STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MARION COUNTY DEVELOPMENT, LLC,

vs.

Petitioner,

Case No. 15-1966CON

MARION COUNTY HRC, LLC, CON APP MARION, LLC, AND AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondents.

/ MARION COUNTY HRC, LLC,

Petitioner,

vs.

MARION COUNTY DEVELOPMENT, LLC, AND AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondents.

/ CON APP MARION, LLC,

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

Case No. 15-1967CON

Case No. 15-1970CON

RECOMMENDED ORDER

Administrative Law Judge John D. C. Newton, II, of the Division of Administrative Hearings conducted the final hearing

in this case on October 19 through 23, November 16 and 17, 2015,

and January 4 through 8, 2016.1/

APPEARANCES

For Marion County Development, LLC:

J. Stephen Menton, Esquire Stephen A. Ecenia, Esquire Gabriel F. Warren, Esquire Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202 Post Office Box 551

Tallahassee, Florida 32301 For Marion County HRC, LLC:

Seann M. Frazier, Esquire Jonathon L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP Suite 750

215 South Monroe Street Tallahassee, Florida 32301

For CON APP Marion, LLC:

Frank P. Rainer, Esquire Broad and Cassel

Suite 400

215 South Monroe Street Tallahassee, Florida 32301

For Agency for Health Care Administration:

Richard Joseph Saliba, Esquire Kevin Michael Marker, Esquire

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 STATEMENT OF THE ISSUE

Which certificate of need (CON) application seeking to establish a new community nursing home in Nursing Home District 3, Subdistrict 4 (Marion County), on balance, best

satisfies the statutory and rule criteria for approval: Marion County Development, LLC's CON Application No. 10257; Marion County HRC, LLC's CON Application No. 10258; or CON APP Marion, LLC's CON Application No. 10256?

PRELIMINARY STATEMENT

Marion County Development, LLC (Marion Development), Marion County HRC, LLC (Marion HRC), and CON APP Marion, LLC (CON App Marion) are competing applicants for a certificate of need to construct a new community nursing home in Nursing Home

District 3, Subdistrict 4, which is Marion County. Marion Development and CON App Marion both seek to establish 120-bed community nursing homes in Marion County. Marion HRC seeks to establish a 140-bed community nursing home.

On October 3, 2014, the Agency for Health Care Administration (Agency) published a need for 140 additional community nursing home beds in Nursing Home Subdistrict 3-4, Marion County, for the July 2017 planning horizon. The three applicants submitted their proposals to establish a new nursing home. On February 23, 2015, the Agency published its State Agency Action Report giving notice of its intent to approve Marion Development's application and to deny the applications of Marion HRC and CON App Marion.

Marion HRC and CON App Marion filed petitions contesting the Agency's preliminary decision. Marion Development filed a cross petition supporting the Agency's preliminary award. The

Agency referred the petitions to the Division of Administrative Hearings (DOAH) on April 10, 2015.

For the batching cycle the Agency also projected a need for

43 beds in District 3, Subdistrict 3. This subdistrict is Putnam County, which adjoins Marion County.

In the same batching cycle, CMCP-Pinecastle, LLC (Pinecastle), applied for approval of a 32-bed nursing home in Marion County. Pinecastle’s application invoked chapter 14-110, section 1, Laws of Florida.2/ That law permits an applicant to aggregate the projected need for geographically contiguous subdistricts in a district. The Agency approved Pinecastle’s application. Neither Pinecastle’s application nor the Agency’s State Agency Action Report identified how many of the Pinecastle beds should be considered as coming from the projected Putnam County need and how many should be considered as coming from the Marion County need.

Petitions challenging Pinecastle’s approval were also referred to DOAH. They were conditional. They challenged Pinecastle’s approval only if it would affect the petitioner’s application. All of the challenges were consolidated.

CON App Marion moved to dismiss the 140-bed application of Marion HRC on the theory that the beds awarded Pinecastle must have included some number of beds from Marion County. That in turn, CON App Marion argued, would reduce the 140-bed need in Marion County and preclude approval of Marion HRC’s 140-bed

application. The Agency fueled this argument by publishing, after the decisions at issue here, a document stating for the first time that its approval of Pinecastle’s application used 20 beds from the Putnam County pool and 12 beds from the Marion County pool.

The motion to dismiss was denied by the Order on Notice of Partial Voluntary Dismissal, Motion to Amend Petition, and Motion to Sever and Relinquish Jurisdiction, rendered July 15, 2015.3/ The Order concludes that application of the “aggregation” provision resulted in a need pool of 183 beds and that, consequently, approval of Pinecastle’s application did not affect the other applicants. The Order severed Pinecastle’s application from this matter and relinquished jurisdiction to the Agency for entry of a final order approving the application. The Agency rendered its final order approving Pinecastle’s application on November 9, 2015.

The final hearing convened on October 19, 2015. Marion Development presented testimony from Anita Faulmann; William Craig Harris; Natalie Holland; Anthony Rudolph Maul; Kathryn Platt, expert in healthcare planning; Gaurie Rodman; Daniel J. Sullivan, expert in health planning; Raymond Thivierge; and Darryl Weiner, expert in healthcare finance. In addition, designated portions of the deposition testimony of

Dr. Gary Bennett, Thomas Davidson, David Dronet, Eric J. Endres, Dr. Jeffrey Lowenkron, JoAnne Reifsnyder, Geoff Shera, and

Jeffrey Solarz were admitted into evidence. Marion Development Exhibits A, 1 through 11, 13, 14, 17, 18, 20, 21, 23 through 25,

27 through 32, 34 through 36, and 38 through 43 were admitted into evidence.

CON App Marion presented the testimony of Kevin Bessolo, expert in nursing home architectural design and project cost estimation; Michael Bokor, expert in community nursing home finance and development; Sheri DeShane, expert in nursing services and nursing homes; Allan Garfinkel; Sharon Gordon- Girvin, expert in health planning; Stephen Jones, expert in nursing home accounting; James Kestler, expert in clinical operations; and Maribel Vega, expert in nursing home therapy services operations. In addition, the deposition testimony of Sevi Kohn was admitted into evidence. CON App Marion Exhibits A through D, 1, 5, 7, 9, 11.1(a) through (d), 11.2(a) and (b), 11.3(a) through (e), 13, 15, and 16A were admitted into evidence.

Marion HRC presented the testimony of Jason Canlas, expert in nursing home administration; Geoff Fraser, an expert in nursing home administration; James Gregory, expert in plans and construction for healthcare facilities in Florida; Taylor Huston, expert in rehabilitation management and speech/language pathology; Deborah Kennedy; Dr. Jose Medina-Sanchez, expert in physiatry; Mark Richardson, expert in health planning; Karen Robins; Dennis Robinson, expert in construction estimation; and

William Tsukalas. In addition, designated portions of the deposition testimony of Thomas Davidson, expert in healthcare finance, and Jeffrey A. Shera were admitted into evidence.

Marion HRC Exhibits B (corporate reinstatement), 1 through 9, 18, 20 through 22, 24, 26, 32, 33, 36, 38, 40, 41, 45, 53, 58,

67, 68, 70, 95, 99, 168, and 169 were admitted into evidence.

The Agency presented the testimony of Marisol Fitch, an expert in certificate of need and health planning. Agency Exhibit 1 was admitted into evidence.

The hearing concluded on January 8, 2016. The record was kept open to allow the parties to take and submit deposition testimony from an unavailable witness and to file designations and cross-designations of testimony from several depositions. The parties asked to extend the period for filing proposed recommended orders from ten days to 30 days after filing of the last transcript. The request was granted.

The last volume of the 22 transcript volumes was filed at DOAH on January 20, 2016. The parties later moved to extend the time period for filing proposed recommended orders. The motion was granted, and the time period was extended from February 19 to March 24, 2016. The parties timely filed proposed recommended orders. They have been considered in the preparation of this Recommended Order. The parties also filed a “Joint Preliminary Statement,” including a Statement of the Issue and a recitation of the proceedings.4/

FINDINGS OF FACT

1. Numeric Need

   
   

   1. Any entity wishing to construct and operate a nursing home in Florida must obtain a CON authorizing the project. Sections 408.035 and 408.039, Florida Statutes (2015),5/ and Florida Administrative Code Rules 59C-1.002, 59C-1.008, 59C- 1.010, 59C-1.030, and 59C-1.036 govern the CON review and approval process. The Agency administers the statutes and rules.

   2. The statutes and rules establish factors for determining future “numeric need” for nursing home beds and criteria to consider when approving proposals or comparatively evaluating competing proposals. Rule 59C-1.036 creates a uniform methodology for determining the future numeric need for nursing home beds. Rules 59C-1.036 and 59C-1.008 require the Agency to calculate and publish the numeric need in batching cycles beginning April and October of each year.

   3. The need methodology of rule 59C-1.036 establishes a planning horizon and requires that the Agency determine the future need by district or subdistrict. The rule also creates a formula for calculating future need. Broadly described, the calculation is based on the projected district population age 65 through 74 and age 75 and older, giving the age 75 and over population six times more weight. The need formula applies the “estimated current bed rate” for each cohort of licensed

      
      

      
      

      facilities in the district or subdistrict to the projected populations to the calculate the gross “numeric need” for nursing home beds. The formula subtracts the licensed and approved beds in each district or subdistrict from the calculated future need to determine the net future numeric need.

   4. In 2001, the Florida Legislature imposed a moratorium on approval of new nursing home beds. In 2014, the Legislature lifted the moratorium. The Agency calculated net numeric need for the districts and subdistricts of the State. The Agency published notice of its calculated fixed need pools (the net numeric need) on October 3, 2014, for the July 2017 planning horizon. For Marion County, which is Nursing Home District 3, Subdistrict 4, the Agency projected a need for 140 new nursing home beds. This was the catalyst for the applications involved in this proceeding. The Agency recognized that reviewing and evaluating applications after a nearly 15-year moratorium would be a challenging and important task.

   5. All of the proposed projects’ applications satisfy the applicable statutory and review criteria. The Agency determined that the proposal of Marion Development best satisfied the criteria and best served the needs of Marion County residents.

2. Marion County

   
   

   1. Marion County is located in central Florida.

      
      

      Reasonable estimates put its population over the age of 64 in 2018 at 102,407 and at 105,077 in 2019. This means 35.90

      
      

      
      

      percent of the population will be over 64 in 2017 and 36.50 percent of the population will be over 64 in 2018.

   2. Ten nursing homes currently operate in Marion County.

      
      

      Nearly all are located in and around Ocala in the central part of the county.

   3. Counting licensed and approved beds, Marion County has

      
      

      19.3 nursing home beds per 1,000 people in the 65 and older cohort. Marion County nursing homes have an average occupancy level of nearly 90 percent. In addition, the Agency recently approved relocation of 184 nursing home beds from Alachua County to northern Marion County.

   4. Although witnesses for Marion Development and Marion HRC quibbled with the other applicants’ utilization projections, the evidence proves that each of the three applicants if properly operating can reasonably expect, with some in-migration which can also be reasonably expected, to reach their projected occupancy levels: Marion HRC – 87 percent in year two; Marion Development – 95 percent in year two; and CON App Marion – 88.25 percent in year two.

   5. The evidence includes occupancy of existing facilities, average lengths of stay at existing facilities, discharges of people age 64 and over from area acute care hospitals, and the absence of indications of unfilled beds. The congruity among the applicants’ utilization projections confirms the reasonableness of their individual utilization projections.

      
      

      
      

   6. On Top of the World is a large deed-restricted retirement community located in southwest Marion County. The Agency, implementing an exception to the requirement for calculated need to obtain a CON, recently approved a 120-bed nursing home known as Bridgewater Park to be located in the community.

   7. The Villages is a large senior retirement community that extends into southern Marion County, Sumter County, and Lake County. The Club at The Villages is a 60-bed nursing home located at the southern edge of Marion County in The Villages. It focuses on providing short-term rehabilitation services to patients.

   8. The Club at The Villages is the only skilled nursing facility currently located in southern Marion County. This area of Marion County has the most rapid growth and densest population of people age 64 and older in Marion County.

3. The Changing Healthcare Business

   
   

   1. The consensus of the witnesses and the parties is that provision of and payment for healthcare services in the United States is in a period of change and uncertainty. The needs of an aging population, a drive to reduce healthcare costs, a related drive to control costs, and evolving views of the merits of institutions providing healthcare all contribute to the health care business being in flux.

      
      

      
      

   2. Creation of Medicaid Health Management Organizations is one financial change. Another is exploration of a bundled care payment plan. This involves Medicare making a single payment for bundled services from several providers, such as a hospital, doctors, and a nursing home. The Center for Medicare and Medicaid Services will be testing that approach with its Bundled Care Payment Initiative Model 3.

   3. Another change is increasing use of nursing homes to provide rehabilitation services for people that would previously have been served by a comprehensive medical rehabilitation facility, but do not need quite that intensity of service. The stay for these patients is shorter than the residential stay historically provided by nursing homes. The cost for the stay is less than would be charged by a comprehensive rehabilitation facility. Each applicant acknowledges this.

4. “Short-term” v. “Long-term”

   
   

   1. Short-term patients are often discharged from acute care hospitals after joint surgery, stroke treatment, or cardiac treatment. These patients need temporary residential services and medical services during a shorter period of rehabilitation than the typical nursing home stay.

   2. These rehabilitation patients are likely to have more frequent and more numerous visitors than other nursing home patients. The patients are unlikely to have chronic, debilitating conditions. Often these patients and their

      
      

      
      

      visitors do not want to dine or otherwise mingle with other nursing home patients who have chronic, debilitating conditions. The essence of the consensus testimony about this matter is that the rehabilitation patients plan to leave and do not want to be with patients who are most likely to reside at the nursing home until death. The rehabilitation patients and their visitors also do not want to be close, especially when dining, to the unappealing infirmities that may accompany chronic, debilitating health conditions and extreme old age.

   3. CON App Marion and Marion HRC address this issue with designs that segregate dining areas, social areas, and residential quarters. These plans, where a nursing home serves but segregates both types of patients, are called hybrid models. The granted applicant and, by its proposed approval, the Agency approach the issue by dedicating a nursing home solely to the short-term rehabilitation patients.

   4. The parties and witnesses talk about short- and long- term nursing home beds. This is not a license category or description codified in statute or rule. “Nursing home bed,” “nursing service,” and “nursing home facility” are defined in sections 400.021(11), (12), and (13), Florida Statutes. Short- term and long-term beds are not defined. Yet the parties, including the Agency, and their witnesses categorized nursing home beds as short-term and long-term.

      
      

      
      

   5. The characterization short-term functions as a proxy for patients receiving rehabilitative services expected to return home within approximately 30 days or less. The characterization long-term serves as a proxy for patients expected to reside in the nursing home for many, many days, often the rest of their days.

   6. Short-term and long-term also serve as proxies for payor source and payment amounts for nursing home services and days. Medicare will pay for approximately 20 days of a Medicare patient’s stay in a nursing home. After that time period, if the patient does not have assets or insurance that will pay for the stay, Medicaid usually pays for the stay. Medicare payment is materially greater than Medicaid payment.

5. The Applicants

   
   

   1. Marion County Development

      
      

      1. Marion County Development is a development stage company created for purposes of filing the CON application here. It is a wholly-owned subsidiary of Genesis Healthcare (Genesis). Genesis was formed in 1985 and operates approximately 440 skilled nursing facilities in 34 states. Nine of them are in Florida.

      2. Genesis acquired its Florida facilities as part of a merger with Sun Healthcare in December 2012. Genesis is committed to expanding its current Florida networks and

         
         

         
         

         developing new facilities in Florida. One of its Florida facilities is Oakhurst Center in Marion County.

      3. When Genesis acquired Oakhurst, Oakhurst was facing quality of care and operational challenges. Genesis hired a new administrator, new director of nursing, and new nursing unit managers. Since Genesis made these changes, Oakhurst has not received any substandard care deficiencies. Genesis has worked to solve problems and has plans to continue to improve the facility.

      4. Oakhurst is a 180-bed nursing home providing services to Medicare (short-term) and Medicaid (long-term) patients. Historically, Oakhurst’s Medicaid utilization has been about

         62 percent. When Marion Development opens, Oakhurst will focus on serving long-term patients. Genesis will work with patients, their families, and hospital discharge planners to determine which facility best serves a patient’s needs. Marion Development reasonably expects that many of the short-term patients who would have been served at Oakhurst will choose the rehabilitation-focused facility. This will open up beds at Oakhurst allowing it to serve more long-term patients.

      5. Genesis operates short-term and long-term nursing homes. Most Genesis facilities have short-term and long-term services under one roof in hybrid facilities. Like other providers, Genesis has recognized the differing needs of various segments of the nursing home population and the trend toward

         
         

         
         

         providing rehabilitation services in nursing homes. In response to this, Genesis has begun developing facilities in select markets focused solely on short-term services. The facility Marion Development proposes is one.

      6. For this project, Genesis teamed up with a division of a real estate development company, Titan Development. The division is Titan Senior Living (Titan). Titan Development operates in Florida, Texas, and New Mexico. It focuses exclusively on senior living and healthcare projects.

      7. Titan is an established senior care community developer. It is developing projects in Florida. One development is a large senior living campus with independent living, assisted living, and a memory care facility located in southwestern Marion County. Marion Development’s proposed facility is part of this project. Master site development is underway.

      8. Genesis is an experienced provider of post-acute senior care services, including subspecialties like dialysis and respiratory care, and clinical programming for cardiac and stroke recovery.

      9. Genesis Rehabilitation Services and Genesis Physician Services are companies related to Genesis. Genesis Rehabilitation Services provides art therapy and rehabilitative services to over 1,700 facilities. They include Genesis skilled nursing centers and unaffiliated inpatient and outpatient

         
         

         
         

         facilities. The services complement the clinical care provided by physicians and nurses.

      10. Genesis Physician Services provides physicians and physician extenders, such as nurses and physicians’ assistants, to nursing homes at Genesis facilities and facilities owned by other providers. These healthcare professionals work in the Genesis facilities and have their offices in them. The company created Genesis Physician Services to oversee and support the medical directors at each facility in order to ensure high quality clinical care and uniform standards.

      11. Marion Development recognizes the changes coming in payment for healthcare services. It has committed to participating in tests of the bundled payment system. It offered to and the Agency plans to require a condition that the facility shall participate “in the Center for Medicare and Medicaid Services’ (CMS’s) Bundled Care Payment Initiative Model 3.”

   2. Marion HRC

      
      

      1. Marion HRC is also a development stage company created for purposes of pursuing the Marion County project proposed in its CON application. Samuel B. Kellett is the primary owner of Marion HRC. Mr. Kellett owns several nursing homes in Florida. Those homes contract with Clear Choice, LLC (Clear Choice), for operations. Marion HRC will contract with Clear Choice for management operations.

         
         

         
         

      2. A group of experienced nursing home administrators and health planning professionals formed Clear Choice. Clear Choice's principals and employees have significant experience in the construction, establishment, and operation of nursing homes. Mr. Kellett does also.

      3. Mr. Kellett formed SBK Capital. It handles relationships between single-purpose entities that Mr. Kellett owns which operate nursing homes.

      4. Mr. Kellett, through his various companies, originally established most of the nursing homes now operated by Clear Choice. Most are in Central Florida.

      5. Since 2013, Mr. Kellett has invested millions in renovation and expansion construction for his nursing homes. More renovations are in the works. The expansion projects typically include providing additional space, increasing the number of private rooms, and significantly enhancing gym and rehabilitation areas. The last are intended to and do attract and serve higher numbers of short-term rehabilitation patients.

   3. CON App Marion

   
   

   1. Like the others, CON App Marion is a development stage company created to file and pursue the CON application. Moshe Shiner6/ is the sole owner. Mr. Shiner owns ten nursing homes located in New York, Pennsylvania, and Maryland. He seeks to enter the Florida market.

      
      

      
      

   2. CON App Marion plans to engage Reliant Health Care Services, Inc. (Reliant), to develop and operate its proposed nursing home. Reliant only provides administrative and financial services to nursing homes. CON App Marion also plans to use nursing home consulting and operation companies recommended by Reliant.

   3. Reportedly Mr. Shiner is familiar with Reliant because his brother is the landlord for several facilities that have administrative services agreements with Reliant. Reliant has contracts with 21 nursing homes in Florida and one in Alabama. Reliant plans to engage another consulting company, Premier Clinical Solutions, to provide clinical operations support. The evidence about the anticipated relationships is markedly short on specificity and certainty.

   4. Mr. Kestler, the principal for Premier was at first unsure if he had ever met Mr. Shiner. Later in his testimony, Mr. Kestler said that he had a “handshake deal” with Mr. Shiner to provide clinical services for CON App Marion. Premier has never done business with Mr. Shiner before or provided services to any facility that he owns.

   5. Mr. Shiner is identified as the person who will decide whether CON App Marion will engage Premier. There is no non- hearsay evidence, and no hearsay evidence that would be admissible over objection, that can support a finding of fact that CON App Marion and Premier will work together.7/ The

      
      

      
      

      evidence that the relationship will develop as described is not persuasive.

   6. Evidence about Mr. Shiner and his involvement is scant and vague. This lack of convincing evidence about a primary player in the plans of CON App Marion permeates and weakens the persuasiveness of its case.

   7. Michael Bokor is the principal of Reliant. Mr. Bokor is an accountant. He has held financial and administrative positions in the skilled nursing industry since 1993. Mr. Bokor proposed and promoted creating a company to seek approval to establish a nursing home in Marion County to Mr. Shiner. In the past five years, Mr. Bokor developed The Villages Health and Rehab Center in Lady Lake, Florida, and Glades West Health and Rehab Center in Miramar, Florida, from preconstruction through operations.

6. The Proposals

   
   

   1. Marion Development

      
      

      1. Marion Development proposes a facility constructed, staffed, and operated to serve short-term patients. It will be an application of Genesis’s PowerBack model. Genesis developed PowerBack to serve the increasing demand for short-term beds in facilities focused on rehabilitation and returning patients to their homes. The model is one part of a network or continuum of care ranging from the hospital through the nursing home, perhaps

         
         

         
         

         through home healthcare, to independent living. Genesis operates 11 PowerBack models around the country.

      2. The facility will be located on three acres of Titan’s 110-acre campus along the southern border of Marion County adjacent to The Villages. Marion Development’s facility will be accessible by golf cart from The Villages.

      3. Development of the PowerBack model reflects an industry trend toward specialization and concentration of clinical capabilities. Over 90 percent of PowerBack admissions come directly from hospitals. Hospitals encourage development of PowerBack to serve the short-term, post-acute skilled nursing population that needs more physician involvement, higher staffing levels, and different equipment than found in traditional nursing homes.

      4. Because of its focus on short-term services, Marion Development’s facility is unlikely to receive significant Medicaid revenue. Some patients may be Medicaid-eligible. But Medicare will pay for their short stay. Marion Development correctly predicts that almost all of its revenue will come from Medicare, commercial insurance or private pay. These payors all pay more than Medicaid. Marion Development does not anticipate any material revenue from Medicaid.

      5. The average length of stay in a PowerBack facility is

         
         

         16 days. Hospital readmission rates for PowerBack patients are below the national average for nursing homes.

         
         

         
         

      6. The PowerBack model requires different equipment and more intensive staffing than the traditional hybrid nursing home. Consequently, data and experiences from operating PowerBack facilities, even though they are in other states, is more useful and predictive than data and experiences from hybrid nursing homes in Florida.

      7. The design of Marion Development’s proposed facility serves the facility’s specific mission. All rooms are private. This is an important design feature that facilitates patients receiving the rehabilitative care they need and assuming their responsibilities in rehabilitation with the support and assistance of their family and friends. The private rooms are also important to achieving the projected second-year occupancy since they eliminate the unused beds that would inevitably result with semi-private rooms from accommodating differences in gender and occasional medical needs for isolation.

      8. Marion Development will build a three-story facility.

         
         

         The two upper stories are primarily residential. The ground floor will house a bistro, rehabilitation gym, spa, movie theatre, classrooms, and a pool. There will be one service elevator and two elevators for patients, visitors, and staff. Three elevators enable employees, patients, and visitors to move between floors. Three elevators is an improvement based upon experience with earlier facilities that had two elevators. The planned construction provides adequate fire protection for

         
         

         
         

         patients. The rigorous code requirements enforced by the Agency during the construction approval and licensure will ensure that.

   2. Marion HRC

      
      

      1. Marion HRC proposes a 140-bed nursing home to be located in central Marion County, along the State Road 200 corridor. It will be west of most existing Marion County nursing homes, which are clustered around downtown Ocala, the location of two of Marion County’s three hospitals. It will be located between those two and the third hospital, Marion West.

      2. Marion HRC’s chief executive has experience in the Marion County Nursing Home market. That experience informed the location selection.

      3. Marion HRC proposes a traditional hybrid facility.

         
         

         Eighty-two of the 140 beds will be in private rooms with toilet and shower. Eight of them will be larger suites with a wall separating the sleeping and sitting areas, designed for quick conversion to semi-private rooms. The remaining 58 beds will be in 29 semi-private rooms.

      4. Marion HRC’s facility is designed around a central connecting corridor. It will have a bistro for dining, two pools, an “Alter-G” treadmill that allows management of how much weight the patient must bear while exercising, and a gym with rehabilitation equipment. Marion HRC also intends to offer outpatient rehabilitation services. Access to the facilities is designed accordingly.

         
         

         
         

      5. Marion HRC intends to serve Medicaid, Medicare, private insurance, and private pay patients. Medicaid patients will generate approximately 32.4 percent of Marion HRC’s patient days. This indicates that 67.6 percent will be Medicare, i.e., short-term patients.

   3. CON App Marion

   
   

   1. CON App Marion proposes a 120-bed nursing home. It hopes to build its facility in zip code 34491, southeast of Ocala near Marion County’s southern border. Zip code 34491 has the largest number of people age 65 and over of all Marion County zip codes. The surrounding zip codes do not have a similar concentration of people age 65 and over.

   2. One-half of CON App Marion’s beds are intended for short-term patients. The other half are for long-term. The rooms are in separate neighborhood pods to separate the two patient populations. The short-term neighborhood has 20 beds in

      20 private rooms and 40 beds in 20 semi-private suites. The long-term neighborhood will have 20 beds in 20 private rooms and

      40 beds housed in 20 semi-private suites.

      
      

   3. All patients will share a centrally located spa. Like the other applicants, CON App Marion describes its main dining area as a bistro intended to be attractive to patients and visitors. CON App Marion will offer “anytime dining” that will not limit patients to defined dining hours.

   
   

   
   

7. Comparisons Applying Statutory and Rule Criteria

   
   

   62. Sections 408.035 and 408.039 and rules 59C-1.008, 59C-

   
   

   1.010 and 59C-1.035 establish the review criteria for approval of CON applications for new skilled nursing facilities.

   A. Section 408.035(1)(a) and Rule 1.036(4)

   – The need for the proposed health care facilities and health services.

   
   

   1. The applications respond to publication of a fixed need pool of 140 beds. Presumptively, the beds are needed. Each applicant presented demographic and utilization data to support its proposed location and service mix. The applicants presented evidence and argument relying upon differences in use rates, population growth, and population ages between Marion County, the entire state, and other geographic areas. These factors are accounted for in the formula that generated the projected need the applicants seek to fill.

   2. Location-specific information by zip code is more useful. Marion Development’s facility will be located in zip code 34491. It has the greatest population growth and the highest number of patients discharged to skilled nursing facilities of all Marion County zip codes. The 13 zip codes closest to the proposed location generate almost 69 percent of hospital discharges to a skilled nursing facility. The discharged patients are a category likely to need the short-term services that Marion Development plans to provide. Its plans to do so are concrete and complete. Significantly, Marion

      
      

      
      

      Development commits to, and the Agency intends to apply, a requirement that Marion Development locate the nursing home where it says it will.

   3. The competing applications and their witnesses confirm a growing need for short-term beds to provide rehabilitative services, especially to patients on the lower end of the age 65 and older spectrum.

   4. For example, CON App Marion proposes that 50 percent of 120 beds will serve those patients. And Marion HRC indicates that over 67 percent of its revenue will be from short-term patients.

   5. Quite significantly, the Agency applying its health care expertise has determined the need for short-term beds is growing and that it is sufficient to support a 120-bed short- term only facility. The rapid fill of The Club Health and Rehabilitation Center at The Villages confirms this judgment. The Club, providing only short-term services, is on its way to achieving a projected 90 percent occupancy within two years of opening.

   6. Marion Development’s proposal focuses on serving the needs of short-term patients. Also, its location in Titan’s planned senior development will result in a growing source of nearby patients.

   7. The growing population will also need long-term beds.

      
      

      Existing facilities remain available to serve those needs. In

      
      

      
      

      addition, the upcoming relocation of 184 beds from Alachua County increases the capacity to serve long-term patients in Marion County.

   8. Only 68 nursing home beds are available within ten miles of Marion Development’s proposed facility. With Sumter and Lake Counties’ beds added, there are 749 existing or approved beds. Of course, those beds were approved to serve the needs of those counties’ populations and should not all be relied upon as all being an alternative to a Marion County nursing home in Marion Development’s proposed location.

   9. All three of Marion HRC’s possible locations are located within ten miles of 1,648 existing or approved nursing

      home beds.

      
      

      1. Section 408.035(1)(b) – The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant.

         
         

   10. There is no persuasive evidence that the quality of care currently available in Marion County is deficient. Utilization is high. That is what generated the projected numeric need. It is thus accounted for. There is no persuasive evidence, other than the high utilization, that nursing home services are not available in the service subdistrict. Existing nursing home beds are reasonably accessible to the population. Population growth just generates a need for more.

       
       

       
       

   11. Of the three proposals, Marion Development presents the most persuasive evidence that it will increase access to nursing home services to a specific area within the subdistrict, by adding short-term beds. The location within the planned senior care development means that Marion Development will also provide access to a future population center of likely patients.

       C. Section 408.035(1)(c) and Rule 1.036(e)

       – The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care.

       
       

   12. Persuasive evidence shows that Marion Development and Marion HRC will provide quality care. They and the entities that they rely upon have a history of providing quality services. Their planned facilities, equipment, and staff are sufficient to serve the patients proposed.

   13. The evidence of CON App Marion is not as persuasive.

       
       

       This is in large part due to the uncertainty of the proposed relationships with those who will or may be providing services

   14. Marion Development’s planned operator, Genesis, has an established record of providing high quality care to patients and residents at its existing facilities. It would provide high quality care at the proposed facility. Genesis’s regional teams include nurse consultants who monitor quality of care, review survey results and compliance, and provide education and training to nurses and other staff at the Genesis facilities.

       
       

       
       

   15. Marion Development relies upon its use of Genesis to ensure quality of care for the patients. Genesis measures quality of care by a number of metrics, measured in real-time. The metrics include pressure ulcers developed in the facility, falls, antipsychotic medication, urinary tract infections, hospital readmissions, and weight loss. These quality measures are reviewed on a monthly basis for each facility. The resulting data provide an accurate picture of the quality of care a facility is providing.

   16. Genesis scores the quality metrics of each facility to provide a benchmark with federal and state standards for evaluating whether a facility needs improvement. If a facility needs improvement, Genesis dedicates people and other resources to work with the facility to implement corrective plans.

   17. Genesis clinical teams make numerous visits to each facility to monitor compliance with and effective implementation of these plans.

   18. The staff at each Genesis facility ensures quality of care. The staff includes licensed nursing home administrators, directors of nursing, assistant directors of nursing, nurse practice educators, as well as the physicians associated with Genesis Physician Services. The staffing is reflected in Marion Development’s proposal.

   19. Quality of care concerns differ for short-term patients. Short-term patients are focused on receiving therapy,

       
       

       
       

       identifying co-morbidities, and monitoring medication so they can return to their daily lives. These patients require more registered nurses to treat their post-acute conditions.

   20. Long-term patients are focused on custodial care that requires daily nursing assistance. These patients require more certified nursing assistants to treat chronic debilitations and to provide help with tasks they cannot perform themselves.

   21. Because nursing homes in Florida have historically focused on long-term care, their facilities and staffing models are not optimized to deal with the needs and higher acuity levels of patients now being discharged from hospitals who need intensive rehabilitation and are not expected to be long-term residents.

   22. The proposed PowerBack approach is well suited to provide quality of care to short-term patients.

   23. The Marion Development application proposes extensive physician involvement through Genesis Physician Services. The Marion Development facility will have much more physician involvement than either of the other applicants. It will also offer more care from highly trained nursing staff.

   24. Marion Development offered to condition approval of its application on the high level of physician involvement described in its application. It certified: “MCD will condition the project on the provision of on-site physician and/or physician extender services 7 days a week.” The Agency

       
       

       
       

       intends to impose that condition. This application condition will result in physicians and physician extenders, like nurses and physicians’ assistants, being on site seven days a week. It is a critical component of Marion Development’s quality of care and linked inextricably to the ability to properly serve the needs of its targeted short-term patients.

   25. Marion Development will use Genesis Rehabilitation Services to provide rehabilitation services, including development of its PowerBack gym and support for patients with pulmonary disease. The benefits of Genesis Rehabilitation Services are an important contributor to the facility’s quality of care.

   26. Marion Development proposes and adequately budgets for equipment needed to provide the rehabilitation services its patients will need. This equipment includes a specialized pool for aqua-therapy. Marion Development emphasizes the sophistication of this pool and its rehabilitative benefits.

       The pool is an integral part of Marion Development’s proposal.

       
       

   27. Recognizing this, Marion Development agreed to condition “the project on the inclusion of a specialized pool for the provision of aqua-therapy.” The Agency intends to impose the condition.

   28. Of the intended operators for the three applicants, Marion HRC’s Clear Choice had the highest statistical ratings of quality for its nursing homes as measured by survey results,

       
       

       
       

       Medicare Star Ratings, and Gold Seal awards. CON App Marion had the lowest survey scores and a less-than-average record. The persuasive evidence, however, shows that the significance of Medicare Star Ratings is debatable.

   29. Marion HRC’s manager has a track record of providing quality of care. Clear Choice provides five clinical oversight managers for its nine facilities. For what limited value star ratings have, five out of Clear Choice’s eight Florida facilities have achieved 5-star ratings from Medicare.

   30. The preponderance of the evidence proves there is no basis to think that the quality of care that will be offered by Marion Development or Marion HRC will be anything but adequate or better.

   31. The evidence for CON App Marion is less persuasive.

       
       

       Its proposed operator Premier uses off-the-shelf policies and procedures. Some were last revised over a decade ago. Premier also does not track the quality and survey ratings of its facilities. An operator who does not at least track this data is in a poor position to identify, investigate, and remedy potential quality problems. CON App Marion did not prove that it can be relied upon to provide high quality care. This follows from the failure to prove with a sufficient degree of certainty that Premier will provide services, as well as the use of outdated policies and procedures.

       
       

       
       

       D. Section 408.035(1)(d) -- The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation.

       
       

   32. Marion Development’s project costs are slightly higher than those of the other two applicants. This is due to the intense clinical focus of the proposed PowerBack facility and the fact that the proposed project will have all private rooms. The private rooms are a very significant feature of Marion Development’s proposal.

   33. Schedule 2 of Marion Development’s CON application is an accurate and reasonable listing of its capital projects. Since the applicant was created solely for this project, the only project listed in Schedule 2 is the proposed nursing home. Schedule 2 includes reasonable capital expenditures for Year 1 and Year 2 of the proposed facility to account for miscellaneous capital items that may be needed once operational.

   34. Schedule 3 of Marion Development’s CON application identifies the source of the project’s funds. The $25,753,579 needed for project costs will be provided by Titan and Genesis. Titan will provide $25,253,579, nearly all of the project costs. Of this amount, $7,576,074 will come from cash on hand. Another

       $17,677,505 will come from non-related company financing. Genesis will provide the remaining $500,000 needed for the project.

       
       

       
       

   35. The funding sources for the proposed project are reasonable. Marion Development has shown that it will be able to provide the funds needed for this project. The proposed ratio of equity to financing is typical for new skilled nursing facilities. A bank statement from Spanish Springs Ventures, LLC, an affiliate of Titan, demonstrates $8,000,000 in cash on hand available for the project. This exceeds the proposed equity contribution.

   36. Marion Development’s application included a letter from the Bank of Texas, a commercial lender with a strong relationship with Titan and an established history of financing senior care projects. Titan’s history with the Bank of Texas includes approximately $65,000,000 in senior care projects and over $75,000,000 in other developments.

   37. The funds committed to this project and the long- standing relationship with the Bank of Texas provide a reasonable basis to conclude that Titan will be able to provide the proposed $7,576,074 in equity funding for the project and obtain the necessary financing.

   38. Genesis has the resources to support the Marion Development facility through Genesis Rehabilitation Services, Genesis Physician Services, and Genesis Respiratory Services. These entities already provide key functions at the other Genesis facilities in Florida.

       
       

       
       

   39. Marion Development’s construction costs are based in part on actual project costs of current skilled nursing facilities in Florida as well as developer input. Its projected costs are also based on a PowerBack building prototype used for other new Genesis projects. The projected site cost on Line 1 of Schedule 1 was developed in conjunction with Titan after determining how much land the project would actually need given the infrastructure already being developed as part of the 110- acre master plan. The purchase price for the land identified in Schedule 1 is accurate, reasonable, and consistent with other Titan projects in the area and includes the cost of improvements for the master site, allocated on a proportional basis.

   40. The projected costs factor in the cost of meeting all code requirements for this type of facility, as well as for road and drainage infrastructure.

   41. The real estate closing for the site has not occurred because it is unusual for a developer to purchase the land before securing regulatory approval to move forward with the project. There is no question, however, about Titan’s ability to locate the facility within the site already under development.

   42. The other applicants fault Marion Development’s application because the land costs were based upon an estimate of three acres and the prototype drawing for a PowerBack facility included in the application is sited on five acres.

       
       

       
       

       That prototype facility includes storm water drainage. The location of the proposed facility as part of the master-planned area eliminates the need for storm water drainage and other infrastructure requirements. The proposed site is adequate and the estimated land costs are accurate.

   43. Marion Development’s projected staffing for its facility is detailed in Schedule 6A of its CON application. These staffing projections are reasonably based on staffing at existing PowerBack facilities. PowerBack services are clinically intensive and emphasize a high level of nursing care to support the patient. The staffing level will increase as the facility’s census increases.

   44. Marion Development projects 101.20 nursing FTEs, the highest of any applicant. For example, it projects 17.43 RN FTEs at the new facility, approximately twice the number of RN FTEs proposed by either of the other applicants. Marion Development’s application also includes more dietary and administration FTEs than any other applicant.

   45. Marion Development reasonably plans to contract for physician and therapy services with Genesis Physician Services and Genesis Rehabilitation Services. Taking these services into account, Marion Development projects 175.86 total staff FTEs. Marion Development has the highest commitment of skilled nursing staff (RNs and LPNs) of any applicant. The average annual staffing salary projections in Marion Development’s application

       
       

       
       

       are reasonably based on rates from facilities in Hillsborough County, which are slightly higher than Marion County rates.

       Marion Development’s CON application contains a small accounting error regarding the number of nurse unit manager FTEs. It resulted in an overstatement of labor costs. The projected staffing costs are lower once the error is corrected. The error does not affect the reasonableness of Marion Development’s financial projections or the ability to staff the proposed facility.

   46. As found earlier, Marion Development plans to contract with Genesis Rehabilitation Services for therapy services provided patients at the proposed facility. Marion Development’s projected expense for these services is

       $3,252,526. This expense is reasonable given its relationship with Genesis as well as the types of services to be provided.

   47. Marion HRC reasonably projected $21.5 million costs for its nursing home project. It also proved its ability to finance those costs.

   48. Marion HRC and its related companies have an established track record of obtaining financing for multi- million dollar renovations and expansions. They also reasonably propose funding for initial operations of the proposed nursing home.

       
       

       
       

   49. Marion HRC demonstrated the availability of cash needed to fund 15 percent of its project’s cost. Marion HRC demonstrated its financial feasibility in the short-term.

   50. There is insufficient evidence to that the funds CON App Marion will need for construction and operation will be available. CON App Marion proposes 100 percent financing by Tunic Capital (Tunic). This is unusual in the healthcare business. Tunic is supposed to facilitate obtaining the bulk of the project financing from a financial institution and then provide the remaining needed assets for completion and start-up.

   51. There are no documents, such as financial statements or bank statements that establish Tunic’s ability to provide the financial support. Tunic is not a traditional lender. The evidence about Tunic’s makeup, resources, and history was limited and unpersuasive.

   52. Tunic’s representative, Zevi Kohn, was uncooperative in his deposition. He refused to answer many basic, relevant questions. Mr. Kohn identified himself as Tunic’s “Senior Vice- President involved in the underwriting process for financing for skilled nursing projects and/or acquisition.” Mr. Kohn would not provide the following basic information relevant to determining Tunic’s ability to provide capital: (1) financial statements; (2) the amount and nature of Tunic’s net assets;

       (3) the bank or banks that Tunic might facilitate providing CON App Marion a loan; (4) the identity of two recently constructed

       
       

       
       

       Florida nursing homes he claimed Tunic funded; (5) the identity of any projects Tunic had funded in Florida; (6) the identity of the person or people who decide to actually fund a project; and

       (7) the address of Tunic.

       
       

   53. In addition Mr. Kohn was unaware of Michael Bokor, the primary person responsible for submitting the application and executing its proposed project. The person Tunic relies upon and views as the owner of the CON App Marion proposal is Mr. Shiner. Mr. Bokor also identified Mr. Shiner as the person responsible for obtaining financing. Mr. Shiner, despite his important role in the project, never testified. There is scant persuasive or non-hearsay evidence about him, his experience, his abilities, or his resources.

   54. CON App Marion did not provide persuasive evidence of the availability of capital for construction of its facility or initial operations.

       1. Section 408.035(1)(e) -- The extent to which the proposed services will enhance access to health care for residents of the service district.

          
          

   55. This criterion asks whether there is a gap in services within the subdistrict and to what extent an applicant closes that gap by increasing the availability of services. It includes implementation of new projects that will provide services currently unavailable to residents of the subdistrict. Marion Development’s proposal to bring a dedicated short-term

       
       

       
       

       acute care facility to Marion County best satisfies this criterion.

   56. Marion Development would bring more than new beds and a new facility to Marion County. It brings a facility that will serve what all parties and witnesses agree is a growing need for short-term beds. The proposed facility also provides the rehabilitative services in a less cumbersome and inefficient way.

   57. The design and staffing of the other two applicants demonstrate the tensions and difficulties created by trying to serve substantial populations of long-term and short-term patients in the same facility. They result in two dining areas, two common areas, and different traffic flows; in short the result is a facility divided to segregate two patient populations. Eliminating the segregated hybrid facility with a facility that serves one patient population enhances health care access for Marion County residents. It is a reasonable health planning decision, an effort to adapt to changing circumstances.

       1. Section 408.035(1)(f) -- The immediate and long-term financial feasibility of the proposal.

   58. Marion Development created its staffing model based upon experience at existing PowerBack facilities. This is more reasonable than using traditional hybrid nursing homes in Marion County as models since the treatment models and patient populations are different. Genesis developed Marion

       
       

       
       

       Development’s pro forma financial projections in collaboration with financial expert Darryl Wiener.

   59. It based projected managed care rates on other Genesis skilled nursing facilities in Florida with high utilizations. This was reasonable.

   60. Marion Development projects the proposed facility will capture 11.8 percent market share in year one, followed by

       21.9 percent in year two. The projected utilization is reasonable. There is no facility like PowerBack in Marion County. It is reasonable to assume that the proposed facility will also capture patients less than 65 years who would otherwise not seek treatment in a traditional skilled nursing facility.

   61. Marion Development projects occupancy of 49 percent in year one and 95 percent in year two. These projections are reasonable and incorporate a reasonable assumption that some market share from Oakhurst will shift to the proposed facility as Oakhurst phases out its current short-term services. This projection is consistent with Genesis’ experience in developing a network of services in an area and should result in more capacity at Oakhurst for patients needing long-term care.

   62. As found earlier, all three applicants project similar occupancy. This congruency combined with the present high utilization of existing facilities, the projected population growth, and inevitable, if limited, in-migration from

       
       

       
       

       adjacent counties makes the ability of all three projects, if developed, to reach their projected occupancy levels, if properly operated, not subject to reasonable dispute.

   63. Marion Development’s financial projections demonstrate that it proposes to spend a higher percentage of net revenue on patient care and less on non-patient related costs than the other applicants.

   64. Schedule 7 of Marion Development’s application demonstrates the long-term feasibility of the proposed facility through projected revenues. The payor mix and projected revenues, as well as the underlying assumptions, are reasonable. Marion Development reasonably used data from other Genesis skilled nursing facilities in Florida and existing PowerBack facilities in other states to project payor mix and Medicare reimbursement rates (known as “RUG” rates) for the proposed facility. For its second year of operation, Marion Development projects 54.4 percent managed care patient days; 43.9 percent Medicare patient days; and 1.8 percent commercial insurance patient days. These projections are reasonable based on Genesis’ experience at existing PowerBack facilities.

   65. The other applicants’ criticism of Marion Development’s financial projections for using Hillsborough County reimbursement rates for Medicare patients and the use of prior PowerBack experience instead of Oakhurst experience to project revenue is not persuasive. The criticism fails to

       
       

       
       

       recognize the difference in services provided by PowerBack facilities and traditional skilled nursing homes. Oakhurst would be a poor proxy for projecting commercial and managed care revenues. Also, if Oakhurst rates were used to project revenue, that would not render Marion Development’s project infeasible.

   66. Furthermore, Marion Development’s Medicare reimbursement rate projections are reasonably based on Hillsborough County rates because the projected staffing expenses are also based on Hillsborough County data. Staffing expenses make up the majority of expenses used to calculate the Medicare reimbursement rates. Adjusting the RUG rates without also adjusting staffing expenses would be inconsistent and unreasonable. Marion Development’s Medicare reimbursement rates are slightly higher than the other applicants’ rates. This minor variance is due to the higher percentage of patients served by Marion Development’s proposed facility who need intensive rehabilitation services. The projected Medicare reimbursement rates are comparable to rates of other skilled nursing facilities in Florida that treat short-terms patients and provide services similar to Marion Development’s proposed facility.

   67. The financial projections for Marion Development’s proposed project, which include expenses based on existing PowerBack experience, are reasonable. The proposed project is financially feasible.

       
       

       
       

       1. Section 408.035(1)(g) -- The extent to which the proposal will foster competition that promotes quality and cost- effectiveness.

          
          

   68. Any of three applicants will add another provider to the market. That will increase the number of competitors with accompanying benefits to quality and cost-effectiveness that may follow from an additional competitor. Marion Development and its short-term model emphasizing rehabilitation adds something new to the market. Marion Development’s entry in the market will provide competition to existing providers’ short-term services. Its model may encourage competition to include specialized design, equipment, and programs for short-term patients. This may promote better quality care at the existing facilities and shorter stays due to the specialized care.

       1. Section 408.035(1)(h) -- The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

       
       

   69. The Agency’s Office of Plans and Construction (Plans and Construction) reviewed Schedule 9, Schedule 10, and the architectural plans for all the applications. The CON architectural review only looks for major deficiencies because a much more in-depth review is conducted prior to construction. The review of Plans and Construction concluded that there were no deficiencies in the applications of Marion Development and CON App Marion and that the proposed costs and methods of

       
       

       
       

       construction were reasonable. The evidence supports that determination.

   70. Plans and Construction determined that the type of construction Marion HRC proposes for its two-story facility is not permitted and would have to be revised. The evidence proved this to be true.

   71. Agency review of plans at the CON stage is limited and the detailed and critical review comes during the plan approval and licensing process. The problem with Marion HRC’s construction is not a fatal flaw. All facility plans evolve during the plan approval and licensing process when plans are subjected to closer, more rigorous scrutiny. But this factor weighs against Marion HRC and for the other two applicants.

   72. Of those two, Marion Development offers two features exceeding the minimum required that make it superior to CON App Marion. Marion Development provides individual controls for each patient room so patients can control their room temperature.

   73. Marion Development’s plans exceed the minimum requirements for backup power generators. The building will have a full power 72-hour generator with the ability to power the building for three days.

   74. Marion Development’s also plans to include European showers. These showers make the entire bathroom the shower. This creates more space in the bathroom and provides for greater

       
       

       
       

       access to patients for people assisting them. This feature also makes Marion Development’s proposal superior to the other two applicants.

       I. Section 408.035(1)(i) and Rule 1.030(2)

       - The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

       
       

   75. None of the applicants have a history of providing care to Medicaid patients and the medically indigent. They were all created to file and pursue the applications at issue. This is common. But they do have parent company or affiliated operators whose history may be considered.

   76. Genesis, affiliated with Marion Development, has a long history of providing a significant amount of Medicaid services. A large majority of residents treated in Genesis facilities are Medicaid-reimbursed. Genesis facilities in Florida provide a higher percentage of Medicaid than either Clear Choice (Marion HRC) or Reliant (CON App Marion)

   77. For fiscal year 2013-2014, Genesis’ payor mix statewide was 65.6 percent Medicaid with a high of 86.5 percent and a low of 58.6 percent.

   78. Clear Choice’s Medicaid percentage for the same period was less, 39.21 percent.

   79. In 2014, Genesis provided 255,068 Medicaid patient days, more than double the totals for Clear Choice and Reliant.

       
       

       
       

   80. The overall Medicaid average for Genesis in Florida is higher than the statewide average for all providers. Every Genesis facility in the state currently exceeds the Medicaid average for Marion County.

   81. Clear Choice facilities in Florida average

       
       

       38.9 percent Medicaid care with a high of 55.2 percent and a low of 26.2 percent. The amount of Medicaid care provided by Clear Choice in Florida has decreased since 2012 from a high of

       44.3 percent in 2012 to its low of 38.9 percent in 2014. In 2014, Clear Choice provided 124,558 Medicaid patient days across its eight facilities compared to Genesis’ 255,068 Medicaid patient days across nine facilities.

   82. Reliant also provides a lower level of Medicaid care in Florida than Genesis. Reliant-affiliated facilities in Florida average 60.6 percent Medicaid care with a high of 83.8 percent and a low of 27.5 percent.

   83. Clear Choice projects to provide 32.4 percent Medicaid at the proposed facility.

   84. Reliant projects it will provide 40-percent Medicaid care at its proposed facility. This is well below its historical percentage, probably due to the number of short-term beds the proposed facility will have.

   85. Marion Development, despite the record of Genesis, proposed no Medicaid days. This is a result of its dedication to short-term stays for patients needing rehabilitation

       
       

       
       

       services. This is a factor to be weighed but balanced with the Agency’s health planning decision to try something different.

       Also Genesis operates the Oakhurst facility in Marion County, a 180-bed nursing home. It provides over 62 percent of its patient days to Medicaid patients. That percentage may increase if short-term patients who would have gone to Oakhurst choose Marion Development instead.

       CONCLUSIONS OF LAW

       
       

8. In General

   
   

   1. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these cases. §§ 120.569, 120.57(1), and 408.039, Fla. Stat.

   2. Each applicant has standing to participate in this proceeding. § 408.039(5)(c), Fla. Stat.

   3. Sections 408.035 and 408.039 and Florida rules 59C- 1.008, 59C-1.010, 59C-1.030 and 59C-1.036 establish the governing review criteria.

   4. Award of a CON must be based on a balanced consideration of all applicable statutory and rule criteria. Balsam v. Dep’t of HRS, 486 So. 2d 1341 (Fla. 1st DCA 1986). The appropriate weight to be given to each criterion is not fixed. The weight varies depending upon the facts of the case. See, e.g., Collier Med. Ctr., Inc. v. Dep’t of HRS, 462 So. 2d

      83, 84 (Fla. 1st DCA 1985); Morton F. Plant Hosp. Ass’n, Inc. v.

      
      

      HRS, 491 So. 2d 586, 589 (Fla. 1st DCA 1986)(quoting N. Ridge

      
      

      
      

      Gen. Hosp., Inc. v. NME Hosps., Inc., 478 So. 2d 1138, 1139

      
      

      (Fla. 1st DCA 1985)).

      
      

   5. An administrative hearing involving disputed issues of material fact is a de novo proceeding. The Administrative Law Judge independently evaluates the evidence. Fla. Dep’t of

      Transp. v. J.W.C., Co., Inc., 396 So. 2d 778, 787 (Fla. 1st DCA 1981); § 120.57(1), Fla. Stat.

   6. An applicant bears the burden of proving, by the preponderance of the evidence, that its CON application meets the statutory and rule criteria for approval. Boca Raton Kidney

      Ctr., Inc. v. Dep’t of HRS, 475 So. 2d 260 (Fla. 1st DCA 1985);

      
      

      § 120.57(1)(j), Fla. Stat.

      
      

9. Incipient Policy

   
   

   1. The Agency’s informed exercise of its healthcare planning expertise and statutory responsibilities are the determinative factor in this case. The Agency advocates a change in policy in this proceeding. It is recognizing the concept of short-term beds and rehabilitation beds in nursing homes. The change flows from the evolution of healthcare during the 15 years since the Legislature imposed the nursing home moratorium.

   2. This is a pure example of an Agency developing incipient policy:

      The Florida Administrative Procedure Act (APA) recognizes the inevitability and desirability of refining incipient agency

      
      

      
      

      policy through adjudication of individual cases. There are quantitative limits to the detail of policy that can effectively be promulgated as rules, and even the agency that knows its policy may wisely sharpen its purposes through adjudication before casting rules. McDonald v. Department of Banking and Finance, 346 So. 2d 569 (Fla. 1st DCA 1977).

      
      

      Gulf Coast Home Health Servs., Inc. v. Dep't of HRS, 513 So. 2d 704, 706 (Fla. 1st DCA 1987).

   3. The Agency must explicate its developing policy.

      
      

      Id.; Exclusive Inv. Mgmt. & Consultants v. Ag. for Health Care Admin., 699 So. 2d 311 (Fla. 1st DCA 1997). It has. The record

      proves these facts that support the Agency’s policy to consider the nature of short-term beds and their patients: (1) financial concerns pressure patients, providers, and payors to use less costly alternatives to comprehensive rehabilitation facilities;

      (2) evolving views of treatment emphasize earlier discharge from acute care hospitals; (3) as a result of these pressures and the increasing numbers of patients who need rehabilitation services, adding a large number of short-term nursing home beds to the Marion County inventory is rational; (4) long-term (traditional) nursing home patients need different services and environments than short-term (rehabilitation) patients; (5) creating a nursing home that serves exclusively short-term patients serves the need for these different services and environments without the challenges (such as separate dining areas and separate common areas) a hybrid facility presents; and (6) recently

      
      

      
      

      approved applications adding traditional nursing home beds to the county, along with existing Marion County facilities, ensure that approval of Marion Development’s proposal will not result in a shortage of long-term beds.

   4. Together these facts and the reasoning articulated by the Agency and its approved applicant elucidate the Agency’s decision reflecting its emerging policy. The Agency has decided to recognize the need for and the value of short-term beds in a dedicated facility and account for them in approving Marion Development’s CON application. The decision lies in the area of the Agency’s expertise. The record supports the decision. Adjusting to the changes in healthcare since the nursing home moratorium ended is a policy-laden decision. See Baptist Hosp., Inc. v. State, Dep't of HRS, 500 So. 2d 620, 623 (Fla. 1st DCA

      1986). The facts here support the Agency’s decision to approve Marion Development’s proposed specialized short-term bed facility. See State Contr. & Eng'g Corp. v. DOT, 709 So. 2d

      607, 610 (Fla. 1st DCA 1998).

      
      

10. Medicaid Services

    
    

    1. Section 408.035 requires the Agency to consider an applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent. Similarly, rule 59C-1.030(2) requires consideration of the extent to which a proposal will increase healthcare access for and meet the needs of low income and other medically underserved populations.

       
       

       
       

    2. The Agency’s interpretation of these criteria supports its preliminary decision that Marion Development’s application, on balance, is the best choice. Given the nature of a traditional nursing home population, the supporting entities behind the applicants all have a history of providing significant services to Medicaid patients. Genesis has a history of serving Medicaid patients in Florida, including at its Oakhurst facility. Genesis also currently provides significantly more Medicaid care in Florida than either Clear Choice or Reliant. Genesis proposes to continue to provide Medicaid services in Marion County through a network strategy with its proposed PowerBack facility and its Oakhurst facility. Genesis’ network strategy will permit Oakhurst to specialize in long-term care, which is traditionally reimbursed by Medicaid. The “provision of Medicaid services” criterion is weighted at least as heavily for Genesis as it is for the other applicants.

11. Impermissible Amendment

    
    

    1. As a general rule, applicants may not amend completed applications in ways that constitute a significant change to the application. Fla. Admin. Code R. 59C-1.010(3)(b); See Manor Care, Inc. (Sarasota), and Health Quest Corp. v. Dep’t of HRS,

       558 So. 2d 26, 29 (Fla. 1st DCA 1989). Applicants may offer evidence that explains assertions, corrects errors, or updates information about an application if the evidence does not introduce a new element to the proceeding or change the nature

       
       

       
       

       and scope of the proposal. Manor Care, 558 So. 2d at 29

       
       

       (amendments “within the general scope” of the original application are permitted).

    2. CON App Marion and Marion HRC argue that Marion Development impermissibly amended its application with the evidence presented at the hearing. They challenge the amount of land needed for Marion Development’s nursing home. The application and the conditions proposed by the Agency’s State Agency Action Report limit the facility to approximately three acres of a 110-acre tract of land adjacent to the Villages, the Titan development. Evidence about the prototype stand-alone PowerBack facility design refers to five acres. Only approximately three acres will be needed for the proposed Marion County facility due to its incorporation into the Titan campus development.

    3. The development will provide facilities to meet requirements such as storm water retention, parking, and site access. Marion Development has not proposed any changes to the building design or physical plant footprint, and the projected cost has not changed. See Manor Care, Inc. v. HRS, 558 So. 2d 26, 29 (Fla. 1st DCA 1989) (application changes that significantly altered the basic design of the facility from three bedrooms to two bedrooms, increasing square footage more than 20 percent were impermissible amendments). Also, Marion Development is not required at this point to provide a specific

       
       

       
       

       site plan because a site location has not yet been secured. See

       
       

       Fla. Admin. Code R. 59C-1.008(f); AHCA Form CON-1 Schedule 9 Jul 00, p. 3, Question 7.

    4. Marion Development’s CON Application No. 10257 meets all the statutory and rule review criteria. Marion Development will increase accessibility to an innovative model of post-acute rehabilitative services in a skilled nursing setting. Marion County has identified a specific location in the highest growth area of the county for its facility. It will be part of a continuum of care campus already under construction.

    5. Approving Marion Development’s application allows the Agency to test its developing policy of recognizing differences between short-term and long-term beds. It will enable the Agency to evaluate possible benefits from the industry trend toward specialization of short-term and long-term services and to evaluate planning choices to adjust to the change. And it will make the benefits of that specialization available to Marion County patients.

    6. The proposals of CON Applications submitted by CON App Marion and Marion HRC do not identify a specific location and would perpetuate the development of one size fits all hybrid facilities. Hybrid facilities may be appropriate in many circumstances. The facts here support AHCA’s policy choice to select a new approach to address the demonstrated need for rehabilitation focused skilled nursing facility.

       
       

       
       

12. Conclusion

1. Applying the statutory and rule criteria as interpreted by the Agency to the facts, Marion Development’s proposal on balance, best meets the needs of the community in Subdistrict 3-4, Marion County, and should be approved with

conditions.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Agency for Health Care Administration, render a Final Order,

1. Approving Certificate of Need Application Number 10257 of Marion County Development, LLC, imposing the following five conditions on the CON:

   1. The proposed facility shall be located in Marion County on approximately three acres of a 110-acre tract of land adjacent to The Villages located off County Road 42 between Highway 201/35 and Federal Highway 441/27 to be controlled by Titan Senior Living with the facility accessible to The Villages by golf cart.

   2. The facility shall include and use a specialized pool for providing aqua-therapy.

   3. The operators of the facility shall provide on- site physician and/or physician extender services seven days per week.

      
      

      
      

   4. The facility shall participate in the Center for Medicare and Medicaid Services’ (CMS’s) Bundled Care Payment Initiative Model 3.

   5. The facility shall have all private rooms for the patients and residents.

2. Denying Certificate of Need Application Number 10258 of Marion County HRC, LLC.

3. Denying Certificate of Need Application Number 10256 of CON APP Marion, LLC.

DONE AND ENTERED this 23rd day of June, 2016, in Tallahassee, Leon County, Florida.

S

JOHN D. C. NEWTON, II

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of June, 2016.

ENDNOTES

1/ Administrative Law Judge J. Lawrence Johnston presided over proceedings the afternoon of November 16 and all day

November 17, 2016.

2/ The law is now codified as section 408.034(6), Florida Statutes (2015).

3/ The Order incorrectly states that Marion Development applied for approval of 140 beds. It sought 120 beds.

4/ This is one of many times that counsel advanced the cause of their clients in this proceeding by displaying the professionalism and cooperativeness advocated for the conduct of litigation. In re Code for Resolving Professionalism Complaints, 116 So. 3d 280 (Fla. 2013); The Florida Bar, The Creed of Professionalism, available at: http://www.floridabar.org/tfb/TFBProfess.nsf/5d2a29f983dc81ef852 56709006a486a/2f2668cdfd7b99e085256b2f006ccd15; See also Fla.

Bar v. Norkin, 132 So. 3d 77 (Fla. 2013)(lawyer disciplined for disruptive and unprofessional conduct in discovery).

5/ All citations to the Florida Statutes are to the 2015 codification unless otherwise noted.

6/ Mr. Shiner’s name is spelled a few different ways in the transcripts and documents. This Recommended Order uses the spelling appearing in his company’s Proposed Recommended Order.

7/ § 120.57(1)(c), Fla. Stat.; Wark v. Home Shopping Club, 715 So. 2d 323, 324 (Fla. DCA 2d 1998).

COPIES FURNISHED:

Stephen A. Ecenia, Esquire Gabriel F. Warren, Esquire Rutledge, Ecenia and Purnell, P.A.

119 South Monroe Street, Suite 202 Post Office Box 551

Tallahassee, Florida 32302-0551 (eServed)

Logan A. White, Esquire

Agency for Health Care Administration Mail Station 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Jay Adams, Esquire Broad and Cassel Suite 400

215 South Monroe Street Tallahassee, Florida 32301 (eServed)

Seann M. Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP Suite 750

215 South Monroe Street Tallahassee, Florida 32301 (eServed)

Jonathon L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP Suite 3600

303 Peachtree Street Northwest Atlanta, Georgia 30308 (eServed)

Lorraine Marie Novak, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

John F. Loar, Esquire Broad and Cassel Suite 400

215 South Monroe Street Tallahassee, Florida 32301 (eServed)

Frank P. Rainer, Esquire Broad and Cassel

Suite 400

215 South Monroe Street Tallahassee, Florida 32301 (eServed)

Kevin Michael Marker, Esquire

Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

Richard Joseph Saliba, Esquire Agency for Health Care Administration Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308 (eServed)

J. Stephen Menton, Esquire Rutledge Ecenia, P.A.

Post Office Box 551 (32302)

119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 (eServed)

R. David Prescott, Esquire Rutledge, Ecenia, and Purnell, P.A.

119 South Monroe Street, Suite 202 Post Office Box 551

Tallahassee, Florida 32302 (eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

Elizabeth Dudek, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308 (eServed)

Stuart Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308 (eServed)

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: 15-001970CON

Orders for Case No: 15-001970CON