Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
Findings Of Fact 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.
The Issue Whether the Department of Health and Rehabilitative Services should approve the application for certificate of need (CON) of any one or more of five applicants for community nursing home beds in Lee County for the July 1989 planning horizon.
Findings Of Fact The Applicants Applications for certificates of need (CON) for nursing homes are accepted by the Department of Health and Rehabilitative Services (Department) in batching cycles and are subject to competitive review. The Department comparatively reviewed and analyzed 13 individual applications for proposed nursing services for District VIII, Lee County, in the July, 1986 nursing home batching cycle. Five of those applications are at issue for purposes of this proceeding. Pertinent to this proceeding, petitioner, Maple Leaf of Lee County Health Care, Inc., a wholly owned subsidiary of Health Care and Retirement Corporation of America (HCR filed an application for a 120-bed nursing home (CON 4746), petitioner Forum Group, Inc. (Forum), filed an application for a 60-bed nursing home (CON 4755), petitioner, Health Quest Corporation (Health Quest), filed an application for a 60-bed nursing home (CON 4747), petitioner, Hillhaven, Inc., d/b/a Hillhaven Health Care Center Lee County (Hillhaven) filed an application for a 120-bed nursing home (CON 4756), and respondent, Gene Lynn d/b/a Careage Southwest Healthcare Center (Careage) filed an application for a 120-bed nursing home (CON 4748). Each of these applications was timely filed. The Department's "preliminary" action The Department is the state agency charged with implementing and regulating the CON program for medical facilities and services in Florida. Within the Department, the Office of Community Medical Facilities is responsible for the review of CON applications and provides a recommendation for approval or disapproval after its analysis is concluded. The Department assigned the subject District VIII applications for the July, 1986 hatching cycle to Medical Facilities Consultant Robert May for review. Mr. May was supervised in his work by Elizabeth Dudek, an experienced Medical Facilities Consultant Supervisor, who has reviewed or supervised the review of approximately 1200 CON applications. Robert Nay and Elizabeth Dudek concurred in their evaluations of the applications and recommended that Hillhaven's application be approved for 60 beds in Lee County. This recommendation was forwarded to the Administrator of the Office of Community Medical Facilities, Robert E. Naryanski, who also occurred with the recommendation on or about December 20, 1986, and forwarded the recommendation to Marta Hardy, Deputy Assistant Secretary for Health Planning and Development, for final approval. An unusual set of circumstances evolved from that approximate point in time with respect to the applications at issue. Sometime in late November 1986 Marta Hardy talked to Robert Sharpe, Administrator of the Office of Comprehensive Health Planning, concerning the applications in this batching cycle and stated that she intended to involve him in the review procedure. In late December, she asked Mr. Sharpe to review the applications for four of the counties in the cycle, including Lee County. Mr. Sharpe is in a separate and distinct part of the Department, which reports to the Deputy Assistant Secretary but does not, in the ordinary course of operations, review certificate of need applications. Mr. Sharpe's involvement with reviewing nursing home applications had never occurred before and has not occurred since. However, Mr. Sharpe has been involved on limited occasions with reviewing hospital CON applications in preparation for administrative hearings. Careage had a CON application in each of the four districts that Mr. Sharpe was asked to review. Mr. Sharpe was not asked to review any other districts other than the four districts in which Careage had applications pending. In Mr. Sharpe's conversation with Ms. Hardy, Ms. Hardy specifically mentioned Careage while expressing her concern about the Department's ability to discriminate the best applicants on the basis of quality of care. Ms. Hardy mentioned no other applicant by name. Mr. Sharpe, in all circumstances, recommended Careage for approval. Mr. Sharpe did not attempt to do a complete re-review the applications, and did not redo any part of the review that had been performed by the Office of Community Medical Facilities specifically the need calculations and comparing the applications to the statutory review criteria. Mr. Sharpe did not apply statutory review criteria in his review of the applications because it had been determined that all the applicants were minimally qualified and met the statutory review criteria. Mr. Sharpe felt that the responsibility of his office was simply to do a comparative review to determine the best applicant. Mr. Sharpe placed information in the applications into what has been termed a "matrix." The purpose of the matrix was to present the information in the applications in a format which would facilitate a comparative analysis based on a greater number of factors than had previously been considered. Traditionally, the predominant factors utilized by the Department in reviewing applications were construction costs, Medicaid participation percentages, proposed sites, and charges. The matrix developed by Mr. Sharpe included additional factors which he felt would better address the quality of care to be provided, such as the size of facility, the size of the patient rooms, the amenities available to the patients and their families, the type and level of staffing, availability of special programs, and operating costs. By including a greater number of factors in the matrix, more information was considered in selecting the best applicant. As a result, the factors that traditionally had been considered by the Department were given relatively less weight. There was no notice to the applicants of this change in practice. Further, although all the information considered by Mr. Sharpe was taken from the applications and generally required to be in the application, the applicants reported the information differently, making a direct "apples-to-apples" comparison difficult. Mr. Sharpe's review of the applications spanned approximately five to eight days. Mr. Sharpe's staff in the information on the matrix from the applications, and, although Mr. Sharpe had personally reviewed all the applications, Mr. Sharpe did not personally check the information placed on matrix for accuracy. The Office of Community Medical Facilities' initial review covered a period of approximately six months. There was no evidence that the duties and responsibilities of the Office of Community Medical Facilities were not carried out in a thorough and appropriate manner. Ms. Dudek has more experience in reviewing CON applications than Mr. Sharpe, and she took into account, among other review criteria requirements, the type programs offered by the applicant and the quality of care the applicant had demonstrated and was capable of providing. Mr. Sharpe never talked to Ms. Dudek to find out the basis for her recommendation because he felt his responsibility was to do an independent review. Robert Sharpe reported his findings with regard to Lee County to Marta Hardy who apparently accepted Mr. Sharpe's recommendation on or about January 7, 1987, approving Careage's application for 60 beds and denying all others. On or about January 23, 1987, in the Florida Administrative Weekly, it was published that Careage was approved fob a 120-bed facility in Lee County. Actually HRS approved Careage for a 60-bed facility; the 120-bed figure in the Florida Administrative Weekly was erroneous. As a result of a new administration and Bob Griffin succeeding Ms. Hardy as Deputy Secretary in the Office of Health Planning, and due to his concerns about the unique manner in which these applications were reviewed and a decision made, another review of the applications for Lee County was conducted. The Office of Community Medical Facilities, the office originally responsible for reviewing the applications, was asked to do this review. This third review was conducted during the summer of 1987 by Bob May while this case was pending before the Division of Administrative Hearings. In this third review, a matrix was also used, but not the identical matrix previously used by Mr. Sharpe. Indeed, the Office of Community Medical Facilities was instructed not to look at what Mr. Sharpe's office had done. The review resulted in a decision that HRS would maintain its position of supporting partial approval of the Careage application for 60 beds. By letter dated September 4, 1987, the parties were formally notified of the HRS decision and a Correction Notice was published in the Florida Administrative Weekly indicating that the notice published in January, 1987, stating that Careage had received a CON for 120 beds, should have shown a partial approval of 60 beds, and a denial of 60 beds. HCR, Forum, Health Quest and Hillhaven timely contested initial approval of the Careage application and their own respective denials. Careage and HRS are the respondents. Hillhaven, prior to final hearing, dismissed its case contesting the Careage approval for 60 beds, and in this proceeding contends that Hillhaven should be awarded a certificate of need because there is a bed need in excess of 60 beds in Lee County. Careage did not timely contest the denial of the 120 beds requested in its original application. Health Care and Retirement Corporation of America HCR, through its wholly owned subsidiary, Maple Leaf of Lee County Health Care, Inc., proposes to construct a 120-bed community nursing home in Lee County, Florida. At the time its application was submitted, HCR had not selected a site on the proposed facility, but at hearing proposed to locate it in the Ft. Myers area. Currently, HCR owns and operates 92 nursing homes in 19 different states, including seven within the State of Florida. Its existing Florida facilities are Pasadena Manor Nursing Home (South Pasadena, Florida), Community Convalescent Center (Plant City Florida), Kensington Manor (Sarasota, Florida), Jacaranda Manor (St. Petersburg, Florida) Wakulla Manor (Crawfordville, Florida, Heartland of St. Petersburg (St. Petersburg, Florida, and Rosedale Manor (St. Petersburg, Florida). Each of these facilities received superior ratings on their latest licensure and certification survey with the exception of Heartland and Rosedale, which received a standard and conditional rating respectively. Significantly, the conditional rating assigned to the Rosedale facility occurred less than six months after that facility was acquired by HCR, and all deficiencies were corrected within 19 days of the survey. HCR's current proposal for a 120-bed facility will be a one-story structure containing 40,000 gross square feet, including 2,000 square feet for an ancillary adult day care center. It will have 58 semi-private rooms with half-bath (toilet and sink) and four private rooms with full bath (toilet, sink and shower) located within four patient wings, two nursing stations, two dining rooms, central bathing facilities, beauty- barber shop, quite lounge, physical therapy room, occupational therapy room, multi-purpose rooms, outdoor patio areas and the other standard functional elements required to meet licensure standards. In all, the proposed facility meets or exceeds state requirements for the construction of nursing homes. HCR proposes to dedicate one wing (14 semi-private and 1 private room) of its facility to the care of patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as such loss progresses, a need for increased personal care. Historically, Alzheimer's patients have been mixed with other patients in nursing homes, often disrupting other patients and presenting problems of control for staff separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient without restraint or sedation, and provides the patient with a smaller, safer and specially designed area with specially trained staff to address the needs of such patients. However, absent fill-up, HCR does not propose to limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders. HCR's Alzheimer's unit is reasonably designed, equipped and minimally staffed for its intended purpose. HCR also proposes to provide, as needed, subacute care at its facility. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there has been an increased demand for subacute services in nursing homes. Included within the subacute services HCR proposes to offer are ventilator care, IV therapy, pulmonary aids, tube feeding, hyperalimentation, and percentage and long term rehabilitation. HCR currently provides a wide variety of such subacute services at its existing facilities, and it may reasonably be expected to continue such practice at the proposed facility. As an adjunct to the proposed nursing home, HCR proposes to operate an adult day care unit for 12 Alzheimer's Disease patients. Additionally, HCR will offer respite care within the nursing home when beds available. Adult care and respite care provide alternatives to institutional long-term care in nursing homes, aid in preventing premature rising home admissions, and promote cost containment. As initially reviewed by the Department, HCR's activity would be a single story building containing 40,000 gross square feet, including the day care area, with an estimated total project cost of $3,894,000. As proposed, the total project cost equates to $32,450 per bed, and as designed provides 127 net square feet of living space for private rooms and 166 square feet for semi- private rooms. Construction equipment costs were as follows: Construction costs $2,200,000; costs per square foot $55.00; construct cost per bed 17,417; equipment costs $420,000; and equipment cost per bed $3,500. HCR's estimate of project costs is reasonable. At hearing HCR updated its project costs to account for changes that arose during the delay between initial review and de novo hearing. As updated, the total project cost was $4,375,500, or $36,462 per bed. Construction equipment costs, as updated were as follows: construction costs $2,400,000; cost per square foot $60.00; construction cost per bed $19,000, equipment costs $420,000; and equipment cost per bed $3,500. HCR's updated estimate of cost is reasonable. Staffing at the proposed 120-bed facility is designed to accommodate the needs of the skilled and intermediate care patients, as well as the special needs of the Alzheimer's and subacute patients. HCR will provide 24-hour registered nurse coverage for subacute patients and a higher staffing level in the Alzheimer's unit. The nursing home will provide 3.59 hours per patient in the Alzheimer's unit and 2.73 nursing hours overall, based on the assumption that 50 percent of the Alzheimer's patients will wanderers and that 50 percent of all patients will require skilled care. Precise staffing for subacute patients will be determined by the nature of the subacute services needed. HCR's staffing levels, as originally proposed and as updated, meet or exceed state standards. The salary and benefit estimates provided by HCR in its original application reflect salary and benefit levels current at the time of application, and the salary and benefit projections provided by HCR at bearing reflect current (1987) salaries and benefits inflated to the date of opening. Both estimates are reasonable. HCR's projection of utilization by class of pay as initially proposed was as follows: Private pay 51 percent, Medicaid 46 percent, and Medicare 3 percent. Due to its experience over the intervening 17 months since submittal of its application, HCR updated its assessment of utilization as follows: Private pay 50 percent, Medicaid 46 percent, and Medicare 4 percent. The current Lee County Medicaid experience level is 46 percent, and HCR provides an average 71 percent Medicaid occupancy in its Florida facilities. HCR's projections for payor mix are reasonable. HCR's initial application contained estimates of expenses and revenues current as of the date of application (July 1986) but failed to include an inflation factor to accommodate anticipated increases in expenses and revenues. Initially, T. projected its per diem room charges to be $60 to $85. At hearing, HCR projected its per diem room charges in the year opening (1990) to be $90 for a private room, $75 for a semiprivate room, $76.00 for Medicare patients, and $72 for Medicaid patients. The private, semi-private and Medicare charges were determined by inflating current (1987) Lee County charges forward to the year of opening. The Medicaid charges were based on a calculation of the Medicaid reimbursement formula. These charges, when multiplied by patient days, are a reasonable estimate of the projected revenues of the facility. HCR's estimate of expenses in its initial application was based on its current experience. Intervening events have lent new insight to its evaluation of expenses, as have intervening inflationary factors. While HCR's estimate of expenses and revenues was reasonable in its initial application, its current estimates comport with the reality of a 1990 opening and are reasonable. HCR has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other personnel necessary to staff its facility. Since HCR does not propose to initially limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders, its pro formas are premised on reasonable assumptions, and it has demonstrated the financial feasibility project in both the short term and long term. The proof demonstrates that HCR provides and Bill continue to provide quality care. HCR's corporate standards and guidelines regulate such areas as patient rights, staff development and orientation, physician and nurse services, pharmacy services and medication administration, social services, and infection control. HCR's manager of quality assurance, house professional services consultants, and quality assurance consultants regularly visit each HCR nursing home to implement the quality assurance standards and guidelines. Each HRC nursing home provides a staff development director who is responsible for the orientation of new employees, training new employees, and continuing training for all employees. Forum Group Inc. Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Currently Forum operates 22 Lang facilities and an additional 11 retirement living centers with attached nursing facilities, including one nursing facility in Florida. Its Florida facility holds a standard rating. Other facilities owned by Forum in Texas, Kentucky and Illinois do, however, hold superior ratings. Pertinent to this case, Forum proposes to develop a retirement living center in Lee County that would consist of its proposed 60-bed skilled and intermediate care nursing home, an adult congregate living facility, and apartments or Independent living. 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, laundry, administrative area and heating plant. Such design provides for an efficient operation, as well as an economical distribution costs facility wide. The nursing facility proposed by Forum will be a single story building of wood frame and brick veneer construction containing 27,000 gross square feet. It will include 20 semi- private rooms with half bath, 16 private rooms with half bath, 3 private rooms with full bath, and one isolation room with full bath. Also included are a beauty-barber shop, quite lounge, physical therapy room, occupational therapy room, and exam-treatment room. But for the length of the corridors in the patient wings, discussed infra, the proposed facility meets or exceeds state requirements for the construction of nursing homes. Forum's proposal, as initially reviewed by the Department, would have a total project cost of $2,314,800. This equates to $38,580 per bed, and as designed provides 150 net square feet of living space for private rooms and 228 net square feet for semi-private rooms. Construction equipment costs were as follows: Construction costs $1,377,000; cost per square foot $51.00; construction cost per bed $22,950; equipment costs $200,000; and equipment costs per bed $3,333. Forum's estimate of project cost is reasonable. Forum provided a single-line drawing indicating the general arrangement of spaces for its proposed facility. As proposed, the facility would consist of two patient wings, and a central nurse's station. The corridor lengths in the patient wings exceed state standards by 40 feet. They could, however, be modified to conform to State standards without significantly affecting the cost of construction. The project would have energy conservation features such as heavy duty roof and side insulation, double-glazed windows, and high efficiency heating and air conditioning equipment. The forum facility will offer skilled and intermediate care, and subacute care, including IV therapy, ventilator care, hyperalimentation, pulmonary aids, and short and long term rehabilitation. Forum would contract out for physical therapy, speech therapy, pharmacy consultation and a registered dietician. If needed, Forum would offer respite care when beds are available. The proposed staffing levels and salaries proposed by Forum in its application are reasonable and meet or exceed state standards. Forum has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent staff. Twenty-four hour coverage by registered nurses will be provided, and a staffing ratio of 2.9 will be maintained. The staffing level at the proposed facility is consistent with that experienced at Forum's existing Florida Facility. Forum provides, and will continue to provide, quality care. Forum's application projected its utilization by class of pay as follows: private pay 58.47 percent, Medicaid 37.16 percent, and Medicare 4.37 percent. Currently, Forum experiences a 48 percent Medicaid occupancy rate system-wide, although it only has 2 of 35 beds dedicated to Medicaid care in its present Florida facility. Forum estimated its revenues based on patient charges ranging from $50.64 per day for Medicaid/semi-private room to $75.00 per day for SNF/private pay/private room. Based on such revenues, its pro forma, utilizing a conservative 86.25 percent occupancy rate at the end of the second year of operation, demonstrated the short term and long term financial feasibility of the project as initially reviewed by the Department notwithstanding the fact that it had underestimated its Medicaid and Medicare reimbursement rates. At hearing, Forum sought to demonstrate that its project was currently feasible by offering proof that intervening events had not significantly impacted the financial feasibility of its project. To this end, Forum offered proof that the contingencies and inflation factors it had built into the construction of its initial proposal would substantially offset any increased costs or expenses of construction. Additionally, Forum sought to update its proposal at hearing by offering testimony that included an increase in the administrator's salary from $27,000 to $39,000, a decrease in interest in year one to $187,803, an increase in interest in year two to $250,790, and an increase in revenues based on patient charges ranging from $69.19 per day for Medicaid/semi private room to $90.00 per day for SNF/private pay/private room. Some of the applicants objected to Forum's proof directed at the current financial feasibility of its project because it had not previously provided them with a written update of its application as ordered by the Hearing Officer. The applicants' objection was well founded. Further, the proof was not persuasive that any contingencies and inflation factors it had built into its initial proposal would substantially offset any increased costs or expenses of construction, nor that salaries, benefits and other expenses that would be currently experienced were appropriately considered in addressing the present financial feasibility of Forum's project. While Forum has the available resources, including management personnel and funds for initial capital and operating expenditures, for project accomplishments and operation, and will be able to recruit any other personnel necessary to staff its facility, it has failed to demonstrate that its proposal, as updated, is financially feasible in the long term. Health Quest Corporation Health Quest is a privately held corporation which owns, develops and operates health care facilities and retirement centers on a national basis. Health Quest has been in business for approximately 20 years, and currently operates 11 long-term care facilities and three retirement centers in Indiana, Illinois, and Florida. Its existing Florida facilities are located in Jacksonville, Boca Raton, and Sarasota. It also has facilities under construction in Winter Park and Sunrise, Florida. Health Quest also held a number of other certificates of need to construct nursing facilities in Florida. Recently, however, it decided to transfer or sell 3-4 of those certificates because its initial decision to develop nine new projects simultaneously would have, in its opinion, strained its management staff and commitment to high quality standards. HCR is, however, currently proceeding with several projects in Florida, and anticipates that the proposed Lee County facility will be brought on line thereafter. Pertinent to this case, Health Quest proposes to develop a retirement center in Lee County that would consist of a 60-bed skilled and intermediate care nursing home, and 124 assisted living studio apartments (an ACLF). 4/ The two components which comprise Health Quest's retirement center are physically connected and share some operational functions such as a common kitchen, laundry, therapy areas, maintenance areas, and administrative areas. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. In addition to providing an economical distribution of costs, the two components of the retirement center are mutually supportive. The nursing care unit supports the ACLF by making sure that health care services are available to the assisted living people. The ACLF supports the nursing unit as a source of referral and as an alternative to nursing home placement. The nursing facility proposed by Health Quest will be a single story building of masonry and concrete construction. It will include 6 private rooms and 27 semi-private rooms with half-bath attached, central nurse's station, central bathing facilities, beauty-barber shop, quite lounge, central dining area, physical and occupational therapy room and outdoor patio The center, itself, will provide patios, walkways and other outdoor features to render the facility pleasant and attractive, and will provide multi-purpose areas to be used for religious services and other activities, an ice cream parlor and gift shop. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Health Quest's proposed facility contained 25,269 gross square feet, with an estimated total project cost of $2,244,505. As proposed, the total project cost equates to $37,408 per bed, and as designed provides 240 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows: Construction costs $1,470,333; cost per square foot $58.19; construction cost per bed $24,506; equipment costs $298,200; and equipment cost per bed $4,970. While the majority of Health Quest's costs are reasonable, its equipment costs are not. These costs are substantially the same as those projected in its original application for a 120-bed facility, which at an equipment cost of $300,000 derived an equipment cost per bed of $2,500. Why the same cost should prevail at this 60-bed facility was not explained by Health Quest, and its equipment cost per bed of $4,970 was not shown to be reasonable. As with most applicants, Health Quest updated its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing. As updated, the estimated project cost is $2,290.331, $38,172 per bed. Construction equipment costs were as follows: Construction costs $1,507,043; cost per square foot $59.64; construction cost per bed $25,117; equipment costs $302,700; and equipment costs per bed $5,045. Again, while the majority of Health Quest's costs are reasonable its equipment costs are, for the reasons heretofore expressed, not shown to be reasonable. The Health Quest facility will offer skilled and intermediate nursing care, and subacute care, including IV therapy, chemotherapy, TPN therapy and tracheostomy care. Also to be offered are respite care as beds are available and, within the complex, adult day care. Health Quest will maintain a nursing staffing ratio of approximately 3.25 hours per patient day for skilled care and 2.5 for intermediate care. As originally reviewed by the Department, Health Quest's staffing levels and expenses were reasonable. At hearing, Health Quest increased its staffing levels to account for an increased demand in labor intensive care, and increased its staffing expenses to account for the intervening changes in the market place. As updated, Health Quest's staffing levels and expenses are reasonable. Health Quest's projection of utilization by class of pay in the application reviewed by the Department was as follows: private pay 51.6 percent, Medicaid 45 percent, and Medicare 3.4 percent. Health Quest's utilization projection, as updated at hearing, was as follows: private pay 50.9 percent, Medicaid 45 percent, and Medicare 4.1 percent. TAB Health Quest currently serves 30 percent Medicaid patients at its Jacksonville facility, 10 percent Medicaid patients at its Boca Raton facility, and no Medicaid patients at its Sarasota facility. It has, however, committed to serve 40 percent and 48 percent Medicaid patients at its Sunrise and Winter Park facilities, respectively. Health Quest's projections of payor are reasonable. Initially, Health Quest projected its per diem room charges to range from $52 for skilled and intermediate care Medicare patients to $57.25 for skilled care-private and Medicare patients. It did not, however, draw any distinction between private and semi-private rooms. At hearing, Health Quest projected its per diem room charges as follows: $90 for SNF/single/private pay; $73 for SNF/double/private pay; $73 for SNF/double/Medicare; $68 for SF/double Medicaid; $68 for ICF/single/private pay; $70.75 for ICF/double/private pay; and $68 for ICF/double/Medicaid. Health Quest's fill-up and occupancy projections, as well as its projections of revenue and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and as updated. During the course of these proceedings, a serious question was raised as to whether Health Quest had demonstrated that it had the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, or that it was committed to the subject project. Within the past three years, Health Quest has sold three of its approved CONS and is considering the sale a fourth due to its inability to handle that number of projects, and the adverse impact it would have on its ability to deliver quality care. Notwithstanding its inability to proceed with approved projects, Health Quest proceeded to hearing in October 1987 and December 1987 for nursing home CONs in Hillsborough County and Lee County (the subject application), and also had nine such applications pending in the January 1987 batching cycle and eight such applications in the October 1987 batching cycle. Health Quest's actions are not logical, nor supportive of the conclusion that it is committed to this project or that it possesses available resources for project accomplishment. Under the circumstances, Health Quest has failed to demonstrate that it has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. Health Quest's facilities in Jacksonville and Boca Raton currently hold superior ratings from the Department. A superior rating includes consideration of staffing ratios, staff training, the physical environment, physical and restorative therapies, social services, and other professional services. Those facilities are monitored, as would the subject facility, by Health Quest for quality care through a system of quarterly peer review, and provide extensive staff education programs that include orientation training for new staff and on-going education for regular staff. Health Quest has demonstrated that it has provided quality care. However, in light of the strain its current activities have placed on its resources, it is found that Health Quest has failed to demonstrate that it could provide quality care at the proposed facility were its application approved. Hillhaven, Inc. Hillhaven is a wholly owned subsidiary of the Hillhaven Corporation, which is a subsidiary of National Medical Enterprises. The Hillhaven Corporation has been business for almost 30 years, and is currently responsible for the operation of approximately 437 nursing homes and retirement centers nationally, including 15 nursing homes which it owns or operates in the State of Florida. Hillhaven proposes to develop a new 120-bed skilled and intermediate care community nursing home in Fort Myers, Lee County, consisting of 38,323 square feet. It will include 14 private rooms and 53 semi-private rooms, a full bath attached to each room (shower, toilet and sink), central tub rooms, beauty- barber shop, quite lounge, chapel, physical therapy room, occupational therapy room, and outdoor patio areas. In all, Hillhaven's proposed facility meets or exceeds state requirements for the construction of nursing homes. As initially reviewed by the Department, Health Quest's proposed facility would be a single-story building containing 38,323 gross square feet, with an estimated total project cost of $3,544,444. As proposed, the total project cost equates to $29,537 per bed, and as designed provides 217 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows; construction costs $2,146,000; cost per square foot $56.00; construction cost per bed $17,884; equipment costs $442,005; and equipment cost per bed $3,683.38. Hillhaven's project costs are reasonable. As with the other applicants, Hillhaven update its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing, certain oversights in its initial submission, and its decision to proceed with type 4 construction as opposed to type 5 construction as originally proposed. As updated, the estimated project cost is $4,089,639, or $34,155.33 per bed. Construction equipment costs, as updated, were as follows: construction costs $2,446,088; cost per square foot $63.82; construction cost per bed $20,384; equipment costs $521,200; and equipment costs per bed $4,343.33. By far, the biggest factor in the increased construction costs was Hillhaven's decision to proceed with type 4 construction as opposed to type 5 construction. Either type of construction would, however, meet or exceed state standards, and Hillhaven's estimates of construction and equipment costs are reasonable. The Hillhaven facility will offer skilled and intermediate care, occupational therapy, speech therapy, physical therapy, recreational services, restorative nursing services, and social services. Hillhaven does not discriminate on admission, and would admit Alzheimer's and subacute patients as presented. Were sufficient demand experienced, Hillhaven has the ability to provide and would develop a full Alzheimer's unit, and provide day care and respite care. Currently, Hillhaven operates 36 Alzheimer's units at its facilities nation wide, but has experienced no demand for such a special unit or other special care at its existent Lee County facility. As originally reviewed by the Department, Hillhaven's staffing levels an expenses were reasonable. At hearing, Hillhaven increased its staffing levels to account for staff inadvertently omitted from its initial application, and increased its staffing expenses to account or intervening changes in the market place. As updated, Hillhaven's staffing level is 2.5, and its staffing levels and expenses are reasonable. Hillhaven's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 30 percent, Medicaid 60 percent, and Medicare 10 percent. As updated at hearing, Hillhaven's utilization projection was as follows: private pay 44 percent, Medicaid 53 percent, and Medicare 3 percent. Currently, Hillhaven provides, on average, 53 percent Medicaid care at its facilities in Florida. Hillhaven's estimate of payor mix was reasonable and, in light of intervening changes in circumstance, was reasonable as updated. Hillhaven's patient charges for its second year of operation as originally reviewed by the Department ranged from $58.60 to $62.00 per day. As updated, Hillhaven's patient charges ranged from $52.13 to $73.50 per day. Hillhaven's estimated charges were achievable when initially proposed and as updated, and are reasonable. Hillhaven's fill-up and occupancy projections, as well as its projections of revenues and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and comport, as updated, with the current experience in Lee County. Hillhaven has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates are premised on reasonable assumptions, and Hillhaven has demonstrated the short term and long term financial feasibility of its project. Currently, Hillhaven owns or operates 15 facilities in the State of Florida. Of these 15 facilities, two have opened within the past year and are not eligible for ratings. Nine of the 13 eligible facilities are operating with superior licenses. Of the remaining four facilities, two have a standard license and two have a conditional license. The two facilities with conditional ratings have both resolved their deficiencies. Hillhaven has provided and will continue to provide quality care. It ensures that quality care will be maintained within its facilities by drawing upon the professional resources four regional offices comprised of registered nurses, quality assurance monitors, regional dietitians, maintenance supervisors, employee relations specialists, and other administrative support personnel. Regional consultants visit company facilities monthly to plan, organize and monitor operations, and to conduct in-service training workshops. Overall, Hillhaven provides each facility with an in-depth quality assurance program. Gene Lynn d/b/a Careage Southwest Healthcare Center Gene Lynn (Careage) is the president and 100 percent owner of Careage Corporation. Since 1962, Careage has developed approximately 150 nursing homes and retirement centers, as well as 100 medically related facilities, in 22 states and the Virgin Islands. Until December 1986 it did not, however, own or operate any facilities. Currently, Careage operates four nursing homes in the United States (one in the State of Washington, two in the State of California, and one in the State of Arizona) , but none in Florida. The home office of Careage is located in Bellevue, Washington. Careage proposed to develop a new 120-bed skilled and intermediate care nursing home in Lee County with specialty units for subacute and Alzheimer's care, consisting of 45,500 square feet. It would include a patient care unit consisting of 2 isolation rooms and 7 private rooms with full bath and 45 semiprivate rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semiprivate rooms with half bath, central dining area, beauty-barber shop, quiet lounge, chapel, physical therapy room, occupational therapy room, outdoor patio areas, and exam-treatment room. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Careage's proposed facility was a single-story building containing 45,500 gross square feet, with an estimated total project cost of $4,150,000. As proposed, the total project cost equates to 34,583 per bed, and as designed provides 184-227 net square feet of living space for isolation/private rooms, and 227-273 net square feet of living space or semi-private rooms. Construction equipment costs were as follows: construction costs $2,583,125; cost per square foot $56.77; construction cost per bed $21,526; equipment costs $420,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipment costs, are reasonable. The Careage facility would offer skilled and intermediate care, occupational therapy, physical therapy, recreational services and social services. Additionally, the proposal includes a special 21-bed unit dedicated solely to the treatment of Alzheimer's disease patients, and a dedicated 10-bed unit for subacute care which will accommodate technology dependent children care. Among the subacute services to be offered are hyperalimentation, IV therapy, ventilators, heparin flush, and infusion pumps for administration of fluids. Careage will offer respite care as beds are available, and will offer day care in a separate facility. Careage's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 49 percent, Medicaid 40 percent, Medicare 3 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patients charges for its facility were projected as follows: private and VA (room rate only) $63.86, Medicaid (all inclusive rate) $59.23, Medicaid (all inclusive rate) $108.15, and private (other) /subacute (room rate only) $128.75. Careage's fill-up and occupancy projections as well as its projections of revenues and expenses, for its 120-bed facility were not shown to be reasonable. First, in light of the fact that there was no quantifiable demand for a dedicated Alzheimer's unit and subacute care unit, as discussed infra at paragraphs 126-129, no reliable calculation of fill-up and occupancy rates or revenues and expenses could be derived that was, as the Careage application is, dependent on such revenue stream. Second, the Careage pro forma was predicated on average rates experienced in Lee County. Since Careage proposes heavier nursing care than that currently experienced in Lee County, its estimates of patient charges are not credible. At hearing, Careage updated its 120-bed application to account for inflationary factors that had affected the project since it was first reviewed, and to correct two staffing errors. These updates did not substantially change the project. Careage has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates were not, however, premised on reasonable assumptions, and Careage has failed to demonstrate the short term and long term financial feasibility of its 120-bed project. Following the Department's initial review of the applications in this batching cycle, it proposed to award a certificate of need to Careage for a 60- bed facility, premised on its conclusion that there was insufficient numeric need to justify an award of beds exceeding that number, notwithstanding the fact that the application of Careage was for 120 beds and did not request or propose a 60-bed facility. Notably, all financial, staffing, construction, equipment and other projections described in the Careage application were based on a 120- bed facility, and no information was provided regarding a 60- bed facility. Also notable is the fact that the other applicants were not accorded equal consideration. Not surprisingly, the proposed award of a CON for 60-beds to Careage was timely challenged, but Careage did not protest the Department's denial of its application for 120 beds but appeared as a respondent to defend the Department's decision to award it 60 beds. At hearing, Careage offered proof of the reasonableness of its 120- bed proposal over the objection of the other applicants. /5 Careage contends that its proposed 60-bed facility is a scaled down version of its 120-bed proposal Careage proposes to offer the same services in its 60-bed facility as it proposed in its 120-bed facility, including the 21-bed Alzheimer's unit and 10-bed subacute care unit. Its proposed 60- bed facility is not, however, an identifiable portion of its initial project. As proposed, the 60-bed facility would contain 26,900 gross square feet, and meet or exceed state standards. It would include a patient care unit consisting of 1 isolation room and 4 private rooms with full bath, 17 semi- private rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semi-private rooms with half-bath, together with the same amenities offered by the 120-bed facility, but on a reduced scale. As proposed, the total project cost for the 60-bed facility is $2,475,000, which equates to $41,250 per bed. As designed, the facility would provide the same net square footage of living space for private and semi-private rooms as the 120-bed facility. Construction equipment costs would be as follows: construction costs $1,431,750; cost per square foot $53.22; construction cost per bed $23,863; equipment costs $210,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipments costs, are reasonable. Careage's projected utilization by class of pay in its 60-bed facility was as follows: private pay 47 percent, Medicaid 40 percent, Medicare 5 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patient charges for its 60-bed facility were projected as follows: private and VA (room rate only) $66.00, Medicaid (all Inclusive rate) $63.50, Medicare (all inclusive rate) $120.00, private (other)/subacute (room rate only) $130.00. Careage's fill-up and occupancy projections, its projections of revenue and expenses, and its pro forma estimates for its 60-bed facility suffer the same deficiencies as those for its proposed 120-bed facility. Under the circumstances, Careage has failed to demonstrate the short term and long term financial feasibility of its 60-bed facility. While Careage has only owned and operated nursing homes for a short time, the proof demonstrates that it has and will continue to provide quality care for its residents. The Alzheimer's unit and subacute care units are reasonably designed, equipped and staffed for their intended functions. Staffing ratios in the subacute unit will be 6.0, and in the other areas of the facility 3.0. Careage currently utilizes a quality assurance program at each facility which includes a utilization review committee, safety committee, infection control committee, and pharmaceutical committee. Each facility also has a resident advisory council, community advisory council, and employee advisory council. Presently, Careage is developing a company level quality assurance program, and has initiated announced and unannounced site visits by a quality assurance expert to evaluate resident care, operations, maintenance and physical environment. The Department of Health and Rehabilitative Services The opinions expressed by the witnesses offered by the Department were premised on information available to them while these applications underwent "preliminary" review. The information available to them at that time, and represented by the State Agency Action Report (SAAR), was incomplete and inaccurate in many respects, including the services to be provided by some of the applicants and the approved bed inventory and occupancy rates utilized in the need methodology. These witnesses were not made privy to, and expressed no opinions, regarding the relative merits of the applications in light of the facts developed at hearing. Throughout the hearing, counsel for the Department objected to evidence from any applicant regarding "updates" (changes) to their applications as they were deemed complete by the Department prior to its initial review. It was the position of the Department's counsel, but otherwise unexplicated, that the only appropriate evidence of changed conditions after the date the application was deemed complete were those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation and other current circumstances external to the application. The majority of the "updated" material offered by the applicants at hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of final hearing, changes in the market place regarding nursing salaries, changes in the Medicaid and Medicare reimbursement system and typographical errors in the application. Some changes in design were offered as a result of the applicant's experience with other construction projects and in order to comply with licensing regulations. There were also some changes which resulted from better information having been secured through more current market surveys. None of the applicants attempted to change their planning horizon, the number of beds proposed, the proposed location of the facility or the services to be offered except Careage. 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; formerly, Rule 10- 5.11(21)(b) 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 2a-d provide the methodology for calculating gross bed need for the district/subdistrict in the horizon year. In this case, the applicable district is District 8, and the applicable subdistrict is Lee County. 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 in the district. 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), as well as the subdistrict licensed bed figure (LBD) is calculated based on the number of community nursing home beds as of June 1, 1986. The Department's Semi-Annual Nursing Home Census Report and Bed Need Allocation prepared for the July 1986 review cycle (July 1989 planning horizon) listed 4,193 licensed community nursing home beds in District 8 and 996 in Lee County. However, that count taken on May 1, 1986, did not include 120 new beds which were licensed in Charlotte County on May 8, 1986. The count also excluded 287 beds at four other facilities in the district, including 60 beds at Calusa Harbor in Lee County, because they were listed as sheltered beds according to Department records at that time. After passage of Section 651.118(8), Florida Statutes, the Department surveyed the facilities and found that the beds at these four facilities were operated as community beds rather than sheltered beds. Under the circumstances, the proof demonstrates that as of June 1, 1986, there were 4,600 licensed community nursing home beds in district 8 (LB) and 1,056 in Lee County (LBD). The formula mandated by the rule methodology or 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. Some of the applicants contend that the current population" for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated or the July batching cycle, OR based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. Under this theory, January 1, 1986, as the midpoint of that period, is the appropriate date to calculate "current population" to derive PCPC and POPD. The Department contends that "current population" for POPC and POPD should be calculated as of July 1986, the filing deadline for applications in this review cycle. The Department's position is, however, contrary to its past and current practice. The need reports issued by the Department between December 1984 and December 1986, routinely used a three and one- half year spread between the base population period and the horizon date for "current population." In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one-half 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 deviate from its past and current practice. Under the circumstances, January 1, 1986, is the appropriate date on which the "current population" is to be calculated when deriving POPC and POPD. The parties are also in disagreement as to whether population estimates developed after the application deadline can used to establish the current population. Rule 10- 5.011(k)2h, Florida Administrative Code, mandates that population projections shall be based upon the official estimates and projections adopted by the Executive Office of the Governor, but does not limit such proof to any particular estimate. The Department advocates the use of population estimates existent at the application deadline. Accordingly, it would apply the official estimates and projections adopted by the Executive Office of the Governor as of July 1, 1986. Other parties would apply the more recent estimates adopted by the Office of the Governor as of July 1, 1987. In this case, the use of either estimate would have no significant effect on the result reached under the rule methodology; however, since all population estimates and projections are only approximations rather than actual counts, it would be more reasonable from a health planning perspective to use the latest estimates of the 1987 population than the estimates available at the time of application. In this case, this means using July 1, 1987, estimates of January 1986 populations. These estimates are still "current" as of January 1986, since It is still the January 1986 population that is to be measured, and more reliable from a health planning perspective than the prior projection. In the same manner, July 1, 1987, estimates of horizon year 1989 populations (PCPA and POP), infra, would also be used rather than July 1, 1986, estimates of that population. Accordingly, Forum's calculation POPC (128,871), POPD (77,194), POPA (149,645), and POPB (95,748) is appropriate. (Forum Exhibit 10, Appendix A) Application of the methodology prescribed by subparagraph 26 to the facts of this case produces the following calculation: BA 4,600/(128,871 + (6 x 77,194) BA 4,600/(128,871 + 463,164) BA 4,600/592,035 BA .0077698 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 in the district. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB 6 x BA BB 6 x .0077698 BB .0466188 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 homes 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 department district projected three years into the future. POPR is the population age 75 years and older in the relevant departmental district projected three years into the future. Application of the methodology prescribed by subparagraph 2a to the facts of this case produces the following calculation: A (149,645 x .0077698) + (95,748 x .0466188) A 1,162.7117 + 4,422.4086 A 5,585.12 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 need in the case. 7/ This calculation is defined by subparagraphs 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, however, occurred before the Department amended its rule to include the fixed need pool concept contemplated by subparagraph 2d. Accordingly, the parties concur that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d of the current rule, but, rather, defined by former rule 1C--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 calculating the occupancy rate (OR) for the licensed community nursing homes in the subdistrict (Lee County) the Department derived a figure of 91.91. The Department arrived at this figure based on the first day of the month patient census of each facility considered to have community beds (LBD=1,056), which included the 60 beds at Shell Point Nursing Pavilion; assumed that such census was maintained throughout the entire month; and then divided such patient days by the actual number of beds available. The Department's methodology is an accepted health planning technique, and comports with its previous practice. Some of the parties disagree with the technique utilized by the Department to calculate OR, and advocate the use of actual patient day occupancy to derive OR. This technique differs from the "first of the month" technique by utilizing the actual number of patient days experienced by the facility, as opposed to assuming a constant census based on first of the month data. This alternative methodology is, likewise, an accepted health planning technique, and if proper assumptions are utilized will yield a more meaningful result than the Department's methodology. In this case, the proponents of the "actual patient day occupancy" methodology, erroneously assumed that 160 beds at Shell Point Nursing Pavilion were community nursing homes beds, as opposed to 60 beds; and, based on an erroneous LBD of 1,156, derived a subdistrict occupancy rate of 92.97. Under such circumstances, these proponents calculations are not reliable, and the subdistrict occupancy rate derived by the Department is accepted. Applying the facts of this case to the methodology prescribed by subparagraph 2d produces the following gross need calculation for the subdistrict: 5A 5,585.12 x (1,056/4,600) x (.9191/.9) SA 5,585.12 x .2295652 x 1.0212222 SA 1309.36 The final step in the numeric need methodology is to derive net need from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant department subdistrict from the bed allocation determined under subparagraphs 2.a. through f. unless the subdistrict's average occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987, in subsequent nursing home batching cycles, the number of licensed and approved beds to be used in establishing net need for a particular batching cycle shall be determined as of the agency's initial decision for the immediately preceding nursing home batching cycle. 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 cross need previously calculated, it is silent as to the date that inventory should be calculated when, as here, the batching cycle at issue predates its enactment. In the face of this dilemma, the parties rely on the provisions of former rule 10-5.11(21)(b) , Florida Administrative Code, which was existent when their applications were filed to resolve their dispute. Under the circumstances, reference to former rule 10-5.11(21)(b), is appropriate. Former rule 10-5.11(21)(b)9 provides: The net bed allocation for a subdistrict, which is the number of beds available, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subaragraphs 1 through 9 (sic 8).... (Emphasis added) While the former 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 calculated under subparagraphs (b)1-8, it is silent as to the date that inventory should be calculated. The Department asserts that the number of licensed beds should be calculated as of June 1, 1986 (the date established by subparagraph (b)7 of the former rule as the data base for calculating LB and LBD, and the number of approved beds as of December 18, 1986 (the date the Department's supervisory consultant signed the state agency action report). The other parties would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no reasonable evidentiary basis for its interpretation of the date at which the total number of licensed and approved beds are to be calculated under subparagraph (b)9 of the former rule. As discussed below, the dates used by the Department and the other parties for purposes of calculating net need were facially unreasonable. The Inventory of licensed and approved beds under subparagraph (b)9 of the former rule, as well as subparagraph 2i of the current rule, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's interpretation of the dates at which licensed and approved beds are to be counted is neither logical nor rational, since it could result in some beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed on June 1, 1986, but licensed before the consultant supervisor signed the SAAR (state agency action report), they would not be counted in either inventory. On the other hand, the other parties' approach would ignore all beds licensed or approved from previous batching cycles after June 1, 1986 which beds were intended to serve at least a portion of the future population. The fundamental flaw in the parties' approach to establishing an inventory date under subparagraph (b)9, was the assumption that subparagraph (b)7 of the former rule defined licensed bed inventory for purposes of subparagraph (b)9. The Department's rule must be construed in its entirety, and all parts of the rule must be construed so as to work harmoniously with its other parts. So construed, the only logical conclusion to be drawn, as hereinafter demonstrated, is that subparagraph (b)7 defines LB and LBD ("current" licensed beds) for the cross need calculation under the methodology defined by subparagraphs (b)1-4, and does not presume to define licensed beds for the net need calculation under subparagraph (b)9. Subparagraphs (b)1-4 and 7 of the numeric need methodology prescribed by the former rule is designed to yield a gross bed need for the horizon year. The keys to this methodology are the calculation of a current bed rate (BA) and current occupancy rate (OR) for the current using population, and the projection of those rates on the population to be served in the horizon year. A meaningful calculation of the current bed rate cannot, however, be derived without a current inventory of licensed beds (LB and LBD). Accordingly, the relationship between subparagraph (b)7, which defines the data base (June 1, 1986 in this case) for defining LB and LBD (the "current" licensed bed inventory) to the gross bed need calculation is apparent. The parties' suggestion that subparagraph (b)7 defines licensed bed inventory under subparagraph (b)9 not only ignores the inextricable link between subparagraph (b)7 and the gross bed need methodology, but also the language and purpose of subparagraph (b)9. The purpose of that subparagraph is to derive a realistic estimate of actual (net) bed need in the horizon year. Since all licensed and approved beds from previous batching cycles were intended to serve at least a portion of the horizon population, it would be illogical to ignore any of those beds when calculating net need. Accordingly, it would be unreasonable in this case not to count any beds that were licensed or approved from previous batching cycles between June 1, 1986, and the date a decision is rendered on these applications. Indeed, subparagraph (b)9 speaks to "the total number" of licensed and approved beds, not beds existent on June 1, 1986. In sum, subparagraph (b)7 cannot be read to define licensed bed inventory under subparagraph (b)9, and the parties' suggestion that it can is rejected as contrary to the clear language of the rule methodology. See: Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986). Since the purpose of subparagraph (b)9 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 undeserved. 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 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 1,056 licensed beds and 120 approved beds in the subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a net need of 145 community nursing home beds for the July 1989 planning horizon. Special Circumstances. The Department will not normally approve an application for new or additional nursing home beds in any service district in excess of the number calculated by the aforesaid methodology. Rule 10-5.011(1)(k), Florida Administrative Code. Succinctly, the need for nursing home services, whether they be general or special, is a product of the rule methodology, and not relevant to a calculation of need absent a demonstration of special circumstances. The Department has adopted by rule the methodology to be utilized in demonstrating special circumstances that would warrant a consideration of factors other than the numeric need methodology in deciding the need for nursing home services. That rule, 10-5.011(1)(k)2; Florida Administrative Code, provides: In the event that the net bed allocation is zero the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained at Section 10-5.011. Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under the provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special 505 home health services, adult day health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders, assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. In the instant case, some of the applicants have proposed special services, including an Alzheimer's unit, subacute care unit, and beds for technology dependent children. They offered, however, no proof that any person with a documented need for such services had been denied access to available beds that the number of persons with a documented need exceeded the number of available beds. Succinctly, there is no credible proof that the need for nursing home services in Lee County exceeds that calculated pursuant to the numeric need methodology. While there are no special circumstances existent in this case that would justify an award of beds in excess of that calculated by the rule methodology, that does not mean that consideration of the Alzheimer's, subacute and technology dependent children services offered by some of the applicants is not relevant to the comparative review of the subject applications. Rather, it means that the need for such services will presumptively be met within the need calculated by the rule methodology. How the applicants propose to address that need is, however, a matter for consideration in a comparative review of their applications. Each of the applicants propose to provide subacute care, with Careage proposing a special 10-bed subacute care unit which would accommodate technology dependent children. HCR and Careage propose special Alzheimer's care units; a 15-bed unit by HCR and a 21-bed unit by Careage. Hillhaven will admit Alzheimer's disease patients as presented, and will develop a dedicated Alzheimer's unit if demand should subsequently develop. The prevalence of Alzheimer's disease and the increased demand for subacute services brought about by DRGs, demonstrates that there will be a demand for such services within existing and proposed facilities. There was, however, no persuasive proof of any demand for technology dependent services in Lee County. While there is a demand for Alzheimer's disease care, and the preferred mode of care is in a separate unit specifically designed, staffed, and equipped to deal with this degenerative disease, there was no persuasive proof that the demand is such as to warrant the creation of a separate unit such as proposed by HCR and Careage. 10/ Absent such quantifiable demand, the application of Hillhaven more realistically addresses the need for Alzheimer's disease patients than does that of the other applicants. With regard to subacute care services, the proof likewise fails to quantify the demand for such services. Under such circumstances, Careage's proposed 10-bed subacute care unit is not objectively warranted, and does not serve to better its proposal to provide such services over the proposals of the other applicants. Consistency with district plan and state plan The District 8 health plan contains the following pertinent standards and criteria: Community nursing home services should be available to the residents of each county, 4 within District Eight. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: a. pharmacy h. occupational therapy b. laboratory i. physical therapy c. x-ray j. speech therapy c. dental care k. mental health counseling e. visual care l. social services f. hearing care m. medial services g. diet therapy New and existing community nursing bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. No new community nursing home facility should be constructed having less than 60 beds... Each nursing facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same county. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs. ... The State Health Plan contains the following pertinent goals: GOAL 1: TO DEVELOP AN ADEQUATE SUPPLY OF LONG TERM CARE SERVICES THROUGHOUT FLORIDA. GOAL 2: TO ENSURE THAT APPROPRIATE LONG TERM, CARE SERVICES ARE ACCESSIBLE TO ALL RESIDENTS OF FLORIDA. Each of the applicants demonstrated that their proposal would conform, at least minimally, with the foregoing provisions of the state and local health plans. Of particular significance to Lee County is, however, an applicant's commitment to Medicaid service. The District 8 Council has reported that hospitals in Lee County are having difficulty placing Medicaid patients in nursing homes due to the unavailability of Medicaid beds. The current Medicaid experience is 46 percent. Therefore, the local council has directed that new and existing community nursing home developments should dedicate at least 33-1/3 percent of their beds for Medicaid patients. While all applicants propose to meet this standard, Hillhaven's proposal to dedicate 53 percent of its beds to Medicaid care is substantially greater than the commitment of the other applicants, and is consistent with its current experience in meeting a community's need for nursing home care. Availability, appropriateness, and extent of utilization of existing health care services Section 381.705(1)(b), Florida Statutes, requires Consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district. When the subject applications were filed, there were 1,056 licensed beds in Lee County with an occupancy rate of 91.91 percent. The nursing home bed supply in Lee County is obviously strained, and there exist no reasonable alternatives to the addition of new beds to the subdistrict. To coordinate with existing health facilities, each applicant proposes to establish appropriate transfer agreements and affiliations with local physicians, hospitals, and other health care providers. While some of the applicants have proposed an Alzheimer's unit and subacute care unit, the proof failed to demonstrate any quantitative need for such units in the subdistrict. Some applicants also proposed to provide day care in conjunction with their nursing home. Currently, there exists adequate day care in Lee County at little or no expense to the patient, and there was no persuasive proof of a need for additional day care services. Economies derived from joint health care resources HCR and Hillhaven each proposed 120-bed facilities which would provide for a more efficient and economical operation than a 60-bed facility. The 60-bed facilities proposed by Forum and Health Quest are, however, part of a larger complex which likewise lends itself to an efficient and economical operation. HCR, Hillhaven, Forum and Health Quest are major operators of nursing home facilities, and are thereby able to negotiate and obtain bulk prices for food, medical and nursing supplies. These savings are ultimately passed on to the residents. Additionally, by drawing upon a broad spectrum of expertise existent within their corporate networks, these applicants are best able to maintain and improve the services they offer. The criteria on balance In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. As between the competing applicants, consideration of those criteria demonstrates that Hillhaven is the superior applicant whether it is evaluated on its application as initially reviewed by the Department or as updated at hearing. Among other things, the Hillhaven facility is spacious with large and well appointed patient rooms, its project costs are most reasonable (whether type 5 or type 4 construction), its programmatic proposal and staffing levels are most reasonable in light of existing demand, its provision for Medicaid services is the highest, and its patient charges are the lowest.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered granting Hillhaven's application for a certificate of need to construct a new 20-bed community nursing home in Lee County, and denying the applications of HCR, Forum, Health Quest and Careage. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of November, 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 22nd day of November, 1987.
Findings Of Fact The Parties Manor-Sarasota Manor Health Care Corporation operates 140 nursing centers throughout the country with nine nursing homes and three adult congregate living facilities (ACLF) in Florida. Seven of the nine Florida nursing homes are rated superior and two are standard. Manor-Sarasota is a wholly-owned subsidiary of Manor Health Care Corporation, and currently owns and operates a 120 bed nursing home, with a 120 bed ACLF, at 5511 Swift Road, Sarasota, Florida. The facility opened in December, 1983 and currently has a standard license, although for a period in 1986 its license was conditional. Manor-Sarasota is currently licensed as a skilled nursing home providing trach care, nasogastric feedings, wound care, physical, speech and occupational therapy, as well as Clinatron beds for patients with severe decubitus ulcers. On or about January 15, 1987, Manor-Sarasota filed CON application number 5050 for the addition of sixty community nursing home beds at its facility. The proposed additional beds will include a separate 30-bed specialized unit for elderly persons suffering from Alzheimer's Disease and related disorders. Manor Health Care Corporation currently operates 13 to 15 Alzheimer's units within their existing centers. Between 30 percent - 50 percent of Manor-Sarasota's current patients are diagnosed as having Alzheimer's or related disorders. There are no specialized facilities for Alzheimer's patients in Sarasota at the current time. The current facility is a two-story nursing home, and the additional beds would be configured in a two-story addition of thirty-five beds on the first floor and twenty-five beds on the second floor. The thirty-bed Alzheimer's unit would be located on the first floor. A separate dining room for Alzheimer's patients will also be provided. An additional nurse's station would be added to provide 4 nurse's stations for 180 beds. Total project costs are reasonably projected at $1.85 million, with construction costs of $1.26 million, equipment costs of approximately $170,000, professional services of approximately $137,000 and related costs of approximately $253,000. The proposal would add 16,683 gross square feet to the existing 49,454 gross square feet. The total project cost per additional bed would be $30,872, while the construction cost per square foot would be $55.00. The gross square footage per bed would be 278 feet. Manor-Sarasota projects a 40 percent Medicaid and 60 percent private pay utilization for the 60 bed addition, although its Medicaid utilization at the existing facility has only been between 15 percent and 24 percent. Since there is an upward trend in Medicaid utilization, Manor-Sarasota would accept a 40 percent Medicaid condition on its CON, if approved. Medicare patients will continue to be served within the existing facility. The project will be funded through 25 percent equity and 75 percent financing. Manor Health Care Corporation will finance the project internally through the sale of assets, and the sale of senior subordinated notes and convertible subordinated debentures, and this financing proposal is reasonable and realistic. In Manor-Sarasota's original application, six 3-bed wards were proposed. As a result of criticism of 3-bed wards in the Department's State Agency Action Report (SAAR) concerning this application as well as other facilities, the applicant modified its proposed design to eliminate all 3-bed wards and to include 24 semiprivate and 12 private rooms. The square footage of the addition was also increased by 21 percent from 13,750 to 16,683 square feet. This modification was presented at hearing and was filed subsequent to the application being deemed complete, and the SAAR being prepared. Competent substantial evidence in support of the original application was not offered, but rather evidence was presented in support of the substantially modified proposal. The applicant's existing 120-bed nursing home has experienced over 90 percent occupancy for the months of November, 1987 to the date of hearing, and also experienced an average occupancy of approximately 86 percent for 1986 and the first ten months of 1987. During the first year of operation, 65 percent occupancy is projected for the 60 new beds which are now being sought, and 95 percent occupancy is projected for the second year of operation. Sarasota Healthcare Sarasota Healthcare, Ltd., is a Georgia limited partnership whose general partners are Stiles A. Kellett, Jr. and Samuel B. Kellett. Sarasota Healthcare proposes to enter into a management agreement with Convalescent Services, Inc., (CSI) for the operation and administration of their proposed facility. The Kelletts, as 100 percent owners, comprise the Board of Directors of CSI and also serve as its Chairman and President. CSI operates 21 nursing homes in seven states, and 85 percent of its beds have superior licenses. There are 6 CSI operated nursing homes in Florida, one of which, Pinebrook Place, is located in Sarasota County in the City of Venice. Pinebrook Place is a 120 bed nursing home and has a superior license. Sarasota Healthcare does not own or operate any other nursing homes. A new 120 bed freestanding nursing home is proposed by Sarasota Healthcare in CON application 5025, which was filed with the Department in January, 1987. The project would be located in Sarasota County at a specific site which has not yet been identified. Sarasota Healthcare projects a utilization of 40 percent Medicaid, 5 percent Medicare and 55 percent private pay at its proposed facility, and would accept a 40 percent Medicaid condition of this CON, if approved. The proposed facility would offer skilled, intermediate, respite and hospice care; specialized services for Alzheimer's patients; physical, occupational, speech and rehabilitative therapy; counseling; and social services. Alzheimer's patients will not be located in a separate unit but will be intermingled with other patients while receiving specialized services and protections for their disease. Sarasota Healthcare proposes a 120 bed nursing home comprised of 12 private and 54 semiprivate rooms, 37,7000 gross square feet and a total project cost of $3.9 million The proposed size and cost of this facility are reasonable. The cost per bed would be $32,500 and the construction cost per square foot would be $58.00. Total project costs are reasonable and consist of approximately $2.45 million in construction costs, $385,000 in equipment costs, $145,000 for professional services, land acquisition of $600,000 for 3 to 5 acres, and $324,000 in related costs. The gross square footage per bed would be 314 feet. The project will be funded with 25 percent equity funding from the general partners, Stiles and Samuel Kellett, and 75 percent from a commercial bank, assuming a 9.5 percent interest rate with 1 percent discount point. The proposal is reasonable, but is dependent upon the general partners' ability to personally fund 25 percent of the costs of the project through an equity contribution, and on their ability to obtain commercial financing for the remaining project costs. Financial statements of the Kelletts provided in the record of this proceeding are unaudited, and were not prepared in accordance with generally accepted accounting principles. The Kelletts have 15 CON applications currently pending, and 4 have already been approved. They have a 6 to 1 debt to equity ratio. Health Quest On or about January 15, 1987, Health Quest corporation submitted an application for CON number 5046 on behalf of Regents Park of Lake Pointe Woods for the addition of 58 new beds to its existing 53 sheltered bed nursing home at a projected cost of approximately $1.29 million. The existing sheltered nursing home facility is known as Regents Park of Sarasota which is part of the Lake Point Woods Retirement Center containing a 110 bed ACLF and 212 retirement apartment units. The sheltered nursing home opened in November, 1986, and has achieved 90 percent occupancy since October, 1987. It is licensed under Chapter 651, Florida Statutes, as a continuing care facility. Health Quest owns and operates nine nursing centers in three states, and has received CON approval for 12 additional facilities in three states, including four in Florida. One of these Florida CONs is for 180 new community nursing home beds in Sarasota County. Health Quest's existing Regents Park of Sarasota nursing home is located at 7979 South Tamiami Trail, Sarasota, Florida. Although it is a sheltered nursing home, only one or two beds are generally occupied by Lake Point Woods residents at any one time. During 1987, only 26 admissions to Regents Park came from Lake Pointe Woods, and most of these admissions were for episodic illnesses of less than 30 days rather than for longer term care. Thus, the vast majority of admissions at Regents Park have been from the community, including admissions directly from home, hospitals and other nursing homes, rather than from the retirement center, Lake Pointe Woods, of which Regents Park is a part. However, since existing beds at Regents Park are sheltered, community patients will not be able to be admitted there beyond November, 1991, the expiration of five years from its opening. During its year and a half of operation, Regents Park has not shown a profit, despite original projections of profitability after only one year. In response to the Department's omissions letter dated February 19, 1987, Health Quest notified the Department, by letter dated March 27, 1987, of its amendment to CON application 5046. Rather than pursuing its request for 58 new community nursing home beds, Health Quest amended the application to seek conversion of the 53 sheltered beds to community beds and to add 7 new community nursing home beds. Since no new space is proposed for construction under the amendment, and since virtually all equipment is already in place, Health Quest projected no cost associated with the amended project. However, there would be some minor costs to equip seven new beds, as well as legal and consulting costs associated with this application and hearing. Currently, the Regents Park nursing home has approximately 31,000 total gross square feet, which would result in 520 gross square feet per bed if its application is approved. On April 10, 1987, the Department published its notice of completeness regarding Health Quest's amended CON application 5046 at Florida Administrative Weekly, Volume 13, No. 15, p. 1365. The Department reviewed and evaluated Health Quest's amended application, rather than the original application, in preparing its SAAR on the applications at issue in this case dated June 15, 1987. Despite this notice of completeness, the record shows that Health Quest's conversion proposal was incomplete since no balance sheet, profit and loss statement for precious fiscal years of operation, detailed statement of financial feasibility or pro forma were introduced. Although sheltered beds can be certified to accept Medicaid patients, Health Quest has not sought such certification for any of the 53 existing beds at Regents Park. Health Quest proposes to seek Medicaid certification for 5 beds, and to serve 8 percent Medicaid patients if CON 5046 is approved. Health Quest does not propose a separate unit for Alzheimer's patients, but would offer special outdoor activities for these patients as well as an Alzheimer's club for patients with this primary diagnosis. Health Quest specializes in caring for patients with hip fractures, and offers a wheelchair mobility and ambulation program, rehabilitation and occupational therapy, bowel and bladder rehabilitation, as well as physical and horticulture therapy. Regents Park has patients on intravenous therapy and who require hyperalimentation and total parenteral nutrition. LPN and nurse's aide students from Sarasota Vo/Tech School receive training at the Regents Park nursing home. HCR In 1986, HCR purchased, and currently owns and operates a 147 bed nursing home located at 3250 12th Street, Sarasota, Florida, known as Kensington Manor, which holds a standard license. HCR is a wholly owned subsidiary of Owens-Illinois, a publicly held corporation, and has built over 200 nursing homes in the last 25 years. At the present time, HCR operates approximately 125 facilities with approximately 16,000 beds in 19 States. HCR owns and operates a total of 9 nursing homes in Florida, and has about 10 nursing home projects under development which it intends to operate upon completion. On or about January 14, 1987, HCR filed CON application 5049 with the Department. This application seeks approval of 60 new community nursing home beds at Kensington Manor, at a currently projected cost of $1.82 million, which is a reasonable projection. The cost per new bed would be $30,030. HCR proposes to finance to project with a 25 percent equity contribution, and 75 percent internally financed by HCR through its parent company, Owens-Illinois, and this proposal is realistic and reasonable. Throughout 1986, Kensington Manor had an occupancy level of between 85 percent - 95 percent and is currently operating at 95 percent - 96 percent occupancy. HCR reasonably projects 95 percent occupancy for the 60 new beds in the second year of operation. HCR reasonably proposes a patient mix in the new addition of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay. Kensington Manor is currently 75 percent - 80 percent Medicaid, 1 percent Medicare, and the remainder is private pay, but its proposed patient mix for the new addition is realistic because there will be no three-bed wards in the addition, and sub- acute services will be provided, thereby increasing the Medicare percentage. The HCR proposed addition at Kensington Manor provides a distinct 29 bed wing for Alzheimer's patients where a special care program and special staffing can be made available. Additionally, a 12 person Alzheimer's adult day care center will be physically attached to the new addition where a less intense level of care outside the home can be made available to these patients. Respite care and sub-acute care will also be provided. The project will add a 60 bed, single story addition to Kensington Manor, with a special Alzheimer unit consisting of 1 private and 14 semiprivate rooms, an enclosed courtyard and porch. A second dining room will be added, as well as 2 central bathing areas, multipurpose and physical therapy rooms. The addition would total 18,000 gross square feet, or 267 gross square feet per bed in the new addition. Kensington Manor currently has approximately 30,000 gross square feet, with 1 private and 52 semiprivate rooms, and 14 three-bedroom wards. Therefore with the addition, Kensington Manor would have approximately 48,000 gross square feet which would be approximately 223 square feet per bed for the entire facility. Sisters of Bon Secours The Sisters of Bon Secours, a Catholic religious order, are currently responsible for the operation and ownership, through not-for-profit corporations, of a JCAH accredited 272 community bed nursing home in North Miami having a superior license, a nursing home in Port Charlotte, Charlotte County, and they also have a CON for an additional nursing home to be located in Collier County. On or about January 15, 1987, Sisters filed CON application 5039 for a new 120 community bed nursing home to be located in Sarasota County, and to be known as Villa Maria of Sarasota County. Sisters is the only applicant involved in this case which is not already providing services in Sarasota County. The proposal calls for the development of a teaching nursing home to be designated as a center for training and research in the study of gerontology and long term care. Affiliations with schools and universities will be developed to allow health care administrators, social workers, medical and nursing students, and practitioners interested in developing a specialization to fulfill their clinical studies and requirements. There will be an emphasis on restorative and rehabilitative care, with 20 percent of the beds being designated for sub-acute care patients who could return home after 30-45 days of therapy and transitional care. Sisters will develop a continuum of care by networking in the community. It is the only applicant that proposes to provide a site for education and research in Sarasota County. The proposed facility is intended to serve the needs of members of the Venice Diocese who reside in Sarasota County, where there is currently no Catholic nursing home. The Venice Diocese is now served by the Sisters' nursing home in Charlotte County, and will also be served by the facility to be located in Collier County, for which a CON has already been issued. However, treatment at these nursing homes, including the proposed Villa Maria of Sarasota County, is not limited to Catholics; the Sisters accept, treat and care for persons in need from all religions backgrounds and denominational affiliations. Total project costs are estimated at $6.64 million, including $3.86 million for construction, approximately $592,000 for equipment, $762,000 to acquire a seven acre site, $237,000 for professional services, $888,000 for financing costs and approximately $300,000 in other related costs. The project would encompass almost 60,000 gross square feet, and would cost approximately $55,300 per bed and $64.50 per square foot. Almost 500 gross square feet would be available per bed, which represents the most square footage per bed of any application under consideration. The proposed facility would have 8 private and 56 semiprivate rooms, with in-room tubs and showers, 3 patient lounges, and a 100 seat dining room. Due to the large size of the proposal, some patient rooms exceed 120 feet from nurse's stations. However, this licensure requirement can easily be met with minor design modifications during the licensure process. Sisters project a 33.3 percent Medicaid, 17.6 - 19.7 percent Medicare, 4 percent indigent and 43 percent - 45 percent private pay utilization for the 120 bed nursing home in its first two years of operation. While Medicaid utilization in Dade County during 1987 rose to 68 percent as a county-wide average, Sisters' Dade County nursing home experienced a drop in Medicaid to 14.6 percent. The high Medicare utilization level which has been projected is consistent with, and based on, the experience of the Sisters at their Dade County nursing home which currently has 21 percent Medicare utilization. However, due to the greater number of hospital referral sources, as well as the larger population and fewer competing nursing homes in Dade County compared with Sarasota County, Medicare utilization projections may be overstated, and actually fall between the 3-4 percent historical utilization in the Sarasota area and Sisters' projection. It will be somewhat above 3-4 percent due to the fact that this will be a teaching nursing home which will attract more Medicare patients. The project will be funded with an equity contribution of 10.6 percent ($635,455) and the remaining 89.4 percent ($6 million) will be funded through the issuance of tax exempt bonds. This financing proposal is realistic and reasonable. The proposed nursing home is intended to offer services to AIDS patients, adult day care, and a meals-on-wheels program. However, it was not established at hearing that such patients would definitely be served, or that space would be available at this facility for these services until the Sisters can determine the actual level of need for these services in Sarasota County, if this CON is approved. Department of HRS On or before January 15, 1987, the Department received the CON applications at issue in this case for additional community nursing home beds in Sarasota County. As it relates to this case, the Department issued its SAAR on June 15, 1987, in which the application of HCR (CON 5049) for a 60 community nursing home bed addition to Kensington Manor was approved, and all other applications in this case were denied. In addition to the HCR application, the Department also supported at hearing the applications of Manor Care (CON 5050) for a 60 bed addition to Manor-Sarasota and Sisters of Bon Secours (CON 5039) for a new 120 bed community bed nursing home to be known as Villa Maria of Sarasota County. The Department opposed the issuance of a CON to the remaining applicants. It is the position of the Department that changes or updates to CON applications made after an application has been deemed complete and reviewed in a SAAR, cannot be considered at hearing if such changes or updates are the result of matters or events within the control of the applicant, and which therefore could have been foreseen and considered at the time the application or responses to omissions were filed. However, matters involving payor mix, salaries and charges could result from changes in demographics and economic factors outside of the applicants' control. In such instances, updates or changes to an application based upon current demographics or economics can, and should be, considered at hearing. The updated pro forma submitted by Sarasota Healthcare at hearing resulted from the applicant's desire to reflect current salaries in the Sarasota County labor market, which have increased dramatically since the original application was submitted. As a result of updating salary expense projections, Medicaid and Medicare rates also had to be updated. Associated projections throughout the pro forma which are dependent upon these reimbursement rates, as well as salary expense projections, also had to be updated. The updated pro forma presented by Sarasota Healthcare results from a factor outside of the control of the applicant, inflation, which could not have been foreseen or predicated with certainty in January, 1987. To ignore actual, current inflation data in Sarasota County is to ignore reality. This update is permissible and has been considered. Manor-Sarasota's application presented at hearing includes changes in its proposed payor mix, charges and salaries, as well as its pro forma. These updates are permissible since they result from changes in demographics and inflation outside of the applicant's control which could not have been foreseen in January 1987. However, a 21 percent increase in square footage and elimination of three-bed wards, with associated changes in proposed staffing, capital costs and equipment, while certainly having a positive effect on quality of care, is nevertheless a matter totally within the control of the applicant. The desireability of these changes could have been foreseen at the time the application was filed, and therefore these substantial changes in design represent impermissible amendments to Manor-Sarasota's application. Stipulations The appropriate planning area for these applications is Sarasota County, and the appropriate planning horizon is January, 1990. Sarasota County is in subdistrict 6 of the Department's service district 8. The parties have stipulated that there is a need for 240 additional community nursing home beds in the January, 1990, planning horizon in Sarasota County, in accordance with the bed need formula in Rule 10-5.011(1)(k), Florida Administrative Code. The parties have agreed that Section 381.705(1)(d) and (j), Florida Statutes (1987), have been met, or are not applicable to this case. This statutory criteria deals with the adequacy and availability of alternative health care facilities and the special needs and circumstances of health maintenance organizations. All remaining criteria found at Section 381.705(1) and (2), Florida Statutes (1987), are at issue in this case. Further, the parties stipulate that 1987 amendments to Chapter 381, Florida Statutes, relating to the content of applications, are inapplicable in this proceeding since these applications were filed prior to the effective date of said law. Therefore, application content provisions of Section 381.494(4), Florida Statutes, govern. State and Local Health Plans The 1985 Florida State Health Plan, Volume II, Chapter 8, identifies areas of concern relating to the provision of long-term care services in Florida, which traditionally has been synonymous with nursing home care. These concerns include resource supply, cost containment and resource access. The State Health Plan seeks a reduction in the fragmentation of services and encourages development of a continuum of care. These proposals are consistent with, or do not conflict with, the State Health Plan. The 1984 District Eight Local Health Plan for Nursing Home Care is applicable to these applications for community nursing home beds in Sarasota County. The Local Health Plan contains the following pertinent criteria and standards for review of these applications: Community nursing home services should be available to the residents of each county within District Eight. At a minimum community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy h. occupational therapy laboratory i. physical therapy x-ray j. speech therapy dental care k. mental health visual care counseling hearing care l. social services diet therapy m. medical services New and existing community nursing home bed developments should dedicate 33 1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. New community nursing home facilities may be considered for approval when existing facilities servicing comparable service areas cannot reasonably, economically, or geographically provide adequate service to these service areas. No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. The proposed project should have a formal discharge planning program as well as some type of patient follow-up services with discharge/transfer made available seven days a week. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. The specifically stated goal of the Local Health Plan is to develop new community nursing home facilities in which at least 33 1/3 percent of the total beds should be Medicaid. The impact of this long range recommended action is stated as follows: The provision of Medicaid care beds in existing nursing homes would assure continuity of care for nursing home patients, and should improve placement in appropriate levels of care by hospitals, physicians, social services, health departments, and other referral groups. The provision for Medicaid beds would reduce cost to patients, utilizing skilled care beds, who could adequately be served by Medicaid. With the exception of Health Quest's application, all other applicants meet the above stated standards and criteria contained in the Local Health Plan. Health Quest's application does not conform to the Local Health Plan. All applicants in this proceeding have indicated that they will provide therapies and services recommended in the Local Health Plan. All applicants, except Health Quest, indicate a commitment to dedicate at least 33 1/3 percent of their beds for Medicaid patients. The new nursing home facilities proposed by Sisters and Sarasota Healthcare would each be for 120 beds, consistent with the Local Health Plan standard that new facilities have at least 60 beds. Health Quest has proposed a 60 bed community nursing home through conversion of 53 sheltered nursing home beds and the addition of 7 new community beds. As existing providers, Manor-Sarasota, HCR band Health Quest have patient transfer agreements with one or more hospitals, as well as formal discharge planning programs and patient follow-up services, as recommended in the Local Health Plan. The applications for new facilities of Sarasota Healthcare and Sisters indicate they will also comply with these priorities if approval is granted and their facilities are opened. By virtue of its existing service and transfer agreements through the CSI facility in Sarasota County, Pinebrook Place, Sarasota Healthcare will be able to obtain these necessary agreements. Based upon Sisters' experience in Dade County at Villa Maria, as well as the fact that this will be a teaching nursing home, Sisters will also be able to obtain such agreements. Data has been provided by the existing nursing homes (Manor-Sarasota, HCR and Health Quest) which documents the history of their participation in the Medicaid and Medicare programs. The other applicants (Sarasota Healthcare and Sisters) have provided Medicaid/Medicare data for other existing facilities with which they are affiliated or upon which their application at issue in this case is based. Based upon this data, Pinebrook Place in Sarasota County, which is owned and operated by Sarasota Healthcare's general partners has not met the Medicaid condition on its CON, and the existing Manor-Sarasota facility has had only 24.8 percent Medicaid utilization in fiscal year 1988: Availability, Accessibility and Adequacy of Like and Existing Services HCR and Manor-Sarasota would increase the availability and adequacy of existing services they are now offering with the 60 bed additions each is seeking. The separate 30-bed specialized unit proposed by Manor-Sarasota and the 29-bed wing proposed by HCR for Alzheimer's patients will clearly increase the availability of specialized services for persons with Alzheimer's and related disorders, as well as their families. HCR will also dedicate 10 beds for sub-acute care, while Manor-Sarasota will offer community outreach, as well as respite care. Sarasota Healthcare, Sisters and Health Quest do not propose special units for Alzheimer's patients, but would offer special programs and services for them and their families. It was established that there is a need for additional services and programs to serve nursing home patients with Alzheimer's and related disorders in Sarasota County, as well as a special need for sub-acute, restorative, hospice, respite, and adult day care in the County. It was not established that there is a need for additional Medicare beds in Sarasota County. Sisters have indicated an interest in offering services to patients with AIDS and patients in need of adult day care, for which there is also a need in Sarasota County. In addition, their application will enhance the availability of sub-acute nursing home services, restorative and rehabilitative care, and respite care in Sarasota County. While it would serve patients of all denominations and religious affiliations, it would be the only Catholic nursing home in Sarasota County. The teaching component of the Sisters' application would provide access for students and other health professionals seeking to further their professional training. The Sarasota Healthcare proposal also places special emphasis on increasing the availability of sub-acute services in Sarasota County. Quality of Care The Sisters will seek JCAH accreditation of the proposed facility if their CON is approved, just as their nursing home in North Miami is currently accredited. The proposed affiliation with a college of medicine and nursing school, and the intent to operate this facility as a teaching nursing home will insure quality of care at this nursing home by utilizing state-of-the-art treatment and therapy programs. Florida nursing homes currently owned or operated by each of the applicants or their affiliated corporations have standard or superior licenses which means they meet or exceed State Standards. Licensure status of facilities owned or operated in other states by the applicants, or their affiliated companies, has not been considered since it was not established that licensure standards in other states are similar, or even comparable, to those in Florida. Each applicant has significant experience rendering quality nursing home care, and each has proposed a reasonable and comprehensive quality assurance program which will insure that quality nursing home services will be provided to their residents. The architectural design proposed by each applicant is reasonable and sufficient to allow quality care to be provided at each facility. All instances where an applicant's design fails to meet final construction standards are relatively minor, and can easily be met during the licensure process with slight modifications and adaptations in design. Staffing proposals by each, while different, will all insure that adequate medical, nursing, counseling and therapeutic staff will be trained and available either on-staff or through contract, to implement quality care programs at each facility. Manor-Sarasota's past reliance on temporary nursing services is decreasing and this will have a positive effect on quality of care. HCR has just completed extensive repairs and renovations costing $350,000 at Kensington Manor which will improve the atmosphere, living conditions and overall quality of care at the facility. Sisters' educational affiliations will aid in recruiting and retaining well-trained staff for its facility. Each facility will be equipped to provide quality care. There was extensive testimony about the advantages and disadvantages of central bathing facilities compared with private baths or showers in patient rooms. Sisters and Health Quest would provide private bathing facilities in patient rooms, while the others would have central facilities. Obviously, individual bathing facilities in patient rooms offer more privacy than central facilities, but privacy can also be achieved in a central bathing area by taking only a single, or limited number of patients to a partitioned central facility at any one time. The central facility is less costly than bathing facilities in each room, and also requires less staff time and involvement to assist with, and insure safety in, the patients' bathing. It has not been shown that one type of bathing facility provided in a nursing home, to the exclusion of all others, affects the quality of care in a positive or adverse manner. Quality care can be, and is, provided under both designs. The elimination of 3-bed wards from Manor-Sarasota's application would have a positive impact on quality of care, and be consistent with the Department's position of discouraging the creation of additional 3-bed wards in nursing homes. However, such elimination was proposed after this application was deemed complete by the Department. Patients suffering from Alzheimer's and related disorders can benefit from programs and treatment conducted in separate units, or while comingled with other patients, particularly in the early and middle phases of the disease. In the later phase of the disease it may be less disruptive to other patients if Alzheimer patients reside in a separate wing or unit of the nursing home. Quality care can be rendered through separate or integrated programming, and all applicants in this case that propose to offer specialized services to these patients have proposed programs and facility designs which will provide quality care to persons with Alzheimer's and related disorders. While there are differences in facility design, such as the two-story construction of Manor-Sarasota compared with the single level construction of all other applicants, and the central heating and cooling proposed by Sisters compared with individual wall units to be used by Sarasota Healthcare, the proposed designs of all applicants allow for the rendering of quality care to patients. Access for Chronically Underserved The Health Quest proposal is inconsistent with the Local Health Plan policy that 33 1/3 percent of all nursing home beds should be dedicated for Medicaid patients since it proposes that only 5 of its 60 beds (8 percent) will be certified for Medicaid patients if CON 5046 is approved. Although Medicaid utilization at Manor-Sarasota has not been consistent with the Local Health Plan, it is projected that if CON 5050 is approved Medicaid utilization will rise to 40 percent. Sarasota Healthcare, HCR and Sisters propose to meet or exceed this Local Health Plan policy. HCR has experienced a 75-80 percent Medicaid utilization at Kensington Manor, and proposes a 45 percent Medicaid level in the new addition if CON 5049 is approved. Financial Feasibility The proposals of Manor-Sarasota, HCR and Sisters are financially feasible. Health Quest did not file a pro forma and has not shown a profit in its year and a half of operation at Regents Park. Based upon its actual per patient operating expense at Pinebrook Place, Sarasota Healthcare has underestimated expenses in its second year of operation by approximately $8 per patient day. Its projection of a profit in the second year of operation is questionable due to this underestimation. Manor-Sarasota, HCR and Sisters have established their ability to finance, through equity and debt, the construction, equipment, supplies, and start-up costs associated with their proposals. Health Quest will have no construction costs, and only very minor costs to equip and supply seven new beds it is requesting. The entire financial structure of CSI and Sarasota Healthcare is dependent upon the financial strength of their general partners, the Kelletts, who currently have $76 million in long term debt and $12 million in equity. This is a relatively high debt to equity ratio of 6 to 1 which makes them susceptible to adverse impacts from any downturn in the economy, especially since they have 15 additional CON applications pending in Florida, totaling $60 million in construction costs. In contrast to the Kelletts' high debt to equity ratio, Sisters have $159 million in long term debt and $160 million in equity for a very secure 1 to 1 debt to equity ratio. Projections of revenue and expense, as well as assumptions concerning projected utilization, Medicaid and Medicare rates, private pay rates, and patient mix used by Manor-Sarasota, HCR and Sisters in their pro forma are reasonable, based upon that applicant's experience and the services proposed in their applications at issue. Adequacy of Staffing All proposals have adequate and reasonable staffing patterns, as well as staff training programs, to insure that quality care is provided. Proposed salaries are reasonable and will allow qualified staff to be hired, based upon the recruiting experience and salaries currently offered by Sarasota nursing homes. Adequate staff resources exist in the area. I. Most Effective and Less Costly Alternative Since it is generally not necessary to construct support areas for storage, laundry, kitchen and administration, adding additional beds to existing facilities is a less costly alternative to an entirely new facility. Health Quest, HCR and Manor-Sarasota are, therefore, less costly per bed than Sarasota Healthcare and Sisters' proposals to construct new 120 bed nursing homes. Specifically, there are only minor costs associated with Health Quest's proposal, while the cost per bed of the Manor-Sarasota and HCR proposals are $30,872 and $30,030, respectively, compared with $32,500 per bed for Sarasota Healthcare and $55,295 for Sisters. Health Quest's application is the least costly alternative since it involves no construction costs to add seven beds to the existing 53 sheltered beds which would be converted to community nursing home beds, although minor costs for equipping seven new beds would be incurred. Effect on Costs and Charges Sisters and Health Quest have proposed, or actually experienced, the highest costs and charges of all applicants. Health Quest has not shown any basis upon which it can be reasonably expected that room rates will decrease, as it asserts, if this CON is approved. Due to the large size of its proposed building, higher food costs and number of staff, Sisters projects the highest operating expense per patient day in the second year of operation. Sisters will provide almost 500 gross square feet per bed, while Manor-Sarasota, HCR, and Sarasota Healthcare will provide 278, 267 and 314 gross square feet per bed, respectively. Enhanced Competition Since the other applicants are already represented in the service area, the approval of Sisters' application would enhance competition by adding another provider to Sarasota County. This will provide more choices to nursing home residents, and should increase the quality of long term care in the community with the added emphasis this proposal will place on rehabilitative programming. Costs and Methods of Construction The costs and methods of construction proposed by the applicants are reasonable, as well as energy efficient.
Recommendation Based upon the foregoing, it is recommended that the Respondent enter a Final Order, as follows: Approving HCR's application for CON 5049; Approving Sisters' application for CON 5039; Denying the application of Manor-Sarasota, Sarasota Healthcare and Health Quest for CONs 5050, 5025 and 5046, respectively. DONE AND ENTERED this 9th day of August, 1988, in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of August, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3471, 87-3473, 87-3475, 87-3478 and 87-3491 Rulings on the Department's Proposed Findings of Fact Adopted in Findings of Fact 3, 12, 17, 19, 24, 30, 37. Adopted in Finding of Fact 37. 3-4. Adopted in Finding of Fact 43. 5. Adopted in Finding of Fact 42. 6-10. Rejected as irrelevant and unnecessary since the parties have stipulated to need. Adopted in Findings of Fact 37, 38. Adopted in Findings of Fact 26, 27, 55, 69, 70. Adopted in Findings of Fact 30, 56, 58, 60. Adopted in Findings of Fact 3, 55. Rejected as irrelevant since the parties have stipulated to need. Rejected in Findings of Fact 48, 57. Rulings on Manor-Sarasota's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Adopted in Findings of Fact 37, 38, 43. Adopted in Findings of Fact 15, 30, 32. Rejected in Finding of Fact 17 and Adopted in Finding of Fact 19. Adopted in Findings of Fact 3, 5, 24. Adopted in Finding of Fact 38. Adopted in Findings of Fact 13, 14 but Rejected in Findings of Fact 71, 73. Adopted in Findings of Fact 29, 31. Adopted in Finding of Fact 34. Adopted in part in Finding of Fact 35, but otherwise Rejected as unnecessary. Adopted in Finding or Fact 2. Rejected as unsupported and unnecessary. Adopted in Findings of Fact 29, 60, 61 but also Rejected in part in Finding of Fact 60. Adopted in Finding of Fact 31. Adopted and. Rejected in Finding of Fact 60, and otherwise Rejected as irrelevant and unsupported in the record. Adopted in Finding of Fact 29 but otherwise Rejected as unsupported argument on the evidence, without any citation to the record, rather than a proposed finding of fact. Rejected in Findings of Fact 63, 76. Adopted in Findings of Fact 32, 33, 82 but Rejected in part in Finding of Fact 33. Rejected as unsupported by the record. Adopted in Findings of Fact 33, 64 in part, but otherwise. Rejected in Finding of Fact 64 and as not supported by the record. Rejected as unnecessary and without citation to the record. Adopted and. Rejected in Findings of Fact 33, 63. Rejected as cumulative and unnecessary. Rejected in Findings of Fact 33, 63. Rejected in Findings of Fact 17. Adopted in Finding of Fact 17, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 17, 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 20, 71. Rejected as cumulative and unnecessary. 33-34. Rejected as irrelevant and unnecessary. 35-36. Adopted in Finding of Fact 81. Adopted in Finding of Fact 21. Rejected as speculative. Adopted in Finding of Fact 18 but otherwise Rejected as irrelevant and unnecessary. Rejected as unnecessary and irrelevant. 41-43. Rejected as not supported by the record and speculative. Adopted in Findings of Fact 19, 80. Adopted in Findings of Fact 48, 51, but Rejected in Finding of Fact 21. Rejected in Findings of Fact 63, 76 and otherwise as unnecessary and irrelevant. Adopted in Findings of Fact 24-26. Adopted in Finding of Fact 23. Adopted in Finding of Fact 79. Adopted in Finding of Fact 27. Adopted in Finding of Fact 1. Adopted in Findings of Fact 61, 63 and otherwise Rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 5, 81. Adopted in Findings of Fact 71, 75. 56-57. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. 58. Adopted in Findings of Fact 3, 55, 56. 59-61. Rejected as irrelevant, unnecessary and cumulative. Rejected in Finding of Fact 66. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 63, 76. Adopted in Findings of Fact 4, 6. Adopted in Finding of Fact l. Adopted in Finding of Fact 81 but otherwise Rejected as unnecessary. Rulings on HCR's Proposed Findings of Fact: 1-2. Adopted in Findings of Fact 42, 43. 3-4. Rejected as unnecessary and irrelevant. 5. Adopted in Finding of Fact 57. 6-7. Rejected as unnecessary. 8-9. Adopted in Finding of Fact 57. 10-15. Rejected in Finding of Fact 66 and otherwise as unnecessary and cumulative. Adopted in Finding of Fact 57. Adopted in Findings of Fact 27, 55. Rejected as unnecessary. Adopted in Finding of Fact 57. Adopted in Findings of Fact 23, 28, 63. Adopted in Finding of Fact 23. Adopted in Findings of Fact 25, 26, 28. Adopted in Findings of Fact 24, 27, 28. 24-25. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. 26-27. Adopted in Finding of Fact 27, but otherwise Rejected as unnecessary. 28-29. Adopted in Finding of Fact 66, but otherwise Rejected as unnecessary. 30. Adopted in Findings of Fact 46-49. 31-37. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. Rejected as unnecessary and irrelevant. Adopted in Finding of Fact 24. 40-42. Adopted in Findings of Fact 25, 26, 71, 75. Adopted in Finding of Fact 71. Rejected as unnecessary. 45-46. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 63, 81. Adopted in Finding of Fact 24. Adopted in Finding of Fact 28, but otherwise Rejected as cumulative and unnecessary. Adopted in Finding of Fact 79. 51-54. Adopted in part in Finding of Fact 24, but otherwise Rejected as unnecessary. 55. Adopted in Finding of Fact 37, but otherwise Rejected as unnecessary and cumulative. 56-57. Rejected as unnecessary. Adopted in part in Finding of Fact 17, but otherwise Rejected as unnecessary. Adopted in Finding of Fact 19. Adopted in part in Findings of Fact 18, 42. Adopted in Finding of Fact 18. 62-63. Adopted in Finding of Fact 20. Adopted in Findings of Fact 22, 55. Adopted in Findings of Fact 21, 49, 51. Adopted in Findings of Fact 32, 33. Adopted and. Rejected in Finding of Fact 33. Adopted in Finding of Fact 82. 69-70. Adopted in Finding of Fact 63. Adopted in Finding of Fact 56. Adopted and Rejected in part in Finding of Fact 34. Rulings on Sisters' Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 43. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 30. Adopted in Findings of Fact 12, 14, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 3. Adopted in Findings of Fact 24, 29. Adopted in Finding of Fact 19, but otherwise Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38. 11-12. Adopted in Finding of Fact 46. 13-15. Adopted in Findings of Fact 47-54. Rejected as unnecessary and not supported by the record. Adopted in Finding of Fact 30. 18-22. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. 23. Adopted in Finding of Fact 34. 24-26. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57, but Rejected in Finding of Fact 34. Adopted in part in Finding of Fact 30, but otherwise Rejected as argument unsupported by any citation to the record. 30-38. Adopted in part in Finding of Fact 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. Adopted in Finding of Fact 40. Rejected in Finding of Fact 40. 41-51. Adopted in Findings of fact 60, 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. 52-58. Adopted in Findings of Fact 29, 60, 61, but otherwise Rejected as unnecessary and irrelevant. 59. Adopted in Finding of Fact 11, but otherwise Rejected as irrelevant. 60-75. Rejected as unnecessary irrelevant, and cumulative. Rejected as unnecessary. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Findings of Fact 33, 82. Adopted in Findings of Fact 33, 82. Adopted in Finding of Fact 33, but Rejected in Finding of Fact 64. 82-83. Rejected as unnecessary. 84. Adopted in Finding of Fact 9. 85-86. Rejected as unnecessary. 87-88. Adopted in Findings of Fact 9, 41. 89. Adopted in Finding of Fact 4, but otherwise Rejected as not supported by the record. 90-91. Rejected in Finding of Fact 63 and otherwise not supported by the record. 92-105. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary, cumulative and irrelevant. Rejected as unsupported in the record and otherwise unnecessary. Adopted in Finding of Fact 29. Adopted in Finding of Fact 11. Rejected as irrelevant, unnecessary and speculative. Rejected as unnecessary. 111-112. Adopted in Finding of Fact 30. 113. Adopted in Finding of Fact 63. 114-115. Rejected as unnecessary and cumulative. 116-120. Adopted in Findings of Fact 60, 63, but otherwise Rejected as unnecessary and cumulative. 121. Adopted in Finding of Fact 30. 122-123. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative. 124. Adopted in Findings of Fact 31, 34, but otherwise Rejected as unsupported in the record. 125-126. Adopted in Finding of Fact 35. 127-129. Rejected as unnecessary and irrelevant since no applicant has locked in interest rates, and therefore these rates will vary and are speculative. Rejected as speculative and irrelevant. Rejected as irrelevant. 132-135. Adopted in Finding of Fact 73. 136. Adopted in Finding of Fact 74. 137-139. Adopted in Finding of Fact 71, but otherwise Rejected as unnecessary and cumulative. 140. Rejected as unnecessary and irrelevant. 141-145. Adopted in Finding of Fact 71. 146-147. Adopted in Finding of Fact 83. Adopted in part in Finding of Fact 71, 84, but Rejected in Findings of Fact 81, 82. Adopted in Finding of Fact 63. Rejected in Finding of Fact 67. Rejected as irrelevant and unnecessary. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Rejected as cumulative and unsupported by the record. 155-158. Adopted in Finding of Fact 54. 159. Rejected as irrelevant and unnecessary. Rulings on Sarasota Healthcare's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38, 43. 4-6. Adopted in Finding of Fact 11, but otherwise Rejected as unnecessary and irrelevant. 7-13. Adopted in Findings of Fact 12-16, but otherwise Rejected as unnecessary and irrelevant. 14-17. Adopted in Finding of Fact 46. Adopted in Finding of Fact 47. Adopted in Finding of Fact 49. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in Findings of Fact 11, 61. 22-23. Rejected as cumulative and unnecessary. 24-41. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in part in Findings of Fact 14, 57, but otherwise. Rejected in Finding of Fact 83 and as unsupported in the record. Rejected in Finding of Fact 54, and otherwise as irrelevant. Adopted in Findings of Fact 13, 51, but Rejected in Finding of Fact 54. Adopted in Finding of Fact 13. Adopted in Findings of Fact 14, 57. 47-49. Adopted in Findings of Fact 56, 66. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. 53-58. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. Adopted in Finding of Fact 14. Adopted in Finding of Fact 53. Adopted in Finding of Fact 81. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. 65-78. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 79-85. Adopted in Findings of Fact 76, 77, but otherwise Rejected as unnecessary and irrelevant. 86-97. Adopted in Findings of Fact 15, 63, 84, but otherwise Rejected as cumulative and unnecessary. Adopted and. Rejected in Finding of Fact 64. Rejected as unsupported in the record. Rejected as cumulative and unnecessary. 101-103. Adopted in Findings of Fact 15, 84. 104. Rejected as unnecessary and cumulative. 105-109. Adopted in Findings of Fact 63, 84, but otherwise Rejected as irrelevant and unnecessary. Rejected as unsupported in the record. Adopted in part in Finding of Fact 16, but Rejected in Finding of Fact 73. 112-116. Adopted and Rejected in part in Findings of Fact 71, 73, 75, but otherwise. Rejected as irrelevant and unnecessary. 117. Adopted in Finding of Fact 16. 118-119. Adopted in Finding of Fact 75. 120-121. Rejected in Finding of Fact 71. 122-126. Adopted in Finding of Fact 40. 127-128. Adopted in Findings of Fact 30, 32. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 31. Adopted in Finding of Fact 33. Adopted and Rejected in Finding of Fact 67. 133-135. Adopted and Rejected in part in Findings of Fact 33, 63, and otherwise. Rejected as irrelevant since all licensure requirements can easily be met with minor modifications. Adopted in Finding of Fact 36. Rejected as unsupported in the record. Adopted in Findings of Fact 15, 30, 32, 33. Adopted in Finding of Fact 31, but otherwise Rejected as simply a summation of testimony. 140-142. Adopted in Finding of Fact 36. Rejected as irrelevant. Adopted in Finding of Fact 34, but Rejected in Finding of Fact 51. 145-146. Adopted in Finding of Fact 34, but otherwise Rejected as unnecessary. 147-148. Adopted in Finding of Fact 30, but Rejected in Finding of Fact 57 and as unsupported in the record. 149-150. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57. Rejected as unnecessary and cumulative 153-156. Rejected in Findings of Fact 63, 76, 77 and otherwise not supported in the record. Rejected as unnecessary. Adopted in Finding of Fact 36. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Finding of Fact s. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 71, but otherwise Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in Finding of Fact 18, but otherwise Rejected as irrelevant and unsupported in the record. Adopted in Findings of Fact 17, 18, but otherwise Rejected as cumulative and as argument on the evidence. Adopted in Findings of Fact 48, 49, 51. Rulings on Health Quest's Proposed Findings of Fact: Adopted in Finding of Fact 24. Adopted in Finding of Fact 3. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 12. Adopted in Finding of Fact 30. 6-10. Adopted in Finding of Fact 37. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 42, 43. Adopted in Finding of Fact 20. Adopted in Findings of Fact 19, 20, 39. Adopted in Finding of Fact 18. Adopted in Findings of Fact 61, 63. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 17. Adopted in Finding of Fact 18. Rejected as argument on the evidence rather than a proposed finding of fact. Rejected as speculative and unsupported in the record. Adopted in Findings of Fact 19, 80. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 80. Rejected in Finding of Fact 71. Rejected as irrelevant. 27-34. Adopted in Findings of Fact 22, 63, 76, but otherwise Rejected as unnecessary and cumulative. 35-39. Adopted in Finding of Fact 22. 40. Adopted in Finding of Fact 66. 41-58. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant. Rejected as simply a statement on the evidence rather than a proposed finding of fact and otherwise irrelevant. Adopted in Finding of Fact 17, but otherwise Rejected as unnecessary. 62-63. Adopted in Finding of Fact 18. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 80. Adopted in Finding of Fact 63. Adopted in Findings of Fact 19, 80. 68-70. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 71. Adopted in Finding of Fact 21. 72-74. Rejected in Findings of Fact 48, 49, 51 and otherwise as irrelevant. 75-76. Rejected as unnecessary, although it is agreed that these matters are irrelevant and speculative. Adopted in Findings of Fact 63, 80. Adopted in Finding of Fact 9. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 9. 81-82. Adopted in Finding of Fact 39. 83. Rejected in Finding of Fact 39. 84-88. Adopted in Finding of Fact 41. Adopted in Finding of Fact 9. Rejected as argument on the evidence and as legal argument rather than a proposed finding of fact. Rejected as unnecessary. 92-94. Adopted in Finding of Fact 41. 95. Adopted and. Rejected in part in Finding of Fact 41. 96-101. Rejected in Findings of Fact 63, 76 and otherwise as irrelevant. 102. Rejected as cumulative. 103-104. Adopted in Finding of Fact 1. Rejected in Findings of Fact 61, 63. Rejected as simply a summation of testimony. 107-109. Rejected in Finding of Fact 63. 110-111. Rejected as unsupported in the record and irrelevant. 112-114. Adopted in Finding of Fact 9, but otherwise Rejected as unsupported by the record. 115. Adopted in Finding of Fact 41. 116-117. Rejected as unnecessary. 118-120. Rejected in Finding of Fact 66 and otherwise simply as a summation of testimony. 121-122. Rejected as irrelevant and as argument on the evidence. Adopted in Finding of Fact 38. Rejected as a conclusion of law rather than a proposed finding of fact. 125-127. Rejected as argument on the evidence and as a summation of testimony. 128. Rejected as cumulative. 129-131. Rejected as simply a summation of testimony rather than a proposed finding of fact. 132-134. Rejected in Findings of Fact 61, 63 and otherwise as irrelevant. 135. Rejected in Findings of Fact 43, 48, 57 and otherwise as irrelevant. 136-142. Rejected as irrelevant. The issue in this case is not the accuracy of the SAAR, but rather whether applicants have sustained their burden of establishing entitlement to a CON based on the record established at hearing. COPIES FURNISHED: Richard A. Patterson, Esquire Department of HRS 2727 Mahan Drive, 3rd Floor Tallahassee, Florida 32308 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House - Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 David Watkins, Esquire Harry F. X. Purnell, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Byron B. Matthews, Jr., Esquire Vicki Gordon Kaufman, Esquire 700 Brickell Avenue Miami, Florida 33131-2802 Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Petitioner, Florida Convalescent Centers, Inc. (FCC), filed an application with respondent, Department of Health and Rehabilitative Services (HRS), on October 14, 1983, seeking a certificate of need authorizing the construction of a 120-bed skilled and intermediate care nursing home facility in Manatee County, Florida. /1 The proposed project carries an estimated cost of $3,530,000. After reviewing the application, HRS issued its proposed agency action on February 21, 1984, in the form of a state agency action report in which it advised petitioner that it intended to deny the application. The report stated in part that "(e)xisting and approved bed capacity in Manatee County... is sufficient to satisfy projected need for 1986," that 240 nursing home beds had just been approved for the county, and when added to the existing nursing home supply, would "maintain a reasonable subdistrict occupancy level through 1986 and satisfy the need for additional beds in Manatee County." The service area in which FCC proposes to construct its new facility is the Manatee County subdistrict of HRS District 6. That district contains five counties, including Manatee. In order to determine need, HRS has adopted Rule 10-5.11(21), Florida Administrative Code, which contains a formula (or methodology) for determining need at both the district and subdistrict level. Under that formula, HRS is required to utilize the "most recent 6 month nursing home utilization in the subdistrict." In this regard, HRS prepares on an on- going basis an internal document entitled "Quarterly Report" which contains the latest available data over a six-month period. In this proceeding, HRS used a report containing data for the period October, 1983, through March, 1984. This was the most current and complete available data at the time of hearing. According to the methodology in Rule 10-5.11(21), there is a gross need in District 6 for 7,336 nursing home beds. At the same time, there are presently 4,910 licensed and 960 approved beds in the District. Therefore, this results in a district-wide shortage of 1,466 nursing home beds through the year 1987, which is the three year planning horizon used by HRS in determining need. Evidenced introduced by HRS indicated there are presently 765 licensed and 240 approved beds in Manatee County. Under the rule, the methodology reflects a need for 1,518 beds, or a subdistrict deficiency of 513 beds through the year 1987. But even if beds are mathematically required under the formula at the subdistrict level, the rule requires that the current utilization of existing facilities be at least 85 percent, and the prospective utilization rate exceed 80 percent. If they do not, no additional beds may be authorized. The current utilization rate in Manatee County is 91.7 percent which meets the 85 percent threshold. However, the prospective utilization rate for the existing and approved operating nursing homes within the county is 69.8 percent, or substantially less than the minimum threshold of 80 percent called for by the rule. If petitioner's proposed beds are added to the calculation, the prospective utilization rate drops to 62.9 percent, or far below the requisite minimum rate. Therefore, there is no need for additional beds in Manatee County. FCC points out that special circumstances are present which justify a deviation from the rule. These include the allocation under the rule of only 15 percent of the district beds to Manatee County even though 21 percent of the elderly population (over 65 years) resides within the county, and the fact that Manatee has the highest percentage of people over 75 years of age of any county within the district. FCC also contends that the county has more persons in poverty than the statewide average, and that it will dedicate some 50 percent of its beds to Medicaid patients if the application is approved. However, these factors are taken into account in the formula devised by HRS, and do not constitute special circumstances that would warrant a departure from the need calculation encompassed in the rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Florida Convalescent Centers, Inc., for a certificate of need to construct a 120-bed skilled and intermediate care nursing home facility in Manatee County, Florida be DENIED. DONE and ORDERED this 31st day of October, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1984.
Findings Of Fact Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
The Issue The issue presented for determination herein is whether or not F.A.C. Health Care, Inc., d/b/a Spring Hill Health Facility (Petitioner) is entitled to a Certificate of Need to establish a 60-bed nursing home to serve Hernando County.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at hearing, including the pre-hearing stipulation, the following relevant facts are found. F.A.C. Health Care, Inc. is a wholly-owned subsidiary of First American Corporation. First American Corporation has owned, operated and developed approximately 75 long-term care and retirement facilities over the past 15 years. These operations are primarily located in the southeastern United States. At present, First American Corporation operates 20 facilities and has seven Certificates of Need in the developmental stages. (TR. 35, Fulmer) On January 14, 1984, Petitioner filed an application with the Respondent for a Certificate of Need to construct and operate a community nursing home in the City of Spring Hill in Hernando County, at a total cost of $3,180,000. (Petitioner's Exhibit 1) The letter of denial accompanying the state agency action report dated April 30, 1984, noted the basis for denial as follows: Existing and approved bed capacity in Citrus/Hernando Counties is sufficient to satisfy projected need for 1986. There are 60 nursing home beds that have been approved but have not been constructed at the present time, which, when added to the existing nursing home bed supply in Citrus/Hernando Counties, will serve to satisfy a portion of the projected need for skilled nursing home beds in the sub-district through 1986. The proposed 120 beds are in excess of the 37 beds needed to reduce the prospective base utilization rate to a reasonable level by 1986. (TR. 36, Fulmer; Petitioner's Exhibit 2) On September 26, 1984, Petitioner amended its original application to reflect a reduction from 120 to 60 nursing home beds. Documents reflecting the corresponding reduction in project costs from 53,180,000 to 51,780,000 were submitted with the amended proposal. (Petitioner's Exhibit 3) FINANCIAL FEASIBILITY OF THE PROPOSED SPRING HILL FACILITY The immediate and long-term financial feasibility of a project is one criteria considered during the Certificate of Need review process. Section 381.494(6)(c)9., Florida Statutes. The total cost of the project of 51,780,000 appears reasonable and in line with similar projects. Funds for full 100 per cent financing of the project are available through industrial revenue bonds at 14 per cent interest over 30 years. In order to acquire an industrial revenue bond application, Petitioner would maintain a $150.000 debt service reserve fund. (Petitioner's Exhibit 3) Other methods of financing available to finance the subject project include conventional financing, syndicated equity programs and insurance investment programs. (Testimony of Fulmer at TR. 39-40) Due to the largely rural setting, projected utilization for the first year would be 81 per cent Medicaid, 5 per cent Medicare and 14 per cent private pay. Occupancy is projected to reach 97 per cent by the fifth full month of operation and would be supported in part by the increased utilization of nursing home beds as a direct result of the implementation of diagnostic related groupings. Pro forma statements for the first and second years of operation show a net operating profit beginning in the ninth month and continuing through the second year. The equipment costs, staffing patterns and personnel budget also appear reasonable for this type of project. METHODS AND CONSTRUCTION COSTS Another issue in this proceeding was whether Spring Hill satisfied the criteria in Section 381.494(6)(c)13., Florida Statutes, regarding the cost and methods of construction. Spring Hill's proposed facility will provide 11,981 square feet devoted to patient care and 9,710 square feet for administrative and common service areas at a construction cost of $41.50 per square foot. (Petitioner's Exhibit 3) Proposed construction costs and methods of construction efficiently minimize square footage space requirements and related construction costs and will permit the most efficient operation of the facility at a low per diem cost. The construction cost appears reasonable and is also supportive of a primarily Medicaid based facility. Finally, Respondent offered no evidence to controvert the reasonableness of construction costs and methods proposed by Petitioner. IMPACT ON HEALTH CARE COSTS Section 381.494(6)(c)12., Florida Statutes provides that as part of the Certificate of Need review, probable impact of the proposed project on the cost of providing health care services be considered. Petitioner's expert, Fulmer, urges that there would either be no impact on the cost of care or due to the availability of additional Medicaid beds, costs would be reduced since the private pay demands of family and relatives having to pay for the care of an individual rather than participating in the Medicaid program would reduce the costs of health care to the community rather than increase the financial burden. In this regard, Petitioner offered no evidence to substantiate the claim that the demand for Medicaid beds exceeded the supply, or that Medicaid patients had been refused health services by the available Medicaid health care providers. AVAILABILITY AND ACCESSIBILITY OF EXISTING SERVICES Hernando County lies within HRS District III which is composed of 16 counties in north-central Florida, stretching from the Gulf of Mexico north of Tampa to the Georgia border. (Petitioner's Exhibit 6) The District is further divided into sub-districts. Hernando County represents a separate sub-district. Petitioner's facility is proposed to be located in the City of Spring Hill, located in the fastest growing area of Hernando County. (Petitioner's Exhibits 1 and 2) The latest bulletin (No. 69) from the University of Florida, Bureau of Economic and Business Research, shows a 90 per cent projected growth between 1980 and 1990. Much of the population in the Spring Hill area falls in the 65 and older age bracket. County age group projections released by HRS on September 24, 1984, reveal that the elderly population of 65 and over in Hernando County in 1985 is projected as 17,616, or approximately 27 per cent of total population. By 1990, those projections will grow to 24,887 or approximately 29 per cent of total population. (Respondent's Exhibit 2) The growth trend in Hernando County is an extension of the rapid coastline development occurring in the New Port Richey- Clearwater areas and the counties to the south of Hernando. Previously, the only major development in Hernando County was centered in Brooksville, the middle of the county. Consequently, the existing community nursing home services in Hernando County are concentrated in the Brooksville area. Although Petitioner, through its expert (Konrad) testified that there is a mal-distribution of existing beds and community nursing home services which renders them neither available nor accessible to the rapidly growing elderly population in the southwestern Hernando County corridor and that high occupancy rates in existing community nursing homes in the area and the existence of waiting lists corroborates the lack of availability and accessibility of community nursing home services in the area, the evidence introduced herein failed to establish either the existence of waiting lists or that the existing community nursing homes in the area were overcrowded. SHELTERED VERSUS COMMUNITY NURSING HOME BEDS Petitioner contends that certain nursing home beds associated with the adult congregate living facility at Evergreen Woods in the Spring Hill area are not actually available and accessible to the general public but instead are functioning as sheltered nursing home beds. Respondent, on the other hand, considers the 60 nursing home beds associated with Evergreen Woods to be available and accessible to the general public. A review of the entire record compiled herein failed to substantiate Petitioner's claim that those beds at Evergreen Woods are unavailable and/or inaccessible to the general public. DETERMINATION OF NEED, SECTION 381.494(6)(c)1., FLORIDA STATUTES. In determining need for nursing home beds, a Certificate of Need project is reviewed on a 3-year planning horizon. In this case, predicted need for nursing home beds in District III and the sub-district of Hernando County is calculated through 1987. Hernando County is a single county sub-district located within in HRS planning District III in north central Florida. HRS has determined the overall nursing home bed need for District III as well as sub-district allocations by applying the uniform nursing home bed need methodology for community nursing home services contained in Florida Administrative Code Rule 10- 5.11(21). (Petitioner's Exhibit 5) Respondent provided a step-by-step application of the community nursing home bed need rule and introduced their exhibits supporting the calculation period (Testimony of expert medical facilities consultant, R. Jaffe and Respondent's Exhibits 1 and 2). Briefly stated, application of the pertinent rules reveals an extrapolated need for 31 beds which are available for CON approval based on data available to Respondent on June 29, 1984 and that 36 beds are available based on later data released on September 24, 1984. (TR. 91, Conrad; TR. 130, Jaffe and Petitioner's Exhibit 6) The census report applicable herein reflects that there were 360 licensed beds in the Hernando sub-districts and no approved beds for a total of 360 beds. 2/ Application of the nursing home bed need methodology is not the sole factor used in determining whether a CON application should be granted. Other factors, such as access, high occupancy rates, chronically underserved population and high Medicaid utilization are definite factors in approval of additional beds in cases where the rule shows either no need or only slight need. Respondent has, on several occasions, granted 60-bed applications where accessibility issues justified the grant of a minimum-sized facility in spite of the lesser numerical need indicated under the rules. 3/ Petitioner referred to instances wherein Respondent had granted approval for CON's in other districts where there were unusual circumstances such as accessibility issues as referred to herein above. A review of those cases reveals that a departure from the usual bed-need methodology is warranted in cases of extremely high occupancy rates (95 per cent or higher) or the facilities with lower occupancy rates, e.g. 85.7 per cent for homes in Sarasota County, which were located in inaccessible distances away from the population concentration. Petitioner has not demonstrated sufficient basis herein to warrant a departure from the usual bed need rule methodology. The instances wherein a departure from the usual bed need rule methodology has occurred are distinguishable, inasmuch as in the instant case, there are three existing facilities presently in Hernando County offering 360 nursing home beds. Current occupancy rate has been shown to be reasonable and is standing at or below average for District III. Additionally, Respondent introduced a "Stipulation of Settlement" dated September 28, 1984 which was entered into by and between Evergreen Woods Health Care Center and Respondent. The substance of that stipulation reveals that during October of 1983, Evergreen Woods Health Care Center (EWHCC) as Petitioner, filed an application with Respondent for a Certificate of Need to add 60 beds to its existing 60-bed nursing home located in Spring Hill, Hernando County, Florida. The application sought 45 community beds and 15 sheltered beds. As a means of amicably resolving that proceeding and based on available need data based on applicable quarterly census reports and application of the need criteria, EWHCC, as Petitioner in that proceeding, amended its Certificate of Need application filed October, 1983, to add a total of 60 beds to its existing facility; 31 beds to be designated as community beds and 29 to be designated as sheltered beds. A review of the public records reveal that the Certificate of Need has been issued (amended CON No. 2959 issued early October, 1984) pursuant to that stipulation of settlement. 4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: The application of First American Corporation d/b/a Spring Hill Health Facility for establishment of a 60-bed nursing home facility in Hernando County, Florida, be DENIED. RECOMMENDED this 14th day of February, 1985, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1985.
The Issue Whether Petitioners' applications for Certificates of Need should be approved?
Findings Of Fact Ocala Ocala is a general partnership composed of three partners: Ocala Health Care Associates, Inc., Casterfield, Ltd., and Big Sun Healthcare Systems, the lessee and operator of Munroe Regional Medical Center. Ocala is the current holder of an approved CON for 35 community beds in Marion County. If the 21-bed transfer of sheltered beds to community beds is approved, Ocala intends to operate a 56-bed facility. A 56-bed facility is more viable than a 35-bed facility. At the time of the hearing, there were 642 approved and licensed beds and 215 approved not yet licensed beds in Marion County. The 215 beds include Ocala's 35-bed CON. A patient needing subacute care is one who has been released from acute care status by a physician and is ready to be released from a hospital (acute care) to a less costly facility, e.g. a skilled nursing home. Subacute care patients are those needing, e.g., intravenous tubes, respirators, IV medication, decubitus ulcer care, tracheotomy tubes, or antibiotic therapy. Patients needing subacute care should be placed in a nursing home, since this is less costly than hospital care and it allows for acute care beds in a hospital to be used for patients needing acute care. Skilled nursing homes are authorized to provide subacute care, but are not required to do so. In order to provide subacute care, a nursing home may need additional staff and equipment. There is a problem in Marion County with the placement of subacute care patients in nursing homes. This problem is caused by a variety of factors and usually results in a patient remaining in a hospital longer than is necessary. One factor is that some of the existing nursing homes will not accept patients needing certain types of subacute care, e.g., patients needing ventilators or feeding tubes. Another equally important factor is that the nursing homes want to make sure they will get paid and there is usually some delay in determining how the nursing home will be compensated. Other factors include the patients inability to pay and, on occasion, the unavailability of beds. Ocala intends to use its 35-bed approved CON to provide subacute care. Country Club While the application shows the applicant's name as "Country Club Retirement Center," that is the name of the project. The applicant is Mr. J. E. Holland. Mr. Holland's application is for a 60-bed nursing home which will be part of a 250-apartment continuing care community. The facility is to be located in Clermont, in Lake County. Lake County is in Planning Area VII of HRS District III. Planning Area VII also includes Sumter County. Mr. Keach, the only witness presented by Country Club, is Vice President of National Health Care. National Health Care operates a nursing home in Gainesville, Florida. In addition to operating the nursing home, National Health Care assists persons seeking a CON with preparation of the CON application. Mr. Keach and other National Health Care employees assisted Mr. Holland with the preparation of the CON application submitted in this case. National Health Care will not own or operate Mr. Holland's facility. Mr. Keach is of the opinion that there is need in Clermont for a 60- bed nursing home. He bases his opinion on letters of support for the construction of the facility, on petitions signed by persons attending a public hearing, and on four or five visits to the area. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home. At the time HRS issued its State Agency Action Report there were 958 beds approved and licensed in Planning Area VII. Of these, 838 are located in Lake County, with 142 located in a nursing home in Clermont. Also these are swing-beds providing long-term care at a hospital in Clermont. Finally, there were 236 beds approved not yet licensed in Planning Area VII, with 176 to be located in Lake County. The occupancy rate for the nursing home facility located in Clermont is approximately 89 percent. For the six months ending March, 1988, the occupancy rate for Planning Area VII was below 80 percent. There are at least two nursing homes in operation within a 20-mile radius of Clermont. These two nursing homes are located in Winter Garden and one of them has received a CON to add 89 beds. Twenty-Eight Corporation The applicant in this case is Twenty-Eight Corporation. "The owner of the nursing home will be the Levy Nursing Care Center, a limited partnership, which will be owned and secured by Twenty-Eight Corporation." (28 Corporation, Composite Exhibit 1.) Twenty-Eight corporation seeks approval of a CON for 60 nursing home beds to be operated as part of a continuing care project which will include a 50-unit apartment complex. The facility is to be located in Chiefland, Florida, in Levy County. Levy County is in Planning Area II of HRS District III. Planning Area II also includes Alachua, Gilchrist and Dixie counties. At the time HRS issued its State Agency Action Report, there were 1112 licensed nursing home beds in Planning Area II. Of these, 120 are located in Trenton, in Gilchrist County, 180 are located in Williston, in Levy County, and the rest are located in Alachua County. Also, there are 147 beds approved not yet licensed to be located in Alachua County. Chiefland is approximately 12 miles from Trenton. Williston is approximately 27 miles from Trenton. Mr. Keach was the only witness who testified on behalf of Twenty-Eight Corporation. Mr. Keach is vice-president of National Health Care. (See Finding of Fact 17, supra.) Mr. Keach is of the opinion that there is need in the Chiefland area for a 60-bed nursing home. His opinion is based on letters of support and petitions of support he received for the project. Also, his opinion is based on the fact that there is no nursing home located in Chiefland and the nearest nursing home is located in Trenton, 12 miles away. The 1986 District III Health Plan shows the Trenton facility having an occupancy rate of 99.93 percent. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order denying Petitioners' applications in these three cases. DONE and ENTERED this 3rd day of March, 1989, in Tallahassee, Leon County, Florida. JOSE A. DIEZ-ARGUELLES Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1862, 88-1863, 88-1864 Rulings on Proposed Findings of Fact Ocala's Proposed Findings of Fact: 1. Accepted. 2-4. Supported by competent, substantial evidence but unnecessary to the decision reached. 5-7. Accepted. Irrelevant. Accepted. Rejected as not supported by the weight of the evidence. There is not an absolute absence of facilities willing to accept all patients needing subacute care. Irrelevant. "Serious concerns" are not what is needed under the Rule. First sentence rejected as recitation of testimony. Second sentence irrelevant; issue is whether nursing homes will accept patients, not whether nursing homes will enter into agreement with MRMC. 13-16. True, but irrelevant. Accepted. (a) Rejected to the extent it implies that the approved facilities would not provide subacute care. Mr. Bailey's testimony is that the facilities refused to enter into a relationship with MRMC; this does not establish that the facilities would not provide subacute care. Rejected as a recitation of testimony. The weight of the evidence shows that some facilities would accept same subacute patients. True, but it is unclear if these are the physician's notations the HRS witness referred to. True that charts and logs were provided, but they did not establish the number of patients in need of subacute care in excess of licensed or approved beds. 19-26. Irrelevant. 27-29. Accepted-for what they are, but insufficient to establish need. Twenty-Eight Corporation's Proposed Findings of Fact: 1-4 Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Accepted. Rejected as hearsay. But see Finding of Fact 31. Mr. Keach testified that Chiefland is 40 miles from Williston. The road map published by the Department of Transportation shows the distance between the two cities at 27 miles. True, but irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. Rejected as hearsay. True, but irrelevant. Rejected as hearsay. Also, a determination by a family member does not establish medical "need". True that this is Mr. Keach's opinion. However, Mr. Keach's opinion is rejected. His opinion of need is not based on what the Rule requires or on what health planners rely on to establish need. Mr. Keach is not able to testify as to the financial feasibility of the facility because he has no first- hand knowledge of the finances. 21-22. Irrelevant. 23. Rejected. See ruling on 10., supra. 24-26. Irrelevant. Rejected as contrary to the weight of the evidence. Irrelevant. Irrelevant; this is not a rule challenge. Irrelevant. True, but irrelevant. Irrelevant. Accepted. Rejected as hearsay. Rejected as not supported by the weight of the evidence. Rejected as argument. Also, unable to determine what the "second portion" is. 37-38. Irrelevant. First phrase accepted. Second phrase rejected to extent implies that only need to show that no other facility exists within 20 miles. Irrelevant. Country Club's Proposed Findings of Fact: 1-4. Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. 14-17. Irrelevant. Rejected as contrary to the weight of the evidence. Accepted. Rejected as not supported by competent evidence; hearsay. Accepted. Rejected as not supported by competent evidence; hearsay. Irrelevant. Rejected as not supported by competent evidence; hearsay. True, but irrelevant. See ruling on 11, supra. Irrelevant. Rejected as not supported by competent evidence; hearsay. Irrelevant. The Rule also recognizes this. Irrelevant. Rejected as not supported by the weight of the evidence and irrelevant. True, but irrelevant. True, but irrelevant. 33-34. True, but irrelevant. This is a de novo proceeding. 35-39. Irrelevant. 40. Rejected as argument. Also, unable to determine what the "second portion" is. 41-42. Accepted 43. Rejected as contrary to the weight of the evidence. 44. True, but irrelevant. Also, there are approved beds within 20 miles, but located in a different HRS District. Leesburg's Proposed Findings of Fact 1-7. Accepted. Rejected as not a finding of fact. Accepted. 10-15. See Conclusions of Law section of RO. Accepted. Rejected as argument. Accepted. Rejected. Fact that need does not exist under HRS rule doesn't necessarily mean that that facility will not be financially feasible. In any event, Country Club was not able to establish financial feasibility. 20-21. See Conclusions of Law. 22. Rejected as argument. 23-28. Supported by competent substantial evidence but unnecessary to the decision reached. Accepted. Rejected as a recitation of testimony. Accepted.- HRS's Proposed Findings of Fact 1-19. Accepted. Rejected. The HRS witness did not specifically state that HRS needs to see the actual physician referral. Accepted. See Conclusions of Law. 22-28. Accepted. See Conclusions of Law. 29. Not a finding of fact. 30-37. Accepted. 38. Irrelevant. 39-42. Unnecessary to the decision reached. Irrelevant. Accepted. 45-46. See Conclusions of Law. Accepted. Accepted. Not a finding of fact. 50-65. Accepted. See Conclusions of Law. 66. Not a finding of fact. 67-71. Accepted, but Ocala's Exhibits 6 & 7 are not amendments to the application but simply more of the same information that was provided with the application. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 First Florida Bank Building Suite 600 215 South Monroe Street Tallahassee, Florida 32301 Theodore Mack, Esquire Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 R. Bruce McKibben, Jr., Esquire 307 West Park Avenue Post Office Box 10651 Tallahassee, Florida 32302 Grafton Wilson, II, Esquire 711 NW 23rd Avenue, Suite #4 Gainesville, Florida 32609 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact Originally, each Petitioner filed an application for a Certificate Of Need for the construction and operation of nursing home facilities in Broward County as follows: HCR - 120 beds, Richmond - 240 beds, Health Quest - 180 beds, and FPM - 240 beds. The applications were reviewed by Respondent comparatively and competitively, and they were denied in a State Agency Action Report on August 12, 1982 solely on the basis that there was no need for additional nursing home beds in Broward County. The formal hearing thereafter requested by all Petitioners was continued several times due to scheduling conflicts and due to the expected promulgation of a new methodology by which the need for nursing home beds is computed. As a result of Respondent's Quarterly Census Report dated November 30, 1983, Respondent determined that in fact there was a need for an additional 101 nursing home beds in Broward County. Accordingly, just prior to the formal hearing and by letter dated January 4, 1984, Respondent's attorney invited each Petitioner to amend its application for the purpose of being eligible to receive a Certificate Of Need for those 101 beds. Each Petitioner so complied. At the final hearing, each Petitioner proceeded on both its original application and its amended application. In spite of the singular ground for denial of each application contained in the State Agency Action Report, Respondent's attorney contended from the inception of this proceeding and into the final hearing that whether any of the applications met all statutory and rule criteria for approval was disputed by Respondent, including the financial feasibility of each proposed project. According to Respondent's only witness, Thomas F. Porter, however, all four applications meet all statutory and rule criteria for approval including financial feasibility. Accordingly, the only facts to be determined herein will relate to the issue of the number of beds needed. Since Respondent stipulated that 101 beds were available to be awarded to one of the applicants in this proceeding (Tr. 17, 36-40, 952), the threshold issue is how many beds in excess of 101, if any, are needed in Broward County. Respondent uses the most recently available information in analyzing applications for nursing home beds, including the Quarterly Census Report which it publishes, and a mathematical methodology contained in Section 10-5.11(21), Florida Administrative Code, the purpose of which methodology is to project the need for nursing home beds on a three year basis to determine the availability of those beds for award to Certificate Of Need applicants in relation to a projected need. The methodology contains several steps. The first part of the methodology projects the number of beds that will be needed based upon an adjustment of a standard of 27 beds per thousand for the population aged 65 and over to reflect the percentage of those in poverty in the HRS district in relation to those living in poverty in the state. The second part of the methodology contains the present and prospective occupancy rates. Before any of the new beds which are determined to be needed can be added, the average occupancy rate for existing homes must exceed eighty five Percent (85), as the rule is applied to Broward County, the only county in Florida constituting its own HRS district and having no sub-districts. Furthermore, the second part of the formula provides that no additional beds which have been determined to be needed can actually be added if, theoretically, the prospective occupancy rate after the beds are added will be reduced below eighty percent (80 percent). Respondent's determination as to the number of beds needed and the number of beds available for Certificate of Need applicants according to "part two" of the formula is based on its Quarterly Census Reports. The November 30, 1983 Quarterly Census Report revealed that 1,419 community nursing home beds (4,058 needed beds, less 2,789 existing and 300 previously approved but not constructed beds) will be needed in Broward county in 1986, the horizon year for these applicants. The occupancy rate of existing nursing home beds for the six months preceding that report was 91.5 percent. According to that report, since the prospective occupancy rate is 80 percent for Broward County, then the addition of more than 101 beds at the present time will theoretically reduce the prospective occupancy rate below 80 percent. Under normal circumstances Respondent will issue Certificates of Need in accordance with the need methodology set forth above. However, Respondent has discretion to approve applications for nursing home beds which do not conform to the need methodology if the existence of special circumstances can be proven. Special circumstances do exist in Broward County which warrant a determination that more nursing home beds are needed than is demonstrated by a strict application of Respondent's need methodology. One of those special circumstances is the existence in the district comprised of Broward County of an older population than in the other districts in Florida. Broward County's 65 and over population is fairly typical of Florida at the present time, but there is a significant difference in the proportion of the population which is 75 and over and which will be 75 and over in the near future. In 1980 Florida as a whole had 6.5 percent of its 65 and over population in the 75 and over category which was projected to increase to 9 percent by the year 2000. By contrast, according to studies performed by Dr. Robert Weller, in Broward County 35.4 percent of the 65 and over population was 75 and over, and by 1986 this number was projected to increase to 53.6 percent. This difference was classified by Dr. Weller as "very meaningful" to the point where he would be very "uncomfortable" with any attempt to plan for Broward County using statewide averages. This large difference in the composition of the elderly population of the state as a whole and Broward County is a significant special circumstance because the older the population the greater the demand for nursing home beds. In fact, the big predictors of need for nursing home beds are illness and age. The average age of entry into a nursing home is 81. While the population group of 85 and older utilize nursing home beds at a rate 15 times greater than the 65 and older group, the over 75 age category constitutes 70 percent of all nursing home users. Respondent's need methodology does not make an adjustment for differences in the 65 and over category between the various districts. This failure to adjust for an older population may not significantly affect districts with more normal population composition, but since Broward County's population departs substantially from the norm, it is an essential consideration. The failure to consider this situation results in a gross understatement of need in Broward County. Diagnostically Related Groups (hereinafter "DRG") regulations are amendments to the Social Security Act effective in 1983 which alter the method by which hospitals will receive reimbursement for Medicare patients. Under the DRG regulations, which hospitals are required to adhere to by the end of 1984, reimbursement for Medicare patients will be based upon an established length of stay for each type of illness. For example a hospital might be reimbursed for an eight day hospital stay for a coronary by-pass operation whether the patient actually stays in the hospital for seven or for 12 days. The effect of the DRG regulations is the earlier discharge of many patients in need of intensive nursing care. Every expert witness and professional administrator opined at the hearing in this cause that DRG regulations will result in an increased demand for nursing home beds. In addition to the effect the DRG regulations will have in a normal situation, the characteristics of the Broward County will accentuate this effect. The nationwide average for percent of Medicare funding in acute care hospitals is approximately 50 percent while the average for Broward County in last 12 months ranges from 53 percent to about 64 percent. The characteristics of Broward's elderly population also increases the effect of the DRG regulations because the population in Broward County is older than that in the remainder of the state. A study of the effects of the DRG regulations on the need for additional nursing home beds was recently conducted for Palm Beach County. That county has a high percentage of elderly (although not as high as Broward) and a high percentage of Medicaid funding. That study indicated that the DRG regulations would increase demand there by about 225 to 300 beds. Theodore J. Foti, an expert in health planning, utilized the Palm Beach study to estimate that from 325 to 400 additional beds are needed in Broward County to compensate for the DRG regulations alone. In Broward County there are three facilities which Respondent counts as nursing home facilities but which do not provide nursing home services. The Daystar Nursing Home, which contains 44 beds, is a Christian Science facility which does not provide the level of care associated with nursing homes. The Manor Oaks facility, which contains 116 beds, has a hospital license as an extended care facility and is a licensed specialty hospital, not a nursing home. St. Johns Nursing and Rehabilitation Center, which contains 100 beds, is a specialty hospital. Respondent includes the 340 beds in these facilities in computing the total of existing nursing home beds. Since these facilities are not truly nursing homes, they are displacing beds which normally provide nursing home services. The need methodology, therefore, does not include the true number of existing nursing home beds in Broward County, and, therefore, even if all other data used in the methodology be accurate, the bed need as determined by the methodology is understated by 340 beds. Barbara Palmer is employed by Respondent in its Office of Aging and Adult Services. Her job duties include writing proposed rules, manual material and legislative budget requests for Respondent's program known as Community Care for the Elderly (hereinafter "CCE"). CCE services include case management as well as CORE services, adult day care, chore, emergency alert response systems, home delivered meals, home health aid, medical transportation and personal care. Each of these programs is generally designed to provide services to the clients in the client's home. None of these services are provided to persons who are already in nursing homes. In order to compute need for CCE services, Palmer and Respondent rely on research by Dr. Carter Osterbind which identifies the incidence of "homebound" and "bedfast" individuals in the population aged 65 and over. Respondent defines bedfast as a person who, because of physical or other infirmities, remains in bed and is incapable of being in any other place. Similarly homebound individuals are those who cannot leave their homes without assistance. Respondent routinely uses Osterbind's 8 percent incidence factor to calculate the percentage of the population in the State of Florida 65 and over that can be characterized as homebound and bedfast. Subject to revisions, Palmer prepares the budget proposal for Aging and Adult Services which is then approved by the Secretary of the Department of Health and Rehabilitative Services for submission to the Governor and which then becomes Services for part of the Governor's budget request which is ultimately submitted to the Legislature. Palmer uses two documents to prepare her budget request: Dr. Osterbind's paper "Older People in Florida" and "Florida Decade of the 80's", a technical appendix provided by the Office of the Governor as a reference for population statistics for use in developing legislative budget requests. Using these two documents, a projected need is compared with the historical data of how many people have been served with the money which was received in a previous budget year. By subtracting the historically met need from the projected need, Palmer arrives at the projected unmet need, which is presented in a table depicting the total number of homebound and bedfast clients who will not receive services. Palmer also uses a factor, developed by Respondent's Community Care for the Elderly Program, to determine how many individuals, but for the fact that their need is going to be met, are at risk of institutionalization. Respondent's Office of Evaluation has developed and published a 42 percent factor and utilizes it as a basis to determine how many of those persons in a category whose needs will be unmet because of lack of budget dollars in the future will actually end up in nursing homes if more dollars are not appropriated. In other words, Respondent utilizes a document promulgated in 1981 by its Office of Evaluation which indicates that a 42 percent factor should be applied to an 8 percent statewide percent of the population 65 and older to determine how many are at risk of institutionalization in a nursing home, and this methodology has been used routinely by Respondent to prepare Respondent's budget requests through 1985. Palmer's approach in preparing the budget request has a purpose of persuading the Legislature that unless money is provided, 42 of all homebound and bedfast individuals will have to be institutionalized but for provision for home health care services. Palmer's last budget request shows that in the decade of the 80's Respondent expects a 69.8 percent increase in the population group 65 and over. The 10 year plan for CCE and CORE services gives the estimated percentage of need which Respondent intends to meet with CCE and CORE services for various budget years through 1990. Respondent will only provide those services to 23.84 percent of those persons needing them in 1985-86 and only 26.48 percent in 1986-87. Estimated unduplicated clients that will be served in those same years are 41,448 and 47,869 respectively. Expert witness, Michael Schwartz, used Respondent's population figures for Broward County and Respondent's methodology according to Palmer to determine how many of those individuals aged 65 and over in Broward County will be homebound and bedfast in the planning horizon year of 1986. Multiplying the number of homebound and bedfast by the percentile of persons that are at risk of institutionalization yields the figure of 9,760 persons for the horizon year. The number of persons projected by Respondent's Office of Aging and Adult Services to actually receive the CCE-CORE services in that horizon year is 3,956. Thus, the number of individuals unable to obtain those services and needing a nursing home bed in that year will be 5,802. These people will need nursing home beds for an average length of stay of two and one-half years (national average). The current inventory of nursing home beds in Broward County, including approved but not built beds, is 3,089. When the existing inventory is subtracted from the number of needed beds, as computed by the Aging and Adult Services methodology, the net need is an additional 2,715. Thus, when Respondent's methodology for determining the need for nursing home beds in the absence of alternatives of CCE and CORE services is applied to Broward County for the year 1986, it yields a need for 2,715 beds in addition to existing and approved beds to accommodate the homebound and bedfast who will not receive those services. However, when Respondent's methodology in Section 10-5.11(21), Florida Administrative Code, is applied to Broward County for the year 1986 it yields a need for 1,419 beds in addition to existing and approved beds. Yet, when the theoretical prospective occupancy feature contained in that rule is applied to Broward County, only 101 beds are needed to be built in time for service in 1986. It is noteworthy that the formula used by Respondent to induce the Legislature to fund programs for the diversion of the elderly from nursing homes yields double the need for nursing home beds in Broward County in 1986 than use of the formula established by Respondent to evaluate applications for new nursing home beds. Schwartz identified the reason for the difference: The CCE funding formula takes into account those below the poverty level as well as those above the poverty level in determining the number of people who are at risk of institutionalization unless CCE services are provided. However, Respondent's bed need methodology uses a poverty ratio (number of impoverished in the county relative to number of impoverished in the state) to adjust the statewide standard of 27 beds per thousand downward to 15.5 beds per thousand in Broward County. Since the first part of the bed need methodology only measures nursing home bed need for the impoverished (by adjusting 27 beds per one thousand by a poverty ratio) while the formula used by Aging and Adult Services contemplates all persons at risk of institutionalization, whether impoverished or not, and since the Aging and Adult Services methodology yields a higher need figure, tie difference between the two figures must represent the extent to which private pay patients (not impoverished) are using, and will continue to use, nursing home beds in Broward County to the exclusion of Medicaid patients. Utilizing the first part of the bed need methodology, Respondent has determined that Broward County will need a total of 4,508 beds in 1986 and that, when licensed and approved beds are subtracted, 1,419 additional beds will be needed. However, the second part of the methodology which purports to determine the prospective utilization of nursing home beds limits the number of beds which can be added to 101. The premise behind the prospective utilization test is that the addition of more than 101 beds will result in the occupancy rate for nursing homes in Broward County being reduced below 80 percent. Because of the particular situation existing in Broward County this premise is not valid. In November 1983, Richmond's newly-constructed Sunrise facility had 120 beds in service, but Respondent counted all 240 approved beds as being in service for determining its occupancy rate. These 240 beds were, therefore, occupied at a rate of 24.4 percent. In November 1982, the occupancy rate for nursing homes in Broward County was 89.8 percent, while a year later after including all 240 licensed beds in Richmond's Sunrise facility, the occupancy rate had only fallen 3 points to 86.7 percent. Expert witness Schwartz concludes that if 240 beds can be added In Broward County and only drop the occupancy rate from 89.8 percent to 86.7 percent, then certainly more than 101 beds can be added before the occupancy rate will drop below 80 percent. He further concludes that when One examines what actually happened in Broward County rather than what could theoretically happen, the prospective utilization test may well be a valid predictor of future occupancy rates under normal circumstances, but it fails to be in Broward County. Rather, Schwartz concluded that approximately 1,000 nursing home beds can be added in Broward County without lowering the occupancy rate below 80. Expert witness Theodore Foti explained the effect of Respondent's bed need methodology when applied to Broward County. The methodology is based on the premise that the only people who need nursing homes in Florida are the impoverished since the standard 27 beds per one thousand is adjusted only by the poverty ratio. However, nursing home providers prefer private patients because they pay more. In Broward County there are facilities that only accept private pay patients. The provider receives about 25 percent more profit than he would if he had two individuals to care for in the same room when the difference between private and semi-private rates and the decrease in staffing that is possible with the lesser number of patients are taken into consideration. Because of the shortage of supply and the ever-growing demand in Broward County, it is economically beneficial to a 60 bed nursing home for example to take 20 beds out of service and operate with 40 beds because the owner can increase the rates and lower the costs simultaneously. According to Foti, a review of the occupancy rates in Broward County shows that beds in certain facilities have been taken out of use over a period of time by those facilities. Those providers have chosen to serve primarily the private paying individual since it is to their financial benefit to do so. The corresponding result is that the demand for nursing home beds by the medicaid recipient cannot be satisfied because the private pay patient has "squeezed out" the Medicaid patient. The existence of this phenomena in Broward County rises to the level of an exceptional circumstance since Respondent uses a formula to prescribe prospective occupancy rates which are directly controlled by the number of beds that the existing owners place in service or take out of service. Considering the "private pay phenomena" in Broward County, and considering that the number of beds per 1,000 in Broward County is the lowest in the state, and considering that the number of beds per 1,000 in the state is the lowest in the country, Foti calculates a need currently in Broward County to be an additional 800 beds as a minimum figure even without considering the DRG regulations which clearly will accentuate that need. Respondent's witness Porter acknowledged that Respondent would look favorably upon applications for Certificates of Need for additional beds in an area where indications are that Medicaid patients are being denied access to beds although Respondent's bed need methodology simultaneously shows that no new beds are needed. He explained that as an extenuating circumstance if there is evidence that a particular population group is being denied access and that Respondent would look favorably upon applications proposing substantial Medicaid beds (such as those under consideration herein) if accessibility for Medicaid clients is limited. He further acknowledged that the Medicaid program office of the division of Adult and Aging Services would be an appropriate authority upon which he would rely in making such a determination. He further acknowledged that the accessibility to Medicaid beds would be increased in Broward County by issuing Certificates of Need with a Medicaid bed condition attached to them since the Medicaid utilization rate has been increasing in Broward County even though the total number of beds has remained constant. Lynn Raichelson as the supervisor of Respondent's Adult Payments Unit for Broward County is responsible for gathering data reflecting the number of people placed in Medicaid beds during the month in Broward County for Medicaid payment purposes. Both her reports admitted in evidence and her testimony at the final hearing noted an overall difficulty in finding placements in Broward County for Medicaid patients. Her reports indicate a number of entries where all Broward County and Dade County nursing homes were contacted but there were no nursing home beds available. The number of days for placement ranged from 23 to in excess of 83 days. Most of the patients were in acute care hospital beds while awaiting nursing home beds. Several health care professionals testified as to the actual need in Broward County as opposed to the projected need based upon Respondent's mathematical formula. One hospital administrator had no problem placing private pay patients but found that Medicaid placements are extremely difficult to make in Broward County. His hospital alone holds 8 to 12 patients on any given day who should have been discharged into a nursing home. The executive director of the North Broward Hospital District which encompasses three hospitals encounters difficulty in placing Medicaid and Medicare patients in nursing homes in Broward County since the nursing homes are at full operational occupancy. Approximately 25 percent of the patients discharged from hospitals in the District are referred to and placed in nursing homes. Of this 25 percent, the District encounters difficulty in placing 10 to 15 percent of the patients. The problems persist year round but are especially difficult during the winter "peak" season. Alan Mahar is the administrator of the Primary Health Care Division of the Health and Public Safety Department for Broward County. He was the supervisor of nursing home placement from 1975 to 1981 when Broward County was making nursing home placements. Between June 1981 and September 1983 he participated in a Medicaid demonstration project called Pentastar which was sponsored by Respondent's District 10 Aging and Adult Program Office. The purpose of the project was to determine if an alternative existed to keep persons out of nursing homes. An important part of the program was the identification of persons aged 60 and over who were potentially at risk of being placed into a nursing home within one year. Those enrolled in the program had to qualify for Medicaid payments. Although he expected he would need to interview approximately 300 to find 150 persons for the program, everyone he interviewed qualified. At the conclusion of the program, none of the persons who received services through pentastar were any less at risk than they were before those services commenced. Services under that program terminated in September 1983. Since Broward County does not have a publicly operated nursing home, Mahar experienced extreme difficulty in placing Medicaid patients and found that it frequently took weeks and sometimes months to find an available nursing home bed for a Medicaid patient. Mahar's opinion that there is not a sufficient number of beds available to Medicaid patients in Broward County is also based on his identification of the trend over the last three years he has been involved in auditing Medicaid matching funds. The money which Broward County has been paying for hospital care for Medicaid persons has almost doubled in the last three years, while the Medicaid match money for nursing home care has gone up only 15 or 20 percent during that same period. The poverty ratio included in Respondent's bed need formula results in an underestimation of bed need for wealthy counties such as Broward County where the majority of nursing home patients are private pay patients. Broward County is the wealthiest county in the state and has the lowest Medicaid usage in the state. The poverty ratio results in a calculated bed-need ratio in Broward County of 15.5 beds per thousand whereas the statewide need ratio is 27 beds per thousand. There is overwhelming competent substantial evidence to show an actual need for community nursing home beds in Broward County currently and in 1986 for in excess of the 780 beds Petitioners collectively seek herein. Substantial competent evidence was presented to show several special circumstances, and respondent's sole witness acknowledged that one of those was sufficient for the grant of all applications filed by the four Petitioners in this cause. The overwhelming need proven herein was uncontroverted by Respondent, and the special circumstances prohibit Respondent from applying the bed need methodology in Broward County at this time. In view of the overwhelming and uncontroverted evidence, there is no need to determine which of the applicants herein is best qualified for the award of the 101 beds in issue in this cause. Additionally, the evidence in this record is insufficient to proclaim any of the applicants to be best qualified. At the final hearing there were a few attempts at a comparative analysis, and none was credible. The attempts at comparative analysis simply resulted in a further substantiation of the fact that all of the applicants are equally qualified. Respondent's witness gave his personal opinion that one of the applicants was preferable but was unable to assign any weight to any of the factors utilized in reaching that individual opinion. Rather, the one factor that he did testify to at length in the hearing as the most important - accessibility by Medicaid patients - was the one item that that applicant would not guarantee. HCR's application for the 101 beds indicated that it would not commit to the number of Medicaid patients that it would serve. In short, the testimony at the hearing and the evidence presented provide very little basis, if any, for choosing one applicant over another. Rather, all applicants meet all criteria, and the need for the number of beds originally requested clearly exists.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is recommended that a Final Order be entered: Granting to Richmond Healthcare, Inc. a Certificate of Need for 240 beds in Broward County in accordance with its original application; Granting to Health Care and Retirement Corporation of America a Certificate of Need 120 beds in Broward County in accordance with its original application; Granting to Health Quest Corporation a Certificate of Need for 180 beds in Broward County in accordance with its original application; and Granting to Federal Property Management a Certificate of Need for 240 beds in Broward County in accordance with its original application. DONE and RECOMMENDED this 15th day of October, 1984 in Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1984. COPIES FURNISHED: Richard G. Coker, Jr., Esquire 1107 South East Fourth Avenue Fort Lauderdale, Florida 33316 Jean Laramore, Esquire and Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601-1568 Robert D. Newell, Jr., Esquire Lewis State Bank Building, Suite 464 Tallahassee, Florida 32301 Claire D. Dryfuss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact The controversy Forum Group, Inc. (Forum Group), Hillsborough Healthcare, Ltd. (Hillsborough Healthcare), Health Quest Corporation (Health Quest), and Careage House Healthcare Center (Careage) filed applications for certificates of need for community nursing homes in Hillsborough County, which is a subdistrict of HRS district VI. The applications were filed in the July, 1986, batching cycle, for need in July, 1989, known as the planning horizon. As amended prior to being deemed complete by HRS, Hillsborough Healthcare and Careage sought 120 beds, Health Quest sought 88 beds, and Forum Group sought 60 beds. All of the applications satisfy and are consistent with state and local health plans. The Department's free form preliminary action Ordinarily, the Department's preliminary decision on these applications would have been issued in November or December of 1986. In these cases, the parties were orally advised of the Department's preliminary action in January, 1987, but the state agency action report containing that preliminary decision was not issued until August, 1987. The delay in decision making in this case occurred due to the altered process of free form decision making that was used in this case. Careage filed a number of applications in the July, 1986, batching cycle, in a number of subdistricts. The preliminary review conducted by HRS determined there to be bed need in four of the counties in which Careage had applications: Hillsborough, Polk, Pinellas, and Lee. During free form agency decision making on the applications in this batching cycle, Ms. Marta Hardy was the Deputy Assistant of Regulation and Health Facilities for the Department. T. 1024. Her duties included responsibility to oversee the issuance of certificates of need and develop health planning policies. Id. Ms. Hardy was the direct supervisor of Robert Maryanski, who was the head of the office of community medical facilities, and Robert Sharp, who was the head of the office of comprehensive health planning. T. 1024. Mr. Maryanski was the direct supervisor of Mr. Reid Jaffe who reviewed the applications in Hillsborough county. Preliminary decisions on the applications in this batch were normally due in November, 1986. It was the normal procedure at the Department to review applications for certificates of need in the following manner. First, an employee in the position entitled "medical facilities consultant" reviewed all applications in the batching cycle for a particular district or subdistrict and made recommendations on each application. These recommendations were then reviewed by his supervisor, the medical facilities consultant supervisor. The recommendations of the medical facilities consultant supervisor upon each application then went to Mr. Maryanski. In Hillsborough, Polk, Pinellas, and Lee Counties in the July, 1986, batching cycle, all reviewers found there to be a bed need. In the normal course of business, all reviewers forwarded through Mr. Maryanski and to Ms. Hardy recommendations that did not recommend the award of a certificate of need to Careage in any of these four counties. T. 1057, 1055, 1281-82. Mr. Maryanski told Mr. Jaffe to "find a way" to approve the Careage application in Pinellas County. T. 1283-84. The time of this communication is not in the record. At about the time that Careage applied for certificates of need (August or September, 1986), Ms. Hardy had dinner with the owner of Careage, Mr. Gene Lynn, Mr. Lynn's wife, and Mr. Ralph Haben. T. 1040. At that meeting, the representatives of Careage told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. Mr. Haben is an attorney, and was then representing Careage. T. 1059. Mr. Haben and Ms. Hardy had been friends since the late 1970's, and in August and September, 1986, they had had lunch or dinner together socially four or five times. T. 1041- 49. In December, 1986, after Departmental staff had preliminarily recommended that Careage's applications be disapproved in the four counties in which was there was need, Ms. Hardy determined to ask Robert Sharp to review applications in the four counties. The result of Mr. Sharp's review was to recommend approval of the Careage application in the four counties. That recommendation was approved by Ms. Hardy. Mr. Sharp was responsible for health planning. He normally had nothing to do with review of certificate of need applications, although he had reviewed some hospital applications in the past. T. 1054. Ms. Hardy had come to the conclusion that Careage provided care of good quality. T. 1063. At the time she formed that opinion, Careage did not operate any nursing homes, and had not done so since 1982. Mr. Sharp understood that Ms. Hardy was impressed with Careage, but did not know the basis for such favorable impression. T. 940. Ms. Hardy told Mr. Sharp that she did not believe that the current method of comparative review of applications was adequate, and used Careage as an example of a best qualified applicant that was overlooked by the current method. T. 940. Mr. Sharp developed a method for comparative review of the applications in the batch for Hillsborough County and the other counties. The method has been referred to in the record as a matrix. Mr. Sharp simply selected certain aspects of the applications for comparison. Two types of information were selected: numerically quantified information, and "program characteristics," which called for a determination whether the selected item existed or did not exist in the proposal. The "matrix" also had a narrative for some of the applicants. Mr. Sharp used Careage as the standard of comparison for all other applicants in the comments section. There was no evidence that the items selected by Mr. Sharp were unreasonable or unfair. The items selected appear to be reasonably related to the task of comparing the virtues of the applicants. The items, for the most part, simply are based on information required by the Department in the application form. The matrix was found in September, 1987, to contain numerous factual errors, and the Department issued a revision. H.Q. Ex. 27. Need pursuant to rule 10-5.011(1)(k) Licensed beds in the district (LB) The number of licensed beds in the district (LB) as of June 1, 1986, was at least 5,964. T. 1706. This figure is derived by adding the 5,557 licensed beds shown on the August 25, 1986, semi-annual nursing home census report, H.Q. Ex. 16, to the 407 additional community nursing home beds that has been erroneously classified as sheltered nursing home beds. None of the other testimony credibly establishes this base figure. There is a dispute as to whether 96 additional beds at the Home Association should be considered licensed community nursing home beds as of June 1, 1986. The Home Association was founded in 1899. It is officially recognized that there was no certificate of need requirement in 1899. The Home Association has never received a certificate of need. Thus, it is inferred that the Home Association was never "issued" beds for "nonrestrictive use." At the time that the Home Association was licensed, there was no license category of "sheltered bed. Prior to 1982, there was no statute defining a "sheltered bed." T 1721-22. Thus, prior to 1979, the Home Association was not 1,issued" beds as "sheltered beds" or "for restrictive use". The Home Association is in the district and in the subdistrict, Hillsborough County. The Home Association had 96 beds in 1972, and had the same number on June 1, 1986. On or about August 20, 1986, HRS sent a letter to the Home Association. HQ Ex. 9. The letter stated that HRS records currently identified the Home Association as a "sheltered nursing home/continuing care facility licensed under Chapter 651, F. S.," but that HRS records did not indicate the date of the initial CON. The letter stated that the specific number of beds allocated to community and sheltered nursing home beds were listed below. At the bottom of the letter, HRS listed 96 beds in the column and line identified as current number of sheltered nursing home beds. The Home Association was told to review the data and make changes and return the letter to HRS. It further stated that a failure to respond would be interpreted as approval of the HRS listed bed allocations. The letter then provided four blanks for the Home Association to respond. The first two provided places to show the "corrected number of beds" both on a line identifying such beds as "community nursing home beds," and a line identify such beds as "sheltered nursing home beds." The Home Association left these lines blank. The third blank asked for the certificate of need number and date. The Home Association typed in: "The Home was founded in 1899; no certificate of need was issued." The fourth blank stated: "Sign Here if Corrections Requested." Initials appear in handwriting in that blank. H.Q. Ex. 9. The response of the Home Association was ambiguous. Having signed the fourth blank, thus seemingly communicating a desire to "correct" the form, the Home Association failed to tell HRS whether it wanted to correct the number of beds or the classification of the beds, or some combination thereof. HRS's need expert admitted that the only way one could settle the question would be to call the Home Association. T. 1724. The problem is further compounded by the way in which the letter from HRS was drafted. The letter did not ask the Home Association to provide information concerning the "historical utilization" of the 96 beds at the Home Association, and thus did not collect any information as to "historical utilization." See the last sentence of section 651.118(8), Fla. Stat. (1987). Instead, it told the Home Association that HRS records identified the Home Association as a sheltered nursing home/continuing care facility licensed under chapter 651. It also told the Home Association that "any nursing home bed located in a continuing care facility and not approved specifically as a sheltered nursing home bed and any nursing home bed located in a life care facility prior to 1979 shall be classified as a community nursing home bed." And the letter appeared to allow the Home Association an opportunity to request a "change in status" only if it had been issued a certificate of need as a community nursing home bed after 1979 and before 1982. It may be that when the Home Association wrote back that it had no certificate of need issued, and that it had been in existence since 1899, the Home Association was simply telling HRS that its beds fell in the category of automatically being community nursing home beds because "located in a life care facility prior to 1979." If the Home Association beds are counted as community nursing home beds, then those 96 beds are added to 5,964, and LB is 6,060. Licensed beds in the subdistrict (LBD) On June 1, 1986, there were 2,612 licensed beds (LBD) in the subdistrict, Hillsborough County. If the 96 beds at the Home Association are counted as community nursing home beds, then LBD is 2,708. Current populations (POPC and POPD) Whether POPC and POPD are the populations on January 1, 1986, or July 1, 1986 HRS divides the regulatory function with respect to certificates of need into two program offices. The office of comprehensive health planning (OCMF) is ordinarily responsible for writing the rules and developing the methodologies for the certificate of need program. It is also responsible for writing the state health plan. The office of community medical facilities (OCMF), which is now called the office of community health services and facilities, is normally responsible for making decisions upon applications for certificates of need. T. 929 (The transcript is in error on line 11; it should read OCMF), 930, 936, 1748, 1251. There are exceptions. T. 937 From 1984 through 1986, the office of comprehensive health planning routinely issued semiannual reports in which it calculated the need for community nursing home beds. H.Q. Exs. 12-18. T. 970-971, 1251. In each of these reports, bed need was projected for an established date. In each of these reports, the "current populations" (the base populations from which the need projection was made) were 3.5 years earlier than the date upon which need was projected. H.Q. Exs. 12-18; T. 1253. From 1984 through 1986, notwithstanding the fact that the semiannual report was based upon a 3.5 year period of need projection, the office of community medical facilities sometimes used a 3.0 year period of projection to actually issue certificates of need. T. 1254. That practice was not uniform within the office of community medical facilities. A number of certificate of need applications were issued based upon the calculations of need in the semiannual nursing home report, which used a 3.5 year period of projection. T. 560-561. It is officially recognized that several formal administrative hearings were settled using a 3.5 year period of projection of need. Health Quest Realty d/b/a Regents Park of Sarasota v. Department of Health and Rehabilitative Services, Final Order issued October 25, 1985 (CON number 3278), DOAH case number 84-3389, which was an exhibit in DOAH case number 86-0050, both cases which were before this Hearing Officer; Health Quest Corporation d/b/a Regents Park of Broward v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 2485, DOAH case number 84- 3297. But even that deviation was not uniform. It is officially recognized that in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051, HRS proposed at the formal administrative hearing to use a 2 year period of projection, using 1986 populations as "current" populations, although the applications were filed in 1985, and need was being projected in 1988. See paragraph 18, findings of fact, of that recommended order, which was written by this Hearing Officer. See also T. 1290. It is also officially recognized that in Forum Group, Inc., et al. v. Department of Health and Rehabilitative Services, et al., 8 F.A.L.R. 5438, 5445, para. 15, the Department used January 1986, as the starting date for a projection to July, 1987, an 18 month period of projection. It would serve no useful purpose to review all the other orders in the files of the Division of Administrative Hearings. It may be concluded from the foregoing that the way in which HRS has interpreted the meaning of "current" populations in its nursing home rule in the period from 1984 to 1986 was inconsistent. In fact HRS did not uniformly use a 3.5 year period of projection as now urged by the Petitioners. Since it has been concluded as a matter of law that the values of POPC and POPD must be determined as of July 1, 1986, no findings of fact will be made as to the populations on January 1, 1986. Whether POPC and POPD are determined from the July 1, 1986, or the May 12, 1987 release of Governor's estimates and projections The Governor's estimates and projections of population are prepared by the Bureau of Economic and Business Research and the University of Florida. T. 240. The Governor's estimates are released twice a year. T. 241. A population estimate, such as POPC or POPD, is an educated guess as to current population size. T. 239. A population projection, such as POPA or POPB, is a mathematical prediction of what a future population size will be. T. 240. The Governor's population estimates are based primarily upon actual data collected with respect to residential electric hookups combined with local information about housing mixes and national data about household size, persons per household, and institutional or group populations. T. 240, 242. The information is gathered each year. T. 242. The Governor's population projections are based upon the most recent population estimate projected forward using assumptions about future migration, mortality, and fertility. T. 240, 242. The May 12, 1987, Governor's population estimates and projections were the official Governor's release on the date of the formal administrative hearing, and were then the most current release. T. 241. The May 12, 1987, Governor's population estimates and projections for July 1, 1986, and July 1, 1989, were more accurate than the release by the Governor on July 1, 1986 for the following reasons: The May 12, 1987, projection of populations on July 1, 1989, is more accurate because the projection only attempts to project two years into the future. The July 1, 1986, release tries to project three years into the future. Extrapolation is more accurate over a shorter period of time because the underlying assumptions upon which the extrapolation is based will be assumed to remain constant for a shorter period of time. Stated another way, fewer things typically go wrong with the assumption that assumptions will remain constant over a short period of time rather than a longer period of time. T. 243-244. The May 12, 1987, projection of populations on July 1, 1989, are based upon actual hard data (electric hookups) for July 1, 1986, projected forward. The July 1, 1986, projection of populations for July 1, 1989, was not based upon a population estimate, but was based upon a population projection as to the population on July 1, 1986, which itself was based upon electric hookup data from an earlier period. T. 244. (This is also the reason that the May 12, 1987, estimate of July 1, 1986, populations, is more accurate than the projection of that population released on July 1, 1986.) The May 12, 1987, projection of populations on July 1, 1989, are based more current (actual 1986) figures upon which the extrapolation is made: actual levels of fertility, mortality, and migration for 1986, as well as 1980 through 1985. The July 1, 1986, release did not have this better data available, and had to rely on figures for only 1980 through 1985. T. 244. The district has grown at about 2.9 percent a year from 1980 to 1986. The July 1, 1986, release projects a rate of growth in each year from July 1, 1986, to July 1, 1989 of only 1.6 percent, or only one-half of the actual observed rate. There is no basis to conclude that the district growth rate in the period 1986-1989 will be one-half the rate observed in the prior six years. T. 245. The July 1, 1986, release bases its projection of July 1, 1989, populations upon an extrapolation based in part upon mortality rates from 1980 mortality tables. However, the mortality rates for the age groups involved, ages 65-74 and 75+, have substantially declined since the 1980 tables were compiled. T. 247-248. Elfie Stamm is Supervisor of the HRS Health Care Facilities and Services office. That office is responsible for all HRS health planning activities, including development of regulations for the certificate of need program, issuance of health policies governing the certificate of need program, and development of the state health plan. Ms. Stamm thought that the May 12, 1987, release of Governor's estimates and projections of populations was more accurate than the July 1, 1986, release because it was based on more up-to-date data. F.G. Ex. 15. The effect of selecting the May 12, 1987, release of populations, rather than the July 1, 1986, release upon the net need projected for the subdistrict in July, 1989, by HRS's rule is exceptionally dramatic: if the July 1, 1986, release is used, the net bed need is 143, and if the May 12, 1987, release is used, the net bed need is 300, assuming other factors are held constant (the projection period and the Home Association beds). HQ Ex. 4. Thus, use of the May 12, 1987, release of populations reveals 100 percent more bed need in 1989 than use of the July 1, 1986, release. HRS presented only one justification or basis for its policy of using the July 1, 1986, release of population estimates and projections: those were the most current estimates and projections at the time the applicants filed their applications and subsequently when the agency conducted its review of the applications in the batching cycle and developed its proposed agency action. T. 1709. The July 1, 1986, release of population estimates and projections was not available, however, when the applicants in this batch had to file their letters of intent. T. 1286. Based upon the Governor's estimates of population released on May 12, 1987, the estimated population on July 1, 1986, for age 65-74 (POPC) was 134,968, and for age 75+ (POPD) was 94,402. H.H. Ex. 6. Projected populations on July 1, 1989, POPA and POPB Based upon the Governor's projections of population released on May l2, 1987, the projected population on July 1, 1989, for age 65-74 (POPA) was 149,771, and for age 75+ (POPB) was 108,400. H.H. Ex. 6. The occupancy rate The occupancy rate for the 2,612 licensed community nursing homes within the subdistrict for October, 1985, through March, 1986, was 94.18 percent. T. 1707. If the 96 nursing home beds at the Home Association are counted as licensed community nursing home beds within the subdistrict, the occupancy rate within the subdistrict for October, 1985, through March, 1986, was 94.29 percent for these 2,708 beds. This is derived by averaging the occupancy rate of the Home Association for the six month period, which is 97.225 percent, see T. 1725, and then factoring the two rates together as follows: (97.225 X 96/2708)) + (94.18 X 2612/2708)= 94.29. The date for determining licensed beds and approved beds for purposes of determining net need in the final calculation The number of approved beds was 368 whether one relies upon the date that the supervisor signed the state agency action report, T. 1708, or August 25, 1986, which is the date of the semiannual nursing home census report and bed need allocations, H.Q. Ex. 16. It appears that all parties agree to use of 368 for AB in the formula. See T. 1708, 437; F.G. Ex. 8. Since that is the case, the following findings of fact are made in the event that the Hearing Officer has overlooked evidence on this point in this voluminous record. HRS relies again on incipient policy for the date of determination of the number of approved beds. That policy is to determine the number of approved beds in the subdistrict on the date that the supervisor signs the state agency action report, a date different from the date that licensed beds are determined. T. 1708, 1716. Pursuant to this policy, the date for determining approved beds will vary, but will always be later than the date of determining licensed beds. T. 1291. The basis for this incipient policy was not explained in this record. T. 1698-1711, 1711-1728, 1291-1295, 1746-1764. Mr. Jaffe, the supervisor in this case, first signed the state agency action report in mid-November, 1986. T. 1295. Subsequently, however there were several superseding state agency action reports, and the report signed originally by Mr. Jaffe was never issued. As a result, the last state agency action report in this case was not issued until August 18, 1987, over one year after the initial applications were filed. This was an irregular procedure, and not the way state agency action reports normally are issued. T. 1714. Moreover, the state agency action report issued in August, 1987, did not have a line or signature for the supervisor, Mr. Jaffe, to sign. T. 1292; F.G. Ex. 5. Changes to the application of Forum Group Forum Group's original application for certificate of need in this case is F.G. Ex. 3. It should be noted that this exhibit contains some revisions to tables that were filed by Forum Group before HRS deemed application to be complete, and thus superseded earlier tables in the same exhibit. At the formal administrative hearing, Forum Group submitted an "update" of its application for certificate of need which was prepared about a year after the initial application, as amended, was filed. The update is F.G. Ex. 6. T. 43. Table 7 of both applications contains Forum Group's plan for utilization by class of pay. Table 7 in the original application was for the first year of operation. Table 7 of the update is for the second year of operation. Table 8 of the application is a list of projected patient charges by reimbursement or charge type. Table 8 of the update is significantly different from the original application. Table 8 of the original application, F.G. Ex. 3, listed charges that were consistent with then current charges at other Forum Group facilities. T. 185. The update is for an effective date two years later. Although Forum Group presented evidence that the charges in the updated table 8 were reasonable, T. 189, it claimed that the above increases were solely due to the two year difference in the tables. T. 195. There is also evidence that the revised charges in table 8 was based upon a telephone survey conducted of subdistrict nursing homes three months prior to the formal administrative hearing. Forum Group was unable to provide any evidence as to whether the charges in the updated table 8 were based upon data that was not available to Forum Group when the original table 8 was prepared; moreover, Forum Group did not prove that the data was such that Forum Group could not, and reasonably should not, have been expected to have gathered for its original application. T. 198. The revisions of table 8 were not based upon ordinary inflation. Forum Group assumed in both the original table 8 and the revised table 8 that the inflation rate impact on charges between the first and second year of operation would be only 3.5 percent, T. 199. Forum Group's expert on charges was of the opinion that the inflation rate for expenses would be about 3.5 percent. T. 200-201. The increases in charges shown on table 8 of the update are much greater than expected inflation. For example, the charge for Medicaid ICF semiprivate rooms increased from $50 to $63, an increase of 26 percent. The charge for private pay ICF private rooms increased from $75 to $115, an increase of 53 percent. Table 10 of the application is a projection of patient days and occupancy percentages for each month over the first two years of occupancy. The revision to table 10, F.G. Ex. 6, were prompted by the delay in the case, resulting in an initial opening date two years later. The revisions to table 10 in the update were also based upon the prior experience of Forum Group and a telephone survey of subdistrict nursing homes to obtain more current fillup and occupancy rates. T. 39, 79-80, 84-87. The telephone survey was conducted after the initial application was deemed to be complete. Table 11 of the application sets forth the "manpower" requirements, specifying full time equivalents and annual salaries. Revised table 11 in F.G. Ex. 6 contains changes both in annual salary levels and in FTE's. The dietary supervisor and maintenance supervisor are new positions in the revised table 11, and would be shared with the retirement living facility. These positions could have been reported in the original table 11. T. 164; F.G. Ex. 6. The revised table 11 reports positions for utility workers, positions not in the original application but which could have been reported in the original table 11. T. 166. The revised table 11 has fewer registered nurses and licensed practical nurses than the original application. This change was based upon Forum Group's decision that this new staffing pattern would be more efficient. While the testimony attributed this to a difference in projected occupancy in the first year (95 percent instead of 74.4 percent), this is not a plausible reason for changing the number of RN FTE's from 5.3 to 4.3, or the number of LPN FTE'S from 3.6 to 2.8, since one would expect a need for more nursing at higher occupancy. The revised staffing pattern could have been contained in the original application. T. 166, 170. The increases in salaries reported in the revised table 11 were caused in part by inflation (a later opening date). T. 161-62. The revision in salaries was based upon a survey of salaries conducted a year after the application was filed, T. 162. Considered in the new survey was new information concerning federal requirements for professionals that was estimated to make the professional hiring shortage even worse. Id. It is concluded that the basis for the revisions to the salaries was market data that could not have been available to Forum Group when it filed its original application. Table 25 of the application covers estimated project costs. Revised table 25, F.G. Ex. 6, contains changes of two types: shifts of costs from one accounting line to another, and new estimates of costs based upon a later date of construction. T. 66-67, 91-94. The new estimates of costs were based upon inflation and the current construction experience off Forum Group, both of which would not have been available to Forum Group when it filed its initial application. T. 66-67. The shifts in costs by accounting line (even though one shift was to operating costs), considered alone, did not substantially change the total project cost. T. 91-94. The construction costs contained in the revised table 25, F.G. Ex. 6, are projected to be $1,654,826, which is 12 percent greater than the $1,466,500 originally projected. This new estimate is based upon inflation, current construction experience, and a decision to reduce some less essential space to lower costs. T. 66-67, 1461-65. The inflation rate is estimated to be higher than 3.5 percent in 1990, and the date of commencement of construction is inferred to be two years later than the date assumed in the original application. The revised projection is also more conservative, based upon Forum Group's analysis of current market data. The revised construction cost is thus adequately based upon new data that was not available to Forum Group when it filed its original application. As a result of inflation, Forum Group decided to reduce some space that was less essential. The reduction of space is reflected in revised tables 17 through 20 of F.G. Ex. 6. Forum Group's initial application (F.G. Ex. 3) did not mention or discuss patient treatment plans, patient rights, patient councils, or Alzheimer's programs. It did, however, list 10 special areas of nursing that it would provide, many of which are in the subacute area. See, e.g., ventilator care and compare T. 150. The revised pro forma of operating expenses projects total operating expenses in the first year of $923,153 and $1,256,991 in the second year. F.G. Ex. 6. The original application, as revised before deemed complete, reported total operating expenses of $659,900 and $740,693, respectively, for these same projected years. The new information in the revised pro forma was explained as based upon a projection of higher use by private pay patients and faster fillup, as well as some inflation. T. 202. The change clearly is not explained as a simple matter of inflation, since the increases are about 50 percent in each of the years. T. 201-202. Changes to the application of Health Quest The original Health Quest application is H.Q. Ex. 1, as amended by H.Q. Ex. 2, and is for an 88 bed community nursing home facility. Health Quest submitted a revised application for 60 beds dated a year later, in September, 1987. H.Q. Ex. 3. Table 8 of the application is the list of projected charges by patient type. The revised application, H.Q. Ex. 3, increased charges from 25 to 34 percent. This new information was not based solely upon inflation assumptions, but was based upon increased assumptions about operating costs, and a decision to make a more conservative projection. T. 629, 690-91. Health Quest did not prove that these assumptions were based upon data not available when the original application was filed. Table 11 of the application lists manpower by position and projected annual salary. The revised table 11, H.Q. Ex. 3, increases the numbers of registered nurses and licensed practical nurses from the original application. The new data is based upon the experience of Health Quest in the year following the filing of the original application. T. 630. The testimony on pages 688-89 of the transcript is not inconsistent with the testimony on page 630. It is evident that a change in planning took place, and that the change in planning was based upon new experience. Table 17 of the revised Health Quest application, H.Q. Ex. 3, does not have six 3 bed rooms which had been planned for the facility in table 17 of the original application, as amended, H.Q. Ex. 2. This new information was not caused by the reduction of the application from 88 beds to 60 beds. Health Quest did not credibly prove that its decision to delete 3 bed rooms from its project was based upon data that it could not have had when it filed its original application. T. 630-31. Table 18 of the revised application, H.Q. Ex. 3, changes the square footage of 1 bed rooms from 150 to 216. Health Quest did not credibly prove that its decision to make this change was based upon data that it could not have obtained when it filed its original application. T. 632-33. Changes to the application of Careage Careage presented new information at the hearing which consisted of Careage Exhibits 18-22 and 24-25. The changes to these exhibits were based solely upon a small (3 percent) inflation rate or a different starting date. T. 1570-85. There was also a decrease in utility rates of an apparent few thousand dollars. Compare C. Ex 25 to C. Ex. 3, attachment 12. T. 1583-85. The new projection of utility rates was shown to be based upon new information from the utility company, and new heating and cooling technology. T. 1584. Changes to the application of Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. The merits of the Careage application Credibility of the Careage application Credibility of Mr. Gentle Russell Gentle is Careage's Vice President for nursing home operations, and is responsible for development of the nursing home at issue in this case, and operation of the facility after it opens, as well as development and operations of other Careage nursing homes. T. 1487. The application filed by Careage in this case was prepared by Mr. Gentle, with the exception of the section on need. T. 1491. Mr. Gentle was called as an expert witness for Careage to provide opinion testimony to substantiate the Careage application and to prove the nature of the facility that Careage states it would build and operate if granted a certificate of need. T. 1491-93. Mr. Gentle testified twice that he had a bachelor's degree with a major in accounting from the Alaska Methodist University. T. 1487, 1493. This testimony was presented in order to have Mr. Gentle qualified as an expert witness. Mr. Gentle was tendered as an expert in several areas, including nursing home finance. T. 1493. Upon voir dire examination, and after it became obvious that counsel conducting the examination had investigated Mr. Gentle's academic credentials, 1493, Mr. Gentle admitted that he did not have a degree in accounting, but that his degree had been in science. T. 1496. A motion was made to have Mr. Gentle precluded from testifying as a witness due to his untruthful testimony. T. 1497-98. The motion for the sanction of preclusion of testimony was denied, but the tender of expertise was denied for lack of credible evidence in the record as to expert credentials. T. 1499, 1504, 1512-13, 1514-16. Since the witness had intentionally lied about his college education, a matter of importance in determining expertise, the remainder of the witness's testimony as to his experience and expert credentials was tainted and not credible. There was no independent evidence of the training and experience of the witness, other than from his own testimony. The tender of expertise thus was denied for lack of credible evidence of expertise in the record. If Mr. Gentle's testimony concerning his experience in nursing home development had been credible, the evidence of such experience was not sufficient to qualify Mr. Gentle as an expert in nursing home development. Since 1985, he had been fully responsible for development of only two nursing homes, and assisted in the development of five others. T. 1509, 1489, 1514-15. If Mr. Gentle's testimony concerning his experience in nursing home operation and administration had been credible, the evidence of such experience was not sufficiently detailed to qualify him as an expert in nursing home operation and administration. T. 1513-15. Mr. Gentle had never served as a nursing home administrator. T. 1494. Mr. Gentle testified that in 1972 he went to work for the State of Alaska as an auditor in the Department of Health and Social Services. He further testified that he worked his way up through the sections and became chief Medicaid auditor for the state of Alaska. T. 1487. The employment record for Mr. Gentle, however, from the State of Alaska was admitted into evidence without objection. H.H. Ex. 33. That record shows a starting date of work in 1973, not 1972. More important, it does not show continuous employment consistent with the claim of having worked "up through the sections." The record shows no employment of Mr. Gentle by the State of Alaska for 2 and 1/2 years, from July, 1973, through March, 1976, and the only employment is in temporary positions, not in permanent positions expected to have been in the "sections" Mr. Gentle "worked up through." Finally, the employment record only shows Mr. Gentle in a position as an accountant IV (temporary) for a 9 month period in 1976. Mr. Gentle's testimony that he obtained the position of chief Medicaid auditor for the State of Alaska after working his way up through the sections is not credible. Mr. Gentle testified that C. Ex. 15 was an excerpt from the magazine "Contemporary Long-Term Care," and that this excerpt was the section of the magazine that included an award. T. 1541-42. He testified that all of the narrative in the exhibit was part of the magazine and the award. T. 1542. This is testimony was incorrect. The last page of the exhibit contains narrative that is advertisement prepared by Careage. The typeset is identical to that in the interior pages as well. Thus, pages 2-4 of the exhibit are not excerpts from the magazine. Mr. Gentle did not choose his words with care as he testified. Table 11 (projected salaries and FTE's) is a part she original application filed with HRS in July of 1986. Mr. Gentle testified that in part the projected salaries were based upon salaries that "Careage is paying to its existing staff." T. 1557. At that time, Careage did not operate any nursing home. Mr. Gentle could have meant that these were salaries in nursing homes leased out by Careage, but his choice of words was misleading. Whether Careage will operate the facility Careage was started in 1962, and since that time it has constructed more than 270 new hospitals, nursing homes, and related facilities. Generally, Careage has built facilities for others to operate. T. 1516-17. A few of these (seven were named, T. 1520) may have been operated by Careage, but the vast majority were not. T. 1591-1520. In 1982, Careage ceased all nursing home operations. T. 1592. From 1982 through 1985, Careage did nothing but hospital development. T. 1519. In 1985, Careage decided to build and operate nursing homes, and in March 1985, hired Mr. Gentle to set up the operating arm of the corporation with respect to nursing homes. T 1513, 1518. In July, 1986, when Careage filed its application for a certificate of need, Careage did not operate any nursing homes in the country. T. 1595. It appears that the first nursing home now operated by Careage was opened in December, 1986. T. 1610. At the time of the formal hearing, Careage operated and managed three nursing homes on its own, and jointly managed three others. (Another was said to be "jointly operated by others.") T. 1519-20. All of these facilities are in western states. In the letter of intent, Gene D. Lynn, the proposed owner of the proposed facility, and the sole owner of Careage, stated his intent to operate the proposed nursing home in Hillsborough County. C. Ex. 3, attachment 8. The application, C. Ex. 3, asserts on page 4-24: Each community and situation is unique. There are times in which we operate directly through Healthco Management (a wholly owned subsidiary). In all cases, we establish the operating procedures and pro forma and closely monitor each facility. This strategy has generated such a successful program that, in twenty-four years of business, we can boast at never having missed a debt service payment nor have we had a single incident of governmental intervention into our operations. (E.S.) The clearly intended implication of the foregoing portion of the application is that for 24 years, Careage has either operated its nursing homes (which in the majority of cases was untrue) or, if it did not operate its nursing homes, it "closely monitored each facility." The statement in the application that Careage closely monitors each facility is not true, at least with respect to currently leased facilities. Mr. Gentle, who is in charge of nursing home operations for Careage, does not routinely review state licensure survey reports for leased facilities. T. 1842. Leased facility reports may be reviewed by the Careage leasing section, which is separate from nursing home operations. T. 1842. The only monitoring that Careage does with respect to leased facilities is to step in if there is government intervention. T. 1843. Careage has retained the contractual right to intervene in the operations of a leased facility only "in cases of severe problems in a facility." (E.S.) T. 1518. The statement in the application, P. 4-24, concerning the history of Careage as to operation or supervision of nursing homes is misleading. As will be discussed ahead, Careage representatives were either confused about the operation of nursing homes by Careage (Dr. Etten) or used words in a manner that misrepresented the operational status of Careage (Mr. Gentle and representatives of Careage at a dinner meeting with Ms. Hardy). These misleading statements, coupled with the prior history generally of not operating nursing homes, lead to the conclusion that Careage has not proved that it will operate the proposed nursing home in Hillsborough County by a preponderance of the credible evidence. Substantive aspects of the application General provisions Careage's original application proposed to construct 120 beds, 10 of which would be a subacute unit, 21 of which would be an Alzheimer's unit, and the remaining 89 beds would be general SNC/ICF (skilled/intermediate) nursing care beds. C. Ex. 3, P. 2-1. Four of the ten subacute unit beds would be designated for neonates and technology dependent children. C. Ex. 3, P. 3-6; T. 1522. The 10 bed subacute unit is proposed to provide 24 hour nursing care patients who are recovering from strokes, craniotomy patients, comatose victims of accidents, and others suffering serious chronic maladies. T. 1212. Nursing services to be provided include tube feedings, ventilators, tracheostomies, continuous intravenous infusion, hyperalimentation, total parenteral nutritional care, and inhalation therapy. T. 1213. The program proposed by Careage conforms to professional standards for such a program. Id. The 21 bed Alzheimer's disease unit is designed and intended to provide an environment adapted for the special needs of those patients. The design and program emphasizes low stimulation, safe ambulation, and simplicity to minimize confusion. The design is considerably more therapeutic for such patients than commingling such patients among other patients in an ordinary nursing home setting. T. 1206-12, 1432, 1474-75. The precise number of skilled and intermediate care nursing beds is unclear. At least 39 beds will be skilled nursing, and 21 beds for the Alzheimer's patients. T. 1136. Careage intends to concentrate on skilled nursing care rather than intermediate care. T. 1523, 1678. Careage does not intend to serve the market for intermediate care. Id.; C. Ex. 3, attachment 8. Careage did not include adult day care in its application, T. 1142, 1592, because it takes the position that adult day care does not require a certificate of need. T. 1592. Careage in fact will not offer adult day care. T. 1192. Careage intends to provide respite care at the facility. T. 1531. Careage estimates that 37 percent of its patients will be Medicaid patients. T. 1361. Quality assurance The nursing quality assurance programs described in the application of Careage are adequate, and would be adequate if implemented by Careage. T. 1221. Dr. Etten testified for Careage concerning her visit to two nursing homes owned by Careage. She did not express an opinion that the Careage quality assurance program in fact would be implemented based upon these visits. She did not describe the current operation of any Careage quality assurance program. She simply stated that she was favorably impressed by the physical environment in those two nursing homes. T. 1221-26. One of the facilities was in Salt Lake City, Utah, and there is no evidence in the record that Careage operates that facility. See T. 1519-20. Indeed, Dr. Etten later admitted on cross examination that she knew the Utah facility was not operated by Careage. T. 1234. Throughout the application process, Careage tended to misrepresent its status as an existing operator of nursing homes providing care of good quality. As discussed above, in the meeting in August or September, 1986, attended by Mr. and Mrs. Lynn, Mr. Haben, and Ms. Hardy, Careage's representatives told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. The application, at page 4-24, appeared to assert that Careage had 24 years of experience operating nursing homes. Mr. Gentle represented that proposed salaries were based upon salaries in nursing homes currently operated by Careage. These statements were not true. Careage leased facilities, but did not operate any facilities at that time of the application, and its history had been primarily in the development of health care facilities for operation by others. Careage did not exercise close operational control of the leased facilities. And Dr. Etten seemed unconcerned as to what entity was operating the Utah nursing home that she visited. Her failure to do so caused her testimony to appear to be representative of the quality of care actually provided at Careage operated nursing homes. For these reasons, Careage did not prove by a preponderance of the credible evidence that it has had a history of operation of nursing homes, that it has had a significant history of providing nursing care of good quality, that it has had substantial experience in management of quality assurance programs, or that it would in fact implement the quality assurance program reviewed by Dr. Etten. Staffing Staffing, particularly nursing staffing, is established based upon the assumption that most of the beds at the Careage facility will be at least skilled nursing care beds, and some will be Alzheimer's disease beds or subacute beds, including beds for technology dependent children. Attachment 14, Ex. 3. The nursing staffing proposed by Careage is adequate. T. 1216. Other staffing proposed by Careage is based upon staffing at other facilities owned by Careage and standards in HRS rules. T. 1557, 1559. It is concluded that other staffing is adequate. The projected annual salaries for staff are reasonable. T. 1648, 1656, 1680-81. The objection to this testimony, taken under advisement, was overruled. T. 1687. The witness amply demonstrated expertise with regard salary levels. Construction and facility design The building proposed by Careage would be one story and have 45,500 square feet for 120 residents, or a total of 379.17 gross square feet per bed. T. 1133. The application represents that the net square foot area for living space in 2 bed (semiprivate) rooms is 283 to 295 square feet. C. Ex. 3, table This was an exaggeration. The actual square footage was shown to be substantially less upon cross examination: 213.75 square feet of living space for semiprivate rooms. This figure is based upon the fact revealed upon cross examination that the length of the room for purposes of calculating gross square feet is 23.5 feet instead of 24 feet, 4 inches. This correction reduces gross living square footage for the living area to 305.5, and net to 213.75. The floor plan, site plan, and space programs in the proposed design are adequate and will meet or exceed all requirements of Florida law. T. 1137. The nursing home floor plan does not include a space for adult day care. T. 1142. Careage projects that construction costs will be $56.77 per square foot. This estimate is in line with estimates of other applicants and is reasonable. T. 1176-78. Construction costs equate to $21,526 per bed. Careage did not include an estimate of costs for equipment for technology dependent children, but plans to cover this with funds estimated for contingencies. T. 1195. The amount of such costs is not in evidence. Id. The estimate of overall project costs, table 25 of the application, Ex. 3, is reasonable. T. 1171-76. Total project costs are estimated to be $4,150,000, or $34,583 per bed. The project cost includes $515,000 for 3 to 5 acres of land. T. 1546. The adequacy and appropriateness of the proposed equipment for the facility was not established by expert testimony. See T. 1179. Availability of resources Gene D. Lynn has an extensive history in successfully financing and constructing health care facilities, including nursing homes. T. 1516-17. Gene D. Lynn has more than adequate lines of credit to obtain complete financing for this project. T. 157 6- /7 Existing lines of credit, including SeaFirst, are available up to at least $9 million. T. 1576. The objection as to hearsay, which was sustained, was sustained only as to what unnamed persons with Washington Mutual "indicated." The remainder is not hearsay. It is testimony of the existing state of facts within the personal knowledge of the witness. The foregoing findings of fact are based upon testimony of Mr. Gentle, whose credibility as a witness was partially impeached as discussed in findings of fact above. Mr. Gentle's credibility problems, however, are not sufficient to compel the disregard of his testimony as to the general financial condition of the Lynns and Careage. Mr. Gentle demonstrated that his testimony as to his own expert qualifications was unworthy of belief, and he demonstrated that some portions of his testimony concerning the features of the proposed facility were exaggerated or incorrect. But this is not sufficient evidence to conclude that his testimony as to general financial resources of Careage is an untruth. It is noted that there is no evidence in this record to suggest in any manner that Gene Lynn does not have the net worth set presented in his unaudited financial statement. That net worth is over $45 million. If this were a substantial untruth, surely one of these highly competitive applicants would have presented evidence on the point. Financial feasibility The proposed project is financially feasible in the short term. T. 1632-39, 1686. Careage's projections as to patient mix (by payor type) and expected fillup (utilization) are reasonable. T. 1640- 42 The charges proposed by Careage are reasonable. T. 1642-45. Careage's projections as to operating expenses are reasonable. T. 1648, 1656-57. The proposed project is financially feasible in the long term. T. 1647, 1649-50, 1686. The Forum Group application General provisions Forum Group is a national company which owns and operates 11 retirement living centers and 22 nursing homes in a number of states. The retirement living centers are independent rental apartments which do not require entry fees. T. 20; F.G. Ex. 3. The Forum Group proposal is to construct and operate a 60 bed community nursing home in conjunction with a retirement living facility of 120 apartments and an adult congregate living facility of 30 units. F.G. Ex. 3, attachment 1. The community nursing home section would offer all services required for provision of skilled nursing care, intermediate nursing care, respite care, and adult daycare. T. 27. Forum Group does not propose to provide a separate Alzheimer's disease unit. The estimated total cost of the nursing home portion of the project is $2,673,084. F.G. Ex. 6, table 25. This is $44,551 per nursing bed. Forum Group will accept Medicare and Medicaid patients. T. 27, 210. Quality assurance Forum Group has never had a license denied, revoked, or suspended, and it has never had one of its facilities placed into receivership. T. 158. The proposed facility would provide 24 hour supervision by either a registered nurse or a licensed practical nurse, or by both. T. 140. The staffing levels proposed in the original application are adequate. T. 153. Staffing levels would vary according to the needs of the residents. T. 134. Medications would be distributed by unit dose. T. 139. Forum Group would implement an adequate plan for quality assurance audits. T. 141-43. The plan is in writing, is in use in other Forum Group nursing homes, and covers all aspects of the operation of the nursing home that are relevant to the quality of care received by nursing home residents. Forum Group would check staff qualifications prior to employment and would provide ongoing staff training. T. 149. Forum Group would provide residents with written statements of patients' rights upon admission to the facility, and would have an independent patients' rights council. T. 147- 48 Forum Group provides reasonably adequate nursing care in its existing nursing homes, and would do so in the proposed nursing home. T. 31-32, 158. Staffing The staffing proposed for the facility, and projected salaries, are reasonable and adequate. T. 151-154. Forum Group reviews the qualifications of applicants to insure that applicants are qualified for the job. T. 149. Construction and facility design Forum Group's community nursing home facility will have about 24,500 square feet. This is reduced from the original 27,000 due to inflation in costs. Patient room areas were not changed. T. 1453. This is 408 total gross square feet per bed. The net living area square footage allocated to semiprivate 2 bed rooms is 228 square feet. F.G. Ex. 3. The square footage allocated in both versions is reasonable. T. 1445, 1453. The building would be wood frame with brick veneer. It would have heavy roof insulation, double glazed windows, and a heat pump to conserve energy and to operate with less utility expense. T. 1454. The construction costs, including equipment costs, estimated for the revised project, F.G. Ex. 6, table 25, paragraph d., are reasonable. T. 1453. The costs as originally projected were also reasonable. T. 1446. The proposed facility would comply with state and federal standards for construction. T. 1456. The 60 bed community nursing home would require two to three acres of land. T. 1455. The $400,000 estimated to be needed to acquire a suitable site is reasonable for location in the northwest portion of Hillsborough County. T. 54, 59. Availability of resources Forum Group will attract suitable health care professionals, despite the shortage in Hillsborough County, by offering attractive fringe benefits, including attractive work schedules and continuing education. T. 156-57. Forum Group has the financial resources to construct and begin the initial operation of the facility. T. 182-84. Financial feasibility The project is financially feasible in the short term. T. 182-84. Due to its corporate size and current operation of a number of nursing facilities, as well as the size of the combined planned facility in Hillsborough County, Forum Group will be able to purchase supplies and other operational necessities at a favorable low cost, thus saving on operational expenses. T. 156. The estimated fillup rate in the original application was about 75 percent occupancy after the first year and about 86 percent occupancy after the second year. T. 37. Given the recent experience in Hillsborough County of occupancy around 95 percent and very fast fillup rates for new nursing homes, T. 116-18, a projection of 86 percent occupancy in the second year is probably too low. For purposes of determining financial feasibility, it is reasonable but conservative. T. 37. The project is financially feasible in the long term based upon the pro forma contained in the original application. T. 186-88; F.G. Ex. 3. The merits of the Hillsborough Healthcare application General provisions Hillsborough Healthcare, Ltd., is a Georgia limited partnership owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. Hillsborough Healthcare, Ltd., would own the proposed facility. T. 419. The facility would be managed by Convalescent Services, Inc., (CSI) which is also owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. CSI was formed in 1978 to own and operate extended care facilities owned or controlled by the Kelletts. T. 420. CSI currently operates 21 nursing homes and 3 retirement homes in 7 states. Six of the nursing homes and 2 retirement centers are in Florida. Id. Centralized management is provided by regional offices in Sarasota, Houston, Texas, and Huntsville, Alabama. T. 420. The long range plan of CSI is to acquire and develop nursing facilities in locations where CSI already has a management structure nearby. T. 421. Hillsborough Healthcare proposes to construct and operate a single story combination nursing home, consisting of 120 beds, and an adult congregate living facility, consisting of 60 beds. H.H. Ex. 1; T. 423. The 120 nursing beds would consist of 60 skilled nursing beds and 60 intermediate care beds. The 60 skilled nursing beds includes a distinct 24 bed unit for Alzheimer's disease patients. Id. The application estimates the total project cost to be $5,032,475, with $3,367,668 of that cost attributed to the nursing facility portion of the project. H.H. Ex. 1. This is $28,063.90 per nursing bed for 120 beds. The facility would have a rehabilitation program, activities, and social services programs. T. 423. The Hillsborough Healthcare facility intends to make its facility available as a training facility for medical and nursing schools. T. 461. The facility would participate in both the Medicare and Medicaid programs, and estimates about 30 percent Medicaid utilization. T. 423. Hillsborough Healthcare would accept partial approval of only 60 nursing home beds. T. 490. In that event, the 60 bed nursing facility (combined with the 60 bed adult congregate living facility) would offer the same services, including the 24 bed Alzheimer's disease unit. T. 390, 473. Access as a patient to the facility will be on an equal basis, without distinction as to race, religion, or sex. The facility will be constructed to provide handicapped access. T. 462-63. At least 30 percent of the patients served by the Hillsborough Healthcare facility would be Medicaid patients, and the percentage may well be higher. Currently, 17 of the 21 CSI nursing homes participate in state Medicaid programs, and all of the Florida nursing homes have Medicaid patients. All new nursing homes developed by CSI participate in both Medicaid and Medicare. Many of the 17 nursing homes were not Medicaid certified prior to acquisition by Hillsborough Healthcare, but are now certified and participate. CSI has never decertified one of its nursing homes as a Medicaid provider. T. 424. Existing CSI managed facilities in Florida are currently experiencing a 40 percent Medicaid utilization, which includes at least one in Hillsborough County. T. 1798. B. Quality assurance Sixteen of the 21 CSI managed nursing homes are in states that use a licensure rating system, and of these, 14 are have achieved the highest rating. T. 422. No CSI facility has ever had its licensed revoked or has ever been fined. Id. One-half (three) of CSI managed Florida facilities are rated superior. T. 319. Centralized management and location of facilities so that management resources can be shared should enhance the quality of care at the proposed nursing facility. The quality assurance program will be guided by a lengthy policies and procedures manual that is in use in other Florida CSI managed nursing homes. H.H. Ex. 11; T. 313. CSI employs a full time Florida registered nurse to make visits at least once a month to CSI facilities in Florida as a part of the quality assurance program. T. 316. The nurse conducts quality of care inspections, using measuring instruments developed by the CSI quality assurance program, and teaches new methods to improve the quality of health care. T. 317. Hillsborough Healthcare will have an adequate quality assurance program. T. 310. C. Services and programs CSI would provide programs for care of Alzheimer's disease patients, respite care, and adult day care. Respite care is temporary nursing care, for 16 days or less, to give the family a temporary rest from home care, and to improve the condition of the patient. T. 300. Adult day care is care only during the day to enable a family member to work. T. 301. Both types of care provide an opportunity for the elderly patient to receive nursing services, including the programs and medical care available at the nursing home, while giving home care providers a rest or needed free time. The Alzheimer's disease unit of 24 intensive care nursing beds would have operational and design features to meet the special needs of those patient. The medical director is to be board certified with a specialty in geriatrics and training with respect to Alzheimer's disease. Activities will be altered to accommodate the limitations of those patients. Staffing will be at a higher level, and staff will be specially trained to meet the needs of those patients. The facility will be designed with a secure courtyard, special dining room, and wander guard, to allow movement without physical or chemical intervention or restraints. T. 299, 289. CSI varies the activities programs at its facilities to match the needs of patients. T. 270. Activities for Alzheimer's patients, adult day care and respite care residents are designed within the limitations of those patients. T. 289-90. CSI typically provides activities that provide small and large group interaction, socialization, mental and physical activity, recreation, and religious activities. T. 270. The activities that have been implemented or suggested for CSI facilities are innovative, varied, and appear to be the result of much thoughtful work. T. 273-74; H.H. Ex. 1, pp. 115-123 H.H. Ex. 8. Some of CSI staff involved in activities have received awards for their work. T. 288. The proposed facility would provide activities similar to the activities provided at other CSI facilities. T. 274. CSI has employed an expert in community relations and activities programming to coordinate community relations, activities, and the volunteer program at all CSI nursing homes, including the proposed facility. That expert is the author of pp. 114-121 of the application, H.H. Ex. 1. The expert would recruit and train activities and community relations directors at the proposed facility. T. 287. CSI publishes a newsletter containing an exchange of program information, and encourages each nursing home to publish its own newsletter. Some do. H.H. Ex. 10; T. 284-85. Volunteers are encouraged to participate in nursing home activities. 272. CSI has compiled a package of volunteer information for use in development of a volunteer program at each nursing home. H.H. Ex. 9. Volunteers increase resident participation in programs, bring fresh ideas, and causes there to be a greater variety of activities and programs for residents. T. 281. Association of the nursing facility with an adult congregate living facility is a useful way to provide continuity of care and lessens the trauma to the resident of the initial move into a nursing facility. In some cases, a spouse may live in the adult congregate living facility and thus be closer to the spouse who must be in a nursing facility. CSI currently manages Sun Terrace Nursing Center, a 120 bed nursing home, and Lake Towers Retirement Center, both in Hillsborough County. Consequently, CSI has already in existence a network of relationships that would benefit residents at the proposed facility. Existing relationships include a system for patient referrals from local hospitals, transfer agreements with local hospitals for acute and emergency care, and agreements with local providers for ancillary services, such as physical therapy, diet therapy, occupational therapy, speech therapy, opthalmology, dental care, podiatry, x- ray, and pharmacy services. T. 302-304. Similar agreements for the proposed facility could be established. Such agreements are cost effective because used only as needed. T. 304. CSI would provide all the ancillary services listed in figure 1, page 14, H.H. Ex. 1. T. 304. Staffing The proposed staffing of the facility, including the 24 bed Alzheimer's disease unit, is adequate. T. 308. The proposed salaries are reasonable and adequate. T. 309. Hillsborough Healthcare will be able to recruit adequate staff. T. 309. Hillsborough Healthcare will provide a reasonable staff development program. T. 309. This program will aid in the retention of staff. T. 310. Construction and facility design The 120 bed nursing section is designed to include 4 private rooms and 58 semiprivate (double occupancy) 4 rooms. T. 355. The design includes the services and departments listed on table 12 of H.H. Ex. 1. It is proposed that the total gross square feet will be 33,996, or 283 square feet per bed. H.H. Ex. 1 The square footage allocated by the design to net living space in patient bedrooms and gross area of the nursing unit, tables 18 and 19, H.H. Ex 1, are reasonable. T. 355. Semiprivate (2 bed) rooms would have 185 net square feet of living space. The Hillsborough Healthcare design has several cost saving features. Sharing ancillary services and spaces (kitchen, administrative areas, and laundry) with the adult congregate living facility of 60 beds reduces the overall construction and equipment cost and operational cost per bed. Use of a modular "T" configuration, with straight line walls and corridors for units, results in a savings in construction cost. T. 360-61. The compact design, accompanied by extensive roof over hangs and insulating materials, will reduce energy requirements. T. 357 The floor plan could easily be altered by alteration of the arrangement of the modular wings to fit on different sites. T. 358. Nurses' stations are located in the middle of wings, giving good visibility down corridors, but no visibility into rooms. The nurses' station is 7 rooms from the most distant room on any wing. H.H. Ex. 1, p. 103. The Alzheimer's disease unit is in a separate portion of one wing, and is contiguous to an interior space that will be fenced to make a secure courtyard. T. 357; H.H. Ex. 1, p. 103. The construction cost includes additional wheelchairs and walkers, and includes $4,500 for a wander guard system for the 24 bed Alzheimer's disease unit. T. 364. The projected construction cost includes fixed equipment. T. 356. The construction cost of $2,331,418 is reasonable. T. 356. All of the costs estimated in table 25, H.H. Ex. 1, p. 33 (estimated project costs) are reasonable. T. 345-466, 356, 455-56. Availability of resources Through available equity and long term debt, adequate resources exist for Hillsborough Healthcare to construct and initially operate the proposed facility. T. 396-402. Financial feasibility The proposed facility is financially feasible in the short term. T. 396-402; H.H. Exs. 15, 16, 1. The projected charge rates, table 8, H.H. Ex. 1, are reasonable. T. 379-80, 400, 452. The projected percentages of patient utilization by payor class, table 7, H.H. Ex. 1, are reasonable. T. 450, 393. The projected number of expected patient days in the first two years of operation, tables 10 and 7, H.H. Ex. 1, reasonable. T. 488-49. The projections of total revenue, table 7, H.H. Ex. 1, are reasonable. T. 400-01. The projections of expenses and net income for the first two years of operation are reasonable. H.H. Ex. 1, pp. 100-01; T. 401-02. The 120 community nursing home bed version of Hillsborough Healthcare's application is financially feasible in the long term. T. 402. If the Department partially approves the Hillsborough Healthcare application for 60 beds, to be operated in conjunction with the 60 bed adult congregate living facility, the projection will be financially feasible in both the short and long term. T. 402. The project would be financially feasible with a higher Medicaid participation. T. 424. The merits of the Health Quest application General provisions Since critical portions of the 60 bed application, H.Q. Ex. 3, were impermissible changes to the 88 bed application, and thus not admitted into evidence, only the 88 bed application will be discussed. Health Quest proposes to construct and operate 88 community nursing home beds in conjunction with an adult congregate living facility of 124 units. H.Q. Ex. 2. The total cost of the nursing portion of the facility is estimated to be $3,054,466, or $34,719 per bed. H.Q. Ex. 2. Health Quest has entered into an agreement with a group of 129 physicians, organized as the University Community Physicians Association of Tampa. That association comprises the bulk of the physicians who practice at University Community Hospital in northern Tampa. T. 585. The agreement is that Health Quest would build and manage the nursing home, and the physicians would provide medical oversight and referrals. T. 579. The physicians would contribute to equity and share in operating profits and losses. T. 624. The share is 25 percent. T. 694-95. Other details are not in evidence. The negotiations for the agreement with the University Community Physicians Association of Tampa took several months, and the agreement itself did not come into being until August, 1987. T. 581. The University Community Physicians Association of Tampa is not named as an applicant in the original application since the agreement came into being after the application was filed. Health Quest intends to construct the proposed nursing home and adult congregate living facility near the present location of the University Community Hospital. T. 583. Health Quest intends to serve approximately 30 percent Medicaid patients. T. 841, 1102. Quality Assurance Health Quest has nursing homes in Florida, Indiana, and Illinois. Health Quest has a reputation in Indiana and Illinois for providing good health care. T. 599-609. Health Quest has three nursing homes in Florida. Of those three, two had been open long enough at the time of the hearing to have received a Florida rating. Both were rated superior. T. 610. Health Quest has a nursing home in Jacksonville, Florida, and the quality assurance program and services at that facility are representative of the type of care and services at other Health Quest facilities, as well as what is intended for the proposed Health Quest facility in Hillsborough County. T. 1077, 1102. All findings of fact which follow that reference the quality of care or scope and nature of services at the Jacksonville facility are thus also findings of fact that these quality assurance programs and services are intended to exist at the Hillsborough facility. The Jacksonville facility maintains a resident care plan on each resident. Health Quest would provide health care of good quality at its proposed facility. Services and programs The Jacksonville facility provides a number of services that require skilled nursing or arguably fall within the category of "subacute" care. The term "subacute" care is not a formal definition, and there is no Florida licensure category for that phrase. The Jacksonville facility provides intravenous therapy, parenteral nutrition, and tracheostomy care. T. 848-51. It also provides care for comatose patients (accident or stroke victims) regardless of age, and care of post-craniotomy patients. T. 851-53, 855-56. Health Quest does not intend to care for neonates (sick infants less than two weeks old). Neonates require care that is distinct from the care required for the elderly, thus requiring staff with different training. Neonates also can be at substantial risk from respiratory and urinary infections commonly present among the elderly in a nursing home. T. 859-61. The Jacksonville facility provides physical therapy, speech therapy, and occupational therapy. The physical therapist is a full time position. T. 871. The Jacksonville facility provides counseling to residents and families with a full time social worker on staff. T. 864. The Jacksonville facility provides music therapy, outside trips, and other activities, such as family night, the artist in residence program, and use of the facility for community programs. T. 866, 888, 892. Some of these programs are conducted jointly with the adult congregate living facility. Volunteers are used in the activities programs as well. T. 869. The quality of the activities program is directly related to the numbers of staff persons involved in the program. T. 871. The Jacksonville facility provides respite care of about two weeks in duration, although it could be longer. T 872. The adult congregate living facility that would be a part of the Health Quest facility would have tee same beneficial consequences as the adult congregate living facility proposed by Hillsborough Healthcare. T. 902-04. The Jacksonville facility is often used as a place for continuing nursing education for high schools or the local nursing association. T. 906-07. Staffing Health Quest proposes a total of 59.75 FTE's or .679 FTE per bed. H.Q. Ex. 2, table 11. Health Quest acknowledged that the staffing proposed for the 88 bed facility was adequate in 1986 when prepared, but by 1987, it was experiencing the need for more licensed personnel, and that it would increase licensed personnel for the 88 bed facility now. T. 630. No evidence was presented as to the specific changes that would be made. T. 632. Construction and facility design Health Quest proposed in its application to construct 34 two bed rooms, 6 three bed rooms, and 2 one bed rooms. H.Q. Ex. 2, table 17. Health Quest wants to change its design, if built, to make the three bed rooms into two bed rooms. T. 631. Health Quest proposes to provide 240 square feet of net living space for semiprivate two bed rooms. H.Q. Ex. 2. Health Quest proposes to provide a total of 37,263 square feet for the 88 bed facility, or 423 square feet per bed. H.Q. Ex. 2. Health Quest estimates that the project will need 3 to 4 acres of land, and projects that it can acquire the land for about $320,000. H.Q. Ex. 2; 634. This estimate is reasonable in comparison to the estimates of all other applicants. Health Quest has constructed three nursing homes in Florida, and others in Indiana and Illinois, and thus has substantial experience in construction. Photographs of the nursing homes constructed and now operated by Health Quest show that those nursing homes are reasonably attractive and appear to be hospitable places in which to live. H.Q. Ex. 22. Availability of resources Health Quest has access to sufficient funds to construct the project and initially operate it. T. 586-87. Financial feasibility The Health Quest proposal is financially feasible in the short term and the long term. T. 593 Summary of comparative data The space and costs associated with the four proposals may be compared as follows: Appl. Cost/Bed NetFt/Bed TotFt/bed Cost/NetFtBed Cost/TotFtBed Careage $34,583 214 306 $162 $113 Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The proposed staffing of the four proposals may be compared as follows: Applicant Total FTE RN FTE LPN FTE RN Asst FTE No. Beds Careage 96.0 11.9 7.4 42.1 120 Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: TotalFTE Applicant Per Bed PN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Careage .80 .10 .16 .51 Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 Comparison of the Careage staffing to other applicants is difficult because Careage proposes primarily to serve patients needing skilled nursing care who thus require more nursing staff per bed. Forum Group, Hillsborough Healthcare, and Health Quest are relatively the same with respect to anticipated efficiencies and continuity of care due to the association of adult congregate living facility beds with the proposed nursing home. Forum Group plans only 30 ACLF beds, but also plans 120 independent living apartments. Hillsborough proposes to provide 60 ACLF beds, and Health Quest proposes to have 124 ACLF beds. There is no evidence in the record to determine the optimum mix of ACLF beds to nursing home beds. Conclusions of Law The Division of Administrative hearings has jurisdiction of the parties and subject matter of this proceeding. The Department's free form preliminary decision The free form decision of the agency is ordinarily not dispositive since a formal administrative hearing is intended to formulate agency action, and is not intended to review prior action. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). The reasoning of the agency in its free form decision, however, ordinarily is a significant matter to be considered in the formal hearing. Findings of fact with respect to the free form decision-making upon the applications in this batching cycle have been made for two reasons: the assertion that the free form decision was influenced by considerations other than objective merit of the applications, and therefore not entitled to any persuasive effect upon this formal hearing, and representations in the free form stage made by Careage relevant to evaluation of the application of Careage. The free form decision in this case had the appearance of having been influenced in part by considerations other than the objective merit of the applications. For this reason, the free form decision with respect to these applicants has been disregarded as having no persuasive weight. Need calculated pursuant to rule 10-5.001(1)(k)2 Need for community nursing home beds is calculated pursuant to the need methodology set forth in rule 10- 5.011(1)(k)2, Fla. Admin. Code. The text of the rule is not in evidence, but comparison of the text of the rule referenced in proposed recommended orders indicates that the parties appear to agree that the rule promulgated on November 24, 1986, should govern this case. It is that rule that will be used in this recommended order. All parties agree that July 1, 1989, is the date upon which subdistrict need for community nursing home beds is to be determined. The first step in the need calculation pursuant to the rule is to determine BA. BA is defined by subparagraph 2a of the rule as the estimated bed rate for the population age 65-74 years in the relevant district. Subparagraph 2b of the rule provides: BA= LB/(POPC + (6 X POPD)) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. LB is at least 5,964, and is 6,060 if the 96 beds at the Home Association are, on this record, classified as community nursing home beds. Section 651.118(8), Fla. Stat. (1987) provides in part: This section shall not preclude a continuing care provider form applying to the Department of Health and Rehabilitative Services for a certificate of need for community nursing home beds or a combination of community and sheltered nursing home beds. Any nursing home bed located in a continuing care facility that is or has been issued for nonrestrictive use shall retain its legal status as a community nursing home bed unless the provider requests a change in status. Any nursing home bed located in a continuing care facility and not issued as a sheltered nursing home bed prior to 1979 shall be classified as a community bed. The Department of Health and Rehabilitative Services may require continuing care facilities to submit bed utilization reports for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents. (E.S.) The first sentence of this statutory section does not apply to the Home Association because it has not applied for a certificate of need. The second sentence does not apply because there is no evidence in the record that the nursing home beds at the Home Association were "issued" by anyone. The third sentence applies because the 96 nursing home beds at the Home Association were "not issued as a sheltered nursing home bed prior to 1979." The Home Association has existed since 1899 with its 96 nursing home beds, and never had a certificate of need. There was no statutory authority or definition for the issuance of a "sheltered nursing home" prior to 1979. By operation of law (the third sentence quoted above), the 96 beds are community nursing home beds. The fourth sentence appears to be directly in conflict with the third sentence. The fourth sentence states that HRS can conduct a study of historical utilization "for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents." The third sentence automatically confers community nursing home bed status upon certain beds based solely upon three criteria (located in a continuing care facility, located there before 1979, and not "issued" as a sheltered nursing home bed). Community nursing home bed status is thus conferred solely upon the three criteria, and historical utilization is irrelevant to the third sentence. If that is so, the fourth sentence, which allows HRS to "determine" community nursing home status based only upon historical utilization, is in direct conflict with the third sentence. This seemingly irreconcilable dilemma is not at issue in this case, however, because there is insufficient credible evidence in the record as to the "historical utilization" of the 96 beds at the Home Association. As discussed in the findings of fact, there is no credible evidence in this record as to how the 96 beds at the Home Association have in fact been "utilized" since 1899. Indeed, the only logical inference on this ambiguous record is that the Home Association has not felt itself constrained by any definitional categories, given its longevity in the Tampa Bay area. It thus is concluded as a matter of law, pursuant to the third sentence of section 651.118(8), Fla. Stat. (1987), that the 96 beds at the Home Association are community nursing home beds, and thus should be counted in the licensed beds in the district and subdistrict, LB and LBD. Thus, the correct value for LB in this case as of June 1, 1986, is 6,060. Next, the values of POPC and POPD must be determined Two issues arise with respect to ascertainment of the values of POPC and POPD. The first is whether the values of POPC and POPD should be determined on January 1, 1986, or on July 1, 1986. The second is whether the values of POPC and POPD should be determined based upon the Governor's estimates and projections of populations released on July 1, 1986, or on May 12, 1987. The first issue is governed by the clear language of the existing rule. The second issue has no clear guidance in the existing rule, and thus depends upon analysis of the record basis of the agency's incipient policy. With respect to the first issue, the parties urge that POPC and POPD are the populations on January 1, 1986, rather than on July 1, 1986. The basis of this argument is the inconsistent behavior of HRS over the last three years and in the January, 1987, batching cycle, wherein the values of POPC and POPD were often effectively determined on a date six months prior to the commencement of the batching cycle, a date which was the midpoint in the occupancy rate months. Notwithstanding the inconsistent manner in which HRS has interpreted its rules, a fundamental principle of law is that if the rule is clear, the agency must follow it. Kearse v. Department of Health and Rehabilitative Services, 474 So.2d 819, 820 (Fla. 1st DCA 1985); Woodley v. Department of Health and Rehabilitative Services, 505 So.2d 676, 678 (Fla. 1st DCA 1987);. There is no deference to the agency's interpretation of law (in this case, the conflicting interpretation of the office of comprehensive health planning) where the construction is based upon common meanings. Schoettle v. State of Florida, Department of Administration, Division of Retirement, 513 So.2d 1299, 1301 (Fla. 1st DCA 1987); Roberts v. Department of Professional Regulation, Construction Industry Licensing Board, 509 So.2d 1227 (Fla. 1st DCA 1987). In this case the Department has elected to follow the clear mandate of its own rule. This is not an occasion where the inconsistency of the agency with respect to incipient policy implicates questions of fairness to those regulated. Here, despite the arguable unfairness to the applicants in this batching cycle, the agency should follow its own clear rules. The populations POPC and POPD are clearly intended by the rule to be determined as of the date of the applications for certificate of need and the date of commencement of the batching cycle. The rule unequivocally calls for a projection of need "three years" into the future. T. 1254, 1250. There is no disagreement that the end date of that projection is July 1, 1989. What ends must have had a beginning. A three year period that ends on June 1, 1989, begins on July 1, 1986. Moreover, the rule clearly establishes the value of LB, licensed beds, as of June 1, 1986. The bedrate, the driving force in determining need, is the ratio of licensed beds as of June 1, 1986, to POPC and POPD, populations of elderly persons assumed to be using the beds. If LB was determined on June 1, 1986, but POPC and POPD determined on January 1, 1986, the ratio would be incongruent. The Department undoubtedly intended there to be a correlation between beds and people in existence at the same time since the result is supposed to be a model of need. Selection of the numerator from one date and the denominator for another date results in a fractured reality having little bearing upon the issue of whether the elderly in Hillsborough County will have enough or too may nursing home beds in July, 1989. Finally, the definition "current" populations POPC and POPD was established by the final order in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051. The final order in that case, entered on February 7, 1987, determined that POPC and POPD must be the populations current on the date of application for the certificate of need. For these reasons, POPC and POPD should be the populations on July 1, 1986. The next issue is the source of those population estimates. HRS argues that POPC and POPD must be derived from the July 1, 1986, release of the Governor's estimates and projections of populations. HRS has failed to establish guidance in this area by rule, and instead has chosen to rely upon evolving agency policy as the basis for selecting the source off POPC and POPD. An agency need not adopt all policy as a rule, but to the extent that it relies upon non-rule incipient policy as a basis for decision and that decision is challenged in a formal administrative hearing, the agency has the burden to establish in the record "adequate support for its decision." Florida Cities Water Company v. Florida Public Service Commission, 384 So.2d 1280, 1281 (Fla. 1980); Baxter's Asphalt and Concrete, Inc. v. Department of Transportation, et al., 475 So.2d 1284, 1286 (Fla. 1st DCA 1985); McDonald v. Department of Banking and Finance, 346 So.2d 569, 582-584 (Fla. 1st DCA 1977). The only support offered by HRS for its incipient policy to use population releases available at the time of certificate of need application was that those releases were the only ones available at such time, and thus necessarily the agency's preliminary decision had to be based upon the earlier release. This may be a permissible construction of the enabling statutes, and might pass muster as an agency rule, but HRS has in this case elected to defend its policy on a case by case basis. On this record, it is clear that the policy has not been adequately supported and is unreasonable. While reliance upon the population release available at this time of preliminary agency action is obviously reasonable at that time, since it is then the most current release, the mere fact that it is the only release-then available is an inadequate reason for continuing to use that release at the de novo formal administrative hearing that follows. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Moreover, the inadequacy of HRS's basis for its incipient policy has been demonstrated in this record. The May 12, 1987, release is substantially more accurate than the release a year earlier. The May 12, 1987, release is much closer to observed population growth in the subdistrict than the earlier release. These facts were not rebutted. To underscore the inadequacy of HRS's incipient policy, it bears repeating that use of the July 1, 1986, population release underestimates the net need for community nursing home beds in Hillsborough County in July, 1989, by 100 percent. This indicates that something is dramatically wrong with the incipient policy. For these reasons, the values of POPC and POPD should be taken from the May 12, 1987, release of population estimates. POPC is 134,968 and POPD is 94,402. The calculation of the bed rate, BA, thus is as follows: BA= LB/(POPC + (6 X POPD)) BA= 6,060/134,968 + (6 X 94,402)) BA= 0.0086401 The next step in the calculation is to calculate BB, which is defined as the estimated bed rate for the population age 75 years and over in the relevant district. The calculation is provided in subparagraph 2c of the rule: BB= 6 X BA BB= 6 X 0.0086401 BB= 0.0518406 Subparagraph 2a of the rule then requires calculation of A, which is gross need for the horizon year: A= (POPA X BA) + (POPB X BB) Where: A is the district's projected age-adjusted total number of community nursing home beds for the review cycle for which a projection is being made. POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. For the reasons discussed with respect to selection of the date of the proper release of Governor's population estimates and projections with respect to POPC and POPD, POPA and POPB should be obtained from the May 12, 1987, Governor's release. POPA is 149,771 and POPB is 108,400. Therefore, continuing the calculation: A= (POPA X BA) + (POPB X BB) A= (149,771 X 0.0086401) + (108,400 X 0.0518406) A= 1,294.0364 + 5,619.521 A= 6,913.5574 The next step is to calculate SA, which is the preliminary subdistrict allocation of community nursing home beds pursuant to paragraph 2d of the rule: SA A X (LBD/LB) x (OR/.90) Where: * * * LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average occupancy rate for all licensed community nursing home beds within the subdistrict of the relevant district. Review of the applications submitted for the July batching cycle shall be based upon occupancy rate data for the months October- March preceding that cycle . . . * * * LBD is 2,708 since the 96 beds at the Home Association were community nursing home beds in Hillsborough County on June 1, 1986. OR is 94.29 Therefore, SA is calculated: SA= A X (LBD/LB) x (OR/.90) SA= 6,913.5574 x (2,708/6,060) x (.9429/.90) SA= 6,913.5574 X 0.4468646 X 1.0476666 SA= 3,236.6863 SA= 3,237 In the last sentence of subparagraph 2 of the rule, the "poverty adjustment" is described as follows: "In districts with a high proportion of elderly residents living in poverty, the methodology specifies a minimum bed rate." In this case, all parties agree that when the numbers are assigned to the values in the formula contained in subparagraph 2e of the rule, the poverty adjustment operates to reduce rather than enlarge the net bed need. Thus, in this case, strict application of the A formula found in subparagraph 2e fails to produce the intended "minimum" bed rate. HRS construes the rule, in this instance, to mean that the poverty adjustment does not apply, T. 1280, and all parties agree. This will be treated as a stipulation by all parties that the poverty adjustment is not an issue in this case. For this reason, the poverty adjustment will not be used in the calculations in this recommended order. The final step in the need calculation is defined by subparagraph 2i of the rule, and that is to calculate the net bed allocation for the subdistrict. Subparagraph 2i provides: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs through I. unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. All parties agree that the number of licensed beds within the subdistrict is determined as of June 1, 1986, for this batching cycle. That number for purposes of determining net need is 2,708. The number of approved beds for purposes of determining net need is 368. Net need for community nursing home beds in the subdistrict for July 1, 1989, is thus determined: Net Need = SA - (LBD + (.9 X AB)) Net Need = 3,237 - (2,708 + (.9 X 368)) Net Need = 3,237 - 3,039.2 Net Need = 197.8 Net Need = 198 Thus, on July 1, 1989, the subdistrict, Hillsborough County, will need 198 community nursing home beds. Evidence of "not normal" need Rule 10-5.011(k)2.j. provides criteria for approval of community nursing home certificates of need "in the event that the net bed allocation [pursuant to the rule formula] is zero . . ." The net bed allocation pursuant to the rule method is not zero in this case. Subparagraph 2j thus does not apply. The Petitioners did not present any evidence of need pursuant to the special criteria of subparagraph 2j of the rule. Rule 10-5.011(k)1. Provides: 1. Department Goal. The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds in the subdistricts designated by local health councils. (E.S.) Many other HRS need rules have the same "not normal" loophole, and in all of these other cases, the applicants are thereby given the opportunity to show exceptional circumstances justifying the grant of additional beds by consideration of various aspects of the statutory criteria. Since subparagraph 2j does not apply, the provisions of subparagraph 1 do apply to grant a similar opportunity. The only other credible or competent evidence presented by the Petitioners as to a "not normal" condition of need was evidence concerning the numbers of elderly residents in the subdistrict and the occupancy rates of existing community nursing homes. These factors have already been accounted for in the rule formula, and cannot be counted again. Health Quest Realty, XII v. Department of Health and Rehabilitative Services, 477 So.2d 576, 578-79 (Fla. 1st DCA 1985) Amendment or update of applications Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn that the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. The review of these applications by HRS was delayed for months beyond the normal review period. Further delay has occurred in discovery and preparation for the lengthy formal administrative hearing. Time changes all, and over this period of time, new data has come to the attention of all parties. It would be absurd `to require the applicants to prove applications that have become erroneous due to the passage of time. It is highly probable that rule 10-5.008(3) was originally drafted with only the free form review of an application for a certificate of need in mind, and that the application (or non-application) of the rule to an administrative hearing a year or more later was not considered by those who drafted the rule. Indeed, prior to August, 1985, the Department and all litigants uniformly followed the McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977) principle of Florida administrative law that formal administrative hearings are de novo, and that new information pertaining to the application is admissible. In August, 1985, the case of Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, et al., 483 So.2d 700 (Fla. 1st DCA 1986) was decided. While the Gulf Court decision was concerned only with the competitive status of applicants with respect to bed need, in the aftermath of that decision, the Department elected to construe rule 10- 5.008(3) as forbidding practically all new information, even information that had nothing to do with bed need. This undoubtedly was an overreaction to the Gulf Court decision, but the Department, after all, has always had the authority to establish rules governing the processing of applications for certificates of need, including the number and timing of amendments to such applications. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Given the fact that the rule is so clear, the better route would have been to amend the rule. As discussed above, conventional rules of statutory construction could easily support the legal conclusion that the rule must be applied as it is written, without further interpretation. Nonetheless, the Department for this case has chosen the other route, to interpret rather than to amend its rule. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December 8, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborough, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988) These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. at 4651: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: . . . HRS has authority by statute to issue a CON for an identifiable portion of project. Section 381.494(8)(c), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 2141-42: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS . . . [Gulf Court] . . . limited the de novo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is extremely obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. New information submitted by Forum Group Table 7 of the Forum Group update is for the second year of operation. There was no projection of utilization by class of pay for the second year of operation in Forum Group's original application, and Forum Group presented no evidence to explain why its original application did not or could not forecast utilization by class of pay for the second year of operation. Table 7 of the update, F.G. Ex. 6, thus constitutes an attempt to add matters to the original application which could have been a part of the original application as filed. Pursuant to rule 10-5.008(3), Fla. Admin. Code, it is now excluded from evidence because it is irrelevant. Table 8 of the Forum Group update was not proven by Forum Group to be based upon ordinary inflation. It appears that the revised charges in table 8 were based in part upon a telephone survey of subdistrict nursing homes conducted after Forum Group filed its original application. Forum Group did not prove that it could not reasonably have conducted such a telephone survey before it filed its original application. Thus, table 8 of F.G. Ex. 6 contravenes rule 10-5.008(3) and now is excluded from evidence because it is irrelevant to the original application. Table 10 of the Forum Group update was precisely the kind of new information allowed by the incipient policy of the Department. The old table 10 had an opening date of January, 1988, a date that was obviously in error due to the delay in decision in these cases. The new information was simply the old information altered by current occupancy and fillup rates in the subdistrict, data that could not have been acquired when the original application was filed. "Current occupancies" is explicitly listed by HRS as permissible new data in the Health Care and Retirement case, supra. Table 10, F.G. Ex. 6, is admitted into evidence. The revised table 11 contains positions for a dietary supervisor, maintenance supervisor, and utility workers, all of which could have been reported in the original table 11. These portions of table 11 are excluded from evidence. The revised table 11 contains changes in the FTE's for registered nurses and licensed practical nurses. These changes could have been in the original table 11 and are excluded from evidence. The revised table 11 contains changes in salaries that were adequately shown to be the result of inflation and new market data not available at the time the application was deemed complete. These portions of revised table 11 are admitted into evidence. Table 25 of the revised application, F.G. Ex. 6, which summarizes estimated project costs, including construction costs, contains new information permitted by the Department's evolving policy. The new table contains no changes of substance except changes caused by inflation and current construction experience. The bottom line, except to that extent, has not changed in substance. Table 25 of F.G. Ex. 6 is admitted into evidence in its entirety. Revisions to tables 17-20, F.G. Ex. 6, were driven entirely by inflation in construction costs. Surely if the Department allows an applicant to respond to inflation by projections of new costs, the Department's policy would also allow the applicant to respond to inflation by projections of new methods to reduce new costs caused by inflation. These revisions are admitted into evidence. The revised pro forma statement of total operating expenses has not been proven by a preponderance of the evidence. First, the revision was explained as being based upon changes in utilization by class of pay, but that data, table 7 of the revision, was not admitted into evidence. Moreover, the changes in total operating expenses resulted from impermissible changes in the numbers of FTE's which have been excluded from evidence. It is not possible on this record to determine how much of the revised pro forma statement of total operating expenses has been shown to be a credible projection, given the lack of these fundamental sources of the projection. Moreover, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, has not been credibly shown to be based upon matters that Forum Group could not have known at the time it originally filed its application. This conclusion flows from the fact that the original application did not project utilization by class of pay in year 2. Absent this projection, the revision of total operating expenses must necessarily be based upon data that was absent from the original application. The same is true with respect to changes in FTE's in the revision. For these reasons, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, constitutes an impermissible offer of new data precluded by rule 10-5.008(3). New information submitted by Health Quest Table 8 of the revised application of Health Quest, H.Q. Ex. 3, was based upon information that Health Quest could have obtained when it filed its original application. Table 8 of H.Q. Ex. 3 is thus excluded from evidence. Table 11 of the revised application was based upon the actual experience acquired after the original application was filed. Table 11 of H.Q. Ex. 3 is admitted into evidence. Table 17 of the original application projected that the facility would have six three-bed rooms, but the revised application deleted all 3 bed rooms. Since Health Quest failed to show that this new information would have been unavailable to it when it filed its original application, the change as to 3 rooms is not admissible. The ineluctable result, therefore, is that all of revised table 17 is inadmissible since the proper mix of beds has not been proven. The change of square footage of 1 bed room to 216 in the revised table 18 is inadmissible because it contravenes rule 10-5.008(3). Evidence as to the agreement with the University Community Physicians Association of Tampa is admissible as matters which did not exist and could not have been a part of the original application. The objections to that testimony, T. 579- 80, are overruled. New information submitted by Careage The changes to the Careage application, C. Exs. 18-23 and 24-25, were shown to be based upon information not reasonably obtainable by Careage when it filed its original application, and thus are admitted into evidence over the objections made that these exhibits were barred by rule 10-5.008(3). New information submitted by Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. Comparative review of the applications Careage failed to prove two essential portions of its application. It did not prove by a preponderance of the credible evidence that it would in fact operate the proposed facility if the certificate of need were granted, and it did not prove by credible evidence that it would provide care of good quality. For these reasons, the Careage application should be denied. The other applicants proved by credible evidence all essential portions of their applications. The only remaining task, therefore, is to determine the proper allocation of the 198 beds needed in July, 1989, among these three applicants. The space and costs associated with the remaining proposals may be compared as follows: Appli Cost/Bed NetFt/Bed TotFt/Bed Cost/NetFtBed Cost/TotFtBed Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The cost per net square foot per bed (Cost/NetFtBed) is derived by dividing the cost per bed by the net square feet of living space per bed. Likewise, the cost by total square feet (gross) per bed (Cost/TotFtBed) is derived by the same division. Health Quest is preferable to the other two applicants when these cost and space figures are considered. It provides more space at a lower cost per square foot. The differences between Hillsborough Healthcare and Forum Group are not sufficiently significant to give one preference over the other. Hillsborough Healthcare is the less expensive proposal, but suffers from being the least spacious proposal in comparison to Forum Group. Moreover, the record does not contain guiding policies to determine whether there is a need in Hillsborough County for cheaper, less spacious, nursing homes, or for more expensive, more spacious nursing homes. The proposed staffing of the remaining proposals may be compared as follows: Applicant TotalFTE RN FTE LPN FTE RN Asst FTE No. Bed Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: Total FTE Applicant Per Bed RN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 The total nursing FTE per bed for each applicant is relatively equal, with Hillsborough Healthcare having the highest ratio and Health Quest the lowest. Forum Group has significantly more RN's and LPN's per bed than Health Quest, but the overall nursing staffing is comparable. Hillsborough Healthcare is the lowest when only RN's and LPN's are considered, and the lowest total FTE per bed. The differences noted in staffing do not appear to be sufficient to draw meaningful conclusions. Hillsborough Healthcare's facility may be staffed at a less costly level, but whether this is due to substitution of nursing assistants for RN's and LPN's, or a result of efficiencies due to the larger number of beds (120), or reflects less than optimum staffing cannot be determined on this record. Hillsborough did not present evidence as to staffing patterns for a 60 bed facility. Other features of the proposals of the three applicants provide little to distinguish or rank them in priority. All three propose to associate the nursing facility with an adult congregate living facility, resulting in cost efficiencies and better continuity of care. All three have a substantial track record in the operation of a nursing homes, and can be expected to provide care of good quality. All three have very substantial resources and prior experience in the development and initial operation of a nursing home. If any distinction were to be made, perhaps it would be to favor the Hillsborough Healthcare application over the Forum Group application. Hillsborough Healthcare plans to serve the needs of Alzheimer's patients, and Forum Group does not. Hillsborough Healthcare's application is, relative to the Forum Group proposal, less expensive. On the other hand, the Alzheimer's disease unit is only a marginal factor since there is no qualified evidence in this record of need for that type of unit in 1989 in Hillsborough County. One can only infer that the need is probably going to be there, and it might be better to prefer Hillsborough over Forum Group for that reason. The "luxury" vs. "austerity" comparison is similarly not of ultimate persuasive weight since, as discussed above, there is no credible evidence in the record as to what the proper mix should be. Of course, it is safe to conclude that the need for less expensive nursing care is greater than the need for care that only a few can afford, but that conclusion does not necessarily result in the total denial of the Forum Group application. In summary, with respect to the question as to which applicant should be favored with approval of the most number of beds from the projected bed need, there is no major issue to adequately distinguish between the three applicants. For this reason, each applicant should be treated as equally as possible consistent with the application it submitted and the evidence it presented in support of that application. The Department appears to have several relatively reasonable ways to allocate bed need among the three applicants. It might simply divide the beds equally among the three. This alternative is less reasonable because it would ignore the detailed proof that has been presented by both Forum Group and Health Quest in support of proposed facilities of 60 beds and 88 beds respectively, and would result in implementation of facilities having staffing and design configuration that would be altered from that proof. A second alternative would be to award partial approval to Health Quest for 78 beds, to award full approval to Hillsborough Healthcare for 120 beds, and to deny the application of Forum Group. A third alternative would be to award partial approval to Health Quest for 78 beds, to award partial approval to Hillsborough Healthcare for 60 beds, and to award full approval to Forum Group for 60 beds. This third alternative is more reasonable and will be recommended by this order. This alternative has the advantage of fostering the most future competition in Hillsborough County by approving three competitors rather than two. Of the three applicants, Health Quest proposed the most space, relatively speaking, for the least cost. The staffing proposed by Health Quest is reasonable in comparison to the other two applicants. Reduction of the Health Quest proposal to 78 beds from 88 beds is a relatively minor reduction; stated another way, the proof provided by Health Quest as to the specifics of an 88 bed facility is likely to be changed only slightly for a 78 bed facility. Forum Group proved all of the details of its 60 bed proposal, and thus approval of those beds would be entirely consistent with its application and proof in this record. Hillsborough Healthcare did not prove the specifics of a 60 bed partially approved facility except that such a facility would contain the full sized Alzheimer's patient unit proposed in its 120 bed facility. It would be fairer to approve Hillsborough for that 60 bed facility than to approve Hillsborough for 120 beds, leaving Forum Group with denial of its application, given the lack of a compelling clear choice between the two applicants. Recommendation It is therefore recommended that the Department of Health and Rehabilitative Services enter its final order partially granting the application of Health Quest for 78 community nursing home beds, partially granting the application of Hillsborough Healthcare for 60 community nursing home beds, fully granting the application of Forum Group for 60 community nursing home beds, and denying the application of Careage. DONE and ORDERED this 30th day of June, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 87-0670, 87-0671, and 87-0774 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact contained in this appendix are adopted as findings of fact. Findings of fact proposed by HRS: 1-2. These proposed findings of fact are' subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The classification of the Home Association beds has been thoroughly discussed in the findings of fact and conclusions of law. The correct population figures are discussed in the findings of fact. 9-13. These are matters of law, and thus not appropriate as proposed findings of fact. 15. The changes to table 7 were not the result of a telephone survey. T. 51. 17. Defining "extrinsic circumstances" as not inclusive of economic or market changes that occurred after the original application was deemed to have been complete, or otherwise not reasonably obtainable or knowable by the applicant when the original application was filed, is contrary to HRS policy embodied in final orders, sketchy as it may be. 18, 23-25. Rejected as explained in the findings of fact. 26, 28. Rejected with respect to table 11 as explained in the findings of fact. 30. This finding of fact, while true, is not made because Health Quest made no such change to its 88 bed application. Rule 10-5.008(1) simply states that the application for a certificate of need must be filed on form 1455. Table 12 of the form has no instructions for what must be contained therein. Since HRS has not demonstrated on this record that table 12 in the original application was supposed to have listed these items, it cannot be said that the listing of these items in the new table 12 is a change. It is noted that spaces to take showers, baths, store linen, and for nursing stations would be assumed for any nursing home, and ought not be presumed to have been excluded by the failure of an applicant to list them. Moreover, it is further noted that from a review of the original application H.Q. Ex. 1 that table 12 does include nursing administrative space, patient lounges, a central supply space, general storage, housekeeping, and laundry. Moreover, the amendment, H.Q. Ex. 2, shows the following spaces on the space diagram: laundry, shower, patient lounge, and medication room (med). Any bed room could be used for isolation. Table 20 does include a chapel. H.Q. Ex. 1. Not supported by the record cited. Findings of fact proposed by Forum Group: 1-4, 9, 13. These are matters of law, and thus not appropriate as proposed findings of fact. 5. LB of 5,964, as proposed by the Department, is most credible as the beginning figure, without considering the beds at the Home Association. 7-8, 10. Incorrect value for LB. 11. OR should be 94.29 with the Home Association beds. 18. Incorrect values for LB and OR. 21. The denial occurred orally in January, 1987. The update has been discussed in findings of fact and conclusions of law. These are matters of law, and thus not appropriate as proposed findings of fact. It is true that there is need and the need must be satisfied. 29-33. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 34. The phrase "homelike atmosphere" is too vague to be a finding of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The record does not contain sufficient evidence to make a finding as to the history of Forum Group with respect to the quality of care provided at Forum Group facilities. 49-50. The update with respect to financial feasibility is not relevant since essential parts of the update with respect to financial feasibility were not admitted into evidence. 60, 65, 67, 68, 74, and 80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 66. This is not relevant. Ms. Kennedy testified that she had authority from Hillsborough Healthcare to accept a certificate of need for a 60 bed nursing home. There is no credible evidence to contradict this statement under oath. The lack of a written partnership authorization in evidence does not negate this statement. 76. Had there been any credible evidence in theme cases that the amount of need in Hillsborough County was minimal and that, consequently, the pro formas for 60 bed nursing-homes must be closely scrutinized for long term financial feasibility, then it would be relevant that CSI did not explain in detail the pro forma for a 60 bed nursing home. CSI did, however, present expert opinion that a 60 bed nursing home would be financially feasible, and on this record, the opinion is very credible. Forum Group and Health Quest have shown the long term financial feasibility of a 60 bed nursing home, and there is a large amount of need. Moreover, existing nursing homes are experiencing very high occupancy rates and fill up rates. For these reasons, this proposed finding of fact, while true, is not relevant. Hillsborough did show that its design was modular. Scaling down the project simply means deletion of one wing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The witness specifically addressed two portions of the state health plan. T. 777. The testimony was competent and substantial evidence. The inference that the certificate of need was "about to expire" is inappropriate since the witness's testimony leads to the inference that Health Quest intends to proceed with that project. T. 641. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 98-99. These proposed findings of fact are true, but insufficient to support a finding that Health Quest lacks the resources to construct and operate this project in the short term. 101, 105-07. These proposed findings of fact are true, but do not lead to the conclusion that the construction cost estimates are unreasonable. See T. 590. Mr. Krisher had sufficient expertise in health planning, nursing home development, and financial feasibility, to testify generally as to these matters. T. 501-516. No party presented any independent evidence to seriously question these estimates. 102. This proposed finding of fact is incorrect since the expected Medicaid rate in Boca Raton is different from the expected rate in Tampa. T. 785. 111. Not supported by the record cited. 114-116, 118-120. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. True, but insufficient to show lack of resources to make the project financially feasible in the short term. Irrelevant. The existence of lines of credit was proved by Mr. Gentle. Irrelevant. The staffing was shown to be reasonable by the testimony of other competent witnesses. 125-27. True, but insufficient to show back of financial feasibility. 129. True, but irrelevant. It would be unreasonable and a waste of health care resources for an applicant to have to buy five expensive acres of urban land to be qualified to apply for a certificate of need. 130-31. Irrelevant. The delay and inflation rates are negligible. Findings of fact proposed by Hillsborough Healthcare: 1. This is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 5. The phrasing of the first and second sentences is rejected for lack of evidence. 7. The evidence is not sufficient to show actual bias by a preponderance of the evidence. 8-9, 19-20, 22-23. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact are true, however, and are adopted by reference. 21. Irrelevant. 24. True, but not relevant. These matters are covered by the numeric need rule. 29. The evidence does not show that CSI managed facilities offer "superior" activities. 32, 33 (fifth and sixth sentences), 35 (last sentence), 38(a)-(i), 40,42 (first sentence), 39, 45 (second and third sentences), 46 (all but the first sentence), 49 (first two sentences), 53, 56 (all but the first two sentences), and 60-72. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact ace true, however, and are adopted by reference. 51. The preponderance of the evidence does not credibly show that the floor plan promotes patient safety and convenience, or that travel distances are minimal. 54. Not supported by the record cited. These proposed findings of fact are irrelevant. A finding of fact that the criminal offense of perjury was committed cannot be made since there is no evidence of a criminal conviction by a court of competent jurisdiction. The testimony of Ms. Etten was not limited to those programs. The documents used in cross examination were never properly authenticated, and are hearsay. Thus, a finding of fact that the documents are in fact surveys of Careage facilities by other agencies in other states cannot be made based upon the documents. For this reason, the remainder of the proposed finding is not relevant. Ms. Etten credibly testified that nursing staffing was generally adequate. Her opinion was not ultimately limited to special programs. T. 1216. The inability of other witnesses to testify on this point is not relevant. The ability of Careage to recruit staff was adequately proved by other parties. There is no credible evidence in this record to believe that any applicant fail to recruit adequate staff. The recruitment plans of Careage appear to be quite reasonable. T. 1562-64. On pages 1686-87 of the transcript, the Hearing Officer ruled that the expert opinion of Ms. Krueger would be allowed even though it was based on hearsay. This was a correct ruling. Section 90.704, Fla. Stat. (1987). The sentence immediately following that ruling is incorrect as stated, and directly contradicts the initial correct ruling. That is, an expert opinion is admissible and may be relied upon even though based upon evidence, such as hearsay, which in itself may not be admissible. Further, the opinion of an expert in an administrative proceeding is a proper basis for a finding of fact even though the opinion is based upon hearsay, and even though hearsay alone in an administrative hearing, absent nonhearsay evidence on the point, is not sufficient as a basis for a finding of fact. The second sentence in the transcript was intended to state that hearsay evidence alone will not be the basis of a finding of fact, setting aside for the moment the issue of expert opinion. For these reasons, these proposed findings of fact are rejected to the extent that they urge that short term financial feasibility was not established because the opinion was premised upon hearsay evidence. With respect to the unaudited financial statement question, Ms. Krueger was not asked whether experts in her field reasonably rely upon unaudited financial statements. She was only asked which type was more worthy of belief and whether her profession feels they can rely on audited statements. She was never asked whether her profession feels it cannot rely upon unaudited statements. Ms. Krueger stated that she was aware of the existence of fraudulent audited statements, implying that the question leads to answers that are not that useful. T. 1652. In fact, Ms. Krueger, who was a thoroughly credible witness, explaining her opinions in a lucid and reasonable manner, relied upon unaudited statements, as well as her conversations with several of the chief executive officers of Careage. Based on this record, a finding cannot be made that experts in this field do not reasonably rely from time to time upon unaudited financial statements. The authenticity of the letter from SeaFirst is irrelevant since that line of credit was established by the direct testimony of Mr. Gentle. T. 1576. Ms. Krueger's lack of personal knowledge as to the existence of a binding commitment for a loan for this project is irrelevant due to Mr. Gentle's direct testimony. The evidence in the record from all parties indicates that land is generally available in Hillsborough County in the 3 to 5 acre range, that 3 to 5 acres is about what is needed for any of the projects, and that the cost is from $300,000 to $600,000. The Careage facility will bring in over $3 million in gross revenue per year in all years beyond the first few. A few hundred thousand dollars can be amortized over the life of a nursing home, and will not be a significant factor in long range financial feasibility. All of the applicants have access to credit to buy land at market rates. There is essentially no reasonable dispute as to land acquisition and cost in this case. The testimony related to equipment , not floor space, for technology dependent children. Those children would be served in the subacute beds. Space for Alzheimer's patients was included in the floor plan and the 45,500 square feet. T. 1136-37. Mr. Cushing testified that the Means reference book might project a cost per square foot in the "60's." He did not adopt that as his opinion. T. 1185-86. Delay in construction for 8 months is not such delay as to necessarily result in substantial increases in construction cost. The last sentence is true but does not account for the fact that Mr. Cushing consulted the Means reference book for labor rates. That is sufficient. The remainder of the reasoning of this proposed finding of fact was rejected in paragraph 85 above. Rejected as described in the preceding paragraphs. Ms. Krueger's expertise with respect to salaries was established perhaps more completely than any other expert witness. She not only had first hand knowledge from her work reviewing salaries in nearby counties, but she consulted expert reference materials. Her inability to remember the name of the book referenced does not seriously undermine her expertise. The ruling at T. 1324 sustained an objection to a question. It was not a ruling upon the admissibility of portions of the document. Ms. Krueger prepared the long range plan section of C. Ex. 3, P. 3-7, and the under served groups section, p. 3-8, in conjunction with Mr. Gentle. T. 1322. This is sufficient predicate for her testimony as to these matters. 91-92. The telephone survey was not a needs survey. It only surveyed existing services. The survey has essentially been discounted because of lack of response and lack of statistical reliability. These proposed findings ace adopted by reference. Since none of this testimony has been relied upon in this recommended order, the proposed findings of fact are irrelevant. These proposed findings of fact are irrelevant. The testimony as to lines of credit and resources of the Lynns was enough to establish the availability of working capital. These proposed findings of fact are irrelevant. Rejected as explained in the findings of fact. These proposed findings of fact are irrelevant. 101. The continuing objection was allowed, not granted. T. 595-96. Otherwise, these proposed findings of fact are true and are adopted by reference. 102-103. These proposed findings of fact are true and are adopted by reference. 104. Essentially irrelevant as explained with respect to proposed findings of fact concerning the land acquisition and preparation costs of other applicants. 105-107. These proposed findings of fact are true and are adopted by reference, except the last clause of the last sentence of proposed finding of fact 105. Absent quantitative data and a study of salaries showing the estimates to be substantially in error, the foregoing proposed findings of fact are not sufficient to show an error affecting financial feasibility. 108-109. These proposed findings of fact are irrelevant since the 60 bed application was not a permissible amendment. These proposed findings of fact are true and are adopted by reference. These proposed findings of fact are irrelevant since these are different health districts having different patient payor mixes. Findings of fact proposed by Health Quest: 4, 5, 7-10. These are matters of law, and thus not appropriate as proposed findings of fact. 11-17. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The rationality of the OCHP's policy is irrelevant since it conflicts with the rule and other policies are also rational. A finding of a consistent pattern with respect to base date populations in the award of certificates of need cannot be made as discussed in the findings of fact. Mr. Sharp understood his position, and Mr. Jaffe well understood the inconsistencies. 22-23. True but irrelevant. Disadvantage often occurs to some person when the law is correctly applied. 24-28. Rejected as discussed at length elsewhere in this order. 33. Not supported by the record cited. 36.a. Mr. Gentle did not work with Careage in these years and could not be expected to have detailed memory on these points. He named seven such facilities. 38. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 40.b. (ii). There is no evidence that CHP is the same as Careage. 40.c.(v). Health Quest has operated since 1969. 42. Both could be true. 43.a.(ii). Mr. Gentle was not sure because this was not within his area of responsibility. T. 1603. 44. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Dr. Etten's unfamiliarity with the fact that the Health Quest facility in Jacksonville provides IV therapy and total parenteral nutrition does not demonstrate exaggeration or lack of expertise. The record does not clearly demonstrate that other Health Quest nursing homes provide these specific services. The evidence is only that services are generally the same. T. 1077. The testimony concerning Medicaid patients in the subacute unit was elicited on cross examination, and was not presented by the witness as an intended representation by Careage on direct. Ms. Krueger's understanding simply was wrong, not misleading. T. 1367. The remainder of this proposed finding of fact is similarly a red herring. Careage did not project anything more than 37 percent Medicaid utilization. C. Ex. 3, table 7B. It is one thing to expect 37 percent utilization, and another thing to represent that the facility will not discriminate. A promise to not discriminate inherently contains the caveat that a facility will not pursue that noble goal to bankruptcy. The Hearing Officer would not find that to be the case with respect to Careage any more than with respect to Health Quest. Mr. Gentle did not testify that the number of nurses aides in the Alzheimer's unit would be higher in comparison to other sections of the facility. He testified that the number would be "higher" in comparison to professional licensed staff, which would be lesser. T. 1525. 54. Irrelevant. Mr. Gentle said that day care would probably be at a location nearby. T. 1593. 57. None of the parties addressed site size with the specificity proposed by these findings of fact. Lack of such specificity has no real bearing on credibility. The record cited, T. 1526, does not support the proposed finding that equipment for technology dependent children is "substantial and expensive." Thus, the remainder of these proposed findings are rejected. It is true, however, that the application fails to itemize such equipment, and that the contingency is relied upon. There is no evidence that Careage proposes to employ a gerontological nurse practitioner. C. Ex. 3, table 11. The testimony of Dr. Etten simply describe the skills of that form of nurse practitioner. She was never asked whether such professional would be employed by Careage. T. 1217-19. The failure to tie in the testimony is only a human error, and does not show a lack of credibility. Proposed finding of fact 62.a. is not supported by the record. Dr. Etten was not asked to describe the care given an Alzheimer's patient in an ACLF. She was asked to describe the care given a "resident" of an adult congregate living facility. Her comment about such residents not being "bed patients for any period of time" is not a dodge of a question about an Alzheimer's disease patient. Moreover, she credibly and directly testified that Alzheimer's disease manifests itself so many different ways she could not say whether it would be appropriate to have such patients living in an adult congregate living facility. Next, Mr. Gentle's testimony as to the medical characteristics and needs of Alzheimer's patients is insufficient as a basis for findings of fact because Mr. Gentle was not accepted as a medical expert. Health Quest presented no credible evidence to show that an Alzheimer's patient can be treated either in an adult congregate living facility or a conventional nursing home. Absent such evidence, the failure of other parties to rebut the nonexistent negative, given the clear affirmative evidence that Alzheimer's disease patients greatly benefit from special care, is unpersuasive. These proposed findings of fact are irrelevant. These children would be served as subacute care patients. Precise identification of the area set aside for these children would have been only of marginal relevance. To the extent not adopted elsewhere in this recommended order, these proposed findings are adopted by reference. Careage's expert was clearly aware of the need to review site specific conditions in the preparation of construction plans. T. 1177. He has built nursing homes in many states. His competence to prepare adequate construction plans for Hillsborough County conditions was clearly established in the record. It is true that he had not yet prepared the final construction plans. But no party has presented final construction plans, and thus the lack of such plans is irrelevant on this record. Irrelevant on this record. Irrelevant. The amount of working capital is well within the resources available to Careage. There is no evidence in the record that a variation one way or the other by $100,000 would make the project not financially feasible. Careage's credibility was not discredited by the fact that Ms. Krueger was not aware of the mix of skilled and intermediate beds. True, but irrelevant. There is no evidence that such expenses were not accounted for, or if missing, the amount and importance. The staffing was shown by expert opinion to be adequate. T. 1216. One presumes that adequacy refers to adequate health care since the witness was only qualified in that area of expertise. The Careage design was not unique. The Careage use of the word "unique" to describe its design has been disregarded in this order. 78.c.(i)-(iii). These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 78.c.(vi). Not supported by the record cited. 78.c.(vii). The testimony cited is not competent opinion. There was no predicate for testimony as to the knowledge of Mr. Haben, and the objection to a similar question just preceding was sustained on that basis. 87-96, 100-101, 103-128. These proposed findings of fact are irrelevant for the reasons stated in Health Quest's proposed finding of fact 76. 135. These are matters of law, and thus not appropriate as proposed findings of fact. 146. Not relevant since the 60 bed proposal is not in evidence. 149. Without evidence as to what is included in the definition of "subacute" care, a finding as to "virtually all" cannot be made. 151 and 158. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 166, 169, 170 and 172. Not relevant since the 60 bed proposal is not in evidence. 168. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of fact proposed by Careage: The first sentence implies that Careage has operated nursing homes for 25 years. Careage has built nursing homes fob that length of time for operation by others, for the most part. The second sentence is true, but subordinate, and is adopted by reference. Mr. Griffin testified that the decision to adhere to the recommendations made by staff before he assumed his duties at HRS was not his decision. T. 705-06, 703. His testimony reflect very little personal participation in the evaluation of the competing applications. T. 697-705. 6. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 8. There was no credible evidence in this record as to how many Alzheimer's patients need specialized services. The evidence was simply that if such patients exist, such patients need specialized services. Thus, the first sentence is rejected. 8 (second sentence) -12. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. A comparison of staffing is not possible since Careage intends to serve primarily persons in need of skilled nursing care, and hence it cannot be determined if Careage in fact has proposed nursing staff that is more generous relative to patient need than Hillsborough. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility, this finding of fact is rejected. The proposed finding concerning intent to provide adult day care is not supported by the record cited. 19-20. Irrelevant since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility. 21. The first sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 22-23, 25 (all but first sentence), 26, 17 (third, fourth, and seventh sentences), 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 24. It is concluded that associating a nursing home with an adult congregate living facility will in fact result in cost efficiencies. The remainder of this proposed finding of fact, noting the relatively higher costs of Health Quest compared to Careage, is true, but does not disprove the conclusion that cost efficiencies would exist. It is true that the Hillsborough Healthcare Medicare mix projection may be somewhat high, but the fiscal consequences of that conclusion was not demonstrated. The second sentence is rejected because Ms. Krueger was not accepted as an expert with respect to appropriate levels of staffing. T. 1686-88. 31. The second sentence is based upon hearsay. It is also based upon the opinion of Mr. Gentle which was inadmissible. T. 1577. The fourth and fifth sentences are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 32-33. These portions of the Forum Group amended application, F.G. EX. 6, were not admitted into evidence, and thus these proposed findings of fact are not relevant. 36. Irrelevant since the Health Quest 60 bed application is an impermissible amended application. COPIES FURNISHED: Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 DEPARTMENT OF HRS Edgar Lee Elzie, Jr., Esquire Guyte P. McCord, III, Esquire McFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 CAREAGE HOUSE HEALTH Robert S. Cohen, Esquire Haben and Associates Post Office Box 10095 Tallahassee, Florida 32302 FORUM GROUP, INC. R. Terry Rigsby, Esquire Post Office Box 11188 Tallahassee, Florida 32302 HILLSBOROUGH HEALTHCARE LTD. W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 HEALTH QUEST CORP. Charles N. Loeser, Esquire Assistant General Counsel 315 W. Jefferson Blvd. South Bend, IN 46601 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302
