Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the stipulation of facts "entered into by all parties, the following relevant facts are found: Along with six other applicants, the petitioner, Health Quest Corporation, d/b/a Lake Pointe Woods Health Center, and the respondent, Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center, submitted applications for a Certificate of Need to construct and operate new nursing homes in Sarasota County, In June of 1982, the respondent Department of Health and Rehabilitative Services (HRS) determined to issue the application of Sarasota Health Care Center and deny the remaining seven applications. For the purposes of this proceeding, the parties have stipulated that there is a need for at least a 120-bed skilled and intermediate care nursing home in the Sarasota, Florida area. In November, 1982, respondent HRS adopted Rule 10- 5.11(21) , Florida Administrative Code, which provides a formula methodology for determining the number of nursing home beds needed in areas throughout the State. Briefly summarizing, this formula begins with a bed to population ratio of 27 per thousand population age 65 and over, and then modifies that ratio by applying a poverty ratio calculated for each district. The theoretical bed need ratio established for Sarasota County by this portion of the Rule's formula is 23.2 nursing home beds per thousand elderly population projected three years into the future. The population figures to be utilized in the formula are the latest mid-range projections published by the Bureau of Economic and Business Research (BEBR) at the University of Florida. After determining the theoretical need for nursing home beds in an area, the Rule purports to determine the actual demand for beds by determining the current utilization of licensed community nursing home beds, establishing a current utilization threshold and, if this is satisfied, applying a prospective utilization test too determine the number of beds at any given time. Applying the formula methodology set forth in Rule 10- 5.11(21) to Sarasota County results in a finding that there are currently 807 excess nursing home beds in that County. The need for sheltered nursing home beds within a life care facility are considered separately in Rule 10-5.11(22), Florida Administrative Code. Generally speaking, need is determined on the basis of one nursing home bed for every four residential units in the life care facility. Elderly persons 75 years of age and older utilize nursing homes to a greater extent than those persons between the ages of 65 and 74. Persons under the age of 65, particularly handicapped individuals, also utilize nursing home beds. The formula set forth in Rule 10-5.11(21) does not consider those individuals under the age of 65, and it does not provide a weighted factor for the age 75 and over population. In the past, the BEBR mid-range population projections for Sarasota County, compared with the actual census reached, have been low. Petitioner Health Quest, an Indiana corporation, currently owns and/or operates some 2,400 existing nursing home beds in approximately 13 facilities in Indiana. It holds several Certificates of Need for nursing homes in Florida and construction is under way. Petitioner owns 53 acres of land on the South Tamiami Trail in Sarasota, upon which it is constructing a 474-unit retirement center. It seeks to construct on six of the 53 acres a 120-bed nursing home adjacent to the retirement center. Of the 120 beds, it is proposed that 60 will be for intermediate care and 60 will be for skilled care. The facility will offer ancillary services in the areas of speech, hearing, physical, occupational, and recreational therapy. Thirty-five intermediate care beds would be classified as beds to be used for Medicaid recipients and the facility would be Medicare certified. Retirement center residents will have priority over nursing home beds. The total capital expenditure for the petitioner's proposed nursing home project was estimated in its application to be $3.1 million, with a cost per square foot of $46.29 and a cost per bed of approximately $26,000,00. As of the date of the hearing, the estimated capital expenditure for the petitioner's project as $3.9 million. The respondent Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center (QHF), is a Mississippi corporation and owns nursing homes in Tennessee, North Carolina and Haines City, Florida, the latter site having been opened in August of 1983. It also holds three other outstanding Certificates of Need. QHF proposes to construct a 120-bed nursing home containing intermediate and skilled care beds which will be equally available to all members of the community. It is anticipated that it will have approximately 65 percent Medicaid usage and 5 percent Medicare usage. Though it has not yet selected its site, QHF plans to utilize a four-acre site near the City of Venice in Sarasota County. At the time of the application, the total capital expenditure for QHF's proposed project was estimated to be $2.3 million. Its construction costs were estimated at $1.16 million or $33.14 per square foot. QHF's recently constructed Haines City nursing home facility was completed at a construction cost of $1.22 million, or $31.00, per square foot. The Sarasota County facility will utilize the same basic design as the Haines City facility. At the current time, the cost of construction would be increased by an inflation factor of about ten percent. As of the date of the hearing, the projected capital expenditure for QHF's Sarasota County proposed facility was approximately $2.6 million or about $21,000.00 per bed. The owners of QHF are willing and able to supply the necessary working capital to make the proposed nursing home a viable operation. As depicted by the projected interest and depreciation expenses, the QHF facility will have lower operating expenses than the facility proposed by petitioner, Health Quest. In Sarasota County, there is a direct correlation between high Medicaid utilization and high facility occupancy. The long term financial feasibility of a 120-bed nursing home in Sarasota County is undisputed, as is the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the health service area.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Health Quest Corporation d/b/a Lake Pointe Woods Health Care, Inc. for a Certificate of Need to construct a 120-bed nursing home in Sarasota County be DENIED. It is further RECOMMENDED that the application of Quality Health Facilities Inc. d/b/a Sarasota Health Care Center for a Certificate of Need to construct a 120-bed nursing home facility in Sarasota County be GRANTED. Respectfully submitted and entered this 31st Day of October, 1983, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1983. COPIES FURNISHED: John M. Laird, Esquire 315 West Jefferson Blvd. South Bend, Indiana 46601 John T. C. Low, Esquire Paul L. Gunn, Esquire Low & McMullan 1530 Capital Towers Post Office Box 22966 Jackson, Mississippi 39205 James M. Barclay, Esquire Assistant General Counsel 1317 Winewood Blvd. Suite 256 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health & Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact The Petitioner originally applied for a certificate of need to construct and operate a 180 bed community nursing home in Broward County, Florida. By stipulation, the Petitioner's application was amended to be an application for a certificate of need for 120 nursing home beds at a cost of $4,600,000. Stipulation filed August 9, 1985. The only issue in this case is whether there is a need for 120 nursing home beds in Broward County. T. 25. The parties agree that need is to be determined in this case by application of rule 10-5.11(21), Florida Administrative Code. Prehearing Stipulation, pp. 2-3. In the case at bar, the relevant district is District X, which is Broward County and is not subdivided into subdistricts. T. 147. Rule 10-5.11(21)(b)1-4, which is applicable to this case, requires use of the following data and abbreviations: The number of licensed beds ("LB"). The current district population age 65-74 (POPC"). The current district population age 75+ ("POPD"). The district population age 65-74 projected three years ahead ("POPA"). The district population age 75+ projected three years ahead ("POPB"). The average occupancy rate for licensed nursing home beds in the district ("OR"). The number of nursing home beds in the district which have received CON approval but are not yet licensed ("approved beds"). HRS gathers data-from local health councils as to the number of patients in a given nursing home on the first day of each month, and this data, collected in six month segments, is compiled into a semiannual occupancy report. T. 145-46. Joint Exhibit 17 is the semiannual census report and bed need allocation published June 3, 1985, and contains data collected on the first days of the months of October-December 1984 and January-March, l98. T. 147; Joint Exhibit 17. The population figures to be used in this case are from the office of the Governor, and neither party disputes the accuracy of these figures. Relying upon the data in Joint Exhibit 17, HRS concluded that there is only a net need for 11 community nursing home beds in District X on the date of the hearing. Joint Exhibit 17, Joint Exhibit 15, T. 150. This was correctly calculated in Petitioner's proposed finding of fact 20: Underlying data: LB = 2,875 POPC = 157,371 POPD = 104,860 POPA = 168,793 POPB = 124,570 OR = 87.59 percent Approved beds = 415 Calculations: Bed rates: BA = LB POPC + (6 x POPD) = 2,875 157,371 + (6 x 104,860) = 2,765 786,531 = 3.65/1,000 BB = 6 x BA = 6 x 3.65/1,000 = 21.93/1,000 Age-adjusted bed total: A = (POPA x BA) + (POPB x BB) = (168,793 x 3.65) + (124,570 x 21.93) 1,000 ( 1,000) = (168.793 x 3.65) + (124,570 x 21.93) = 617 + 2,732 = 3,349 Occupancy-adjusted total: SA = A x OR 90 = 3,349 x 87.59 90 = 3,259 Deduction for licensed & approved beds: Net beds = SA - LB - .9 (approved beds) = 3,259 - 2,875 - .9 (415) = 384 - 373 Net beds = 11 Beverly Manor was licensed as a community nursing home for 120 beds on May 13, 1985. T. 140-41, 151; Petitioner's Exhibit 16. The Department of Health and Rehabilitative Services has a policy to use May 1, 1985, as the cutoff date for Counting licensed nursing home beds for the June 1985 semiannual report, and based on that policy, did not consider the licensed beds at Beverly Manor in calculating bed need in Joint Exhibit 17 and 15. T. 149, 151-52. The Department of Health and Rehabilitative Services uses a variety of other cutoff dates in compiling the semiannual report. Poverty data is from 1980. Approved bed count is from May 1, 1985. Population data is from January 1985. T. 148-50. The reason offered by HRS for using May 1, 1985, for a cutoff date for counting licensed nursing home beds was to give HRS employees enough time to put all the data together t issue the semiannual report on the due date, June 1985. T. 159-60. Daystar, Inc., is reported to be a 44 bed nursing home in District X on Joint Exhibit 17. The Department of Health and Rehabilitative Services includes in the semiannual report all nursing homes that are licensed by the HRS office of licensure and certification. T. 152. HRS included Daystar, Inc., on the semiannual report. Id. Daystar, Inc., operates a 44 bed facility far Christian Scientists that does not offer medical treatment or medication of any kind, but relies solely upon spiritual healing. T. 36-37. On September 29, 1981, certificate of need number 1746 was issued to Colonial Palms Nursing Home East. Petitioner's Exhibit 18. The termination date was extended to March 27, 1983. Id. Three days before the termination date, HRS issued an amended certificate of need number 1746, to Colonial Palms, Inc. to construct the 120 beds in two phases. Phase I was the addition of 46 beds to an existing facility, which HRS did not name, and phase II was to construct a new 74 bed nursing home facility. Petitioner's Exhibit 19. On April 5, 1983, a Robert T. Held wrote to HRS on "Colonial Palms Nursing Home" letterhead stating that construction regarding certificate of need 1746 had commenced. On June 3, 1985, a William R. Meyer spoke with a Ruth Dixon, Control Clerk, Broward County Permit Bureau, and Ms. Dixon advised Mr. Meyer that no building permit had been issued to Colonial Palms West at 51 West Sample Road, Pompano Beach, Florida 33064 or to Bodee Construction Company for 74 beds. Ms. Dixon further advised Mr. Meyer that "Colonial Palms" has not been issued a building permit since 1983, and that she checked both addresses of Colonial Palms and under the construction company in her investigation. HRS takes the position that the Colonial Palms Certificate of need for 74 new beds is still valid since it is still on its approved list and has not been taken off as void. T. 156-57. The foregoing evidence is not sufficient to conclude that certificate of need lumber 1746 is void in whole or in part due to failure to commence construction. The evidence is ambiguous as to which entity holds the certificate of need or which entity was checked for construction permits, and there is no evidence as to whether construction could have been initiated without a construction permit on file in Broward County. Moreover, the Broward County evidence is hearsay, and although there has been no objection to it, the Hearing Officer independently does not regard it to be sufficient, pursuant to section 120.58(1)(a), Fla. Stat., to be relied upon. Finally, it is entirely unclear what type of construction, undertaken by what entity, would be required for this certificate of need to satisfy the "commence construction" requirement. Colonial Palms was not licensed for an additional 46 beds until January 18, 1985, and thus it had only 81 licensed beds on the first of January, 1985; thus, the occupancy report for Colonial Palms for January, 1985, should have been 83 patients in 81 licensed beds. T. 154; Petitioner's Exhibit 13. The "occupancy rate" contained in the semiannual reports, Joint Exhibit 17 and Petitioner's Exhibit 9, is calculated by dividing the total of the patient census in all nursing homes on the first of each month for the six month reporting period by the total of all licensed nursing home beds for those same facilities during the same months. T. 161. Petitioner's Exhibit 10 is an example of how HRS makes this calculation. Id. As a result of adding the 120 licensed beds at Beverly Manor, the "licensed beds" (LB) figure in the formula increases to 2,995, and "approved beds" changes from 415 to 295. The correction to the January 1985 licensed beds at Colonial Palms (corrected to 81 licensed beds), results in a change to the "occupancy rate" from 87.59 percent as reported in Joint Exhibit 17, to 88.06 percent. This calculation is derived from Petitioner's Exhibits 12, 13, and 14. The patient census for October 1984 through March 1985 was 13,051. The licensed beds total for the same months, however, would be 14,820, which is the result of subtracting 46 beds from Colonial Palms for January 1985. The result, 13,051 divided by 14,820, is 88.06 percent. In the past, HRS has granted partial approval of a lesser number of beds than sought by the applicant for a certificate of need. T. 142. The computations contained in conclusion of law paragraph 10 are found to be the correct computation of need pursuant to the rule, and are hereby incorporated by reference as a finding of fact.
Recommendation It is therefore recommended, subject to paragraph 12 above, that the Department of Health and Rehabilitative Services issue to the Petitioner, Health Quest Corporation d/b/a Regents Park of Broward, a certificate of need to construct and operate 120 community nursing home beds in District X. DONE and ORDERED this 6th day of November 1985, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of November, 1985. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 84-3297 The following proposed findings of fact by Petitioner are adopted herein, if these proposed findings have not already been adopted in the findings of fact: 1, 2, 3, 4, 5, 6, 7, 8, 13, 14, 17, 19, 20 and 21. The following proposed findings were concerned with the December 1984 semiannual report, and thus are not relevant since better and more current data, the June 1985 semiannual report, exists: 9, 10, 11, 15, and 16. See conclusions of law 2-6. The following proposed findings are rejected to the extent that they concern exclusion of Daystar, Inc., data, or to the extent that they are based upon exclusion of Colonial Palms data due to the theory that the Colonial Palms certificate of need is void due to failure to commence construction: 18, 22, and 23. The rejection of these factual matters has been explained in findings of fact 14-16 and conclusions of law 7-9. Proposed finding 24 is rejected as irrelevant, since a net bed need is shown by the rule formula. See rule 10- 5.11(21)(b)10. Moreover, even if the net bed need, which is called the "net bed allocation" by the rule, were zero, the facts proposed in finding of fact 24 are not of the type permitted under this exception of the rule. COPIES FURNISHED: Paul V. DeBianchi, P.A. 2601 East Oakland Park Blvd. Suite #500 Fort Lauderdale, Florida 33306 Charles M. Loeser, Esquire Assistant General Counsel Health Quest Corporation 315 W. Jefferson Blvd. South Bend, Indiana 46601-1586 Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
Findings Of Fact By Stipulation it was agreed and it is found that Petitioner's Petition for Administrative Hearing to contest Respondent's initial decision to deny its application was timely filed. On July 15, 1986, Petitioner submitted a Certificate of Need application to construct a 60 bed community nursing home in Collier County, Florida. In December, 1986, this application was denied by the Respondent because of its determination that there was insufficient numeric need according to the rule bed need methodology and because of the low utilization rate of existing facilities in Collier County. The initial intent to deny was appealed by Petitioner which filed a request for formal administrative hearing. Before the matter could be heard, however, Intervenor, Lakeside, filed a Petition for Intervention which was granted by the former Hearing Officer. After the case was set for hearing, Respondent, DHRS, and Petitioner, Surrey, entered into a stipulation and agreement in which DHRS agreed to reverse its position and support Surrey's application at the final hearing and, pursuant to that agreement, on May 14, 1987, DHRS filed a Notice of Change of Agency Position. Health Care Associates was formed in May, 1977, by Dr. John A. McCoy, PhD, in conjunction with an associate, Stanford L. Hoye, each of whom owns 50 percent of the business. This company which, upon approval, will develop and manage the Surrey project, has been involved in the development of several nursing homes in Florida, all but two of which have been managed by the corporation upon development. At the present time, in addition to the instant project, Petitioner is developing three other nursing home projects in Florida at Live Oak, Bradenton, and Crystal River. Dr. McCoy was instrumental in obtaining Certificates of Need for nine of the nursing homes developed by his company. Two of those have not yet been licensed and of the seven remaining facilities, five have been sold by the corporation to other unrelated organizations. In each case, Dr. McCoy personally realized a profit on the sale. Petitioner proposes to build a 60 bed skilled nursing facility in Collier County at a projected project cost of $1,600,000.00. Approximately $250,000.00 of that figure will be utilized for land acquisition and site costs; $150,000.00 for furniture, fixtures, and equipment; $100,000.00 for architectural fees; and $1,100,000.00 for construction costs, insurance, non- movable equipment, and other items. The initial state agency action report on the application, rendered in late November, 1986, recommended the project be denied on the basis there was insufficient bed need shown and because of the low utilization of currently licensed and operating facilities. Nonetheless, on May 6, 1987, the Department changed its position and entered into a stipulation and agreement with the Petitioner, in which it agreed that no CON approved nursing home beds exist in Collier County; the District Health Plan indicates a need for an additional 143 beds in that county in the applicable planning horizon; the bed to population ratio in Collier County for the 65 and older population is the lowest in the Health Care District; and the age 75 and over population is expected to increase by 24 percent within the next three years. On the basis of these factors and others outlined in the stipulation, the Department concluded, inter alia, that Petitioner proposed the lowest total project cost and the highest Medicare and Medicaid commitment, and determined that Petitioner's application should be approved. Petitioner has identified two potential sites for construction of the facility, both located in North Naples. Both sites carry an asking price substantially in excess of the land acquisition estimates outlined in the application, and neither is currently zoned for the operation of a nursing home. Zoning changes or variances are available, but the cost of securing them may be high and time consuming. Albeit each site would be utilized for construction of not only the proposed nursing home facility but also its related personal care unit, Petitioner estimates that 60 percent of the cost of land acquisition would be apportioned to the nursing home component and 40 percent to the personal care unit. That being the case, one of the parcels would fall within the proposed land acquisition figure cited. DHRS District VIII has been divided into subdistricts for the purposes of planning for community nursing home beds. Subdistrict 2 of District VIII consists of Collier County, Florida. The methodology used by DHRS to determine the need for community nursing home beds in Florida is found in Rule-10-5.011, F.A.C. and it provides, among other things, that the need for proposed new community nursing home beds is to be determined based on a planning horizon three years in the future from date of application. In this case, the appropriate planning horizon is July, 1989, three years after Petitioner's application was filed. The population figures relied upon by DHRS for ages 65 through 74 and ages 75 and above for the period July, 1986 and July, 1989 as of the date of the filing of the application were: 131,642 and 79,661 as well as 148, 229 and 96,142, respectively. The need formula contained in the F.A.C. also requires that the application submitted for July batching cycles be based upon the number of licensed beds in the District as of the preceding June 1. On June 1, 1986, District VIII showed 4,600 licensed community nursing home beds of which there were 473 licensed community nursing home beds in Subdistrict 2. As of November 26, 1986, however, there were no approved community nursing home beds in Collier County, a portion of Subdistrict 2. Another factor to be considered in the methodology is the occupancy rate within the district. As of the application period, the occupancy rate in Collier County was 84.44 percent including the occupancy data for Moorings Park. Petitioner and DHRS urge that it is DHRS policy to utilize at the de novo hearing the latest population figures available at the time of the initial application. These figures, cited above, reflect a 55 bed need in Collier county for the period July, 1989. There is, in addition, a factor which Petitioner urges relating to the licensure report submitted by Americana Nursing Home, located in Collier County, which indicates that a number of that facility's semiprivate rooms were converted to private rooms, thereby reducing the number of beds available for use in District VIII during the relevant time period. When this factor is incorporated into the calculations, a higher occupancy rate is indicated which results in a bed need of 66 rather than 55. Intervenor contests any adjustment made on the basis of Americana's conversion of some of its rooms from semiprivate to private rooms and a resultant decrease in the bed inventory thereby. It points out, and properly so, that former semiprivate rooms can be reconstituted as such in a very short period of time if needed and though the beds may not be set up when the room is a single room, the facility is capable of providing those additional beds without further approval when necessary. The removal of those beds, therefore, from the inventory, as a result of a temporary conversion is not an appropriate methodology. It has not been followed by DHRS in the past nor is it provided for in the rule and it should not be done here. Turning to the question of the population estimates and projections appropriate to make the proper calculation of numeric need for the area at the proper time, Intervenor objects to Petitioner's and DHRS' use of the pertinent population projections existing at the time of application on the basis that at a de novo hearing, the proper and most appropriate approach to bed need analysis and calculation would require the use of the most current available statistics. Utilizing the most current population projections for the July, 1989 planning horizon results in a net numeric need for July, 1989 of 21 beds with an error possible to 22 beds. In addition, the occupancy rate would be reduced and in that regard, evidence indicates that occupancy rates in Collier County have been low since 1982. However, there has been a steady and continuous rise in that figure since that time and as of July, 1987, it was 91.1 percent. The date upon which licensed beds are to be counted is provided for specifically in the rule defining need methodology, but the date upon which approved beds are to be counted is not stated in the rule. Similarly, the times for which population data are to be considered is contained in the rule methodology, but the release date of official estimates and projections to be utilized is not specified. Likewise, though the time period for which occupancy rates of existing facilities are to be considered is specifically set out, the input to be utilized when calculating "average occupancy rate" within that time period is not specifically established. In any case, the average occupancy rate as stipulated in the rule methodology for the area has been, until recently, consistently lower than 90 percent which is the figure identified in the rule methodology. Based on all the above, then, it must be found that the more accurate and pragmatic calculation of need utilizing the most current projections and discounting the agency policy for which the agency has not established any firm rationale or justifiable basis, indicates no numeric need for additional beds in the District during the period set forth in the planning horizon. Even if use of the rule methodology does not result in a mathematical showing of bed need sufficient to justify award of a certificate of need, nonetheless such a certificate can be awarded if other conditions and other circumstances establish a need that requires satisfaction within the area and the planning horizon. There was some dispute regarding poverty rates within Collier County and evidence presented at the hearing tends to indicate that the poverty rate in Collier County for the 65 and older population group is generally the lowest in the state. Low poverty rates among the elderly generally coincide with low nursing home utilization since wealthier patients generally have available to them alternatives to inpatient nursing home care. Intervenor urges, and there is no evidence to contradict it, that there are currently available alternatives to nursing home care for wealthy patients not only in Collier County but within District VIII as a whole. The Health Services and Facilities consultant for DHRS who initially reviewed Petitioner's application felt approval was not appropriate at the time he did his analysis. However, since that time additional information has caused him to conclude the application should be granted. He has subsequently learned that two of the four nursing homes in Collier County, which account for more than 50 percent of the beds licensed, have "conditional" quality ratings and there are currently no beds approved for construction in the county even though the county is one of the fastest growing counties in Florida. On the basis of this information, he now agrees with the agency's determination to approve a certificate of need for 60 beds for Petitioner. Based on what Mr. May knows of the three applicants, in his opinion Petitioner is the most appropriate applicant to receive the award. In the Stipulation entered into between Petitioner and the agency, the parties adopted the District VIII Health Council projection of 143 beds needed for Collier County for the 1986 planning horizon. The quarterly nursing home report for the period April through June, 1987, reflects the status of previously issued certificate of needs and includes all reported approved beds up to the date of issuance. This report shows that as of June 30, 1987, two applicants from prior batches received a total of 81 beds which, when subtracted from the 143 identified bed need, still leaves a 62 bed net need. Turning from the question of numeric need to other considerations regarding the applicant in issue, there can be little doubt that the estimates for the design of the proposed facility and construction are appropriate. The figures in Tables 18 and 19 of the application are also appropriate and reasonable. The costs for the project appear to be accurate and appropriate and the completion forecast timetable appears to be more than ample. Mr. Philips, the Vice President in charge of construction lending for the mortgage company which proposes to finance construction of the facility, is familiar with not only the applicant's corporate financial statement, but also those of the two principals, Dr. McCoy and Mr. Hoye. In his opinion, both are capable of providing the initial financing and their operations statements show a history of successful business operation. The 11 percent proposed as an interest rate for the loan supporting the construction is reasonable if not liberal, and the 25 year duration of the loan is also reasonable as is the loan origination fee of two points. If the certificate of need is approved, the lender is ready, willing, and able to lend the applicant sufficient funds to complete construction. Intervenor's expert in nursing home budgeting and financial feasibility analysis, testifying in contravention of Petitioner's experts, believes that approval of Petitioner's operation would have a severe financial impact on the Intervenor's operation as a current provider resulting in a first year bottom line loss of approximately $235,000 and a second year bottom line loss of almost $300,000. It should be noted here, however, that these are not actual operating losses but a projected reduction in profit. These estimates are based on August, 1987 figures adjusted forward for inflation. In short, while the opening of Petitioner's facility may have a negative impact on existing facilities, it would not necessarily result in a deficit operation for any existing provider. This expert also has some difficulty with Petitioner's projections of financial feasibility in its own facility. For example, he questions the 15 percent census of Medicare patients based on the fact that currently Intervenor does not have any Medicare patients though it does accept them. He also considers the estimate of a 96 percent occupancy by the end of six months to be unreasonable, especially in Collier County. He believes Petitioner's proposed expenses are understated and there are inconsistencies between the staffing table and labor costs in that the nursing expense is understated and the hourly rates projected to be paid are much too low. He believes that the projected cash flow is overstated since there is no provision for a reduction of principal. There are, also, other possible negative aspects to approval of Petitioner's application. Intervenor's regional director, who is an expert in nursing home administration, believes that approval of Petitioner's application will have a direct adverse reaction on Intervenor's Lakeside operation in regard to services provided, staffing, and its own financial feasibility. With regard to staffing, there is currently a critical shortage of nurses in Collier County and this factor was confirmed by a representative of another facility in the area. Approval of Petitioner's facility might well worsen the problem. Other service personnel are also in short supply and approval of Petitioner's application will worsen this as well. If these personnel shortages materialize, it may result in a reduction of quality of care, but this is speculative and there is no direct evidence that this would happen. Lakeside's current license is rated as "standard" as opposed to "superior" and this is claimed to be directly related to the nursing shortage which resulted in the facility's inability to attract sufficient nursing personnel to merit a "superior" rating. The witness identified other apparent deficiencies in applicant's submission, but these are either of a minor nature or the subject of opinion or conjecture. In short, the only substantive objection sustainable is the prospective adverse effect on the cost of attracting qualified nursing personnel. Certain other projections by the applicant are considered to be unreasonable by Americana's Director of Operations, such as the 15 percent projection for Medicare patients. Currently Americana, which generally has between 13 and 23 beds open at any time, has 2 Medicare patients and this witness also feels that a 96 per cent fill up rate in 6 months is unreasonable. Based on his experience, Collier County had even a slower than normal fill up rate when compared to other areas of the state. Notwithstanding the negative testimony, there can be little question, and it is so found, that Petitioner would be able to provide quality care if its application were approved. Turning to the question of the relationship of this application to State and Local health plans, the bed need calculation has already been discussed above. That calculation is based on the state methodology. However, the state methodology may be substantially different than a need developed by reference to the local health plan. The local plan looks at need from the county/subdistrict basis whereas the state looks at the district as a whole for establishment of need and then distributes beds on the basis of current bed census. When the smaller counties with fewer existing beds grow faster than the larger counties with a greater number of existing beds, they tend to be caught in a squeeze in that they get fewer beds because they are smaller, while their actual need may be greater than that of the larger county which, by virtue of its size, gets the larger number of beds. This state need rule, which calls for a 90 percent occupancy rate is felt by some to be less valid and less accurate a basis for evaluating the need in reality. As to the question of alternatives, there appear to be none for the vast majority of people in the county. Hospices or internal acute care bed or ambulatory facilities are not truly alternatives to nursing homes. In summary, Petitioner's expert believes that the Department's projected need for 43 beds could justifiably result in an approval of an application for 60 beds because: There were no approved beds at review time, Population trends, growth, and utilization trends indicate a need for new beds, The bed to population ratio in the county is one of the lowest in the district and in the state, (16 or 17/1,000 vs 27/1,000 normal for 65 plus) and the situation has not changed, Although the 65 plus population is used to determine need, the greatest use of nursing home facilities comes from the 75 plus population which is expected to increase in Collier County by July, 1989 by 32 percent, double the statewide average, At the time of application review, no existing facility was rated "superior" (there are now), showing a need for options. The applicant has a record of "superior" ratings statewide, The district health plan shows a bed need exceeding 60 beds for Collier County, The granting of a 60 bed nursing home is not inconsistent with previous actions by the Department when a mathematical need less a bed showed than 60 number. The project also is consistent with the rule criteria as well as statutory criteria, and Given DHRS's methodology and considering the adjustments due to Americana's change, there can be shown a mathematical need greater than the 43 shown by DHRS. Whether the need is 43 or 66 is really not important. The need is there. There is much to be said for these conclusions and they are adopted as findings herein.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Respondent, Department of Health and Rehabilitative Services, approving Petitioner, Health Care Associates, Inc., d/b/a Surrey Place of Collier County' application for a certificate of Need to establish and operated a 60 bed skilled nursing facility in Collier County, Florida. RECOMMENDED this 8th day of January, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK, 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 8th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0691 The following constitutes my specifics rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER AND RESPONDENT JOINT SUBMISSION 1 - 5. Accepted and incorporated herein. 6 - 8. Accepted and incorporated herein. 9. Accepted and incorporated herein. 10 - 15. Accepted and incorporated herein. 16. Accepted as a statement of DHRS policy and the resultant figures determined thereunder but rejected as the appropriate source of information. 17 - 19. Accepted and incorporated herein. Accepted as Petitioner's and Respondent's calculation but rejected as bearing in the Issue of bed need. Rejected as not reducing the number of available beds. Rejected. Accepted and incorporated herein. 24 - 29. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. 32 - 34. Accepted. 35 - 50. Accepted. Accepted. Accepted. 53 - 54. Accepted and incorporated herein. 55 - 56. Accepted. 57. Accepted. 58 - 59. Accepted. 60. Accepted. 61 - 65. Accepted and incorporated herein. 66 - 69. Accepted and incorporated herein. 70. Accepted. FOR INTERVENOR 1 - 6. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. Accepted and incorporated herein. Irrelevant. Accepted. Accepted and incorporated herein in substance. First sentence is rejected. Occupancy rates of other local facilities are not necessarily determinative of the expected occupancy rates of Petitioner in the absence of a showing of similarity of other factors. 16 - 19. Rejected as based on other than the best evidence. No original source was presented. 20. Accepted. 21 - 25. Accepted and incorporated herein. 26 - 27. Accepted. 28 - 29(b). Accepted. 30 - 31. Accepted and incorporated herein. 32. Accepted and incorporated herein. 33 - 34. Accepted and incorporated herein - except for that portion of paragraph 34 indicating the approval of Petitioner's application would be inconsistent with local health plan. Accepted but not determinative. Accepted but not determinative. First sentence rejected as argumentative. Remainder accepted. Rejected as contrary to the weight of the evidence. Rejected. 40-42. Accepted except for the last sentence of paragraph 40 which is rejected. Rejected as not proven. Rejected as not proven. Mr. May was unaware of possible charges during lag time. Accepted. Accepted. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Accepted. Rejected as argument rather than fact. 52 - 53. Irrelevant in light of 53. which is accepted. 54 - 55. Irrelevant in light of Intervenors' paragraph 55 which is accepted. 56 - 58. Accepted and incorporated herein. 59. Accepted. 60 - 64. Accepted. Accepted. Rejected as biased. Accepted. Accepted as to the fact that a reduction in Lakeside's income might occur, but rejected as to its severity. Intervenor presents a "worst case" picture based on speculation and conjecture. Accepted that Petitioner's projected site is near that of Intervenor. Remainder rejected as conjecture. 70 - 71. Accepted. COPIES FURNISHED: Philip F. Blank, Esquire Reynold Meyer, Esquire 204-B South Monroe Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Asst. General Counsel 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 W. David Watkins, Esquire Oertel & Hoffman, P.A. 2700 Blair Stone Road Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility. The population of Lee County in 1978 was 184,841 with 41,984 more than 65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day. No significant difference exists in the services proposed by each of the applicants. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.
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 Parties The Agency For Health Care Administration (AHCA) is responsible for administration of the certificate of need (CON) program pursuant to section 408.034, Florida Statutes. Clearwater Land Company (CLC) is a Florida corporation which owns, operates, and is the license holder of the Regency Oaks Continuing Care Retirement Community (Retirement Community) and Regency Oaks Nursing Center (Regency Oaks) located in Clearwater, Florida. The Johnson Ezell Corporation is a closely held private corporation owned by two shareholders who are also shareholders of CLC. Johnson Ezell provides management, financial services, data processing services, collective purchasing, and other aspects of management for CLC. CLC and Johnson Ezell Corporation are affiliates; two shareholders of Johnson Ezell comprise two out of the four shareholders of CLC. Johnson Ezell is also the contract manager of CLC. Three of the four shareholders of CLC own 100 percent of two other large continuing care retirement communities (CCRC) in Florida. One of these communities, located in Port Charlotte, is known as South Port Square. A second retirement community, Lake Port Square, is in the mid-development stage in Leesburg, Lake County, Florida. Typically, CCRCs offer a broad spectrum of services or a continuum of care ranging from independent living apartments, to assisted living, to skilled nursing which often includes home health care. South Port Square has 440 independent living apartments in which the holders of continuing care agreements reside. South Port also has a 120-bed community skilled nursing facility, originally CON approved in 1984. There are 140 additional units of assisted living. The first phase of the 240 independent living units opened in October of 1987, and the second and final phase of 200 continuing care apartments opened in October of 1990. Lake Port Square currently has 200 continuing care apartments with 205 additional apartments currently under construction. Lake Port also has a 60-bed skilled nursing facility which was originally licensed as a sheltered nursing home facility. It is now a licensed community nursing home. Lake Port also has 35 units of assisted living. Beverly Savana Cay Manor, Inc., is a wholly-owned subsidiary of Beverly Enterprises-Florida, Inc., which is a wholly owned subsidiary of Beverly Enterprises, Inc. The Beverly family of companies operates 838 nursing homes in 48 states. It is the largest provider of long-term care services in the country. Beverly Savana Cay Manor will receive substantial financial, managerial, operational and program support from Beverly Enterprises Florida's regional office. These are specific services which will be available to Beverly's proposed project from its parent's Florida regional office: A nurse consultant who is a former director of nursing will monitor the overall performance of the nursing staff and will assist in maintaining quality assurance and proper staffing patterns; a registered dietician will provide consulting dietary services; and a financial consultant will monitor and assist with the orientation of staff on all financial matters, including implementation of the billing system for Medicare and Medicaid. An area manager who is a licensed nursing home administrator will coordinate the support services. Other consulting services available through the Florida regional office include: an activities consultant, a trained social services consultant, a rehabilitation program coordinator, a rehabilitation clinical coordinator, an accounting-finance department, and a quality assurance department that conducts inspections and reviews the facility's compliance with governmental requirements. The regional maintenance department will oversee the care and maintenance of the physical plant. The regional purchasing department coordinates purchases of food, chemicals, and other items more economically purchased in large volumes. The human resources department assists in the implementation of uniform personnel and wage policies, the training of supervisory and managerial personnel, and the monitoring of facility participation in government programs. CLC Project: Regency Oaks CLC filed two CON applications: In CON Application No. 7503 (now withdrawn), it requested approval of a new 120-bed community nursing home through the conversion of 60 sheltered nursing home beds and the addition of 60 community nursing home beds. CLC also filed CON Application No. 7503P, the subject of this de novo review, to convert Regency Oaks Nursing Center's 60 sheltered nursing home beds to 60 community nursing home beds. CLC's project calls for a reclassification of existing services and assets. There is no capital required, no renovation costs, and no new equipment. The project basically involves moving from one state classification category to another, i.e., sheltered nursing home beds to community nursing home beds. The project under consideration involves Regency Oaks Nursing Center, a 60-bed facility which commenced operations and was licensed in August of 1991. Regency Oaks is a part of a 40-acre campus. The Regency Oaks Retirement Community has approximately 200 units located in a separate five-story structure which also commenced operations in August or September of 1991. There are an additional 201 independent living units in a separate phase that is also located in a separate five-story structure on the campus that is currently under construction. When fully developed, the retirement community's independent living units will be roughly equivalent in size and substantially the same as the operations at its sister communities at Lake Port and South Port. Sheltered nursing home beds are often located in a CCRC. A continuing care provider is authorized to provide a certain number of sheltered nursing home beds based upon the number of independent living apartments that are being constructed, operated and licensed pursuant to Chapter 651, Florida Statutes. Chapter 651 first authorized CCRC's to apply for and receive sheltered nursing home beds in 1986. A CCRC is regulated by statute and markets and provides services pursuant to a continuing care agreement in which the continuing care resident is provided with shelter, food, and some element of health care in exchange for a specified lump sum payment of money and the payment of a monthly maintenance or service fee. The business was largely unregulated until major revisions were incorporated into Chapter 651. Pursuant to section 651.118(4), Florida Statutes, Regency Oaks originally applied for and was granted a CON to construct a 60-bed sheltered nursing home based upon the ratio of one sheltered nursing home bed for every four residential units in the retirement community. The prevailing wisdom in the early 1980's, when Chapter 651 was enacted, held that the 1:4 ratio was appropriate. The underlying assumption was the utilization of the sheltered nursing homes by the residents in the retirement community on a 1:4 ratio should result in a fully occupied and financially feasible nursing center. The ratio also ensured that residents could gain access to nursing home care. In the last half of the 1980's the prevailing wisdom held that the 1:4 ratio was still appropriate but only after allowing for several years of "aging in place" by the residents of the retirement community. To provide needed occupancy during the initial years of operation, subsection 651.118(7) allows the sheltered nursing home to admit residents from outside the resident community for a period of up to five years from the date of the issuance of the original license. For the first five years of operation, the nursing home beds are available to residents and nonresidents of the senior living community. However, at the end of the five year period, the nursing home is not allowed to accept any additional patients from outside the senior living facility because residents alone are expected to need the beds. In 1986, CLC had no intention of converting its CON approved beds to community nursing home beds. For several reasons, including the general health of retirement community residents and their willingness to pay for home health services in order to stay in their own apartment, the 1:4 ratio is no longer a reasonable projection of sheltered nursing home bed need. In the last two years at Regency Oaks, there was an average daily census of 3.5 to 5 patients in Regency Oaks originating from the independent living facility. Of the 200 units, an average daily census of 5 patients converts to a 1:40 ratio rather than the 1:4 ratio that was included in the sheltered bed model. Currently over 90 percent of Regency Oaks' patient days are patients who do not live in the senior housing facility. Without the approval of this project, by September 1996, Regency Oaks will no longer be able to admit outside community residents. Based upon current and projected ratios, this will have an impact on the ability of Regency Oaks to continue to operate in an economical and financially feasible manner. CLC's experience at South Port Square illustrates this problem. The first phase of South Port's independent living apartments has been in operation for 7.5 years. Phase Two has been in operation more than 4.5 years. The demographics of the population area served by Regency Oaks and South Port are almost identical. The South Port community has had 7.5 years to "age in place." For the first ten months of South Port's 1994 fiscal year, 27 percent of the patient days of the South Port's 120-bed skilled nursing center were attributable to contractual requirements of residents of the independent living apartments. Twenty-three percent of the patient days were attributable to campus residents (non- contractual) who were either private pay or some other source of payment. At the top end of the scale, Regency Oaks expects to experience between 25 percent to 30 percent, and up to 40 percent, of its admissions from independent living apartments on campus. CLC does not intend to apply for new sheltered nursing home beds to complement the additional 201 independent living units now under construction. According to its qualified health care planning expert, Mark Richardson, at full build-out, CLC will need to hold (at the high end of the range) 30 beds to fulfill its contractual obligations to its life care residents. (Transcript, pp. 332-3) At full build-out, the approximately 400 independent living units will house 550 to 600 residents, all eligible for nursing home care, when needed, under their continuing care agreements. Beverly's Project: New Crown Beverly proposes a new, 120-bed community nursing home in the Seminole Park area of Pinellas County (New Crown) using 66 beds from the fixed need pool and 54 beds made available from the delicensure of its existing Crown Nursing Center (Old Crown). Granted by CON No. 7505, Old Crown originally was constructed as a motel in the 1940's and has been a nursing home since the 1960's. Although Old Crown currently holds a superior license, the facility is outmoded and is reaching the end of its useful life as a nursing home. There is no room to expand or renovate the existing physical plant, and it is perpetually in need of costly repairs. It is not in compliance with modern building codes and is allowed to continue to operate only by virtue of grandfather clauses. Resident rooms are undersized, and corridors are only 5.5 feet wide rather than the 8 feet currently required. Room doors are narrower than those required in new facilities and will not accommodate moveable beds. Bathroom doors will not accommodate wheelchairs, and there is no central air conditioning. The floor plan also is inconsistent with modern nursing home standards. The building is multistory with outside stairs. This configuration is highly undesirable because it restricts the freedom of movement of residents who are physically impaired, makes it difficult to monitor resident movement, requires extra nursing stations, and slows evacuation in an emergency. Old Crown has one four-bed ward and eight three-bed wards. Space limitations at times require that men and women reside in the same ward. There is no room for specialized services such as adult day care, subacute services or separate Alzheimer's care. Nursing stations are undersized and medical/chemical supplies must be kept in an outdoor shed. Laundry space is inadequate, and linens must be stored outside and in hallways. One room serves as the employee break room, the uniform storage room and the beauty parlor. The kitchen is too small and there is inadequate food storage. The dining area is located in the old motel lobby. Outdoor activities must be conducted in the back parking lot and there is no outdoor ambulation/recreation space. There is only one small space for physical, occupational and speech therapy, requiring that therapies sometimes be administered in hallways or bedside. This arrangement is particularly undesirable for residents receiving speech therapy, as they tend to be self- conscious about their inability to speak, eat and swallow. There is only one activities room, and it is located on the second floor. The second floor contains asbestos, and removal would require the evacuation of the entire second floor. In contrast, New Crown will meet or exceed all existing licensure requirements for construction and safety codes. It will contain 53,310 square feet of space on a single story, and is designed to optimize operational efficiency, minimize institutional effects, and emphasize a home-like atmosphere. All areas within the facility will meet federal guidelines for handicapped accessibility and use. Corridors will be 8 feet wide, and the doors to resident rooms will accommodate moveable beds. These features will eliminate the movement, monitoring and safety shortcomings inherent in Old Crown's two- story motel floor plan. There will be plenty of storage, a modern kitchen and laundry facility. Residents at New Crown will reside only in private and double occupancy semi-private rooms. Each room will feature private toilets, telephone, cable T.V., and individual thermostat controls. Homelike furnishings will be used throughout the facility. There will be two large day rooms adjacent to the nursing stations with access to three enclosed outdoor courtyards, a large restaurant-like dining area, a secured patio and an activity room. The day rooms will have aquariums, large screen televisions and VCRs. A large solarium/greenhouse will be located adjacent to the dining area. AHCA's approval of Beverly's application for New Crown is expressly contingent on the approval of expedited CON application 7505 to delicense Old Crown. This CON has been granted. Beverly will not allow operation of the two facilities to overlap. Old Crown will remain fully operational until New Crown is operational and placement is made for every Old Crown resident. Beverly will transfer Old Crown residents to New Crown, and will assist residents who choose not to move to New Crown in making whatever other arrangements the resident chooses. No resident will be "put out on the street." Compliance With The Local Health Plan The Health Council of West Central Florida, Inc. has identified three preferences, the first of which is a preference to new nursing homes which commit to serve Medicaid patients in proportion to the average number of Medicaid residents in existing nursing homes in the "health service area." That relevant average (subdistrict) is 55.32 percent. Beverly commits to 56 percent total Medicaid days for New Crown; Old Crown is at 59.24 percent; and other Beverly facilities have a high record of Medicaid services (nationally at 68.5 percent, and in Florida an average of 66 percent). CLC commits to 31.58 percent, which is a reasonable expectation since the Medicaid days will be generated primarily, if not exclusively, from patients drawn from the community at large and not from the independent living facility. CLC's Regency Oaks market is dominated by residents and potential residents from a narrow service area with higher financial resources than the southern end of Pinellas County. The second allocation factor gives a preference to applicants who propose specialized services, including adult day care, to meet identified needs. Beverly has conditioned its application on the provision of a wide range of specialized services. New Crown will provide distinct subacute care in a 20-bed Medicare certified subacute unit with four ventilator-dependent beds, and comprehensive rehabilitation in a 3,404 square foot physical therapy site with physical therapy gym, hydrotherapy area, "activities of daily living" room and outdoor ambulation court. It also will provide adult day care services in a 987-square foot Adult Day Care Center, Alzheimer's care in an 18-bed Alzheimer's wing that includes separate dining/activity areas and an enclosed courtyard, respite care services, care to individuals with mental disorders, care to individuals who are HIV+ or who have AIDS, and hospice care. Beverly also will make a $10,000 grant to Florida State University School of Nursing for research into gerontological issues in the nursing home environment and will make its facility available to nursing students for clinical rotations. CLC proposes intensive rehabilitation services, respite care, subacute care, hospice care and care to mental health patients. Its current facility has not provided respite care and it does not propose a separate unit for Alzheimer's patients. The third local health plan allocation factor gives preference to applicants who demonstrate an intent to serve HIV-infected patients. Both applicants commit to provide AIDS and HIV-positive health care. Beverly has documented its experience with these patients at its Old Crown and other facilities. CLC simply has stated that it does not discriminate in admissions of these patients; it also asserts that it has no idea which, if any, of its patients have been HIV-positive or AIDS patients since that information is not disclosed by the patient. Compliance With The State Health Plan The State Health Plan contains twelve allocation factors. Factor 1 gives preference to applicants locating in areas within subdistricts with occupancy rates exceeding 90 percent. Pinellas County's occupancy rate of 90.23 percent qualifies both Beverly and CLC. Allocation Factor 2 gives preference to applicants who propose to serve Medicaid residents at the subdistrict Medicaid average. Exceptions are considered for applicants who propose the development of multi-level care systems. The applicants' Medicaid commitments are addressed above in paragraphs 23 and 24. The applicants' experts disagree on whether the Regency Oaks facility is truly "multi-level," as contemplated by the exception. The availability of different levels of care: independent living, assisted living and nursing home, on a single campus does represent a "multi-level" care system. State Health Plan Allocation Factor 3 gives preference to applicants proposing specialized services to special needs residents, including AIDS and Alzheimer's residents and the mentally ill. Both applicants, as discussed in paragraphs 26-28, above, have described in detail their proposals for specialized services. Beverly's experience in the past and specific plans for discrete subacute, ventilator-dependent and Alzheimer's units lend credibility to its commitment to those specialized services. CLC's commitment is more general. Its proposed staffing is too low to provide the level of care proposed for New Crown's subacute unit, but its staffing would be increased as needed by the patient population. Regency Oaks has 12 Medicare certified skilled nursing beds in the general nursing home population. None can accommodate a ventilator- dependent patient. Allocation 4 encourages a continuum of services, including adult day care and respite care. Both applicants propose to meet this requirement of the State Health Plan. Again, Beverly's commitment is evidenced by a specific description of discrete programs, while CLC's plans are more general. CLC contends that there is "insufficient demand" in the area to support adult day care; Beverly proposes a 987 square foot "Adult Day Care Center" with its own staff, staff office and storage, to accommodate up to 8 guests, 8 a.m. to 6 p.m., five days a week. Day care guests will have an individual care plan prepared by professional staff and will have access to the full facility and its recreational, therapeutic and social services. Beverly will implement a respite program at New Crown and has such programs at its other facilities. CLC offers respite care but has never had a respite care patient. Allocation Factor 5 gives preference to applicants proposing facilities which provide maximum comfort and quality of care. Both applicants qualify for this preference with outstanding designs and programs. Both applicants propose therapeutic programs consistent with Allocation Factor 6. Specialized rehabilitation, restorative care and normalizing training are described in both applications and are committed to by the applicants. Both propose a more aggressive, intensive rehabilitation than other nursing homes in the area. The highest Medicaid per diem rate in Pinellas County is $100.74 (January, 1994). Inflated forward to 1996, the planning horizon, that rate becomes $113.00. New Crown's proposed rate of $100.14, and Regency Oaks' proposed rate of $102.75 (for 1995) do not exceed that highest rate (even when Regency Oaks' rate is inflated 5 percent for 1996). Both applicants are entitled to the preference in Allocation Factor 7. Both applicants qualify for the preference under Allocation Factor 8, as both enjoy the highest (superior) rating. Three of Beverly's four facilities, including Old Crown, currently hold superior licenses, and the fourth has been recommended for a superior license. Regency Oaks was eligible for a superior license shortly after issuance of its original license and actually received the superior license, after some logistical mix-up, in December of 1994. State Health Plan Allocation Factor 9 gives preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. As a well-run existing facility Regency Oaks maintains appropriate staffing levels. The staffing proposed in its application omits one certified nurse assistant (CNA) on the 11:00 to 7:00 shift. The director of nursing monitors the patient population to assure that staff is added when needed. Beverly's proposed staffing plainly meets or exceeds standards, including statutory and regulatory requirements at all levels. Both Beverly and CLC use professionals from a variety of disciplines and both are entitled to the preference described in State Health Plan Allocation Factor 10. Likewise, both applications describe, and the applicants' experience bears out, a respect for residents' rights and privacy and a well- designed quality assurance and discharge planning program, as required in Allocation Factor 11. State Health Plan Allocation Factor 12 gives preference to applicants proposing lower administrative costs and higher resident care costs than the average nursing home costs in the district. As conceded by Beverly's expert health care planner, both applicants meet this preference criteria; however, Beverly's proposed administrative costs are lower, and patient costs are higher, than CLC's. Need and the Availability of Alternatives Nursing home occupancy rates in District V, subdistrict 2, Pinellas County, currently exceed 90 percent, and the need for 68 more nursing home beds in this district is undisputed. Evidence in this proceeding also established the need for such specialized services as subacute care (sometimes referred to as "step down" care), adult day care, HIV/AIDS care, Alzheimer's care and mental health care. Both applicants propose to meet a portion of the numerical need: Beverly with 66 new beds; and CLC with 60 beds converted from sheltered to community beds. Beverly's project more closely meets the numerical need; CLC concedes that some, and perhaps as many as 30, of its beds will be utilized by the residents of its independent living community. Both applicants propose outstanding programs for subacute care and other specialized services. As discussed above, Beverly's actual experience lends greater credibility to its commitment. Maintenance of the status quo in either case is not a viable alternative. Old Crown is only 54 beds; as of 1996, none of Regency Oaks' sheltered beds will be available for new community admissions. Without approval of one application or the other, the 68 bed need will remain wholly unmet. Availability of Resources, Including Staffing and Short-Term Funds Regency Oaks maintains a recruitment and staff development program designed to attract pools of qualified applicants for each personnel vacancy which occurs at the facility. This program has been effective in the recruitment and retention of high quality nurses and other professionals. Regency Oaks also maintains effective staff training and competency enhancement programs. The facility has a solid core staff in place. The parties have stipulated that Beverly will be able to hire the staff it needs at the proposed salaries and that Beverly's proposed recruitment plan career ladder, incentives and opportunities for advancement and efforts to recruit disciplines in short supply are reasonable and capable of being accomplished by the applicant. New Crown has the advantage of access to a statewide network of consultants who will draw from the expertise and resources of the Beverly companies. Since Regency Oaks is already built and in place, very little additional financial resources are needed in the short-term. The incremental project costs of $22,000 filing fee and $15,000 in consulting fees have already been expended. Whether it is a "zero cost" project or whether its cost should include the construction of the facility in 1991 for $2,634,441, as suggested by Beverly, CLC has the financial resources for short-term support of the project. Beverly likewise will be able to finance its total project cost of $6,361,751. Beverly's parent company has committed its substantial resources, including $80 million cash on hand, to finance the project. An issue arose in this proceeding regarding Beverly's failure to include on Schedule 2 of its application three nursing home facilities which it acquired on January 13, 1994. Two facilities, Old Crown and Beach Convalescent Center, were transferred to Beverly from its sister corporation, Petersen Health Care, Inc. The third facility, Clewiston Health Care Center, was transferred to Beverly from its "grandparent," Beverly California Corporation. Change of ownership applications addressing the transfers were filed with AHCA on October 15, 1993. CLC contends that these inter-company transfers involved expenditures that were "capital projects" within the meaning of section 408.037(2)(a), Florida Statutes, and therefore, Beverly should have included them on its Schedule 2. CLC introduced a closing statement and two deeds from the Beach and Old Crown change of ownership files in an attempt to suggest that Beverly had purchased the facilities in exchange for cash payments. Beverly established, however, that it gave no value of any kind in exchange for the transfers, which were accomplished simply by changing the corporate name on each facility's general ledger. Beverly prepared the documents in question only after the AHCA indicated that it would not approve the change of ownership applications until it received closing statements and deeds. No long-term debt was transferred, and each transferred facility had a positive asset value net of accumulated depreciation and amortization. Consequently, the transfers resulted in permanent additions to Beverly's equity (i.e. plant, property and equipment) valued at $3,882,033. Future Beverly audited financial statements will reflect the transfers as additions to paid-in capital. The operational assets of each facility far exceeded the operational liabilities (e.g. accounts payable) of each facility, and Beverly received net working capital in the total amount of $600,116. For reimbursement purposes, the transfers were treated as "related party transfers" and did not result in any change in Medicare or Medicaid reimbursement rates. Beverly California Corporation paid all the incidental expenses associated with the transfers such as application and legal fees. Beverly would not capitalize these expenses. Contrary to CLC's contention, Financial Accounting Standards Board (FASB) statements 11 and 14 do not require that these transfers be treated as "capital expenditures." FASB Statement 11 deals with accounting for contingencies, and does not offer any insight into the proper characterization of the intercompany transfers at issue here. FASB Statement 14 requires that financial statements of a business enterprise include information about its "segments," i.e., operations representing at least 10 percent of the company's total revenues. There is no evidence that Beverly is a "segment," nor does FASB 14 define "expenditure" or "capital expenditure." FASB Statement 14 mentions capital expenditures only once. Paragraph 27 is titled "Other Related Disclosures." Paragraph 27(b) requires that "information for reportable segments shall be made as follows: . . . Disclosure shall be made of the amount of each reportable segment's capital expenditures, i.e., additions to its property, plant and equipment." (Transcript, pp. 623) This passing reference does not define capital expenditures for all purposes, or require that all additions to plant property and equipment be characterized as capital expenditures. Paragraph 27(b) of FASB Statement 14 merely advises accountants that the financial statement of a company must disclose the capital expenditures --- as opposed to expense items --- that a reportable segment of the company has made. Read in context, the reference to additions to plant, property and equipment is meant only as an example of transactions that, under circumstances not defined in FASB 14, might involve a capital expenditure. In the universe of additions to plant property and equipment, some may involve capital expenditures. However, the transfers here at issue demonstrate that a company can obtain additions to plant, property and equipment without incurring any expenditure at all. FASB Statement 6, at paragraph 66, provides that an increase in the equity of a business entity resulting from the transfer to it of something of value to obtain or increase an equity interest in the entity is considered an investment by owners, not an expenditure by the receiving entity. Health Care Financial Management Association Principles and Practices Board Statement No. 12 similarly would characterize the transfers at issue as equity investments by affiliated companies, not expenditures. This is the proper characterization of the transactions between Beverly and its affiliated companies. The equity contributions of its affiliated companies made Beverly a financially stronger and wealthier entity that was more capable of undertaking the proposed project, and did not involve an expenditure of any kind on the part of Beverly, and therefore cannot be characterized as "capital projects" according to credible, competent expert opinion. AHCA's sample Schedule 2 form does not provide a place to list the receipt of equity, but rather asks only for "expenditures." Had Beverly incorrectly included the transfers as "expenditures" in its Schedule 2, it would have had to show them as negative expenditures, thereby reducing the total amount of reported capital projects and improving Beverly's reported financial position. Upon inquiry, AHCA properly advised Beverly that since the transfers did not involve any expenditures by the applicant, it should not disclose them. Accessibility To All Residents of the Service District Regency Oaks has never turned away a Medicaid or other patient based on payor status and affirmatively accepts patients regardless of ability to pay. Regency Oaks also accepts AIDS/HIV patients, Alzheimer's and other specialty needs patients. Beverly also has this type of "open door" policy. Its experience, however, as discussed above, has been more successful in attracting and serving Medicaid patients and patients with special needs. As an integral part of a beautifully designed, upscale retirement community, Regency Oaks has not drawn the payor mix that Old Crown and its sister facilities have served. As the residents of the independent living units age in place and increase in number with completion of the additional units, accessibility to all residents of the service district is diminished, not enhanced, if the conversion from sheltered to community beds is approved for Regency Oaks. Long Term Financial Feasibility Review of financial feasibility of Regency Oaks is simplified by the fact that it has actual operating experience to support its projections. Opened in Fall 1991, the nursing home, as typically expected, showed losses for the first few years. It turned a profit in 1993. Regency Oaks has the necessary resources to continue to operate the continuing care apartments as well as the nursing home with net operating income, including net operating income from the completion and opening of the new 200 independent living units and further supplemented by the resources of the shareholders of CLC. The four CLC shareholders are personal guarantors on the mortgage indebtedness of all the property at Regency Oaks. Their net worth is in excess of $60 million and cash reserve is greater than $10 million. If the CON is approved and Regency Oaks is permitted to accept community bed patients it will be financially healthy. If, however, the facility is restricted in 1996 and the beds will be filled only from its continuing care units, the nursing home will become financially stressed. Neil Ezell, the corporate representative of CLC and chief financial officer for the Johnson Ezell Corporation, acknowledges the difficulty in making a profit in a smaller 60-bed nursing home because of the high fixed administrative costs. If the high-end estimate that 30 beds will be filled from the continuing care facility is accurate, Regency Oaks will be operating at 50 percent capacity in 1996 or shortly thereafter. The contractual obligations to Regency Oaks residents would still be honored in some fashion, but with substantial difficulty. Absent CON approval, Regency Oaks' cost per patient day will increase and will negatively impact Medicare since Medicare is a cost-based reimbursement system for skilled nursing facilities. Beverly's proposal for a new 120-bed facility at New Crown is financially more efficient than either Regency Oaks or the existing 54-bed Old Crown facility, even considering the $6,361,751.00 total project cost. The old facility is too dated and too small to be efficiently operated much longer. The 120-bed proposal meets the need for new beds and effectively puts to rest the old well-used beds. The patients at New Crown will come from the community at large and will also be transferred from the existing Crown facility. The projected utilization is reasonable and the projected pre-tax net income of approximately $299,000.00 at the end of the second year is likewise realistic. The proposal is financially feasible. SUMMARY OF FINDINGS AND BALANCING THE CRITERIA Both applicants presented outstanding proposals. There is no question that they have provided, and will continue to provide, superior quality of care in attractive, well-equipped and well-staffed facilities. Beverly's proposal enjoys the financial "economies of scale" advantage of a larger facility; CLC's proposal is financially appealing because it requires little or no additional start-up expenditures. Beverly effectively countered CLC's assertions that the application was defective for failure to include the three recently-acquired facilities as "capital expenditures". Beverly also appropriately addressed CLC's claim that it failed to consider the transfer of Old Crown residents in its projected utilization of beds at the new 120-bed facility. Approval of Beverly's application for 120 beds will not result in approval of an excess of beds left in the fixed need pool. Approval is conditioned on approval of delicensure. The old and new facilities will not be concurrently licensed. It strains common sense to find that the concurrent approval and delicensure process should somehow result in creating a need in some future planning horizon, rather than the immediate planning horizon. Both applicants avow their commitment to serve Medicaid and specialty needs population and to remain accessible to persons regardless of ability to pay. Beverly's commitment is underscored with an existing record of service and with its willingness to accept conditions of approval. More troubling than the Medicaid and special needs accessibility issue, however, is the concern that CLC's existing 60-bed facility at Regency Oaks will, upon conversion, fall substantially short of meeting the need for 68 beds. Its continuing care community is expanding and the demand for nursing home beds by that population will increase. Somewhere between 10 and 30 beds will be filled, leaving only 30 to 50 beds available to the population at large. CLC's financial dilemma is the result of a considered decision to build 60 sheltered nursing home beds to support a 200 unit continuing care facility. The only explanation in the record for exceeding the 1:4 ratio is that initially the plan was for 240 units. Even with 50, rather than 60 sheltered beds, the facility would have problems, since the prevailing wisdom based on actual utilization experience is that far fewer sheltered beds are needed. Although the anticipated financial dilemma will have some impact on Medicare reimbursement in the Regency Oaks' facility, there is no major health care planning impact from denial of the conversion. The impact is facility- specific and was at least partially foreseeable five years ago. That is, the statute, then as now, provided a fixed 5-year period for the use of sheltered care beds by the community at large. Balancing of the criteria and weighing the evidence results in a finding that Beverly's, rather than CLC's, application should be approved.
Recommendation Based on the foregoing it is hereby RECOMMENDED: That the agency enter its Final Order denying Clearwater Land Company's application for CON #7503P and approving Beverly Savana Cay, Inc.'s application for CON #7508, conditioned upon 56 percent of patient days of care to Medicaid residents, and appropriate specific conditions for a ventilator-dependent unit, respite care, adult day care, Alzheimer's unit, and AIDS/HIV+ care. DONE and ORDERED this 30th day of June, 1995, 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 30th day of June, 1995. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Clearwater Land Company's Proposed Findings 1. and 2. Adopted in paragraph 2. Adopted in paragraph 3. and 5. Adopted in paragraph 4. 6. and 7. Adopted in paragraph 5. Adopted in paragraph 9. and 10. Rejected as unnecessary. Adopted in paragraph 24. Adopted in paragraph 9. Adopted in paragraph 72. Adopted in substance in paragraph 24. Adopted in paragraph 10. Adopted in paragraph 11. - 19. Adopted in paragraph 12. Adopted in substance in paragraph 13. Adopted in substance in paragraph 14. Rejected as unnecessary. and 24. Adopted in paragraph 15. Adopted in paragraph 64. and 27. Adopted in substance in paragraph 13. Covered in Preliminary Statement. Covered in Conclusions of Law, paragraph 79. and 31. Rejected as unnecessary. Rejected as contrary to the evidence and law. Rejected as contrary to the greater weight of evidence. and 35. Adopted in substance in paragraphs 17 and 22. Adopted in substance in paragraphs 23 and 24. Adopted in substance in paragraph 27. Adopted in substance in paragraph 28. and 40. Adopted in paragraph 29. Adopted in paragraph 30. Adopted in paragraph 31. Adopted in substance in paragraph 32. Adopted in paragraph 33. Adopted in paragraph 34. Adopted in paragraph 35. Adopted in paragraph 36. Adopted in substance in paragraph 37. and 50. Adopted in paragraph 38. Adopted in paragraph 39. - 55. Rejected as cumulative and unnecessary. 56. and 57. Adopted in substance in paragraphs 47 and 64. 58. and 59. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected, as to the comparative conclusion; otherwise accepted generally. - 64. Rejected as unnecessary and cumulative. Adopted in paragraph 62. - 71. Rejected as unnecessary. Adopted in substance in paragraph 64. Adopted in substance in paragraph 64, except as to the impact if Beverly is approved. That finding is rejected as unsupported by the evidence. and 75. Adopted generally in paragraphs 64 and 65. Accepted, as to no impact on existing providers; rejected, as to impact by Beverly. Adopted in paragraph 67 (as to Beverly's cost). - 82. Rejected generally as contrary to the greater weight of evidence. Adopted in paragraph 10. - 86. Rejected as unnecessary. Rejected as contrary to the greater weight of evidence. - 94. Rejected as unnecessary or cumulative. Findings regarding the high quality of care and range of services are addressed above. 95. and 96. Adopted in part in paragraph 37; the one staffing omission was conceded by CLC's director of nursing. 97. - 99. Adopted in substance in paragraph 45. 100. - 117. Rejected as unnecessary or cumulative. 118. Addressed in Preliminary Statement. Beverly's Proposed Findings Addressed in Preliminary Statement. and 3. Rejected as unnecessary. Adopted in paragraph 17. Adopted in paragraph 18. and 7. Adopted in paragraph 19. Adopted in paragraph 20. Adopted in paragraph 21. Adopted in paragraph 26. Adopted in paragraph 22. Adopted in substance in paragraphs 9 and 12. Adopted in paragraph 6. Adopted in paragraph 7. Adopted in paragraph 8. and 17. Rejected as unnecessary. Adopted in summary in paragraph 70. Adopted in paragraph 50. Adopted in paragraph 51. Adopted in paragraph 52. Adopted in substance in paragraph 53, although the testimony was related to both Medicare and Medicaid reimbursement. and 24. Adopted in paragraph 54. Adopted in paragraph 55. Adopted in paragraph 56. Adopted in paragraph 57. and 29. Rejected as unnecessary. Adopted generally in paragraph 24. Adopted generally in paragraph 26. Adopted generally in paragraph 27. Adopted generally in paragraph 28. Rejected as unnecessary. Adopted in paragraph 28. Adopted in paragraph 29. Adopted generally in paragraph 30, although "multi-level" was not defined, and CLC's assertion that it is a "multi-level" facility is generally accepted. Adopted in paragraph 31. - 64. Rejected as cumulative and unnecessary. Rejected as to the characterization of CLC's rate; otherwise adopted in substance in paragraph 35. Adopted in paragraph 36. and 68. Rejected as cumulative and unnecessary. 69. and 70. Adopted in paragraph 38, except as to the conclusion that CLC does not meet the preference. 71. and 72. Adopted in part; rejected in part in paragraph 39. Adopted in paragraphs 40 and 75. - 100. Rejected as cumulative or unnecessary. 101. Adopted generally in paragraphs 72 and 73. COPIES FURNISHED: Robert Griffin, Esq. Charles A. Stampelos, Esq. MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 215 S. Monroe Street, Ste. 600 Tallahassee, FL 32301 Douglas L. Mannheimer, Esq. Michael Manthei, Esq. BROAD & CASSEL 215 S. Monroe Street, Ste. 400 Tallahassee, FL 32302 Samuel D. Bunton, Esq. Agency for Health Care Administration The Atrium Building, Ste. 301 325 John Knox Road Tallahassee, FL 32303 Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32309 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Bldg. 3, Ste. 3431 2727 Mahan Drive Tallahassee, FL 32308-5403
The Issue Whether there is a need for a 120 bed nursing home in Manatee County?
Findings Of Fact HCR is a health care corporation. Its sole business is designing and constructing nursing homes. During the twenty years it has been in the business, HCR has built approximately 180 nursing homes. HCR currently operates approximately 10,000 nursing home beds in twelve states including Florida. HCR filed an application for a certificate of need to construct a 120 bed nursing home in Manatee County. The Department denied this request. The only issue in this case is whether there is a need for a 120 bed nursing home facility in Manatee County. If such a need exists, the Department has agreed that HCR "meets all applicable statutory and rule criteria." The need for nursing home beds is determined under Rule 10-5.11(21), Florida Administrative Code. Rule 10-5.11(21)(a), Florida Administrative Code, contains the following 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 calculated by the methodology described in subsections (21)(b), (c), (d), (e), (f), (g), and (h) of this rule. Rule 10-5.11(21)(b), Florida Administrative Code, provides for a determination of bed need three years into the future "according to the methodology specified under subparagraphs 1 through 10." Under the methodology provided in subparagraphs 1 through 10, need is determined on a subdistrict basis if a departmental service district has been divided into subdistricts. Manatee County is located in District 6. District 6 has been divided into subdistricts for purposes of determining nursing home bed need. Manatee County has been designated as a subdistrict. Rule 10-17.018, Florida Administrative Code. Therefore, nursing home bed need is to be determined under the methodology of Rule 10-5.11(21), Florida Administrative Code, for Manatee County. The parties have agreed and the evidence proves that there is no need for nursing home beds in Manatee County based upon an application of the methodology of Rule 10-5.11(21), Florida Administrative Code (hereinafter referred to as the "Formula"). In fact, an application of the Formula indicates that there will be an excess of 105 nursing home beds in Manatee County three years into the future based upon the following: 876 nursing home beds needed - (765 existing beds + 90 percent of 240 approved beds) = (105). Based upon an application of the Formula, there is clearly no need for any additional nursing home beds in Manatee County. This determination, however, does not totally resolve the issue in this case. Rule 10-5.11(21)(b), Florida Administrative Code, provides that the Department is to determine bed need according to the Formula "[i] n addition to other statutory and rule criteria . . . " Also, Rule 10-5.11(21)(b)10, Florida Administrative Code, provides in relevant part, the following: In the event that the net bed allocation is zero, the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained in the Department's Rule 10-5.11. Based upon these provisions of the Department's rules, it appears clear that if no nursing home bed need is shown to exist based upon an application of the Formula, other statutory and rule criteria should be considered, i.e., are there adequate like and existing services in the subdistrict? Rule 10-5.11(21)(b)10, Florida Administrative Code, however, goes on to provide: Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under this provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed, unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special services, home health services, adult day health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders, assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. As discussed under the Conclusions of Law, infra, this portion of the Department's rule (hereinafter referred to as the "Specific Exception") is not the only alternative method of demonstrating a need for nursing home beds when there appears to be no need based upon an application of the Formula. A need for nursing home beds can be demonstrated even if there is no need indicated under the Formula and the Specific Exception is not complied with based upon a consideration of other statutory and rule criteria. The Specific Exception is, however, the only method by which an applicant can demonstrate the need for a new nursing home facility based upon an access problem in the relevant service district. HCR has attempted to prove there is a need for its proposed 120 bed facility based in part upon a consideration of Rule 10-5.11(3)(a)-(d), Florida Administrative Code. This rule provides generally for a consideration of the extent to which all residents of the service area and, in particular, low income persons, the elderly and others, can access existing nursing home beds. In particular, HCR has attempted to prove that there is a need for a 120 bed nursing home because of alleged access problems under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code, during the "peak season" in Manatee County and alleged access problems of Medicaid patients, Alzheimer patients and respite care patients. As discussed under Conclusions of Law, infra, HCR has failed to comply with the Specific Exception in attempting to demonstrate need for its proposal under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code. Therefore, any evidence concerning access problems cannot be considered. HCR has also attempted to demonstrate need for its proposal based upon an application of Rules 10-5.11(4) and (6), Florida Administrative Code. These rules require a consideration of the availability of alternative, less costly, or more effective methods of providing the proposed health services and the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services. In particular, HCR has attempted to prove that like and existing services in Manatee County are not meeting the needs of Alzheimer patients and respite care patients and that there are no alternative, less costly or more effective methods of providing HCR's proposed services. If HCR had succeeded in demonstrating need for its proposal under these rules, a certificate of need would have been recommended even though the Specific Exception was not complied with. HCR has agreed that its proposed facility will meet the alleged need for Medicaid patients, Alzheimer patients and respite care patients in Manatee County by dedicating a thirty- bed wing to the care of Alzheimer patients, a thirty-bed wing to respite care patients and guaranteeing access to fifty percent of its beds to Medicaid patients. The following findings of fact are made with regard to the specific categories of persons allegedly in need of nursing home care. Although HCR's proposed findings of fact concerning access problems of these groups are not relevant because of its failure to comply with the Specific Exception, findings are made in an abundance of caution in case the Department or a Court ultimately determines that need can be demonstrated based upon access problems even when the Specific Exception is not complied with. Medicaid Patients. Manatee County generally experiences a "peak season" from November to March during which time nursing home bed use increases. The peak season in 1984-1985, however, was only about seven weeks. During the peak season there is some difficulty in placing Medicaid patients in nursing home beds in Manatee County. Between January, 1985 and March, 1985, the Department's Manatee County office placed twenty-two Medicaid patients in nursing home beds located outside of Manatee County. Some Medicaid patients have also been placed in adult congregate living facilities even though such placements are contrary to the prohibition against placing patients in need of skilled nursing home services in such facilities. L. W. Blake Memorial Hospital has also had to place patients in nursing homes on a temporary basis outside of Manatee County. During the past year, only twenty-four patients were placed in nursing homes outside Manatee County. The evidence does not establish how many of those patients were Medicaid patients, however. Alzheimer Patients. Alzheimer's disease is a disease which primarily afflicts persons in their 50's and 60's. It can, however, afflict younger persons also. The disease progresses through three stages and has no cure. During the first stage, the afflicted person experiences forgetfulness, impairment of judgement and inability to perform routine tasks. During the second stage, the afflicted person begins to wander. During the third and final stage, the afflicted person becomes dependent and incontinent. Currently there are approximately 160 Alzheimer patients in the five existing nursing homes in Manatee County. None of these nursing homes has a special program designed for Alzheimer patients. The evidence does not, however, support a finding that Alzheimer patients are not being adequately cared for. The evidence also does not establish how many persons in Manatee County are afflicted by Alzheimer's disease or the number of persons so afflicted who are in need of nursing home care. Generally, it is not until the third stage of the disease that nursing home care becomes necessary. Even then some Alzheimer patients are cared for in the home, private boarding facilities, or mental hospitals. The evidence does establish that no person afflicted with Alzheimer's disease has been refused admittance to a nursing home bed in Manatee County. The evidence also establishes that there is a 303 bed nursing home located in neighboring Hillsborough County which treats only Alzheimer patients. Hillborough County is located in District 6. Finally, the evidence demonstrates that Alzheimer patients would benefit from a special wing dedicated to the care of Alzheimer's disease in its final stages. Respite Care Patients. Respite care is the placement of a person in need of care under the supervision of another person for a short period of time. One purpose of this care is to free-up the primary care giver for a short period of time. The patient needs supervision or may need skilled nursing care. The length of the care can vary from a few hours to several weeks. HCR has proposed to establish a thirty-bed wing in its proposed facility that will be dedicated solely to the care of respite care patients in need of skilled nursing care for a period of one to eight weeks. None of the existing nursing homes in Manatee County provides the type of specialized wing HCR in proposing. The evidence establishes that there is a need for such a service in Manatee County. The evidence does not establish, however, how many nursing home beds are needed. There was testimony that there was a need for fifty nursing home beds. This testimony was, however, purely a "guess". Additionally, this estimate was not limited to the type of respite care HCR proposes to provide; the respite care giving rise to this guess included respite care for as short a period as three to five days. Short-term respite care needs are currently being met by existing programs in Manatee County. DHRS Exhibit 4 does not corroborate the fifty bed estimate because it is not at all clear what the data on this Exhibit means. Based upon the foregoing, there is a need for nursing home beds for Medicaid patients during the "peak season" and for respite care patients in need of skilled nursing care for a period of one to eight weeks because of an access problem. The need of these patients, however, has not been properly demonstrated pursuant to the Specific Exception and therefore cannot be considered. If this need could be considered even though the Specific Exception has not been complied with, the evidence fails to demonstrate how many additional beds are needed. Additionally, two new nursing homes have been approved for construction which will add 240 nursing home beds in Manatee County. The addition of these beds will eliminate some, if not all, of the need of Medicaid patients. There is a need for nursing home beds for respite care patients in need of skilled nursing care for a period of one to eight weeks because of the lack of adequate like and existing services. HCR has, however, failed to prove that this need is sufficient to justify its proposal. The evidence fails to demonstrate a need for Alzheimer patients sufficient to justify HCR's proposal based upon the care presently being given to Alzheimer patients in Manatee County. Although the ability of Alzheimer patients to access beds is not relevant because of HCR's failure to comply with the Specific Exception, the evidence also fails to demonstrate any access problem of Alzheimer patients. Alzheimer patients would benefit from a dedicated nursing home wing. This finding, however, based upon the other findings of fact in this case, does not justify HCR's proposal. Even if it were concluded that HCR does not need to comply with the Specific Exception in this case, the evidence does not support a finding that a 120 bed facility should be approved. The only evidence as to the total number of nursing home beds allegedly needed in Manatee County was presented by Mr. Jay Cushman, an expert in the field of health planning. According to Mr. Cushman there is a need for a minimum of 193 additional nursing home beds in Manatee County. Mr. Cushman's opinion was based upon the criteria of Rules 10- 5.11(3)(a)-(d), (4) and (6), Florida Administrative Code. In particular, Mr. Cushman relied upon the effect on nursing home bed use of Manatee County's peak season and the needs of Alzheimer patients, respite care patients and Medicaid patients. Mr. Cushman's opinion was based upon his determination that there is a need for a total of 1,174 nursing home beds in Manatee County. This figure was arrived at by adding Mr. Cushman's projected need for Medicaid patients (40 beds), Alzheimer patients (121 beds), respite care patients (50 beds) and the current peak census of nursing homes in Manatee County (718 beds). The sum of these figures was multiplied by 1.137 (to account for population growth in Manatee County over the next three years) and the result was divided by ninety percent (to account for a maximum occupancy rate of ninety percent). Mr. Cushman's determination of need, to the extent his figures are based upon purported access problems associated with Medicaid patients, Alzheimer patients, respite care patients and persons in need of care during the peak season, should not and cannot be considered because of the lack of compliance with the Specific Exception. Since Mr. Cushman did take into account alleged access problems without complying with the Specific Exception in arriving at his conclusion that 193 nursing home beds are needed in Manatee County, Mr. Cushman's opinion of need is rejected. Even if it was proper for Mr. Cushman to consider access problems despite the failure to comply with the Specific Exception, the weight of the evidence does not support Mr. Cushman's opinion. In arriving at his estimate of the need for Medicaid patients, Mr. Cushman relied in part upon the fact that twenty-four patients (twenty-five according to Mr. Cushman) had been placed in nursing homes located out of Manatee County by L. W. Blake Memorial Hospital personnel. The evidence, however, does not prove that all of these patients were Medicaid patients. Mr. Cushman's determination that 50 beds are needed for respite care patients was based upon on the opinion of Mr. Russell Kitching. Mr. Kitching's estimate was rejected, supra. The most significant problem with Mr. Cushman's determination of bed need is his estimate of the need for Alzheimer's patients. The evidence does not support a conclusion that there is a need for additional nursing home beds for Alzheimer's patients. The evidence proved that no Alzheimer's patient in Manatee County has been denied access to a nursing home. Finally, Mr. Cushman's opinion is contrary to, and did not take into account, the fact that Manatee County is projected to have an excess of 105 nursing home beds under the Formula. Based upon the foregoing, it is concluded that HCR has failed to prove that there is a need for a 120 bed nursing home in Manatee County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by HCR for a 120-bed nursing home to be located in Manatee County be denied. DONE and ENTERED this 2nd day of August, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 2nd day of August, 1985. COPIES FURNISHED: Jean Laramore, Esquire G. Steven Pfeiffer, Esquire LARAMORE & CLARK, P.A. The Bowen House 325 N. Calhoun Street Tallahassee, Florida 32301 John F. Gilroy, Esquire CULPEPPER, TURNER & MANNHEIMER P. O. Drawer 11300 Tallahassee, Florida 32302 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
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
Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
Findings Of Fact Petitioner is the licensee for Palm Beach Regional Hospital. Respondent is the state agency charged with responsibility for issuing certificates of need ("CONs") for both hospital and nursing home beds pursuant to Chapter 381, Florida Statutes. A letter of intent is a statutory prerequisite for filing CON applications under Chapter 381. Petitioner filed a letter of intent dated February 21, 1991, with Respondent. The letter of intent notified Respondent of Petitioner's intent to file an application for a certificate of need ("CON") to convert 12 acute care beds in Palm Beach Regional Hospital to skilled nursing beds. Petitioner requested that its application for CON be reviewed in the first 1991 batching cycle for hospital projects. Respondent rejected Petitioner's letter of intent by letter dated March 7, 1991. Petitioner's letter of intent was rejected for the reason that it was ". . . for a project which is reviewable in the nursing home cycle, rather than the hospital review cycle." Petitioner timely filed a petition for formal hearing to contest Respondent's proposed agency action. Respondent has a long standing policy of requiring applications for hospital-based skilled nursing units ("SNU") to be filed in the nursing home batching cycle, on nursing home application forms, and in competition with applications by other nursing homes. Respondent reviews such applications to determine need under the nursing home bed methodology. Respondent unsuccessfully attempted to promulgate its policy of requiring SNUs to be considered in nursing home batching cycles through formal rulemaking procedures in Proposed Rules 10-5.002(13) 7/ and 10-5.008(2)(d). 8/ Both proposed rules were determined in Venice Hospital, Inc. v. Department of Health and Rehabilitative Services, 12 F.A.L.R. 3320 (HRS 1990) to be invalid exercises of delegated legislative authority. Hearing Officer Diane K. Kiesling found that the proposed rules were not reasonable or rational and would lead to an illogical result. The policy Respondent attempted to codify in Proposed Rules 10- 5.002(13) and 10-5.008(2)(d) is no less unreasonable and irrational when applied on a case-by-case basis in this proceeding. 9/ Hospital-based skilled nursing units and free-standing community based nursing home beds are not comparable. Comparing the two types of beds in the same batching cycle creates an unfair comparison and fails to address an existing and expanding gap in the need for medical care needs for health planning purposes. Changes in health care reimbursement since 1985 and 1986 have created a gap in the need for medical care provided by acute care hospitals and that provided by most nursing homes. The level of medical care in the gap is referred to as subacute care. Patients who no longer need the acute care provided by hospitals but who need a higher level of medical services than that available in most nursing homes can be properly treated in a distinct part of a hospital known as a hospital-based skilled nursing unit or SNU. 10/ Hospital-based skilled nursing units provide a higher level of service than that provided by free-standing community nursing homes. An SNU provides 24-hour nursing by an RN nurse, skilled nursing multi-disciplinary treatments, and therapy services and equipment. Patients who do not meet acute care standards but who have more complex diagnoses or who require specialized equipment are difficult to place in free standing community nursing homes due to the level of services and types of equipment required for proper treatment. Some free-standing community nursing homes do provide some of the services available in a hospital-based SNU. However, the complex medical services required for subacute care is not available in most nursing homes. It is therefore difficult to place patients with subacute medical care needs in nursing homes. Petitioner, for example, has been unable to place patients in free standing community based nursing homes if a patient requires: therapy three or four times a day; ventilator assistance; dressings three or four times a day for decubitus ulcers; heart monitors; or respirators. The unavailability of staff, high cost of care, and lower Medicare rates paid to nursing homes 11/ preclude most free-standing community nursing homes from delivering the level of services required for subacute care in hospital-based skilled nursing units. The types of patients served by a hospital-based skilled nursing unit are different from those served by a free- standing community nursing home. The average length of stay in a hospital-based skilled nursing unit is approximately 15 to 20 days. While the average length of stay in a free-standing community nursing home is less than 90 days, many patients in such facilities have lengths of stay in excess of one year. 12/ Hospital-based skilled nursing units are predominantly Medicare patients whereas patients in free-standing community nursing homes are predominantly Medicaid patients. Medicaid does not reimburse for subacute care provided in hospital-based skilled nursing units. Finally, patients in hospital-based skilled nursing units have more complex and difficult diagnoses and require more specialized equipment. Hospital-based skilled nursing units cannot compete equally with free- standing community nursing homes. The cost of subacute care provided by SNUs is two or three times more than the cost of medical care provided by free-standing community nursing homes. The higher cost for SNUs is a result of the higher level of medical services provided in SNUs. Federally funded Medicare reimbursement is a principal payor source for both hospital-based skilled nursing units and free-standing community nursing homes. 13/ The conditions of participation in Medicare are the same for both types of facilities, but a higher rate of Medicare reimbursement is allowed for hospital-based skilled nursing units. Hospital-based skilled nursing units are certified under federal guidelines to care for patients who no longer meet "acute" care criteria. Acute care is determined under federal guidelines on the basis of standards that include "intensity of service" and "severity of illness." Hospitals and physicians may face sanctions under federal guidelines if patients who do not meet the acute care criteria are kept in acute care beds. Hospitals are the primary source of patients admitted to nursing homes. Petitioner is put in a difficult position when it cannot place subacute patients in community nursing homes, due to the level of medical care required for such patients, but cannot keep such patients in acute care beds in the hospital without facing sanctions under federal guidelines. Respondent's policy of requiring SNUs to be reviewed in the nursing home batching cycle is based in part upon Respondent's concern over the potential for increased costs in the delivery of medical care. Although hospital-based skilled nursing units are reimbursed by Medicare at a higher rate than that received by nursing homes, SNUs are not prohibited under federal guidelines from treating patients who require medical care that is below the standards for either acute care or subacute care. There are no restrictions under federal guidelines on the patients each type of facility can admit. Patients in both types of facilities must meet the same admission standards for treatment, and both types of facilities can treat patients who are neither acute care patients nor subacute care patients. 14/ As a practical matter, however, the unavailability of staff, high cost of care, and low Medicare reimbursement rates preclude most free-standing community nursing homes from delivering the level of services required for subacute care in hospital-based skilled nursing units. Respondent has the ability to place conditions on certificates of need and regularly does so. If Respondent imposes conditions of certification that preclude a provider from treating patients who meet Medicare guidelines, however, the state may be decertified for federal Medicare funds. Similarly, if a provider voluntarily refuses to treat such patients, the provider may be decertified for Medicare reimbursement. It is uncontroverted that it would be inappropriate for a hospital- based skilled nursing unit to treat patients who require levels of medical care that are available in a free- standing community nursing home and receive a higher rate of reimbursement from Medicare. Such treatment would be inappropriate for purposes of both health care planning and the cost effective delivery of medical services. The potential for inappropriate treatment does not establish that Petitioner does or would provide such treatment if its application for CON is reviewed in the hospital batching cycle. The evidence failed to establish that reviewing Petitioner's application in the hospital batching cycle would preclude Respondent from adequately addressing Respondent's concerns, including the actual need for hospital-based subacute care. CON applications for hospital-based skilled nursing units must be reviewed in either the nursing home batching cycle or the hospital batching cycle. There is no specialty bed need methodology for reviewing CON applications for SNUs. Hospital beds and nursing home beds are licensed respectively under Chapters 395 and 400, Florida Statutes. Beds in hospital-based skilled nursing units are in fact "hospital" beds under Chapter 395 and not nursing home beds under Chapter 400. SNUs are licensed by Respondent as general hospital beds pursuant to Chapter 395. 15/ The two types of beds are in different planning cycles, and the application form used for nursing home beds is not suitable for SNUs. Respondent's policy, however, requires SNU beds to be carried as part of the inventory of nursing home beds for purposes of projecting need under pool projections utilized by Respondent for the purpose of evaluating the need for new beds. The standards for licensing nursing home beds under Chapter 400 are different from the standards applied to hospital beds in Chapter 395. It is difficult to prove need for an SNU under the standards applied for purposes of licensing nursing home beds. As Hearing Officer Kiesling found in Venice Hospital: A hospital desiring to establish . . . [an SNU] . . . will likely find itself having either to challenge the fixed need pool for nursing home beds or litigate the almost inevitable denial of its application for lack of need. Either course of action would in- volve time and expense over and above those usually encountered in the CON process, par- ticularly because such an application would likely draw the opposition of existing nursing homes, even though their services are not really comparable. . . . The proposed rule amendments do not comport with the basic health planning policy of reducing over-bedding by encouraging conver- sion to other services. It is unlikely a hospital could get a skilled nursing unit by showing a numeric need under the nursing home need methodology, and any attempt to show excep- tional circumstances would be hampered by the lack of utilization data. Such beneficial conversions will probably also be chilled by the difficulty in converting a skilled nursing unit back to general acute care use, should it not be successful. Given the extreme acute care over-bedding which exists throughout the state, it is not anticipated that there will be any need for additional acute care beds for the foreseeable future. Since a skilled nursing unit would not be counted in the acute care bed inventory, the reconversion to acute care use would have to undergo CON review and would almost certainly be denied.
Recommendation Based upon the foregoing Findings of Facts and Conclusions of Law, it is recommended that Respondent should enter a final order accepting Petitioner's letter of intent to file a CON application for a hospital-based skilled nursing unit to be reviewed in the appropriate hospital batching cycle. RECOMMENDED this 21st day of November, 1991, in Tallahassee, Leon County, Florida. DANIEL MANRY 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 November, 1991.
