The Issue The issues for determination are: (1) whether the noncompliance as alleged during the August 30, 2001, survey and identified as Tags F324 and F242, were Class II deficiencies; (2) whether the "Conditional" licensure status, effective August 30, 2001, to September 30, 2001, based upon noncompliance is appropriate; and (3) whether a fine in the amount of $5,000 is appropriate for the cited noncompliance
Findings Of Fact Charlotte is a nursing home located at 5405 Babcock Street, Northeast, Fort Myers, Florida, with 180 residents and is duly licensed under Chapter 400, Part II, Florida Statutes. AHCA is the state agency responsible for evaluating nursing homes in Florida pursuant to Section 400.23(7), Florida Statutes. As such, in the instant case it is required to evaluate nursing homes in Florida in accordance with Section 400.23(8), Florida Statutes (2000). AHCA evaluates all Florida nursing homes at least every 15 months and assigns a rating of standard or conditional to each licensee. In addition to its regulatory duties under Florida law, AHCA is the state "survey agency," which, on behalf of the federal government, monitors nursing homes that receive Medicaid or Medicare funds. On August 27 through 30, 2001, AHCA conducted an annual survey of Charlotte's facility and alleged that there were deficiencies. These deficiencies were organized and described in a survey report by "Tags," numbered Tag F242 and Tag F324. The results of the survey were noted on an AHCA form entitled "Statement of Deficiencies and Plan of Correction." The parties refer to this form as the HCFA 2567-L or the "2567." The 2567 is the document used to charge nursing homes with deficiencies that violate applicable law. The 2567 identified each alleged deficiency by reference to a Tag number. Each Tag on the 2567 includes a narrative description of the allegations against Charlotte and cites a provision of the relevant rule or rules in the Florida Administrative Code violated by the alleged deficiency. To protect the privacy of nursing home residents, the 2567 and this Recommended Order refer to each resident by a number (i.e., Resident 24) rather than by the name of the resident. AHCA must assign a class rating of I, II or III to any deficiency that it identifies during a survey. The ratings reflect the severity of the identified deficiency, with Class I being the most severe and Class III being the least severe deficiency. There are two Tags, F242 and F324 at issue in the instant case, and, as a result of the August 2001 survey, AHCA assigned each Tag a Class II deficiency rating and issued Charlotte a "Conditional" license effective August 30, 2001. Tag F242 Tag F242 generally alleged that Charlotte failed to meet certain quality of life requirements for the residents, based on record review, group interviews, and staff interviews, and that Charlotte failed to adequately ensure that the residents have a right to choose activities that allow them to interact with members of the community outside the facility. On or about August 24, 2001, AHCA's surveyors conducted group interviews. During these interviews, 10 of 16 residents in attendance disclosed that they had previously been permitted to participate in various activities and interact with members of the community outside the facility. They were permitted to go shopping at malls, go to the movies, and go to restaurants. Amtrans transportation vans were used to transport the residents to and from their destinations. The cost of transportation was paid by Charlotte. An average of 17 to 20 residents participated in those weekly trips to dine out with other community members at the Olive Garden and other restaurants. During those trips, Charlotte would send one activity staff member for every four to six residents. The record contains no evidence that staff nurses accompanied those select few residents on their weekly outings. The outings were enjoyed by those participants; however, not every resident desired or was able to participate in this particular activity. Since 1985, outside-the-facility activities had been the facility's written policy. However, in August 2000, one year prior to the survey, Matthew Logue became Administrator of the facility and directed his newly appointed Activities Director, Debbie Francis, to discontinue facility sponsored activities outside the facility and in its stead to institute alternative activities which are all on-site functions. Those residents who requested continuation of the opportunity to go shopping at the mall or dine out with members of the community were denied their request and given the option to have food from a restaurant brought to the facility and served in-house. The alternative provided by the facility to those residents desiring to "interact with members of the community outside the facility" was for each resident to contact the social worker, activity staff member, friends or family who would agree to take them off the facility's premises. Otherwise, the facility would assist each resident to contact Dial-A-Ride, a transportation service, for their transportation. The facility's alternative resulted in a discontinuation of all its involvement in "scheduling group activities" beyond facility premises and a discontinuation of any "facility staff members" accompanying residents on any outing beyond the facility's premises. As described by its Activities Director, Charlotte's current activities policy is designed to provide for residents' "interaction with the community members outside the facility," by having facility chosen and facility scheduled activities such as: Hospice, yard sales, barbershop groups for men and beautician's day for women, musical entertainment, antique car shows, and Brownie and Girl Guides visits. These, and other similar activities, are conducted by "community residents" who are brought onto the facility premises. According to the Activities Director, Charlotte's outside activities with transportation provided by Amtrans buses were discontinued in October of 2000 because "two to three residents had been hurt while on the out trip, or on out-trips."1 Mr. Logue's stated reason for discontinuing outside activities was, "I no longer wanted to take every member of the activities department and send them with the resident group on an outing, thereby leaving the facility understaffed with activities department employees." The evidence of record does not support Mr. Logue's assumption that "every member of the facility's activities department accompanied the residents on any weekly group outings," as argued by Charlotte in its Proposed Recommended Order. Charlotte's Administrator further disclosed that financial savings for the facility was among the factors he considered when he instructed discontinuation of trips outside the facility. "The facility does not sponsor field trips and use facility money to take people outside and too many staff members were required to facilitate the outings." During a group meeting conducted by the Survey team, residents voiced their feelings and opinions about Charlotte's no longer sponsoring the field trips on a regular basis in terms of: "feels like you're in jail," "you look forward to going out," and being "hemmed in." AHCA's survey team determined, based upon the harm noted in the Federal noncompliance, that the noncompliance should be a State deficiency because the collective harm compromised resident's ability to reach or maintain their highest level of psychosocial well being, i.e. how the residents feel about themselves and their social relationships with members of the community. Charlotte's change in its activities policy in October of 2000 failed to afford each resident "self- determination and participation" and does not afford the residents the "right to choose activities and schedules" nor to "interact with members of the community outside the facility." AHCA has proved the allegations contained in Tag F242, that Charlotte failed to meet certain quality of life requirements for the residents' self-determination and participation. By the testimonies of witnesses for AHCA and Charlotte and the documentary evidence admitted, AHCA has proven by clear and convincing evidence that Charlotte denied residents the right to choose activities and schedules consistent with their interests and has failed to permit residents to interact with members of the community outside the facility. Tag F324 As to the Federal compliance requirements, AHCA alleged that Charlotte was not in compliance with certain of those requirements regarding Tag F324, for failing to ensure that each resident receives adequate supervision and assistance devices to prevent accidents. As to State licensure requirements of Sections 400.23(7) and (8), Florida Statutes (2000), and by operation of Florida Administrative Code, Rule 59A-4.1288, AHCA determined that Charlotte had failed to comply with State established rules, and under the Florida classification system, classified Tag F324 noncompliance as a Class II deficiency. Based upon Charlotte's patient record reviews and staff interviews, AHCA concluded that Charlotte had failed to adequately assess, develop and implement a plan of care to prevent Resident 24 from repeated falls and injuries. Resident 24 was admitted to Charlotte on April 10, 2001, at age 93, and died August 6, 2001, before AHCA's survey. He had a history of falls while living with his son before his admission. Resident 24's initial diagnoses upon admission included, among other findings, Coronary Artery Disease and generalized weakness, senile dementia, and contusion of the right hip. On April 11, 2001, Charlotte staff had Resident 24 evaluated by its occupational therapist. The evaluation included a basic standing assessment and a lower body assessment. Resident 24, at that time, was in a wheelchair due to his pre-admission right hip contusion injury. On April 12, 2001, two days after his admission, Resident 24 was found by staff on the floor, the result of an unobserved fall, and thus, no details of the fall are available. On April 23, 2001, Resident 24 was transferred to the "secured unit" of the facility. The Survey Team's review of Resident 24's Minimum Data Set, completed April 23, 2001, revealed that Resident 24 required limited assistance to transfer and to ambulate and its review of Resident 24's Resident Assessment Protocols (RAPs), completed on April 23, 2001, revealed that Resident 24 was "triggered" for falls. Charlotte's RAP stated that his risk for falls was primarily due to: (1) a history of falls within the past 30 days prior to his admission; (2) his unsteady gait; (3) his highly impaired vision; and (4) his senile dementia. On April 26, 2001, Charlotte developed a care plan for Resident 24 with the stated goal that the "[r]esident will have no falls with significant injury thru [sic] July 25, 2001," and identified those approaches Charlotte would take to ensure that Resident 24 would not continue falling. Resident 24's care plan included: (1) place a call light within his reach; (2) do a falls risk assessment; (3) monitor for hazards such as clutter and furniture in his path; (4) use of a "Merry Walker" for independent ambulation; (5) placing personal items within easy reach; (6) assistance with all transfers; and (7) give Resident 24 short and simple instructions. Charlotte's approach to achieving its goal was to use tab monitors at all times, to monitor him for unsafe behavior, to obtain physical and occupational therapy for strengthening, and to keep his room free from clutter. All factors considered, Charlotte's care plan was reasonable and comprehensive and contained those standard fall prevention measures normally employed for residents who have a history of falling. However, Resident 24's medical history and his repeated episodes of falling imposed upon Charlotte a requirement to document his records and to offer other assistance or assistive devices in an attempt to prevent future falls by this 93-year-old, senile resident who was known to be "triggered" for falls. Charlotte's care plan for Resident 24, considering the knowledge and experience they had with Resident 24's several falling episodes, failed to meet its stated goal. Charlotte's documentation revealed that Resident 24 did not use the call light provided to him, and he frequently refused to use the "Merry Walker" in his attempts of unaided ambulation. On June 28, 2001, his physician, Dr. Janick, ordered discontinuation of the "Merry Walker" due to his refusal to use it and the cost involved. A mobility monitor was ordered by his physician to assist in monitoring his movements. Charlotte's documentation did not indicate whether the monitor was actually placed on Resident 24 at any time or whether it had been discontinued. Notwithstanding Resident 24's refusal to cooperatively participate in his care plan activities, Charlotte conducted separate fall risk assessments after each of the three falls, which occurred on April 12, May 12, and June 17, 2001. In each of the three risk assessments conducted by Charlotte, Resident 24 scored above 17, which placed him in a Level II, high risk for falls category. After AHCA's surveyors reviewed the risk assessment form instruction requiring Charlotte to "[d]etermine risk category and initiate the appropriate care plan immediately," and considered that Resident 24's clinical record contained no notations that his initial care plan of April 23, 2001, had been revised, AHCA concluded that Charlotte was deficient. On May 13, 2001, Dr. Janick visited with Resident 24 and determined that "there was no reason for staff to change their approach to the care of Resident 24." Notwithstanding the motion monitors, on June 17, 2001, Resident 24 fell while walking unaided down a corridor. A staff member observed this incident and reported that while Resident 24 was walking (unaided by staff) he simply tripped over his own feet, fell and broke his hip. Charlotte should have provided "other assistance devices," or "one-on-one supervision," or "other (nonspecific) aids to prevent further falls," for a 93-year-old resident who had a residential history of falls and suffered with senile dementia. Charlotte did not document other assistive alternatives that could have been utilized for a person in the condition of Resident 24. AHCA has carried its burden of proof by clear and convincing evidence regarding the allegations contained in Tag F324.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Agency enter a final order upholding the assignment of the Conditional licensure status for the period of August 30, 2001 through September 30, 2001, and impose an administrative fine in the amount of $2,500 for each of the two Class II deficiencies for a total administrative fine in the amount of $5,000. DONE AND ENTERED this 13th day of February, 2003, in Tallahassee, Leon County, Florida. FRED L. BUCKINE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of February, 2003.
The Issue Whether Life Care Center of Punta Gorda (Respondent), timely submitted its monthly nursing home quality assessment fee for February 2019; and, if not, whether a fine should be imposed for each day that the payment was delinquent.
Findings Of Fact AHCA, pursuant to section 409.913, Florida Statutes (2018),1/ is responsible for overseeing and administering the Medicaid program for the State of Florida. At all times relevant hereto, Respondent was a Florida Medicaid provider authorized to provide nursing home services, and had a valid Medicaid provider agreement with AHCA. Respondent operates a nursing home facility as defined by section 409.9082(1)(b), and is required, pursuant to section 409.9082(2), to “report monthly to [AHCA] its total number of resident days, exclusive of Medicare Part A resident days, and remit an amount equal to the assessment rate times the reported number of days.” The monthly amount assessed pursuant to section 409.9082 is known as a “Quality Assessment Fee.” Section 409.9082(2) provides, in part, that AHCA “shall collect, and each facility shall pay, the quality assessment each month[, and [AHCA] shall collect the assessment from nursing home facility providers by the 20th day of the next succeeding calendar month.” Respondent’s Quality Assessment Fee for February 2019 was to be remitted to AHCA by March 20, 2019. It is undisputed that AHCA received payment of Respondent’s Quality Assessment Fee on April 12, 2019, and that this was the first instance where Respondent failed to timely remit payment of the fee to AHCA. In explaining why the Quality Assessment Fee was not tendered by the due date, Ms. Talbott testified that Respondent’s customary process is to remit payment by FedEx “so that . . . [there is] a tracking mechanism on it.” Ms. Talbott explained that her investigation revealed that the customary process for mailing payment to AHCA was not followed in the instant dispute because the accounts payable clerk, instead of using FedEx, and as a consequence of being distracted by a family emergency, inadvertently mailed the payment via the United States Postal Service, without requesting delivery confirmation. The accounts payable clerk did not testify during the final hearing and there is no specific finding of fact that the check was not delivered to AHCA because of any act(s) or omission(s) by the accounts payable clerk. The check that was purportedly mailed by the accounts payable clerk for payment of the Quality Assessment Fee was never received by AHCA, and Ms. Talbott credibly testified that the same was never returned to Respondent by the postal service. AHCA, by correspondence dated April 3, 2019, and mailed on April 9, 2019, informed Respondent that there was “an outstanding balance pertaining to a Quality Assessment Fee for February [2019],” and that payment of the same was due immediately. Respondent paid the Quality Assessment Fee on April 12, 2019.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Petitioner, Agency for Health Care Administration, enter a final order finding that Life Care Center of Punta Gorda committed its first offense of section 409.9082 and imposing a fine of $11,500. DONE AND ENTERED this 26th day of November, 2019, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of November, 2019.
The Issue The issues for consideration in these cases are: as to Case Number 00-3497, whether the Agency for Health Care Administration should impose an administrative fine against the Respondent's license to operate Beverly Savana Cay Manor, a nursing home in Lakeland; and, as to Case Number 00-2465, whether the Agency should issue a conditional license to the Respondent's facility effective April 28, 2000.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Agency for Health Care Administration, was the state agency in Florida responsible for the licensing of nursing homes and the regulation of the nursing home industry in this state. It is also the agency responsible for conducting surveys to monitor the compliance of nursing homes with the conditions of Medicare and Medicaid participation. Respondents, Beverly Savana Cay Manor, Inc., d/b/a Beverly Healthcare Lakeland, and Beverly Enterprises - Lakeland, are licensed by the Agency to operate a skilled nursing home at 1010 Carpenter's Way in Lakeland. On August 31, 1999, the Agency conducted an investigation into a complaint that Savana Cay had failed to provide sufficient nursing service and related services to allow residents to attain or maintain the highest practicable physical, mental, and psychosocial well-being as required by Federal rules governing Medicare and Medicaid. The Agency surveyor, Patricia Mills, observed several residents who did not have their call buttons within reach so that they could summon help if needed. Ms. Mills also talked with residents and family members and from these interviews determined that even when the resident could reach the call button and summon help, the response time was excessively long or, in some instances, the call went unheeded. This sometimes resulted in resident's suffering from the results of their incontinence because the staff did not timely respond to the help calls. Ms. Mills concluded, based on her extensive experience in surveying nursing homes, that the number of staff on duty was not sufficient to meet the residents' needs. It did not allow for the best possible well-being of the residents. Though the information related by Ms. Mills came from her interviews with residents and their families and was clearly hearsay testimony, it was admissible and considered as corroborative of her direct observation. The parties stipulated that a follow-up survey of the facility was conducted on October 13, 1999, at which time the deficiency described was deemed to have been timely corrected. The Respondent, by stipulation, does not concede the validity of this discrepancy on the August 19, 1999, survey, and the Agency does not rely on it to support the administrative fine sought to be imposed herein. Another survey of the facility was conducted by the Agency on April 26-28, 2000. On this occasion, surveyor Patricia Gold interviewed residents regarding the everyday life of the facility and reviewed resident council reports to follow up on any resident or family concerns which did not appear to have been addressed by the facility staff. During the resident interviews, Ms. Gold was advised that call lights were not answered in a timely fashion. In that connection, early on the morning of April 28, 2000, Ms. Gold observed a resident request a nurse to bring something to drink. The nurse was overheard to tell the resident the request would have to wait until she finished her report. Ms. Gold also noted on April 28, 2000, that dirty dishes were left uncollected over night in the facility common corridor and that one resident had two dirty trays left in the room. The dishes in the corridor were also seen by surveyors Donna Edwards and Marie Maisel. Based on their observations, the interviews, and the review of the council reports, the surveyors concluded that the staff on duty were insufficient in number. Another surveyor, Joanne Stewart, reviewed the resident files and medical reports of several of the residents and determined that in several cases the facility had failed to provide adequate supervision and assistive devices to prevent falls and inconsistently applied the interventions that were put in place. For example, Ms. Stewart observed Resident 12 on the floor at 2:40 p.m. on April 27, 2000. This resident, a cognitively impaired individual, had been placed in the facility from the hospital after he had sustained a fracture to his right hip and, at the time of the fall, still had staples in his hip. Ms. Stewart's review of the kardexes maintained by the certified nursing assistant (CNA) revealed there were no entries thereon indicating a need for special care to prevent this resident from falling. Although he was supposed to wear a tab alarm at all times, the facility staff knew the resident would periodically remove it, and when Ms. Stewart saw him prior to the fall, he was not wearing it. No other interventions, such as quick-release seat belts or Velcro belts, had been implemented to prevent his falls. It was just the kind of fall that he had which caused his placement in the facility and which gave rise to the need for supervision adequate to prevent further injury. He did not get the needed supervision. In fact, though the resident sustained a skin tear and bleeding of the arm as a result of the fall, the nurse who came to the scene of the fall went back to her desk and did some paperwork for between twenty and twenty-five minutes before the resident was provided any treatment for his injury. Ms. Stewart concluded the facility did not provide adequate supervision and assistance to Resident 12, and it is so found. Due to a cognitive impairment and an inability to ambulate due to an intracerebral hemorrhage, diabetes, and a cardio-vascular accident, Resident 9 was assessed at high risk for falls, and a determination was made that the resident should wear a tab alarm while in bed and in the wheelchair. During the course of her survey, Ms. Stewart observed this resident on several occasions without the tab alarm when she should have been wearing it. The resident had previously sustained falls, one of which occurred while the resident was on leave, on March 31 and April 1, 2000, but the only caveat on the CNA kardex for the resident was the caution not to leave her on the toilet alone. Ms. Stewart did not consider the supervision and assistance rendered Resident 9 to be adequate. It is so found. Ms. Edwards focused her review on the records of Resident 22 who was not at the facility at the time of the survey. The records indicated the resident had been assessed at a high risk for falls at the time of her admission and a tab alarm was used. However, according to the nurse's notes, on April 10, 2000, the alarm went off causing the resident to lose her balance and fall while in the merry walker. She lacerated her scalp and sustained a large swelling in the occipital area. The only fall assessment of this resident was done when she was admitted to the facility. The evidence does not indicate when this was, but presumably, it was not done timely. There is a requirement that fall assessments be done quarterly, but it cannot be determined when it was done here. Even when, on April 11, 2000, the day after the fall, the physical therapy staff re-screened this resident for a merry walker, no change in care notation was noted in her record or implemented. Resident 22 sustained another fall on April 16, 2000. On this occasion, the resident was found on the floor of the day room, out of the merry walker. There was no indication she was being supervised or monitored at the time of her fall. This time she sustained another head injury just above the old one. After this fall, the facility staff ordered a new merry walker even though there was no indication a different one would provide additional protection. The resident sustained a third fall on April 18, 2000, sustaining another injury to the head which resulted in substantial blood loss. As a result of this fall, she was taken to the hospital. Because of this, she was not present when the survey was done, but based on her review of the resident records, Ms. Edwards concluded that the facility did not provide sufficient supervision or assistive devices to this resident. During the period of the survey, Ms. Gold observed Resident 3 on five separate occasions. On none of them was the resident wearing a Tabs alarm even though the facility's care plan called for one to be used. A falls assessment had been started on the resident but not completed. The record also revealed that the resident fell on March 29, 2000, resulting in a skin tear to the right arm. Based on the above, Ms. Gold concluded that the resident was not provided with adequate care and assistive devices. Resident 10 was a resident with a history of falls both before and after admission to the facility. The resident's care plan called for chair alarms, a merry walker, a safety seat belt, a low bed, and a bike horn. Though Ms. Maisel, the surveyor, observed that the resident had a chair alarm, she did not see that any of the other interventions called for in the plan were provided. She did not ever see the resident with a merry walker, and on at least two occasions, she saw the resident when the chair alarm was not in use. In her opinion, the use of one intervention does not make the use of other interventions unnecessary, and she considers the facility's supervision and assistive device provision to be inadequate. Resident 4 was an individual who had sustained a hip fracture, was senile, and was taking pain medications. The resident required help in getting out of bed or a chair. The care plan for the resident called for the use of a Tabs alarm, but on none of the occasions that Ms. Stewart observed this resident was the tabs alarm in use. She considered the supervision and assistive devices provided by the facility to this resident to be inadequate. Respondent does not contest that the incidents cited by the Agency took place. Rather, it contends that the interventions implemented by it were sufficient. It also disputes the effectiveness of some interventions called for, specifically the Tabs alarms, suggesting that the alarm does not prevent falls and often contributes to them by startling the wearer. There is some evidence to support that claim. Respondent further contends that the safety provided by the use of an intervention device, such as the Tabs alarm, straps, bed rails, or the merry walker, restrictive as they are, must be weighed and evaluated against the loss of dignity of the resident caused by their use. It is also urged by the facility that the use of certain interventions such as Tabs alarms is made unnecessary when the resident is immobile and safety is provided by the use of other interventions such as bed rails, which are more pertinent to the condition of the resident. In the case of Resident 9, the failure to provide for the use of a Tabs alarm when the resident was on leave with her husband was off-set by the one-on-one supervision she received during that period. Respondent contends that falls will occur among residents of the type in issue here regardless of the planning to identify the risks of fall, the efforts made to prevent them, and the implementation and use of interventions designed to avoid them. While this may be so, the facility nonetheless has a duty to provide necessary and adequate supervision and assistive devices to minimize to the greatest extent possible, the risk of injury as the result of falls. In some cases, this was not done here. In support of its position, Respondent presented the testimony of Theresa Vogelspohl, a nursing home consultant and an agreed expert on falls, issues of the elderly, issues of care of the elderly, and nursing practices and standards in nursing homes. Ms. Vogelspohl indicated that as a general practice when patients are admitted to a nursing home they are considered at risk for falls until the facility staff gets to know them. Each facility sets its own standard as to the length of the observation period, during which the residents are studied for their gait and safety awareness. In addition, the residents are evaluated for safety awareness by the staff of the physical and occupational therapy departments. Ordinarily, the assessment includes only the minimum data set (MDS) criteria, but increasingly during the last few years, a separate falls assessment has become common. In addition to the initial assessment, the attending nurses do an independent admissions assessment, and Ms. Vogelspohl found that such an assessment process was followed as to each of the residents in issue here. Ms. Vogelspohl found that an incomplete falls assessment had been done on Resident 3. Based upon her own review of the resident's records, however, had the full assessment been completed, other than the fact that she was a new resident, the resident would have been classified as a low risk for falls. She opines that the failure to complete the falls assessment did not deny the resident any care or a care plan for falls. Ms. Vogelspohl determined that the facility had opted, instead, for a more cautious approach to this resident in the care plan which, in her opinion, was appropriate for a new admission. A care plan is a map for the staff to be made aware of the care being provided and the specific interventions pertinent to the resident. If the resident is at increased risk for falls, the care plan would list the interventions designed to decrease the risk of falls. One of the most significant risk factors for falls is increase in age. Others are disease conditions, medications, cognitive functioning levels, eyesight, and other impairments. The interventions available to a facility to address the issue of risk of falls depend upon the condition of the resident. The first consideration should be the need to maintain a safe physical environment for the resident. Appropriate footwear is important as is the availability of assistive devices such as a cane or walker. If the resident has a history of falls, consideration should be given to changing those factors which were related to the prior falls. Included in that is consideration of different seating or a more frequent toileting schedule. According to Ms. Vogelspohl, the last thing one would want to do is to apply physical restraint, but, if all else has failed, the least restrictive physical or chemical restraint may be necessary to decrease the likelihood of falls. Ms. Vogelspohl emphasizes that only the likelihood of falls can be reduced. It is not possible to prevent all falls. Room cleanliness is not something which should appear in a care plan. It is a given, and nurses know to place furniture in such a way and to reduce clutter to the extent that the resident can safely navigate the room either with a walker or a wheelchair. Obviously, in this case the survey staff concluded the placement of the dirty trays in the hallway and in the resident's room constituted a hazard. In Ms. Vogelspohl's opinion, supervision and monitoring of residents in a nursing home is a basic. That is generally the reason for the resident's being admitted in the first place. While they should be done on a routine basis, supervision and monitoring are still sometimes placed in a care plan, but the failure to have the requirements in black and white is not a discrepancy so long as the appropriate supervision and monitoring are accomplished. The residents most at risk for falls, and those who are the most difficult to manage, are those who have full physical functioning yet who have almost nonexistent cognitive functioning. Ms. Vogelspohl is of the opinion that for these residents, the best intervention is the merry walker. This is better than a regular walker because the resident cannot leave it behind. If the resident is one who falls from bed, then a low bed, with rails if appropriate, is the primary option. A low bed was called for for Resident 10 but was not provided. Ms. Vogelspohl does not have a high opinion of the Tabs alarm because it can cause as many falls as it prevents. It has a place with the cognitively aware resident who will sit back down if she or he hears the alarm sound. More often than not, however, the routine resident will automatically react by trying to get away from the noise, and, thus, be more likely to engage in rapid, impulsive behavior that can lead to a fall. Ms. Vogelspohl considers the use of the Tabs alarm as only one factor in assessing the degree of supervision provided. She looks at the care plan to see if the Tabs alarm even meets the needs of the resident. If the resident is cognitively alert and at no risk of falls, a Tabs alarm is not appropriate. There are other interventions which can be used such as quick release, velcro seat belts which better prevent falls because they provide a resistance when the resident attempts to stand up. To determine whether a care plan has been developed and implemented, Ms. Vogelspohl reviews the record. She looks at the nurse's notes and those of the social services personnel. She evaluates the records of the physical, occupational, and recreational therapy staff. Finally, she reads the resident's chart to see what staff is actually doing to implement the interventions called for in the care plan. However, on the issue of supervision, she does not expect the notes or the record to affirmatively reflect every incident of supervision. There is no standard of nursing practice that she is aware of that calls for that degree of record keeping. What she would expect to see is a record of any kind of unsafe behavior that was observed. By the same token, Ms. Vogelspohl would not expect a facility to document every time it placed an alarm unit on a resident. The units are applied and removed several times a day for bathing, clothing changes, incontinence care, and the like, and it would be unreasonable, she opines, to expect each change to be documented. Further, she considers it inappropriate and insulting to the resident to require him or her to wear an alarm when cognizant and not displaying any unsafe behavior. If a resident who is not cognitively impaired declines intervention, it would, in her opinion, be a violation of that resident's rights to put one on. In that regard, generally, interventions are noted in the resident records when initiated. Usually, however, they are not removed until the quarterly assessment, even though the intervention may be discontinued shortly after implementation. Ms. Vogelspohl took exception to Ms. Edwards' finding fault with the facility for the three falls experienced by Resident 22. The resident was under observation when the first fall occurred, but the staff member was not able to get to the resident quickly enough to catch her when she stood up and immediately toppled over in her merry walker. The resident had been properly assessed and proper interventions had been called for in the care plan. Ms. Vogelspohl attributes the fall to the resident's being frightened by the Tabs alarm going off when she stood up and believes she probably would not have fallen had she not had the tab unit on. The second fall took place while the resident got out of her marry walker in the day room. Though the day room was visible to anyone out in the hallway, the fall was not witnessed, but Ms. Vogelspohl is of the opinion that it is not reasonably possible to keep every resident under constant visual supervision unless an aide can be assigned on a one-on-one basis to every resident. On the third fall, which occurred at about 10 p.m., the staff had put the resident to bed and had put a Tabs unit on her at that time, but the resident had detached the unit and gotten out of bed. There was nothing the staff could do to prevent that. The resident was able to remove the unit no matter how it was affixed to her. Taken together, the actions taken by the facility with regard to this resident were, to Ms. Vogelspohl, appropriate. Some things could have been done differently, such as perhaps using a heavier merry walker, but she did not consider these matters as defects in the care plan, in assessment, in design, or in application. Further, she concluded that the actions taken by the facility subsequent to the first fall on April 10, 2000, wherein the resident's medications were adjusted to compensate for their effect on the resident, constituted a recognition of a change in the resident's condition which was properly addressed. Too much supervision becomes a dignity issue. There is no formula for determining how much supervision is adequate. It is a question of nursing discretion based on the individual resident. An unofficial standard in place within the industry calls for a resident to be checked on every two hours, but rarely will this be documented. Staff, mostly nurses and CNAs, are in and out of the residents' rooms on a regular basis, administering medications and giving treatments. Those visits are documented, but not every visit to a resident's room is. Resident 12, a relatively young man of 62 with several severe medical problems, sustained a fall which resulted in a fractured hip just two weeks after admission to the facility and two weeks before the survey. He was far more mobile than expected. According to the records, he was mostly cognitive intact and had been assessed for falls. As a result of this assessment, the facility developed a care plan to address his risk for falls. Implementation of the plan was difficult, however, because he was aware and could make up his own mind as to what interventions he would accept. As to the resident's April 27, 2000 fall, the only evidence in the file shows that he was found on the floor of his room in front of a straight chair, having sustained a small skin tear in addition to the fracture. From Ms. Vogelspohl's review of the record she could find no indication that the facility had failed to do something that it should have done to prevent the fall. The staff had put a Tabs alarm on the resident, and he removed it. They tried to keep his wheel chair as close to him as possible. They tried to restrict his water intake by giving him thickened liquids to reduce his trips to the rest room. He would pour out the thickened fluids and replace them with water. Because of this resident's mobility, Ms. Vogelspohl does not accept the surveyor's conclusion that the facility did not use Tabs alarms. He was able to get out of them by himself and frequently did. She is also of the opinion, in light of the way the resident behaved, that the blank kardex observed by the surveyor in no way contributed to the resident's fall. The CNA's were aware that the Tabs units were supposed to be used, and Ms. Vogelspohl has concluded that there were no more aggressive interventions that could have been used with this resident. To attempt the use of restraints, either belt or vest, would have been futile because he could have gotten out of them easily. The only other thing Ms. Vogelspohl feels could have been done was to put him in a geriatric psychiatric unit, and this was ultimately done, but not in the Respondent facility. Ms. Vogelpohl also addressed the surveyors' write- ups as they related to Residents 9, 4, 3, and 10. Resident 4 was bed-ridden as a result of Parkinson's Disease and did not need a Tabs alarm, the deficiency cited, while in bed. When seated in a wheel chair, his postural deficits were compensated for by lateral supports and a padded cushion, and she was of the opinion that a Tabs alarm was not required. She opines its absence would not have addressed his risk for falls. His January 2000 fall apparently did not relate to the failure to use a Tabs unit. Resident 3, also the subject of a write-up for failure to use a Tabs alarm, was not, in Ms. Vogelspohl's opinion, at risk for falls because she did not move around a lot due to her physical condition. Nonetheless, she experienced a fall in late March 2000 and shortly thereafter, the facility placed a Tabs alarm on her and made the appropriate entry in her care plan. Resident 9 was ambulatory only with assistance and had a special seating device to keep her in her wheel chair. After the resident sustained two falls close together, a Tabs alarm was placed on her, and from that time until the time of the survey she had no further falls. Ms. Vogelspohl contends that it was an appropriate nursing decision not to place a Tabs unit on her. The rationale for this position is not at all clear. The care plan for Resident 10, also one of the residents observed without a Tabs alarm in place, was described as "somewhat cluttered." It showed multiple interventions initiated as early as April 1999. The initial care plan was crossed through and a new one substituted in September 1999 with the family's concurrence. Nonetheless, Ms. Vogelspohl did not find it too cluttered to be understood. The evidence shows that the resident's chair was outfitted with a soft seat belt and a pressure-sensitive alarm, both of which are considered to be more effective than the Tabs alarm. Ms. Vogelspohl contends that the facility did not ignore the requirement to assess the residents for falls or the requirement to address that issue in care planning. She admits that in some cases, the plan addressing falls prevention was covered in another assessment than the one wherein it might most likely be expected, but it is her contention that if the subject is properly and thoroughly addressed somewhere in the resident's care record, that is sufficient. She considers placing it in several areas to be a redundancy and though it is frequently done so, it is done to meet a paper compliance without having any impact on the quality of care provided.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a final order sustaining the Conditional license for the Respondent effective April 28, 2000, and, based only on the conditions observed at the facility on that date, imposing an administrative fine of $700.00. DONE AND ENTERED this 22nd day of March, 2001, in Tallahassee, Leon County, Florida. ___________________________________ ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 2001. COPIES FURNISHED: Christine T. Messana, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 R. Davis Thomas, Jr., Qualified Representative Broad and Cassel 215 South Monroe Street, Suite 400 Post office Box 11300 Tallahassee, Florida 32302-1300 Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact The parties' stipulation The parties have stipulated to the following facts: Forum and Amedex timely filed their respective letters of intent and applications with the Department and the District Local Health Council for the July 1986 batching cycle. The Department ultimately deemed the applications complete and, following review, published its notice of intent to deny the applications. Forum and Amedex each timely filed a petition requesting a formal hearing on the denial of their application. With regard to the Forum application, the Department contends that there is no need for the proposed facility, that such lack of need will render Forum's project financially unfeasible, that the project is not the best use of Forum's resources, and that Forum fails to meet the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. All other statutory and rule criteria are satisfied, at least minimally, based on Forum's 60-bed proposal. With regard to the Amedex application, the Department contends that there is no need for the proposed facility, that such lack of need will render Amedex's project financially unfeasible, and that the project is not the best use of Amedex's resources. The Department further contends that Amedex has not demonstrated that it can provide quality of care, that it has not demonstrated that its project is financially feasible in the short or long term, that it has not provided long range plans and that, even assuming minimal need, the size of Amedex' proposed project will cause difficulty in meeting projected utilization needs based on Broward County's past utilization rates. All other statutory and rule criteria are satisfied, at least minimally, based on Amedex' 240-bed proposal. As between the applicants, they agree that a comparative review is appropriate to determine the best applicant. Further, they agree for purposes of this proceeding that the other meets all statutory and rule criteria, at least minimally, except the following: need beyond 60 beds, ability to provide quality of care, and availability of funds for project accomplishment and operation. The parties have further agreed that there are no special circumstances existent in this case upon which a certificate of need is being sought. The Amedex Proposal In July 1986 Amedex filed an application with the Department for a certificate of need to construct a 240-bed skilled and intermediate care nursing home in Broward County, Florida. The total project cost is projected to be $9,040,228. At hearing, Amedex failed to offer any competent proof to demonstrate the immediate and long-term financial feasibility of its proposed project, that it could provide quality care, or that it had available the necessary funds for project accomplishment and operation. 1/ While the Department contended that the proposed project was not the best use of Amedex's resources, it offered no proof to demonstrate what other health services would be a more appropriate use of the resources. The Forum Proposal In July 1986, Forum also filed an application with the Department for a certificate of need to construct a skilled and intermediate care nursing home in Broward County, Florida. Forum's application sought leave to construct a 60-bed facility. The estimated cost for construction of Forum's proposed nursing home is $2,39,800. Forum has the necessary resources for project accomplishment and operation. While the Department contended that the proposed project was not the best use of Forum's resources, it offered no proof to demonstrate what other health service would be a more appropriate use of such resources. Forum is a publicly held health services company which owns, develops, and operates retirement living centers and nursing homes on a national basis. Pertinent to this case, Forum proposes to develop a retirement living center in Broward County that would consist of 120 apartments for independent living, a 30-bed adult congregate living facility, and the proposed 60-bed skilled and intermediate care nursing home. Forum has packaged its centers to provide these three levels of service to meet the desires of retired persons they hope to attract to their retirement community. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen and heating plant. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. The nursing facility proposed by Forum would offer a wide range of services for its residents including: 24-hour skilled and intermediate nursing care, physical therapy services, and other restorative services. Additionally, Forum proposes to offer, as needed, subacute services such as: intravenous care, continuous bladder irrigation, oxygen therapy, nastrogastric tube feeding, ventilator care, insulin treatment, sterile dressing changes, and sterile care of tracheotomies. Forum also proposes to offer in the future, if need is identified and if any necessary agreements can be reached, respite care, adult day care, meals on wheels and hospice care. Forum proposes to seek medicare and medicaid certification, and will dedicate 25 of its beds to medicaid patients. Forum has a history of providing quality care at its existing facilities, and will provide quality care at the proposed facility. Forum has demonstrated the immediate and long term financial feasibility of its proposed project. Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. Due to the excellent growth potential in Broward County for retirement living centers, Forum should be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible. However, in view of the lack of numeric need for such facility as discussed infra, Forum's success will be to the detriment of existing and approved facilities. Numeric need The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)2, Florida Administrative Code. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides: Need Methodology ... the Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i... The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case, establishes a "planning horizon" of July 1989. Pertinent to this case, subparagraphs 2 a-d provide the methodology for calculating gross bed need for the district/subdistrict (in this case the district and subdistrict are the same--Broward County) in the horizon year. The first step in the calculation of gross need for the horizon year is to derive "BA," the estimated bed rate for the population age-group 65-74. This rate is defined by subparagraph 2b as follows: BA = LB/ (POPC + (6 x POPD) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. The parties concur that the district licensed bed figure (LB) is calculated based on the number of licensed community nursing home beds as of June 1, 1986, and that there were 3,226 licensed beds in the district on that date. 2/ The parties do not, however, agree as to the date on which POPC and POPD should be derived. The formula mandated by the rule methodology for calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived. Forum contends that the appropriate date to establish the "current population" for POPC and POPD is January 1, 1986. The Department contends that the appropriate date is the date of application. In the opinion of David Warner, which opinion is credited, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. January 1, 1986, as the midpoint of that date, is the appropriate date to derive POPC and POPD. Supportive of Dr. Warner's opinion are the past practices of the Department. Between December 1984 and December 1986, the Department routinely used a three and one half year spread between the base population period and the horizon date for "current population" in its semiannual nursing home census report and bed need allocation. That three and one half year spread was adopted by the Department for the same reasons expressed by Dr. Warner. In the batching cycle of January 1987, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one half year spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to use a three year spread between the base population period and the horizon date for "current population" in calculating POPC and POPD. Application of the methodology prescribed by subparagraph 2b to the facts of this case produces the following calculation: BA = 3,226 / (158,878 + (6 x 110,217) BA = 3,226 / (158,878 + 661,302) BA = 3,226 / 820,180 BA = .0039332 The second step in the calculation of gross need for the horizon year is to derive "BB," the estimated bed rate for the population age group 75 and over. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB = 6 x BA BB = 6 x .0039332 BB = .0235992 The third step in the calculation of gross need for the horizon year is to derive "A," the district's "age-adjusted number of community nursing home beds" at the horizon year. This methodology is defined by subparagraph 2a as follows: A = (POPA x BA) + (POPB x BB) Where: POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. The parties concur that POPA and POPB are, respectively, 165,533 and 128,250 for the horizon year. Accordingly, application of the methodology prescribed by subparagraph 2a produces the following calculation: A = (165,533 x .0039332) + (128,250 x .0235992) A = 651.07439 + 3,026.5974 A = 3,677.67 The final step in the calculation of gross need in the horizon year is to derive "SA," the "preliminary subdistrict allocation of community nursing home beds" (gross bed need in this case. 3/ This calculation is defined by subparagraph 2d as follows: SA = A x (LBD/LB) x (OR/.90) Where: LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through June 30. The batching cycle in which these applications were filed occurred before the Department amended its rule to include the fixed need pool concept. Accordingly, the parties agree that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d, but, rather is defined by former rule 10-5.11(21)(b)4 as follows: OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of applications submitted for the July batching cycle shall be based upon occupancy data for the months of October through March preceding that cycle... In Broward County (District X) LB and LBD are the same since the county has not been divided into subdistricts. Application of the foregoing methodology to the facts of this case produces a gross need in July 1989 of 3,453 beds, computed as follows: 4/ SA = 3,677.67 x (3226/3226) x (.845/.9) SA = 3,677.67 x 1 x .938888 SA = 3452.92 The net need calculation The final step in the numeric need methodology is to derive net reed from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed need allocation for a subdistrict, which is the number of beds available for certificate of need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental sub- district from the bed allocation determined under subparagraphs 2.a. through f. Notably, former rule 10-5.11(21)(b)9 comports with the new rule in all material respects. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need previously calculated, it is silent as to the date that inventory should be calculated. The Department asserts, through application of "policy," that the number of licensed beds should be calculated as of June 1, 1986 (the date established by former rule 10-5.11(21)(b)7 for calculating LB and LBD), and the number of approved beds as of December 1, 1986 (the date the Department's supervisory consultant signed the state agency action report). Forum would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no proof to expose and elucidate its policy choice. As discussed below, the dates used by the Department and Forum for purposes of calculating net need were facially unreasonable. 5/ The inventory of licensed and approved beds under subparagraph 2i, as well as former rule 10-5.11(21)(b)9, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's policy choice concerning the dates at which licensed and approved beds are to be counted is neither logical nor rational since it could result in some nursing home beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed in June 1, 1986, but licensed before the supervisory consultant signed the state agency action report (SAAR), they would not be counted in either inventory. Since the purpose of subparagraph 2i is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures, to the greatest extent possible, that the horizon population will not be over or underserved. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated by reducing the gross need calculation by the inventory of licensed and approved beds, from previous batching cycles, existent on that date. As of the date of administrative hearing, there were 3,226 licensed beds and 695 approved beds in the district/subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a surplus of 399 community nursing home beds in the district for the June 1989 planning horizon. Consistency with State and local health plans The parties have stipulated that both proposals are consistent with the State and local health plans except for Forum's facial failure to comply with the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. Pertinent to this issue, the local health plan provides: In addition to controlling capacity in order to discourage the construction of unneeded beds, the certificate of need program addresses cost containment by encouraging efficiencies in operation as a criteria to certificate of need approval. A number of operational models have historically proven to be positive influences on efficiency. Licensure laws, for instance, require nursing home staffing patterns to be structured in minimum modules of 30 bed configurations. As a result, the construction of nursing homes with beds totalling numbers not divisible by 30, has the capability of encouraging over staffing. Similarly, experience has shown that freestanding nursing homes constructed at less than 120 beds also are less cost efficient compared to larger facilities. Likewise, since construction and corresponding debt service retirement is greater for freestanding facilities than for new construction on existing facilities, expansion and conversion as an alternative to new construction frequently acts to reduce costs. The basis for the 120-bed minimum size for a "freestanding" facility in the local health plan is to insure efficiency and economy of scale. The 60- bed project proposed by Forum is not "freestanding" but is an integral part of a retirement center which also includes 120 independent living units and a 30-bed adult congregate living facility. Under the circumstances, the economies and efficiencies contemplated by the local health plan will be achieved, and Forum's proposal is consistent with such plan. The local health plan also provides, as a recommendation, that: ... applications for certificates of need to construct additional nursing home beds should be approved so as to support the State policy of 27 beds/1000 population over age 65 in Broward County. Considering the population over age 65 at the applicants' planning horizon, as well as the number of licensed and approved beds in the district, calculates a 14.36 beds/1000 population over age 65 for July 1989. Accordingly, the applicants' proposal is consistent with state and local health plans regarding bed to population ratio. Comparative Review As between the competing applicants, the proof demonstrates that Forum is the superior applicant, and that were the award of a certificate of need appropriate in this case that its application would be the one of choice. Under no circumstance does the proof support an award to Amedex, since it failed to demonstrate the immediate and long-term financial feasibility of its project, failed to demonstrate that it would provide quality care, and failed to demonstrate that it had sufficient resources for project accomplishment and operation. The criteria on balance In evaluating the applications of Amedex and Forum, none of the criteria established by Section 381.705, Florida Statutes (1987), or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. In the case of Amedex, the lack of need in the district, as well as its failure to demonstrate compliance with relevant criteria as discussed in paragraph 46, demonstrates that, on balance, its application should be denied. In the case of Forum, its application meets all relevant statutory and rule criteria except need. Need is the key criteria in the instant case. Forum's failure to satisfy that criterion by proof of numeric need or special circumstances is dispositive of its application for licensure, and such failure is not outweighed by any other, or combination of any other, criteria.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications for certificate of need filed by Amedex and Forum be DENIED. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of February, 1988. WILLIAM J. KENDRICK 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 25th day of February, 1988.
The Issue The basic issue in this case is whether the Petitioner, Laurence Arthur Baird, is entitled to be licensed by endorsement as a Nursing Home Administrator.
Findings Of Fact On March 3, 1993, the Petitioner, Laurence Arthur Baird, filed his application for licensure by endorsement to sit for the Nursing Home Administrators examination and subsequently to be licensed as a Nursing Home Administrator by the Board of Nursing Home Administrators. The application was complete and was timely filed. The appropriate fee was paid. Mr. Baird holds current active licenses to practice as a Nursing Home Administrator in Georgia and Illinois. Mr. Baird has a high school diploma. In addition, Mr. Baird completed over four semesters at Milliken University. He has also secured additional hours at Jacksonville University, has received CLEP credit in five course areas, and has secured a number of continuing education hours in areas relative to nursing home administration. He has spent over 600 hours in continuing education since his initial licensure. He also passed the GMAT examination which is a prerequisite to admission to many M.B.A. programs. The University of Alabama considered Mr. Baird's undergraduate career, his CLEP scores, his GMAT score, and his life experiences and concluded that Mr. Baird was qualified for graduate studies in its M.B.A. program. Mr. Baird completed 42 hours toward an M.B.A. degree. Mr. Baird has formal education in the following areas: Nursing Home Administration; including planning, organization, operations and services, resource development, supervision of staff, and control and evaluation of facility performance. Personnel Management; including managing people for the specific needs of the long-term care facility, recruitment and selection, orientation, training and development of employees, development of employee appraisal programs, communications, wage and salary administration, union procedures and employee-management relations, discipline and morale. Accounting and Financial Management; including basic accounting, adjustment of accounts, preparation of financial statements, financial management planning, effective use of resources, financial performance evaluation, cost analysis, reimbursement from the United States Department of Health and Human Services under Medicare and Medicaid, and budgeting. Social Gerontology; including biology of aging, psychology of aging, changing social roles of aging, personal adjustment to aging, programs for health improvement and rehabilitation, financial aspects of aging, retirement, independency and dependency of aging persons, societal disengagement, impact of living arrangements and interaction between the needs of the institution and the needs of the patients. Mr. Baird has practiced as a Nursing Home Administrator since 1970. Mr. Baird has attained many years of experience in all of the areas mentioned immediately above. A review of Mr. Baird's work experience includes the following details: In 1970 Mr. Baird participated in and fully completed an AIT program. He then became assistant administrator at a facility in Decatur, Georgia. From 1970 to 1972 he was administrator of a 102-bed facility in Champaign, Illinois. From 1972 to 1977 Mr. Baird was administrator of a 165-bed facility. During that time the company built a second 65-bed facility and Mr. Baird oversaw both. From 1977 to 1988 Mr. Baird was administrator of a 209-bed facility. In 1979 Mr. Baird purchased a 65-bed facility and, until its sale in 1987, oversaw both of them. In 1988, Mr. Baird took the position of Director of Operations at Pruitt Corporation. Initially, he was responsible for the operation of 17 nursing home facilities. He was promoted to Vice President of Operations and, later, to Senior Vice President of Operations. At the time he left Pruitt, he was responsible for 30 facilities. He resigned from Pruitt to move his family to Florida to take a position at Beacon Pointe in Sunrise. During the last five years he was with Pruitt, he acted in the capacity of administrator for at least two years. Mr. Baird has distinguished himself as a Nursing Home Administrator by being nominated for Nursing Home Administrator of the year in 1976 in Georgia and by winning the equivalent award in Alabama in 1984. For five years Mr. Baird served on a board in the State of Alabama which advised the state on nursing home licensure matters. He chaired that board for one year. He also served three years on a Georgia advisory board on Medicaid. Mr. Baird is a member of the American Academy of Nursing Home Administrators. He has been certified as an administrator by that body, after passing a rigorous two-day examination. He served as the regional governor of the American Academy of Nursing Home Administrators. Mr. Baird has successfully completed a national examination which is substantially equivalent to the examination given by the department. Mr. Baird has worked as a fully licensed Nursing Home Administrator for two years within the five year period immediately preceding the application by endorsement. The Board's Order of Denial filed on July 9, 1993, included the following pertinent language: The Board of Nursing Home Administrators reviewed and considered your application for licensure by endorsement on May 14, 1993, in Miami, Florida and has determined that said licensure be denied, stating as grounds therefore: Your application and supporting documentation do not evidence that the licensure requirements for Georgia or Illinois are substantially equivalent to those in Florida. In the State of Georgia the rules and regulations governing qualifications for licensure as a Nursing Home Administrator include the following: 393-3-.01 Pre-Examination Requirements. Amended. A person who seeks licensure by examination as a nursing home administrator must show the following: be at least 21 years of age; be of reputable and responsible character; and meet one of the following education and experience requirements: Have earned a master's degree in Nursing Home Administration, in Health Care Administration or in a related health care administration field from an accredited institution of higher learning. If the master's degree did not include an Administrator-In-Training (AIT) program as provided in Rule 393-4-.04, the applicant must either have completed an AIT program as provided in Chapter 393-4 or the applicant must have attained two years of employment working in a nursing facility. Have earned a baccalaureate degree from an accredited institution of higher learning and have completed AIT program as provided in Chapter 393-4; or earned a baccalaureate degree from an accredited institution of higher learning and have attained two years of employment working in a nursing facility. With less than a baccalaureate degree, the applicant must have either: 3 years of college plus 2 years of full time work experience; 2 years of college plus 4 years of full time work experience; 1 year of college plus 6 years of full time work experience; or a High School Diploma or GED certificate plus 8 years of full time work experience; provided that: One year of college means 45 quarter hours or 24 semester hours of course work at an accredited institution of higher learning; and Full time work experience means a minimum of 35 hours per week in a licensed nursing facility. In the State of Illinois the statutory provisions governing qualifications for licensure as a Nursing Home Administrator include the following: 70/8. Qualifications Sec. 8. A person is qualified to receive a license as a nursing home administrator: (a) who is at least 21 years of age, (b) who has not engaged in conduct or behavior determined to be grounds for discipline under this Act, (c) who is in sound physical and mental health, (d) who is a citizen of the United States or lawfully admitted alien, (e) who is a graduate of a college or university deemed reputable and in good standing by the Department, or who has satisfactorily completed a course of instruction approved by the Department containing subjects embracing the laws governing the operation of nursing homes, the protection of the health and safety of patients in nursing homes and the elements of sound nursing home administration, or who presents evidence to the Department of education, training and experience deemed by the Department to be equivalent of either of the above, (f) who passes a written examination conducted by the Department to determine his fitness to receive a license as a nursing home administrator and (g) who pays the required fee. The Illinois Administrative Code includes the following requirements at Section 1310.30(a)(2) regarding the contents of applications for licensure as a Nursing Home Administrator: (a) An applicant for a license as a nursing home administrator shall file an application on forms supplied by the Department . . . together with: (1) *** Certified records of any one of the following: Graduation from an accredited college or university with the minimum of a Baccalaureate Degree; Satisfactory completion of an approved course of instruction in nursing home administration as outlined in Section 1310.40; or Graduation from an accredited college or university with the minimum of an Associate Degree and an Employer's Affidavit certifying to the applicant's qualifying experience as described in Section 1310.50. The types of courses that may be approved for satisfaction of the requirements of Section 1310.30(a)(2)(B), above, are described as follows at Section 1310.40 of the Illinois Administrative Code: The Department, upon the recommendation of the Nursing Home Administrators Licensing Board, shall approve courses of instruction in nursing home administration which include instruction in the following areas: Nursing Home Administration; including planning, organization, operations and services, resource development, supervision of staff, and control and evaluation of facility performance. Personnel Management; including managing people for the specific needs of the long- term care facility, recruitment and selection, orientation, training and development of employees, development of employee appraisal programs, communications, wage and salary administration, union procedures and employee-management relations, discipline and morale. Accounting and Financial Management; including basic accounting, adjustment of accounts, preparation of financial statements, financial management planning, effective use of resources, financial performance evaluation, cost analysis, reimbursement from the United States Department of Health and Human Services under Medicare and Medicaid, and budgeting. Social Gerontology; including biology of aging, psychology of aging, changing social roles of aging, personal adjustment to aging, programs for health improvement and rehabilitation, financial aspects of aging, retirement, independency and dependency of aging persons, societal disengagement, impact of living arrangements and interaction between the needs of the institution of [sic] the needs of the patients. The types of qualifying experience that will satisfy the experience requirements of Section 1310.30(a)(2)(C) are described as follows in Section 1310.50 of the Illinois Administrative Code: Qualifying experience for applicants . . . shall include: One year of full time employment as a nursing home administrator in a licensed nursing home or two years of full time employment as an assistant nursing home administrator in a licensed nursing home with 50 or more beds. Experience as a nursing home administrator or as the assistant nursing home administrator must have been completed within the 36 months immediately preceding date of application. Full time employment as an administrator of a related facility for two years or more. Related facilities include hospitals with long term care beds or other licensed long-term care facilities not having nursing care beds licensed by the Illinois Department of Public Health. Experience as an assistant administrator in such a facility shall not qualify.
Recommendation Based on all of the foregoing, it is RECOMMENDED that the Board of Nursing Home Administrators issue a Final Order in this case concluded that the Petitioner is not entitled to licensure by endorsement as a Nursing Home Administrator. DONE AND ENTERED this 8th day of November 1993 in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH 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 8th day of November 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4844 The following are the Hearing Officer's specific rulings on all proposed findings of fact submitted by all parties. Proposed findings submitted by Petitioner: Paragraph 1: Accepted. Paragraph 2: Rejected as consisting primarily of subordinate and unnecessary background and procedural details. Paragraph 3: Accepted. Paragraph 4: Accepted in substance with the exception of the portion reading "which gave him more than the requisite number of hours necessary to secure an A.A. Degree." The quoted portion is rejected as irrelevant in the absence of evidence that the Petitioner's courses at Milliken satisfied the subject matter requirements for an Associate of Arts degree. Paragraphs 5 through 12: Accepted in substance with the exception of a few repetitious observations. Proposed findings submitted by Respondent: All of the proposed findings of fact submitted by the Respondent have been accepted in whole or in substantial part. COPIES FURNISHED: Karen L. Goldsmith, Esquire Goldsmith & Grout, P.A. 2709 West Fairbanks Avenue Post Office Box 2011 Winter Park, Florida 32790-2011 Arthur R. Wiedinger, Esquire Assistant Attorney General Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Anna Polk, Executive Director Board of Nursing Home Administrators Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0777 Jack McRay, Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue [Case No. 79-2407] Whether the Department is entitled to reimbursement of certain Medicaid funds previously paid to a nursing home owner in the amount of $118,061.00, based upon a recommendation by the Department and subsequent determination by the U.S. Department of Health, Education and Welfare, under Section 1122, Social Security Act, that Federal reimbursement of expenses attributable to the purchase of the nursing home should be withheld due to the Owner's lack of timely notice of intent to acquire the nursing home; [Case No. 80-467] Whether, based on the Section 1122 determination, the Department wrongfully disallowed and withheld payment to the nursing home owner, certain medicaid reimbursement funds in the amount of $101,348.00. Conclusions and Recommendation: Conclusions: Here, each party has the burden of presenting a preponderance of evidence in support of its affirmative claim. Each claim rests on the propriety or impropriety of imposition of Section 1122 penalties against the nursing home. Since the Department failed to present sufficient evidence justifying the imposition of Section 1122 penalties and the nursing home failed to establish the Section 1122 penalties were erroneously imposed, neither party sustained its burden of establishing entitlement to the relief requested. Recommendation: That the Department's Medicaid overpayment claim against the nursing home owner, in the amount of $118,061.00 be DENIED, and the nursing home owner's claim against the Department for $101.348.00 in Medicaid underpayments be DENIED. Background: On April 26, 1979, and May 2, 1979, Petitioner/Respondent, Department of Health and Rehabilitative Services ("Department") notified Respondent/Petitioners, Lakeview Nursing Home, Robert Becht and R. B. Care, Inc., d/b/a Lakeview Manor and d/b/a Intercoastal Nursing Manor ("Owner") that a desk review of the annual cost report for the Lakeview Nursing Home (a/k/a Lakeview Manor) indicated that the nursing home had been overpaid $18,900.00 by the Department's Medicaid Program during the eight months, ending June 30, 1978, and that such overpayment should be returned to the Department. On October 8, 1979, the Department notified the nursing home Owner that, pursuant to a "Notice of Determination Under Section 1122" issued by the U.S. Department of Health, Education and Welfare ("HEW") the Department had recalculated the nursing home's historic per diem rates and determined that the Owner had been overpaid $61,155.00 in Medicaid funds during the period ending June 30, 1978. On November 19, 1979, the nursing home Owner requested a formal hearing, under Section 120.57(1), Florida Statutes, to challenge the validity of the Department's overpayment claim. On November 30, 1979, the Department forwarded the Owner's request for a hearing to the Division of Administrative Hearings. [DOAH Case No. 79-2407] On January 10, 1980, the Department notified the nursing home Owner that an additional $56,906.00 should be repaid to the State of Florida--based upon alleged overpayment to the nursing home during the period ending June 30, 1979. On February 14, 1980, the nursing home Owner filed a Petition with the Department alleging numerous wrongful and negligent Department actions resulting in the withholding and underpayment of Medicaid funds to which the nursing home was entitled, demanding full payment, and requesting a formal Section 120.57 hearing. On March 12, 1980, the Department forwarded the nursing home Owner's Petition to the Division of Administrative Hearings for assignment of a Hearing Officer. [DOAH Case No. 80-467] By Notice of Hearing, dated April 11, 1980, Case No. 80-467 was set for final hearing on May 29, 1980. By agreement of the parties, the two cases were subsequently consolidated for final hearing. At final hearing, the Department called John T. Donaldson, and offered Respondent's Exhibit Nos. 1 through 9, into evidence, each of which was received. The nursing home Owner called as its witnesses, William McCaulley, Leonard Cordes, and Linda Zarecki, and offered Petitioner's Exhibit Nos. 5, (Composite) and 6, each of which was received. At the request of the nursing home, and without objection by the Department, official recognition was taken of Rule 10C-7.48(6)(c), Florida Administrative Code. The nursing home further stipulated that the only allegations which it would pursue in the administrative hearing concerned whether the Department wrongfully withheld from the nursing home certain Medicaid funds to which its was entitled. Neither party submitted post-hearing proposed Findings of Fact or Conclusions of Law.
Findings Of Fact Pursuant to an agreement with HEW, the Department administers the Medicaid Program within Florida which includes allocation and payment of Medicaid funds to nursing homes which provide health care to patients qualifying for Medicaid benefits. (Testimony of Donaldson, Petitioners Exhibit 5; Respondent's Exhibit 9) On November 1, 1977, Robert Becht, on behalf of R. B. Care, Inc. ("Owner") purchased a nursing care facility located at 208 Lakeview Avenue, West Palm Beach, Florida, known as Intercoastal Nursing Manor. No evidence was presented to establish the purchase price paid for the facility. Subsequent to its purchase, the name of the nursing home was changed to Lakeview Manor, although Department correspondence frequently refers to it as Lakeview Nursing Home. (Testimony of Donaldson, McCaulley, Respondent's Exhibits 1, 2, 5, 9 [Composite]) On January 9, 1978, a representative of the Regional Health Care Planning Agency--Health Planning Council, Inc.--advised the Department's Bureau of Community Medical Facilities of an apparent change in ownership of the Intercoastal Nursing Home, noted that the new owner had not "sought, applied for, or received the necessary Certificate of Need for this change of ownership transaction," and asked for Department assistance in determining the present status of the nursing facility. (Testimony of Donaldson, Respondent's Exhibit 1) In response to the Health Planning Council's letter, the Department's Office of Medical Facilities sent a letter to the Nursing Home Owner, dated January 26, 1978. That letter enclosed Department rules which provided that, when certain expenditures have been incurred by a health care facility without prior notice of such expenditure being given to the designated planning agency (Office of Medical Facilities), that agency should notify the health care facility that such obligation was subject to review, that timely notice of the proposed expenditure was not given, and that the Agency proposed to recommend to the Secretary of HEW that the expenditure be disapproved. The nursing home was given 30 days to reply, or file the necessary application for approval of the expenditure (acquisition of the nursing home). The letter closed with the following: "You should understand that we must report the purchase of Intercoastal Nursing Manor to the Department of Health, Education and Welfare on a no timely notice and that it may affect depreciation, interest, and fair returns on the project and reimbursement on the project." (Respondent's Exhibit 2) By letter dated March 22, 1978 (with copy to the nursing home Owner), the Department's Office of Community Medical Facilities subsequently informed the regional office of HEW that notice had been given the nursing home Owner concerning the need to file an application for review of the November 1, 1977, acquisition of and change in ownership of the nursing home, but that it had failed to respond. The recommendation of the Office of Community Medical Facilities was attached to the transmittal letter; however, that recommendation was not offered into evidence by the Department. The letter of transmittal concluded that, because no application for approval was submitted by the nursing home Owner, there was "no indication on the HRA-45 of the amount of capital expended for the acquisition." (Respondent's Exhibit 3) During April, 1978, the Regional Health Administrator of HEW issued a "Notice of Determination under Section 1122--Reimbursement to be Excluded." The Notice was addressed to the nursing home Owner and concluded that reimbursement for expenses related to the capital expenditure (acquisition of the nursing home facility) would be excluded from payment for services provided under the Social Security Act based upon the finding that (1) the expenditure was subject to Section 1122, and (2) Notice of Intent to make the expenditure had not timely been given. By way of explanation, the regional administrator added that reimbursement would be "withheld for an indefinite period" because the State had been unable to make a finding that the expenditure conformed to applicable plans, standards, and criteria due to the failure to submit an application. (Respondent's Exhibit 4) By separate agreements entered into by the Department and the nursing home Owner on November 2, 1977, October 30, 1978, and September 5, 1979 (which enabled the nursing home to participate in Florida's Medicaid Program) the nursing home Owner expressly agreed to comply with state and federal laws and rules applicable to the Medicaid Program. The Owner also agreed that Medicaid cost reporting would be governed by the procedures and methods contained in the Medicare Provider Reimbursement Manual (HIM-15). The agreements relieve the nursing home from responsibility in "those instances of overpayment due to Agency [Department] errors in eligibility investigation and determination. . ." (Respondent's Exhibit 9 [Composite]) Section 2422 of HIM-15 describes the requirements concerning approval of capital expenditures imposed by Section 1122 of the Social Security Act. The Manual cautions providers desiring to make or having made expenditures subject to Section 1122 to familiarize themselves with the regulations and direct questions concerning its implementation to the designated planning agency. (Respondent's Exhibit 8) Notwithstanding having been sent repeated notices by the Department and HEW concerning the requirements of Section 1122, the nursing home Owner has not filed an application for approval of the capital expenditure associated with acquisition of the nursing home; neither has it contended that such capital expenditure does not fall within the ambit of Section 1122 and implementing HEW and Department rules. (Testimony of McCaulley, Donaldson) Despite the Department's withholding and disallowal of payment to the nursing home of expenses relating to the acquisition of the facility (due to the federal Section 1122 determination), the nursing home continued to qualify for and participate in the Medicaid Program. The nursing home provided efficient and satisfactory medical care to Medicaid patients during 1978, and 1979, and the Department does not assert otherwise. The three Medicaid participation agreements entered into during 1977, 1978, and 1979, do not directly address or purport to relieve health care facilities from compliance with Department rules and Section 1122. (Testimony of Donaldson, McCaulley, Respondent's Exhibit 9 [Composite]) It is probable that the nursing home received actual notice of the requirement that certain capital expenditures by health care facilities must receive Section 1122 approval. Although the nursing home Owner's secretary since June, 1978, does not recall receiving the HEW Section 1122 Notice, she was not employed by the nursing home during the time the notice was issued, and she admitted that she could not testify that the owner had not received the HEW Notice. Moreover, her testimony did not address the earlier Department correspondence to the Owner concerning the need to obtain State and Federal Section 1122 approval, including the Department's Section 1122 recommendation to HEW. (Testimony of Zarecki, Donaldson, Respondent's Exhibits 2, 3, 4, 5, 6) Between 1977 and 1979, the Department overpaid the nursing home $118,061.00 (which includes the $18,900.00 claimed by the Department in its May 2, 1979, letter) in per diem patient reimbursements which the nursing home was not entitled to under the Section 1122 Notice and Penalty. This overpayment was caused by the Department's failure to exclude that portion of per diem patient reimbursements attributable to the Owner's acquisition of the nursing home property. (Testimony of Donaldson, Respondent's Exhibits 5 and 7) If the Section 1122 penalty was incorrectly recommended by the Department, and imposed by the HEW, the Department has withheld between November 1, 1977, and December 31, 1979, $101,348.00 which is now due and owing to the nursing home Owner. (Testimony of McCaulley, Petitioner's Exhibit 6) Since January 2, 1979, the Owner has no longer owned or operated the nursing home in question. (Testimony of McCaulley, Cordes)
Findings Of Fact Lake and Sumter Counties comprise a subdistrict of District III. Both the district and subdistrict have a sufficiently high occupancy rate of nursing homes to indicate a need for additional bed capacity considering both licensed and approved beds. This subdistrict has an above average percentage of elderly (over age 65) living in poverty and thereby qualifying for Medicaid. This increases the bed need ratio from 27 per 1,000 to 35.6 per 1,000 in this subdistrict. Applying the provisions of Rule 10-5.11(21), Florida Administrative Code, to the projected population over age 65 of this subdistrict results in a need for 1,522 beds in 1987. There are 931 licensed and approved beds in this subdistrict including the 15 beds approved for Eustis Limited Partnership in June, 1984. Since the current utilization of nursing home beds in the subdistrict exceeds 85 percent and both subdistrict and district indicate a need for additional bed capacity, the prospective base rate of utilization is 80 percent. From January through March, 1984, there were 684 licensed nursing home beds in this subdistrict. From April through June, this number increased by 120 to 804 licensed beds. In July 35 licensed beds were added and in August an additional 17 licensed beds were added. From these undisputed figures Respondent contends there is no need for additional beds, although its witness testified to a need for 41 additional beds when the bed need methodology of Rule 10-5.21 was applied to the latest data available (TR. Vol. II, page 253, 270) , and Petitioners contend that the application of this formula indicates a need from 41 to 85 additional beds. The formula in the rule which is used to determine prospective utilization and number of additional beds needed is: Up = PC where: Eb + Pb Up is prospective utilization of community nursing home beds (in this case not less than 80 percent) PC is the average patient census within the area during the T.est recent six months' period prior to the filing of the CON application(s) under consideration for which the Department has data available. Eb is the current number of licensed and approved community nursing home beds within the area (here 931). Pb is the number of additional beds being pro posed. (Pb must be low enough to keep Up at or above 0.80). Nursing homes submit monthly census reports to DHRS showing the number of patients in the nursing home on the first day of the month. A summary of those reports for this subdistrict is shown in Exhibit 30. The only factor in the formula on which there is any dispute is PC, the average census for the preceding six months. At the hearing DHRS contended that the definition in the rule respecting the census during the most recent six- month period prior to the filing of the CON application was controlling in this case; however, this position has now been abandoned by DHRS as not consistent with the concept of de novo proceedings and their customary practice of using the latest six-month data available prior to the hearing. If we use the latest six months data of patient census in this subdistrict available to DHRS to determine the average patient census for this period, those figures are shown on Exhibit 30 for 1/1/84 through 6/1/84. The average patient census for these six months is 4289 divided by 6 or 715. Since the latest nursing home beds approved in this subdistrict was the 15 approved in June, 1984, these 15 should be deducted from the 931 beds currently licensed and approved because they were authorized after this six-month period for which the average patient census is determined. Therefore, when using this average census figure, the beds licensed and authorized should be 916. Applying these figures to the prospective utilization formula in Finding of Fact No. 6 above, we have .80 = 715 916 + Pb Pb = 893-916 = 0 If, as proposed by Petitioners, we use the average patient census for the six-month period for which Petitioners submitted data, viz., 3/1/84 through 8/1/84, the average patient census is 4556 divided by 6 or 759. When this figure for PC is used in the utilization formula, we have .80 = 759 931 + Pb Pb = 949-931 = 18 Although it does not affect the total number of beds licensed and approved, during the month of July, 1984, 35 more beds were licensed and in August, 1984, an additional 17 beds were licensed. Petitioners obtain a different number for Pb by ignoring the definition of PC as given in Rule 10-5.11(21). To determine PC they would take the latest number of licensed beds, here 856, and multiply this by the occupancy rate of 93.3 percent to arrive at a patient census of 799 which, by reason of the arithmetic used to get the percentage of licensed beds occupied, is exactly equal to the patient census submitted by Petitioner for August 1, 1984. Applying this one-month patient census to the prospective utilization formula, they would show 67 additional beds are needed as follows: .80 = 799 931 + Pb Pb = 998.75 - 931 = 67 The methodology used by DHRS's witness to obtain a bed need of 41 from the data available to DHRS was not shown. However, during the six-month period January-June 1984, the occupancy rate in this subdistrict was 96 percent. If the average census for the six-month period can be determined by taking 96 percent of the 804 licensed beds, this number (PC) is 772. Applying a PC of 772 to the prospective utilization formula we have .80 = 772 916 + Pb Pb = 965 - 916 = 49 (Again, 916 is used instead of 931 because the additional 15 beds were not authorized until after June 1, 1984.) QUALIFICATIONS OF PETITIONERS Although no need for additional beds has been shown, the following facts are found respecting the Petitioners' qualifications. Both FLC and HCR are qualified to provide the proposed service. FLC is a management company owned by six individuals comprising two groups, each of which own one-half. FLC is a Subchapter S corporation which means all earnings flow to the shareholders and are taxable to these shareholders. Each nursing home built to be operated by FLC is also a Subchapter S corporation owned by the owners of FLC. Construction of nursing homes to be managed by Florida is done by Living Care Constructors, a partnership comprised of the same six investors. FLC plans to finance construction of the proposed facility by conventional financing from Barnett Bank or through industrial revenue bonds. Barnett Bank will provide the necessary financing. The net worth of the six investors is in excess of $37 million dollars. Four of the six investors are Harold Puckett and his three sons, Hal, Thomas, and James. Each of these own 12-1/2 percent of the nursing homes operated by FLC in Florida while John Cather and E.R.N. Kuzendorf own the other 50 percent. FLC currently operates 10 nursing homes in Florida all of which were constructed by Living Care Contructors. The Puckett family owns some 20 nursing homes in states other than Florida which they have operated for many years. FLC has received citations and has been fined by DHRS for violations of various regulations at the nursing homes it operates in Florida. FLC has also received superior ratings for the nursing homes it operates in Florida. FLC estimated total cost of construction for the 60-bed facility proposed is $1,342,000. Both FLC and HCR propose to have a patient mix comprising approximately 50 percent Medicaid. HCR is a public corporation which, for many years before going public, constructed nursing homes in Indiana, Ohio, Missouri, and West Virginia before moving some operations to Florida. Most of those were built for others or sold to others after construction. HCR currently has three nursing homes under construction in Florida but, to date, none is operational. HCR plans to finance the proposed facility with industrial development bonds. No evidence was presented relative to alternate financing if industrial revenue bonds are not available although evidence was presented that, if desired, HCR is sufficiently liquid to finance these construction costs. HCR's estimated costs to construct and furnish the proposed nursing home is $1,645,000. Its pro forma estimated interest costs are 12 percent. Most of the nursing homes built by HCR were built for or sold to others. Those nursing homes presently under construction by HCR in Florida are intended to be operated by HCR. HCR has several other applications pending for certificates of need to construct nursing homes in Florida. Some of these, if approved, may be sold by HCR rather than be operated by HCR. HCR presented witnesses who extolled the virtues of HCR's program for training personnel and the operating procedures to be followed by HCR in operating the proposed nursing home. However, HCR has no track record in Florida and the management of HCR is certainly no more, and probably less, qualified by experience to operate nursing homes than is the management of FLC.
The Issue As stated in the Prehearing Stipulation filed by the parties, the "issue to be litigated is whether Petitioner is entitled to a Superior or Standard rating on its license for the period September 1, 1986 through August 31, 1987"?
Findings Of Fact The Petitioner, The Magnolias Nursing and Convalescent Center, is a 210-bed nursing home located in a four-story building in Pensacola, Florida. It is licensed as a nursing home by the State of Florida pursuant to Chapter 400, Florida Statutes. Howard Bennett and his wife have been the owners of the Petitioner since it was built in 1978. On April 28-30, 1986, and May 1-2, 1986, the Department conducted an annual Licensure and Certification survey (hereinafter referred to as the "Annual Survey") of the Petitioner's nursing home as required by Section 400.23, Florida Statutes. Based upon the Annual Survey conducted by the Department, the Department determined that the Petitioner's facility failed to meet nursing home licensure requirement numbers (NH) 100 and 102, as identified on the Department's Nursing Home Licensure Survey Report, DHRS exhibit 2. The deficiencies found by the Department and which in fact existed during the Annual Survey relating to NH 100 and 102 were as follows: The charge nurse for each shift on each of the four floors of the facility is responsible, under direction from Director of Nursing, for the total nursing activities in the facility during each tour of duty. The charge nurses are thus responsible for ensuring that nursing personnel carry out the direct nursing care needs of specific patients and assist in carrying out these nursing care needs. This responsibility is not always met in that: On the day of the survey, there were urine odors noted on the halls, rooms of fourth and third floors, indicating lack of attention by nursing. Other instances of lack of personal attention by nursing on the above mentioned floor in that: One patient required oral hygiene. Fourteen residents required fingernail care, one resident's fingernails were long, thick, and black indicating a need for attention. Two residents had redden buttocks, three residents were wet, three residents needed shaving, three residents needed hair cuts. One resident needed colostomy bag changed. One resident had a small amount of feces on backside, and was not properly cleaned around the rectum and scrotum. Several residents had on clothing that was too tight, zippers open, buttons not fasten, soil wrinkled and threads hanging around the bottom. It is also noted, that there are 116 total care, and 17 self care residents in the facility indicating a need for constant intensive nursing care to the residents. Ref. 10D-29.108(3)(d)(1) Based upon the totality of these deficiencies, it was concluded that the Petitioner failed to comply with the standard of care to be provided by the charge nurse. The deficiencies cited by the Department during the Annual Survey were classified as Class III deficiencies. The Annual Survey was conducted by Christine Denson. Ms. Denson had conducted nine to ten annual surveys of the Petitioner prior to the survey which is the subject of this proceeding. During Ms. Denson's inspection of the Petitioner's nursing home, Ms. Denson pointed out the deficiencies which are noted above to the director of nursing who accompanied Ms. Denson during her inspection. Ms. Denson normally records in some manner the identity of a resident to whom a deficiency relates; by noting the room number or bed number. Ms. Denson did not follow this procedure during the Annual Survey. Ms. Denson met with Howard Bennett, the owner of the Petitioner, at the conclusion of the Annual Survey. After Ms. Denson had explained the deficiencies she had found during her inspection, Judge Bennett stated to Ms. Denson: "I know the place is going down hill. We are letting it slide. Judge Bennett did not ask Ms. Denson for any information concerning the identity of the residents to which deficiencies related. The Petitioner had policies in effect at the time of the Annual Survey which addressed each of the deficiencies cited by the Department. Those policies were not, however, followed. Ms. Denson did not know when the residents to which the deficiencies she found related had been admitted to the Petitioner, their medical condition, how long the fingernail problems had existed or how long the residents had resided at the Petitioner. Ms. Denson did not speak to the residents about the problems she noted, review their medical or dental records or talk to any residents' physician. Finally, Ms. Denson did not remember whether any of the residents were continent or incontinent. On August 13, 1986, a letter was issued by the Department informing the Petitioner that its license rating was being converted from a superior rating to a standard rating. The August 13, 1986, letter from the Department also indicated that the deficiencies noted in the Annual Survey had been corrected based upon a July 31, 1986, follow-up inspection conducted by the Department. The Petitioner requested an administrative hearing challenging the proposed rating of its license by letter dated September 24, 1986.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued assigning a standard rating on the Petitioner's license for the period September 1, 1986, through August 31, 1987. DONE and ENTERED this 19th day of October, 1988, in Tallahassee, Florida. LARRY J. SARTIN 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 19th day of October, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4182 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Accentance or Reason for Rejection 1-3, 6-7, 81 These are matters included in the Prehearing Stipulation. They are hereby accepted. 4-5 Statement of the issue in this case 8 Not supported by the weight of the evidence. Ms. Denson testified at pages 48-49 of the transcript that whether a nursing home was considered to be out of compliance depended on the totality of the deficiencies and that she considered all of the deficiencies she found at the Petitioner's facility. 9 12. 10-11 10. 12-13 7. 14 Irrelevant. 15-16, 19-20, 22-23, 25, 29-31 10. 17 Hearsay. 18, 28, 33-34, 36-37, 39, 41-43, 45 Hereby accepted. 21, 24, 26-27, 32, 48, 54-66, 71, 73-77 These proposed findings of fact are generally true. They all involve, however, possible explanations for the deficiencies found at the Petitioner's facility. In order for these proposed findings of fact to be relevant it would have to be concluded that the Department had the burden of dispelling any and all possible explanations for the deficiencies. Such a conclusion would not be reasonable in this case. The Department presented testimony that the deficiencies cited existed and that, taken as a whole, they supported a conclusion that the Petitioner was not providing minimum nursing care. This evidence was credible and sufficient to meet the Department's burden of proof and to shift the burden to the Petitioner to provide proof of any explanations for the deficiencies. 35 9. 38, 40, 49-51, 53, 82-83, 86-87 Irrelevant and/or argument. 43-44 1. 46-47, 51, 56, 66-67, 71-71 These proposed findings of fact are true. They are not relevant to this proceeding, however, because they involve situations at the Petitioner's facility which may explain the deficiencies. The Petitioner failed to prove that they actually were the cause of any of the deficiencies. 70, 78-80, 84-85 Conclusions of law. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 2-3. 2 11-12. 3 4 and 6. 4 4. 5-7 Irrelevant, summary of testimony, conclusion of law. 8 9. 9 8. 10 Irrelevant. 11 8. 12 Summary of testimony and facts relating to the weight of Ms. Mayo's testimony. 13-14 Hereby accepted. 15 Argument. 16-17 Conclusions of law. 18 4. 19-20 Conclusions of law, argument and irrelevant. COPIES FURNISHED: Jonathan S. Grout, Esquire Dempsey & Goldsmith, P.A. Post Office Box 10651 Tallahassee, Florida 32302 Michael O. Mathis Staff Attorney Office of Licensure and Certification Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 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
Findings Of Fact On February 19, 1981, Certificate of Need No. 1843 was issued to Medical Investment Corp. to construct and operate a 120-bed nursing home in Tallahassee, Florida. Thereafter, status reports were filed by Medical Investment Corp. at regular intervals; a six-month extension was granted of the time in which the project was to be completed; and Beverly Enterprises-Florida, Petitioner, acquired the assets of Medical Investment Corp. Construction of the nursing home remained on schedule; however, before opening, Beverly Enterprises decided to experiment with the concept of converting some of the rooms to Adult Congregate Living Facilities (ACLF) rooms. Without major structural change, six of the authorized nursing home rooms were converted and two storerooms in the same wing were modified to create a 12-bed ACLF with four private and four semi-private rooms. On or before the scheduled date to open the facility as a nursing home, the facility was sufficiently complete to obtain a certificate of occupancy from the local building official and licenses from Respondent. In accordance with Respondent's desires, a license was issued on June 9, 1984, for a 12-unit ACLF and on July 5, 1983, for a 114-bed nursing home. License No. p-2-37-0224 was issued for the ACLF and License No. 1274 for the 114-bed nursing home. Respondent intended the ACLF to serve Alzheimer's patients in stages 1 and 2 who needed supervision but not the nursing home care that was required as the disease progressed in later stages. These rooms were furnished comparable to that of a nice Holiday Inn (Exhibit 14). Respondent's rates for the ACLF rooms are $50 per day semi-private and $55 per day private. After being notified that the CON for 120 beds had been reduced to the 114 beds licensed by Petitioner because those six beds were not under continuous construction after they were licensed as ACLF beds on June 9, 1983, Respondent filed this petition to contest the conclusion of Petitioner that those six beds had become null and void by reason of not being under construction at the conclusion of the time period authorized for the project. Respondent had not made final payment to the contractor during this period, a punch list of items requiring completion before final payment was provided to the contractor, one additional dryer was installed in the laundry room as required by the plans and specifications, and modifications to two linen lockers were completed after the 114 beds were licensed. As a result of this work, Respondent contends that construction was not complete and was perforce continuing after the license was issued. As a matter of agency policy Petitioner considers construction complete when the facility is ready for occupancy and is licensed to accept patients.
Findings Of Fact NATURE OF THE CONTROVERSY In response to a 144 nursing home bed need for southeast Duval County, Florida, Subdistrict 3, HRS Service District IV, several applicants filed nursing home bed certificate of need applications for the review cycle triggered by a December 5, 1990 deadline, including; CVI for a 60-bed addition to an existing 60-bed facility authorized by Certificate of Need No. 5602; Atrium for an 84-bed facility; Marriott for a 30-bed facility; Health Quest for a 41-bed renovation and conversion of assisted-living facility beds, or 24-bed addition to the existing nursing home. Two other applicants, Health Care and Retirement Corporation of America for a 120-bed facility and Health Care Properties of St. Augustine for a 60-bed facility, did not pursue administrative appeals of their applications. HRS found all of the applications to be complete and all proposals were comparatively reviewed on their merits, with the exception of the MCRI 24-bed proposal which HRS found was untimely. The Department noticed its intent to approve the applications filed by CVI and Atrium. MRCI and HQR are Petitioners contesting the HRS intent because their applications were denied. HQR also claimed standing as an alleged substantially affected existing facility; however, HQR did not present any evidence in support of its standing on these grounds. THE HRS REVIEW HRS required the applicants to submit their proposals on an application form designated "HRS Form 1455, Oct.`88". [CVI Ex. 8; Tr. 2461. This application form is not a rule. [E.D. Tr. 1618]. A work group consisting of HRS and nursing home industry representatives developed the application form and HRS review procedures. [S.G., Q. 14; CVI Ex. 10; ANH Ex. 8]. Criteria at Section 381.705, Florida Statutes, form the basis for 13 goals of the HRS review process. (Id. S.G. pp. 4-15, Q. 14-39; ANH Ex. 8, p. 4). The goals are as follows: The first goal promotes the establishment of facilities to provide services when and where needed, intended to implement Sections 381.705(l) (a), (b), (d), (e), (j), (l), (2)(a), (b), (d) and (e) The second goal promotes special resident programs for special population groups, intended to implement Sections 381.705(1)(a), (b), (c), (f), (j), (l), (2) (a), (b) and The third goal promotes the establishment of continuing care-type communities, intended to implement Sections 381.705(1)(a), (b), (d), (e), (j), (2)(a), (b) and (d). The fourth goal promotes use of professionals in a variety of disciplines to meet resident needs, intended to implement Sections 381.705(1)(b),(c), (f), (g), (h), (j), (1) and (n). The fifth goal promotes the establishment of well-designed, comfortable facilities, intended to implement Sections 381.705(1)(b), (c), (m) and (2)(c). The sixth goal promotes residents' rights and residents' quality of life, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b). The seventh goal promotes a full range of social services for nursing home residents, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b) and (d). The eighth goal promotes provision of services to Medicaid eligible residents, intended to implement Sections 381.705(1)(a), (h), (n) and (2) (e) The ninth goal promotes the establishment of nursing homes which do not intend to secure significant profits at the expense of resid ent care programs and facility design, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (2)(a), (c) and (e) The tenth goal promotes nursing home locations which achieve a geographic distribution of nursing home beds, intended to implement Sections 381.705(1)(a), (b), (d), (e), (h), (j), (2) (a), (b) and (d). The eleventh goal promotes proper projection of construction costs, intended to implement Sections 381.705(1)(b), (e), (i) , (l), (m) , (2)(a) and (c) The twelfth goal promotes the establishment of nursing homes which have a record of implementing superior resident care programs and providing superior quality of care, intended to implement Sections 38 1.705(1) (b), (c), (f), (h), (j), (l), (n) and (2) (b); and The thirteenth goal promotes nursing home charges consistent with industry trends and Medicaid charges which are within Medicaid upper limits, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (m), (2)(a) and (e) The working group identified the goals as representing desirable outcomes under the statute to be attained by successful applicants if specific objectives are achieved. Eight objectives, each relating to one or more of the goals are then utilized, with each operationally defined by several items of information. Scoring points are divided among the various items of information solicited under each objective. [SAG. p. 3, Q. 14, p. 17, 18, Q. 45; A.G. Tr. 1330]. The scoring system is not a rule; HRS utilizes it on a case-by-case basis to aid in decision-making. [A.G. Tr. 1273, 1274; S.G. Q. 43, 45, 46]. An application was measured by assessing the responses provided in the application against the point system. [ANH Ex. 8, p. 4; S.G. Q. 43, 45, 46]. The scoring system is a means to accomplish an evaluation of information--the process of forming, qualifying, verifying, and establishing judgments. Applicants are asked to specify concrete procedures or steps that, when implemented, are likely to result in a clear and predictable outcome. [S.G. Q. 44; A.G. Tr. 1320, 1321]. Thus, both operational features and the implementation process for those features are sought. All of the foregoing evaluation procedures, including the goals, objectives, review protocols and scoring system were disclosed to the applicants prior to application preparation and filing. [S.G. Q. 14; CVI Ex. 10; ANH Ex. 8; J.B. Q. 24]. Two HRS review consultants, a primary and a secondary reviewer, assigned a number to each application item which represented that consultant's assessment of how well the applicant's response addressed the particular item. [S.G. Q. 42, 43, 45; ANH Ex. 8, p. 4]. The ultimate score was calculated by a combination of manual and computer scoring which assigned the points available for each item number. [ANH Ex. 8 p. 4; S.G. Q. 45]. The scores assigned by each of the two consultants were then averaged. [ANH Ex. 8, p. 4; S.G. Q. 45]. A statistical reliability analysis of the consultants' assessments was then conducted before further evaluation proceeded. The work group also established protocols for evaluating the information provided by applicants. [S.G. Q. 14, 45]. The protocols utilized by the HRS provide a methodology which results in predictability, uniformity and commonality of judgment in the review of each application insofar as that is possible with subjective judgments of facts [S.G. Q. 42, 43, 45, 46]. Upon completion of the scoring, a final assessment was conducted by HRS managers who evaluated the overall presentation of information in the application available to make a judgment--the application of functional aspects with program components, whether the integration of the elements was internally consistent, and the likelihood that the proposal will have the success predicted by the applicant. [S.G. Q. 43, 46]. These elements serve as verification of the reviewer's actions and reflect the decision-making that occurs when the preliminary decision is made. Under the HRS evaluation system, there is no particular "passing" score. [S.G. Q. 45, 46]. The scores attained were utilized as an aid to evaluating the applications. [A.G. Tr. 1273, 1274]. The goal is to attain the highest possible percentage score possible based upon a potential base score of 1500 points. A successful applicant should demonstrate a consistently high number on each of the eight rated objectives. Reviewer judgment dictates the score; the score does not dictate the judgment. A display of the scores will quickly reveal weak points and inconsistencies in the application which assist HRS in exercising its decision- making discretion in weighing and balancing the statutory criteria. [A.G. Tr. 1273, 1274]. HRS prepared a "State Agency Action Report" which explained the evaluation, summarized the HRS findings, provided the scoring results, and stated HRS' intent to approve the CVI and ANH applications. [ANH Ex. 8]. 22. The scoring results Primary were: Secondary Average Percent of Reviewer Reviewer Score Maximum Atrium 1196.9 1274.33 1235.61 82.37 CVI 1175.28 1178.77 1177.03 78.47 Health Care & Retirement Corp. 1113.92 1185.4 1149.66 76.64 Health Care 1119.25 Properties of St . Augustine Marriott 1110.58 1150.90 1143.67 1135.08 1127.12 75.64 75.14 Health Quest (41 beds) 1079.46 1109.05 1094.26 72.95 Health Quest 1079.46 (24 beds) 1109.05 1094.26 72.95 The staff consultant with primary review responsibility exercised her professional judgment in reviewing the applications. [A.G. Tr. p. 1272]. /1 There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and the high occupancy rates within the subdistrict. There were no alternatives within the subdistrict for the providing the type of care required except construction of additional beds or renovation of existing beds of a similar type. Both of these alternatives were presented by the various applicants. THE CVI APPLICATION CVI is a not-for-profit Florida corporation. [CVI Ex. 3, iiia, iiic; J.B. Q. 28; CVI Ex. 8]. It is a local service unit of the National Benevolent Association of the Christian Church (Disciples of Christ), a Missouri not-for-profit corporation. The NBA was founded in 1887, and is one of the general administrative units of the General Assembly of the Christian Church (Disciples of Christ). The NBA provides care at numerous facilities to older adults, children and persons with developmental disabilities. [Id.; L.W. Q. 14]. Through local service units, (not including the CVI project), the NBA currently operates 13 nursing homes in 8 states. [Id.] CVI is developing a 65-acre adult retirement community on a site adjacent to the Mayo Clinic Jacksonville in southeast Duval County. [Id.]. Construction has been completed on all individual residential components of Phase I. [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q. 19]. The 60 bed addition will be part of Phase 11. [CVI Ex 3, PT 1, p. iiia; J.B. Q. 28]. Phase I consists of independent living apartments, an adult congregate living facility ("ACLF"), a 60-bed skilled nursing facility specifically designed for and dedicated to the care of persons afflicted with Alzheimer's disease and related dementia, and a core service building which contains administrative and other support facilities- [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q 19; CVI Ex. 3, PT II, p. 50a, supp. after p. 72a]. These elements, as required, have already been granted CON's. Phase I also included a maintenance building which in turn includes a laundry to serve the campus. [Id.; J.B. Q. 78, 79; CVI Ex. 3, PT I, p. 40a]. The Alzheimer's facility was authorized pursuant to Certificate of Need No. 5602 issued to CVI in 1989. [CVI Ex. 9; J.B. Q. 18]. The Alzheimer's facility consists of a 60-bed unit connected to the core service building. The 60 beds proposed by CVI herein will be located in a new nursing unit a.ii so to be /2 connected to the core service center. [Id.; P.R.Q. 12, 13, 14; P.R. Tr. 188, 189]. The Alzheimer's unit will also serve as a research center. [CVI Ex. 3, PT II, p. 71a, 71b; T.W. Q. 46, 47; K.V. Q. 17, 18]. All residents will participate in low-risk research such as diagnostic assessments, tracking the degenerative process through the collection of clinical data, behavioral observation and modification, activity-based therapy, and the use of environmental cues. [Id.; T.W. Q. 13]. Ultimately, dietary and drug therapies will also be the subject of research. [T.W. Q. 13]. The Mayo Clinic Jacksonville has a special Alzheimer's disease research team which will actively participate in the CVI research. [Id.]. CVI will be the only applicant licensed by HRS to operate the Alzheimer's unit. [F.D. Tr. 1565, 1566]. The Alzheimer's unit constitutes the nursing facility to which the proposed 60 nursing unit beds will be added.. [Id.]. CVI PROPOSED NURSING UNIT PROGRAM/QUALITY OF CARE CVI seeks a CON for a 60-bed nursing home addition to the ACLF mentioned above. The majority of the residents for the proposed nursing unit will come from the adult community developed by CVI which will be occupied by residents from within the total district. However, it is not anticipated that the adult community will be a direct source for nursing home residents for at least five years after the nursing unit is opened. [J.B. Q. 52, 103]. The CVI nursing unit will provide nursing care of a more generalized nature compared to the Alzheimer's unit. [J.B. Q. 26; K.V. Q. 28; CVI Ex. 3, PT II, p. iiia]. Consistent with CVI's plan for a continuum of care, the proposed nursing unit beds will also serve residents initially admitted to the Alzheimer's unit but whose disease has progressed to the point where the medical diagnosis becomes primary and, therefore, skilled nursing care becomes the primary need for that resident. [CVI Ex. 3, PT I, iiia; J.B. Q. 26; CVI Ex. 3, PT II, pp. 46a-46c; K.V. Q. 26, 27, 28]. However, utilizing existing Alzheimer's unit resources, these former Alzheimer's unit residents will still receive specialized care and participate in research; CVI Ex. 3, PT II, pp. 71a, 71b; T.W. Q. 46, 47]. CVI defines a "program" as those services designed to correct a resident's problem or condition. [CVII Ex. 3, PT I, p. 46a-46c; K.V. Q. 26, 27, 28]. The CVI nursing unit will offer three different specialized programs: (a) Alzheimer's care offering specific therapies for residents with Alzheimer's disease or related dementias; (b) a medically complex program offering restorative, therapeutic care for residents with acute, medically complex conditions; and (c) an inter-generational enrichment program for the purpose of stimulating nursing residents by daily interaction with children in a structured therapeutic activity. [Id.] Given the experience of the NBA at other local service units, CVI can reasonably be expected to provide excellent quality of care through the support and resources of NBA. [CVI Ex. 3, PT ii, pp. 24a-24c; T.W. Q. 29, 30; K.V. Q. 54]. CVI PROPOSED NURSING UNIT DESIGN SUPPORT FEATURES The nursing unit will comprise 18,720 square feet of new construction, with 28 semiprivate rooms, 3 private rooms, and one isolation room. [CVI Ex. 3, iiia; P.R. Q. 14-16]. The nursing unit will include an activity room, a day room/lounge with an outside activity deck, a nourishment station, and three garden recreation areas. [Id.]. The quality of life and care of the CVI nursing unit resident will be enhanced by resources available in the adjacent core service building which include a kitchen, a large, dividable dining area, activity rooms, physical and occupational therapy areas, beauty and barber shops, administration areas offices, medical treatment rooms, and a visitor lounge. [CVI Ex. 3, PT I, p. iiia; J.B. Q. 28]. Construction of the core service building was completed as part of the construction for the Alzheimer's unit. [P.R. Tr. 205-208]. When HRS reviewed the feasibility of the certificate of need application for the Alzheimer's unit, it also reviewed plans for the core service building. [P.R. 196-203, 207, 208; HQR Ex. 44; J.B. Tr. 255, 256]. The Alzheimer's unit was approved as a 60-bed alternative to a 120-bed nursing home proposed in CVI's earlier application for Certificate of Need No. 5602. [Id.]. Approval of the 60-bed Alzheimer's unit did not change the design nor reduce the total space planned far the core service building. [Id.]. The CVI nursing unit addition will not require the conversion, through renovation or new constructions of any area within the core service building. [P.R. pp. 200-206; J.B. Tr. 311, 312]. After the Alzheimer's unit project construction was underway, HRS allocated 7741 square feet of the core service building to represent the amount of core service area space under HRS nursing home jurisdiction. [P.R. Tr. 196, 199; HQR Ex. 42]. It is unrebutted that this allocated space will be sufficient to support both the proposed nursing unit beds and the Alzheimer's unit. [J.B. Tr. 311, 312; P.R. Tr. 196-203, 205, 206]. The allocated core space includes an allocation for the main dining room. Use of this main dining area is optional for residents of the Alzheimer's unit and the proposed nursing unit, since each unit has its own adequate dining facilities. [P.R. Tr. 188-191, 229; K.V. pp. 59, 60]. CVI will provide child day care for employees, and these children will participate inn the inter-generational enrichment program. [CVI Ex. 3,PT II, pp. 46a, 60a, 60b; K.V. 27, 28, 33, 34]. Ultimately, the child day care center will be located within a new apartment building, but will be temporarily housed in the core service building. [K.V. Tr. 52, 58]. CVI will also eventually construct a chapel to be located on the campus. [CVI Ex. 3, PT II, p. 66b; K.V. Q. 43, 44]. Until then, the nursing home residents will be able to utilize a chapel area located in one of the lounge areas in the existing apartment building. [K.V. Tr. p. 56]. CVI's semiprivate rooms are specially designed to provide a physical separation, through the use of a dividing wall, that approaches the privacy of a single room with the economizes of a semiprivate room, while still allowing each resident to have the very important contact with another person. [CVI Ex. 3, PT I, p. iiia, Appendix 11(4B); P.R. Q. 14-16; P.R. Tr. 182-186]. Each bed will overlook an individual adjacent window. [Id.]. CVI PROJECT COSTS CVI reasonably projects that the nursing unit will involve a total project cost of $3,286,258 - ($301,175 land, $2,174,108 (including $79,880 fixed equipment) building construction, $231,525 moveable equipment, and $571,450 intangible asset and deferred) [CVI Ex. 3, PT I, 24-27c; J.B. Q. 37-39, 41; P.R. Q. 8; T.W. Q. 19-21]. CVI's capital budget also includes the possible development of additional ACLF units on a second floor of the nursing unit building as part of Phase II. [CVI Ex. 3, PT I, pp. 28, 28a; J.B. Q. 42; J.B. Tr. 303, 304]. However, the CVI nursing unit construction cost was conservatively projected on the basis that the nursing unit would, like the Alzheimer's unit, be a one-story building. [P.R. Tr. 193-195]. It thereby accounts for all construction, including the roof, necessary to build the 18,720 square foot nursing unit. [Id.]. CVI's projected construction costs for the proposed nursing unit are reasonable and conservative. [CVI Ex. 3, PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. In the application, they were premised upon the Alzheimer's unit costs as known at the time the application was submitted. [Id.]. The reasonableness of the proposed nursing unit construction cost projections was again verified by the time of hearing in August, 1991. [J.B. Q. 41]. For construction (labor, materials, overhead, construction management, and profit) CVI projected a cost of $1,825,144, or $97.50 per square foot [CVI Ex. 3 PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. CVI certified to HRS that the final construction cost for the Alzheimer's unit under Certificate of Need No. 5602, including fixed equipment, was $76.33 per square foot. [CVI Ex. 34]. Adding the construction management fee, the final cost was $81.30 per square foot. [Id.]. If CVI's fixed equipment costs of $79,880 were added to the $1,825,144 projected construction cost for CVI's nursing unit, the result would be $101.74 per square foot. If the comparable Alzheimer's unit cost of $81.30 per square foot was conservatively inflated for a two year period (to allow adequate construction commencement after final agency action, see CVI Ex. 3, PT II, p. 57; P.R. 1. 25, 26) the result of $89.63 per square foot again reveals the reasonableness of CVI's projected construction costs. The CVI proposed nursing unit will occupy approximately 3 acres of the total 65 acre campus. [CVI Ex. 3, PT I, pp. iiia, 27a; J.B. Q. 28,38, 39, 46]. CVI reasonably allocated, pursuant to generally accepted accounting principles, a portion of the land's fair market value and land improvement costs to the proposed nursing unit 60-bed project. [CVI Ex. 3, PT I, p. 27a; J.B. Q. 38, 39; J.B. Tr. 294-296]. CVI's ABILITY TO FINANCE THE PROJECT CVI has the ability to finance the nursing unit project. [ANH Ex. 8, p. 22]. Phase I, including: the Alzheimer's unit, of the CVI campus was financed through a $21,960,000 tax exempt bond issue through the Jacksonville Health Facilities Authority. [CVI Ex. 3, PT I, p. 28a, 1990 Audited: Financial Statement, p. 10; CVI Ex. 8; R.B. Tr. 241, 242]. CVI intends to secure the same type of financing for the proposed nursing unit. [CVI Ex. 3, PT I, pp. 30, 30a; J.B. Q. 44-46; CVI Ex. 3, Appendix 5(2.c.1); L.W. Q. 8-10; R.B. Q. 5-13; R.B. Tr. 241,: 242]. The Jacksonville Health Facilities Authority provided the tax exempt bond issue through the authority of Chapter 159, Part II, Florida Statutes. [CVI Ex. 8, p. 1]. Thus, pursuant to the provisions of the statute, CVI Phase I project in its entirety (which includes the core service building and the ACLF) necessarily was found to be financially feasible. See Section 159.29, Florida Statutes. CVI will be primarily responsible for repayment of the bond proceeds but the NBA will guarantee the bond issue, as it did for Phase I. [Id.; M.G. Q. 26]. The NBA has significant financial strength. In 1988, it had total assets of $145,493,840. [CVI Ex. 8; L.W. Q. 16]. In 1989, the total grew to $168,507,027. [Id.]. In 1988, it realized a net income (revenue over expenditures) of $5,670,754. [Id.]. In 1989, the income increased to $11,563,778. [Id.] The NBA has secured third party financing for its local service units on numerous other occasions. [L.W. Q. 7; R.B. pp. 241, 242]. The most recent occasion involved tax exempt bond financing immediately prior to the hearing, ore July 31, 1991. [L.W. Q. 7]. The investment banking firm which has worked on several tax exempt bond financing projects with the NBA, and which handled the financing for Phase I of CVI, has reviewed the financing proposal for the CVI nursing unit and has found it to be reasonable and achievable. [R.B. Q. 1-13]. Raising charitable funds has been a regular activity of the NBA and its local service units. [L.W. Q. 11, 13]. To date, CVI has raised $4,000,000. [Id.]. As of June 30, 1991, $1,327,589 in cash from donations was still available for the proposed nursing unit. [Id.; J.B.Q. 44-46]. The CVI application revealed $24 million in assets consisting primarily of bond issue proceeds. [CVI Ex. 3, PT I, pp. 28-28(b); J.B. Q. 42, 43]. CVI STAFF AND INDEPENDENT CONTRACTORS The staff proposed for CVI's nursing unit significantly exceeds minimum requirements, and would meet the criteria in Florida for a superior rating. [CVI Ex. 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. The superior rating indicates a higher level, and higher quality, of care. [Id.]. Because of the nursing intensity required for Alzheimer's and related dementia patients, the Alzheimer's units staff nursing to patient ratio will be 1:5 or 1:6. [K.V. Tr. 63, 66]. The CVI nursing unit will have a 1:8. The typical ratio for nursing homes in the Jacksonville, Florida area is 1:10. [K.V. Tr. p. 66]. The CVI application presented reasonable levels of anticipated salaries and fringe benefits. [CVI Ex 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. CVI accounted for employees, such as the administrator and director of nursing, who were full-time and on a fixed salary. (Id.]. CVI also accounted for those staff who are to be paid on the basis of an hourly wage, such as nurses, calculated according to the number of work hours expected (based on full-time equivalent factors). [Id.]. Under this approach, the CVI salary projections account for vacation, overtime, and sick leave. [Id.; K.V. Tr. 45, CVI did not directly reflect revenues nor expenses attendant to the activities of therapists, pharmacists, dentists, podiatrists, a medical director, for other such consultants because they would serve as independent contractors. [CVI Ex. 3, PT I, pp. 40a, 46b; J.B. Q. 66, Instead, CVI indirectly accounted for the independent contractors by utilizing a "net methodology" pursuant to which the anticipated consulting fees are included within a base rate for private pay residents along with a markup. [Id., Tr. 312-314, 339, 340]. The markup covers the cost to provide the contractual services to Medicaid or Medicare reimbursed residents. [Id.]. In this regard, CV followed the customary accounting approach taken by a not-for-profit nursing home whereby the facility does not attempt to profit from the provision of such contractual services. [Id.] FINANCIAL FEASIBILITY OF CVI'S NURSING; UNIT By the end of the second year of proposed nursing unit operations, it is reasonably anticipated that the 120-bed CVI nursing home will realize a net income of at least $275,300 at 95 percent occupancy. [CVI Ex. 3, PT I, pp. 35 35a, 47-49a (Schedule 18); J.B. Q. 77-81; J.B. Tr. 274, 275]. By the second year of operation, CVI's revenues per patient day will be $99.25, compared to $116.16 for HQR's 24 bed proposal, $117.45 for HQR's 41 bed proposal, $118.15 for Atrium's proposal, and $126.03 for MRCI's proposal. [Comparison of Schedule 18 of applications]. The nursing unit is feasible on an immediate and long-term basis. [J.B. Q. 27]. CVI did not rely upon any non-nursing home revenues to demonstrate feasibility for the nursing unit. [Id.; J.B. Tr. p. 305]. CVI demonstrated nursing home feasibility as a stand-alone project. [Id.] Schedule 18 of the application contains space for the applicant to enter non-nursing home revenues and costs, such as those items associated with the operation of a co-located ACLF. Under HRS policy, the applicant has the option as to whether or not to provide these projections. [E.D. Tr. 1551-1559]. CVI proposes a 35 percent Medicaid utilization condition for the nursing unit which, with a 50 percent rate in the Alzheimer unit, results in a 42.5 percent Medicaid rate for the 120 bed facility. [CVI Ex. 3, PT I, p.iv, p. 46a; H.B. Q. 31, 33, 73-75; A.G. Tr. 1260, 1261, 1320]. Of the completing applicants, only CVI showed all it beds will be Medicaid certified. [J.B. Tr. 263, 265]. It is the financial feasibility of the specific certificate of need being reviewed which is assessed by HRS. [Id.]. HRS does not review the financial feasibility of any other operations of the applicant which are not part of the nursing home certificate of need application. [Id.]. VALIDITY OF CVI'S AUDITED FINANCIAL STATEMENTS The completeness deadline for applications was January 18, 1991. However, the completeness determination for CVI was delayed by approximately one month because, initially, HRS withdrew the CVI application from review. HRS' action was based upon an audited financial statement of CVI covering the first 10 months of 1990. HRS acted upon an apparent non-rule policy that a "combined" audited financial statement would not be `accepted, and the conclusion that the 1990 10-month CVI audit was a "combined" statement. No evidence was adduced at hearing to demonstrate what HRS specifically defined to be a "combined" statement, or specifically why the Department initially felt the 10-month 1990 audit was not an audited financial statement of Cypress Village, Inc. Upon reconsideration, the HRS reinstated the CVI application, specifically finding that another audited financial statement, covering the full 1989. The purpose of an audit is to fairly present, in all material respects, an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles (GAAP). [M.G. Q. 11; M.F. Tr. p. 1813]. This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an audit performed in accordance with general accepted accounting principles which govern auditing standards. [Id.] The certified public accountant has a duty to exercise independent professional judgment with due professional care in preparing the audit and preparing the report. [Id.; M.F., Tr. p. 1811; M.G. Q. 35]. Within the accounting profession, because independent judgment is to be utilized, reasonable persons can disagree on a professional basis as to whether, how, and why certain items should or should not be included in, or appear in, audited financial statements under GAAP for any particular entity. [M.F. Tr. 1918]. The CVI auditors found that `failure to account for all assets, regardless of legal title, exclusively utilized by CVI for its economic benefit would violate the completeness requirement. [M.G. Q. 16, 17, 33]. [M.G.Q. 26]. If CVI's auditors had not reflected the assets to which that liability applies, notwithstanding titled ownership, the audited statements would not have been complete and would not have fairly represented the financial position of CVI. [Id.]. Both CVI audited financial statements meet the test of fairly presenting CVI's financial position results of its operations, and cash flows in conformity with GAAP. [M.G. Q. 1-39]. The CVI auditors exercised independent professional judgment with due care. [Id.; M.G. 34, 36]. Even if reasonable persons disagreed with the results, the application's requirements were met and HRS had information presented to it upon which to base its decision. The balance sheet and income statements contained in both the 1989 and 1990 CVI audited financial statements are based upon the "fund balance" accounting approach. [CVI Ex. 3, p. 9, 1990 audit; M.G. Q. 28, 30; Burcham Q. 11]. Fund balance accounting is unique to not-for- profit and governmental entities. [M.G. Q. 31]. The CVI audit balance sheets and income statements represent the combination of funds from two sources, both directly related to CVI operations and both of which have a material influence upon CVI's financial position, cash flows, and operational results. [M.G. Q. 26, 27, 28, 29, 32, 33, 36]. The 1990 statement is only different from the 1989 audit in terms of the form of presentation and because the passage of time resulted in updated financial information being available to reflect the more mature status of CVI in its development activities. [M.G. Tr. 1536; CVI Ex. 3 1989 & 1990 audits]. The characterization of the audited financial statement as a "combined statement" has no significance from an accounting standpoint because "combined statement" is not a term of art in accounting and has no precise meaning. [Id.; M.F. Tr. 1825, 1826]. To the extent the CVI statements may be deemed "combined", they do portray CVI as a distinct legal entity and do not distort the financial ability of the applicant [M.G.Q. 1-39; M.G.Q. 16, 27-29]. To the extent that CVI's 1990 audited financial statements make a specific reference to "combined financial statements", this reference is not a term of art and does not effect the validity of the audited financial statement. [M.G.Q. 27; Burcham Tr. 330, 331]. The financial statements account for the assets and liabilities shared with the NBA as required by GAAP. [Id.; and M.F. Tr. 1333-1334]. The American Institute of Certified Public Accountant's Technical Division concurs in the type of presentation utilized by CVI's auditors. [I.B.Q. 17]. The Technical Division was asked to comment on an audit for another NBA local which utilized the fund balance presentation. [Burcham Q. 5- 18]. The Division concurred that NBA's assets dedicated to that service unit's retirement program (similar to CVI's) should be included on the audit given the unit's debt and other obligations and economic benefit derived from those assets. [Id.; M.F. Tr. 1744, 1745]. VALIDITY OF CVI'S LETTER OF INTENT NOTICE OF PUBLICATION CVI timely published notice of its letter of intent in the Jacksonville Times Union. The contents of the publication are set forth in Rule 10-5.008(1)(i), Florida Administrative Code. Due to an error which was solely the fault of the newspaper, the newspaper left a zero off the total project costs so that the publication actually said "$30,000.00" instead of $3,000,000. [CVI Ex. 4]. Prior to the application completeness deadline, CVI provided an affidavit to the HRS which revealed that the error was not due to any fault of CVI. [CVI Ex. 4; A.G. Tr. 1266, 1267; E.D. Tr. 1569-1571]. Consistent with its existing policy, HRS found that since the publication error was not the fault of or within the control of the applicant, CVI had satisfied the legal requirements for publication. [Id.; A.G. Tr. 1269-1270]. The rationale for the HRS policy was that it would not be fair to punish an applicant for the `mistake of the newspaper as long as the applicant fulfilled its responsibility to demonstrate that it had no part in creating the error. [Id.]. At the time of the CVI application, this policy had been consistently applied by HRS for numerous other applicants who were found to be in compliance with the law as long as the publication error was not their fault. [Id.]. CONFORMITY WITH THE LOCAL HEALTH PLAN All four applicants conformed generally to the applicable local health plan. The applications of CVI and Atrium were determined by HRS to meet the elements of the local plan better than did the applications of Health Quest and MRCI. Atrium and CVI were the only applicants which provided specialized programs for Alzheimer's patients, a preference for applicants in the local health plan. [Atrium/Nelson PF, pp. 20- 28; Atrium Ex. 8, p. 10-11; HRS/Granger PF, pp. 6-8; ANH Ex 16; A.G. Tr. 1323]. Atrium and CVI had the lowest costs per bed of the applicants. [See p. 249 below]. MCRI failed to address the current District Health Plan (1990-91) and instead used the 1989-90 plan. [Atrium/Nelson PF, p.9]. MRCI proposes to serve the lowest percentage of Medicaid patients in proportion to the average subdistrict-wide experience of nursing homes. Health Quest's existing facility, already at 120 beds, would be substantially over optimal size at 161 beds, if its proposed project is approved. Furthermore, Health Quest was not in compliance with regard to special programs and commitment to serve hard-to-place patients. [Atrium/Nelson PF, pp. 9-20; Atrium Ex. 8; HRS/Granger PF, pp.: 9-10]. There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and high occupancy rates of the subdistrict. ATRIUM'S APPLICATION The proposed Atrium 84-bed nursing home will be constructed in close proximity to The Atrium Retirement Community of Jacksonville, an existing 176 unit retirement and assisted- living community. The Atrium will be a new facility constructed and developed by owners new to construction and operation of health care facilities. The applicant is a "shell" corporation with assets of $50,000.00 owned by Jack and William Deinetree, two brothers, who have also provided financial data and letters from their bank indicating their financial ability and intent to complete this project. The applicant filed an audited financial statement as required by statute although it revealed a shell corporation waiting CON approval for the infusion of dollars by the shareholders, Jack and William Demetree. HRS does not limit an applicant's documentation in demonstrating how it will be able to finance its project, if approved. Atrium's letter of intent was clearly indicated as such within its application. Atrium's application was deemed complete. [Vol. 15, pp. 1616-17; Atrium Ex. 2, p.123; Atrium Ex. 5]. Personal financial statements of the Demetrees, prepared by their longtime CPA, were also included in Atrium's application. [Atrium/Schramm PF, pp. 10-11]. The Demetrees' financial statements were "compiled" statements. [Vol. 16, p. 1678]. A CPA will not even prepare a compiled statement unless he has personal knowledge of the individual involved and his business operations. [Vol. 16, p. 1678]. `The financial statements of the Demetrees were provided as supplementary material. There is no statutory or rule requirement that they be in a certain form. [Vol. 16, p. 1694] After assessing their financial net worth, DHRS concluded that the Demetrees have more than sufficient liquid assets to make the equity contribution required in Atrium's application. It is a matter of the general business philosophy of the Demetrees that they put equity into all their development projects. [Atrium/Schramm PF, p. 11]. The nursing home application form does not require audited financial statements of stockholders in order to support their ability to make equity contributions. Neither the application Form 1455A, October 1988, nor the instructions thereto, dictate such a requirement. [Atrium Ex. 2, p. 24; Healthy Quest Ex. 9, p. 1-6; MRCI/Beiseigel PF, p. 6; Vol. 1, p. 75; Vol. 5, p. 444]. The ability of the Demetrees to obtain construction and permanent financing, as well as contribute substantial equity and operating capital was demonstrated by competent, substantial evidence. The $100,000 note payable to owners that appears in Schedule 15 of Atrium's application will be a line of credit, used for working capital during the first year of operation, before the cash flow picks up. It is fairly customary in the industry to provide such financing during the initial year or so of operations. (Vol. 6, p. 569; Vol. 16, p. 1682). The Atrium will have the resources available to complete the proposed project if the Demetrees provide the financing. Because the Atrium is a shell corporation in which the Demetrees own all the stock, it is logically assumed that they will provide the financing to the extent they are able. [Vol. 16, p. 1682; p. 1716; p. 1723; HRS/Granger PF, p. 13]. Their ability to finance the project is discussed above, and no evidence was introduced to show they could not finance the project. As a shell corporation, the Atrium currently has no other capital projects or expenditures under development or in the planning stage. Because it has very little capital and is totally dependent upon the infusion of capital by the Demetrees, existence of other project and expenditures is absolutely irrelevant. [Atrium/Schramm PF, pp. 5, 7]. Recent borrowings in amounts of from 3 to 8 million dollars by companies in which the Demetrees are major owners indicate their ability to obtain capital at rates from prime plus one-half to prime plus one. [Vol. 16, pp. 1680-1]. In its application, Atrium provided a letter of interest from First Union National Bank to finance the project, if approved. The Demetrees have a long-standing relationship with the bank, which has financed numerous large scale developments for the Demetrees through construction loans, working capital lines and permanent financing. The Demetrees have a 40-year, unblemished lender-borrower relationship with First Union (formerly Atlantic National Bank); there was no competent substantial testimony to the contrary. [Atrium/Schramm PF, pp. 8-9; Vol. 6, p. 549; Atrium Ex. 2, App.; Vol. 16, pp. 1679-81; Vol. 5, p. 445]. The Atrium's proposed plan is designed to develop innovative quality of life enhancements to minimize the institutional setting characteristic of some nursing homes. The plan utilizes a staggered semiprivate room design that increases residents' privacy and allows each resident to have a window to the exterior. The facility will-meet social needs of the residents, as well as their need for privacy. It is supported by a resident room design as well as a variety of activity and support spaces. (Atrium/Bhide PF, p. 3; Atrium Ex. 8, p. 18) The Atrium's proposed design is both appropriate and reasonable in light of state and local construction standards for a freestanding nursing home. (Atrium/Bhide PF, p. 3-7) The projected construction costs are based on Vasant Bhide's experience with designing and working on at least five (5) nursing home projects in the North Florida area in the past two years. According to Bhide, the proposed project cost estimates (construction costs, fees and equipment) are reasonable, and include almost $200,000 in contingency funds. Bhide's representations are disputed by other equally knowledgeable and experienced builders and architects whose costs estimates on similar facilities exceed Bhide's estimates. (Vol. 7, p. 644; Atrium/Bhide PF, p. 4; Atrium Ex. 3, p. 49; Atrium/Downs PF, p. 6-7) The Atrium's project costs compare favorably with HRS experience, and the actual costs may be lower due to the impact of the current recession. (Vol. 5, P. 434). (Vol. 7, p.644; Atrium/Bhide PF, p. 4-7; Atrium Ex. 3, p. 4-7) The total project cost of Atrium, which is just under $4 million, is deemed reasonable. (Atrium/Nelson PF, p. 29; Atrium/Downs PF, p. 6; Vol. 6, p.570, 572; Vol. 6, p. 552; Vol. 16, p. 1699-1703). The Atrium's projected bed utilization for the first two years is both reasonable and appropriate. (Atrium/Nelson PF, p. 6; Atrium/Downs PF, p. 4) The Atrium's proposed patient charges and expenses are reasonable. (Atrium/Nelson PF, p. 29, 31; Atrium/Mitchell PF, p. 4-6) Although acknowledging he had seen Medicare rates as high as $270 per patient day, Mark Fall challenged the Medicare rates projected by Atrium. (Vol. 18, p. 1888) If Mr. Fall's opinion were credited, Atrium's net income in year two would still exceed $260,000. (Atrium Ex. 4, Sch. 18) reasonable and conservative, based on actual recent financing of other Demetree projects. (Atrium/Schramm PF, p.12) The Atrium's assumptions on Schedule 11, especially regarding fringe benefits, were shown to be reasonable. The total dollar amount of salaries and wages and benefits for Schedule 11 were compared to other historical operations, inflated forward, and found to be well within the reasonable range by Joseph Mitchell, Atrium's expert in Medicaid and Medicare reimbursement and nursing home accounting. (Vol. 6, p. 563-565) The Atrium's proforma assumptions, using fringe benefits of 22 percent, were reasonable. (Vol. 6, p. 565) The Atrium's projected Medicare per diem revenues are reasonable considering this is a start up facility. One cannot compare a start up facility's Medicare rates with those of a long-standing facility, as Medicare imposes a limitation on Medicare rates after the first three (3) years of operation. (Vol. 6, p. 568) Atrium's proposed project is feasible in both the short and long term. Mr. Mitchell tested the reasonableness of the proforma assumptions based on his experience working with 125 to 150 nursing homes on an operational basis. (Atrium/Mitchell PF, p. 9; Vol. 6, p. 578) The Atrium's projected debt schedule is reasonable and conservative based upon recent financing of projects by the Demetrees. (Atrium/Schramm PF, p. 12.) The Atrium's design meets all codes, including building and life safety, energy code, handicap accessibility code, etc. (Atrium/Bhide PF, p. 6) HRS' architects ranked Atrium's plans first among the applicants in this hearing. (Atrium Ex. 8, p. 17-19; HRS/Granger PF, p. 14) The Atrium's application notes a willingness to take AIDS patients and will be bringing on-line 84 beds in a high occupancy subdistrict, which will promote better geographic accessibility. [Atrium/Nelson PF, p. 31]. The Atrium proposes to commit to 61% Medicaid, the most of any applicant. This commitment is attainable in light of the actual experience in the subdistrict (62.1% average) and the overall state average (60.6%). [Atrium/Nelson PF, p. 8- 9]. The proposed operations and quality assurance program submitted by Atrium meet or exceed Florida regulatory standards. [Atrium/Fitzpatrick PF, p.5, 14; Atrium/Downs PF, pp. 4-6; HRS/Granger PF, p. 11]. The Atrium's proposed staffing levels are reasonable and meet or exceed Florida standards. [Atrium/Fitzpatrick PF, p. 7; Health Quest Ex. 11]. The Atrium will develop and implement a training/staff development/internship program, to include students residing in Duval County. [Atrium Ex. 4, p. 70 A-C]. The Atrium will also be associated with an existing 176-unit retirement community known as The Atrium Retirement Community of Jacksonville, through their common ownership. The experience gained, in the five years of operating The Atrium Retirement Community of Jacksonville will be beneficial to the Atrium nursing home project, especially in the areas of housing for elderly residents, security, housekeeping, dietary and nutritional services, activities and counseling. (Atrium Ex. 2, p. 24B) Atrium will have established linkages with its sister retirement community and thereby offer a continuum of care. [Atrium Ex. 4, p. 46 A-c; 58A]. Atrium will have a good recruitment and career ladder programs. The Atrium's description of its patient assessment and care plan, utilization review program, quality assurance program, operations and dietary programs were comprehensive and explicit. The Atrium described very good activities programs, family involvement, mental conditions of residents, restoration/normalization programs and quality of life enhancement programs. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. Overall, the presentation was consistent and thorough and stated the services to be offered by the applicant. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. However, Atrium has never built or operated a nursing home. The Atrium's inexperience is demonstrated by its failure to properly plan for the cleaning of soiled laundry. The Atrium indicated it may send out the patients' laundry or use the laundry of a nearby retirement community. (T. 171, 549; Atrium Exhibit 4) As additional evidence of its inexperience in operating nursing homes, the Atrium proposes to use a non- wheelchair accessible van for transportation of it's residents, pulling a U-Haul with the wheelchairs. (Atrium Exhibit 4) When the matter was raised at hearing, its representative indicated that Atrium would rent a wheelchair accessible van, and private medical providers might be called on to transport Medicare and Medicaid residents to doctors' appointments, therapy sessions, and related activities. [Atrium Ex. 4, p. 61A; Atrium/Downs PF, p. 9]. Atrium intends to draw upon the management skills of the American Retirement Corporation (ARC) of Nashville, Tennessee. ARC is a national management services company which operates 21 retirement communities in 14 states. Most of the programmatic features set forth in Atrium's application are already utilized successfully at ARC facilities around the country. (Atrium Ex. 2, p. 24 A-B) For more than 10 years, ARC has employed its standard operating methods at a nursing home located at the Burcham Hills Retirement Community in East Lansing, Michigan. (Atrium Exhibit 13, p. 2; T. 520) ARC has been found to be in violation of several nursing home standards at its facility at Burcham Hills, Michigan, including serious failures to provide appropriate care to residents. (Health Quest Exhibit 26, pp. 3-7) The Senior Vice President of Operations for ARC plans to manage Atrium's nursing home using ARC's "`standard operating methods," to describe the programs that would be offered. (Downs PT, pp. 5-12) He asserted that ARC's lack of experience in managing a nursing facility of this size, type, and location is irrelevant because, among other reasons, "a patient is a patient." (T. 618) The Atrium, through its proposed management contract with American Retirement Corporation (ARC), will attempt to provide quality care to its patients. [Atrium/Fitzpatrick PF, p. 3]. MCRI'S APPLICATION FOR CON The MRCI CON is for a 30-bed nursing home. MRCI filed a proper letter of intent and audited financial statement for this CON. (T. 1608, 1609, 1611, 1613). MRCI also filed a CON for a 24 bed nursing home which HRS rejected as incomplete and untimely. Because the completeness issue of the 24 bed CON was undecided, MRCI presented evidence that included the feasibility, etc., of the 24 bed CON. In summary, there were no significant differences between the two CONs, and both were equally feasible. MRCI has developed a prototype facility called "Brighton Gardens". An MRCI Brighton Gardens facility typically includes 30 nursing home beds and 120 ACLF `beds. (Walter PT, p. 5). The concept anticipates carrying for the elderly from their need for an ACLF through nursing home care with minimum disruptions due to changes in environment. MRCI's research has indicated that as people get older, changes become more difficult and residents do not want to transfer back and forth between facilities. (T. 909) MRCI's project minimizes transfer trauma. The more unfamiliar the situation the more serious the transfer trauma. Transfer trauma manifests itself by despair, isolation, a change in a person's behavior and the way they deal with ordinary situations. Some states require transfer trauma plans before a resident is moved out of a facility. (T. 910, 911) At a Brighton Gardens facility, when a resident moves from the ACLF to the nursing home, friends in the ACLF can visit the nursing home on a regular basis. This is particularly beneficial for spouses to be able to visit back and forth without the need for transportation. (T. 907, 908) All of the beds are contained within the same building, although the nursing home is a self-contained unit with its own separate entrance for privacy and ease of access by residents, staff and visitors. (Walter PT, pp. 5, 6). Marriott and Marriott Retirement Communities, Inc. currently own and operate ten retirement centers and manage two other. (Evans PT, p. 4) MRCI operates two Brighton Gardens in Arizona and one in Virginia Beach and one in Houston, Texas. (Evans PT, p. 6) Five retirements communities are currently under construction and are all scheduled to open within 18 months (Evans PT, p. 4). MRCI already operates one facility in Florida which is a full service retirement community and has a superior rating. (Walter PT, p. 18) MRCI has demonstrated that it has the ability to provide superior care at its Brighton Garden facility. MRCI has demonstrated that it can provide the quality and types of programs equal to or exceeding any of the other applicants. MRCI has demonstrated that it can improve the quality of care in existing institutions and successfully operate nursing homes. For example, MRCI began managing a property in Canton, Ohio in June, 1988, when occupancy was less than 50%. When it discontinued management in early 1991, occupancy was approximately 90%. The net loss in income for the property had been reduced substantially from $2.3 million in 1988 to $900,000 in 1990. Reduction in cash loss was even more significant. (T. 874-875) MRCI managed property known as Towne Center, beginning in June, 1988, and discontinued management in early 1991. When MRCI began managing the property occupancy was approximately 55%. Occupancy had increased to over 90% by the time MRCI discontinued management. Efforts to discredit Marriott's management were unsuccessful and rebutted by its representatives. The design of MRCI's proposed project lends itself to quality of care because residents will not be expected to transfer from one entity to another as their needs change and because the small size of the unit allows for more individualized care. (Evans PT, pp. 28, 29; T. 1315) MRCI's proposal provides sufficient staff to provide top quality care. (Evans PT, p. 6) MRCI is proposing to provide 3.0 nursing hours per patient day for the 30-bed project. This does not include direct nursing hours which could be provided by the director of nursing. If you include those hours, direct nursing hours increased to 3.21 nursing hours per patient day. For the 24-bed project, if you include direct nursing hours provided by the director of nursing, 3.25 nursing hours per nursing hours per patient day will be provided. (T. 922-923, 954) There will be a full time administrator on the property of Brighton Gardens of Jacksonville. (T. 872) The administrator will be responsible, for the entire property. (T. 872) MRCI's proposed staffing exceeds the regulations of the State of Florida. In fact, MRCI proposes to provide four licensed nurses five days per week. By regulation, MRCI is required to provide only three licensed nurses. (Evans PT, p. 7) MRCI has an excellent recruitment plan and has designed a variety of enhancement programs for its employees. Some of these programs include a profit sharing program, the employee stock ownership plan, and a benefit trade system. MRCI offers an employee credit union, employee discounts at Marriott Hotels, continuing education, as well as additional training for employees to advance in their areas. MRCI has a working family life program, offers family life-counseling programs and has a guaranteed right to fair treatment policy within the company. MRCI recruitment efforts have been very successful. (Evans PT, p. 10) MRCI has developed a superb quality assurance program which exceeds the federal OBRA requirements and exceeds state requirements for quality assurance committees. (Evans PT, pp. 11, 12, 13-19) The wage assumptions and salary assumptions of both MRCI applications are reasonable projections. (Huber PT, p. 11) The staffing assumptions in both Schedules 11 are reasonable assumptions. The proposed Medicaid rate is reasonable and consistent with the Medicaid requirement in Florida. (Huber PT, p. 13) MRCI has demonstrated that its proposed 30-bed project is a financially feasible project. (Huber PT, p. 6) The proposed capital expenditure is $1,901,507 and first year operating expenses are projected-to be $1,065,108. MRCI has demonstrated that its Jacksonville Brighton Gardens project will be profitable in Year 2 of operation. This is true for the 30-bed application and for the 24-bed application. (Huber PT, pp. 14, 15) The ACLF revenues are a reasonable estimate of revenues for the Duval project. (Huber PT, p. 17) MRCI's land cost is based upon an option contract it entered into in 1989. The land cost for the project is reasonable and based upon a reasonable allocation of cost to the nursing home. (T. 1237, 1238, 12 41) MRCI intends to develop the entire Brighton Gardens of Jacksonville, which includes the ACLF and the nursing home. (T. 800) In conjunction with this type of facility, a nursing home this size is a viable alternative to "optimal sized" facilities because the small complement of beds is offset as part of the larger facility. The data provided attest to the financial feasibility of such a concept. MIRCI does not intend to build a stand-alone 30-bed nursing home. They will only be built in conjunction with the ACLF. (T. 861) The costs of construction for the MRCI proposals are reasonable and are allocated appropriately between the nursing facility and the ACLF. (McPhail PT, p. 20, 21, 22) MRCI allocated the costs of construction of the 30-bed project between the nursing home portions and the ACLF portions. This allocation was performed by determining the cost of the entire Brighton Gardens and conducting an allocation of those costs directly related to the nursing home portion of the building, including construction costs, fixed and movable equipment. Shared area costs, such as those associated with the kitchen, laundry, circulation, beauty-barber, and administrative areas, were allocated on a proportional basis. The kitchen was allocated on a proportion of meals served to the nursing center residents. The construction, site development costs and equipment costs of other shared areas were estimated by function, and these costs were then allocated on the basis of a square footage ratio of the nursing center to the ACLF portion of the building. (McPhail PT, pp. 20, 21) MRCI has three other Brighton Gardens projects which have been constructed. Those projects have been constructed at a cost within 1% of the original cost assumptions prepared at Marriott. (McPhail PT, p. 9) The Brighton Gardens design and schematic plans are consistent with the requirements contained in Chapter 10D-29 and local building codes for the 30-bed project and the 24-bed project. (McDowell PT, p. 5) Marriott has developed a bi-axial room which is one of the best semiprivate rooms available. The residents are situated so that they each have a privacy curtain and each resident still has a window. Semiprivate rooms are more affordable than a private room. Private rooms often lead to a resident feeling isolated, thereby leading to depression. (T. 915, 916, 1012) MRCI's design provides certain advantages for residents of both the ACLF and the nursing components. The bi- axial semiprivate rooms are quite large; there is significant amount of storage space; all resident's bathrooms are handicapped accessible. Residents will be able to take advantage of some of the ACLF common spaces at will, and MRCI's project will have a courtyard which will allow residents to do some secure wandering. The buildings are residential in nature, both in the exterior and interior architecture. (McDowell PT, p. 7) MRCI anticipated that the duration of construction for the Brighton Gardens of Jacksonville will be 12 months. This is a reasonable estimate. (McPhail PT, p. 22) The Brighton Gardens project in Southeast Duval County will be located on an 11 acre parcel on San Jose Boulevard which has ready access to public transportation and is convenient to the elderly population in the service area. (Walter PT, p. 19). MRCI will accept the following conditions on its certificate of need: MRCI will make at least 30% of its patient days available to Medicaid eligible patients, will donate 20 prepared meals per day to a local Meals-on-Wheels program for distribution to elderly residents and will provide respite care at both the nursing home and ACLF levels of care. MRCI will implement its special Homeward Bound Program. (Walter PT, pp. 16, 17, 30; Evans PT, pp. 22, 23,). MRCI has a history of providing nursing care services to Medicaid eligible residents. For example, although MRCI's Calusa Harbour facility carries no Medicaid, condition, approximately 31% of its community patient days were provided to Medicaid residents in 1990. (Walter PT, p. 18). MRCI will provide' services to ACLF residents requiring AIDS care or Alzheimer's care. (Walter PT, p. 19, T 915). MRCI filed an audited financial statement as required by the statute. Nationwide, Marriott has designated approximately $90 million for the development of retirement projects for 1991 and has designated $70 to $80 million for 1992. (T. 1020). Marriott has the resources to fund Brighton Gardens. [Handlon, p. 2]. Schedules 2A and 2B of MRCI's CON application contain a list of other planned capital projects of MRCI. This list of projects changes on a regular basis as projects are either added or rejected from the development process. This list includes projects in the very preliminary stages of planning. (Handlon PT, p. 3). No project has been dropped from Schedule 2 for financial feasibility problem's. (T. 1246). Typically, projects are deleted because of difficulty obtaining suitable property or problems with zoning or other regulatory hurdles. (T. 1253). Furthermore, certain projects listed on the capital project list in Schedule 2 identify expenditures which will occur as late as, or later than, 1998. (T. 798). An omission by MCI of approximately $7 million relating to a Boynton Beach project will have no effect on Marriott's ability to finance these projects. The amount omitted is inconsequential when considering Marriott's total development plans. Furthermore, MRCI has included projects on Schedule 2 which will be financed beyond the' next five years, well after the proposed project is operational and has demonstrated financial feasibility. (Handlon PT, p. 3; T. 1040, 1042). No MRCI or Marriott retirement housing project under construction has been slowed down or stopped for economic reasons. (T. 893). No retirement housing project which has been presented to the Executive Committee of Marriott has been denied or delayed. No project will be delayed once a CON has been issued or if another government timetable requires construction by a particular time. (T. 1223). MRCI is a subsidiary of Marriott Corporation, and the board of MRCI filed a proper letter of intent. Marriott has proven that it is committed to constructing, licensing and operating the project at issue iii this proceeding. MRCI operates five facilities that have had deficiency-free surveys under the new Omnibus Budget Reconciliation Act ("OBRA") guidelines. It is unusual to have no deficiencies found by the survey-team. Under the OBRA guidelines there are 710 elements in the program and surveyors evaluate compliance with the regulations by looking at each item. For each of these facilities, surveyors found that all 710 elements were in compliance with the guidelines and there were no deficiencies. (T. 905, 906). HQR'S APPLICATION Health Quest Realty II, Ltd. ("HQR II") is an Indiana limited partnership, first created prior to March 30, 1987 and authorized to transact business in the State of Florida on July 11, 1991. (HQR II Exhibit 7). HQR II is the authorized licensee of Regents Park of Jacksonville, a 120-bed community nursing home located in Duval County, Florida. HQR II has been the licensee of this facility since it first opened in 1986. HQR II's CON proposes to convert a portion of Regents Woods of Jacksonville, and existing Adult Congregate Living Facility, and thereby add nursing beds to an existing and co-located 120-bed nursing facility licensed as Regents Park of Jacksonville by HQR II. Alternatively, HQR II's CON proposed a 24 beds addition to Regents Park of Jacksonville. The 41-bed addition proposed by HQR II would involve 16,025 gross square feet at an estimated total project cost of approximately $2.6 million. The 24-bed partial request would involve 10,405 gross square feet at an estimated total project cost of $1.76 million. (HQR II App.) Health Quest Management Corporation IV ("HQMC IV") is an Indiana corporation, which filed, on October 3, 1984, a notice of doing business in Jacksonville as Regents Park in compliance with the fictitious name law. On February 12, 1986, HQR II filed a notice under Florida's "fictitious name" law, Section 865.09, Florida Statutes, in the public records of Duval County, Florida, giving notice of doing business as "Regents Park" in Jacksonville. CVI 33 (exhibit indicates document recorded at Duval County Official Records Vol. 6084, Pg. 1948). According to filings in the official records of Duval County, Florida, on September 25, 1987, the persons having an interest in HQR II were Lawrence H. Garatoni, holding a 90% interest, and Judith A. Garatoni,, holding a 10% interest. HQ 41 (exhibit indicates document recorded at Duval County Public Records Vol. 6402, Pg. 1466). An affidavit was filed in the official records of Duval County, Florida, that identified Lawrence H. Garatoni as owning a 190% interest in HQR IV, an Indiana corporation. HQ 40 (exhibit indicates document recorded at Duval County Official Records: Vol. 5860, Pg. 1904). Regents Park of Jacksonville actually is owned by Health Quest Realty XXII, another Indiana general partnership ("HQR XXII") (Krisher 7). The construction of Regents Park was financed by industrial revenue bonds issued by the City of Jacksonville on November 1, 1984. CVI 210. HQR XXII leased the property to HQR IV, which operates the facility. As part of the bond transaction, HQR XXII gave the City of Jacksonville a collateral assignment of its rights as lessor in its lease of the property to HQMC IV. All the Health Quest entities are controlled by one man, Lawrence Garatoni. Mr. Garatoni is the sole general partner of HQR II and owns 90% in that partnership, T. 1908 (Fall); HQ 41. Mr. Garatoni also owns 90% of the stock of HQMC IV, HQ 40, and owns 95% of HQR XXII partnership. T. 1780 (Fall). CVI 32, p. 7. The original CON for Regents Park was issued to HQR II. T. 1381. When Regents Park was first licensed in February of 1986, the license was issued to HQR II. T. 1382 (Krisher). In the process of obtaining renewal of the license for Regents Park in January of 1987 Mr. Krisher realized that the licensee, HQR II, in facet held no interest in the facility; HQR XXII was the owner of the property and HQMC IV the lessee/operator. Mr. Krisher brought this to the attention of Bruce Henderson of the HRS Office of Licensure and Certification ("OLC"). In an attempt to rectify the problem, HQR XXII entered an agreement to retain HQR II, the licensee to provide management services for the facility operated by HQR IV. CVI 23; T. 1382. This agreement was not rescinded. HRS advised that it would not issue a license to HQR II based on HQR II being a management agent because only the owner or lessee of a nursing home was eligible to be licensed. T. 1383. HQR II then approached HRS about obtaining approval for HQR IV to be the licensee of tie facility. HRS indicated to Mr. Krisher that to have the license issued to HQR IV would require a change of ownership. T. 1383. Mr. Garatoni did not want to go through a "change of ownership" since a new licensee could not retain the superior license, which Regents Park had received in December of 1986. T. 1384 (Krisher). In order to enable HQR II to obtain renewal of the license, HQR IV assigned its leasehold to HQR II. T. 1383. However, all profits and losses of Regents Park were recorded in the books of HQR IV because Mr. Garatoni did not wish to change the internal accounting structure of the Jacksonville operation. CVI 32, Wright deposition, p. 25. Conversely, there is only one set of books and records for HQR II, and they related only to the facility located in Merrillville, Indiana. T. 1861 (Fall). Disclosure of all material transactions and circumstances affecting the entity being audited is a key requirement (i.e., "completeness") in order to properly present an audited financial statement under GAAP. (Vol. 14, p. 1534; Vol. 17, p. 1840; Vol. 18, p. 1920). Since the Regents Park began operation in 1986, HQR IV has had and continues to have full operational and financial responsibility for the nursing home. (CVI Ex. 22; Vol. 13, p. 1394; Vol. 14, p. 1455; Vol. 18, p. 1883-4). HQR IV took the benefit of all profits and the risk of all losses from the operation of a nursing home licensed to HQR II and owned by Health Quest Realty XXII. (CVI Ex. 21a, 21b, 21c; Vol. 13, p. 1384, 1407-11; Vol. 14, p. 1430) HQR II claims these circumstances relieved its auditors from any responsibility to even mention, much less adequately disclose, financial data or other disclosure information pertaining to Regents Park. (Vol. 17, p. 1830-1). Neither the 1988 nor 1989 audited financial statements submitted by HQR II with its CON fairly present, in all material respects, the financial position, cash flow and results of operations of Regents Park of Jacksonville under GAAP. To the contrary, both financial statements were the result of a "special audit" of property located in Merrillville, Indiana, which is owned by HQR II and leased to a third party for a retirement community. (HQR II App,.; Vol. 17 p. 1824; Vol. 13, p. 1404-5) Although an audit of the applicant and licensee, HQR II, was presented, the operation of the nursing home upon which determinations of financial feasibility would be based never occurred. When each audit was conducted, HQR II's auditors had no knowledge of the Jacksonville operation. (Vol. 14, p. 1445-46; Vol. 18, p. 1877). The purpose of requiring audited financial statements is to provide HRS with reasonable assurances that an appropriate audit, with all necessary field work, was conducted. (Vol. 15, p. 1563; Vol. 15, p. 1619-22). HQR II did not provide financial statements which reasonably represented and presented the financial status of the applicant because HQR II did not tell the auditors about its Jacksonville operations. If complete field work and independent evaluation by the auditors had been performed, the auditors would have discovered the relationship between Health Quest Realty XXII, HQR II and HQR IV. In considering disclosure of related party transactions, the auditors would have had to reconcile the relationships between the various entities, and present a accurate picture of the finances of the applicant. The Health Quest nursing home has not made a profit in its five years of existence. (Vol. 17, p. 1798, 1799; Vol. 14, p. 1444, 1445) For example, in 1989 it suffered a net loss of $114,000. (Vol. 17, p. 1)98) In 1990, it suffered a net loss of $107,000. (Id.) Health Quest's past history of consistent losses was not disclosed anywhere in its application. (Vol. 14, p. 1444, 1445) Such information is relevant to the financial feasibility of a CON, and is revealed in a proper audited financial statement. (Vol. 12, p. 1324, 1325; Vol. 15, p. 1560- 61) Health Quest projects a profit for its bed addition alternatives. (Health Quest App. Sch. 18) Given the past history of losses, Health Quest did not provide any explanation as to how a profit should now be expected. (Health Quest App.) Health Quest is a foreign limited partnership which did not register to conducts business in the State of Florida until July 11, 1991. (Health Quest Ex. 7) Its petitions for formal administrative proceedings were filed in March and April of this year. Some scores in HRS' s system are objective, i.e., based on specific facts. Other scores in HRS's system are subjective, i.e., based on the reviewer's opinion. On the objective items, Health Quest received 480.3 points, 80% of the possible 602; Atrium received 47911 (80%). MRCI 397.3,7 (66%), and CVI 374.55 (62%). At. 8. On the subjective items, Health Quest received 442.94 points, 68%, of the possible 654; Atrium received 575.61 (88%); MRCI 566.7:5 (87%); and CVI 621.47 (95%). At. 8. Health Quest finished highest among the applicants on the items scored objectively add lowest among the applicants (by a gap of 19% of the maximum s1core available) on the items scored subjectively. Health Quest's is the only nursing home in Duval County that has had a "superior" licensure rating since 1986. Krisher 8. Only about a third of Florida's nursing homes have superior licenses. Brockish 4; HQ 2. Health Quest's facility is considered excellent by local physicians, hospital discharge planners, and home health agencies. HQ 38. The chairman of the District IV Long-Term Care Ombudsman Council described Regent's Park as having a "solid reputation," and as having been identified by the University of Northern Florida as "a model facility and primary site for its newly developed Administrator-in-training program."' 6513, PT 2, Item 3M (1/14/91 letter). A high level of staffing, measured by the ratio of full-time equivalent ("FTE") staff to patients, generally correlates to high quality care. T. 40, 42 (Vroman). Health Quest's existing total direct care staffing pattern, at 3.49 hours per patient day, exceeds the levels proposed by the other applicants. Health Quest's proposed staffing, measured by licensed staff (i.e., RNs & LPNs) or by total direct care staff (i.e., including nursing aides), is higher than that of any other applicant except MRCI's 24-bed proposal. HQ 11. Health Quest provides a broader range of services than most nursing homes, including subacute care such as intravenous antibiotics, respiratory care and tracheostomy care. T. 757, 59 (Janesky). Regents Park provides more physical therapy ("PT") than most nursing homes. Provision of PT is related to Medicare utilization because Medicare residents are the primary recipients of PT in nursing homes. 6513, PT 2, Only one other facility in Duval County provides the type of subacute care which Regents Park provides, and that facility is not an applicant for beds in this cycle, [T. 775 (Janesky), H31] although CVI states that it too will serve high acuity patients. Vroman 6-7. Although the CON application form asks for a description of "specialized programs," HRS has not defined "specialized program" in the application instructions. T. 394 (Gordon-Girvin). HRS gave Health Quest no credit for providing subacute care because subacute care was not considered a "specialized program" although HRS had considered subacute care a specialized program in the past. T. 1286-87 (Granger). The Office of Licensure and Certification, which licenses and monitors nursing homes, recognizes 11 categories of "special care." Regents Park provides all of them. Although Health Quest referred to this in `,its application, HRS gave Health Quest zero points in this category. At. 8 (Ex. B, p. 22). HRS gives the same weight to its consideration of a proposal to provide a particular service and type of care that it gives to actually providing the service or care. The application evaluation process does not differentiate between the promise to perform by a entity which has never engaged in the nursing home business and actual performance by an existing provider with an excellent track record. T. 1295 (Granger). The success of Regents Park in restoring residents to health is objectively demonstrated by the high ratio of patients discharged from Regents Park rather than remaining as residents until death. As reflected in HCCCB reports for 7/89- 6/90, Regents Park discharged 179 patients, i.e., 1.49 times its licensed beds, which was more than twice the rate for all other District IV facilities. 6513, PT 2, p. 43E Health Quest's actual resident care cost per resident day is the highest in the Southeast Duval County, which is considered a favorable factor under State Health Plan Preference #12. Nursing care cost for resident day for Regents Park for fiscal year 1989, per HCCCB reports, at $30.64 was higher than that for any of the other nine Southeast Duval County facilities reporting. 6513, PT 2, p. 45F. Similarly, Regents Park's dietary cost per patient day, at $8.69, exceeded any of the other nine facilities. 6513, PT 2, p. 48C. Health Quest proposes that all but four of its new beds are to be in private rooms. There would be two rooms, each with two beds, sharing an entrance to the hallway but otherwise private. T. 1155. CVI, MRCI and Atrium each plan to provide four to twelve beds in private rooms. HQ 10. Health Quest agreed to condition an approval on the following: The proposed site would be 7130 Southside Boulevard, Jacksonville, Florida. A minimum of 50% of patient days will be devoted to Medicaid patients for the proposed new unit. The facility will continue to use only certified nursing aides ("CNA's"). (Health Quest App.) The conditions, above, to which Health Quest committed are largely redundant. As an existing provider, Health Quest is limited to expansion at its existing site, 7130 Southside Boulevard, and it must use trained personnel. Health Quest listed as special care restraint reduction, and weight maintenance. HRS found that the these programs constitute services which every nursing home must provide, or should provide, as standard care. (Atrium Ex. 8, p. 17; Vol. 8, p. 753-63) Health Quest did not characterize its services to Alzheimer's residents as a special program within its application. (Vol. 12, p. 1288) The care for Alzheimer's patients becomes a special program when it is offered in a discrete unit or when some other unique feature is present, such as a facility design, which specifically takes into account and benefits the needs of residents with Alzheimer's. (Vol. 12, p. 1319, 1323) Health Quest's application did not present any such unique features. Health Quest's willingness to accept hard-to-place patients is reflected its practice of accepting Medicaid residents requiring skilled rather than intermediate care. Per 1989 HCCCB data, the proportion of Medicaid patients receiving skilled care at Regents Park (31.5%) was more than twice the average (11.6%) for other reporting Southeast Duval County facilities. 6513, PT 2, p. 45F. However, the percentage of Medicaid utilization to which Health Quest is committed is ambiguous because its application states: It should be noted that Medicaid residents are to be placed in the facility according to the wishes of the residents themselves, their attending physicians, and the staff. The Agreement on page 6 should not be misconstrued as evidencing an intention to operate the new unit at 50% Medicaid occupancy [sic]. (Health Quest App., Sch. 17, Footnote #16) The reference to "page 6" is the application page wherein the applicant can expressly agree to a particular Medicaid utilization condition. Given its proposal to convert ACLF space, the remoteness of the proposed Health Quest unit from its existing skilled nursing facility will not lend itself to optimal efficiency in utilizing existing nursing home support areas. (Atrium Ex. 8, p. 19) Almost all of the proposed Health Quest beds will be located in private rooms. (Vol. 9, p. 915) The isolation of the elderly in a private room can cause problems with depression. (Id.) Health Quest was deficient in describing how it would measure the outcomes for its programs. (Atrium Ex. 8, p. 21) Health Quest description of its residential quality assurance program was weak. [ANH Ex. 8, pp. 16, 17]. Health Quest was the only applicant proposing renovation rather than new construction. The instructions to the CON application form state: If currently owned land is going to be converted from some other use to be used for this project, the land's original cost plus past improvements made must be included. If the purchase price of the land was previously approved in CON review by this department, it must be excluded when calculating the application fee. * * * The same treatment applies to donated and converted buildings (including partial bed conversion) as apply to donated and converted land, except that cost less accumulated depreciation must be used. Health Quest followed the instructions and included the depreciated cost of the existing ACLF area to be converted to nursing beds. 6513, 6513-P, Sch. 1. HRS in its cost comparisons used the "total cost" figures given by the applicants. Using those figures, the cost per bed were as follows: CON Total Cost Cost Per Bed HQ 41-bed $2,608,646 $63,625 HQ 24-bed $1,765,482 $73,562 CVI $3,286,258 $54,771 Atrium $3,944,324 $46,956 MRCI 30-bed $1,891,507 $63,050 See State Agency Action Report, At. 8, pp. 2-3.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED, in the absence of reconsideration by the Department, that: The application of Health Quest be denied for failure to file a properly audited financial statement and establish its financial feasibility; The CON of Cypress Village be approved for 60 beds; The CON of Atrium be approved for 84 beds; and The beds sought by MRCI should be denied. DONE AND ENTERED this 11 day of February, 1992, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11 day of February, 1992.
