STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TARPON SPRINGS HOSPITAL FOUNDATION, ) INC., d/b/a HELEN ELLIS MEMORIAL ) HOSPITAL, and FLORIDA HOSPITAL ) ASSOCIATION, INC., )

)

Petitioners, )

)

vs. ) CASE NOS. 94-0958RU

) 94-1165RU

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent, )

and )

) FAWCETT MEMORIAL HOSPITAL, INC., ) ARBOR HEALTH CARE COMPANY, ST. ) ANTHONY'S HOSPITAL, INC., HEALTH ) CARE AND RETIREMENT CORPORATION OF ) AMERICA, HCR LIMITED PARTNERSHIP I, ) FLORIDA HEALTH CARE ASSOCIATION, ) INC., MARRIOTT INTERNATIONAL, INC., ) MARRIOTT SENIOR LIVING SERVICES, ) INC., and NATIONAL HEALTHCORP, L.P., )

)

Intervenors. )

)

FINAL ORDER

Pursuant to notice, a formal hearing in this cause was commenced on April 18, 1994, and concluded on April 27, 1994, in Tallahassee, Florida. The hearing was held before James W. York, duly designated Hearing Officer of the Division of Administrative Hearings. The appearances were as follows:

APPEARANCES

For Petitioners: Kenneth F. Hoffman, Esquire

Robert C. Downie, Esquire

OERTEL, HOFFMAN, FERNANDEZ & COLE, P.A.

2700 Blair Stone Road Post Office Box 6507

Tallahassee, Florida 32314-6507

For Respondent: J. Robert Griffin, Esquire

Senior Attorney

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road

Tallahassee, Florida 32303-4131

For Intervenor John D.C. Newton, Esquire Fawcett: Lauchlin T. Waldoch, Esquire

MESSER, VICKERS, CAPARELLO, MADSEN, LEWIS, GOLDMAN & METZ

Post Office Box 1876 Tallahassee, Florida 32301-1876

For Intervenor Chris H. Bentley, Esquire Arbor: John Wharton, Esquire

Diane Tremor, Esquire ROSE, SUNDSTROM & BENTLEY

2548 Blairstone Pines Drive Tallahassee, Florida 32301

For Intervenor Robert D. Newell, Esquire St. Anthony's: NEWELL & STAHL, P.A.

817 North Gadsden Street Tallahassee, Florida 32303-6313

For Intervenor Peter A. Lewis, Esquire Florida HCA: Jonathan S. Grout, Esquire

GOLDSMITH & GROUT, P.A.

307 West Park Avenue Post Office Box 1017

Tallahassee, Florida 32302

For Intervenor Alfred W. Clark, Esquire HCR: 1725 East Mahan Drive

Tallahassee, Florida 32302

For Intervenor Frank Rainer, Esquire National RUDEN, BARNETT, McCLOSKY,

Healthcorp: SMITH, SCHUSTER & RUSSELL

215 South Monroe Street, Suite 815 Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

1. Whether Rule 59C-1.036 constitutes an invalid exercise of delegated legislative authority, and;

   
   

2. Whether the Agency's application form and scoring system utilized in the review of nursing home batch certificate of need applications constitute rules of the Agency as the term "rule" is defined in Section 120.52(16), employed in violation of Section 120.535, Florida Statutes (1993) and;

   
   

3. Whether the disputed form and scoring system constitute an invalid exercise of delegated legislative authority.

PRELIMINARY STATEMENT

On February 23, 1994, Tarpon Springs Hospital Foundation, Inc., d/b/a Helen Ellis Memorial Hospital (Tarpon Springs) filed a petition seeking a determination of the invalidity of Rule 59C-1.036, Florida Administrative Code, and a determination that the application and scoring system utilized by the Agency in the review of nursing home batch applications constitute rules of the Agency not promulgated as required by Section 120.54, Florida Statutes,

therefore invalid pursuant to Section 120.535, Florida Statutes (1993). The petition was amended on March 2, 1994. The case was assigned DOAH Case No. 94- 0958RU.

On March 2, 1994, the Florida Hospital Association (FHA) filed a petition seeking a determination of the invalidity of existing and unpromulgated rules raising essentially the same issues as those presented in the Tarpon Springs petition. This case was assigned DOAH Case No. 94-1165RU and was consolidated for hearing with DOAH Case No. 94-0958RU.

On March 31, 1994, Fawcett Memorial Hospital, Inc. (Fawcett) filed a petition to intervene adopting and incorporating the allegations set forth in the Tarpon Springs petition. Subsequently, additional parties filed petitions to intervene. On April 4, 1994, an Order was entered granting intervention to: Arbor Health Care Company (Arbor); St. Anthony's Hospital, Inc. (St. Anthony's); Health Care and Retirement Corporation of America; HCR Limited Partnership (HCR); Florida Health Care Association (FHA); Marriott International, Inc. and Marriott Senior Living Services, Inc. (Marriott) and National Healthcorp, L.P.

All Intervenors support the Tarpon Springs challenge to the application form and scoring system as constituting a violation of Section 120.535, Florida Statutes (1993). Tarpon Springs and some of the Intervenors also allege that the application form and scoring system are invalid exercises of delegated legislative authority, thus invalid pursuant to Section 120.56, Florida Statutes (1993).

Fawcett and St. Anthony's support the Tarpon Springs challenge to Rule 59C- 1.036(1), Florida Administrative Code. Marriott took no position on this issue. The remaining Intervenor nursing home companies and partnerships and FHCA support the Agency defense of the challenged rule.

At the final hearing Tarpon Springs and FHA presented the testimony of Fredrick Henry Roever, M.D., accepted as an expert in geriatric medicine; Armond Balsone, accepted as an expert in health care financing and health care planning; and Michael Douglas Jernigan, accepted as an expert in health care planning. Petitioner's exhibits 1 through 7, exhibit 9 and composite exhibit 10 were received into evidence.

Fawcett presented the testimony of Mark L. Callmen, M.D., accepted as an expert in geriatric medicine and Fawcett Exhibit 1 was received into evidence.

St. Anthony's presented the deposition testimony of Bonnie Gorramone.

HCR presented the testimony of JoAnn Verbanic, accepted as an expert in skilled nursing facility operation, and Milo Bishop, accepted as an expert in health planning and certificate of need (CON) policy. HCR exhibits 1 through 4 were received into evidence.

FHCA presented the testimony of Lu Marie Polivka-West, accepted as an expert in licensure and regulation of health care facilities.

Arbor presented the testimony of Roger Oberautt, accepted as an expert in health care administration, hospital administration, and development of subacute units.

AHCA presented the testimony of Elfie Stamm, accepted as an expert in health planning and CON policy analysis, and Elizabeth Dudek, accepted as an

expert in health planning and CON policy and procedure. AHCA Exhibits 1 and 2 were received into evidence.

By stipulation, the parties agreed to file proposed final orders by July 6, 1994, thereby waiving the 30 day time period within which the final order would issue pursuant to Chapter 120, Florida Statutes.

Tarpon Springs and FHA filed a timely proposed final order which Fawcett adopted and incorporated in its submission. Marriott adopted and incorporated paragraphs 117-147, the findings of fact, and 11-13 and 20-23 of the conclusions of law submitted by Tarpon Springs and FHA.

The Agency (AHCA), HCR, and FHCA each filed timely proposed final orders.

Arbor adopted and incorporated the proposed final order of FHCA in its submission.

No other proposed final orders were filed.

All proposed final orders filed were considered and specific rulings of proposed findings of fact submitted by the parties are contained in an Appendix to this Final Order.

FINDINGS OF FACT

1. The disputed rule in this case is Rule 59C-1.036(1), Florida Administrative Code, which provides in pertinent part:

   
   

   The community nursing home beds subject

   to the provisions of this rule include beds licensed by the agency in accordance with Chapter 400, Part I, Florida Statutes, and beds licensed under Chapter 395, Florida Statutes, which are located in a distinct part of a hospital that is Medicare certified as a skilled nursing unit. All proposals for

   community nursing home beds will be comparatively reviewed consistent with the requirements of Subsection 408.39(1), Florida Statutes, and consistent with the batching cycles for

   nursing home projects described in paragraph 59C-1.008(1)(l), Florida Administrative Code.

   
   

2. The challenged rule is entitled "Community Nursing Home Beds," and also includes the "need methodology" for determining the need for community nursing home beds and specifically:

   
   

   regulates the construction of new community nursing home beds, the addition of new community nursing home beds, and the conversion of other health care facility bed types to community nursing home beds...

   
   

3. Also pertinent to this case, the challenged rule provides:

   
   

   The Agency will not normally approve applications for new or additional community nursing home beds in any agency service subdistrict if approval of

   an application would cause the number of community nursing home beds in that agency subdistrict to exceed the numeric need for community nursing

   home beds, as determined consistent with the methodology described in paragraphs (2)(a), (b), (c), (d), (e), and (f) of this rule.

   
   

4. The challenged rule has the effect of, among other things, requiring nursing homes and hospitals who seek to operate skilled nursing facility beds to file applications for community nursing home beds in the same batching cycle, compete against each other for those beds in nursing home subdistricts and be subject to the need methodology applicable to nursing home beds. The Agency has not developed a need methodology specifically for Medicare certified distinct part skilled nursing units.

   
   

5. In 1980, the Agency's predecessor, the Department of Health and Rehabilitative Services, attempted to promulgate rules with the same effect of the rules challenged in this case. In Venice Hospital, Inc. v. State of Florida, Department of Health and Rehabilitative Services, 14 FALR 1220 (DOAH 1990) 1/ the Hearing Officer found the challenged rule in that case to be invalid and concluded, as a matter of law, that, with respect to the previous proposed rule:

   
   

   The competent, substantial evidence shows that these proposed rules are not reasonable or practical and will lead to an illogical result. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing beds into the community nursing bed inventory.

   
   

6. In the 1990 challenge to the previously proposed rule, the Hearing Officer concluded that the proposed rule in question was an invalid exercise of delegated legislative authority, but also found that, from a health planning standpoint, reasons existed for and against the inclusion of hospital-based skilled nursing units within the nursing home bed inventory.

   
   

7. In the instant proceedings, the Agency concedes that the challenged rule and the previous proposed rule are substantially identical. In this case, the parties defending the challenged rule presented several facts, many of which seek to establish changed circumstances since 1990, as evidence of a rational basis for the inclusion of hospital-based skilled nursing units within the nursing home bed inventory.

   
   

   Facts Established Which Arguably Support the Validity of the Challenged Rule

   
   

8. Although the term "subacute care" does not have a generally accepted definition, this term is often applied to that care provided patients in skilled nursing units. Subacute care is an emerging and developing area of care which covers patients whose medical and clinical needs are higher than would be found in a traditional nursing home setting, but not so intense as to require an acute medical/surgical hospital bed. Subacute care is a level of care that is being developed to bridge a gap between hospital and traditional nursing home care and to lower the cost of care to the health delivery system.

9. Both hospitals and nursing homes operate Medicare-certified distinct part skilled nursing facility units. The same criteria, including admissions criteria, staffing requirements and reimbursement methodologies, apply to such skilled nursing units, in hospitals and freestanding nursing homes. The patient population served in such units is primarily a population which comes to either a hospital or nursing home-based unit from an acute care hospital stay. This population group has a short length of stay in the Medicare distinct part unit and can be rehabilitated within a certain period of time.

   
   

10. Skilled nursing units in hospitals and those in freestanding nursing homes are competing for the same patient population. Both hospitals and nursing homes are aggressively entering the subacute care market.

    
    

11. There are some nursing homes which provide a level of subacute care equal to that provided by hospitals.

    
    

12. As a general rule, the staffing, clinical programs, patient acuity and costs of care for patients do not substantially vary between skilled nursing units in hospitals and such units in freestanding nursing homes.

    
    

13. In the past two or three years, the number of Florida nursing homes which compete for skilled unit patients has increased.

    
    

14. In applications for skilled nursing unit beds, the services proposed by hospitals and those proposed by nursing homes are generally similar.

    
    

15. Medicare-certified distinct part units in both freestanding nursing homes and hospitals are certified to provide the same nursing services.

    
    

16. The types of services and equipment provided by hospital skilled nursing units and nursing home skilled nursing units are similar.

    
    

17. There has been an increase in subacute care in the past five years.

    
    

18. The average length of stay for patients treated in Medicare-certified distinct part nursing units in hospitals and in such units located in freestanding nursing homes is similar.

    
    

19. The federal eligibility requirement for Medicare patients in hospital- based and in freestanding nursing home distinct part skilled nursing units are the same.

    
    

20. Some skilled nursing units which are located in nursing homes have historically received patient referrals from hospitals. When these referring hospitals develop distinct part Medicare certified skilled nursing units, the nursing home skilled nursing units tend to experience a decline in occupancy.

    
    

21. Uniform need methodology is developed in part based upon demographic characteristics of potential patient population. Nursing home bed need methodology utilizes changes in population by age groups over age 65 to project need for beds. Both hospital-based skilled nursing units and nursing home-based units serve substantial numbers of Medicare-eligible patients who are 65 years of age and older.

    
    

22. Population health status is also utilized in developing uniform need methodologies. The health status of service population for Medicare units in

    freestanding nursing homes is, as a general rule, the same as the health status of population served in such units located in hospitals.

    
    

23. The intent behind the process of reviewing CON applications from hospitals seeking skilled nursing unit beds and nursing homes seeking such beds is to reduce the risk of overbedding and duplication of services. Overbedding and duplication of services have the tendency to result in excessive costs and can result in deterioration of quality of care.

    
    

24. Medicare admissions to nursing homes and Medicare revenue to nursing homes have increased in the past several years. Data also indicates that nursing homes are beginning to provide more intensive care for patients in skilled nursing units.

    
    

25. The prevalence of freestanding nursing home Medicare-certified skilled nursing units has substantially increased in the past three years and this growth trend is expected to continue.

    
    

    Facts Established Which Demonstrate That

    the Challenged Rule Should be Declared Invalid

    
    

26. The challenged rule requires a hospital seeking Medicare-certified skilled nursing unit beds to be comparatively reviewed with nursing home applications seeking all types of nursing home beds.

    
    

27. There is no separate nursing home licensure bed category for skilled nursing unit beds.

    
    

28. The Agency's inventories of freestanding nursing home beds do not identify Medicare-certified skilled nursing beds.

    
    

29. Once an applicant to construct a nursing home opens the nursing home, the applicant does not need a separate CON to designate beds as a Medicare- certified skilled nursing unit. According to the AHCA's own witness, a freestanding nursing home can internally change its categories at any time without CON review. Pursuant to statute and agency rule, however, hospitals must obtain a CON to change the category of even one bed. 2/

    
    

30. Although a hospital seeking hospital licensed Medicare-certified skilled nursing beds is compelled by Rule 59C-1.036(1), Florida Administrative Code, to compete against all nursing home applicants and all nursing home beds in a batched review, it faces totally different standards of construction, operation and staffing after approval.

    
    

31. Rule 59C-1.036(2), Florida Administrative Code, is the nursing home bed need formula. This formula does not result in an estimate of need for skilled nursing unit beds and projects need for total community nursing home beds only. There is currently no bed need methodology (hospital or nursing home) to ascertain the need for Medicare certified skilled nursing unit beds.

    
    

32. The Agency's inventories of freestanding nursing home beds do not separately identify Medicare-certified skilled nursing home beds in nursing homes. All that is shown is whether the beds are "community nursing home beds" or "sheltered nursing home beds." The Agency has not established how, under this inventory and regulatory scheme, it controls overbedding in Medicare- certified skilled nursing units within a specific district or subdistrict since the only such beds shown on the inventories are those in hospitals.

33. It is unreasonable and illogical to compare the need for hospital- based Medicare-certified skilled nursing unit beds with the need for all community nursing home beds. Under the present circumstances a reasonable comparison might be drawn between need for hospital-based skilled nursing unit beds and freestanding nursing home skilled nursing unit beds, but the AHCA rules do not currently provide for such a comparison.

    
    

34. Determining the need for hospital-based skilled nursing unit beds by comparing such beds to all nursing unit beds constitutes poor health planning. Such hospital-based skilled nursing units do not provide similar services to similar patients when compared to all community nursing home beds and it is neither logical or reasonable to comparatively review the need for such services.

    
    

35. The challenged rule also requires hospital applicants for skilled nursing unit beds to compete with nursing homes within the nursing home subdistrict. The Agency by rule divides districts differently for nursing homes than for hospitals. Thus, some hospitals' skilled nursing unit beds are comparatively reviewed against nursing home beds of all kinds and against hospital skilled nursing beds which are not within the same hospital subdistrict.

    
    

36. As a general statement, the treatment profiles for patients in Medicare-certified skilled nursing units in hospitals and those for patients in nursing homes skilled nursing units are similar. There is, however, a distinct part of such patient population which must be treated in a setting which provides immediate access to emergency care. The provision of immediate emergency care is not typically available in nursing homes and nursing home patients in need of such care usually have to be readmitted to hospitals.

    
    

37. Care available in hospitals (physicians and registered nurses on duty at all times, laboratory and radiation services available on premises) is sufficiently different to demonstrate that Medicare-certified skilled nursing units are not comparable to such units in freestanding nursing homes in all aspects. This distinction is clearly significant to patients who need emergency services because of age, multiple illnesses, and other conditions.

    
    

38. Chapter 395, Florida Statutes, is the hospital licensure statute. Section 395.003(4), Florida Statutes, provides:

    
    

    The Agency shall issue a license which specifies the service categories and the number of hospital beds in each category for which a license is received. Such information shall be listed on the face of the license. All which are not covered by any specialty-bed-need methodology shall be specified as general beds.

    
    

39. The Agency equates "acute care" beds with general beds.

    
    

40. By rule, the Agency has excluded from the definition of "acute care bed":

    
    

    1. neonatal intensive care beds

    2. comprehensive medical rehabilitation beds

    3. hospital inpatient psychiatric beds

    4. hospital inpatient substance abuse beds

    5. beds in distinct part skilled nursing units, and

    6. beds in long term care hospitals licensed

       pursuant to Part I, Chapter 395, Florida Statutes.

       
       

41. By Agency rule, a hospital specialty need methodology exists for all categories of hospital beds excluded from the acute care bed definition except category (e) beds in distinct part skilled nursing units and (f) long term care beds.

    
    

42. The Agency is currently drafting a specialty hospital bed need methodology for long term care beds.

    
    

43. The only licensed bed category for which the Agency has developed no specialty bed need methodology (existing or in process) is hospital beds in distinct part skilled nursing units.

    
    

44. At hearing, the Agency presented the testimony of Elfie Stamm who was accepted as an expert in health planning and certificate of need policy analysis. Through Ms. Stamm's testimony, the Agency attempted to establish that the numeric need methodology established by the challenged rule includes a calculation of the need for both nursing home and hospital-based distinct part skilled nursing units. This testimony was not persuasive on this point.

    Indeed, Ms. Stamm acknowledged that the disputed rule does not result in an estimate of need for skilled nursing units or beds.

    
    

45. The parties to this proceeding have attempted to establish that Medicare admission statistics in Florida support either the validity or invalidity of the challenged rule.

    
    

46. Based upon the Medicare-related statistical data placed in the record in this case, it is more likely than not that, as of 1992, in excess of 90 percent of utilization of hospital-based skilled nursing units is Medicare covered and that the percentage of Medicare (as opposed to Medicaid) patient days in all freestanding nursing home beds was only seven percent. In this respect, it is not logical or reasonable to comparatively review the need for hospital-based Medicare-certified skilled nursing unit beds with all community nursing home beds.

47. The Agency lists Sections 408.15(8), 408.34(3)(5), 408.39(4)(a) and 400.71(7), Florida Statutes, as specific statutory authority for the challenged rule. None of the cited statutory provisions provides specific authority for the Agency to require hospitals seeking hospital licensed beds in Medicare- certified skilled nursing units to be reviewed against all community nursing home beds. There is no evidence of record in this case of any federal law requiring such review and no evidence to suggest that Medicare reimbursement is affected by such a review one way or the other.

1. In this case, the competent, substantial evidence shows that the disputed rule is not reasonable or rational. The Agency has not developed a specific numerical need methodology providing for a reasonable and rational basis to comparatively review the need for Medicare-certified skilled nursing unit beds in hospitals or in nursing homes. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing units into the inventory of all community nursing home beds.

   
   

   Form 1455A

2. Agency Form 1455A and the scoring methodology are used by the Agency in the review of applications for community nursing home beds and for skilled nursing facilities within distinct parts of a hospital. Various parties in this proceeding assert the Form 1455A and the scoring methodology constitute unpromulgated rules which are invalid pursuant to Section 120.535, Florida Statutes.

   
   

3. Any party filing a letter of intent concerning community nursing home beds receives from the Agency an application package including Form 1455A and instructions. The instructions are an integral part of the application. Also included as part of the application are 34 pages of instructions on how the Agency scores the application.

   
   

4. Form 1455A has general applicability to all applicants for community nursing home beds and for skilled nursing home facilities within distinct parts of a hospital.

   
   

5. Form 1455A contains numerous provisions of mandatory language which facially provides that it must be submitted with applications for CON.

   
   

6. The Agency acknowledges that such mandatory language predated the passage of Section 120.535, Florida Statutes, and considers the language obsolete. The Agency intends, in the future, to edit the form to strike "misleading language".

   
   

7. Form 1455A is not incorporated in any rule of the Agency and has not been promulgated as a rule.

   
   

8. Applications are reviewed based upon questions in Form 1455A. Applications are also reviewed against a numerical scoring system developed with the form.

   
   

9. The form requires that the applicant certify that it will obtain a license to operate a nursing home. The form also requires certification that the applicant participate in Medicaid services which are not applicable to hospitals. These and other portions of the form are not rationally or reasonably related to the operation of a hospital-based distinct part skilled nursing unit.

   
   

10. In the review and analysis of the applications at issue, a "scoring methodology" is used by the Agency. The scoring matrix is utilized to put numerous applications filed in the same agency district in perspective in terms of numerical ranking and how the applications compare to each other.

    
    

11. The State Agency Action Report is the end product of the Agency review of the applications. The scoring system is used in the review proceedings and is utilized and included in at least some of the State Agency Action Reports.

    
    

12. Form 1455A and the scoring methodology are utilized by the Agency in a manner that has general application and which forms significant components of a process which creates rights, and which implements, interprets, and prescribes law and Agency policy.

    
    

13. At the final hearing, the Agency presented the testimony of Ms. Elizabeth Dudek, the Agency Chief of the Certificate of Need and budget review offices. Ms. Dudek was accepted as an expert in CON policy and procedure. Ms.

    Dudek provided an overview of the process whereby the challenged form and scoring system are used by the Agency in analyzing CON applications.

    
    

14. Ms. Dudek testified that the Agency does not believe the form and scoring system meet the requirements of a rule. Ms. Dudek considers the form and system to be tools used to elicit responses in a standardized format.

    
    

15. The fact that an application receives a high score based on the scoring matrix does not mean that the application will be approved. Ms. Dudek is of the opinion that the form and scoring system do not competitively disadvantage hospitals competing with nursing homes. Ms. Dudek cited the most recent batch cycle in which twelve hospitals were awarded distinct part nursing units, although these hospitals' applications did not receive the highest scores.

    
    

16. Ms. Dudek's testimony was not persuasive in the above-referenced areas.

    
    

17. As currently structured and utilized by the Agency, the form and the scoring system at issue are not reasonable or rational. There is not an adequate factual or legal basis to support the use of the form or the scoring system in analyzing applications for CON files by hospitals for distinct part Medicare-certified skilled nursing units.

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the subject matter of, and the parties to, this proceeding pursuant to Sections 120.535, 120.56, and 120.57(1), Florida Statutes.

    
    

19. Petitioners, Respondent, and all current intervenors are substantially affected by the challenged rule and by the disputed non rule policy and each has standing to seek on administrative determination of the issues litigated in this proceeding.

    
    

    The Invalidity of Existing Rule 59C-1.036, Florida Administrative Code

    
    

20. Petitioners challenge Rule 59C-1.036(1), F.A.C. and allege that the rule is an invalid exercise of delegated authority. Section 120.52(8), Florida Statutes defines "invalid exercise of delegated legislative authority" as:

    
    

    ...action which goes beyond the powers, functions and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rule making procedure set forth in s. 120.54;

    2. The agency has exceeded its grant of rule- making authority, citation to which is required by s. 120.54(7);

    3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

       
       

21. Rule 59C-1.036(1), the existing rule challenged in this case, as amended and effective on October 6, 1992, states,

    
    

    Agency Goal. This rule regulates the construction of new community nursing homes, the addition of

    new community nursing home beds, and the conversion of other health care facility bed types to community nursing home beds, including the conversion of community nursing home beds in continuing care facilities regulated under section 651.118, Florida Statutes, and rule 59C-1.037, Florida Administrative Code. The community nursing home beds subject to the provisions of this rule include beds licensed

    by the agency in accordance with Chapter 400, Part I, F.S., and beds licensed under Chapter 395, F.S., which are located in a distinct part of a hospital

    that is Medicare certified as a skilled nursing unit.

    All proposals for community nursing home beds will be comparatively reviewed consistent with the requirements of subsection 408.039(1), F.S., and consistent with the batching cycles for nursing

    home projects described in paragraph 59C-1.008(1)(1),

    F.A.C. The agency will consider applications for community nursing home beds in section 408.035, F.S., and the standards and need determination criteria set forth in this rule. The agency will not normally approve applications for new or additional community nursing home beds in any agency service subdistrict if approval of an application would cause the number of community nursing home beds in that agency service subdistrict to exceed the numeric need for community nursing home beds, as determined consistent with the methodology described in paragraphs (2)(a), (b), (c), (d), (e), and (f) of this rule.

    
    

22. The challenged rule cites Sections 408.15(8), 408.34(3) and (5), 408.039(4)(a), and 400.071(9), Florida Statutes, as specific authority.

    
    

23. Sections 408.34(3) and (5), Florida Statutes, provide:

    
    

    (3) The department shall establish, by rule, uniform need methodologies for health facilities. In developing uniform need methodologies, the department shall, at a minimum, consider the demographic characteristics of the population, the health status of the population, service

    use patterns, standards and trends, geographic accessibility, and market economics.

    (5) The department may adopt rules as necessary to implement ss. 381.701-381.75. [transferred to ss. 408.031-408.045 by s. 15. ch. 42.33]

24. Section 408.15 in pertinent part, provides:

    
    

    In addition to the powers granted to the agency elsewhere in this chapter, the agency is authorized to:

    (8) Adopt, amend, and repeal all rules necessary to carry out the provisions of this chapter.

    
    

25. Section 408.34(3) mandates that the agency develop uniform need methodologies and outlines considerations to be applied in such development. These provisions grant no specific authority for the agency to comparatively review hospital based skilled nursing units in the manner provided in the challenged rule.

    
    

26. Relevant portions of Sections 408.034 and 408.15 were analyzed by a Division of Administrative Hearing Officer in the recent case of University Hospital, Ltd., operating as University Hospital and University Pavilion Hospital v. Agency for Health Care Administration, et al, DOAH Case Nos. 94- 0906RX, 94-0957RX and 94-1164RX. In the University Hospital case, the Hearing Officer succinctly and correctly concluded as follows:

    
    

    32. Sections 408.034(5) and 408.15 are typical general legislative grants of rulemaking power which are of little help in determining an agency's specific jurisdiction or authority. "It is of little legal significance because it is generally a restatement of the common law concerning agency powers." Cataract Surgery Center v. Health Care Cost Containment Board,

    581 So.2d 1359, 1361 (Fla. 1st DCA 1991). Id at p. 13.

    
    

27. Section 408.039(4)(a), outlines the review of applications for CON and Section 400.071(7) is a general provision relating to nursing home licensing. Neither of these statutory provisions convey any specific authority for the provisions of the challenged rule which are at issue in this case.

    
    

28. The challenged rule does not cite as specific authority or as "law implemented" Section 408.039(1), Florida Statutes. This statutory provision authorizes the Agency to comparatively review only "similar types of services, facilities and equipment" in the same review cycle. However, the rule requires the comparison of applications for hospital based distinct part medicare certified skilled nursing units with applications for all community nursing home beds in the same review cycle.

    
    

29. Petitioners in this case have established by a preponderance of evidence: (a) that the challenged rule forces the inclusion of hospital based distinct part skilled nursing beds into the overall community nursing home bed inventory; and (b) that such hospital based units are not similar in terms of services, facilities are equipment when compared to all community nursing home beds. Therefore, the challenged rule contravenes Section 408.039(1), Florida Statutes.

    
    

30. Based upon the evidence in this case and on the foregoing conclusions, the challenged rule is invalid because it enlarges, modifies, or contravenes specific provisions of Florida Statutes.

31. The evidence in this case also clearly establishes that the challenged rule has the same effect as rules previously proposed by the Agency's predecessor, the Department of Health and Rehabilitative Services. These proposed rules were found to be invalid in the 1990 case of Venice Hospital, Inc., v. State of Florida Department of Health and Rehabilitative Services, 14 FALR 1220 (DOAH 1990).

    
    

32. In Venice Hospital, the Hearing Officer correctly concluded the following with respect to the law and its application to the previously proposed rules:

    
    

    If a proposed rule does not exceed the agency's statutory authority and is reasonably related to an appropriate purpose of the statutes, it should be sustained. State, Marine Fisheries Commission v. Organized Fisherman of Florida,

    503 So.2d 935 (Fla. 1st DCA 1987); Agrico Chemical Co. v. DER, 365 So.2d 759 (Fla. 1st DCA 1978). An agency's construction of the statute it administers is entitled to great weight and is not to be overturned unless clearly erroneous. Pan American Airways, Inc.

    v. Florida Public Service Commission, 427 So.2d 716 (Fla. 1983); Department of Professional Regulation v. Durrani, 455 So.2d 515 (Fla. 1st DCA 1984) (agency rule upheld as a valid exercise of delegated legislative authority). Moreover, the agency's interpretation of a statute when developing a rule need not be the sole possible interpretation or even the most desirable one;

    it need only be within the range of possible interpretations. Humhosco, Inc. v. Department of Health and Rehabilitative Services, 476 So. 2d 258 (Fla. 1st DCA 1985); Department of Professional Regulation v. Durrani, supra.

    
    

    The various standards for applying Section 120.52(8) have been established by case law. A rule is vague or fails to establish adequate standards for agency decisions when its terms

    are so vague that persons of common intelligence must necessarily guess at its meaning and differ as to its application. State v. Cumming, 365 So.2d 153 (Fla. 1978). A rule vests unbridled discretion in an agency when it fails to establish adequate standards and reserves to the agency the arbitrary power to determine private rights.

    Barrow v. Holland, 125 So.2d 749 (Fla. 1960). Arbitrary and capricious actions are defined in Agrico, supra, as follows:

    A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision

    is one not supported by facts or logic, or despotic.

    See, Adam Smith Enterprises v. Florida Department of Environmental Regulation, 553 So.2d 1260 (Fla. 1st DCA 1989).

    
    

    The burden is on the Petitioners to show by a preponderance of the evidence that the rule is arbitrary and capricious. Agrico, supra.

    Petitioners have the burden to prove that a proposed rule is an invalid exercise of delegated legislative authority. It is a stringent burden of proof. Id. at 763....

    
    

    The competent, substantial evidence shows that these proposed rules are not reasonable or rational and will lead to an illogical result. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing beds into the community nursing home bed inventory. Proposed Rules 10-5.002(13) and 10-5.008(2)(d) are invalid exercises of delegated legislative authority. Id., 1237, 1238.

    
    

33. Respondents and intervenors in support of the rule have established that, in recent years, freestanding nursing homes have become more competitive in the area of Medicare certified skilled nursing units. Further, the Respondent has established (that some) skilled nursing units in community nursing homes are similar in terms of equipment and staffing to such units in hospitals. To this extent the facts of this case are sufficiently "fluid" to avoid the application of the doctrines of res judicata or estoppel by judgement, see, Thomson v. Department of Environmental Regulation, 511 So.2d 989, 991 (Fla. 1987).

    
    

34. However, the Agency policy in this case is the same as it was in the Venice Hospital case and the facts are sufficiently similar for that case to be persuasive in this proceeding. Further, based upon the doctrine of stare decisis, it is concluded that the findings and conclusions of the Hearing Officer in Venice Hospital constitute ample and specific precedent in the instant case for the conclusion that Rule 59C-1.036(1), Florida Administrative Code, is invalid on the grounds that it is arbitrary and capricious. The existing rule is no less illogical and unreasonable as were the proposed rules in Venice Hospital.

    
    

    Form 1455A and The Scoring System

35. Section 120.535(1), Florida Statutes provides as follows: Rulemaking is not a matter of agency discretion.

    Each agency statement defined as a rule under s. 120.52(16) shall be adopted by the rulemaking procedure provided by s. 120.54 as soon as feasible and practical. Rulemaking shall be presumed feasible and practicable to the extent provided by this subsection unless one of the factors provided by this subsection is applicable.

    1. Rulemaking shall be presumed feasible unless the agency proves that:

       1. The agency has not had sufficient time to

          acquire the knowledge and experience reasonable necessary to address a statement by rulemaking; or

       2. Related matters are not sufficiently resolved to enable the agency to address a statement by rulemaking; or

       3. The agency is currently using the rulemaking procedure expeditiously and in good faith to adopt rules which address the statement.

    2. Rulemaking shall be presumed practicable to the extent necessary to provide fair notice to affected persons of relevant agency procedures

       and applicable principles, criteria, or standards for agency decisions unless the agency proves that:

       1. Detail or precision in the establishment of principles, criteria, or standards for agency

          decisions is not reasonable under the circumstances; or

       2. The particular questions addressed are of such a narrow scope that more specific resolution of the matter is impractical outside of an adjudication to determine the substantial interests of a party based on individual circumstances.

       
       

36. In the 1992 case of Spear v. Department of Highway Safety and Motor Vehicles, DOAH Case No. 92-4861RU, the Hearing Officer provided an excellent overview of the application of section 120.535(1), Florida Statutes as follows:

    
    

    1. Under the foregoing statutory scheme, a party asserting that an agency statement is a rule has the burden of proving that matter by a preponderance of the evidence. Assuming this evidentiary showing is satisfied, the burden

       then shifts to the agency to overcome the statutory presumption that rulemaking is feasible by showing that it is not feasible and practicable to address the challenged statement by rulemaking. As to this latter burden, the statute provides that if one of the factors enumerated in subsections 120.535(1)(a) and (b) is found to be applicable, rulemaking need not be immediately undertaken, and the agency can continue to rely upon the statement subject to the satisfaction of the requirements in Subsection 120.57(1)(b)15., Florida Statutes. Thus, the issues in this case are whether the agency statement being challenged meets the definition of a rule, and if so, whether rulemaking is feasible and practicable.

    2. In resolving the first issue, reference to Subsection 120.52(16), Florida Statutes (1991), is necessary. That subsection defines a rule as follows:

    (16) each agency statement of general appli- cability that implements, interprets, or prescribes law or policy or describes the organization, procedure, or practice requirements of an agency and includes any form which imposes any requirement

    or solicits any information not specifically required by statute or by an existing rule. The term also includes the amendment or repeal of a rule. The

    term does not include:

    (a) Internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum.

    * * *

    
    

    In Spear, the Hearing Officer also concluded that, in construing the above definition of a rule in the context of a challenge under section 120.535:

    
    

    The term "rule" should be interpreted broadly. The work "statement" used in the definition of "rule" is intended to encompass any form of communication by an agency. The words "general applicability" used in the definition of "rule" are intended to be given their plain meaning.

    The restrictive interpretation given "general applicability" by the case decisions should be reversed. (citations omitted) A broad inter- pretation of the term "rule" gives effect to the Legislature's intent to maximize the applicability of the rulemaking standard to the implementation of delegated authority by administrative agencies.

    
    

    Staff of Fla. H. R. comm. on Govtl. Ops., HB 1879 (1991) Staff Analysis 4 (final May 22, 1991) (on file with comm.) Id, pages 6-7.

    
    

    In a proceeding brought under Section 120.535, then, deference should be accorded to the legislature's intent that rulemaking is no longer discretionary on the part of an agency and that Subsection 120.52(16) should be broadly construed.

    
    

37. In this case, the Agency takes the position that the form and scoring system in question do not rise to the level of a rule. Although acknowledging that the challenged form and scoring system contain mandatory language, the Agency contends that submission of the form is not mandatory and that the scoring system is merely an analytical tool. The Agency points out that in the most recent CON review, several hospitals scored low on the system but were awarded CON's despite the overall scores. However, applicable case law indicates that the Agency interpretation in this regard is not dispositive.

    
    

38. In Balsam v. Department of Health and Rehabilitative Services, 452 So.2d 976, 977-78 (Fla. 1st DCA 1984), the court held:

    
    

    Any agency statement is a rule if it purports in and of itself to create certain rights and adversely affect others, or serves by its own

    effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law. (emphasis supplied).

    
    

39. Further, "whether an agency's statement is a rule which must be adopted in accordance with statutory procedure turns on the effect of the statement and not the Agency's characterization by some appellation other than

    'rule'." Amos v. Department of Rehabilitative Services, 444 So.2d. 43, 46 (Fla. 1st DCA 1983), citation omitted.

    
    

40. Petitioners have established, by a preponderance, that the form and scoring system at issue have application to all applicants for CON for skilled nursing units and/or beds. Further, the agency acknowledges that the forms and scoring system are, by their terms, self executing.

    
    

41. The form and scoring system also affect the petitioners rights, since submission of the documents result in comparison and ranking of applicants. The State Agency Action Report is the end product of the total review of CON applications. The scoring system is used for the review process and sometimes included in the State Agency Action Report.

    
    

42. The form and scoring system in question have all the attributes of a rule. The form and scoring system are utilized and are self executing applied outside the Agency. The policies in question do not, therefore, constitute "Internal Management Memoranda" as the Agency contends.

    
    

43. The Agency has not attempted to demonstrate that rulemaking with respect to the form and scoring system at issue was not feasible or practicable.

    
    

44. Finally, the form and scoring system in question are not appropriate for use in reviewing hospital applications for skilled nursing unit projects. Information called for in the form is, in several instances, not applic able to hospitals. The scoring system awards points based upon factors not applicable to hospitals and is therefore irrational and unreasonable as currently applied by the agency.

    
    

45. Form 1445A and the scoring system at issue in this proceeding, as applied in the comparative review of hospital applications for skilled nursing unit projects and beds, are invalid exercises of delegated legislative authority pursuant to section 120.56, Florida Statutes.

ORDER

Based upon the foregoing findings of fact and conclusions of law, it is ORDERED that the petition is GRANTED and

1. Rule 59C-1.036(1), Florida Administrative Code is invalid, as an invalid exercise of delegated legislative authority.

   
   

2. Agency Form 1455A and its accompanying scoring system are declared to fall within the definition of a rule, pursuant to Section 120.52(16), Florida Statutes, but have not been adopted as a rule. Rule making in this instance is also found to be feasible and practicable. The use of the form and scoring system by the agency is contrary to the provisions of Section 120.535, Florida Statutes.

   
   

3. Agency Form 1455A and the accompanying scoring system are invalid exercises of delegated legislative authority pursuant to Section 120.56, Florida Statutes.

DONE and ORDERED this 22nd day of August, 1994, in Tallahassee, Florida.

JAMES W. YORK, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550 904/488-9675

FILED with the Clerk of the Division of Administrative Hearings this 22nd day of August, 1994.

ENDNOTES

1/ See also, Hospital Corporation of Lake Worth v. Department of Health and Rehabilitative Services, 14 FALR 797 (DOAH 1991) wherein the Hearing Officer found that the proposed rules invalidated in the Venice Hospital case, supra, were no less unreasonable and irrational as a non rule policy. 14 FALR at 803. A different conclusion was reached by the Hearing Officer in Venice Hospital, Inc. v. Department of Health and Rehabilitative Services, 12 FALR 4641 (DOAH 1990). In this Venice Hospital case, decided under s. 120.57, the Hearing Officer concluded that the agency had articulated a reasonable and justifiable basis for its "long standing policy".

2/ One exception, not at issue in this case, is a statutory exemption for small rural hospitals from CON review to establish skilled nursing units, including "swing beds." Such beds are included in the community nursing home inventory.

Section 408.036(3)(i), Florida Statutes.

APPENDIX

Rulings on proposed findings of fact submitted by Petitioner Tarpon Springs:

1.-6. Adopted, in material part in paragraphs 38-43 of the Final Order.

7. Rejected, cumulative and not necessary to the conclusions reached in the final order. Medicare statistics are addressed in paragraphs 21 and 44-45 of the Final Order.

8.-9. Rejected, cumulative and not necessary to the conclusions reached in the Final Order.

1. Adopted, in material part, in paragraph 1 of the Final Order.

2. Adopted in material part, in paragraph 4 of the Final Order.

12.-14. Rejected, cumulative and not necessary to the conclusions reached in the Final Order.

1. Adopted in material part in paragraph 27 of the Final Order.

2. Adopted in material part in paragraph 9 of the Final Order. The remainder of this proposed finding is rejected as cumulative.

3. Adopted in paragraph 29 of the Final Order.

4. Adopted in material part in paragraphs 28 and 31 of the Final Order. 19.-21. Adopted in material part in paragraph 31 of the Final Order.

22. Adopted in material part in paragraph 26 of the Final Order.

23.-24. Adopted in material part, in paragraphs 33-34 of the final order.

25. Adopted in material part in paragraph 35 of the Final Order.

26.-28. Rejected, cumulative and not necessary to the conclusions reached in the Final Order.

29.-30. Adopted, in material part, in paragraph 46 of the Final Order. 31.-36. Rejected, cumulative and not necessary to the conclusions reached

in the Final Order.

37. Adopted, in material part in paragraph 30 of the Final Order.

38.-43. Rejected, cumulative and not necessary to the conclusions reached in the Final Order.

44. Adopted, in material part, in paragraph 47 of the Final Order.

45.-46. Rejected, cumulative and not necessary to the conclusions reached in the Final Order.

1. Adopted, in material part, in paragraph 36 of the Final Order.

2. Adopted, in material part, in paragraph 37 of the Final Order.

3. Rejected as stated as argumentative and containing conclusions not totally supported by the record.

50.-51. Adopted, in material part, in paragraph 5 of the Final Order.

1. Rejected as cumulative and not necessary to the conclusions reached.

2. Adopted, in material part, in paragraph 5 of the Final Order.

54.-95. Rejected as argument which is addressed in the conclusions of law in the Final Order.

96.-105. Rejected as cumulative and not necessary to the conclusions reached.

106.-109. Adopted, in material part, in paragraph 8 of the Final Order. 110.-111. Rejected, cumulative and not necessary to the conclusions

reached.

1. Adopted, in material part, in paragraph 9 of the Final Order.

2. Rejected as cumulative and not necessary to the conclusions reached in the Final Order.

3. Rejected, the evidence conflicts on this point and the finding is subordinate to the conclusion reached.

115.-116. Adopted, in relevant part, in paragraph 48 of the Final Order.

1. Adopted, in material part, in paragraph 48 of the Final Order. Conclusions contained in this proposed finding are addressed in the conclusions of law of the Final Order.

2. Adopted, in material part, in paragraphs 49, 50 and 51 of the Final Order.

3. Adopted, in material part, in paragraphs 52 and 56 of the Final Order.

120.-123. Adopted to the extent material and not cumulative, in paragraph

52 of the Final Order.

124.-141. Rejected, cumulative and not necessary to the conclusions reached.

1. Adopted in paragraph 58 of the Final Order.

2. Rejected, cumulative and not necessary to the conclusions reached.

3. Adopted in material part in paragraph 54 of the Final Order. 145.-146. Adopted, in material part in paragraphs 59-63 of the Final

Order.

147.-148. Rejected, argumentative and conclusory. These proposed findings are addressed in the conclusions of law in the Final Order.

149.-153. Rejected, cumulative and not necessary to conclusions reached. Rulings on Proposed Findings of Fact Submitted by Respondent AHCA

1. Adopted in paragraph 1 of the Final Order.

2. Adopted, in material part, in paragraphs 4 and 9 of the Final Order.

3. Adopted, in material part, in paragraph 9 of the Final Order.

4. Rejected, subordinate to findings made and to the conclusions reached in the Final Order.

5. Rejected, cumulative and subordinate to the conclusions reached. The final sentence in this proposed finding is not supported by the evidence.

6. The first two sentences are adopted, in material part, in paragraphs 10 and 13 of the Final Order. The final sentence of this proposed finding is rejected as cumulative and subordinate to conclusions reached in the Final Order.

7. Rejected. Sentence one is subordinate to the conclusions reached. The remainder of this proposed finding is not supported by competent substantial evidence.

8. Rejected, not supported by competent substantial evidence (in sentences

   1 and 2). The remainder of this proposed finding is cumulative and subordinate to conclusions reached in the Final Order.

9. Rejected. Ms. Polivka-West's opinion is not supported by the substantial competent evidence. While services are substantially similar, there are, in some cases, important differences. (see finding of fact 36-37)

10. Adopted, in material part, in paragraph 8 of the Final Order. The last 2 sentences of this proposed finding are subordinate to conclusions reached in the Final Order.

11. Adopted, in material part, in paragraph 13 of the Final Order.

12. Adopted, in material part, in paragraph 11 of the Final Order.

13.-14. Adopted, in material part, in paragraphs 8-16 of the Final Order.

1. Rejected as subordinate to the conclusions reached in the Final Order.

2. Rejected, subordinate and not necessary to the conclusions reached in the Final Order. The language contained in the 1989 plan supports Petitioners' arguments, and its absence in the 1993 plan tends to support Respondent's position. This point is not pivotal to the conclusions reached.

3. Rejected. Conclusory, argumentative and not supported by the substantial competent evidence in this proceeding.

4. Adopted in paragraph 49 of the Final Order.

5. Adopted in paragraph 60 of the Final Order.

6. Adopted in material part in paragraph 50 of the Final Order.

7. Rejected, subordinate and not necessary to the conclusions reached in the Final Order.

8. Adopted, in material part in paragraph 57 of the Final Order.

9. Rejected, not supported by competent, substantial evidence. The issue as to "required" information is addressed in paragraph 53 and in the conclusions of law contained in the Final Order.

10. Sentence 1 is adopted in paragraph 54 of the Final Order. The remainder of the proposed finding is rejected as the testimony presented on these points was not persuasive.

11. Rejected, not supported by competent substantial evidence and/or subordinate to the conclusions reached in the Final Order.

12. Rejected, cumulative and subordinate to the conclusions reached in the Final Order.

13. Adopted, in material part, in paragraphs 57-58 of the Final Order.

14. Rejected, subordinate to the conclusions reached in the Final Order. The proposed findings are further addressed in paragraphs 60-63 of the Final Order.

15. Rejected, subordinate to conclusions reached in the Final Order. 30.-32. Rejected, subordinate to the conclusions reached. The proposed

findings contained in these 3 paragraphs are addressed in the conclusions of law in the Final Order.

Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation of America and HCR Limited Partnership

1.-2. Adopted, in paragraphs 1-2 of the Final Order.

1. Adopted, in material part, in paragraph 4 of the Final Order.

2. Rejected as subordinate and not necessary to the conclusions reached.

3. Adopted, in material part, in paragraph 9 of the Final Order.

4. Rejected, not necessary to the conclusions of law in the Final Order.

5. Rejected as subordinate to conclusions reached in the Final Order but discussed in the conclusions of law portion of the order.

6. Adopted, in material part, in paragraph 8 of the Final Order.

7. Rejected, subordinate and not necessary to the conclusions reached in the Final Order.

10.-21. Adopted, in material part, in paragraph 10-19 of the Final Order. 22.-23. Rejected, cumulative and subordinate to the conclusions reached in

the Final Order.

1. Rejected. While it may be logical to compare the two described skilled nursing units, the competent substantial evidence shows that the process at issue does not do so.

2. Rejected. Not supported by the substantial competent evidence. Ms. Stamm's testimony in this regard is not sufficiently specific or persuasive to support this finding.

3. Adopted, in material part, in paragraph 56 of the Final Order.

4. Adopted, in material part, in paragraph 62 of the Final order, but also, see paragraph 63 of the Final Order.

5. Adopted, in material part, in paragraph 20 of the Final Order.

6. Rejected as subordinate to the findings and conclusions contained in the Final Order. Medicare statistics are discussed further in paragraphs 45-46 of the Final Order. See further paragraph 24 of the Final Order.

30.-31. Adopted, in material parts, in paragraphs 21-22 of the Final Order.

1. Rejected. The competent substantial evidence in this case shows that hospital based skilled nursing units are reviewed comparatively with all community nursing home beds.

2. Rejected, unnecessary and subordinate to the conclusions reached in the Final Order.

3. Adopted, in material part, in paragraph 23 of the Final Order.

4. Rejected. Subordinate and not necessary to conclusions reached in the Final Order.

5. Rejected. Medicare statistics are discussed in paragraphs 45-46 of the Final Order.

6. Rejected, subordinate and unnecessary to the conclusions reached in the Final Order. See further, paragraph 24 of the Final Order.

38.-39. Adopted, in material part, in paragraph 24 of the Final Order. 40.-41. Rejected. Data from the 1994 State Health Plan, compared to the

same plan issued in 1989, is not pivotal or dispositive of the issues in this case.

42.-43. Rejected, subordinate and not necessary to the conclusions reached in the Final Order.

44. Rejected. The competent, substantial evidence in this case shows that the comparison alluded to is not provided for in the challenged Rule.

Rulings Proposed Findings of Fact Submitted by Florida Health Care Association

1. Adopted, in material part, in paragraphs 1-3 of the Final Order.

2. Rejected. This proposed finding is not supported by the competent, substantial evidence in this case. The portion of the record cited to is not sufficiently specific or persuasive to support the proposed finding.

3. Rejected as irrelevant. See further, footnote 2 in the Final Order.

4. Adopted, in material part, in paragraphs 8, 13, 17, 14 and 25 of the Final Order.

5. Adopted, in material part, in paragraphs 9-16 of the Final Order. 6.-7. Adopted, in material part, in paragraph 24 of the Final Order.

1. Adopted, in material part, in paragraphs 13 and 25 of the Final Order.

2. Adopted, in material part, in paragraphs 9, 15 and 19 of the Final Order.

3. Adopted, in material part in paragraphs 9-12 and 15-16 of the Final Order.

4. Adopted, in relevant and material part, in paragraph 23 of the Final Order.

12.-13. Rejected, irrelevant and subordinate to conclusions reached in the Final Order.

14.-16. Rejected. Not supported by competent substantial evidence and further addressed in the conclusions of law in the Final Order.

1. Rejected, irrelevant and subordinate to the conclusions reached in the Final Order.

2. Adopted, in material part, in paragraph 10 of the Final Order.

3. Adopted, in material part, in paragraph 12 of the Final Order.

4. Adopted, in material part, in paragraph 15 of the Final Order.

5. Rejected, as argument and conclusion. This finding is also not supported by the weight of the evidence.

22.-24. Rejected, subordinate to the findings and conclusions in the Final Order.

1. Adopted, in material part, in paragraph 15 of the Final Order.

2. Adopted, in material part, in paragraphs 9-15 of the Final Order.

3. Adopted, in material part, in paragraph 24 of the Final Order.

4. Rejected. While the health status of patients described in this proposal are generally very similar, the record reflects that there are, on occasion, important differences.

5. Rejected. Not supported by the weight of competent, substantial evidence.

6. Subordinate to the conclusions reached in the Final Order.

7. Adopted, in material part, in paragraphs 12 and 24 of the Final Order.

8. Rejected, cumulative and subordinate to the conclusions reached in the Final Order.

9. Rejected, cumulative.

10. Rejected, subordinate to the conclusions reached in the Final Order. 35.-45. Rejected, cumulative, argumentative and subordinate to the

conclusions reached in the Final Order.

1. Rejected as argument which is addressed in the conclusions of law of the Final Order.

2. Adopted, in material part, in paragraphs 10 and 22 of the Final Order. 48.-52. Rejected as findings of fact. The witnesses at hearing are

described in the preliminary statement and in appropriate findings of fact in the Final Order.

1. Rejected, conclusory and there is no citation to the record to support the proposed finding in any event.

   54.-55. Rejected as conclusory and argumentative.

   COPIES FURNISHED:

   
   

   Kenneth F. Hoffman, Esquire Robert C. Downie, II, Esquire

   OERTEL, HOFFMAN, FERNANDEZ & COLE, P.A.

   2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507

   
   

   Harold D. Lewis, Esquire

   J. Robert Griffin, Esquire Office of the General Counsel

   Agency for Health Care Administration The Atrium, Suite 301

   325 John Knox Road Tallahassee, Florida 32303

   
   

   John D.C. Newton, II, Esquire Lauchlin T. Waldoch, Esquire MESSER, VICKERS, CAPARELLO, MADSEN,

   LEWIS, GOLDMAN & METZ

   215 South Monroe Street, Suite 701 Tallahassee, Florida 32301-1876

   
   

   Thomas J. Jones, Esquire HOLLAND & KNIGHT

   Post Office Box 810 Tallahassee, Florida 32302

   
   

   John L. Wharton, Esquire Chris H. Bentley, Esquire ROSE, SUNDSTROM & BENTLEY

   2548 Blairstone Pines Drive Tallahassee, Florida 32301

   
   

   Robert D. Newell, Jr., Esquire NEWELL & STAHL, P.A.

   817 North Gadsden Street Tallahassee, Florida 32303-6313

   
   

   Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302

   
   

   Jonathan S. Grout, Esquire Peter A. Lewis, Esquire GOLDSMITH & GROUT, P.A.

   Post Office Box 1017 Tallahassee, Florida 32302-1017

   
   

   Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire

   RUDEN, BARNETT, McCLOSKY, SMITH, SCHUSTER & RUSSELL, P.A.

   215 South Monroe Street, Suite 815 Tallahassee, Florida 32301

   NOTICE OF RIGHT TO JUDICIAL REVIEW

   
   

   A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

   
   

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

   DISTRICT COURT OPINION

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

   
   

   IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

   
   

   HEALTH CARE & RETIREMENT NOT FINAL UNTIL TIME EXPIRES TO CORPORATION OF AMERICA; HCR FILE MOTION FOR REHEARING AND LIMITED PARTNERSHIP; ARBOR DISPOSITION THEREOF IF FILED HEALTH CARE COMPANY; THE

   FLORIDA HEALTH CARE CASE NO. 94-3042/3051/3052/3057 ASSOCIATION, INC.; and THE DOAH CASE NO. 94-958RU

   AGENCY FOR HEALTH CARE ADMINISTRATION,

   
   

   Appellants,

   
   

   v.

   
   

   TARPON SPRINGS HOSPITAL FOUNDATION, INC., d/b/a HELEN ELLIS MEMORIAL HOSPITAL; FLORIDA HOSPITAL ASSOCIATION, INC., FAWCETT MEMORIAL HOSPITAL, INC.; and ST. ANTHONY'S HOSPITAL, INC.,

   
   

   Appellees.

   / Opinion filed April 4, 1996.

   An appeal from an order of the Division of Administrative Hearings.

   
   

   John L. Wharton, Diane D. Tremor, and Chris H. Bentley of Rose Sundstrom & Bentley, Tallahassee, for appellant Arbor Health Care Co.; Alfred W. Clark, Tallahassee, for appellants Health Care & Retirement Corp. and HCR Limited

   Partnership; Peter A. Lewis of Goldsmith & Grout, Tallahassee, for appellant Florida Health Care Association, Inc.; Richard A. Patterson, Tallahassee, for appellant Agency for Health Care Administration, for appellants.

   
   

   Kenneth F. Hoffman and Patricia A. Renovitch of Oertel, Hoffman, Fernandez & Cole, P.A., Tallahassee, for appellees Tarpon Springs Hospital Foundation and Florida Hospital Association; John D.C. Newton II of Messer, Vickers, Caparello, Madsen, Lewis, Goldman & Metz, Tallahassee, for appellee Fawcett Memorial Hospital, Inc.; Robert D. Newell of Newell & Stahl, P.A., Tallahassee, for appellee St. Anthony's Hospital, Inc., for appellees.

   
   

   KAHN, J.

   
   

   We have for review consolidated appeals from a final order of the Division of Administrative Hearings finding Rule 59-1.036(1), Florida Administrative Code, an invalid exercise of delegated legislative authority. Rule 59-1.036(1), entitled Community Nursing Home Beds, provides in pertinent part:

   
   

   The community nursing home beds subject to the provisions of this rule include beds licensed by the agency in accordance with Chapter 400, Part I, F.S., and beds licensed under Chapter 395, F.S., which are

   located in a distinct part of a hospital that

   is Medicare certified as a skilled nursing unit. All proposals for community nursing home beds will be comparatively reviewed consistent with the requirements of subsection 408.039(1), F.S., and consistent with the batching cycles

   for nursing home projects described in para- graph 59C-1.008(1)(1), F.A.C. . . . The agency will not normally approve applications for new or additional community nursing home beds in any agency service subdistrict if approval of an application would cause the number of comm-

   unity nursing home beds,, in that agency service subdistrict to exceed the numeric need for community nursing home beds, as determined consistent with the methodology described in paragraphs (2)(a), (b), (c), and (f) of this rule.

   
   

   In the final order, the hearing officer described the effect of this rule:

   
   

   The challenged rule has the effect of, among other things, requiring nursing homes and hospitals who seek to operate skilled nursing facility beds to file applications for comm- unity nursing home beds in the same batching cycle, compete against each other for those beds in nursing home subdistricts and be sub- ject to the need methodology applicable to nursing home beds. The Agency has not deve- loped a need methodology specifically for Medicare certified distinct part skilled nursing units.

   The hearing officer then made the following findings of fact demonstrating the invalidity of the rule:

   
   

   1. Once an applicant to construct a nursing home opens the nursing home, the applicant does not need a separate CON to designate beds as a Medicare-certified skilled nursing unit. According to the AHCA's own witness, a free- standing nursing home can internally change

      its categories at any time without CON review. Pursuant to statute and agency rule, however, hospitals must obtain a CON to change the category of even one bed.

   2. Although a hospital seeking hospital licensed Medicare-certified skilled nursing beds is compelled by Rule 59C-1.036(1), Florida Administrative Code, to compete against all nursing home applicants and all nursing home beds in a batched review, it faces totally different standards of construc- tion, operation and staffing after approval.

   3. Rule 59C-1.036(2), Florida Administra- tive Code, is the nursing home bed need formula. This formula does not result in an estimate of need for skilled nursing unit beds and projects need for total community nursing home beds only. There is currently no bed need methodology (hospital or nursing home) to ascertain the need for Medicare certified skilled nursing unit beds.

   4. The Agency's inventories of freestand- ing nursing home beds do not separately identify Medicare-certified skilled nursing home beds in nursing homes. All that is shown is whether the beds are "community nursing home beds" or "sheltered nursing home beds." The Agency has not established how, under this inventory and regulatory scheme, it controls overbedding in Medicare-certified skilled nurs- ing units within a specific district or subdistrict since the only such beds shown on the inventories are those in hospitals.

   5. It is unreasonable and illogical to compare the need for hospital-based Medicare- certified skilled nursing unit beds with the need for all community nursing home beds. Under the present circumstances a reasonable comparison might be drawn between need for hospital-based skilled nursing unit beds and freestanding nursing home skilled nursing unit beds, but the AHCA rules do not currently pro- vide for such a comparison.

   6. Determining the need for hospital-based skilled nursing unit beds by comparing such beds to all nursing unit beds constitutes poor health planning. Such hospital-based skilled nursing units do not provide similar services

      to similar patients when compared to community nursing home beds and it is neither logical or reasonable to comparatively review the need for such services.

   7. The challenged rule also requires hos- pital applicants for skilled nursing unit beds to compete with nursing homes within the nurs- ing home subdistrict. The Agency by rule divides districts differently for nursing homes than for hospitals. Thus, some hosp- itals' skilled nursing unit beds are compara- tively reviewed against nursing home beds of all kinds and against hospital skilled nursing beds which are not within the same hospital subdistrict.

   8. As a general statement, the treatment profiles for patients in Medicare-certified skilled nursing units in hospitals and those for patients in nursing homes skilled nursing units are similar. There is, however, a dis- tinct part of such patient population which must be treated in a setting which provides immediate access to emergency care. The pro- vision of immediate emergency care is not typically available in nursing homes and nursing home patients in need of such care usually have to be readmitted to hospitals.

   9. Care available in, hospitals (physicians and registered nurses on duty at `all times, laboratory and radiation services available

on premises) is sufficiently different to demonstrate that Medicare-certified skilled nursing units are not comparable to such units in freestanding nursing homes in all aspects. This distinction is clearly sign- ificant to patients who need emergency ser- vices because of age, multiple illnesses, and other conditions.

Among his conclusions of law, the hearing officer found that hospital skilled nursing unit beds are, under the challenged rule, included in the overall community nursing home inventory. He noted, based upon the findings of fact set out above, that "such hospital based units are not similar in terms of services, facilities, and equipment when compared to all community nursing home beds." Section 408.039(1), Florida Statutes (1993), allows certificate of need review in the same cycle of "all completed applications pertaining to similar types of service, facilities, or equipment. . . ." The order concludes that the challenged rule contravenes this statute.

The hearing officer's determination of non-similarity is factual, and the findings on this subject are supported by competent substantial evidence. See Adam Smith Enters, Inc. v. State, Dep't of Envtl. Reg. 553 So 2d 1260, 1273-74 (Fla. 1st DCA 1989). The order on appeal is therefore AFFIRMED.

ZEHMER, C.J., and ALLEN, J. CONCUR.

MANDATE

From

DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT

To the Honorable James W. York, Hearing Officer

Division of Administrative Hearings

WHEREAS, in that certain cause filed in this Court styled: TARPON SPRINGS HOSPITAL FOUNDATION,

INC., d/b/a HELEN ELLIS MEMORIAL HOSPITAL, and FLORIDA HOSPITAL ASSOCIATION, INC.,

Petitioners,

vs. *CASE NO. 94-3042

YOUR CASE NOS. 94-0958RU

AGENCY FOR HEALTH CARE 94-1165RU

ADMINISTRATION,

Respondent,

and

FAWCETT MEMORIAL HOSPITAL, INC., ARBOR HEALTH CARE COMPANY, ET AL.

*NOTE: Four Mandates filed, different as to DCA Case Numbers.

Four DCA Case Numbers were: 94-3042,

94-3051,

94-3052, and

94-3057.

The attached opinion was rendered on April 4, 1996.

YOU ARE HEREBY COMMANDED that further proceedings be had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.

WITNESS the Honorable E. Earle Zehmer

Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 22nd day of April, 1996.

(Seal) Jon S. Wheeler

Clerk, District Court of Appeal of Florida, First District

Docket for Case No: 94-000958RU

Orders for Case No: 94-000958RU