Findings Of Fact Each applicant in this proceeding submitted its application in the January, 1986 batching cycle for the January, 1989 planning horizon, each requesting a certificate of need to build a 120-bed nursing home in Brevard County, Florida. The parties have stipulated that each applicant's letter of intent and application was timely filed, that there is a need in the January, 1989 planning horizon for additional community nursing home beds, and that 120 of those beds should be awarded to one of these applicants. They further stipulated that there are sufficient professional staff available in the Brevard County area to completely staff a new nursing home facility and that each of the applicants is able to obtain the funds necessary to construct its project. Maple Leaf of Brevard County Health Care, Inc., a new corporation to be formed as a wholly-owned subsidiary of HCR proposes a 120-bed community nursing home to be located in central Brevard County in the area of Rockledge and Cocoa. In addition to traditional skilled and intermediate care, the nursing home will provide services for sub-acute patients, and a separate wing of the nursing home will be set aside for Alzheimers and related dementia disease patients (hereinafter "Alzheimers patients"). The HCR proposal includes an adult day- care unit for Alzheimers patients and respite care on a bed- availability basis. At final hearing, HCR submitted an application supplement which provided updated calculations, projections and program descriptions to account for changes occurring as a result of the elapse of time between submission of the original application and the final hearing. The application supplement does not include any programmatic changes from the original application and does not add any new concepts or elements to the original HCR proposal. The adult day-care unit will provide care to Alzheimers patients for four to eight hours a day and from one to five days a week, depending upon the needs of the patient and caregiver. The program will be staffed by a nurse director and an assistant. Patients will be provided with various activities of daily living in an environment developed for Alzheimers disease victims. This program provides placement for the patient who does not need inpatient care but whose caregiver needs rest or an opportunity to attend to matters outside of the home, such as employment. Respite care at the HCR facility is intended to provide placement for patients on a 24-hour basis while the family or caregiver attends to needs such as vacation or hospitalization incompatible with overnight care of the patient at home. Respite care provides inpatient nursing home care for short periods of time, typically a week or two. Sub-acute care is a more intensive form of skilled nursing care than typically has been provided in nursing homes. Historically, this care was provided in hospitals, but adoption of the DRG (diagnostically related group) system of acute care reimbursement has resulted in an earlier discharge from hospitals of elderly patients who continue to need an intense level of nursing care. Sub-acute care includes the provision of high-tech services such as ventilator care IV therapy, pulmonary aids, tube feeding, hyperalimentation and short- and long-term rehabilitation. HCR provides a wide variety of these sub- acute care services in its existing facilities. Hospitals in Brevard County report difficulty in placing patients who require sub-acute care and high-tech services. Particularly difficult to place are these patients whose care is reimbursed by Medicaid. The availability of sub-acute care also provides continuity of care for bedridden Alzheimers patients in the later stages of the disease when they require life support systems. HCR proposes to devote a 29-bed wing of the facility to the care of Alzheimers patients. Special design features, patient activities and programs and modified staffing will be provided to meet the special needs of Alzheimers patients. Alzheimers disease, a form of dementia, is a degenerative condition of the brain which results in a progressive dementia and loss of Previously- acquired intellectual functions and memory. Generally, the disease has three or four stages. In the earliest stages, the victims experience some mild memory loss, behavioral changes, loss of interest in previous hobbies, depression, anxiety and increased difficulty handling some routine day-to-day affairs. In the early stages, victims often are in reasonably good physical condition and symptoms tend to be fairly subtle. In stage two memory loss is much more apparent, and victims begin to have problems with the use of language. They may have increased difficulty with spatial relationships and become lost in familiar surroundings. These victims experience more noticeable problems with their memory in terms with dealing with their family and friends; as the disease progresses to stage three, those problems tend to worsen and become apparent even to people who are not otherwise familiar with the patient. The victims may have additional behavioral or psychiatric difficulties associated with depression or severe anxiety. A delusional stage is frequent. These victims experience disruption of their sleeping cycles and sleep during the day and wander during the night. Seizures may become a problem. In stage three, the victims usually require supervision. As the disease progresses through stage three, the victims have difficulty with personal hygiene, difficulty getting dressed and difficulty performing the simplest human task. As the disease progresses into stage four the victim becomes bedridden and requires total nursing care. There is no cure for the disease. It is terminal. Nursing home care is probably appropriate for everyone in stage four of Alzheimers disease. Most patients in stage three require nursing home care. Some patients in stage two may require nursing home care, depending upon the type of care that is available at home. According to some estimations, approximately 2.5 million American adults suffer from Alzheimers disease and approximately one-half of existing nursing home patients, and 15 percent of the population age 75 and over suffer from Alzheimers disease (4 - 5 percent 65 and over, 20 - 30 percent 85 and older). There are eleven nursing homes in Brevard County, but there is only one nursing home in Brevard County which provides a separate unit for Alzheimers patients. This facility is located in West Melbourne in south Brevard County. There is no nursing home which provides a separate Alzheimers program in central or north Brevard County. Historically, Alzheimers patients in nursing homes have been mixed with other patients. The Alzheimers patient in the nursing home has often created management problems because of wandering, incontinence, confusion, loss of cognitive and communicative capabilities, unusual sensitivity to normal environmental stress, and socially, unacceptable behavior. Because of these characteristics, nursing homes have sometimes avoided admitting Alzheimers patients. Often, when such patients were admitted, their behavior was controlled by sedation and physical restraints. Nursing home patients who do not suffer from Alzheimers disease are often agitated and disrupted by the Alzheimers patient. The Alzheimers patient exhibits such unacceptable social behavior as going through other patients' belongings, sleeping in other patients' beds, violent behavior, being unresponsive to attempted communications and continually wandering. A separate unit for the Alzheimers disease victim also accommodates the needs of the non- Alzheimers patient. It is medically appropriate to separate Alzheimers patients from other nursing home patients. Frequently, the Alzheimers patient is suffering from mental problems resulting in confusion and disorientation but is otherwise physically healthy and ambulatory. Other patients in the nursing home often have a variety of medical problems which require more intensive nursing care. Placing Alzheimers patients in the same area with those patients with medical problems requiring more nursing care can be disruptive to the nursing care being provided to the non- Alzheimers patient, The design of the HCR facility is intended to reduce the environmental stress on Alzheimers disease victims and allow them to maintain their cognitive capabilities for as long as possible. Special wall coverings, floor coverings, labeling and color coding features are provided. Separate dining and activities areas are provided. Wandering is permitted. A fenced courtyard is provided. A monitoring system will alert the facility staff when a patient begins to wander out of the facility. Bathrooms are designed to avoid fright and confusion by automatic lighting systems, coloring and distinctly shaped fixtures and waste baskets. Safe dinnerware and tables which enhance the Alzheimers victim's ability to continue to feed himself or herself are provided. Additional staffing in the Alzheimers unit and staff training in Alzheimers care will be provided. The goal of the Alzheimers design and program is to maintain the patient's activities of daily living and assist in the retention of the patient's cognitive capabilities for as long as possible. Separate, specialized Alzheimers care units are beneficial for several reasons. They are safer for the Alzheimers patient. They reduce the agitation and disruption of the Alzheimer's and non-Alzheimer's patient. They provide programs for Alzheimers patients which are within the patient's cognitive abilities. The units are smaller, and each patient receives more individual attention. Sedation and physical restraint is eliminated or reduced. Individual dignity is enhanced. HCR confirmed the need for an Alzheimers program in Brevard County by calculations based upon nationally-accepted statistics and contact in Brevard County with individuals knowledgeable of the availability of care being provided to Alzheimers disease patients. Special units for Alzheimers patients are a fairly new phenomenon. HCR proposes to develop Alzheimers units in other nursing homes in Florida and has submitted applications to add Alzheimers wings to existing nursing homes in Florida. HCR also proposes to convert a wing in an existing facility in Dade County to provide care for Alzheimers patients. HCR will locate its nursing home in the Rockledge- Cocoa area, about thirty miles north of Melbourne and thirty miles south of Titusville, in central Brevard County. All 120 nursing home beds in the HCR nursing home will be certified for Medicaid reimbursement. New equipment for the HCR nursing home is projected to cost $412,079. This represents an increase in cost over the original estimate of $370,000 because of a general increase in equipment cost since the original application and an allocation of approximately $13,800 for equipment for the daycare unit, a cost which was not included in the original estimate. HCR's estimate for purchase of new equipment is reasonable. Projections of payor-mix, facility utilization and revenue and expenses of a nursing home are useful to evaluate the financial feasibility of the project. All projections utilized by HCR to evaluate financial feasibility are conservative projections. The updated projections presented by HCR at final hearing are more conservative than the projections presented in HCR's original application. If the projections found in HCR's original application were realized, the facility simply would be more profitable. HCR's estimate of an 11 percent interest rate for the funds to be borrowed for this project is a reasonable and conservative estimate. HCR's estimate of 50 percent intermediate care patients and 50 percent skilled care patients is a reasonable estimate for the patients expected to be found in this facility and is a conservative estimate. No other applicant provided such an estimate. In computing revenues and expenses, HCR assumed an inflation factor of 3 percent for Medicare and Medicaid revenues, 5 percent for other revenues and 5 percent for expenses. These inflation factors are reasonable. HCR's projections of 22 percent in year one and 25 percent in year two for payroll taxes and fringe benefits are reasonable and consistent with HCR's actual experience. HCR utilized reasonable and appropriate depreciation periods of 40 years for the building and 10 years for equipment. These are the depreciation periods used by HCR in its regular course of business. The patient charges projected by HCR, including Medicaid, Medicare and private room rates and ancillary charges, are reasonable projections. HCR projected that private pay room charges at the nursing home would be $75 for a semi-private room and $85 for a private room in July, 1989. These updated projections are consistent with existing (1987) private pay rates in Brevard County, which range from $59 for a semi-private room to $90 for a private room. The HCR rates, inflated forward to 1989, are reasonable and consistent with the existing private pay charges in Brevard County. Private pay room rates charged at nursing homes tend to reflect the market for private pay rates in the vicinity of the nursing home. HCR's updated projection of payor-mix is consistent with the actual experience in central Brevard County and an open admissions policy for Medicaid patients. HCR projects that the facility will reach 95 percent occupancy within 12 months of operation. This projection is based upon HCR's experience subsequent to filing the original application. This projection is reasonable and more conservative than those of the other applicants. HCR anticipates a loss in the first year of operation of $293,885, but a profit in the second year of Operation of $241,084. These projections reveal that the project proposed by HCR is financially feasible, and these projections are reasonable. Staffing of the HCR nursing home is comprised of an administrator, a director of nursing, an assistant director of nursing, an Alzheimers program director, 8.4 FTE (full time equivalent) registered nurses, 6.3 FTE licensed practical nurses, 39.9 FTE nurse-aides, 1 full time occupational therapy aide, 1 full time recreational therapy aide, a social worker, an activities director, 10 FTE dietary personnel, 3 FTE laundry personnel, 8 FTE housekeeping personnel, a maintenance person, 2 clerical workers, and 1 medical records worker. Physical therapy, occupational therapy, recreational therapy, and speech therapy will be provided by licensed therapists on a contract basis. The updated staffing pattern represents minor changes from the staffing pattern in the original application. These changes are a direct result of HCR's experience in operating an Alzheimers wing within a nursing home. HCR's staffing level for staff who provide direct patient care (RNs, LPNs and Aides) exceeds that of Wuesthoff and Unicare. Staff levels in the HCR nursing home are designed to meet the special needs of the Alzheimers patients. An Alzheimers program director will be responsible for the Alzheimers wing and will be an advisor for the day-care facility. HCR's staffing pattern assumes 15 wandering Alzheimers patients in the Alzheimers wing. Care for Alzheimers patients requires increased staffing. Higher nurse-aides staffing is required in the Alzheimers wing during the evening and night hours than in the remainder of the nursing home because Alzheimers patients tend to wander without regard to the time of day. HCR estimates construction costs to be $2,200,000, not including site preparation, which is estimated to cost $275,000. Construction costs per square foot are estimated at $55 and $61.87 when site preparation is included. The estimates of construction cost and construction cost per square foot include an allocation of 2,000 square feet and $110,000 for the day-care unit. The cost per square foot projected in the updated application differs from that projected in the original application because the original application included site preparation, assumed a facility size of 36,000 square feet and was not changed when the original design was changed to add day- care in the original application supplement. The actual size is approximately 40,000 gross square feet. The original HCR application submitted a blueprint which is somewhat different in shape from that which HCR currently intends to build. When HCR added day-care in its Original application supplement, a change in the shape of the building was required and a new design was submitted, but cost estimates were not changed. The design which HCR will use for this facility is similar to the design being used in four ongoing HCR projects in Florida, and which, therefore, meets HRS' requirements. The design relied upon by HCR at final hearing is not substantially different from the design presented to HRS in the original application supplement. HCR's estimates of construction cost, construction cost per square foot, construction cost per bed, equipment cost per bed and total project costs are reasonable and adequate to accomplish the construction of the proposed facility. HCR's updated construction cost estimates are based upon its construction experience in Florida, its experience in having built the design proposed and its discussions with contractors and subcontractors on the east coast of Florida. HCR is currently building two facilities on the east coast of Florida. HCR does not anticipate any cost overruns on any of the facilities currently under construction. All HCR facilities under construction are being constructed within the certificate of need budgets for those facilities. HCR estimates project development costs, including feasibility studies, surveys, legal and accounting fees, planning and HRS's plan review, to be $55,000, which represents an increase over the estimate in the original application due to the passage of time. HCR estimates professional services required for the construction of the facility to cost $90,000. These services include architectural and engineering fees and a site survey and soil investigation report. These costs are approximate1y $5,000 less than the original estimate. This reduction in cost is a direct result of HCR's new staff of civil engineers. Previously, HCR had contracted for site survey work with outside engineers. Thus, while architectural and engineering fees increase, the costs for site surveys and soil investigation reports decrease. The HCR nursing home will be located on approximately 5 acres. HCR estimates land cost for the facility to be approximately $500,000. This - represents an increase over the original land cost estimate because HCR intends to acquire a site which requires less site preparation, located near a hospital. The HCR estimates for land cost are reasonable and consistent with other applicants' estimates. Site preparation costs are estimated at $275,000, a reduction from the original site preparation cost estimate of $315,000. This change is accounted for by HCR's intention to acquire a more costly site which will require less site preparation. HCR intends to build and operate the nursing home proposed for Brevard County and is willing to accept a condition to that effect on any certificate of need issued. HCR estimates a project completion schedule which will result in its nursing home being occupied and in use in July, 1989, and this project completion forecast is a reasonable forecast. HCR has taken steps to ensure that failure to initiate construction within statutory requirements will not occur. HCR has undertaken numerous nursing home projects since 1983 and has successfully constructed or initiated construction on all of those projects. At this time HCR has approximately six projects under construction, four projects have been completed, and one project is under construction for a third party. The design of the HCR facility incorporates numerous energy conservation measures and efficiencies. The HCR facility will comply with all energy code requirements. HCR owns and operates seven nursing homes in Florida. Three of these facilities have superior licenses, and the remaining facilities have standard licenses. HCR nursing homes adhere to extensive quality assurance standards and guidelines. These standards and guidelines regulate such areas as patients' rights, staff development and orientation, physician and nurses services, pharmacy services and medication administration, social services, patient activities, infection control, patient care planning, safety and the physical environmental, menus, diets, nutritional care and scheduling and staffing of dietary personnel, personal appearance and hygiene for dietary personnel, and food storage, preparation and sanitation. These standards and guidelines will be applicable to this proposed project. The standards and guidelines cover all areas of operations and patient care and incorporate survey tools used by the state of Florida and the Health Care and Finance Administration of the federal government for their annual licensure surveys. Additionally, administrators of HCR facilities have a financial incentive to optimize the performance and the quality of care of their facilities. HCR estimates that approximately 60 percent of the patient days in the facility (53 percent of the revenue) will result from Medicaid patients. This estimate is consistent with the experience in the Rockledge-Cocoa area, where one facility has a very low percentage of Medicaid patients and the remaining facilities have very high Medicaid populations (over 60 percent). HCR's estimate also takes into account HCR's recent experience in staffing a facility which includes an Alzheimers wing. HCR will not restrict the number of Medicaid patients in the Alzheimers wing or the remainder of the home. HCR's original application assumed approximately 45 percent of the patient days (42 percent of the revenues) would be accounted for by Medicaid patients. This assumption was based upon HCR's assumption at that time that, in order to cover the assumed high cost of additional staffing in the Alzheimers wing, a greater percentage of private patients (at a higher daily charge) would be required. Subsequent to submission of the original application, HCR has gained actual experience which has demonstrated that the level of staffing proposed by the original application is not necessary and that the cost of staffing can be reduced. The result is that HCR can reduce its reliance on the additional revenue generated by the private paying patient. HCR's design for its Brevard County Alzheimers unit is based upon a state-of-the-art Alzheimers wing at its facility in Perrysburg, Ohio, and HCR's experience gained there. In addition, HCR operates two other facilities which have separate units for Alzheimers patients. The HCR application is consistent with both state and local health plans. HCR projects a charge for Medicaid patients to be $60.93 and, for Medicare patients to be $76 in July, 1989. The increase in charges between the updated projections and the original projections is due to increases in costs during the passage of time since the original estimates were made. The cost of care for patients who are unable to pay is subsidized by the general revenue of the nursing home. Although HCR and Unicare have not projected a percentage of "charity" patients who will not be paying for their services, there will always be some patients who do not pay for all of their care. Patients who do not qualify for Medicaid but who cannot afford standard private pay rates are charged at lower contract rates. The loan fees projected by HCR of $57,000 for the amount of the project financed by debt are reasonable projections based upon current discussions with lenders. HCR estimates that interest during construction will cost $225,000. This amount represents the interest expense paid during the period of construction. This estimate is reasonable. HCR estimates $50,000 will be required for preopening expenses - those incurred in preparing the facility for the opening day. These expenses include marketing and the hiring of an administrator, a director of nursing, and other employees prior to opening. $50,000 is an adequate amount to cover the pre- opening expenses for the proposed facility. HCR's pro forma assumptions, proposed patient charges, projections of revenue and expense, staffing and projections of salaries are reasonable. Each HCR nursing home provides individual patient care plans for each patient, a statement of patients' rights and a resident council (which is a unit of individuals selected by the patients to afford an opportunity to have a formalized, direct method to state preferences, grievances and other opinions related to the operation of the nursing home), and each HCR nursing home has transfer agreements with local-hospitals. The planning director of the Local Health Council responsible for Brevard County performed an analysis of the need for nursing home beds in Brevard County. The results of the study demonstrate that the central part of Brevard County has a lower number of nursing home beds per thousand population over 65 than the remainder of Brevard County. If additional nursing home beds are to be approved for Brevard County, the beds should be located in the central part of the county because the need for nursing home beds in Brevard County is greatest in central Brevard. The HCR architectural design best accommodates the needs of the nursing home patient. Wuesthoff Health Services, Inc., is a non-profit corporation affiliated with Wuesthoff Hospital, Inc., a 305-bed non-profit hospital serving Brevard County, through a common parent Wuesthoff Health Systems, Inc. Wuesthoff Hospital provides some indigent medical care in central Brevard County, and the Wuesthoff nursing home certificate of need application commits to providing some indigent care at the proposed nursing home facility. Wuesthoff, through its affiliated non-profit companies, operates within Brevard County a home health agency, a hospice, four family practice clinics, Life Line for the elderly or disabled who live alone, and Brevard Medical Transport, a no- cost transportation service for the elderly. It also operates a retail pharmacy through a for-profit affiliated corporation. The hospital has for several years maintained a senior citizens' advisory council which concerns itself with the needs of the elderly in Brevard County. It also intends to compete with other businesses in operating Brevard County's Meals On Wheels due to a recent expansion of the size of the Hospital's kitchen. The proposed nursing home will be located on a tract of land owned by Wuesthoff Hospital which will make the property available to Wuesthoff Health Services, Inc., at either the nominal rental of $1 per year for the useful life of the nursing home or by outright contribution if required by HRS. The land has been owned for several years by Wuesthoff Hospital, but Wuesthoff included $48,000 for land costs in its original certificate of need application. The site for the Wuesthoff nursing home is part of a large tract of land which already has located thereon a 20,000 square feet ambulatory care center, diagnostic testing center, family practice physician, dental facility, and retail pharmacy, all of which are owned by one of the Wuesthoff corporations. The ambulatory care center includes laboratory services, physical therapy services, radiology services, two out-patient surgery suites, and 24- hour physician coverage. The nursing home will be connected to the ambulatory care center by an air conditioned, enclosed corridor through which the nursing home patients will be transported to receive any therapies or services which they require. The farthest distance from any patient room in the nursing home to the ambulatory care center, including physical therapy rooms, is approximately 400 feet. Wuesthoff's nursing home would be located in the area which the Local Health Council recognizes as having the greatest need for nursing home beds, i.e., central Brevard County in the Cocoa/Rockledge area. According to Wuesthoff's updated application the total project cost for its 120-bed nursing home would be $2,901,213, and the facility will consist of 37,500 square feet. The project size actually includes 1,000 square feet for the corridor which connects the nursing home to the ambulatory care center. Therefore, the facility itself consists of only 36,500 square feet. It is unclear whether that figure should be further reduced since Wuesthoff decreased the size of its kitchen in its amended application so that the nursing home would no longer have a full-service kitchen. Similarly, the total project cost was substantially higher in Wuesthoff's original application wherein the total project cost was given as $4,417,884. Wuesthoff made changes from its original to its updated application either because the applications were prepared by different persons or because decisions were made to change Wuesthoff's application, as follows: The original application included a full-service kitchen, while the updated application contemplates meals will be prepared at Wuesthoff Hospital and transported seven miles to the nursing home. The removal of the kitchen affects the square footage of the facility along with equipment costs, staffing costs and other costs associated with the operation of the proposed nursing home, such as the increased costs associated with transporting the food to the nursing home. In its original application, one individual was listed as both the nursing home administrator and director of nursing. In its updated application, Wuesthoff treated these as separate positions. Wuesthoff proposed $376,000 for equipment costs in its original application and projected $187,400 for equipment costs in its updated application. Wuesthoff projected 45 percent Medicaid and 15 percent Medicare in its original application and 50 percent Medicaid and 2 percent Medicare in its updated application without any evidence that the needs in the community had changed. Wuesthoff removed the debt service, in its updated application, thus reducing the financing costs. The underwriter's fees between the original and updated application were reduced based upon a dimunition of the bond size as a result of reduction of square footage in the facility and the elimination of the debt service. Wuesthoff reduced land cost from $48,000 in its original application to no cost in its updated application despite the fact that the land was owned by Wuesthoff at the time the original application was filed. Wuesthoff changed the equity contribution between its original and updated applications without any testimony of extrinsic factors while evidence showed that the funds were available to make the equity contribution at the time of the submittal of the Original certificate of need application. Although Wuesthoff's application' represents that approximately 3 percent of the revenues from private pay patients would be devoted to indigent or charity patients, the 3 percent actually applies to both charity and bad debt. Wuesthoff failed to demonstrate how much of its revenues, if any, would be allocated to charity care alone. Wuesthoff projected charges of $65 for a semi- private room for a private paying patient and $73 for a private room for a private paying patient. These charges, projected for mid-1989, are below existing (1987) charges at nursing homes in Brevard County. The projections of financial feasibility and the pro formas for the Wuesthoff facility are based upon the assumption that the Wuesthoff nursing home will be owned and operated by Wuesthoff Health Services, Inc. The only financial statements provided by Wuesthoff in support of its application are those relating to Wuesthoff Memorial Hospital. Wuesthoff Memorial Hospital is a corporation separate and distinct from Wuesthoff Health Services, Inc. Further, the financial statements of Wuesthoff Memorial Hospital provided by Wuesthoff do not include the "notes" normally appended to those statements. The "notes" to the audited financial statements are typically included in any complete financial statements and are required for a full understanding of the financial statements. The pro formas of Wuesthoff assume that 15 percent of salaries would be allocated to fringe benefits. This assumption is based upon the assumption that the employees of the nursing home will not be unionized and, therefore, their fringe benefits will not be as high as those for unionized employees. The nurses at Wuesthoff Memorial Hospital are unionized and have higher benefits than proposed for the nursing home. Unionization is a decision made by employees and not by management. Wuesthoff's assumptions for fringe benefits do not assume any increase in the fringe benefits from year to year. Wuesthoff agrees that there are required increases in fringe benefits, such as increases in required contributions to social security programs over the next few years. Thus, the amount for fringe benefits assumed by Wuesthoff understates the amount likely to be paid. A participant in the Medicaid reimbursement system is entitled to reimbursement on the basis of fair rental value of the nursing home. Although the fair rental value aspect of the reimbursement plan includes consideration of the value of land upon which a nursing home is situated, and although Wuesthoff assumes that it would receive reimbursement under this element of the plan, Wuesthoff does not include in that reimbursement any value for land value. Wuesthoff would be entitled to that form of reimbursement, but Wuesthoff was unable to specify "how that's going to be done." The Medicaid reimbursement system incorporates certain caps on reimbursement, including caps for patient care costs, operating costs and property costs. Wuesthoff is unable to specify which Medicaid reimbursement caps it utilized when calculating its Medicaid charges. It is not possible to calculate Wuesthoff's Medicaid reimbursement and Medicaid charges based upon the exhibits presented by Wuesthoff, including its applications. The Wuesthoff application does not contain any description of patient care costs or costs of operation of the Wuesthoff facility upon which Medicaid charges can be determined. Wuesthoff represented that certain services would be provided to the Wuesthoff nursing home by Wuesthoff Health Services or Wuesthoff Memorial Hospital at no charge to the nursing home. The exact nature of the services and their value are unspecified. Although Wuesthoff contends fewer staff will be needed at the nursing home, Wuesthoff has not determined how many additional staff would be required at the hospital and has not calculated the cost of transporting food to the nursing home. Ordinarily, a related entity providing services to a nursing home is entitled to reimbursement for the cost of those services under the Medicaid reimbursement system. Wuesthoff has not determined whether the Medicaid statutes and regulations will allow a related entity to waive its entitlement to such reimbursement. Wuesthoff's parent company, Wuesthoff Health Systems, and Wuesthoff Memorial Hospital will incur costs for providing those services to Wuesthoff which Wuesthoff represents will not be reimbursed. These entities' budgets and Medicaid reimbursement are regulated and audited by HRS and the Hospital Cost Containment Board. By providing services to the nursing home and no longer allocating 100 percent of costs to operation of the hospital, the hospital's reimbursement and budget will have to be adjusted. These required adjustments have not been taken into consideration by Wuesthoff. In preparing its budget to be submitted to the Hospital Cost Containment Board, the hospital will be required to allocate a certain amount of time for those persons providing services to the nursing home. The hospital will not be reimbursed for those services by Medicaid or Medicare. The total cost of providing care to nursing home residents must be reported by the nursing home in its Medicaid cost report. If a nursing home does not include allowable Medicaid costs in its cost report, HRS will include those costs when HRS audits the cost report. When those additional costs are included, the nursing home's reimbursement (Medicaid charge) will increase. It is not a generally accepted accounting principle to exclude allowable costs in a Medicaid cost report. By not including certain costs, expenses are understated and profit is overstated. Wuesthoff attempted to present evidence that a hospital-based nursing home facility maintains lower costs which can be passed on to its patients, because of an absence of taxation and the presence of group purchasing. However, this evidence also revealed that the hospital-based nursing home to which Wuesthoff sought comparison had patient care and operating costs which exceed the caps for Medicaid reimbursement. Additionally, Wuesthoff's Medicaid costs are higher than those of HCR. Wuesthoff proposes an architectural plan for its nursing home which has never been built in Florida. Wuesthoff is the only applicant which proposes three nurses' stations for 120 beds. The 120-bed nursing home with two nurses' stations is more efficient to operate than a 120-bed nursing home with three nurses' stations. Three nurses' stations result in a higher cost per patient day than two nurses' stations. Wuesthoff's architect was unable to estimate the cost of site preparation and was unable to specify the exact nature of site preparation required. However, site preparation will be required. There is confusion concerning the cost of equipment for the Wuesthoff project, particularly with regard to food service equipment. Although the Wuesthoff architect testified that Wuesthoff originally had consulted with him concerning the cost of equipment, the witness was unable to identify the equipment costs listed in the application. The equipment list relied upon by Wuesthoff and the list of used equipment and food service equipment was not prepared until the first week of the final hearing. Wuesthoff's projection of construction cost ($57 per square foot) was not prepared by Wuesthoff's architect and the source of the projection is unspecified. The project is not based upon any actual experience of nursing home construction in Florida. The original estimate was provided by the architect to Wuesthoff several years earlier and was lower than $57 per square foot. Wuesthoff proposes to connect its nursing home to a nearby ambulatory surgical center by a corridor. There are no physical therapy or Occupational therapy rooms provided at the nursing home. Although recreational therapy and speech therapy must be provided at the nursing home, only small meeting rooms are available for these purposes. A nursing home patient transported from a nursing home to a location outside the nursing home for therapies must remain in the care of nursing home staff. This mode of operation requires more staff than one in which all therapies are provided within the physical confines of the nursing home. Wuesthoff did not include in its estimate of project development cost any estimate for attorney's fees or consulting fees of the planners and financial consultants retained for the purpose of obtaining a certificate of need. The shared services referred to by Wuesthoff are not free services, and no evidence was offered to show that the sharing of those services would be cost efficient. The corridor between the ambulatory surgical center and the nursing home is estimated by Wuesthoff to be 1,000 square feet. The cost for the corridor is -included in the costs projected for the nursing home, and the corridor is included in the total size (37,500 square feet) of the nursing home. Wuesthoff proposes to equip the nursing home with used equipment and furniture. The used hospital beds which Wuesthoff proposes to use at the nursing home are eight to twelve years old. Although Wuesthoff proposes to provide therapy through professional staff from Wuesthoff Memorial Hospital, Wuesthoff could not estimate how many additional therapists must be hired by the hospital in order to provide therapy for the nursing home patients. Wuesthoff contends that it will provide a high level of charity care in its nursing home at the same level that is provided at the hospital. However, when calculating the percentage of charity care at the hospital, Wuesthoff included care provided within programs where some form of governmental funding was available to pay for care. For instance, Brevard County contributes funding toward the care of patients who are not eligible for Medicaid or Medicare reimbursement. There is also a state fund for indigent care and Wuesthoff expects to receive revenues from that fund. The total allowance for bad debt and charity care proposed by Wuesthoff is 1.1 percent of gross patient revenues. Wuesthoff will require financial screening of patients prior to admission. Unicare proposes as total project cost in both its original and updated applications the amount of $3,360,000. The project cost cannot be relied upon, however, since it will be necessary for Unicare to modify its design. As further set forth below, Unicare's projected revenues and expenses are suspect. Unicare has never constructed a new nursing home in Florida or built the design proposed. When filing a cost report and determining Medicaid reimbursement for a new nursing home, all costs incurred throughout the process of developing and constructing the project, including feasibility studies, attorney's fees, accounting fees, consulting fees and certificate of need fees must be included. Unicare failed to include all project development costs in its application. The pro formas and projections of revenues and expenses for Unicare were prepared solely by Unicare's certificate of need consultants, based upon the consultants' experience in their own nursing homes and not upon any information (other than home office costs) concerning the operation of Unicare nursing homes. Unicare's in-house financial expert agreed that it is difficult to project revenues and expenses for operation of the proposed Unicare nursing home without having knowledge of what Unicare's general costs and expenses are. Two Unicare homes have failed to comply with the isolation room requirements of Rule 10D-29, Florida Administrative Code, which governs the licensure of nursing homes. The Unicare design does not provide any single, licensed isolation room as required by HRS licensure regulations. The Unicare architectural design provides only one toilet room between two patient rooms to meet the needs of four nursing home patients. The company which designed and expects to construct the Unicare facility has not performed any nursing home construction work in Florida since 1983 or 1984 when the company remodeled a nursing home. The last nursing home which this company completed for Unicare was prior to 1985. This company did not prepare the construction cost estimates relied upon by Unicare. Calculation of the size of the Unicare facility did not include a reduction of 9 square feet for each indented, V-shaped window in the facility. There are 23 such windows proposed for the Unicare facility. Accordingly, the Unicare facility is 207 square feet smaller than represented in the application. Licensure regulations require an unobstructed view (vista) of 20 feet from the window of a nursing home resident's room. At least four Unicare patient rooms have an unobstructed view of less than 20 feet. Therefore, the design presented by Unicare at final hearing does not comply with the rules for licensure of a new nursing home, pursuant to Chapter 10D-29, Florida Administrative Code. The Unicare design has never been built, although it was prepared more than five years ago. The design was intended for patient programs not now proposed by Unicare. The original facility design accommodated residents who require a degree of care below and can participate in activities above typical nursing home residents, such as residents found in adult congregate living facilities. The design and location of the sinks in the Unicare patient rooms do not allow sufficient space for a patient in a wheelchair to have access to the sink at the same time that the door to the toilet room is open. Unicare proposes to locate its facility in the Titusville area in north Brevard County. The local health plan shows the greatest need for additional nursing home beds to be in central, not north, Brevard County. Unicare's selection of Titusville as the area for location of its nursing home was not based upon any demographic analysis or determination of need for additional nursing home beds in the Titusville area. Rather, the selection of Titusville would avoid competition with another of Unicare's facilities located in the Rockledge/Cocoa area. In determining equipment needs, Unicare's certificate of need consultants did not refer to the design of the Unicare nursing home. Unicare projects that its facility will reach 97 percent occupancy in the first nine months of operation. However, the last nursing home to open in the Titusville area, Vista Manor, did not reach 97 percent occupancy until after the first year of operation. Unicare will staff at skilled levels. Its proposed staff salaries are reasonable. Unicare has not yet settled on any site in the Titusville area although it has narrowed its search down to four sites which vary between four and seven acres with prices ranging from $25,000 to $90,000 per acre. Its current total project cost of $3,360,000 computes to a project cost per bed of exactly $28,000. Unicare's parent, United Health, Inc., is the entity that must fund this project and has, by resolution, committed to such funding "provided that said expenditure shall not exceed $28,000 per bed." Consequently, it is highly likely that the proposed design, which has never been built anywhere, which must be redone to comply with HRS codes, and which will be built on land that is yet to be acquired but which will likely require a zoning variance, will cost more than $28,000 per bed. The HCR nursing home is larger and provides more area for patient care than the facilities proposed by Wuesthoff and Unicare. The HCR facility will provide more gross square feet per bed and a larger nursing unit area (which includes patient rooms, the nursing support unit and corridor areas). The entire facility proposed by HCR will be 40,000 square feet, 2,000 of which is allocated to day-care; the day-care area will be available to nursing home residents during those hours in which the day-care area is not in use by day- care residents. The Wuesthoff facility is said to be 37,500 square feet, but 1,000 square feet consists of an outside corridor; thus, the net usable space at the Wuesthoff nursing home is only 36,5' 00 square feet. The smallest proposed facility is the Unicare facility, said to be 34,121.5 square feet, but actually less than 34,000 feet when accurately measured. The nursing homes proposed by Wuesthoff and Unicare are at or below the low gross square foot average determined by HRS. Larger patient care areas are desirable. It is not desirable to place only one toilet room between two patient rooms to accommodate four patients, as proposed by Unicare. It is a generally accepted standard for nursing home skilled nursing units to be organized in groups of 60 beds. Units of this size offer the best efficiencies of operation in terms of economics and quality of care. Each nursing unit must include, in addition to patient bedrooms, toilet rooms and bathing facilities, one nurses' station, a clean utility room, a soiled utility room, a medication preparation room, a nourishment room, a janitors closet, an equipment storage room, a stretcher and wheel chair alcove, a clean linen closet and a nurses' toilet and lavatory. By providing three nursing units, Wuesthoff must devote more space to meet these requirements than would be required for two nursing units.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order: Granting HCR's application for a certificate of need; Denying Unicare's application for a certificate of need; Denying Wuesthoff's application for a certificate of need; and Dismissing the Petition to Intervene of Brevard Medical Investors, Inc. DONE and RECOMMENDED this 30th day of July, 1987, in Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2686, 86-2687, 86-2688 and 86-2690 Unicare's proposed findings of fact numbered 14, 22, and 25 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Unicare's proposed findings of fact have been rejected as follows: 1, 3, 8, 10, 11, and 13 as being contrary to the evidence in this cause; 2, 4-7, 12, 15-17, 19-21, 23, 24, and 26 as not being supported by the weight of the evidence in this cause; 9 and 18 as being subordinate to the issues in this cause; and 27 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. Wuesthoff's proposed findings of fact numbered 2-6, 36, 39, and 40 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Wuesthoff's proposed findings of fact have been rejected as follows: 31 as being contrary to the evidence in this cause; 1, 7-18, 22-30, 32, 34, and 41 as not being supported by the weight of the evidence in this cause; 19-21, 33, 35, 37 and 38 as being subordinate to the issues in this cause; and 42 - 43 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. HCR's and HRS' proposed findings of fact numbered 1-66, 68, 70-81, 83, 85- 92, 94, 96-104, and 106-123 have been adopted either verbatim or in substance in this Recommended Order. The remainder of HCR's and HRS' proposed findings of fact have been rejected as follows: 67 as being subordinate to the issues in this cause; 69 as being cumulative; 82 and 95 as being irrelevant; 84 as being unnecessary; 93 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law; and 105 as being not supported by the weight of the evidence in this cause. COPIES FURNISHED: Harold F. X. Purnell, Esquire Kenneth Hoffman, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Richard Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Frank J. Santry, Esquire Post Office Box 14129 Tallahassee, Florida 3231 Jonathan S. Grout, Esquire Karen L. Goldsmith, Esquire Dempsey & Goldsmith, P.A. Post Office Box 1980 Orlando, Florida 32802 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
Findings Of Fact 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 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 Petitioner, Health Care and Retirement Corporation of America, d/b/a Heartland of Broward, filed an application with respondent, Department of Health and Rehabilitative Services (HRS), for a certificate of need to construct a 120- bed nursing home in Broward County, Florida. After reviewing the application, respondent issued its proposed agency action in the form of a letter dated January 28, 1983 denying the application on the ground no need for 120 additional nursing home beds was demonstrated under the existing bed need methodology set forth in Rule 10-5.11(21), Florida Administrative Code. The parties now agree, and have so stipulated, that a numerical need for 101 nursing home beds exists in Broward County at the present time. They have also agreed that petitioner meets all statutory and rule criteria for the issuance of a certificate of need for those 101 beds. There are four other pending applications, including a second one by petitioner herein, for nursing home beds in Broward County. These applications were evaluated and denied by HRS in an earlier batching cycle than that of applicant. However, their final hearing was not conducted until after the hearing in this cause. Despite a contention by HRS counsel that under HRS policy or practice an earlier applicant has first priority over a later applicant to any available beds, there was no evidence to support that policy.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that petitioner's application for a Certificate of Need be granted in part and that it be authorized to construct a 101-bed nursing home facility in Broward County, Florida. DONE and ENTERED this 16th day of February, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of February, 1984.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws. In this case, AHCA projected a need for an additional 295 community nursing home beds in District 3 for the July 1996 planning horizon, and reviewed the applications submitted in response to the published need. A numeric need for 186 beds remains. CON applications are evaluated according to applicable statutory and rule criteria and, as required by Section 408.035(1)(a), Florida Statutes, the preferences and factors in the state and local health plans. The applicable state plan is Toward A Healthier Future - The 1993 State Health Plan. The applicable local health plan is the District Three Health Plan for 1992, with 1993 Allocation Factors, prepared by the North Central Florida Health Planning Council in Gainesville. AHCA has not promulgated a rule subdividing District 3. However, the local planning council has divided the sixteen counties into nursing home planning areas, as follows: Columbia, Hamilton, Suwannee, Bradford, Union and Lafayette Counties; Alachua, Dixie, Gilchrist, and Levy Counties; Putnam County; Marion County; Citrus County; Hernando County; Lake and Sumter Counties. In this case, one applicant, Dixie Health Care Center, L.P., ("Dixie") proposes to locate in Dixie County in planning area 2 or (b). Hilliard HealthCare, Inc., ("Hilliard"), Unicare Health Facilities, Inc., ("Unicare"), Life Care Centers of America, Inc., ("Life Care") and Beverly Enterprises- Florida, Inc., ("Beverly") propose to construct nursing homes in planning area 7 or (g). Within planning area 7, Hilliard would build a nursing home in Sumter County, while Unicare, Life Care, and Beverly would build in Lake County. The total population in planning area 2 is approximately 230,000, and in planning area 7, approximately 180,000. More relevant to a determination of need for a nursing home, the population age 65 and over in planning area 2 is approximately 25,000, as compared to 49,000 in planning area 7. Within planning area 2, the projected Dixie County population over 65 in the year 2000 is 2,211, while the Sumter County projection is 9,824 residents. The actual 1994 population age 75 and over was 644 in Dixie, and 3,296 in Sumter County, and over 20,000 in Lake County. Currently, there are 1,238 licensed and approved beds in planning area 2, and 1,391 in planning area 7. For planning area 2, which includes Dixie County, there are 22 people age 65 and over for each nursing home bed. In planning area 7, the ratio is 41.1 to one. If 120 beds are added in Lake County, the comparable county ratio will decrease from 41.4 to 37.6 persons 65 and over to a bed. The addition of 60 beds in Sumter County will result in a decline in the county from 39.5 to ratio of 30.7 to 1. The district-wide ratio for District 3 is 34.5 persons 65 and over for every nursing home bed. The local planning council has compared the relative need for nursing home beds by planning area, according to a Planning Area Nursing Home Bed Allocation Matrix ("PANHAM"). Using a comparison of the percent of population age 75 and over to the percent of district beds in each planning area, the local health council describes planning area 7 as high need/moderate occupancy. It is ranked the planning area of greatest need for this CON application cycle. Planning area 2 is described as an area of low need/high occupancy. It also ranked as an area of priority in this cycle, although lower than planning area 7. The local health council has adopted three factors for use in making more specific determinations of locations which will best meet unmet needs within a planning area. Ranked in order of priority, the factors are: the absence of nursing homes in the same county, a location more than 20 miles or 25 minutes drive from any other nursing home, and an area in which nursing homes within a 20 mile radius exceeded 90 percent occupancy for the most recent twelve months or 95 percent for the most recent six months. There is no evidence that construction of new nursing home beds is not needed or that the need is based on any inefficiency or quality of care problems in existing nursing homes. Consideration of the availability, utilization, and adequacy of other nursing homes and alternative health care providers in the district is also mandated by statute. See, e.g. Subsections 408.035(1)(b), (1)(d), (2)(a), (2)(b), (2)(c), and (2)(d), Florida Statutes. In this group of applicants, only Dixie is favored by the first local health council factor for proposing to locate in a county in which there are no existing or approved nursing homes. Dixie does not meet the preference for a location more than 20 miles or a 25 minute drive from the closest nursing home. Dixie's expert witness who believed the drive took more than 25 minutes lacked direct knowledge of the road conditions. By contrast, the deposition testimony of the administrator of Tri-County Nursing Home established that the drive from Tri-County to Cross City takes about 15 minutes, most of it on a four lane highway, U.S. 27. Tri-County in Wilcox near Fanning Springs, and Medic-Ayers in Trenton are both within 20 miles or 25 minutes drive of the proposed Dixie site. Their occupancy rates for the first six months of 1993 were 94.41 percent and 95.85 percent, respectively, or an average of 95.13 percent. Therefore, Dixie is extremely close to meeting the local allocation factor related to existing nursing home occupancies in excess of 95 percent for the January-June 1993. By contrast, there are 12 existing and approved nursing homes in Lake County, and one in Sumter County. Occupancy rates in Lake County averaged 91.7 percent, but the facility in Sumter County reported 99.13 percent occupancy in the 1992-1993 reporting period. Applicants in Lake and Sumter Counties are not favored for proposing locations in counties without nursing homes, or for locations more than 20 miles or 25 minutes drive from existing nursing homes. Lake County applicants also do not meet the preference for an area defined by a 20-mile radius in which average occupancy rates exceeded 95 percent for the most recent six months or 90 percent for the most recent 12 months. The Sumter County applicant, Hilliard, does meet the occupancy requirement for a location in which nursing homes within a 20 mile radius exceeded 90 percent occupancy for the most recent twelve months. Because the state rule methodology results in a positive need calculation, the local health council factor related to special circumstances in the absence of numeric need is inapplicable to this case. Dixie Health Care Center, L.P., Cross City, Dixie County Dixie is seeking AHCA's issuance of CON 7492 to construct a 60-bed nursing home in Cross City, Dixie County, which is in planning area 2. If issued a CON, Dixie offers to be bound by the following conditions: to construct the nursing home on a specific site in Cross City; to provide 80 percent of its total resident days to Medicaid-reimbursed residents by the second year, with all beds certified for Medicaid and 9 beds certified for Medicare reimbursement; to provide rehabilitative, respite, and adult day care, with transportation for some day care participants; and not to deny HIV+ admissions. At the time that Dixie filed the letter of intent for the 60-bed project in Dixie County, it also submitted three others for contiguous areas of District 3. Thus, four legal notices, for projects in Alachua, Gilchrist, Levy and Dixie Counties were submitted by fax and then by mail to the Gainesville Sun newspaper for publication. All four legal notices, when published, referred to Levy County, as the proposed location of the nursing home. The proof of publication sent by the newspaper to the applicant and included in the CON application states that the notice published was for Dixie County, although the notice itself states that the project will be in Levy County. Dixie's health care planning expert requested the publication of a corrected notice, but there is no evidence that one ever appeared in the newspaper. AHCA accepts CON applications, despite publication errors, if the error is made by a newspaper, not by the applicant. Dixie is a partnership formed to file the application for CON 7492. The project will be funded by Smith/Packett Med-Com, Inc. Smith/Packett is owned by James R. Smith, who with Herbert H. Frazier, is a general partner in Dixie Health Care Center, Limited Partnership. Herbert Frazier is an employee of a Florida licensed general contractor, MB Conn Construction, and president of its Frazier Division which oversees the construction of nursing homes. Separately, the two general partners in Dixie own over 20 nursing homes, and jointly own one in Virginia and one in North Carolina. The partners owned, but, in February 1994, sold a Lake City nursing home. The estimated total project cost is approximately $3,000,000, of which the general partners will provide $250,000 in cash for project development costs and initial cash flow requirements, as noted in the application in the schedule 3 assumptions. Dixie included in its application a letter of interest in financing the project from Colonial Bank, Alabama. Dixie has a contract to purchase a two acre site for the project for $33,000. As previously noted, Dixie meets the highest priority local allocation factor for proposing to locate in a county which has no nursing homes, and is close to the factor for over 95 percent average occupancy rates in the nearest nursing homes. Dixie is also favored by the local plan for proposing to construct at least 60 beds, for improving access within the planning area, and for proposing respite care, adult day care, and rehabilitative therapies. Dixie meets state health plan preferences for proposing the following: to locate in a subdistrict with over 90 percent occupancy (93.42 percent for plan- ning area 2); to serve 80 percent Medicaid, which is in excess of the subdistrict average of 79.37 percent in the first six months of 1993, for specialized services to AIDS, Alzheimers' and mentally ill patients, to provide a continuum of services including long term, respite, and adult day care; to construct a well-designed facility to maximize resident comfort and quality or care, which is a reasonable size and meets all licensure requirements; to provide rehabilitative and restorative therapies, to establish a Medicaid reimbursement rate of $91.75 in year one and $94.65 in year two, as compared to the projected subdistrict high of $92.83 in 1995 and $96.54 in 1996 (using an annual 4 percent inflation rate from the January 1994 rate); * * * to offer multi-disciplinary services to residents, with the various therapist, social workers, and counselors; to document protection for residents rights and privacy, and to establish resident's councils, quality assurance and discharge planning programs, as SunQuest and all other nursing homes operating in Florida must do by state laws; to operate with lower administrative costs and higher patient care costs than the average in the district ($21.61 and $51.33 respectively in year two (1996), in contrast to $22.02 and $41.62 in 1992 for the respective average district per diem costs); Questions were raised about Dixie's compliance with state factors (8) for providing superior resident care in existing facilities, and (9) for staffing ratios which exceed minimum state requirements and are appropriate for proposed special services. The proposal is substantially based on the assumption that the applicant will contract with SunQuest for management services. Although the application refers to a management contract with SunQuest, no contract has been executed, which is not unusual prior to the issuance of a CON. At the final hearing, however, Dixie contended that SunQuest is only one of the candidates for a management contract, while conceding that the management policies and procedures in its application are those of SunQuest. In fact, the Dixie application states in response to state allocation factor (9) that SunQuest will be the management company. SunQuest manages 10 and leases an additional 10 long term care facilities in the United States, two in Florida. One of the Florida nursing homes, Bayshore Convalescent Center in North Miami Beach, has a superior license. SunQuest also manages the Lake City Extended Care Center, which was built by the company which employs Mr. Frazier, began accepting residents in December 1993, and was sold by the Dixie general partners in approximately February 1994. The original holder of the Lake City CON became unable to develop the proposal and contacted Mr. Smith and Mr. Frazier just prior to the expiration of the CON. They acquired the CON, financed, designed, and constructed the nursing home. Lake City currently operates with a conditional license, as a result of medical record-keeping deficiencies. The testimony, by Dixie's corporate representative, that SunQuest is merely one management company candidate along with Senior Care Properties, is inconsistent with the totality of the proposal, which renders significantly less reliable the program descriptions in the original application. Dixie's intent to provide van transportation for adult day care participants was also questioned, due to the absence of any provision for the service in the financial schedules to the application. The financial feasibility of Dixie's proposal is also a matter at issue. Although Dixie has a contract to purchase a two acre site, the architect who designed the facility testified he had constructed a 120-bed two-story nursing home on less than two acres, but that two and a half to three acres are generally needed to construct a 60-bed facility. Dixie projected a net loss of $201,813 in the first year of operation and a net profit of $55,123 by the end of the second year. The general partners have committed to provide $250,000 to cover the first year negative cash flow. However, the average annual salaries projected when multiplied by number of full time equivalent ("F.T.E.") positions listed on schedule 6 of its application exceeds salaries listed in the projected income and expenses on schedule 11 by approximately $219,866 in year one and $51,694 in year two. Including the underestimate of related benefits, the loss expected in the second year is $8,759. Dixie maintains that the staffing on schedule 6 cannot be compared to the pro forma, because the staffing and related expenses in the pro forma will increase over the first year as the census increases, while the staffing schedule is a snapshot at the end of the first year. The same is not true for the second year, since the facility is projected to be full after 8 months. Dixie's expert on finance described the second year discrepancy between a $50,000 profit and an $8,700 loss as insignificant in determining the financial viability of a $2 million project which, taking into consideration depreciation, amortization, and noncash related items, still results in a positive cash flow. Dixie's financial feasibility also depends on its reaching 96 percent occupancy by the fourth quarter of the first year. One witness for Dixie has achieved 93 percent occupancy in similar facilities in a county he deemed comparable, but has operated his facilities since 1989. Dixie also has to contend with competition for residents and staff from a relatively new facility within 20 miles and a 25 minute drive, Tri-County Nursing Home. Tri-County Nursing Home in Gilchrist County opened in May 1992, close to the Gilchrist- Dixie line, serving residents of Levy, Gilchrist and Dixie Counties. Approximately 30 of its 60 beds are occupied by Dixie County residents, all of whom rely on Medicaid reimbursement. Tri-County is also establishing a 25 person adult day care, having completed the required state inspection and awaiting the issuance of its license. After 8 months of operation, 51 of the 60 beds were filled. In June of 1993, Tri-County was full, with 98 percent occupancy. Approximately 40 percent of Tri-County's staff resides in Dixie County. There was testimony that 41 registered nurses reside in Dixie County, but with no information concerning their distribution within the county, current employment, or ages, their availability to work at a new nursing home could not be evaluated. In Gilchrist County, the ratio of persons 65 and over to nursing home beds is 8.7 to 1, in contrast to 31.46 for Levy County, and 34.5 for the district. The data supports the conclusion that Tri-County relies on service to Dixie County residents, clearly has an insufficient population base within Gilchrist County to fill its beds, and even when combined with Levy County is below the district ratio of 34.5 persons over 65 per nursing home bed. AHCA's expert in health planning and nursing home financial feasibility testified that Tri-County has had financial difficulties. On balance, Dixie has failed to demonstrate that it has estimated reasonable land requirements and costs, and that it can meet the required occupancy and staffing levels to survive financially, without adversely affecting Tri-County. Hilliard Healthcare, Inc., Bushnell, Sumter County Hilliard is the applicant for CON 7485 to construct a 60-bed nursing home in Bushnell, Sumter County, which is in planning area 7. Hilliard's CON, if issued, will commit to construction of Osprey Point Nursing Center on a specific five acre site on State Road 475, and to the establishment of a 10-bed Medicare unit, and a 20-bed secure Alzheimers' unit, with all beds Medicare and Medicaid certified. Hilliard commits to providing 64 percent of total resident days for Medicaid. The total estimated project cost is $2,650,000, funded by $650,000 cash from stockholders and $2,000,000 in loans from Bankers First. Hilliard, formed in 1987, currently owns a superior licensed 120-bed facility in Nassau County, having completed a 60-bed expansion in September 1994. The Nassau County nursing home is managed by Health Care Managers ("HCM"), which is owned by Steven Sell, Hilliard's president and founder. Mr. Sell, in partnership with three others, first acquired a 55-bed facility in Jacksonville in 1984, expanded it to 120 beds in 1988, and sold it in 1994 for a profit of approximately $2.5 million. In 1991, Hilliard's president also received a CON to construct a 60-bed nursing home in Clay County, which was sold without a profit, but at a break-even point, while it was under construction. HCM is the intended manager of the Bushnell facility, if the CON is approved. Hilliard submitted a notice of its intent to file a CON application to the Sumter County Times newspaper for publication. The notice, published in November of 1993, stated erroneously that the application would be filed on December 1, 1992, rather than December 1, 1993. Hilliard's president testified that he knows for a fact that he submitted the notice with the correct date, but no document in evidence establishes what Hilliard submitted to the Sumter County Times. Hilliard's proposal does not meet the local health council factors for a location in a county without nursing homes, nor is Bushnell more than a 20 mile radius or 25 minute drive from existing nursing homes. It does merit consideration under the factor which relates to the occupancy of nursing homes within a 20 mile radius, all of which exceeded 90 percent from July 1992 - June 1993, ranging from 90.89 to 99.13 percent. The highest rate was at WeCare, the only other nursing home in Sumter County, which is located in Wildwood, in the northern area of Sumter County. WeCare has two fifteen-bed Alzheimers' units, and unchallenged CON approval to add 30 beds. The approval of the 30 additional beds at WeCare raises the bed to population ratio of Sumter County from 20.2 to 23.5 per 1000, in contrast to the current Lake County ratios of 22.4. With the approval of 60 beds at Hilliard and another 120 beds in Lake County, the ratios are increased to 30.2 in Sumter and 24.7 in Lake County. After approval of WeCare's addition, the need in Sumter County has been decreased. Hilliard, by its proposal to serve central and southern sections of Sumter County, would improve access within the planning area. The occupancy rate for Medicare patients at WeCare was 1.1 percent. Hilliard contends that the relatively low percentage of Medicare services indicates a need for short-term, post-hospitalization rehabilitation services, as proposed in its 10-bed Medicare unit. Hilliard demonstrated that average lengths of hospital stays for Sumter County residents for certain procedures exceed national Medicare reimbursement averages, but there was no comparison to average lengths of stay within the district or the state. Other local health council allocation factors which apply to and favor Hilliard's proposal are those for: establishing a facility of at least 60 beds, improving access within a planning area with over 80 percent occupancy, and serving Alzheimers' and dementia patients. Hilliard's proposal meets state preferences for: locating in a subdistrict exceeding 90 percent occupancy (95.42 percent for planning area 7); * * * providing specialized services to Alzheimers' residents; offering respite care (although limited to hospice services); designing a comfortable facility, with short corridor segments, relatively large therapy areas, and a separate enclosed courtyard for the Alzheimers' unit; proposing occupational, speech and physical therapies, particularly to enhance the functioning of Alzheimers' residents; setting Medicaid rates of $101.90 for 1996 and $104.13 for 1998, in contrast to the highest rates projected for the same time, $107.89 and $113.28, respectively (using 5 percent inflation); providing superior resident care at its existing Nassau County Nursing home; proposing staffing ratios in excess of minimum state requirements, with reasonable salaries; including multi-disciplinary staff, including occupational, speech, and physical therapists, as well as nurses and an activities director; protecting residents' rights and privacy, and developing quality assurance and discharge planning programs; and proposing lower administrative costs ($26.35) with higher patient care costs ($64.30) than the district average of $26.63 and $54.67, respectively (1977 projection with 5 percent inflation). Hilliard does not meet state preference 2 for service to Medicaid proportionate to the subdistrict average, which is 69.95 percent, in contrast to Hilliard's proposed commitment of 64 percent. Under the preference, Hilliard's proposal to emphasize Medicare reimbursed therapies does not relieve it of the obligation to serve a proportionate share of Medicaid. Hilliard's proposal does not meet the specific exceptions allowed in preference 2 for applicants proposing to serve particular ethnic or cultural groups, and those developing multi-level care systems. Hilliard has a commitment letter from Banker's First to provide a $2 million loan for a fee of 1 1/2 to 2 percent of the principal loan amount, or $30,000 to $40,000. In schedule 1 of the application Hilliard's estimate of closing costs in $10,000, with $4,120 in legal fees. Dixie's expert claimed that the closing cost was inconsistent with the Banker's First letter and unreasonably low. By contrast for a $3 million loan, Dixie estimated $10,000 for loan closing costs, $30,000 for legal fees, $10,000 for recording fees and taxes, and $60,000 in loan origination fees. Dixie's expert apparently overlooked an additional $20,000 in origination fees, which was included on Hilliard's schedule 1. Hilliard projects a loss of $177,000 in year one, and income from nursing home operations of $114,690 in year two. In the first year, a loan of $271,660 is expected to cover the losses in year one. In the second year, a pay off of $154,940 on the loan is expected. The financial ability of Hilliard's shareholders to provide the initial $650,000 equity contribution and $271,660 to cover first year losses was questioned. Hilliard's president noted that the shareholders previously raised in excess of $600,000 to develop the Nassau County facility and have received $2.5 million in profits from the sale of the Jacksonville nursing home. Personal financial statements of three of the six stockholders were included in Hilliard's application. The personal financial statements were incomplete, omitting referenced attachments. The statements were also inaccurate or inconsistent, with missing liabilities, discrepancies regarding property values, and including the total value of some property which was not owned by the shareholders individually. Nevertheless, the statements do, according to Dixie's expert, show that the shareholders could provide over $900,000 in capital needed for Hilliard to be financially feasible, although that would take virtually all of the liquid assets, unless they assumed some additional individual debts. On balance, Hilliard has shown that Sumter County is more likely than not in need of additional Medicare-reimbursed subacute services, and that its proposal is financially feasible based on the shareholders' history of being able to raise capital for similar development projects. Lake County Applicants Three applicants in this batch seek to construct new 115 or 120-bed nursing homes in Lake County. Given the remaining numeric need for 186 beds, only one of the applicants can be approved. See, Beverly Enterprises-Florida, Inc., et al. v. AHCA, et al., DOAH Case No. 92-6656 (F.O. 10/17/94). In addition, the District 3 Allocation Factors Report Preferences includes the following guideline: To the extent possible, all planning areas ranked in one of the four categories of priority established in subparagraph d above should be approved to add some new beds. Unicare Health Facilities, Inc., Lady Lake, Lake County Unicare Health Facilities, Inc. ("Unicare") is an applicant for a CON to construct a 120-bed nursing home or to receive a partial award to construct a 115-bed community nursing home in the town of Lady Lake, in northwest Lake County. Unicare proposes to have its CON conditioned on the establishment of a 20-bed Alzheimers' and related dementia unit, an adult day care to accommodate an additional 20 Alzheimers' sufferers for half day care, and on providing 73 percent of total resident days to Medicaid residents. Unicare also plans to include a 10-bed subacute unit, and to offer rehabilitative therapies, respite and hospice care. The total size of the building is 58,700 square feet. Unicare is a subsidiary of United Health, Inc., which is committed to finance the project by providing an equity contribution of 60 percent and drawing on its available line of credit for the remaining 40 percent of the total projected cost of $5,754,983. Unicare owns and operates 45 nursing homes in 7 states, has been in business for 28 years and in Florida since 1982, and currently owns and operates 13 Florida nursing homes. Life Care Centers of America Life Care Centers of America, Inc. ("Life Care") proposes to establish a 120-bed community nursing home of 53,175 square feet, in west central Lake County, in the areas of Lady Lake, Tavares, or Leesburg, for a total project cost of $5,906,000. Life Care's CON, if issued, will include its commitment to provide 73 percent of total resident days to Medicaid residents, to establish a 20-bed Alzheimers/dementia unit, to offer adult day care services, and to include a 20-bed sub-acute unit. Life Care is a privately held company operating 150 nursing homes in 27 states. Life Care owns two and operates three other nursing homes in Florida. Life Care proposes to fund the Lake County nursing home from $206,000 cash-on-hand and $5,700,000 in financing from a non-related company. With its application, Life Care submitted letters of interest from potential lenders with interest rates ranging from 9 to 12 percent, and a 25 year amortization schedule. In reviewing other Life Care applications, AHCA has considered and rejected as incomplete a list of capital projects identical to that included in this Lake County application. Specifically, Life Care listed projects by county name, although the total amount of capital obligations, according to AHCA, was significantly underestimated. Life Care submitted, at hearing, its exhibit 6, a stipulation to certain facts and, through the testimony of its Vice President for Development, established that the facts related to the schedule 2 issues in this case are identical to those considered in Life Care Centers of America, Inc. v. Agency For Health Care Administration, DOAH Case No. 94-2409 (F.O. 10/24/94), which is pending on appeal in the district court. Beverly Enterprises Beverly Enterprises-Florida, Inc. ("Beverly") is a wholly owned subsidiary of Beverly Corporation-California, a subsidiary of Beverly Enterprises, Inc. Beverly proposes to construct a 120-bed community nursing home in Lady Lake or Leesburg, in Lake County, with a commitment to provide 73 percent of total annual resident days for Medicaid, to establish a 20-bed Medicare-certified subacute unit with 4 beds for ventilator-dependent patients, an 18-bed Alzheimers' wing, an adult day care for 8 clients, respite care, and to accept and care for residents who are HIV positive, or have mental health disorders. Beverly also will commit to donate $10,000 for gerontological research. Beverly Enterprises companies operate 720 nursing homes, 70 in Florida. Of the 70, 41 are operated by the applicant. Beverly's proposal to establish Lake Beverly Terrace has a total project cost of $5,421,372, for 48,969 square feet. Existing Nursing Home and Alternatives - Sections 408.035(1)(b), and (2), Florida Statutes. As of January 1994, there were 460 nursing home beds in Leesburg, 142 in Clermont, 236 in Mount Dora and 377 in Eustis. All of the facilities, exceeded the average Lake County occupancy of approximately 92 percent in 1992- 1993, except two, Waterman Hospital Extended Care Center in Eustis and Edgewater in Mount Dora. All of the parties agreed that additional subacute and Alzheimers' beds, and adult day care spaces are needed in Lake County. Local and State Health Plans - Sections 408.035(1)(a), Florida Statutes. Unicare, Life Care, and Beverly propose to locate in Lake County, within planning area 7 for Lake/Sumter Counties. The planning area has a higher priority need ranking than planning area 2, as determined by the local health plan council. Local allocation factors 1 - 5 apply equally, or are inapplicable to the three proposals. There are existing nursing homes in the county, which are within 20 miles or 25 minutes all of the proposed locations, and which exceeded 90 percent occupancy. Unicare distinguishes its proposal based on its intention to locate in the town of Lady Lake, rather than further contributing to the concentration of nursing homes in Leesburg. Lady Lake was, in 1990, the third largest municipality in Lake County, and projected to be the largest in 2000. The 1990- 2000 projected growth rate is over 100 percent, in contrast to 13 percent for Leesburg, 50 percent for Tavares, and 37 percent for the entire county. Lady Lake was also mentioned in the Life Care and Beverly applications as a possible location for their facility, along with other towns in Lake County. Beverly's Vice President has investigated the cost of sites only in Leesburg, Fruitland Park, and Eustis, but concedes that Leesburg is a desirable location due to its proximity to the hospital. Without a CON condition, which AHCA could impose, all three applicants could locate anywhere within Lake County. Although Lady Lake is only 8 miles from Leesburg, Unicare's proposal, all other factors being equal, would be favored as more consistent with local allocation factor 6, which discourages the concentration of nursing homes in one community within a multi- county planning area. The final local allocation factor, 7 (as related to Alzheimers' and adult day care), as well as state health plan factors 3 (as related to Alzheimers') and 4 (as related to adult day care), and subsection 408.035(1)(o), Florida Statutes, favor applicants proposing specialized care or therapies to meet the needs of community and nursing home residents suffering from Alzheimers' and related forms of dementia. Unicare's 20-bed Alzheimers' unit and programs, and half day adult day care for 20 additional Alzheimers' sufferers are consistent with the specialized services that are needed. Life Care also proposes, as conditions for its CON, that it will establish a 20-bed Alzheimers/dementia unit and an adult day care center to accommodate 10 participants a day, between 7:00 a.m. and 6:00 p.m. Beverly proposes to provide services in an 18-bed Alzheimers' wing, and an 8-person adult day care program. State health plan allocation factors met by all of the Lake County applicants include the following: locating in a subdistrict exceeding 90 percent occupancy (approximately 92 percent for planning area 7 for January-June 1993); see, also Subsection 408.035(1)(b), (d), and (2) (a) - (d); proposing to serve 73 percent Medicaid- reimbursed residents in comparison to the subdistrict average of 72.65 percent in the first six month of 1993; and * * * (11) documenting measures and procedures to protect resident's rights and privacy, and the use of resident councils, quality assurance and discharge planning programs. The Lake County applicants' proposals differ more when compared in accordance with state health plan factors and related statutory criteria, for: services to AIDS residents and the mentally ill; respite care, adult day care, and other services in a continuum of care (Sections 408.035(1)(o), F.S.); facilities with designs which maximize residents' comfort and the quality of care, and the costs and methods of construction (Sections 408.035(l)(m), F.S.); innovative therapeutic programs to enhance mental and physical functioning; charges which do not exceed the highest Medicaid per diem rate in the subdistrict (Sections 408.035(2)(e), F.S.); a record of providing superior care in existing nursing homes (Sections 408.035)(1)(c), F.S.); staffing in excess of minimum requirements, with the highest ratio of registered and licensed practical nurses to residents (Sections 408.035)(1)(h), F.S. - availability of staff and personnel); use of professionals from a variety of disciplines; and * * * (12) administrative cost which are lower patient care costs which are higher than the district average. State health plan preference 3 is given to applicants for care to AIDS residents and the mentally ill, and state health plan 4, in part, applies to respite care. Beverly points to its increase in service to HIV positive patients from 39 patients for 124 patient days in 1993 to 3500 patient days in 1994. Unicare also has served AIDS residents. All of the Lake County applicants plan to offer respite care. Beverly offers a wider array of specialized services. By providing a range of levels of care to inpatients and outpatients, including adult day care and respite care, the applicants also, in part, meet the criterion of subsection 408.035(1)(o), Florida Statutes. Nursing homes with more features to enhance resident comfort and quality of care are given state health plan preference 5. Unicare's 58,720 square foot plan, includes semi-private patient rooms designed for the placement of the heads of residents' beds on opposite walls, each side with a window, rather than the alignment of beds next to each other, typical of semi-private hospital rooms. The plan includes indoor wandering space for Alzheimers' residents in a loop around an activity and recreation area, separated by a 3 to 4 foot wall. The Alzheimers' unit has a separate dining room with access to a secured courtyard, which, in turn, connects with the day care center. AHCA's architectural report notes that the construction cost of $60 per gross square foot is below the median cost projection, because Unicare will use a design/build contract. The design/build contract provides for one contractor to provide all of the services, including architectural and design, engineering and construction management, which saves time and money. Unicare's contractor, KM Development Corporation, has been in business since 1977, and has renovated and enlarged Unicare's facilities in Florida without cost overruns, and has done residential construction in the state. Unicare's design, based on the AHCA architectural review and the contractor's testimony, meets requirements for licensure and safety, and is a one-hour fire safety protected structure with a stucco finish, and brick and wood trim. Although skeptical and concerned that the design/build contract can be manipulated to cut corners to stay within budget, AHCA's expert in architecture testified that it is possible for Unicare to build the facility at the projected cost, but he would expect a cost over- run. Life Care's 53,175 square foot building will cost $75 a square foot. AHCA's architects described it as wings organized around a central courtyard, providing good visual control of short corridors. Life Care's design also includes a gift shop, library, and ice cream parlor. A separate wing for Alzheimers residents is adjacent to the adult day care center, with a separate dining room and courtyard. The institutional effect of corridors is decreased by using recessed entrances and doors to residents' rooms. There were no concerns expressed by architectural experts with the appropriateness of the design for the functions in each wing, the adequacy of the project cost, or the safety of the structure. Beverly's construction cost per gross square feet, listed as $63 on line I in response to question 4A was challenged as too low by Life Care's experts. Beverly's construction cost plus a 10 percent contingency or $70 a square foot for 48,969 square feet is considered reasonable by AHCA, although that eliminates the availability of the contingency for unknown conditions on an unselected site. Beverly's design is organized generally around a core area of courtyards with therapy space in the center. Beverly's Alzheimers' unit has a separate courtyard which allows wandering residents to exit a door near one end of the corridor and return by a door near the opposite end. AHCA's architectural review concludes that Beverly's design meets licensure and safety requirements. In general, Unicare's design better meets the preference for enhancing resident comfort and quality of care with rooms over 30 percent larger than required, four outside landscaped areas, physical therapy rooms, and three staff lounges, and an in-service training area, but its cost may be underestimated. Life Care's design is second in terms of accommodating program needs with space arrangements. Adult day care clients with Alzheimers, for example, are located adjacent to the area for Alzheimers residents' programs and activities. Life Care's projected construction costs are also the highest. Innovative therapeutic programs effective in enhancing physical and mental functions are favored in state health plan preference 6. Unicare will provide physical, occupational, and speech therapy and has developed special programs to serve Alzheimers's and related dementia residents and day care clients. Life Care and Beverly will offer IV therapy, wound care, and ventilator and respiratory therapy in addition to other therapies offered by Unicare. Beverly's therapy programs are more innovative and intense, based on the staffing and level of detail provided in describing the proposed services. Preference 7 is given for proposed charges not exceeding the highest Medicaid per diem in the subdistrict. Unicare proposes a Medicaid per diem rate for $86.57 for 120 beds in the second year while at least one provider in the subdistrict for 1997 will be charging $95.27. Unicare computed projected future rates by using 9.1 percent inflation of the Medicaid rate at one facility, which is not necessarily the highest existing provider, which results in a $98.44 rate. Unicare criticized Beverly's use of a 5 percent inflation rate of the highest current provider resulting in a projected rate of $99.47. The highest Medicaid rate in the district, inflated forward to 1997, was $99.31 at the time the application was submitted, so that Beverly's proposed charge of $99.00 is lower, as is Life Care's projected $97.11 and Unicare's $86.57. Preference 8 and subsection 408.035(1)(c) require a comparison of the applicants' records in terms of the quality of care provided in their existing nursing homes, as indicated partly by licensure ratings over the last 36 months. During that time, Unicare's 13 nursing homes have had 468 months of operation at approximately 63 percent superior, 29 percent standard, and 9 percent conditional. Beverly has had a total of 976 months of operations, 67 percent superior, 25 percent standard, and 7 percent conditional. Beverly has also paid a fine to the State of Oregon to settle claims related to patient care problems. The two Florida nursing homes owned by Life Care are rated standard, one in Citrus County opened in November, 1994 and is not yet eligible for a superior license. The other, in Altamonte Springs has been in operation for over 36 months, 29 of those with a superior licensure rating. The three applicants generally have operated and have the capacity to continue to operate superior facilities. Preference 9, on proposed staffing ratios and preference 10 related to the use of varied professional staff are also indications of the quality of care. AHCA requires one registered nurse on the day shift and none on the night shift in a 120-bed nursing home. All of the applicants exceed the minimum. The number of nursing hours per patient day will be 3.2 at Unicare, 3.35 at Life Care, and 3.85 at Beverly. One of four registered nurses on the day shift at Beverly will always be in the subacute unit. However, the ratio outside the unit, for the remaining 100 residents, still exceeds the minimum and meets the preference requirements. All three companies have existing Florida facilities available to provide training and, if needed, transfers of experienced staff to a new nursing home. They currently use and are proposing to continue to use professional staff from a variety of disciplines to meet residents' and clients' needs. Average administrative costs in the district, inflated forward, will be $24.58 and average patient care costs will be $49.49. The applicants report their comparable projections on Schedule 11. Unicare's projected costs are $27.80 and $50.59, respectively. Life Care's costs are $24.84 and $65.94, respectively. Beverly's are $24.44 and $62.30, respectively. With erroneously omitted laundry costs added to administrative costs, Beverly's administrative costs increase to $26.52. All three applicants propose higher administrative costs than the district average, but Life Care's are the lowest. All three have higher than average patient care costs, with Life Care favored as the highest. The following subsections of the CON statutory review criteria do not apply, in this case, to distinguishing among the Lake County applicants: - availability or adequacy of alternatives, such as outpatient care or home care; - economics of joint or shared resources; - need for equipment or services not accessible in adjoining areas; * * * - special needs of health maintenance organizations; - needs of entities which provide substantial services beyond the district; and - impacts on costs and effects of competition. Subsection 408.035(1)(g) - research and educational facilities needs Unicare and Life Care have established foundations to foster education and research in gerontology and health care. Beverly will commit, as a condition for the issuance of its CON, to providing a $10,000 research grant for a gerontological studies to Florida State University. All three companies assist in providing clinical experiences for nursing and therapy students in technical schools, community colleges, and universities, and benefit by recruiting employees from the programs. Subsection 408.035(1)(h) - availability of funds to establish and operate project, and Subsection 408.045(1)(i) - immediate and long-term financial feasibility Unicare has $5 million in available cash and a $30 million line of credit. Unicare, using costs from other facilities adjusted to take into consideration geographical differences, projects a net loss of $250,672 in the first year and a profit of $50,482 in the second year. Unicare failed to include $3,000 in housekeeping equipment in its projected expenses, but can more than cover that omission with a $75,000 contingency. Life Care had a net worth of $50 million in 1993. For calendar year 1992, its audited financial statement shows over $10 million in net earnings and $4.5 million in cash on hand. Life Care projects a net loss of $548,190 in year one and a net profit of $236,022 in year two. Beverly has access to over $200 million for project development, combining its cash, cash equivalents, commercial paper and lines of credit. Beverly projects a pre-tax loss of $314,000 in the first year and a net profit of $214,000 in the second year. Beverly's figures were questioned based on its use of the experience of a Tampa area facility to determine some costs and expenses, its assumption that Medicare will be 13 percent of its patient mix, and its projected lengths of stay and revenues from Medicare. Beverly's use of unit-costs from existing facilities with modifications to fit the specific proposal is reasonable. Although the district Medicare rate is 5.7 percent and Lake County's is 6.1 percent, Beverly's higher proportion of Medicare is consistent with the level of subacute services it proposes in 20 of its 120 beds. After the maximum of 100 days of Medicare coverage, Beverly will have weaned or will transfer ventilator patients who do not have private insurance. Subsection 408.035(1)(n) - past and proposed Medicaid participation Unicare has no nursing homes with CON conditions requiring a specified level of Medicaid participation, having purchased older, existing facilities in Florida. Nevertheless, eleven of its thirteen facilities exceed the Medicaid average in their respective subdistricts. For the first six months of 1993, Life Care's Medicaid resident days were 78 percent in Altamonte Springs (with no CON condition), 70 percent in Punta Gorda, 88 percent and 68 percent, respectively, in the two West Palm Beach nursing homes. Beverly's percent of patient days for Medicaid increased 63.3 percent to 66.8 percent from 1993 to 1994 for facilities in Florida. Beverly paid a $1500 fine to the state for falling below its Medicaid commitment in one of 17 state facilities with such conditions, Coral Trace in Lee County. AHCA agreed to reduce the Coral Trace medicaid condition from 78 percent to 53.3 percent to reflect the subdistrict average. In 1994, at Coral Trace, 49.5 percent of total patient days were Medicaid. All three Lake County applicants have demonstrated strong compliance with Medicaid participation criterion. Comparison of Lake County Applicants On balance, the Lake County applications are all more in compliance than not with statutory review criteria, with varying strengths and weaknesses. They are financially sound, experienced nursing home owners and operators. Unicare will improve access within the planning area. The demographic data on the municipality of Lady Lake shows significant growth. Unicare also will build a better designed and larger facility, and will focus its programs on meeting the needs of Alzheimers' residents and day care participants. Unicare's weaknesses are AHCA's architect's expectation that it will experience cost- overruns and the absence of ventilator services. Unicare relies on its actual experience with Florida construction projects to support the reasonableness of its projections. Unicare also projects the lowest Medicaid per diem rate. Life Care proposes to offer a wider range of specialized programs and therapies than Unicare, a design second to Unicare's in terms of size and residential amenities. Life Care's project costs are the highest of the Lake County applicants, but Life Care, when operational, will have the highest proportion of its costs applied to patient care. Beverly offers a range of programs comparable to those offered by Life Care, with greater emphasis on subacute care, and less emphasis than Unicare on Alzheimers' services. Beverly will build the smallest nursing home at the lowest cost, but is highest in projected Medicaid per diem rate. Unicare is recommended for CON approval due to its superior design, and superior Alzheimers' and day care services, and proposed location. Because the proposed location is a factor in Unicare's favor, it is recommended that Unicare's CON be conditioned on its obtaining a site in Lady Lake. Absent Unicare's agreement to a condition on location, Beverly is recommended for approval based primarily on its lower project cost, scope and intensity of subacute of services, and higher staffing levels.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that AHCA issue CON No. 7489 to Unicare to construct a 120-bed community nursing home in District III, conditioned on the establishment of a 20-bed unit for residents with Alzheimers and related dementia and an adult day care providing half day care for 20 clients, the provision of 73 percent of total resident days to Medicaid residents, and the selection of a site for the facility in the municipality of Lady Lake, Florida. DONE AND ENTERED this 9th day of June, 1995, 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 9th day of June, 1995. APPENDIX TO RECOMMENDED ORDER, CASES NOs. 94-2452, 94-2453, 94-2462, 94-2467 and 94-2971 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner, Dixie's Proposed Findings of Fact. Accepted in Findings of Fact 3 and 8. Accepted in Findings of Fact 3 and 4. Accepted in Findings of Fact 8 and 9. Accepted in Findings of Fact 7. Accepted in general in Findings of Fact 7-9 and 14. Rejected conclusions in Findings of Fact 15-19. Subordinate to Findings of Fact 14. Accepted in Findings of Fact 11 and 24. Accepted in Findings of Fact 7-9. Accepted in or subordinate to Findings of Fact 9. Accepted in part in Findings of Fact 7, rejected in part in Findings of Fact 9. Accepted first sentence in Findings of Fact 9. Rejected second sentence in Findings of Fact 9. Rejected in part in Findings of Fact 9. Rejected in Findings of Fact 9. Accepted in Findings of Fact 9. Subordinate to Findings of Fact 8. Accepted in Findings of Fact 13. Accepted in general in Findings of Fact 13. 19-22. Accepted in Findings of Fact 17-19. 23-24. Accepted in or subordinate to Findings of Fact 15. Accepted in or subordinate to Findings of Fact 30. Accepted in part in Findings of Fact 9. Accepted in Findings of Fact 28. 28-30. Accepted in or subordinate to Findings of Fact 25. 31-32. Accepted in or subordinate to Findings of Fact 30. 33-34. Rejected in Findings of Fact 8 and 22. 35-36. Accepted in or subordinate to Findings of Fact 13. Accepted in Findings of Fact 9. Accepted in or subordinate to Findings of Fact 15. Accepted in Findings of Fact 13. 40-41. Accepted in part in or subordinate to Findings of Fact 13. 42-46. Accepted in Findings of Fact 24 and 35. 47. Rejected in general in Findings of Fact 22. 48-49. Accepted in or subordinate to Findings of Fact 21. 50. Rejected in Findings of Fact 23. 51-52. Rejected in Findings of Fact 21-23. 53-54. Accepted. 55-57. Accepted in Findings of Fact 9 and 22. Accepted in or subordinate to Findings of Fact 21. Accepted in or subordinate to Findings of Fact 15. Rejected in Findings of Fact 21. Accepted in or subordinate to Findings of Fact 13. 62-63. Accepted in Findings of Fact 15. Accepted in Findings of Fact 24 and 31. Accepted in Findings of Fact 11. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to preliminary statement. 68-69. Accepted in Findings of Fact 4 and 9. 70-76. Accepted in Findings of Fact 12. 77-78. Accepted in Findings of Fact 26. 79-80. Accepted in or subordinate to Findings of Fact 12. Petitioner, Life Care's Proposed Findings of Fact. Accepted in Findings of Fact 2 and 3. Accepted in Findings of Fact 2-4. 3-4. Accepted in Findings of Fact 7. Accepted in or subordinate to Findings of Fact 4. Accepted, except 6, in Findings of Fact 51-53. Accepted in general in Findings of Fact 56-67. Accepted in or subordinate to Findings of Fact 53. Accepted in or subordinate to Findings of Fact 61. 10. Accepted in Findings of Fact 42 and 58. 11. Accepted in or subordinate to Findings of Fact 4, 8-10 and 51-53. 12. Accepted in or subordinate to Findings of Fact 54. 13. Accepted in or subordinate to Findings of Fact 51. 14. Accepted in or subordinate to Findings of Fact 7. 15. Accepted in general in Findings of Fact 52. 16. Accepted in Findings of Fact 71. 17. Accepted in or subordinate to Findings of Fact 54-67. 18. Accepted in or subordinate to Findings of Fact 53. 19. Accepted in or subordinate to Findings of Fact 61. 20. Accepted in or subordinate to Findings of Fact 61. 21. Accepted in or subordinate to Findings of Fact 59. Accepted in or subordinate to Findings of Fact 54. Accepted in or subordinate to Findings of Fact 65. Accepted in Findings of Fact 43 and 65. Accepted in or subordinate to Findings of Fact 43. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 53 and 56. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 54 and 65. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 68. 32-34. Accepted in or subordinate to Findings of Fact 66. 35. Accepted in or subordinate to Findings of Fact 68. 36-38. Accepted in or subordinate to Findings of Fact 69. 39-42. Accepted in or subordinate to Findings of Fact 7. 43-44. Accepted in or subordinate to Findings of Fact 66. 45-53. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 66. Rejected in Findings of Fact 70. 56-59. Accepted in Findings of Fact 68. 60. Accepted in or subordinate to Findings of Fact 66. 61-65. Accepted in or subordinate to Findings of Fact 58. 66-67. Accepted in or subordinate to Findings of Fact 57. Accepted in Findings of Fact 54. Accepted in or subordinate to Findings of Fact 71. Accepted in Findings of Fact 54. Accepted in Findings of Fact 42. Petitioner, Hilliard Health Care's Proposed Findings of Fact. 1-2. Accepted in Findings of Fact 1. 3-4. Accepted in Preliminary Statement. Accepted in Findings of Fact 13. Subordinate to Findings of Fact 13 and 21. Accepted in Findings of Fact 13. 8-9. Accepted in Findings of Fact 11. Accepted in Findings of Fact 15. Accepted. 12-15. Accepted in Findings of Fact 24. Accepted in Findings of Fact 24 and 31. Accepted in Findings of Fact 31. Accepted in or subordinate to Findings of Fact 8. Accepted in or subordinate to Findings of Fact 15 and 30. Accepted in or subordinate to Findings of Fact 3, 4 and 9. Accepted in Findings of Fact 15 and 30. Accepted in Findings of Fact 15. Accepted in or subordinate to Findings of Fact 28 and 31. Accepted in or subordinate to Findings of Fact 24 and 31. Accepted in Findings of Fact 16, 24 and 30. 26-27. Accepted in or subordinate to Findings of Fact 11, 15 and 22. Accepted in or subordinate to Findings of Fact 30. Accepted in or subordinate to Findings of Fact 16 and 30. Accepted in Findings of Fact 30. 31-34. Accepted in part in Findings of Fact 17-19. Accepted in Findings of Fact 30. Accepted in relevant part in Findings of Fact 17-19. 37-38. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16 and 30. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 30. Rejected in Findings of Fact 15. Accepted in Findings of Fact 3. Accepted in general in Findings of Fact 7 and 8. 48-49. Accepted in Findings of Fact 9. Accepted in Findings of Fact 7. Rejected as "lowest need" in Findings of Fact 7. 52-61. Accepted in or subordinate to Findings of Fact 5, 6 and 22. 62-65. Accepted in or subordinate to Findings of Fact 14-16 and 23. Accepted. Rejected in Findings of Fact 8. Accepted in general in Findings of Fact 5-9. Accepted in Findings of Fact 9. Accepted in Findings of Fact 5-9. Accepted in Findings of Fact 5-9 and 24. Accepted in Findings of Fact 25. Accepted in general in Findings of Fact 16-19. Rejected as not at issue. Accepted in Findings of Fact 28. Subordinate to Findings of Fact 30. 77-79. Accepted in or subordinate to Findings of Fact 24 and 30. 80-85. Accepted in or subordinate to Findings of Fact 31-36. Rejected except first sentence in Findings of Fact 21. Rejected in Findings of Fact 21. 88-91. Accepted in or subordinate to Findings of Fact 21-22. 92. Accepted in Findings of Fact 8. Respondent, AHCA's Proposed Findings of Fact 1. Accepted in Findings of Fact 13. 2-6. Accepted in or subordinate to Findings of Fact 11. 7. Accepted in Findings of Fact 12. 8-9. Accepted in or subordinate to Findings of Fact 47-49. 10-12. Accepted in or subordinate to Findings of Fact 39-41. 13-16. Accepted in or subordinate to Findings of Fact 24-26. Accepted in or subordinate to Findings of Fact 42-44. Accepted. 20-23. Accepted in or subordinate to Findings of Fact 4-9. 24. Accepted. 25-26. Accepted in Findings of Fact 15. 27-28. Accepted in Findings of Fact 15, 24-30 and 54. Accepted in or subordinate to Findings of Fact 67. Accepted in preliminary statement and Finding of Fact 1. Accepted in Findings of Fact 15, 31, and 54. Accepted in or subordinate to Findings of Fact 15, 30 and 55. 33-35. Accepted in or subordinate to Findings of Fact 16-19. Rejected in Findings of Fact 22. Accepted in Findings of Fact 66. Accepted in Findings of Fact 61. 39-40. Accepted in or subordinate to Findings of Fact 56. Accepted in Findings of Fact 60. Accepted in or subordinate to Findings of Fact 54. Accepted in or subordinate to Findings of Fact 53 and 56. Accepted in or subordinate to Findings of Fact 47 and 61. Accepted in or subordinate to Findings of Fact 47 and 56. 46-48. Accepted in or subordinate to Findings of Fact 66. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 69. 51-52. Accepted in or subordinate to Findings of Fact 13 and 21. Conclusion rejected in Findings of Fact 21 and 23. 53-55. Accepted in or subordinate to Findings of Fact 13. 56. Rejected in Findings of Fact 22. 57-58. Accepted in or subordinate to Findings of Fact 15 and 21. 59. Rejected in Findings of Fact 22 and 23. 60-64. Accepted in or subordinate to Findings of Fact 49 and 70. 65-66. Rejected in Findings of Fact 70 and in conclusions of law 76. 67. Accepted in Findings of Fact 67. 68-69. Accepted in or subordinate to Findings of Fact 15. 70-75. Accepted in or subordinate to Findings of Fact 57-60, except "probable" in last sentence of proposed findings of fact 74. (See, T-p 2197.) Accepted in Findings of Fact 30. Accepted in Findings of Fact 11 and 15. Accepted in Findings of Fact 54 and 71. Accepted in Findings of Fact 54. Accepted in Findings of Fact 31. Petitioner/Respondent, Beverly's Proposed Findings of Fact. Accepted in preliminary statement and Findings of Fact 1. Accepted in preliminary statement and Findings of Fact 1 and 37. Accepted in preliminary statement and Findings of Fact 1. Accepted in Findings of Fact 45 and 46. Accepted in preliminary statement. Accepted in Findings of Fact 48. Accepted in Findings of Fact 47. Accepted in Findings of Fact 43. Accepted in Findings of Fact 42. Accepted in Findings of Fact 51. Accepted in Findings of Fact 6. Accepted in Findings of Fact 27. Accepted in or subordinate to Findings of Fact 37 and 50. 16-17. Accepted in or subordinate to Findings of Fact 51. Accepted in or subordinate to Findings of Fact 52. Rejected in general in Findings of Fact 52. 20,22. Accepted in or subordinate to Findings of Fact 51 and 54. 23-24. Accepted in or subordinate to Findings of Fact 39, 42 and 47. 25 Accepted in Findings of Fact 39, 42, 47 and 56. Accepted in or subordinate to Findings of Fact 56. Accepted in Findings of Fact 56. 28-29. Accepted in relevant part in Findings of Fact 59 and 60. 30. Accepted in Findings of Fact 61. 31-32. Accepted in or subordinate to Findings of Fact 62, 63 and 64. Accepted in Findings of Fact 65. Subordinate to Findings of Fact 65. Rejected as speculative. Rejected conclusion in Findings of Fact 65. Accepted in general in Findings of Fact 65. Accepted in Findings of Fact 66. Accepted in general except conclusion in Findings of Fact 66. 40-42. Accepted in or subordinate to Findings of Fact 66. Accepted in or subordinate to Findings of Fact 54. Accepted in Findings of Fact 67. Accepted in Findings of Fact 50. Rejected conclusion in Findings of Fact 65. Accepted in Findings of Fact 68. Accepted in or subordinate to Findings of Fact 66 and 68. Accepted in Findings of Fact 68. 50-51. Accepted in Findings of Fact 69. Accepted in Findings of Fact 66. Accepted in Findings of Fact 70. 54-55. Accepted in or subordinate to Findings of Fact 70. 56-58. Accepted in or subordinate to Findings of Fact 70. Rejected, as irrelevant based on previous interpretations by AHCA, in Findings of Fact 68. Accepted in Findings of Fact 68. Accepted in or subordinate to Findings of Fact 54. 62-64. Accepted in or subordinate to Findings of Fact 57-60. 65-66. Accepted in or subordinate to Findings of Fact 54 and 71. 67. Accepted, but list not construed as exclusive in Findings of Fact 56. 68-69. Accepted in Findings of Fact 50. Accepted in preliminary statement and subordinate to Findings of Fact 50. Accepted in Findings of Fact 50. Accepted in or subordinate to Findings of Fact 54 and 71. Petitioner, Unicare's Proposed Findings of Fact. 1. Accepted in Findings of Fact 37 and 39. 2-3. Accepted in Findings of Fact 39. Accepted in Findings of Fact 40, 41, and 66. Subordinate to preliminary statement. Accepted in Findings of Fact 1. 7-8. Accepted in or subordinate to Findings of Fact 5-8 and 51. Accepted in Findings of Fact 39. Accepted in Findings of Fact 40. Subordinate to preliminary statement and Findings of Fact 39. 12-13. Accepted in or subordinate to Findings of Fact 70. 14-16. Accepted in relevant part in Findings of Fact 52. 17. Accepted in or subordinate to Findings of Fact 66. 18-22. Accepted in or subordinate to Findings of Fact 70. Accepted in Findings of Fact 54 and 71. Accepted. Subordinate to Findings of Fact 65. 26-27. Accepted in or subordinate to Findings of Fact 54. Accepted in preliminary statement. Accepted in or subordinate to Findings of Fact 56. Accepted in or subordinate to Findings of Fact 65. 31-32. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 57. Accepted in Findings of Fact 66. Subordinate to Findings of Fact 54. 36-39. Accepted in or subordinate to Findings of Fact 53. 40-41. Accepted in or subordinate to Findings of Fact 57 and 60. Accepted in or subordinate to Findings of Fact 69. Accepted in or subordinate to Findings of Fact 57 and 60. 44-48. Accepted in Findings of Fact 39 and 61. 49-52. Accepted in or subordinate to Findings of Fact 53 and 56. 53-62. Accepted in or subordinate to Findings of Fact 57 and 60. 63-68. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 70. 71-75. Accepted in or subordinate to Findings of Fact 7 and 51. 76-78. Accepted in or subordinate to Findings of Fact 52. 79. Accepted in Findings of Fact 53. 80-81. Accepted in or subordinate to Findings of Fact 54. 82-83. Accepted in or subordinate to Findings of Fact 56. 84. Accepted in or subordinate to Findings of Fact 57 and 60. 85-86. Accepted in or subordinate to Findings of Fact 61. Accepted in Findings of Fact 64. Accepted in Findings of Fact 65. 89-90. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 54. Accepted in Findings of Fact 67. 93-94. Accepted in or subordinate to Findings of Fact 57, 59 and 60. 95. Accepted in or subordinate to Findings of Fact 70. 96-103. Rejected as having been modified and adjusted in Findings of Fact 70. Accepted in Findings of Fact 64. Rejected in Findings of Fact 64. Accepted in general in Findings of Fact 67. Rejected in Findings of Fact 66 and 67. Accepted in Findings of Fact 52. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 60. Accepted in Findings of Fact 57-60. Accepted in Findings of Fact 42 and 44. Accepted in Findings of Fact 42. Rejected as not supported by the record. Accepted in Findings of Fact 45 and 46. Accepted in Findings of Fact 64. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 61. Accepted in Findings of Fact 57. COPIES FURNISHED: Douglas L. Mannheimer, Esquire Jay Adams, Esquire Broad & Cassel Post Office Box 11300 Tallahassee, Florida 32302 Theodore E. Mack, Esquire Cobb, Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301 W. David Watkins, Esquire Patricia Renovitch, Esquire Oertel, Hoffman, Fernandez & Cole 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 R. Bruce McKibben, Jr., Esquire Pennington, Haben, Wilkinson,Culpepper, Dunlap, Dunbar, Richmond & French, P.A. 215 South Monroe Street, 2nd Floor Post Office Box 10095 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Tom Wallace Assistant Director Agency For Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether petitioner should be granted a certificate of need to build a 120- bed nursing and extended care facility in West Palm Beach, Florida.
Recommendation Based on the foregoing, it is RECOMMENDED: That the application be denied for failure to meet licensing criteria contained in Rule 10-5.11(21), Florida Administrative Code. DONE and ENTERED this 8th day of December, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of December, 1983.
Findings Of Fact The semi-annual census report by DHRS for District. III dated December 1, 1984, (Exhibit 23) indicated a need for 615 additional nursing home beds for the January 1985 review cycle. Although this report cautioned that changes in reporting and pending litigation or appeals could change the count of approved beds, nevertheless, most of the applicants for beds in the January 1985 batching cycle relied on this report as the basis for their applications. At the time this report was submitted, District III was subdivided into seven sub districts, and the need for each sub district was separately listed. Prior to the completion of the review of the applications in the January 1985 batching cycle, some 500 nursing home beds in District III were allocated to applicants in earlier batching cycles whose applications had been denied for lack of need, and who were in the process of appealing those denials. Many of these applications had been updated and those beds were issued by DHRS pursuant to its then-current policy of issuing beds on a first come-first served basis. As a result, only some beds were allocated to those applicants in the January 1985 batching cycle before the pool of available beds was depleted. Furthermore, rule changes became effective before the January 1985 batching cycle applications were reviewed which eliminated sub districts in District III. Largely because of the allocation of beds to applicants in earlier batching cycles, but also due to population based changes in District III, the bed need methodology, using data current at the time of the hearing and computing need to January 1988, shows there will be an excess of 342 nursing home beds in District III in 1988. (Exhibit 33) Eustis Limited Partnership The initial application of Eustis was for 8 additional beds which involved construction costs. The amended application which was considered in this hearing is for three (3) beds with costs allocated only for the equipment and furniture needed to add a bed to three existing rooms. As amended, Eustis' application is very similar to the application of Oakwood Nursing Center who was granted a CON for the addition of three (3) beds without construction costs. At the time Oakwood's CON was granted, DHRS was in the process of granting CONs for 103 beds. At the time Eustis submitted its application, all of the 615 beds initially available had been dispensed and there was no need for additional beds. At this hearing, Eustis produced no evidence to show a need for the three (3) beds for which Eustis applied. The evidence submitted by Eustis primarily showed that by simply adding a bed to three existing rooms, the cost per bed added was far less than would be the cost of constructing new facilities. Inverness Convalescent Center (ICC) ICC proposes to construct and operate a 120-bed nursing home in Citrus County at a cost of $3,400,000. (Exhibit 15) Citrus County has four licensed nursing homes with a total of 430 beds and an average occupancy rate of less than 90% during the last reported six-month period. (Exhibit 17)- During the last quarter of 1985, the occupancy rate in Citrus County nursing homes was the lowest of the planning areas in District III, and in the first quarter of 1986, it was second lowest. ICC contends the need formula doesn't apply to their application because they propose to serve special needs of the elderly, such as institutionalized patients, head trauma patients, etc. However, the only testimony presented indicating a need in Citrus County for such special services came from ICC owners and employees who live in New Jersey. ICC further contends that since there are less than 27 nursing home beds in Citrus County per 1,000 residents over age 65, that an additional nursing home is needed in Citrus County. However, the 27-beds per 1,000 population is but one factor considered in determining need for nursing home beds. In short, ICC presented no evidence to show that need exists in Citrus County for the proposed facility. Beverly Enterprises Beverly's application is for a CON to add 60 beds to an existing 120-bed nursing home in Live Oak, Suwannee County, Florida, at Suwannee Health Care Center. This facility was opened in 1983 and reached full capacity in seven to nine months. There are two nursing homes in Suwannee County; Suwannee Health Care Center, (HCC) and Advent Christian Village, Dowling Park (ACV). The latter is a church owned retirementc ~B community of 550 residents which provides a continuum of care on five levels. Although Advent Christian is not licensed as a life care community, it gives priority of admission to its 107 licensed nursing home beds to residents of the life care community. As a result, there are few vacancies available for persons living outside the retirement community. Advent - Christian has a waiting list of 32 on the active waiting list and ~20 on an inactive waiting list. People on waiting lists are told the wait is from one to five years for admission. Suwannee HCC has an occupancy rate approaching 100% and a waiting list of approximately 50. As a result, the vast majority of Suwannee County residents needing nursing home care are sent to a nursing home outside Suwannee County, usually in Gainesville, some 65 miles from Live Oak. The planning area in which Suwannee County is located, formerly sub district 1 in District III, has five nursing homes with an average occupancy rate for the last three months of 1985 and the first three months of 1986, ranging from 96.91% to 99.75%. During the first three months of 1986, the occupancy rate of three of these nursing homes was greater than 99%' one as 98.7% and the lowest, Advent Christian, was 96.91% (Exhibit 17). The patient mix at Suwannee ACC is over 80% Medicaid and approximately one-third black. The black population is about 30% of the total population in Suwannee County. Suwannee HCC has had several superior ratings (Exhibits 9, 10), takes patients in order on the waiting list regardless of whether they are Medicaid or private pay, and has a very good reputation in the area for service. DHRS personnel who approve Medicaid placement of patients, hospital employees who have the duty of placing patients in nursing homes, nursing home personnel, and private citizens with relatives in nursing homes, all confirmed the critical access problems of Suwannee County residents for local nursing home placement. Live Oak residents, for example, who need placement in a nursing home are usually sent outside Suwannee County, have their names added to waiting lists at nursing homes in Live Oak, and nursing homes closer to Live Oak than the nursing home in which they are placed, and move to the closer nursing home when a vacancy occurs. As a result, most of the vacancies at Suwannee HCC are filled by patients who were, first transferred outside Suwannee County for nursing home placement, and got on the waiting list at Suwannee HCC. There are very few patients from Suwannee County who are initially placed in a Suwannee County nursing home. Southern Medical Associates (SMA) SMA proposes to construct and operate a free standing, 60-bed, skilled nursing home in Palatka, Putnam County, Florida, at a cost of $1,692,400. (Exhibit 19) When SMA's application was submitted the computation of bed need in Suwannee County under the sub district rule in effect when the application was submitted, showed 30 beds needed in Putnam County. This calculation included 36 beds earlier approved but not yet licensed. At the time of this hearing those approved 36 beds had been revoked by reason of not beginning construction in a timely fashion. The medical consultant who reviewed these applications and prepared most of the State Agency Action reports, (Exhibit 30) initially recommended that SMA'S application be granted. The two existing nursing homes in Putnam County have an occupancy rate in excess of 98 percent for the latest reported 3 month period. (Exhibit 17) 85 to 90 percent of these patients are Medicaid patients. The one nursing home in Palatka, Putnam Memorial Nursing Home, is a 65-bed nursing home with an occupancy rate in excess of 99 percent for the past year, and on the date of hearing had 18 people on the waiting list for a bed. The turnover in this nursing home is about 50 percent each year, with most vacancies resulting from the death of a patient. Two HRS employees whose job it is to determine eligibility of residents of Putnam County for Medicaid reimbursement for nursing home care, testified that they very, seldom see a patient go to Putnam Memorial Nursing Home, that over half of the patients they qualify for eligibility are sent out of the county, and of those placed in the county, almost all are placed at Lakewood Nursing Home which is located 18 miles from Palatka. The only hospital in Putnam County discharges 5 to 6 patients per month who need additional nursing care after discharge. Most of these patients are sent to nursing homes in St. Augustine, Florida, a few are sent to Lakewood, but for very few is a bed available in Palatka.
Findings Of Fact FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility. The population of Lee County in 1978 was 184,841 with 41,984 more than 65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day. No significant difference exists in the services proposed by each of the applicants. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.
Findings Of Fact The Department hereby adopts the findings of fact made by the Hearing Officer but with the significant modification set out and explained in PDCF's Exception (1).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department issue to petitioner Holmes Health Care, Inc., a Certificate of Need for 60 additional community nursing home beds in an addition, to be constructed, to its 60-bed facility now under construction, with permission to use the existing Bonifay Nursing Home facility under the CON until the 60-bed addition is constructed. RECOMMENDED this 8th day of June, 1984, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 8th day of June, 1984.
The Issue The ultimate issue to be resolved in this proceeding is whether the Petitioner should be granted a Certificate of Need to construct a 120-bed nursing home in Pinellas County, Florida. Petitioner contends that there is a need for such a facility; that the Department's rules do not apply in determining need; and that to the extent the Department's rules do apply, they are not a reasonable measure of the need for a nursing home facility. The Department contends that its rules are reasonable and applicable to this proceeding, and that there is no need for the proposed facility.
Findings Of Fact Petitioner is seeking a Certificate of Need authorizing the construction of a 120-bed nursing home in northern Pinellas County, Florida. At the time that the Application for Certificate of Need was filed, the total project cost was estimated at $3,829,000. Cost estimates have, been revised since that time, and at the time of the hearing, it was estimated that the total capital expenditure required would be $5.3 million. Petitioner proposes to provide intermediate and skilled care facilities and to secure Medicare and Medicaid approval. Petitioner has built and operated numerous nursing home facilities in states other than Florida. Petitioner has the necessary resources, competence and experience to build and operate the proposed nursing home facility. Prior to the adoption of Rule 10-5.11(21), Florida Administrative Code, the Department was utilizing a Health Services Plan adopted by the Florida Gulf Health Services Agency to determine the need for nursing home facilities in Pinellas County. Under the plan, the need for nursing home facilities was basically determined by estimating the population of persons 65 years old and older in the services area three years in the future and using a ratio of 27 nursing home beds per 1,000 persons in that population category. A reasonable estimate of the total population of persons 65 years of age and older in Pinellas County for 1986 is 217,232. Using the 27 beds per 1,000 ratio, total nursing home beds needed in the area by 1986 would be 5,865. There are at present 6,982 nursing home beds that are licensed or that have been approved for licensure in Pinellas County. Therefore, under the Health Services Plan, there will be 1,117 more nursing home beds than needed by 1986. In determining the need and demand for nursing home facilities, the Department now utilizes a formula set out in its Rule 10-5.11(21), Florida Administrative Code. Under the rule, the Department will not normally approve applications for additional nursing home beds in any service district unless a need for the beds is demonstrated by application of a formula set out in the rule. Under the formula, a ratio of 27 nursing home beds per 1,000 persons age 65 or older in the population is utilized. This formula historically allows for construction of nursing home beds which exceeds need. Persons who live in poverty have a historic need for nursing home services that exceeds that for the remainder of the population. The Department's formula thus applies a poverty ratio to the 27 beds per 1,000 formula. The percentage of poverty in Pinellas County is less than the state average. The bed need ratio for Pinellas County under the Department's rule is therefore 17.7 beds per 1,000 of aged population. Under its rule, the Department utilizes the most recent mid-range population projections published by the Bureau of Economic and Business Research at the University of Florida to determine the population of the service district. In Pinellas County, the population age 65 and above was estimated by that bureau for 1986 to be 217,232. Applying the 17.7 beds per 1,000 ratio, the theoretical bed need for Pinellas County for 1986 is 3,847 beds. There are more beds than that presently licensed, and more have been approved for Certificates of Need. When theoretical need for nursing home beds is exceeded, as is the case in Pinellas County and in the district that includes Pinellas County, the Department, under its rule, will not allocate additional beds unless an occupancy rate of 95 percent is exceeded. The occupancy rate in Pinellas County is 92.9 percent. There is therefore no need nor actual demand for the nursing home proposed by Petitioner under the Department's rule. The Department's Rule 10-5.11(21), Florida Administrative Code, is a reasonable method of determining theoretical need and actual demand for nursing home beds. There are other reasonable methodologies that could be followed. The Department's methodology is not, however, unreasonable, arbitrary, or capricious. Even if application of the formula does not demonstrate any need or demand for nursing home services, the Department can grant a Certificate of Need if other circumstances exist that would justify the addition of new nursing home beds. The applicant has failed to establish that any such conditions exist in Pinellas County. It has not been established that persons who live in poverty, Medicaid or Medicare patients, or any segment of the population are unable to obtain nursing home services. It has not been established that existing facilities are providing inferior services. The Department's Rule 10-5.11(21), Florida Administrative Code, allows for the construction of more nursing home beds in districts with a high degree of poverty than would be allowed in districts where there is a lesser degree of poverty. This factor has been placed in the formula because it has been established that persons who live in poverty have a greater need for nursing home facilities than do other segments of the population. The formula does not operate to discriminate against persons who do not live in poverty. Rather, it serves to allow the placement of facilities where they are needed.
