r. terry rigsbyVs.gerald sternstein|Agency for Health Care A... -- eLawyers

Petitioner: ALACHUA GENERAL HOSPITAL, INC.
Respondent: LAKE PORT PROPERTIES, D/B/A LAKE PORT NURSING CENTER
Judges: WILLIAM F. QUATTLEBAUM
Agency: Agency for Health Care Administration
Locations: Tallahassee, Florida
Filed: Dec. 13, 1994
Status: Closed
Settled and/or Dismissed prior to entry of RO/FO on Wednesday, March 15, 1995.
Latest Update: Aug. 02, 1995
Summary: Whether the applications for certificates of need filed by Petitioners Alachua General Hospital, Inc., Oakhurst Manor Nursing Corporation and Florida Convalescent Centers, Inc., meet the requirements of law and should be approved based on application of the statutory review criteria or upon other considerations.Applicant's failure to file financial data is fatal.

93-6264

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ALACHUA GENERAL HOSPITAL, INC., ) d/b/a ALACHUA GENERAL HOSPITAL, )

)

Petitioner, )

vs. ) CASE NO. 93-6264

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and OAKHURST )

MANOR NURSING CORP., )

)

Respondents. )

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

)

Petitioner, )

vs. ) CASE NO. 93-6266

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and OAKHURST )

MANOR NURSING CORP., )

)

Respondents. )

) OAKHURST MANOR NURSING )

CENTER CORP., )

)

Petitioner, )

vs. ) CASE NO. 93-6810

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William F. Quattlebaum, held a formal hearing in the above-styled case on March 7 and 14-18, 1994, in Tallahassee, Florida.

APPEARANCES

For Alachua General Hospital, Inc.:

R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN

204 South Monroe Street Tallahassee, Florida 32302

For Florida Convalescent Centers, Inc.: Gerald Sternstein, Esquire

Frank Rainer, Esquire

RUDEN, BARNETT, McCLOSKY, SMITH

215 South Monroe Street

Barnett Bank Building, Suite 815 Tallahassee, Florida 32301

For Oakhurst Manor Nursing Corp.: Alfred W. Clark, Esquire

117 South Gadsden Street, Suite 201 Tallahassee, Florida 32301

For the Agency for Health Care Administration: Dean Bunton, Esquire

Agency for Health Care Administration

325 John Knox Road

Atrium Building, Suite 301 Tallahassee, Florida 32303-4131

STATEMENT OF THE ISSUE

Whether the applications for certificates of need filed by Petitioners Alachua General Hospital, Inc., Oakhurst Manor Nursing Corporation and Florida Convalescent Centers, Inc., meet the requirements of law and should be approved based on application of the statutory review criteria or upon other considerations.

PRELIMINARY STATEMENT

In the January 1995 nursing home bed batching cycle, several nursing home operators filed applications for certificates of need seeking an award of beds. By publication of notice of intent, the Agency for Health Care Administration (AHCA) preliminarily determined that awards should be made to Oakhurst Manor Nursing Home Corp., (CON 7326) and to Lake Port Nursing Center (CON 7223).

Petitions for Formal Administrative Proceeding were filed by applicants including Life Care Centers of America, Inc., Beverly Enterprises-Florida, Inc., North Florida Retirement Village, Inc., Alachua General Hospital, Inc., Florida Convalescent Centers, Inc., Lake Port Nursing Center, SHCC Service, Inc., and Oakhurst Manor Nursing Center Corp. Petitions were subsequently withdrawn by Life Care Centers of America, Inc., Beverly Enterprises-Florida, Inc., North Florida Retirement Village, Inc., Lake Port Nursing Center and SHCC Service, Inc.

Immediately preceding the commencement of the formal hearing, Florida Convalescent Centers, Inc., (FCC) filed a Motion for Summary Recommended Order seeking to have the application of Oakhurst Manor Nursing Center Corp., (Oakhurst) rejected as incomplete. FCC asserts that the combined financial statement and supplemental schedule submitted as part of Oakhurst's application are insufficient to meet the requirements of Section 408.037(3), Florida Statutes, which requires that a certificate of need application contain an audited financial statement of the applicant.

Oakhurst responded stating that the Hearing Officer does not have jurisdiction to consider the issue of application completeness under the circumstances of this case, that FCC failed to raise the issue in the Petition

for Hearing and so is precluded from attempting to litigate the matter, and that the Oakhurst financial information submitted as part of its application meets the requirements set forth in the agency's rules.

Oakhurst also moved for a Summary Recommended Order on grounds that the FCC application is deficient because it fails to include balance sheets or profit- and-loss statements for Palm Garden of Ocala, the facility for which FCC seeks an award. FCC responded asserting that it has met the requirement of the statute governing content of applications.

At hearing on the motions prior to commencement of the formal proceeding, the motions were denied; however, as was stated at the motion hearing, the issues raised in the Motions for Summary Recommended Order are addressed in this Recommended Order.

At hearing, Alachua General Hospital, Inc., presented the testimony of four witnesses and had exhibits numbered 1-6 admitted into evidence.

Florida Convalescent Centers, Inc., presented the testimony of six witnesses and had exhibits numbered 1-16 admitted into evidence.

Oakhurst Manor Nursing Center Corp., presented the testimony of eight witnesses and had exhibits numbered 1, and 3-10 admitted into evidence.

AHCA presented the testimony of one witness and had exhibits numbered 1-3 admitted into evidence.

One Hearing Officer's exhibit was also admitted.

A transcript of the hearing was filed. Upon motions filed by the parties, the deadline for filing proposed recommended orders was extended several times. All parties filed proposed orders. The proposed findings of fact contained therein are ruled upon either directly or indirectly as reflected in this Recommended Order, and in the Appendix which is attached and hereby made a part of this Recommended Order.

Subsequent to the filing of the Proposed Recommended Orders, Oakhurst and FCC jointly moved to strike portions of the Alachua Proposed Recommended Order submitted by Alachua. As grounds for the motion, the movants state that the arguments raised by Alachua are inconsistent with the prehearing stipulation jointly filed by the parties. Alachua filed a response to the motion. Based on review of the motion, response, and the prehearing stipulation filed by the parties, the motion is hereby denied.

FINDINGS OF FACT

Alachua General Hospital, Inc.'s, (Alachua) CON application (#7320) seeks approval to convert 30 existing and underutilized acute care beds into 30 skilled nursing facility beds at the applicant's Alachua County hospital.
Approximately 11,509 square feet of space within Alachua General Hospital will be renovated for the unit. The cost of the project is identified in the application as $1,000,000.
Alachua, located in Gainesville, Florida, has been in operation for 65 years, is appropriately accredited and is part of the Sante Fe Health Care System. Alachua's acute care bed occupancy rate is in the range of 37 percent.
Alachua was the only applicant in this batching cycle to propose conversion of existing hospital beds into a skilled nursing subacute care unit.
Alachua maintains that under the District 3 local health plan, its CON application to convert underutilized acute care beds to skilled nursing care beds should be approved independent of the fixed need pool.
Palm Garden of Ocala (Palm Garden), a unit of Florida Convalescent Centers, Inc., (FCC) is a 120 bed community-based skilled nursing facility located in Ocala, Florida. Palm Garden has been in operation since 1987, has a history of high-occupancy and is a superior rated facility.
Palm Garden is managed by National HealthCorp L.P. (NHC) which also manages or owns 96 other nursing homes in Florida and other states. The NHC has sited its regional office at Palm Garden. Among other activities, NHC funds a foundation for geriatric education.
The FCC CON application (#7325) seeks approval for a sixty bed expansion to the existing facility in Marion County. Approximately 30,559 square feet of new space will be required for the additional beds. The cost of the project is $3,160,600.
Oakhurst Manor Nursing Center (Oakhurst), a Subchapter S corporation operated by Harborside Healthcare Limited Partnership ("Harborside"), is a 120 bed community-based skilled nursing facility located in Ocala, Florida. Oakhurst has a history of high-occupancy and is a superior rated facility.
Oakhurst was formed simultaneously with six other Subchapter S corporations in 1989 to acquire and operate seven nursing centers. All seven centers were purchased in March 1990.
Harborside is affiliated with Oakhurst through common ownership, Douglas and George Krupp. Harborside provides management services to Oakhurst and to 16 other affiliated nursing centers in four states.
The Oakhurst CON application (#7326) seeks approval for a sixty bed expansion to the existing facility in Marion County. Approximately 23,500 square feet of new space will be required for the additional beds. The cost of the project is $2,707,126. The addition will include a 20 bed subacute care unit specializing in skin and wound care and will provide space for ancillary therapy and rehabilitation services.
On April 16, 1993, the AHCA published a fixed bed need projection for
110 community nursing home beds in District 3, the district relevant to this proceeding. Of the 110 beds needed, an award of 50 beds has been made to another facility and are not at issue in this case.
The AHCA has recommended that the CON application filed by Oakhurst for the 60 bed expansion be approved.
The AHCA recommended denial of the remaining CON applications.
The parties stipulated that the project cost and project design for all CON applications at issue in this procedure are reasonable.
As previously stated, Alachua seeks approval to convert the 30 acute care beds to subacute care beds, either as part of or in addition to the fixed need pool. The phrase "subacute care" indicates a level of care which is lower than acute care and higher than custodial care on a "continuum" of care. Subacute care requires use of skilled nursing services.
Services which will be provided at Alachua's skilled nursing unit are different from those which are typically available in a community nursing home setting. Although some community nursing homes offer subacute care services (and FCC proposes to provide some subacute services) patients in a hospital unit are generally more ill and require more complex medical services than are available in regular community nursing homes. Lengths of stay are generally shorter in a hospital-based skilled nursing unit than in a community nursing home.
The Alachua CON application summarizes the proposed project as follows:

The hospital-based skilled nursing facility will be the only such unit in the four-county
nursing home planning area in which the hospital is located. It will meet a need, as determined in the application, for an intermediate level
of care between acute hospital and community home nursing services. Existing community nursing homes in Gainesville have neither the range of services nor the capacity necessary to care for the increasing number of patients who need "heavy" nursing service but for whom hospitalization is inappropriate....
Based on Alachua's response to two questions in the CON application, the AHCA asserts that the agency was required to comparatively review the Alachua application for the beds in the pool and that Alachua is precluded from requesting beds independent of the fixed need pool.
Question 1.B.1 of the CON application states as follows:

Are you applying for more beds than contained in the published fixed need pool?
The fixed pool establishes a need for 110 beds. Alachua's CON application seeks to convert 30 existing beds. Alachua responded "no" to the question. The Alachua response to the question is correct.
Question 1.B.2 of the CON application states as follows:

Address Rule 59C-1.036(2)(k) FAC and describe the needs assessment (such as market feasibility study) and the findings utilized in establishing the target population upon which your special circumstances request is based. In addition, justify the number of requested beds in your application as based on the findings of a needs
assessment with identifiable assumptions, methods and reference sources.
Rule 59C-1.036(2)(k), Florida Administrative Code, does not exist. The applicable rule is 59C-1.036(2)(h), Florida Administrative Code, which requires consideration and review of access criteria "in the event that the net bed allocation is zero..." In this cycle, the net bed allocation was 110. The rule is inapplicable to this case. Alachua provided no response to this question.
As to the dispute related to Alachua's responses to the reference questions, the AHCA position is illogical, is not supported by the questions or by credible evidence of record and is rejected.
As to Oakhurst's submission of financial data, section 408.037(3), Florida Statute, provides that an application for a certificate of need shall contain:

[A]n audited financial statement of the applicant. In an application submitted by an existing health care facility, health maintenance organization, or hospice, financial condition documentation shall include, but need not be limited to, a balance sheet and a profit-and-loss statement of the 2 previous fiscal years' operation.
As part of its application, Oakhurst submitted a combined audited financial statement setting forth the financial position of Harborside Healthcare Limited Partnership.
Oakhurst is identified on the CON application as the applicant. Harborside Healthcare Limited Partnership is not the applicant for the CON at issue in this proceeding. The application fails to contain an audited financial statement of the applicant.
The Oakhurst application for CON# #7326 is incomplete and is hereinafter treated as having been withdrawn.
As part of their applications, Alachua and FCC submitted audited financial statements setting forth the financial positions of the respective applicants, Alachua General Hospital, Inc., and Florida Convalescent Centers, Inc. The audited financial statements were prepared in accordance with generally accepted accounting principles. Both the Alachua and FCC applications are complete.
The criteria for review of the applicant's proposals are set forth at Section 408.035, Florida Statutes. The parties stipulated that a number of the criteria are inapplicable or do not present disputed issues of material fact. The remainder of these Findings of Fact are a comparative review of the two remaining applications based on applicable review criteria as set forth in paragraph four of the prehearing stipulation.
The 1989 state health plan in part provides that because the health needs of subacute patients are different from those of community nursing home patients, separate licensing standards should be developed. The plan also indicates that the need for hospital-based nursing home services should be determined separately from the need for community nursing homes and states that CON applications for hospital-based nursing home services should not be competitively reviewed with community nursing home applications.
In this case, the AHCA did not comply with the state health plan's direction that CON applications for hospital-based nursing home services not be competitively reviewed with community nursing home applications. In this case, the application was reviewed with the applications for community nursing homes submitted by other providers.
The statute applicable to this case requires that this Recommended Order contain a competitive review of the applications.
Section 408.035(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health.
As to the application of Alachua, there are no hospital-based subacute care facilities in the planning area. Patients in need of such care have been transferred to facilities in south Florida or to other states. The application establishes that need exists for a hospital-based skilled nursing unit in the area.
As to the application of FCC, review of current utilization rates indicates that need exists for additional community nursing care services in Marion County. FCC experiences occupancy rates near 95 percent. Projected occupancy levels set forth in the FCC application are reasonable.
The evidence establishes that the need for additional beds exists and that the applications of both Alachua and FCC are consistent with the applicable district and state health plans. A discussion of "preferences" set forth in the state and district health plans follows this discussion of statutory review criteria.
Section 408.035(1)(b), Florida Statutes, requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.
As to the Alachua proposal, there are no other hospital-based skilled nursing units in the planning area within which Alachua is located. There have been difficulties discharging patients in need of subacute care from Alachua's acute care beds, resulting in unnecessary hospitalization of patients otherwise suitable for a reduced level of care. Utilization in the planning area exceeds
90 percent.
As to the FCC application, approval will increase the availability of community nursing care at a superior rated facility, and will meet the projected need determined by the AHCA's determination of the fixed pool.
Section 408.035(1)(c), Florida Statutes, requires consideration of the applicant's ability to provide quality of care and the applicant's record of providing quality of care.
Alachua has been in operation for 65 years and is the only applicant accredited by the Joint Commission on Accreditation of Healthcare Organizations. Quality assurance and quality control programs are in place.
Alachua has a well trained acute care nursing staff experienced with the types of care to be provided at a subacute care level. Staffing ratios exceed both the legal minimums and the existing staff ratios found at community nursing homes.
As would be expected at an existing hospital, the dietary program is operational and will be available to provide service to the subacute patients. Alachua proposes to create an activities department to provide an opportunity for subacute patients to become or remain active. A patients' "bill of rights" is already in existence at the facility.
Alachua has a history of providing high quality care. There is no evidence that the care provided to subacute care patients will be other than of the same high quality.
FCC is a superior rated facility with a history of providing high quality care. There is no indication that the 60 bed unit addition will result in a decline in quality of care.
The FCC addition will be staffed appropriately. FCC provides professional health training and has specific programs, including tuition assistance, intended to retain, reward and recruit staff. A registered nurse will be on duty on a 24 hour basis. More than 500 therapists are employed by FCC (although not necessarily at the Palm Garden of Ocala location.)
Section 408.035(1)(e), Florida Statutes, requires consideration of the probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources.
As part of the Sante Fe Health System, approval of the Alachua application will provide for increased use of shared resources and minimize duplication of services by other parts of the system.
The evidence fails to establish that approval of the FCC application will result in probable economies and improvements in service from joint, cooperative, or shared health care operations.
Section 408.035(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal.
Both Alachua's and FCC's proposals are financially feasible in both the short and long term. The evidence establishes that the audited financial statements and schedules present an accurate and reasonable representation of their respective financial positions.
Section 408.035(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness.
Approval of Alachua's application can be expected to have no competitive impact on the supply of services being proposed based on the fact that intensive subacute services are generally not available at community nursing homes. Approval may result in a positive impact on Alachua's overall
patient charges based on the conversion of underutilized beds into revenue producing beds and the dilution of the hospital's fixed overhead expenses across a greater number of utilized beds. It is expected that 85 percent of the subacute patients will be Medicare patients, accordingly Medicare regulations will govern the charges in the converted unit.
As compared to community nursing home charges, Alachua's charges will be higher that those of a community nursing home. Compared to a community facility, Alachua will provide an increased level of services to patients, including additional nursing hours, medical supplies and related ancillary costs. Under the circumstances, the difference in the charges is reasonable.
Approval of FCC's application can be expected to have a positive competitive impact on the supply of services being proposed based on the fact that the addition of beds will increase the supply of appropriate placements.
Section 408.035(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent.
Alachua has historically been and will continue to be the indigent care provider in the community. Ten percent of Alachua's patient days are related to Medicaid patients. Because Medicaid regulations prohibit payment to hospital-based skilled nursing units, Alachua has not proposed provision of services to Medicaid patients as a condition of receiving an award of the CON.
As previously stated, FCC currently is subject to a 50 percent Medicaid participation rate at Palm Garden. In the CON application, FCC has committed to a 73 percent Medicaid participation rate for the additional unit at Palm Garden. Subject to issuance of the CON, Palm Garden will have a total number of 104 conditioned Medicaid beds.
Section 408.035(2)(b), Florida Statutes, requires consideration of whether existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. To the extent that such information is available, there is no evidence that these services are used inappropriately or inefficiently.
Section 408.035(2)(d), Florida Statutes, requires consideration of whether patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service.
Because there are no other hospital-based skilled nursing units in the planning area, patients in need of subacute care at a level exceeding that normally available in community nursing homes are unable to locate appropriate placement in the area.
As to community nursing home beds, the AHCA has determined that a need exists for additional capacity in the planning area's nursing homes. It is likely that failure to meet projected need will result in difficulty in locating appropriate placements.
The state health plan sets forth "preferences" which are considered in comparative evaluations of competing CON applications.
Preference is given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 percent. The occupancy rate is higher in the Alachua planning area than in the Marion planning area. Alachua more closely meets this preference.
Preference is given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level, care systems.
FCC is currently subject to a 50 percent Medicaid participation rate at Palm Garden. In the CON application, FCC commits to a 73 percent Medicaid participation rate for the additional beds. Subject to issuance of the CON, Palm Garden will have a total number of 104 conditioned Medicaid beds. Hospital-based skilled nursing units are not eligible to participate in the Medicaid program. However, Alachua has a long history of providing a substantial level of health care to indigent persons. Both parties meet this preference.
Preference is given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Both parties propose to provide specialized services and meet this preference.
Preference is given to applicants proposing to provide a continuum of services to community residents, including but not limited to, respite care and adult day care.
FCC works with local health care providers to position itself as an option on the continuum of care available to Marion County residents. As part of a program specifically aimed at providing care for Alzheimer's patients, FCC proposes to provide respite care at Palm Garden.
Alachua is part of the Sante Fe Health System, a provider of a broad range of health services from acute care inpatient hospital services to outpatient ambulatory and rehabilitation services, including home health and hospice. Approval of Alachua's application will provide appropriate care between acute care and home health care services.
Essentially due to the differences in the types of facilities owned by related organizations, Alachua more closely meets this preference than does FCC.
Preference is given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual room temperature controls, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. Both applications meet this preference.
Preference is given to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. Neither party proposes to offer any therapeutic programs which may credibly be identified as "innovative."
Preference is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are be considered for facilities proposing to serve upper income residents.
FCC's projected rates do not exceed the highest Medicaid per diem rate in the subdistrict, therefore FCC meets this preference. Hospital-based skilled nursing units are not eligible to participate in the Medicaid program, therefore Alachua does not meet this preference.
Preference is given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. HRS' evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida. AHCA is the successor agency to HRS. Both applications meet this preference.
Preference is given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents than other applicants shall be given preference. By virtue of location, Alachua's hospital-based unit more closely meets this preference than does FCC.
Preference is given to applicants who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. These professionals include physical therapists, mental health nurses, and social workers. Both applications meet this preference.
Preference is given to applicants who document plans to will ensure residents' rights and privacy, to use resident councils, and to implement a well-designed quality-assurance and discharge-planning program. Both applications meet this preference.
Preference is given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. FCC projects lower administrative costs and higher resident care costs compared to the average nursing home in the district and meets this preference. Alachua's higher costs do not meet this preference.
Alachua asserts that because it is a hospital-based unit, administrative costs are typically higher than in a community nursing home setting, and therefore the preference is inapplicable to their CON application. The suggestion that because a facility does not meet a preference it should not be applied is not supported by evidence and is rejected.
The district health plan sets forth preferences which are to be considered in comparative evaluations of CON applications.
The first applicable district preference is directed toward providing geographic access to nursing home beds. Neither of the applications meet this preference.
The second applicable district preference requires consideration of existing bed utilization. Based on the percentage of elderly population and utilization of existing beds in each area, relative priorities are established.
Based on population age statistics, Alachua is in a "low need" planning area; FCC is in a "high need" planning area.
As to utilization, existing nursing homes in the Alachua planning area are experiencing occupancy levels in excess of 91 percent, placing Alachua in a "high occupancy" planning area. Existing nursing homes in the Marion planning area are experiencing occupancy levels between 80 and 90 percent placing FCC in a "moderate occupancy" planning area.
According to the preference matrix set forth in the district plan, FCC is in a priority two planning area (high need and moderate occupancy.) Alachua is in a priority four planning area (low need and high occupancy.)
The evidence establishes that FCC more closely meets this preference than does Alachua, although the preference indicates that both should receive an award of beds to some extent. The preference specifies that "to the extent possible, all planning areas ranked" in one of the four priority categories "should be approved to add some new beds."
The third preference relates to the conversion of acute care beds to skilled nursing use and states:

[e]ven when the State Rule calculates no need for additional beds in the district and priority is not established for a planning area, special consideration should be given to applicants proposing to convert underutilized hospital beds into skilled nursing beds for step-down or
subacute care for patients discharged from hospitals.
The preference sets forth the conditions under which such an award would be appropriate as:
1. The number of patients whose hospital stays have been extended due to lack of subacute care placements exceeded one percent of the applicant's Medicare patients in the most recent 12 months; or,
2. The number of extended stay patient days in the hospital during the last 12 months exceeded one percent of the applicant's facility's Medicare patient days.
The evidence establishes that due to a lack of appropriate area facilities, Alachua has experienced difficulty in placing patients in need of intense subacute care. The evidence further establishes that the number of extended stay patient days in Alachua during the relevant 12 months period exceeds one percent of the applicant's facility's Medicare patient days. As set forth in the application, extended patient days for the year ending June 30, 1992, were 2.14 percent of Alachua's Medicare days for the period. Alachua meets this preference.
The fourth and fifth preferences apply to new facilities of at least
60 beds. Neither application meets these preferences.
The sixth preference states that priority consideration should be given to facilities which propose to offer specialized services to meet the needs of the identified population. Both applications meet this preference.
At the hearing, the AHCA witness opined that subacute service, considered a specialized service in a community nursing home setting, is not a specialized service when provided in a hospital setting. The testimony is not persuasive. The greater weight of the evidence establishes that subacute care is a specialized service regardless of where the service is delivered.
The AHCA witness appeared to suggest that patients should remain in an acute care setting until such time as an alternative community placement is located. It is inappropriate to place or leave a patient needing "step-down" subacute care in an acute care bed.
Alachua's proposed hospital-based unit will serve as a step-down unit for patients of higher acuity than those normally residing in a community nursing facility. Such patients require a more intense level of care than is generally available in a community nursing home setting.
FCC currently provides Alzheimer's patient care, rehabilitation services, intravenous and respiratory therapy, and wound care. FCC proposes to provide subacute care, rehabilitation services and Alzheimer's patients. It is difficult to quantify the intensity or volume of subacute care FCC will provide upon issuance of the CON at issue in this case.
Given the nature of the facilities and the types of patients for which care will be provided, it is unlikely that Alachua and FCC will be providing the same level of subacute care to the same types of patients. It is likely that Alachua's patients will need a higher level of skilled nursing care than is typically available in a community nursing home.

CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. Section 120.57(1), Florida Statutes.
As previously stated, Section 408.037(3), Florida Statute, provides that an application for a certificate of need shall contain an audited financial statement of the applicant. The application submitted by Oakhurst fails to contain an audited financial statement of the applicant and is incomplete.
In this case, the AHCA accepted Harborside's combined financial statement as meeting the requirement set forth in the statute. The combined financial statement and schedules filed as part of the application fail to meet the requirement set forth in the statute. Harborside is not identified as and is not the applicant for the CON.
Failure to submit the financial statements of the applicant prevents competing applicants and other interested parties from meaningfully reviewing and testing the financial feasibility of the proposed project and the financial ability of the applicant to implement the project. Humhosco, Inc. v. Department of Health and Rehabilitative Services, 561 So.2d 388, at 391 (Fla. 1st DCA 1990.)
The submission of Oakhurst's audited financial statement at the hearing fails to provide competing applicants and other interested parties an opportunity for meaningful review and testing of the financial feasibility of the proposed project and the financial ability of the applicant to implement the project and is rejected as an improper attempt to amend the application.
Because an incomplete application is treated as withdrawn and receives no further consideration pursuant to section 408.039(5), Florida Statutes, the remainder of this Recommended Order is directed to the applications filed by Alachua and FCC.
An applicant for a certificate of need has the burden to demonstrate entitlement to an award of the certificate. Florida Department of Transportation v. J.W.C. Co., 396 So.2d 778 (Fla. 1st DCA 1981), Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services,
475 So.2d 260 (Fla. 1st DCA 1985). A balanced consideration of applicable statutory and rule criteria must be made. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985). Such consideration requires that varying weight be accorded each criterion depending on the facts of each case. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985). In this case, the evidence establishes that both parties have demonstrated entitlement to an award of the certificate.
A formal administrative hearing is a de novo proceeding requiring the independent evaluation of the evidence and intended to formulate final agency action. No presumption of correctness attaches to the preliminary agency decision. Florida Department of Transportation v. J.W.C. Co., 396 So.2d 778 (Fla. 1st DCA 1981).
Section 408.035, Florida Statutes, identifies the specific review criteria which the AHCA considers in CON application determinations. By agreement of the parties, the following criteria have been determined to be at issue in this proceeding. The material criteria are as follows:
* * *
(b) That existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner.
* * *
(d) That patients will experience serious problems in obtaining inpatient care of the type proposed,
in the absence of the proposed new service.
Based on review of the criteria and related preferences as herein set forth in the Findings of Fact, the evidence establishes that the parties are essentially equal with respect to Sections 408.035(1)(a), (b), (c), (i), (l) and (n), and 408.035(2)(b) and (d), Florida Statutes.
Alachua is superior with respect to Section 408.035(1)(e), Florida Statutes, relating to probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. However, this is somewhat negated by the fact that Alachua's more intense level of subacute care results in higher costs and charges than would normally be found in a community nursing home setting.
As to the preferences in the state health plan, Alachua is superior with respect to preferences related to subdistrict occupancy rates, provision of a continuum of services, and staffing levels. FCC is superior with respect to preferences related to charges and costs. The applications are essentially similar with respect to the remaining preferences.
As to the preferences in the district health plan, FCC is in a higher priority planning area than is Alachua, however because both applicants fall into one of the four identified priority planning areas, both should to some extent receive an award of beds as specified in the preference.
Alachua is superior with respect to the preference related to conversion of underutilized hospital beds. Alachua meets the specific condition set forth in the district health plan related to extended stay patient days as a percentage of the facility's Medicare patient days. The applications are essentially similar with respect to the remaining preferences.
A balanced consideration of applicable statutory and rule criteria indicates that both applicants should be awarded certificates of need.
The published fixed need pool indicates a need for 60 community nursing home beds in this planning cycle. Based on the need for community nursing home beds and the proposed charges and costs for such care, FCC's application for community nursing home beds is superior to Alachua's application for conversion to subacute care beds. FCC should receive an award of the 60 community nursing home beds.
Alachua's CON application establishes that a need exists for step down hospital-based skilled nursing care in the planning area. None is currently available. Patients in need of such care have been transferred to distant appropriate placements. Alachua's application to convert underutilized acute care beds into subacute care beds would fill a gap in the local availability of services and meets the applicable condition for special consideration set forth in the district health plan.
The state health plan recognizes the need for hospital-based nursing home services and states that applications for such beds should not be competitively reviewed with community nursing home applications; nonetheless, the AHCA comparatively reviewed Alachua's application with those submitted by the community nursing home operators and found Alachua's application to be insufficient.
At hearing, the AHCA offered no credible substantive evidence disputing Alachua's demonstration of need. Instead the AHCA relied on Alachua's answers to two questions on the CON application to assert that Alachua was entitled only to comparative review with the other applicants and to support the agency's apparent refusal to provide a "special circumstances" review of the proposal. However a simple reading of the questions establishes that Alachua's responses are reasonable. The AHCA position is illogical, not supported by credible evidence and is rejected.
Alachua has demonstrated that special circumstances exist justifying approval of the application to convert underutilized beds into a hospital-based skilled nursing unit outside the fixed need pool.

RECOMMENDATION

RECOMMENDED that a Final Order be entered determining the application of Oakhurst Manor Nursing Center for Certificate of Need #7326 to be incomplete and withdrawn, GRANTING the application of Florida Convalescent Centers, Inc., for Certificate of Need #7325 for the 60 remaining beds in the applicable fixed need pool and GRANTING the application of Alachua General Hospital for Certificate of Need #7320 to convert 30 existing acute care beds into a skilled nursing unit.

DONE and RECOMMENDED this 5th day of October, 1994, in Tallahassee, Florida.

WILLIAM F. QUATTLEBAUM

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 5th day of October, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-6264

To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties.

Alachua General Hospital, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

15. Rejected, irrelevant as to the AHCA's review of the proposals prior to notice of intended award.

16, 20. Rejected, unnecessary.

21-26. Rejected, subordinate.

30. Rejected, recitation of testimony is not finding of fact. 32, 34. Rejected, subordinate.

42-50. Rejected, not supported by the evidence. The preferences set forth in the proposed finding are not those contained within Alachua's exhibit #1, which has been utilized in this Recommended Order.

52. Rejected, immaterial.

Rejected, recitation of testimony is not finding of fact.
Rejected, evidence fails to establish that therapy offered is "innovative."

62. Rejected, cumulative.

63-64. Rejected, subordinate.

72. Rejected as to SAAR, unnecessary.

73-76. Rejected, recitation of testimony is not finding of fact.

Oakhurst Manor Nursing Corp.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

4,6, 8-51. Rejected, unnecessary, application rejected as incomplete and withdrawn from consideration.

52-54, 56-58. Rejected, irrelevant. Although it is true that the application contained the combined audited financial statements for the Harborside facilities, such statement fails to meet the requirement that the application contain an audited financial statement for the applicant.

Harborside is not the applicant.

55. Rejected, irrelevant. The agency has cited no authority which would permit the waiver of the statutory requirement.

59. Rejected, immaterial. The document was admitted to demonstrate that the material required by law was not submitted with the CON application. Further consideration constitutes an impermissible amendment to the CON application and is rejected.

Florida Convalescent Centers, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

3. Rejected, unnecessary.

5-91. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn.

93. Rejected, unnecessary.

102-143. References to Oakhurst application, rejected, unnecessary.

Agency for Health Care Administration's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

3. Rejected, irrelevant.

4-5. Rejected, unnecessary.

6. Rejected, subordinate.

Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn.
Rejected, not supported by the greater weight of evidence.

13-16. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn.

19. Rejected, contrary to the comparative review contained herein.

Rejected, contrary to the greater weight of the evidence, wherein the CON application sets forth such information.
Rejected, unnecessary. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Comparison is inappropriate.

Rejected, contrary to the comparative review contained herein.
Rejected, contrary to the evidence. The CON application sets forth the information which the agency asserts was not provided.
Rejected, contrary to the comparative review contained herein.
Rejected, contrary to the evidence as related to applicable criteria for review set forth in the statute.

35. Rejected, not supported by credible evidence or the administrative rules cited in the proposed finding of fact.

COPIES FURNISHED:

Douglas M. Cook, Director

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road

Tallahassee, Florida 32303-4131

Dean Bunton, Esquire

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road

Tallahassee, Florida 32303-4131

R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN

204 South Monroe Street Tallahassee, Florida 32302

Gerald Sternstein, Esquire Frank Rainer, Esquire

RUDEN, BARNETT, McCLOSKY, SMITH

215 South Monroe Street

Barnett Bank Building, Suite 815 Tallahassee, Florida 32301

Alfred W. Clark, Esquire

117 South Gadsden Street, Suite 201 Tallahassee, FL 32301

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 ten 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.

================================================================= AGENCY ORDER REMANDING

=================================================================

STATE OF FLORIDA

AGENCY FOR HEALTH CARE ADMINISTRATION

ALACHUA GENERAL HOSPITAL, INC.; FLORIDA CONVALESCENT CENTERS, INC. d/b/a PALM GARDEN OF OCALA; AND	CASE NO.	93-6264
OAKHURST MANOR NURSING CENTER		93-6266
CORPORATION,		93-6810
Petitioners,	CON NO.	7320
		7325
vs.		7326
STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION AND OAKHURST MANOR NURSING CORP.,

Respondents.

ORDER REMANDING

TO: William F. Quattlebaum Hearing Officer

DOAH, The DeSoto Building 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

The Recommended Order of October 5, 1994, is challenged n exceptions filed by the Agency for Health Care Administration; Oakhurst Manor Nursing Corporation (Oakhurst); and Florida Convalescent Centers, Incorporated, doing business as Palm Garden of Ocala. A specific ruling on each exception is not appropriate at this time because additional fact finding proceedings are necessary before a Section 120.59 Final Order can be entered. It is necessary to identify those conclusions of law in the Recommended Order which are contrary to the legal conclusions of the agency. See Friends of Children vs. Department of Health and Rehabilitative Services, 504 So2d 1345 (Fla. 1st DCA 1987)

In the January 1992 nursing home batching cycle for District 3, the agency initially approved Oakhurst's application for CON 7326 for a 60 bed addition to Oakhurst's 120 bed nursing home in Marion County. At the final hearing the initially denied applications of Alachua General Hospital for a 30 bed hospital based nursing unit (CON 7320) and Florida Convalescent Centers for a 60 bed addition to an existing nursing home in Marion County should have been comparatively reviewed with the Oakhurst application, but were not because the Hearing Officer found the Oakhurst application to be incomplete based on his conclusion that Oakhurst did not comply with the statutory requirement [Section 408.037(3)] for an audited financial statement. Oakhurst's application included a combined financial statement on Oakhurst and six related nursing homes, but the Hearing Officer concluded that a combined statement does not satisfy the

statutory requirement even though the combined statement was supported by expert testimony that the combined statement represented the most meaningful presentation of Oakhurst's financial condition. I reject the legal conclusion that a combined financial statement can not satisfy the statutory requirement.

Oakhurst and its related entities are subject to combined audited statements because they are corporations which share common control but do not have the parent-subsidiary relationship. Oakhurst has satisfied the statutory requirement; thus, remand is required for comparative review of the three competing applications.

In the Recommended Order the Hearing Officer found the proposal of Florida Convalescent Center (FCC) to be superior to the proposal of Alachua General Hospital on the basis of the comparative review /1 and recommends its approval to satisfy the need as calculated under the need rule. After making this recommendation to satisfy the need, the Hearing Officer recommends approval of the Alachua General Hospital proposal on the basis of special circumstances.

See paragraph 116 and 120. I reject the conclusion that a proposal may be approved on the basis of special circumstances where there is a proposal to add beds and the proposal is at or below the number of beds needed as published in the applicable fixed need pool. In other words, when numeric need exists, special circumstances may not be cited as the basis for approval of a CON when the need can be met by approval of a proposal which is at or within the needed number of beds. Section 59C-1.008(2)(d)3 and 59C-1.036(2)(g) or (h), Florida Administrative Code; Humana vs. Department of Health and Rehabilitative Services, 469 So2d 889 (Fla. 1st DCA 1989) . Implicit in the concept of comparative review, is the mutual exclusivity of competing applications for the needed number of beds. It is also noted that a CON application addressing numeric need cannot be amended during Section 120.57 proceedings to address special circumstances need. Manor Care vs. Department of Health and Rehabilitative Services, 558 So2d 26 (Fla. 1st DCA 1990)

Based upon the foregoing these consolidated cases are remanded to the Division of Administrative Hearings for further fact finding proceedings and the entry of a Recommended Order consistent with the legal conclusions expressed herein.

DONE and ORDERED this 5th day of December, 1994, in Tallahassee, Florida.

Douglas Cook, Director Agency for Health Care

Administration

ENDNOTE

1/ Comparative review is required by Section 408.039(1), Florida Statutes.

COPIES FURNISHED:

R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN, P. A.

204 South Monroe Street Tallahassee, Florida 32301

Gerald B. Sternstein, Esquire RUDEN, BARNETT, McCLOSKY,

SMITH, SCHUSTER & RUSSELL, P. A.

Post Office Box 10888 Tallahassee, Florida 32301

Alfred W. Clark, Esquire Post Office Box 623

1725 Mahan Drive, Suite 300

Tallahassee, Florida 32308

Samuel Dean Bunton, Esquire Senior Attorney, Agency for Health Care Administration

325 John Knox Road

Atrium Building, Suite 301 Tallahassee, Florida 32303-4131

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named addresses by U.S. Mail this 7th day of December, 1994.

R. S. Power, Agency Clerk Agency for Health Care Administration

325 John Knox Road

Atrium Building, Suite 301 Tallahassee, Florida 32303-4131

(904)922-3808

================================================================= ADDITIONAL FINDINGS OF FACT AND RECOMMENDATION

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ALACHUA GENERAL HOSPITAL, INC., ) d/b/a ALACHUA GENERAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 93-6264

)

AGENCY FOR HEALTH CARE ) ADMINISTRATION and OAKHURST ) MANOR NURSING CORP., )

Respondent. )

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

)

Petitioner, )

)

vs. ) CASE NO. 93-6266

)

AGENCY FOR HEALTH CARE ) ADMINISTRATION and OAKHURST ) MANOR NURSING CORP., )

)

Respondent. )

) OAKHURST MANOR NURSING )

CENTER CORP., )

)

Petitioner, )

)

vs. ) CASE NO. 93-6810

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

ADDITIONAL FINDINGS OF FACT AND RECOMMENDATION

On October 5, 1994, the undersigned Hearing Officer entered a Recommended Order in this case. On December 5, 1994, the director of the Agency for Health Care Administration entered an order remanding this case to the Division of Administrative Proceedings. In the remand, the AHCA states that "additional fact finding proceedings are necessary" and directs that the applications submitted by the three Petitioners in these consolidated cases be comparatively reviewed.

The order of remand states that the AHCA considers the combined financial statement filed by Oakhurst Manor Nursing Center Corp., to be in compliance with section 408.037(3), Florida Statutes. The Hearing Officer found otherwise in the Recommended Order.

Section 408.037(3), Florida Statute, requires submission of "an audited financial statement of the applicant." As the Recommended Order states, "[a]s part of its application, Oakhurst submitted a combined audited financial statement setting forth the financial position of Harborside Healthcare Limited Partnership. Oakhurst is identified on the CON application as the applicant.

Harborside Healthcare Limited Partnership is not the applicant for the CON at issue in this proceeding." Accordingly, the Recommended Order finds that Oakhurst's application fails to contain an audited financial statement of the applicant.

The order of remand states that "the hearing officer concluded that a combined statement does not satisfy the statutory requirement even though the combined statement was supported by expert testimony that the combined statement represented the most meaningful presentation of Oakhurst's financial condition."

It is the Hearing Officer's function to consider, weigh and judge the credibility of all evidence presented. The Hearing Officer considered and rejected the evidence cited by the AHCA in the order of remand. Nonetheless, the AHCA has directed the Hearing Officer to provide a comparative review of Oakhurst's application with the applications filed by Florida Convalescent Centers, Inc. and Alachua General Hospital, the two parties for which such review was provided in the Recommended Order.

By order of January 17, 1995, the Hearing Officer directed the parties to file new proposed recommended orders including proposed Findings of Fact setting forth a comparative review of the three applications at issue. The order stated that the comparative review was to be limited to the specific rule criteria and to the preferences set forth in the Recommended Order.

The three parties filed proposed orders. Rulings on the proposed findings are included in the Appendix which is attached and hereby made a part of this Recommended Order.

This order sets forth Additional Findings of Fact which assume, as directed by the AHCA, that the Harborside Healthcare Limited Partnership financial statement meets the requirements of law. The following Findings of Fact are directed towards consideration of the Oakhurst application and should be considered in conjunction with those set forth in the Recommended Order of October 5, 1994. The Findings of Fact and Conclusions of Law of the Recommended Order are hereby incorporated by reference.

The following paragraphs are numbered consecutively beginning with the last numbered paragraph in the Recommended Order.

ADDITIONAL FINDINGS OF FACT

Oakhurst Manor Nursing Center is a community-based skilled nursing facility of 120 beds located in Ocala, Florida.
Oakhurst has a history of high occupancy and is a superior rated facility.
At hearing, Oakhurst acknowledged a number of inaccuracies in its application. Some staffing ratios were misstated. The data utilized to calculate financial ratios is different from the data set forth in the combined statement. The physical location of the facility was incorrectly identified. The application misstated the existing number of beds in the facility.
Section 408.035(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health.
As to the application of Oakhurst, utilization rates indicate that need exists for additional community nursing care services in Marion County. Oakhurst experiences full occupancy. Projected occupancy levels set forth in the Oakhurst application are reasonable. The evidence establishes that the need for additional beds exists and that the application of Oakhurst is consistent with the applicable district and state health plans.
Section 408.035(1)(b), Florida Statutes, requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.
Approval of the Oakhurst application will increase the availability of community nursing care at a superior rated facility and will meet the projected need determined by the AHCA's determination of the fixed pool.
Section 408.035(1)(c), Florida Statutes, requires consideration of the applicant's ability to provide quality of care and the applicant's record of providing quality of care.
Oakhurst is a superior rated facility with a history of providing high quality care. There is no indication that the 60 bed unit addition will result in a decline in quality of care.
Section 408.035(1)(e), Florida Statutes, requires consideration of the probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources.
The evidence fails to establish that approval of the Oakhurst application will result in probable economies and improvements in service from joint, cooperative, or shared health care operations.
Section 408.035(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal.
Since purchase by the current owners, Oakhurst's financial performance has been satisfactory. Losses experienced during the two years following the purchase are attributed to accelerated depreciation. The facility is currently profitable.
Although there was evidence that insufficient funds are being generated to maintain the facility's physical plant, the evidence is insufficient to establish that Oakhurst is unable to maintain the facility.
Projected occupancy rates are reasonable.
Funds for capital and operating expenditures are available to Oakhurst.
Notwithstanding current operation of the facility and availability of funds, Oakhurst's proposal is not financially feasible.
Oakhurst's revenue projections are not reasonable. This finding is based on the credible testimony of expert Charles Wysocki.
Mr. Wysocki opined that the Oakhurst application is not financially feasible in the short and long term and that the financial projections in the Oakhurst application are not reliable. Mr. Wysocki's testimony was credible and persuasive.
Oakhurst's current Medicaid rate is $71.68.
Oakhurst application Schedule 10 projects Medicaid rates as follows:
$77.41 during the construction year; $104.69 during operation year one; and
$99.75 during operation year two.
Oakhurst's projected Medicaid rates are unreasonable. Projected Medicaid rates are overstated and do not appear to account for Medicaid program rate ceilings. Medicaid program payment restrictions will not permit payment of such rates during years one and two.
Oakhurst's current Medicare rate is $186.87.
Oakhurst application Schedule 10 projects Medicare rates as follows:
$340 during the construction year; $361 during operation year one; and $328 during operation year two.
Oakhurst's projected Medicare rates are overstated and unreasonable. Medicare program payment restrictions will not permit payment of such rates.
Oakhurst's application overstated revenue projections related to private pay patients.
Further, according to Mr. Wysocki, Oakhurst has underestimated expenses related to depreciation, amortization and property taxes.
Section 408.035(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness.
Approval of Oakhurst's application can be expected to have a positive competitive impact on the supply of services being proposed based on the fact that the addition of beds will increase the supply of appropriate placements.
Section 408.035(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent.
Although Oakhurst has historically participated in the Medicaid program, Oakhurst is currently not subject to Medicaid participation requirements. If the CON at issue in this proceeding is awarded, Oakhurst will be required to provide at least half of the expanded facility's 160 beds to Medicaid patients.
Section 408.035(2)(b), Florida Statutes, requires consideration of whether existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. To the extent that such information is available, there is no evidence that these services are used inappropriately or inefficiently.
Section 408.035(2)(d), Florida Statutes, requires consideration of whether patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service.
As to community nursing home beds, the AHCA has determined that a need exists for additional capacity in the planning area's nursing homes. It is likely that failure to meet projected need will result in difficulty in locating appropriate placements.
The state health plan sets forth "preferences" which are considered in comparative evaluations of competing CON applications.
Preference is given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 percent. The occupancy rate is higher in the Alachua planning area than in the Marion planning area. Oakhurst is in the Marion planning area and has the highest occupancy in the planning area. Oakhurst meets this preference.
Preference is given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level care systems.
The Marion County Medicaid participation average is 72.93 percent. Oakhurst's application subjects the facility to a 50 percent Medicaid average. Oakhurst does not meet this preference.
Preference is given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Oakhurst intends to operate a separate 20 bed subunit specializing in skin and wound care. A distinct subacute care program targeted at a specific patient population is a specialized service.
Oakhurst does not have specialized Alzheimer services. Oakhurst does not provide care to AIDS patients. Oakhurst does not meet this preference.
Preference is given to applicants proposing to provide a continuum of services to community residents, including but not limited to, respite care and adult day care.
The Oakhurst proposal does not address respite care or adult day care. Oakhurst does not meet this preference.
Preference is given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual room temperature controls, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. Oakhurst's application meets this preference.
Preference is given to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. No party proposes to offer any therapeutic programs which may credibly be identified as "innovative."
Preference is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are be considered for facilities proposing to serve upper income residents.
Oakhurst's projected rates exceed the highest Medicaid per diem rate in the subdistrict, therefore Oakhurst does not meets this preference.
Preference is given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. HRS' evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida. AHCA is the successor agency to HRS. All applications meet this preference.
Preference is given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents than other applicants shall be given preference. Although FCC and Oakhurst propose reasonable staff levels, Alachua's hospital-based unit, by virtue of location, more closely meets this preference than FCC or Oakhurst.
Preference is given to applicants who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. These professionals include physical therapists, mental health nurses, and social workers. All applications meet this preference.
Preference is given to applicants who document plans to will ensure residents' rights and privacy, to use resident councils, and to implement a well-designed quality-assurance and discharge-planning program. All applications meet this preference.
Preference is given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Oakhurst has higher administrative costs and lower resident care costs compared to the average nursing home in the district. Oakhurst does not meet this preference.
The district health plan sets forth preferences which are to be considered in comparative evaluations of CON applications.
The first applicable district preference is directed toward providing geographic access to nursing home beds. None of the applications meet this preference.
The second applicable district preference requires consideration of existing bed utilization. Based on the percentage of elderly population and utilization of existing beds in each area, relative priorities are established.
Oakhurst is in a "high need" planning area.
Existing nursing homes in the Marion planning area are experiencing occupancy levels between 80 and 90 percent placing Oakhurst in a "moderate occupancy" planning area.
According to the preference matrix set forth in the district plan, Oakhurst is in a priority two planning area (high need and moderate occupancy.) The evidence establishes that Oakhurst meets this preference.
The third preference relates to the conversion of acute care beds to skilled nursing use. Oakhurst does not intend to convert underutilized hospital beds into skilled nursing beds for step-down or subacute care.
The fourth and fifth preferences apply to new facilities of at least
60 beds. No application meets these preferences.
The sixth preference states that priority consideration should be given to facilities which propose to offer specialized services to meet the needs of the identified population. Oakhurst proposes to offer a subunit specializing in skin and wound care. Oakhurst meets this preference.

RECOMMENDATION

It is hereby RECOMMENDED that a Final Order be entered GRANTING the application of Florida Convalescent Centers, Inc. for Certificate of Need #7325 for the 60 remaining beds in the applicable fixed need pool and GRANTING the application of Alachua General Hospital for Certificate of Need #7320 to convert

30 existing acute care beds into a skilled nursing unit.

DONE and RECOMMENDED this 15th day of March, 1995, in Tallahassee, Florida.

WILLIAM F. QUATTLEBAUM

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 15th day of March, 1995.

APPENDIX TO ADDITIONAL FINDINGS OF FACT, CASE NO. 93-6264

The following constitute rulings on proposed findings of facts submitted by the parties in response to the Hearing Officer's Order of January 17, 1995.

Alachua General Hospital, Inc. The Hearing Officer's Order of January 17, 1995 directed the parties to file new proposed recommended orders including proposed Findings of Fact setting forth a comparative review of the three applications at issue. A cover letter accompanying Alachua's submission states that "[p]rior to final hearing in this matter, Alachua General entered into separate agreements with Oakhurst Manor Nursing Center Corp. and Florida Convalescent Centers, Inc. that it would not oppose or criticize their respective applications in return for which the same treatment would be accorded to Alachua General's application....In light of these agreements, Alachua General Hospital's Proposed Recommended Order does not include a comparative review of each application...." Because these additional findings of fact relate solely to consideration of Oakhurst's application and relevant review criteria, the new proposed findings of fact submitted by Alachua General Hospital are rejected as unnecessary.

Oakhurst Manor Nursing Corp.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

1-8. Rejected, cumulative.

14-15. Rejected, unnecessary.

17-22. Rejected, immaterial, not at issue per agreement of the parties.

23. Rejected, subordinate.

Rejected, unnecessary.
Rejected, cumulative.

28. Rejected, contrary to the greater weight of credible and persuasive evidence.

32-33. Rejected, contrary to the greater weight of credible and persuasive evidence.

35-38. Rejected, contrary to the greater weight of credible and persuasive evidence.

39-41. Rejected, unnecessary.

42. Rejected, subordinate. 44-45. Rejected, cumulative.

Rejected, no party meets this preference, unnecessary.
Rejected, contrary to the greater weight of credible and persuasive evidence.

52-54. Rejected, cumulative.

55-57. Rejected, unnecessary.

58-60. Rejected, contrary to the greater weight of credible and persuasive evidence.

Florida Convalescent Centers, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

29. Rejected, unnecessary.

Rejected, contrary to greater weight of evidence.
Rejected, unnecessary.

58-60. Rejected, unnecessary.

61-63. Rejected, cumulative.

92. Rejected, contrary to greater weight of the evidence. The proposed construction will provide appropriate facilities under the preference.

97. Rejected, contrary to the greater weight of credible and persuasive evidence.

120-130. Rejected, conclusions of law.

Agency for Health Care Administration's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:

1-3. Rejected, unnecessary.

4. Rejected, irrelevant.

5-6. Rejected, subordinate.

7-11. Rejected, unnecessary.

13-14. Rejected, contrary to the greater weight of credible and persuasive evidence.

Rejected, cumulative.
Rejected, subordinate.

18. Rejected, contrary to the greater weight of credible and persuasive evidence.

20. Rejected, irrelevant.

21-44. Rejected, unnecessary.

Rejected, contrary to the greater weight of credible and persuasive evidence. The cited witness' explanation of consideration of the Alachua application was not persuasive.
Rejected, see Recommended Order previously entered in this case. Alachua did not apply for more beds than were contained in the published fixed need bed pool.

Rejected, conclusion of law.
Rejected, cumulative.

COPIES FURNISHED:

Douglas M. Cook, Director

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, Florida 32308

Sam Power, Agency Clerk

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road

Tallahassee, Florida 32303-4131

Dean Bunton, Esquire

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road

Tallahassee, Florida 32303-4131

R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN

204 South Monroe Street Tallahassee, Florida 32302

Gerald Sternstein, Esquire Frank Rainer, Esquire

RUDEN, BARNETT, McCLOSKY, SMITH

215 South Monroe Street

Barnett Bank Building, Suite 815 Tallahassee, Florida 32301

Alfred W. Clark, Esquire

117 South Gadsden Street, Suite 201 Tallahassee, FL 32301

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the Findings of Fact set forth herein. All agencies allow each party at least ten 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 Order.

Docket for Case No: 93-006264CON

Issue Date	Proceedings
Aug. 02, 1995	Final Order filed.
Mar. 15, 1995	Additional Findings of Fact and Recommendation sent out. CASE CLOSED,
Feb. 20, 1995	Alachua General Hospital's Proposed Recommended Order In Response to Order On Remand; (Alachua General) Memorandum of Law; Cover Letter filed.
Feb. 17, 1995	National Healthcorp., L.P. Proposed Recommended Order On Remand filed.
Feb. 17, 1995	Oakhurst Manor Nursing Center Corp`s Proposed Recommended Order filed.
Feb. 17, 1995	Oakhurst Manor Nursing Center Corp`s Proposed Recommended Order filed.
Feb. 16, 1995	Recommended Order Proposed by AHCA filed.
Feb. 16, 1995	Recommended Order Proposed By AHCA filed.
Jan. 17, 1995	Order On Remand And Requiring New Proposed Recommended Orders sent out. (all parties shall not later than 2/17/95 file new proposed recommended orders)
Dec. 16, 1994	(Petitioner) Motion to Reject Order Remanding; Alachua General Hospital, Inc`s Motion to Reject Order Remanding filed.
Dec. 12, 1994	Order Remanding (Transcript & Exhibits) filed.
Oct. 05, 1994	Recommended Order sent out. CASE CLOSED. Hearing held 03/18/94.
Jun. 27, 1994	(Petitioner) Response to Joint Motion to Strike Portions of Alachua General Hospital's Proposed Recommended Order w/Exhibits A-D filed.
Jun. 15, 1994	Joint Motion to Strike Portions of Alachua General Hospital's Proposed Recommended Order filed.
May 25, 1994	Notice of Change of Street Address And Telephone Number (from A. Clark) filed.
May 20, 1994	(Florida Convalescent Center) Proposed Recommended Order filed.
May 20, 1994	Alachua General Hospital's Proposed Recommended Order filed.
May 20, 1994	Oakhurst Manor Nursing Center Corp`s Memorandum of Law Regarding Application Completeness filed.
May 17, 1994	(Petitioner) Motion for Extension of Time to File Proposed Recommended Orders filed.
May 16, 1994	Order sent out. (Proposed Recommended Orders to be filed by 5/18/94)
May 09, 1994	(Petitioner) Motion for Extension of Time to File Proposed Recommended Orders filed.
May 05, 1994	Order Granting Extension sent out. (Parties to file Proposed recommended orders by 5/31/94)
May 05, 1994	Alachua General Hospital's Proposed Recommended Order (unsigned) filed.
May 04, 1994	(Petitioner) Motion for Extension of Time To File Proposed Orders filed.
Apr. 21, 1994	Order Granting Extension sent out. (Parties to file proposed recommended orders by 5/6/94)
Apr. 19, 1994	(Petitioner) Agreed Motion for Extension of Time filed.
Apr. 01, 1994	Evidentiary Hearing Transcript (Volumes I - VII TAGGED); & Cover Letter from C. Rankine filed.
Mar. 14, 1994	Order of Consolidation sent out. (Consolidated cases are: 93-6264, 93-6266, 93-6810)
Mar. 14, 1994	Case No/s 93-6009, 93-6264, 93-6266, 93-6267, 93-6810: unconsolidated.
Mar. 07, 1994	CASE STATUS: Hearing Held.
Dec. 02, 1993	Order of Consolidation, Granting Continuance, and Rescheduling Hearing sent out. (Consolidated cases are: 93-6009, 93-6264, 93-6265, 93-6266, 93-6267, 93-6268, 93-6269, 93-6270, 93-6271, 93-6810; hearing set for 3/7-18/94; 9:30am)
Dec. 02, 1993	Case No/s: unconsolidated.
Nov. 15, 1993	Order of Consolidation and Establishing Prehearing Procedure sent out. (Consolidated cases are: 93-6009, 93-6264, 93-6265, 93-6266, 93-6267, 93-6268, 93-6269, 93-6270, 93-6271)
Nov. 05, 1993	Notification card sent out.
Nov. 03, 1993	Notice Of Related Petitions,(93-6009, 93-6264-93-6271); Notice; Petition For Formal Administrative Hearing; Notice Of Appearance filed.

Orders for Case No: 93-006264CON

Issue Date	Document	Summary
Dec. 05, 1994	Remanded from the Agency
Oct. 05, 1994	Recommended Order	Applicant's failure to file financial data is fatal.

Source: Florida - Division of Administrative Hearings

ALACHUA GENERAL HOSPITAL, INC. vs LAKE PORT PROPERTIES, D/B/A LAKE PORT NURSING CENTER, 93-006264CON (1993)

Docket for Case No: 93-006264CON

Orders for Case No: 93-006264CON

Ryland Terry Rigsby

Geoffrey Duane Smith

Gerald Barry Sternstein

Frank Paul Rainer

Jeff Goodman

Samuel Dean Bunton

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ALACHUA GENERAL HOSPITAL, INC. vs LAKE PORT PROPERTIES, D/B/A LAKE PORT NURSING CENTER, 93-006264CON (1993)

Docket for Case No: 93-006264CON

Orders for Case No: 93-006264CON

Lawyers who claimed

Ryland Terry Rigsby

Geoffrey Duane Smith

Gerald Barry Sternstein

Frank Paul Rainer

Jeff Goodman

Samuel Dean Bunton

Counsels

Cites

Florida Laws (4)

Florida Administrative Code (1)

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