Findings Of Fact General Background At all times material hereto, Carol's Care Center (CCC) was a licensed nursing home facility certified to and participating in the Florida Medicaid Program. (Stip.) At all times material hereto, Volusia County owned the facility, which was an indigent nursing home. The first wing of the facility was constructed in 1954, at a time when there were no building codes for Volusia County. Volusia County operated the nursing home until 1968, at which time the county leased the nursing home to Dr. George Erickson. Both Volusia County and Dr. Erickson suffered financial losses in the operation of the nursing home. (Tr. 43, 162) In 1969, Carol E. Forrer and her son, Walter Littler, took over operation of the nursing home. Under their contract with Volusia County, the nursing home was required to accept up to 95 percent indigent patients. Another clause in that contract required the remaining five percent of the nursing home's beds to be available for Medicaid patients, if needed. Almost all of the nursing home patients were indigent. (Tr. 44, 162, 163) CCC experienced serious and continuous financial problems prior to 1979 because of the number of indigent or Medicaid patients placed at CCC. Funds were always short. In addition, the building was antiquated and in such poor condition that it required at least six staff people on the payroll to do only maintenance work. The reputation of the facility was horrendous. In addition, staff was difficult to find and keep because of low pay and poor working conditions. In fact, turnover was 105 percent. In 1979, Mrs. Forrer had extreme difficulty in getting physicians and nurses to treat patients in the nursing home. In early 1979, the Department of Health and Rehabilitative Services (Department) informed Mrs. Forrer that the building was not in conformance with licensure standards and would not be allowed to continue operation as a nursing home. Mrs. Forrer knew that a new facility had to be built, but she could not finance the necessary expenses because the county owned the facility. (Tr. 45, 48, 162, 165) In an effort to solve many of the problems at the nursing home, Mrs. Forrer hired Progressive Management Group (PMG) in July of 1979 to operate and administer the facility. Mrs. Forrer stayed on as administrator for August, 1979, during the transition period in which PMG took over. The Department disallowed $2,109 of her salary on the basis that there could not be two administrators. (Tr. 45, 46) On December 31, 1979, CCC had 134 beds, and its occupancy rate was approximately 97 percent. Of the patients at CCC, 88 to 92 percent were Medicaid patients. When Charles F. Cantrell, Jr., purchased all of Mrs. Forrer's stock in the 344 Corporation and assumed responsibility for the operation of CCC, the nursing home had the highest Medicaid percentage in the area because local doctors were not referring private patients to the nursing home. Private patients generate revenues that can be used to offset expenses for Medicaid patients. (Tr. 50, 51, 52) On December 31, 1979, Mr. Cantrell purchased Mrs. Forrer's stock and assumed any liabilities arising from the audits of CCC by the Department for the fiscal years 1978 and 1979. (Tr. 45, 70) The Department conducted audits of CCC for the fiscal years ending August 31, 1978, 1979 and 1980. The audits for fiscal years 1978 and 1979 were conducted by Hugo Jordan, an auditor employed by the Department. The Medicaid Program is a joint federal and state program. It is governed by the Florida Title XIX Medicaid Reimbursement Plan and the applicable doctrines in HIM-15. The Medicaid cost reports for CCC in fiscal years 1978, 1979 and 1980 were timely filed. This dispute arose from audit adjustments to CCC's Medicaid cost reports for fiscal years 1978, 1979 and 1980. (Stip.; Tr. 289; Petitioner's Exhibits 4, 5, 6) Activities of Charles F. Cantrell, Jr. The Department notified CCC that it would not be relicensed in the absence of major alterations of the physical plant to bring it up to existing standards. This was impossible because of the state of the existing building. Cantrell negotiated an arrangement with the Department that CCC would continue to be licensed upon the condition that major intermediate repairs be made to the existing facility and a new facility be built within 30 months. (Tr. 49, 57, 151) Cantrell was obliged to continue to operate CCC in the existing facility, making the necessary repairs to the physical plant, upgrading staffing and establishing an effective bookkeeping system while also undertaking to plan, finance and build a new facility. All of these actions were necessary to meet conditions for Department licensure and to continue operating the facility which was the primary facility in the area providing care for indigent and Medicaid patients. (Tr. 49, 57, 59, 151) Cantrell took a direct hand in the management and operation of the facility. He assumed the business management of CCC, supervising and arranging for maintenance and repairs, revamping the bookkeeping system and training personnel, and coordinating activities related to the planning, financing, certification and building of the new facility. All of his activities were necessary. Cantrell's prior experience as the owner of several businesses, including a small chain of drug stores, and his experience in providing professional services to nursing homes assisted him in keeping CCC operating and in establishing the new facility which is now in operation. Cantrell was a salaried management employee of CCC for eight months in fiscal year 1980. He was paid $37,977 by CCC for his services. Under Department guidelines, the annual salary for the administrator of a facility the size of CCC was $27,032. Cantrell dismissed PMG shortly after he took control on December 31, 1979. Because he was not a licensed administrator, Cantrell employed Mrs. Forrer for several weeks as an interim administrator. Cantrell hired Buford Jones as the permanent administrator in March, 1980. Jones is still in this position. Jones and Mrs. Forrer were assigned duties related to patient care, staffing and record-keeping related to patient care. The Department audit disallowed one month of Cantrell's compensation in total because his service overlapped that of two other administrators. In addition, the Department reduced Cantrell's salary to that of an assistant administrator/owner. The total disallowed by the Department was $25,277. The Department disallowed $1,195 of Mrs. Forrer's salary for the fiscal year ending August 31, 1980, on the same grounds. The field auditor for the Department disallowed a portion of Mrs. Forrer's salary in fiscal year 1979, when PMG was employed, because of overlapping administrators. The Department's auditor took the position that there could not be two administrators at the same time. The total salary paid Mrs. Forrer for the periods of transition in August of 1979 and January, 1980, when her employment overlapped that of another administrator, were legitimate. Both administrators were head administrators, one leaving and one coming. The maintenance of continuity and the benefits flowing to the patients warrant such a transition. The auditor for CCC, Betty Kelly, C.P.A., gave her expert opinion, based upon her personal observation of Cantrell's activities and the duties he performed. Cantrell's activities were necessary, and, had he not performed them, someone would have had to be hired to do those jobs. The salary he received was reasonable and consistent with salaries paid other persons for similar work. The situation at CCC was unusual, and its many problems justified additional management, expertise and personnel. CCC needed more than an assistant manager. It needed a separate manager to handle business operations until its inherent problems could be solved. Cantrell provided this expertise. Drug Expenses In fiscal year 1978, the Department disallowed $1,894 in prescription drug expenses on the grounds that prescription drugs are not covered under the Florida Medicaid Program. (Petitioner's Exhibit 4) In 1978, the Florida Medicaid drug program permitted patients to purchase $33 worth of legend drugs with a monthly Medicaid eligibility card. Some patients exceeded the limits on their card and had to apply for an excess prescribed medicine grant. In order to apply for the grant, the patient forwarded a form to the attending physician. (Tr. 84, 85, 86) The drug information portion of the form was to be completed by the physician and submitted to Jacksonville or to Tallahassee, where a board of physicians would review the request. The physicians, in general, were unable or unwilling to fill out these forms because they could not obtain the needed information. As a pharmacist, Cantrell applied for 700 to 800 excess prescribed medicine grants, but only ten were approved for increases. (Tr. 86, 87) Since some drugs are life-sustaining, CCC assumed the responsibility in fiscal year 1978 of paying the pharmacist for the excess cost of a Medicaid patient's prescription drugs. The amount of $1,894 represents the excess of purchases of drugs from The Medicine Shoppe. (Petitioner's Exhibit 16) Nursing homes are responsible for supplying their patients with prescribed drugs. Rental Equipment In fiscal year 1978, the Department disallowed $2,444, which represented 100 percent of the costs of a leased automobile. In fiscal year 1979, the Department disallowed $2,270, which represented 100 percent of the costs of a leased automobile. (Petitioner's Exhibits 4, 5) CCC operated three vehicles in 1978: a maintenance vehicle, a Pontiac Grand Prix, and a Dodge van. The maintenance vehicle was used to haul lumber and other items. The van contained a lift and was designed to transport patients. The van was used to transport patients until its insurance was raised to $3,600 per six months because of installation of the lift. It was thereafter not used to transport patients. The Pontiac was rented for that purpose, with insurance being included in the rental charges. Eventually, the maintenance vehicle was disposed of and the van used by maintenance personnel. (Tr. 169, 170, 176) All three vehicles were kept at the facility, and they were all used for patient-related activities. The Pontiac was used to transport patients. Mr. Littler also used it to conduct nursing home business in Tallahassee and Jacksonville. Littler left his personal car at the facility whenever he took the Pontiac and did not charge the costs of this vehicle to the Medicaid program. (Tr. 72, 172) Depreciation of Camper The Department disallowed $295 in fiscal year 1978 for depreciation on a camper as not related to patient care. (Petitioner's Exhibit 4) The camper in question was used by Dr. Legg, a scientist, while he was conducting studies related to the certificate of need for the new facility. (Tr. 178, 179) Advertising and Promotion In fiscal year 1978, the Department disallowed $210 on the grounds that it constituted promotional advertising. (Petitioner's Exhibit 4) The amount contained in Petitioner's proposed recommended order exceeded the amount disallowed. None of the advertising was for the purpose of hiring staff. The aerial photograph was taken for use in settling a property dispute with the city. It was directly related to cost containment in operating the facility by reducing maintenance requirements and taxes. As such, this provided a benefit to the patients and to the public. Utility Expense In fiscal year 1978, the Department disallowed $272, claiming that this was for utility bills for a commercial building owned by Mr. Littler. (Tr. 196; Petitioner's Exhibit 4) At said time, the Department cited CCC for not having proper beds. Littler used the building to refurbish beds for the facility according to the Department's standards. More than 100 beds were refurbished on the property owned by Littler. The only demand Littler made in return for the use of his building was that CCC pay his utility bills during the period of time that the beds were being refurbished. (Tr. 197) These utility bills paid by CCC were in actuality the rental assessed for use of the building. Considering the period of use, the rental was reasonable. Additional Rents The Department disallowed $2,000 in fiscal year 1978 for rent paid to Volusia County. (Tr. 198; Petitioner's Exhibit 4) The records of CCC reflect that it paid $38,000 in rents to Volusia County in 1978. The contractual rental was $36,000 per year. The auditor concluded, based upon data which he believed was given him by a bookkeeper, that the $2,000 was a late payment of 1977 rents. The uncontroverted testimony of Mr. Littler was to the contrary. Volusia County was to pay for repairs to the facility under the terms of the lease, but it did not have the money to pay for repairs required by the Department. It was agreed that CCC would pay Volusia County $2,000 for a sinking fund to cover future repairs. The $2,000 paid to this fund was not used to pay for repairs and was not for rental. The county retained it. Gasoline Expense In fiscal year 1980, the Department disallowed $380 of gasoline expense which was used in the vehicles of CCC's employees when they used their vehicles for patient-related activities. Petitioner is not challenging $133 of this adjustment. (Petitioner's Exhibits 6, 18) CCC has one gasoline credit card that is kept by Mr. Jones to supply fuel to vehicles that are used in the service of the nursing home. (Tr. 108) Jones only allowed other employees to use the gasoline credit card for patient-related activities. Cantrell never used the gasoline credit card for his own vehicle because he has another card. Employees who have used the gasoline credit card are the administrator, the activities director, the maintenance-man and the secretary. (Tr. 108, 109, 239) The amount of $247 would be an expense related to operations of the facility. Professional Services In fiscal year 1980, the Department disallowed $1,061 as costs incurred in the prior year. (Petitioner's Exhibit 6) The legitimacy of the expense is not at issue, and it was disallowed solely because it was not incurred in fiscal year 1980. These expenses were inadvertently omitted from the 1979 cost report. (Tr. 272; Petitioner's Exhibits 18, 19) The expenses for the 1979 audit are also at issue in these proceedings. Travel and Expense The Department disallowed $821 in fiscal year 1978 because the expense was considered personal. Petitioner does not challenge $247 of this adjustment. (Petitioner's Exhibit 4) A portion of this expense is related to the expenses incurred by Mr. Littler to go to Washington, D.C., to participate in what was primarily a lobbying effort. This was not for the benefit of the patients or to increase the professional skills of Littler. Each administrator who is licensed by the State of Florida must attend a certain number of seminars every year as a condition of licensure. Mrs. Forrer and Littler registered and participated in the Miami seminar to expand their knowledge and to maintain their nursing home administrators' licenses. Mr. Jordan admitted that he erred in disallowing $157 for Mrs. Forrer's hotel room on this trip. Littler's room expense for this trip was $170. No travel expense was validated. (Tr. 188, 189, 291) Littler attended a seminar in Atlanta on cost reporting sponsored by the University of Pennsylvania. His American Express invoices contain a record of certain expenses which he incurred while attending this seminar. This was an activity related to Littler's professional qualification and to the business operations of CCC. The travel and room expense were $206. (Tr. 191; Petitioner's Exhibit 14) Mrs. Forrer's and Littler's expenses for the trips to Miami and Atlanta are $533. Other exhibits include expenses not mentioned in Petitioner's proposed recommended order. It is assumed that the Petitioner has abandoned those claims, and no findings are made regarding them. Travel and Expense In fiscal year 1979, the Department disallowed $113 as an expense that was not actually spent in that year. Petitioner asserts that the $113 was refunded in 1980, and the 1980 expenses reduced by that amount. This is based upon the testimony of the facility's accountant at pages 275 and 276. The effect of the accounting treatment was to reduce the 1980 expenses by $113. The result is that the Department deducted the $113 in 1979, and the accountant deducted the $113 again in 1980.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, the following is recommended: The adjustment to Cantrell's salary should be reduced from $25,277 to $19,956; The adjustment to Mrs. Forrer's salary of $1,915 in 1979, and of $2,109 in 1980, should be rescinded; The adjustment for drug expenses of $1,894 should not be altered; The adjustment of $4,714 for rental of a Pontiac Grand Prix in 1978 and 1979 should be rescinded; The adjustment of $295 for depreciation of the camper should not be altered; The adjustment of $210 for advertisements should be reduced by $125, the cost of the aerial photograph; The adjustment of $272 for utility expense should be rescinded; The adjustment of $2,000 for rentals should not be altered; The adjustment of $380 for gasoline expense should be reduced by $247; The adjustment of $1,061 for professional services should be rescinded unless other grounds exist to deny an amendment of the previous year's report; The adjustment of $821 for travel and expense should be reduced by $533; and The adjustment of $113 for travel in 1979 should be rescinded unless other grounds exist to deny an amendment of the previous year's report. DONE and RECOMMENDED this 16th day of February, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 16th day of February, 1983. COPIES FURNISHED: Karen L. Goldsmith, Esquire Michael J. Bittman, Esquire Day Building, Suite 610 605 East Robinson Street Post Office Box 1980 Orlando, Florida 32802 Joseph L. Shields, Esquire Office of Audit and Quality Control Services Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301 David H. Pingree, Secretary Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Whether Respondent’s nursing home license should be disciplined, and whether Respondent’s nursing home license should be changed from a Standard license to a Conditional license.
Findings Of Fact Bayside Manor is a licensed nursing home located in Pensacola, Florida. On June 14, 2003, Resident No. 4 climbed out of her bed without assistance to go to the bathroom. She fell to the floor and sustained a bruise to her forehead and lacerations to her cheek and chin. Her Foley catheter was pulled out with the bulb still inflated. The fall occurred shortly after Resident No. 4 had finished eating. No staff was in her room when she climbed out of her bed. She was found on her side on the floor by staff. According to the June 14 Bayside’s Nurses' notes, Resident No. 4 stated, "Oh, I was going to the bathroom." In the hour prior to her fall, Resident No. 4 was seen at least three times by nursing assistants, which was more than appropriate monitoring for Resident No. 4. On June 20, 2002, AHCA conducted a survey of Bayside Manor’s facility. In its survey, AHCA found one alleged deficiency relating to Resident No. 4. The surveyor believed that Resident No. 4 should have been reassessed for falls by the facility and, based upon that reassessment, offered additional assistive devices and/or increased supervision. The surveyor also believed that the certified nursing assistant had left Resident No. 4 alone with the side rails to her bed down. The deficiency was cited under Tag F-324. Tag F-324 requires a facility to ensure that “[e]ach resident receives adequate supervision and assistance devices to prevent accidents.” The deficiency was classified as a Class II deficiency. On October 9, 2001, and January 14, 2002, Bayside Manor assessed Resident No. 4 as having a high risk for falls, scoring 9 on a scale where scores of 10 or higher constitute a high risk. In addition to the June 14, 2002, fall noted above, Resident No. 4 had recent falls on November 30, 2001, April 19, 2002, and May 12, 2002. Resident No. 4's diagnoses included end-stage congestive heart failure and cognitive impairment. She had periods of confusion, refused to call for assistance, and had poor safety awareness. Resident No. 4 had been referred to hospice for palliative care. Because hospice care is given when a resident is close to death, care focuses on comfort of the resident rather than aggressive care. Additionally, the resident frequently asked to be toileted even though she had a catheter inserted. She frequently attempted to toilet herself without staff assistance, which in the past had led to her falls. Often her desire to urinate did not coincide with her actual need to urinate. She was capable of feeding herself and did not require assistance with feeding. Bayside Manor addressed Resident No. 4’s high risk of falls by providing medication which eliminated bladder spasms that might increase her desire to urinate and medication to alleviate her anxiety over her desire to urinate. She was placed on the facility’s falling stars program which alerts staff to her high risk for falls and requires that staff check on her every hour. The usual standard for supervision in a nursing home is to check on residents every two hours. The facility also provided Resident No. 4 with a variety of devices to reduce her risk of falling or any injuries sustained from a fall. These devices included a lap buddy, a criss-cross belt, a roll belt while in bed, a low bed, and a body alarm. Some of the devices were discontinued because they were inappropriate for Resident No. 4. In December 2001, the roll belt was discontinued after Resident No. 4, while attempting to get out of bed, became entangled in the roll belt and strangled herself with it. On May 6, 2002, the low bed and fall mat were discontinued for Resident No. 4. The doctor ordered Resident No. 4 be placed in a bed with full side rails. The doctor discontinued the low bed because it could not be raised to a position that would help alleviate fluid build-up in Resident No. 4’s lungs caused by Resident No. 4’s congestive heart failure. Discontinuance of the low bed was also requested by hospice staff and the resident’s daughter to afford the resident more comfort in a raised bed. The fact that placement in a regular raised bed potentially could result in an increase in the seriousness of injury from a fall from that bed was obvious to any reasonable person. The May 5, 2002, nurses’ notes indicate that there was a discussion with Resident No. 4’s daughter about returning the resident to a high bed for comfort. On balance, the placement of Resident No. 4 in a regular raised bed was medically warranted, as well as reasonable. The placement in a regular bed with side rails was not noted directly in the care plan but was contained in the doctor’s orders and was well known by all the facility’s staff. There was no evidence that directly mentioned the regular bed in the formal care plan was required or that the failure to do so had any consequence to Resident No. 4’s care. Even a lack of documentation clearly would not constitute a Class II deficiency. Moreover, the bed with side rails was not ordered to protect or prevent falls by Resident No. 4. The facility does not consider a bed with side rails of any sort to be a device which assists in the prevention of falls. Indeed rails often cause falls or increase the injury from a fall. In this case, the rails were ordered so that the resident could more easily position herself in the bed to maintain a comfortable position. Again, the decision to place Resident No. 4 in a regular raised bed with side rails was reasonable. The focus is on comfort as opposed to aggressive care for hospice residents. The evidence did not demonstrate that Bayside Manor failed to adequately supervise or provide assistive devices to Resident No. 4. There was no evidence that reassessment would have shown Resident No. 4 to be at any higher risk for falls, since she was already rated as a high risk for falls. Nor did the evidence show that reassessment would have changed any of the care given to Resident No. 4 or changed the type bed in which she was most comfortable.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order restoring the Respondent’s licensure status to Standard and dismissing the Administrative Complaint. DONE AND ENTERED this 3rd day of June, 2003, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of June, 2003. COPIES FURNISHED: Joanna Daniels, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Donna H. Stinson, Esquire R. Davis Thomas, Jr., Esquire Broad & Cassel 215 South Monroe Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
The Issue In an attachment to the joint prehearing stipulation filed on February 18, 1996, the parties describe their resolution of all issues in these consolidated cases with the exception of this issue: Whether the Agency for Health Care Administration, through audit adjustments, properly removed working capital interest from the patient care cost centers and reallocated those costs to the operating cost centers of the individual providers.
Findings Of Fact Petitioners are individual nursing homes participating in the Florida Medicaid program. They are separate providers in the program but are all owned by Florida Convalescent Centers, Inc. (FCC). Respondent, State of Florida Agency for Health Care Administration (AHCA) is the agency responsible for administration and implementation of the Medicaid program in Florida. Title XIX of the Social Security Act (Title XIX) is the matching entitlement program, now known as Medicaid, which provides medical assistance for eligible low-income persons. Within broad federal guidelines, states are given the authority to establish eligibility standards, define the scope of services, establish reimbursement rates and generally administer their own program. One requirement of Title XIX is that a state plan for medical assistance must provide for payment of nursing facility services through rates that "are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities..." (42 USC 1396(a)). Florida's reimbursement methodology has been approved by the Health Care Financing Administration of the U.S. Department of Health and Human Services. Florida's Medicaid reimbursement methodology requires that a provider file an annual cost report which summarizes all costs by cost centers for a given reporting period. The three Medicaid cost centers are: operating costs, patient care costs and property costs, which are defined, respectively, in the Florida Title XIX Long Term Care Reimbursement Plan: Medicaid Nursing Home Operating Costs: [Those costs not directly related to patient care or property costs], such as administrative, plant operation, laundry and housekeeping costs. Return on equity or use allowance costs are not included in operating costs. Medicaid Nursing Home Patient Care Costs: Those costs [directly] attributed to nursing services, dietary costs, and other costs [directly] related to patient care, such as activity costs, social services, and all medically-ordered therapies. Medicaid Nursing Home Property Costs: Those costs related to the ownership or leasing of a nursing home. Such costs may include property taxes, insurance, interest and depreciation, or rent. [Petitioners' exhibit no. 5, page 85, emphasis added] The historical costs reported by the provider are used to compute a separate per-patient day cost for each of the three cost centers. The per diem rates are then added to create a comprehensive per diem rate which is used to prospectively compensate the provider. For example, a provider's costs for 1992, reported in its 1992 cost report, are used to set the 1993 per diem rate. Among the regulatory objectives of the reimbursement plan is cost containment. To further this objective, the plan provides for cost ceilings and targets in each of the cost centers. The ceilings and targets are derived from data collected from all providers in Florida's Medicaid program. The ceiling rates are the maximum amount any provider can be reimbursed, based on its geographical location and size. Provider reimbursement is also limited by facility-specific target rates based on historical data and rates for the individual facility. Year to year increases in the per diems for the three cost centers are permitted to reflect the inflation rate above an established base rate. In compliance with the reporting requirements of the reimbursement plan, FCC's in-house controller, Charles Wysocki, prepared Petitioners' 1992 cost reports. They were then reviewed and signed by a Florida CPA, Joseph Mitchell. In the cost reports, on Schedule C, Mr. Wysocki with the concurrence of Mr. Mitchell, reclassified working capital interest from the property cost center to the patient care and operating cost centers based on the ratio of the total salaries in each to the total salaries for the provider facility. This salary-based allocation method was selected because salaries account for the single largest expenditure in a nursing home, generally 65 - 70 percent, and as high as 86 percent of the total costs for some FCC providers. As part of AHCA's routine review, the agency engaged a nationally- recognized accounting firm, DeLoitte and Touche, to audit the Medicaid cost reports submitted by FCC. The purpose of the review and audits is to assure that only allowable costs are included, that the costs have been properly classified and that the data used to calculate future reimbursement is correct in all material respects. The treatment of working capital interest was one of several issues identified in the audit of FCC's 1992 cost report, but it is the only issue remaining now for resolution. At the time of the audit DeLoitte and Touche was under the impression that the working capital loans were "related party" loans which are treated differently for reimbursement purposes than loans that are "arms-length" between non-related parties. The working capital interest cost was disallowed altogether. After review by the agency an audit report was issued with citations to the authorities supporting the adjustment in the audit. Later in the audit review process the agency conceded that the problem was not "related party" loans and that the working capital interest was a reimbursable cost. However, the agency disputed the allocation of the interest and adjusted Petitioners' cost reports to allocate the interest to the operating cost center. There are three authorities for treatment of Florida Medicaid nursing home costs. The parties concur that the first and primary authority is the Florida Title XIX Long Term Care Reimbursement Plan (Plan). If an issue is not addressed in the Plan, then the next resort is to the Provider Reimbursement manual (HIM-15). Finally, if the issue remains unresolved, providers and the Agency rely on Generally Accepted Accounting Principles (GAAP). The Plan does not specifically address allocation of working capital interest, although it does provide some guidance in the definitions described in paragraph 4, above, and in this language: B. Setting prospective reimbursement per diems and ceilings. The department shall: * * * 4. Determine allowable Medicaid property costs, patient care costs, and return on equity or use allowance. Patient care costs include those costs directly attributable to nursing services, dietary costs, activity costs, social services costs, and all medically- ordered therapies. All other costs, exclusive of property cost and return on equity or use allowance costs, are considered operating costs. . . . (Petitioners' exhibit no. 5, page 45) The guidance found in HIM-15 is much more specific. For example, Section 2806.2 provides: Costs Excluded from Capital-Related Costs. This section sets forth some of the costs that are excluded from capital-related costs. To the extent that these costs are allowable they may be included in determining each provider's operating costs. Exclusions from capital-related costs include: * * * c. interest expense incurred to borrow working capital [for working expenses]; * * * [emphasis added] HIM-15, Section 2338, cited in the agency's audit report, provides: C. Interest expense incurred on funds borrowed for operating expenses must be allocated with administrative and general expenses. . . . Definitions found in Section 2102 of HIM-15 establish that reasonable costs take into account both direct and indirect costs of providers of services and that costs related to patient care include administrative costs. Costs that are neither directly nor indirectly related to patient care are not allowable in computing reimbursable costs. (Petitioners' exhibit number 2, Sections 2102.1, 2102.2 and 2102.3). The loans which generated the interest costs at issue here were obtained by the provider facilities to meet operating shortfalls. When a new facility opens there are almost all the expenses of a fully-staffed nursing home, but until the patient beds are filled, there is insufficient revenue to cover the expenses. FCC's methodology of allocating working capital interest based on salaries resulted in allocating those interest costs to both the patient care cost center and operating cost center, with most going to the patient care cost center. For example, 86 percent of salaries on the cost report for Palm Garden of Ocala for the year ending 12/31/92 were in the patient care cost center, so 86 percent of the working capital interest was allocated to patient care rather than the operating cost center. There is a substantial incentive for providers to shift costs from one center to another to avoid the ceilings. If the provider's reimbursement for operating cost is capped, but its patient care cost is not yet at the ceiling, then shifting costs from operating to patient care increases the total reimbursement to the provider. From the record it is impossible to determine exactly how the loan funds were expended by each provider. The monies were deposited into the general operating accounts of the providers and were used to cover operating shortfalls. In 1989, 1990 and 1991, the three years preceding the year at issue, the agency permitted FCC to allocate working capital interest in the same manner that FCC allocated that cost in its 1992 cost reports. However, the three preceding years' treatment was the outcome of a settlement agreement between the parties wherein each gave up some issues. Except in the context of settlement, the agency has steadfastly maintained its position that working capital interest must be allocated in the operating cost center. Prior cases with other providers have involved adjustments to move the working capital interest costs from the property cost center rather than from the patient care cost center.
Recommendation Based on the foregoing it is hereby: RECOMMENDED: That the Agency for Health Care Administration enter its Final Order adopting the parties' settlement agreement and approving the agency's audit adjustments related to allocation of working capital interest. DONE and RECOMMENDED this 26th day of April, 1996, in Tallahassee, Florida. MARY CLARK, 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 26th day of April, 1996. APPENDIX TO RECOMMENDED ORDER, CASES NOS. 94-6893 - 94-6906 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Adopted in paragraph 8. Rejected as unnecessary. 3.-4. Adopted in part in paragraph 11, otherwise rejected as irrelevant or immaterial. 5.-7. Adopted in part in paragraph 9, otherwise rejected as irrelevant or immaterial. 8. Rejected as irrelevant or immaterial. 9.-10. Adopted in substance in paragraph 18. Rejected as unnecessary. Rejected as unnecessary and argument. Rejected as contrary to the weight of evidence. Rejected as contrary to the weight of evidence. Moreover, it is immaterial since HIM-15 and the Plan are applied, not general principles in this case. Adopted in paragraph 13. Adopted in paragraph 4. Adopted in paragraph 5. Adopted in paragraph 6. Adopted in paragraph 7. 20.-23. Adopted in part in paragraph 14, otherwise rejected as immaterial. Rejected as unnecessary. Adopted in part in paragraph 17, otherwise rejected as unnecessary. 26.-31. Rejected as immaterial. 32. Adopted in part in paragraph 16, otherwise rejected as unnecessary. 33.-34. Rejected as unnecessary or immaterial. The interest addressed in paragraphs A and B is distinguished from working capital interest. Rejected as an interpretation not supported by the greater weight of evidence. Rejected as immaterial. Addressed in conclusion of law, paragraph 29. 38.-39. Rejected as argument and contrary to the greater weight of evidence. Rejected as argument or unnecessary. Rejected as argument. 42.-45. Rejected as immaterial. It is unnecessary to apply GAAP here. Rejected as unnecessary. Adopted in paragraph 22. 48.-51. Rejected as argument that is unsupported by the weight of evidence. 52. Adopted in summary in paragraph 20. 53.-54. Rejected as immaterial. Respondent's Proposed Findings of Fact. Adopted in paragraphs 1 and 2. Adopted in paragraph 4. Adopted in paragraph 9. Adopted in paragraph 10. 5.-6. Adopted in substance in paragraph 11. Adopted in paragraph 13. Adopted in substance in paragraphs 14 and 15. Adopted in paragraph 16. Addressed in conclusion of law, paragraph 29. Adopted in paragraph 15. Adopted in part in paragraph 6, otherwise rejected as unnecessary. Adopted in part in paragraph 4. Rejected as unnecessary. 15.-18. Adopted in paragraph 4. Adopted in substance in paragraph 6. Rejected as unnecessary. COPIES FURNISHED: Gerald B. Sternstein, Esquire RUDEN, BARNETT, MCCLOSKY, SMITH SHUSTER & RUSSELL, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Harold M. Knowles, Esquire KNOWLES & RANDOLPH 528 East Park Avenue Tallahassee, Florida 32301 Jerome Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Ft. Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact The Agency for Health Care Administration ("AHCA") is responsible for the administration of the Certificate of Need ("CON") program in Florida, pursuant to Section 408.034, Florida Statutes (1992 supp.) AHCA initially published a need for 313 community nursing home beds in the 16 county area encompassing District III on April 17, 1992, which was subsequently corrected and published as a revised total of 321 net bed need for District III. On September 17, 1992, with a cover letter signed by Elizabeth Dudek, AHCA issued notice that it intended to issue: CON No. 6983P to Unicare Health Facilities, Inc. ("Unicare"), for construction of a 60 bed community nursing home in Hernando County; CON No. 6985 to Beverly Enterprises-Florida, Inc. ("Beverly"), for the construction of a 120-bed community nursing home in Hernando County; and CON No. 6986 to Life Care Centers of America, Inc. ("Life Care"), for the construction of a 120-bed community nursing home in Hernando County; and, intended to deny, among others: CON 6983 to Unicare for the construction of a 120-bed community nursing home in Hernando County; CON No. 6989 to Lake Port Properties ("Lake Port") for either the conversion of 60 sheltered nursing beds to 60 community nursing home beds or the conversion of the 60 beds and the construction of an additional 60 community nursing beds to be located in Lake County; CON No. 6991 to Unicare for the addition of 51 community nursing home beds to New Horizon Rehabilitation Center, in Marion County; CON No. 6992 to Ocala Health Care Associates, G.P., for the addition of 60 community nursing home beds to TimberRidge Nursing and Rehabilitation Center in Marion County; and CON No. 6993 to Southern Medical Associates, Inc. (Southern Medical) for the addition of 60 community nursing beds to Palatka Health Care Center in Putnam County. Prior to the hearing, the parties stipulated that all participants have standing, except Heartland. Additional stipulations, accepted during the hearing, in the absence of a representative for Ocala Health Care Associates, are as follows: subsection 408.035 (1)(m) is not in dispute; proposed project costs and design are reasonable; the applicants' Schedules 1, notes and assumptions, the schematics, and the narrative responses to all of objective 4 in each application are in evidence, not in dispute, and are reasonable. The parties also stipulated to the approval of CON 6991 for Unicare to add 51 beds to its New Horizon Rehabilitation Center in Marion County, and the denial of CONS 6983 and 6983P to Unicare. LIFE CARE Life Care Centers of America, Inc. ("Life Care"), a privately-held corporation established in 1976, by its sole shareholder, Forrest L. Preston, owns, operates or manages 131 nursing homes and 14 retirement centers in 26 states. In Florida, Life Care manages four facilities with superior licenses, located in Altamonte Springs, Punta Gorda, and two in Palm Beach County, Lakeside and Darcy Hall. Life Care also owns, as well as operates, the facility in Altamonte Springs. Life Care owns and operates 28 nursing homes through leases, 6 or 7 of which are capital leases. Under the terms of the capital leases, Life Care is responsible for capital expenditures and projects. Life Care is not responsible for capital expenditures and projects at approximately 91 of its 131 facilities. Life Care proposes to construct and operate a 120-bed nursing home in the southwest section of Hernando County, near Spring Hill, and to finance the total project cost of approximately $5 1/2 million from bank loans. Life Care has not identified a specific site for its facility. Life Care has proposed to accept a CON condition to provide 75 percent of its patient days to Medicaid beneficiaries, to establish a separate 20-bed wing for Alzheimers and related dementia ("ARD") residents, and to provide intravenous therapy, inpatient and outpatient rehabilitative therapy, wound care and adult day care. Life Care's proposed Medicaid condition exceeds the 1991 district average of 73.78 percent, and is consistent with its experience in Altamonte Springs of up to 73 percent Medicaid without a CON condition, and over 80 percent Medicaid in West Palm Beach. The Medicaid percentages indicate that Life Care will offer mainly traditional nursing home services. BEVERLY Beverly Enterprises, Inc., the ultimate corporate parent of the applicant, owns 830 nursing homes, with a total of 89,000 beds in 35 states. Beverly Enterprises-Florida, Inc., the applicant in this proceeding, is a wholly-owned subsidiary of Beverly California Corporation, a wholly owned subsidiary of Beverly Enterprises, Inc. Beverly Enterprises-Florida ("Beverly") owns 41 of the total 68 nursing homes owned in Florida by Beverly-related companies. Of the 40 nursing homes owned by Beverly at the time the application was filed, 31 had superior licenses. Three facilities had moratoria within the preceding 36 months, one a facility built in 1929, another with a two-week moratorium which is now licensed superior, and a third which is still conditional while physical plant improvements are underway. See, Finding of Facts 28, infra. Beverly proposes to construct a 120-bed nursing home in Spring Hill, Hernando County, for $5,213,077, with its CON conditioned on the provision of 74 percent of annual patient days to Medicaid residents and a $10,000 grant for gerontology research at Hernando-Pasco Community College. Beverly proposes four beds for a ventilator-dependent unit, two beds for respite care, 20 beds on a separate wing for ARD residents, and to establish an adult care program. Beverly commits to group patients with ARD or other losses in cognitive functioning together in a 20-bed area, to offer subacute rehabilitative care in a 24 bed Medicare skilled nursing unit, and to provide intravenous therapy. Beverly also intends to establish a dedicated four-bed ventilator unit staffed with at least one registered nurse with a minimum of two years experience in critical care continuously on duty, a separately staffed adult day care program, and respite care. Beverly's would be the first ventilator beds other than in hospitals and the first licensed adult day care program in Hernando County. One of Beverly's existing Florida nursing homes is Eastbrooke which is also located in Hernando County, approximately 10 miles from the proposed Spring Hill site. Beverly expects its experienced personnel from Eastbrooke to train and assist in establishing Spring Hill. Beverly has identified a site for the Spring Hill facility which is across the street from an acute care hospital. Spring Hill is in southern Hernando County, near Pasco County. UNICARE By stipulation of the parties, the Unicare Health Facilities, Inc. ("Unicare") proposal to add 51 beds to New Horizon Rehabilitation Center in Marion County was recommended for approval on May 12, 1993. Unicare withdrew its requests for the approval of CONs 6983P and 6983 in Hernando County. As a result, the parties agreed that the number of beds needed was reduced from 321 beds to 270 beds. LAKE PORT Lake Port is a 60-bed licensed skilled nursing center, with a superior rating, located at the Lake Port Properties Continuing Care Retirement Community, in Leesburg, Lake County. Lake Port Properties is a partnership, for which Johnson Simmons Company serves as the managing general partner. The Lake Port community includes independent living residences, a 66-bed adult congregate living facility, and the 60 sheltered nursing beds. Among the services provided are post-operative care and orthopedic rehabilitative therapy for patients who have had knee or hip replacement surgery or shoulder injuries, neurological therapies for stroke injuries, pain management, subacute, open wound and respite care, and hospice services. Lake Port currently has 11 Medicare certified beds, and has had from 8 to 22 Medicare certified beds at a time. Lake Port has a contract with Hospice of Lake-Sumter County to provide interdisciplinary services to approximately five hospice residents a year. Rehabilitation services are also provided by contract at Lake Port. Lake Port has a relatively high volume of residents who are discharged home following intensive therapy within an average of three weeks. As an indicator of the intensity of therapeutic services, Lake Port has provided 26 percent Medicare, while the Lake/Sumter planning area average was 7.2 percent. Life Care projected a Medicare rate of 6.7 percent, Beverly projected 10 percent Medicare, and the Hernando County average is 9.3 percent. In this proceeding, Lake Port proposes either to convert the existing 60 skilled nursing beds to 60 community nursing beds at no cost, or the 60 bed conversion and the approval to construct an additional 60 community nursing home beds, for a total 120-bed community facility at a cost of $1.4 million. Lake Port proposes to have either CON, if approved, conditioned on the provision of 29.2 percent and 33.81 percent Medicaid, in years one and two, and respite, subacute, and intense rehabilitative care. Historically, the payer mix has included 25-30 percent Medicare and 30-35 percent Medicaid. All of the proposed services are provided currently at Lake Port. The effect of the change in licensure categories is to eliminate the requirement that the facility serve exclusively the retirement community residents after five years in operation, or after August 1995. Lake Port would still be obligated to provide nursing home care to Lake Port community residents at discounted costs, pursuant to the terms of their continuing care contracts. Occupancy levels at Lake Port exceed 95 percent, with 7 to 8 percent of patient days attributable to retirement community, and the remainder to patients in a service area which includes West Lake and Sumter Counties. Lake Port asserts that its financial viability depends on its ability to continue to serve all residents of its service area. SOUTHERN MEDICAL Southern Medical Associates, Inc. ("Southern Medical") is a Florida corporation which owns two nursing homes, one with 60 beds in Okaloosa County and one with 120 beds in Palatka, in Putnam County. Palatka Health Care Center opened with 60 beds in May 1989, added 60 beds in November 1990. Both nursing homes have superior licenses and are managed and staffed by National HealthCorp, L.P., which was founded in 1971, and manages 86 nursing homes, twenty-nine of those in Florida. The management fee is 6 percent of net revenues. In its application for CON number 6993, Southern Medical proposes to add 60 beds to the existing 120-bed nursing home, known as Palatka Health Care Center. Occupancy levels at the Palatka Center ranged between 96 and 99 percent in 1992-1993. Total project costs of $2.1 million will be financed by or through National HealthCorp. Southern Medical proposes that its CON be conditioned on the establishment of a 20-bed distinct Alzheimer's wing and the provision of 74 percent of total patient days to Medicaid patients. Southern Medical provides rehabilitation services in a 14-bed Medicare certified unit, antibiotic intravenous therapy, hospice and respite care. It exceeds the 73 percent Medicaid condition of its CON. SUBSECTION 408.035(1)(a) - NEED IN RELATION TO STATE AND LOCAL HEALTH PLANS The Florida State Health Plan includes 12 preferences to consider in reviewing nursing home CON applications, most of which overlap statutory review criteria in Section 408.035, Florida Statutes. Preference 1 encourages more nursing homes beds in subdistricts with 90 percent or higher occupancy in existing beds. District 3 is not subdistricted, but its nursing home bed occupancy rate was 91 percent in 1991. Therefore, all applicants for nursing homes in District 3 meet the preference. District 3 has been divided into planning areas by the local health council. The applications filed in this proceeding coincide with the planning areas for Hernando, Putnam, and Lake/Sumter Counties. In 1991, occupancy rates averaged 92 percent for Hernando, 96 percent for Putnam, and 93 percent for Lake/Sumter planning areas. Each applicant meets preference 1 using planning areas as substitutes for subdistricts. Preference 2 favors applicants whose Medicaid commitments equal or exceed the subdistrict-wide average. In the absence of subdistricts, the district wide average is used, which is 73.78 percent. Beverly's 74 percent commitment, Life Care's 75 percent commitment, and Southern Medical's 74 percent commitment, entitle them to be favored under preference 2. In addition, Beverly cites its 76.9 percent Medicaid patient days in 1991 at Eastbrooke, but it has failed to achieve its Medicaid commitment at one Florida nursing home in Cape Coral. Lake Port committed to provide a minimum of 33.81 percent Medicaid patient days and argued that it meets the exception to the preference for providing multi-level care. As described in the 1989 Florida State Health Plan, multi-level health systems offer a continuum of care which may range from acute care and ambulatory surgery centers to home health and education, including traditional nursing care. Special emphasis is placed on short-term intensive rehabilitation programs. Although Lake Port's proposal includes some of the features of a multi-level system, such as post-operative rehabilitative therapy and respite care, the Medicaid exception is inappropriate for Lake Port, because the same services are also proposed by Beverly and Southern Medical. See, also, Section 408.035(1)(n), Florida Statutes. Preference 3 relates to providing specialized services, including acquired immune deficiency syndrome ("AIDS") services to residents, ARD residents, and the mentally ill. This preference is met by Beverly, Life Care, and SMA, particularly for ARD patients for which all three applicants proposed to establish separate 20-bed units. The preference is also met by Lake Port, particularly with its emphasis on specialized, intense rehabilitative services. See, also Subsection 408.205(1)(f), Florida Statutes. Preference 4 supports applicants proposing to provide a "continuum of services to community residents," including respite and adult day care. Beverly and Life Care propose to offer both respite and adult day care. Lake Port and Southern Medical propose to provide respite and hospice care. Preference 5, for the construction of facilities which provide maximum comfort and quality of care, was stipulated as being met by all the parties. The applicants also stipulated that project costs and construction plans are reasonable. See, also, Subsection 408.035(1)(m),(2)(a) and (2)(c), Florida Statutes. Preference 6 is met by all of the applicants: . . . proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. Life Care, Beverly and Southern Medical propose to offer specialized services to ARD residents. Lake Port and Southern Medical emphasize physical rehabilitation. All of the applicants meet the requirements for preference 6. Preference 7 is for applicants whose charges do not exceed the highest Medicaid per diem rate in the subdistrict, which, for District 3, is $74.05, or $93.49 inflated at 6 percent to 1996. Life Care Care's proposed Medicaid charges are $93.69 for year 1, and $94.46 for year 2. Beverly projected that the average Medicaid per diem rate in the subdistrict will be $93.49 in 1996, its charge will be $95.00, but it will expect Medicaid reimbursement to be $93.30 for that year. Lake Port projected proposed charges to Medicaid patients as $90 to $93.92 in year one and $93 to $97.37 in year two, for the full 120 beds or the partial 60 beds, respectively. Southern Medical's Medicaid charges will be $90.22 in year one and $94.28 in year two. Preference 8 applies to applicants with a history of providing superior resident care programs, as indicated by licensure ratings. Of Beverly's 40 Florida facilities, 31 held superior licenses at the time the application was filed. Of the nine Beverly nursing homes with conditional ratings, six are now superior. Renovations or, in the case of one facility built in 1929, construction of a replacement building, are underway at the three others. Life Care, Southern Medical and Lake Port have histories of consistently superior license ratings. See, also, Subsection 408.035(1)(c), Florida Statutes. Preference 9 favors applicants proposing staffing levels exceeding minimum standards. Due to the ventilator, intravenous and rehabilitative services proposed, Beverly will staff in excess of that required by the state, with at least one registered nurse with a minimum of two years experience on all shifts and a full-time physical therapist. It intends to rely on its current Hernando County facility, Eastbrooke's relationship with Hernando-Pasco Community College, for recruitment and training of staff, although Beverly has not opened a new nursing home in Florida since 1987. Life Care similarly intends to rely on a CON approved facility in adjacent Citrus County. Southern Medical employs St. Augustine Vocational College students who are certified nurse assistants training to become licensed practical nurses, and licensed practical nurses training to become registered nurses are employed at Palatka, which also has internships for health sciences students from the University of North Florida. Its occupational, speech and physical therapists are full-time employees. Lake Port's staffing ratios will also exceed the minimums, in order to provide intensive rehabilitative therapies. See, also Subsection 408.035(1)(h), Florida Statutes. Each applicant meets preference 10 based on their proposed or current use of a variety of professional disciplines. See, Finding of Fact 29. Preference 11 seeks to ensure resident rights and privacy as well as implementing plans for quality assurance and discharge planning. All of the applicants were shown to follow well established residents' rights and privacy policies, and to have effective quality assurance programs. Pre-admission screening programs include discharge planning. Beverly has the most highly standardized corporate structure of incentives to maintain quality. Preference 12 relates to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the District. Average costs in District III are expected to be $54.79 for resident care and $13.97 for administrative overhead by 1996. Life Care expects resident care costs of $51.97 a day and administrative costs of $17.43 a day. Beverly projects its resident care to cost $61.89, with administrative costs of $8.86. Southern Medical proposes administrative costs of $19.88 per patient day and patient care costs of $46.23 per patient day. Lake Port's administrative costs are expected to be $27.80 for 60 beds or $22.12 for 120 beds, with patient care costs of $43.04 for 60 beds or $45.08 for 120 beds. Beverly, best meets the preference and expects enhanced economics and efficiency from combining some overhead for the operation of two nursing homes in Hernando County. Life Care, however, notes that its proposal enhances competition in view of the existence of one Beverly facility in Hernando County. See, Subsection 408.035(1)(e),(1)(h) and (1)(l), Florida Statutes, which also relate to costs, resources, and competition. District III includes 16 west central Florida counties, from Hamilton, Columbia, Union Bradford and Putnam in the North to Hernando, Sumter and Lake in the south. The allocation factors in the plan for District III are prepared by the North Central Florida Health Planning Council, the local health council for the district. The district has not been subdivided by agency rule. Using its planning areas, the local health council has given priority rankings for applicants in certain areas of the district. Dixie, Lafayette and Union Counties, which have no nursing homes, are favored by the local plan. If, as in this case, there are no applicants from these counties, Hernando should be favored, followed by Putnam County. No priority was given to Lake County. The council also quantified bed need by planning area for the January 1995 planning horizon, with additional beds needed, ranging from 120 to 180 in Hernando, and up to 60 in Putnam. The parties agree generally that the council may establish planning areas in the discharge of its duties, but they disagree whether the establishment of upper limits, or caps in numeric need by planning area is authorized by law. Section 408.034, Florida Statutes, requires a uniform need methodology, which the agency has established by enacting the nursing home rule, Rule 59C-1.036(1)(c), Florida Administrative Code. Once the agency determines numeric need for a district and the district driving time standard, the local plan cannot alter these determinations. The local plan also includes certain fundamental principles for the allocation of new beds: (1) to promote geographic access, (2) to consider the locations of at-risk population need factors, and (3) to increase supply based on demand. In order of importance, the local plan lists three allocation factors (1) for counties without nursing homes, (2) for new nursing homes 20 miles or 25 minutes drive from existing or approved beds, and (3) for locations without approved beds and with existing nursing homes averaging occupancy levels at least 95 percent for the most recent six month or 90 percent for the most recent 12 months. With respect to the specific allocation factors, Life Care, Beverly, Southern Medical and Lake Port are in areas with over 90 percent average occupancy within a 20 mile radius. Life Care, Beverly and Southern Medical are proposing to establish facilities in areas of greater need than that in the area of Lake Port. Hernando and Putnam Counties also have lower ratios of nursing home beds to population than Lake County. The local health council's determination of the greatest need in Hernando County, was confirmed by expert testimony, based on analyzing licensed and approved beds, occupancy rates, distribution of population ages 65 and older, and 75 and older, and most importantly, projected growth of population 65 and older, and of 75 and older. The bed to population ratio for Hernando was, in 1992, 15.5 percent for 65 and older, and 44.9 percent for the population 75 and older, both of which are below the ratios for any other planning areas in the District. The projected increase in population 75 and older for the state is 12 percent, in contrast to the projected increase of 38 percent for Hernando County. Expert testimony for Beverly supported the addition of up to 300 beds in Hernando County to bring Hernando County's bed distribution in line with that of the entire district. The only approved provider in the county, Hernando Health Care, has surrendered its CON to add 18 nursing home beds in Hernando County. On the contrary, Heartland's expert calculated numeric need of only 119 additional beds in Hernando County. AHCA, however, gave no consideration to the effect on occupancy, fill- up rates, or financial feasibility of it preliminarily approving all new beds in Hernando County. The experience was compared, by Southern Medical's expert, to that in Clay County, in which 555 beds were 95 percent occupied, prior to the opening of two 120-bed facilities, one in December 1989, and the other in April 1990. At the end of the first year of operation, the facility that opened first was 48.5 percent occupied, the second was 21.7 percent occupied, and district occupancy was 77.7 percent. At the end of the second year, the rates were 81 percent, 55.6 percent, and 85.6 percent. However, by 1992, the nursing homes in that subdistrict averaged 93 percent occupancy. Opponents to the AHCA proposal to locate all new facilities in Hernando County, contend that the bed-to- population ratio or "parity" approach used to support the approval of 240 beds in that county does not take into account demographic variables among the counties in the district. While the bed-to-population ratio is not reliable in and of itself, alternative analyses for the determination of the location of greatest need within the district support the same conclusions. Those analyses relied upon current nursing homes occupancy levels, poverty, and population migration trends and available alternatives to distinguish among the various proposed locations. Based on occupancy levels, the District III counties of greatest need for additional beds are Putnam, Lake and Sumter, and Hernando, in that order. Putnam County residents are being placed in facilities outside the county due to the lack of available nursing home beds. In terms of poverty level and mortality levels, the figures for Putnam and Marion Counties indicated their populations were less healthy than those in Hernando and Lake. Hernando had 6.05 percent of its over 65 population, which is 85 and older, as compared to 9.34 percent in Lake, 8 percent in Putnam, and 8.28 percent as the district average. Hernando and Putnam Counties also had lower percentages of people 75 and older than did Lake and Marion Counties. ALTERNATIVES AND EXISTING NURSING HOMES IN DISTRICT 3 Subsections 408.035(1)(b) and (d) require consideration of other like and existing facilities in the district, as well as health care services which are alternatives to nursing homes. Currently, there are 4 nursing homes in Hernando County, and 12 in Lake County. In Putnam County, there are 3 nursing homes and 15 additional "swing beds," which may be used for acute care or long term care, approved for Putnam Community Hospital. Those beds are not available to serve Medicaid patients and are not included on the inventory of community nursing home beds. In the 511 existing nursing home beds in Hernando, there is an average daily census of 45 beds occupied by residents originating from other counties, while 23 Hernando residents constituted the average daily census leaving the County. Hernando cannot expect to retain in-migrating patients with the development of nursing homes in those residents' counties of origin, particularly, Citrus and Pasco. Given the decrease in nursing home patient days form 1991 to 1992, there is also no reason to expect any significant increase in use rate for the population in Hernando. The most compelling support for need in Hernando County is that the rate of growth of its over 75 population, which is more than three times that of the State. Putnam County has the lowest migration and a greater demand for nursing home services for the population age 85 and older. Putnam County nursing homes exceed 95 percent occupancy. Lake County area nursing homes were 93 percent occupied for the same period of time, and with the relinquishment of an approved CON for 60 beds by Leesburg Regional Hospital, that occupancy rate rises to approximately 95 percent. The award to Leesburg Regional established a need for 60 beds in Lake County, but there is also an approved CON for a 120-bed facility in Mount Dora. According to Lake Port's expert witnesses, the Mount Dora nursing home will not alleviate the need for beds in western Lake County. That facility, owned by the Adventist health group, is expected to be a referral facility from the nearby Adventist Hospital in Orlando and Sanford. Based on the alternative considerations of occupancy levels, poverty and morality rates, the need for additional beds in Putnam County is greater than the need in Lake County. Projected population increases and the limited alternatives also support the conclusion that a greater need exists in Hernando than in Lake County. Heartland of Brooksville ("Heartland"), is an existing 120-bed community nursing home in Brooksville, which is licensed superior. Heartland contends that the virtually simultaneous establishment of both Beverly and Life Care will adversely impact Heartland, and make it difficult for the new nursing homes to meet their projected utilizations. The trend of twice as many people migrating to, as there are leaving Hernando County for nursing home services, will be reversed as more nursing homes are established in surrounding counties. See, Finding of Fact 45. Heartland reasonably expects gradually to lose up to 30 percent of its residents who came from the Spring Hill area, where Beverly and Life Care intend to build new nursing homes. Heartland also reasonably expects to lose Medicare patients among the group from Spring Hill. Medicare residents average 9.3 percent of the total mix in the county, but account for 15 percent of the patient mix at Heartland. Heartland will be adversely affected for at least the first two years if both Life Care and Beverly are approved. See, Finding of Fact 40, supra. FINANCIAL FEASIBILITY Heartland, Southern Medical and Lake Port assert that Beverly will be successful in Hernando County, but that Life Care will not. Beverly is already established in the county, will provide services not currently available in nursing homes, and will open its facility seven months before Life Care. Life Care projected a net loss of $589,042 in year one, and a net gain of $254,991 in year two of operation. Life Care's projections fail to consider the company's 6.5 percent management fee, income taxes, and Medicaid reimbursement rate ceilings. By contrast to the other proposals and to the Hernando County average of 9.3 percent, Life Care is relying on a payor mix of only 6.7 percent Medicare, the group for which competition will be most intense. That mix parallels its Florida experience, which has historically allowed it to achieve a profit margin of 16 to 22 percent of net revenues in the third year of operation. Life Care's experience and audited financial statements support its contention that it can borrow essentially 100 percent of the funds necessary to support the project and complete the proposed project, a debt arrangement it has successfully used in the past, without defaulting on loans. Life Care's resources are also potentially subject to a $12 to $18 million judgment, due to litigation which is on appeal. Life Care has a contingency fund of $8 million to satisfy the judgment and has sufficient equity in its properties to pay the balance through refinancing. The deficiencies in Life Care's pro forma and its potential liabilities are off-set by the size and strength of the company, and its Hernando County project is financially feasible in the short and long terms. Beverly projects opening at Spring Hill 15 1/2 months after issuance of a CON, reaching 90 percent utilization within 15 months of opening. Beverly reasonably expects an after tax profit of $239,489 in the second year of operation. Beverly estimates project costs of $5.2 million, financed by the parent corporation, Beverly-California. Beverly-California has from $35 to 45 million available to contribute a 40 percent ($2 million) equity investment, and a $35 million loan commitment from which it will draw the balance to finance the project. Southern Medical has a letter of interest for financing of the total project costs of $2.1 million at 12 percent rate of interest by National HealthCorp. During the construction period, Southern Medical estimates that the existing 120 beds will remain 94 percent full, and that the new beds once open will fill at a rate of 10 percent a month, which is consistent with the experience of the management company, National HealthCorp. Southern Medical's actual experience in Palatka was, in fact, better. The first 60 beds were filled after 5 months while the additional 60 beds were filled in 7 to 8 months. Projected revenues of $290,000 during construction, $323,000 after year one, and $488,000 after year two are reasonable. Southern Medical's balance sheet shows short term debt of approximately $1.4 million attributable to the construction of the Okaloosa nursing home. Although Southern Medical secured a $3 million loan commitment for the Okaloosa facility, it has drawn from that account $473,000. That debt will be refinanced and recategorized as long term debt. Southern Medical's project is financially feasible in the short and long term, based on its actual experience in the existing 120-bed facility. Lake Port has the financial resources to construct 60 additional beds for $1.4 million. Lake Port's proposed conversion of the licensure category for its existing 60 beds is at no cost, except for approximately $37,000 in filing and consultants fees. In its third year of operation, Lake Port has achieved 97 percent occupancy. At present, delays of up to a week may be experienced in transfering patients from acute care hospitals to nursing homes in the Leesburg area. From October to May, due to the influx of northerners, beds are generally not available in the Leesburg area of western Lake and Sumter Counties. Lake Port's projections of occupancy and its financial ability to complete either 60-bed conversion and/or 60-bed addition make either proposal financially feasible in the short or long term.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That AHCA issue CON 6985 to Beverly Enterprises-Florida, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the operation of a 4-bed ventilator-dependent unit, 2 beds for respite care, an adult day care program, and a 20-bed separate unit for residents with Alzheimer's and related dementia. That AHCA issue CON 6986 to Life Care Centers of America, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of a minimum of 75 percent of total annual patient days to Medicaid residents, the operation of a 20-bed dedicated wing for residents with Alzheimer's and related dementia, and the operation of an adult day care. That AHCA issue CON 6993 to Southern Medical Associates, Inc. for the addition of 60 community nursing home beds at Palatka Health Care Center in Putnam County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the establishment of a 20-bed district Alzheimer's wing. That AHCA deny CON 6989P and CON 6989 to Lake Port Properties. DONE AND ENTERED this 20th day of July, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER 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 21st day of July, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6656 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast-Florida, Inc.'s Proposed Findings of Fact. 1. Accepted in Preliminary Statement and Finding of Fact 3. 2-9. Accepted in or subordinate to Findings of Fact 8-10, 24 and 25. 10. Accepted in Preliminary Statement. 11-15. Accepted in relevant part in Finding of Fact 33. 16-19. Accepted in part in Findings of Fact 9, 20-21, 37-39. 20-23. Accepted in Findings of Fact 19-32. 24-30. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 31. Accepted in Findings of Fact 19-32. 32-38. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 39-42. Accepted in or subordinate to Finding of Fact 28. 43-48. Accepted in or subordinate to Findings of Fact 29-31. 49. Accepted in or subordinate to Findings of Fact 29-30. 50-56. Accepted in or subordinate to Findings of Fact 50-51. 57-62. Accepted in or subordinate to Findings of Fact 29 or 30. 63-64 Accepted in or subordinate to Findings of Fact 32, 39 and 46-47. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. 67-68. Accepted in Findings of Fact 9-10. 69. Subordinate to Finding of Fact 6. 70-71. Accepted in or subordinate to Findings of Fact 6, 7 and 10. 72-75. Accepted in or subordinate to Findings of Fact 5-7, 8-10 and 48-51. 76. Accepted in Finding of Fact 32. 77-79. Accepted in or subordinate to Findings of Fact 48-49. Petitioner, Southern Medical's, Proposed Findings of Fact 1-2. Accepted in Finding of Fact 16. Accepted in Finding of Fact 34. Accepted in Findings of Fact 16 and 17. 5-14. Subordinate to preliminary statement. 15. Accepted in Finding of Fact 2. 16-17. Accepted in Finding of Fact 20. 18-19. Accepted in Finding of Fact 17. 20-22. Rejected in conclusions of law 4. 23. Accepted in Finding of Fact 36. 24-41. Accepted in or subordinate to Findings of Fact 21 and 33-45. Accepted in Finding of Fact 19. Accepted in Findings of Fact 20-21. Accepted in Finding of Fact 22. Accepted in Finding of Fact 23. Accepted in Finding of Fact 24. Accepted in Finding of Fact 25. Accepted in Finding of Fact 26. Accepted in Finding of Fact 27. Accepted in Finding of Fact 28. Accepted in Finding of Fact 29. Accepted in Finding of Fact 30. Accepted in Finding of Fact 31. Accepted in part in Finding of Fact 32. Accepted in part in Findings of Fact 19-32. 56-57. Accepted in part in Findings of Fact 43-45. 58-60. Accepted in or subordinate to Finding of Fact 28. 61-62. Accepted in Findings of Fact 18, 22 and 28. Subordinate to Finding of Fact 28. Accepted in Finding of Fact 28. 65-69. Accepted in or Subordinate to Finding of Fact 34 and 43-45. 70-72. Accepted in Findings of Fact 17-18 and 22-23. 73-74. Accepted in Findings of Fact 29-30. 75. Accepted in Finding of Fact 24. 76-77. Accepted in Finding of Fact 29. 78-96. Accepted in Findings of Fact 52-53. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. Rejected in Findings of Fact 34-39 and 45. 100-101. Rejected in Findings of Fact 41-42 and 45. 102. Accepted in relevant part in Findings of Fact 43-45. 103-109. Rejected in relevant part and accepted in relevant part in Findings of Fact 41-45. 110-112. Rejected in Finding of Fact 45. Accepted in Findings of Fact 48 and 49. Rejected in Finding of Fact 45. Accepted in conclusions of law 60. 116-120. Accepted in relevant part in Findings of Fact 48 and 49. 121. Rejected in Finding of Fact 5. 122-123. Rejected in Findings of Fact 39 and 40. 124-125. Issue not addressed at hearing. Accepted in relevant part in Finding of Fact 48. Rejected in Finding of Fact 29. Petitioner, HCR Limited Partnership I d/b/a Heartland of Brooksville's Proposed Findings of Fact Accepted in part in Findings of Fact 8-10. Accepted in part in Findings of Fact 5-7. Accepted in part in Findings of Fact 12-14. Accepted in part in Findings of Fact 16-18. Accepted in Preliminary Statement and Findings of Fact 2 and 11. Accepted in Finding of Fact 40. Accepted in Finding of Fact 33. Accepted in Finding of Fact 34. 9-16. Accepted in Findings of Fact 34-38. 17. Accepted in Findings of Fact 21 and 43. 19-22. Accepted in Findings of Fact 21, 42 and 43. 23-33. Accepted in Findings of Fact 38, 42 and 43. Rejected in Finding of Fact 45. Accepted in Finding of Fact 39. 36-41. Accepted in or Subordinate to Findings of Fact 45 and 47. 42-44. Rejected in Finding of Fact 5. 45. Accepted in Findings of Fact 45, 48 and 49. Petitioner, Lake Port Properties's Proposed Findings of Fact Accepted in Finding of Fact 2. Accepted in Finding of Fact 3. Accepted in Findings of Fact 3 and 40. Accepted in preliminary statement. Accepted in Findings of Fact 4 and last sentence rejected in preliminary statement. Accepted in Preliminary Statement. 7-28. Accepted in Findings of Fact 12-15. 29. Rejected in Finding of Fact 45. 30-34. Accepted in Findings of Fact 39-43 and 46. 35. Rejected in Finding of Fact 46. 36-38. Accepted in Findings of Fact 12-15. 39-42. Facts accepted, conclusions rejected in Findings of Fact 44-46. 43-47. Accepted in Findings of Fact 33-39. 48. Rejected in Finding of Fact 39. 49-54. Conclusion in first sentence rejected in Finding of Fact 39. Facts accepted in Findings of Facts 39-45. 55-60. Not solely relied upon but not disregarded. Facts generally accepted in Findings of Fact 39-45. 61-74. Accepted in part and rejected in part in Findings of Fact 19-32. 75-82. Accepted in part in Findings of Fact 33-38. 83-93. Accepted in or subordinate to Findings of Fact 28-29. 94-100. Accepted in Findings of Fact 54-55. 101-103. Accepted in Findings of Fact 15 and 54. 104. Accepted in Finding of Fact 31. 105-106. Accepted in Finding of Fact 22. 107-111. Rejected first sentence in Findings of Fact 39 and 40. Remainder of 107-111 accepted in Findings of Fact 8-10 and 19-38. 112-113. Conclusion rejected in Findings of Fact 45, 48, and 49. 114-117. Accepted in Findings of Fact 45, 48 and 49. Rejected in Findings of Fact 45, 48 and 49. Accepted in Finding of Fact 6. 120-121. Subordinate to Finding of Fact 7. 122-125. Accepted in Findings of Fact 7 and 48. 126-130. Rejected in Finding of Fact 5. Respondent, Life Care Centers of America, Inc.'s, Proposed Findings of Fact. 1-9. Accepted in Findings of Fact 33-43. 10-12. Accepted in Findings of Fact 12-15. 13. Rejected in Finding of Fact 12. 14(a-d)-20. Accepted in Findings of Fact 33-40. 21(a-d). Accepted in Findings of Fact 19-32. 22. Accepted in Finding of Fact 34. 23-28. Accepted in Findings of Fact 44-47. Accepted in Finding of Fact 7. Accepted in Finding of Fact 39. Accepted in part or subordinate to Findings of Fact 43-45. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 17. 34-40. Accepted in relevant part or subordinate to Findings of Fact 5-7. 41(a-c). Accepted in Findings of Fact 8-10 and 29. 42. Rejected in relevant part in Finding of Fact 12. 43-45. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Rejected in Findings of Fact 44. 47-48. Subordinate to Finding of Fact 45. 49-50. Accepted in Findings of Fact 5-7. 51-54. Subordinate to Finding of Fact 29. 55-62. Accepted in Findings of Fact 48-49. 63-64. Accepted in Finding of Fact 29. 65-69. Accepted in Findings of Fact 48-49. Subordinate to Findings of Fact 54-55. Subordinate to Finding of Fact 52. Subordinate to Finding of Fact 29. 73-74. Accepted. 75. Accepted in Finding of Fact 4. 76-77. Accepted in Findings of Fact 40-43. 78-79. Accepted in Finding of Fact 29. Subordinate to Finding of Fact 52. Accepted in Finding of Fact 25. 82-85. Accepted in or subordinate to Finding of Fact 22. Subordinate to Finding of Fact 47. Accepted in conclusions of law. Accepted in preliminary statement. Issue not reached. Subordinate to preliminary statement. Conclusion rejected in Finding of Fact 16. Respondent, AHCA's Proposed Findings of Fact Accepted in or subordinate to preliminary statement and Findings of Fact 1-3. Accepted in preliminary statement. Accepted in Findings of Fact 2 and 21 and conclusions of law 66. Accepted in Finding of Fact 2 and 21. Accepted in Finding of Fact 2 and 4. Accepted in preliminary statement and Finding of Fact 3. Accepted in Findings of Fact 12-15. Accepted in Findings of Fact 16-18.8. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 5-7. Subordinate to preliminary statement and Finding of Fact 3. Accepted in relevant part in Findings of Fact 5-7 and 19-33. Relevant as to availability due to occupancy ratio in Findings of Fact 37-45. Accepted in Finding of Fact 28. Accepted in Findings of Fact 48-49. Accepted, except first sentence in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 19-20 and 44. Accepted in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 50-51. Accepted in Findings of Fact 33-39. Conclusions rejected in Findings of Fact 19-32. Accepted facts in 19-20 and 44. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 52-53. Accepted in Findings of Fact 12-15 and 19-32. Rejected in Findings of Fact 19 and 20. Accepted in Finding of Fact 28. Accepted in Findings of Fact 54 and 55. COPIES FURNISHED: Douglas L. Manheimer, Attorney Dennis LaRosa, Attorney Broad & Cassel 215 South Monroe Street Post Office Box 11300 Tallahassee, Florida 32302 Alfred W. Clark, Attorney at Law Post Office Box 623 Tallahassee, Florida 32308 James C. Hauser, Attorney Lachlin Waldoch, Attorney Messer, Vickers, Caparello, Madsen Lewis, Goldman & Metz, P.a. Post Office Box 1876 Tallahassee, Florida 32301 Gary Anton, Attorney Stowell, Anton & Kraemer Post Office Box 11059 Tallahassee, Florida 32302 Edward Labrador, Attorney Richard Patterson, Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 W. David Watkins, Attorney Robert Downey, Attorney Oretel, Hoffman, Fernandez, et al. 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 R. Bruce McKibben, Jr., Attorney Pennington & Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32302 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Attorney Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether Respondent violated the duly promulgated rules of the Department of Health and Rehabilitative Services by designating and continuing to designate the same person as the Assistant Administrator and the Director of Nursing of the Bonifay Nursing Home, Inc., after having been cited for such deficiency and allowed sufficient time to correct the deficiency.
Findings Of Fact An Administrative Complaint was filed by Petitioner Department of Health and Rehabilitative Services on October 27, 1980 notifying Respondent Bonifay Nursing Home, Inc., a skilled nursing care home, that Petitioner intended to impose a civil penalty of $100 for violating duly promulgated rules by designating the same person to act as Assistant Administrator and Director of Nursing of the nursing home. At the formal administrative hearing the Administrator admitted that he served more than one health facility, that at all times pertinent to the hearing the acting Assistant Nursing Home Administrator was also designated as the Director of Nursing, and that she was the only registered nurse on duty. It was admitted that no change had been made after the inspector for the Petitioner Department had called attention to this alleged violation until after the time period allowed for correcting this situation had expired and after the Petitioner had informed Respondent it intended to impose a $100 civil penalty. In mitigation Respondent presented testimony and adduced evidence showing that as the owner and operator of the nursing home he had made an effort to employ registered nurses at the home and that on the date of hearing the nursing home was in compliance with the statutes, rules and regulations. It was evident to the Hearing Officer that the nursing home serves a need in the community and that the residents appreciate the service. Petitioner Department submitted proposed findings of fact, memorandum of law and a proposed recommended order, which were considered in the writing of this order. Respondent submitted a memorandum. To the extent the proposed findings of fact have not been adopted in or are inconsistent with factual findings in this order, they have been specifically rejected as being irrelevant or not having been supported by the evidence.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends that a final order be entered by the Petitioner assessing an administrative fine not to exceed $50. DONE and ORDERED this 10th day of February, 1982, in Tallahassee, Leon County, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 1982. COPIES FURNISHED: John L. Pearce, Esquire Department of Health and Rehabilitative Services 2639 North Monroe Street, Suite 200-A Tallahassee, Florida 32301 Mr. J. E. Speed, Administrator Bonifay Nursing Home 108 Wagner Road Bonifay, Florida 32425 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue In their Prehearing Stipulation the original parties described the background and general nature of the controversy as follows: In January, 1985, HCR filed an application for certificate of need to develop a new 120 bed nursing home in Collier County, Florida. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceeding, and the proceeding was forwarded to the Division of Administrative Hearings. By application supplement dated May 15, 1986, HCR has reduced this application to a 90-bed new nursing home. The nursing home will provide skilled nursing care to Alzheimer's patients and to patients discharged from hospitals in need of additional intensive nursing care, in addition to the typical nursing home patient. HRS has denied HCR's application because, pursuant to Rule 10-5.11(21), Florida Administrative Code there is insufficient need for the additional nursing home beds proposed by HCR. In the Prehearing Statement the Petitioner described its position as follows: HCR contends that there is an identifiable need for a nursing home in Collier County, Florida, to serve the needs of patients who suffer from Alzheimer's disease and similar disorders and patients who are discharged from hospitals with a continuing need for a high level of intensive care, often provided through sophisticated technical or mechanical means. Existing nursing homes in Collier County do not offer adequate facilities for such patients and refuse admission to such patients. These patients have experienced an inability to obtain such care in Collier County. HCR's proposed nursing home will provide needed care which is otherwise unavailable and inaccessible in Collier County. The application meets all criteria relevant to approval of a certificate of need. HCR further contends that the nursing home formula shows a need for additional nursing home beds in Collier County. Previously, in circumstances where a need for additional nursing home services has been identified, HRS has approved certificates of need even though the nursing home formula showed a need for zero additional beds or a small number of additional beds. In the Prehearing Statement the Respondent described its position as follows: HRS contends, pursuant to the formula contained in Rule 10-5.11(21), Florida Administrative Code, that there is insufficient need in the January, 1988 planning horizon demonstrated for additional nursing home beds in Collier County to warrant approval of a-new nursing home. Therefore, HRS contends that the HCR application should be denied. Further in its original application, HCR did not identify services proposed specially for Alzheimer's disease patients or "sub-acute" patients. HCR did not and has not complied with provision of Chapter 10-5.11(21)(b 10., Florida Administrative Code, regarding mitigated circumstances. The Respondent also identified the following as an issue of fact to be litigated. "HRS contends that it should be determined whether HCR's supplement dated May 15, 1986, is a significant change in scope for which the application was originally submitted." Because of its late intervention into this case, the Intervenor's position is not described in the Prehearing Statement. In general, the Intervenor urges denial of the application on the same grounds as those advanced by the Respondent. The Intervenor did not attempt to become a party to this case until the morning of the second day of the formal hearing. Respondent had no objection to the Petition To Intervene. The original Petitioner objected on the grounds that the effort at intervention was untimely and that the Intervenor was without standing. The objection to intervention was overruled and the Intervenor was granted party status subject to taking the case as it found it. Accordingly, intervention having been granted at the conclusion of the evidentiary presentation of the other parties, the Intervenor was not permitted to call any witnesses or offer any exhibits. Intervenor's participation before the Division of Administrative Hearings was limited to an opportunity to file proposed findings of fact and conclusions of law. Following the hearing a transcript of proceedings was filed on July 8, 1986. Thereafter, all parties filed Proposed Recommended Orders containing proposed findings of fact. Careful consideration has been given to all of the Proposed Recommended Orders in the formulation of this Recommended Order. A specific ruling on all proposed findings of fact proposed by all parties is contained in the Appendix which is attached to and incorporated into this Recommended Order. The Petitioner also filed an unopposed post-hearing motion requesting that its name be corrected in the style of this case. The motion is granted.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Findings based on admitted facts The parties agree that HCR properly filed a letter of intent and application for certificate of need for a new nursing home to be located in Collier County. The application was reviewed by HRS in the ordinary course of its activities, and HRS initially denied the application. HRS continues to oppose issuance of a CON because (a) there is an insufficient need, pursuant to Rule 10-5.11(21), Florida Administrative Code, for additional nursing home beds to warrant approval of a new nursing home [Section 381.494(6)(c)1., Florida Statutes]; (b) the long term financial feasibility and economic impact of the proposal is questionable because of low occupancy being experienced by existing nursing homes "Section 381.494(6)(c)9., Florida Statutes]. HRS proposes no other basis for denial of the application. The parties agree that HCR meets all criteria for a certificate of need, with the exception of those two criteria listed in the immediately foregoing paragraph relating to need and financial feasibility/economic impact (relevant to low occupancy), which HRS contends have not been met. The parties agree that HCR would provide good quality care to patients, that the project would be financially feasible if the occupancy projections asserted by HCR were obtained, that the costs and methods of proposed construction are appropriate and reasonable, and that the proposed facility would be adequately available to underserved population groups. The rest of the findings In January 1985, HCR filed an application for a certificate of need to develop a new 120-bed nursing home facility in Collier County, Florida. The original application described a traditional approach to nursing home care. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceedings and this proceeding ensued. By application supplement dated May 15, 1986, HCR made certain changes to its original application. These changes included reducing the size of the proposed nursing home from 120 to go beds and changing the-concept of the nursing home from a traditional nursing home to one specifically designed to address the treatment of Alzheimer's disease patients and sub-acute care patients. The supplement specifically provided that 30 of the 90 proposed beds would be "set aside to offer a therapeutic environment for patients with Alzheimer's or similar disorders." The project description in the original application contained no such provision. HCR's proposed facility would consist of 90 nursing home beds, 30 assisted living beds, and an adult day care facility located adjacent to the nursing home portion of the facility. Those portions of the facility relating to assisted living and adult day care do not require certificate of need review. The estimated cost of the portion of the project which requires certificate of need review is $3.5 million. HCR estimates that approximately 33 1/3 per cent of the patients in the facility will be Medicaid reimbursed. It is proposed that 30 of the 90 nursing home beds be designed and staffed specifically to provide care and treatment necessary to meet the special needs of certain patients who suffer from Alzheimer's disease and dementia and exhibit need for care different from that found in the typical nursing home. It is proposed that another 30-bed wing be staffed and equipped to provide sub-acute, high-tech services such as ventilator, I.V. therapy, pulmonary aids, tube feeding, hyperalimentation and other forms of care more intensive than those commonly found in a nursing home and necessary for the care of patients discharged from hospitals and patients in the last stages of Alzheimer's disease. The remaining 30-bed wing would be devoted to traditional nursing home care. HRS has adopted a rule which establishes a methodology for estimating the numeric need for additional nursing home beds within the Department's districts or subdistricts. This methodology is set out in Rule 10-5.11(21), Florida Administrative Code. This rule determines historic bed rates and projects those bed rates to a three-year planning horizon. Allocation to a subdistrict such as Collier County is adjusted by existing occupancy in the subdistrict and the subdistrict's percentage of beds in relationship to the total number of beds in the district. Additional beds normally are not authorized if there is no need for beds as calculated under the rule. HRS calculated need utilizing current population estimates for January 1986 and projected need for the population estimated for January 1988, arriving at a need of approximately 16 additional nursing home beds for the January 1988 planning horizon. HCR projected need to the January 1989 planning horizon and projected a numeric need of approximately 38 additional nursing home beds. There are no applicants for additional nursing home beds in the January 1989 planning horizon (batching cycle). Alzheimer's disease is a primary degenerative disease of the central nervous system which results in a breakdown of the nerve cells in the brain. The disease is progressive, in that it begins subtly, often with forgetfulness or simple personality changes, and ultimately results in death following a phase in which the patient is bedridden and totally dependent upon others for survival. The cause of the disease is not known. The disease is much more common in the older age groups and is very common in the southwest Florida area. (However, nothing in the evidence in this case suggests that Alzheimer's disease is more common in southwest Florida than in other parts of the state.) There is no known cure for Alzheimer's disease. Alzheimer's disease patients are characterized by such symptoms as memory loss, communication problems, difficulty understanding, confusion, disorientation, inability to recognize care givers, waking at night, wandering, inability to socialize appropriately, and incontinence. The progress of the disease can be divided into stages. During the initial stage, the patients will display forgetfulness and subtle personality changes. As the disease progresses, the patients encounter increasing difficulty performing more than simple tasks, tend to be more emotional, become more confused, encounter difficulty with concentration and retaining thoughts, and often display poor judgment and a denial of the significance of their actions. In the next stage, the patients begin to require assistance to survive. Forgetfulness and disorientation increase and wandering patients are often unable to find their way. The patients become incontinent, experience sleep disturbances, become restless at night, and wander during the day, leading to considerable family distraction and difficulties for the care givers. The patients encounter difficulty recognizing family members and often become paranoid and fearful of those family members within the house. violence and aggressive outbursts may occur. Finally, the patients progress to a stage in which they are totally inattentive to their features physical needs, requiring total care. These Patients are totally incontinent, experience frequent falls, develop seizures, and eventually become bedridden, going into a fetal position and becoming totally unable to provide any care for themselves. Traditionally, most nursing homes offer no special programs for patients who suffer from Alzheimer's disease and mix these patients with other patients in the nursing home. There is no nursing home in Collier County which provides program specifically designed for the treatment of Alzheimer's disease patients. The nearest nursing home where such care can be found is in Venice, some 92 miles from Naples. The total facility proposed by HCR is designed to provide a continum of care for Alzheimer's disease patients and their family care givers. The adult day care portion of the facility would enable family members to place Alzheimer's disease patients in day care for a portion of the day in order for the family care givers to maintain employment, perform normal household chores, and find relief from the extremely demanding task of constantly supervising and caring for an Alzheimer's disease victim. The adult day care portion of the facility would be designed and staffed to provide a therapeutic program for the Alzheimer's disease patient and the patient's family. The assisted living portion of the facility would allow an Alzheimer's disease patient in the early stages of the disease to live in an environment, with his or her spouse if desired, where immediate care and routine supervision at a level lower than that required by a nursing home patient would be provided. Thirty nursing home patient and who do not display those characteristics which are disruptive to non-Alzheimer's patients, such as wandering, combativeness, and incontinence. For those Alzheimer's patients who should not be mixed with other nursing home patients because of their disruptive routines and who require unique programs and facility design features to meet their specific needs, a 30-bed wing would be set aside. Finally, for Alzheimer's patients in the final stages of the disease who require total care and are bedridden, and for patients discharged from local hospitals who require high-tech services, a 30-bed wing designed, staffed and equipped to provide such services would be set aside. The facility would provide a high level of staffing to meet the demanding, personal care needs of Alzheimer's patients and would provide 24-hour nursing supervision in that portion of the facility dedicated to intensive services for the bedridden and high-tech patient. The design and equipment of the proposed facility are particularly addressed to the needs of Alzheimer's disease patients. Physically, the facility would allow patients freedom of movement both inside the facility and in an outside courtyard with porches, but the facility would be sufficiently secure to prevent the patient from wandering away from the facility. There would be amenities such as therapeutic kitchens which would allow patients still able to cook to do so. Fixtures in the facility would be designed so that the Alzheimer's disease patients could easily identify the functions of fixtures such as wastebaskets, toilets, and sinks. Features such as low frequency sound systems, lever door knobs, square instead of round tables, barrier-free doorways, special floor coverings, appropriate labeling, automatic bathroom lighting, and provisions for seating small groups of patients together would all provide the special care required by the Alzheimer's patient. The concept of a separate unit for Alzheimer's disease patients is a new one, growing out of increased medical awareness of the disease. The proposed unit would be a prototype for the Petitioner. There are four nursing homes in Collier County and 413 licensed nursing home beds. There are no approved but unlicensed nursing home beds in Collier County. At the time that HRS initially reviewed the HCR application, Collier County nursing homes were reporting an average occupancy of approximately 70 percent. At the time of the hearing, average occupancy of existing nursing home beds in Collier County was 83.5 per cent. Existing nursing home beds in Collier County are underutilized and there are a number of nursing home beds available to the public. Also there are available alternatives to nursing homes in Collier County. HCR has projected reaching 95 per cent occupancy within one year of opening. This projection seems overly optimistic and unwarranted by prior history, as only one existing facility has an occupancy rate that high. HCR's occupancy projections are based on assumptions that the future growth will be similar to that experienced between 7/1/85 and 12/1/85. But more recent data shows that growth has been decreasing and that there was no growth for the most recent period prior to the hearing. If projected occupancy is not met, projected revenues will not be realized, and projections of financial feasibility will not materialize. The record in this case does not contain evidence of patients' need for nursing home care documented by the attending physicians' plans of care or orders, assessments performed by the staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. The local health plan (Policy 1, priority 4) requires an occupancy level of at least 90 per cent before new nursing homes can be approved. The local health plan (Policy 1, priority 6) also provides, "No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility."
Recommendation For all of the foregoing reasons, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order in this case denying the Petitioner's application for a certificate of need to construct either its original proposal or its supplemented proposal. DONE AND ENTERED this 14th day of October, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1986.
Findings Of Fact The controversy Forum Group, Inc. (Forum Group), Hillsborough Healthcare, Ltd. (Hillsborough Healthcare), Health Quest Corporation (Health Quest), and Careage House Healthcare Center (Careage) filed applications for certificates of need for community nursing homes in Hillsborough County, which is a subdistrict of HRS district VI. The applications were filed in the July, 1986, batching cycle, for need in July, 1989, known as the planning horizon. As amended prior to being deemed complete by HRS, Hillsborough Healthcare and Careage sought 120 beds, Health Quest sought 88 beds, and Forum Group sought 60 beds. All of the applications satisfy and are consistent with state and local health plans. The Department's free form preliminary action Ordinarily, the Department's preliminary decision on these applications would have been issued in November or December of 1986. In these cases, the parties were orally advised of the Department's preliminary action in January, 1987, but the state agency action report containing that preliminary decision was not issued until August, 1987. The delay in decision making in this case occurred due to the altered process of free form decision making that was used in this case. Careage filed a number of applications in the July, 1986, batching cycle, in a number of subdistricts. The preliminary review conducted by HRS determined there to be bed need in four of the counties in which Careage had applications: Hillsborough, Polk, Pinellas, and Lee. During free form agency decision making on the applications in this batching cycle, Ms. Marta Hardy was the Deputy Assistant of Regulation and Health Facilities for the Department. T. 1024. Her duties included responsibility to oversee the issuance of certificates of need and develop health planning policies. Id. Ms. Hardy was the direct supervisor of Robert Maryanski, who was the head of the office of community medical facilities, and Robert Sharp, who was the head of the office of comprehensive health planning. T. 1024. Mr. Maryanski was the direct supervisor of Mr. Reid Jaffe who reviewed the applications in Hillsborough county. Preliminary decisions on the applications in this batch were normally due in November, 1986. It was the normal procedure at the Department to review applications for certificates of need in the following manner. First, an employee in the position entitled "medical facilities consultant" reviewed all applications in the batching cycle for a particular district or subdistrict and made recommendations on each application. These recommendations were then reviewed by his supervisor, the medical facilities consultant supervisor. The recommendations of the medical facilities consultant supervisor upon each application then went to Mr. Maryanski. In Hillsborough, Polk, Pinellas, and Lee Counties in the July, 1986, batching cycle, all reviewers found there to be a bed need. In the normal course of business, all reviewers forwarded through Mr. Maryanski and to Ms. Hardy recommendations that did not recommend the award of a certificate of need to Careage in any of these four counties. T. 1057, 1055, 1281-82. Mr. Maryanski told Mr. Jaffe to "find a way" to approve the Careage application in Pinellas County. T. 1283-84. The time of this communication is not in the record. At about the time that Careage applied for certificates of need (August or September, 1986), Ms. Hardy had dinner with the owner of Careage, Mr. Gene Lynn, Mr. Lynn's wife, and Mr. Ralph Haben. T. 1040. At that meeting, the representatives of Careage told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. Mr. Haben is an attorney, and was then representing Careage. T. 1059. Mr. Haben and Ms. Hardy had been friends since the late 1970's, and in August and September, 1986, they had had lunch or dinner together socially four or five times. T. 1041- 49. In December, 1986, after Departmental staff had preliminarily recommended that Careage's applications be disapproved in the four counties in which was there was need, Ms. Hardy determined to ask Robert Sharp to review applications in the four counties. The result of Mr. Sharp's review was to recommend approval of the Careage application in the four counties. That recommendation was approved by Ms. Hardy. Mr. Sharp was responsible for health planning. He normally had nothing to do with review of certificate of need applications, although he had reviewed some hospital applications in the past. T. 1054. Ms. Hardy had come to the conclusion that Careage provided care of good quality. T. 1063. At the time she formed that opinion, Careage did not operate any nursing homes, and had not done so since 1982. Mr. Sharp understood that Ms. Hardy was impressed with Careage, but did not know the basis for such favorable impression. T. 940. Ms. Hardy told Mr. Sharp that she did not believe that the current method of comparative review of applications was adequate, and used Careage as an example of a best qualified applicant that was overlooked by the current method. T. 940. Mr. Sharp developed a method for comparative review of the applications in the batch for Hillsborough County and the other counties. The method has been referred to in the record as a matrix. Mr. Sharp simply selected certain aspects of the applications for comparison. Two types of information were selected: numerically quantified information, and "program characteristics," which called for a determination whether the selected item existed or did not exist in the proposal. The "matrix" also had a narrative for some of the applicants. Mr. Sharp used Careage as the standard of comparison for all other applicants in the comments section. There was no evidence that the items selected by Mr. Sharp were unreasonable or unfair. The items selected appear to be reasonably related to the task of comparing the virtues of the applicants. The items, for the most part, simply are based on information required by the Department in the application form. The matrix was found in September, 1987, to contain numerous factual errors, and the Department issued a revision. H.Q. Ex. 27. Need pursuant to rule 10-5.011(1)(k) Licensed beds in the district (LB) The number of licensed beds in the district (LB) as of June 1, 1986, was at least 5,964. T. 1706. This figure is derived by adding the 5,557 licensed beds shown on the August 25, 1986, semi-annual nursing home census report, H.Q. Ex. 16, to the 407 additional community nursing home beds that has been erroneously classified as sheltered nursing home beds. None of the other testimony credibly establishes this base figure. There is a dispute as to whether 96 additional beds at the Home Association should be considered licensed community nursing home beds as of June 1, 1986. The Home Association was founded in 1899. It is officially recognized that there was no certificate of need requirement in 1899. The Home Association has never received a certificate of need. Thus, it is inferred that the Home Association was never "issued" beds for "nonrestrictive use." At the time that the Home Association was licensed, there was no license category of "sheltered bed. Prior to 1982, there was no statute defining a "sheltered bed." T 1721-22. Thus, prior to 1979, the Home Association was not 1,issued" beds as "sheltered beds" or "for restrictive use". The Home Association is in the district and in the subdistrict, Hillsborough County. The Home Association had 96 beds in 1972, and had the same number on June 1, 1986. On or about August 20, 1986, HRS sent a letter to the Home Association. HQ Ex. 9. The letter stated that HRS records currently identified the Home Association as a "sheltered nursing home/continuing care facility licensed under Chapter 651, F. S.," but that HRS records did not indicate the date of the initial CON. The letter stated that the specific number of beds allocated to community and sheltered nursing home beds were listed below. At the bottom of the letter, HRS listed 96 beds in the column and line identified as current number of sheltered nursing home beds. The Home Association was told to review the data and make changes and return the letter to HRS. It further stated that a failure to respond would be interpreted as approval of the HRS listed bed allocations. The letter then provided four blanks for the Home Association to respond. The first two provided places to show the "corrected number of beds" both on a line identifying such beds as "community nursing home beds," and a line identify such beds as "sheltered nursing home beds." The Home Association left these lines blank. The third blank asked for the certificate of need number and date. The Home Association typed in: "The Home was founded in 1899; no certificate of need was issued." The fourth blank stated: "Sign Here if Corrections Requested." Initials appear in handwriting in that blank. H.Q. Ex. 9. The response of the Home Association was ambiguous. Having signed the fourth blank, thus seemingly communicating a desire to "correct" the form, the Home Association failed to tell HRS whether it wanted to correct the number of beds or the classification of the beds, or some combination thereof. HRS's need expert admitted that the only way one could settle the question would be to call the Home Association. T. 1724. The problem is further compounded by the way in which the letter from HRS was drafted. The letter did not ask the Home Association to provide information concerning the "historical utilization" of the 96 beds at the Home Association, and thus did not collect any information as to "historical utilization." See the last sentence of section 651.118(8), Fla. Stat. (1987). Instead, it told the Home Association that HRS records identified the Home Association as a sheltered nursing home/continuing care facility licensed under chapter 651. It also told the Home Association that "any nursing home bed located in a continuing care facility and not approved specifically as a sheltered nursing home bed and any nursing home bed located in a life care facility prior to 1979 shall be classified as a community nursing home bed." And the letter appeared to allow the Home Association an opportunity to request a "change in status" only if it had been issued a certificate of need as a community nursing home bed after 1979 and before 1982. It may be that when the Home Association wrote back that it had no certificate of need issued, and that it had been in existence since 1899, the Home Association was simply telling HRS that its beds fell in the category of automatically being community nursing home beds because "located in a life care facility prior to 1979." If the Home Association beds are counted as community nursing home beds, then those 96 beds are added to 5,964, and LB is 6,060. Licensed beds in the subdistrict (LBD) On June 1, 1986, there were 2,612 licensed beds (LBD) in the subdistrict, Hillsborough County. If the 96 beds at the Home Association are counted as community nursing home beds, then LBD is 2,708. Current populations (POPC and POPD) Whether POPC and POPD are the populations on January 1, 1986, or July 1, 1986 HRS divides the regulatory function with respect to certificates of need into two program offices. The office of comprehensive health planning (OCMF) is ordinarily responsible for writing the rules and developing the methodologies for the certificate of need program. It is also responsible for writing the state health plan. The office of community medical facilities (OCMF), which is now called the office of community health services and facilities, is normally responsible for making decisions upon applications for certificates of need. T. 929 (The transcript is in error on line 11; it should read OCMF), 930, 936, 1748, 1251. There are exceptions. T. 937 From 1984 through 1986, the office of comprehensive health planning routinely issued semiannual reports in which it calculated the need for community nursing home beds. H.Q. Exs. 12-18. T. 970-971, 1251. In each of these reports, bed need was projected for an established date. In each of these reports, the "current populations" (the base populations from which the need projection was made) were 3.5 years earlier than the date upon which need was projected. H.Q. Exs. 12-18; T. 1253. From 1984 through 1986, notwithstanding the fact that the semiannual report was based upon a 3.5 year period of need projection, the office of community medical facilities sometimes used a 3.0 year period of projection to actually issue certificates of need. T. 1254. That practice was not uniform within the office of community medical facilities. A number of certificate of need applications were issued based upon the calculations of need in the semiannual nursing home report, which used a 3.5 year period of projection. T. 560-561. It is officially recognized that several formal administrative hearings were settled using a 3.5 year period of projection of need. Health Quest Realty d/b/a Regents Park of Sarasota v. Department of Health and Rehabilitative Services, Final Order issued October 25, 1985 (CON number 3278), DOAH case number 84-3389, which was an exhibit in DOAH case number 86-0050, both cases which were before this Hearing Officer; Health Quest Corporation d/b/a Regents Park of Broward v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 2485, DOAH case number 84- 3297. But even that deviation was not uniform. It is officially recognized that in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051, HRS proposed at the formal administrative hearing to use a 2 year period of projection, using 1986 populations as "current" populations, although the applications were filed in 1985, and need was being projected in 1988. See paragraph 18, findings of fact, of that recommended order, which was written by this Hearing Officer. See also T. 1290. It is also officially recognized that in Forum Group, Inc., et al. v. Department of Health and Rehabilitative Services, et al., 8 F.A.L.R. 5438, 5445, para. 15, the Department used January 1986, as the starting date for a projection to July, 1987, an 18 month period of projection. It would serve no useful purpose to review all the other orders in the files of the Division of Administrative Hearings. It may be concluded from the foregoing that the way in which HRS has interpreted the meaning of "current" populations in its nursing home rule in the period from 1984 to 1986 was inconsistent. In fact HRS did not uniformly use a 3.5 year period of projection as now urged by the Petitioners. Since it has been concluded as a matter of law that the values of POPC and POPD must be determined as of July 1, 1986, no findings of fact will be made as to the populations on January 1, 1986. Whether POPC and POPD are determined from the July 1, 1986, or the May 12, 1987 release of Governor's estimates and projections The Governor's estimates and projections of population are prepared by the Bureau of Economic and Business Research and the University of Florida. T. 240. The Governor's estimates are released twice a year. T. 241. A population estimate, such as POPC or POPD, is an educated guess as to current population size. T. 239. A population projection, such as POPA or POPB, is a mathematical prediction of what a future population size will be. T. 240. The Governor's population estimates are based primarily upon actual data collected with respect to residential electric hookups combined with local information about housing mixes and national data about household size, persons per household, and institutional or group populations. T. 240, 242. The information is gathered each year. T. 242. The Governor's population projections are based upon the most recent population estimate projected forward using assumptions about future migration, mortality, and fertility. T. 240, 242. The May 12, 1987, Governor's population estimates and projections were the official Governor's release on the date of the formal administrative hearing, and were then the most current release. T. 241. The May 12, 1987, Governor's population estimates and projections for July 1, 1986, and July 1, 1989, were more accurate than the release by the Governor on July 1, 1986 for the following reasons: The May 12, 1987, projection of populations on July 1, 1989, is more accurate because the projection only attempts to project two years into the future. The July 1, 1986, release tries to project three years into the future. Extrapolation is more accurate over a shorter period of time because the underlying assumptions upon which the extrapolation is based will be assumed to remain constant for a shorter period of time. Stated another way, fewer things typically go wrong with the assumption that assumptions will remain constant over a short period of time rather than a longer period of time. T. 243-244. The May 12, 1987, projection of populations on July 1, 1989, are based upon actual hard data (electric hookups) for July 1, 1986, projected forward. The July 1, 1986, projection of populations for July 1, 1989, was not based upon a population estimate, but was based upon a population projection as to the population on July 1, 1986, which itself was based upon electric hookup data from an earlier period. T. 244. (This is also the reason that the May 12, 1987, estimate of July 1, 1986, populations, is more accurate than the projection of that population released on July 1, 1986.) The May 12, 1987, projection of populations on July 1, 1989, are based more current (actual 1986) figures upon which the extrapolation is made: actual levels of fertility, mortality, and migration for 1986, as well as 1980 through 1985. The July 1, 1986, release did not have this better data available, and had to rely on figures for only 1980 through 1985. T. 244. The district has grown at about 2.9 percent a year from 1980 to 1986. The July 1, 1986, release projects a rate of growth in each year from July 1, 1986, to July 1, 1989 of only 1.6 percent, or only one-half of the actual observed rate. There is no basis to conclude that the district growth rate in the period 1986-1989 will be one-half the rate observed in the prior six years. T. 245. The July 1, 1986, release bases its projection of July 1, 1989, populations upon an extrapolation based in part upon mortality rates from 1980 mortality tables. However, the mortality rates for the age groups involved, ages 65-74 and 75+, have substantially declined since the 1980 tables were compiled. T. 247-248. Elfie Stamm is Supervisor of the HRS Health Care Facilities and Services office. That office is responsible for all HRS health planning activities, including development of regulations for the certificate of need program, issuance of health policies governing the certificate of need program, and development of the state health plan. Ms. Stamm thought that the May 12, 1987, release of Governor's estimates and projections of populations was more accurate than the July 1, 1986, release because it was based on more up-to-date data. F.G. Ex. 15. The effect of selecting the May 12, 1987, release of populations, rather than the July 1, 1986, release upon the net need projected for the subdistrict in July, 1989, by HRS's rule is exceptionally dramatic: if the July 1, 1986, release is used, the net bed need is 143, and if the May 12, 1987, release is used, the net bed need is 300, assuming other factors are held constant (the projection period and the Home Association beds). HQ Ex. 4. Thus, use of the May 12, 1987, release of populations reveals 100 percent more bed need in 1989 than use of the July 1, 1986, release. HRS presented only one justification or basis for its policy of using the July 1, 1986, release of population estimates and projections: those were the most current estimates and projections at the time the applicants filed their applications and subsequently when the agency conducted its review of the applications in the batching cycle and developed its proposed agency action. T. 1709. The July 1, 1986, release of population estimates and projections was not available, however, when the applicants in this batch had to file their letters of intent. T. 1286. Based upon the Governor's estimates of population released on May 12, 1987, the estimated population on July 1, 1986, for age 65-74 (POPC) was 134,968, and for age 75+ (POPD) was 94,402. H.H. Ex. 6. Projected populations on July 1, 1989, POPA and POPB Based upon the Governor's projections of population released on May l2, 1987, the projected population on July 1, 1989, for age 65-74 (POPA) was 149,771, and for age 75+ (POPB) was 108,400. H.H. Ex. 6. The occupancy rate The occupancy rate for the 2,612 licensed community nursing homes within the subdistrict for October, 1985, through March, 1986, was 94.18 percent. T. 1707. If the 96 nursing home beds at the Home Association are counted as licensed community nursing home beds within the subdistrict, the occupancy rate within the subdistrict for October, 1985, through March, 1986, was 94.29 percent for these 2,708 beds. This is derived by averaging the occupancy rate of the Home Association for the six month period, which is 97.225 percent, see T. 1725, and then factoring the two rates together as follows: (97.225 X 96/2708)) + (94.18 X 2612/2708)= 94.29. The date for determining licensed beds and approved beds for purposes of determining net need in the final calculation The number of approved beds was 368 whether one relies upon the date that the supervisor signed the state agency action report, T. 1708, or August 25, 1986, which is the date of the semiannual nursing home census report and bed need allocations, H.Q. Ex. 16. It appears that all parties agree to use of 368 for AB in the formula. See T. 1708, 437; F.G. Ex. 8. Since that is the case, the following findings of fact are made in the event that the Hearing Officer has overlooked evidence on this point in this voluminous record. HRS relies again on incipient policy for the date of determination of the number of approved beds. That policy is to determine the number of approved beds in the subdistrict on the date that the supervisor signs the state agency action report, a date different from the date that licensed beds are determined. T. 1708, 1716. Pursuant to this policy, the date for determining approved beds will vary, but will always be later than the date of determining licensed beds. T. 1291. The basis for this incipient policy was not explained in this record. T. 1698-1711, 1711-1728, 1291-1295, 1746-1764. Mr. Jaffe, the supervisor in this case, first signed the state agency action report in mid-November, 1986. T. 1295. Subsequently, however there were several superseding state agency action reports, and the report signed originally by Mr. Jaffe was never issued. As a result, the last state agency action report in this case was not issued until August 18, 1987, over one year after the initial applications were filed. This was an irregular procedure, and not the way state agency action reports normally are issued. T. 1714. Moreover, the state agency action report issued in August, 1987, did not have a line or signature for the supervisor, Mr. Jaffe, to sign. T. 1292; F.G. Ex. 5. Changes to the application of Forum Group Forum Group's original application for certificate of need in this case is F.G. Ex. 3. It should be noted that this exhibit contains some revisions to tables that were filed by Forum Group before HRS deemed application to be complete, and thus superseded earlier tables in the same exhibit. At the formal administrative hearing, Forum Group submitted an "update" of its application for certificate of need which was prepared about a year after the initial application, as amended, was filed. The update is F.G. Ex. 6. T. 43. Table 7 of both applications contains Forum Group's plan for utilization by class of pay. Table 7 in the original application was for the first year of operation. Table 7 of the update is for the second year of operation. Table 8 of the application is a list of projected patient charges by reimbursement or charge type. Table 8 of the update is significantly different from the original application. Table 8 of the original application, F.G. Ex. 3, listed charges that were consistent with then current charges at other Forum Group facilities. T. 185. The update is for an effective date two years later. Although Forum Group presented evidence that the charges in the updated table 8 were reasonable, T. 189, it claimed that the above increases were solely due to the two year difference in the tables. T. 195. There is also evidence that the revised charges in table 8 was based upon a telephone survey conducted of subdistrict nursing homes three months prior to the formal administrative hearing. Forum Group was unable to provide any evidence as to whether the charges in the updated table 8 were based upon data that was not available to Forum Group when the original table 8 was prepared; moreover, Forum Group did not prove that the data was such that Forum Group could not, and reasonably should not, have been expected to have gathered for its original application. T. 198. The revisions of table 8 were not based upon ordinary inflation. Forum Group assumed in both the original table 8 and the revised table 8 that the inflation rate impact on charges between the first and second year of operation would be only 3.5 percent, T. 199. Forum Group's expert on charges was of the opinion that the inflation rate for expenses would be about 3.5 percent. T. 200-201. The increases in charges shown on table 8 of the update are much greater than expected inflation. For example, the charge for Medicaid ICF semiprivate rooms increased from $50 to $63, an increase of 26 percent. The charge for private pay ICF private rooms increased from $75 to $115, an increase of 53 percent. Table 10 of the application is a projection of patient days and occupancy percentages for each month over the first two years of occupancy. The revision to table 10, F.G. Ex. 6, were prompted by the delay in the case, resulting in an initial opening date two years later. The revisions to table 10 in the update were also based upon the prior experience of Forum Group and a telephone survey of subdistrict nursing homes to obtain more current fillup and occupancy rates. T. 39, 79-80, 84-87. The telephone survey was conducted after the initial application was deemed to be complete. Table 11 of the application sets forth the "manpower" requirements, specifying full time equivalents and annual salaries. Revised table 11 in F.G. Ex. 6 contains changes both in annual salary levels and in FTE's. The dietary supervisor and maintenance supervisor are new positions in the revised table 11, and would be shared with the retirement living facility. These positions could have been reported in the original table 11. T. 164; F.G. Ex. 6. The revised table 11 reports positions for utility workers, positions not in the original application but which could have been reported in the original table 11. T. 166. The revised table 11 has fewer registered nurses and licensed practical nurses than the original application. This change was based upon Forum Group's decision that this new staffing pattern would be more efficient. While the testimony attributed this to a difference in projected occupancy in the first year (95 percent instead of 74.4 percent), this is not a plausible reason for changing the number of RN FTE's from 5.3 to 4.3, or the number of LPN FTE'S from 3.6 to 2.8, since one would expect a need for more nursing at higher occupancy. The revised staffing pattern could have been contained in the original application. T. 166, 170. The increases in salaries reported in the revised table 11 were caused in part by inflation (a later opening date). T. 161-62. The revision in salaries was based upon a survey of salaries conducted a year after the application was filed, T. 162. Considered in the new survey was new information concerning federal requirements for professionals that was estimated to make the professional hiring shortage even worse. Id. It is concluded that the basis for the revisions to the salaries was market data that could not have been available to Forum Group when it filed its original application. Table 25 of the application covers estimated project costs. Revised table 25, F.G. Ex. 6, contains changes of two types: shifts of costs from one accounting line to another, and new estimates of costs based upon a later date of construction. T. 66-67, 91-94. The new estimates of costs were based upon inflation and the current construction experience off Forum Group, both of which would not have been available to Forum Group when it filed its initial application. T. 66-67. The shifts in costs by accounting line (even though one shift was to operating costs), considered alone, did not substantially change the total project cost. T. 91-94. The construction costs contained in the revised table 25, F.G. Ex. 6, are projected to be $1,654,826, which is 12 percent greater than the $1,466,500 originally projected. This new estimate is based upon inflation, current construction experience, and a decision to reduce some less essential space to lower costs. T. 66-67, 1461-65. The inflation rate is estimated to be higher than 3.5 percent in 1990, and the date of commencement of construction is inferred to be two years later than the date assumed in the original application. The revised projection is also more conservative, based upon Forum Group's analysis of current market data. The revised construction cost is thus adequately based upon new data that was not available to Forum Group when it filed its original application. As a result of inflation, Forum Group decided to reduce some space that was less essential. The reduction of space is reflected in revised tables 17 through 20 of F.G. Ex. 6. Forum Group's initial application (F.G. Ex. 3) did not mention or discuss patient treatment plans, patient rights, patient councils, or Alzheimer's programs. It did, however, list 10 special areas of nursing that it would provide, many of which are in the subacute area. See, e.g., ventilator care and compare T. 150. The revised pro forma of operating expenses projects total operating expenses in the first year of $923,153 and $1,256,991 in the second year. F.G. Ex. 6. The original application, as revised before deemed complete, reported total operating expenses of $659,900 and $740,693, respectively, for these same projected years. The new information in the revised pro forma was explained as based upon a projection of higher use by private pay patients and faster fillup, as well as some inflation. T. 202. The change clearly is not explained as a simple matter of inflation, since the increases are about 50 percent in each of the years. T. 201-202. Changes to the application of Health Quest The original Health Quest application is H.Q. Ex. 1, as amended by H.Q. Ex. 2, and is for an 88 bed community nursing home facility. Health Quest submitted a revised application for 60 beds dated a year later, in September, 1987. H.Q. Ex. 3. Table 8 of the application is the list of projected charges by patient type. The revised application, H.Q. Ex. 3, increased charges from 25 to 34 percent. This new information was not based solely upon inflation assumptions, but was based upon increased assumptions about operating costs, and a decision to make a more conservative projection. T. 629, 690-91. Health Quest did not prove that these assumptions were based upon data not available when the original application was filed. Table 11 of the application lists manpower by position and projected annual salary. The revised table 11, H.Q. Ex. 3, increases the numbers of registered nurses and licensed practical nurses from the original application. The new data is based upon the experience of Health Quest in the year following the filing of the original application. T. 630. The testimony on pages 688-89 of the transcript is not inconsistent with the testimony on page 630. It is evident that a change in planning took place, and that the change in planning was based upon new experience. Table 17 of the revised Health Quest application, H.Q. Ex. 3, does not have six 3 bed rooms which had been planned for the facility in table 17 of the original application, as amended, H.Q. Ex. 2. This new information was not caused by the reduction of the application from 88 beds to 60 beds. Health Quest did not credibly prove that its decision to delete 3 bed rooms from its project was based upon data that it could not have had when it filed its original application. T. 630-31. Table 18 of the revised application, H.Q. Ex. 3, changes the square footage of 1 bed rooms from 150 to 216. Health Quest did not credibly prove that its decision to make this change was based upon data that it could not have obtained when it filed its original application. T. 632-33. Changes to the application of Careage Careage presented new information at the hearing which consisted of Careage Exhibits 18-22 and 24-25. The changes to these exhibits were based solely upon a small (3 percent) inflation rate or a different starting date. T. 1570-85. There was also a decrease in utility rates of an apparent few thousand dollars. Compare C. Ex 25 to C. Ex. 3, attachment 12. T. 1583-85. The new projection of utility rates was shown to be based upon new information from the utility company, and new heating and cooling technology. T. 1584. Changes to the application of Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. The merits of the Careage application Credibility of the Careage application Credibility of Mr. Gentle Russell Gentle is Careage's Vice President for nursing home operations, and is responsible for development of the nursing home at issue in this case, and operation of the facility after it opens, as well as development and operations of other Careage nursing homes. T. 1487. The application filed by Careage in this case was prepared by Mr. Gentle, with the exception of the section on need. T. 1491. Mr. Gentle was called as an expert witness for Careage to provide opinion testimony to substantiate the Careage application and to prove the nature of the facility that Careage states it would build and operate if granted a certificate of need. T. 1491-93. Mr. Gentle testified twice that he had a bachelor's degree with a major in accounting from the Alaska Methodist University. T. 1487, 1493. This testimony was presented in order to have Mr. Gentle qualified as an expert witness. Mr. Gentle was tendered as an expert in several areas, including nursing home finance. T. 1493. Upon voir dire examination, and after it became obvious that counsel conducting the examination had investigated Mr. Gentle's academic credentials, 1493, Mr. Gentle admitted that he did not have a degree in accounting, but that his degree had been in science. T. 1496. A motion was made to have Mr. Gentle precluded from testifying as a witness due to his untruthful testimony. T. 1497-98. The motion for the sanction of preclusion of testimony was denied, but the tender of expertise was denied for lack of credible evidence in the record as to expert credentials. T. 1499, 1504, 1512-13, 1514-16. Since the witness had intentionally lied about his college education, a matter of importance in determining expertise, the remainder of the witness's testimony as to his experience and expert credentials was tainted and not credible. There was no independent evidence of the training and experience of the witness, other than from his own testimony. The tender of expertise thus was denied for lack of credible evidence of expertise in the record. If Mr. Gentle's testimony concerning his experience in nursing home development had been credible, the evidence of such experience was not sufficient to qualify Mr. Gentle as an expert in nursing home development. Since 1985, he had been fully responsible for development of only two nursing homes, and assisted in the development of five others. T. 1509, 1489, 1514-15. If Mr. Gentle's testimony concerning his experience in nursing home operation and administration had been credible, the evidence of such experience was not sufficiently detailed to qualify him as an expert in nursing home operation and administration. T. 1513-15. Mr. Gentle had never served as a nursing home administrator. T. 1494. Mr. Gentle testified that in 1972 he went to work for the State of Alaska as an auditor in the Department of Health and Social Services. He further testified that he worked his way up through the sections and became chief Medicaid auditor for the state of Alaska. T. 1487. The employment record for Mr. Gentle, however, from the State of Alaska was admitted into evidence without objection. H.H. Ex. 33. That record shows a starting date of work in 1973, not 1972. More important, it does not show continuous employment consistent with the claim of having worked "up through the sections." The record shows no employment of Mr. Gentle by the State of Alaska for 2 and 1/2 years, from July, 1973, through March, 1976, and the only employment is in temporary positions, not in permanent positions expected to have been in the "sections" Mr. Gentle "worked up through." Finally, the employment record only shows Mr. Gentle in a position as an accountant IV (temporary) for a 9 month period in 1976. Mr. Gentle's testimony that he obtained the position of chief Medicaid auditor for the State of Alaska after working his way up through the sections is not credible. Mr. Gentle testified that C. Ex. 15 was an excerpt from the magazine "Contemporary Long-Term Care," and that this excerpt was the section of the magazine that included an award. T. 1541-42. He testified that all of the narrative in the exhibit was part of the magazine and the award. T. 1542. This is testimony was incorrect. The last page of the exhibit contains narrative that is advertisement prepared by Careage. The typeset is identical to that in the interior pages as well. Thus, pages 2-4 of the exhibit are not excerpts from the magazine. Mr. Gentle did not choose his words with care as he testified. Table 11 (projected salaries and FTE's) is a part she original application filed with HRS in July of 1986. Mr. Gentle testified that in part the projected salaries were based upon salaries that "Careage is paying to its existing staff." T. 1557. At that time, Careage did not operate any nursing home. Mr. Gentle could have meant that these were salaries in nursing homes leased out by Careage, but his choice of words was misleading. Whether Careage will operate the facility Careage was started in 1962, and since that time it has constructed more than 270 new hospitals, nursing homes, and related facilities. Generally, Careage has built facilities for others to operate. T. 1516-17. A few of these (seven were named, T. 1520) may have been operated by Careage, but the vast majority were not. T. 1591-1520. In 1982, Careage ceased all nursing home operations. T. 1592. From 1982 through 1985, Careage did nothing but hospital development. T. 1519. In 1985, Careage decided to build and operate nursing homes, and in March 1985, hired Mr. Gentle to set up the operating arm of the corporation with respect to nursing homes. T 1513, 1518. In July, 1986, when Careage filed its application for a certificate of need, Careage did not operate any nursing homes in the country. T. 1595. It appears that the first nursing home now operated by Careage was opened in December, 1986. T. 1610. At the time of the formal hearing, Careage operated and managed three nursing homes on its own, and jointly managed three others. (Another was said to be "jointly operated by others.") T. 1519-20. All of these facilities are in western states. In the letter of intent, Gene D. Lynn, the proposed owner of the proposed facility, and the sole owner of Careage, stated his intent to operate the proposed nursing home in Hillsborough County. C. Ex. 3, attachment 8. The application, C. Ex. 3, asserts on page 4-24: Each community and situation is unique. There are times in which we operate directly through Healthco Management (a wholly owned subsidiary). In all cases, we establish the operating procedures and pro forma and closely monitor each facility. This strategy has generated such a successful program that, in twenty-four years of business, we can boast at never having missed a debt service payment nor have we had a single incident of governmental intervention into our operations. (E.S.) The clearly intended implication of the foregoing portion of the application is that for 24 years, Careage has either operated its nursing homes (which in the majority of cases was untrue) or, if it did not operate its nursing homes, it "closely monitored each facility." The statement in the application that Careage closely monitors each facility is not true, at least with respect to currently leased facilities. Mr. Gentle, who is in charge of nursing home operations for Careage, does not routinely review state licensure survey reports for leased facilities. T. 1842. Leased facility reports may be reviewed by the Careage leasing section, which is separate from nursing home operations. T. 1842. The only monitoring that Careage does with respect to leased facilities is to step in if there is government intervention. T. 1843. Careage has retained the contractual right to intervene in the operations of a leased facility only "in cases of severe problems in a facility." (E.S.) T. 1518. The statement in the application, P. 4-24, concerning the history of Careage as to operation or supervision of nursing homes is misleading. As will be discussed ahead, Careage representatives were either confused about the operation of nursing homes by Careage (Dr. Etten) or used words in a manner that misrepresented the operational status of Careage (Mr. Gentle and representatives of Careage at a dinner meeting with Ms. Hardy). These misleading statements, coupled with the prior history generally of not operating nursing homes, lead to the conclusion that Careage has not proved that it will operate the proposed nursing home in Hillsborough County by a preponderance of the credible evidence. Substantive aspects of the application General provisions Careage's original application proposed to construct 120 beds, 10 of which would be a subacute unit, 21 of which would be an Alzheimer's unit, and the remaining 89 beds would be general SNC/ICF (skilled/intermediate) nursing care beds. C. Ex. 3, P. 2-1. Four of the ten subacute unit beds would be designated for neonates and technology dependent children. C. Ex. 3, P. 3-6; T. 1522. The 10 bed subacute unit is proposed to provide 24 hour nursing care patients who are recovering from strokes, craniotomy patients, comatose victims of accidents, and others suffering serious chronic maladies. T. 1212. Nursing services to be provided include tube feedings, ventilators, tracheostomies, continuous intravenous infusion, hyperalimentation, total parenteral nutritional care, and inhalation therapy. T. 1213. The program proposed by Careage conforms to professional standards for such a program. Id. The 21 bed Alzheimer's disease unit is designed and intended to provide an environment adapted for the special needs of those patients. The design and program emphasizes low stimulation, safe ambulation, and simplicity to minimize confusion. The design is considerably more therapeutic for such patients than commingling such patients among other patients in an ordinary nursing home setting. T. 1206-12, 1432, 1474-75. The precise number of skilled and intermediate care nursing beds is unclear. At least 39 beds will be skilled nursing, and 21 beds for the Alzheimer's patients. T. 1136. Careage intends to concentrate on skilled nursing care rather than intermediate care. T. 1523, 1678. Careage does not intend to serve the market for intermediate care. Id.; C. Ex. 3, attachment 8. Careage did not include adult day care in its application, T. 1142, 1592, because it takes the position that adult day care does not require a certificate of need. T. 1592. Careage in fact will not offer adult day care. T. 1192. Careage intends to provide respite care at the facility. T. 1531. Careage estimates that 37 percent of its patients will be Medicaid patients. T. 1361. Quality assurance The nursing quality assurance programs described in the application of Careage are adequate, and would be adequate if implemented by Careage. T. 1221. Dr. Etten testified for Careage concerning her visit to two nursing homes owned by Careage. She did not express an opinion that the Careage quality assurance program in fact would be implemented based upon these visits. She did not describe the current operation of any Careage quality assurance program. She simply stated that she was favorably impressed by the physical environment in those two nursing homes. T. 1221-26. One of the facilities was in Salt Lake City, Utah, and there is no evidence in the record that Careage operates that facility. See T. 1519-20. Indeed, Dr. Etten later admitted on cross examination that she knew the Utah facility was not operated by Careage. T. 1234. Throughout the application process, Careage tended to misrepresent its status as an existing operator of nursing homes providing care of good quality. As discussed above, in the meeting in August or September, 1986, attended by Mr. and Mrs. Lynn, Mr. Haben, and Ms. Hardy, Careage's representatives told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. The application, at page 4-24, appeared to assert that Careage had 24 years of experience operating nursing homes. Mr. Gentle represented that proposed salaries were based upon salaries in nursing homes currently operated by Careage. These statements were not true. Careage leased facilities, but did not operate any facilities at that time of the application, and its history had been primarily in the development of health care facilities for operation by others. Careage did not exercise close operational control of the leased facilities. And Dr. Etten seemed unconcerned as to what entity was operating the Utah nursing home that she visited. Her failure to do so caused her testimony to appear to be representative of the quality of care actually provided at Careage operated nursing homes. For these reasons, Careage did not prove by a preponderance of the credible evidence that it has had a history of operation of nursing homes, that it has had a significant history of providing nursing care of good quality, that it has had substantial experience in management of quality assurance programs, or that it would in fact implement the quality assurance program reviewed by Dr. Etten. Staffing Staffing, particularly nursing staffing, is established based upon the assumption that most of the beds at the Careage facility will be at least skilled nursing care beds, and some will be Alzheimer's disease beds or subacute beds, including beds for technology dependent children. Attachment 14, Ex. 3. The nursing staffing proposed by Careage is adequate. T. 1216. Other staffing proposed by Careage is based upon staffing at other facilities owned by Careage and standards in HRS rules. T. 1557, 1559. It is concluded that other staffing is adequate. The projected annual salaries for staff are reasonable. T. 1648, 1656, 1680-81. The objection to this testimony, taken under advisement, was overruled. T. 1687. The witness amply demonstrated expertise with regard salary levels. Construction and facility design The building proposed by Careage would be one story and have 45,500 square feet for 120 residents, or a total of 379.17 gross square feet per bed. T. 1133. The application represents that the net square foot area for living space in 2 bed (semiprivate) rooms is 283 to 295 square feet. C. Ex. 3, table This was an exaggeration. The actual square footage was shown to be substantially less upon cross examination: 213.75 square feet of living space for semiprivate rooms. This figure is based upon the fact revealed upon cross examination that the length of the room for purposes of calculating gross square feet is 23.5 feet instead of 24 feet, 4 inches. This correction reduces gross living square footage for the living area to 305.5, and net to 213.75. The floor plan, site plan, and space programs in the proposed design are adequate and will meet or exceed all requirements of Florida law. T. 1137. The nursing home floor plan does not include a space for adult day care. T. 1142. Careage projects that construction costs will be $56.77 per square foot. This estimate is in line with estimates of other applicants and is reasonable. T. 1176-78. Construction costs equate to $21,526 per bed. Careage did not include an estimate of costs for equipment for technology dependent children, but plans to cover this with funds estimated for contingencies. T. 1195. The amount of such costs is not in evidence. Id. The estimate of overall project costs, table 25 of the application, Ex. 3, is reasonable. T. 1171-76. Total project costs are estimated to be $4,150,000, or $34,583 per bed. The project cost includes $515,000 for 3 to 5 acres of land. T. 1546. The adequacy and appropriateness of the proposed equipment for the facility was not established by expert testimony. See T. 1179. Availability of resources Gene D. Lynn has an extensive history in successfully financing and constructing health care facilities, including nursing homes. T. 1516-17. Gene D. Lynn has more than adequate lines of credit to obtain complete financing for this project. T. 157 6- /7 Existing lines of credit, including SeaFirst, are available up to at least $9 million. T. 1576. The objection as to hearsay, which was sustained, was sustained only as to what unnamed persons with Washington Mutual "indicated." The remainder is not hearsay. It is testimony of the existing state of facts within the personal knowledge of the witness. The foregoing findings of fact are based upon testimony of Mr. Gentle, whose credibility as a witness was partially impeached as discussed in findings of fact above. Mr. Gentle's credibility problems, however, are not sufficient to compel the disregard of his testimony as to the general financial condition of the Lynns and Careage. Mr. Gentle demonstrated that his testimony as to his own expert qualifications was unworthy of belief, and he demonstrated that some portions of his testimony concerning the features of the proposed facility were exaggerated or incorrect. But this is not sufficient evidence to conclude that his testimony as to general financial resources of Careage is an untruth. It is noted that there is no evidence in this record to suggest in any manner that Gene Lynn does not have the net worth set presented in his unaudited financial statement. That net worth is over $45 million. If this were a substantial untruth, surely one of these highly competitive applicants would have presented evidence on the point. Financial feasibility The proposed project is financially feasible in the short term. T. 1632-39, 1686. Careage's projections as to patient mix (by payor type) and expected fillup (utilization) are reasonable. T. 1640- 42 The charges proposed by Careage are reasonable. T. 1642-45. Careage's projections as to operating expenses are reasonable. T. 1648, 1656-57. The proposed project is financially feasible in the long term. T. 1647, 1649-50, 1686. The Forum Group application General provisions Forum Group is a national company which owns and operates 11 retirement living centers and 22 nursing homes in a number of states. The retirement living centers are independent rental apartments which do not require entry fees. T. 20; F.G. Ex. 3. The Forum Group proposal is to construct and operate a 60 bed community nursing home in conjunction with a retirement living facility of 120 apartments and an adult congregate living facility of 30 units. F.G. Ex. 3, attachment 1. The community nursing home section would offer all services required for provision of skilled nursing care, intermediate nursing care, respite care, and adult daycare. T. 27. Forum Group does not propose to provide a separate Alzheimer's disease unit. The estimated total cost of the nursing home portion of the project is $2,673,084. F.G. Ex. 6, table 25. This is $44,551 per nursing bed. Forum Group will accept Medicare and Medicaid patients. T. 27, 210. Quality assurance Forum Group has never had a license denied, revoked, or suspended, and it has never had one of its facilities placed into receivership. T. 158. The proposed facility would provide 24 hour supervision by either a registered nurse or a licensed practical nurse, or by both. T. 140. The staffing levels proposed in the original application are adequate. T. 153. Staffing levels would vary according to the needs of the residents. T. 134. Medications would be distributed by unit dose. T. 139. Forum Group would implement an adequate plan for quality assurance audits. T. 141-43. The plan is in writing, is in use in other Forum Group nursing homes, and covers all aspects of the operation of the nursing home that are relevant to the quality of care received by nursing home residents. Forum Group would check staff qualifications prior to employment and would provide ongoing staff training. T. 149. Forum Group would provide residents with written statements of patients' rights upon admission to the facility, and would have an independent patients' rights council. T. 147- 48 Forum Group provides reasonably adequate nursing care in its existing nursing homes, and would do so in the proposed nursing home. T. 31-32, 158. Staffing The staffing proposed for the facility, and projected salaries, are reasonable and adequate. T. 151-154. Forum Group reviews the qualifications of applicants to insure that applicants are qualified for the job. T. 149. Construction and facility design Forum Group's community nursing home facility will have about 24,500 square feet. This is reduced from the original 27,000 due to inflation in costs. Patient room areas were not changed. T. 1453. This is 408 total gross square feet per bed. The net living area square footage allocated to semiprivate 2 bed rooms is 228 square feet. F.G. Ex. 3. The square footage allocated in both versions is reasonable. T. 1445, 1453. The building would be wood frame with brick veneer. It would have heavy roof insulation, double glazed windows, and a heat pump to conserve energy and to operate with less utility expense. T. 1454. The construction costs, including equipment costs, estimated for the revised project, F.G. Ex. 6, table 25, paragraph d., are reasonable. T. 1453. The costs as originally projected were also reasonable. T. 1446. The proposed facility would comply with state and federal standards for construction. T. 1456. The 60 bed community nursing home would require two to three acres of land. T. 1455. The $400,000 estimated to be needed to acquire a suitable site is reasonable for location in the northwest portion of Hillsborough County. T. 54, 59. Availability of resources Forum Group will attract suitable health care professionals, despite the shortage in Hillsborough County, by offering attractive fringe benefits, including attractive work schedules and continuing education. T. 156-57. Forum Group has the financial resources to construct and begin the initial operation of the facility. T. 182-84. Financial feasibility The project is financially feasible in the short term. T. 182-84. Due to its corporate size and current operation of a number of nursing facilities, as well as the size of the combined planned facility in Hillsborough County, Forum Group will be able to purchase supplies and other operational necessities at a favorable low cost, thus saving on operational expenses. T. 156. The estimated fillup rate in the original application was about 75 percent occupancy after the first year and about 86 percent occupancy after the second year. T. 37. Given the recent experience in Hillsborough County of occupancy around 95 percent and very fast fillup rates for new nursing homes, T. 116-18, a projection of 86 percent occupancy in the second year is probably too low. For purposes of determining financial feasibility, it is reasonable but conservative. T. 37. The project is financially feasible in the long term based upon the pro forma contained in the original application. T. 186-88; F.G. Ex. 3. The merits of the Hillsborough Healthcare application General provisions Hillsborough Healthcare, Ltd., is a Georgia limited partnership owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. Hillsborough Healthcare, Ltd., would own the proposed facility. T. 419. The facility would be managed by Convalescent Services, Inc., (CSI) which is also owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. CSI was formed in 1978 to own and operate extended care facilities owned or controlled by the Kelletts. T. 420. CSI currently operates 21 nursing homes and 3 retirement homes in 7 states. Six of the nursing homes and 2 retirement centers are in Florida. Id. Centralized management is provided by regional offices in Sarasota, Houston, Texas, and Huntsville, Alabama. T. 420. The long range plan of CSI is to acquire and develop nursing facilities in locations where CSI already has a management structure nearby. T. 421. Hillsborough Healthcare proposes to construct and operate a single story combination nursing home, consisting of 120 beds, and an adult congregate living facility, consisting of 60 beds. H.H. Ex. 1; T. 423. The 120 nursing beds would consist of 60 skilled nursing beds and 60 intermediate care beds. The 60 skilled nursing beds includes a distinct 24 bed unit for Alzheimer's disease patients. Id. The application estimates the total project cost to be $5,032,475, with $3,367,668 of that cost attributed to the nursing facility portion of the project. H.H. Ex. 1. This is $28,063.90 per nursing bed for 120 beds. The facility would have a rehabilitation program, activities, and social services programs. T. 423. The Hillsborough Healthcare facility intends to make its facility available as a training facility for medical and nursing schools. T. 461. The facility would participate in both the Medicare and Medicaid programs, and estimates about 30 percent Medicaid utilization. T. 423. Hillsborough Healthcare would accept partial approval of only 60 nursing home beds. T. 490. In that event, the 60 bed nursing facility (combined with the 60 bed adult congregate living facility) would offer the same services, including the 24 bed Alzheimer's disease unit. T. 390, 473. Access as a patient to the facility will be on an equal basis, without distinction as to race, religion, or sex. The facility will be constructed to provide handicapped access. T. 462-63. At least 30 percent of the patients served by the Hillsborough Healthcare facility would be Medicaid patients, and the percentage may well be higher. Currently, 17 of the 21 CSI nursing homes participate in state Medicaid programs, and all of the Florida nursing homes have Medicaid patients. All new nursing homes developed by CSI participate in both Medicaid and Medicare. Many of the 17 nursing homes were not Medicaid certified prior to acquisition by Hillsborough Healthcare, but are now certified and participate. CSI has never decertified one of its nursing homes as a Medicaid provider. T. 424. Existing CSI managed facilities in Florida are currently experiencing a 40 percent Medicaid utilization, which includes at least one in Hillsborough County. T. 1798. B. Quality assurance Sixteen of the 21 CSI managed nursing homes are in states that use a licensure rating system, and of these, 14 are have achieved the highest rating. T. 422. No CSI facility has ever had its licensed revoked or has ever been fined. Id. One-half (three) of CSI managed Florida facilities are rated superior. T. 319. Centralized management and location of facilities so that management resources can be shared should enhance the quality of care at the proposed nursing facility. The quality assurance program will be guided by a lengthy policies and procedures manual that is in use in other Florida CSI managed nursing homes. H.H. Ex. 11; T. 313. CSI employs a full time Florida registered nurse to make visits at least once a month to CSI facilities in Florida as a part of the quality assurance program. T. 316. The nurse conducts quality of care inspections, using measuring instruments developed by the CSI quality assurance program, and teaches new methods to improve the quality of health care. T. 317. Hillsborough Healthcare will have an adequate quality assurance program. T. 310. C. Services and programs CSI would provide programs for care of Alzheimer's disease patients, respite care, and adult day care. Respite care is temporary nursing care, for 16 days or less, to give the family a temporary rest from home care, and to improve the condition of the patient. T. 300. Adult day care is care only during the day to enable a family member to work. T. 301. Both types of care provide an opportunity for the elderly patient to receive nursing services, including the programs and medical care available at the nursing home, while giving home care providers a rest or needed free time. The Alzheimer's disease unit of 24 intensive care nursing beds would have operational and design features to meet the special needs of those patient. The medical director is to be board certified with a specialty in geriatrics and training with respect to Alzheimer's disease. Activities will be altered to accommodate the limitations of those patients. Staffing will be at a higher level, and staff will be specially trained to meet the needs of those patients. The facility will be designed with a secure courtyard, special dining room, and wander guard, to allow movement without physical or chemical intervention or restraints. T. 299, 289. CSI varies the activities programs at its facilities to match the needs of patients. T. 270. Activities for Alzheimer's patients, adult day care and respite care residents are designed within the limitations of those patients. T. 289-90. CSI typically provides activities that provide small and large group interaction, socialization, mental and physical activity, recreation, and religious activities. T. 270. The activities that have been implemented or suggested for CSI facilities are innovative, varied, and appear to be the result of much thoughtful work. T. 273-74; H.H. Ex. 1, pp. 115-123 H.H. Ex. 8. Some of CSI staff involved in activities have received awards for their work. T. 288. The proposed facility would provide activities similar to the activities provided at other CSI facilities. T. 274. CSI has employed an expert in community relations and activities programming to coordinate community relations, activities, and the volunteer program at all CSI nursing homes, including the proposed facility. That expert is the author of pp. 114-121 of the application, H.H. Ex. 1. The expert would recruit and train activities and community relations directors at the proposed facility. T. 287. CSI publishes a newsletter containing an exchange of program information, and encourages each nursing home to publish its own newsletter. Some do. H.H. Ex. 10; T. 284-85. Volunteers are encouraged to participate in nursing home activities. 272. CSI has compiled a package of volunteer information for use in development of a volunteer program at each nursing home. H.H. Ex. 9. Volunteers increase resident participation in programs, bring fresh ideas, and causes there to be a greater variety of activities and programs for residents. T. 281. Association of the nursing facility with an adult congregate living facility is a useful way to provide continuity of care and lessens the trauma to the resident of the initial move into a nursing facility. In some cases, a spouse may live in the adult congregate living facility and thus be closer to the spouse who must be in a nursing facility. CSI currently manages Sun Terrace Nursing Center, a 120 bed nursing home, and Lake Towers Retirement Center, both in Hillsborough County. Consequently, CSI has already in existence a network of relationships that would benefit residents at the proposed facility. Existing relationships include a system for patient referrals from local hospitals, transfer agreements with local hospitals for acute and emergency care, and agreements with local providers for ancillary services, such as physical therapy, diet therapy, occupational therapy, speech therapy, opthalmology, dental care, podiatry, x- ray, and pharmacy services. T. 302-304. Similar agreements for the proposed facility could be established. Such agreements are cost effective because used only as needed. T. 304. CSI would provide all the ancillary services listed in figure 1, page 14, H.H. Ex. 1. T. 304. Staffing The proposed staffing of the facility, including the 24 bed Alzheimer's disease unit, is adequate. T. 308. The proposed salaries are reasonable and adequate. T. 309. Hillsborough Healthcare will be able to recruit adequate staff. T. 309. Hillsborough Healthcare will provide a reasonable staff development program. T. 309. This program will aid in the retention of staff. T. 310. Construction and facility design The 120 bed nursing section is designed to include 4 private rooms and 58 semiprivate (double occupancy) 4 rooms. T. 355. The design includes the services and departments listed on table 12 of H.H. Ex. 1. It is proposed that the total gross square feet will be 33,996, or 283 square feet per bed. H.H. Ex. 1 The square footage allocated by the design to net living space in patient bedrooms and gross area of the nursing unit, tables 18 and 19, H.H. Ex 1, are reasonable. T. 355. Semiprivate (2 bed) rooms would have 185 net square feet of living space. The Hillsborough Healthcare design has several cost saving features. Sharing ancillary services and spaces (kitchen, administrative areas, and laundry) with the adult congregate living facility of 60 beds reduces the overall construction and equipment cost and operational cost per bed. Use of a modular "T" configuration, with straight line walls and corridors for units, results in a savings in construction cost. T. 360-61. The compact design, accompanied by extensive roof over hangs and insulating materials, will reduce energy requirements. T. 357 The floor plan could easily be altered by alteration of the arrangement of the modular wings to fit on different sites. T. 358. Nurses' stations are located in the middle of wings, giving good visibility down corridors, but no visibility into rooms. The nurses' station is 7 rooms from the most distant room on any wing. H.H. Ex. 1, p. 103. The Alzheimer's disease unit is in a separate portion of one wing, and is contiguous to an interior space that will be fenced to make a secure courtyard. T. 357; H.H. Ex. 1, p. 103. The construction cost includes additional wheelchairs and walkers, and includes $4,500 for a wander guard system for the 24 bed Alzheimer's disease unit. T. 364. The projected construction cost includes fixed equipment. T. 356. The construction cost of $2,331,418 is reasonable. T. 356. All of the costs estimated in table 25, H.H. Ex. 1, p. 33 (estimated project costs) are reasonable. T. 345-466, 356, 455-56. Availability of resources Through available equity and long term debt, adequate resources exist for Hillsborough Healthcare to construct and initially operate the proposed facility. T. 396-402. Financial feasibility The proposed facility is financially feasible in the short term. T. 396-402; H.H. Exs. 15, 16, 1. The projected charge rates, table 8, H.H. Ex. 1, are reasonable. T. 379-80, 400, 452. The projected percentages of patient utilization by payor class, table 7, H.H. Ex. 1, are reasonable. T. 450, 393. The projected number of expected patient days in the first two years of operation, tables 10 and 7, H.H. Ex. 1, reasonable. T. 488-49. The projections of total revenue, table 7, H.H. Ex. 1, are reasonable. T. 400-01. The projections of expenses and net income for the first two years of operation are reasonable. H.H. Ex. 1, pp. 100-01; T. 401-02. The 120 community nursing home bed version of Hillsborough Healthcare's application is financially feasible in the long term. T. 402. If the Department partially approves the Hillsborough Healthcare application for 60 beds, to be operated in conjunction with the 60 bed adult congregate living facility, the projection will be financially feasible in both the short and long term. T. 402. The project would be financially feasible with a higher Medicaid participation. T. 424. The merits of the Health Quest application General provisions Since critical portions of the 60 bed application, H.Q. Ex. 3, were impermissible changes to the 88 bed application, and thus not admitted into evidence, only the 88 bed application will be discussed. Health Quest proposes to construct and operate 88 community nursing home beds in conjunction with an adult congregate living facility of 124 units. H.Q. Ex. 2. The total cost of the nursing portion of the facility is estimated to be $3,054,466, or $34,719 per bed. H.Q. Ex. 2. Health Quest has entered into an agreement with a group of 129 physicians, organized as the University Community Physicians Association of Tampa. That association comprises the bulk of the physicians who practice at University Community Hospital in northern Tampa. T. 585. The agreement is that Health Quest would build and manage the nursing home, and the physicians would provide medical oversight and referrals. T. 579. The physicians would contribute to equity and share in operating profits and losses. T. 624. The share is 25 percent. T. 694-95. Other details are not in evidence. The negotiations for the agreement with the University Community Physicians Association of Tampa took several months, and the agreement itself did not come into being until August, 1987. T. 581. The University Community Physicians Association of Tampa is not named as an applicant in the original application since the agreement came into being after the application was filed. Health Quest intends to construct the proposed nursing home and adult congregate living facility near the present location of the University Community Hospital. T. 583. Health Quest intends to serve approximately 30 percent Medicaid patients. T. 841, 1102. Quality Assurance Health Quest has nursing homes in Florida, Indiana, and Illinois. Health Quest has a reputation in Indiana and Illinois for providing good health care. T. 599-609. Health Quest has three nursing homes in Florida. Of those three, two had been open long enough at the time of the hearing to have received a Florida rating. Both were rated superior. T. 610. Health Quest has a nursing home in Jacksonville, Florida, and the quality assurance program and services at that facility are representative of the type of care and services at other Health Quest facilities, as well as what is intended for the proposed Health Quest facility in Hillsborough County. T. 1077, 1102. All findings of fact which follow that reference the quality of care or scope and nature of services at the Jacksonville facility are thus also findings of fact that these quality assurance programs and services are intended to exist at the Hillsborough facility. The Jacksonville facility maintains a resident care plan on each resident. Health Quest would provide health care of good quality at its proposed facility. Services and programs The Jacksonville facility provides a number of services that require skilled nursing or arguably fall within the category of "subacute" care. The term "subacute" care is not a formal definition, and there is no Florida licensure category for that phrase. The Jacksonville facility provides intravenous therapy, parenteral nutrition, and tracheostomy care. T. 848-51. It also provides care for comatose patients (accident or stroke victims) regardless of age, and care of post-craniotomy patients. T. 851-53, 855-56. Health Quest does not intend to care for neonates (sick infants less than two weeks old). Neonates require care that is distinct from the care required for the elderly, thus requiring staff with different training. Neonates also can be at substantial risk from respiratory and urinary infections commonly present among the elderly in a nursing home. T. 859-61. The Jacksonville facility provides physical therapy, speech therapy, and occupational therapy. The physical therapist is a full time position. T. 871. The Jacksonville facility provides counseling to residents and families with a full time social worker on staff. T. 864. The Jacksonville facility provides music therapy, outside trips, and other activities, such as family night, the artist in residence program, and use of the facility for community programs. T. 866, 888, 892. Some of these programs are conducted jointly with the adult congregate living facility. Volunteers are used in the activities programs as well. T. 869. The quality of the activities program is directly related to the numbers of staff persons involved in the program. T. 871. The Jacksonville facility provides respite care of about two weeks in duration, although it could be longer. T 872. The adult congregate living facility that would be a part of the Health Quest facility would have tee same beneficial consequences as the adult congregate living facility proposed by Hillsborough Healthcare. T. 902-04. The Jacksonville facility is often used as a place for continuing nursing education for high schools or the local nursing association. T. 906-07. Staffing Health Quest proposes a total of 59.75 FTE's or .679 FTE per bed. H.Q. Ex. 2, table 11. Health Quest acknowledged that the staffing proposed for the 88 bed facility was adequate in 1986 when prepared, but by 1987, it was experiencing the need for more licensed personnel, and that it would increase licensed personnel for the 88 bed facility now. T. 630. No evidence was presented as to the specific changes that would be made. T. 632. Construction and facility design Health Quest proposed in its application to construct 34 two bed rooms, 6 three bed rooms, and 2 one bed rooms. H.Q. Ex. 2, table 17. Health Quest wants to change its design, if built, to make the three bed rooms into two bed rooms. T. 631. Health Quest proposes to provide 240 square feet of net living space for semiprivate two bed rooms. H.Q. Ex. 2. Health Quest proposes to provide a total of 37,263 square feet for the 88 bed facility, or 423 square feet per bed. H.Q. Ex. 2. Health Quest estimates that the project will need 3 to 4 acres of land, and projects that it can acquire the land for about $320,000. H.Q. Ex. 2; 634. This estimate is reasonable in comparison to the estimates of all other applicants. Health Quest has constructed three nursing homes in Florida, and others in Indiana and Illinois, and thus has substantial experience in construction. Photographs of the nursing homes constructed and now operated by Health Quest show that those nursing homes are reasonably attractive and appear to be hospitable places in which to live. H.Q. Ex. 22. Availability of resources Health Quest has access to sufficient funds to construct the project and initially operate it. T. 586-87. Financial feasibility The Health Quest proposal is financially feasible in the short term and the long term. T. 593 Summary of comparative data The space and costs associated with the four proposals may be compared as follows: Appl. Cost/Bed NetFt/Bed TotFt/bed Cost/NetFtBed Cost/TotFtBed Careage $34,583 214 306 $162 $113 Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The proposed staffing of the four proposals may be compared as follows: Applicant Total FTE RN FTE LPN FTE RN Asst FTE No. Beds Careage 96.0 11.9 7.4 42.1 120 Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: TotalFTE Applicant Per Bed PN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Careage .80 .10 .16 .51 Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 Comparison of the Careage staffing to other applicants is difficult because Careage proposes primarily to serve patients needing skilled nursing care who thus require more nursing staff per bed. Forum Group, Hillsborough Healthcare, and Health Quest are relatively the same with respect to anticipated efficiencies and continuity of care due to the association of adult congregate living facility beds with the proposed nursing home. Forum Group plans only 30 ACLF beds, but also plans 120 independent living apartments. Hillsborough proposes to provide 60 ACLF beds, and Health Quest proposes to have 124 ACLF beds. There is no evidence in the record to determine the optimum mix of ACLF beds to nursing home beds. Conclusions of Law The Division of Administrative hearings has jurisdiction of the parties and subject matter of this proceeding. The Department's free form preliminary decision The free form decision of the agency is ordinarily not dispositive since a formal administrative hearing is intended to formulate agency action, and is not intended to review prior action. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). The reasoning of the agency in its free form decision, however, ordinarily is a significant matter to be considered in the formal hearing. Findings of fact with respect to the free form decision-making upon the applications in this batching cycle have been made for two reasons: the assertion that the free form decision was influenced by considerations other than objective merit of the applications, and therefore not entitled to any persuasive effect upon this formal hearing, and representations in the free form stage made by Careage relevant to evaluation of the application of Careage. The free form decision in this case had the appearance of having been influenced in part by considerations other than the objective merit of the applications. For this reason, the free form decision with respect to these applicants has been disregarded as having no persuasive weight. Need calculated pursuant to rule 10-5.001(1)(k)2 Need for community nursing home beds is calculated pursuant to the need methodology set forth in rule 10- 5.011(1)(k)2, Fla. Admin. Code. The text of the rule is not in evidence, but comparison of the text of the rule referenced in proposed recommended orders indicates that the parties appear to agree that the rule promulgated on November 24, 1986, should govern this case. It is that rule that will be used in this recommended order. All parties agree that July 1, 1989, is the date upon which subdistrict need for community nursing home beds is to be determined. The first step in the need calculation pursuant to the rule is to determine BA. BA is defined by subparagraph 2a of the rule as the estimated bed rate for the population age 65-74 years in the relevant district. Subparagraph 2b of the rule provides: BA= LB/(POPC + (6 X POPD)) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. LB is at least 5,964, and is 6,060 if the 96 beds at the Home Association are, on this record, classified as community nursing home beds. Section 651.118(8), Fla. Stat. (1987) provides in part: This section shall not preclude a continuing care provider form applying to the Department of Health and Rehabilitative Services for a certificate of need for community nursing home beds or a combination of community and sheltered nursing home beds. Any nursing home bed located in a continuing care facility that is or has been issued for nonrestrictive use shall retain its legal status as a community nursing home bed unless the provider requests a change in status. Any nursing home bed located in a continuing care facility and not issued as a sheltered nursing home bed prior to 1979 shall be classified as a community bed. The Department of Health and Rehabilitative Services may require continuing care facilities to submit bed utilization reports for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents. (E.S.) The first sentence of this statutory section does not apply to the Home Association because it has not applied for a certificate of need. The second sentence does not apply because there is no evidence in the record that the nursing home beds at the Home Association were "issued" by anyone. The third sentence applies because the 96 nursing home beds at the Home Association were "not issued as a sheltered nursing home bed prior to 1979." The Home Association has existed since 1899 with its 96 nursing home beds, and never had a certificate of need. There was no statutory authority or definition for the issuance of a "sheltered nursing home" prior to 1979. By operation of law (the third sentence quoted above), the 96 beds are community nursing home beds. The fourth sentence appears to be directly in conflict with the third sentence. The fourth sentence states that HRS can conduct a study of historical utilization "for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents." The third sentence automatically confers community nursing home bed status upon certain beds based solely upon three criteria (located in a continuing care facility, located there before 1979, and not "issued" as a sheltered nursing home bed). Community nursing home bed status is thus conferred solely upon the three criteria, and historical utilization is irrelevant to the third sentence. If that is so, the fourth sentence, which allows HRS to "determine" community nursing home status based only upon historical utilization, is in direct conflict with the third sentence. This seemingly irreconcilable dilemma is not at issue in this case, however, because there is insufficient credible evidence in the record as to the "historical utilization" of the 96 beds at the Home Association. As discussed in the findings of fact, there is no credible evidence in this record as to how the 96 beds at the Home Association have in fact been "utilized" since 1899. Indeed, the only logical inference on this ambiguous record is that the Home Association has not felt itself constrained by any definitional categories, given its longevity in the Tampa Bay area. It thus is concluded as a matter of law, pursuant to the third sentence of section 651.118(8), Fla. Stat. (1987), that the 96 beds at the Home Association are community nursing home beds, and thus should be counted in the licensed beds in the district and subdistrict, LB and LBD. Thus, the correct value for LB in this case as of June 1, 1986, is 6,060. Next, the values of POPC and POPD must be determined Two issues arise with respect to ascertainment of the values of POPC and POPD. The first is whether the values of POPC and POPD should be determined on January 1, 1986, or on July 1, 1986. The second is whether the values of POPC and POPD should be determined based upon the Governor's estimates and projections of populations released on July 1, 1986, or on May 12, 1987. The first issue is governed by the clear language of the existing rule. The second issue has no clear guidance in the existing rule, and thus depends upon analysis of the record basis of the agency's incipient policy. With respect to the first issue, the parties urge that POPC and POPD are the populations on January 1, 1986, rather than on July 1, 1986. The basis of this argument is the inconsistent behavior of HRS over the last three years and in the January, 1987, batching cycle, wherein the values of POPC and POPD were often effectively determined on a date six months prior to the commencement of the batching cycle, a date which was the midpoint in the occupancy rate months. Notwithstanding the inconsistent manner in which HRS has interpreted its rules, a fundamental principle of law is that if the rule is clear, the agency must follow it. Kearse v. Department of Health and Rehabilitative Services, 474 So.2d 819, 820 (Fla. 1st DCA 1985); Woodley v. Department of Health and Rehabilitative Services, 505 So.2d 676, 678 (Fla. 1st DCA 1987);. There is no deference to the agency's interpretation of law (in this case, the conflicting interpretation of the office of comprehensive health planning) where the construction is based upon common meanings. Schoettle v. State of Florida, Department of Administration, Division of Retirement, 513 So.2d 1299, 1301 (Fla. 1st DCA 1987); Roberts v. Department of Professional Regulation, Construction Industry Licensing Board, 509 So.2d 1227 (Fla. 1st DCA 1987). In this case the Department has elected to follow the clear mandate of its own rule. This is not an occasion where the inconsistency of the agency with respect to incipient policy implicates questions of fairness to those regulated. Here, despite the arguable unfairness to the applicants in this batching cycle, the agency should follow its own clear rules. The populations POPC and POPD are clearly intended by the rule to be determined as of the date of the applications for certificate of need and the date of commencement of the batching cycle. The rule unequivocally calls for a projection of need "three years" into the future. T. 1254, 1250. There is no disagreement that the end date of that projection is July 1, 1989. What ends must have had a beginning. A three year period that ends on June 1, 1989, begins on July 1, 1986. Moreover, the rule clearly establishes the value of LB, licensed beds, as of June 1, 1986. The bedrate, the driving force in determining need, is the ratio of licensed beds as of June 1, 1986, to POPC and POPD, populations of elderly persons assumed to be using the beds. If LB was determined on June 1, 1986, but POPC and POPD determined on January 1, 1986, the ratio would be incongruent. The Department undoubtedly intended there to be a correlation between beds and people in existence at the same time since the result is supposed to be a model of need. Selection of the numerator from one date and the denominator for another date results in a fractured reality having little bearing upon the issue of whether the elderly in Hillsborough County will have enough or too may nursing home beds in July, 1989. Finally, the definition "current" populations POPC and POPD was established by the final order in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051. The final order in that case, entered on February 7, 1987, determined that POPC and POPD must be the populations current on the date of application for the certificate of need. For these reasons, POPC and POPD should be the populations on July 1, 1986. The next issue is the source of those population estimates. HRS argues that POPC and POPD must be derived from the July 1, 1986, release of the Governor's estimates and projections of populations. HRS has failed to establish guidance in this area by rule, and instead has chosen to rely upon evolving agency policy as the basis for selecting the source off POPC and POPD. An agency need not adopt all policy as a rule, but to the extent that it relies upon non-rule incipient policy as a basis for decision and that decision is challenged in a formal administrative hearing, the agency has the burden to establish in the record "adequate support for its decision." Florida Cities Water Company v. Florida Public Service Commission, 384 So.2d 1280, 1281 (Fla. 1980); Baxter's Asphalt and Concrete, Inc. v. Department of Transportation, et al., 475 So.2d 1284, 1286 (Fla. 1st DCA 1985); McDonald v. Department of Banking and Finance, 346 So.2d 569, 582-584 (Fla. 1st DCA 1977). The only support offered by HRS for its incipient policy to use population releases available at the time of certificate of need application was that those releases were the only ones available at such time, and thus necessarily the agency's preliminary decision had to be based upon the earlier release. This may be a permissible construction of the enabling statutes, and might pass muster as an agency rule, but HRS has in this case elected to defend its policy on a case by case basis. On this record, it is clear that the policy has not been adequately supported and is unreasonable. While reliance upon the population release available at this time of preliminary agency action is obviously reasonable at that time, since it is then the most current release, the mere fact that it is the only release-then available is an inadequate reason for continuing to use that release at the de novo formal administrative hearing that follows. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Moreover, the inadequacy of HRS's basis for its incipient policy has been demonstrated in this record. The May 12, 1987, release is substantially more accurate than the release a year earlier. The May 12, 1987, release is much closer to observed population growth in the subdistrict than the earlier release. These facts were not rebutted. To underscore the inadequacy of HRS's incipient policy, it bears repeating that use of the July 1, 1986, population release underestimates the net need for community nursing home beds in Hillsborough County in July, 1989, by 100 percent. This indicates that something is dramatically wrong with the incipient policy. For these reasons, the values of POPC and POPD should be taken from the May 12, 1987, release of population estimates. POPC is 134,968 and POPD is 94,402. The calculation of the bed rate, BA, thus is as follows: BA= LB/(POPC + (6 X POPD)) BA= 6,060/134,968 + (6 X 94,402)) BA= 0.0086401 The next step in the calculation is to calculate BB, which is defined as the estimated bed rate for the population age 75 years and over in the relevant district. The calculation is provided in subparagraph 2c of the rule: BB= 6 X BA BB= 6 X 0.0086401 BB= 0.0518406 Subparagraph 2a of the rule then requires calculation of A, which is gross need for the horizon year: A= (POPA X BA) + (POPB X BB) Where: A is the district's projected age-adjusted total number of community nursing home beds for the review cycle for which a projection is being made. POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. For the reasons discussed with respect to selection of the date of the proper release of Governor's population estimates and projections with respect to POPC and POPD, POPA and POPB should be obtained from the May 12, 1987, Governor's release. POPA is 149,771 and POPB is 108,400. Therefore, continuing the calculation: A= (POPA X BA) + (POPB X BB) A= (149,771 X 0.0086401) + (108,400 X 0.0518406) A= 1,294.0364 + 5,619.521 A= 6,913.5574 The next step is to calculate SA, which is the preliminary subdistrict allocation of community nursing home beds pursuant to paragraph 2d of the rule: SA A X (LBD/LB) x (OR/.90) Where: * * * LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average occupancy rate for all licensed community nursing home beds within the subdistrict of the relevant district. Review of the applications submitted for the July batching cycle shall be based upon occupancy rate data for the months October- March preceding that cycle . . . * * * LBD is 2,708 since the 96 beds at the Home Association were community nursing home beds in Hillsborough County on June 1, 1986. OR is 94.29 Therefore, SA is calculated: SA= A X (LBD/LB) x (OR/.90) SA= 6,913.5574 x (2,708/6,060) x (.9429/.90) SA= 6,913.5574 X 0.4468646 X 1.0476666 SA= 3,236.6863 SA= 3,237 In the last sentence of subparagraph 2 of the rule, the "poverty adjustment" is described as follows: "In districts with a high proportion of elderly residents living in poverty, the methodology specifies a minimum bed rate." In this case, all parties agree that when the numbers are assigned to the values in the formula contained in subparagraph 2e of the rule, the poverty adjustment operates to reduce rather than enlarge the net bed need. Thus, in this case, strict application of the A formula found in subparagraph 2e fails to produce the intended "minimum" bed rate. HRS construes the rule, in this instance, to mean that the poverty adjustment does not apply, T. 1280, and all parties agree. This will be treated as a stipulation by all parties that the poverty adjustment is not an issue in this case. For this reason, the poverty adjustment will not be used in the calculations in this recommended order. The final step in the need calculation is defined by subparagraph 2i of the rule, and that is to calculate the net bed allocation for the subdistrict. Subparagraph 2i provides: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs through I. unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. All parties agree that the number of licensed beds within the subdistrict is determined as of June 1, 1986, for this batching cycle. That number for purposes of determining net need is 2,708. The number of approved beds for purposes of determining net need is 368. Net need for community nursing home beds in the subdistrict for July 1, 1989, is thus determined: Net Need = SA - (LBD + (.9 X AB)) Net Need = 3,237 - (2,708 + (.9 X 368)) Net Need = 3,237 - 3,039.2 Net Need = 197.8 Net Need = 198 Thus, on July 1, 1989, the subdistrict, Hillsborough County, will need 198 community nursing home beds. Evidence of "not normal" need Rule 10-5.011(k)2.j. provides criteria for approval of community nursing home certificates of need "in the event that the net bed allocation [pursuant to the rule formula] is zero . . ." The net bed allocation pursuant to the rule method is not zero in this case. Subparagraph 2j thus does not apply. The Petitioners did not present any evidence of need pursuant to the special criteria of subparagraph 2j of the rule. Rule 10-5.011(k)1. Provides: 1. Department Goal. The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds in the subdistricts designated by local health councils. (E.S.) Many other HRS need rules have the same "not normal" loophole, and in all of these other cases, the applicants are thereby given the opportunity to show exceptional circumstances justifying the grant of additional beds by consideration of various aspects of the statutory criteria. Since subparagraph 2j does not apply, the provisions of subparagraph 1 do apply to grant a similar opportunity. The only other credible or competent evidence presented by the Petitioners as to a "not normal" condition of need was evidence concerning the numbers of elderly residents in the subdistrict and the occupancy rates of existing community nursing homes. These factors have already been accounted for in the rule formula, and cannot be counted again. Health Quest Realty, XII v. Department of Health and Rehabilitative Services, 477 So.2d 576, 578-79 (Fla. 1st DCA 1985) Amendment or update of applications Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn that the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. The review of these applications by HRS was delayed for months beyond the normal review period. Further delay has occurred in discovery and preparation for the lengthy formal administrative hearing. Time changes all, and over this period of time, new data has come to the attention of all parties. It would be absurd `to require the applicants to prove applications that have become erroneous due to the passage of time. It is highly probable that rule 10-5.008(3) was originally drafted with only the free form review of an application for a certificate of need in mind, and that the application (or non-application) of the rule to an administrative hearing a year or more later was not considered by those who drafted the rule. Indeed, prior to August, 1985, the Department and all litigants uniformly followed the McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977) principle of Florida administrative law that formal administrative hearings are de novo, and that new information pertaining to the application is admissible. In August, 1985, the case of Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, et al., 483 So.2d 700 (Fla. 1st DCA 1986) was decided. While the Gulf Court decision was concerned only with the competitive status of applicants with respect to bed need, in the aftermath of that decision, the Department elected to construe rule 10- 5.008(3) as forbidding practically all new information, even information that had nothing to do with bed need. This undoubtedly was an overreaction to the Gulf Court decision, but the Department, after all, has always had the authority to establish rules governing the processing of applications for certificates of need, including the number and timing of amendments to such applications. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Given the fact that the rule is so clear, the better route would have been to amend the rule. As discussed above, conventional rules of statutory construction could easily support the legal conclusion that the rule must be applied as it is written, without further interpretation. Nonetheless, the Department for this case has chosen the other route, to interpret rather than to amend its rule. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December 8, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborough, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988) These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. at 4651: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: . . . HRS has authority by statute to issue a CON for an identifiable portion of project. Section 381.494(8)(c), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 2141-42: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS . . . [Gulf Court] . . . limited the de novo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is extremely obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. New information submitted by Forum Group Table 7 of the Forum Group update is for the second year of operation. There was no projection of utilization by class of pay for the second year of operation in Forum Group's original application, and Forum Group presented no evidence to explain why its original application did not or could not forecast utilization by class of pay for the second year of operation. Table 7 of the update, F.G. Ex. 6, thus constitutes an attempt to add matters to the original application which could have been a part of the original application as filed. Pursuant to rule 10-5.008(3), Fla. Admin. Code, it is now excluded from evidence because it is irrelevant. Table 8 of the Forum Group update was not proven by Forum Group to be based upon ordinary inflation. It appears that the revised charges in table 8 were based in part upon a telephone survey of subdistrict nursing homes conducted after Forum Group filed its original application. Forum Group did not prove that it could not reasonably have conducted such a telephone survey before it filed its original application. Thus, table 8 of F.G. Ex. 6 contravenes rule 10-5.008(3) and now is excluded from evidence because it is irrelevant to the original application. Table 10 of the Forum Group update was precisely the kind of new information allowed by the incipient policy of the Department. The old table 10 had an opening date of January, 1988, a date that was obviously in error due to the delay in decision in these cases. The new information was simply the old information altered by current occupancy and fillup rates in the subdistrict, data that could not have been acquired when the original application was filed. "Current occupancies" is explicitly listed by HRS as permissible new data in the Health Care and Retirement case, supra. Table 10, F.G. Ex. 6, is admitted into evidence. The revised table 11 contains positions for a dietary supervisor, maintenance supervisor, and utility workers, all of which could have been reported in the original table 11. These portions of table 11 are excluded from evidence. The revised table 11 contains changes in the FTE's for registered nurses and licensed practical nurses. These changes could have been in the original table 11 and are excluded from evidence. The revised table 11 contains changes in salaries that were adequately shown to be the result of inflation and new market data not available at the time the application was deemed complete. These portions of revised table 11 are admitted into evidence. Table 25 of the revised application, F.G. Ex. 6, which summarizes estimated project costs, including construction costs, contains new information permitted by the Department's evolving policy. The new table contains no changes of substance except changes caused by inflation and current construction experience. The bottom line, except to that extent, has not changed in substance. Table 25 of F.G. Ex. 6 is admitted into evidence in its entirety. Revisions to tables 17-20, F.G. Ex. 6, were driven entirely by inflation in construction costs. Surely if the Department allows an applicant to respond to inflation by projections of new costs, the Department's policy would also allow the applicant to respond to inflation by projections of new methods to reduce new costs caused by inflation. These revisions are admitted into evidence. The revised pro forma statement of total operating expenses has not been proven by a preponderance of the evidence. First, the revision was explained as being based upon changes in utilization by class of pay, but that data, table 7 of the revision, was not admitted into evidence. Moreover, the changes in total operating expenses resulted from impermissible changes in the numbers of FTE's which have been excluded from evidence. It is not possible on this record to determine how much of the revised pro forma statement of total operating expenses has been shown to be a credible projection, given the lack of these fundamental sources of the projection. Moreover, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, has not been credibly shown to be based upon matters that Forum Group could not have known at the time it originally filed its application. This conclusion flows from the fact that the original application did not project utilization by class of pay in year 2. Absent this projection, the revision of total operating expenses must necessarily be based upon data that was absent from the original application. The same is true with respect to changes in FTE's in the revision. For these reasons, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, constitutes an impermissible offer of new data precluded by rule 10-5.008(3). New information submitted by Health Quest Table 8 of the revised application of Health Quest, H.Q. Ex. 3, was based upon information that Health Quest could have obtained when it filed its original application. Table 8 of H.Q. Ex. 3 is thus excluded from evidence. Table 11 of the revised application was based upon the actual experience acquired after the original application was filed. Table 11 of H.Q. Ex. 3 is admitted into evidence. Table 17 of the original application projected that the facility would have six three-bed rooms, but the revised application deleted all 3 bed rooms. Since Health Quest failed to show that this new information would have been unavailable to it when it filed its original application, the change as to 3 rooms is not admissible. The ineluctable result, therefore, is that all of revised table 17 is inadmissible since the proper mix of beds has not been proven. The change of square footage of 1 bed room to 216 in the revised table 18 is inadmissible because it contravenes rule 10-5.008(3). Evidence as to the agreement with the University Community Physicians Association of Tampa is admissible as matters which did not exist and could not have been a part of the original application. The objections to that testimony, T. 579- 80, are overruled. New information submitted by Careage The changes to the Careage application, C. Exs. 18-23 and 24-25, were shown to be based upon information not reasonably obtainable by Careage when it filed its original application, and thus are admitted into evidence over the objections made that these exhibits were barred by rule 10-5.008(3). New information submitted by Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. Comparative review of the applications Careage failed to prove two essential portions of its application. It did not prove by a preponderance of the credible evidence that it would in fact operate the proposed facility if the certificate of need were granted, and it did not prove by credible evidence that it would provide care of good quality. For these reasons, the Careage application should be denied. The other applicants proved by credible evidence all essential portions of their applications. The only remaining task, therefore, is to determine the proper allocation of the 198 beds needed in July, 1989, among these three applicants. The space and costs associated with the remaining proposals may be compared as follows: Appli Cost/Bed NetFt/Bed TotFt/Bed Cost/NetFtBed Cost/TotFtBed Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The cost per net square foot per bed (Cost/NetFtBed) is derived by dividing the cost per bed by the net square feet of living space per bed. Likewise, the cost by total square feet (gross) per bed (Cost/TotFtBed) is derived by the same division. Health Quest is preferable to the other two applicants when these cost and space figures are considered. It provides more space at a lower cost per square foot. The differences between Hillsborough Healthcare and Forum Group are not sufficiently significant to give one preference over the other. Hillsborough Healthcare is the less expensive proposal, but suffers from being the least spacious proposal in comparison to Forum Group. Moreover, the record does not contain guiding policies to determine whether there is a need in Hillsborough County for cheaper, less spacious, nursing homes, or for more expensive, more spacious nursing homes. The proposed staffing of the remaining proposals may be compared as follows: Applicant TotalFTE RN FTE LPN FTE RN Asst FTE No. Bed Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: Total FTE Applicant Per Bed RN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 The total nursing FTE per bed for each applicant is relatively equal, with Hillsborough Healthcare having the highest ratio and Health Quest the lowest. Forum Group has significantly more RN's and LPN's per bed than Health Quest, but the overall nursing staffing is comparable. Hillsborough Healthcare is the lowest when only RN's and LPN's are considered, and the lowest total FTE per bed. The differences noted in staffing do not appear to be sufficient to draw meaningful conclusions. Hillsborough Healthcare's facility may be staffed at a less costly level, but whether this is due to substitution of nursing assistants for RN's and LPN's, or a result of efficiencies due to the larger number of beds (120), or reflects less than optimum staffing cannot be determined on this record. Hillsborough did not present evidence as to staffing patterns for a 60 bed facility. Other features of the proposals of the three applicants provide little to distinguish or rank them in priority. All three propose to associate the nursing facility with an adult congregate living facility, resulting in cost efficiencies and better continuity of care. All three have a substantial track record in the operation of a nursing homes, and can be expected to provide care of good quality. All three have very substantial resources and prior experience in the development and initial operation of a nursing home. If any distinction were to be made, perhaps it would be to favor the Hillsborough Healthcare application over the Forum Group application. Hillsborough Healthcare plans to serve the needs of Alzheimer's patients, and Forum Group does not. Hillsborough Healthcare's application is, relative to the Forum Group proposal, less expensive. On the other hand, the Alzheimer's disease unit is only a marginal factor since there is no qualified evidence in this record of need for that type of unit in 1989 in Hillsborough County. One can only infer that the need is probably going to be there, and it might be better to prefer Hillsborough over Forum Group for that reason. The "luxury" vs. "austerity" comparison is similarly not of ultimate persuasive weight since, as discussed above, there is no credible evidence in the record as to what the proper mix should be. Of course, it is safe to conclude that the need for less expensive nursing care is greater than the need for care that only a few can afford, but that conclusion does not necessarily result in the total denial of the Forum Group application. In summary, with respect to the question as to which applicant should be favored with approval of the most number of beds from the projected bed need, there is no major issue to adequately distinguish between the three applicants. For this reason, each applicant should be treated as equally as possible consistent with the application it submitted and the evidence it presented in support of that application. The Department appears to have several relatively reasonable ways to allocate bed need among the three applicants. It might simply divide the beds equally among the three. This alternative is less reasonable because it would ignore the detailed proof that has been presented by both Forum Group and Health Quest in support of proposed facilities of 60 beds and 88 beds respectively, and would result in implementation of facilities having staffing and design configuration that would be altered from that proof. A second alternative would be to award partial approval to Health Quest for 78 beds, to award full approval to Hillsborough Healthcare for 120 beds, and to deny the application of Forum Group. A third alternative would be to award partial approval to Health Quest for 78 beds, to award partial approval to Hillsborough Healthcare for 60 beds, and to award full approval to Forum Group for 60 beds. This third alternative is more reasonable and will be recommended by this order. This alternative has the advantage of fostering the most future competition in Hillsborough County by approving three competitors rather than two. Of the three applicants, Health Quest proposed the most space, relatively speaking, for the least cost. The staffing proposed by Health Quest is reasonable in comparison to the other two applicants. Reduction of the Health Quest proposal to 78 beds from 88 beds is a relatively minor reduction; stated another way, the proof provided by Health Quest as to the specifics of an 88 bed facility is likely to be changed only slightly for a 78 bed facility. Forum Group proved all of the details of its 60 bed proposal, and thus approval of those beds would be entirely consistent with its application and proof in this record. Hillsborough Healthcare did not prove the specifics of a 60 bed partially approved facility except that such a facility would contain the full sized Alzheimer's patient unit proposed in its 120 bed facility. It would be fairer to approve Hillsborough for that 60 bed facility than to approve Hillsborough for 120 beds, leaving Forum Group with denial of its application, given the lack of a compelling clear choice between the two applicants. Recommendation It is therefore recommended that the Department of Health and Rehabilitative Services enter its final order partially granting the application of Health Quest for 78 community nursing home beds, partially granting the application of Hillsborough Healthcare for 60 community nursing home beds, fully granting the application of Forum Group for 60 community nursing home beds, and denying the application of Careage. DONE and ORDERED this 30th day of June, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. 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 June, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 87-0670, 87-0671, and 87-0774 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact contained in this appendix are adopted as findings of fact. Findings of fact proposed by HRS: 1-2. These proposed findings of fact are' subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The classification of the Home Association beds has been thoroughly discussed in the findings of fact and conclusions of law. The correct population figures are discussed in the findings of fact. 9-13. These are matters of law, and thus not appropriate as proposed findings of fact. 15. The changes to table 7 were not the result of a telephone survey. T. 51. 17. Defining "extrinsic circumstances" as not inclusive of economic or market changes that occurred after the original application was deemed to have been complete, or otherwise not reasonably obtainable or knowable by the applicant when the original application was filed, is contrary to HRS policy embodied in final orders, sketchy as it may be. 18, 23-25. Rejected as explained in the findings of fact. 26, 28. Rejected with respect to table 11 as explained in the findings of fact. 30. This finding of fact, while true, is not made because Health Quest made no such change to its 88 bed application. Rule 10-5.008(1) simply states that the application for a certificate of need must be filed on form 1455. Table 12 of the form has no instructions for what must be contained therein. Since HRS has not demonstrated on this record that table 12 in the original application was supposed to have listed these items, it cannot be said that the listing of these items in the new table 12 is a change. It is noted that spaces to take showers, baths, store linen, and for nursing stations would be assumed for any nursing home, and ought not be presumed to have been excluded by the failure of an applicant to list them. Moreover, it is further noted that from a review of the original application H.Q. Ex. 1 that table 12 does include nursing administrative space, patient lounges, a central supply space, general storage, housekeeping, and laundry. Moreover, the amendment, H.Q. Ex. 2, shows the following spaces on the space diagram: laundry, shower, patient lounge, and medication room (med). Any bed room could be used for isolation. Table 20 does include a chapel. H.Q. Ex. 1. Not supported by the record cited. Findings of fact proposed by Forum Group: 1-4, 9, 13. These are matters of law, and thus not appropriate as proposed findings of fact. 5. LB of 5,964, as proposed by the Department, is most credible as the beginning figure, without considering the beds at the Home Association. 7-8, 10. Incorrect value for LB. 11. OR should be 94.29 with the Home Association beds. 18. Incorrect values for LB and OR. 21. The denial occurred orally in January, 1987. The update has been discussed in findings of fact and conclusions of law. These are matters of law, and thus not appropriate as proposed findings of fact. It is true that there is need and the need must be satisfied. 29-33. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 34. The phrase "homelike atmosphere" is too vague to be a finding of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The record does not contain sufficient evidence to make a finding as to the history of Forum Group with respect to the quality of care provided at Forum Group facilities. 49-50. The update with respect to financial feasibility is not relevant since essential parts of the update with respect to financial feasibility were not admitted into evidence. 60, 65, 67, 68, 74, and 80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 66. This is not relevant. Ms. Kennedy testified that she had authority from Hillsborough Healthcare to accept a certificate of need for a 60 bed nursing home. There is no credible evidence to contradict this statement under oath. The lack of a written partnership authorization in evidence does not negate this statement. 76. Had there been any credible evidence in theme cases that the amount of need in Hillsborough County was minimal and that, consequently, the pro formas for 60 bed nursing-homes must be closely scrutinized for long term financial feasibility, then it would be relevant that CSI did not explain in detail the pro forma for a 60 bed nursing home. CSI did, however, present expert opinion that a 60 bed nursing home would be financially feasible, and on this record, the opinion is very credible. Forum Group and Health Quest have shown the long term financial feasibility of a 60 bed nursing home, and there is a large amount of need. Moreover, existing nursing homes are experiencing very high occupancy rates and fill up rates. For these reasons, this proposed finding of fact, while true, is not relevant. Hillsborough did show that its design was modular. Scaling down the project simply means deletion of one wing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The witness specifically addressed two portions of the state health plan. T. 777. The testimony was competent and substantial evidence. The inference that the certificate of need was "about to expire" is inappropriate since the witness's testimony leads to the inference that Health Quest intends to proceed with that project. T. 641. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 98-99. These proposed findings of fact are true, but insufficient to support a finding that Health Quest lacks the resources to construct and operate this project in the short term. 101, 105-07. These proposed findings of fact are true, but do not lead to the conclusion that the construction cost estimates are unreasonable. See T. 590. Mr. Krisher had sufficient expertise in health planning, nursing home development, and financial feasibility, to testify generally as to these matters. T. 501-516. No party presented any independent evidence to seriously question these estimates. 102. This proposed finding of fact is incorrect since the expected Medicaid rate in Boca Raton is different from the expected rate in Tampa. T. 785. 111. Not supported by the record cited. 114-116, 118-120. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. True, but insufficient to show lack of resources to make the project financially feasible in the short term. Irrelevant. The existence of lines of credit was proved by Mr. Gentle. Irrelevant. The staffing was shown to be reasonable by the testimony of other competent witnesses. 125-27. True, but insufficient to show back of financial feasibility. 129. True, but irrelevant. It would be unreasonable and a waste of health care resources for an applicant to have to buy five expensive acres of urban land to be qualified to apply for a certificate of need. 130-31. Irrelevant. The delay and inflation rates are negligible. Findings of fact proposed by Hillsborough Healthcare: 1. This is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 5. The phrasing of the first and second sentences is rejected for lack of evidence. 7. The evidence is not sufficient to show actual bias by a preponderance of the evidence. 8-9, 19-20, 22-23. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact are true, however, and are adopted by reference. 21. Irrelevant. 24. True, but not relevant. These matters are covered by the numeric need rule. 29. The evidence does not show that CSI managed facilities offer "superior" activities. 32, 33 (fifth and sixth sentences), 35 (last sentence), 38(a)-(i), 40,42 (first sentence), 39, 45 (second and third sentences), 46 (all but the first sentence), 49 (first two sentences), 53, 56 (all but the first two sentences), and 60-72. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact ace true, however, and are adopted by reference. 51. The preponderance of the evidence does not credibly show that the floor plan promotes patient safety and convenience, or that travel distances are minimal. 54. Not supported by the record cited. These proposed findings of fact are irrelevant. A finding of fact that the criminal offense of perjury was committed cannot be made since there is no evidence of a criminal conviction by a court of competent jurisdiction. The testimony of Ms. Etten was not limited to those programs. The documents used in cross examination were never properly authenticated, and are hearsay. Thus, a finding of fact that the documents are in fact surveys of Careage facilities by other agencies in other states cannot be made based upon the documents. For this reason, the remainder of the proposed finding is not relevant. Ms. Etten credibly testified that nursing staffing was generally adequate. Her opinion was not ultimately limited to special programs. T. 1216. The inability of other witnesses to testify on this point is not relevant. The ability of Careage to recruit staff was adequately proved by other parties. There is no credible evidence in this record to believe that any applicant fail to recruit adequate staff. The recruitment plans of Careage appear to be quite reasonable. T. 1562-64. On pages 1686-87 of the transcript, the Hearing Officer ruled that the expert opinion of Ms. Krueger would be allowed even though it was based on hearsay. This was a correct ruling. Section 90.704, Fla. Stat. (1987). The sentence immediately following that ruling is incorrect as stated, and directly contradicts the initial correct ruling. That is, an expert opinion is admissible and may be relied upon even though based upon evidence, such as hearsay, which in itself may not be admissible. Further, the opinion of an expert in an administrative proceeding is a proper basis for a finding of fact even though the opinion is based upon hearsay, and even though hearsay alone in an administrative hearing, absent nonhearsay evidence on the point, is not sufficient as a basis for a finding of fact. The second sentence in the transcript was intended to state that hearsay evidence alone will not be the basis of a finding of fact, setting aside for the moment the issue of expert opinion. For these reasons, these proposed findings of fact are rejected to the extent that they urge that short term financial feasibility was not established because the opinion was premised upon hearsay evidence. With respect to the unaudited financial statement question, Ms. Krueger was not asked whether experts in her field reasonably rely upon unaudited financial statements. She was only asked which type was more worthy of belief and whether her profession feels they can rely on audited statements. She was never asked whether her profession feels it cannot rely upon unaudited statements. Ms. Krueger stated that she was aware of the existence of fraudulent audited statements, implying that the question leads to answers that are not that useful. T. 1652. In fact, Ms. Krueger, who was a thoroughly credible witness, explaining her opinions in a lucid and reasonable manner, relied upon unaudited statements, as well as her conversations with several of the chief executive officers of Careage. Based on this record, a finding cannot be made that experts in this field do not reasonably rely from time to time upon unaudited financial statements. The authenticity of the letter from SeaFirst is irrelevant since that line of credit was established by the direct testimony of Mr. Gentle. T. 1576. Ms. Krueger's lack of personal knowledge as to the existence of a binding commitment for a loan for this project is irrelevant due to Mr. Gentle's direct testimony. The evidence in the record from all parties indicates that land is generally available in Hillsborough County in the 3 to 5 acre range, that 3 to 5 acres is about what is needed for any of the projects, and that the cost is from $300,000 to $600,000. The Careage facility will bring in over $3 million in gross revenue per year in all years beyond the first few. A few hundred thousand dollars can be amortized over the life of a nursing home, and will not be a significant factor in long range financial feasibility. All of the applicants have access to credit to buy land at market rates. There is essentially no reasonable dispute as to land acquisition and cost in this case. The testimony related to equipment , not floor space, for technology dependent children. Those children would be served in the subacute beds. Space for Alzheimer's patients was included in the floor plan and the 45,500 square feet. T. 1136-37. Mr. Cushing testified that the Means reference book might project a cost per square foot in the "60's." He did not adopt that as his opinion. T. 1185-86. Delay in construction for 8 months is not such delay as to necessarily result in substantial increases in construction cost. The last sentence is true but does not account for the fact that Mr. Cushing consulted the Means reference book for labor rates. That is sufficient. The remainder of the reasoning of this proposed finding of fact was rejected in paragraph 85 above. Rejected as described in the preceding paragraphs. Ms. Krueger's expertise with respect to salaries was established perhaps more completely than any other expert witness. She not only had first hand knowledge from her work reviewing salaries in nearby counties, but she consulted expert reference materials. Her inability to remember the name of the book referenced does not seriously undermine her expertise. The ruling at T. 1324 sustained an objection to a question. It was not a ruling upon the admissibility of portions of the document. Ms. Krueger prepared the long range plan section of C. Ex. 3, P. 3-7, and the under served groups section, p. 3-8, in conjunction with Mr. Gentle. T. 1322. This is sufficient predicate for her testimony as to these matters. 91-92. The telephone survey was not a needs survey. It only surveyed existing services. The survey has essentially been discounted because of lack of response and lack of statistical reliability. These proposed findings ace adopted by reference. Since none of this testimony has been relied upon in this recommended order, the proposed findings of fact are irrelevant. These proposed findings of fact are irrelevant. The testimony as to lines of credit and resources of the Lynns was enough to establish the availability of working capital. These proposed findings of fact are irrelevant. Rejected as explained in the findings of fact. These proposed findings of fact are irrelevant. 101. The continuing objection was allowed, not granted. T. 595-96. Otherwise, these proposed findings of fact are true and are adopted by reference. 102-103. These proposed findings of fact are true and are adopted by reference. 104. Essentially irrelevant as explained with respect to proposed findings of fact concerning the land acquisition and preparation costs of other applicants. 105-107. These proposed findings of fact are true and are adopted by reference, except the last clause of the last sentence of proposed finding of fact 105. Absent quantitative data and a study of salaries showing the estimates to be substantially in error, the foregoing proposed findings of fact are not sufficient to show an error affecting financial feasibility. 108-109. These proposed findings of fact are irrelevant since the 60 bed application was not a permissible amendment. These proposed findings of fact are true and are adopted by reference. These proposed findings of fact are irrelevant since these are different health districts having different patient payor mixes. Findings of fact proposed by Health Quest: 4, 5, 7-10. These are matters of law, and thus not appropriate as proposed findings of fact. 11-17. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The rationality of the OCHP's policy is irrelevant since it conflicts with the rule and other policies are also rational. A finding of a consistent pattern with respect to base date populations in the award of certificates of need cannot be made as discussed in the findings of fact. Mr. Sharp understood his position, and Mr. Jaffe well understood the inconsistencies. 22-23. True but irrelevant. Disadvantage often occurs to some person when the law is correctly applied. 24-28. Rejected as discussed at length elsewhere in this order. 33. Not supported by the record cited. 36.a. Mr. Gentle did not work with Careage in these years and could not be expected to have detailed memory on these points. He named seven such facilities. 38. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 40.b. (ii). There is no evidence that CHP is the same as Careage. 40.c.(v). Health Quest has operated since 1969. 42. Both could be true. 43.a.(ii). Mr. Gentle was not sure because this was not within his area of responsibility. T. 1603. 44. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Dr. Etten's unfamiliarity with the fact that the Health Quest facility in Jacksonville provides IV therapy and total parenteral nutrition does not demonstrate exaggeration or lack of expertise. The record does not clearly demonstrate that other Health Quest nursing homes provide these specific services. The evidence is only that services are generally the same. T. 1077. The testimony concerning Medicaid patients in the subacute unit was elicited on cross examination, and was not presented by the witness as an intended representation by Careage on direct. Ms. Krueger's understanding simply was wrong, not misleading. T. 1367. The remainder of this proposed finding of fact is similarly a red herring. Careage did not project anything more than 37 percent Medicaid utilization. C. Ex. 3, table 7B. It is one thing to expect 37 percent utilization, and another thing to represent that the facility will not discriminate. A promise to not discriminate inherently contains the caveat that a facility will not pursue that noble goal to bankruptcy. The Hearing Officer would not find that to be the case with respect to Careage any more than with respect to Health Quest. Mr. Gentle did not testify that the number of nurses aides in the Alzheimer's unit would be higher in comparison to other sections of the facility. He testified that the number would be "higher" in comparison to professional licensed staff, which would be lesser. T. 1525. 54. Irrelevant. Mr. Gentle said that day care would probably be at a location nearby. T. 1593. 57. None of the parties addressed site size with the specificity proposed by these findings of fact. Lack of such specificity has no real bearing on credibility. The record cited, T. 1526, does not support the proposed finding that equipment for technology dependent children is "substantial and expensive." Thus, the remainder of these proposed findings are rejected. It is true, however, that the application fails to itemize such equipment, and that the contingency is relied upon. There is no evidence that Careage proposes to employ a gerontological nurse practitioner. C. Ex. 3, table 11. The testimony of Dr. Etten simply describe the skills of that form of nurse practitioner. She was never asked whether such professional would be employed by Careage. T. 1217-19. The failure to tie in the testimony is only a human error, and does not show a lack of credibility. Proposed finding of fact 62.a. is not supported by the record. Dr. Etten was not asked to describe the care given an Alzheimer's patient in an ACLF. She was asked to describe the care given a "resident" of an adult congregate living facility. Her comment about such residents not being "bed patients for any period of time" is not a dodge of a question about an Alzheimer's disease patient. Moreover, she credibly and directly testified that Alzheimer's disease manifests itself so many different ways she could not say whether it would be appropriate to have such patients living in an adult congregate living facility. Next, Mr. Gentle's testimony as to the medical characteristics and needs of Alzheimer's patients is insufficient as a basis for findings of fact because Mr. Gentle was not accepted as a medical expert. Health Quest presented no credible evidence to show that an Alzheimer's patient can be treated either in an adult congregate living facility or a conventional nursing home. Absent such evidence, the failure of other parties to rebut the nonexistent negative, given the clear affirmative evidence that Alzheimer's disease patients greatly benefit from special care, is unpersuasive. These proposed findings of fact are irrelevant. These children would be served as subacute care patients. Precise identification of the area set aside for these children would have been only of marginal relevance. To the extent not adopted elsewhere in this recommended order, these proposed findings are adopted by reference. Careage's expert was clearly aware of the need to review site specific conditions in the preparation of construction plans. T. 1177. He has built nursing homes in many states. His competence to prepare adequate construction plans for Hillsborough County conditions was clearly established in the record. It is true that he had not yet prepared the final construction plans. But no party has presented final construction plans, and thus the lack of such plans is irrelevant on this record. Irrelevant on this record. Irrelevant. The amount of working capital is well within the resources available to Careage. There is no evidence in the record that a variation one way or the other by $100,000 would make the project not financially feasible. Careage's credibility was not discredited by the fact that Ms. Krueger was not aware of the mix of skilled and intermediate beds. True, but irrelevant. There is no evidence that such expenses were not accounted for, or if missing, the amount and importance. The staffing was shown by expert opinion to be adequate. T. 1216. One presumes that adequacy refers to adequate health care since the witness was only qualified in that area of expertise. The Careage design was not unique. The Careage use of the word "unique" to describe its design has been disregarded in this order. 78.c.(i)-(iii). These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 78.c.(vi). Not supported by the record cited. 78.c.(vii). The testimony cited is not competent opinion. There was no predicate for testimony as to the knowledge of Mr. Haben, and the objection to a similar question just preceding was sustained on that basis. 87-96, 100-101, 103-128. These proposed findings of fact are irrelevant for the reasons stated in Health Quest's proposed finding of fact 76. 135. These are matters of law, and thus not appropriate as proposed findings of fact. 146. Not relevant since the 60 bed proposal is not in evidence. 149. Without evidence as to what is included in the definition of "subacute" care, a finding as to "virtually all" cannot be made. 151 and 158. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 166, 169, 170 and 172. Not relevant since the 60 bed proposal is not in evidence. 168. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of fact proposed by Careage: The first sentence implies that Careage has operated nursing homes for 25 years. Careage has built nursing homes fob that length of time for operation by others, for the most part. The second sentence is true, but subordinate, and is adopted by reference. Mr. Griffin testified that the decision to adhere to the recommendations made by staff before he assumed his duties at HRS was not his decision. T. 705-06, 703. His testimony reflect very little personal participation in the evaluation of the competing applications. T. 697-705. 6. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 8. There was no credible evidence in this record as to how many Alzheimer's patients need specialized services. The evidence was simply that if such patients exist, such patients need specialized services. Thus, the first sentence is rejected. 8 (second sentence) -12. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. A comparison of staffing is not possible since Careage intends to serve primarily persons in need of skilled nursing care, and hence it cannot be determined if Careage in fact has proposed nursing staff that is more generous relative to patient need than Hillsborough. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility, this finding of fact is rejected. The proposed finding concerning intent to provide adult day care is not supported by the record cited. 19-20. Irrelevant since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility. 21. The first sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 22-23, 25 (all but first sentence), 26, 17 (third, fourth, and seventh sentences), 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 24. It is concluded that associating a nursing home with an adult congregate living facility will in fact result in cost efficiencies. The remainder of this proposed finding of fact, noting the relatively higher costs of Health Quest compared to Careage, is true, but does not disprove the conclusion that cost efficiencies would exist. It is true that the Hillsborough Healthcare Medicare mix projection may be somewhat high, but the fiscal consequences of that conclusion was not demonstrated. The second sentence is rejected because Ms. Krueger was not accepted as an expert with respect to appropriate levels of staffing. T. 1686-88. 31. The second sentence is based upon hearsay. It is also based upon the opinion of Mr. Gentle which was inadmissible. T. 1577. The fourth and fifth sentences are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 32-33. These portions of the Forum Group amended application, F.G. EX. 6, were not admitted into evidence, and thus these proposed findings of fact are not relevant. 36. Irrelevant since the Health Quest 60 bed application is an impermissible amended application. COPIES FURNISHED: 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 Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 DEPARTMENT OF HRS Edgar Lee Elzie, Jr., Esquire Guyte P. McCord, III, Esquire McFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 CAREAGE HOUSE HEALTH Robert S. Cohen, Esquire Haben and Associates Post Office Box 10095 Tallahassee, Florida 32302 FORUM GROUP, INC. R. Terry Rigsby, Esquire Post Office Box 11188 Tallahassee, Florida 32302 HILLSBOROUGH HEALTHCARE LTD. W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 HEALTH QUEST CORP. Charles N. Loeser, Esquire Assistant General Counsel 315 W. Jefferson Blvd. South Bend, IN 46601 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302
Findings Of Fact Hillhaven Convalescent Center is a 120-bed skilled nursing care facility, and it participates in Florida's medical assistance program (Medicaid) as a provider of skilled nursing home care. The Department reimburses the Petitioner for the Petitioner's cost in providing such services to eligible patients. As a part of the reimbursement system, Petitioner is required to calculate a per diem reimbursement rate for its Medicaid patients. The Petitioner computed this rate by dividing its total of appropriate expenses ($828,628) by its total patient days (39,399). The resulting per diem rate is $21.03. The total expense and total patient day figures were based upon all categories of patients served by the Petitioner, including Medicare, Medicaid, private and Veterans Administration patients. The Department retained a private accounting firm, Coopers & Lybrand, to audit the Petitioner's 1977 fiscal cost report. The accounting firm concluded that the per diem rate calculated by the Petitioner was erroneous. The firm subtracted total expenses and total patient days attributable to Medicare patients from the figure utilized by the Petitioner. The result of this adjustment was to substantially reduce the Center's per diem rate, and the amount of compensation that the Petitioner is entitled to receive for its participation in the Medicaid Program. Medicare patients generally require a more profound degree of care than do Medicaid patients. Including Medicare patients in a determination of per diem rates at nursing homes will almost universally result in an increase in the rate. The Department has not adopted its policy to exclude Medicare expenses and Medicare days in determining Medicaid per diem rates as a rule in accordance with the Administrative Procedure Act. The Department has uniformly enforced the policy with respect to nursing home facilities participating in the Medicaid Program that it has audited. The parties have stipulated and agreed that the decision in this matter will be applicable to a companion case involving a different nursing home owned by the same corporation. The Petitioner has submitted proposed findings of fact and conclusions of law. To the extent that the proposals have not been substantively adopted herein, they have been rejected either as not supported by the evidence, or as not relevant.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, hereby RECOMMENDED: That a final order be entered affirming the audit exceptions respecting the Petitioner's Medicaid reimbursement for the fiscal year ending March 31, 1977, and requiring that the per diem rate of compensation for Medicaid patients be recomputed by deleting expenses and patient days relating to Medicare patients. DONE and ENTERED this 7th day of December, 1979, in Tallahassee, Florida. G. STEVEN PFEIFFER Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 1979.
