The Issue In their Prehearing Stipulation the original parties described the background and general nature of the controversy as follows: In January, 1985, HCR filed an application for certificate of need to develop a new 120 bed nursing home in Collier County, Florida. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceeding, and the proceeding was forwarded to the Division of Administrative Hearings. By application supplement dated May 15, 1986, HCR has reduced this application to a 90-bed new nursing home. The nursing home will provide skilled nursing care to Alzheimer's patients and to patients discharged from hospitals in need of additional intensive nursing care, in addition to the typical nursing home patient. HRS has denied HCR's application because, pursuant to Rule 10-5.11(21), Florida Administrative Code there is insufficient need for the additional nursing home beds proposed by HCR. In the Prehearing Statement the Petitioner described its position as follows: HCR contends that there is an identifiable need for a nursing home in Collier County, Florida, to serve the needs of patients who suffer from Alzheimer's disease and similar disorders and patients who are discharged from hospitals with a continuing need for a high level of intensive care, often provided through sophisticated technical or mechanical means. Existing nursing homes in Collier County do not offer adequate facilities for such patients and refuse admission to such patients. These patients have experienced an inability to obtain such care in Collier County. HCR's proposed nursing home will provide needed care which is otherwise unavailable and inaccessible in Collier County. The application meets all criteria relevant to approval of a certificate of need. HCR further contends that the nursing home formula shows a need for additional nursing home beds in Collier County. Previously, in circumstances where a need for additional nursing home services has been identified, HRS has approved certificates of need even though the nursing home formula showed a need for zero additional beds or a small number of additional beds. In the Prehearing Statement the Respondent described its position as follows: HRS contends, pursuant to the formula contained in Rule 10-5.11(21), Florida Administrative Code, that there is insufficient need in the January, 1988 planning horizon demonstrated for additional nursing home beds in Collier County to warrant approval of a-new nursing home. Therefore, HRS contends that the HCR application should be denied. Further in its original application, HCR did not identify services proposed specially for Alzheimer's disease patients or "sub-acute" patients. HCR did not and has not complied with provision of Chapter 10-5.11(21)(b 10., Florida Administrative Code, regarding mitigated circumstances. The Respondent also identified the following as an issue of fact to be litigated. "HRS contends that it should be determined whether HCR's supplement dated May 15, 1986, is a significant change in scope for which the application was originally submitted." Because of its late intervention into this case, the Intervenor's position is not described in the Prehearing Statement. In general, the Intervenor urges denial of the application on the same grounds as those advanced by the Respondent. The Intervenor did not attempt to become a party to this case until the morning of the second day of the formal hearing. Respondent had no objection to the Petition To Intervene. The original Petitioner objected on the grounds that the effort at intervention was untimely and that the Intervenor was without standing. The objection to intervention was overruled and the Intervenor was granted party status subject to taking the case as it found it. Accordingly, intervention having been granted at the conclusion of the evidentiary presentation of the other parties, the Intervenor was not permitted to call any witnesses or offer any exhibits. Intervenor's participation before the Division of Administrative Hearings was limited to an opportunity to file proposed findings of fact and conclusions of law. Following the hearing a transcript of proceedings was filed on July 8, 1986. Thereafter, all parties filed Proposed Recommended Orders containing proposed findings of fact. Careful consideration has been given to all of the Proposed Recommended Orders in the formulation of this Recommended Order. A specific ruling on all proposed findings of fact proposed by all parties is contained in the Appendix which is attached to and incorporated into this Recommended Order. The Petitioner also filed an unopposed post-hearing motion requesting that its name be corrected in the style of this case. The motion is granted.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Findings based on admitted facts The parties agree that HCR properly filed a letter of intent and application for certificate of need for a new nursing home to be located in Collier County. The application was reviewed by HRS in the ordinary course of its activities, and HRS initially denied the application. HRS continues to oppose issuance of a CON because (a) there is an insufficient need, pursuant to Rule 10-5.11(21), Florida Administrative Code, for additional nursing home beds to warrant approval of a new nursing home [Section 381.494(6)(c)1., Florida Statutes]; (b) the long term financial feasibility and economic impact of the proposal is questionable because of low occupancy being experienced by existing nursing homes "Section 381.494(6)(c)9., Florida Statutes]. HRS proposes no other basis for denial of the application. The parties agree that HCR meets all criteria for a certificate of need, with the exception of those two criteria listed in the immediately foregoing paragraph relating to need and financial feasibility/economic impact (relevant to low occupancy), which HRS contends have not been met. The parties agree that HCR would provide good quality care to patients, that the project would be financially feasible if the occupancy projections asserted by HCR were obtained, that the costs and methods of proposed construction are appropriate and reasonable, and that the proposed facility would be adequately available to underserved population groups. The rest of the findings In January 1985, HCR filed an application for a certificate of need to develop a new 120-bed nursing home facility in Collier County, Florida. The original application described a traditional approach to nursing home care. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceedings and this proceeding ensued. By application supplement dated May 15, 1986, HCR made certain changes to its original application. These changes included reducing the size of the proposed nursing home from 120 to go beds and changing the-concept of the nursing home from a traditional nursing home to one specifically designed to address the treatment of Alzheimer's disease patients and sub-acute care patients. The supplement specifically provided that 30 of the 90 proposed beds would be "set aside to offer a therapeutic environment for patients with Alzheimer's or similar disorders." The project description in the original application contained no such provision. HCR's proposed facility would consist of 90 nursing home beds, 30 assisted living beds, and an adult day care facility located adjacent to the nursing home portion of the facility. Those portions of the facility relating to assisted living and adult day care do not require certificate of need review. The estimated cost of the portion of the project which requires certificate of need review is $3.5 million. HCR estimates that approximately 33 1/3 per cent of the patients in the facility will be Medicaid reimbursed. It is proposed that 30 of the 90 nursing home beds be designed and staffed specifically to provide care and treatment necessary to meet the special needs of certain patients who suffer from Alzheimer's disease and dementia and exhibit need for care different from that found in the typical nursing home. It is proposed that another 30-bed wing be staffed and equipped to provide sub-acute, high-tech services such as ventilator, I.V. therapy, pulmonary aids, tube feeding, hyperalimentation and other forms of care more intensive than those commonly found in a nursing home and necessary for the care of patients discharged from hospitals and patients in the last stages of Alzheimer's disease. The remaining 30-bed wing would be devoted to traditional nursing home care. HRS has adopted a rule which establishes a methodology for estimating the numeric need for additional nursing home beds within the Department's districts or subdistricts. This methodology is set out in Rule 10-5.11(21), Florida Administrative Code. This rule determines historic bed rates and projects those bed rates to a three-year planning horizon. Allocation to a subdistrict such as Collier County is adjusted by existing occupancy in the subdistrict and the subdistrict's percentage of beds in relationship to the total number of beds in the district. Additional beds normally are not authorized if there is no need for beds as calculated under the rule. HRS calculated need utilizing current population estimates for January 1986 and projected need for the population estimated for January 1988, arriving at a need of approximately 16 additional nursing home beds for the January 1988 planning horizon. HCR projected need to the January 1989 planning horizon and projected a numeric need of approximately 38 additional nursing home beds. There are no applicants for additional nursing home beds in the January 1989 planning horizon (batching cycle). Alzheimer's disease is a primary degenerative disease of the central nervous system which results in a breakdown of the nerve cells in the brain. The disease is progressive, in that it begins subtly, often with forgetfulness or simple personality changes, and ultimately results in death following a phase in which the patient is bedridden and totally dependent upon others for survival. The cause of the disease is not known. The disease is much more common in the older age groups and is very common in the southwest Florida area. (However, nothing in the evidence in this case suggests that Alzheimer's disease is more common in southwest Florida than in other parts of the state.) There is no known cure for Alzheimer's disease. Alzheimer's disease patients are characterized by such symptoms as memory loss, communication problems, difficulty understanding, confusion, disorientation, inability to recognize care givers, waking at night, wandering, inability to socialize appropriately, and incontinence. The progress of the disease can be divided into stages. During the initial stage, the patients will display forgetfulness and subtle personality changes. As the disease progresses, the patients encounter increasing difficulty performing more than simple tasks, tend to be more emotional, become more confused, encounter difficulty with concentration and retaining thoughts, and often display poor judgment and a denial of the significance of their actions. In the next stage, the patients begin to require assistance to survive. Forgetfulness and disorientation increase and wandering patients are often unable to find their way. The patients become incontinent, experience sleep disturbances, become restless at night, and wander during the day, leading to considerable family distraction and difficulties for the care givers. The patients encounter difficulty recognizing family members and often become paranoid and fearful of those family members within the house. violence and aggressive outbursts may occur. Finally, the patients progress to a stage in which they are totally inattentive to their features physical needs, requiring total care. These Patients are totally incontinent, experience frequent falls, develop seizures, and eventually become bedridden, going into a fetal position and becoming totally unable to provide any care for themselves. Traditionally, most nursing homes offer no special programs for patients who suffer from Alzheimer's disease and mix these patients with other patients in the nursing home. There is no nursing home in Collier County which provides program specifically designed for the treatment of Alzheimer's disease patients. The nearest nursing home where such care can be found is in Venice, some 92 miles from Naples. The total facility proposed by HCR is designed to provide a continum of care for Alzheimer's disease patients and their family care givers. The adult day care portion of the facility would enable family members to place Alzheimer's disease patients in day care for a portion of the day in order for the family care givers to maintain employment, perform normal household chores, and find relief from the extremely demanding task of constantly supervising and caring for an Alzheimer's disease victim. The adult day care portion of the facility would be designed and staffed to provide a therapeutic program for the Alzheimer's disease patient and the patient's family. The assisted living portion of the facility would allow an Alzheimer's disease patient in the early stages of the disease to live in an environment, with his or her spouse if desired, where immediate care and routine supervision at a level lower than that required by a nursing home patient would be provided. Thirty nursing home patient and who do not display those characteristics which are disruptive to non-Alzheimer's patients, such as wandering, combativeness, and incontinence. For those Alzheimer's patients who should not be mixed with other nursing home patients because of their disruptive routines and who require unique programs and facility design features to meet their specific needs, a 30-bed wing would be set aside. Finally, for Alzheimer's patients in the final stages of the disease who require total care and are bedridden, and for patients discharged from local hospitals who require high-tech services, a 30-bed wing designed, staffed and equipped to provide such services would be set aside. The facility would provide a high level of staffing to meet the demanding, personal care needs of Alzheimer's patients and would provide 24-hour nursing supervision in that portion of the facility dedicated to intensive services for the bedridden and high-tech patient. The design and equipment of the proposed facility are particularly addressed to the needs of Alzheimer's disease patients. Physically, the facility would allow patients freedom of movement both inside the facility and in an outside courtyard with porches, but the facility would be sufficiently secure to prevent the patient from wandering away from the facility. There would be amenities such as therapeutic kitchens which would allow patients still able to cook to do so. Fixtures in the facility would be designed so that the Alzheimer's disease patients could easily identify the functions of fixtures such as wastebaskets, toilets, and sinks. Features such as low frequency sound systems, lever door knobs, square instead of round tables, barrier-free doorways, special floor coverings, appropriate labeling, automatic bathroom lighting, and provisions for seating small groups of patients together would all provide the special care required by the Alzheimer's patient. The concept of a separate unit for Alzheimer's disease patients is a new one, growing out of increased medical awareness of the disease. The proposed unit would be a prototype for the Petitioner. There are four nursing homes in Collier County and 413 licensed nursing home beds. There are no approved but unlicensed nursing home beds in Collier County. At the time that HRS initially reviewed the HCR application, Collier County nursing homes were reporting an average occupancy of approximately 70 percent. At the time of the hearing, average occupancy of existing nursing home beds in Collier County was 83.5 per cent. Existing nursing home beds in Collier County are underutilized and there are a number of nursing home beds available to the public. Also there are available alternatives to nursing homes in Collier County. HCR has projected reaching 95 per cent occupancy within one year of opening. This projection seems overly optimistic and unwarranted by prior history, as only one existing facility has an occupancy rate that high. HCR's occupancy projections are based on assumptions that the future growth will be similar to that experienced between 7/1/85 and 12/1/85. But more recent data shows that growth has been decreasing and that there was no growth for the most recent period prior to the hearing. If projected occupancy is not met, projected revenues will not be realized, and projections of financial feasibility will not materialize. The record in this case does not contain evidence of patients' need for nursing home care documented by the attending physicians' plans of care or orders, assessments performed by the staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. The local health plan (Policy 1, priority 4) requires an occupancy level of at least 90 per cent before new nursing homes can be approved. The local health plan (Policy 1, priority 6) also provides, "No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility."
Recommendation For all of the foregoing reasons, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order in this case denying the Petitioner's application for a certificate of need to construct either its original proposal or its supplemented proposal. DONE AND ENTERED this 14th day of October, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1986.
The Issue Whether Petitioner's application for a Certificate of Need ("CON") authorizing establishment of a 60-bed sheltered nursing home adjacent to a 75-unit life care residential facility in HRS Health District IX, Palm Beach County, Florida, should be granted (in whole or in part), or denied.
Findings Of Fact I. The Proposal Petitioner is a not-for-profit Florida corporation organized to provide retirement and nursing home services to aged Episcopalians in the three Episcopal Dioceses in Florida: Central, Southwest and Southeast. Since 1951, Petitioner has operated a life care facility or community, with adjacent nursing home, in Davenport, Florida. It has 71 residential (well-care) units and 60 nursing home beds, operates at nearly full capacity, and has a 3-to-5 year waiting list. There are 128 residents at the facility, 57 of whom live in the nursing home. Petitioner now seeks to replicate the (Davenport) Crane Gray Inn in Lake Worth, Palm Beach County, Florida, in order to better serve the needs of older Episcopalians. The life care community, consisting of a 60-bed skilled nursing home and a 75- unit retirement facility, would be convenient to the residents of the Southeast Florida diocese, but is expected to draw residents throughout Florida. The 60-bed skilled nursing home, for which a CON is required, would be a one-story building measuring 19,100 square feet. Initially estimated to cost $1,705,515, or $68.06 per square foot to construct and equip, actual bids subsequently received have reduced the expected cost to $60.00 per square foot. The total cost of the entire project, including the well- care and nursing-care facilities, is estimated to be $3,600,000. Petitioner intends to obtain certification of the entire project as a continuing care facility in accordance with Chapter 651, Florida Statutes. In March, 1985, the State of Florida Department of Insurance and Treasurer issued Petitioner a provisional license to operate the proposed facility as a continuing care facility.2 Petitioner intends to comply with the reporting and escrow requirements which Chapter 651, Florida Statutes, imposes on life-care facilities. The admission requirements for the proposed life care facility are the same as those which have applied to the Davenport Crane Gray Inn ("Inn"). Before admission, a resident must execute a continuing care or "Resident's Agreement" with the Inn. Under that agreement, in exchange for the future maintenance and support of the resident at the Inn for the remainder of the applicant's life, the applicant transfers all of his or her real and personal property to the Inn. The resident also agrees to execute a will to the Inn to effectuate the transfer of property then owned or later acquired. No entrance fee is charged. The Inn promises to provide the resident with a personal living unit (including all utilities); three meals a day; health care (including medicine, physician fees, dental care, and hospitalization); recreational, educational, social and religious programs; funeral and burial costs; a monthly allowance for personal expenses; weekly maid service and laundry facilities; and transportation for shopping trips and other activities. Either party may terminate the agreement under specified conditions. On termination, the Inn will transfer back to the resident the property previously conveyed, or a sum equal to the value thereof, without interest and deducting therefrom an amount sufficient to compensate the Inn for the resident's care and support while at the Inn. If the resident becomes eligible for social security or government assistance, such assistance is paid to the Inn for the support of the resident. If the resident dies while at the Inn, all property transferred to the Inn on admission is considered to have been earned and becomes the property of the Inn. (Joint Exhibit I) There is no requirement that a prospective resident have any assets and applicants are ostensibly admitted without regard to their financial condition. (However, in the past ten years, only two Medicaid patients or indigent residents have been admitted to the Davenport Inn.) An account for each resident is maintained, to which earnings are transferred and costs of care deducted. Residents without assets are treated the same as those with assets and the account information is treated confidentially. Over time, the accounts of residents are depleted. Currently, 68% of the patients at the Davenport nursing home are Medicaid patients. The per diem rate reimbursed by Medicaid is $51.25. No resident has ever been transferred for lack of funds. However, the average resident, when admitted, transfers assets worth approximately $24,000 to the Inn. Prospective residents of the proposed nursing home will ordinarily come from the adjacent well-care retirement units. The purpose of the nursing home is to serve the individuals residing in the life care community who, as their needs intensify, require skilled nursing care. Only on rare occasions will an individual be admitted directly to the nursing home without first residing in the well-care portion of the life care community. At the Davenport Inn, this has happened only once. Petitioner acknowledges that prospective nursing home patients may come from eligible Episcopalians who reside in nursing homes in the local community. Actual residence in the well-care units will not be a prerequisite to admission to the nursing home. However, no person has been, or will be, admitted to the nursing home without first executing a continuing care agreement. Direct admission of nursing home patients from outside the life care center is permissible under "sheltered nursing home" rules, as construed by HRS officials. Robert E. Maryanski, Administrator of HRS' Community Medical Facilities Office of Health Planning and Development (which implements the CON licensing process) advised Petitioner's counsel on September 20, 1985, that under HRS rules, patients may--if necessary--be admitted directly to the proposed nursing home without first residing in the well-care units. Individuals who have paid for membership with the particular life care center, finding themselves in immediate need of nursing home care, may be directly admitted into the nursing home. (Petitioner's Ex. No. 11) If HRS rules were interpreted otherwise, perfunctory stops in well-care units "on the way to the nursing home" would be encouraged, a practice which would burden patients and serve no useful purpose. Although Petitioner's CON application does not specify a minimum age for admission to the life care community, Petitioner's life care centers are oriented toward members of the Episcopal Protestant Churches who are at an advanced age and "need a place to go for their last days... [In] a lot of cases they have outlived their own children." (TR-34) The average age of the patients in the Davenport nursing home is 89; in the well-care retirement units, 82. The average overall age of members of the Davenport life care community is 84 or 85. Approximately one-half of the residents eventually need nursing care. At Davenport, the minimal age for admission is 71. (TR- 12) According to a member of the Board of Directors of Petitioner, only patients 70 or over will be admitted to the life care community proposed for Palm Beach County. (TR-35) There is already a waiting list of ninety (90) qualified persons for the proposed life care community in Palm Beach County. Out of that figure, only five people currently require nursing home services. After executing the standard continuing care agreement, these five people would be admitted directly to the nursing home facility, without first residing in a well-care unit. Waiting lists are compiled six times a year, with the most recent completed only a week prior to hearing. Petitioner does not intend to utilize all the nursing home beds, since it must keep some beds open to meet the needs of well-care residents. Nursing home beds at the Palm Beach facility would be filled gradually, approximately two per week, so it would take six months to reach optimum capacity. The parties stipulate that all criteria for evaluating CON applications under Section 381.494(6)(c) and Rule 10-5.11, Florida Administrative Code, have been met or are inapplicable except for the following: The long-term financial feasibility of the project, the availability of operating capital, and the economic impact on other providers (Section 381.494(6) (c)8, 9, Fla. Stat.); The cost of construction (Section 381.494(6) (c)13, Fla. Stat.); The ratio of beds to residential units (Rule 10-5.11(22)(a), Fla. Admin. Code). II. Financial Feasibility The historical track record of the Davenport facility over the last 13 years and projections for the proposed facility demonstrate that the proposed nursing home is financially feasible and that Petitioner has, or can obtain sufficient funds to meet its operating costs. Moreover, as a licensed Chapter 651 life care facility, the financial viability of the entire operation will be monitored by the Department of Insurance. Assets available to support the costs of operating the life care community include income and assets derived from incoming residents; estates and bequests; and a fund of 1,300,000.00, functioning as an endowment, to be placed in escrow. The cost for a resident in the well-care units is approximately $27 per day; the cost in the nursing home is approximately $54 per day. Although there is a deficit of approximately $300 per month in the well-care section of the Davenport facility, there is no deficiency in the nursing home. Medicaid payments are sufficient to cover the costs of providing nursing care. Philanthropy should not be required to sustain the operation of the proposed nursing home. Petitioner has never had difficulty in obtaining financial support for its Davenport well-care units. More than one-half of the operating deficit for the well-care units was met by funds at work and did not depend on philanthropy. There are over 200 Episcopal Churches in the three Florida dioceses with 90-100,000 parishioners, who have been responsive to fund- raising efforts in the past. Last year, Petitioner raised $693,000 from fund raising drives. It is reasonably expected that this source of financial support will also be available to support the proposed life care facility, including the nursing home. An endowment fund of $1,300,000 is also available. These funds will be made available to support the proposed life care community. In addition, each new resident contributes an average of $24,000, which is used to defray operating costs. Barnett Bank will finance construction of the project at one-half percent over prime. Petitioner intends to pay off the capital debt in two or three years. The land has already been acquired and some land preparation costs have been paid. Petitioner has expended over $800,000, to date, on the proposed life care community. Petitioner has $120, 000 on hand for the project, in addition to escrowed reserves. An HRS health care planner has misgivings about the financial viability of the project since Petitioner has relied on philanthropy to support its Davenport facility, and would rely on it to some extent to support the proposed facility. However, Petitioner projects that 77% of the nursing home patients at the proposed facility will be Medicaid eligible. Due to efficiencies in operation, Medicaid payments should be sufficient to cover the costs of nursing home patients at the proposed facility, just as they have been at the Davenport nursing home. The various sources of funds available to Petitioner--proven wholly adequate in the past--should be sufficient to cover the other costs of operation and ensure the continued financial viability of the nursing home, as well as the associated well-care units. III. Cost of Construction HRS contends that the initial estimate of construction costs for the proposed nursing home ($68.00 per square foot) is excessive when compared to other 60-bed nursing facilities, where the cost is approximately $10.00 less per square foot. But, through various cost-cutting measures, the cost of the project has now been reduced to approximately $60.00 per square foot, which is reasonable and in line with the other nursing home projects. IV. Ratio of Nursing Rome Beds to Residential Units Rule 10-5.11(22)(a), Florida Administrative Code, provides that HRS "will not normally approve an application for new or additional sheltered nursing home beds if approved would result in the number of sheltered nursing home beds that exceed one for every four residential units in the life care facility." The parties stipulate that, absent unusual or exceptional circumstances, this rule would preclude approval of more than 19 of Petitioner's 60 proposed nursing home beds. The proposed nursing home, like the Davenport facility it duplicates, will be unique, unusual or extraordinary, when compared with other nursing homes in Florida, due to the advanced age of its patients. No one under 70 will be admitted. The average age of its patients is expected to approach 89 with the average age of well-care residents approaching 82. Approximately one-half of the well-care residents will eventually require transfer into the nursing home. People of advanced age are more likely to require nursing home care. Based on Petitioner's historical experience at its Davenport facility, it is likely that 60 nursing home beds will be required to meet the needs of residents of the proposed well- care units. It has been shown that the proposed 60 nursing beds will be needed to serve the needs of well-care residents as they age and their health care needs intensify. That has been the case at the Davenport facility, where rarely has a patient been admitted to the nursing home who did not first reside in the well-care units. The proposed nursing home and life care center will draw patients and residents similar to those drawn by the Davenport facility--the state-wide applicant "pool" of both is expected to be the same. For this reason, the proposed nursing home should have no significant impact on the census of, or need for, community nursing homes in Palm Beach County. It appears that the rationale behind the four-to-one (residential units to nursing home beds) ratio of the HRS rule is that, under normal or ordinary conditions, only one nursing home bed will be required to serve the residents of four well- care units. In the instant case, actual experience has shown this assumption to be patently erroneous. If only 19 nursing home beds were allowed Petitioner--because of the ratio cast in HRS rules--it is likely that many well-care residents at the proposed life care center would be forced to find nursing care outside of the center. Displaced, placed in nursing homes distant from the life care community, such patients would lose close contact with spouses and friends. The HRS rule, embracing a numerical ratio for the norm, allows flexibility in particular situations which are shown to be abnormal. The circumstances of the instant case show it to be an abnormal situation, fully justifying approval of 60-beds sought, rather than the 19 otherwise permitted by the HRS rule.
Recommendation Accordingly, based on the foregoing, it is RECOMMENDED: That Petitioner's application for a CON authorizing establishment of a 60-bed nursing home in Palm Beach County be GRANTED; and that the CON, on its face, state that issuance is predicated on Petitioner's statement of intent (during Section 120.57(1) licensing proceedings) that (i.) no one under 70 years of age will be admitted to the life care community (including both well-care and nursing-care sections) and (ii.) that, only in relatively rare and unusual cases, will patients be directly admitted to the nursing home without first residing in the well- care residential units of the life care communities.3 See, Section 381.494(8)(g), Florida Statutes (1985). DONE and ORDERED this 14th day of March, 1986, in Tallahassee, Florida. R. L. CALEEN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1986.
Findings Of Fact On or about July 15, 1986, Petitioner filed an application with Respondent to construct a 60 bed community nursing home with a 45 bed adult congregate living facility (ACLF) in Highlands County, Florida. This application was identified as CON 4700. After preliminary review, Respondent denied this application on or about December 23, 1986, and Petitioner timely filed its petition for formal administrative hearing. Highlands County is in Respondent's Service District VI, Subdistrict IV. The parties stipulated that there was a net bed need in the July, 1989 planning horizon for Highlands County of an additional 28 community nursing home beds, based upon the bed need calculation set forth in Rule 10-5.011(1)(k), Florida Administrative Code. It was further stipulated by the parties that Petitioner's original application met all statutory and rule criteria for the issuance of a CON, but for the issue of need. Since the parties did stipulate to a need for 28 community nursing home beds, Petitioner sought, at hearing, to offer evidence in support of only an "identifiable portion" of its original application. Thus, Petitioner offered no evidence in support of the application it filed with Respondent, and which was preliminarily denied on December 23, 1986. Rather, Petitioner sought consideration and approval of either 28 nursing home beds with 32 ACLF beds, or 30 nursing home beds with 30 ACLF beds. Since the stipulation of the parties could not cover the financial feasibility of either alternative because they were presented for the first time at hearing, Petitioner offered evidence to establish the financial feasibility of these alternatives. Based upon the testimony of Herbert E. Straughn, it is found that Respondent does not normally approve nursing home CON applications for less than 60 nursing home beds. However, Respondent has approved a CON application for 30 nursing home beds in association with 30 ACLF beds or some other similar service when the need for 30 nursing home beds was shown to exist. Respondent has also approved a CON for less than 30 nursing home beds in connection with an existing 60 bed facility when the stipulated need did not reach 30. In this case, Petitioner's original application was for 60 community nursing home and 45 ACLF beds, and it was at hearing that Petitioner sought to down-size its application to meet the stipulated need of 28 nursing home beds. There are no accessibility problems with regard to special programs or services, or any other problems of accessibility, in District VI, Subdistrict IV. Petitioner's request for partial consideration and approval of its application, which was presented at hearing, would not introduce any new services or construction not originally contemplated in its application, although the size of the project and number of beds sought would be reduced. In its original application, Petitioner proposed a nursing home with two 30-bed units, and now seeks approval for only one 28 or 30-bed unit. From a health planning standpoint, nursing home bed units usually occur in multiples of 60 due to staffing and equipment considerations. No evidence was offered to show why the Respondent should deviate from its usual practice in this case, other than the fact that a need for only 28 beds exists. At hearing, Petitioner introduced revised pro formas for 28 and 30 nursing home beds, associated with 32 and 30 ACLF beds, respectively. These revised pro formas were based on the same ratios of patients by payor class as in the original pro forma. The equity to loan ratios in the revised pro formas to finance the project remained the same as in the original application. The revised pro formas combine revenue and expenses for nursing home and ACLF beds. However, if revenue and expenses for nursing home beds is segregated from ACLF beds, it is found that a 30 bed nursing home facility would not be financially feasible in either 1989 or 1990, and a 28 bed nursing home facility would be even less financially feasible than a 30 bed facility. When revenues and expenses for the ACLF component of the project are considered along with nursing home bed income and expenses, the project shows only a marginal profit in the second year of operation with the 30 nursing home bed-30 ACLF bed alternative. It is barely break-even in the second year under the 28 nursing home bed-32 ACLF bed alternative. Thus, under either alternative, the project is not financially feasible in 1989, and the nursing home component of this project, standing alone under either alternative presented at hearing, is not financially feasible in either 1989 or 1990. The 30 nursing home bed-30 ACLF bed alternative is more financially feasible than the 28-32 alternative since the 28-32 alternative is barely break even in the second year of operation. Specifically, under the 28-32 alternative, pretax income of less than $9000 is projected in the second year of operation with total revenues of approximately $1.321 million and total expenses of approximately $1.312 million.
Recommendation Based upon the foregoing, it is recommended that Respondent enter a Final Order denying Petitioner's application for CON 4700. DONE AND ENTERED this 7th day of January, 1988, in Tallahassee, Florida. DONALD D. CONN 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 7th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0667 Rulings on Petitioner's Proposed Findings of Fact: Adopted in Findings of Fact 1, 2. Adopted in Finding of Fact 2. Rejected as unnecessary. Adopted in Finding of Fact 4. Adopted in Findings of Fact 5, 6. Adopted in Finding of Fact 8. Adopted in Findings of Fact 5, 6, 9. 8-10 Adopted in Finding of Fact 10. Rejected as simply a statement of position and not a proposed finding of fact. Adopted in Finding of Fact 6. 13-16 Rejected as conclusions of law and not proposed findings of fact; this legal argument has been considered in the preparation of conclusions of law contained in this Recommended Order. Adopted in part in Findings of Fact 8, 9, 10. However the last sentence in the proposed finding of fact is rejected as unclear. Rejected as unnecessary. Rejected as not based on competent substantial evidence, although from a health planning viewpoint a 30 nursing home bed unit is more functional and cost effective than a 28; it is also more financially feasible in this case. Adopted in Finding of Fact 11. Adopted and Rejected in part in Findings of Fact 9, 11, and otherwise rejected as unnecessary and cumulative. Rejected as not based on competent substantial evidence, although adopted in part in Findings of Fact 9, 11. Rulings on Respondent's Proposed Findings of Fact: 1 Adopted in Findings of Fact 1, 2. 2 Adopted in Finding of Fact 2. 3 Adopted in Finding of Fact 3. 4 Adopted in Finding of Fact 4. 5 Adopted in Finding of Fact 6. 6 Adopted in Findings of Fact 5, 6. 7 Adopted in Finding of Fact 11. 8-9 Adopted in Finding of Fact 7. COPIES FURNISHED: Jay Adams, Esquire 215 East Virginia Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 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
The Issue Whether Petitioners' applications for Certificates of Need should be approved?
Findings Of Fact Ocala Ocala is a general partnership composed of three partners: Ocala Health Care Associates, Inc., Casterfield, Ltd., and Big Sun Healthcare Systems, the lessee and operator of Munroe Regional Medical Center. Ocala is the current holder of an approved CON for 35 community beds in Marion County. If the 21-bed transfer of sheltered beds to community beds is approved, Ocala intends to operate a 56-bed facility. A 56-bed facility is more viable than a 35-bed facility. At the time of the hearing, there were 642 approved and licensed beds and 215 approved not yet licensed beds in Marion County. The 215 beds include Ocala's 35-bed CON. A patient needing subacute care is one who has been released from acute care status by a physician and is ready to be released from a hospital (acute care) to a less costly facility, e.g. a skilled nursing home. Subacute care patients are those needing, e.g., intravenous tubes, respirators, IV medication, decubitus ulcer care, tracheotomy tubes, or antibiotic therapy. Patients needing subacute care should be placed in a nursing home, since this is less costly than hospital care and it allows for acute care beds in a hospital to be used for patients needing acute care. Skilled nursing homes are authorized to provide subacute care, but are not required to do so. In order to provide subacute care, a nursing home may need additional staff and equipment. There is a problem in Marion County with the placement of subacute care patients in nursing homes. This problem is caused by a variety of factors and usually results in a patient remaining in a hospital longer than is necessary. One factor is that some of the existing nursing homes will not accept patients needing certain types of subacute care, e.g., patients needing ventilators or feeding tubes. Another equally important factor is that the nursing homes want to make sure they will get paid and there is usually some delay in determining how the nursing home will be compensated. Other factors include the patients inability to pay and, on occasion, the unavailability of beds. Ocala intends to use its 35-bed approved CON to provide subacute care. Country Club While the application shows the applicant's name as "Country Club Retirement Center," that is the name of the project. The applicant is Mr. J. E. Holland. Mr. Holland's application is for a 60-bed nursing home which will be part of a 250-apartment continuing care community. The facility is to be located in Clermont, in Lake County. Lake County is in Planning Area VII of HRS District III. Planning Area VII also includes Sumter County. Mr. Keach, the only witness presented by Country Club, is Vice President of National Health Care. National Health Care operates a nursing home in Gainesville, Florida. In addition to operating the nursing home, National Health Care assists persons seeking a CON with preparation of the CON application. Mr. Keach and other National Health Care employees assisted Mr. Holland with the preparation of the CON application submitted in this case. National Health Care will not own or operate Mr. Holland's facility. Mr. Keach is of the opinion that there is need in Clermont for a 60- bed nursing home. He bases his opinion on letters of support for the construction of the facility, on petitions signed by persons attending a public hearing, and on four or five visits to the area. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home. At the time HRS issued its State Agency Action Report there were 958 beds approved and licensed in Planning Area VII. Of these, 838 are located in Lake County, with 142 located in a nursing home in Clermont. Also these are swing-beds providing long-term care at a hospital in Clermont. Finally, there were 236 beds approved not yet licensed in Planning Area VII, with 176 to be located in Lake County. The occupancy rate for the nursing home facility located in Clermont is approximately 89 percent. For the six months ending March, 1988, the occupancy rate for Planning Area VII was below 80 percent. There are at least two nursing homes in operation within a 20-mile radius of Clermont. These two nursing homes are located in Winter Garden and one of them has received a CON to add 89 beds. Twenty-Eight Corporation The applicant in this case is Twenty-Eight Corporation. "The owner of the nursing home will be the Levy Nursing Care Center, a limited partnership, which will be owned and secured by Twenty-Eight Corporation." (28 Corporation, Composite Exhibit 1.) Twenty-Eight corporation seeks approval of a CON for 60 nursing home beds to be operated as part of a continuing care project which will include a 50-unit apartment complex. The facility is to be located in Chiefland, Florida, in Levy County. Levy County is in Planning Area II of HRS District III. Planning Area II also includes Alachua, Gilchrist and Dixie counties. At the time HRS issued its State Agency Action Report, there were 1112 licensed nursing home beds in Planning Area II. Of these, 120 are located in Trenton, in Gilchrist County, 180 are located in Williston, in Levy County, and the rest are located in Alachua County. Also, there are 147 beds approved not yet licensed to be located in Alachua County. Chiefland is approximately 12 miles from Trenton. Williston is approximately 27 miles from Trenton. Mr. Keach was the only witness who testified on behalf of Twenty-Eight Corporation. Mr. Keach is vice-president of National Health Care. (See Finding of Fact 17, supra.) Mr. Keach is of the opinion that there is need in the Chiefland area for a 60-bed nursing home. His opinion is based on letters of support and petitions of support he received for the project. Also, his opinion is based on the fact that there is no nursing home located in Chiefland and the nearest nursing home is located in Trenton, 12 miles away. The 1986 District III Health Plan shows the Trenton facility having an occupancy rate of 99.93 percent. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order denying Petitioners' applications in these three cases. DONE and ENTERED this 3rd day of March, 1989, in Tallahassee, Leon County, Florida. JOSE A. DIEZ-ARGUELLES 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 3rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1862, 88-1863, 88-1864 Rulings on Proposed Findings of Fact Ocala's Proposed Findings of Fact: 1. Accepted. 2-4. Supported by competent, substantial evidence but unnecessary to the decision reached. 5-7. Accepted. Irrelevant. Accepted. Rejected as not supported by the weight of the evidence. There is not an absolute absence of facilities willing to accept all patients needing subacute care. Irrelevant. "Serious concerns" are not what is needed under the Rule. First sentence rejected as recitation of testimony. Second sentence irrelevant; issue is whether nursing homes will accept patients, not whether nursing homes will enter into agreement with MRMC. 13-16. True, but irrelevant. Accepted. (a) Rejected to the extent it implies that the approved facilities would not provide subacute care. Mr. Bailey's testimony is that the facilities refused to enter into a relationship with MRMC; this does not establish that the facilities would not provide subacute care. Rejected as a recitation of testimony. The weight of the evidence shows that some facilities would accept same subacute patients. True, but it is unclear if these are the physician's notations the HRS witness referred to. True that charts and logs were provided, but they did not establish the number of patients in need of subacute care in excess of licensed or approved beds. 19-26. Irrelevant. 27-29. Accepted-for what they are, but insufficient to establish need. Twenty-Eight Corporation's Proposed Findings of Fact: 1-4 Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Accepted. Rejected as hearsay. But see Finding of Fact 31. Mr. Keach testified that Chiefland is 40 miles from Williston. The road map published by the Department of Transportation shows the distance between the two cities at 27 miles. True, but irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. Rejected as hearsay. True, but irrelevant. Rejected as hearsay. Also, a determination by a family member does not establish medical "need". True that this is Mr. Keach's opinion. However, Mr. Keach's opinion is rejected. His opinion of need is not based on what the Rule requires or on what health planners rely on to establish need. Mr. Keach is not able to testify as to the financial feasibility of the facility because he has no first- hand knowledge of the finances. 21-22. Irrelevant. 23. Rejected. See ruling on 10., supra. 24-26. Irrelevant. Rejected as contrary to the weight of the evidence. Irrelevant. Irrelevant; this is not a rule challenge. Irrelevant. True, but irrelevant. Irrelevant. Accepted. Rejected as hearsay. Rejected as not supported by the weight of the evidence. Rejected as argument. Also, unable to determine what the "second portion" is. 37-38. Irrelevant. First phrase accepted. Second phrase rejected to extent implies that only need to show that no other facility exists within 20 miles. Irrelevant. Country Club's Proposed Findings of Fact: 1-4. Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. 14-17. Irrelevant. Rejected as contrary to the weight of the evidence. Accepted. Rejected as not supported by competent evidence; hearsay. Accepted. Rejected as not supported by competent evidence; hearsay. Irrelevant. Rejected as not supported by competent evidence; hearsay. True, but irrelevant. See ruling on 11, supra. Irrelevant. Rejected as not supported by competent evidence; hearsay. Irrelevant. The Rule also recognizes this. Irrelevant. Rejected as not supported by the weight of the evidence and irrelevant. True, but irrelevant. True, but irrelevant. 33-34. True, but irrelevant. This is a de novo proceeding. 35-39. Irrelevant. 40. Rejected as argument. Also, unable to determine what the "second portion" is. 41-42. Accepted 43. Rejected as contrary to the weight of the evidence. 44. True, but irrelevant. Also, there are approved beds within 20 miles, but located in a different HRS District. Leesburg's Proposed Findings of Fact 1-7. Accepted. Rejected as not a finding of fact. Accepted. 10-15. See Conclusions of Law section of RO. Accepted. Rejected as argument. Accepted. Rejected. Fact that need does not exist under HRS rule doesn't necessarily mean that that facility will not be financially feasible. In any event, Country Club was not able to establish financial feasibility. 20-21. See Conclusions of Law. 22. Rejected as argument. 23-28. Supported by competent substantial evidence but unnecessary to the decision reached. Accepted. Rejected as a recitation of testimony. Accepted.- HRS's Proposed Findings of Fact 1-19. Accepted. Rejected. The HRS witness did not specifically state that HRS needs to see the actual physician referral. Accepted. See Conclusions of Law. 22-28. Accepted. See Conclusions of Law. 29. Not a finding of fact. 30-37. Accepted. 38. Irrelevant. 39-42. Unnecessary to the decision reached. Irrelevant. Accepted. 45-46. See Conclusions of Law. Accepted. Accepted. Not a finding of fact. 50-65. Accepted. See Conclusions of Law. 66. Not a finding of fact. 67-71. Accepted, but Ocala's Exhibits 6 & 7 are not amendments to the application but simply more of the same information that was provided with the application. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 First Florida Bank Building Suite 600 215 South Monroe Street Tallahassee, Florida 32301 Theodore Mack, Esquire Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 R. Bruce McKibben, Jr., Esquire 307 West Park Avenue Post Office Box 10651 Tallahassee, Florida 32302 Grafton Wilson, II, Esquire 711 NW 23rd Avenue, Suite #4 Gainesville, Florida 32609 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue The broad issue in this proceeding is whether either of the petitioners should be granted a community nursing home CON. The parties disagree as to the appropriate application of the need methodology described in Rule 10-5.011(1)(k), F.A.C. Both Petitioners argue that the approved bed inventory should be determined as of December 1, 1986, at the same time that the number of licensed beds was determined for the January 1987 batching cycle. HRS computed approved beds as of the date that the supervisor signed its State Agency Action Report (SAAR), in May 1987. The parties further disagree as to the effect of subsequent changes to a Final Order in Wuesthoff Health Services, Inc., et al. v. HRS, cited above, originally entered in April 1987.
Findings Of Fact BMI's application number 5010, and Manor's application number 5022, were timely filed for review by HRS in the January 1987 batching cycle. Both applications were denied in HRS' State Agency Action Report (SAAR) dated May 19, 1987. BMI previously received a CON for 73 nursing home beds in Brevard County. Its current application is for 47 additional beds, to create a single 120-bed facility. The entire facility is currently under construction, with the intention that the portion unlicensed as nursing home beds will be utilized as a distinct section of adult congregate living facility (ACLF) beds. Manor also previously received a CON for 60 nursing home beds in Brevard County. CON number 3828 was granted in a prior batching cycle after the current application for 120 beds was filed. At the final hearing, Manor explained that it is now seeking only 60 more beds as it intends to construct a 120-bed facility in Brevard County. In their pre-hearing stipulation the parties agreed that if numeric need is demonstrated, numeric need would first be met through partial or total approval of BMI's application. If the need exceeds 47 beds, the excess should be applied toward determination of approval of Manor's application. The parties also stipulated that all criteria, except those directly related to numeric need for the projects, have either been satisfied by both applicants or are not applicable to this proceeding. In calculating bed need for Brevard County, the parties have agreed, through their exhibits and testimony, that the first portion of the need methodology in Rule 10-5.011(1)(k), F.A.C., yields a subdistrict allocation of 1560 community nursing home beds. It is further undisputed that the relevant number of licensed beds for the period in question is 1,180 beds. The version of Rule 10-5.011(1)(k) F.A.C. in effect at the time of review requires that licensed beds be counted as of December 1, 1986, for the January 1987 batching cycle. The rule is silent as to when approved beds should be counted. Both applicants argue that approved beds should be counted at the same time as licensed beds for consistency and planning purposes. The current version of Rule 10-5.011(1)(k) F.A.C., known as the fixed pool rule, establishes a bed need for each batching cycle, thus providing the certainty and consistency sought by Petitioners' health planners. Prior to its adoption of the fixed pool rule, HRS experimented with various policies as to the determination of "current" data utilized in the need methodology. At the time of the January 1987 batching cycle, HRS' non-rule policy regarding approved beds was to count those beds as of the date that health services and facilities consultant supervisor signs off on the SAAR. In this case, that individual was Reid Jaffe, and the date was May 11, 1987. At the hearing, Mr. Jaffe explained the policy was an attempt to reach a balance between deriving a proper number of beds and minimizing the duplication of services and overbedding. Because the need for future beds is partially predicated on how many beds have already been approved, the Department felt it necessary to take into consideration all those beds which had been approved up until its decision time. Generally the difference between the number of beds published in initial projections of need by HRS' Office of Comprehensive Health Planning and the number of approved beds considered at the time of the decision, are those beds which were approved in final orders issued during that period. Contrary to Petitioners'assertions, those beds which became licensed after the December 1st cut-off date, but before the SAAR sign off, were not lost, but rather were computed by HRS as "approved" beds under the policy. The policy described by Reid Jaffe in his testimony at final hearing is also reflected in HRS' Final Order in Broward Healthcare, Ltd., d/b/a Broward Convalescent Center v. Department of Health and Rehabilitative Services, 9 FALR 1974 (DOAH #86- 2708, Order dated March 21, 1987), aff. per curiam, without opinion, January 21, 1988, 1st DCA case no. BT-258. Utilizing the HRS policy of counting approved beds at the time the supervisor signs the SAAR yields the following total: Approved Facilities Beds Date Approved West Melbourne Health Care 60 7/27/84 Unicare Health Facility of Brevard 120 5/30/86 Brevard Medical Investors 73 9/02/86 Meridian 60 2/ /87 Palm Bay Care Center 60 4/17/87 Forum Group 60 4/17/87 Courtney Springs 36 4/17/87 Total 469 In its SAAR, HRS neglected to include the 60 beds approved for Meridian. These beds were properly included by the applicants' health care planner in her adjustment to the SAAR count and HRS agrees the beds should be included. (See transcript, p. 20 and HRS proposed finding of fact #6.) In June 1985, Courtney Springs received a CON for 36 beds in Broward County. The action was challenged, and the proceeding was consolidated with challenges by other applicants who were denied CONs in the same batching cycle. Wuesthoff Health Services, Inc., et al. v. Department of Health and Rehabilitative Services and Courtney Springs, consolidated cases #85-2868, 85- 2936, 85-2934, 85-3243, 85-3322, 85-3365, 85-3366. In its Final Order, filed on April 17, 1987, HRS granted 60 beds each to Palm Bay Care Center, Forum Group and Courtney Springs. The Final Order was corrected on May 19, 1987, to provide that the award to Courtney Springs was 36, rather than 60 beds, as there was no intent to award the facility more beds than originally provided. In all other respects the final order of April 17, 1987, remained in full force and effect. On July 6, 1987, another order was entered and styled "Amended Final Order." The stated purposes of the amendment were to correct a scrivener's error in failing to serve the final order on a moving party, Brevard Medical Investors, Ltd., (BMI) and to give that party an "opportunity to exercise its right to judicial review." The Amended Final Order addressed BMI's lack of standing for failure to file a timely petition to intervene in the consolidated Wuesthoff cases. This is the only subject of the amended final order. The original final order, dated April 17, 1987, did not address this subject. It is not at all clear that the "Amended Final Order" dated July 6, 1987, amends the April 17, 1987, Final Order, since it references only an April 9th Final Order, not the April 17th Final Order. The record in this proceeding does not include a subsequent correction of "scriveners error", if indeed the referenced date was an error. The applicants argue that the 120 beds awarded to Forum Group and Palm Care should not be regarded as ?approve even under HRS' policy, since the amended final order was dated in July 1987, well after the SAAR was signed by Reid Jaffe in May. Application of this theory would result in 349 approved beds, and a net bed need of 66 beds in the January 1990 planning horizon. (Manor Care, exhibit #5) Application of Petitioners' theory that approved beds should be counted on December 1, 1986, results in 289 approved beds, and a need for 120 beds in the January 1990 planning horizon. HRS' application of its policy regarding the time at which approved beds are to be counted results in 469 approved beds, and a surplus of 42 beds in the January 1990 planning horizon. There is no evidence in this proceeding of circumstances which would justify the approval of beds in excess of a net bed allocation derived through the bed need methodology in Rule 10-5.011(1)(k), F.A.C.
Recommendation Based on the foregoing, it is, hereby RECOMMENDED: That the CON applications by BMI and Manor for nursing home beds in Brevard County be denied DONE and RECOMMENDED this 1st day of April, 1988, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of April, 1987. APPENDIX TO RECOMMENDED ORDER The following reflect on my specific rulings on the findings of fact proposed by the parties: Petitioners' Proposed Findings Adopted in paragraph 1. Adopted in paragraph 5. Adopted in paragraph 4. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Reid Jaffe testified that need for 12 beds exists, but this conclusion did not include the 60 beds approved for Meridian in February 1987. Rejected as contrary to the weight of evidence and to the legal effect of the changes to HRS' April 1987 Final Order. Adopted, as to the characterization of applicants' position, in paragraph 7. Adopted in paragraph 7. Rejected as contrary to the weight of evidence. Rejected as unnecessary. 11-12. Adopted in paragraph 8. Rejected as contrary to the evidence and law. Rejected as contrary to the evidence. Rejected as unnecessary. Rejected as immaterial. Rejected as irrelevant. 18-19. Rejected as immaterial. Adopted in paragraph 7. Adopted in paragraph 3. 22-26. Rejected as immaterial and irrelevant. Respondents' Proposed Findings 1-2. Adopted in paragraph 1. Adopted in paragraph 3. Adopted in paragraph 2. Addressed in paragraph 11. Adopted in paragraphs 9 and 10. Adopted in paragraph 8. Adopted in paragraph 10. 9-11. Rejected as unnecessary. Adopted in paragraph 6. Adopted in paragraph 9. Adopted in paragraph 15. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 Donna H. Stinson, Esquire Moyle, Flanigan, Katz, Fitzgerald & Sheehan, P. A. The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 Theodore E. Mack, Esquire Department of Health and Rehabilitative Services Regulation and Health Facilities 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Heritage Hall is a partnership, domiciled in the State of Virginia, which owns and operates ten nursing homes in that state. Heritage Hall did not, at the time of the close of this record, own or operate, nor have under completed construction, any nursing home in Florida. Heritage Hall filed a "letter of intent to construct, own and operate a 60-bed nursing home in the counties of Collier, DeSoto, Highlands, and Lee. On July 15, 1983, Heritage Hall filed the specific Certificate of Need application at issue with HRS, requesting authorization to construct a 60-bed freestanding nursing home in DeSoto County. That application was deemed complete on September 15, 1983, and a free form decision was made to grant it by HRS on December 1, 1983. The proposed nursing home would be located in the vicinity of Arcadia, in DeSoto County, a subdistrict of HRS District VIII. Diversicare Corporation, Inc. d/b/a DeSoto Manor Nursing Home (DeSoto Manor), (Diversicare), owns and operates DeSoto Manor Nursing Home, an existing 60-bed nursing home facility located in Arcadia, DeSoto County, Florida. On November 3, 1983, Diversicare filed a Letter of Intent with HRS announcing its intention to seek a Certificate of Need for an addition to its DeSoto County facility. It ultimately filed an application seeking authorization for a 36-bed nursing home addition on January 12, 1984. No additional information was requested by HRS and the application became complete by operation of law on March 15, 1984. That application is thus in a separate and later batch for purposes of Rule 10-5.08, Florida Administrative Code, and thus was not comparatively reviewed with the application in the case at bar as a competing application. On May 1, 1984, HRS notified Diversicare of its intent to deny its application for the 36-bed addition. Heritage Hall proposes to construct a 60-bed nursing home at a total cost of $1,597,293. This specific cost of construction, not including land acquisition cost, is proposed to be $1,070,740. The nursing home's cost of construction allocated on a per bed basis would be $26,622. Heritage Hall proposes to finance this project to a tax-exempt bond issue in an aggregate amount of $1,436,075, carrying a 10 percent interest rate with a 30-year maturity. Additionally, the Heritage Hall partnership would invest $161,218. Heritage Hall projects that once it begins operation of the proposed new nursing home, that a 97 percent occupancy level for the proposed 60 beds would be reached within six months. Included within that projection, Heritage Hall projects that 49 percent of the patient revenues would come from Medicaid reimbursement, that 10 percent would come from Medicare reimbursement, and that 40 percent of its revenues would be attributable to private paying patients, not included within any relevant government entitlement programs. The remaining one per cent of its patient revenue base would be charged off and attributable to bad debt, or indigent patients. Heritage Hall proposes charges for its Medicare and Medicaid patients to constitute $62.39 per day, and its charges for private paying patients would be $68.00 a day for a private room, and $65.00 per day for a semiprivate room. It proposes to staff its facility with five registered nurses, six licensed practical nurses (LPN), 17 nurses aides, and an administrative and miscellaneous employee staff of 16, for a total staff for a 60- bed nursing home of 44 employees. DeSoto Manor's present patient population is largely composed of Medicaid and Medicare patients, such that 84 percent of its revenue is derived from Medicaid and Medicare sources. Its private paying patients are a small minority contributing 16 percent of its total patient revenues. DeSoto Manor has consistently experienced 99 - 100 percent occupancy for all of 1983 and 1984, upon which is earned a net income for fiscal year 1983 of approximately $15,000. DeSoto Manor presently employs on its staff 2.2 registered nurses, 5.6 LPN's, 17.1 aides, and 17.4 administrative and miscellaneous employees, those figures being expressed in terms of full-time equivalent employees in those categories. DeSoto Manor's application filed in a later batch is not at issue in this proceeding, in terms of comparative review for the purpose of determining whether Heritages Hall or DeSoto Manor is entitled to a Certificate of Need for DeSoto County nursing home beds as a result of this proceeding. Such a proposal, however, to add additional beds to an existing nursing home, is worthy of consideration as an alternative means of providing nursing home services to the public in District VIII, and specifically the subdistrict of DeSoto County, pursuant to authority cited infra. In that vein, DeSoto Manor proposes to add 36 additional beds at a total cost of $767,337, including involving a construction cost of $541,280, which is equivalent to a $21,260 cost per bed for the proposed 36-bed addition. DeSoto Manor would require the equivalent of 17.3 full time additional staff members, if such an addition (a 36-bed addition) were approved and built. DeSoto Manor charges will be (on January 1, 1985) $45.56 a day for Medicaid and Medicare patients, and $47.00 a day for its private pay patients. If its 36-bed addition were installed, it would charge $49.31 per day for Medicaid and Medicare patients, and $53.00 a day for private paying patients. DeSoto County is a relatively small county geographically, located inland from the counties bordering the Gulf of Mexico in District VIII. It is a rural county in character, as that term relates to its economic base being largely agriculture, and its low population density, with its population center being in the only sizable community of Arcadia, the county seat, located approximately in the geographic center of the county. It is surrounded by Sarasota, Charlotte, Highlands, and Hardee Counties. Highlands and Hardee Counties are in District VI, with Sarasota, Charlotte and DeSoto Counties being in District VIII, as are Lee, Collier, Glades and Hendry Counties. In 1987, DeSoto County is expected to have a population of 3,749 persons age 65 and over. The county is not experiencing a significant rate of growth at this time, nor is it expected to through 1987, the pertinent "horizon" year. Pursuant to Rule 10-5.11(21), Florida Administrative Code, the nursing home bed need methodology, HRS computes a need for additional nursing home beds in its health care districts and sub-districts, first by determining "actual need" or the "area specific bed need allocation." The actual need for additional nursing home beds is computed by means of a population based formula embodied in that rule. The second step of the need/availability determination process involves determining how many beds above or below the actual need determined may be added before the utilization in the district or subdistrict falls below 80 or 85 percent. The actual need or "area specific allocation" is determined by multiplying the poverty ratio for the district or subdistrict by the statewide nursing home bed need ratio of 27 per 1,000 persons age 65 and older, and the population of the district or subdistrict age 65 and older, and then subtracting from this computation the number of existing nursing home beds within the district or subdistrict. Within District VIII, the poverty ratio equals 8.61 divided by 12.70, the relevant population of the district for the applicable year being 213,561, with the population for DeSoto County, as a subdistrict, being 3,749 persons age 65 and older. There were 3,671 licensed nursing home beds in District VIII at the time of the hearing, and there were 1,130 beds approved, but not yet licensed or open in the district. There were 60 licensed and operating nursing home beds in DeSoto County. There were 3,904 actually "needed" or allocated beds in District VIII, which, when added to those beds approved but not yet licensed and operating, total an aggregate of 4,801 licensed and approved beds in the district. Thus, there are 997 excess nursing home beds over and above those actually needed in District VIII by 1987, according to the population based formula used in the first part of the need/availability determination process embodied in the above-cited rule. There is an actual need in DeSoto County alone of nine additional nursing home beds by 1987, based upon the subdistrict actual need allocation determined by the first part of the above methodology process of 69 beds. The second part of the need/availability determination process computes how many additional beds can be added to a district or subdistrict before the occupancy rates of nursing home beds in the district or subdistrict fall below the applicable rule mandated percentage. In DeSoto County, the applicable percentage is 80 per cent, because the subdistrict of DeSoto County indicates some need for additional beds, although the district as a whole has excess beds with no additional actual bed need shown. Thus, based upon the entire applicable computation, 15 beds may be added to DeSoto County before utilization of nursing home beds in the county will drop below the threshold of 80 percent. It has thus been established that if 60 beds are added to the bed supply in DeSoto County, for instance by a grant of the instant application, the utilization of nursing home beds will decline to approximately 50 percent. Under the above rule methodology, HRS, in adhering to the requirements of that rule, would not normally grant a certificate of need when only a small number of additional nursing home beds are computed to be available under that formula, that is, for a new freestanding nursing home facility. It is undisputed that construction of a new nursing home of less than 60 beds is not considered to be financially feasible. That rule of thumb does not apply, however, to the addition of beds to an existing, already-built parent facility, and it is undisputed that the addition of needed beds to an existing facility is more cost-effective in terms of construction costs and staffing, than the construction of a new facility. In its review process, with regard to the instant application and proceeding, HRS did not consider the alternative of adding new needed beds to the existing facility operated by Diversicare (DeSoto Manor), since the Diversicare application was not filed in the same batching cycle as the application at bar filed by Heritage Hall. Although the nursing home bed need determination formula reveals a maximum need of 15 beds for DeSoto County by 1987, HRS proposes to approve 60 beds in conjunction with the Heritage Hall application. In its review process, HRS took into account the fact that DeSoto and surrounding counties in District VIII were experiencing high occupancy rates as to existing licensed beds, and took the position then and in this proceeding that residents of DeSoto County needing nursing home care would have difficulty finding available nursing home beds. HRS failed to take into consideration, in its review process, the additional number of nursing home beds which had been approved in surrounding counties (as pertinent hereto, the surrounding counties of District VIII), but which were not yet licensed and actually operating. Thus, at the time of hearing there were 301 approved but not yet opened beds in Charlotte County, 97 approved but not yet operating beds in Collier County, 222 approved but not yet opened beds in Lee County and 597 approved but not yet operating beds in Sarasota County. Thus, the approved but not yet licensed and operating beds will result in an increase of 1,217 beds available, when open, to the residents of DeSoto and the adjacent counties of District VIII. 1/ The applicant and HRS seek to justify the approval of 60 additional beds in DeSoto County by reference to the high utilization rates being experienced in adjacent counties. As pertinent hereto, Charlotte County was experiencing an occupancy rate of 99 percent, Sarasota was at 88 percent occupancy, Lee County at 91.5 percent, with Collier County at 64.5 percent. Those figures do not take into account the latest nursing home District VIII occupancy figures as of June 29, 1984 which reflect the above-discussed additional approved, but not yet opened beds, and which result in the occupancy rates in these counties falling substantially. Thus, Charlotte is now experiencing only an 80.4 percent occupancy, for instance, with Sarasota County falling to a 78.5 per cent occupancy, with lowered occupancy rates resulting in Lee and Collier County as well with the addition of the approved, but not yet opened beds. These lowered occupancy rates resulting from the opening of these approved, but not yet licensed beds, were not considered by HRS at the time of its initial review, and free form grant of the certificate of need at issue. The opening of these hundreds of additional beds will continue to reduce occupancy in those counties and provide available beds to residents of District VIII and to residents of DeSoto County, to the extent those beds in the other counties are deemed accessible. HRS admitted at hearing that the availability of beds has increased in the district since its first review of the application. The financial feasibility of the Heritage Hall proposal depends upon an assumed 97 percent occupancy in its sixth month of operation, and projects that 40 percent of the revenues will be derived from private, paying patients. The 97 percent occupancy is an optimistic projection however, because only nine beds are shown to be actually needed in the county by 1987, and only 15 beds can be added before occupancy will drop below 80 percent. The addition of 60 beds would drop occupancy at DeSoto Manor and the proposed Heritage Hall facility, if built, to 50 percent. The Heritage Hall projection for revenues from private, paying patients which is 40 percent, is substantially more than the current revenue source from private, paying patients experienced by DeSoto Manor of 16 percent. In order to achieve such an occupancy rate in such a short time, and such a higher percentage of private, paying patient revenues, Heritage Hall must aggressively market its new facility and nursing home service so as to attract private, paying patients. Based upon historical evidence of record, it is likely that the patient base in DeSoto County itself will not support such a high percentage of private, paying patients and such patients will doubtless have to come from other areas or counties in the district, specifically the counties lying along the coast of District VIII. There is no evidence to establish that nursing home patients in the coastal counties have any inclination to seek nursing home care in DeSoto County, particularly because those coastal counties are already experiencing lowered occupancy rates, and nursing homes there need more patients. There is thus no demonstration that residents of the coastal counties in District VIII (or other adjacent counties for that matter) would travel to DeSoto County for nursing home care when there are empty beds available to them closer to their homes or the homes of their families in those counties. Heritage Hall proposes to recruit its staff from DeSoto County and the surrounding geographical area. DeSoto Manor however, itself is currently experiencing severe problems in recruiting registered nurses for its facility, in spite of repeated advertising and recruitment attempts. Potential staff members share a reluctance in becoming employed at DeSoto Manor, which lies in an isolated, rural area, and which must compete with the many nursing homes lying in the coastal areas in the other counties of District VIII for staff, and which areas offer more living amenities in general, than does the isolated, rural, small community setting in which DeSoto Manor is located. Indeed, other District VIII nursing home administrators have contacted the administrator of DeSoto Manor, in her capacity as administrator, as well as in her capacity as president of the Florida Health Care Association for District VIII, seeking assistance in obtaining additional staff for their facilities. Approval of the Heritage Hall application will, in effect, double the competition for staff members for nursing homes in DeSoto County, and will concomitantly, increase DeSoto Manor's present difficulties in obtaining and retaining appropriate employees. In calculating the financial impact which an additional 60-bed nursing home would have on the existing DeSoto Manor facility, DeSoto Manor assumed that the number of nursing home beds said to be available before occupancy dropped below 80 per cent, which includes the proposed 15 additional beds, would be full of patients and that these patients would be evenly split between the two nursing homes in the county. Thus, each nursing home would have approximately 37.5 patients in its respective 60-bed facility. In this event, and taking into account the concomitant reduction in staff, salaries and other per patient expenses because of a reduction in the number of patients, the proposed Heritage Hall facility would likely experience a net loss of approximately $232,587 for the first year of operation of its additional facility. DeSoto Manor's Medicaid reimbursement revenues would fall $31,722 below DeSoto Manor's actual cost of providing Medicaid patient care. Thus, in order to recover lost revenues and achieve a break-even profit and loss status, a significant increase in patient charges over existing charges would be necessary. The weight of such increase in patient charges would have to fall upon the private, paying patients in the revenue mix of each nursing home, because of the inflexible nature of the current Medicaid reimbursement scheme. In evaluating the DeSoto County population's accessibility to nursing home services, HRS admittedly did not take into account the provisions of Rule 10-17.020(2)(b), Florida Administrative Code, which is the local health plan as it relates to nursing home planning adopted in the most current HRS rules. This local health plan provides for nursing home services to be available within a one hour travel time by automobile for at least 95 percent of the residents of District VIII. The president of the District VIII chapter of the Florida Health Care Association, who is the administrator of DeSoto Manor, is aware of at least ten nursing homes within a one hour drive of Arcadia and at least three others within that radius which are under construction, a significant number of which are in District VIII. Arcadia is located in the center of DeSoto County. All counties surrounding DeSoto County in District VIII have substantial numbers of approved beds which have not yet been opened and at least Sarasota and Charlotte Counties, which are adjacent to DeSoto County have occupancy rates in the neighborhood of 80 percent or less. The applicant did not establish, in furtherance of its attempted justification of 60 additional beds for DeSoto County, the lack of accessibility to DeSoto County nursing home patients of beds in the adjoining counties of District VIII, especially Charlotte and Sarasota, inasmuch as it was not established that those nursing homes in those coastal counties are more than an hour's driving time from the center of DeSoto County. Although, as witness Straughn for HRS established, Sarasota or the more westerly parts of Sarasota County, are approximately 49 miles and roughly an hour driving time from DeSoto County, it was not established that there are not nursing homes available in closer parts of Sarasota County which are accessible in less than an hour's driving time to DeSoto County residents and/or patients. Indeed, witness Porter testifying after the hearing by deposition, established that most of the nursing homes in the coastal counties involved in this proceeding, are within "40 some miles" from the present DeSoto Manor facility and the proposed Heritage Hall facility. Indeed, witness Porter established that Port Charlotte, in the immediate vicinity of which are several nursing homes, and which county is experiencing now an 80.4 percent occupancy rate (with the above-mentioned numbers of approved but not yet installed beds) is only 25 miles from the proposed Arcadia location. Thus, the criteria of the above rule which HRS witnesses failed to take into account, encompasses nursing home beds available or approved in the coastal counties referred to, which are accessible to patients in DeSoto County.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the relevant legal authority, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order DENYING the application of Heritage Hall to construct a new 60-bed nursing home facility in DeSoto County, Florida. DONE and ENTERED this 28th day of January, 1985, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1985.
Findings Of Fact 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 parties present at the hearing stipulated to the following facts which are hereby entered as findings of fact: All letters of intent submitted by the applicants involved herein with the exception of FCC were timely filed on or before December 15, 1984 and the relating applications by these applicants were timely filed on or before January 15, 1985. As a result, these applications addressed a January, 1988 bed need planning horizon. All applications, as mentioned above, were deemed complete by DHRS and were reviewed under a January, 1988 bed need planning horizon. All applications as cited above, were preliminarily denied by DHRS based on a lack of need and notice of these denials were timely published in the Florida Administrative Weekly. All unsuccessful applicants herein thereafter timely filed petitions for formal administrative hearing to contest the denial of their applications. The application filed by FCC for CON number 2738, filed by the applicant in July, 1983, and addressing a July, 1986 bed need was initially denied by DHRS in November, 1983. FCC thereafter timely filed a petition for formal, administrative hearing contesting the denial of this application and on January 10, 1985, DHRS and FCC entered into a stipulated settlement in which DHRS agreed to grant CON Number 2738 to FCC. This CON was issued to FCC on January 19, 1985, for 91 community nursing home beds and on March 15, 1985, a Final Order was entered by DHRS confirming the grant off CON Number 2738 to FCC. FCC's original application under CON Number 2738 was for a 120 bed community nursing home to be located in Indian River County, Florida. DHRS's initial denial of FCC's application was based on a lack of bed need at the time. When DHRS entered into the stipulation with FCC reversing its position and granting a CON to FCC for 91 community nursing home beds, it did so on the basis of bed need figures utilizing statistics relating to the subsequent January, 1988 bed need planning horizon even though FCC's application did not pertain to that planning horizon. In fact the beds taken and awarded to FCC came from the fixed pool of beds that, under the DHRS rule in effect at the time, was reserved for applicants in the January, 1985 batching cycle with a planning horizon of January, 1988. Rule 10-5.11(21)(b), F.A.C., sets out the bed need rule methodology for determining projected need for new or additional community nursing home beds. Pursuant to this rule, need is projected three years into the future. The methodology provided in this rule is clear and reasonable. If this methodology is followed precisely as set forth in the rule and utilizing the DHRS statistics available to personnel in the health care professions, such as its semi-annual nursing home census report as well as the Florida population estimates and projections by DHRS district and county, a net bed need of 116 additional beds in Indian River County is established for the period January, 1988. This figure does not, however, include an award of 91 beds to FCC under CON Number 2738 by DHRS under the terms of its settlement and those 91 beds are included within the 116. The expert testifying for the applicants herein concluded that the award of the 91 beds to FCC outside its planning horizon was erroneous and improper and based on no calculation of bed need appropriate to the applicant's original July, 1986 planning horizon and it was so found. In this case, DHRS, by awarding beds to FCC from a subsequent planning horizon is implementing a bed need policy which establishes a "planning horizon" three years from the date the Petitioners' applications were filed but updating all available data to that existing as of the date of the final hearing. This would include July, 1986 population data, current licensed beds, current approved beds, and the latest occupancy rate. The procedure followed by DHRS here is, however, a DHRS policy interpretation rather than a literal interpretation of the rule and the DHRS expert was unable to establish or in any way justify DHRS' policy of updating all data to the date of hearing in contravention of the terms of its own rule. If the unjustified and unsubstantiated DHRS policy were accepted and utilized here, calculations would reflect a surplus of 70 nursing home beds in Indian River County for the January, 1988 planning horizon as opposed to the more reasonable and rational bed need of 116.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED THAT Certificate of Need Number 2733, previously issued to Florida Convalescent Centers be rescinded and that the 91 beds relating thereto be returned to the January, 1988 planning horizon fixed pool. It is further recommended that the Secretary, Department of Health and Rehabilitative Services remand the case to the Division of Administrative Hearings for the conduct of a comparative hearing to evaluate the pending applicants within that batching cycle. RECOMMENDED this 28th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1987. APPENDIX The following constitutes my specific ruling pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by National Health Corporation, FMSC and Forum 1. Incorporated in Finding of Fact 4 except for the actual calculations outlined in the formulas which are incomplete. 2 & 3 Incorporated in Finding of Fact 5. 4-6 Incorporated in Finding of Fact 5. 7-13 Incorporated in Finding of Fact 6. 14 Not a Finding of Fact. Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation Incorporated in Finding of Fact 4 except for the citation of the rule which is incomplete. Accepted. Accepted. Accepted and incorporated. 5-9 Accepted. 10 & 11 Accepted. 12 Rejected as not the best analysis. Rulings on Proposed Findings of Fact Submitted by Beverly Enterprises 1-3 Accepted. 4-6 Incorporated into Findings of Fact. 7 & 8 Accepted. Rejected as legal argument and not a Finding of Fact. & 11 Accepted. Rejected as legal argument and not a Finding of Fact. Cumulative to other findings. Rejected as legal argument and not a Finding of Fact. Incorporated in Finding of Fact. 16-20 Legal Argument not a Finding of Fact. 21-22 Cumulative to other evidence of record. Rulings on Proposed Findings of Fact Submitted by DHRS 1-3 Accepted. 4-8 Rejected as not supported by the weight of the evidence. 9 Accepted as to the calculation including the 91 beds available to FCC. Rejected as to the propriety of the award and the reason. Copies Furnished: William Page, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 200 South Monroe Street Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Post Office Box 10555 Tallahassee, Florida 32302 John Rodriguez, Esquire, Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Which of two competing applications for nursing home beds better meets the statutory and rule criteria to satisfy the numeric need for 79 additional beds in Agency for Health Care Administration District 7, Subdistrict 1, Brevard County.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the single agency responsible for the administration of certificate of need ("CON") laws in Florida. AHCA published a numeric need for an additional 79 beds in District 7, Subdistrict 1, for Brevard County for the July 1996 planning horizon. There was no challenge to the numeric need determination. After reviewing the applications of Holmes/VHA Long Term Care Joint Venture ("Holmes/VHA") and National Health Corporation d/b/a NHC of Merritt Island ("NHC"), among others, AHCA published its intent to approve the application of NHC and to deny that of Holmes/VHA. The State Agency Action Report ("SAAR") issued on March 13, 1994, for the July 1996 Planning Horizon, summarizes AHCA's review of the applications and the reasons for its decision. Holmes/VHA timely challenged AHCA's preliminary approval of CON 7527 to NHC and denial of CON 7539 to Holmes/VHA. In a pre-hearing stipulation, the parties agreed that the specific statutory criteria at issue, related to the contents of the letter of intent and application are subsections 408.037(2)(a), (2)(c), (4) and 408.039(2)(c), Florida Statutes. The parties also agreed that the CON review criteria at issue are subsections 408.035(1)(a), (b), (d), (e), (h), (i), (l), (m), (n) and (0), and 408.035(2)(e), Florida Statutes. The parties stipulated to the need for 79 additional community nursing home beds in the subdistrict. At the formal hearing the parties also agreed that quality of care is not at issue and that staffing schedules and proposals to fund or finance both projects are reasonable, thereby removing from consideration subsections 408.035(1)(c) and portions of (1)(h). HOLMES/VHA Holmes/VHA, the applicant for CON 7539, is a Florida general partnership formed between Holmes Regional Enterprises, Inc. ("Holmes Enterprises"), a Florida not-for-profit corporation, in Brevard County, Florida, and Vantage Health Systems, Inc., d/b/a VHA Long Term Care ("VHA"). The partnership, Holmes/VHA, owns and operates an existing 120-bed nursing home, Holmes Regional Nursing Center ("Holmes Nursing Center") in Melbourne. VHA is a division of Service Master Diversified Health Services of Memphis, Tennessee, which manages 106 facilities in 30 states. Holmes Enterprises operates Holmes Regional Medical Center ("Holmes Regional"), a 528-bed acute care hospital, with open heart surgery and neonatal intensive care services and approval for 30 skilled nursing beds. Sixty of Holmes Regional's licensed beds are located at Palm Bay Community Hospital in Palm Bay, approximately 8 to 15 miles south of Holmes Regional. Although it is a separate municipality, Palm Bay was described as a suburb of and contiguous to Melbourne. The site for the Palm Bay Center, which is across the street from Palm Bay Community Hospital, is in another community known as Mallibar. VHA has entered into similar partnerships with acute care hospitals in Jacksonville, Florida, and Greensboro, North Carolina, to operate nursing homes in those areas. The Service Master organization provides management and support services, including data processing, legal, personnel, dietary, and architectural and design services for nursing homes. Holmes/VHA, the joint venture general partnership, has a management committee of four people, two from the hospital and two from the VHA company. The management committee, functioning like a board of directors, adopted a resolution authorizing Holmes/VHA to file the Con application. When formed, the joint venture obtained an older 60-bed facility, and then constructed a replacement facility. During the construction, it obtained a 60-bed CON from another company and combined beds to build its existing 120-bed nursing home, Holmes Nursing Center. Holmes Nursing Center is rated superior and offers inpatient and outpatient rehabilitative and restorative services, including a head and spinal cord injury program. The rehabilitative services are directed by Holmes Regional, which is located a block and a half from the nursing home. The original CON for Holmes Nursing Center required that 35 percent of total patient days be provided to Medicaid. The requirement was increased to 45 percent with the 60-bed addition, which Holmes Nursing Center has exceeded. The 120 beds are divided into 20 percent Medicare certified, 50 percent Medicaid certified and 30 percent non-certified or private pay. Holmes Nursing Center also operates a 24-bed subacute unit for persons qualifying under Medicare criteria for skilled nursing care. Patients in the unit receive intensive assessments on each nursing shift and services which include pain, respiratory, and wound management. Holmes Regional Hospice, Inc. ("the hospice") is an affiliate of Holmes Enterprises, for which Holmes Regional holds the CON to take care of hospitalized hospice patients The current hospice census of over 200 patients includes 70 percent cancer, 9 percent AIDS, and 21 percent other terminal illnesses, such as heart disease and Alzheimers. Holmes/VHA applied for a CON to construct the 79-bed Palm Bay Nursing and Rehabilitation Center ("Palm Bay Center") conditioned on the provision of 61 percent of total patient days to Medicaid and the establishment of a 12-bed sub- acute unit, one room for hospice patients, inpatient and outpatient rehabilitative therapy, and respite care. The total gross square footage is 42,691 square feet. The Holmes Enterprises affiliates propose to provide support services for the Palm Bay Center, as they do for Holmes Nursing Center. The estimated total project cost for the Palm Bay Center is $4,732,790, of which the construction cost is $82,720,000 or $63.71 a square foot. An equity contribution of land valued at $420,000, will be provided by the hospital. Service Master will provide the funds or obtain financing for the project. The assumptions in the pro forma, including the expectation that interest may be due for a commercial loan, are reasonable. AHCA's expert's conclusion that the project is financially feasible is accepted. The financing by Service Master can be structured to avoid being treated as a related party transaction, which would adversely affect Medicaid and Medicare reimbursements. Holmes/VHA listed as capital projects three other pending CON and an additional $25,000 in annual capitalized routine expenses for furniture, fixtures and equipment attributable to Holmes Regional Nursing Center. The total of the capital projects listed on Schedule 2 of the application is $13,256,701. NHC National HealthCorp, L.P. ("NHC"), the applicant for CON 7527, began operations in 1986, with 14 nursing homes. Currently, NHC owns or manages 96 nursing homes primarily in the southeast United States. It manages 36 nursing homes in Florida, 6 of which are also owned by NHC. NHC proposes to add 60 beds to National Healthcare Center of Merritt Island ("NHC-Merritt Island"), a superior rated, 120-bed community nursing home on a 7 acre site in Merritt Island, Brevard County. NHC-Merritt Island has a 22-bed Alzheimers' unit. NHC's regional office provides support services, including speech, occupational, and physical therapies, nursing, dietary, and administrative services to NHC-Merritt Island. With the addition of 60 beds, NHC intends to provide respite care, a dedicated 20-bed subacute unit, and an additional 16-bed Alzheimers' unit. Without a subacute unit, NHC already has an average census of 9 subacute patients. NHC will triple the size of the therapy space and more than double the size of the building. The projected total capital expenditure is $3,891,850, with construction costs of $2,955,000, or $85.00 a square foot. To accommodate the addition, NHC has entered into a contract to purchase an additional 1.3 acres, adjacent to the current 7 acres, for a cost of $175,000. For the past few years, NHC has experienced 94 to 100 percent occupancy. Fifty-four people are on NHC's waiting list and an additional 16 are on the waiting list for the Alzheimers' unit. The projected annual fill-up rates for NHC's additional beds are supported by the demand for its service and its historical experience, even though the monthly fill-up rates in the application are not adjusted to reflect the specific number of days in each month. Medicaid resident days are 55 percent to 57 percent of the total at present, below the 60.31 percent average in the subdistrict and the current 60 percent CON condition. If the expansion CON is approved, NHC will commit to providing 60.31 percent Medicaid patient days and will increase the number of Medicaid certified beds from 77 to 108. NHC was profitable in 1992 and 1993, by approximately $100,000 and $250,000, respectively, but currently is not profitable, with an approximate deficit of $8,000. The deficit is attributable to (1) a decline in the Medicaid reimbursement rate, which was initially higher due to start up costs, (2) the expiration of a new provider exemption from Medicare cost limits, and (3) the transfer of assets by NHC, in exchange for stock, to a newly formed subsidiary, from which NHC-Merritt Island is now leased. Lease payments are $517,000 a year whether the facility has 120 or 180 beds, and profits are returned to stockholders, including NHC. Using Medicaid rates, calculated by the state, as inflated forward, and Medicare rates in excess of routine cost limits, based on the current experience of NHC-Merritt Island, NHC reasonably projected its costs and profit margin. NHC-Merritt Island has a positive cash flow and its expenses and revenues are at the goal set by NHC. With a total of 180 beds, the projections are reasonable that NHC-Merritt Island will be profitable. As AHCA's expert opined, NHC's proposal is financially feasible. Subsection 408.035(1)(a) - need in relation to district and state health plans The 1991 District 7 health plan has three preferences related to nursing homes, one favoring a section of Orange County, is inapplicable to the Brevard County applications. A second, for applicants proposing pediatric services, is inapplicable because both proposals in this batch are to provide adult services. The third preference favors applicants proposing to establish units providing psychiatric or subacute services, with emphasis on treating medically complex patients and AIDS/HIV positive patients. Holmes/VHA's health planner considers the subacute care and AIDS/HIV services proposed by Holmes/VHA superior to those proposed by NHC. NHC, however, proposes to provide specialized care in designated units for both subacute and Alzheimers's patients. Although Holmes/VHA argues that Alzheimers' care is required in every nursing home and is, therefore, not a specialized program, the physical design of a separate unit for such patients was shown to enhance their comfort. No AIDS/HIV positive patient has been treated at either Holmes Nusing Center or at NHC-Merritt Island. NHC-Merritt Island has accepted AIDS/HIV positive patients who did not come to the facility. The state health plan has twelve allocation factors for use in comparing nursing home applications. Both applicants comply with the factors favoring locations in a subdistrict in which occupancy levels exceed 90 percent, proposals to meet or exceed that average subdistrict Medicaid occupancy of 60.31 percent, proposals with respite care and innovative therapies, multi- disciplinary staffing, for staffing in excess of minimum state requirements, and which document means to protect residents' rights and privacy. Both Holmes/VHA and NHC also meet the preference for proposing charges that do not exceed the highest Medicaid per diem in the subdistrict. NHC asserted, but failed to demonstrate that its therapy services with in-house staff are superior to those provided to Holmes/VHA by contract staff from Holmes Regional. The state health plan factor number 3, for specialized services, is largely duplicative of district health plan preferences. Neither applicant meets the part of one preference for providing adult day care, or the preference for proposing lower than average administrative costs and higher than average resident care costs. The fifth state allocation factor, for maximizing resident comfort and the criterion of subsection 408.035(1)(m), Florida Statutes, related to the cost and methods of construction, are at issue. NHC questions the adequacy of three acres for the building proposed by Holmes/VHA and the design of the building. Holmes Regional Nursing Center has 120 beds and approximately the same building area as that proposed for Palm Bay Center. The architects of the building have constructed a 163-bed facility on four acres in Jacksonville, and a 240-bed facility in Memphis, Tennessee on approximately six acres. Homes/VHA expects to construct the building in half the time required for completion of NHC's proposed addition. AHCA's architect noted, however, that Holmes/VHA has no Alzheimers unit and that its subacute area is not separated from the areas used by other patients and their families. Holmes/VHA has showers only in the 13 private rooms. By contrast, NHC has an Alzheimers unit with its own lounge and courtyard and a subacute unit at the end of a wing with a separate waiting room. NHC's rooms are larger, with larger windows. NHC's costs are higher than Holmes/VHA's, but not above the high average cost guidelines for construction used by AHCA. NHC has one nursing station for 60 beds, which meets the state requirement while Holmes/VHA is better equipped with two nurses stations for 79 beds. In general, Holmes/VHA established that its building could be built on 3 acres, and that its interior spaces exceed the requirements to be licensed. NHC established that its building and grounds will be larger, higher quality construction with more non-combustible materials, and better meet the preference for maximizing resident comfort. The preference for superior resident care is met by both Holmes/VHA and NHC-Merritt Island. An NHC facility in Stuart was rated conditional for 80 days of the 36 months, prior to the filing of the application. NHC had just purchased the Stuart facility at the time of the conditional rating, and had, in total, many more months of superior operations. In addition, the parties stipulated to quality of care issues at the hearing. Subsection 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, extent of utilization of like and existing services; alternatives to the applicants' proposals Brevard County is 80 miles long from north to south, 22 miles wide at its widest point, with 62 percent of its population in the southern area of the county. Holmes/VHA contends that its application should be approved based on the greater need for nursing home beds in southern Brevard County. Using ratios of beds in existing or approved nursing homes as compared to the population ages 65 and older, and 75 and older, a need is shown for more beds in the southern area, including Palm Bay. In the central area, there are 31.52 beds per 1000 people over 65, as compared to 26.53 in the southern area of Brevard County. For the population over 75, the ratios are 82.53 in the central and 68.47 in the southern area. The over 75 population is also projected to increase by a greater percentage in the southern as contrasted to the central areas of the county. AHCA claims to reject the use of any "sub-subdistrict" analysis of need, other than the test for geographically underserved areas, as defined by Rule 59C-1.036, Florida Administrative Code. That test which applies to proposed sites more than 20 miles from a nursing home, is not met by Holmes/VHA or NHC. However, AHCA has, in at least one other case, considered geographic accessibility within the planning area in determining which applicant should be approved, without the applicants having to demonstrate that the proposed sites are geographically underserved areas. NHC takes issue with Holmes/VHA's data on bed availability in the southern and central portions of the county. NHC maintains that its central location better serves the entire county. NHC's expert also criticized the methodology used by Holmes/VHA for demonstrating need in the southern area. The comparison of existing beds to population, shows a lack of county-wide parity, but not necessarily need. Other factors related to the need for nursing homes were not presented, such as poverty, migration, mortality and occupancy rates. In addition, NHC's expert questioned Holmes/VHA's experts calculations of bed- to-population ratios. The ratios arguably were skewed by using beds for Wuesthoff Hospital Progressive Care in the central area data, but including the population of the zip code in which Wuesthoff is located in the southern area. Holmes/VHA noted that the majority of the population in the zip code is in the southern area. Subsection 408.035(1)(n) - past and proposed Medicaid/indigent care Holmes/VHA's expert criticized NHC because two of its facilities, Merritt Island and Stuart, have been below the subdistrict average for Medicaid occupancy. For 3 six month periods during the last 4 years, they also were below their CON Medicaid commitments. One other NHC facility, in Hudson, has been below the subdistrict average, but significantly above its CON condition. NHC claims that it treats its Medicaid condition as a minimum, while Holmes/VHA uses its conditions as an artificial ceiling or maximum. Subsection 408.035(1)(e),(1)(o) - cooperative or shared health care resources; continuum of care Holmes/VHA has established linkages to its various related companies to provide cooperative care and shared resources. Palm Bay Nursing Center would enhance the multi-level care provided by the Holmes Enterprises group and provide another integral step in the continuum, particularly in rehabilitative therapies. NHC, however, as an existing provider, is part of a well-established network of health care providers in the community. NHC has also purchased land to build an adult congregate living facility near or adjacent to NHC-Merritt Island. Subsections 408.039(2)(a), (2)(c) and 408.037(4), and Rule 59C-1.008, Florida Administrative Code - capital projects list; board resolutions; and impacts on costs AHCA interprets the requirements for the submission of a board resolution to allow an original resolution accompanying the letter of intent to be treated as a part of the complete application. A board resolution with an application, which the statute requires "if applicable," applies to expedited applications for which a letter of intent would not have been received, according to AHCA. NHC submitted an original board resolution with its letter of intent, and a copy of that resolution with its application for CON 7527. The authority of Holmes/VHA's management committee to authorize the construction of a new nursing home, and the authority to operate a nursing home outside the city of Melbourne was questioned. The testimony that the joint venture agreement authorizes the management committee to adopt a resolution authorizing the filing of CON 7539 was not refuted. In addition, the testimony that operations are restricted to the "Melbourne area" as opposed to some more specifically defined geographic area was not refuted. Repeatedly, witnesses described Palm Bay, although a separate municipal corporation, as a suburb of Melbourne. Holmes/VHA claims that NHC failed to disclose certain capital equipment leases from its schedule 2 list of capital projects and failed to evaluate the impact on costs, as required by subsection 408.037, Florida Statutes. In NHC's annual reports, the costs of capital equipment leases were $204,000 in 1991, $43,000 in 1992, and $88,000 in 1993. In fact, the NHC witness who prepared schedule 2 included a total of $21,653,468 for the category "Renovations (Including Furnishings and Equipment) 1994", taken from the capital expenditure budget of each NHC facility. The listing is consistent with the footnote indicating the budget items "are subject to final approval and cash reserves availability." In addition, $100,000 is also listed under "Other Capitalization" for equipment, for which a footnote explains "[a]mount included in an abundance of caution to cover any items unknown at the time of filing." NHC, according to Holmes/VHA, also failed to provide a detailed evaluation of the impact of the proposed project on the cost of other services it provides, as required by subsection 408.037(2)(c), Florida Statutes. NHC merely states that the impact is "nominal" and "negligible." NHC satisfied the impact analysis requirement in the notes to schedule 2 and in schedules 11, 13 and 14 of the application. The incremental pro forma analysis of the effect on costs with or without the proposed project, and projected financial ratios and costs, give detail support for the statements in the application. Assuming, arguendo, that Holmes/VHA omitted $50,000 in capital costs from schedule 2, the omission is not material or fatal to consideration of the application on the merits. Holmes/VHA's financial expert testified that $50,000 is less than on-half of one percent of the total project expenditures listed on schedule 2 and is, therefore, immaterial. As AHCA concedes, Holmes/VHA and NHC have the resources to establish their projects and to provide the services described in their applications. On balance, the demand for additional beds, the enhancement of a superior, existing physical plant and the expansion of specialized services at NHC outweigh the community linkages demonstrated by Holmes/VHA and the desirability of county- wide parity in the distribution of nursing homes beds, at this time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration issue a Final Order approving CON No. 7527 for the construction of an additional 60 community nursing home beds by National Healthcorp, L.P., conditioned on the provision of 60.31 percent of total patient days to Medicaid patients. DONE AND ENTERED this 17th day of April, 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 17th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2393 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 NHC's Proposed Findings of Fact. Accepted in Findings of Fact 13. Accepted in Findings of Fact 3. Accepted in or subordinate to Findings of Fact 14-18. Accepted in or subordinate to Findings of Fact 14-18, except last phrase. Accepted in or subordinate to Findings of Fact 6 and 10. 6-17. Accepted in or subordinate to Findings of Fact 30 and conclusions of law. 18-21. Accepted in Findings of Fact 32. 22. Accepted in Findings of Fact 3. 23-30. Accepted in or subordinate to Findings of Fact 5 and 31. Rejected in Findings of Fact 6 and 31. Accepted in Findings of Fact 33. Rejected in Findings of Fact 33. Accepted in preliminary statement and Finding of Fact 1. 35-36. Accepted in part and rejected in part in Findings of Fact 21-25. 37-38. Accepted in Findings of Fact 21. 39. Rejected conclusion in Findings of Fact 20, 23 and 34. 40. Accepted in Findings of Fact 21 and 23. 41. Accepted in Findings of Fact 24. 42. Accepted in Findings of Fact 21. 43. Accepted in Findings of Fact 20. 44-45. Accepted in Findings of Fact 21. 46-48. Accepted in Findings of Fact 25. 49. Rejected in Findings of Fact 25. 50. Accepted in Findings of Fact 21. 51. Rejected in Findings of Fact 21. 52. Accepted in Findings of Fact 21. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 19. 56-57. Accepted in Findings of Fact 20. Accepted in Findings of Fact 34. Accepted in Findings of Fact 27 and 28. Accepted in Findings of Fact 26 and 27. Rejected in Findings of Fact 26 and 27. Accepted in or subordinate to Findings of Fact 26 and 27. Accepted in Findings of Fact 19. Accepted in Findings of Fact 19, 26 and 27. Rejected in Findings of Fact 26-27 and conclusions of law. Rejected in Findings of Fact 26-27 and conclusions of law. Accepted in Findings of Fact 2. 68-77. Accepted in part and rejected in part in Findings of Fact 27. Accepted in Findings of Fact 20. Rejected in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in or subordinate to Findings of Fact 9, 10 and 20. Accepted in or subordinate to Findings of Fact 20. 84-88. Accepted in or subordinate to Findings of Fact 10, and 20. 89-95. Accepted in or subordinate to Findings of Fact 15, and 20. 96-97. Accepted in Findings of Fact 10, 15, and 21. 98-100. Accepted in Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 15, 16 and 20. Accepted in or subordinate to Findings of Fact 16. Accepted in or subordinate to Findings of Fact 8 and 15. 104-108. Accepted in or subordinate to Findings of Fact 13 and 14. 109-110. Accepted in or subordinate to Findings of Fact 34. Subordinate to Finding of Fact 4. Accepted in or subordinate to Findings of Fact 34. 113-117. Accepted in Findings of Fact 21. Accepted in Findings of Fact 34. Accepted in Findings of Fact 11, 18 and 34. 120-123. Rejected conclusion in Findings of Fact 11. 124-130. Rejected in or subordinate to Findings of Fact 18. 131. Accepted in Findings of Fact 32. 132. Accepted in or subordinate to Findings of Fact 21. 133. Accepted in or subordinate to Findings of Fact 21. 134-136. Accepted in or subordinate to Findings of Fact 24. 137. Rejected first sentence in Findings of Fact 24. 138. Accepted in or subordinate to Findings of Fact 24. 139. Rejected as subordinate to Finding of Fact 24. 140. Accepted in or subordinate to Findings of Fact 15 and 24. 141-150. Accepted in or subordinate to Findings of Fact 24. 151. Rejected as not entirely supported by the record. 152-162. Accepted in or subordinate to Findings of Fact 24. 163-172. Accepted in or subordinate to Findings of Fact 21 and 28. 173-175. Accepted in or subordinate to Findings of Fact 29. 176. Rejected conclusion that "NHC better . . ." in or subordinate to Findings of Fact 29. 177. Accepted. Petitioner Holmes/VHA's Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 3.. 4. Accepted in or subordinate to Findings of Fact 3 and 4. 5. Accepted in Findings of Fact 26. 6-8. Accepted in or subordinate to Findings of Fact 10 and 31. 9. Accepted in Findings of Fact 10. 10. Accepted in Findings of Fact 2. 11. Accepted in Findings of Fact 30 and 31. 12. Rejected in Findings of Fact 30 and 32. 13. Conclusion rejected in Findings of Fact 30 and conclusions of law 37-40. 14. Accepted in Findings of Fact 2. 15. Accepted in Findings of Fact 3 and 31. 16. Accepted in Findings of Fact 26. 17-21. Accepted in or subordinate to Findings of Fact 26 and 27. 22. Accepted, except last sentence, in Findings of Fact 27. 23-24. Accepted in or subordinate to Findings of Fact 26 and 27. 25. Conclusions cannot be reached in Findings of Fact 26 and 27. 26-29. Accepted in or subordinate to Findings of Fact 11. 30-36. Accepted in Findings of Fact 11, 12, 33 and 34. Rejected in Findings of Fact 18 and 34. Rejected in or subordinate to Finding of Fact 32. Accepted in or subordinate to Findings of Fact 16. Accepted in Findings of Fact 40. Rejected in Findings of Fact 16. Rejected conclusion in Findings of Fact 18. 43-44. Rejected in Findings of Fact 18. 45-48. Rejected conclusion in Findings of Fact 18. 49-51. Accepted in or subordinate to Findings of Fact 3-10 and 29. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 7 and 8. Accepted in Findings of Fact 20. Accepted in or subordinate to Findings of Fact 3. Accepted in or subordinate to Findings of Fact 3 and 24. Accepted in Findings of Fact 29. 58-59. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in Findings of Fact 29. Accepted in Findings of Fact 19. Accepted in Findings of Fact 20. 63-65. Accepted in or subordinate to Findings of Fact 21. Accepted, except conclusion, in Findings of Fact 21 and 28. Rejected conclusions in Findings of Fact 20. Accepted in Findings of Fact 21 and 22. Accepted in Findings of Fact 24. 70-71. Accepted in Findings of Fact 21. 72. Accepted as corrected in Findings of Fact 25. 73-74. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 10 and 21. 77-78. Accepted in or subordinate to Findings of Fact 28. Rejected conclusion in Findings of Fact 28. Accepted in Findings of Fact 28. 81-89. Accepted in or subordinate to Findings of Fact 10, 21 and 29. 90-96. Accepted in or subordinate to Findings of Fact 9 and 10. 97. Accepted in Findings of Fact 20. 98. Accepted in Findings of Fact 21. 99. Accepted in Findings of Fact 20. 100. Accepted in Findings of Fact 8. 101. Accepted in or subordinate to Findings of Fact 20. 102. Accepted in Findings of Fact 8. 103-105. Accepted in or subordinate to Findings of Fact 20. 106. Accepted in or subordinate to Findings of Fact 10 and 21. 107-108. Accepted in or subordinate to Findings of Fact 21. 109. Accepted in or subordinate to Findings of Fact 4. 110-112. Accepted in or subordinate to Findings of Fact 21 and 25. 113-115. Accepted in or subordinate to Findings of Fact 21. 116-118. Accepted in or subordinate to Findings of Fact 20. 119-136. Accepted in or subordinate to Findings of Fact 24. 137. Accepted in Findings of Fact 10. 138-143. Accepted in or subordinate to Findings of Fact 11 and 24. COPIES FURNISHED: P. Timothy Howard, Esquire John F. Gilroy, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Darrell White, Esquire Charles Stampelos, Esquire MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 600 First Florida Bank Tower 215 South Monroe Street Tallahassee, Florida 32301 Robert M. Simmons, Esquire 5050 Poplar Avenue 18th Floor Memphis, Tennessee 38157 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Ruden, Barnett, McClosky, et al. Monroe-Park Tower, Suite 815 215 South Monroe Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome W. Hoffman General Counsel Agency For Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303
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.
