STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA CONVALESCENT CENTERS, ) INC., d/b/a PALM GARDEN OF ) ORLANDO, )

)

Petitioner, )

)

vs. ) CASE NO. 91-2927

) COORDINATED CARE, INC. and ) DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondents. )

) HEALTH CARE AND RETIREMENT ) CORPORATION, d/b/a HEARTLAND ) HEALTH CARE CENTER OF ORANGE ) COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 91-2928

) COORDINATED CARE, INC. and ) DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondents. )

)

RECOMMENDED ORDER

These consolidated cases were heard by Eleanor M. Hunter, the Hearing Officer designated by the Division of Administrative Hearings, on January 13 - 17, 1992, in Tallahassee, Florida.

APPEARANCES

Florida Convalescent Gerald B. Sternstein, Esquire Centers, Inc., d/b/a McFarlain, Sternstein, Wiley Palm Garden of Orlando: & Cassedy, P.A.

600 First Florida Bank Bldg. Post Office Box 2174 Tallahassee, Florida 32316-2174

Health Care and Alfred W. Clark, Esquire Retirement Corporation, 1725 Mahan Drive, Suite 300 d/b/a Heartland Health Post Office Box 623

Care Center of Orange Tallahassee, Florida 32308 County:

Department of Health Lesley Mendelson, Sr. Attorney and Rehabilitative 2727 Mahan Drive

Services: Fort Knox Executive Center Tallahassee, Florida 32308

Coordinated Care, Inc.: Theodore Mack, Esquire

James M. Barclay, Esquire Cobb Cole & Bell

315 South Calhoun Street Suite 500

Tallahassee, Florida 32301 STATEMENT OF THE ISSUES

1. Whether the certificate of need applications of Health Care and Retirement Corporation, d/b/a Heartland Health Care of Orange County and/or Coordinated Care, Inc., d/b/a Care Center of Orange County meet the applicable and disputed criteria of Subsections 381.705(1), (2), and 381.707, Florida Statutes.

   
   

2. Which of the applications is the superior proposal to meet the published need for 120 additional nursing home beds in HRS District VII, Subdistrict II, for Orange County, Florida.

PRELIMINARY STATEMENT

On October 19, 1990, the Department of Health and Rehabilitative Services ("HRS") published a Notice of Nursing Home Fixed Need Pools which established the need for 120 additional nursing home beds in Orange County, Subdistrict II of HRS District VII. See, Vol. 16, No. 42, Florida Administrative Weekly (October 19, 1990). In response to the published need, Health Care and Retirement Corporation, d/b/a Heartland Health Care Center of Orange County ("HCR"), Coordinated Care, Inc. ("CCI"), and Florida Convalescent Centers, Inc. d/b/a Palm Garden of Orlando ("FCC") timely filed applications, each for a certificate of need for 120 community nursing home beds. After review of the applications, HRS issued a State Agency Action Report preliminarily approving the application of CCI.

In Case No. 91-2927, FCC challenged HRS' proposed approval of certificate of need number 6530 for CCI. In Case No. 91-2928, HCR challenged HRS' proposed denial of HCR's certificate of need application 6532 to construct a 120 bed nursing home, and HRS' proposed approval of certificate of need application 6530 of CCI to construct a 120 bed nursing home. On February 7, 1992, FCC filed a voluntary dismissal of its petition in Case No. 91-2927. By prehearing stipulation, the parties agreed that there is a need for 120 community nursing home beds in Orange County and that the disputed criteria are those in Subsections 381.705(1)(a), (b), (c), (h), (i), (l), (m), and (n), 381.705(2), and 381.707, Florida Statutes.

At final hearing, HCR presented the testimony of Milo Bishop, expert in health planning and nursing home development; Mary Lucero, expert in care of dementia patients in nursing homes; J. Susan Hines, expert in nursing home rehabilitation care and programs, quality assurance, staffing and recruiting; F. Joseph Schmitt, expert in nursing home administration and operations; Bruce Schroeder, expert in nursing home financing and financial feasibility; and Paul Sieben, expert in nursing home design, development and construction. HCR also submitted exhibits 1 - 14, which were received in evidence.

CCI presented the testimony of Fred A. Lane, Patrick Lane and Freda Ebert, all experts in nursing home administration; James Mitchell, expert in architecture; the stipulated testimony of Patricia Lane; Darrell Winer, expert in health care finance; and Eugene Nelson, expert health planner. CCI also submitted exhibits 1 - 5 which were received in evidence.

HRS presented the testimony of Ed Carter, Jr., expert in health care planning and certificate of need ("CON") review, and exhibits 1 and 2, which were received in evidence, and exhibit 3 which was withdrawn.

The transcript of the hearing was filed with the Division of Administrative Hearings on February 10, 1992, and proposed findings of fact were received on March 10 and 11, 1992.

FINDINGS OF FACT

1. There is a need for an additional 120 community nursing home beds in Department of Health and Rehabilitative Services ("HRS") District 7, Subdistrict 1, Orange County, for the July 1993 planning horizon.

   
   

2. Health Care and Retirement Corporation of America, d/b/a Heartland Health Care Center of Orange County ("HCR") is a wholly owned subsidiary of Owens-Illinois, Inc., and has been in nursing home development and operation for

   26 years. HCR proposes to develop, own and operate a 120 bed community nursing home, in an innovative pod design consisting of 20 beds in each of 6 pods. HCR currently operates 139 nursing homes in 19 states, 16 of the nursing homes are in Florida.

   
   

3. HCR proposes to designate four of the 20 bed pods for separate groups of patients. One for those suffering from Alzheimer's and related dementia ("ARD"), one for short-term rehabilitative transitional care services, one for high acuity patients, and a fourth pod for extended rehabilitative services, operated in affiliation with the Brain Injury Rehabilitation Center of Sand Lake Hospital. HCR proposes to locate its facility near Sand Lake Hospital.

   
   

4. HCR's total project cost is $7,944,787 intended to be funded from its operation of nursing homes. 1/ HCR currently operates facilities in Florida, nine of which have superior licenses, eight of which have standard licenses, and one of which has a conditional license. Two of the eight with standard licenses have been recommended, but not yet approved for superior licenses. The one facility with a conditional license has been recommended, but not yet approved for a standard license.

   
   

5. HCR has not had a license denied, suspended, or revoked within the past thirty-six months. HCR has no facilities in receivership. HCR has had moratoria on admissions in three Florida facilities, and in facilities in Michigan and Connecticut within the past 36 months.

   
   

6. Coordinated Care, Inc. ("CCI") proposes to construct a 120 bed facility in excess of 44,000 square feet on a 5 1/2 acre site which has not been located, in a design that the architect described as two "T-shaped" groups of 60 beds each. Twenty-four beds would be designated for subacute care. The certificate of need ("CON") would be conditioned on the provision of fifty percent (50%) service to Medicaid patients, eighteen percent (18%) to Medicare patients, and services to AIDs patients. CCI is proposing to serve ventilator dependent patients and to provide intravenous (I.V.) therapy. In addition, CCI proposes

   to have a rehabilitative restorative program, respite care, and a mentally impaired program.

   
   

7. CCI, CCI related entities, and CCI stockholders currently operate four nursing homes and three adult congregate living facilities ("ACLF") in Florida. Of the four nursing homes, all of which are located in Volusia County, three have superior licenses and one has a standard license.

   
   

8. The facilities managed or owned in whole or in part by CCI or CCI stockholders have never had a CON transferred, voided, decertified or suspended and have never had a moratorium on admissions to any of its facilities.

   
   

9. CCI has projected a total project cost of 6.4 million dollars. CCI's application has two different funding sources described. First, a combined conventional loan for five million dollars and a 1.4 million capital contribution in exchange for a limited partnership or loan in exchange for stock from another corporation, PMV, Inc. Second, CCI's president secured a letter of interest from a bank, for financing one hundred percent of the project, in the range of $6.5 to $7 million.

   
   

   Section 381.707, Florida Statutes - Identity of Applicant, License Holder, and Operator, and Financial Feasibility of CCI Proposal

   
   

10. Of the three alternative arrangements for financing its project proposed by CCI, the first would result in an impermissible change of identity from the applicant to the license holder/operator, if PMV, Inc. obtains an interest as a limited partner. Although CCI is the applicant, the operator would be the partnership, with CCI as general partner and PMV, Inc., as limited partner, the latter in return for the $1.4 million capital contribution. PMV, Inc., is a limited partner in three of the four Volusia County nursing homes operated by CCI family members. The president of CCI candidly admitted that the partnership arrangement was initially intended for the current project until he found out, after his deposition was taken in this case, that the proposed partnership arrangement violated the provisions of Section 381.707, Florida Statutes.

    
    

11. CCI's president testified that a second alternative financial arrangement is for PMV, Inc. to take an interest as a stockholder at CCI in exchange for $1.4 million contribution to the project costs. The financial feasibility of CCI's second alternative cannot be determined from its application. The record contains no information identifying the principles, assets (other than an unspecified limited interest in three nursing homes), or liabilities of PMV, Inc. Although, there is a letter of interest from First Union Bank, which corroborates the availability of financing by that institution, there is no similar representation by PMV, Inc. There is no basis in the record to conclude that PMV, Inc. will provide $1.4 million as either capital contribution or loan, with or without a partnership or stockholder interest, or as conventional financing for CCI's proposed project.

    
    

12. CCI's corporate resolution certifies that CCI will license and operate the facility, as required by Subsection 381.707(4), Florida Statutes. CCI's president's testimony of a third alternative financing plan is consistent with the resolution, that of obtaining the entire $6.4 million from First Union Bank. The plan is corroborated by a letter of interest from the Bank, expressing an interest in providing 100 percent financing for the project, in the range of

    $6.5 to $7 million. Assuming, arguendo, that other projections in the CCI pro forma are correct, the additional debt of $1.4 million would result in

    additional interest payments in year 1 of $136,776.49 and in year 2 of

    $129,776.49 and additional principal payments of $70,000 annually. 2/ The combined totals of $206,776.49 in year one and $199,776.49 in year two, when subtracted from projected net positive cash flow of $269,450, still results in a profit in year two. 3/ Therefore, under CCI's third alternative, the project is financially feasible in the short and long terms.

    
    

    CCI's Other Pro Forma Assumptions

    
    

13. HCR asserts that CCI's application overstates revenues and understates expenses when compared to CCI's actual experience at Halifax Convalescent Center, which CCI offers as the basis for its projections. HCR asserts that CCI's projected revenues are inflated by overstated utilization, understated salaries, omitted start-up costs, and underestimated per patient day costs which will approximate $93.15, not $84.02.

    
    

14. CCI's revenues are based on utilization calculated from per patient days averaged over an entire quarter. That calculation is accepted as more reasonable than one based on the census on the last day of the quarter.

    
    

15. The salary for the administrator which was estimated by CCI is below the median for Orange County, but not shown to be inconsistent with what CCI stockholders receive as nursing home administrators, and are therefore reasonable for CCI's family-owned operation.

    
    

16. The testimony offered by CCI that start-up costs, although not included in fixed assets on Schedule 6 of CCI's application, are included in Schedule 15 as "financial and developmental costs" is accepted.

    
    

17. Total expenses per patient day, as reported to the HCCB for 1990 for CCI managed Halifax Convalescent Center, Ltd., which has 84 licensed beds, were

    $93.15. CCI stockholder managed facilities reported the following data to the HCCB:

    
    

    Facility Licensed Beds Occupancy Rate Total Expenses

    Patient Day

    
    

    84	96.53	93.15
    192	80.64	63.60
    122	95.14	64.06
    93	97.36	60.51
    for 303 (not 365) days for 102 (not 365) days

    Halifax*

    
    

    Fairview Manor**

    
    

    Deland Convalescent Center

    
    

    DeBary Manor

    
    

    * Reporting

    ** Reporting

    
    

    Based on the fact that CCI plans to operate the new facility with a mix of patient acuity levels much the same as those at Halifax, but since Halifax is smaller and, for 1990, did not report data for two months, the HCR assertion that per patient day expenses will be the same as for Halifax ($93.15), not as projected by CCI ($84.02), is rejected.

18. HCR's assertion that the various items in CCI's schedules as overstatements of revenue and understatements of expenses is rejected. CCI's proposal is accepted as financially feasible in the short and long term.

    
    

    Subsection 381.705(a) - District and State Health Plans

    
    

19. Preference one of the 1990 District 7 Health Plan, favoring applicants proposing to locate in Brevard County, is inapplicable to CCI and HCR.

    
    

20. Preference two of the District 7 plan, favoring applicants who commit to serving AIDS patients, is met by CCI and not by HCR.

    
    

21. Preference three of the District 7 plan, for applicants with clear recruitment plans including salaries, benefits, bonuses and training opportunities is met by both CCI and HCR. The preference is better met by HCR which proposes to pay higher salaries and to provide a greater benefits package. Preference three of the district plan, overlaps with Subsection 381.705(1)(h), Florida Statutes, in the criterion focused on the availability of resources, including staff and management personnel. Both HCR and CCI have demonstrated the adequacy of their recruitment plans and that they have plans to establish relationships with Orlando area technical schools, community colleges or universities, which will enhance training and hiring qualified personnel.

    
    

22. Preference one of the 1989 Florida State Health Plan for nursing homes proposals to locate in districts with over 90% occupancy rates is met by both CCI and HCR.

    
    

23. State health plan preference two is for applicants proposing to serve Medicaid residents in proportion to the average subdistrict-wide percentage of nursing homes in the same subdistrict. The subdistrict-wide average of Medicaid residents in Orange County is 62.5 percent. HCR does not meet the requirement for the preference, based on its unwillingness to make a Medicaid commitment. CCI's commitment to a minimum of 50 percent Medicaid patient days better meets the requirements for the second preference in the state health plan.

    
    

24. The third preference of the state health plan for applicants proposing to serve special care residents, including AIDS, Alzheimer's and mentally-ill residents is met by both HCR and CCI. CCI gives greater emphasis to serving AIDS patients, while HCR proposes to have a designated unit more adequately suited for Alzheimer's sufferers.

    
    

25. The fourth state health plan preference for applicants offering a continuum of services to the community, by offering respite care, is met by both CCI and HCR.

    
    

26. The fifth state health plan preference for facilities constructed to maximize resident comfort and quality of care is met, in different ways, by both CCI and HCR. CCI's rooms will be 30 percent larger than required which allows residents space to decorate with more of their personal items and to have more comfortable areas for visitors in their rooms. CCI has emphasized visual openness and space in dining areas. HCR's pod design offers the elimination of institutional like corridors, provides multiple unique living room type visitation areas, and the advantage of separating the frail but mentally alert elderly from Alzheimer's sufferers.

    
    

27. The sixth state health plan preference is for applicants proposing innovative therapeutic programs. HCR asserts that it best meets the preference

    by its proposal to provide in-house therapeutic services. Although the in-house staff may enhance residents accessibility to the services, that fact is not sufficient to find that the service itself is innovative. Neither CCI nor HCR proposes an innovative therapeutic program.

    
    

28. Preference seven of the state health plan, for applicants whose charges do not exceed the highest Medicaid per diem in the subdistrict, was not addressed by either applicant.

    
    

29. Preference eleven of the state health plan, for applicants who ensure patient privacy and residents rights was minimally demonstrated, with regard to residents councils by CCI, but not by HCR.

    
    

30. Preference twelve applies to applicants proposing lower administrative costs and higher resident care costs, compared to the district average. CCI and HCR propose to charge patients, as follows:

    
    

    Private Semi-Private Medicaid Medicare

    
    

    CCI-Year One $ 92.00	$ 92.00	$ 90.00	$115.00
    HCR-Year One 95.00	95.00	93.00	120.54
    CCI-Year Two 132.00	98.00	79.30	137.75
    HCR-Year One 136.50	102.90	72.63	128.50

    
    

    Administrative costs for HCR are approximately one-fourth of patient care costs, but those of CCI are approximately one-half of patient care costs. CCI's total costs and charges are lower. Based on HCR Exhibit 8, ratios in the district range from lows of one-fourth to highs of two-thirds. HCR compares most favorably to the preference for lower relative administrative costs.

    
    

    Subsection 381.705(1)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the services district

    
    

31. Although, by prehearing stipulation the parties placed the criteria in 381.705(1)(b) at issue, no evidence on any like or existing services in the service district was presented at final hearing. Both applicant parties stipulated that HRS correctly determined that a need exists for an additional

    120 community nursing home beds in Orange County.

    
    

    Subsection 381.705(1)(c) - ability and record of providing quality of care; and preferences eight, nine and ten - superior history; higher staffing levels; and varied professions and disciplines

    
    

32. CCI's four family/stockholders operated facilities hold three superior and one standard license. CCI has never transferred, sold, or voided, nor have CCI-related facilities ever had a moratorium on patient admissions. CCI also proposes to provide staffing above minimum requirements. CCI has established its ability and record of providing high level quality of care.

    
    

33. HCR holds 8 standard and 9 superior facilities licenses in Florida. HCR has not had a license denied, suspended or revoked within the last 36 months. HCR has had moratoria on admissions at three of its Florida facilities and at two out of state facilities within the past 36 months. HCR's expert also testified that two of the eight facilities with standard licenses have been recommended for superior licenses, and the one facility with a conditional license has been recommended for a standard license. HCR has allowed a prior

    CON for a facility in Orange County to lapse. HCR does not, to same extent as CCI, meet the preference for applicants with a record for quality of care. HCR does propose staffing which meets the requirements of the preference for having the ability to provide quality care, and its proposal is, only with regard to the provision of in-house therapy services, superior to the staffing proposed by CCI.

    
    

    Subsection 381.705(1)(h) - funds for project accomplishment; accessibility for district residents; and Subsection 381.705(1)(i) - financial feasibility

    
    

34. HCR proposes to finance construction and development from cash flows from the operation of its existing facilities. CCI and HRS assert that HCR does not have the ability to finance the project from "operations" and that HCR's projected fill rates are overly optimistic. HCR had cash on hand of $125,000 in 1989, in part generated from the sale and not operations of facilities. HCR also has a history of significant cost overruns. HCR has been able to finance previous projects from cash flow and it is reasonable to conclude that the same will occur with this project. The testimony of the HCR expert in nursing home design, development and construction that the estimated costs for this project take into account the prior cost overruns is accepted.

    
    

35. HCR's fill-up rates were estimated based on the experience of other HCR facilities in the state. However, none of those facilities have the patient mix projected for the new HCR facility. For this project, HCR proposes 85% private-pay. For the facilities which were used to project utilization, Medicaid patients equal the percentage of Medicaid patients in the respective districts. Undisputed evidence was presented that a number of private pay patients "spend-down" and become Medicaid eligible in less than a year. In addition, only 30% of District 7 patients are private pay patients. Although HCR plans to keep patients who spend down, the pro forma fails to take in account any spend-downs within the first two years. HCR has failed to demonstrate the short term financial feasibility of its project by failing to demonstrate the reasonableness of projected utilization and by failing to project the need to accommodate spend-downs in light of the stated intention to keep such residents. HCR's proposal is financially feasible in the long-term after its beds are certified as Medicaid eligible.

    
    

36. CCI's proposal is more accessible to Medicaid residents, at least for the first two years of operation.

    
    

    Subsection 381.705(1)(l) - probable impact on costs, effect of competition, improvements or innovations

    
    

37. There was no evidence of the impact of either proposal on costs or competition among nursing homes in the area, despite the prehearing stipulation that the statutory criterion was at issue.

    
    

    Subsection 381.705(1)(m) - costs and methods of construction; and 381.705 (2) construction alternatives

    
    

38. HCR's proposed facility of 47,000 square feet will cost $3,600,000 to build. Construction costs are reasonable. HCR has taken into account prior cost overruns in projecting the cost of this project. Revisions in the HCR schematic design to enhance visibility of room doors and exits to courtyards can be accommodated in the final design plans.

39. CCI's proposed 44,000 square foot facility will cost $4,200,000 to build. Construction costs are reasonable to include all site work, including driveways and sidewalks. Revisions required in the CCI design can be appropriately included when the schematic design is revised for submission with final construction documents.

    
    

    Subsection 381.705(1)(n) - past and proposed provision of services to Medicaid and medically indigent

    
    

40. CCI proposes to commit to serving 50 percent Medicaid patient days and CCI family/stockholder facilities have the following Medicaid commitments and record:

    
    

    Halifax Convalescent Center DeBary Manor	CON Commitment 44 percent 0	1989 Record 70 percent 54 percent
    DeLand	0	*
    Fairview Manor	0	75-80 percent

    
    

    *No information was found in the record, except a statement that the Medicaid percentage was "above" the subdistrict county coverage.

    
    

41. HCR proposes to commit no patient days to Medicaid in the first two years, except to certify beds as needed for those patients who spend-down to Medicaid eligibility. HCR currently provides Medicaid services to 60 percent of its Florida nursing home residents.

    
    

42. Both HCR and CCI have established a history of past services to Medicaid, but CCI has established the superior proposed service to Medicaid patients in its proposed project.

    
    

    CONCLUSIONS OF LAW

    
    

43. The Division of Administrative Hearings has jurisdiction over this matter. Subsections 120.57(1) and 381.709(5), Florida Statutes.

    
    

44. A certificate of need is a license within the meaning of Section 120.52(9), Florida Statutes. The applicants have the burden of proving entitlement to a license. Florida Department of Transportation v. JWC Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). The award of a certificate of need must be based upon a balanced consideration of all statutory and rule criteria. Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1984).

    
    

45. Section 381.705(1)(a) requires the need for proposed health care facilities to be reviewed in relation to the state health plan and the applicable district plan. The applications are distinguishable relative to the plans by CCI's proposal to accept a condition to provide a minimum of 50 percent of its total annual patient days to Medicaid patients. HCR does not propose to serve Medicaid patients in its first two years, other than those who initially are private pay whose resources are reduced enough to make them Medicaid eligible. HCR will not accept a condition to serve Medicaid patients.

    
    

46. The other important distinction between these two applications, relative to the district plan, is CCI's willingness to accept a condition to serve AIDS patients, and HCR's willingness to accept a condition to serve Alzheimer's and related dementia patients in a designated unit.

47. On Subsection 381.705(1)(b), there was not evidence presented on like and existing facilities, except that all parties agree that a need exists for

    120 additional community nursing home beds. The need, as published by HRS, was not challenged.

    
    

48. Subsection 381.705(1)(c) requires consideration of the applicants' ability to provide quality of care and their record of providing quality of care. Florida Administrative Code Rule 10-5.036(4) contains factors to be evaluated in assessing the applicant's ability to provide quality of care. CCI has a more consistent record of providing quality care as measured by licensure criteria. CCI has not had a nursing home license denied, revoked, or suspended within the 36 months prior to the application, nor had a nursing home placed into receivership. HCR, on the other hand, has had moratoria placed on three of its Florida facilities within the 36 months preceding the filing of its application.

    
    

49. Section 381.705(1)(h) requires consideration of the availability of resources for project accomplishment, the effect and accessibility of the project on clinical needs of health professional training programs in the district, and the extent to which the proposed facility will be accessible to all the residents of the service district. Both applicants are experienced developers and operators of nursing homes. Both should be able to attain the necessary resources for project accomplishment, and both applicants will to an extent provide a training ground for area schools, which will also assist them in recruiting personnel. The proposed HCR facility, however, will not be accessible to the Medicaid eligible population in the subdistrict, which is approximately 62.5 percent of the nursing home population.

    
    

50. Subsection 381.705(1)(i) requires consideration of the short and long term financial feasibility of the proposals. The financial feasibility of the applicant's proposal would be meaningless as a predictor of the success of the project if the applicant is not also going to license and operate the facility.

    
    

51. For that reason, Subsection 381.709(2)(c) requires submission of a letter of intent which includes identification of the names of those with controlling interest in the applicant and a resolution by the governing authority that the applicant shall license and operate the facility. Subsection 381.707(4) requires certification by the governing authority that the applicant shall license and operate the project. The applicant must be the person who intends to operate and license the project.

    
    

52. It is clear that from the beginning CCI conceived of the Orange County nursing home as one which would be licensed and operated by a partnership including PMV, Inc., as are three of the four other nursing homes where CCI provides accounting services. That circumstance alone is not significantly different from those in PIA Psychiatric Hospitals, Inc., d/b/a Fort Myers Residential Treatment Center v. Department of Health and Rehabilitative Services, 12 FALR 1019 (DOAH Case No. 89-1422, DHRS Final Order December 13, 1989), where evidence that an entity other than the applicant would operate a health care facility resulted in denial of that applicant's application.

    
    

53. PIA had submitted a corporate resolution which stated that "The corporation is hereby authorized to license and operate such facility in the name of a wholly owned subsidiary." HRS adopted the Hearing Officer's ruling that Subsection 381.707(4), Florida Statutes, specifically requires the applicant to license and operate the facility, that the application must be

    filed in the name of the proposed license and operator, and that any other interpretation of the law "could circumvent the specific application requirements mandated by the legislature ... and seriously undermine the comparative review of each applicant during the review process."

    
    

54. In PIA, both the Hearing Officer and HRS relied upon Home Volkswagon, Inc. v. Calvin, 338 So.2d 1287 (1st DCA 1976), where an automobile "certificate of need" applicant was required to file a new application when the original applicant, after receiving preliminary approval, decided to operate in the name of a wholly owned subsidiary.

    
    

55. Similarly, in Brookwood-Jackson County Convalescent Center v. Department of Health and Rehabilitative Services, So.2d (1st DCA Opinion filed January 2, 1992) a CON application was rejected because "unrefuted evidence has established that [the applicant] cannot accurately certify that they would license and operate the facilities". The First District Court of Appeal held that the Section 381.707(4) requirement that the applicant shall license and operate the facility could be considered a clarification of the legislative intent in Section 381.704(2), which prohibits issuance of a health care facility license to any facility which fails to receive a certificate of need.

    
    

56. The facts of this case demonstrate that CCI was not initially the intended licensee or operator. None of the statutorily required information of the originally intended licensee and operator for the CCI proposal has been provided. Unlike the PIA resolution stating that a wholly owned subsidiary would license and operate the facility, CCI's resolution stated that CCI will license and operate its facility. CCI candidly admitted that a partnership initially was intended to license and operate the facility, but that CCI had abandoned that plan when informed that it violated Subsection 381.707(4). As a result of CCI's representations, the central issues became (1) whether the alternative plan was an impermissible amendment to the CCI application, and (2) whether CCI could demonstrate that it could, in fact, accurately certify that it would license and operate the facility, as distinguished from the applicant in Brookwood-Jackson County Convalescent Center, supra.

    
    

57. The facts that the applicant clearly changed its plans and failed to submit in its application the supporting data to demonstrate the feasibility of the alternative provide strong support for HCR's legal argument that the application was impermissibly amended.

    
    

58. Consistent with objectives stated in PIA, however, the CCI alternative plan to finance the entire project does not constitute an impermissible amendment solely because no additional data is needed beyond that submitted in the original application to test its feasibility. Taking together the letter of interest from the bank, the assumptions in CCI's pro forma, and the projected costs, HCR's expert was able to recast the financial schedules to demonstrate the effect of 100 percent financing.

    
    

59. The CCI plan for one hundred percent financing of the project is financially feasible, and therefore supports CCI certification that it can and will license and operate the project if approved.

    
    

60. CCI and HRS demonstrated that HCR's proposed patient mix is significantly different from that in other HCR facilities, and HCR failed to demonstrate that comparable fill-up and utilization rates could reasonably be expected in the short term.

61. Subsection 381.705(1)(m) related to costs and methods of construction are met by both applicants. Each had design deficiencies which can be corrected by the applicants with relatively minor modifications.

    
    

62. Subsection 381.705(1)(n) related to the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent is most nearly met by CCI. Both applicants have excellent histories of service to Medicaid patients. CCI's proposed service of a minimum of 50 percent Medicaid patient days is superior to the HCR proposal to only keep private pay patients who spend-down to Medicaid eligibility within the first two years.

    
    

63. CCI has provided competent, substantial evidence to support its entitlement to a CON for construction, development and operation of a 120 bed community nursing home in Orange County.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered:

1. Granting Certificate of Need application 6530 to Coordinated Care, Inc., based upon the conditions agreed to in the application;

   
   

2. Denying Certificate of Need application 6532 of HCR; and

   
   

3. Closing Case No. 91-2927 consistent with FCC's voluntary dismissal of its petition.

RECOMMENDED this 6th day of April, 1992, at Tallahassee, Florida.

ELEANOR M. HUNTER

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 6th day of April, 1992.

ENDNOTES

1/ HCR's proposed finding of fact number 3 states that "HCR will construct and operate a 120-bed nursing home in Orange County for $6,195,000. According to schedule 1 in HCR exhibit 1, the total capital expenditure is $6,195,000, but the total project cost is $7,944,787.

2/ Calculations made by HCR's expert witness. Tr. 223-224.

3/ Projected year one losses increases from $127,255 to $334,031.49. Profit or loss comparisons are made to projected cash flow, not to projected cash balances at the end of years one and two. Cash balances were to be derived from interest

generated from the investment of the $1.4 million capital contribution, which CCI failed to demonstrate is available. Tr. 454.

APPENDIX TO RECOMMENDED ORDER, CASE NOs. 91-2927 and 91-2928

Rulings on findings proposed by Health Care and Retirement Corporation of America, d/b/a Heartland Health Care Center of Orange County:

1. Accepted in Finding of Fact 1.

2. Accepted in Finding of Fact 2.

3. Rejected amount, in first sentence, in Finding of Fact 4. Accepted, remainder, in Findings of Fact 2 and 3.

4. Subordinate to Findings of Fact 2 and 26.

5. Accepted in Finding of Fact 3.

6. Subordinate to Findings of Fact 24 and 26.

7. Accepted in Finding of Fact 3.

8. Accepted in Findings of Fact 6 and 9.

9 and 10. Accepted in Finding of Fact 10.

1. Accepted in Findings of Fact 11 and 12.

2. Subordinate to Findings of Fact 2 and 4.

3. Accepted in Findings of Fact 19 and 20.

4. Accepted in Finding of Fact 21.

5. Accepted in Finding of Fact 22.

6. Accepted, in relevant part, in findings of Fact 23, 40 and 41.

7. Subordinate to Findings of Fact 23, 40 - 42.

8. Subordinate to Finding of Fact 23.

9. Subordinate to Finding of Fact 41.

10. Accepted in Finding of Fact 24.

11. Accepted in Finding of Fact 25.

12. Accepted, except last sentence, in Finding of Fact 26.

13. Rejected in Finding of Fact 39.

14. Rejected in Finding of Fact 30.

15. Accepted in Finding of Fact 28.

16. Accepted, except last sentence, which is rejected in Findings of Fact 32 and 33.

17. Accepted, first four sentences, in Finding of Fact 33. Rejected, remainder in Finding of Fact 32.

18. Rejected in Finding of Fact 32.

19. Accepted, first two sentences, in Finding of Fact 33. Rejected in Finding of Fact 32.

20. Rejected in Finding of Fact 29.

21. Accepted in Finding of Fact 30.

22. Accepted in Finding of Fact 35.

23. Accepted in Finding of Fact 21.

24. Rejected, in relevant part, in Finding of Fact 21.

25. Accepted in Finding of Fact 10.

26. Accepted in Findings of Fact 11 and 12; Conclusion of Law not reached.

27. Rejected in Finding of Fact 12.

28. Rejected, first sentence, in Finding of Fact 12. Rejected, second sentence, in Conclusions of Law. Accepted, remainder, in Findings of Fact 10 and 11.

29. Rejected in Finding of Fact 14.

30. Rejected in Finding of Fact 17.

31. Rejected in Finding of Fact 18.

32. Rejected in Finding of Fact 15.

33. Rejected, first four sentences, in Findings of Fact 16 and 18. Accepted, last two sentences, in relevant part, in Finding of Fact 12.

34. Rejected in Conclusions of Law.

Rulings on findings proposed by the Department of Health and Rehabilitative Services:

1. Accepted in Preliminary Statement.

2. Accepted in Findings of Fact 2 and 3.

3. Accepted in Finding of Fact 4.

4. Accepted in Finding of Fact 7.

5. Accepted in Finding of Fact 6.

6. Accepted in Findings of Fact 6 and 21.

7. Subordinate to Finding of Fact 6.

8 - 10. Subordinate to Preliminary Statement.

11 and 12. Subordinate to Preliminary Statement and Findings of Fact 2 and 6.

1. Subordinate to Findings of Fact 3 and 6.

2. Rejected as not relevant.

3. Subordinate to Findings of Fact 2 and 3.

4. Subordinate to Findings of Fact 3 and 6.

5. Subordinate to Findings of Fact 20 and 23.

18 - 20. Accepted in Finding of Fact 23.

21. Subordinate to Finding of Fact 32.

22 and 23. Accepted in Finding of Fact 25.

1. Subordinate to Findings of Fact 19 - 21.

2. Accepted in Finding of Fact 20.

3. Subordinate to Finding of Fact 20.

27 and 28. Accepted in Finding of Fact 20.

1. Subordinate to Finding of Fact 31.

2. Accepted in Finding of Fact 1.

3. Accepted in Finding of Fact 31.

4. Subordinate to Findings of Fact 31 and 32.

5. Subordinate to Finding of Fact 32.

34 - 36. Accepted in Finding of Fact 32.

37 and 38. Subordinate to Finding of Fact 32.

1. Accepted in Finding of Fact 32.

2. Accepted in Finding of Fact 31.

3. Subordinate to Finding of Fact 31.

4. Accepted in Finding of Fact 31.

43 and 44. Subordinate to Findings of Fact 31 and 32.

1. Subordinate to Finding of Fact 32.

2. Accepted in Finding of Fact 32.

3. Accepted in Finding of Fact 6.

4. Subordinate to Finding of Fact 17.

5. Subordinate to Finding of Fact 31.

50 - 52. Accepted in Finding of Fact 34.

1. Rejected in Finding of Fact 34.

2. Accepted in Finding of Fact 12.

3. Accepted in Findings of Fact 9 and 12.

4. Subordinate to Finding of Fact 12.

57 and 58. Accepted in Finding of Fact 21.

59. Accepted in Findings of Fact 13 and 15.

60 and 61. Accepted in Finding of Fact 21.

1. Accepted in Findings of Fact 35 and 36.

2. Accepted in Finding of Fact 35.

3. Subordinate to Finding of Fact 35.

65 - 67. Accepted in Finding of Fact 35.

68. Accepted in Finding of Fact 34.

69 and 70. Accepted in Finding of Fact 30.

71 - 76. Subordinate to Finding of Fact 12.

1. Rejected in Findings of Fact 10 and 11.

2. Subordinate to Finding of Fact 12.

3. Rejected in Finding of Fact 12.

4. Subordinate to Findings of Fact 12, 34 and 35.

5. Subordinate to Finding of Fact 12.

6. Subordinate to Findings of Fact 12, 32 - 35.

7. Accepted in Finding of Fact 12.

8. Accepted in Findings of Fact 6 and 23.

85 and 86. Accepted in Findings of Fact 17 and 18.

1. Accepted in Finding of Fact 37.

2. Accepted in Finding of Fact 38.

3. Accepted in Findings of Fact 34 and 38.

4. Accepted in Findings of Fact 3 and 26.

5. Accepted in Finding of Fact 3.

6. Subordinate to Finding of Fact 35.

7. Accepted in Finding of Fact 38.

94 and 95. Accepted in Finding of Fact 39.

96 - 104. Subordinate to Findings of Fact 26 and 39.

1. Accepted in Findings of Fact 23, 41 and 42.

2. Accepted in Findings of Fact 23, 40 and 42.

3. Accepted in Finding of Fact 40.

Rulings on findings proposed by Coordinated Care:

1 and 2. Accepted in Finding of Fact 1.

3 - 8. Subordinate to Finding of Fact 7.

1. Accepted in Finding of Fact 2.

2. Subordinate to Findings of Fact 6 and 9.

3. Accepted in Finding of Fact 12.

4. Accepted in Finding of Fact 6.

5. Accepted in Finding of Fact 23.

6. Subordinate to Finding of Fact 23 and accepted in Finding of Fact 40.

7. Accepted in Findings of Fact 6 and 24.

8. Accepted in Finding of Fact 24.

17 and 18. Accepted in Finding of Fact 6.

1. Accepted in relevant part in Finding of Fact 26 and 32.

2. Accepted in Finding of Fact 4.

3. Accepted in Finding of Fact 3.

4. Accepted in Findings of Fact 19 - 21 and 24.

5. Accepted in Findings of Fact 23 and 36.

6. Accepted in Finding of Fact 24.

7. Subordinate to Finding of Fact 6.

8. Accepted in Finding of Fact 6.

9. Subordinate to Finding of Fact 21.

10. Subordinate to Findings of Fact 23, 24 and 33.

11. Subordinate to Findings of Fact 19, 20, 22 - 25.

12. Subordinate to Findings of Fact 20 and 24.

13. Accepted in Findings of Fact 20 and 24.

14. Subordinate to Finding of Fact 20.

33 and 34. Accepted in Finding of Fact 23.

1. Accepted in Finding of Fact 40.

2. Accepted in Findings of Fact 40 and 42.

3. Accepted in Findings of Fact 41 and 42.

38 and 39. Accepted in Finding of Fact 32.

1. Accepted in relevant part in Finding of Fact 33.

2. First sentence, rejected. Second sentence, subordinate to Finding of Fact 33.

42 and 43. Accepted in Finding of Fact 30.

COPIES FURNISHED:

James M. Barclay, Esquire Cobb Cole & Bell

315 South Calhoun Street, Suite 500 Tallahassee, Florida 32301

Lesley Mendelson, Esquire Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, Florida 32308

Gerald Sternstein, Esquire McFarlain, Sternstein, Wiley

& Cassedy, P.A.

600 First Florida Bank Building Post Office Box 2174 Tallahassee, Florida 32316-2174

Alfred W. Clark, Esquire 1725 Mahan Drive, Suite 300 Post Office Box 623 Tallahassee, Florida 32308

Sam Power, Agency Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Slye, General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 91-002927

Orders for Case No: 91-002927