Findings Of Fact The Agency for Health Care Administration ("AHCA") is responsible for the administration of the Certificate of Need ("CON") program in Florida, pursuant to Section 408.034, Florida Statutes (1992 supp.) AHCA initially published a need for 313 community nursing home beds in the 16 county area encompassing District III on April 17, 1992, which was subsequently corrected and published as a revised total of 321 net bed need for District III. On September 17, 1992, with a cover letter signed by Elizabeth Dudek, AHCA issued notice that it intended to issue: CON No. 6983P to Unicare Health Facilities, Inc. ("Unicare"), for construction of a 60 bed community nursing home in Hernando County; CON No. 6985 to Beverly Enterprises-Florida, Inc. ("Beverly"), for the construction of a 120-bed community nursing home in Hernando County; and CON No. 6986 to Life Care Centers of America, Inc. ("Life Care"), for the construction of a 120-bed community nursing home in Hernando County; and, intended to deny, among others: CON 6983 to Unicare for the construction of a 120-bed community nursing home in Hernando County; CON No. 6989 to Lake Port Properties ("Lake Port") for either the conversion of 60 sheltered nursing beds to 60 community nursing home beds or the conversion of the 60 beds and the construction of an additional 60 community nursing beds to be located in Lake County; CON No. 6991 to Unicare for the addition of 51 community nursing home beds to New Horizon Rehabilitation Center, in Marion County; CON No. 6992 to Ocala Health Care Associates, G.P., for the addition of 60 community nursing home beds to TimberRidge Nursing and Rehabilitation Center in Marion County; and CON No. 6993 to Southern Medical Associates, Inc. (Southern Medical) for the addition of 60 community nursing beds to Palatka Health Care Center in Putnam County. Prior to the hearing, the parties stipulated that all participants have standing, except Heartland. Additional stipulations, accepted during the hearing, in the absence of a representative for Ocala Health Care Associates, are as follows: subsection 408.035 (1)(m) is not in dispute; proposed project costs and design are reasonable; the applicants' Schedules 1, notes and assumptions, the schematics, and the narrative responses to all of objective 4 in each application are in evidence, not in dispute, and are reasonable. The parties also stipulated to the approval of CON 6991 for Unicare to add 51 beds to its New Horizon Rehabilitation Center in Marion County, and the denial of CONS 6983 and 6983P to Unicare. LIFE CARE Life Care Centers of America, Inc. ("Life Care"), a privately-held corporation established in 1976, by its sole shareholder, Forrest L. Preston, owns, operates or manages 131 nursing homes and 14 retirement centers in 26 states. In Florida, Life Care manages four facilities with superior licenses, located in Altamonte Springs, Punta Gorda, and two in Palm Beach County, Lakeside and Darcy Hall. Life Care also owns, as well as operates, the facility in Altamonte Springs. Life Care owns and operates 28 nursing homes through leases, 6 or 7 of which are capital leases. Under the terms of the capital leases, Life Care is responsible for capital expenditures and projects. Life Care is not responsible for capital expenditures and projects at approximately 91 of its 131 facilities. Life Care proposes to construct and operate a 120-bed nursing home in the southwest section of Hernando County, near Spring Hill, and to finance the total project cost of approximately $5 1/2 million from bank loans. Life Care has not identified a specific site for its facility. Life Care has proposed to accept a CON condition to provide 75 percent of its patient days to Medicaid beneficiaries, to establish a separate 20-bed wing for Alzheimers and related dementia ("ARD") residents, and to provide intravenous therapy, inpatient and outpatient rehabilitative therapy, wound care and adult day care. Life Care's proposed Medicaid condition exceeds the 1991 district average of 73.78 percent, and is consistent with its experience in Altamonte Springs of up to 73 percent Medicaid without a CON condition, and over 80 percent Medicaid in West Palm Beach. The Medicaid percentages indicate that Life Care will offer mainly traditional nursing home services. BEVERLY Beverly Enterprises, Inc., the ultimate corporate parent of the applicant, owns 830 nursing homes, with a total of 89,000 beds in 35 states. Beverly Enterprises-Florida, Inc., the applicant in this proceeding, is a wholly-owned subsidiary of Beverly California Corporation, a wholly owned subsidiary of Beverly Enterprises, Inc. Beverly Enterprises-Florida ("Beverly") owns 41 of the total 68 nursing homes owned in Florida by Beverly-related companies. Of the 40 nursing homes owned by Beverly at the time the application was filed, 31 had superior licenses. Three facilities had moratoria within the preceding 36 months, one a facility built in 1929, another with a two-week moratorium which is now licensed superior, and a third which is still conditional while physical plant improvements are underway. See, Finding of Facts 28, infra. Beverly proposes to construct a 120-bed nursing home in Spring Hill, Hernando County, for $5,213,077, with its CON conditioned on the provision of 74 percent of annual patient days to Medicaid residents and a $10,000 grant for gerontology research at Hernando-Pasco Community College. Beverly proposes four beds for a ventilator-dependent unit, two beds for respite care, 20 beds on a separate wing for ARD residents, and to establish an adult care program. Beverly commits to group patients with ARD or other losses in cognitive functioning together in a 20-bed area, to offer subacute rehabilitative care in a 24 bed Medicare skilled nursing unit, and to provide intravenous therapy. Beverly also intends to establish a dedicated four-bed ventilator unit staffed with at least one registered nurse with a minimum of two years experience in critical care continuously on duty, a separately staffed adult day care program, and respite care. Beverly's would be the first ventilator beds other than in hospitals and the first licensed adult day care program in Hernando County. One of Beverly's existing Florida nursing homes is Eastbrooke which is also located in Hernando County, approximately 10 miles from the proposed Spring Hill site. Beverly expects its experienced personnel from Eastbrooke to train and assist in establishing Spring Hill. Beverly has identified a site for the Spring Hill facility which is across the street from an acute care hospital. Spring Hill is in southern Hernando County, near Pasco County. UNICARE By stipulation of the parties, the Unicare Health Facilities, Inc. ("Unicare") proposal to add 51 beds to New Horizon Rehabilitation Center in Marion County was recommended for approval on May 12, 1993. Unicare withdrew its requests for the approval of CONs 6983P and 6983 in Hernando County. As a result, the parties agreed that the number of beds needed was reduced from 321 beds to 270 beds. LAKE PORT Lake Port is a 60-bed licensed skilled nursing center, with a superior rating, located at the Lake Port Properties Continuing Care Retirement Community, in Leesburg, Lake County. Lake Port Properties is a partnership, for which Johnson Simmons Company serves as the managing general partner. The Lake Port community includes independent living residences, a 66-bed adult congregate living facility, and the 60 sheltered nursing beds. Among the services provided are post-operative care and orthopedic rehabilitative therapy for patients who have had knee or hip replacement surgery or shoulder injuries, neurological therapies for stroke injuries, pain management, subacute, open wound and respite care, and hospice services. Lake Port currently has 11 Medicare certified beds, and has had from 8 to 22 Medicare certified beds at a time. Lake Port has a contract with Hospice of Lake-Sumter County to provide interdisciplinary services to approximately five hospice residents a year. Rehabilitation services are also provided by contract at Lake Port. Lake Port has a relatively high volume of residents who are discharged home following intensive therapy within an average of three weeks. As an indicator of the intensity of therapeutic services, Lake Port has provided 26 percent Medicare, while the Lake/Sumter planning area average was 7.2 percent. Life Care projected a Medicare rate of 6.7 percent, Beverly projected 10 percent Medicare, and the Hernando County average is 9.3 percent. In this proceeding, Lake Port proposes either to convert the existing 60 skilled nursing beds to 60 community nursing beds at no cost, or the 60 bed conversion and the approval to construct an additional 60 community nursing home beds, for a total 120-bed community facility at a cost of $1.4 million. Lake Port proposes to have either CON, if approved, conditioned on the provision of 29.2 percent and 33.81 percent Medicaid, in years one and two, and respite, subacute, and intense rehabilitative care. Historically, the payer mix has included 25-30 percent Medicare and 30-35 percent Medicaid. All of the proposed services are provided currently at Lake Port. The effect of the change in licensure categories is to eliminate the requirement that the facility serve exclusively the retirement community residents after five years in operation, or after August 1995. Lake Port would still be obligated to provide nursing home care to Lake Port community residents at discounted costs, pursuant to the terms of their continuing care contracts. Occupancy levels at Lake Port exceed 95 percent, with 7 to 8 percent of patient days attributable to retirement community, and the remainder to patients in a service area which includes West Lake and Sumter Counties. Lake Port asserts that its financial viability depends on its ability to continue to serve all residents of its service area. SOUTHERN MEDICAL Southern Medical Associates, Inc. ("Southern Medical") is a Florida corporation which owns two nursing homes, one with 60 beds in Okaloosa County and one with 120 beds in Palatka, in Putnam County. Palatka Health Care Center opened with 60 beds in May 1989, added 60 beds in November 1990. Both nursing homes have superior licenses and are managed and staffed by National HealthCorp, L.P., which was founded in 1971, and manages 86 nursing homes, twenty-nine of those in Florida. The management fee is 6 percent of net revenues. In its application for CON number 6993, Southern Medical proposes to add 60 beds to the existing 120-bed nursing home, known as Palatka Health Care Center. Occupancy levels at the Palatka Center ranged between 96 and 99 percent in 1992-1993. Total project costs of $2.1 million will be financed by or through National HealthCorp. Southern Medical proposes that its CON be conditioned on the establishment of a 20-bed distinct Alzheimer's wing and the provision of 74 percent of total patient days to Medicaid patients. Southern Medical provides rehabilitation services in a 14-bed Medicare certified unit, antibiotic intravenous therapy, hospice and respite care. It exceeds the 73 percent Medicaid condition of its CON. SUBSECTION 408.035(1)(a) - NEED IN RELATION TO STATE AND LOCAL HEALTH PLANS The Florida State Health Plan includes 12 preferences to consider in reviewing nursing home CON applications, most of which overlap statutory review criteria in Section 408.035, Florida Statutes. Preference 1 encourages more nursing homes beds in subdistricts with 90 percent or higher occupancy in existing beds. District 3 is not subdistricted, but its nursing home bed occupancy rate was 91 percent in 1991. Therefore, all applicants for nursing homes in District 3 meet the preference. District 3 has been divided into planning areas by the local health council. The applications filed in this proceeding coincide with the planning areas for Hernando, Putnam, and Lake/Sumter Counties. In 1991, occupancy rates averaged 92 percent for Hernando, 96 percent for Putnam, and 93 percent for Lake/Sumter planning areas. Each applicant meets preference 1 using planning areas as substitutes for subdistricts. Preference 2 favors applicants whose Medicaid commitments equal or exceed the subdistrict-wide average. In the absence of subdistricts, the district wide average is used, which is 73.78 percent. Beverly's 74 percent commitment, Life Care's 75 percent commitment, and Southern Medical's 74 percent commitment, entitle them to be favored under preference 2. In addition, Beverly cites its 76.9 percent Medicaid patient days in 1991 at Eastbrooke, but it has failed to achieve its Medicaid commitment at one Florida nursing home in Cape Coral. Lake Port committed to provide a minimum of 33.81 percent Medicaid patient days and argued that it meets the exception to the preference for providing multi-level care. As described in the 1989 Florida State Health Plan, multi-level health systems offer a continuum of care which may range from acute care and ambulatory surgery centers to home health and education, including traditional nursing care. Special emphasis is placed on short-term intensive rehabilitation programs. Although Lake Port's proposal includes some of the features of a multi-level system, such as post-operative rehabilitative therapy and respite care, the Medicaid exception is inappropriate for Lake Port, because the same services are also proposed by Beverly and Southern Medical. See, also, Section 408.035(1)(n), Florida Statutes. Preference 3 relates to providing specialized services, including acquired immune deficiency syndrome ("AIDS") services to residents, ARD residents, and the mentally ill. This preference is met by Beverly, Life Care, and SMA, particularly for ARD patients for which all three applicants proposed to establish separate 20-bed units. The preference is also met by Lake Port, particularly with its emphasis on specialized, intense rehabilitative services. See, also Subsection 408.205(1)(f), Florida Statutes. Preference 4 supports applicants proposing to provide a "continuum of services to community residents," including respite and adult day care. Beverly and Life Care propose to offer both respite and adult day care. Lake Port and Southern Medical propose to provide respite and hospice care. Preference 5, for the construction of facilities which provide maximum comfort and quality of care, was stipulated as being met by all the parties. The applicants also stipulated that project costs and construction plans are reasonable. See, also, Subsection 408.035(1)(m),(2)(a) and (2)(c), Florida Statutes. Preference 6 is met by all of the applicants: . . . proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. Life Care, Beverly and Southern Medical propose to offer specialized services to ARD residents. Lake Port and Southern Medical emphasize physical rehabilitation. All of the applicants meet the requirements for preference 6. Preference 7 is for applicants whose charges do not exceed the highest Medicaid per diem rate in the subdistrict, which, for District 3, is $74.05, or $93.49 inflated at 6 percent to 1996. Life Care Care's proposed Medicaid charges are $93.69 for year 1, and $94.46 for year 2. Beverly projected that the average Medicaid per diem rate in the subdistrict will be $93.49 in 1996, its charge will be $95.00, but it will expect Medicaid reimbursement to be $93.30 for that year. Lake Port projected proposed charges to Medicaid patients as $90 to $93.92 in year one and $93 to $97.37 in year two, for the full 120 beds or the partial 60 beds, respectively. Southern Medical's Medicaid charges will be $90.22 in year one and $94.28 in year two. Preference 8 applies to applicants with a history of providing superior resident care programs, as indicated by licensure ratings. Of Beverly's 40 Florida facilities, 31 held superior licenses at the time the application was filed. Of the nine Beverly nursing homes with conditional ratings, six are now superior. Renovations or, in the case of one facility built in 1929, construction of a replacement building, are underway at the three others. Life Care, Southern Medical and Lake Port have histories of consistently superior license ratings. See, also, Subsection 408.035(1)(c), Florida Statutes. Preference 9 favors applicants proposing staffing levels exceeding minimum standards. Due to the ventilator, intravenous and rehabilitative services proposed, Beverly will staff in excess of that required by the state, with at least one registered nurse with a minimum of two years experience on all shifts and a full-time physical therapist. It intends to rely on its current Hernando County facility, Eastbrooke's relationship with Hernando-Pasco Community College, for recruitment and training of staff, although Beverly has not opened a new nursing home in Florida since 1987. Life Care similarly intends to rely on a CON approved facility in adjacent Citrus County. Southern Medical employs St. Augustine Vocational College students who are certified nurse assistants training to become licensed practical nurses, and licensed practical nurses training to become registered nurses are employed at Palatka, which also has internships for health sciences students from the University of North Florida. Its occupational, speech and physical therapists are full-time employees. Lake Port's staffing ratios will also exceed the minimums, in order to provide intensive rehabilitative therapies. See, also Subsection 408.035(1)(h), Florida Statutes. Each applicant meets preference 10 based on their proposed or current use of a variety of professional disciplines. See, Finding of Fact 29. Preference 11 seeks to ensure resident rights and privacy as well as implementing plans for quality assurance and discharge planning. All of the applicants were shown to follow well established residents' rights and privacy policies, and to have effective quality assurance programs. Pre-admission screening programs include discharge planning. Beverly has the most highly standardized corporate structure of incentives to maintain quality. Preference 12 relates to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the District. Average costs in District III are expected to be $54.79 for resident care and $13.97 for administrative overhead by 1996. Life Care expects resident care costs of $51.97 a day and administrative costs of $17.43 a day. Beverly projects its resident care to cost $61.89, with administrative costs of $8.86. Southern Medical proposes administrative costs of $19.88 per patient day and patient care costs of $46.23 per patient day. Lake Port's administrative costs are expected to be $27.80 for 60 beds or $22.12 for 120 beds, with patient care costs of $43.04 for 60 beds or $45.08 for 120 beds. Beverly, best meets the preference and expects enhanced economics and efficiency from combining some overhead for the operation of two nursing homes in Hernando County. Life Care, however, notes that its proposal enhances competition in view of the existence of one Beverly facility in Hernando County. See, Subsection 408.035(1)(e),(1)(h) and (1)(l), Florida Statutes, which also relate to costs, resources, and competition. District III includes 16 west central Florida counties, from Hamilton, Columbia, Union Bradford and Putnam in the North to Hernando, Sumter and Lake in the south. The allocation factors in the plan for District III are prepared by the North Central Florida Health Planning Council, the local health council for the district. The district has not been subdivided by agency rule. Using its planning areas, the local health council has given priority rankings for applicants in certain areas of the district. Dixie, Lafayette and Union Counties, which have no nursing homes, are favored by the local plan. If, as in this case, there are no applicants from these counties, Hernando should be favored, followed by Putnam County. No priority was given to Lake County. The council also quantified bed need by planning area for the January 1995 planning horizon, with additional beds needed, ranging from 120 to 180 in Hernando, and up to 60 in Putnam. The parties agree generally that the council may establish planning areas in the discharge of its duties, but they disagree whether the establishment of upper limits, or caps in numeric need by planning area is authorized by law. Section 408.034, Florida Statutes, requires a uniform need methodology, which the agency has established by enacting the nursing home rule, Rule 59C-1.036(1)(c), Florida Administrative Code. Once the agency determines numeric need for a district and the district driving time standard, the local plan cannot alter these determinations. The local plan also includes certain fundamental principles for the allocation of new beds: (1) to promote geographic access, (2) to consider the locations of at-risk population need factors, and (3) to increase supply based on demand. In order of importance, the local plan lists three allocation factors (1) for counties without nursing homes, (2) for new nursing homes 20 miles or 25 minutes drive from existing or approved beds, and (3) for locations without approved beds and with existing nursing homes averaging occupancy levels at least 95 percent for the most recent six month or 90 percent for the most recent 12 months. With respect to the specific allocation factors, Life Care, Beverly, Southern Medical and Lake Port are in areas with over 90 percent average occupancy within a 20 mile radius. Life Care, Beverly and Southern Medical are proposing to establish facilities in areas of greater need than that in the area of Lake Port. Hernando and Putnam Counties also have lower ratios of nursing home beds to population than Lake County. The local health council's determination of the greatest need in Hernando County, was confirmed by expert testimony, based on analyzing licensed and approved beds, occupancy rates, distribution of population ages 65 and older, and 75 and older, and most importantly, projected growth of population 65 and older, and of 75 and older. The bed to population ratio for Hernando was, in 1992, 15.5 percent for 65 and older, and 44.9 percent for the population 75 and older, both of which are below the ratios for any other planning areas in the District. The projected increase in population 75 and older for the state is 12 percent, in contrast to the projected increase of 38 percent for Hernando County. Expert testimony for Beverly supported the addition of up to 300 beds in Hernando County to bring Hernando County's bed distribution in line with that of the entire district. The only approved provider in the county, Hernando Health Care, has surrendered its CON to add 18 nursing home beds in Hernando County. On the contrary, Heartland's expert calculated numeric need of only 119 additional beds in Hernando County. AHCA, however, gave no consideration to the effect on occupancy, fill- up rates, or financial feasibility of it preliminarily approving all new beds in Hernando County. The experience was compared, by Southern Medical's expert, to that in Clay County, in which 555 beds were 95 percent occupied, prior to the opening of two 120-bed facilities, one in December 1989, and the other in April 1990. At the end of the first year of operation, the facility that opened first was 48.5 percent occupied, the second was 21.7 percent occupied, and district occupancy was 77.7 percent. At the end of the second year, the rates were 81 percent, 55.6 percent, and 85.6 percent. However, by 1992, the nursing homes in that subdistrict averaged 93 percent occupancy. Opponents to the AHCA proposal to locate all new facilities in Hernando County, contend that the bed-to- population ratio or "parity" approach used to support the approval of 240 beds in that county does not take into account demographic variables among the counties in the district. While the bed-to-population ratio is not reliable in and of itself, alternative analyses for the determination of the location of greatest need within the district support the same conclusions. Those analyses relied upon current nursing homes occupancy levels, poverty, and population migration trends and available alternatives to distinguish among the various proposed locations. Based on occupancy levels, the District III counties of greatest need for additional beds are Putnam, Lake and Sumter, and Hernando, in that order. Putnam County residents are being placed in facilities outside the county due to the lack of available nursing home beds. In terms of poverty level and mortality levels, the figures for Putnam and Marion Counties indicated their populations were less healthy than those in Hernando and Lake. Hernando had 6.05 percent of its over 65 population, which is 85 and older, as compared to 9.34 percent in Lake, 8 percent in Putnam, and 8.28 percent as the district average. Hernando and Putnam Counties also had lower percentages of people 75 and older than did Lake and Marion Counties. ALTERNATIVES AND EXISTING NURSING HOMES IN DISTRICT 3 Subsections 408.035(1)(b) and (d) require consideration of other like and existing facilities in the district, as well as health care services which are alternatives to nursing homes. Currently, there are 4 nursing homes in Hernando County, and 12 in Lake County. In Putnam County, there are 3 nursing homes and 15 additional "swing beds," which may be used for acute care or long term care, approved for Putnam Community Hospital. Those beds are not available to serve Medicaid patients and are not included on the inventory of community nursing home beds. In the 511 existing nursing home beds in Hernando, there is an average daily census of 45 beds occupied by residents originating from other counties, while 23 Hernando residents constituted the average daily census leaving the County. Hernando cannot expect to retain in-migrating patients with the development of nursing homes in those residents' counties of origin, particularly, Citrus and Pasco. Given the decrease in nursing home patient days form 1991 to 1992, there is also no reason to expect any significant increase in use rate for the population in Hernando. The most compelling support for need in Hernando County is that the rate of growth of its over 75 population, which is more than three times that of the State. Putnam County has the lowest migration and a greater demand for nursing home services for the population age 85 and older. Putnam County nursing homes exceed 95 percent occupancy. Lake County area nursing homes were 93 percent occupied for the same period of time, and with the relinquishment of an approved CON for 60 beds by Leesburg Regional Hospital, that occupancy rate rises to approximately 95 percent. The award to Leesburg Regional established a need for 60 beds in Lake County, but there is also an approved CON for a 120-bed facility in Mount Dora. According to Lake Port's expert witnesses, the Mount Dora nursing home will not alleviate the need for beds in western Lake County. That facility, owned by the Adventist health group, is expected to be a referral facility from the nearby Adventist Hospital in Orlando and Sanford. Based on the alternative considerations of occupancy levels, poverty and morality rates, the need for additional beds in Putnam County is greater than the need in Lake County. Projected population increases and the limited alternatives also support the conclusion that a greater need exists in Hernando than in Lake County. Heartland of Brooksville ("Heartland"), is an existing 120-bed community nursing home in Brooksville, which is licensed superior. Heartland contends that the virtually simultaneous establishment of both Beverly and Life Care will adversely impact Heartland, and make it difficult for the new nursing homes to meet their projected utilizations. The trend of twice as many people migrating to, as there are leaving Hernando County for nursing home services, will be reversed as more nursing homes are established in surrounding counties. See, Finding of Fact 45. Heartland reasonably expects gradually to lose up to 30 percent of its residents who came from the Spring Hill area, where Beverly and Life Care intend to build new nursing homes. Heartland also reasonably expects to lose Medicare patients among the group from Spring Hill. Medicare residents average 9.3 percent of the total mix in the county, but account for 15 percent of the patient mix at Heartland. Heartland will be adversely affected for at least the first two years if both Life Care and Beverly are approved. See, Finding of Fact 40, supra. FINANCIAL FEASIBILITY Heartland, Southern Medical and Lake Port assert that Beverly will be successful in Hernando County, but that Life Care will not. Beverly is already established in the county, will provide services not currently available in nursing homes, and will open its facility seven months before Life Care. Life Care projected a net loss of $589,042 in year one, and a net gain of $254,991 in year two of operation. Life Care's projections fail to consider the company's 6.5 percent management fee, income taxes, and Medicaid reimbursement rate ceilings. By contrast to the other proposals and to the Hernando County average of 9.3 percent, Life Care is relying on a payor mix of only 6.7 percent Medicare, the group for which competition will be most intense. That mix parallels its Florida experience, which has historically allowed it to achieve a profit margin of 16 to 22 percent of net revenues in the third year of operation. Life Care's experience and audited financial statements support its contention that it can borrow essentially 100 percent of the funds necessary to support the project and complete the proposed project, a debt arrangement it has successfully used in the past, without defaulting on loans. Life Care's resources are also potentially subject to a $12 to $18 million judgment, due to litigation which is on appeal. Life Care has a contingency fund of $8 million to satisfy the judgment and has sufficient equity in its properties to pay the balance through refinancing. The deficiencies in Life Care's pro forma and its potential liabilities are off-set by the size and strength of the company, and its Hernando County project is financially feasible in the short and long terms. Beverly projects opening at Spring Hill 15 1/2 months after issuance of a CON, reaching 90 percent utilization within 15 months of opening. Beverly reasonably expects an after tax profit of $239,489 in the second year of operation. Beverly estimates project costs of $5.2 million, financed by the parent corporation, Beverly-California. Beverly-California has from $35 to 45 million available to contribute a 40 percent ($2 million) equity investment, and a $35 million loan commitment from which it will draw the balance to finance the project. Southern Medical has a letter of interest for financing of the total project costs of $2.1 million at 12 percent rate of interest by National HealthCorp. During the construction period, Southern Medical estimates that the existing 120 beds will remain 94 percent full, and that the new beds once open will fill at a rate of 10 percent a month, which is consistent with the experience of the management company, National HealthCorp. Southern Medical's actual experience in Palatka was, in fact, better. The first 60 beds were filled after 5 months while the additional 60 beds were filled in 7 to 8 months. Projected revenues of $290,000 during construction, $323,000 after year one, and $488,000 after year two are reasonable. Southern Medical's balance sheet shows short term debt of approximately $1.4 million attributable to the construction of the Okaloosa nursing home. Although Southern Medical secured a $3 million loan commitment for the Okaloosa facility, it has drawn from that account $473,000. That debt will be refinanced and recategorized as long term debt. Southern Medical's project is financially feasible in the short and long term, based on its actual experience in the existing 120-bed facility. Lake Port has the financial resources to construct 60 additional beds for $1.4 million. Lake Port's proposed conversion of the licensure category for its existing 60 beds is at no cost, except for approximately $37,000 in filing and consultants fees. In its third year of operation, Lake Port has achieved 97 percent occupancy. At present, delays of up to a week may be experienced in transfering patients from acute care hospitals to nursing homes in the Leesburg area. From October to May, due to the influx of northerners, beds are generally not available in the Leesburg area of western Lake and Sumter Counties. Lake Port's projections of occupancy and its financial ability to complete either 60-bed conversion and/or 60-bed addition make either proposal financially feasible in the short or long term.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That AHCA issue CON 6985 to Beverly Enterprises-Florida, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the operation of a 4-bed ventilator-dependent unit, 2 beds for respite care, an adult day care program, and a 20-bed separate unit for residents with Alzheimer's and related dementia. That AHCA issue CON 6986 to Life Care Centers of America, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of a minimum of 75 percent of total annual patient days to Medicaid residents, the operation of a 20-bed dedicated wing for residents with Alzheimer's and related dementia, and the operation of an adult day care. That AHCA issue CON 6993 to Southern Medical Associates, Inc. for the addition of 60 community nursing home beds at Palatka Health Care Center in Putnam County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the establishment of a 20-bed district Alzheimer's wing. That AHCA deny CON 6989P and CON 6989 to Lake Port Properties. DONE AND ENTERED this 20th day of July, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6656 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast-Florida, Inc.'s Proposed Findings of Fact. 1. Accepted in Preliminary Statement and Finding of Fact 3. 2-9. Accepted in or subordinate to Findings of Fact 8-10, 24 and 25. 10. Accepted in Preliminary Statement. 11-15. Accepted in relevant part in Finding of Fact 33. 16-19. Accepted in part in Findings of Fact 9, 20-21, 37-39. 20-23. Accepted in Findings of Fact 19-32. 24-30. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 31. Accepted in Findings of Fact 19-32. 32-38. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 39-42. Accepted in or subordinate to Finding of Fact 28. 43-48. Accepted in or subordinate to Findings of Fact 29-31. 49. Accepted in or subordinate to Findings of Fact 29-30. 50-56. Accepted in or subordinate to Findings of Fact 50-51. 57-62. Accepted in or subordinate to Findings of Fact 29 or 30. 63-64 Accepted in or subordinate to Findings of Fact 32, 39 and 46-47. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. 67-68. Accepted in Findings of Fact 9-10. 69. Subordinate to Finding of Fact 6. 70-71. Accepted in or subordinate to Findings of Fact 6, 7 and 10. 72-75. Accepted in or subordinate to Findings of Fact 5-7, 8-10 and 48-51. 76. Accepted in Finding of Fact 32. 77-79. Accepted in or subordinate to Findings of Fact 48-49. Petitioner, Southern Medical's, Proposed Findings of Fact 1-2. Accepted in Finding of Fact 16. Accepted in Finding of Fact 34. Accepted in Findings of Fact 16 and 17. 5-14. Subordinate to preliminary statement. 15. Accepted in Finding of Fact 2. 16-17. Accepted in Finding of Fact 20. 18-19. Accepted in Finding of Fact 17. 20-22. Rejected in conclusions of law 4. 23. Accepted in Finding of Fact 36. 24-41. Accepted in or subordinate to Findings of Fact 21 and 33-45. Accepted in Finding of Fact 19. Accepted in Findings of Fact 20-21. Accepted in Finding of Fact 22. Accepted in Finding of Fact 23. Accepted in Finding of Fact 24. Accepted in Finding of Fact 25. Accepted in Finding of Fact 26. Accepted in Finding of Fact 27. Accepted in Finding of Fact 28. Accepted in Finding of Fact 29. Accepted in Finding of Fact 30. Accepted in Finding of Fact 31. Accepted in part in Finding of Fact 32. Accepted in part in Findings of Fact 19-32. 56-57. Accepted in part in Findings of Fact 43-45. 58-60. Accepted in or subordinate to Finding of Fact 28. 61-62. Accepted in Findings of Fact 18, 22 and 28. Subordinate to Finding of Fact 28. Accepted in Finding of Fact 28. 65-69. Accepted in or Subordinate to Finding of Fact 34 and 43-45. 70-72. Accepted in Findings of Fact 17-18 and 22-23. 73-74. Accepted in Findings of Fact 29-30. 75. Accepted in Finding of Fact 24. 76-77. Accepted in Finding of Fact 29. 78-96. Accepted in Findings of Fact 52-53. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. Rejected in Findings of Fact 34-39 and 45. 100-101. Rejected in Findings of Fact 41-42 and 45. 102. Accepted in relevant part in Findings of Fact 43-45. 103-109. Rejected in relevant part and accepted in relevant part in Findings of Fact 41-45. 110-112. Rejected in Finding of Fact 45. Accepted in Findings of Fact 48 and 49. Rejected in Finding of Fact 45. Accepted in conclusions of law 60. 116-120. Accepted in relevant part in Findings of Fact 48 and 49. 121. Rejected in Finding of Fact 5. 122-123. Rejected in Findings of Fact 39 and 40. 124-125. Issue not addressed at hearing. Accepted in relevant part in Finding of Fact 48. Rejected in Finding of Fact 29. Petitioner, HCR Limited Partnership I d/b/a Heartland of Brooksville's Proposed Findings of Fact Accepted in part in Findings of Fact 8-10. Accepted in part in Findings of Fact 5-7. Accepted in part in Findings of Fact 12-14. Accepted in part in Findings of Fact 16-18. Accepted in Preliminary Statement and Findings of Fact 2 and 11. Accepted in Finding of Fact 40. Accepted in Finding of Fact 33. Accepted in Finding of Fact 34. 9-16. Accepted in Findings of Fact 34-38. 17. Accepted in Findings of Fact 21 and 43. 19-22. Accepted in Findings of Fact 21, 42 and 43. 23-33. Accepted in Findings of Fact 38, 42 and 43. Rejected in Finding of Fact 45. Accepted in Finding of Fact 39. 36-41. Accepted in or Subordinate to Findings of Fact 45 and 47. 42-44. Rejected in Finding of Fact 5. 45. Accepted in Findings of Fact 45, 48 and 49. Petitioner, Lake Port Properties's Proposed Findings of Fact Accepted in Finding of Fact 2. Accepted in Finding of Fact 3. Accepted in Findings of Fact 3 and 40. Accepted in preliminary statement. Accepted in Findings of Fact 4 and last sentence rejected in preliminary statement. Accepted in Preliminary Statement. 7-28. Accepted in Findings of Fact 12-15. 29. Rejected in Finding of Fact 45. 30-34. Accepted in Findings of Fact 39-43 and 46. 35. Rejected in Finding of Fact 46. 36-38. Accepted in Findings of Fact 12-15. 39-42. Facts accepted, conclusions rejected in Findings of Fact 44-46. 43-47. Accepted in Findings of Fact 33-39. 48. Rejected in Finding of Fact 39. 49-54. Conclusion in first sentence rejected in Finding of Fact 39. Facts accepted in Findings of Facts 39-45. 55-60. Not solely relied upon but not disregarded. Facts generally accepted in Findings of Fact 39-45. 61-74. Accepted in part and rejected in part in Findings of Fact 19-32. 75-82. Accepted in part in Findings of Fact 33-38. 83-93. Accepted in or subordinate to Findings of Fact 28-29. 94-100. Accepted in Findings of Fact 54-55. 101-103. Accepted in Findings of Fact 15 and 54. 104. Accepted in Finding of Fact 31. 105-106. Accepted in Finding of Fact 22. 107-111. Rejected first sentence in Findings of Fact 39 and 40. Remainder of 107-111 accepted in Findings of Fact 8-10 and 19-38. 112-113. Conclusion rejected in Findings of Fact 45, 48, and 49. 114-117. Accepted in Findings of Fact 45, 48 and 49. Rejected in Findings of Fact 45, 48 and 49. Accepted in Finding of Fact 6. 120-121. Subordinate to Finding of Fact 7. 122-125. Accepted in Findings of Fact 7 and 48. 126-130. Rejected in Finding of Fact 5. Respondent, Life Care Centers of America, Inc.'s, Proposed Findings of Fact. 1-9. Accepted in Findings of Fact 33-43. 10-12. Accepted in Findings of Fact 12-15. 13. Rejected in Finding of Fact 12. 14(a-d)-20. Accepted in Findings of Fact 33-40. 21(a-d). Accepted in Findings of Fact 19-32. 22. Accepted in Finding of Fact 34. 23-28. Accepted in Findings of Fact 44-47. Accepted in Finding of Fact 7. Accepted in Finding of Fact 39. Accepted in part or subordinate to Findings of Fact 43-45. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 17. 34-40. Accepted in relevant part or subordinate to Findings of Fact 5-7. 41(a-c). Accepted in Findings of Fact 8-10 and 29. 42. Rejected in relevant part in Finding of Fact 12. 43-45. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Rejected in Findings of Fact 44. 47-48. Subordinate to Finding of Fact 45. 49-50. Accepted in Findings of Fact 5-7. 51-54. Subordinate to Finding of Fact 29. 55-62. Accepted in Findings of Fact 48-49. 63-64. Accepted in Finding of Fact 29. 65-69. Accepted in Findings of Fact 48-49. Subordinate to Findings of Fact 54-55. Subordinate to Finding of Fact 52. Subordinate to Finding of Fact 29. 73-74. Accepted. 75. Accepted in Finding of Fact 4. 76-77. Accepted in Findings of Fact 40-43. 78-79. Accepted in Finding of Fact 29. Subordinate to Finding of Fact 52. Accepted in Finding of Fact 25. 82-85. Accepted in or subordinate to Finding of Fact 22. Subordinate to Finding of Fact 47. Accepted in conclusions of law. Accepted in preliminary statement. Issue not reached. Subordinate to preliminary statement. Conclusion rejected in Finding of Fact 16. Respondent, AHCA's Proposed Findings of Fact Accepted in or subordinate to preliminary statement and Findings of Fact 1-3. Accepted in preliminary statement. Accepted in Findings of Fact 2 and 21 and conclusions of law 66. Accepted in Finding of Fact 2 and 21. Accepted in Finding of Fact 2 and 4. Accepted in preliminary statement and Finding of Fact 3. Accepted in Findings of Fact 12-15. Accepted in Findings of Fact 16-18.8. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 5-7. Subordinate to preliminary statement and Finding of Fact 3. Accepted in relevant part in Findings of Fact 5-7 and 19-33. Relevant as to availability due to occupancy ratio in Findings of Fact 37-45. Accepted in Finding of Fact 28. Accepted in Findings of Fact 48-49. Accepted, except first sentence in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 19-20 and 44. Accepted in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 50-51. Accepted in Findings of Fact 33-39. Conclusions rejected in Findings of Fact 19-32. Accepted facts in 19-20 and 44. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 52-53. Accepted in Findings of Fact 12-15 and 19-32. Rejected in Findings of Fact 19 and 20. Accepted in Finding of Fact 28. Accepted in Findings of Fact 54 and 55. COPIES FURNISHED: Douglas L. Manheimer, Attorney Dennis LaRosa, Attorney Broad & Cassel 215 South Monroe Street Post Office Box 11300 Tallahassee, Florida 32302 Alfred W. Clark, Attorney at Law Post Office Box 623 Tallahassee, Florida 32308 James C. Hauser, Attorney Lachlin Waldoch, Attorney Messer, Vickers, Caparello, Madsen Lewis, Goldman & Metz, P.a. Post Office Box 1876 Tallahassee, Florida 32301 Gary Anton, Attorney Stowell, Anton & Kraemer Post Office Box 11059 Tallahassee, Florida 32302 Edward Labrador, Attorney Richard Patterson, Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 W. David Watkins, Attorney Robert Downey, Attorney Oretel, Hoffman, Fernandez, et al. 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 R. Bruce McKibben, Jr., Attorney Pennington & Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32302 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Attorney Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact Health Quest filed an application for a Certificate of Need (CON) to construct a 120-bed nursing home facility in Lee County, Florida. The application was dated June 24, 1983, was filed on June 27, 1983, and projected the project cost to be $5,557,000. The application was denied by DHRS by letter dated December 19, 1983. Based on the stipulation of the parties, the application met all of the criteria of Section 381.494(6)(c), Florida Statutes, and Rule 10-5.11, Florida Administrative Code, except for Rule 10-5.11(21), hereinafter referred to as "the bed need methodology." The relevant service area for determination of need is the Lee County subdistrict of DHRS District B. The district poverty ratio is .68; the bed need ratio is 18.3 beds per 1000 for District B. For District 8, the projected 1987 elderly population is 213,561, and for Lee County it is 69,649. By applying the bed need ratio to the projected elderly population, a raw numeric need is established of 3,910 beds for District 8 and 1,275 beds for Lee County. In District 8 there are 3,671 beds licensed and 1,053 beds approved, for a total bed inventory of 4,724 beds. This exceeds the numeric need of 3,910 and results in no need showing. In Lee County there are 808 beds licensed and 332 beds approved, for a total bed inventory of 1,140 beds. This is less than the numeric need of 1,275 and results in a need showing for Lee County. Where there is no need in the District and need in the subdistrict, subsection 10-5.11(21)(e)(1) becomes operative and the situation is denoted as "c2". For category c2, the current utilization threshold is 90 percent occupancy in the subdistrict. Lee County, with a current utilization of 95.5 percent meets this threshold. By applying the occupancy rate of 95.5 percent to the 808 licensed beds, it is determined that the patient census for Lee County is 772. For a c2 subdistrict the prospective base rate of utilization is 80 percent. The limit for projected need for the subdistrict is the maximum number of beds for which the census would produce an occupancy rate of 80 percent. Here, patient census of 772 divided by 80 percent produces a limit of 965. The inventory of 1,140 beds in the subdistrict is greater than the limit for projected need. Approval of additional beds would be inconsistent with these calculations of need under Rule 10-5.11(21). Lee County has a low supply of nursing home beds in comparison with the remainder of District 8. District 8 has a low supply of nursing home beds in comparison with the remainder of the State of Florida. The beds currently in operation in Lee County are being fully utilized. Nursing home facilities do not operate at 100 percent capacity. For all practical purposes, a 95.5 percent occupancy rate indicates full utilization. There are currently four approved nursing home facilities in Lee County. DHRS has received no correspondence from residents of Lee County or other interested persons indicating the presence of waiting lists at existing nursing home or claiming the unavailability of accessible nursing home facilities in the service area.
Recommendation Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, DIANE K. KIESLING, held a formal hearing in this case on September 11, 1984, in Tallahassee, Florida.
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.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the stipulations of the parties and the entire record complied herein, I hereby make the following findings of fact: THE STIPULATIONS OF THE PARTIES The parties stipulated to the following facts: Forum timely filed its letter of intent and application with DHRS and the District IX Local Health Council for the July 1986 batching cycle. DHRS ultimately deemed the application complete and, following review, published its notice of intent to deny the application. Forum timely filed a petition requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The sole issue is whether there is a need for Forum's proposed services; additionally, it is DHRS's position that a lack of need for the project results in the project not being financially feasible in the short or long term. All other statutory and rule criteria were satisfied, at least minimally, except proof of need pursuant to Rule 10-5.011(1)(k) [formerly 10-5.11(21)(b)], Florida Administrative Code, and financial feasibility as it relates to need. FORUM'S PROPOSAL Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Forum proposes to develop a retirement living center in Palm Beach County that would consist of 120 to 150 apartment units for independent living, a separate personal care unit (known in Florida as an adult congregate living facility), and a 60-bed nursing home component certified for skilled and intermediate care. Palm Beach County is in HRS Service District IX, Subdistrict 4. All three components of Forum's retirement living center would be physically connected and share some operational functions, such as dietary facilities and the heating plant. Such a design provides for an efficient operation as well as an economic distribution of costs facility wide. No specific site has been selected , although Forum has narrowed its focus to the eastern half of Palm Beach County. It is not economically feasible to acquire property or pay for an option on property until after receiving CON approval. The projected total cost of Forum's proposed 60-bed nursing home is $2,329,800. Forum has the necessary resources for project accomplishment and operation. Forum proposes to seek Medicare certification and will provide up to 25 of its beds for Medicaid patients. FINANCIAL FEASIBILITY Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. If need for the facility is shown, Forum would be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible while at the same time having no material negative impact on existing providers in the district. NUMERIC NEED Need for new or additional community nursing home beds in Florida is determined, preliminarily, by use of the methodology found in Rule 10- 5.011(1)(k), Florida Administrative Code. Additional beds normally are not approved if there is no need for beds as calculated under the rule. Pursuant to the rule, need for a defined nursing home subdivision is projected to a three- year planning horizon, in this case July 1989. The need methodology prescribed in the rule is as follows: A (POPA x BA) + (POPB x BB) or: The District's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made [A] (The population age 65-74 years in the relevant departmental districts projected three years into the future [POPA] x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]) + (The population age 75 years and older in the relevant departmental district projected three years into the future [POPB] x the estimated current bed rate for the population age 75 years and over in the relevant district [BB].) BA LB/(POPC) + (6 x POPD) or: The estimated current bed rate for the population age 65-74 years in the relevant district [BA] (The number of licensed community nursing home beds in the relevant district [LB]/the current population age 65-74 years [POPC] + (6 x the current population age 75 years and over [POPD]) BB 6 x BA or: The estimated current bed rate for the population age 75 years and over in the relevant district [BB] 6 x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]. SA A x (LBD/LB) x (OR/.90) or: The preliminary subdivision allocation of community nursing home beds [SA] The district's age-adjusted number of community nursing home bids for the review cycle for which a projection is being made [A] x (The number of licensed community nursing home beds in the relevant subdistrict [LBD]/the number of licensed community nursing home beds in the relevant district [LB]) x (The average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district [OR]/.90) Rule 10-5.011(1)(k)(2)(i), Florida Administrative Code, provides that: The new bed allocation for a subdistrict, which is the number of beds available for CON 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 a. 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. The appropriate planning horizon for the instant case is July 1989, corresponding to the review cycle which began July 15, 1986, and the subdistrict is Palm Beach County. THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT DISTRICT (LB)/THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT SUBDISTRICT (LBD) Rule 10-5.011(1)(k) requires that "review of applications submitted for the July batching cycle shall be based upon the number of licensed beds (LB and LBD) as of June 1 preceding this cycle..." On June 1, 1986, there were 5,459 licensed community nursing home beds in District XI (LB) and 4,084 licensed community nursing home beds in subdistrict 4 (Palm Beach County LBD). These figures include 220 licensed beds that were previously categorized as sheltered. In the instant case, the appropriate figure for LB is 5,459, and the appropriate figure for LBD is 4,084. APPROVED BEDS WITHIN THE RELEVANT DEPARTMENTAL SUBDISTRICT DHRS's interpretation of the rule is to include in the count of approved beds, those approved up to the date of the supervisor's signature on the State Agency Action Report (SAAR). In this case, there were 640 approved beds in Palm Beach County at that time. As of June 1, 1986, the same date as the licensed bed cutoff, there were 640 approved beds in the subdistrict. In Dr. Warner's opinion, approved beds should be determined as of the same time period as licensed beds in order to have consistency and avoid anomalies in the formula. This opinion is reasonable and appropriate. In the instant case, the figure to be applied in the formula for approved beds in the subdistrict is 640 approved beds. THE POPULATION AGE 65-79 YEARS IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPA). THE POPULATION AGE 75 YEARS AND OVER IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPB). The rule provides that the three year projections of population shall be based upon the official estimates and projections adopted by the Office of the Governor. For the purposes of calculating need, DHRS utilizes at the final hearing the figures for estimated population obtained from data available at the time of initial application and review. The set of population projections which were available when Petitioner's application was filed and reviewed were those published on July 1, 1986. Based on this data, which is reasonable to use, POPA 170,639; and, POPB 122,577. THE CURRENT POPULATION AGE 65-74 YEARS (POPC)/THE CURRENT POPULATION AGE 75 YEARS AND OVER (POPD). In calculating POPC and POPD, DHRS also utilizes at final hearing the most current data available at the time of initial application and review, in this case the July 1, 1986, release. Based on that data, POPC 153,005 and POPD 112,894. In the opinion of Dr. Warner, Forum's expert, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. According to Warner, January 1, 1986, as the midpoint of this time period, is the appropriate date to derive POPC and POPD in this case. The formula mandated by the rule methodology for calculating the estimated current bed rate requires that the "current population" for the two age groups be utilized. It is reasonable and appropriate for the base for POPC and POPD to correspond to the period for which the average occupancy rate is calculated. Supportive of Dr. Warner's opinion are the past practices of DHRS. Between December 1984 and December 1986, DHRS routinely used a three and one half year spread between the base population period and the horizon date in determining "current population" in its semiannual nursing home census report and bed need allocation. In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, DHRS utilized a three and one half year spread between the base population period and the horizon data for "current population" when it awarded beds. DHRS offered In this case, it proposed to use a three year spread between the base population period and the horizon dated for "current population" in calculating POPC and POPD. Using the July 1986 population release, POPC for January 1986 is 149,821 and POPD for January 1986 is 98,933. THE AVERAGE OCCUPANCY RATE FOR ALL LICENSED COMMUNITY NURSING HOMES WITHIN THE SUBDIVISION OF THE RELEVANT DISTRICT (OR). The rule requires the use of occupancy data from the HRS Office of Health Planning and Development for the months of the previous October through March when calculating a July batch of nursing home applicants. However, the rule is not instructive as to how one calculates this number. In this case, DHRS computed average occupancy rates based on the existing occupancy rates at applicable facilities on the first day of each month. Based on this occupancy data, which includes the data for the 220 previously sheltered beds in the subdistrict, occupancy rates for the July 1986 batch of Palm Beach County nursing home applicants is 83.75 percent. Forum's witness, Dr. Warner, determined that the correct occupancy rate was 85.46 percent for Palm Beach County for the period October 1985 to March 1986. Dr. Warner arrived at this figure by including paid reservation days. A paid reservation day is a day which is paid for by the patient or the patient's intermediary during which the patient is not physically in the bed. Typically, the patient will either be in the hospital, visiting relatives or otherwise away from the facility and will continue to pay for the nursing home bed, so that they will be able to return and not have someone occupy the bed. One of the goals and objectives of the District IX Local Health Plan is that paid reservation days be considered when bed need calculations are made. Calculating prepaid reservation days is consistent with the Rule because such beds are no longer available to the public and are therefore in use. Dr. Warner determined that during the applicable period, 1.25 percent of the licensed beds in the subdistrict were paid reservation days. Although taking paid reservation days into account would not be inconsistent with the rule, Forum failed to demonstrate that the 1.25 percent figure arrived at is valid for the applicable period, i.e., October 1985 to March 1986. Dr. Warner merely calculated a two-year average number of paid reservation days, broke this figure down to a six-month average and applied this average to the six-month period specified in the Rule. Gene Nelson, an expert called on behalf of Forum, calculated the occupancy rate as 88.72 percent in Palm Beach County for the appropriate period called for in the Rule. Nelson used the average monthly occupancy data obtained from medicaid cost reports for some facilities rather than first-day of the month data as used by DHRS. In addition, Nelson did not factor in the occupancy date of licensed beds in the extreme western portion of the County based on his belief that the District IX Local Health Plan mandates that the western area not be considered in any way with the eastern coast section of Palm Beach County for purposes of determining competitiveness. While the use of average full-month occupancy data is generally more reliable than using first-day of the month data, it is best, from a health planning prospective, to be able to use either all full-month data or all first- day of the month data. In making his calculations, Mr. Nelson mixed the two types of data, using full-month data when available and in other cases using first-day of the month data when full-month data was not available. It is inappropriate to fail to consider licensed beds in the extreme western portion of the County based solely on the local health plan. Among other reasons, the rule does not provide for exclusions for any of the subdistricts licensed facilities from the methodology. The appropriate and most reasonable occupancy rate (OR) in the instant case for the applicable time period is 83.75 percent. NET NEED Applying the above-referenced variables to the Rule formula produces the following results. July, 1986. District Allocation BA LB (POPC + (6 x POPD) - 5459 [149,821 + (6 x 98,833)] - .007349 BB - 6 x BA .044094 (.007349) July, 1989 Allocation (POPA x BA) + (POPB x BB) - (170,639 x .007349) + (122,577 x .044094) - 6659 Subdivision Allocation and Need SA A x (LBD / LB) x (OR 1.9) - 6659 x (4084 / 5459) x (.8375/.9) - 6659 x .74812236673 x .93055555555 4636 Subdistrict Allocation for Palm Beach County 4084 (Licensed Beds) 576 (90 percent of 640 Approved Beds) -24 (Bed Surplus)
Recommendation Based on the foregoing Findings of Fact, and Conclusions of Law, it is, RECOMMENDED that the application for certificate of need filed by Forum be Denied. DONE AND ORDERED, this 4th day of April, 1988, in Tallahassee, Florida. W. MATTHEW STEVENSON 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 4th day of April, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0704 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in substance in Finding of Fact 2. Adopted in substance in Finding of Fact 3. Adopted in substance in Finding of Fact 4. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 9. Sentence 1 is rejected as contrary to the weight of the evidence. Rejected as subordinate and/or unnecessary. 11. Adopted in substance in Finding of Fact 9. 12. Adopted in substance in Finding of Fact 9. 13. Adopted in substance in Finding of Fact 10. 14. Adopted in substance in Finding of Fact 12. 15. Adopted in substance in Finding of Fact 1. 16. Adopted in substance in Finding of Fact 14. 17. Adopted in substance in Finding of Fact 21. 18. Adopted in substance in Finding of Fact 20. 19. Adopted in substance in Finding of Fact 22. 20. Adopted in substance in Finding of Fact 22. 21. Adopted in substance in Finding of Fact 18. Adopted in substance in Finding of Fact 15. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 23. Rejected as a recitation of testimony and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 24. Rejected as a recitation of testimony and/or unnecessary. Adopted in substance in Finding of Fact 25. Rejected as a recitation of testimony and/or subordinate. Adopted in substance in Finding of Fact 25. Adopted in substance in Finding of Fact 21. Rejected as contrary to the weight of the evidence. Rejected as not supported by the weight of the evidence and/or unnecessary. Rejected as subordinate and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Rejected as a recitation of testimony and/or subordinate. Rejected as misleading and/or subordinate. Rejected as subordinate and/or unnecessary. Rejected as contrary to the weight of the evidence. Rejected as contrary to the weight of the evidence. Rulings on Proposed Findings of Fact Submitted by the Respondent Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 9. Adopted in substance in Finding of Fact 3. Rejected as contrary to the weight of evidence. Adopted in substance in Finding of Fact 13. Adopted in substance in Finding of Fact 18 and 19. Adopted in substance in Finding of Fact 16. Adopted in substance in Finding of Fact 23. Addressed in Conclusions of Law. Addressed in Conclusions of Law. Rejected as subordinate and/or unnecessary. COPIES FURNISHED: Thomas W. Stahl, Esquire 102 South Monroe Street Tallahassee, Florida 32301 R. Terry Rigsby, Esquire 325 John Knox Road Building C, Suite 135 Tallahassee, Florida 32303 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 John Miller, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power HRS Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 =================================================================
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED That Manor Care be issued a CON for the construction of a 60 bed nursing home; Palm Bay Care Center be awarded a CON for the construction of a 60 bed nursing home; Forum Group be awarded a CON for a 40 bed nursing home and Courtenay Springs be awarded a CON for 36 nursing home beds. RECOMMENDED this 26th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-99675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 1987. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Jean Laramore, Esquire Kenneth Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Thomas B. Smith, Esquire Post Office Box 633 Orlando, Florida 32802 John Grout, Esquire Post Office Box 180 Orlando, Florida 32802 Donna H. Stinson, Esquire Suite 100 Perkins House 118 North Gadsden Street Tallahassee, Florida 32301 Susan G. Tuttle, Esquire 402 South Florida Avenue Tampa, Florida 33602 Robert D. Newell, Jr., Esquire Suite B 200 South Monroe Street Tallahassee, Florida 32301 John F. Gilroy, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 APPENDIX The following constitutes my specific rulings pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties herein. 1-13 Accepted. 14 & 15 Accepted. 16-18 Rejected as a recitation of the evidence. 19-23 Accepted. 24 Accepted. 25-29 Accepted. 30 & 31 Accepted. 32 Irrelevant. 33-34 Accepted. 35-37 Accepted. 38-46 Accepted. 47 & 48 Accepted. 49 & 50 Accepted. 51 Discussion, not Finding of Fact. 52-56 Accepted. Rejected as a recitation of the evidence. Accepted. Accepted to the fact that there were no sheltered beds in existence. Irrelevant. 61-63 Accepted but not of substantial positive value. 64 & 65 Accepted. Opinion not Finding of Fact. Accepted. 68-75 Accepted. 76-80 Irrelevant based on part operation and evidence shows facility is to be sold. 81-85 Irrelevant - see next 86-90 Rejected as a conclusion of law and not a Finding of Fact. 91 Not a Finding of Fact. 92-94 Accepted. 95 Irrelevant as to local district. 96-103 Accepted. 104-105 Rejected as contrary to the weight of the evidence. Accepted as to what Dr. Hoffman supported. Accepted as to what Dr. Hoffman indicated. 108-110 Accepted. Rejected as contrary to the weight of the evidence. Accepted. Not a Finding of Fact. 114-118 Accepted. 119&120 Not a Finding of Fact. 121&122 Accepted. 123 Accepted as to the one facility currently operated. 124-127 Accepted. Speculation insufficient to support a Finding of Fact. Argument, not a Finding of Fact. Accepted. 131-133 Accepted. 134 Not a Finding of Fact. 135-137 Accepted. 138 Not supported by the weight of the evidence. 139-147 Accepted. 148&149 Not a Finding of Fact. 150-164 Accepted. Rejected as a summary of testimony, not a Finding of Fact. Irrelevant. 167-176 Accepted. Rejected as contrary to the weight of the evidence Rejected as a summary of testimony. Accepted. 180&181 Accepted. 182 Irrelevant. 183&184 Accepted. 185 Rejected as a conclusion. 186&187 Rejected as contrary to the weight of the evidence. As to Manor Care 1 Accepted. 2&3 Rejected as not a part of the case. 4 Accepted. 5-7 Accepted. Accepted. Accepted. 10-11 Accepted. 12 Accepted. 13-19 Accepted. 20-22 Accepted. As to Forum 1-13 Accepted. 14-16 Accepted. 17-22 Accepted. 23&24 Accepted. 25-27 Accepted. 28-31 Accepted. 32 Accepted. 33-35 Accepted. 36 Rejected as speculation. 37-42 Accepted. 43 Accepted. 44-47 Accepted. 48&49 Accepted. 50-55 Accepted. Rejected as a conclusion not consistent with the evidence. Accepted. 58&59 Accepted. 60-64 Accepted. 65-69 Accepted. 70&71 Irrelevant. 72&73 Accepted. 74-76 Accepted. Accepted as to the first sentence. Second sentence is not a Finding of Fact. Accepted. As to PBCC 1&2 Accepted. 3 Rejected as a Conclusion of Law. 46 Accepted. Accepted. Rejected as contrary to the weight of the evidence. Accepted. 10-12 Accepted. Rejected as contrary to the weight of the evidence except for the first sentence which is accepted. Rejected. 15-20 Accepted. 21-27 Accepted. 28 Rejected as an overstatement and not supported by the evidence. 29&30 Accepted. 31 Rejected as contrary to the weight of the evidence. 32-38 Accepted. 39-43 Accepted. 44-50 Accepted. 51-57 Accepted. Accepted except for the first sentence which is unsupported by credible evidence of record. Accepted. Rejected. Accepted. As to Courtenay This party failed to number or otherwise identify its Findings of Fact individually. Therefore, no specific ruling as to each Finding of Fact is hereby made. In light of the ultimate recommendation of the Hearing Officer that the party's CON be approved, no prejudice to this party can be said to have occurred. As to DHRS 1-4 Accepted 5 Summary of testimony and not a Finding of Fact. 6-1 Is an argument of the party's position, not a Finding of Fact. 12-14 Rejected as matters not a part of the party's position at hearing. Accepted. Accepted. Accepted. Accepted. 19-22 Accepted. Rejected as a summary of testimony and not a Finding of Fact. Accepted. 25-28 Accepted. 29-31 Accepted.
Findings Of Fact Petitioner proposes to construct a 90 bed long term skilled facility near a hospital complex on University Boulevard in Jacksonville, and to offer beds to medicare patients immediately upon opening the facility Only one of the four existing nursing homes on the east side of the St. Johns River in Jacksonville has medicare certification. The existing nursing home in Jacksonville with the greatest number of vacant beds does not yet have medicare certification. Petitioner submitted its application for certificate of need on July 1, 1977. Between July 1, 1970, and July 1, 1977, overall occupancy of available nursing home beds in Jacksonville was between 95 and 97 percent. In April of 1977, Riverside Nursing Home had made 58 new beds available, 95 percent of which were occupied within two and a half months, in August of 1977, Riverside Nursing Home made an additional 58 now beds available. The following month 94.4 percent of the beds at Riverside Nursing Home were occupied. On September 19, 1977, a new 180-bed nursing home, Turtle Creek, opened its doors. At the time of the hearing, 82 of Turtle Creek's beds were occupied, although Turtle Creek, which is located on the northern periphery of Jacksonville, had not received medicare certification. Notwithstanding the filling of these new beds, the number of patients in other Jacksonville nursing homes did not decline appreciably. At the time of the hearing, 90.3 percent of all nursing home beds in Jacksonville were occupied, and all authorized beds were available for occupancy. It takes approximately 22 months after the start of construction to make a nursing home like petitioner proposes to build ready for occupancy. Stays in hospital beds are three or four times more expensive than stays in nursing home beds. At the time of the hearing, some medicare patients were staying in hospitals up to a week and a half after their physicians had authorized their discharge to a nursing home, because beds in medicare certified nursing homes were unavailable. This situation should be ameliorated, at least temporarily, if Turtle Creek obtains medicare certification before its beds are filled by non-medicare patients. On the other hand, social workers employed by Memorial Hospital and Riverside Hospital testified to recently increased numbers of persons requiring placement in nursing homes, upon discharge from their respective hospitals. In the four to six months next preceding the hearing, the number of persons requiring nursing home care when discharged by Memorial Hospital doubled. At the time of the hearing, persons otherwise ready to be discharged from hospitals remained hospitalized for lack of available beds in medicare certified nursing homes. Proximity of nursing homes to their residents' families and friends facilitates visiting, which has a beneficial effect on the health of persons confined to nursing homes. The southeast section of Jacksonville, in which petitioner proposes to construct a nursing home, has a large and growing population. Turtle Creek, which has the biggest block of vacant nursing home beds in Jacksonville, is 15 miles north of petitioner's proposed site. Relevant portions of the 1977 State Medical Facilities Plan (the Plan) were received in evidence as petitioner's exhibit No. 6. The Plan utilizes projected population increases in Duval County in projecting how many nursing home beds will be necessary in order to accommodate everybody who will need one, at a 90 percent occupancy rate. On this basis, a projected need by 1982, of 1,845 nursing home beds for Duval County was incorporated into the Plan. After adoption of the Plan, but before August 10, 1977, the 1,845 figure was changed to 1,921 at the instance of Lloyd Bulme end Ronald Fehr Floyd, employees 01 the Health Systems Agency of Northeast Florida Area 3, Inc. (HSA). At the time of the hearing, 1,912 or 1,914 nursing home beds, all that had been authorized, were available for occupancy in Duval County. While embodying projections as to how many nursing home beds would be needed in the future so as to assure a 90 percent occupancy rate, the Plan provides for the possibility of error in these projections. Specifically, the Plan allows for the consideration of "extenuating and mitigating circumstances," including "availability": Availability In those instances whereby a capital expenditure/certificate of need proposal is made for a new or expanded facility and whereby it can be demonstrated and documented by the applicant and verified by the HSA and/or OCMF that: similar facilities in the documented service area have been utilized at an optimum rate (85 percent occupancy for acute general hospitals and 90 percent occupancy for nursing homes) for the previous 12 month period; and, there exists a current, unduplicated waiting list within the documented service area for the services to be offered by the new or expanded facility; these factors will be considered in making a determination on the capital expenditure/ certificate of need proposal. Petitioner's exhibit No. 6. In applying the Plan's 90 percent optimum rate formula, the Office of Community Medical Facilities "would certainly consider the open beds, the occupancy during the preceding twelve months of the open, available for use beds, tempered certainly by beds which have been approved but are not yet available." (T1231) Fifty-nine of the nursing home beds in Jacksonville require "[m]odernization," according to the Plan. Petitioner's application for a certificate of need was initially reviewed by a committee" of the HSA. On August 25, 1977, the Health Needs and Priorities Committee voted to recommend approval of petitioner's application, on condition that Jacksonville's nursing homes' occupancy rate not fall below 90 percent for four months once all the authorized nursing home beds became available for occupancy. This consideration was consistent with the local Health Systems Plan's requirement of 90 percent or better occupancy, calculated the basis of all authorized beds, for four months preceding the grant of a certificate of need for additional nursing home beds. Before the Executive Committee of the HSA acted on the Recommendation of the HSA's Health Needs and Priorities Committee, HSA staff were advised by the Office of Community Medical Facilities in Tallahassee that "December 19, 1977 . . . . [was] the latest possible time for a decision Petitioner's exhibit No. 17. Inasmuch as Turtle Creek began operation on September 19, 1977, only three months before "the latest possible time for a decision," there was not to be a four months' trial with all authorized beds available, before HSA's Executive Committee passed on petitioner's application. Instead, HSA staff calculated the occupancy rate by adding all existing nursing home beds in Jacksonville, and all other authorized nursing home beds expected to become available in Jacksonville, and dividing the sum into the number of occupied nursing home beds in Jacksonville less the number of occupied beds in Regency House Center (because the HSA staff did not have Regency House Center "patient data." Petitioner's exhibit No. 6.) This calculation yielded an occupancy rate of 84.4 percent for the four months preceding the date on which petitioner filed its application. Because 84.4 percent was less than 90 percent called for by the Health Systems Plan, the HSA's Executive Committee disapproved petitioner's application. Subsequently, the Office of Community Medical Facilities also acted unfavorably on petitioner's application, for reasons which the evidence adduced at the hearing did not make entirely clear. The foregoing findings of fact should be road in conjunction with the statement required by Stuckey's of Eastmam, Georgia v. Department of Transportation, 340 So.2d 119 (Fla 1st DCA 1976) , which is attached as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent grant petitioner's application for certificate of need. DONE AND ENTERED this 23rd day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 77-2243 Paragraphs one, two, five, six, seven, nine, ten, eleven, thirteen, fourteen, sixteen, seventeen and eighteen of petitioner's proposed findings of fact accurately report the evidence adduced at the hearing and have been adopted, in substance, insofar as relevant. Paragraphs three and four and most of paragraph nineteen of petitioner's proposed findings of fact are actually proposed conclusions of law. Paragraph eight of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville. The discrepancy between the Health Systems Plan and the State Medical Facilities Plan was 146 beds for the entire area. Paragraph twelve of petitioner's proposed findings or fact has been largely rejected. The evidence did not establish that all 35 beds at Regency House Center were probably full. The charges to the state plan were apparently called to the attention of federal bureaucrats in Atlanta. (T254) Paragraph fifteen of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville; end is otherwise supported only by the speculative testimony of one witness. COPIES FURNISHED: Kenneth F. Hoffman, Esq. Rogers, Towers, Dailey, Jones & Gay Post Office Box 1872 Tallahassee, Florida 32302 Robert M. Eisenberg, Esquire 5920 Arlington Expressway Post Office Box 2417 F Jacksonville, Florida 32231
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses, and on the exhibits received in evidence, I make the following findings of fact. By application dated April 15, 1983, Beverly Enterprises-Florida, Inc., (hereinafter "Beverly" or "Petitioner") applied to the Department of Health and Rehabilitative Services for the issuance of a certificate of need for the construction of a new 120-bed nursing home in Marco Island, Collier County, Florida. The application was deemed by HRS to be complete effective September 15, 1983. (Pet. Ex. 1) By letter dated December 5, 1983, HRS advised Beverly that its application was denied. (Pet. Ex. 2) The letter included the following reasons for denial: The proposed project is not consistent with Chapter 10-5.11(21), Florida Administrative Code, nursing home bed need methodology. With a six month occupancy of 58.2 percent in the subdistrict of Collier County, the utilization threshold of 90 percent developed from the application of Chapter 10-5.11(e), (f), and (h), Florida Administrative Code, is not satisfied and no further bed need is demonstrated for this subdistrict. There are 97 approved but unlicensed beds in the subdistrict which, when added to the existing licensed bed supply, should effectively maintain the county-wide occupancy at a reasonable level through 1986. Further explication was contained in the State Agency Action Report which accompanied the HRS letter of December 5, 1983. Florida Administrative Code Rule 10-5.11(21)(a), adopted by HRS, reads as follows: Departmental Goal. The Department will consider applications for community nursing home beds in context with the applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in subsections (21)(b), (c), (a), (f), (g), and (h) of this rule. (Pet. Ex. 3) A step-by-step application of the methodology described in Rule 10- 5.11(21)(b) through (h) to the facts in this case is as follows. Under the formula, bed need is determined by first looking at the poverty level in District VIII and in Collier County (Pet. Ex. 5, Tr.252). The poverty level is computed by comparing the number of elderly living in poverty in the district, which is 8.61, to the number of elderly living in poverty in the State, which is 12.70, resulting in a poverty ratio of .68 (Tr.252). The bed need ratio is computed by multiplying the poverty ratio of .68 times 27 beds per thousand population 65 or older, which results in a bed need ratio of 18.3 beds per thousand residents 65 years or older (Tr.252). When the bed need ratio is applied to the 65 and over population in District VIII, the total bed need is 3,858. The bed need for the subdistrict of Collier County is 514 beds (Tr.252). The number of licensed and approved beds in the district is 4,618 and the number of licensed and approved beds in the subdistrict is 429 (Tr.252). When the need for beds is subtracted from the total number of licensed and approved beds, there is a surplus of 760 beds in District VIII, but a need for 85 beds in the subdistrict of Collier County (Tr.253). When a need for beds exists in the subdistrict but not the district as a whole, subsection (g) of the rule allows new beds to be added only if existing beds are being utilized at a 90 percent or greater occupancy rate (Pet. Ex. 5, Tr.253-255). The current utilization rate for nursing home beds in Collier County is 61.1 percent (Pet. Ex. 7, Tr.255). Since the current utilization rate is less than 90 percent, no additional beds are needed in Collier County (Tr.256). Approval of the Beverly application to construct a 120-bed nursing home in Marco Island would, in the words of the applicable rule, "cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in subsections (21)(b), (c), (d), (e), and (h) . . . " of Rule 10-5.11(21), Florida Administrative Code. (Pet. Ex. 2, 5, 6, and 7; testimony of expert witnesses Mr. Knight and Ms. Dudek.) HRS is presently considering the adoption of amendments to the nursing home need methodology provisions presently found in Florida Administrative Code Rule 10-5.11 (21)(b) through (h). If the present form of the tentative amendments to Rule 10-5.11(21)(b) through (h) were to be adopted and become effective soon enough to be applicable to Beverly's application in this case the result would be the same as under the current rule. Approval of Beverly's application would cause the number of community nursing home beds in HRS District VIII to exceed the number of community nursing home beds calculated by the methodology of both the existing rule and the tentative amendments to the rule. (Testimony of expert witness Knight.) Florida Administrative Code Rule 10-17.020(2)(b), adopted by HRS, reads as follows: (2) Policies and Priorities. In addition to the statewide criteria against which applications are evaluated, applications from District 8 will be evaluated against the following local criteria: a. * * * b. Nursing home services should be available within at least one hour typical travel time by automobile for at least 95 percent of all residents of District 8. (Pet. Ex. 3) HRS District VIII consists of seven counties. The current population estimate of these seven counties is 679,019. According to the most recent census information, the permanent population of Marco Island is 8,605. Four community nursing homes are located in Naples, which is also in Collier County. Typical travel time by automobile from the center of Marco Island to the center of Naples is approximately 30 to 45 minutes, depending on the season of the year. (Tr.59-60, 83, 118, and 151) In arriving at the current utilization rates for purposes of applying the need determination methodology, HRS relied on the latest available quarterly nursing home census reports. (Pet. Ex. 7; Tr.255-256) In compiling the Collier County average occupancy rate for purposes of applying the need determination methodology, HRS counted as existing beds all of the licensed beds of all of the community nursing homes in Collier County, which included 114 beds licensed for Gulf Drive Residence, Inc., and 120 beds for Americana Healthcare Center. (Pet. Fx. 2)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Department of Health and Rehabilitative Services enter a final order in this case DENYING the application of Beverly Enterprises-Florida, Inc., for a certificate of need to construct a new community nursing home in Marco Island, Collier County, Florida. DONE and ORDERED this 20th day of September, 1984 in Tallahassee, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of September, 1984.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws. In this case, AHCA projected a need for an additional 295 community nursing home beds in District 3 for the July 1996 planning horizon, and reviewed the applications submitted in response to the published need. A numeric need for 186 beds remains. CON applications are evaluated according to applicable statutory and rule criteria and, as required by Section 408.035(1)(a), Florida Statutes, the preferences and factors in the state and local health plans. The applicable state plan is Toward A Healthier Future - The 1993 State Health Plan. The applicable local health plan is the District Three Health Plan for 1992, with 1993 Allocation Factors, prepared by the North Central Florida Health Planning Council in Gainesville. AHCA has not promulgated a rule subdividing District 3. However, the local planning council has divided the sixteen counties into nursing home planning areas, as follows: Columbia, Hamilton, Suwannee, Bradford, Union and Lafayette Counties; Alachua, Dixie, Gilchrist, and Levy Counties; Putnam County; Marion County; Citrus County; Hernando County; Lake and Sumter Counties. In this case, one applicant, Dixie Health Care Center, L.P., ("Dixie") proposes to locate in Dixie County in planning area 2 or (b). Hilliard HealthCare, Inc., ("Hilliard"), Unicare Health Facilities, Inc., ("Unicare"), Life Care Centers of America, Inc., ("Life Care") and Beverly Enterprises- Florida, Inc., ("Beverly") propose to construct nursing homes in planning area 7 or (g). Within planning area 7, Hilliard would build a nursing home in Sumter County, while Unicare, Life Care, and Beverly would build in Lake County. The total population in planning area 2 is approximately 230,000, and in planning area 7, approximately 180,000. More relevant to a determination of need for a nursing home, the population age 65 and over in planning area 2 is approximately 25,000, as compared to 49,000 in planning area 7. Within planning area 2, the projected Dixie County population over 65 in the year 2000 is 2,211, while the Sumter County projection is 9,824 residents. The actual 1994 population age 75 and over was 644 in Dixie, and 3,296 in Sumter County, and over 20,000 in Lake County. Currently, there are 1,238 licensed and approved beds in planning area 2, and 1,391 in planning area 7. For planning area 2, which includes Dixie County, there are 22 people age 65 and over for each nursing home bed. In planning area 7, the ratio is 41.1 to one. If 120 beds are added in Lake County, the comparable county ratio will decrease from 41.4 to 37.6 persons 65 and over to a bed. The addition of 60 beds in Sumter County will result in a decline in the county from 39.5 to ratio of 30.7 to 1. The district-wide ratio for District 3 is 34.5 persons 65 and over for every nursing home bed. The local planning council has compared the relative need for nursing home beds by planning area, according to a Planning Area Nursing Home Bed Allocation Matrix ("PANHAM"). Using a comparison of the percent of population age 75 and over to the percent of district beds in each planning area, the local health council describes planning area 7 as high need/moderate occupancy. It is ranked the planning area of greatest need for this CON application cycle. Planning area 2 is described as an area of low need/high occupancy. It also ranked as an area of priority in this cycle, although lower than planning area 7. The local health council has adopted three factors for use in making more specific determinations of locations which will best meet unmet needs within a planning area. Ranked in order of priority, the factors are: the absence of nursing homes in the same county, a location more than 20 miles or 25 minutes drive from any other nursing home, and an area in which nursing homes within a 20 mile radius exceeded 90 percent occupancy for the most recent twelve months or 95 percent for the most recent six months. There is no evidence that construction of new nursing home beds is not needed or that the need is based on any inefficiency or quality of care problems in existing nursing homes. Consideration of the availability, utilization, and adequacy of other nursing homes and alternative health care providers in the district is also mandated by statute. See, e.g. Subsections 408.035(1)(b), (1)(d), (2)(a), (2)(b), (2)(c), and (2)(d), Florida Statutes. In this group of applicants, only Dixie is favored by the first local health council factor for proposing to locate in a county in which there are no existing or approved nursing homes. Dixie does not meet the preference for a location more than 20 miles or a 25 minute drive from the closest nursing home. Dixie's expert witness who believed the drive took more than 25 minutes lacked direct knowledge of the road conditions. By contrast, the deposition testimony of the administrator of Tri-County Nursing Home established that the drive from Tri-County to Cross City takes about 15 minutes, most of it on a four lane highway, U.S. 27. Tri-County in Wilcox near Fanning Springs, and Medic-Ayers in Trenton are both within 20 miles or 25 minutes drive of the proposed Dixie site. Their occupancy rates for the first six months of 1993 were 94.41 percent and 95.85 percent, respectively, or an average of 95.13 percent. Therefore, Dixie is extremely close to meeting the local allocation factor related to existing nursing home occupancies in excess of 95 percent for the January-June 1993. By contrast, there are 12 existing and approved nursing homes in Lake County, and one in Sumter County. Occupancy rates in Lake County averaged 91.7 percent, but the facility in Sumter County reported 99.13 percent occupancy in the 1992-1993 reporting period. Applicants in Lake and Sumter Counties are not favored for proposing locations in counties without nursing homes, or for locations more than 20 miles or 25 minutes drive from existing nursing homes. Lake County applicants also do not meet the preference for an area defined by a 20-mile radius in which average occupancy rates exceeded 95 percent for the most recent six months or 90 percent for the most recent 12 months. The Sumter County applicant, Hilliard, does meet the occupancy requirement for a location in which nursing homes within a 20 mile radius exceeded 90 percent occupancy for the most recent twelve months. Because the state rule methodology results in a positive need calculation, the local health council factor related to special circumstances in the absence of numeric need is inapplicable to this case. Dixie Health Care Center, L.P., Cross City, Dixie County Dixie is seeking AHCA's issuance of CON 7492 to construct a 60-bed nursing home in Cross City, Dixie County, which is in planning area 2. If issued a CON, Dixie offers to be bound by the following conditions: to construct the nursing home on a specific site in Cross City; to provide 80 percent of its total resident days to Medicaid-reimbursed residents by the second year, with all beds certified for Medicaid and 9 beds certified for Medicare reimbursement; to provide rehabilitative, respite, and adult day care, with transportation for some day care participants; and not to deny HIV+ admissions. At the time that Dixie filed the letter of intent for the 60-bed project in Dixie County, it also submitted three others for contiguous areas of District 3. Thus, four legal notices, for projects in Alachua, Gilchrist, Levy and Dixie Counties were submitted by fax and then by mail to the Gainesville Sun newspaper for publication. All four legal notices, when published, referred to Levy County, as the proposed location of the nursing home. The proof of publication sent by the newspaper to the applicant and included in the CON application states that the notice published was for Dixie County, although the notice itself states that the project will be in Levy County. Dixie's health care planning expert requested the publication of a corrected notice, but there is no evidence that one ever appeared in the newspaper. AHCA accepts CON applications, despite publication errors, if the error is made by a newspaper, not by the applicant. Dixie is a partnership formed to file the application for CON 7492. The project will be funded by Smith/Packett Med-Com, Inc. Smith/Packett is owned by James R. Smith, who with Herbert H. Frazier, is a general partner in Dixie Health Care Center, Limited Partnership. Herbert Frazier is an employee of a Florida licensed general contractor, MB Conn Construction, and president of its Frazier Division which oversees the construction of nursing homes. Separately, the two general partners in Dixie own over 20 nursing homes, and jointly own one in Virginia and one in North Carolina. The partners owned, but, in February 1994, sold a Lake City nursing home. The estimated total project cost is approximately $3,000,000, of which the general partners will provide $250,000 in cash for project development costs and initial cash flow requirements, as noted in the application in the schedule 3 assumptions. Dixie included in its application a letter of interest in financing the project from Colonial Bank, Alabama. Dixie has a contract to purchase a two acre site for the project for $33,000. As previously noted, Dixie meets the highest priority local allocation factor for proposing to locate in a county which has no nursing homes, and is close to the factor for over 95 percent average occupancy rates in the nearest nursing homes. Dixie is also favored by the local plan for proposing to construct at least 60 beds, for improving access within the planning area, and for proposing respite care, adult day care, and rehabilitative therapies. Dixie meets state health plan preferences for proposing the following: to locate in a subdistrict with over 90 percent occupancy (93.42 percent for plan- ning area 2); to serve 80 percent Medicaid, which is in excess of the subdistrict average of 79.37 percent in the first six months of 1993, for specialized services to AIDS, Alzheimers' and mentally ill patients, to provide a continuum of services including long term, respite, and adult day care; to construct a well-designed facility to maximize resident comfort and quality or care, which is a reasonable size and meets all licensure requirements; to provide rehabilitative and restorative therapies, to establish a Medicaid reimbursement rate of $91.75 in year one and $94.65 in year two, as compared to the projected subdistrict high of $92.83 in 1995 and $96.54 in 1996 (using an annual 4 percent inflation rate from the January 1994 rate); * * * to offer multi-disciplinary services to residents, with the various therapist, social workers, and counselors; to document protection for residents rights and privacy, and to establish resident's councils, quality assurance and discharge planning programs, as SunQuest and all other nursing homes operating in Florida must do by state laws; to operate with lower administrative costs and higher patient care costs than the average in the district ($21.61 and $51.33 respectively in year two (1996), in contrast to $22.02 and $41.62 in 1992 for the respective average district per diem costs); Questions were raised about Dixie's compliance with state factors (8) for providing superior resident care in existing facilities, and (9) for staffing ratios which exceed minimum state requirements and are appropriate for proposed special services. The proposal is substantially based on the assumption that the applicant will contract with SunQuest for management services. Although the application refers to a management contract with SunQuest, no contract has been executed, which is not unusual prior to the issuance of a CON. At the final hearing, however, Dixie contended that SunQuest is only one of the candidates for a management contract, while conceding that the management policies and procedures in its application are those of SunQuest. In fact, the Dixie application states in response to state allocation factor (9) that SunQuest will be the management company. SunQuest manages 10 and leases an additional 10 long term care facilities in the United States, two in Florida. One of the Florida nursing homes, Bayshore Convalescent Center in North Miami Beach, has a superior license. SunQuest also manages the Lake City Extended Care Center, which was built by the company which employs Mr. Frazier, began accepting residents in December 1993, and was sold by the Dixie general partners in approximately February 1994. The original holder of the Lake City CON became unable to develop the proposal and contacted Mr. Smith and Mr. Frazier just prior to the expiration of the CON. They acquired the CON, financed, designed, and constructed the nursing home. Lake City currently operates with a conditional license, as a result of medical record-keeping deficiencies. The testimony, by Dixie's corporate representative, that SunQuest is merely one management company candidate along with Senior Care Properties, is inconsistent with the totality of the proposal, which renders significantly less reliable the program descriptions in the original application. Dixie's intent to provide van transportation for adult day care participants was also questioned, due to the absence of any provision for the service in the financial schedules to the application. The financial feasibility of Dixie's proposal is also a matter at issue. Although Dixie has a contract to purchase a two acre site, the architect who designed the facility testified he had constructed a 120-bed two-story nursing home on less than two acres, but that two and a half to three acres are generally needed to construct a 60-bed facility. Dixie projected a net loss of $201,813 in the first year of operation and a net profit of $55,123 by the end of the second year. The general partners have committed to provide $250,000 to cover the first year negative cash flow. However, the average annual salaries projected when multiplied by number of full time equivalent ("F.T.E.") positions listed on schedule 6 of its application exceeds salaries listed in the projected income and expenses on schedule 11 by approximately $219,866 in year one and $51,694 in year two. Including the underestimate of related benefits, the loss expected in the second year is $8,759. Dixie maintains that the staffing on schedule 6 cannot be compared to the pro forma, because the staffing and related expenses in the pro forma will increase over the first year as the census increases, while the staffing schedule is a snapshot at the end of the first year. The same is not true for the second year, since the facility is projected to be full after 8 months. Dixie's expert on finance described the second year discrepancy between a $50,000 profit and an $8,700 loss as insignificant in determining the financial viability of a $2 million project which, taking into consideration depreciation, amortization, and noncash related items, still results in a positive cash flow. Dixie's financial feasibility also depends on its reaching 96 percent occupancy by the fourth quarter of the first year. One witness for Dixie has achieved 93 percent occupancy in similar facilities in a county he deemed comparable, but has operated his facilities since 1989. Dixie also has to contend with competition for residents and staff from a relatively new facility within 20 miles and a 25 minute drive, Tri-County Nursing Home. Tri-County Nursing Home in Gilchrist County opened in May 1992, close to the Gilchrist- Dixie line, serving residents of Levy, Gilchrist and Dixie Counties. Approximately 30 of its 60 beds are occupied by Dixie County residents, all of whom rely on Medicaid reimbursement. Tri-County is also establishing a 25 person adult day care, having completed the required state inspection and awaiting the issuance of its license. After 8 months of operation, 51 of the 60 beds were filled. In June of 1993, Tri-County was full, with 98 percent occupancy. Approximately 40 percent of Tri-County's staff resides in Dixie County. There was testimony that 41 registered nurses reside in Dixie County, but with no information concerning their distribution within the county, current employment, or ages, their availability to work at a new nursing home could not be evaluated. In Gilchrist County, the ratio of persons 65 and over to nursing home beds is 8.7 to 1, in contrast to 31.46 for Levy County, and 34.5 for the district. The data supports the conclusion that Tri-County relies on service to Dixie County residents, clearly has an insufficient population base within Gilchrist County to fill its beds, and even when combined with Levy County is below the district ratio of 34.5 persons over 65 per nursing home bed. AHCA's expert in health planning and nursing home financial feasibility testified that Tri-County has had financial difficulties. On balance, Dixie has failed to demonstrate that it has estimated reasonable land requirements and costs, and that it can meet the required occupancy and staffing levels to survive financially, without adversely affecting Tri-County. Hilliard Healthcare, Inc., Bushnell, Sumter County Hilliard is the applicant for CON 7485 to construct a 60-bed nursing home in Bushnell, Sumter County, which is in planning area 7. Hilliard's CON, if issued, will commit to construction of Osprey Point Nursing Center on a specific five acre site on State Road 475, and to the establishment of a 10-bed Medicare unit, and a 20-bed secure Alzheimers' unit, with all beds Medicare and Medicaid certified. Hilliard commits to providing 64 percent of total resident days for Medicaid. The total estimated project cost is $2,650,000, funded by $650,000 cash from stockholders and $2,000,000 in loans from Bankers First. Hilliard, formed in 1987, currently owns a superior licensed 120-bed facility in Nassau County, having completed a 60-bed expansion in September 1994. The Nassau County nursing home is managed by Health Care Managers ("HCM"), which is owned by Steven Sell, Hilliard's president and founder. Mr. Sell, in partnership with three others, first acquired a 55-bed facility in Jacksonville in 1984, expanded it to 120 beds in 1988, and sold it in 1994 for a profit of approximately $2.5 million. In 1991, Hilliard's president also received a CON to construct a 60-bed nursing home in Clay County, which was sold without a profit, but at a break-even point, while it was under construction. HCM is the intended manager of the Bushnell facility, if the CON is approved. Hilliard submitted a notice of its intent to file a CON application to the Sumter County Times newspaper for publication. The notice, published in November of 1993, stated erroneously that the application would be filed on December 1, 1992, rather than December 1, 1993. Hilliard's president testified that he knows for a fact that he submitted the notice with the correct date, but no document in evidence establishes what Hilliard submitted to the Sumter County Times. Hilliard's proposal does not meet the local health council factors for a location in a county without nursing homes, nor is Bushnell more than a 20 mile radius or 25 minute drive from existing nursing homes. It does merit consideration under the factor which relates to the occupancy of nursing homes within a 20 mile radius, all of which exceeded 90 percent from July 1992 - June 1993, ranging from 90.89 to 99.13 percent. The highest rate was at WeCare, the only other nursing home in Sumter County, which is located in Wildwood, in the northern area of Sumter County. WeCare has two fifteen-bed Alzheimers' units, and unchallenged CON approval to add 30 beds. The approval of the 30 additional beds at WeCare raises the bed to population ratio of Sumter County from 20.2 to 23.5 per 1000, in contrast to the current Lake County ratios of 22.4. With the approval of 60 beds at Hilliard and another 120 beds in Lake County, the ratios are increased to 30.2 in Sumter and 24.7 in Lake County. After approval of WeCare's addition, the need in Sumter County has been decreased. Hilliard, by its proposal to serve central and southern sections of Sumter County, would improve access within the planning area. The occupancy rate for Medicare patients at WeCare was 1.1 percent. Hilliard contends that the relatively low percentage of Medicare services indicates a need for short-term, post-hospitalization rehabilitation services, as proposed in its 10-bed Medicare unit. Hilliard demonstrated that average lengths of hospital stays for Sumter County residents for certain procedures exceed national Medicare reimbursement averages, but there was no comparison to average lengths of stay within the district or the state. Other local health council allocation factors which apply to and favor Hilliard's proposal are those for: establishing a facility of at least 60 beds, improving access within a planning area with over 80 percent occupancy, and serving Alzheimers' and dementia patients. Hilliard's proposal meets state preferences for: locating in a subdistrict exceeding 90 percent occupancy (95.42 percent for planning area 7); * * * providing specialized services to Alzheimers' residents; offering respite care (although limited to hospice services); designing a comfortable facility, with short corridor segments, relatively large therapy areas, and a separate enclosed courtyard for the Alzheimers' unit; proposing occupational, speech and physical therapies, particularly to enhance the functioning of Alzheimers' residents; setting Medicaid rates of $101.90 for 1996 and $104.13 for 1998, in contrast to the highest rates projected for the same time, $107.89 and $113.28, respectively (using 5 percent inflation); providing superior resident care at its existing Nassau County Nursing home; proposing staffing ratios in excess of minimum state requirements, with reasonable salaries; including multi-disciplinary staff, including occupational, speech, and physical therapists, as well as nurses and an activities director; protecting residents' rights and privacy, and developing quality assurance and discharge planning programs; and proposing lower administrative costs ($26.35) with higher patient care costs ($64.30) than the district average of $26.63 and $54.67, respectively (1977 projection with 5 percent inflation). Hilliard does not meet state preference 2 for service to Medicaid proportionate to the subdistrict average, which is 69.95 percent, in contrast to Hilliard's proposed commitment of 64 percent. Under the preference, Hilliard's proposal to emphasize Medicare reimbursed therapies does not relieve it of the obligation to serve a proportionate share of Medicaid. Hilliard's proposal does not meet the specific exceptions allowed in preference 2 for applicants proposing to serve particular ethnic or cultural groups, and those developing multi-level care systems. Hilliard has a commitment letter from Banker's First to provide a $2 million loan for a fee of 1 1/2 to 2 percent of the principal loan amount, or $30,000 to $40,000. In schedule 1 of the application Hilliard's estimate of closing costs in $10,000, with $4,120 in legal fees. Dixie's expert claimed that the closing cost was inconsistent with the Banker's First letter and unreasonably low. By contrast for a $3 million loan, Dixie estimated $10,000 for loan closing costs, $30,000 for legal fees, $10,000 for recording fees and taxes, and $60,000 in loan origination fees. Dixie's expert apparently overlooked an additional $20,000 in origination fees, which was included on Hilliard's schedule 1. Hilliard projects a loss of $177,000 in year one, and income from nursing home operations of $114,690 in year two. In the first year, a loan of $271,660 is expected to cover the losses in year one. In the second year, a pay off of $154,940 on the loan is expected. The financial ability of Hilliard's shareholders to provide the initial $650,000 equity contribution and $271,660 to cover first year losses was questioned. Hilliard's president noted that the shareholders previously raised in excess of $600,000 to develop the Nassau County facility and have received $2.5 million in profits from the sale of the Jacksonville nursing home. Personal financial statements of three of the six stockholders were included in Hilliard's application. The personal financial statements were incomplete, omitting referenced attachments. The statements were also inaccurate or inconsistent, with missing liabilities, discrepancies regarding property values, and including the total value of some property which was not owned by the shareholders individually. Nevertheless, the statements do, according to Dixie's expert, show that the shareholders could provide over $900,000 in capital needed for Hilliard to be financially feasible, although that would take virtually all of the liquid assets, unless they assumed some additional individual debts. On balance, Hilliard has shown that Sumter County is more likely than not in need of additional Medicare-reimbursed subacute services, and that its proposal is financially feasible based on the shareholders' history of being able to raise capital for similar development projects. Lake County Applicants Three applicants in this batch seek to construct new 115 or 120-bed nursing homes in Lake County. Given the remaining numeric need for 186 beds, only one of the applicants can be approved. See, Beverly Enterprises-Florida, Inc., et al. v. AHCA, et al., DOAH Case No. 92-6656 (F.O. 10/17/94). In addition, the District 3 Allocation Factors Report Preferences includes the following guideline: To the extent possible, all planning areas ranked in one of the four categories of priority established in subparagraph d above should be approved to add some new beds. Unicare Health Facilities, Inc., Lady Lake, Lake County Unicare Health Facilities, Inc. ("Unicare") is an applicant for a CON to construct a 120-bed nursing home or to receive a partial award to construct a 115-bed community nursing home in the town of Lady Lake, in northwest Lake County. Unicare proposes to have its CON conditioned on the establishment of a 20-bed Alzheimers' and related dementia unit, an adult day care to accommodate an additional 20 Alzheimers' sufferers for half day care, and on providing 73 percent of total resident days to Medicaid residents. Unicare also plans to include a 10-bed subacute unit, and to offer rehabilitative therapies, respite and hospice care. The total size of the building is 58,700 square feet. Unicare is a subsidiary of United Health, Inc., which is committed to finance the project by providing an equity contribution of 60 percent and drawing on its available line of credit for the remaining 40 percent of the total projected cost of $5,754,983. Unicare owns and operates 45 nursing homes in 7 states, has been in business for 28 years and in Florida since 1982, and currently owns and operates 13 Florida nursing homes. Life Care Centers of America Life Care Centers of America, Inc. ("Life Care") proposes to establish a 120-bed community nursing home of 53,175 square feet, in west central Lake County, in the areas of Lady Lake, Tavares, or Leesburg, for a total project cost of $5,906,000. Life Care's CON, if issued, will include its commitment to provide 73 percent of total resident days to Medicaid residents, to establish a 20-bed Alzheimers/dementia unit, to offer adult day care services, and to include a 20-bed sub-acute unit. Life Care is a privately held company operating 150 nursing homes in 27 states. Life Care owns two and operates three other nursing homes in Florida. Life Care proposes to fund the Lake County nursing home from $206,000 cash-on-hand and $5,700,000 in financing from a non-related company. With its application, Life Care submitted letters of interest from potential lenders with interest rates ranging from 9 to 12 percent, and a 25 year amortization schedule. In reviewing other Life Care applications, AHCA has considered and rejected as incomplete a list of capital projects identical to that included in this Lake County application. Specifically, Life Care listed projects by county name, although the total amount of capital obligations, according to AHCA, was significantly underestimated. Life Care submitted, at hearing, its exhibit 6, a stipulation to certain facts and, through the testimony of its Vice President for Development, established that the facts related to the schedule 2 issues in this case are identical to those considered in Life Care Centers of America, Inc. v. Agency For Health Care Administration, DOAH Case No. 94-2409 (F.O. 10/24/94), which is pending on appeal in the district court. Beverly Enterprises Beverly Enterprises-Florida, Inc. ("Beverly") is a wholly owned subsidiary of Beverly Corporation-California, a subsidiary of Beverly Enterprises, Inc. Beverly proposes to construct a 120-bed community nursing home in Lady Lake or Leesburg, in Lake County, with a commitment to provide 73 percent of total annual resident days for Medicaid, to establish a 20-bed Medicare-certified subacute unit with 4 beds for ventilator-dependent patients, an 18-bed Alzheimers' wing, an adult day care for 8 clients, respite care, and to accept and care for residents who are HIV positive, or have mental health disorders. Beverly also will commit to donate $10,000 for gerontological research. Beverly Enterprises companies operate 720 nursing homes, 70 in Florida. Of the 70, 41 are operated by the applicant. Beverly's proposal to establish Lake Beverly Terrace has a total project cost of $5,421,372, for 48,969 square feet. Existing Nursing Home and Alternatives - Sections 408.035(1)(b), and (2), Florida Statutes. As of January 1994, there were 460 nursing home beds in Leesburg, 142 in Clermont, 236 in Mount Dora and 377 in Eustis. All of the facilities, exceeded the average Lake County occupancy of approximately 92 percent in 1992- 1993, except two, Waterman Hospital Extended Care Center in Eustis and Edgewater in Mount Dora. All of the parties agreed that additional subacute and Alzheimers' beds, and adult day care spaces are needed in Lake County. Local and State Health Plans - Sections 408.035(1)(a), Florida Statutes. Unicare, Life Care, and Beverly propose to locate in Lake County, within planning area 7 for Lake/Sumter Counties. The planning area has a higher priority need ranking than planning area 2, as determined by the local health plan council. Local allocation factors 1 - 5 apply equally, or are inapplicable to the three proposals. There are existing nursing homes in the county, which are within 20 miles or 25 minutes all of the proposed locations, and which exceeded 90 percent occupancy. Unicare distinguishes its proposal based on its intention to locate in the town of Lady Lake, rather than further contributing to the concentration of nursing homes in Leesburg. Lady Lake was, in 1990, the third largest municipality in Lake County, and projected to be the largest in 2000. The 1990- 2000 projected growth rate is over 100 percent, in contrast to 13 percent for Leesburg, 50 percent for Tavares, and 37 percent for the entire county. Lady Lake was also mentioned in the Life Care and Beverly applications as a possible location for their facility, along with other towns in Lake County. Beverly's Vice President has investigated the cost of sites only in Leesburg, Fruitland Park, and Eustis, but concedes that Leesburg is a desirable location due to its proximity to the hospital. Without a CON condition, which AHCA could impose, all three applicants could locate anywhere within Lake County. Although Lady Lake is only 8 miles from Leesburg, Unicare's proposal, all other factors being equal, would be favored as more consistent with local allocation factor 6, which discourages the concentration of nursing homes in one community within a multi- county planning area. The final local allocation factor, 7 (as related to Alzheimers' and adult day care), as well as state health plan factors 3 (as related to Alzheimers') and 4 (as related to adult day care), and subsection 408.035(1)(o), Florida Statutes, favor applicants proposing specialized care or therapies to meet the needs of community and nursing home residents suffering from Alzheimers' and related forms of dementia. Unicare's 20-bed Alzheimers' unit and programs, and half day adult day care for 20 additional Alzheimers' sufferers are consistent with the specialized services that are needed. Life Care also proposes, as conditions for its CON, that it will establish a 20-bed Alzheimers/dementia unit and an adult day care center to accommodate 10 participants a day, between 7:00 a.m. and 6:00 p.m. Beverly proposes to provide services in an 18-bed Alzheimers' wing, and an 8-person adult day care program. State health plan allocation factors met by all of the Lake County applicants include the following: locating in a subdistrict exceeding 90 percent occupancy (approximately 92 percent for planning area 7 for January-June 1993); see, also Subsection 408.035(1)(b), (d), and (2) (a) - (d); proposing to serve 73 percent Medicaid- reimbursed residents in comparison to the subdistrict average of 72.65 percent in the first six month of 1993; and * * * (11) documenting measures and procedures to protect resident's rights and privacy, and the use of resident councils, quality assurance and discharge planning programs. The Lake County applicants' proposals differ more when compared in accordance with state health plan factors and related statutory criteria, for: services to AIDS residents and the mentally ill; respite care, adult day care, and other services in a continuum of care (Sections 408.035(1)(o), F.S.); facilities with designs which maximize residents' comfort and the quality of care, and the costs and methods of construction (Sections 408.035(l)(m), F.S.); innovative therapeutic programs to enhance mental and physical functioning; charges which do not exceed the highest Medicaid per diem rate in the subdistrict (Sections 408.035(2)(e), F.S.); a record of providing superior care in existing nursing homes (Sections 408.035)(1)(c), F.S.); staffing in excess of minimum requirements, with the highest ratio of registered and licensed practical nurses to residents (Sections 408.035)(1)(h), F.S. - availability of staff and personnel); use of professionals from a variety of disciplines; and * * * (12) administrative cost which are lower patient care costs which are higher than the district average. State health plan preference 3 is given to applicants for care to AIDS residents and the mentally ill, and state health plan 4, in part, applies to respite care. Beverly points to its increase in service to HIV positive patients from 39 patients for 124 patient days in 1993 to 3500 patient days in 1994. Unicare also has served AIDS residents. All of the Lake County applicants plan to offer respite care. Beverly offers a wider array of specialized services. By providing a range of levels of care to inpatients and outpatients, including adult day care and respite care, the applicants also, in part, meet the criterion of subsection 408.035(1)(o), Florida Statutes. Nursing homes with more features to enhance resident comfort and quality of care are given state health plan preference 5. Unicare's 58,720 square foot plan, includes semi-private patient rooms designed for the placement of the heads of residents' beds on opposite walls, each side with a window, rather than the alignment of beds next to each other, typical of semi-private hospital rooms. The plan includes indoor wandering space for Alzheimers' residents in a loop around an activity and recreation area, separated by a 3 to 4 foot wall. The Alzheimers' unit has a separate dining room with access to a secured courtyard, which, in turn, connects with the day care center. AHCA's architectural report notes that the construction cost of $60 per gross square foot is below the median cost projection, because Unicare will use a design/build contract. The design/build contract provides for one contractor to provide all of the services, including architectural and design, engineering and construction management, which saves time and money. Unicare's contractor, KM Development Corporation, has been in business since 1977, and has renovated and enlarged Unicare's facilities in Florida without cost overruns, and has done residential construction in the state. Unicare's design, based on the AHCA architectural review and the contractor's testimony, meets requirements for licensure and safety, and is a one-hour fire safety protected structure with a stucco finish, and brick and wood trim. Although skeptical and concerned that the design/build contract can be manipulated to cut corners to stay within budget, AHCA's expert in architecture testified that it is possible for Unicare to build the facility at the projected cost, but he would expect a cost over- run. Life Care's 53,175 square foot building will cost $75 a square foot. AHCA's architects described it as wings organized around a central courtyard, providing good visual control of short corridors. Life Care's design also includes a gift shop, library, and ice cream parlor. A separate wing for Alzheimers residents is adjacent to the adult day care center, with a separate dining room and courtyard. The institutional effect of corridors is decreased by using recessed entrances and doors to residents' rooms. There were no concerns expressed by architectural experts with the appropriateness of the design for the functions in each wing, the adequacy of the project cost, or the safety of the structure. Beverly's construction cost per gross square feet, listed as $63 on line I in response to question 4A was challenged as too low by Life Care's experts. Beverly's construction cost plus a 10 percent contingency or $70 a square foot for 48,969 square feet is considered reasonable by AHCA, although that eliminates the availability of the contingency for unknown conditions on an unselected site. Beverly's design is organized generally around a core area of courtyards with therapy space in the center. Beverly's Alzheimers' unit has a separate courtyard which allows wandering residents to exit a door near one end of the corridor and return by a door near the opposite end. AHCA's architectural review concludes that Beverly's design meets licensure and safety requirements. In general, Unicare's design better meets the preference for enhancing resident comfort and quality of care with rooms over 30 percent larger than required, four outside landscaped areas, physical therapy rooms, and three staff lounges, and an in-service training area, but its cost may be underestimated. Life Care's design is second in terms of accommodating program needs with space arrangements. Adult day care clients with Alzheimers, for example, are located adjacent to the area for Alzheimers residents' programs and activities. Life Care's projected construction costs are also the highest. Innovative therapeutic programs effective in enhancing physical and mental functions are favored in state health plan preference 6. Unicare will provide physical, occupational, and speech therapy and has developed special programs to serve Alzheimers's and related dementia residents and day care clients. Life Care and Beverly will offer IV therapy, wound care, and ventilator and respiratory therapy in addition to other therapies offered by Unicare. Beverly's therapy programs are more innovative and intense, based on the staffing and level of detail provided in describing the proposed services. Preference 7 is given for proposed charges not exceeding the highest Medicaid per diem in the subdistrict. Unicare proposes a Medicaid per diem rate for $86.57 for 120 beds in the second year while at least one provider in the subdistrict for 1997 will be charging $95.27. Unicare computed projected future rates by using 9.1 percent inflation of the Medicaid rate at one facility, which is not necessarily the highest existing provider, which results in a $98.44 rate. Unicare criticized Beverly's use of a 5 percent inflation rate of the highest current provider resulting in a projected rate of $99.47. The highest Medicaid rate in the district, inflated forward to 1997, was $99.31 at the time the application was submitted, so that Beverly's proposed charge of $99.00 is lower, as is Life Care's projected $97.11 and Unicare's $86.57. Preference 8 and subsection 408.035(1)(c) require a comparison of the applicants' records in terms of the quality of care provided in their existing nursing homes, as indicated partly by licensure ratings over the last 36 months. During that time, Unicare's 13 nursing homes have had 468 months of operation at approximately 63 percent superior, 29 percent standard, and 9 percent conditional. Beverly has had a total of 976 months of operations, 67 percent superior, 25 percent standard, and 7 percent conditional. Beverly has also paid a fine to the State of Oregon to settle claims related to patient care problems. The two Florida nursing homes owned by Life Care are rated standard, one in Citrus County opened in November, 1994 and is not yet eligible for a superior license. The other, in Altamonte Springs has been in operation for over 36 months, 29 of those with a superior licensure rating. The three applicants generally have operated and have the capacity to continue to operate superior facilities. Preference 9, on proposed staffing ratios and preference 10 related to the use of varied professional staff are also indications of the quality of care. AHCA requires one registered nurse on the day shift and none on the night shift in a 120-bed nursing home. All of the applicants exceed the minimum. The number of nursing hours per patient day will be 3.2 at Unicare, 3.35 at Life Care, and 3.85 at Beverly. One of four registered nurses on the day shift at Beverly will always be in the subacute unit. However, the ratio outside the unit, for the remaining 100 residents, still exceeds the minimum and meets the preference requirements. All three companies have existing Florida facilities available to provide training and, if needed, transfers of experienced staff to a new nursing home. They currently use and are proposing to continue to use professional staff from a variety of disciplines to meet residents' and clients' needs. Average administrative costs in the district, inflated forward, will be $24.58 and average patient care costs will be $49.49. The applicants report their comparable projections on Schedule 11. Unicare's projected costs are $27.80 and $50.59, respectively. Life Care's costs are $24.84 and $65.94, respectively. Beverly's are $24.44 and $62.30, respectively. With erroneously omitted laundry costs added to administrative costs, Beverly's administrative costs increase to $26.52. All three applicants propose higher administrative costs than the district average, but Life Care's are the lowest. All three have higher than average patient care costs, with Life Care favored as the highest. The following subsections of the CON statutory review criteria do not apply, in this case, to distinguishing among the Lake County applicants: - availability or adequacy of alternatives, such as outpatient care or home care; - economics of joint or shared resources; - need for equipment or services not accessible in adjoining areas; * * * - special needs of health maintenance organizations; - needs of entities which provide substantial services beyond the district; and - impacts on costs and effects of competition. Subsection 408.035(1)(g) - research and educational facilities needs Unicare and Life Care have established foundations to foster education and research in gerontology and health care. Beverly will commit, as a condition for the issuance of its CON, to providing a $10,000 research grant for a gerontological studies to Florida State University. All three companies assist in providing clinical experiences for nursing and therapy students in technical schools, community colleges, and universities, and benefit by recruiting employees from the programs. Subsection 408.035(1)(h) - availability of funds to establish and operate project, and Subsection 408.045(1)(i) - immediate and long-term financial feasibility Unicare has $5 million in available cash and a $30 million line of credit. Unicare, using costs from other facilities adjusted to take into consideration geographical differences, projects a net loss of $250,672 in the first year and a profit of $50,482 in the second year. Unicare failed to include $3,000 in housekeeping equipment in its projected expenses, but can more than cover that omission with a $75,000 contingency. Life Care had a net worth of $50 million in 1993. For calendar year 1992, its audited financial statement shows over $10 million in net earnings and $4.5 million in cash on hand. Life Care projects a net loss of $548,190 in year one and a net profit of $236,022 in year two. Beverly has access to over $200 million for project development, combining its cash, cash equivalents, commercial paper and lines of credit. Beverly projects a pre-tax loss of $314,000 in the first year and a net profit of $214,000 in the second year. Beverly's figures were questioned based on its use of the experience of a Tampa area facility to determine some costs and expenses, its assumption that Medicare will be 13 percent of its patient mix, and its projected lengths of stay and revenues from Medicare. Beverly's use of unit-costs from existing facilities with modifications to fit the specific proposal is reasonable. Although the district Medicare rate is 5.7 percent and Lake County's is 6.1 percent, Beverly's higher proportion of Medicare is consistent with the level of subacute services it proposes in 20 of its 120 beds. After the maximum of 100 days of Medicare coverage, Beverly will have weaned or will transfer ventilator patients who do not have private insurance. Subsection 408.035(1)(n) - past and proposed Medicaid participation Unicare has no nursing homes with CON conditions requiring a specified level of Medicaid participation, having purchased older, existing facilities in Florida. Nevertheless, eleven of its thirteen facilities exceed the Medicaid average in their respective subdistricts. For the first six months of 1993, Life Care's Medicaid resident days were 78 percent in Altamonte Springs (with no CON condition), 70 percent in Punta Gorda, 88 percent and 68 percent, respectively, in the two West Palm Beach nursing homes. Beverly's percent of patient days for Medicaid increased 63.3 percent to 66.8 percent from 1993 to 1994 for facilities in Florida. Beverly paid a $1500 fine to the state for falling below its Medicaid commitment in one of 17 state facilities with such conditions, Coral Trace in Lee County. AHCA agreed to reduce the Coral Trace medicaid condition from 78 percent to 53.3 percent to reflect the subdistrict average. In 1994, at Coral Trace, 49.5 percent of total patient days were Medicaid. All three Lake County applicants have demonstrated strong compliance with Medicaid participation criterion. Comparison of Lake County Applicants On balance, the Lake County applications are all more in compliance than not with statutory review criteria, with varying strengths and weaknesses. They are financially sound, experienced nursing home owners and operators. Unicare will improve access within the planning area. The demographic data on the municipality of Lady Lake shows significant growth. Unicare also will build a better designed and larger facility, and will focus its programs on meeting the needs of Alzheimers' residents and day care participants. Unicare's weaknesses are AHCA's architect's expectation that it will experience cost- overruns and the absence of ventilator services. Unicare relies on its actual experience with Florida construction projects to support the reasonableness of its projections. Unicare also projects the lowest Medicaid per diem rate. Life Care proposes to offer a wider range of specialized programs and therapies than Unicare, a design second to Unicare's in terms of size and residential amenities. Life Care's project costs are the highest of the Lake County applicants, but Life Care, when operational, will have the highest proportion of its costs applied to patient care. Beverly offers a range of programs comparable to those offered by Life Care, with greater emphasis on subacute care, and less emphasis than Unicare on Alzheimers' services. Beverly will build the smallest nursing home at the lowest cost, but is highest in projected Medicaid per diem rate. Unicare is recommended for CON approval due to its superior design, and superior Alzheimers' and day care services, and proposed location. Because the proposed location is a factor in Unicare's favor, it is recommended that Unicare's CON be conditioned on its obtaining a site in Lady Lake. Absent Unicare's agreement to a condition on location, Beverly is recommended for approval based primarily on its lower project cost, scope and intensity of subacute of services, and higher staffing levels.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that AHCA issue CON No. 7489 to Unicare to construct a 120-bed community nursing home in District III, conditioned on the establishment of a 20-bed unit for residents with Alzheimers and related dementia and an adult day care providing half day care for 20 clients, the provision of 73 percent of total resident days to Medicaid residents, and the selection of a site for the facility in the municipality of Lady Lake, Florida. DONE AND ENTERED this 9th day of June, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1995. APPENDIX TO RECOMMENDED ORDER, CASES NOs. 94-2452, 94-2453, 94-2462, 94-2467 and 94-2971 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner, Dixie's Proposed Findings of Fact. Accepted in Findings of Fact 3 and 8. Accepted in Findings of Fact 3 and 4. Accepted in Findings of Fact 8 and 9. Accepted in Findings of Fact 7. Accepted in general in Findings of Fact 7-9 and 14. Rejected conclusions in Findings of Fact 15-19. Subordinate to Findings of Fact 14. Accepted in Findings of Fact 11 and 24. Accepted in Findings of Fact 7-9. Accepted in or subordinate to Findings of Fact 9. Accepted in part in Findings of Fact 7, rejected in part in Findings of Fact 9. Accepted first sentence in Findings of Fact 9. Rejected second sentence in Findings of Fact 9. Rejected in part in Findings of Fact 9. Rejected in Findings of Fact 9. Accepted in Findings of Fact 9. Subordinate to Findings of Fact 8. Accepted in Findings of Fact 13. Accepted in general in Findings of Fact 13. 19-22. Accepted in Findings of Fact 17-19. 23-24. Accepted in or subordinate to Findings of Fact 15. Accepted in or subordinate to Findings of Fact 30. Accepted in part in Findings of Fact 9. Accepted in Findings of Fact 28. 28-30. Accepted in or subordinate to Findings of Fact 25. 31-32. Accepted in or subordinate to Findings of Fact 30. 33-34. Rejected in Findings of Fact 8 and 22. 35-36. Accepted in or subordinate to Findings of Fact 13. Accepted in Findings of Fact 9. Accepted in or subordinate to Findings of Fact 15. Accepted in Findings of Fact 13. 40-41. Accepted in part in or subordinate to Findings of Fact 13. 42-46. Accepted in Findings of Fact 24 and 35. 47. Rejected in general in Findings of Fact 22. 48-49. Accepted in or subordinate to Findings of Fact 21. 50. Rejected in Findings of Fact 23. 51-52. Rejected in Findings of Fact 21-23. 53-54. Accepted. 55-57. Accepted in Findings of Fact 9 and 22. Accepted in or subordinate to Findings of Fact 21. Accepted in or subordinate to Findings of Fact 15. Rejected in Findings of Fact 21. Accepted in or subordinate to Findings of Fact 13. 62-63. Accepted in Findings of Fact 15. Accepted in Findings of Fact 24 and 31. Accepted in Findings of Fact 11. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to preliminary statement. 68-69. Accepted in Findings of Fact 4 and 9. 70-76. Accepted in Findings of Fact 12. 77-78. Accepted in Findings of Fact 26. 79-80. Accepted in or subordinate to Findings of Fact 12. Petitioner, Life Care's Proposed Findings of Fact. Accepted in Findings of Fact 2 and 3. Accepted in Findings of Fact 2-4. 3-4. Accepted in Findings of Fact 7. Accepted in or subordinate to Findings of Fact 4. Accepted, except 6, in Findings of Fact 51-53. Accepted in general in Findings of Fact 56-67. Accepted in or subordinate to Findings of Fact 53. Accepted in or subordinate to Findings of Fact 61. 10. Accepted in Findings of Fact 42 and 58. 11. Accepted in or subordinate to Findings of Fact 4, 8-10 and 51-53. 12. Accepted in or subordinate to Findings of Fact 54. 13. Accepted in or subordinate to Findings of Fact 51. 14. Accepted in or subordinate to Findings of Fact 7. 15. Accepted in general in Findings of Fact 52. 16. Accepted in Findings of Fact 71. 17. Accepted in or subordinate to Findings of Fact 54-67. 18. Accepted in or subordinate to Findings of Fact 53. 19. Accepted in or subordinate to Findings of Fact 61. 20. Accepted in or subordinate to Findings of Fact 61. 21. Accepted in or subordinate to Findings of Fact 59. Accepted in or subordinate to Findings of Fact 54. Accepted in or subordinate to Findings of Fact 65. Accepted in Findings of Fact 43 and 65. Accepted in or subordinate to Findings of Fact 43. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 53 and 56. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 54 and 65. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 68. 32-34. Accepted in or subordinate to Findings of Fact 66. 35. Accepted in or subordinate to Findings of Fact 68. 36-38. Accepted in or subordinate to Findings of Fact 69. 39-42. Accepted in or subordinate to Findings of Fact 7. 43-44. Accepted in or subordinate to Findings of Fact 66. 45-53. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 66. Rejected in Findings of Fact 70. 56-59. Accepted in Findings of Fact 68. 60. Accepted in or subordinate to Findings of Fact 66. 61-65. Accepted in or subordinate to Findings of Fact 58. 66-67. Accepted in or subordinate to Findings of Fact 57. Accepted in Findings of Fact 54. Accepted in or subordinate to Findings of Fact 71. Accepted in Findings of Fact 54. Accepted in Findings of Fact 42. Petitioner, Hilliard Health Care's Proposed Findings of Fact. 1-2. Accepted in Findings of Fact 1. 3-4. Accepted in Preliminary Statement. Accepted in Findings of Fact 13. Subordinate to Findings of Fact 13 and 21. Accepted in Findings of Fact 13. 8-9. Accepted in Findings of Fact 11. Accepted in Findings of Fact 15. Accepted. 12-15. Accepted in Findings of Fact 24. Accepted in Findings of Fact 24 and 31. Accepted in Findings of Fact 31. Accepted in or subordinate to Findings of Fact 8. Accepted in or subordinate to Findings of Fact 15 and 30. Accepted in or subordinate to Findings of Fact 3, 4 and 9. Accepted in Findings of Fact 15 and 30. Accepted in Findings of Fact 15. Accepted in or subordinate to Findings of Fact 28 and 31. Accepted in or subordinate to Findings of Fact 24 and 31. Accepted in Findings of Fact 16, 24 and 30. 26-27. Accepted in or subordinate to Findings of Fact 11, 15 and 22. Accepted in or subordinate to Findings of Fact 30. Accepted in or subordinate to Findings of Fact 16 and 30. Accepted in Findings of Fact 30. 31-34. Accepted in part in Findings of Fact 17-19. Accepted in Findings of Fact 30. Accepted in relevant part in Findings of Fact 17-19. 37-38. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16 and 30. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 30. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 30. Rejected in Findings of Fact 15. Accepted in Findings of Fact 3. Accepted in general in Findings of Fact 7 and 8. 48-49. Accepted in Findings of Fact 9. Accepted in Findings of Fact 7. Rejected as "lowest need" in Findings of Fact 7. 52-61. Accepted in or subordinate to Findings of Fact 5, 6 and 22. 62-65. Accepted in or subordinate to Findings of Fact 14-16 and 23. Accepted. Rejected in Findings of Fact 8. Accepted in general in Findings of Fact 5-9. Accepted in Findings of Fact 9. Accepted in Findings of Fact 5-9. Accepted in Findings of Fact 5-9 and 24. Accepted in Findings of Fact 25. Accepted in general in Findings of Fact 16-19. Rejected as not at issue. Accepted in Findings of Fact 28. Subordinate to Findings of Fact 30. 77-79. Accepted in or subordinate to Findings of Fact 24 and 30. 80-85. Accepted in or subordinate to Findings of Fact 31-36. Rejected except first sentence in Findings of Fact 21. Rejected in Findings of Fact 21. 88-91. Accepted in or subordinate to Findings of Fact 21-22. 92. Accepted in Findings of Fact 8. Respondent, AHCA's Proposed Findings of Fact 1. Accepted in Findings of Fact 13. 2-6. Accepted in or subordinate to Findings of Fact 11. 7. Accepted in Findings of Fact 12. 8-9. Accepted in or subordinate to Findings of Fact 47-49. 10-12. Accepted in or subordinate to Findings of Fact 39-41. 13-16. Accepted in or subordinate to Findings of Fact 24-26. Accepted in or subordinate to Findings of Fact 42-44. Accepted. 20-23. Accepted in or subordinate to Findings of Fact 4-9. 24. Accepted. 25-26. Accepted in Findings of Fact 15. 27-28. Accepted in Findings of Fact 15, 24-30 and 54. Accepted in or subordinate to Findings of Fact 67. Accepted in preliminary statement and Finding of Fact 1. Accepted in Findings of Fact 15, 31, and 54. Accepted in or subordinate to Findings of Fact 15, 30 and 55. 33-35. Accepted in or subordinate to Findings of Fact 16-19. Rejected in Findings of Fact 22. Accepted in Findings of Fact 66. Accepted in Findings of Fact 61. 39-40. Accepted in or subordinate to Findings of Fact 56. Accepted in Findings of Fact 60. Accepted in or subordinate to Findings of Fact 54. Accepted in or subordinate to Findings of Fact 53 and 56. Accepted in or subordinate to Findings of Fact 47 and 61. Accepted in or subordinate to Findings of Fact 47 and 56. 46-48. Accepted in or subordinate to Findings of Fact 66. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 69. 51-52. Accepted in or subordinate to Findings of Fact 13 and 21. Conclusion rejected in Findings of Fact 21 and 23. 53-55. Accepted in or subordinate to Findings of Fact 13. 56. Rejected in Findings of Fact 22. 57-58. Accepted in or subordinate to Findings of Fact 15 and 21. 59. Rejected in Findings of Fact 22 and 23. 60-64. Accepted in or subordinate to Findings of Fact 49 and 70. 65-66. Rejected in Findings of Fact 70 and in conclusions of law 76. 67. Accepted in Findings of Fact 67. 68-69. Accepted in or subordinate to Findings of Fact 15. 70-75. Accepted in or subordinate to Findings of Fact 57-60, except "probable" in last sentence of proposed findings of fact 74. (See, T-p 2197.) Accepted in Findings of Fact 30. Accepted in Findings of Fact 11 and 15. Accepted in Findings of Fact 54 and 71. Accepted in Findings of Fact 54. Accepted in Findings of Fact 31. Petitioner/Respondent, Beverly's Proposed Findings of Fact. Accepted in preliminary statement and Findings of Fact 1. Accepted in preliminary statement and Findings of Fact 1 and 37. Accepted in preliminary statement and Findings of Fact 1. Accepted in Findings of Fact 45 and 46. Accepted in preliminary statement. Accepted in Findings of Fact 48. Accepted in Findings of Fact 47. Accepted in Findings of Fact 43. Accepted in Findings of Fact 42. Accepted in Findings of Fact 51. Accepted in Findings of Fact 6. Accepted in Findings of Fact 27. Accepted in or subordinate to Findings of Fact 37 and 50. 16-17. Accepted in or subordinate to Findings of Fact 51. Accepted in or subordinate to Findings of Fact 52. Rejected in general in Findings of Fact 52. 20,22. Accepted in or subordinate to Findings of Fact 51 and 54. 23-24. Accepted in or subordinate to Findings of Fact 39, 42 and 47. 25 Accepted in Findings of Fact 39, 42, 47 and 56. Accepted in or subordinate to Findings of Fact 56. Accepted in Findings of Fact 56. 28-29. Accepted in relevant part in Findings of Fact 59 and 60. 30. Accepted in Findings of Fact 61. 31-32. Accepted in or subordinate to Findings of Fact 62, 63 and 64. Accepted in Findings of Fact 65. Subordinate to Findings of Fact 65. Rejected as speculative. Rejected conclusion in Findings of Fact 65. Accepted in general in Findings of Fact 65. Accepted in Findings of Fact 66. Accepted in general except conclusion in Findings of Fact 66. 40-42. Accepted in or subordinate to Findings of Fact 66. Accepted in or subordinate to Findings of Fact 54. Accepted in Findings of Fact 67. Accepted in Findings of Fact 50. Rejected conclusion in Findings of Fact 65. Accepted in Findings of Fact 68. Accepted in or subordinate to Findings of Fact 66 and 68. Accepted in Findings of Fact 68. 50-51. Accepted in Findings of Fact 69. Accepted in Findings of Fact 66. Accepted in Findings of Fact 70. 54-55. Accepted in or subordinate to Findings of Fact 70. 56-58. Accepted in or subordinate to Findings of Fact 70. Rejected, as irrelevant based on previous interpretations by AHCA, in Findings of Fact 68. Accepted in Findings of Fact 68. Accepted in or subordinate to Findings of Fact 54. 62-64. Accepted in or subordinate to Findings of Fact 57-60. 65-66. Accepted in or subordinate to Findings of Fact 54 and 71. 67. Accepted, but list not construed as exclusive in Findings of Fact 56. 68-69. Accepted in Findings of Fact 50. Accepted in preliminary statement and subordinate to Findings of Fact 50. Accepted in Findings of Fact 50. Accepted in or subordinate to Findings of Fact 54 and 71. Petitioner, Unicare's Proposed Findings of Fact. 1. Accepted in Findings of Fact 37 and 39. 2-3. Accepted in Findings of Fact 39. Accepted in Findings of Fact 40, 41, and 66. Subordinate to preliminary statement. Accepted in Findings of Fact 1. 7-8. Accepted in or subordinate to Findings of Fact 5-8 and 51. Accepted in Findings of Fact 39. Accepted in Findings of Fact 40. Subordinate to preliminary statement and Findings of Fact 39. 12-13. Accepted in or subordinate to Findings of Fact 70. 14-16. Accepted in relevant part in Findings of Fact 52. 17. Accepted in or subordinate to Findings of Fact 66. 18-22. Accepted in or subordinate to Findings of Fact 70. Accepted in Findings of Fact 54 and 71. Accepted. Subordinate to Findings of Fact 65. 26-27. Accepted in or subordinate to Findings of Fact 54. Accepted in preliminary statement. Accepted in or subordinate to Findings of Fact 56. Accepted in or subordinate to Findings of Fact 65. 31-32. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 57. Accepted in Findings of Fact 66. Subordinate to Findings of Fact 54. 36-39. Accepted in or subordinate to Findings of Fact 53. 40-41. Accepted in or subordinate to Findings of Fact 57 and 60. Accepted in or subordinate to Findings of Fact 69. Accepted in or subordinate to Findings of Fact 57 and 60. 44-48. Accepted in Findings of Fact 39 and 61. 49-52. Accepted in or subordinate to Findings of Fact 53 and 56. 53-62. Accepted in or subordinate to Findings of Fact 57 and 60. 63-68. Accepted in or subordinate to Findings of Fact 70. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 70. 71-75. Accepted in or subordinate to Findings of Fact 7 and 51. 76-78. Accepted in or subordinate to Findings of Fact 52. 79. Accepted in Findings of Fact 53. 80-81. Accepted in or subordinate to Findings of Fact 54. 82-83. Accepted in or subordinate to Findings of Fact 56. 84. Accepted in or subordinate to Findings of Fact 57 and 60. 85-86. Accepted in or subordinate to Findings of Fact 61. Accepted in Findings of Fact 64. Accepted in Findings of Fact 65. 89-90. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 54. Accepted in Findings of Fact 67. 93-94. Accepted in or subordinate to Findings of Fact 57, 59 and 60. 95. Accepted in or subordinate to Findings of Fact 70. 96-103. Rejected as having been modified and adjusted in Findings of Fact 70. Accepted in Findings of Fact 64. Rejected in Findings of Fact 64. Accepted in general in Findings of Fact 67. Rejected in Findings of Fact 66 and 67. Accepted in Findings of Fact 52. Accepted in or subordinate to Findings of Fact 65. Accepted in or subordinate to Findings of Fact 60. Accepted in Findings of Fact 57-60. Accepted in Findings of Fact 42 and 44. Accepted in Findings of Fact 42. Rejected as not supported by the record. Accepted in Findings of Fact 45 and 46. Accepted in Findings of Fact 64. Accepted in or subordinate to Findings of Fact 66. Accepted in Findings of Fact 61. Accepted in Findings of Fact 57. COPIES FURNISHED: Douglas L. Mannheimer, Esquire Jay Adams, Esquire Broad & Cassel Post Office Box 11300 Tallahassee, Florida 32302 Theodore E. Mack, Esquire Cobb, Cole & Bell 131 North Gadsden Street Tallahassee, Florida 32301 W. David Watkins, Esquire Patricia Renovitch, Esquire Oertel, Hoffman, Fernandez & Cole 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 R. Bruce McKibben, Jr., Esquire Pennington, Haben, Wilkinson,Culpepper, Dunlap, Dunbar, Richmond & French, P.A. 215 South Monroe Street, 2nd Floor Post Office Box 10095 Tallahassee, Florida 32302 Lesley Mendelson, Esquire Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Tom Wallace Assistant Director Agency For Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact 1-2. Rejected as a statement of the issues and not a Finding of Fact. Accepted and incorporated in Finding of Facts 8 and 9. Incorporated in Finding of Fact 9. Accepted. Incorporated in Finding of Facts 6 - 9. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 16. Incorporated in Finding of Fact 17. Irrelevant. Incorporated in Finding of Fact 5. Incorporated in Finding of Fact 6. 13-14. Irrelevant. Cumulative. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 11. Irrelevant. Incorporated in Finding of Fact 22. Incorporated in Finding of Fact 14. Irrelevant. Incorporated in Finding of Facts 4 and 5. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman 2700 Blairstone Rd. Suite C Tallahassee, Florida 32301 R. Bruce McKibben, Jr. Assistant General Counsel Department of HRS 1323 Winewood Boulevard Jonathan S. Grout, Esquire 307 W. Tharpe Avenue Tallahassee, Florida 32302 Thomas Beason, Esquire Suite 100 118 N. Gadsden Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore RECOMMENDED that the applications for a CON to construct either a 60 or 120-bed nursing home in Brevard County, Florida, submitted by Wuesthoff Health Services, Inc. and Florida Convalescent Centers, Inc., be denied. RECOMMENDED this 8th day of October, 1986, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway The Oakland Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 84-1976; 85-1310; 85-1506 The following constitutes my specific findings pursuant to Section 120.59(2), Florida Statutes, on all Proposed Findings of Fact submitted by the parties to this case.
The Issue Which one of three Certificate of Need applications for a new nursing facility in AHCA Nursing Home District 3 should be granted: Beverly Savana Cay Manor, Inc.’s; Life Health Care Resources, Inc.’s; or Arbor Health Care Company’s?
Findings Of Fact The Parties and The Applications Beverly Beverly Savana Cay Manor, Inc., is a wholly-owned subsidiary of Beverly Enterprises, Inc., the largest provider of nursing-home care in the nation. Beverly is proposing to construct a 120-bed freestanding nursing home in Marion County from which it proposes to provide hospice services, respite services and, for six days a week, inpatient and outpatient therapy services. The nursing home, if constructed, will contain a 16-bed Medicare unit and a 20-bed secured Alzheimer’s unit. The Beverly application is conditioned upon providing at least 55 percent of its patient days to Medicaid patients. In addition, Beverly proposes to provide 0.2 percent of its patient days to indigent and charity patients. Beverly proposes to provide care to residents who are HIV positive or have AIDS. If the application is approved, Beverly will contribute $10,000 to a geriatric research fund. Life Care Life Care is a new, start-up corporation formed initially for the purpose of seeking a CON for a nursing home in Hernando County. Life Care’s plan is that it be operated by Life Care Centers of America, Inc. (LCCA), a privately owned Tennessee corporation authorized to business in Florida. LCCA owns, operates, or manages over 185 nursing homes with over 22,700 beds and retirement center units in 28 states. It is the largest privately owned nursing-home company in the United States. Life Care’s application proposes construction and operation of a 120-bed nursing home in Hernando County. The nursing home will include a 20-bed secured Alzheimers/dementia care unit and a state-of-the-art adult care unit. In fact, Life Care has agreed to condition approval of its application on inclusion of these two units. Additionally, it has agreed to a condition of service of Medicaid residents at the district average (69.26 percent) at least. Life Care proposes a broad range of Specialized Programs, including care of AIDS victims, respite care, and care to hospice clients and outpatient rehabilitative care. Its inpatient care will include a 20-bed Medicare unit, within which will be at least 12 beds for "subacute" services. Arbor Headquartered in Lima, Ohio, Arbor Health Care Company has 27 facilities located in five states. Twelve of the facilities are in Florida but none of its licensed facilities are in District 3. Of the twelve in Florida, eleven are JCAHO accredited, with the twelfth, newly-licensed, scheduled at the time of hearing for an accreditation survey in December of 1997. Ten of the eleven accredited facilities are also accredited for subacute care. Arbor’s accreditation record is outstanding compared to both the 600 nursing facilities in Florida, 93 of which are JCAHO accredited and 49 of which are accredited for subacute care, and the national record of accreditation of nursing home facilities in subacute care, 23 percent. This record, too, is demonstrative of Arbor’s progress in carrying out its corporate mission: to be the premier subacute provider of long-term care services. Consistent with its mission, Arbor proposes a distinct subacute unit to serve patients with digestive diseases and patients in need of ventilator therapy, infusion therapy, wound care, and cardiac therapy. In addition to subacute services, Arbor proposes to serve residents with dementia, including Alzheimer’s, by utilizing a strongly-developed, individualized- care plan with an interdisciplinary approach implemented upon admission and subject to continuous review and, if necessary, revision. Arbor's application, however, distinctly different from Beverly’s and Life Care’s, does not propose a secured Alzheimer’s unit. Arbor proposes comprehensive rehabilitation care for its patient and residents, as well as outpatient rehabilitation services for both former residents and residents throughout the community. Arbor proposes to provide 0.2 percent of all patient days for charity care and 69.26 percent of all patient days for Medicaid patients within its 104-bed long-term facility. Medicaid patients will also be served in the 16-bed subacute unit. In addition, Arbor proposes to provide, at a minimum, one percent of its patient days for hospice care, respite care, the care of AIDS patients, and the care of pediatric patients. Arbor is committed to such services, as well as the provision of both inpatient and outpatient intensive rehabilitative programs, and has agreed to condition its award of a Certificate of Need upon such commitments. Arbor is the only one of the three applicants committed to provide care and services to pediatric patients. Location Introduction The issue on which these cases turn is location within District 3. (There are other issues in this case certainly. For one reason or another, their disposition will not determine the outcome of this case. Not the least among the other issues is whether Beverly or Life Care should be favored over Arbor because they propose secured Alzheimer’s units. This issue, however important and subject to whatever quality of debate, is not dispositive because at present it has no clear answer. See Findings of Fact Nos. 43-45, below.) District 3 Comprised of 16 counties located as far north as the Georgia state line and southwest to Hernando County, District 3 is the largest AHCA Nursing Home District area-wise. The District is not divided into subdistricts for the purpose of applying the state methodology to determine numeric need of additional nursing home beds. Among the 16 counties in the district are Marion, Hernando and Citrus. The Applicant’s Proposed Locations Beverly proposes to construct its 120-bed freestanding nursing home in Marion County. The specific proposed location is south of the City of Ocala, east of State Road 200 and west of Maricamp Road. From this location, Beverly would serve primarily residents of Marion County, but would also be accessible to residents of Citrus, Lake and Sumter Counties. Life Care proposes to construct its 120-bed nursing home in the Spring Hill area of Hernando County. Arbor proposes to locate its 120-bed nursing home in Citrus County. It did not propose a specific location within the County. The Best Location Conflicting qualified opinions were introduced into evidence by each of the three applicants. Each applicant, of course, presented expert testimony that its proposed location was superior to the locations proposed by the other two. In its preliminary decision, AHCA approved Arbor’s application and denied the other two. AHCA continues to favor Citrus County as the best location for a new 120-bed nursing home in District 3. At bottom, AHCA’s preliminary decision is supported by Arbor's proposal to locate in the county among Marion, Hernando and Citrus Counties with the greatest need: Citrus. This basis underlying, and therefore, the Agency’s preliminary decision, is supported by the findings of fact in paragraphs 21-35, below. Allocation of Nursing Home Beds Within AHCA Nursing Home District 3 Although the district is identified as a single entity for purposes of the state methodology utilized to determine the need for additional nursing home beds, the local planning council divides the district into geographic units or planning areas in order to specify preferences for the allocation of nursing homes within the district. The North Central Florida Health Planning Council, Inc., has created seven planning areas in District 3. The local health plan utilizes a priority-setting system to identify the relative importance of adding beds to specific planning areas. After establishing well-defined priorities for geographically-underserved areas and designated occupancy thresholds, the priority-setting system creates a decision matrix: the Planning Area Nursing Home Bed Allocation (PANHAM). The matrix is based on the population at risk, bed supply (both licensed and approved), and occupancy levels within the planning area. The allocation factors in the local health plan are particularly significant with respect to District 3 in light of its lone stance among the Agency’s Nursing Home Districts as lacking a process for allocating number of beds needed to the individual subdistrict. The local health plan provides "the only road map or the only guidance" (Tr. 311) as to how to allocate beds within District 3. The local health plan bases its occupancy priorities upon both licensed and approved beds within each planning area. From a planning perspective, it is reasonable and appropriate to calculate occupancy rates based upon both licensed and approved beds in assessing the need for additional beds. The number of approved beds is a measure of how much additional capacity will be on line in the near future. To ignore the number of approved beds in the evaluation of where to allocate new beds is not a good health planning technique. The three counties in which Beverly, Life Care and Arbor propose to locate are each separate planning areas in the local health plan. Marion is Planning Area 4; Hernando and Citrus are 6 and 5, respectively. The preferences contained within the local health plan for the allocation of nursing home beds within District 3 are listed in terms of importance and priority. Allocation factors "[t]wo and three really are the basis . . . for figur[ing] out in this huge district of 16 counties, how [to] make sense of where the beds ought to go." (Tr. 312.) The first of these is for applicants proposing to develop nursing home beds in geographically-underserved areas. None of the planning areas designated by the three applicants in this proceeding meet this geographic-access priority. The second of these two allocation factors, Allocation Factor 3, assigns a number of priorities in order of significance. These priorities are based primarily upon occupancy or utilization and need determined by the number of beds per area residents of 75 years of age and older. The first priority in Allocation Factor 3 is "an acid test." (Tr. 312.) It states that no nursing home beds should be added in a planning area until the number of nursing home days, considering both licensed and approved beds, for the most recent six months is 80 percent. It is only when an applicant meets this threshold that the remaining priorities in Allocation Factor 3 are considered. If the 80-percent priority is not met in a planning area, then the area should be given no further consideration for the allocation of beds. The only planning area of the three at issue in this case which meets the 80-percent occupancy standard is Planning Area 5, Citrus County. At the time the original fixed need pool for District 3 was published for the batching cycle applicable to this case, Citrus County had 69-approved nursing home beds. Hernando County had 147 (including 27 hospital-based skilled nursing beds), and Marion County had 234 approved beds. The most recent data available at the time of hearing show no new beds in Citrus or Hernando Counties but 309 new beds approved for Marion County. Utilizing the most recent data regarding the number of licensed and approved beds in Citrus, Hernando and Marion Counties, Citrus County remains the only planning area of the three which meets or exceeds the 80 percent occupancy threshold. Assuming that the remaining priority factors contained within the PANHAM matrix are applicable, none of the three applicants received a priority ranking under the PANHAM methodology. Applying the most recent data available, however, only Citrus County is moving toward the highest priority of high need and high occupancy. Both Marion County and Hernando County are moving away from the highest priority. Excluding the two counties within District 3 which have no nursing home beds (Dixie and Union), Hernando County has the lowest bed-to-elderly population ratio in the District. Considering occupancy rates over the past three years based solely upon licensed beds, Hernando County has demonstrated a marked decrease in utilization. Thus, even though Hernando has had a growth in population and experiences a lower bed-to- population ratio than the District as a whole, there is no stress on the nursing home bed supply in Hernando County. There is, moreover, no evidence of a high need to add additional bed capacity in Hernando County. The recently opened 120-bed Beverly nursing home in Spring Hill will serve to suppress or depress the overall rate of occupancy in Hernando County, making the occupancy rate even lower. There are a number of reasons why an area that has a relatively low bed-to-population ratio may also experience low occupancy. While a county or a planning area is defined by political boundaries, people do not necessarily stay within those boundaries for nursing home services. Socio-economic factors, the quality of existing nursing home services and the existence of alternatives, such as assisted living facilities, driving times and distances, the proximity of family, all may play a role in determining occupancy rates in a particular area. With regard to Planning Area 6, Hernando County, there are five nursing homes in northern Pasco County within a 15-mile radius of the center of Spring Hill, Life Care’s proposed location. Three of the four existing nursing homes in Hernando County have had downward occupancy trends. Occupancy rate may be expected to further drop with the recently licensed 120-bed facility in Spring Hill. Marion County has far and away the highest number of approved beds and a very high ratio of approved beds to licensed beds, thus providing significant additional capacity in that planning area. While the local health plan for District 3 affords no priorities based upon data concerning patient origin, Beverly attempted to demonstrate a greater need for additional beds in Marion County, as opposed to Citrus County, through patient origin information reported in those two counties. Beverly concluded that while 99 percent of the Citrus County population placed in a nursing home seek care within Citrus County, only 78 percent of Marion County residents placed in a nursing home seek nursing home care in Marion County. A 1996 nursing home data report showed that 147 Marion County residents sought nursing home care outside of Marion County, primarily in adjacent Levy, Sumter and Citrus Counties. Beverly’s analysis fails to establish need in Marion greater than in Citrus. First, it fails to take into account the 309 approved beds which will significantly add to Marion County’s capacity. Second, Citrus County’s occupancy rates are slightly higher than Marion County’s. Third, the data relied upon by Beverly’s expert performing the analysis is incomplete in that two or three nursing homes in Marion County did not report any data regarding patient origin. And finally, there are a number of reasons, found above, for why residents of one planning area choose a nursing home in another planning area. The Extent and Quality of Services Overview The District 3 local plan expresses a preference and priority for applicants which propose specialized services to meet the needs of identified population groups. Examples of such services include care for special children, care for Alzheimer’s or dementia patients, subacute care, and adult day care. Only a small percentage of nursing home care is provided to children. Proposing such care does not in the ordinary nursing home case carry much weight. Nor was there any demonstration that there is an unmet need for pediatric nursing home services in District 3. Nonetheless, it is at least noteworthy that only Arbor proposes care for special children as part of its pediatric services; the other two do not propose pediatric care at all. Arbor is also the only applicant that demonstrated a need for subacute care in its planning area and that is committed to provide such care. Utilizing a reasonable methodology, Arbor demonstrated a need for 41 additional subacute care beds in Citrus County. Arbor’s 16-bed subacute unit is consistent with that demonstrated need. While Beverly and Life Care propose to offer skilled, short-term services, neither proposes a distinct subacute unit. Indeed, Beverly’s skilled Medicare unit will not provide subacute care or services. Life Care’s subacute "program" will be implemented only if management later verifies a community need for such a program. While Life Care proposes to offer adult day care for five clients, Life Care did not identify a need for such services in Hernando County. Each of the applicants proposes to offer services and programs for residents with Alzheimer’s disease or dementia and each intends to service AIDS patients, provide respite care, and offer rehabilitation therapy services. Given the mix of services proposed, as well as Arbor’s commitment to such services, Arbor best meets the local health plan’s priority for the provision of specialized services to meet the needs of identified population groups. Subacute Care Arbor will offer a full range of subacute services, programs, and staffing it in its quest to be a premier provider of subacute services. In contrast, neither Beverly nor Life Care demonstrated a need for subacute care in their districts. In keeping with this lack of demonstration, neither Beverly nor Life Care made any commitment to a dedicated and distinct subacute unit or the provision of such services. Care for Alzheimer’s and Dementia Patients Approximately 50 percent of residents within nursing homes suffer from Alzheimer’s Disease or some form of related dementia. All three applicants propose to serve such patients and offer specified programs and rehabilitative services to these patients. Arbor, however, differs from Beverly and Life Care in its approach to treating those with Alzheimer’s. Beverly and Life Care propose secured, dedicated Alzheimer’s units. Arbor, while clustering patients within the facility in terms of the level of care and resources which each requires, follows a policy of mainstreaming residents with Alzheimer’s within the general nursing home population. There is a difference of opinion in the health care community as to which approach is better: secured, dedicated Alzheimer’s units or mainstreaming. There are both positive and negative aspects to dedicated, secured Alzheimer’s units. And it may turn out that the positive aspects prevail ultimately. But, at present, the results of research are inconclusive. The conclusion cannot yet be drawn that a secured, dedicated unit provides a more effective manner, either from a clinical standpoint or a cost-effective standpoint, of treating and caring for Alzheimer’s or dementia patients. Medicaid Services Florida’s State Health Plan expresses a preference for applicants proposing to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Since District 3 is not divided into subdistricts, the applicable comparison is the average District Medicaid utilization: 69.26 percent at the time the applications were filed. Beverly proposes to offer only 55 percent of its patient days to Medicaid patients. Beverly showed that Medicaid utilization has been declining in Marion County to the point at the time of hearing that it was 58 percent. But even if it were appropriate to use Marion County as the equivalent of a subdistrict, Beverly’s commitment would not match the Marion County rate, a rate lower than the district-wide rate. Beverly does not qualify for the preference. Life Care proposes 69.5 percent of its total patient days to Medicaid patients. Life Care qualifies for the preference. Arbor proposes to commit 69.26 percent of its patient days to Medicaid residents in the 104-bed long-term unit of its facility, or a minimum of 67 long-term care beds. In addition, Arbor will dually-certify some of its Medicare-certified beds for Medicaid in its subacute unit for patients who are either admitted on Medicaid or would convert of Medicaid. Typically, an applicant’s commitment to provide a certain percentage of its patient days for services to Medicaid patients is expressed in terms of patient days for the total facility. This batching cycle, however, was unique in that AHCA created a separate subset of nursing home beds, known as short- term beds, and required that separate applications be filed by applicants proposing both long-term and short-term beds. The partition created a problem for each applicant because it set up the possibility that one of the applicant's applications (either the short-term or the long-term) would be approved and the other denied. Arbor solved the problem by considering its 104-bed long term application as an application for a stand-alone project. Beverly and Life Care did not have the problem since they do not intend to have subacute units within their proposed facility. For facilities approved by more than one CON, AHCA uses a blended rate for monitoring compliance with CON conditions. For Arbor’s application, therefore, one could argue that a blended rate of 60.03 percent, composed of 69.23 percent for 104 beds and 0 percent for the 16 subacute beds, which is the rate Arbor proposes for the entire 120-bed facility, should apply. Whether applying a blended rate or using the rate applicable to long-term beds, Arbor is entitled to the State Health Plan preference for service to Medicaid patients. Financial Feasibility With one exception, all parties stipulated that each of the three applicants propose projects that are financially feasible both immediately and on a long-term basis. The exception relates to the listing in Arbor’s application in Schedule 6 of understated proposed wages for certified occupational therapy assistants (COTAs) and licensed physical therapy assistants (LPTAs). The evidence establishes that through inadvertence, Arbor mislabeled the line item designated as COTAs and LPTAs. The item should have borne a description of therapists aides instead of licensed therapists. Had the item been correctly described, the wages listed were salary levels comparable to wages experienced in other Arbor facilities. The error is harmless. The licensed assistants, that is, the COTAs and LPTAs, were included under the therapist line items within Arbor’s Schedule 6. Thus, the total salary expenses reflected in the schedule are accurate and Arbor’s project is financially feasible in the second year of operation. Even if Arbor has misstated the total amount of salaries for therapists and aides in Schedule 6, Arbor’s project would still be financially feasible because the majority of those costs would be allocated to the Medicare unit and would be reimbursed by the Medicare program. Arbor would continue to show a profit (approximately $189,000) in the second year of operation. Arbor’s proposed project is financially feasible in both the short and long terms.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The applications of Arbor Health Care Company (CON Application Numbers 8471L and 8471S) to construct and operate a 120-bed nursing home facility in Citrus County be GRANTED; and the applications of Beverly Savana Cay Manor, Inc. (CON Applications Numbers 8484L and 8484S) and Life Care Health Resources, Inc. (CON Applications Numbers 8479L and 8479S) to construct and operate 120-bed nursing home facilities in Marion and Hernando Counties, respectively, be DENIED. DONE AND ORDERED this 17th day of February, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1998. COPIES FURNISHED: Diane D. Tremor, Esquire John L. Wharton, Esquire Rose, Sundstrom & Bentley, LLP 2548 Blairstone Pines Drive Tallahassee, Florida 32301 R. Bruce McKibben, Esquire Holland & Knight, LLP Post Office Box 810 Tallahassee, Florida 32301-0810 Jay Adams, Esquire Douglas L Mannheimer, Esquire Broad & Cassel Post Office Box 11300 Tallahassee, Florida 32302-1300 Richard A. Patterson, Esquire Office of the General Counsel Agency for Health Care Administration Post Office 14229 Tallahassee, Florida 32317-4229 Jerome W. Hoffman, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
