STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Administrative Law Judge, Don W. Davis, held a formal hearing in the above-styled case on March 19 through 26, 1997, in Tallahassee, Florida.

APPEARANCES

For Petitioner Good Samaritan Hospital:

Thomas A. Sheehan, III, Esquire Moyle, Flanigan, Katz, et al.

Barnett Centre, Ninth Floor 625 North Flagler Drive

West Palm Beach, Florida 33402 For Petitioner Elysium Rehabilitation Center Inc.:

David K. Friedman, Esquire Weiss and Handler, P.A.

2255 Glades Road, Suite 218A Boca Raton, Florida 33431

For Intervenor Manor Health Care Corp. d/b/a Manor Care Nursing Center:

James C. Hauser, Esquire Skelding, Labasky, Corry, et al. 3l8 North Monroe Street Tallahassee, Florida 32301

For Respondent Agency For Health Care Administration: John Gilroy, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3426

Tallahassee, Florida 32308 STATEMENT OF THE ISSUE

Whether the application of Elysium Rehabilitation Center Inc., (“Elysium”) for a certificate of need (CON) to construct and operate a 120-bed nursing home along with a CON application for an included 20-bed subacute unit in Palm Beach County, Florida, and the application of Good Samaritan Hospital (“Good Samaritan”) for a CON to convert 27 acute care beds to a 27-bed hospital-based skilled nursing unit (SNU), also known as a “subacute unit”, should be approved or denied.

PRELIMINARY STATEMENT

On April 19, 1996, the Agency for Health Care Administration (AHCA or Agency) published a Fixed Need pool for community nursing home beds for the January, 1999 planning horizon. In that batching cycle were applicants Good Samaritan and Elysium.

The published fixed need, acknowledged by all parties, was zero.

On April 4, 1996, the First District Court of Appeal upheld a decision by Administrative Law Judge James York invalidating Rule 59C-1.036(1), Florida Administrative Code. Health Care and Retirement Corp. v. Tarpon Springs, 671 So.2d 217 (Fla. App. 1st DCA 1996). Under the invalidated provision, applications for subacute beds or SNUs in hospitals were reviewed by AHCA in relation to applications for all community nursing home beds.

While comparative review of such applications is clearly precluded by Tarpon Springs, the April 19, 1996 fixed need pool was derived by AHCA using existing need methodology in Rule 59C- 1.036(2), Florida Administrative Code, to separately determine need for “short term” skilled nursing or subacute beds. That fixed need is, as acknowledged by the parties, zero.

By stipulation of the parties, Good Samaritan’s application is unopposed by Manor Care. Good Samaritan and Elysium do not oppose each other’s application.

On September 23, 1996, AHCA issued its decision denying, among others, the following applications: CON Numbers 8540 and 8540S to Elysium to construct a 120 bed facility (including a 20-

bed subacute unit) and CON Number 8539S to Good Samaritan to convert 27 acute care beds to a 27 bed hospital-based SNU.

Petitioners timely asserted their entitlement to administrative review of the pending agency decision. Subsequently the cases were forwarded to the Division of Administrative Hearings for formal proceedings, and by order of Administrative Law Judge Eleanor M. Hunter entered on November 22, 1996, were consolidated for final hearing. On February 5, 1997, Manor Care Healthcare Corporation (“Manor Care”), filed a Petition to Intervene which was granted by Judge Hunter on February 13, 1997.

Thereafter the matter was assigned to the undersigned for conduct of the final hearing where Good Samaritan presented the testimony of Joan Horvath (expert in rehabilitation services), Jeffrey S. Farber, M.D. (expert in subacute care and physical and rehabilitation medicine), and Jay Cushman (expert in the field of health planning). Good Samaritan exhibits 1 through 8 were admitted into evidence.

Elysium presented the testimony of Sharon Gordon-Girvin (expert in health care planning), Rabbi Joseph Pollack (Jewish customs and practice), Ira M. Sheskin, Ph.D. (expert in Jewish demography), Rabbi Bruce Warshall, John L. Fiorella, Jr., Joseph Legan (expert in architectural design including nursing home design and cost estimation), Thomas Davidson (expert in health care finance), and Suzanne Richardson, (expert in the field of

skilled nursing and subacute care). Elysium’s exhibits 1 through

2 and 4 through 11 were received into evidence.

Manor Care presented the testimony of Marta Meers, R.N. (expert in nursing home administration and operations and clinical services), Linda Ward (expert in the field and operation of special Alzheimer’s and dementia care units in nursing homes), George L. Siefert (expert in nursing home architecture and design), Linda Gilchrist , Diane Karolkowski, Doug Wanke and Thomas J. Sullivan (expert in health care planning and health care finance). Manor Care exhibits 1 through 12 were received into evidence.

AHCA presented the testimony of Elfie Stamm (expert in the area of health planning) and Karen Rivera. AHCA’s exhibits 1 through 3 were received into evidence.

The transcript of the proceeding was filed on April 11, 1997. By stipulation of the parties, the time to file proposed recommended orders was extended to May 8, 1997. Manor Care subsequently filed a timely motion for extension of time requesting that the time for filing proposed recommended orders be extended to May 15, 1997. The motion for extension of time was granted on May 5, 1997. Proposed findings of fact submitted by the parties have been duly considered in the preparation of this recommended order.

FINDINGS OF FACT

1. AHCA published a “Notice of Community Nursing Home Fixed Need Pool” on April 19, 1996, in the Florida Administrative Weekly, Volume 22, No. 16. In District 9, Subdistrict 4, the published numerical need, as acknowledged by the parties, was zero for the January 1999 planning horizon. The published need resulted from calculation of projected need for additional community nursing beds in accordance with need methodology contained in Rule 59C-1.036(2), Florida Administrative Code.

2. On May 24, 1996, AHCA published a “Notice To Potential Applicants” for CONs. The notice stated the following:

   In the review of applicants seeking beds from the January, 1999 Nursing Home Fixed Need Pool, as published in the April 19, 1996 F.A.W., which includes the same need for long and short term beds, the agency will consider the need for short and long term beds separately. Those applicants seeking both short and long term [beds] must file applications for each type of bed.

3. As acknowledged by the parties, the notice specifically set out a “Need For Short Term Beds” in AHCA’s Subdistrict 9-4 of zero. Neither the April 19 published fixed need pool or the May

   24 notice was challenged by any of the parties.

   
   

4. Although the term “subacute” is not defined in federal or Florida law, the weight of expert testimony in this case establishes that for health planning purposes in the current environment, measurement of Medicare certified skilled nursing

   days or services (“Short Term Beds”) is a fair and reasonable surrogate for “subacute” care.

   Good Samaritan’s Application

   
   

5. By letter of intent and application for CON filed in the batching cycle applicable to the January, 1999 planning horizon, Good Samaritan seeks to convert 27 acute beds at its Palm Beach County facility in AHCA District 9, Subdistrict 4, to a 27-bed subacute unit or SNU.

6. Good Samaritan has attempted to demonstrate a need for the proposed beds through the presentation of an “internal survey,” in addition to calculations under three different methodologies.

7. The internal survey results relied upon by Good Samaritan to show the existence of need is a product of the social work staff of Good Samaritan and its affiliate, St. Mary’s Hospital. The purpose of the survey was to identify patients who could, on the day of the survey, have received subacute as opposed to acute care.

8. The survey results were compiled from 36 patients who, at that time, were in acute care beds and, according to Rehabilitation Services Expert Joan Horvath, needed to be in a subacute program. Survey documentation includes descriptive columns documenting “Reason for SNU Potential” and “Reason for Occupying Acute Bed.” Short, non-specific statements of the “reasons” for a patient’s occupation of an acute bed are listed

   for most of those surveyed. Reasons are varied with some having little to do with availability of an appropriate subacute bed.

   Of all survey results, only one patient case arguably reports unavailability of subacute care. There is no contention that attempts were made to provide placement to the patients in the survey.

9. Karen Rivera, AHCA’s CON review consultant testified that the survey “raised more questions than it answered.” Good Samaritan’s application confirms that most patients included in the survey were subsequently placed in free standing SNU facilities without any substantiation by Good Samaritan of unnecessary delays. Good Samaritan has failed to demonstrate or document any lack of patient access to needed services.

10. Dr. Jeffrey Farber, slated to be the medical director of Good Samaritan’s proposed subacute unit, testified “from an anecdotal level” that certain physicians may retain patients longer than necessary in acute care because of a lack of physician comfort with available facilities. Farber is unaware of any quantification of patient need related to systematic or chronic lack of availability of subacute care services. Evidence related to physician convenience or patient preference is not responsive to the rule-based criteria which requires a finding of a lack of reasonable access to appropriate medical care. Reasons advanced by Dr. Farber to support a finding of need for additional access to subacute services are, as he conceded,

    “those same issues [that] would exist as to any acute care patient at any acute care facility which did not have a subacute care unit.”

11. Several methodologies presented in Good Samaritan’s application seek to support the conclusion that the proposed project is needed. Reliance is primarily on a health planning product called the Subacute Care Market Analysis Model, developed and marketed by Dr. Harold Ting as a means to estimate demand for subacute care in a given market. A “normative” demand model, the Ting methodology attempts to project potential demand for subacute services based on a subjective ideal, the number of patients that should or could have been provided subacute care—as opposed to actual experience with patients.

12. Without regard to any specific infirmities in the Ting theory, the Ting methodology cannot be credited as a means of determining need in this case. It is a proprietary collection of calculations which, as a result, cannot be expressly described or tested. It can be discerned, however, that the theory may be flawed in its application inasmuch as it uses an inflated average length of stay for patients in subacute facilities of 36 days for purpose of need calculation, as opposed to the median length of stay for patients in subacute units in hospitals in Florida of approximately 24 days. An adjustment to calculations for this inflation factor which were then run at the final hearing by Jay Cushman, Good Samaritan’s expert in the field of health planning,

    did not demonstrate any need for additional hospital-based subacute capacity.

13. Neither of the other two numeric methodologies presented by Good Samaritan at the final hearing demonstrated need for the proposed project sufficient to warrant its approval.

14. Hospital-based SNUs or subacute units, beyond convenience and preference issues, in relation to free standing skilled nursing facilities, offer more immediate availability of emergency and acute services and the possibility that laboratory tests are completed in a shorter time.

15. Good Samaritan maintains that the need pool for community nursing homes published by AHCA on April 19, 1996, is inapplicable to its application, although Good Samaritan filed no challenge to that bed need pool.

16. Since affirmation by the First District Court of Appeal in Health Care and Retirement Corp. v. Tarpon Springs, 671 So.2d

    217 (Fla. App. 1st DCA 1996)of Administrative Law Judge James York’s decision invalidating Rule 59C-1.036(1), Florida Administrative Code, no comparative review of SNU beds in hospitals in relation to all community nursing home beds has been conducted and AHCA no longer conducts such reviews.

17. Subsequent to publication of the court’s opinion in Tarpon Springs, AHCA published the fixed need pool for the planning horizon at issue in this case based upon a calculation of need using the same numeric methodology contained in Rule 59C-

    1.036(2), Florida Administrative Code. The calculation includes consideration of the entire Subdistrict population, and the need for all of the various categories of services included under the heading of skilled nursing care, including subacute and Alzheimer’s care. AHCA’s calculation also accounts fully for the number and occupancy rates of skilled nursing beds within the Subdistrict’s hospitals and free standing nursing homes.

18. The published fixed need of zero represents “overall” need for skilled nursing beds, including Medicare certified and non-Medicare certified (also referred to as “short term” and “long term”). AHCA’s expert health planner, responsible for CON rule development, testified at final hearing that the need number calculated under the methodology contained in Rule 59C-1.036(2), Florida Administrative Code, represents the “overall” need for all nursing beds except for private contract “sheltered beds” requiring entry fees which are a specific category regulated by another government agency and not available to the public at large. This need number also includes all skilled nursing facility beds, whether located in freestanding nursing homes or hospitals.

19. After determination of overall need, AHCA determined the need for Medicare certified beds in each subdistrict, based upon existing utilization of such beds. In response to the decision in Tarpon Springs, AHCA explored options and proceeded to determine, as reflected in the April 19 and May 24, 1996

    notices published in this case, the need for Medicare certified nursing home beds separately from non-Medicare certified or “long term” beds, without regard to the location of those beds in hospitals or nursing homes.

20. AHCA segregated nursing home beds into two groups, Medicare certified and non-medicare certified, for need determinations and comparative review purposes. Under this approach, comparison of applicants is made on the character of the services being provided.

21. Good Samaritan’s position is that AHCA’s need determination is inconsistent with the court’s holding in Tarpon Springs. As established by proof at the final hearing, there has been no showing that subdividing the applications into short-term and long-term services is flawed or irrational. Additionally, Good Samaritan has not shown any rational alternative means of creating subgroups of skilled nursing applications or determining need for short-term beds on anything broader than an institution- specific basis.

22. AHCA’s position is that the actual need methodology in Rule 59C-1.036(2), Florida Administrative Code was not invalidated by Tarpon Springs. The court’s decision in that case is limited to a prohibition of comparative review between hospital-based SNUs or subacute care beds and all community nursing home beds.

    Elysium’s Application

23. Elysium, like Good Samaritan, did not challenge the April 19, 1996, published notice of the fixed need pool for the January 1999 planning horizon. As noted above, the notice, published in the Florida Administrative Weekly, established a projected bed need of zero (0) for community nursing homes in AHCA’s planning district 9, Subdistrict 4, Palm Beach County.

24. Elysium’s timely filed application for a CON to construct a 120 bed skilled nursing facility containing a 20 bed subacute care unit (medicare certified) and a 16 bed Alzheimer’s Disease and Related Dementia Unit, however, seeks approval pursuant to provisions of Rule 59C-1.036(2)(h) and Rule 59C- 1.030(2), Florida Administrate Code for CON issuance to meet “special circumstances” despite the lack of numeric need.

25. It is Elysium’s contention that elderly Jews who keep kosher are an identifiable ethnic minority in Palm Beach County with unique ethnic, religious, cultural and dietary needs who will be effectively denied access to long term care absent CON issuance.

26. However, the applicant, Elysium Rehabilitation Center, Inc., owns no nursing homes and operates no nursing homes. The applicant has virtually no operating assets and no businesses.

27. Sole shareholder of Elysium is John Fiorella, Jr. He is not a licensed nursing home administrator. He has never worked full time in a nursing home. He has not operated or opened a nursing home.

28. The board of directors of Elysium include Fiorella and his mother and father. Both of the parents are experienced in the nursing home industry, but stopped working in 1986.

29. A related corporation is Elysium of Boca Raton, Inc., which owns an assisted living facility (ALF) in Boca Raton, Florida, but no nursing homes. The ALF has a kosher kitchen.

30. Elysium proposes to locate its nursing home facility on the ALF campus. The proposed facility is a freestanding building to be connected by an enclosed walkway to the ALF operated by Elysium of Boca Raton, Inc.

31. The proposed facility’s connection to the existing ALF is intended to allow residents of the facility to be visited by spouses who are residing in the adjacent ALF, to allow use of common staff elements, and to allow for sharing of the common space of the existing facility.

32. The projected cost of the proposed facility approximates 7.9 million dollars and includes proposals for a 20 bed subacute care unit and a 16 bed Alizheimer’s disease/related dementia unit.

33. Elysium projects 65 percent occupancy in year one and

    
    

    90 percent occupancy in year two. The proposed payor mix is: 7.1 percent private, 16.6 percent semiprivate, 55.5 percent Medicaid,

    16.7 percent Medicare, 0 percent HMO or insurance and 4.2 percent “other”. The facility will admit Jewish and non-Jewish residents.

34. While proposing to “provide a predominantly Jewish environment and meet the dietary laws of glatt kosher for the large number of elderly Jewish citizens residing in the area”, Elysium’s application also documents that the proposed facility will have a “predominately non-Jewish staff.” The proposed nursing home will not have an in-house kosher kitchen since the kosher kitchen at the adjoining ALF has been designated as glatt kosher by the Va’ad Hakashrut section of the Rabbinical Association. Elysium also proposes to offer its residents Hebrew classes, Yiddish discussion groups, religious studies, programs at the local Jewish Community Center and holiday celebrations.

    Need Per Section 408.035(1)(b) and (2), Florida Statutes And Rule 59C-1036(2), Florida Administrative Code

    
    

35. Section 408.035(1)(b) and (2) requires that consideration be given to the availability, need, accessibility, extent of utilization, and adequacy of like and existing health care services in a District. By Rule 59C-1.036(2), Florida Administrative Code, AHCA projects bed need on a county-wide basis. The need formula considers elderly population in a county, projected growth in the elderly population, the occupancy of existing nursing homes, number of licensed and CON-approved beds in a county, and other health variables. The formula projects need for all nursing home services, inclusive of custodial care, Alzheimer/related dementia disease, and subacute care.

36. AHCA has published a zero need for additional nursing home beds in Palm Beach County. Elysium does not dispute AHCA’s finding. Additionally, there are 630 CON-approved, but not yet opened, nursing home beds in Palm Beach County. As established by the testimony at the final hearing of Dan Sullivan, an expert in health care planning and health care finance, the zero fixed need for Palm Beach County is attributable to these already approved beds.

37. Many of the CON-approved beds will serve the same geographic area as that proposed by Elysium. Further, all nursing homes in Palm Beach County provide custodial care, Alzheimer’s care, subacute care, and Medicaid services. As conceded at final hearing by Elysium’s expert in health planning, Sharon Gordon-Girvin, custodial care, Alzheimer’s care, subacute care, and Medicaid services are provided at all nursing homes in Palm Beach County and are not unique or “not normal” services. Jewish residents in Palm Beach County currently receive Alzheimer’s services and subacute services with no problem in regard to clinical outcomes or quality of care issues.

38. Subacute bed need is subsumed within AHCA’s need methodology. The specific subacute disorders proposed to be dealt with by Elysium are commonly provided in any subacute unit and, clinically, subacute care is the same regardless of religion.

39. Per Rule 59C-1.036(2)(h), Florida Administrative Code, proof of need in the absence of fixed need requires proof of an access problem. Documented need means persons must be denied access or demonstrate that actual need exceeds the number of available beds. The testimony of Dan Sullivan at hearing establishes that Elysium’s allegation of unique need is not proven in that there has not been identification of “a single patient who had been denied services or refused services in nursing home” due to a lack of glatt kosher services.

40. The lack of documentation of an “access” problem for glatt kosher food is illustrated by the lack of demand for same. Diane Karolkowski was the admissions director at Menorah House, a Jewish facility, in 1996. An in-house survey conducted by her documented that of 115 patients, only 2 preferred kosher foods.

41. Jewish residents are adequately served at existing nursing homes in Palm Beach County. As established by testimony of Dr. Ira Sheskin, Elysium’s expert in Jewish demography, the majority of Jewish residents in south Palm Beach County nursing homes are in nursing homes other than Jewish nursing homes.

42. About 60 percent of patients at Intervenor Manor Care’s facility are Jewish, including orthodox and conservative Jews. Kosher foods are made available to residents requesting same, but such foods are rarely requested by even the orthodox Jewish residents. Manor Care’s Boynton, Florida facility has conducted

    studies of residents’ food preferences with the result that residents simply do not prefer the kosher foods.

43. The ALF owned by Elysium of Boca Raton, Inc. has a kosher kitchen. With 144 beds, the ALF averages only 55 residents—a very low occupancy demonstrative of the little demand for kosher kitchen services. Elysium’s submittal that 20 percent of elderly Jews in south Palm Beach County keep kosher does not establish a demand or need for kosher kitchen services in a nursing home.

44. Occupancy rates are expressly incorporated in the calculation of fixed need. The occupancy rates of the two Jewish nursing homes in the area accordingly do not justify deviation from the zero fixed need.

45. Waiting lists at nursing homes do not demonstrate need. As indicators of bed need, such list are not meaningful. Nursing homes with empty beds have waiting lists. Waiting lists can reflect patient preference for a particular accommodation such as a private room or need for a Medicaid bed, a subacute bed, an Alzheimer’s bed, or simply a desire to be with a friend. Additionally, such lists become outdated when people change their minds or develop other placement options without removing themselves from other waiting lists. Waiting for a Medicaid bed, not kosher foods, is the primary reason given by those on waiting lists.

    Elysium And Quality Of Care Section 408.035(1)(c), Florida Statutes.

    
    

46. Elysium is without any record of providing quality of care. Neither owner nor operator of any nursing home, this applicant has no experience or record of nursing home operations. A premium is placed on nursing home provider experience and competence since people are discharged earlier from hospitals than in the past and are consequently sicker than in previous years. Elysium’s ability to provide quality of care is not demonstrated.

47. Schedule 6 in Elysium’s application presents projected staffing patterns. The projected staffing is not proposed by specific unit. Staffing will vary between the proposed facility’s 20-bed subacute unit, the 16-bed Alzheimer’s unit, and the custodial care units but this variance is not indicated in the application. Also, Elysium’s sole shareholder could not testify concerning the different staffing ratios for different units.

48. There is no indication in Elysium’s application regarding whether a dedicated staff is contemplated for the subacute or Alzheimer’s units. Lack of a dedicated staff for these units is not reasonable. A minimum of 2.7 nursing hours per day for the subacute patient is reflected by on page 1b-5 of Elysium’s application, an unreasonable number since subacute units usually require at least 4.7 nursing hours per day to properly service the complexity and acuity of subacute disorders.

49. Special Alzheimer’s units require 2.8 nursing hours per patient day. Elysium’s application fails to state what the ratio will be for such units in its facility.

50. Assuming a standard of 4.7 nursing hours per day for subacute, 2.8 nursing hours per day for an Alzheimer’s unit and

    1.9 nursing hours per day for custodial patients, measures established at final hearing by testimony of Marta Meers, Manor Care’s expert on Nursing, Nursing Administration and Clinical Services, the nursing full time equivalency (FTEs)required per Elysium’s utilization projections in year two for Registered Nurses (RNs), Licensed Practical Nurses (LPNs), and Certified Nursing Assistants (CNAs) is as follows:

    UNIT RN/LPN CNA TOTAL

    Alzheimer’s 4.2 10 14.2

    Subacute 8.2 8.2 16.4

    Long-Term 6.3 24 30.3

    (Custodial)

    TOTAL

    FTEs 60.9

    
    

    The 30.3 FTEs for custodial beds presumes that all 72 custodial, non-specialty beds are in one contiguous unit. Under Elysium’s proposal these units are to be located on separate floors of the proposed facility and would require more FTEs.

51. Elysium’s projections in year two show requirements for

    
    

    5.6 RNs, 8.5 LPNs, and 34.1 CNAs for a total of 48.2 positions.

    This is at least 12.7 FTEs low, as established by testimony of expert Meers.

52. Elysium’s professed intent, as documented on Schedule 6, to contract for therapists (physical, speech, occupational, and audiological) instead of hiring these professionals as employees does not promote quality of care or quality assurance since contract staff provides less continuity. Many companies send different therapists to nursing homes at different times.

53. Elysium’s application fails to state the volume of therapy that will be provided to subacute patients. Normal practice is to provide three hours of physical, occupational and speech therapy to patients requiring same.

54. While stating that subacute programmatic policies and procedures will be developed, Elysium’s application is absent any such formulated policies—evidence of an inexperienced provider.

55. The Elysium application also projects zero HMO or insurance days for its subacute program. In Palm Beach County,

    30 to 40 percent of subacute patients are managed care with the likelihood that this percentage will increase in the future.

56. Deficiencies of the proposed facility include mixing custodial and subacute patients; location of the physical therapy room on the second floor while subacute patients are located on the first floor; and a nurses’ station layout that complicates the possibility of a dedicated staff by locating the one station to service the subacute unit, the Alzheimer’s Unit, and custodial

    beds. Successful subacute programs require a dedicated, trained staff who normally exhibit a higher level of skill and professionalism than the custodial bed staff.

57. Elysium’s application lacks established protocols of care and has not identified any employee who will serve in the capacity of therapist, unit director, or nurses for the subacute program.

58. Elysium’s proposed 16-bed Alzheimer’s unit provides no nursing station within the unit, no separate dining room, no activity space, therapy space, family visitation area or quiet time room. These spaces are necessary for a quality, operational unit.

59. Elysium’s proposal to mainstream Alzheimer’s residents for various services and activities is at variance with the fundamental reason for a special unit, particularly in view of the special needs of latter stage Alzheimer patients which make separate services appropriate. Mainstreaming these patients does not promote quality of care or quality assurance, and the application fails to indicate what mainstreaming for what stage of disease is contemplated.

60. Elysium’s application promotes a less than ideal bracelet security system for the Alzheimer’s unit. Patients will be fitted with bracelets that will trigger and lock doors as the patients approach them. Safer measures would include the locked

    ward concept where doors are locked and alarms sound when the door is opened.

    Adequate And Available Alternatives Section 408.035(1)(d), Florida Statutes.

    
    

61. Consideration of adequate alternatives to the proposed project is required by Section 408.035(1)(d), Florida Statutes. The many available and accessible nursing homes already existent in the area illustrate such alternatives to Elysium’s proposal. Most of the existing nursing homes provide the same services proposed by Elysium. Additionally, many of the CON-approved beds that are still to come on line will provide further alternatives.

62. Most of the nursing homes in the southern part of Palm Beach County admit Jewish residents, observe Jewish holidays, and allow other cultural practices and customs for the Jewish population, inclusive of religious services.

63. Kosher foods can and are provided without kosher kitchens in many of the area nursing homes, but, as noted earlier, demand for such foods is rare. Catering kosher food, if necessary, from the under-utilized ALF which would supply Elysium’s proposed facility is a cheaper, better alternative to meeting the occasional need for kosher food than building an unneeded nursing home.

    Improvements In Services Through Joint Resources Section 408.035(1)(e), Florida Statutes.

    
    

64. Section 408.035(1)(e), Florida Statutes, addresses whether improvements in services may be derived from operation of

    joint, cooperative, or shared health care resources. With exception of limited discussion regarding joint use of the ALF’s kosher kitchen, the Elysium application does not meet this criterion. Additionally, financial projections in the application fail to indicate any economies, reduction in staff, reduction in non-salary expense, or other expense relief resulting from locating the nursing home next to the ALF. There is no discussion in the application of shared services with other health care providers. The ALF administrator, Claire Bojanoski, even professes no knowledge of the application or involvement in discussions about coordination between the existing ALF and the proposed facility.

    Applicant Resources For Project Accomplishment Section 408.035(1)(h), Florida Statutes.

    
    

65. Section 408.035(1)(h), Florida Statutes, considers whether the applicant has available resources in personnel, management, and funds for project accomplishment and operation. Elysium’s application does not meet this criterion.

66. As noted above, Elysium neither owns or operates nursing homes. The sole shareholder has no ownership or operational experience in the field. The applicant has no employees or specific individuals employed in any key operational or management positions.

67. With regard to funding, the applicant proposes to borrow 5.8 million in long-term debt for project development. The only evidence in the application with regard to availability

    of such funding are two “letters of interest” from banks. The letters are casual, in no way binding, and cannot be viewed as firm commitments to provide debt funding. The applicant does have 250,000 dollars in capital for the nearly 8 million dollar project. Such a small percentage of the initial requirement for funding, plus the need for working capital when the facility opens, necessitates a finding that Elysium has not demonstrated in its application that it can firmly secure funds for project accomplishment and operation.

    Project Financial Feasibility Section 408.035(1)(i), Florida Statutes.

    
    

68. Immediate financial feasibility is the ability to finance construction and initial operations. It is similar to the criterion of funds availability for capital and operating expenditures and, based on findings set forth above in that regard, it is found that the project lacks immediate financial feasibility.

69. Long term feasibility addresses whether a project is financially viable after two years of operation. Elysium’s position that the large and growing Jewish population in the southern part of Palm Beach County will be adequate to assure long term feasibility is not sufficient to meet this criterion, particularly in view of the present usage of the ALF (less than

    40 percent occupancy) and the lack of documented need for a facility that will target primarily a Jewish population.

70. Utilization projections advanced by Elysium in Schedule

    
    

    5 of its application are not reasonable. There is inadequate demand for glatt kosher in Palm Beach County to justify the high occupancy and rapid fill up of occupancy projected by Elysium. Physical needs of patients primarily direct nursing home placement as opposed to cultural or dietary preferences, and the zero fixed need also illustrates the lack of need on that basis for the Alzheimer’s services, subacute care, Medicaid services, and custodial services associated with the typical nursing home.

71. Elysium projects, in Schedule 10 of the application, that it will capture 6,588 Medicare days. Equated to subacute days, such a figure amounts to 337 subacute admissions for which no specific referral sources are identified.

72. Subacute services are increasingly funded by managed care, yet Elysium projects zero days from managed care for the entire facility.

73. With regard to projected Medicare revenues, a significant portion of total revenues, Elysium did not calculate Medicare costs on the basis of actual cost of delivering subacute services, but chose instead to assume that Medicare reimbursement would equal the average Medicare reimbursement for all Palm Beach County nursing homes. Such an assumption for an alleged unique facility is not reasonable. Additionally, projected Medicare revenues do not indicate staffing patterns or amount of therapy to be provided subacute patients.

74. With respect to projected expenses, Elysium projected these expenses merely as a percentage of projected revenues. No consideration was given to the purported unique aspects of the proposed facility.

75. Salary expenses, the largest expense item for a nursing home, are very understated in view of the dramatic understated number of nursing home employees required to operate the specialized units and the total facility.

76. As established at the final hearing by testimony of the expert on health care planning and health care finance, Dan Sullivan, Elysium’s projection on Schedule 11 of $61.58 patient care costs per day in year 2000, the second year of operation, is unrealistic. Palm Beach County nursing homes averaged $61.27 in 1994. If the 1994 figure is inflated 4 percent per year, that would increase Elysium’s patient care costs by $15 per day. Multiplication of $15 per day times 39,528 patient days (utilization projections in year two) generates an additional expense of almost $600,000. Elysium projected a profit of

    $300,000, which, as Sullivan opined, becomes a $300,000 loss with the additional $600,000 cost.

    Promotion Of Competition, Quality Assurance, Or Cost-Effectiveness

    Section 408.035(1)(l), Florida Statutes.

    
    

77. There are no competitive benefits associated with Elysium’s application in view of the lack of Fixed Need and the existence of many nursing homes that presently provide the same

    services proposed by this applicant. Additionally, Jewish residents now receive adequate, available, and accessible cultural and religious services at existing facilities.

78. For the same facts set forth earlier, finding that Elysium’s application fails to meet the “quality of care” criterion, the criterion of quality assurance is not met.

79. With regard to cost effectiveness, there is no specific cost savings or cost effectiveness for health care delivery systems identified by Elysium’s application. Elysium has substantially understated its expenses and has expended no effort to share costs with the ALF or to provide any meaningful economic linkage with the ALF.

    Reasonableness Of Project Cost And Design Section 408.035(1)(m), Florida Statutes.

    
    

80. The layout of Elysium’s Alzheimer’s unit and subacute unit, as previously noted, are not reasonable. Additionally, Elysium’s projected “start-up” costs of $25,000 shown on Schedule

    1 manifests a misapprehension of what is involved in developing and operating a nursing home. Testimony of Marta Meers establishes that start-up involves hiring an administrator and other key staff six to eight months before opening; hiring and training other staff prior to opening; marketing and promotion. A projection of $25,000 for these costs is unrealistic and fails to meet this criterion.

81. Elysium is inconsistent with regard to whether there will be a separate kosher kitchen for the proposed facility.

    Page 3-16 of the application states there will not be a separate kitchen, contrary to the project architect’s testimony that the proposed facility could accommodate preparation of kosher and non-kosher foods. The architect’s testimony is not credited on this point.

    Applicant’s Past And Proposed Provision Of Medicaid And Indigent Services Section 408.035(1)(n), Florida Statutes.

    
    

82. Elysium has no history and therefore has no history of providing service to Medicaid or indigent persons. Elysium projects 55 percent Medicaid which is the Palm Beach County nursing home average. Elysium makes no attempt to quantify Medicaid need for nursing home residents demanding glatt kosher foods and puts further in question whether the applicant seeks to offer a unique service. Elysium does not satisfy this criterion.

    Continuum Of Care In A Multi-Level Health Care System Section 408.035(1)(o), Florida Statutes.

    
    

83. This proposed facility is not linked to any other element in the health care system of Palm Beach County with the exception of the ALF which is not particularly viable. There are no letters of support from hospitals or other nursing homes. The applicant has failed to establish that the proposed facility is an integrated part of a continuum of services.

    Local And State Health Plan Satisfaction Section 408.035(1)(a), Florida Statutes.

    
    

    Local Health Plan

84. The District 9 Local Health Plan includes preferences for consideration in the review of applications for nursing home beds.

85. The first preference gives priority to applicants for new nursing homes who agree to provide a minimum of 30 percent Medicaid patient days. Elysium has proposed a minimum of 55 percent Medicaid patient days and, therefore, meets this preference.

86. The second preference contains four subparts that establish priorities for applicants: documented history of providing good residential care; staffing ratios, particularly for registered nurses and aids, that exceed staffing requirements; provision for the treatment of residents with mental health problems; and the inclusion of intensive rehabilitation services for those short stay patients requiring rehabilitation below the level of an acute care hospital.

87. Elysium has not operated a skilled nursing facility to date and therefore does not have a rating history to report.

88. With regard to staffing ratios, provision of treatment of residents with mental health problems, the inclusion of intensive rehabilitation services for those short stay patients requiring rehabilitation such as a subacute unit, these preferences are not met by Elysium in view of the facts found above documenting the applicant’s failure to demonstrate an

    ability to provide high quality of care and quality assurance for its specialized services.

89. The third priority under the local/district health plan establishes a priority for applicants who propose to serve a distinct population that is not currently being served within the Subdistrict. As noted above, the distinct population in this instance is already well served by other nursing homes in Palm Beach County which meet the ethnic, religious, cultural and dietary needs of the elderly Jewish population who keep kosher. Florida State Health Plan

90. The Florida State Health Plan contains twelve allocation factors for reviewing CON applications for community nursing home beds.

91. Factor 1 provides a preference for applicants proposing to locate in subdistricts with occupancy rates exceeding 90 percent. Elysium conforms to this preference since occupancy rates in Palm Beach County have exceeded 90 percent throughout 1995.

92. Factor 2 provides a preference to those proposing to serve Medicaid residents in proportion to the subdistrict average. At risk to its claim that it proposes a truly unique facility, Elysium conforms to this preference.

93. Factor 3 provides a preference to applicants proposing specialized services to special care residents, including AIDS, Alzheimer’s and mentally ill residents. As previously noted

    above, the applicant’s failure to demonstrate an ability to provide high quality of care and quality assurance for its specialized services prevents conformance with this preference.

94. Factor 4 provides a preference to applicants proposing a continuum of services, including but not limited to, respite care and adult day care. As previously noted, Elysium’s failure to demonstrate an ability to provide quality of care or quality assurance precludes consideration of this preference.

95. Factor 5 of the State Health Plan is for applicants proposing reasonable facility design. As found above, Elysium’s proposal is unreasonable in design, particularly with regard to the specialized units for Alzheimer’s and subacute patients.

96. Factor 6 provides a preference to applicants providing innovative and therapeutic programs that enhance residents’ physical and mental functional level and emphasize restorative care. Elysium’s proposed subacute program does not offer services not provided at other nursing homes in the area. Additionally, Elysium does not demonstrate an ability to provide quality of care in its programs.

97. Factor 7 provides a preference to applicants proposing charges that do not exceed the highest Medicaid per diem rate in the Subdistrict. Elysium conforms with this preference.

98. Factor 8 provides a preference to applicants with a history of providing superior residential care in existing facilities in Florida and other states. Elysium has not operated

    a skilled nursing facility to date and therefore does not have a rating history to report.

99. Factor 9 provides a preference to applicants proposing staffing levels that exceed the minimum staffing standards contained in licensure administrative rules. The staffing ratios proposed by Elysium’s application do not meet minimum staffing ratios under the licensure rules due to understatement by the applicant of the number of nursing employees needed to operate its proposed facility.

100. Factor 10 provides preference to applicants who will use professionals from a variety of disciplines to meet the residents’ needs for social services, specialized therapies, nutrition, recreation and spiritual guidance. Elysium minimally complies, with proposed contractual services, with requirements for this preference.

101. Factor 11 provides a preference to applicants who document how they will ensure residents’ rights and privacy, if they use residents’ councils, and if they plan to implement a well-designed quality assurance and discharge planning program. Absent quality assurance concerns, Elysium qualifies for priority under this factor.

102. Factor 12 provides preference to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Elysium

     does not meet this preference in that proposed patient care costs are lower than average.

     Adverse Impact To Other Facilities

     
     

103. Manor Care is a 180 bed nursing home. Superior-rated, it has a 32-bed Alzheimer’s unit and provides subacute services. Service is provided to the Medicaid population and 60 percent of its residents are Jewish. It is located 1.5 miles from Elysium’s proposed site.

104. Presuming that Elysium reached projected utilization,

     
     

     20 percent of that business would come at the expense of Manor Care in an amount equal to the loss of 8,000 patient days. Currently generating a contribution margin of $60 per resident day, the loss to Manor Care would approximate $480,000 should Elysium’s application be approved. This is a substantial and adverse financial loss.

     CONCLUSIONS OF LAW

     
     

105. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings pursuant to Section 120.57(1) and 408.039, Florida Statutes.

106. Each applicant bears the burden of proving its entitlement to the particular CON sought, based on a balanced consideration of the criteria. Department of HRS v. Johnson & Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1994). Weight to be accorded each criterion is not fixed, but

     varies dependent upon facts of the case. Collier Medical Center, Inc. v. Department of HRS, 462 So.2d 83 (Fla. 1st DCA 1985).

107. With regard to both applicants, the fixed need determination made by AHCA pursuant to provisions of Rule 59C- 1.036(2), Florida Administrative Code of zero need, went unchallenged and must be applied in this case. St. Joseph’s Hospital, Inc. v. AHCA, AHCA Final Order dated March 17, 1997, Appeal Pending, Fla. 1st DCA Case No. 97-01440 (adopting DOAH Recommended Order in Case No.96-6236).

108. In response to concerns of Good Samaritan regarding the court’s decision in Tarpon Springs, it is simply noted that the opinion does not expressly address the calculation of bed need.

109. Good Samaritan acknowledged the unchallenged fixed need pool of zero, protested application of that finding, and sought to demonstrate a need for its project in order to provide access to residents to subacute care, pursuant to Rule 59C- 1.030(2), Florida Administrative Code.

110. In addition to the la0ck of proof establishing any general unavailability of appropriate care or quantification of any class of patients unable to reasonably access needed subacute care, the methodologies presented by Good Samaritan failed to establish a need for the proposed project. “Normative” in approach to determining need (in that an estimate of projected need is arrived at on the basis of what is subjectively

     determined should be available), the methodologies are fundamentally flawed and fail to establish unmet subacute care need in Subdistrict 9-4 for the planning horizon in question.

111. Similarly, Elysium acknowledged that the bed need methodology employed by AHCA to calculate need for beds in Palm Beach County did not result in a projected need for beds for the current nursing home batching cycle. However, since numerical need is but one of several factors to be considered in determining whether beds are needed, Elysium sought to show special circumstances justifying approval of its application despite a lack of bed need.

112. Elysium’s application expressly addresses the alleged special needs of the distinct elderly Jews who keep kosher and who are alleged to be an identifiable ethnic minority in Palm Beach County with unique ethnic, religious, cultural and dietary needs.

113. While elderly Jews falling into the category of individuals sought to be addressed by Elysium’s application may well be an identifiable ethnic minority, Elysium has not shown an unmet demand for glatt kosher foods in existing nursing homes.

114. An access problem has not been demonstrated by Elysium nor has the applicant established a need for its project in Palm Beach County. Further, as noted in the factual findings set forth above, Elysium’s application fails to meet other

requirements, inclusive of quality of care and financial feasibility considerations.

RECOMMENDATION

Based on the foregoing, it is, hereby, RECOMMENDED:

That a final order be entered denying the applications of Elysium and Good Samaritan which are at issue in this proceeding.

DONE AND ENTERED this 2nd day of June, 1997, in Tallahassee, Leon County, Florida.

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 1997.

COPIES FURNISHED:

Thomas A. Sheehan, III, Esquire Moyle, Flanigan, Katz, et al.

625 North Flagler Drive West Palm Beach, FL 33402

David K. Friedman, Esquire Weiss and Handler, P.A.

2255 Glades Road, Suite 218A Boca Raton, FL 33431

James C. Hauser, Esquire Skelding, Labasky, Corry et al.

318 North Monroe Street Tallahassee, FL 32301

John Gilroy, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3426

Tallahassee, FL 32308

R. Sam Power, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Tallahassee, FL 32308-5403

Jerome W. Hoffman, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, FL 32308-5403

Douglas M. Cook, Director

Agency for Health Care Administration 2727 Mahan Drive

Tallahassee, FL 32308-5403

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 96-005369CON

Orders for Case No: 96-005369CON