CIMERRON PROPERTIES, INC. and ROBERT W. HAGAN,
vs.
Respondent.
) Case No. 00-2749
Pursuant to notice, a formal hearing was conducted in this case on December 7, 2000, in Tallahassee, Florida, before Carolyn S. Holifield, Administrative Law Judge, Division of
Administrative Hearings.
For Petitioner: R. Bruce McKibben, Jr., Esquire
R. Bruce McKibben, P.A. Post Office Box 1798
For Respondent: Michael R. Hope, Esquire
Whether Petitioners' application for nursing home license renewal and for change of ownership was properly denied.
By letter dated April 3, 2000, Respondent, the Agency for Health Care Administration, advised Petitioner, Robert W. Hagan, President of Cimerron Properties, Inc., that his application for renewal of the nursing home license for Victoria Martin Nursing Home and for change of ownership was denied. The Agency for Health Care Administration indicated that Victoria Martin Nursing Home discontinued operation in June 1999, and as a result thereof and in accordance with Section 400.18, Florida Statutes, its license had been canceled.
Petitioners challenged the denial and on June 21, 2000, filed a Petition for Formal Hearing. On or about July 3, 2000, the Agency referred the matter to the Division of Administrative Hearings for assignment of an Administrative Law Judge to conduct the formal hearing. The hearing was scheduled to be held on September 6 and 7, 2000, but was continued until December 7, 2000, upon the undersigned's granting of Petitioner's Agreed Motion for Continuance.
At the final hearing, Petitioners presented the testimony of one witness and had seven exhibits received into evidence. Respondent, the Agency for Health Care Administration, presented the testimony of two witnesses and had two exhibits received into evidence.
A Transcript of the proceeding was filed on January 2, 2001. Both parties timely filed Proposed Recommended Orders.
Respondent, the Agency for Health Care Administration (Agency), is responsible for licensing and regulating nursing homes in the State of Florida pursuant to Chapter 400, Part II, Florida Statutes.
Victoria Martin Nursing Home (Victoria Martin or Facility) was a 38-bed skilled nursing facility located in
St. Petersburg, Florida. The Facility had served that community for approximately 35 to 40 years.
While a nursing home operating in the State of Florida, Victoria Martin was licensed by and subject to regulation by the Agency in accordance with Chapter 400, Florida Statutes.
At all times relevant hereto and until the time it voluntarily discontinued its operation, Victoria Martin was licensed to NewCare, Inc. (NewCare), through its subsidiary corporation, Suncoast Nursing Home, Limited (Suncoast), and was managed by Lenox Healthcare (Lenox).
By letter dated and received by the Agency on June 10, 1999, the then-owner of Victoria Martin, NewCare, notified the Agency that the Facility intended to voluntarily discontinue operation as a nursing home. The letter stated that the notification was being provided pursuant to the requirement of
Section 400.18, Florida Statutes. That section is titled "Closing of Nursing Homes." In accordance with that provision, NewCare also stated that the Facility's residents or their families or other appropriate representatives would be given notice, and that the residents would be transferred to suitable facilities "before the discontinuance of the operation." Finally, NewCare indicated that Lenox, which had taken over management of Victoria Martin on June 1, 1999, would propose to the Agency that Lenox be allowed to retain the Facility's license for a period of 120 days after discontinuing operation in order to "evaluate the needs of the property and assess the financial commitment needed to restore the property to their standard of operation."
NewCare's June 10, 1999, letter referenced in paragraph
5 above stated the following:
Pursuant to the requirement in FS 400.18 please accept this letter as official notification that it is the providers [sic] intention to voluntarily discontinue operation of the Victoria Martin Nursing Home provider number 10A433, located at 555 31st Street South, St. Petersburg, FL 33712.
As you are aware the provider agreement is due to terminate July 8, 1999. As required, a 90-day notification will be made, but I am not sure how practical that is considering the termination date of July 8, 1999. As I understand, payments will still continue to be made on behalf of residents for a period of 30-days after the July termination date. If that is the case then we will begin the
notification process immediately and cooperate with the wishes of the resident, family member or guardian as to suitable transfer of the resident before discontinuation of the operation.
In light of the substantial improvements that have been made at Victoria Martin Nursing Home it has become difficult to justify funding the ongoing capital intensive needs of the building in its current condition. Lenox Healthcare, which took over management of the Victoria Martin Nursing Home on June 1, 1999 will propose to the Agency for Health Care Administration in Tallahassee that they be allowed to retain the facility operating license for a period of 120 days after the discontinuance of the operation so that they can evaluate the need of the property and assess the financial commitment needed to restore the property to their standard of operation.
By letter dated June 24, 1999, Petitioner,
Robert W. Hagan, writing as president of Prime Health Services, advised the Agency that he intended to purchase the assets of Victoria Martin. According to the letter, Hagan had already signed a letter of intent and planned to sign a contract to purchase the assets of Victoria Martin. Hagan noted, however, that the "major requirement in our contract with NewCare is that the nursing home stays open."
In the letter, Hagan acknowledged that he was aware of the deficiency problems at Victoria Martin and understood that the Facility's Medicaid license was being suspended July 7, 1999. In light of this imminent license suspension, Hagan
requested a 60-day extension of the Medicaid license and promised that if the extension were granted, his company would immediately begin correcting the deficiencies. In closing, Hagan stated that he understood that the Agency would have to review this request but asked that the Agency give immediate attention to the matter.
In a July 2, 1999, letter to the Agency, Lenox, acting as agent for NewCare and manager of Victoria Martin, requested that upon closure of the Facility, the Agency preserve the licensed beds at Victoria Martin and place them into "reserve status" for at least six months.
The letter from Lenox to the Agency stated in relevant part the following:
Per our conversation this letter is to serve as the formal request of Lenox Healthcare, Inc. ("Lenox") acting as agent for NewCare Health Corporation ("NewCare") and manager of [Victoria Martin] to preserve the licensed beds upon closure of the Facility for a period of at least six months in an effort to review capital expenditure initiatives and the condition of the Facility.
We believe that it is in the best interests of Lenox and the Agency to place the Facility's beds into reserve status. This would offer Lenox the opportunity to review the Facility from the perspective of capital expenditure initiatives to better suit the needs of the residents in this service area. Lenox respectively [sic] requests a reserve approval status of at least six months, to
December 31, 1999 in order to review plans to either refurbish or replace the Facility.
As you know, Lenox initiated a relocation plan that transitioned the residents to the facilities of their choice. Lenox has kept the Agency informed of the progress in this area, and will continue to do so as we review the future plans for the Facility.
* * * Please let us know at your earliest
convenience of the steps that you will
require in order for Lenox to preserve the licensed beds for this period of time.
The Agency did not respond to the June 10, 1999, letter from NewCare advising the Agency that it intended to voluntarily discontinue operation of Victoria Martin; the June 24, 1999, letter from Robert Hagan asking for a 60-day extension of the Facility's Medicaid license; or the July 2, 1999, letter from Lenox asking that the licensed beds at the
Facility be placed in a "reserve status" for at least 6 months.
By early or mid July 1999, all the residents of Victoria Martin had been transferred to other facilities. With the transfer of the residents and in accordance with the June 10, 1999, notification letter from NewCare, Victoria Martin voluntarily discontinued its operation. Accordingly, the Agency considered the Facility closed and the license canceled.
Section 400.18(4), Florida Statutes, provides that immediately upon discontinuance of operation of a facility, the
licensee shall surrender the license to the Agency and the license shall be canceled.
The Agency construes Section 400.18(4), Florida Statutes, to require the licensee to surrender the license immediately after a facility voluntarily discontinues operation. Furthermore, the Agency's interpretation is that once the facility voluntarily discontinues its operation, the license under which it operated is automatically canceled and such cancellation is not contingent on the facility's surrendering its license.
Based on its interpretation of Section 400.18(4), Florida Statutes, after the residents of the Facility were transferred to other facilities and the Facility voluntarily discontinued operation, the Agency considered the Facility's license canceled. However, the Agency did not notify any of the interested parties that it canceled or deemed the license canceled by operation of law.
The license for Victoria Martin was never surrendered and until June 2000, about a year after the Facility discontinued operation, the Agency did not request that the Facility, NewCare, Lenox, or Petitioner surrender the nursing home license.
At or near the time residents of Victoria Martin were transferred to other facilities, NewCare sought the protection
of the bankruptcy court. In September 1999, the bankruptcy court appointed Hagan as receiver of Victoria Martin.
Hagan asserts that during the time that he served as the court-appointed receiver, he operated the Facility until it could be purchased by Cimmeron Properties, Inc., the company owned by Hagan's wife and of which he is president.
When Hagan assumed the role of receiver of Victoria Martin, he knew that the Facility was not operating as a nursing home. He also knew that the Facility was only a vacant building and that there were no residents in the Facility or nursing home employees working on the premises. Accordingly, notwithstanding Hagan's statements to the contrary, he did not operate Victoria Martin as a nursing home and could not have done so.
Even though Hagan had requested that Victoria Martin's Medicaid license be extended and Lenox had requested that the facility's beds be placed in "reserve status" for six months, the Agency never acted on either of these requests.
In the past, where there have been "unusual circumstances," the Agency has placed a facility in an "inactive status." In those situations, an agreement between the Agency and the licensed facility memorializes the terms and conditions of such action.
However, here the Agency never issued or entered into an agreement with Hagan, Cimmeron Properties, Inc., New Care,
Suncoast, or Lenox that purported to place Victoria Martin's license in an inactive or reserve status or to extend the license after the facility closed or voluntarily discontinued operation.
On December 6, 1999, a computer-generated letter was mailed in error to Victoria Martin from the Agency's Bureau of Managed Care and Health Quality. The letter mistakenly informed the facility that its nursing home license was due to expire on April 30, 2000, and gave instructions on renewing the license.
In response to the Agency's letter, Hagan contacted the Agency to discuss exactly how the renewal application should be completed inasmuch as there were no residents at the facility. An Agency employee told Hagan that he should submit an application to reflect that the Facility was in an "inactive" status.
Hagan prepared a license renewal application form indicating that Victoria Martin's license was in an inactive status and, on January 7, 2000, filed the renewal application. In the cover letter for the application, Hagan stated that the application had been completed pursuant to the instructions given to him on the telephone by an Agency staff person. Consistent with his understanding of those instructions, Hagan completed only the basic portion of the application and generally responded to questions "N/A" or "not applicable."
In addition to the renewal application, Hagan also filed a change of ownership application seeking to have the ownership of the Victoria Martin license changed or transferred to Cimerron Properties, Inc., as of February 1, 2000.
By letter dated April 3, 2000, the Agency denied Hagan's license renewal application on the grounds that the license had been canceled after Victoria Martin discontinued operation in June 1999. In the letter, the Agency directed Hagan to immediately surrender the Victoria Martin nursing home license under which the Facility operated and advised him that if he wanted to pursue initial licensure, he must apply for and obtain a Certificate of Need.
In the April 3, 2000, letter, the Agency did not expressly deny Petitioner's application for change of ownership. However, the Agency's determination that Victoria Martin's license had been canceled, implicitly and effectively denied Petitioner's application for change of ownership. It was the Agency's position that there was nothing to transfer.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Sections 120.569 and 120.57(1), Florida Statutes.
The Agency is authorized to license nursing home facilities in the State of Florida, pursuant to Chapter 400,
Part II, Florida Statutes, and subject to the conditions prescribed therein.
This proceeding involves a challenge to the Agency's denial of Petitioner's applications for license renewal and change of ownership. Therefore, the burden is on Petitioners to show by the preponderance of the evidence that they are eligible for the licenses they seek. Petitioners have not met their burden.
Section 400.071, Florida Statutes, delineates the information that must be included in an initial and renewal application for a nursing home license, and the Agency has promulgated rules implementing the statute's directive relating to licensure.
Rule 59A-4.103, Florida Administrative Code, provides that licensees or prospective licensees shall make application for an initial, renewal, or change of ownership to operate a nursing home facility and shall provide all information required by Section 400.071, Florida Statutes. The Agency is required to approve an application if the applicant or licensee meets the statutorily prescribed criteria.
Section 400.18, Florida Statutes, provides in pertinent part the following:
Closing of nursing facility.–
Whenever a licensee voluntarily discontinues operation, and during the
period when it is preparing for such discontinuance, it shall inform the agency not less than 90 days prior to the discontinuance of operation. The licensee also shall inform the resident or the next of kin, legal representative, or agency acting on behalf of the resident of the fact, and the proposed time, of such discontinuance and give at least 90 days' notice so that suitable arrangements may be made for the transfer and care of the resident.
* * *
(4) Immediately upon discontinuance of operation of a facility, the licensee shall surrender the license therefor to the agency, and the license shall be canceled. (emphasis supplied)
Pursuant to Section 400.18(1), Florida Statutes, when a licensed nursing home voluntarily discontinues operation, it must notify the Agency 90 days prior to the discontinuance of operation. Immediately upon discontinuance of operation of the licensed facility, the licensee is required to surrender the license to the Agency and the license is canceled.
In this case, the uncontroverted evidence established that NewCare substantially complied with the provisions of Section 400.18(1), Florida Statutes. NewCare's compliance was evidenced by its notifying the Agency that NewCare was voluntarily discontinuing operation and by indicating to the Agency that it would give notice to the residents or their family members or representatives that the Facility was
discontinuing operation and would be transferring the residents to a suitable facility. In the letter, NewCare noted that it was giving notice and taking the steps in accordance with Section 400.18, Florida Statutes.
Victoria Martin's nursing home license was canceled, pursuant to Section 400.18(4), Florida Statutes, upon the Facility's voluntary discontinuance of operations in July 1999.
The evidence established that the Victoria Martin license which Petitioners sought to renew had been canceled in July 1999, about six months prior to Petitioners' filing the application for renewal. Accordingly, the Agency was required by law to deny Petitioner's application for license renewal, since at the time the application was filed, there was no longer any license to renew.
Section 400.18(4), Florida Statutes, is clear and unambiguous. This provision places the burden of surrendering the license on the licensee and gives the Agency no discretion in canceling the license. Moreover, the cancellation of the license is not contingent on the Facility's surrendering the license.
In this case, the evidence is undisputed that Lenox requested that Victoria Martin's nursing home license be extended or that its licensed beds be put in a "reserve status."
However, the evidence established that the Agency never granted the request.
Sections 400.062 and 400.179, Florida Statutes, are relevant to Petitioners' application for change of ownership.
Section 400.062(6), Florida Statutes, states the following:
A license shall be valid only in the hands of the individual, firm, partnership, association, or corporation to whom it is issued and shall not be subject to sale, assignment, or other transfer, voluntary or involuntary, nor shall a license be valid for any premises other than those for which originally issued.
Section 400.l79, Florida Statutes, provides in pertinent part the following:
Sale or transfer of ownership of a nursing facility; liability for Medicaid underpayments and overpayments.
* * *
Whenever a nursing facility is sold or the ownership is transferred, including leasing, the transferee shall make application to the agency for a new license at least 90 days prior to the date of transfer of ownership.
The transferor shall notify the agency in writing at least 90 days prior to the date of transfer of ownership. The transferor shall be responsible and liable for the lawful operation of the nursing facility and the welfare of the residents domiciled in the facility until the date the transferee is licensed by the agency . . . .
According to Section 400.062, Florida Statutes, a nursing home license is not automatically transferable because the premises in which the facility operated have been sold or otherwise transferred. A transfer to a receiver in bankruptcy proceedings comes within the purview of this provision. Therefore, the Victoria Martin license could not be transferred to Petitioner, Hagan, by virtue of his being appointed receiver for Victoria Martin.
Pursuant to Section 400.179, Florida Statutes, when a nursing facility is sold or transferred, certain action must be taken by both parties. The transferee is required to apply to the Agency for a new license at least 90 days prior to the date of transfer of ownership. Section 400.179(2), Florida Statutes. The transferor is required to notify the Agency in writing 90 days prior to the date of transfer of ownership. Section 400.179(3), Florida Statutes. Additionally, that subsection provides that the transferor is "responsible and liable for the lawful operation of the nursing facility and the welfare of the residents domiciled in the facility until the date the transferee is licensed by the agency."
By assigning to the transferor the responsibility and liability for the "operation of the nursing facility" and "the welfare of the residents," Section 400.179, Florida Statutes, requires that a condition precedent to transferring ownership of
a nursing facility is that the facility is operating as a nursing facility.
As noted in the preceding paragraph, a change of ownership is limited to transfers of actively licensed facilities. In this case, the evidence established that in January 2000, when Petitioners applied for a change of ownership of the Victoria Martin Facility, the Facility had voluntarily discontinued operation and that the license had been canceled. Because Victoria Martin had closed, there was no license attached to the Facility, and, therefore, the Agency was without authority to grant a change of ownership to Petitioners.
RECOMMENDED that Respondent, the Agency for Health Care Administration, deny Petitioners', Cimerron Properties, Inc.'s, and Robert Hagan's, license renewal application for the property known as Victoria Martin Nursing Home and Petitioners' application for change of ownership.
Tallahassee, Leon County, Florida.
CAROLYN S. HOLIFIELD
Michael R. Hope, Esquire
R. Bruce McKibben, Jr., Esquire
R. Bruce McKibben, P.A. Post Office Box 1798
Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive
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.
