Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the stipulation of facts "entered into by all parties, the following relevant facts are found: Along with six other applicants, the petitioner, Health Quest Corporation, d/b/a Lake Pointe Woods Health Center, and the respondent, Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center, submitted applications for a Certificate of Need to construct and operate new nursing homes in Sarasota County, In June of 1982, the respondent Department of Health and Rehabilitative Services (HRS) determined to issue the application of Sarasota Health Care Center and deny the remaining seven applications. For the purposes of this proceeding, the parties have stipulated that there is a need for at least a 120-bed skilled and intermediate care nursing home in the Sarasota, Florida area. In November, 1982, respondent HRS adopted Rule 10- 5.11(21) , Florida Administrative Code, which provides a formula methodology for determining the number of nursing home beds needed in areas throughout the State. Briefly summarizing, this formula begins with a bed to population ratio of 27 per thousand population age 65 and over, and then modifies that ratio by applying a poverty ratio calculated for each district. The theoretical bed need ratio established for Sarasota County by this portion of the Rule's formula is 23.2 nursing home beds per thousand elderly population projected three years into the future. The population figures to be utilized in the formula are the latest mid-range projections published by the Bureau of Economic and Business Research (BEBR) at the University of Florida. After determining the theoretical need for nursing home beds in an area, the Rule purports to determine the actual demand for beds by determining the current utilization of licensed community nursing home beds, establishing a current utilization threshold and, if this is satisfied, applying a prospective utilization test too determine the number of beds at any given time. Applying the formula methodology set forth in Rule 10- 5.11(21) to Sarasota County results in a finding that there are currently 807 excess nursing home beds in that County. The need for sheltered nursing home beds within a life care facility are considered separately in Rule 10-5.11(22), Florida Administrative Code. Generally speaking, need is determined on the basis of one nursing home bed for every four residential units in the life care facility. Elderly persons 75 years of age and older utilize nursing homes to a greater extent than those persons between the ages of 65 and 74. Persons under the age of 65, particularly handicapped individuals, also utilize nursing home beds. The formula set forth in Rule 10-5.11(21) does not consider those individuals under the age of 65, and it does not provide a weighted factor for the age 75 and over population. In the past, the BEBR mid-range population projections for Sarasota County, compared with the actual census reached, have been low. Petitioner Health Quest, an Indiana corporation, currently owns and/or operates some 2,400 existing nursing home beds in approximately 13 facilities in Indiana. It holds several Certificates of Need for nursing homes in Florida and construction is under way. Petitioner owns 53 acres of land on the South Tamiami Trail in Sarasota, upon which it is constructing a 474-unit retirement center. It seeks to construct on six of the 53 acres a 120-bed nursing home adjacent to the retirement center. Of the 120 beds, it is proposed that 60 will be for intermediate care and 60 will be for skilled care. The facility will offer ancillary services in the areas of speech, hearing, physical, occupational, and recreational therapy. Thirty-five intermediate care beds would be classified as beds to be used for Medicaid recipients and the facility would be Medicare certified. Retirement center residents will have priority over nursing home beds. The total capital expenditure for the petitioner's proposed nursing home project was estimated in its application to be $3.1 million, with a cost per square foot of $46.29 and a cost per bed of approximately $26,000,00. As of the date of the hearing, the estimated capital expenditure for the petitioner's project as $3.9 million. The respondent Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center (QHF), is a Mississippi corporation and owns nursing homes in Tennessee, North Carolina and Haines City, Florida, the latter site having been opened in August of 1983. It also holds three other outstanding Certificates of Need. QHF proposes to construct a 120-bed nursing home containing intermediate and skilled care beds which will be equally available to all members of the community. It is anticipated that it will have approximately 65 percent Medicaid usage and 5 percent Medicare usage. Though it has not yet selected its site, QHF plans to utilize a four-acre site near the City of Venice in Sarasota County. At the time of the application, the total capital expenditure for QHF's proposed project was estimated to be $2.3 million. Its construction costs were estimated at $1.16 million or $33.14 per square foot. QHF's recently constructed Haines City nursing home facility was completed at a construction cost of $1.22 million, or $31.00, per square foot. The Sarasota County facility will utilize the same basic design as the Haines City facility. At the current time, the cost of construction would be increased by an inflation factor of about ten percent. As of the date of the hearing, the projected capital expenditure for QHF's Sarasota County proposed facility was approximately $2.6 million or about $21,000.00 per bed. The owners of QHF are willing and able to supply the necessary working capital to make the proposed nursing home a viable operation. As depicted by the projected interest and depreciation expenses, the QHF facility will have lower operating expenses than the facility proposed by petitioner, Health Quest. In Sarasota County, there is a direct correlation between high Medicaid utilization and high facility occupancy. The long term financial feasibility of a 120-bed nursing home in Sarasota County is undisputed, as is the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the health service area.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Health Quest Corporation d/b/a Lake Pointe Woods Health Care, Inc. for a Certificate of Need to construct a 120-bed nursing home in Sarasota County be DENIED. It is further RECOMMENDED that the application of Quality Health Facilities Inc. d/b/a Sarasota Health Care Center for a Certificate of Need to construct a 120-bed nursing home facility in Sarasota County be GRANTED. Respectfully submitted and entered this 31st Day of October, 1983, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1983. COPIES FURNISHED: John M. Laird, Esquire 315 West Jefferson Blvd. South Bend, Indiana 46601 John T. C. Low, Esquire Paul L. Gunn, Esquire Low & McMullan 1530 Capital Towers Post Office Box 22966 Jackson, Mississippi 39205 James M. Barclay, Esquire Assistant General Counsel 1317 Winewood Blvd. Suite 256 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health & Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact 1-2. Rejected as a statement of the issues and not a Finding of Fact. Accepted and incorporated in Finding of Facts 8 and 9. Incorporated in Finding of Fact 9. Accepted. Incorporated in Finding of Facts 6 - 9. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 16. Incorporated in Finding of Fact 17. Irrelevant. Incorporated in Finding of Fact 5. Incorporated in Finding of Fact 6. 13-14. Irrelevant. Cumulative. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 11. Irrelevant. Incorporated in Finding of Fact 22. Incorporated in Finding of Fact 14. Irrelevant. Incorporated in Finding of Facts 4 and 5. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman 2700 Blairstone Rd. Suite C Tallahassee, Florida 32301 R. Bruce McKibben, Jr. Assistant General Counsel Department of HRS 1323 Winewood Boulevard Jonathan S. Grout, Esquire 307 W. Tharpe Avenue Tallahassee, Florida 32302 Thomas Beason, Esquire Suite 100 118 N. Gadsden Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore RECOMMENDED that the applications for a CON to construct either a 60 or 120-bed nursing home in Brevard County, Florida, submitted by Wuesthoff Health Services, Inc. and Florida Convalescent Centers, Inc., be denied. RECOMMENDED this 8th day of October, 1986, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway The Oakland Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 84-1976; 85-1310; 85-1506 The following constitutes my specific findings pursuant to Section 120.59(2), Florida Statutes, on all Proposed Findings of Fact submitted by the parties to this case.
Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
The Issue Whether petitioner's application for a certificate of need to construct a 120-bed nursing home in West Palm Beach, Florida, should be granted, or denied in accordance with DHRS' preliminary agency action.
Findings Of Fact The sole reason given for denying Health Quest's application for a CON is the alleged failure of the application to satisfy the nursing home bed need methodology contained in DHRS Rule 10-5.11(21), Florida Administrative Code. DHRS contends that application of this bed need methodology supports a conclusion that the proposed nursing home is not needed within the three-year planning horizon--1983 through 1986. I. Application of Rule 10-5.11(21): The Nursing Home Bed Need Methodology Under the nursing home bed need methodology expressed by Rule 10- 5.11(21'), DHRS determines if there is a projected need for new or additional community nursing home beds three years into the future by using the following formula: De N = -------- x R x P - Eb Se where: N is area-specific allocation of community nursing home beds for the calendar year for which a projection is being made, De is the percentage of elderly living in poverty in the relevant departmental service district according to the latest available U.S. census. Se is the percentage of elderly living in poverty in the State according to the latest available U.S. census. R is the statewide bed need ratio (27 community nursing home beds per 1,000 population age 65 years and older), P is the population age 65 and older projected three years into the future residing in the relevant departmental district based on latest mid-range projections published by the Bureau of Economics and Business Research at the University of Florida, and Eb is the number of existing and approved community nursing home beds within the relevant departmental service district. The projected bed need derived from this formula is then measured against a "current utilization" threshold. Rule 10-5.11(21)(f). Thus, although bed need may be projected under the formula, an application will not normally be approved unless current nursing home occupancy rates meet minimum standards prescribed in the rule. Finally, if bed need is projected and the current utilization threshold is satisfied, additional beds may be added only to the point at which further bed need additions will cause "prospective utilization rates" for the subdistrict to drop below a base rate prescribed in the rule. Rule 10-5.11(21)(g), (h), Fla. Admin. Code. Under this bed need forum1a, projected need for nursing home beds in 1986 is calculated as follows: N = De ------ Se N = 9.28 ----- = .73 12.70 .73 x 27 ---- = 19.7 beds/1000 65 + 1000 District IX Subdistrict (Palm Beach Co.) 19.7 x 264,326 = 5,207 19.7 x 198,747 = 3,915 Thus the formula shows a projected need for 5,207 nursing beds in 1986 in District IX; and a projected need for 3,915 beds in 1986 in the subdistrict of Palm Beach County. (Testimony of Straughn, R-4, R-5, R-6) The inventory of licensed and approved beds for District IX is 5,487 beds, and for Palm Beach County, is 4,086. Subtracting the projected inventory from the projected need indicates a "no need" of 280 beds. A similar calculation for Palm Beach County indicates a "no need" of 171 beds. (Testimony of Straughn, R-4, R-5, R-6) Under Rule 10-5.11(21)(e) , this is identified as a "c4" need relationship--where neither district nor subdistrict show a need for additional bed capacity. The prescribed current utilization threshold and the prospective bed rate of utilization for "c4" need relationship is 95 percent and 85 percent, respectively. See, 10-5.11(21)(f), (h). These utilization thresholds are not satisfied in the instant case. The current utilization of beds in Palm Beach County is 92.7, which falls short of the required 95 percent threshold. Consequently under the rule, no beds may be added until the 95 percent threshold is met. Even if this current threshold of 95 percent were met, there would still be 1,192 excess beds in Palm Beach County through 1986. 2/ Hence, use of the bed need methodology contained in Rule 10-5.11(21) indicates that the proposed nursing home beds are not needed through 1986. In the absence of unique and peculiar circumstances, and unless other rule or statutory criteria justify issuance, the application must be denied. II. Failure to Show Unique or Peculiar Circumstances, or Other Overriding Criteria Health Quest, having failed to satisfy the numerical bed need standards imposed by DHRS rule, has also failed to show unique and peculiar circumstances which would otherwise justify granting its application. The bed need rule takes into account factors raised by Health Quest, such as the relative wealth and poverty of an affected population. While it is expected that new Medicare regulations may increase the need for nursing home services, increases attributable to Medicare changes remain speculative and uncertain. In any case, changes in need for nursing home services due to Medicare changes will not be unique to District IX or Palm Beach County. Health Quest has also failed to show that it is entitled to a CON based on any other rule or statutory criteria. Its reliance on the provisions of the State Health Plan is misplaced since that plan is largely obsolete.
Recommendation Based on the foregoing, it is RECOMMENDED: That Health Quest's application for a certificate of need to construct a nursing home in West Palm Beach, Florida, be denied. DONE and ENTERED this 7th day of June, 1984, in Tallahassee, Florida. R. L. CALEEN. JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1984. COPIES FURNISHED: Charles M. Loeser, Esquire 315 W. Jefferson Blvd. South Bend, Indiana 46601 Steven W. Huss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact Heritage Hall is a partnership, domiciled in the State of Virginia, which owns and operates ten nursing homes in that state. Heritage Hall did not, at the time of the close of this record, own or operate, nor have under completed construction, any nursing home in Florida. Heritage Hall filed a "letter of intent to construct, own and operate a 60-bed nursing home in the counties of Collier, DeSoto, Highlands, and Lee. On July 15, 1983, Heritage Hall filed the specific Certificate of Need application at issue with HRS, requesting authorization to construct a 60-bed freestanding nursing home in DeSoto County. That application was deemed complete on September 15, 1983, and a free form decision was made to grant it by HRS on December 1, 1983. The proposed nursing home would be located in the vicinity of Arcadia, in DeSoto County, a subdistrict of HRS District VIII. Diversicare Corporation, Inc. d/b/a DeSoto Manor Nursing Home (DeSoto Manor), (Diversicare), owns and operates DeSoto Manor Nursing Home, an existing 60-bed nursing home facility located in Arcadia, DeSoto County, Florida. On November 3, 1983, Diversicare filed a Letter of Intent with HRS announcing its intention to seek a Certificate of Need for an addition to its DeSoto County facility. It ultimately filed an application seeking authorization for a 36-bed nursing home addition on January 12, 1984. No additional information was requested by HRS and the application became complete by operation of law on March 15, 1984. That application is thus in a separate and later batch for purposes of Rule 10-5.08, Florida Administrative Code, and thus was not comparatively reviewed with the application in the case at bar as a competing application. On May 1, 1984, HRS notified Diversicare of its intent to deny its application for the 36-bed addition. Heritage Hall proposes to construct a 60-bed nursing home at a total cost of $1,597,293. This specific cost of construction, not including land acquisition cost, is proposed to be $1,070,740. The nursing home's cost of construction allocated on a per bed basis would be $26,622. Heritage Hall proposes to finance this project to a tax-exempt bond issue in an aggregate amount of $1,436,075, carrying a 10 percent interest rate with a 30-year maturity. Additionally, the Heritage Hall partnership would invest $161,218. Heritage Hall projects that once it begins operation of the proposed new nursing home, that a 97 percent occupancy level for the proposed 60 beds would be reached within six months. Included within that projection, Heritage Hall projects that 49 percent of the patient revenues would come from Medicaid reimbursement, that 10 percent would come from Medicare reimbursement, and that 40 percent of its revenues would be attributable to private paying patients, not included within any relevant government entitlement programs. The remaining one per cent of its patient revenue base would be charged off and attributable to bad debt, or indigent patients. Heritage Hall proposes charges for its Medicare and Medicaid patients to constitute $62.39 per day, and its charges for private paying patients would be $68.00 a day for a private room, and $65.00 per day for a semiprivate room. It proposes to staff its facility with five registered nurses, six licensed practical nurses (LPN), 17 nurses aides, and an administrative and miscellaneous employee staff of 16, for a total staff for a 60- bed nursing home of 44 employees. DeSoto Manor's present patient population is largely composed of Medicaid and Medicare patients, such that 84 percent of its revenue is derived from Medicaid and Medicare sources. Its private paying patients are a small minority contributing 16 percent of its total patient revenues. DeSoto Manor has consistently experienced 99 - 100 percent occupancy for all of 1983 and 1984, upon which is earned a net income for fiscal year 1983 of approximately $15,000. DeSoto Manor presently employs on its staff 2.2 registered nurses, 5.6 LPN's, 17.1 aides, and 17.4 administrative and miscellaneous employees, those figures being expressed in terms of full-time equivalent employees in those categories. DeSoto Manor's application filed in a later batch is not at issue in this proceeding, in terms of comparative review for the purpose of determining whether Heritages Hall or DeSoto Manor is entitled to a Certificate of Need for DeSoto County nursing home beds as a result of this proceeding. Such a proposal, however, to add additional beds to an existing nursing home, is worthy of consideration as an alternative means of providing nursing home services to the public in District VIII, and specifically the subdistrict of DeSoto County, pursuant to authority cited infra. In that vein, DeSoto Manor proposes to add 36 additional beds at a total cost of $767,337, including involving a construction cost of $541,280, which is equivalent to a $21,260 cost per bed for the proposed 36-bed addition. DeSoto Manor would require the equivalent of 17.3 full time additional staff members, if such an addition (a 36-bed addition) were approved and built. DeSoto Manor charges will be (on January 1, 1985) $45.56 a day for Medicaid and Medicare patients, and $47.00 a day for its private pay patients. If its 36-bed addition were installed, it would charge $49.31 per day for Medicaid and Medicare patients, and $53.00 a day for private paying patients. DeSoto County is a relatively small county geographically, located inland from the counties bordering the Gulf of Mexico in District VIII. It is a rural county in character, as that term relates to its economic base being largely agriculture, and its low population density, with its population center being in the only sizable community of Arcadia, the county seat, located approximately in the geographic center of the county. It is surrounded by Sarasota, Charlotte, Highlands, and Hardee Counties. Highlands and Hardee Counties are in District VI, with Sarasota, Charlotte and DeSoto Counties being in District VIII, as are Lee, Collier, Glades and Hendry Counties. In 1987, DeSoto County is expected to have a population of 3,749 persons age 65 and over. The county is not experiencing a significant rate of growth at this time, nor is it expected to through 1987, the pertinent "horizon" year. Pursuant to Rule 10-5.11(21), Florida Administrative Code, the nursing home bed need methodology, HRS computes a need for additional nursing home beds in its health care districts and sub-districts, first by determining "actual need" or the "area specific bed need allocation." The actual need for additional nursing home beds is computed by means of a population based formula embodied in that rule. The second step of the need/availability determination process involves determining how many beds above or below the actual need determined may be added before the utilization in the district or subdistrict falls below 80 or 85 percent. The actual need or "area specific allocation" is determined by multiplying the poverty ratio for the district or subdistrict by the statewide nursing home bed need ratio of 27 per 1,000 persons age 65 and older, and the population of the district or subdistrict age 65 and older, and then subtracting from this computation the number of existing nursing home beds within the district or subdistrict. Within District VIII, the poverty ratio equals 8.61 divided by 12.70, the relevant population of the district for the applicable year being 213,561, with the population for DeSoto County, as a subdistrict, being 3,749 persons age 65 and older. There were 3,671 licensed nursing home beds in District VIII at the time of the hearing, and there were 1,130 beds approved, but not yet licensed or open in the district. There were 60 licensed and operating nursing home beds in DeSoto County. There were 3,904 actually "needed" or allocated beds in District VIII, which, when added to those beds approved but not yet licensed and operating, total an aggregate of 4,801 licensed and approved beds in the district. Thus, there are 997 excess nursing home beds over and above those actually needed in District VIII by 1987, according to the population based formula used in the first part of the need/availability determination process embodied in the above-cited rule. There is an actual need in DeSoto County alone of nine additional nursing home beds by 1987, based upon the subdistrict actual need allocation determined by the first part of the above methodology process of 69 beds. The second part of the need/availability determination process computes how many additional beds can be added to a district or subdistrict before the occupancy rates of nursing home beds in the district or subdistrict fall below the applicable rule mandated percentage. In DeSoto County, the applicable percentage is 80 per cent, because the subdistrict of DeSoto County indicates some need for additional beds, although the district as a whole has excess beds with no additional actual bed need shown. Thus, based upon the entire applicable computation, 15 beds may be added to DeSoto County before utilization of nursing home beds in the county will drop below the threshold of 80 percent. It has thus been established that if 60 beds are added to the bed supply in DeSoto County, for instance by a grant of the instant application, the utilization of nursing home beds will decline to approximately 50 percent. Under the above rule methodology, HRS, in adhering to the requirements of that rule, would not normally grant a certificate of need when only a small number of additional nursing home beds are computed to be available under that formula, that is, for a new freestanding nursing home facility. It is undisputed that construction of a new nursing home of less than 60 beds is not considered to be financially feasible. That rule of thumb does not apply, however, to the addition of beds to an existing, already-built parent facility, and it is undisputed that the addition of needed beds to an existing facility is more cost-effective in terms of construction costs and staffing, than the construction of a new facility. In its review process, with regard to the instant application and proceeding, HRS did not consider the alternative of adding new needed beds to the existing facility operated by Diversicare (DeSoto Manor), since the Diversicare application was not filed in the same batching cycle as the application at bar filed by Heritage Hall. Although the nursing home bed need determination formula reveals a maximum need of 15 beds for DeSoto County by 1987, HRS proposes to approve 60 beds in conjunction with the Heritage Hall application. In its review process, HRS took into account the fact that DeSoto and surrounding counties in District VIII were experiencing high occupancy rates as to existing licensed beds, and took the position then and in this proceeding that residents of DeSoto County needing nursing home care would have difficulty finding available nursing home beds. HRS failed to take into consideration, in its review process, the additional number of nursing home beds which had been approved in surrounding counties (as pertinent hereto, the surrounding counties of District VIII), but which were not yet licensed and actually operating. Thus, at the time of hearing there were 301 approved but not yet opened beds in Charlotte County, 97 approved but not yet operating beds in Collier County, 222 approved but not yet opened beds in Lee County and 597 approved but not yet operating beds in Sarasota County. Thus, the approved but not yet licensed and operating beds will result in an increase of 1,217 beds available, when open, to the residents of DeSoto and the adjacent counties of District VIII. 1/ The applicant and HRS seek to justify the approval of 60 additional beds in DeSoto County by reference to the high utilization rates being experienced in adjacent counties. As pertinent hereto, Charlotte County was experiencing an occupancy rate of 99 percent, Sarasota was at 88 percent occupancy, Lee County at 91.5 percent, with Collier County at 64.5 percent. Those figures do not take into account the latest nursing home District VIII occupancy figures as of June 29, 1984 which reflect the above-discussed additional approved, but not yet opened beds, and which result in the occupancy rates in these counties falling substantially. Thus, Charlotte is now experiencing only an 80.4 percent occupancy, for instance, with Sarasota County falling to a 78.5 per cent occupancy, with lowered occupancy rates resulting in Lee and Collier County as well with the addition of the approved, but not yet opened beds. These lowered occupancy rates resulting from the opening of these approved, but not yet licensed beds, were not considered by HRS at the time of its initial review, and free form grant of the certificate of need at issue. The opening of these hundreds of additional beds will continue to reduce occupancy in those counties and provide available beds to residents of District VIII and to residents of DeSoto County, to the extent those beds in the other counties are deemed accessible. HRS admitted at hearing that the availability of beds has increased in the district since its first review of the application. The financial feasibility of the Heritage Hall proposal depends upon an assumed 97 percent occupancy in its sixth month of operation, and projects that 40 percent of the revenues will be derived from private, paying patients. The 97 percent occupancy is an optimistic projection however, because only nine beds are shown to be actually needed in the county by 1987, and only 15 beds can be added before occupancy will drop below 80 percent. The addition of 60 beds would drop occupancy at DeSoto Manor and the proposed Heritage Hall facility, if built, to 50 percent. The Heritage Hall projection for revenues from private, paying patients which is 40 percent, is substantially more than the current revenue source from private, paying patients experienced by DeSoto Manor of 16 percent. In order to achieve such an occupancy rate in such a short time, and such a higher percentage of private, paying patient revenues, Heritage Hall must aggressively market its new facility and nursing home service so as to attract private, paying patients. Based upon historical evidence of record, it is likely that the patient base in DeSoto County itself will not support such a high percentage of private, paying patients and such patients will doubtless have to come from other areas or counties in the district, specifically the counties lying along the coast of District VIII. There is no evidence to establish that nursing home patients in the coastal counties have any inclination to seek nursing home care in DeSoto County, particularly because those coastal counties are already experiencing lowered occupancy rates, and nursing homes there need more patients. There is thus no demonstration that residents of the coastal counties in District VIII (or other adjacent counties for that matter) would travel to DeSoto County for nursing home care when there are empty beds available to them closer to their homes or the homes of their families in those counties. Heritage Hall proposes to recruit its staff from DeSoto County and the surrounding geographical area. DeSoto Manor however, itself is currently experiencing severe problems in recruiting registered nurses for its facility, in spite of repeated advertising and recruitment attempts. Potential staff members share a reluctance in becoming employed at DeSoto Manor, which lies in an isolated, rural area, and which must compete with the many nursing homes lying in the coastal areas in the other counties of District VIII for staff, and which areas offer more living amenities in general, than does the isolated, rural, small community setting in which DeSoto Manor is located. Indeed, other District VIII nursing home administrators have contacted the administrator of DeSoto Manor, in her capacity as administrator, as well as in her capacity as president of the Florida Health Care Association for District VIII, seeking assistance in obtaining additional staff for their facilities. Approval of the Heritage Hall application will, in effect, double the competition for staff members for nursing homes in DeSoto County, and will concomitantly, increase DeSoto Manor's present difficulties in obtaining and retaining appropriate employees. In calculating the financial impact which an additional 60-bed nursing home would have on the existing DeSoto Manor facility, DeSoto Manor assumed that the number of nursing home beds said to be available before occupancy dropped below 80 per cent, which includes the proposed 15 additional beds, would be full of patients and that these patients would be evenly split between the two nursing homes in the county. Thus, each nursing home would have approximately 37.5 patients in its respective 60-bed facility. In this event, and taking into account the concomitant reduction in staff, salaries and other per patient expenses because of a reduction in the number of patients, the proposed Heritage Hall facility would likely experience a net loss of approximately $232,587 for the first year of operation of its additional facility. DeSoto Manor's Medicaid reimbursement revenues would fall $31,722 below DeSoto Manor's actual cost of providing Medicaid patient care. Thus, in order to recover lost revenues and achieve a break-even profit and loss status, a significant increase in patient charges over existing charges would be necessary. The weight of such increase in patient charges would have to fall upon the private, paying patients in the revenue mix of each nursing home, because of the inflexible nature of the current Medicaid reimbursement scheme. In evaluating the DeSoto County population's accessibility to nursing home services, HRS admittedly did not take into account the provisions of Rule 10-17.020(2)(b), Florida Administrative Code, which is the local health plan as it relates to nursing home planning adopted in the most current HRS rules. This local health plan provides for nursing home services to be available within a one hour travel time by automobile for at least 95 percent of the residents of District VIII. The president of the District VIII chapter of the Florida Health Care Association, who is the administrator of DeSoto Manor, is aware of at least ten nursing homes within a one hour drive of Arcadia and at least three others within that radius which are under construction, a significant number of which are in District VIII. Arcadia is located in the center of DeSoto County. All counties surrounding DeSoto County in District VIII have substantial numbers of approved beds which have not yet been opened and at least Sarasota and Charlotte Counties, which are adjacent to DeSoto County have occupancy rates in the neighborhood of 80 percent or less. The applicant did not establish, in furtherance of its attempted justification of 60 additional beds for DeSoto County, the lack of accessibility to DeSoto County nursing home patients of beds in the adjoining counties of District VIII, especially Charlotte and Sarasota, inasmuch as it was not established that those nursing homes in those coastal counties are more than an hour's driving time from the center of DeSoto County. Although, as witness Straughn for HRS established, Sarasota or the more westerly parts of Sarasota County, are approximately 49 miles and roughly an hour driving time from DeSoto County, it was not established that there are not nursing homes available in closer parts of Sarasota County which are accessible in less than an hour's driving time to DeSoto County residents and/or patients. Indeed, witness Porter testifying after the hearing by deposition, established that most of the nursing homes in the coastal counties involved in this proceeding, are within "40 some miles" from the present DeSoto Manor facility and the proposed Heritage Hall facility. Indeed, witness Porter established that Port Charlotte, in the immediate vicinity of which are several nursing homes, and which county is experiencing now an 80.4 percent occupancy rate (with the above-mentioned numbers of approved but not yet installed beds) is only 25 miles from the proposed Arcadia location. Thus, the criteria of the above rule which HRS witnesses failed to take into account, encompasses nursing home beds available or approved in the coastal counties referred to, which are accessible to patients in DeSoto County.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the relevant legal authority, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order DENYING the application of Heritage Hall to construct a new 60-bed nursing home facility in DeSoto County, Florida. DONE and ENTERED this 28th day of January, 1985, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1985.
Findings Of Fact FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility. The population of Lee County in 1978 was 184,841 with 41,984 more than 65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day. No significant difference exists in the services proposed by each of the applicants. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.
Findings Of Fact Each applicant in this proceeding submitted its application in the January, 1986 batching cycle for the January, 1989 planning horizon, each requesting a certificate of need to build a 120-bed nursing home in Brevard County, Florida. The parties have stipulated that each applicant's letter of intent and application was timely filed, that there is a need in the January, 1989 planning horizon for additional community nursing home beds, and that 120 of those beds should be awarded to one of these applicants. They further stipulated that there are sufficient professional staff available in the Brevard County area to completely staff a new nursing home facility and that each of the applicants is able to obtain the funds necessary to construct its project. Maple Leaf of Brevard County Health Care, Inc., a new corporation to be formed as a wholly-owned subsidiary of HCR proposes a 120-bed community nursing home to be located in central Brevard County in the area of Rockledge and Cocoa. In addition to traditional skilled and intermediate care, the nursing home will provide services for sub-acute patients, and a separate wing of the nursing home will be set aside for Alzheimers and related dementia disease patients (hereinafter "Alzheimers patients"). The HCR proposal includes an adult day- care unit for Alzheimers patients and respite care on a bed- availability basis. At final hearing, HCR submitted an application supplement which provided updated calculations, projections and program descriptions to account for changes occurring as a result of the elapse of time between submission of the original application and the final hearing. The application supplement does not include any programmatic changes from the original application and does not add any new concepts or elements to the original HCR proposal. The adult day-care unit will provide care to Alzheimers patients for four to eight hours a day and from one to five days a week, depending upon the needs of the patient and caregiver. The program will be staffed by a nurse director and an assistant. Patients will be provided with various activities of daily living in an environment developed for Alzheimers disease victims. This program provides placement for the patient who does not need inpatient care but whose caregiver needs rest or an opportunity to attend to matters outside of the home, such as employment. Respite care at the HCR facility is intended to provide placement for patients on a 24-hour basis while the family or caregiver attends to needs such as vacation or hospitalization incompatible with overnight care of the patient at home. Respite care provides inpatient nursing home care for short periods of time, typically a week or two. Sub-acute care is a more intensive form of skilled nursing care than typically has been provided in nursing homes. Historically, this care was provided in hospitals, but adoption of the DRG (diagnostically related group) system of acute care reimbursement has resulted in an earlier discharge from hospitals of elderly patients who continue to need an intense level of nursing care. Sub-acute care includes the provision of high-tech services such as ventilator care IV therapy, pulmonary aids, tube feeding, hyperalimentation and short- and long-term rehabilitation. HCR provides a wide variety of these sub- acute care services in its existing facilities. Hospitals in Brevard County report difficulty in placing patients who require sub-acute care and high-tech services. Particularly difficult to place are these patients whose care is reimbursed by Medicaid. The availability of sub-acute care also provides continuity of care for bedridden Alzheimers patients in the later stages of the disease when they require life support systems. HCR proposes to devote a 29-bed wing of the facility to the care of Alzheimers patients. Special design features, patient activities and programs and modified staffing will be provided to meet the special needs of Alzheimers patients. Alzheimers disease, a form of dementia, is a degenerative condition of the brain which results in a progressive dementia and loss of Previously- acquired intellectual functions and memory. Generally, the disease has three or four stages. In the earliest stages, the victims experience some mild memory loss, behavioral changes, loss of interest in previous hobbies, depression, anxiety and increased difficulty handling some routine day-to-day affairs. In the early stages, victims often are in reasonably good physical condition and symptoms tend to be fairly subtle. In stage two memory loss is much more apparent, and victims begin to have problems with the use of language. They may have increased difficulty with spatial relationships and become lost in familiar surroundings. These victims experience more noticeable problems with their memory in terms with dealing with their family and friends; as the disease progresses to stage three, those problems tend to worsen and become apparent even to people who are not otherwise familiar with the patient. The victims may have additional behavioral or psychiatric difficulties associated with depression or severe anxiety. A delusional stage is frequent. These victims experience disruption of their sleeping cycles and sleep during the day and wander during the night. Seizures may become a problem. In stage three, the victims usually require supervision. As the disease progresses through stage three, the victims have difficulty with personal hygiene, difficulty getting dressed and difficulty performing the simplest human task. As the disease progresses into stage four the victim becomes bedridden and requires total nursing care. There is no cure for the disease. It is terminal. Nursing home care is probably appropriate for everyone in stage four of Alzheimers disease. Most patients in stage three require nursing home care. Some patients in stage two may require nursing home care, depending upon the type of care that is available at home. According to some estimations, approximately 2.5 million American adults suffer from Alzheimers disease and approximately one-half of existing nursing home patients, and 15 percent of the population age 75 and over suffer from Alzheimers disease (4 - 5 percent 65 and over, 20 - 30 percent 85 and older). There are eleven nursing homes in Brevard County, but there is only one nursing home in Brevard County which provides a separate unit for Alzheimers patients. This facility is located in West Melbourne in south Brevard County. There is no nursing home which provides a separate Alzheimers program in central or north Brevard County. Historically, Alzheimers patients in nursing homes have been mixed with other patients. The Alzheimers patient in the nursing home has often created management problems because of wandering, incontinence, confusion, loss of cognitive and communicative capabilities, unusual sensitivity to normal environmental stress, and socially, unacceptable behavior. Because of these characteristics, nursing homes have sometimes avoided admitting Alzheimers patients. Often, when such patients were admitted, their behavior was controlled by sedation and physical restraints. Nursing home patients who do not suffer from Alzheimers disease are often agitated and disrupted by the Alzheimers patient. The Alzheimers patient exhibits such unacceptable social behavior as going through other patients' belongings, sleeping in other patients' beds, violent behavior, being unresponsive to attempted communications and continually wandering. A separate unit for the Alzheimers disease victim also accommodates the needs of the non- Alzheimers patient. It is medically appropriate to separate Alzheimers patients from other nursing home patients. Frequently, the Alzheimers patient is suffering from mental problems resulting in confusion and disorientation but is otherwise physically healthy and ambulatory. Other patients in the nursing home often have a variety of medical problems which require more intensive nursing care. Placing Alzheimers patients in the same area with those patients with medical problems requiring more nursing care can be disruptive to the nursing care being provided to the non- Alzheimers patient, The design of the HCR facility is intended to reduce the environmental stress on Alzheimers disease victims and allow them to maintain their cognitive capabilities for as long as possible. Special wall coverings, floor coverings, labeling and color coding features are provided. Separate dining and activities areas are provided. Wandering is permitted. A fenced courtyard is provided. A monitoring system will alert the facility staff when a patient begins to wander out of the facility. Bathrooms are designed to avoid fright and confusion by automatic lighting systems, coloring and distinctly shaped fixtures and waste baskets. Safe dinnerware and tables which enhance the Alzheimers victim's ability to continue to feed himself or herself are provided. Additional staffing in the Alzheimers unit and staff training in Alzheimers care will be provided. The goal of the Alzheimers design and program is to maintain the patient's activities of daily living and assist in the retention of the patient's cognitive capabilities for as long as possible. Separate, specialized Alzheimers care units are beneficial for several reasons. They are safer for the Alzheimers patient. They reduce the agitation and disruption of the Alzheimer's and non-Alzheimer's patient. They provide programs for Alzheimers patients which are within the patient's cognitive abilities. The units are smaller, and each patient receives more individual attention. Sedation and physical restraint is eliminated or reduced. Individual dignity is enhanced. HCR confirmed the need for an Alzheimers program in Brevard County by calculations based upon nationally-accepted statistics and contact in Brevard County with individuals knowledgeable of the availability of care being provided to Alzheimers disease patients. Special units for Alzheimers patients are a fairly new phenomenon. HCR proposes to develop Alzheimers units in other nursing homes in Florida and has submitted applications to add Alzheimers wings to existing nursing homes in Florida. HCR also proposes to convert a wing in an existing facility in Dade County to provide care for Alzheimers patients. HCR will locate its nursing home in the Rockledge- Cocoa area, about thirty miles north of Melbourne and thirty miles south of Titusville, in central Brevard County. All 120 nursing home beds in the HCR nursing home will be certified for Medicaid reimbursement. New equipment for the HCR nursing home is projected to cost $412,079. This represents an increase in cost over the original estimate of $370,000 because of a general increase in equipment cost since the original application and an allocation of approximately $13,800 for equipment for the daycare unit, a cost which was not included in the original estimate. HCR's estimate for purchase of new equipment is reasonable. Projections of payor-mix, facility utilization and revenue and expenses of a nursing home are useful to evaluate the financial feasibility of the project. All projections utilized by HCR to evaluate financial feasibility are conservative projections. The updated projections presented by HCR at final hearing are more conservative than the projections presented in HCR's original application. If the projections found in HCR's original application were realized, the facility simply would be more profitable. HCR's estimate of an 11 percent interest rate for the funds to be borrowed for this project is a reasonable and conservative estimate. HCR's estimate of 50 percent intermediate care patients and 50 percent skilled care patients is a reasonable estimate for the patients expected to be found in this facility and is a conservative estimate. No other applicant provided such an estimate. In computing revenues and expenses, HCR assumed an inflation factor of 3 percent for Medicare and Medicaid revenues, 5 percent for other revenues and 5 percent for expenses. These inflation factors are reasonable. HCR's projections of 22 percent in year one and 25 percent in year two for payroll taxes and fringe benefits are reasonable and consistent with HCR's actual experience. HCR utilized reasonable and appropriate depreciation periods of 40 years for the building and 10 years for equipment. These are the depreciation periods used by HCR in its regular course of business. The patient charges projected by HCR, including Medicaid, Medicare and private room rates and ancillary charges, are reasonable projections. HCR projected that private pay room charges at the nursing home would be $75 for a semi-private room and $85 for a private room in July, 1989. These updated projections are consistent with existing (1987) private pay rates in Brevard County, which range from $59 for a semi-private room to $90 for a private room. The HCR rates, inflated forward to 1989, are reasonable and consistent with the existing private pay charges in Brevard County. Private pay room rates charged at nursing homes tend to reflect the market for private pay rates in the vicinity of the nursing home. HCR's updated projection of payor-mix is consistent with the actual experience in central Brevard County and an open admissions policy for Medicaid patients. HCR projects that the facility will reach 95 percent occupancy within 12 months of operation. This projection is based upon HCR's experience subsequent to filing the original application. This projection is reasonable and more conservative than those of the other applicants. HCR anticipates a loss in the first year of operation of $293,885, but a profit in the second year of Operation of $241,084. These projections reveal that the project proposed by HCR is financially feasible, and these projections are reasonable. Staffing of the HCR nursing home is comprised of an administrator, a director of nursing, an assistant director of nursing, an Alzheimers program director, 8.4 FTE (full time equivalent) registered nurses, 6.3 FTE licensed practical nurses, 39.9 FTE nurse-aides, 1 full time occupational therapy aide, 1 full time recreational therapy aide, a social worker, an activities director, 10 FTE dietary personnel, 3 FTE laundry personnel, 8 FTE housekeeping personnel, a maintenance person, 2 clerical workers, and 1 medical records worker. Physical therapy, occupational therapy, recreational therapy, and speech therapy will be provided by licensed therapists on a contract basis. The updated staffing pattern represents minor changes from the staffing pattern in the original application. These changes are a direct result of HCR's experience in operating an Alzheimers wing within a nursing home. HCR's staffing level for staff who provide direct patient care (RNs, LPNs and Aides) exceeds that of Wuesthoff and Unicare. Staff levels in the HCR nursing home are designed to meet the special needs of the Alzheimers patients. An Alzheimers program director will be responsible for the Alzheimers wing and will be an advisor for the day-care facility. HCR's staffing pattern assumes 15 wandering Alzheimers patients in the Alzheimers wing. Care for Alzheimers patients requires increased staffing. Higher nurse-aides staffing is required in the Alzheimers wing during the evening and night hours than in the remainder of the nursing home because Alzheimers patients tend to wander without regard to the time of day. HCR estimates construction costs to be $2,200,000, not including site preparation, which is estimated to cost $275,000. Construction costs per square foot are estimated at $55 and $61.87 when site preparation is included. The estimates of construction cost and construction cost per square foot include an allocation of 2,000 square feet and $110,000 for the day-care unit. The cost per square foot projected in the updated application differs from that projected in the original application because the original application included site preparation, assumed a facility size of 36,000 square feet and was not changed when the original design was changed to add day- care in the original application supplement. The actual size is approximately 40,000 gross square feet. The original HCR application submitted a blueprint which is somewhat different in shape from that which HCR currently intends to build. When HCR added day-care in its Original application supplement, a change in the shape of the building was required and a new design was submitted, but cost estimates were not changed. The design which HCR will use for this facility is similar to the design being used in four ongoing HCR projects in Florida, and which, therefore, meets HRS' requirements. The design relied upon by HCR at final hearing is not substantially different from the design presented to HRS in the original application supplement. HCR's estimates of construction cost, construction cost per square foot, construction cost per bed, equipment cost per bed and total project costs are reasonable and adequate to accomplish the construction of the proposed facility. HCR's updated construction cost estimates are based upon its construction experience in Florida, its experience in having built the design proposed and its discussions with contractors and subcontractors on the east coast of Florida. HCR is currently building two facilities on the east coast of Florida. HCR does not anticipate any cost overruns on any of the facilities currently under construction. All HCR facilities under construction are being constructed within the certificate of need budgets for those facilities. HCR estimates project development costs, including feasibility studies, surveys, legal and accounting fees, planning and HRS's plan review, to be $55,000, which represents an increase over the estimate in the original application due to the passage of time. HCR estimates professional services required for the construction of the facility to cost $90,000. These services include architectural and engineering fees and a site survey and soil investigation report. These costs are approximate1y $5,000 less than the original estimate. This reduction in cost is a direct result of HCR's new staff of civil engineers. Previously, HCR had contracted for site survey work with outside engineers. Thus, while architectural and engineering fees increase, the costs for site surveys and soil investigation reports decrease. The HCR nursing home will be located on approximately 5 acres. HCR estimates land cost for the facility to be approximately $500,000. This - represents an increase over the original land cost estimate because HCR intends to acquire a site which requires less site preparation, located near a hospital. The HCR estimates for land cost are reasonable and consistent with other applicants' estimates. Site preparation costs are estimated at $275,000, a reduction from the original site preparation cost estimate of $315,000. This change is accounted for by HCR's intention to acquire a more costly site which will require less site preparation. HCR intends to build and operate the nursing home proposed for Brevard County and is willing to accept a condition to that effect on any certificate of need issued. HCR estimates a project completion schedule which will result in its nursing home being occupied and in use in July, 1989, and this project completion forecast is a reasonable forecast. HCR has taken steps to ensure that failure to initiate construction within statutory requirements will not occur. HCR has undertaken numerous nursing home projects since 1983 and has successfully constructed or initiated construction on all of those projects. At this time HCR has approximately six projects under construction, four projects have been completed, and one project is under construction for a third party. The design of the HCR facility incorporates numerous energy conservation measures and efficiencies. The HCR facility will comply with all energy code requirements. HCR owns and operates seven nursing homes in Florida. Three of these facilities have superior licenses, and the remaining facilities have standard licenses. HCR nursing homes adhere to extensive quality assurance standards and guidelines. These standards and guidelines regulate such areas as patients' rights, staff development and orientation, physician and nurses services, pharmacy services and medication administration, social services, patient activities, infection control, patient care planning, safety and the physical environmental, menus, diets, nutritional care and scheduling and staffing of dietary personnel, personal appearance and hygiene for dietary personnel, and food storage, preparation and sanitation. These standards and guidelines will be applicable to this proposed project. The standards and guidelines cover all areas of operations and patient care and incorporate survey tools used by the state of Florida and the Health Care and Finance Administration of the federal government for their annual licensure surveys. Additionally, administrators of HCR facilities have a financial incentive to optimize the performance and the quality of care of their facilities. HCR estimates that approximately 60 percent of the patient days in the facility (53 percent of the revenue) will result from Medicaid patients. This estimate is consistent with the experience in the Rockledge-Cocoa area, where one facility has a very low percentage of Medicaid patients and the remaining facilities have very high Medicaid populations (over 60 percent). HCR's estimate also takes into account HCR's recent experience in staffing a facility which includes an Alzheimers wing. HCR will not restrict the number of Medicaid patients in the Alzheimers wing or the remainder of the home. HCR's original application assumed approximately 45 percent of the patient days (42 percent of the revenues) would be accounted for by Medicaid patients. This assumption was based upon HCR's assumption at that time that, in order to cover the assumed high cost of additional staffing in the Alzheimers wing, a greater percentage of private patients (at a higher daily charge) would be required. Subsequent to submission of the original application, HCR has gained actual experience which has demonstrated that the level of staffing proposed by the original application is not necessary and that the cost of staffing can be reduced. The result is that HCR can reduce its reliance on the additional revenue generated by the private paying patient. HCR's design for its Brevard County Alzheimers unit is based upon a state-of-the-art Alzheimers wing at its facility in Perrysburg, Ohio, and HCR's experience gained there. In addition, HCR operates two other facilities which have separate units for Alzheimers patients. The HCR application is consistent with both state and local health plans. HCR projects a charge for Medicaid patients to be $60.93 and, for Medicare patients to be $76 in July, 1989. The increase in charges between the updated projections and the original projections is due to increases in costs during the passage of time since the original estimates were made. The cost of care for patients who are unable to pay is subsidized by the general revenue of the nursing home. Although HCR and Unicare have not projected a percentage of "charity" patients who will not be paying for their services, there will always be some patients who do not pay for all of their care. Patients who do not qualify for Medicaid but who cannot afford standard private pay rates are charged at lower contract rates. The loan fees projected by HCR of $57,000 for the amount of the project financed by debt are reasonable projections based upon current discussions with lenders. HCR estimates that interest during construction will cost $225,000. This amount represents the interest expense paid during the period of construction. This estimate is reasonable. HCR estimates $50,000 will be required for preopening expenses - those incurred in preparing the facility for the opening day. These expenses include marketing and the hiring of an administrator, a director of nursing, and other employees prior to opening. $50,000 is an adequate amount to cover the pre- opening expenses for the proposed facility. HCR's pro forma assumptions, proposed patient charges, projections of revenue and expense, staffing and projections of salaries are reasonable. Each HCR nursing home provides individual patient care plans for each patient, a statement of patients' rights and a resident council (which is a unit of individuals selected by the patients to afford an opportunity to have a formalized, direct method to state preferences, grievances and other opinions related to the operation of the nursing home), and each HCR nursing home has transfer agreements with local-hospitals. The planning director of the Local Health Council responsible for Brevard County performed an analysis of the need for nursing home beds in Brevard County. The results of the study demonstrate that the central part of Brevard County has a lower number of nursing home beds per thousand population over 65 than the remainder of Brevard County. If additional nursing home beds are to be approved for Brevard County, the beds should be located in the central part of the county because the need for nursing home beds in Brevard County is greatest in central Brevard. The HCR architectural design best accommodates the needs of the nursing home patient. Wuesthoff Health Services, Inc., is a non-profit corporation affiliated with Wuesthoff Hospital, Inc., a 305-bed non-profit hospital serving Brevard County, through a common parent Wuesthoff Health Systems, Inc. Wuesthoff Hospital provides some indigent medical care in central Brevard County, and the Wuesthoff nursing home certificate of need application commits to providing some indigent care at the proposed nursing home facility. Wuesthoff, through its affiliated non-profit companies, operates within Brevard County a home health agency, a hospice, four family practice clinics, Life Line for the elderly or disabled who live alone, and Brevard Medical Transport, a no- cost transportation service for the elderly. It also operates a retail pharmacy through a for-profit affiliated corporation. The hospital has for several years maintained a senior citizens' advisory council which concerns itself with the needs of the elderly in Brevard County. It also intends to compete with other businesses in operating Brevard County's Meals On Wheels due to a recent expansion of the size of the Hospital's kitchen. The proposed nursing home will be located on a tract of land owned by Wuesthoff Hospital which will make the property available to Wuesthoff Health Services, Inc., at either the nominal rental of $1 per year for the useful life of the nursing home or by outright contribution if required by HRS. The land has been owned for several years by Wuesthoff Hospital, but Wuesthoff included $48,000 for land costs in its original certificate of need application. The site for the Wuesthoff nursing home is part of a large tract of land which already has located thereon a 20,000 square feet ambulatory care center, diagnostic testing center, family practice physician, dental facility, and retail pharmacy, all of which are owned by one of the Wuesthoff corporations. The ambulatory care center includes laboratory services, physical therapy services, radiology services, two out-patient surgery suites, and 24- hour physician coverage. The nursing home will be connected to the ambulatory care center by an air conditioned, enclosed corridor through which the nursing home patients will be transported to receive any therapies or services which they require. The farthest distance from any patient room in the nursing home to the ambulatory care center, including physical therapy rooms, is approximately 400 feet. Wuesthoff's nursing home would be located in the area which the Local Health Council recognizes as having the greatest need for nursing home beds, i.e., central Brevard County in the Cocoa/Rockledge area. According to Wuesthoff's updated application the total project cost for its 120-bed nursing home would be $2,901,213, and the facility will consist of 37,500 square feet. The project size actually includes 1,000 square feet for the corridor which connects the nursing home to the ambulatory care center. Therefore, the facility itself consists of only 36,500 square feet. It is unclear whether that figure should be further reduced since Wuesthoff decreased the size of its kitchen in its amended application so that the nursing home would no longer have a full-service kitchen. Similarly, the total project cost was substantially higher in Wuesthoff's original application wherein the total project cost was given as $4,417,884. Wuesthoff made changes from its original to its updated application either because the applications were prepared by different persons or because decisions were made to change Wuesthoff's application, as follows: The original application included a full-service kitchen, while the updated application contemplates meals will be prepared at Wuesthoff Hospital and transported seven miles to the nursing home. The removal of the kitchen affects the square footage of the facility along with equipment costs, staffing costs and other costs associated with the operation of the proposed nursing home, such as the increased costs associated with transporting the food to the nursing home. In its original application, one individual was listed as both the nursing home administrator and director of nursing. In its updated application, Wuesthoff treated these as separate positions. Wuesthoff proposed $376,000 for equipment costs in its original application and projected $187,400 for equipment costs in its updated application. Wuesthoff projected 45 percent Medicaid and 15 percent Medicare in its original application and 50 percent Medicaid and 2 percent Medicare in its updated application without any evidence that the needs in the community had changed. Wuesthoff removed the debt service, in its updated application, thus reducing the financing costs. The underwriter's fees between the original and updated application were reduced based upon a dimunition of the bond size as a result of reduction of square footage in the facility and the elimination of the debt service. Wuesthoff reduced land cost from $48,000 in its original application to no cost in its updated application despite the fact that the land was owned by Wuesthoff at the time the original application was filed. Wuesthoff changed the equity contribution between its original and updated applications without any testimony of extrinsic factors while evidence showed that the funds were available to make the equity contribution at the time of the submittal of the Original certificate of need application. Although Wuesthoff's application' represents that approximately 3 percent of the revenues from private pay patients would be devoted to indigent or charity patients, the 3 percent actually applies to both charity and bad debt. Wuesthoff failed to demonstrate how much of its revenues, if any, would be allocated to charity care alone. Wuesthoff projected charges of $65 for a semi- private room for a private paying patient and $73 for a private room for a private paying patient. These charges, projected for mid-1989, are below existing (1987) charges at nursing homes in Brevard County. The projections of financial feasibility and the pro formas for the Wuesthoff facility are based upon the assumption that the Wuesthoff nursing home will be owned and operated by Wuesthoff Health Services, Inc. The only financial statements provided by Wuesthoff in support of its application are those relating to Wuesthoff Memorial Hospital. Wuesthoff Memorial Hospital is a corporation separate and distinct from Wuesthoff Health Services, Inc. Further, the financial statements of Wuesthoff Memorial Hospital provided by Wuesthoff do not include the "notes" normally appended to those statements. The "notes" to the audited financial statements are typically included in any complete financial statements and are required for a full understanding of the financial statements. The pro formas of Wuesthoff assume that 15 percent of salaries would be allocated to fringe benefits. This assumption is based upon the assumption that the employees of the nursing home will not be unionized and, therefore, their fringe benefits will not be as high as those for unionized employees. The nurses at Wuesthoff Memorial Hospital are unionized and have higher benefits than proposed for the nursing home. Unionization is a decision made by employees and not by management. Wuesthoff's assumptions for fringe benefits do not assume any increase in the fringe benefits from year to year. Wuesthoff agrees that there are required increases in fringe benefits, such as increases in required contributions to social security programs over the next few years. Thus, the amount for fringe benefits assumed by Wuesthoff understates the amount likely to be paid. A participant in the Medicaid reimbursement system is entitled to reimbursement on the basis of fair rental value of the nursing home. Although the fair rental value aspect of the reimbursement plan includes consideration of the value of land upon which a nursing home is situated, and although Wuesthoff assumes that it would receive reimbursement under this element of the plan, Wuesthoff does not include in that reimbursement any value for land value. Wuesthoff would be entitled to that form of reimbursement, but Wuesthoff was unable to specify "how that's going to be done." The Medicaid reimbursement system incorporates certain caps on reimbursement, including caps for patient care costs, operating costs and property costs. Wuesthoff is unable to specify which Medicaid reimbursement caps it utilized when calculating its Medicaid charges. It is not possible to calculate Wuesthoff's Medicaid reimbursement and Medicaid charges based upon the exhibits presented by Wuesthoff, including its applications. The Wuesthoff application does not contain any description of patient care costs or costs of operation of the Wuesthoff facility upon which Medicaid charges can be determined. Wuesthoff represented that certain services would be provided to the Wuesthoff nursing home by Wuesthoff Health Services or Wuesthoff Memorial Hospital at no charge to the nursing home. The exact nature of the services and their value are unspecified. Although Wuesthoff contends fewer staff will be needed at the nursing home, Wuesthoff has not determined how many additional staff would be required at the hospital and has not calculated the cost of transporting food to the nursing home. Ordinarily, a related entity providing services to a nursing home is entitled to reimbursement for the cost of those services under the Medicaid reimbursement system. Wuesthoff has not determined whether the Medicaid statutes and regulations will allow a related entity to waive its entitlement to such reimbursement. Wuesthoff's parent company, Wuesthoff Health Systems, and Wuesthoff Memorial Hospital will incur costs for providing those services to Wuesthoff which Wuesthoff represents will not be reimbursed. These entities' budgets and Medicaid reimbursement are regulated and audited by HRS and the Hospital Cost Containment Board. By providing services to the nursing home and no longer allocating 100 percent of costs to operation of the hospital, the hospital's reimbursement and budget will have to be adjusted. These required adjustments have not been taken into consideration by Wuesthoff. In preparing its budget to be submitted to the Hospital Cost Containment Board, the hospital will be required to allocate a certain amount of time for those persons providing services to the nursing home. The hospital will not be reimbursed for those services by Medicaid or Medicare. The total cost of providing care to nursing home residents must be reported by the nursing home in its Medicaid cost report. If a nursing home does not include allowable Medicaid costs in its cost report, HRS will include those costs when HRS audits the cost report. When those additional costs are included, the nursing home's reimbursement (Medicaid charge) will increase. It is not a generally accepted accounting principle to exclude allowable costs in a Medicaid cost report. By not including certain costs, expenses are understated and profit is overstated. Wuesthoff attempted to present evidence that a hospital-based nursing home facility maintains lower costs which can be passed on to its patients, because of an absence of taxation and the presence of group purchasing. However, this evidence also revealed that the hospital-based nursing home to which Wuesthoff sought comparison had patient care and operating costs which exceed the caps for Medicaid reimbursement. Additionally, Wuesthoff's Medicaid costs are higher than those of HCR. Wuesthoff proposes an architectural plan for its nursing home which has never been built in Florida. Wuesthoff is the only applicant which proposes three nurses' stations for 120 beds. The 120-bed nursing home with two nurses' stations is more efficient to operate than a 120-bed nursing home with three nurses' stations. Three nurses' stations result in a higher cost per patient day than two nurses' stations. Wuesthoff's architect was unable to estimate the cost of site preparation and was unable to specify the exact nature of site preparation required. However, site preparation will be required. There is confusion concerning the cost of equipment for the Wuesthoff project, particularly with regard to food service equipment. Although the Wuesthoff architect testified that Wuesthoff originally had consulted with him concerning the cost of equipment, the witness was unable to identify the equipment costs listed in the application. The equipment list relied upon by Wuesthoff and the list of used equipment and food service equipment was not prepared until the first week of the final hearing. Wuesthoff's projection of construction cost ($57 per square foot) was not prepared by Wuesthoff's architect and the source of the projection is unspecified. The project is not based upon any actual experience of nursing home construction in Florida. The original estimate was provided by the architect to Wuesthoff several years earlier and was lower than $57 per square foot. Wuesthoff proposes to connect its nursing home to a nearby ambulatory surgical center by a corridor. There are no physical therapy or Occupational therapy rooms provided at the nursing home. Although recreational therapy and speech therapy must be provided at the nursing home, only small meeting rooms are available for these purposes. A nursing home patient transported from a nursing home to a location outside the nursing home for therapies must remain in the care of nursing home staff. This mode of operation requires more staff than one in which all therapies are provided within the physical confines of the nursing home. Wuesthoff did not include in its estimate of project development cost any estimate for attorney's fees or consulting fees of the planners and financial consultants retained for the purpose of obtaining a certificate of need. The shared services referred to by Wuesthoff are not free services, and no evidence was offered to show that the sharing of those services would be cost efficient. The corridor between the ambulatory surgical center and the nursing home is estimated by Wuesthoff to be 1,000 square feet. The cost for the corridor is -included in the costs projected for the nursing home, and the corridor is included in the total size (37,500 square feet) of the nursing home. Wuesthoff proposes to equip the nursing home with used equipment and furniture. The used hospital beds which Wuesthoff proposes to use at the nursing home are eight to twelve years old. Although Wuesthoff proposes to provide therapy through professional staff from Wuesthoff Memorial Hospital, Wuesthoff could not estimate how many additional therapists must be hired by the hospital in order to provide therapy for the nursing home patients. Wuesthoff contends that it will provide a high level of charity care in its nursing home at the same level that is provided at the hospital. However, when calculating the percentage of charity care at the hospital, Wuesthoff included care provided within programs where some form of governmental funding was available to pay for care. For instance, Brevard County contributes funding toward the care of patients who are not eligible for Medicaid or Medicare reimbursement. There is also a state fund for indigent care and Wuesthoff expects to receive revenues from that fund. The total allowance for bad debt and charity care proposed by Wuesthoff is 1.1 percent of gross patient revenues. Wuesthoff will require financial screening of patients prior to admission. Unicare proposes as total project cost in both its original and updated applications the amount of $3,360,000. The project cost cannot be relied upon, however, since it will be necessary for Unicare to modify its design. As further set forth below, Unicare's projected revenues and expenses are suspect. Unicare has never constructed a new nursing home in Florida or built the design proposed. When filing a cost report and determining Medicaid reimbursement for a new nursing home, all costs incurred throughout the process of developing and constructing the project, including feasibility studies, attorney's fees, accounting fees, consulting fees and certificate of need fees must be included. Unicare failed to include all project development costs in its application. The pro formas and projections of revenues and expenses for Unicare were prepared solely by Unicare's certificate of need consultants, based upon the consultants' experience in their own nursing homes and not upon any information (other than home office costs) concerning the operation of Unicare nursing homes. Unicare's in-house financial expert agreed that it is difficult to project revenues and expenses for operation of the proposed Unicare nursing home without having knowledge of what Unicare's general costs and expenses are. Two Unicare homes have failed to comply with the isolation room requirements of Rule 10D-29, Florida Administrative Code, which governs the licensure of nursing homes. The Unicare design does not provide any single, licensed isolation room as required by HRS licensure regulations. The Unicare architectural design provides only one toilet room between two patient rooms to meet the needs of four nursing home patients. The company which designed and expects to construct the Unicare facility has not performed any nursing home construction work in Florida since 1983 or 1984 when the company remodeled a nursing home. The last nursing home which this company completed for Unicare was prior to 1985. This company did not prepare the construction cost estimates relied upon by Unicare. Calculation of the size of the Unicare facility did not include a reduction of 9 square feet for each indented, V-shaped window in the facility. There are 23 such windows proposed for the Unicare facility. Accordingly, the Unicare facility is 207 square feet smaller than represented in the application. Licensure regulations require an unobstructed view (vista) of 20 feet from the window of a nursing home resident's room. At least four Unicare patient rooms have an unobstructed view of less than 20 feet. Therefore, the design presented by Unicare at final hearing does not comply with the rules for licensure of a new nursing home, pursuant to Chapter 10D-29, Florida Administrative Code. The Unicare design has never been built, although it was prepared more than five years ago. The design was intended for patient programs not now proposed by Unicare. The original facility design accommodated residents who require a degree of care below and can participate in activities above typical nursing home residents, such as residents found in adult congregate living facilities. The design and location of the sinks in the Unicare patient rooms do not allow sufficient space for a patient in a wheelchair to have access to the sink at the same time that the door to the toilet room is open. Unicare proposes to locate its facility in the Titusville area in north Brevard County. The local health plan shows the greatest need for additional nursing home beds to be in central, not north, Brevard County. Unicare's selection of Titusville as the area for location of its nursing home was not based upon any demographic analysis or determination of need for additional nursing home beds in the Titusville area. Rather, the selection of Titusville would avoid competition with another of Unicare's facilities located in the Rockledge/Cocoa area. In determining equipment needs, Unicare's certificate of need consultants did not refer to the design of the Unicare nursing home. Unicare projects that its facility will reach 97 percent occupancy in the first nine months of operation. However, the last nursing home to open in the Titusville area, Vista Manor, did not reach 97 percent occupancy until after the first year of operation. Unicare will staff at skilled levels. Its proposed staff salaries are reasonable. Unicare has not yet settled on any site in the Titusville area although it has narrowed its search down to four sites which vary between four and seven acres with prices ranging from $25,000 to $90,000 per acre. Its current total project cost of $3,360,000 computes to a project cost per bed of exactly $28,000. Unicare's parent, United Health, Inc., is the entity that must fund this project and has, by resolution, committed to such funding "provided that said expenditure shall not exceed $28,000 per bed." Consequently, it is highly likely that the proposed design, which has never been built anywhere, which must be redone to comply with HRS codes, and which will be built on land that is yet to be acquired but which will likely require a zoning variance, will cost more than $28,000 per bed. The HCR nursing home is larger and provides more area for patient care than the facilities proposed by Wuesthoff and Unicare. The HCR facility will provide more gross square feet per bed and a larger nursing unit area (which includes patient rooms, the nursing support unit and corridor areas). The entire facility proposed by HCR will be 40,000 square feet, 2,000 of which is allocated to day-care; the day-care area will be available to nursing home residents during those hours in which the day-care area is not in use by day- care residents. The Wuesthoff facility is said to be 37,500 square feet, but 1,000 square feet consists of an outside corridor; thus, the net usable space at the Wuesthoff nursing home is only 36,5' 00 square feet. The smallest proposed facility is the Unicare facility, said to be 34,121.5 square feet, but actually less than 34,000 feet when accurately measured. The nursing homes proposed by Wuesthoff and Unicare are at or below the low gross square foot average determined by HRS. Larger patient care areas are desirable. It is not desirable to place only one toilet room between two patient rooms to accommodate four patients, as proposed by Unicare. It is a generally accepted standard for nursing home skilled nursing units to be organized in groups of 60 beds. Units of this size offer the best efficiencies of operation in terms of economics and quality of care. Each nursing unit must include, in addition to patient bedrooms, toilet rooms and bathing facilities, one nurses' station, a clean utility room, a soiled utility room, a medication preparation room, a nourishment room, a janitors closet, an equipment storage room, a stretcher and wheel chair alcove, a clean linen closet and a nurses' toilet and lavatory. By providing three nursing units, Wuesthoff must devote more space to meet these requirements than would be required for two nursing units.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order: Granting HCR's application for a certificate of need; Denying Unicare's application for a certificate of need; Denying Wuesthoff's application for a certificate of need; and Dismissing the Petition to Intervene of Brevard Medical Investors, Inc. DONE and RECOMMENDED this 30th day of July, 1987, in Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2686, 86-2687, 86-2688 and 86-2690 Unicare's proposed findings of fact numbered 14, 22, and 25 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Unicare's proposed findings of fact have been rejected as follows: 1, 3, 8, 10, 11, and 13 as being contrary to the evidence in this cause; 2, 4-7, 12, 15-17, 19-21, 23, 24, and 26 as not being supported by the weight of the evidence in this cause; 9 and 18 as being subordinate to the issues in this cause; and 27 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. Wuesthoff's proposed findings of fact numbered 2-6, 36, 39, and 40 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Wuesthoff's proposed findings of fact have been rejected as follows: 31 as being contrary to the evidence in this cause; 1, 7-18, 22-30, 32, 34, and 41 as not being supported by the weight of the evidence in this cause; 19-21, 33, 35, 37 and 38 as being subordinate to the issues in this cause; and 42 - 43 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. HCR's and HRS' proposed findings of fact numbered 1-66, 68, 70-81, 83, 85- 92, 94, 96-104, and 106-123 have been adopted either verbatim or in substance in this Recommended Order. The remainder of HCR's and HRS' proposed findings of fact have been rejected as follows: 67 as being subordinate to the issues in this cause; 69 as being cumulative; 82 and 95 as being irrelevant; 84 as being unnecessary; 93 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law; and 105 as being not supported by the weight of the evidence in this cause. COPIES FURNISHED: Harold F. X. Purnell, Esquire Kenneth Hoffman, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Richard Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Frank J. Santry, Esquire Post Office Box 14129 Tallahassee, Florida 3231 Jonathan S. Grout, Esquire Karen L. Goldsmith, Esquire Dempsey & Goldsmith, P.A. Post Office Box 1980 Orlando, Florida 32802 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
Findings Of Fact Petitioner is a nonprofit corporation located in Lehigh Acres, Lee County, Florida, with a membership of approximately 900 persons. The association's goals are to insure that quality health care services, including, but not limited to, long-term care services, are available to that community. The Community Health Association, Inc., was preceded by a non-profit corporation known as Lehigh Acres General Hospital, Inc. This corporation managed and operated the Lehigh Acres General Hospital, located in Lehigh Acres, Florida. In June, 1981, the corporation sold its license to operate this acute care hospital to Hospital Corporation of America (HCA). HCA took over management of the facility July 1, 1981. HCA is currently leasing the facility from Community Health Association, Inc. HCA applied for and received a Certificate of Need to construct a new hospital in Lehigh Acres, Florida. Construction of this hospital is underway and is to be completed on or about January 1, 1984, at which time HCA will turn the old hospital facility back to Community Health Association. At the time of the licensure sale by Community Health Association (Lehigh Acres General Hospital, Inc.) to HCA, the Lehigh Acres General Hospital operated an 88-bed acute care facility which had utilized, since 1970, 20 of the 88 beds as nursing home beds. In July, 1981, Community Health Association, Inc., filed a letter of intent with Respondent for a 60-bed nursing home to be operated in Lehigh Acres, Florida. Respondent advised Community Health Association, Inc., that its application for a CON was premature due to the pending CON issued to HCA to construct a hospital in Lehigh Acres. In early 1982, Community Health Association, Inc., employed Herman Smith & Associates, of Chicago, Illinois, health care consultants, to perform a long-term study concerning need for a nursing home or nursing home beds in the Lehigh Acres area. On the basis of its study, Herman Smith & Associates recommended that Petitioner seek authority to provide 110 nursing home beds in two phases. The first phase of the project would involve converting the 1970 wing of the previous hospital building for use as a 50-bed nursing unit at a cost of approximately $350,000. The second phase consisting of construction of a 60-bed addition, costing $1,380,000 for 15,527 square feet, would be completed in early 1985. The sale of the license to HCA brought Petitioner $1,000,000. These funds will cover the first phase and part of the second phase costs. Petitioner's prior experience in health care delivery and its community support, along with these financial resources, will enable it to construct and operate the proposed nursing facility. There are no existing or approved nursing homes or nursing home beds to be located in Lehigh Acres, Florida. Except as noted below, all existing and approved nursing home beds are located in western Lee County in Ft. Myers, Cape Coral or in other communities located approximately 30 minutes or more by automobile from Lehigh Acres. Upon completion of construction and abandonment of the old Lehigh Acres hospital building by HCA, the new hospital will discontinue the 20 nursing home beds currently operated. Approximately 75 percent of this hospital's patients are Lehigh Acres residents, with few if any patients from Ft. Myers or western Lee County. All the nursing home referrals from the new hospital will be required to leave Lehigh Acres unless Petitioner's proposed nursing home is constructed. Petitioner filed a letter of intent with Respondent, followed by an application for a CON on or about October 1, 1982, proposing the project as recommended by Herman Smith & Associates. Following the submission of the instant application, Respondent adopted Rule 10-5.11(21), Florida Administrative Code (F.A.C.), which became effective on November 9, 1982. That rule establishes the "Methodology to Determine and Calculate the Need for Community Nursing Home Beds" in a service district. About January 29, 1983, Respondent advised Petitioner that its application for a 110-bed nursing home in Lehigh Acres was denied as not consistent with the Section 10-5.11, F.A.C., nursing home bed need methodology. Respondent's State Agency Action Report stated that "A need does not exist to add nursing home beds in Lee County through 1985. There are 347 approved but not constructed beds in the county. The bed need methodology produces an excess of 494 nursing home beds in the county through 1985." The State Agency Action Report reflected 970 existing and approved nursing home beds in Lee County. The report also projected a need for 1,400 community nursing home beds for the year 1985 in Lee County. The testimony of its author established that the same portion of the rule applied to 1986 protected population figures would yield a need for 1,522 beds in Lee County in 1986. At the time Petitioner's application was evaluated by Respondent, nursing homes in Lee County had an average 95.8 percent occupancy rate. Based on the application of the current utilization formula contained in Chapter 10-5.11(21), F.A.C., Respondent calculated that 494 excess nursing home beds in Lee County are licensed or approved. Projected population of persons age 65 and over living in Lee County in 1985 is 60,463 and ir 1986 is 65,708. The application of these population figures to the formula contained in Ch. 10-5.11(21)(b), F.A.C., yields a nursing home bed need in Lee County for 1985 of 1,400 and for 1986 of 1,522. As noted above, there are currently 970 licensed and approved nursing home beds in Lee County. The "Nursing Home Plan Component" of the Local Health Plan of the District Eight Health Council of Sarasota, Florida, of which Lee County is a portion, adopted June 29, 1983, indicates a need for 501 additional beds in Lee County for the year 1986. In applying Rule 10-5.11(21), F.A.C., Respondent's determination was subject to two errors. The first, a mathematical error, caused a miscalculation of beds which could be added in Lee County using current patient count data and avoid falling below the desired 80 percent occupancy rate. The formula, properly applied, indicates there would be 239 excess beds rather than the 494 shown in the State Agency Action Report. The second error concerns Respondent's failure to reconcile and compare the determinations made under the need methodology contained in paragraph (b) of the rule and other portions of the rule, particularly the current utilization sections contained in subparagraphs (d) and (f). Section 10-5.11(21)(f), F.A.C., stated that "consideration of applications for additional nursing home beds will be premised on both the projected need for new bed capacity and current utilization." (emphasis added) The requirement for additional nursing home beds based on the projected need for new bed capacity, as well as current utilization, establishes a need for the 110 beds proposed by Petitioner. Further, the proposed location is consistent with the goal of accessibility and community need in Lehigh Acres.
Recommendation Based on the foregoing, it is RECOMMENDED that Respondent enter a Final Order granting Petitioner's application. DONE and ENTERED this 26th day of September, 1983, in Tallahassee, Florida. R. T. CARPENTER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of September, 1983. COPIES FURNISHED: Ronald A. Labasky, Esquire Robert S. Cohen, Esquire 318 N. Monroe Street Tallahassee, Florida 32302 James M. Barclay, Esquire DeparLment of Health and Rehabilitative Services 1317 Winewood Blvd., Suite 256 Tallahassee, Florida 32301 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
The Issue The broad issue in this proceeding is whether either of the petitioners should be granted a community nursing home CON. The parties disagree as to the appropriate application of the need methodology described in Rule 10-5.011(1)(k), F.A.C. Both Petitioners argue that the approved bed inventory should be determined as of December 1, 1986, at the same time that the number of licensed beds was determined for the January 1987 batching cycle. HRS computed approved beds as of the date that the supervisor signed its State Agency Action Report (SAAR), in May 1987. The parties further disagree as to the effect of subsequent changes to a Final Order in Wuesthoff Health Services, Inc., et al. v. HRS, cited above, originally entered in April 1987.
Findings Of Fact BMI's application number 5010, and Manor's application number 5022, were timely filed for review by HRS in the January 1987 batching cycle. Both applications were denied in HRS' State Agency Action Report (SAAR) dated May 19, 1987. BMI previously received a CON for 73 nursing home beds in Brevard County. Its current application is for 47 additional beds, to create a single 120-bed facility. The entire facility is currently under construction, with the intention that the portion unlicensed as nursing home beds will be utilized as a distinct section of adult congregate living facility (ACLF) beds. Manor also previously received a CON for 60 nursing home beds in Brevard County. CON number 3828 was granted in a prior batching cycle after the current application for 120 beds was filed. At the final hearing, Manor explained that it is now seeking only 60 more beds as it intends to construct a 120-bed facility in Brevard County. In their pre-hearing stipulation the parties agreed that if numeric need is demonstrated, numeric need would first be met through partial or total approval of BMI's application. If the need exceeds 47 beds, the excess should be applied toward determination of approval of Manor's application. The parties also stipulated that all criteria, except those directly related to numeric need for the projects, have either been satisfied by both applicants or are not applicable to this proceeding. In calculating bed need for Brevard County, the parties have agreed, through their exhibits and testimony, that the first portion of the need methodology in Rule 10-5.011(1)(k), F.A.C., yields a subdistrict allocation of 1560 community nursing home beds. It is further undisputed that the relevant number of licensed beds for the period in question is 1,180 beds. The version of Rule 10-5.011(1)(k) F.A.C. in effect at the time of review requires that licensed beds be counted as of December 1, 1986, for the January 1987 batching cycle. The rule is silent as to when approved beds should be counted. Both applicants argue that approved beds should be counted at the same time as licensed beds for consistency and planning purposes. The current version of Rule 10-5.011(1)(k) F.A.C., known as the fixed pool rule, establishes a bed need for each batching cycle, thus providing the certainty and consistency sought by Petitioners' health planners. Prior to its adoption of the fixed pool rule, HRS experimented with various policies as to the determination of "current" data utilized in the need methodology. At the time of the January 1987 batching cycle, HRS' non-rule policy regarding approved beds was to count those beds as of the date that health services and facilities consultant supervisor signs off on the SAAR. In this case, that individual was Reid Jaffe, and the date was May 11, 1987. At the hearing, Mr. Jaffe explained the policy was an attempt to reach a balance between deriving a proper number of beds and minimizing the duplication of services and overbedding. Because the need for future beds is partially predicated on how many beds have already been approved, the Department felt it necessary to take into consideration all those beds which had been approved up until its decision time. Generally the difference between the number of beds published in initial projections of need by HRS' Office of Comprehensive Health Planning and the number of approved beds considered at the time of the decision, are those beds which were approved in final orders issued during that period. Contrary to Petitioners'assertions, those beds which became licensed after the December 1st cut-off date, but before the SAAR sign off, were not lost, but rather were computed by HRS as "approved" beds under the policy. The policy described by Reid Jaffe in his testimony at final hearing is also reflected in HRS' Final Order in Broward Healthcare, Ltd., d/b/a Broward Convalescent Center v. Department of Health and Rehabilitative Services, 9 FALR 1974 (DOAH #86- 2708, Order dated March 21, 1987), aff. per curiam, without opinion, January 21, 1988, 1st DCA case no. BT-258. Utilizing the HRS policy of counting approved beds at the time the supervisor signs the SAAR yields the following total: Approved Facilities Beds Date Approved West Melbourne Health Care 60 7/27/84 Unicare Health Facility of Brevard 120 5/30/86 Brevard Medical Investors 73 9/02/86 Meridian 60 2/ /87 Palm Bay Care Center 60 4/17/87 Forum Group 60 4/17/87 Courtney Springs 36 4/17/87 Total 469 In its SAAR, HRS neglected to include the 60 beds approved for Meridian. These beds were properly included by the applicants' health care planner in her adjustment to the SAAR count and HRS agrees the beds should be included. (See transcript, p. 20 and HRS proposed finding of fact #6.) In June 1985, Courtney Springs received a CON for 36 beds in Broward County. The action was challenged, and the proceeding was consolidated with challenges by other applicants who were denied CONs in the same batching cycle. Wuesthoff Health Services, Inc., et al. v. Department of Health and Rehabilitative Services and Courtney Springs, consolidated cases #85-2868, 85- 2936, 85-2934, 85-3243, 85-3322, 85-3365, 85-3366. In its Final Order, filed on April 17, 1987, HRS granted 60 beds each to Palm Bay Care Center, Forum Group and Courtney Springs. The Final Order was corrected on May 19, 1987, to provide that the award to Courtney Springs was 36, rather than 60 beds, as there was no intent to award the facility more beds than originally provided. In all other respects the final order of April 17, 1987, remained in full force and effect. On July 6, 1987, another order was entered and styled "Amended Final Order." The stated purposes of the amendment were to correct a scrivener's error in failing to serve the final order on a moving party, Brevard Medical Investors, Ltd., (BMI) and to give that party an "opportunity to exercise its right to judicial review." The Amended Final Order addressed BMI's lack of standing for failure to file a timely petition to intervene in the consolidated Wuesthoff cases. This is the only subject of the amended final order. The original final order, dated April 17, 1987, did not address this subject. It is not at all clear that the "Amended Final Order" dated July 6, 1987, amends the April 17, 1987, Final Order, since it references only an April 9th Final Order, not the April 17th Final Order. The record in this proceeding does not include a subsequent correction of "scriveners error", if indeed the referenced date was an error. The applicants argue that the 120 beds awarded to Forum Group and Palm Care should not be regarded as ?approve even under HRS' policy, since the amended final order was dated in July 1987, well after the SAAR was signed by Reid Jaffe in May. Application of this theory would result in 349 approved beds, and a net bed need of 66 beds in the January 1990 planning horizon. (Manor Care, exhibit #5) Application of Petitioners' theory that approved beds should be counted on December 1, 1986, results in 289 approved beds, and a need for 120 beds in the January 1990 planning horizon. HRS' application of its policy regarding the time at which approved beds are to be counted results in 469 approved beds, and a surplus of 42 beds in the January 1990 planning horizon. There is no evidence in this proceeding of circumstances which would justify the approval of beds in excess of a net bed allocation derived through the bed need methodology in Rule 10-5.011(1)(k), F.A.C.
Recommendation Based on the foregoing, it is, hereby RECOMMENDED: That the CON applications by BMI and Manor for nursing home beds in Brevard County be denied DONE and RECOMMENDED this 1st day of April, 1988, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1987. APPENDIX TO RECOMMENDED ORDER The following reflect on my specific rulings on the findings of fact proposed by the parties: Petitioners' Proposed Findings Adopted in paragraph 1. Adopted in paragraph 5. Adopted in paragraph 4. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Reid Jaffe testified that need for 12 beds exists, but this conclusion did not include the 60 beds approved for Meridian in February 1987. Rejected as contrary to the weight of evidence and to the legal effect of the changes to HRS' April 1987 Final Order. Adopted, as to the characterization of applicants' position, in paragraph 7. Adopted in paragraph 7. Rejected as contrary to the weight of evidence. Rejected as unnecessary. 11-12. Adopted in paragraph 8. Rejected as contrary to the evidence and law. Rejected as contrary to the evidence. Rejected as unnecessary. Rejected as immaterial. Rejected as irrelevant. 18-19. Rejected as immaterial. Adopted in paragraph 7. Adopted in paragraph 3. 22-26. Rejected as immaterial and irrelevant. Respondents' Proposed Findings 1-2. Adopted in paragraph 1. Adopted in paragraph 3. Adopted in paragraph 2. Addressed in paragraph 11. Adopted in paragraphs 9 and 10. Adopted in paragraph 8. Adopted in paragraph 10. 9-11. Rejected as unnecessary. Adopted in paragraph 6. Adopted in paragraph 9. Adopted in paragraph 15. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 Donna H. Stinson, Esquire Moyle, Flanigan, Katz, Fitzgerald & Sheehan, P. A. The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 Theodore E. Mack, Esquire Department of Health and Rehabilitative Services Regulation and Health Facilities 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 =================================================================
