the formal hearing. MTR-SEFLA and MTR-CENFLA were dismissed based on the untimely filing of their petition and their lack of standing. HCA Doctors Hospital of Sarasota (HCA) was granted leave to intervene.
Venice Hospital presented the testimony of Larry Bebee and Amy Jones.
Venice Hospital's Exhibit 5 was admitted in evidence and official recognition was granted for Venice Hospital's Exhibits 1-4.
Adventist presented the testimony of Armond Balsano, Christine Thompson, and Amy Jones.
Humana presented the testimony of Armond Balsano, Amy Jones, and James H. Cruickshank. Humana's Exhibits 1, 2, and 5 were admitted in evidence and Humana's Exhibits 3 and 6-10 were proferred.
Sarasota presented the testimony of Michael C. Carroll.
The Department of Health and Rehabilitative Services presented the testimony of David Murray, Amy Jones, and Sharon Gordon-Girvin.
Joint Exhibits 1 and 2 were admitted in evidence.
On July 31, 1990, during the course of the hearing all the parties except FHA entered into a Stipulation which settled many of the issues raised in the petitions. The Stipulation did not settle any of the issues raised by FHA in its petition. The Stipulation was admitted into evidence as Joint Exhibit 2 and is binding on all parties who signed it. As part of its terms, the Stipulation amended the proposed rules and the amendments were attached to it as Exhibit A. Since the amendments contained in Exhibit A do not adversely impact FHA and are agreed to by all the other parties, the proposed rules are modified to incorporate the changes set forth in Exhibit A, which is attached hereto and incorporated herein as if fully set forth in the text of this Final Order.
HRS stipulated at the onset of the hearing that all of the remaining parties have standing to participate in this case and standing is not an issue that will be considered further herein.
The transcript of the proceedings was filed on August 13, 1990. The parties all timely filed proposed findings of fact and proposed conclusions of law. By their proposed orders, the parties further clarified the portions of the proposed rules which remain at issue. In considering the petitions, the Stipulation, and the proposed orders in pari materia, it appears that the following portions of the proposed rules are under challenge by the identified parties:
Venice 10-5.002(1), (13), (52); 10-
and 5.008(1)(c)3, (2)(d) & (f),
Adventist (3)(b); and 10-5.020.
FHA 10-5.005(2)(e); 10-5.008(1)(c)3
and (2)(d); and 10-5.0085(4).
FHA also attempts to challenge Rule 10-5.002 (61), but that rule is an existing rule and was not challenged in its petition.
Humana 10-5.008(1)(c)3 and (3)(b);
and 10-5.010(2). Humana also argues in support of 10-5.004(2)(g).
NME & PIA 10-5.008(1)(c)3 & (3)(b); 10- 5.010(2).
Sarasota 10-5.004(2)(g).
HCA HCA argues in support of 10- 5.004(2)(g).
The adequacy of the Economic Impact Statement (EIS) remains an issue as it relates to the challenged portions of the proposed rules.
All proposed findings of fact and conclusions of law have been considered.
A specific ruling on each proposed finding of fact is made in the Appendix attached hereto and made a part of this Final Order.
FINDINGS OF FACT
10-5.002(1)
Proposed Rule 10-5.002(1) defines the term "acquisition" to mean "the act of possessing or controlling, in any manner or by any means, a health care facility, major medical equipment, an institutional health service or medical office building as one's own."
The proposed rule is HRS's attempt to clarify the term's meaning as used in Section 381.706, Florida Statutes. It is based on dictionary definitions, primarily, Webster's Dictionary, Ninth Edition, but also Black's Law Dictionary.
Armond Balsano, an expert in health planning, did not believe the definition to be reasonable and thought it was unclear, ambiguous, and open ended. However his opinion in this regard was not persuasive.
Proposed Rule 10-5.002(1) is reasonable and sufficiently clear to withstand this challenge.
10-5.002(13) and 10-5.008(2)(d)--Skilled Nursing Issues
Proposed Rule 10-5.002(13) defines "community nursing home beds" as relevant to this proceeding to include "acute care beds licensed pursuant to Chapter 395, Part I, F.S., but designated as skilled nursing beds, which are reviewable pursuant to Rule 10-5.011(1)(k) [the nursing home bed need methodology]."
Proposed Rule 10-5.008(2)(d) relates to fixed need pools and states:
(d) Skilled Nursing Units in Hospitals.
Beds in skilled nursing units which are a distinct part of a hospital will be counted in the nursing home bed inventory, even though they retain their licensure as acute care beds.
Essentially, proposed Rule 10-5.008(2)(d) requires that skilled nursing beds in a distinct unit in a hospital be categorized as hospital "general" beds on the hospital license, but that they be carried at the same time on the inventory of community nursing home beds for purposes of projecting need under "pool" projections utilized by HRS for evaluating need for new beds.
Proposed Rule 10-5.008(2)(d) attempts to codify what has been HRS's policy. This rule proposes that licensed acute care beds, which form a distinct part of a hospital-based skilled nursing unit, be counted in the nursing home bed inventory to project future need with respect to the nursing home bed need formula. Thus, these beds will no longer be counted or used in the acute care bed need formula to project the acute care bed need.
From a health planning standpoint, several reasons exist for and against the inclusion of these hospital-based skilled nursing units within the nursing home bed inventory.
A hospital cannot use its acute care beds as skilled nursing beds without a certificate of need. However, pursuant to this rule, to obtain these distinct unit beds a hospital is forced to compete with nursing home applicants for those beds.
Skilled nursing beds in hospitals are "general" beds set up in a special category for which there is no specialty hospital bed methodology. Applications are reviewed under the nursing home bed methodology.
A skilled nursing unit in a hospital is a unit, certified under the Health Care Finance Administration program, to identify a distinct part of the hospital as being a service in which there is 24-hour nursing with an RN nurse on the day shift. There also must be skilled nursing multi-disciplinary treatments and therapy services provided.
The Health Care Finance Administration categorizes such beds as hospital beds, a distinct part of a hospital.
Skilled nursing facility (SNF) beds in a hospital are used to treat acutely ill patients with an average length of stay of 20 days, who are different from the extended care patients found in community nursing homes, who have lengths of stay of one year or longer.
Hospital skilled nursing patients are overwhelmingly Medicare patients, whereas community nursing home patients are overwhelmingly Medicaid patients.
In Florida, Medicaid does not reimburse for care provided in the hospital-based skilled nursing unit.
Hospital-based skilled nursing units are reimbursed by the Health Care Financing Administration (HCFA) on a cost-based method. This system of reimbursement is also used with respect to non-hospital-based skilled nursing facilities. Furthermore, this means that hospital-based units are no longer reimbursed under the DRG (Diagnosis Related Groups) system.
Medicare limits the patient benefit period to 100 days, regardless of the patient setting. Except for hospitals having higher allowable costs, federal guidelines do not differentiate between hospital and non-hospital-based skilled nursing units.
The level of staffing is higher in a hospital nursing unit than in any community nursing home.
Specialized equipment and services are offered in the hospital skilled nursing unit which are not offered in the community nursing homes.
There are different conceptual approaches to care in the skilled nursing unit in a hospital as compared to those provided in community nursing facilities. Acutely ill patients on intravenous feeding or hyperalimentation, and those with multiple diagnoses require the hospital level nursing care. These units are not intended to provide residential care.
Hospital beds are licensed under Rule 10D-28, whereas nursing home beds are licensed under Rule 10D-29, Florida Administrative Code. Although the proposed rule requires skilled nursing beds in distinct units of hospitals to be comparatively and competitively reviewed with community nursing home applications, the two types of beds are not comparable. This creates an unfair comparison. As a matter of good health planning, these skilled units in hospitals should be reviewed differently and separately from regular community nursing home beds.
By their nature, SNF beds in distinct units in hospitals are in fact "hospital" beds under Chapter 395 and not nursing home beds under Chapter 400, Florida Statutes. Hospital-based skilled nursing units are not considered special care units as defined in Rule 10D-28, Florida Administrative Code. Specifically, special care units deal with very specialized intensive care settings. However, pursuant to some federal guidelines and state licensing requirements, a skilled nursing unit is considered a custodial type setting. For example, special care units are surveyed about once every two years and skilled nursing facilities once every year. However, failure to conduct a
survey is not a determinative factor for special care units continuing under the Medicaid/Medicare programs. Skilled nursing units are not as fortunate. In fact, failure to survey a skilled nursing unit leads to the expiration of its enrollment in the Medicaid/Medicare programs.
Section 395.003(4), Florida Statutes, defines the various types of hospital beds and states that beds not covered under any specialty bed need methodology, which a skilled nursing unit is not, shall be considered general beds. This is why these hospital-based skilled nursing units are licensed as general acute care beds.
The proposed rule amendments also present logistical problems. Hospitals and nursing homes are licensed under different chapters of the Florida Statues and the Florida Administrative Code, and those standards do not match. Their projects are in different planning cycles. HRS intends that hospitals apply for skilled nursing units on the nursing home application currently in use, but admits that the application does not really fit this type of project.
The proposed rule amendments regarding skilled nursing units will be costly and burdensome. Although skilled nursing units offer valuable services and few currently exist, under the nursing home need rule it will be difficult to prove need for these projects. A hospital desiring to establish one will likely find itself having either to challenge the fixed need pool for nursing home beds or litigate the almost inevitable denial of its application for lack of need. Either course of action would involve time and expense over and above those usually encountered in the CON process, particularly because such an application would likely draw the opposition of existing nursing homes, even though their services are not really comparable.
The proposed rule amendments do not comport with the basic health planning policy of reducing over-bedding by encouraging conversion to other services. It is unlikely a hospital could get a skilled nursing unit by showing a numeric need under the nursing home need methodology, and any attempt to show exceptional circumstances would be hampered by the lack of utilization data. Such beneficial conversions will probably also be chilled by the difficulty in converting a skilled nursing unit back to general acute care use, should it not be successful. Given the extreme acute care over-bedding which exists throughout the state, it is not anticipated that there will be any need for additional acute care beds for the foreseeable future. Since a skilled nursing unit would not be counted in the acute care bed inventory, the reconversion to acute care use would have to undergo CON review and would almost certainly be denied.
10-5.002(52)
Proposed Rule 10-5.002(52) defines refinancing costs, which Rule 10- 5.004(2)(c) states are subject to expedited review under Section 381.706(2). The purpose of this definition is to provide guidance to applicants by identifying examples that are often encountered in either bond refunding or refinancing. The definition is straightforward in nature and encompasses the elements common in refinancing. Mr. Balsano, testifying for Adventist, readily acknowledged the preciseness of this definition, but faulted the definition for its absence of any discussion as to the potential benefit of refinancing.
However, Mr. Balsano's concerns were misplaced. Distinctions exist between the benefits of refinancing and the meaning of refinancing. Indeed, the benefits of refinancing go to the merit of whether or not the certificate of need should be granted. Since every applicant is required to address the review criteria found in Section 381.705, Florida Statutes, the proper forum for addressing the benefits of refinancing is in the CON application itself. Proposed Rule 10- 5.002(52) is simply a definition.
10-5.004(2)(g)--Projects Subject to Expedited Review: Capital Expenditure Projects
This proposed rule allows applicants who propose a capital expenditure project to improve, repair, or correct their existing facility to apply for a certificate of need on an expedited basis. This proposed rule is conducive to encouraging existing facilities to make needed improvements by seeking approval of the expenditure expeditiously and without the delays associated with batching cycles. It is important for a provider to make and complete corrections or improvements quickly in order to minimize the disruption of patient care. Some of the more common capital expenditures include expansion of emergency departments or emergency rooms and the renovation or expansion of other patient care areas. An application to relocate a hospital is also considered a capital expenditure.
Under extreme circumstances of pervasive physical plant deficiencies, coupled with a lack of practical renovation options to overcome plant deficiencies, an existing health care facility might apply for a replacement facility. Only when such replacement facility would (1) involve no new beds or changed bed use (e.g., from general acute care to comprehensive medical rehabilitation beds), (2) involve no substantial change in services, and (3) involve no substantial change in service area would HRS consider such an application to be solely reviewable as a capital expenditure and thus entitled to expedited review under the proposed rule.
HRS reviews replacement facility applications by carefully assessing the applicants' claims of pervasive physical plant problems. HRS sends a team of experts, including architects, to the existing facilities to independently judge whether the physical plant is in such a condition as would warrant replacement and whether renovations could serve as a practical alternative from a physical standpoint. HRS also performs an economic assessment to compare the alternatives of replacement versus renovation in order to determine the most cost-effective alternative. Replacement facility applications typically involve a determination not of whether dollars will be spent, but rather, how they are best spent--by replacement or by renovation. As such, HRS helps to contain health care costs without participation by competitors in these institution- specific decisions.
Pursuant to Section 381.709(5)(b), Florida Statutes, competitors do not have standing to challenge a proposed capital expenditure and, therefore, there is no adequate reason to defer review of these projects until a future application cycle.
Further, when a capital expenditure approval is sought to replace or relocate an existing facility, no one other than the applicant/existing facility can apply to spend or make those expenditures. An unrelated entity cannot compete to replace another entity's existing facility. Conducting a comparative review with respect to a capital expenditure project for the replacement of a hospital is illogical, unworkable, and futile.
10.5.008(1)(c)3 and 10-5.008(3)(b)--Capitalized Costs
Proposed Rule 10-5.008(1)(c) requires that a letter of intent describe the proposal with specificity. Subsection (1)(c)3 sets forth the following requirement:
3. A proposed capital expenditure must be rounded to the nearest dollar . . . . If no capital expenditure is proposed, the applicant
must so indicate. If the actual capital expenditure has already been incurred, either wholly or in part, and the project will account for such expenditures as capitalized costs, regardless of the purpose, then the total capital expenditure of the project shall be indicated.
As related to this same subject, proposed Rule 10-5.008(3)(b) states:
(b) Capital expenditures incurred for projects not originally subject to Certificate of Need
review must be identified as a proposed expenditure when such expenditure will be capitalized in a project for which a Certificate of Need is required.
HRS asserts that this proposed rule codifies HRS's existing policy and that the purpose of this provision is to develop consistency in how applicants treat an already incurred capital expenditure. It is also allegedly intended that this proposed rule give uniformity concerning how project costs are calculated and allocated. For example, if an applicant is going to convert space from one use to another, the value of the space must be included in the applicant's capital expenditure estimate.
While Ms. Gordon-Girvin, HRS's health planning expert, opined that this proposed rule is consistent with current practices in the health care market place concerning how capital expenditures are treated and that it forms a common basis of comparison for comparing the applicants' treatment of capitalized costs, the greater weight of the credible evidence does not support these opinions.
Actually, the effect of these proposed rules is that a certificate of need applicant, who has previously made capital expenditures and later pursues a certificate of need project utilizing such prior capitalized costs, must identify and include those prior capital expenditures as a portion of the certificate of need project, even though no actual incremental funds will be necessary or spent in connection with the project.
One of the problems with proposed Rules 10-5.008(1)(c)3 and (3)(b) is that they both ignore a distinction between fixed costs and variable costs which is fundamental to a financial evaluation of any project. Specifically, it is inappropriate to require an applicant who will have no incremental costs in implementing a project to allocate a portion of prior capital expenditures, where such an application is measured against a competing application in which the entire outlay for capital costs will be necessary. This distorts the evaluation due to inappropriately comparing prior fixed costs to future variable costs.
An example of the illogical result of the proposed rules provides guidance. If a hospital has already spent one million dollars to add a CON- exempt outpatient cardiac cath lab, and later seeks to establish an inpatient cardiac cath program, under these proposed provisions, that hospital would have to represent a cost of one million dollars in its application to convert the outpatient cardiac cath lab to an inpatient project. From a health planning and financial standpoint, this is inappropriate. Having to include capital costs which have already been incurred and viewing those costs in the context of the decision to approve or reject a CON project is misleading.
Ultimately, the purpose and objective of the CON process is to minimize duplication of health care resources. The proposed rules work in conflict with that goal. Conversion of underutilized resources to resources that could be more beneficially utilized is a policy that is encouraged by HRS. This policy is encouraged in the various need methodologies. One of the reasons to encourage a conversion is that often zero dollars are involved to convert a project from one CON-approved use to another CON-approved use. Proposed Rules
10-5.008(1)(c)3 and (3)(b) would eliminate consideration of the minimal cost involved in a conversion project and are therefore unreasonable. Moreover, the proposed rules could end up creating excess resources in the system simply because they would eliminate the preference for conversion as opposed to new construction.
With respect to allocating prior capital expenditures, the proposed rules, as alleged by HRS, are intended to codify existing HRS policy as well as provide uniformity to the process of ascertaining project costs. These proposed rules do neither. In point of fact, HRS has accepted, within the last three years, conversion projects indicating a zero project cost in the application. The proposed rules are thus inconsistent with current HRS policy of accepting and evaluating these applications and are contrary to HRS's stated intention in this proceeding. However, with respect to providing uniformity to the process of ascertaining project costs, the proposed rules provide no methodology by which prior capital cost allocations are to be determined. Indeed, there is no uniformity proposed regarding how a health care facility or applicant accounts for capital expenditures. Generally, a capital expenditure is one that is "material" and the useful life of the item capitalized exceeds one year. What is material to one applicant may be entirely different from that which would be material to another applicant. Thus, the uniformity of presentation of prior capitalized costs contained in CON applications submitted to HRS for review will not and cannot exist as envisioned by HRS in its proposed rules.
10-5.005(2)(e)
Proposed Rule 10-5.005 relates to exemption from CON review and Subsection (2)(e) states as follows:
(e) Failure to initiate the exemption within twelve months after it appears in the Florida Administrative Weekly will result in the notice of exemption being void.
The alleged basis for this proposed rule is to protect those persons pursuing an exemption by ensuring that they are still eligible for it under the same facts and circumstances. Additionally, HRS has encountered problems in the past when entities have received a determination of exemption for a project but have failed to implement the project. In one case, HRS gave a nursing home an exemption to replace a facility on site. After discharging the patients, the nursing home took no further action. However, these beds are still licensed and are included in the bed inventory. Such a situation artificially suppresses the need for nursing home beds in that district for the planning horizon. The proposed rule is an attempted response to this problem.
The laws implemented by the proposed rules are Section 381.706 and 381.713(1). Pursuant to these sections, HRS must grant an exemption if the applicant meets the statutory definitions. Further, if a project is exempt, it is not subject to review. Exemption requests may be made at any time and are not subject to batching requirements. Once a project is deemed to be exempt and not subject to review, HRS ceases to have jurisdiction over the project and HRS, accordingly, has no jurisdiction to void an exemption.
10-5.008(2)(f)
Proposed Rule 10-5.008(2)(f) establishes a procedure for HRS and applicants to follow when a departmental need methodology does not exist for a proposed project. The proposed rule attempts to clarify for applicants how best to present themselves when applying for a project for which no methodology has been adopted in an existing rule. This is particularly useful to applicants in addressing the need component required by statute. Policy utilized but not yet adopted by HRS will be provided to applicants in addressing the need component required by statute; however, applicants are not bound by that policy and may tender their need calculations. This proposed rule gives credence to the fact that there may be different methodologies and allows applicants the opportunity to make all the necessary arguments to demonstrate the nature and extent of entitlement to a certificate of need.
10-5.0085(4)
Proposed Rule 10-5.008(4) describes shared service arrangements and delineates the procedures applicants must follow to initiate or terminate a shared service. The part of the proposed rule challenged by FHA and the area on which it focused concerned the termination of a shared service arrangement. Proposed Rule 10-5.008(4) provides in pertinent part:
(4)(a) The following factors are considered when reviewing applications for shared services where none of the applicants are currently authorized to provide the service:
* * *
Any of the parties providing a shared service may seek to dissolve the arrangement. This action is subject to review as a termination of service.
If termination is approved by the department, all parties to the original shared service give up their rights to provide the service.
Parties seeking to provide the service independently in the future must submit applications in the next applicable review cycle and compete for the service with all other applicants.
* * *
6.b. The following factors are considered when reviewing applications for shared services when one of the applicants has the service:
* * *
e. Dissolution of a shared services contract
is subject to review as a termination of service.
* * *
If termination is approved, the entity(ies) authorized to provide the service prior to the contract retains the right to continue the service.
All other parties to the contract who seek to provide the service in their own right must request the service as a new health service and are subject to full Certificate of Need review as a new health service. (Emphasis added)
The basis for requiring CON review for a termination of a shared service as delineated above is found in Section 381.706(2)(e), Florida Statutes (1989). If a shared service arrangement terminates, the party who originally had the service would retain the service. This is reasonable because the entity would have already been granted a certificate of need for the service, singularly offered. The party would be placed back in the same situation it was in prior to the shared service. Conversely, in situations where neither party originally had the service, the remaining parties would have to apply for the service in a batched review. This, too, is reasonable in that the service would no longer be shared and the ability to provide it singularly would be evaluated anew. Here, the party would also be placed back in the same situation it was in prior to the shared service.
Additionally, a shared service arrangement (and approval of it) is based on certain benefits present within that arrangement. Upon termination the same benefits may not be present. The identity of the parties and their relationships to each other will have changed. Review at this point provides an applicant the opportunity to compete again to establish the service in its own right under a different set of circumstances, and it allows other providers to compete either for the service in their own right or through another shared arrangement. Such a policy is prudent because the very reason for the shared service was to produce benefits that were not otherwise obtainable singularly. Indeed, even FHA's own witness, Mr. Bebee, acknowledged that certain advantages to a shared services arrangement might not be present when such an arrangement terminates.
10-5.010(2)
Proposed Rule 10-5.010(2) concerns what local health plan is to be used and addressed in a CON application, and it provides as follows:
The applicable local health plan is the most current plan adopted by the appropriate local health council and which has been accepted and approved in writing by the Department at the
time letters of intent are due or, if not accepted by the Department, as reviewed and commented on by the Department. The agency will provide to all prospective applicants those items of the local
health plan which must be addressed in the application.
HRS asserts that the purpose of this amendment to existing Rule 10-
5.010 is to assist applicants by identifying various components of the plan to which they should address their application and thereby maximize their time and effort and, ultimately, their chances for approval and that this proposed rule codifies current departmental practice of providing those items of the local health plan which must be addressed by the applicant.
Contrary to HRS's assertion that this proposed rule is clarifying in nature, the rule in fact goes far beyond those parameters.
"Reviewed and commented on by the Department" means that the local health council's adopted plan has been reviewed for consistency with existing need methodologies and has been commented on by HRS. HRS maintains that "commented on" does not mean verbal comments. The proposed rule does not, however, specify that only written comments were intended. Indeed, HRS admitted that the way the rule is drafted it takes into account oral as well as written comments.
Statutorily, HRS is required to adopt as a rule the local health plans or portions thereof to be used in the CON review regulatory process. Local health plans generally contain allocation factors, preferences, and policies with respect to the particular district. Within the last several months, HRS has sought to adopt as a rule preferences and policies set forth in the various local health plans around the state of Florida. HRS withdrew those proposed rules.
Proposed Rule 10-5.010(2) does not make reference to or account for the fact that the local health plans must be adopted as rules by HRS. HRS cannot circumvent statutory requirements by proposing that an applicant address "approved plans," nor can it require an applicant to address local health plans with which HRS is not in full agreement with the local health council as to whether the plan is consistent with statutory guidelines. Indeed, where HRS and the local health council are in disagreement, an applicant is pulled between HRS and the local council. This proposed rule allows HRS to simply reject the expressed wants of the local health council and to insert its own comments and views, thereby inserting itself into a province exclusively reserved to the local health councils.
10-5.020
Proposed Rule 10-5.020 involves addition of one sentence to the existing rule. The added language provides that HRS will issue a license to the CON holder in accordance with the CON and will not issue a license for fewer beds than the total on the CON.
The proposed addition to this rule addresses a problem currently facing the Department, and it reflects a change in agency policy for HRS. Basically, the added language clarifies for an applicant or certificate of need holder that the Office of Licensure and Certification shall only issue a license consistent with the terms of the certificate of need.
The proposed rule addition conforms to several health planning goals. First, it requires the implementation of a project in accordance with the certificate of need. Second, the language addresses HRS's current problem of need suppression by industry members. Third, it seeks to ensure uniform development of services. This proposed rule does not penalize hospitals who want to do phase-in type projects. On the contrary, the language seeks to ensure that needed beds and services will be implemented in the horizon year in accordance with the application and entitlement demonstrated by the applicant.
Economic Impact Statement
The Summary of the Estimate of the Economic Impact states in relevant part:
The proposed amendments are expected to have no adverse impact either on existing and new applicants for certificate of need, or on small and minority businesses . . . .
The Economic Impact Statement (EIS) addresses the cost to the agency of implementing the proposed rules, an estimate of the cost to persons directly affected by the proposed rules, an estimate of the impact of the proposed action on competition, a statement of the date and method used in making those estimates, and an analysis of the impact on small businesses as defined in the Florida Small and Minority Business Assistance Act of 1985. Specifically, the EIS states that the proposed rules "will have a minimal economic impact on current or future certificate of need applicants and the public at large."
There is no competent, substantial evidence to establish with specificity the existence of any defects in the EIS which impaired the fairness of the rulemaking proceeding or the correctness of the agency actions related to the EIS.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the parties to and subject matter of these proceedings. Section 120.54(4), Florida Statutes.
A proposed rule is declared invalid if it is an "invalid exercise of delegated legislative authority." This term is defined in Section 120.52(8) as follows:
(8) "Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature.
A proposed or existing rule is an invalid exercise
of delegated legislative authority if any one or more of the following apply:
The agency has materially failed to follow the applicable rulemaking procedures set forth in S. 120.54;
The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7);
The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);
The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or
The rule is arbitrary or capricious.
If a proposed rule does not exceed the agency's statutory authority and is reasonably related to an appropriate purpose of the statutes, it should be sustained. State, Marine Fisheries Commission v. Organized Fisherman of Florida, 503 So.2d 935 (Fla. 1st DCA 1987); Agrico Chemical Co. v. DER, 365 So.2d 759 (Fla. 1st DCA 1978). An agency's construction of the statute it administers is entitled to great weight and is not to be overturned unless clearly erroneous. Pan American Airways, Inc. v. Florida Public Service Commission, 427 So.2d 716 (Fla. 1983); Department of Professional Regulation v. Durrani, 455 So.2d 515 (Fla. 1st DCA 1984) (agency rule upheld as a valid exercise of delegated legislative authority). Moreover, the agency's interpretation of a statute when developing a rule need not be the sole possible interpretation or even the most desirable one; it need only be within the range of possible interpretations. Humhosco, Inc. v. Department of Health and Rehabilitative Services, 476 So.2d 258 (Fla. 1st DCA 1985); Department of Professional Regulation v. Durrani, supra.
The various standards for applying Section 120.52(8) have been established by case law. A rule is vague or fails to establish adequate standards for agency decisions when its terms are so vague that persons of common intelligence must necessarily guess at its meaning and differ as to its application. State v. Cumming, 365 So.2d 153 (Fla. 1978). A rule vests unbridled discretion in an agency when it fails to establish adequate standards and reserves to the agency the arbitrary power to determine private rights. Barrow v. Holland, 125 So.2d 749 (Fla. 1960). Arbitrary and capricious actions are defined in Agrico, supra, as follows:
A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic, or despotic.
See, Adam Smith Enterprises v. Florida Department of Environmental Regulation, 553 So.2d 1260 (Fla. 1st DCA 1989).
The burden is on the Petitioners to show by a preponderance of the evidence that the rule is arbitrary and capricious. Agrico, supra. Petitioners have the burden to prove that a proposed rule is an invalid exercise of delegated legislative authority. It is a stringent burden of proof. Id. at 763.
10-5.002(1)
Rule 10-5.002(1) is valid and is upheld. The definition of "acquisition" is reasonable, rational, and clear.
10-5.002(13) and 10-5.008(2)(d)
The competent, substantial evidence shows that these proposed rules are not reasonable or rational and will lead to an illogical result. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing beds into the community nursing home bed inventory. Proposed Rules 10-5.002(13) and 10-5.008(2)(d) are invalid exercises of delegated legislative authority.
10-5.002(52)
Proposed Rule 10-5.002(52) is a reasonable, rational, and clear definition of "refinancing costs" and is valid.
10-5.004(2)(g)
Proposed Rule 10-5.004(2)(g) relates to expedited review for capital expenditure projects. It is valid.
Section 381.702, Florida Statutes, clearly defines a "capital expenditure" to include replacement or relocation of an existing facility. Just as clearly, capital expenditure projects are subject to an expedited review. Section 381.705, Florida Statutes. Further, Section 381.709(5)(b), Florida Statutes, makes it clear that existing health care providers do not have standing to challenge HRS's decision to issue a CON for a capital expenditure project, even if it includes replacement of an existing facility.
The proposed rule simply clarifies that which is already established by statute. It is a reasonable and logical interpretation and restatement of that which is already law. Promulgation of this rule is clearly within HRS's authority and it is not arbitrary, capricious, or vague.
10-5.008(1)(c)3 and 10-5.008(3)(b)
Proposed Rules 10-5.008(1)(c)3 and (3)(b) relate to capitalization costs. They are an invalid exercise of delegated legislative authority.
These proposed rules are illogical and are not supported by the facts. The results of these rules would be misleading and inaccurate from both a health planning and a health care finance perspective. The proposals are vague in that they give no guidance as to the methodology to be used in allocating costs. Further, these proposed rules will result in comparative CON review which is not supported by fact or logic, leading to inappropriate CON awards. Finally, proposed Rules 10-5.008(1)(c)3 and (3)(b) are arbitrary and capricious.
10-5.005(2)(e)
Proposed Rule 10-5.005(2)(e) is an invalid exercise of delegated legislative authority. Projects deemed to be exempt are not subject to review. There is no authority for HRS to continue to assert jurisdiction over or to exercise review of an exempt project which is not subject to review. HRS's attempt in this proposed rule to maintain review power over an exempt project and to void an exemption exceeds HRS's rulemaking authority and enlarges and modifies its authority and the statutory provision to be implemented. The proposed rule is an unreasonable and despotic usurpation of power which is beyond the statutory scheme.
10-5.008(2)(f)
Proposed Rule 10-5.008(2)(f), relating to need determinations where no promulgated need methodology exists, is valid. It is reasonable, rational, logical, explicit, and authorized.
10-5.0085(4)
This proposed rule relates to shared service arrangements and is also valid because it is reasonable, rational, logical, clear, and authorized.
10-5.010(2)
Proposed Rule 10-5.010(2), relating to local health plans, is an invalid exercise of delegated legislative authority. Section 381.703(1)(b), Florida Statutes, requires HRS to adopt the elements of the local health plans which are necessary to the review of CON applications as rules. Despite this statutory mandate, HRS attempts through this proposed rule to evaluate CON applications against local health plans which have not been adopted as rules. Further, the proposal would permit HRS to tacitly reject or modify local health plans before applying them to CON applications. HRS does not have authority to do this, and this proposed rule exceeds its statutory authority. Finally, the proposal is vague in that it cannot be determined what "commented on by the Department" really means and what form of comment is contemplated.
10-5.020
This proposed rule, relating to issuance of a license only in accordance with the CON and only for the total beds on the CON is valid. It is reasonable, rational, logical, clear, authorized, and consistent with statutory provisions.
Economic Impact Statement
Proposed rules are an invalid exercise of delegated legislative authority if the promulgating agency materially fails to follow applicable rulemaking procedures. See, Section 120.52(8)(a), Florida Statutes. One rulemaking procedure relates to the economic impact statement (EIS which must accompany every proposed rule. Section 120.54(2)(b), Florida Statutes, requires the following:
Each agency shall provide information on its proposed action by preparing a detailed economic impact statement. The economic impact statement shall include:
An estimate of the cost to the agency of the implementation of the proposed action, including the estimated amount of paperwork;
An estimate of the cost or the economic benefit to all persons directly affected by the proposed action;
An estimate of the impact of the proposed action on competition and the open market for employment, if applicable;
A detailed statement of the data and methods used in making each of the above estimates; and
An analysis of the impact on small business as defined in the Florida Small and Minority Business Assistance Act of 1985.
The adequacy of the EIS is material to the validity of a proposed rule. An inadequate EIS materially impairs the fairness of the rulemaking proceedings.
In the case of Department of Health and Rehabilitative Services v. Wright, 439 So.2d 937, 941 (Fla. 1st DCA 1983), the District Court explained that:
. . . [The] materiality of the economic impact statement to the rule-making process cannot be given short shrift. Preparation of the statement is a sobering task, one designed to arrest agency discretion bordering on despotic, and to channel it through logic and reason to a rational end.
Compiled conscientiously, an economic impact statement can shield an otherwise valid rule from collateral attack on the basis that, as applied, the rule would be devastating economically and therefore arbitrary and capricious.
The courts do not require perfection, only "substantial compliance" with Section 120.54(2), Florida Statutes. Department of Health and Rehabilitative Services v. Wright, supra. An economic impact statement may be held sufficient even though its conclusions are not the same as those of regulated parties and even though some of the estimated costs are speculative or incapable altogether of estimation. Brewster Phosphates v. DER, 444 So.2d 483 (Fla. 1st DCA 1984). The statement is sufficient if it addresses all areas required by the statute to be addressed, even though its conclusions were subject to debate. Florida Waterworks Association v. Florida Public Service Commission, 473 So.2d 237 (Fla. 1st DCA 1985). An agency need not speculate on estimates of costs on matters it cannot predict. State of Florida Department of Insurance v. Insurance Services Office, 434 So.2d 908 (Fla. 1st DCA 1983).
An agency rule will not be declared invalid merely because the economic impact statement may not be as complete as possible, and any deficiencies must be so grave as to impair the fairness of the proceeding. Health Care and Retirement Corporation of America v. Department of Health and Rehabilitative Services, 463 So.2d 1175 (Fla. 1st DCA 1984).
Section 120.54(2)(d), Florida Statutes, specifies that "failure to provide an adequate statement of economic impact is a ground for holding the rule invalid." See, Florida Department of Environmental Regulation v. Leon County, 344 So.2d 297 (Fla. 1st DCA 1977); see also, Florida Department of Health and Rehabilitative Services v. Delray Hospital Corporation, 373 So.2d 75 (Fla. 1st DCA 1979).
Applying these standards to the present case, it can only be concluded that the Economic Impact Statement is adequate and is in substantial compliance with Section 120.54(2). Any minor deficiencies in the EIS are not so grave that they impair the fairness of the proceeding.
RECOMMENDATION
Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED:
1. Proposed Rules 10-5.002(1) and (52), 10-5.004(2)(g), 10-5.008(2)(f),
10-5.0085(4), and 10-5.020 are valid.
2. Proposed Rules 10-5.002(13); 10-5.008(1)(c)3, (2)(d), and (3)(b); 10-
5.005(2)(e); and 10-5.010(2) are invalid exercises of delegated legislative authority.
DONE and ORDERED this 10th day of October, 1990, in Tallahassee, Florida.
DIANE K. KIESLING, 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 10th day of October, 1990.
APPENDIX TO THE FINAL ORDER
The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in these cases.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioners Venice Hospital and Adventist
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 4(3); 5(5); 6(6); 10(14); 12(15 and 16); 15-17(25-27); and 19(28).
Proposed findings of fact 1, 3, 7-9, 11, 13, 18, 21, 22, 24, and 25 are subordinate to the facts actually found in this Final Order.
Proposed finding of fact 2 is unnecessary.
Proposed findings of fact 14, 20, 23, and 26 are unsupported by the credible, competent, and substantial evidence.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioner FHA
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 4(7); 5(10); 6(11); 8-12(12- 16); and 13-17(19-23).
Proposed findings of fact 2, 3, 18, 19, and 21-24 are subordinate to the facts actually found in this Final Order
Proposed finding of fact 7 is unnecessary.
Proposed finding of fact 20 is unsupported by the credible, competent, substantial evidence.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioner Humana
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 6(34, 35, and 38).
Proposed findings of fact 2, 5, and 7-13 are subordinate to the facts actually found in this Final Order.
Proposed findings of fact 1, 3, 4, and 14-19 are unnecessary.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioners NME and PIA
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 2(34, 35, and 38); 3-6(39- 42); 8(53); and 9(54 and 55).
Proposed findings of fact 1 and 7 are subordinate to the facts actually found in this Final Order.
Proposed findings of fact 10 and 11 are irrelevant because these Petitioners dismissed their challenge to the EIS in the Stipulation of the parties admitted as Joint Exhibit 2.
Specific Rulings on Proposed Findings of Fact Submitted by Petitioner Sarasota
Proposed findings of fact 1-4, 6, 7, and 13 are subordinate to the facts actually found in this Final Order.
Proposed finding of fact 5 is unnecessary.
Proposed findings of fact 17, 18, and 20 are unsupported by the credible, competent, and substantial evidence.
Proposed findings of fact 8-12, 14-16, and 19 are irrelevant.
Specific Rulings on Proposed Findings of Fact Submitted by Respondent HRS
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1 and 2); 2(28); 3(46); 4(47-49); 5(51); 7(29); 8(32 and 33); 9(33); 11(8); 13(17); 14(18); 15(23); 16(23 and 24); 17(36); 19(37); 21(57); and 22(58).
Proposed findings of fact unnumbered paragraph re: 10-5.005(2)(e); 10; 12; 18; 20; and unnumbered paragraph re: Economic Impact Statement are subordinate to the facts actually found in this Final Order.
Proposed findings of fact 1A and 6 are unnecessary.
Specific Rulings on Proposed Findings of Fact Submitted by Intervenor HCA DOCTORS
Each of the following proposed findings of fact is adopted in substance as modified in the Final Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 6(30) and 7(31).
Proposed findings of fact 2-5 are subordinate to the facts actually found in this Final Order.
Proposed findings of fact 1 and 9-11 are unnecessary.
Proposed findings of fact 8 is irrelevant.
*NOTE: THIS RECOMMENDED ORDER'S EXHIBIT "A"
[RULE 10-5.002, 10-5.004(2), 10-5.005(2), 10-2.008(1)(n),
10-5.008(5)(h), 10-5.010(2), 10-5.020]
IS AVAILABLE FOR REVIEW IN THE DIVISION'S CLERK'S OFFICE.
COPIES FURNISHED:
Jeffery A. Boone, Attorney at Law
Robert P. Mudge, Attorney at Law 1001 Avenida del Circo
Post Office Box 1596 Venice, FL 34284
Kenneth F. Hoffman, Attorney at Law 2700 Blair Stone Road
Post Office Box 6507 Tallahassee, FL 32314-6507
James C. Hauser, Attorney at Law 204-B South Monroe Street Tallahassee, FL 32301
C. Gary Williams, Attorney at Law Stephen C. Emmanuel, Attorney at Law Post Office Box 391
Tallahassee, FL 32302
Theodore C. Eastmoore, Attorney at Law 1550 Ringling Boulevard
Post Office Box 3258 Sarasota, FL 34230
Robert A. Weiss, Attorney at Law John M. Knight, Attorney at Law The Perkins House, Suite 101
118 North Gadsden Street Tallahassee, FL 32301
Thomas R. Cooper, Attorney at Law Edward G. Labrador, Attorney at Law Department of Health and
Rehabilitative Services 2727 Mahan Drive, Suite 103
Tallahassee, FL 32399-0700
John Radey, Attorney at Law
Elizabeth W. McArthur, Attorney at Law Suite 1000, Monroe-Park Tower
101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
Donna H. Stinson Moyle, Flanigan, Katz,
FitzGerald & Sheehan, P.A. The Perkins House--Suite 100
118 North Gadsden Street Tallahassee, Florida 32301
Sam Power, Clerk Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Linda K. Harris
Acting General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Liz Cloud, Chief
Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250
Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32399-1300
NOTICE OF RIGHT TO JUDICIAL REVIEW
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
VENICE HOSPITAL, INC. )
)
Petitioner, )
)
vs. ) CASE NO. 90-2383RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) ADVENTIST HEALTH SYSTEM/SUNBELT, ) INC. d/b/a FLORIDA HOSPITAL )
)
Petitioner, )
)
vs. ) CASE NO. 90-2384RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) FLORIDA HOSPITAL, ASSOCIATION, ) INC. )
)
Petitioner, )
)
vs. ) CASE NO. 90-2385RP
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
)
HUMANA, INC., HUMHOSCO, INC.; ) AND HUMANA OF FLORIDA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 90-2386R
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) PIA PSYCHIATRIC HOSPITALS, INC., ) AND PIA SARASOTA PALMS, INC., ) d/b/a SARASOTA PALMS HOSPITAL, )
Petitioner, )
)
)
vs. ) CASE NO. 90-2393R
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
) NME HOSPITALS, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 90-2394R
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
)
SARASOTA COUNTY PUBLIC HOSPITAL ) BOARD, d/b/a MEMORIAL HOSPITAL, ) SARASOTA, )
)
Petitioner, )
)
vs. ) CASE NO. 90-2395R
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE SERVICES, )
)
Respondent. )
and )
) HCA DOCTORS HOSPITAL OF SARASOTA, )
)
Intervenor. )
)
PARTIAL SUMMARY FINAL ORDER OF DISMISSAL
This cause came on for consideration on Department of Health and Rehabilitative Services' Motion toto Dismiss; on Humana's Response in Opposition to HRS Motion to Dismiss and Humana's Motion for Leave to Amend Petition to Challenge Invalidity of Rule; and on Petitions to Intervene filed by NME Hospitals, Inc. and Adventist Health Systems/Sunbelt, Inc. Also considered, partially contingent on the above-mentioned Motion to Dismiss, are two Motions to Dismiss the Petitions to Intervene filed by NME and Adventist. NME also filed its Response to HRS' Motion to Dismiss NME's Petition to Intervene. In order that the other motions can be resolved, Humana's Motion for Leave to Amend Petition to Challenge Validity of Rules is GRANTED. Consideration of the existing motions shall proceed under the Amended Petition to Determine the Invalidity of Proposed and Existing Rules.
FINDINGS OF FACT
Humana filed a Petition to Determine the Invalidity of Proposed and Existing Rules on April 20, 1990, ostensibly challenging several proposed amendments to Chapter 10-5, Florida Administrative Code, and three existing rules, 10-5.002(3), (59), and (60), Florida Administrative Code. Rules 10- 5.002(59) and (60) are simply renumberings of existing rules 10-5.002(34) and (35), respectively.
2. Rule 10-5.002(3) states:
(3) "Applicant" means any individual, partnership, corporation, or governmental entity which has filed an application for a certificate of need with the department.
3. Rules 10-5.002(59) and (60) state:
"Short-term and long-term hospital inpatient psychiatric beds" mean beds designated for the exclusive use of short- term or long-term hospital inpatient services regulated under Rule 10-5.011(1)(o) and (p), F.A.C.
"Short-term and long-term hospital inpatient substance abuse beds" mean beds designated for the exclusive use of short- term or long-term hospital inpatient services regulated under Rule 10-s.011(1)(q), F.A.C.
On May 21, 1990, a formal hearing was convened in these cases. At the onset, a Motion to Strike the portions of Humana's Petition relating to the existing rules was granted. That segment of the formal hearing terminated on May 23, 1990, and the hearing was scheduled to reconvene on June 7, 1990.
On June 7, 1990, Humana sought ore tenus to resurrect the portions of its petition which had been stricken on May 21, 1990. That request was predicated on an Amended Order of Assignment entered by DOAH Director Sharyn L. Smith on May 24, 1990. Also as authority for its request, Humana cited Island Harbor Beach Club, Ltd., v. Department of Natural Resources, 495 So.2d 209 (Fla. 1st DCA 1986).
Humana' s request was tentatively granted subject to HRS' opportunity to file and argue in opposition to those portions of the petition. The hearing was again continued and was rescheduled to commence on July 30, 1990. Leave to amend has been granted, and Humana's Amended Petition is the one under consideration here.
Humana has argued throughout these proceedings that the definition of "applicant" in Rule 10-5.002(3) is inextricably bound up in any determination of the validity of the proposed rules. There is no allegation in the Amended Petition which alleges with specific facts which support this argument.
The terms of Rules 10-5.002(59) and (60) are easily separable from the issues of validity involving the proposed rules.
Humana's allegations of standing to challenge the proposed and existing rules are in paragraph 5 of the Amended Petition and state:
Petitioners are substantially affected by such proposed rules and existing Rule 10- 5.002(3), (59) and (60), for reasons that
include but are not limited to the following:
Petitioners own and operate licensed acute care hospitals in Florida
which provide services that are now subject to the CON review process or will be under these and other existing and proposed rules. Accordingly, Petitioners have in the past and will in the future be actively involved in seeking CON's for CON regulated services and will be substantially affected by other potential applicants seeking CON's for such
services. The provisions of the proposed and existing rules specifically regulate such services and the manner in which applications for such services will be reviewed.
Petitioners are substantially affected by the proposed and existing rules as the proposed changes and the existing rules will significantly and materially alter the process by which Petitioners' applications for services will be processed and reviewed.
Additionally, Petitioners will be adversely affected by the proposed and existing rules in that such rules will unnecessarily add costs to the health care delivery system offered by Petitioners.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Sections 120.54(4) and 120.56, Florida Statutes.
The case cited by Humana to support the resurrection of the portions of its petition which were stricken, Indian Harbor, supra, does not stand for the proposition for which Humana argued. For this reason, the tentative resurrection of the portions of its petition relating to the Section 120.56 rule challenge was incorrect. However this is harmless error in that the propriety of allowing challenges to both proposed and existing rules in the same rule challenge becomes irrelevant in light of this Partial Summary Final Order of Dismissal.
The portions of Humana's petition challenging existing Rules 10- 5.002(3), (59), and (60) are governed by Section 120.56, Florida Statutes. Specifically, Section 120.56 states in pertinent part:
Any person substantially affected by a rule may seek an administrative
determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority.
The petition seeking an administra- tive determination under this section shall be in writing and shall state with particularity facts sufficient to show the person seeking relief is substantially
affected by the rule and facts sufficient to show the invalidity of the rule.
The courts have interpreted Section 120.56 as it relates to standing in a series of cases beginning with Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978), cert. denied, 359 So.2d 1215 (Fla. 1978).
In applying Jerry to support its conclusion that the petitioner must demonstrate standing under Section 120.56 "by showing that a rule has a real and immediate
effect upon his case, as well as by proving injury in fact," the court in Professional Firefighters of Florida, Inc., v. Department of Health and Rehabilitative Services, 396 So.2d 1194, 1195 (Fla. 1st DCA 1981), stated:
In both Jerry and Alice P., supra, the challengers were not subject to the rule or immediately affected by it at the time suit was filed and were unlikely to be affected in the future.
In Village Park Mobile Home Association, Inc., v. State Department of Business Regulation, 506 So.2d 426 (Fla. 1st DCA 1987), on denial of motion for rehearing, the court analyzed Jerry and Firefighters. The court stated that Firefighters set forth a standing test in Section 120.56 rule challenges which required that a party "demonstrate standing by showing that a rule has a real and immediate effect upon his case, as well as injury-in-fact." The court also stated at p. 433 as follows:
As recognized by this Court in Jerry, abstract injury is not enough. The injury or threat `of injury must be both real and immediate, not conjectural or hypothetical.
A petitioner must allege that he has sustained or is immediately in danger of sustaining some direct injury as a result of the challenged official conduct. [Emphasis supplied]
Based on its construction of Firefighters and Jerry, as well as Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 3d DCA 1981), the Village Park court concluded that a petitioner can sufficiently allege standing by stating in his petition that he has sustained actual injury in fact at the time of filing his petition or that he is immediately in danger of sustaining some direct injury as a result of the challenged rule. Id. at 433.
Finally, in another Section 120.56 rule challenge, Florida Board of Optometry v. Florida Society of Ophthalmology, 538 So.2d 878 (Fla. 1st DCA 1989), on motions for rehearing and clarification, February 10, 1989, the court again analyzed Jerry and Firefighters and reached certain conclusions relevant to the present case. The court concluded that Jerry stands for the proposition that "to have standing under Section 120.56, the person challenging the validity of an adopted rule must show a direct injury in fact of `sufficient immediacy and reality' to the petitioner." In applying these standing tests to the petitioners in Board of Optometry, the court held that the petitions were "not predicated upon a legally recognized right of sufficient immediacy and reality to support their standing to challenge the validity of the adopted rule." Id. at
p. 881. Accordingly, the court held that the standing allegations in the petitions stated sufficiently immediate and real injury and were purely a matter of speculation and conjecture.
NME cites to Coalition of Mental Health Professions v. Department of Professional Regulation, 546 So.2d 27 (Fla. 1st DCA 1989), to support the existence of standing for the Section 120.56 rule challenge. Coalition is inapplicable to the current case. Clearly, Coalition involves standing under Section 120.54, not Section 120.56.
In applying the enunciated standing tests in Sect ion 120.56 rule challenge proceedings, it becomes clear that Humana, both in its original petition and its amended petition, predicates its standing to challenge the existing rules on speculative and conjectural injury which is neither sufficiently immediate nor real. Humana has been permitted to amend its petition to sufficiently allege standing to challenge the existing rules. Having failed in that attempt, Humana is no longer entitled to further amend its petition. HRS' Motion to Dismiss is GRANTED. The portions of Humana's Amended Petition which relate to its Section
120.56 rule challenge to Rules 10- 5.002(3), (59), and (60) are DISMISSED for Humana's failure to allege with particularity facts sufficient to show standing pursuant to Section 120.56(2). NME's Petition to Intervene and Adventist's Petition to Intervene are DENIED since there is no longer a Humana Section
120.56 rule challenge into which they can intervene. HRS' Motions to Dismiss the Petitions to Intervene are GRANTED.
DONE and ORDERED this 12th day of July, 1990, at Tallahassee, Florida.
DIANE K. KIESLING
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 12th day of July, 1990.
COPIES FURNISHED:
Jeffery A. Boone, Attorney at Law Robert P. Mudge, Attorney at Law 1001 Avenida del Circo
Post Office Box 1596 Venice, FL 34284
Kenneth F. Hoffman, Attorney at Law 2700 Blair Stone Road
Post Office Box 6507 Tallahassee, FL 32314-6507
James C. Hauser, Attorney at Law 204-B South Monroe Street Tallahassee, FL 32301
Gary Williams, Attorney at Law Michael J. Glazer, Attorney at Law Stephen C. Emmanuel, Attorney at Law Post Office Box 391
Tallahassee, FL 32302
Theodore C. Eastmoore, Attorney at Law 1550 Ring1ing Boulevard
Post Office Box 3258 Sarasota, FL 34230
Robert A. Weiss, Attorney at Law John M. Knight, Attorney at Law The Perkins House, Suite 101
118 North Gadsden Street Tallahassee, FL 32301
Thomas R. Cooper, Attorney at Law Edward G. Labrador, Attorney at Law Department of Health and
Rehabilitative Services 2727 Mahan Drive, Suite 103
Tallahassee, FL 32399-0700
John Radey, Attorney at Law
Elizbaeth W. McArthur, Attorney at Law Suite 1000, Monroe-Park Tower
101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
Sam Power, Clerk Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Liz Cloud, Chief
Bureau of Administrative Code Room 1802, The Capitol Tallahassee, Florida 32399-0250
Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32399-1300
NOTICE OF RIGHT TO JUDICIAL REVIEW
PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
Docket for Case No: 90-002383RP
Orders for Case No: 90-002383RP
| Issue Date |
Document |
Summary |
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Oct. 31, 1990 |
DOAH Final Order
|
Various proposed rule amendments to HRS chapter 10-5 (regarding Certificate Of Need reviews are invalid.) Economic Impact Statement not defective.
|
