The Issue Whether the Department of Health and Rehabilitative Services should approve the application for certificate of need (CON) of any one or more of five applicants for community nursing home beds in Lee County for the July 1989 planning horizon.
Findings Of Fact The Applicants Applications for certificates of need (CON) for nursing homes are accepted by the Department of Health and Rehabilitative Services (Department) in batching cycles and are subject to competitive review. The Department comparatively reviewed and analyzed 13 individual applications for proposed nursing services for District VIII, Lee County, in the July, 1986 nursing home batching cycle. Five of those applications are at issue for purposes of this proceeding. Pertinent to this proceeding, petitioner, Maple Leaf of Lee County Health Care, Inc., a wholly owned subsidiary of Health Care and Retirement Corporation of America (HCR filed an application for a 120-bed nursing home (CON 4746), petitioner Forum Group, Inc. (Forum), filed an application for a 60-bed nursing home (CON 4755), petitioner, Health Quest Corporation (Health Quest), filed an application for a 60-bed nursing home (CON 4747), petitioner, Hillhaven, Inc., d/b/a Hillhaven Health Care Center Lee County (Hillhaven) filed an application for a 120-bed nursing home (CON 4756), and respondent, Gene Lynn d/b/a Careage Southwest Healthcare Center (Careage) filed an application for a 120-bed nursing home (CON 4748). Each of these applications was timely filed. The Department's "preliminary" action The Department is the state agency charged with implementing and regulating the CON program for medical facilities and services in Florida. Within the Department, the Office of Community Medical Facilities is responsible for the review of CON applications and provides a recommendation for approval or disapproval after its analysis is concluded. The Department assigned the subject District VIII applications for the July, 1986 hatching cycle to Medical Facilities Consultant Robert May for review. Mr. May was supervised in his work by Elizabeth Dudek, an experienced Medical Facilities Consultant Supervisor, who has reviewed or supervised the review of approximately 1200 CON applications. Robert Nay and Elizabeth Dudek concurred in their evaluations of the applications and recommended that Hillhaven's application be approved for 60 beds in Lee County. This recommendation was forwarded to the Administrator of the Office of Community Medical Facilities, Robert E. Naryanski, who also occurred with the recommendation on or about December 20, 1986, and forwarded the recommendation to Marta Hardy, Deputy Assistant Secretary for Health Planning and Development, for final approval. An unusual set of circumstances evolved from that approximate point in time with respect to the applications at issue. Sometime in late November 1986 Marta Hardy talked to Robert Sharpe, Administrator of the Office of Comprehensive Health Planning, concerning the applications in this batching cycle and stated that she intended to involve him in the review procedure. In late December, she asked Mr. Sharpe to review the applications for four of the counties in the cycle, including Lee County. Mr. Sharpe is in a separate and distinct part of the Department, which reports to the Deputy Assistant Secretary but does not, in the ordinary course of operations, review certificate of need applications. Mr. Sharpe's involvement with reviewing nursing home applications had never occurred before and has not occurred since. However, Mr. Sharpe has been involved on limited occasions with reviewing hospital CON applications in preparation for administrative hearings. Careage had a CON application in each of the four districts that Mr. Sharpe was asked to review. Mr. Sharpe was not asked to review any other districts other than the four districts in which Careage had applications pending. In Mr. Sharpe's conversation with Ms. Hardy, Ms. Hardy specifically mentioned Careage while expressing her concern about the Department's ability to discriminate the best applicants on the basis of quality of care. Ms. Hardy mentioned no other applicant by name. Mr. Sharpe, in all circumstances, recommended Careage for approval. Mr. Sharpe did not attempt to do a complete re-review the applications, and did not redo any part of the review that had been performed by the Office of Community Medical Facilities specifically the need calculations and comparing the applications to the statutory review criteria. Mr. Sharpe did not apply statutory review criteria in his review of the applications because it had been determined that all the applicants were minimally qualified and met the statutory review criteria. Mr. Sharpe felt that the responsibility of his office was simply to do a comparative review to determine the best applicant. Mr. Sharpe placed information in the applications into what has been termed a "matrix." The purpose of the matrix was to present the information in the applications in a format which would facilitate a comparative analysis based on a greater number of factors than had previously been considered. Traditionally, the predominant factors utilized by the Department in reviewing applications were construction costs, Medicaid participation percentages, proposed sites, and charges. The matrix developed by Mr. Sharpe included additional factors which he felt would better address the quality of care to be provided, such as the size of facility, the size of the patient rooms, the amenities available to the patients and their families, the type and level of staffing, availability of special programs, and operating costs. By including a greater number of factors in the matrix, more information was considered in selecting the best applicant. As a result, the factors that traditionally had been considered by the Department were given relatively less weight. There was no notice to the applicants of this change in practice. Further, although all the information considered by Mr. Sharpe was taken from the applications and generally required to be in the application, the applicants reported the information differently, making a direct "apples-to-apples" comparison difficult. Mr. Sharpe's review of the applications spanned approximately five to eight days. Mr. Sharpe's staff in the information on the matrix from the applications, and, although Mr. Sharpe had personally reviewed all the applications, Mr. Sharpe did not personally check the information placed on matrix for accuracy. The Office of Community Medical Facilities' initial review covered a period of approximately six months. There was no evidence that the duties and responsibilities of the Office of Community Medical Facilities were not carried out in a thorough and appropriate manner. Ms. Dudek has more experience in reviewing CON applications than Mr. Sharpe, and she took into account, among other review criteria requirements, the type programs offered by the applicant and the quality of care the applicant had demonstrated and was capable of providing. Mr. Sharpe never talked to Ms. Dudek to find out the basis for her recommendation because he felt his responsibility was to do an independent review. Robert Sharpe reported his findings with regard to Lee County to Marta Hardy who apparently accepted Mr. Sharpe's recommendation on or about January 7, 1987, approving Careage's application for 60 beds and denying all others. On or about January 23, 1987, in the Florida Administrative Weekly, it was published that Careage was approved fob a 120-bed facility in Lee County. Actually HRS approved Careage for a 60-bed facility; the 120-bed figure in the Florida Administrative Weekly was erroneous. As a result of a new administration and Bob Griffin succeeding Ms. Hardy as Deputy Secretary in the Office of Health Planning, and due to his concerns about the unique manner in which these applications were reviewed and a decision made, another review of the applications for Lee County was conducted. The Office of Community Medical Facilities, the office originally responsible for reviewing the applications, was asked to do this review. This third review was conducted during the summer of 1987 by Bob May while this case was pending before the Division of Administrative Hearings. In this third review, a matrix was also used, but not the identical matrix previously used by Mr. Sharpe. Indeed, the Office of Community Medical Facilities was instructed not to look at what Mr. Sharpe's office had done. The review resulted in a decision that HRS would maintain its position of supporting partial approval of the Careage application for 60 beds. By letter dated September 4, 1987, the parties were formally notified of the HRS decision and a Correction Notice was published in the Florida Administrative Weekly indicating that the notice published in January, 1987, stating that Careage had received a CON for 120 beds, should have shown a partial approval of 60 beds, and a denial of 60 beds. HCR, Forum, Health Quest and Hillhaven timely contested initial approval of the Careage application and their own respective denials. Careage and HRS are the respondents. Hillhaven, prior to final hearing, dismissed its case contesting the Careage approval for 60 beds, and in this proceeding contends that Hillhaven should be awarded a certificate of need because there is a bed need in excess of 60 beds in Lee County. Careage did not timely contest the denial of the 120 beds requested in its original application. Health Care and Retirement Corporation of America HCR, through its wholly owned subsidiary, Maple Leaf of Lee County Health Care, Inc., proposes to construct a 120-bed community nursing home in Lee County, Florida. At the time its application was submitted, HCR had not selected a site on the proposed facility, but at hearing proposed to locate it in the Ft. Myers area. Currently, HCR owns and operates 92 nursing homes in 19 different states, including seven within the State of Florida. Its existing Florida facilities are Pasadena Manor Nursing Home (South Pasadena, Florida), Community Convalescent Center (Plant City Florida), Kensington Manor (Sarasota, Florida), Jacaranda Manor (St. Petersburg, Florida) Wakulla Manor (Crawfordville, Florida, Heartland of St. Petersburg (St. Petersburg, Florida, and Rosedale Manor (St. Petersburg, Florida). Each of these facilities received superior ratings on their latest licensure and certification survey with the exception of Heartland and Rosedale, which received a standard and conditional rating respectively. Significantly, the conditional rating assigned to the Rosedale facility occurred less than six months after that facility was acquired by HCR, and all deficiencies were corrected within 19 days of the survey. HCR's current proposal for a 120-bed facility will be a one-story structure containing 40,000 gross square feet, including 2,000 square feet for an ancillary adult day care center. It will have 58 semi-private rooms with half-bath (toilet and sink) and four private rooms with full bath (toilet, sink and shower) located within four patient wings, two nursing stations, two dining rooms, central bathing facilities, beauty- barber shop, quite lounge, physical therapy room, occupational therapy room, multi-purpose rooms, outdoor patio areas and the other standard functional elements required to meet licensure standards. In all, the proposed facility meets or exceeds state requirements for the construction of nursing homes. HCR proposes to dedicate one wing (14 semi-private and 1 private room) of its facility to the care of patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as such loss progresses, a need for increased personal care. Historically, Alzheimer's patients have been mixed with other patients in nursing homes, often disrupting other patients and presenting problems of control for staff separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient without restraint or sedation, and provides the patient with a smaller, safer and specially designed area with specially trained staff to address the needs of such patients. However, absent fill-up, HCR does not propose to limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders. HCR's Alzheimer's unit is reasonably designed, equipped and minimally staffed for its intended purpose. HCR also proposes to provide, as needed, subacute care at its facility. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there has been an increased demand for subacute services in nursing homes. Included within the subacute services HCR proposes to offer are ventilator care, IV therapy, pulmonary aids, tube feeding, hyperalimentation, and percentage and long term rehabilitation. HCR currently provides a wide variety of such subacute services at its existing facilities, and it may reasonably be expected to continue such practice at the proposed facility. As an adjunct to the proposed nursing home, HCR proposes to operate an adult day care unit for 12 Alzheimer's Disease patients. Additionally, HCR will offer respite care within the nursing home when beds available. Adult care and respite care provide alternatives to institutional long-term care in nursing homes, aid in preventing premature rising home admissions, and promote cost containment. As initially reviewed by the Department, HCR's activity would be a single story building containing 40,000 gross square feet, including the day care area, with an estimated total project cost of $3,894,000. As proposed, the total project cost equates to $32,450 per bed, and as designed provides 127 net square feet of living space for private rooms and 166 square feet for semi- private rooms. Construction equipment costs were as follows: Construction costs $2,200,000; costs per square foot $55.00; construct cost per bed 17,417; equipment costs $420,000; and equipment cost per bed $3,500. HCR's estimate of project costs is reasonable. At hearing HCR updated its project costs to account for changes that arose during the delay between initial review and de novo hearing. As updated, the total project cost was $4,375,500, or $36,462 per bed. Construction equipment costs, as updated were as follows: construction costs $2,400,000; cost per square foot $60.00; construction cost per bed $19,000, equipment costs $420,000; and equipment cost per bed $3,500. HCR's updated estimate of cost is reasonable. Staffing at the proposed 120-bed facility is designed to accommodate the needs of the skilled and intermediate care patients, as well as the special needs of the Alzheimer's and subacute patients. HCR will provide 24-hour registered nurse coverage for subacute patients and a higher staffing level in the Alzheimer's unit. The nursing home will provide 3.59 hours per patient in the Alzheimer's unit and 2.73 nursing hours overall, based on the assumption that 50 percent of the Alzheimer's patients will wanderers and that 50 percent of all patients will require skilled care. Precise staffing for subacute patients will be determined by the nature of the subacute services needed. HCR's staffing levels, as originally proposed and as updated, meet or exceed state standards. The salary and benefit estimates provided by HCR in its original application reflect salary and benefit levels current at the time of application, and the salary and benefit projections provided by HCR at bearing reflect current (1987) salaries and benefits inflated to the date of opening. Both estimates are reasonable. HCR's projection of utilization by class of pay as initially proposed was as follows: Private pay 51 percent, Medicaid 46 percent, and Medicare 3 percent. Due to its experience over the intervening 17 months since submittal of its application, HCR updated its assessment of utilization as follows: Private pay 50 percent, Medicaid 46 percent, and Medicare 4 percent. The current Lee County Medicaid experience level is 46 percent, and HCR provides an average 71 percent Medicaid occupancy in its Florida facilities. HCR's projections for payor mix are reasonable. HCR's initial application contained estimates of expenses and revenues current as of the date of application (July 1986) but failed to include an inflation factor to accommodate anticipated increases in expenses and revenues. Initially, T. projected its per diem room charges to be $60 to $85. At hearing, HCR projected its per diem room charges in the year opening (1990) to be $90 for a private room, $75 for a semiprivate room, $76.00 for Medicare patients, and $72 for Medicaid patients. The private, semi-private and Medicare charges were determined by inflating current (1987) Lee County charges forward to the year of opening. The Medicaid charges were based on a calculation of the Medicaid reimbursement formula. These charges, when multiplied by patient days, are a reasonable estimate of the projected revenues of the facility. HCR's estimate of expenses in its initial application was based on its current experience. Intervening events have lent new insight to its evaluation of expenses, as have intervening inflationary factors. While HCR's estimate of expenses and revenues was reasonable in its initial application, its current estimates comport with the reality of a 1990 opening and are reasonable. HCR has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other personnel necessary to staff its facility. Since HCR does not propose to initially limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders, its pro formas are premised on reasonable assumptions, and it has demonstrated the financial feasibility project in both the short term and long term. The proof demonstrates that HCR provides and Bill continue to provide quality care. HCR's corporate standards and guidelines regulate such areas as patient rights, staff development and orientation, physician and nurse services, pharmacy services and medication administration, social services, and infection control. HCR's manager of quality assurance, house professional services consultants, and quality assurance consultants regularly visit each HCR nursing home to implement the quality assurance standards and guidelines. Each HRC nursing home provides a staff development director who is responsible for the orientation of new employees, training new employees, and continuing training for all employees. Forum Group Inc. Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Currently Forum operates 22 Lang facilities and an additional 11 retirement living centers with attached nursing facilities, including one nursing facility in Florida. Its Florida facility holds a standard rating. Other facilities owned by Forum in Texas, Kentucky and Illinois do, however, hold superior ratings. Pertinent to this case, Forum proposes to develop a retirement living center in Lee County that would consist of its proposed 60-bed skilled and intermediate care nursing home, an adult congregate living facility, and apartments or Independent living. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen, laundry, administrative area and heating plant. Such design provides for an efficient operation, as well as an economical distribution costs facility wide. The nursing facility proposed by Forum will be a single story building of wood frame and brick veneer construction containing 27,000 gross square feet. It will include 20 semi- private rooms with half bath, 16 private rooms with half bath, 3 private rooms with full bath, and one isolation room with full bath. Also included are a beauty-barber shop, quite lounge, physical therapy room, occupational therapy room, and exam-treatment room. But for the length of the corridors in the patient wings, discussed infra, the proposed facility meets or exceeds state requirements for the construction of nursing homes. Forum's proposal, as initially reviewed by the Department, would have a total project cost of $2,314,800. This equates to $38,580 per bed, and as designed provides 150 net square feet of living space for private rooms and 228 net square feet for semi-private rooms. Construction equipment costs were as follows: Construction costs $1,377,000; cost per square foot $51.00; construction cost per bed $22,950; equipment costs $200,000; and equipment costs per bed $3,333. Forum's estimate of project cost is reasonable. Forum provided a single-line drawing indicating the general arrangement of spaces for its proposed facility. As proposed, the facility would consist of two patient wings, and a central nurse's station. The corridor lengths in the patient wings exceed state standards by 40 feet. They could, however, be modified to conform to State standards without significantly affecting the cost of construction. The project would have energy conservation features such as heavy duty roof and side insulation, double-glazed windows, and high efficiency heating and air conditioning equipment. The forum facility will offer skilled and intermediate care, and subacute care, including IV therapy, ventilator care, hyperalimentation, pulmonary aids, and short and long term rehabilitation. Forum would contract out for physical therapy, speech therapy, pharmacy consultation and a registered dietician. If needed, Forum would offer respite care when beds are available. The proposed staffing levels and salaries proposed by Forum in its application are reasonable and meet or exceed state standards. Forum has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent staff. Twenty-four hour coverage by registered nurses will be provided, and a staffing ratio of 2.9 will be maintained. The staffing level at the proposed facility is consistent with that experienced at Forum's existing Florida Facility. Forum provides, and will continue to provide, quality care. Forum's application projected its utilization by class of pay as follows: private pay 58.47 percent, Medicaid 37.16 percent, and Medicare 4.37 percent. Currently, Forum experiences a 48 percent Medicaid occupancy rate system-wide, although it only has 2 of 35 beds dedicated to Medicaid care in its present Florida facility. Forum estimated its revenues based on patient charges ranging from $50.64 per day for Medicaid/semi-private room to $75.00 per day for SNF/private pay/private room. Based on such revenues, its pro forma, utilizing a conservative 86.25 percent occupancy rate at the end of the second year of operation, demonstrated the short term and long term financial feasibility of the project as initially reviewed by the Department notwithstanding the fact that it had underestimated its Medicaid and Medicare reimbursement rates. At hearing, Forum sought to demonstrate that its project was currently feasible by offering proof that intervening events had not significantly impacted the financial feasibility of its project. To this end, Forum offered proof that the contingencies and inflation factors it had built into the construction of its initial proposal would substantially offset any increased costs or expenses of construction. Additionally, Forum sought to update its proposal at hearing by offering testimony that included an increase in the administrator's salary from $27,000 to $39,000, a decrease in interest in year one to $187,803, an increase in interest in year two to $250,790, and an increase in revenues based on patient charges ranging from $69.19 per day for Medicaid/semi private room to $90.00 per day for SNF/private pay/private room. Some of the applicants objected to Forum's proof directed at the current financial feasibility of its project because it had not previously provided them with a written update of its application as ordered by the Hearing Officer. The applicants' objection was well founded. Further, the proof was not persuasive that any contingencies and inflation factors it had built into its initial proposal would substantially offset any increased costs or expenses of construction, nor that salaries, benefits and other expenses that would be currently experienced were appropriately considered in addressing the present financial feasibility of Forum's project. While Forum has the available resources, including management personnel and funds for initial capital and operating expenditures, for project accomplishments and operation, and will be able to recruit any other personnel necessary to staff its facility, it has failed to demonstrate that its proposal, as updated, is financially feasible in the long term. Health Quest Corporation Health Quest is a privately held corporation which owns, develops and operates health care facilities and retirement centers on a national basis. Health Quest has been in business for approximately 20 years, and currently operates 11 long-term care facilities and three retirement centers in Indiana, Illinois, and Florida. Its existing Florida facilities are located in Jacksonville, Boca Raton, and Sarasota. It also has facilities under construction in Winter Park and Sunrise, Florida. Health Quest also held a number of other certificates of need to construct nursing facilities in Florida. Recently, however, it decided to transfer or sell 3-4 of those certificates because its initial decision to develop nine new projects simultaneously would have, in its opinion, strained its management staff and commitment to high quality standards. HCR is, however, currently proceeding with several projects in Florida, and anticipates that the proposed Lee County facility will be brought on line thereafter. Pertinent to this case, Health Quest proposes to develop a retirement center in Lee County that would consist of a 60-bed skilled and intermediate care nursing home, and 124 assisted living studio apartments (an ACLF). 4/ The two components which comprise Health Quest's retirement center are physically connected and share some operational functions such as a common kitchen, laundry, therapy areas, maintenance areas, and administrative areas. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. In addition to providing an economical distribution of costs, the two components of the retirement center are mutually supportive. The nursing care unit supports the ACLF by making sure that health care services are available to the assisted living people. The ACLF supports the nursing unit as a source of referral and as an alternative to nursing home placement. The nursing facility proposed by Health Quest will be a single story building of masonry and concrete construction. It will include 6 private rooms and 27 semi-private rooms with half-bath attached, central nurse's station, central bathing facilities, beauty-barber shop, quite lounge, central dining area, physical and occupational therapy room and outdoor patio The center, itself, will provide patios, walkways and other outdoor features to render the facility pleasant and attractive, and will provide multi-purpose areas to be used for religious services and other activities, an ice cream parlor and gift shop. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Health Quest's proposed facility contained 25,269 gross square feet, with an estimated total project cost of $2,244,505. As proposed, the total project cost equates to $37,408 per bed, and as designed provides 240 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows: Construction costs $1,470,333; cost per square foot $58.19; construction cost per bed $24,506; equipment costs $298,200; and equipment cost per bed $4,970. While the majority of Health Quest's costs are reasonable, its equipment costs are not. These costs are substantially the same as those projected in its original application for a 120-bed facility, which at an equipment cost of $300,000 derived an equipment cost per bed of $2,500. Why the same cost should prevail at this 60-bed facility was not explained by Health Quest, and its equipment cost per bed of $4,970 was not shown to be reasonable. As with most applicants, Health Quest updated its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing. As updated, the estimated project cost is $2,290.331, $38,172 per bed. Construction equipment costs were as follows: Construction costs $1,507,043; cost per square foot $59.64; construction cost per bed $25,117; equipment costs $302,700; and equipment costs per bed $5,045. Again, while the majority of Health Quest's costs are reasonable its equipment costs are, for the reasons heretofore expressed, not shown to be reasonable. The Health Quest facility will offer skilled and intermediate nursing care, and subacute care, including IV therapy, chemotherapy, TPN therapy and tracheostomy care. Also to be offered are respite care as beds are available and, within the complex, adult day care. Health Quest will maintain a nursing staffing ratio of approximately 3.25 hours per patient day for skilled care and 2.5 for intermediate care. As originally reviewed by the Department, Health Quest's staffing levels and expenses were reasonable. At hearing, Health Quest increased its staffing levels to account for an increased demand in labor intensive care, and increased its staffing expenses to account for the intervening changes in the market place. As updated, Health Quest's staffing levels and expenses are reasonable. Health Quest's projection of utilization by class of pay in the application reviewed by the Department was as follows: private pay 51.6 percent, Medicaid 45 percent, and Medicare 3.4 percent. Health Quest's utilization projection, as updated at hearing, was as follows: private pay 50.9 percent, Medicaid 45 percent, and Medicare 4.1 percent. TAB Health Quest currently serves 30 percent Medicaid patients at its Jacksonville facility, 10 percent Medicaid patients at its Boca Raton facility, and no Medicaid patients at its Sarasota facility. It has, however, committed to serve 40 percent and 48 percent Medicaid patients at its Sunrise and Winter Park facilities, respectively. Health Quest's projections of payor are reasonable. Initially, Health Quest projected its per diem room charges to range from $52 for skilled and intermediate care Medicare patients to $57.25 for skilled care-private and Medicare patients. It did not, however, draw any distinction between private and semi-private rooms. At hearing, Health Quest projected its per diem room charges as follows: $90 for SNF/single/private pay; $73 for SNF/double/private pay; $73 for SNF/double/Medicare; $68 for SF/double Medicaid; $68 for ICF/single/private pay; $70.75 for ICF/double/private pay; and $68 for ICF/double/Medicaid. Health Quest's fill-up and occupancy projections, as well as its projections of revenue and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and as updated. During the course of these proceedings, a serious question was raised as to whether Health Quest had demonstrated that it had the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, or that it was committed to the subject project. Within the past three years, Health Quest has sold three of its approved CONS and is considering the sale a fourth due to its inability to handle that number of projects, and the adverse impact it would have on its ability to deliver quality care. Notwithstanding its inability to proceed with approved projects, Health Quest proceeded to hearing in October 1987 and December 1987 for nursing home CONs in Hillsborough County and Lee County (the subject application), and also had nine such applications pending in the January 1987 batching cycle and eight such applications in the October 1987 batching cycle. Health Quest's actions are not logical, nor supportive of the conclusion that it is committed to this project or that it possesses available resources for project accomplishment. Under the circumstances, Health Quest has failed to demonstrate that it has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. Health Quest's facilities in Jacksonville and Boca Raton currently hold superior ratings from the Department. A superior rating includes consideration of staffing ratios, staff training, the physical environment, physical and restorative therapies, social services, and other professional services. Those facilities are monitored, as would the subject facility, by Health Quest for quality care through a system of quarterly peer review, and provide extensive staff education programs that include orientation training for new staff and on-going education for regular staff. Health Quest has demonstrated that it has provided quality care. However, in light of the strain its current activities have placed on its resources, it is found that Health Quest has failed to demonstrate that it could provide quality care at the proposed facility were its application approved. Hillhaven, Inc. Hillhaven is a wholly owned subsidiary of the Hillhaven Corporation, which is a subsidiary of National Medical Enterprises. The Hillhaven Corporation has been business for almost 30 years, and is currently responsible for the operation of approximately 437 nursing homes and retirement centers nationally, including 15 nursing homes which it owns or operates in the State of Florida. Hillhaven proposes to develop a new 120-bed skilled and intermediate care community nursing home in Fort Myers, Lee County, consisting of 38,323 square feet. It will include 14 private rooms and 53 semi-private rooms, a full bath attached to each room (shower, toilet and sink), central tub rooms, beauty- barber shop, quite lounge, chapel, physical therapy room, occupational therapy room, and outdoor patio areas. In all, Hillhaven's proposed facility meets or exceeds state requirements for the construction of nursing homes. As initially reviewed by the Department, Health Quest's proposed facility would be a single-story building containing 38,323 gross square feet, with an estimated total project cost of $3,544,444. As proposed, the total project cost equates to $29,537 per bed, and as designed provides 217 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows; construction costs $2,146,000; cost per square foot $56.00; construction cost per bed $17,884; equipment costs $442,005; and equipment cost per bed $3,683.38. Hillhaven's project costs are reasonable. As with the other applicants, Hillhaven update its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing, certain oversights in its initial submission, and its decision to proceed with type 4 construction as opposed to type 5 construction as originally proposed. As updated, the estimated project cost is $4,089,639, or $34,155.33 per bed. Construction equipment costs, as updated, were as follows: construction costs $2,446,088; cost per square foot $63.82; construction cost per bed $20,384; equipment costs $521,200; and equipment costs per bed $4,343.33. By far, the biggest factor in the increased construction costs was Hillhaven's decision to proceed with type 4 construction as opposed to type 5 construction. Either type of construction would, however, meet or exceed state standards, and Hillhaven's estimates of construction and equipment costs are reasonable. The Hillhaven facility will offer skilled and intermediate care, occupational therapy, speech therapy, physical therapy, recreational services, restorative nursing services, and social services. Hillhaven does not discriminate on admission, and would admit Alzheimer's and subacute patients as presented. Were sufficient demand experienced, Hillhaven has the ability to provide and would develop a full Alzheimer's unit, and provide day care and respite care. Currently, Hillhaven operates 36 Alzheimer's units at its facilities nation wide, but has experienced no demand for such a special unit or other special care at its existent Lee County facility. As originally reviewed by the Department, Hillhaven's staffing levels an expenses were reasonable. At hearing, Hillhaven increased its staffing levels to account for staff inadvertently omitted from its initial application, and increased its staffing expenses to account or intervening changes in the market place. As updated, Hillhaven's staffing level is 2.5, and its staffing levels and expenses are reasonable. Hillhaven's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 30 percent, Medicaid 60 percent, and Medicare 10 percent. As updated at hearing, Hillhaven's utilization projection was as follows: private pay 44 percent, Medicaid 53 percent, and Medicare 3 percent. Currently, Hillhaven provides, on average, 53 percent Medicaid care at its facilities in Florida. Hillhaven's estimate of payor mix was reasonable and, in light of intervening changes in circumstance, was reasonable as updated. Hillhaven's patient charges for its second year of operation as originally reviewed by the Department ranged from $58.60 to $62.00 per day. As updated, Hillhaven's patient charges ranged from $52.13 to $73.50 per day. Hillhaven's estimated charges were achievable when initially proposed and as updated, and are reasonable. Hillhaven's fill-up and occupancy projections, as well as its projections of revenues and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and comport, as updated, with the current experience in Lee County. Hillhaven has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates are premised on reasonable assumptions, and Hillhaven has demonstrated the short term and long term financial feasibility of its project. Currently, Hillhaven owns or operates 15 facilities in the State of Florida. Of these 15 facilities, two have opened within the past year and are not eligible for ratings. Nine of the 13 eligible facilities are operating with superior licenses. Of the remaining four facilities, two have a standard license and two have a conditional license. The two facilities with conditional ratings have both resolved their deficiencies. Hillhaven has provided and will continue to provide quality care. It ensures that quality care will be maintained within its facilities by drawing upon the professional resources four regional offices comprised of registered nurses, quality assurance monitors, regional dietitians, maintenance supervisors, employee relations specialists, and other administrative support personnel. Regional consultants visit company facilities monthly to plan, organize and monitor operations, and to conduct in-service training workshops. Overall, Hillhaven provides each facility with an in-depth quality assurance program. Gene Lynn d/b/a Careage Southwest Healthcare Center Gene Lynn (Careage) is the president and 100 percent owner of Careage Corporation. Since 1962, Careage has developed approximately 150 nursing homes and retirement centers, as well as 100 medically related facilities, in 22 states and the Virgin Islands. Until December 1986 it did not, however, own or operate any facilities. Currently, Careage operates four nursing homes in the United States (one in the State of Washington, two in the State of California, and one in the State of Arizona) , but none in Florida. The home office of Careage is located in Bellevue, Washington. Careage proposed to develop a new 120-bed skilled and intermediate care nursing home in Lee County with specialty units for subacute and Alzheimer's care, consisting of 45,500 square feet. It would include a patient care unit consisting of 2 isolation rooms and 7 private rooms with full bath and 45 semiprivate rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semiprivate rooms with half bath, central dining area, beauty-barber shop, quiet lounge, chapel, physical therapy room, occupational therapy room, outdoor patio areas, and exam-treatment room. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Careage's proposed facility was a single-story building containing 45,500 gross square feet, with an estimated total project cost of $4,150,000. As proposed, the total project cost equates to 34,583 per bed, and as designed provides 184-227 net square feet of living space for isolation/private rooms, and 227-273 net square feet of living space or semi-private rooms. Construction equipment costs were as follows: construction costs $2,583,125; cost per square foot $56.77; construction cost per bed $21,526; equipment costs $420,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipment costs, are reasonable. The Careage facility would offer skilled and intermediate care, occupational therapy, physical therapy, recreational services and social services. Additionally, the proposal includes a special 21-bed unit dedicated solely to the treatment of Alzheimer's disease patients, and a dedicated 10-bed unit for subacute care which will accommodate technology dependent children care. Among the subacute services to be offered are hyperalimentation, IV therapy, ventilators, heparin flush, and infusion pumps for administration of fluids. Careage will offer respite care as beds are available, and will offer day care in a separate facility. Careage's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 49 percent, Medicaid 40 percent, Medicare 3 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patients charges for its facility were projected as follows: private and VA (room rate only) $63.86, Medicaid (all inclusive rate) $59.23, Medicaid (all inclusive rate) $108.15, and private (other) /subacute (room rate only) $128.75. Careage's fill-up and occupancy projections as well as its projections of revenues and expenses, for its 120-bed facility were not shown to be reasonable. First, in light of the fact that there was no quantifiable demand for a dedicated Alzheimer's unit and subacute care unit, as discussed infra at paragraphs 126-129, no reliable calculation of fill-up and occupancy rates or revenues and expenses could be derived that was, as the Careage application is, dependent on such revenue stream. Second, the Careage pro forma was predicated on average rates experienced in Lee County. Since Careage proposes heavier nursing care than that currently experienced in Lee County, its estimates of patient charges are not credible. At hearing, Careage updated its 120-bed application to account for inflationary factors that had affected the project since it was first reviewed, and to correct two staffing errors. These updates did not substantially change the project. Careage has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates were not, however, premised on reasonable assumptions, and Careage has failed to demonstrate the short term and long term financial feasibility of its 120-bed project. Following the Department's initial review of the applications in this batching cycle, it proposed to award a certificate of need to Careage for a 60- bed facility, premised on its conclusion that there was insufficient numeric need to justify an award of beds exceeding that number, notwithstanding the fact that the application of Careage was for 120 beds and did not request or propose a 60-bed facility. Notably, all financial, staffing, construction, equipment and other projections described in the Careage application were based on a 120- bed facility, and no information was provided regarding a 60- bed facility. Also notable is the fact that the other applicants were not accorded equal consideration. Not surprisingly, the proposed award of a CON for 60-beds to Careage was timely challenged, but Careage did not protest the Department's denial of its application for 120 beds but appeared as a respondent to defend the Department's decision to award it 60 beds. At hearing, Careage offered proof of the reasonableness of its 120- bed proposal over the objection of the other applicants. /5 Careage contends that its proposed 60-bed facility is a scaled down version of its 120-bed proposal Careage proposes to offer the same services in its 60-bed facility as it proposed in its 120-bed facility, including the 21-bed Alzheimer's unit and 10-bed subacute care unit. Its proposed 60- bed facility is not, however, an identifiable portion of its initial project. As proposed, the 60-bed facility would contain 26,900 gross square feet, and meet or exceed state standards. It would include a patient care unit consisting of 1 isolation room and 4 private rooms with full bath, 17 semi- private rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semi-private rooms with half-bath, together with the same amenities offered by the 120-bed facility, but on a reduced scale. As proposed, the total project cost for the 60-bed facility is $2,475,000, which equates to $41,250 per bed. As designed, the facility would provide the same net square footage of living space for private and semi-private rooms as the 120-bed facility. Construction equipment costs would be as follows: construction costs $1,431,750; cost per square foot $53.22; construction cost per bed $23,863; equipment costs $210,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipments costs, are reasonable. Careage's projected utilization by class of pay in its 60-bed facility was as follows: private pay 47 percent, Medicaid 40 percent, Medicare 5 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patient charges for its 60-bed facility were projected as follows: private and VA (room rate only) $66.00, Medicaid (all Inclusive rate) $63.50, Medicare (all inclusive rate) $120.00, private (other)/subacute (room rate only) $130.00. Careage's fill-up and occupancy projections, its projections of revenue and expenses, and its pro forma estimates for its 60-bed facility suffer the same deficiencies as those for its proposed 120-bed facility. Under the circumstances, Careage has failed to demonstrate the short term and long term financial feasibility of its 60-bed facility. While Careage has only owned and operated nursing homes for a short time, the proof demonstrates that it has and will continue to provide quality care for its residents. The Alzheimer's unit and subacute care units are reasonably designed, equipped and staffed for their intended functions. Staffing ratios in the subacute unit will be 6.0, and in the other areas of the facility 3.0. Careage currently utilizes a quality assurance program at each facility which includes a utilization review committee, safety committee, infection control committee, and pharmaceutical committee. Each facility also has a resident advisory council, community advisory council, and employee advisory council. Presently, Careage is developing a company level quality assurance program, and has initiated announced and unannounced site visits by a quality assurance expert to evaluate resident care, operations, maintenance and physical environment. The Department of Health and Rehabilitative Services The opinions expressed by the witnesses offered by the Department were premised on information available to them while these applications underwent "preliminary" review. The information available to them at that time, and represented by the State Agency Action Report (SAAR), was incomplete and inaccurate in many respects, including the services to be provided by some of the applicants and the approved bed inventory and occupancy rates utilized in the need methodology. These witnesses were not made privy to, and expressed no opinions, regarding the relative merits of the applications in light of the facts developed at hearing. Throughout the hearing, counsel for the Department objected to evidence from any applicant regarding "updates" (changes) to their applications as they were deemed complete by the Department prior to its initial review. It was the position of the Department's counsel, but otherwise unexplicated, that the only appropriate evidence of changed conditions after the date the application was deemed complete were those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation and other current circumstances external to the application. The majority of the "updated" material offered by the applicants at hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of final hearing, changes in the market place regarding nursing salaries, changes in the Medicaid and Medicare reimbursement system and typographical errors in the application. Some changes in design were offered as a result of the applicant's experience with other construction projects and in order to comply with licensing regulations. There were also some changes which resulted from better information having been secured through more current market surveys. None of the applicants attempted to change their planning horizon, the number of beds proposed, the proposed location of the facility or the services to be offered except Careage. The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)(2), Florida Administrative Code; formerly, Rule 10- 5.11(21)(b) Florida Administrative Code. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides: Need Methodology... The Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i. The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case establishes a "planning horizon" of July 1989. Pertinent to this case, subparagraphs 2a-d provide the methodology for calculating gross bed need for the district/subdistrict in the horizon year. In this case, the applicable district is District 8, and the applicable subdistrict is Lee County. The first step in the calculation of gross need for the horizon year is to derive "BA", the estimated bed rate for the population age group 65-74 in the district. This rate is defined by subparagraph 2b as follows: BA LB/ (POPC + (6 x POPD) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. The parties concur that the district licensed bed figure (LB), as well as the subdistrict licensed bed figure (LBD) is calculated based on the number of community nursing home beds as of June 1, 1986. The Department's Semi-Annual Nursing Home Census Report and Bed Need Allocation prepared for the July 1986 review cycle (July 1989 planning horizon) listed 4,193 licensed community nursing home beds in District 8 and 996 in Lee County. However, that count taken on May 1, 1986, did not include 120 new beds which were licensed in Charlotte County on May 8, 1986. The count also excluded 287 beds at four other facilities in the district, including 60 beds at Calusa Harbor in Lee County, because they were listed as sheltered beds according to Department records at that time. After passage of Section 651.118(8), Florida Statutes, the Department surveyed the facilities and found that the beds at these four facilities were operated as community beds rather than sheltered beds. Under the circumstances, the proof demonstrates that as of June 1, 1986, there were 4,600 licensed community nursing home beds in district 8 (LB) and 1,056 in Lee County (LBD). The formula mandated by the rule methodology or calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived. Some of the applicants contend that the current population" for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated or the July batching cycle, OR based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. Under this theory, January 1, 1986, as the midpoint of that period, is the appropriate date to calculate "current population" to derive PCPC and POPD. The Department contends that "current population" for POPC and POPD should be calculated as of July 1986, the filing deadline for applications in this review cycle. The Department's position is, however, contrary to its past and current practice. The need reports issued by the Department between December 1984 and December 1986, routinely used a three and one- half year spread between the base population period and the horizon date for "current population." In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one-half spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to deviate from its past and current practice. Under the circumstances, January 1, 1986, is the appropriate date on which the "current population" is to be calculated when deriving POPC and POPD. The parties are also in disagreement as to whether population estimates developed after the application deadline can used to establish the current population. Rule 10- 5.011(k)2h, Florida Administrative Code, mandates that population projections shall be based upon the official estimates and projections adopted by the Executive Office of the Governor, but does not limit such proof to any particular estimate. The Department advocates the use of population estimates existent at the application deadline. Accordingly, it would apply the official estimates and projections adopted by the Executive Office of the Governor as of July 1, 1986. Other parties would apply the more recent estimates adopted by the Office of the Governor as of July 1, 1987. In this case, the use of either estimate would have no significant effect on the result reached under the rule methodology; however, since all population estimates and projections are only approximations rather than actual counts, it would be more reasonable from a health planning perspective to use the latest estimates of the 1987 population than the estimates available at the time of application. In this case, this means using July 1, 1987, estimates of January 1986 populations. These estimates are still "current" as of January 1986, since It is still the January 1986 population that is to be measured, and more reliable from a health planning perspective than the prior projection. In the same manner, July 1, 1987, estimates of horizon year 1989 populations (PCPA and POP), infra, would also be used rather than July 1, 1986, estimates of that population. Accordingly, Forum's calculation POPC (128,871), POPD (77,194), POPA (149,645), and POPB (95,748) is appropriate. (Forum Exhibit 10, Appendix A) Application of the methodology prescribed by subparagraph 26 to the facts of this case produces the following calculation: BA 4,600/(128,871 + (6 x 77,194) BA 4,600/(128,871 + 463,164) BA 4,600/592,035 BA .0077698 The second step in the calculation of gross need for the horizon year is to derive "BB", the estimated bed rate for the population age group 75 and over in the district. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB 6 x BA BB 6 x .0077698 BB .0466188 The third step in the calculation of gross need for the horizon year is to derive "A", the district's age adjusted number of community nursing homes beds" at the horizon year. This methodology is defined by subparagraph 2a as follows: A (POPA x BA) + (POPB x BB) Where: POPA is the population age 65-74 years in the relevant department district projected three years into the future. POPR is the population age 75 years and older in the relevant departmental district projected three years into the future. Application of the methodology prescribed by subparagraph 2a to the facts of this case produces the following calculation: A (149,645 x .0077698) + (95,748 x .0466188) A 1,162.7117 + 4,422.4086 A 5,585.12 The final step in the calculation of gross need in the horizon year is to derive "SA", the preliminary subdistrict allocation of community nursing home beds;" gross need in the case. 7/ This calculation is defined by subparagraphs 2d as follows: SA A x (LBD/LB) x (OR/.90) Where: LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through June 30. The batching cycle in which these applications were filed, however, occurred before the Department amended its rule to include the fixed need pool concept contemplated by subparagraph 2d. Accordingly, the parties concur that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d of the current rule, but, rather, defined by former rule 1C--5. 11(21)(b)4 as follows: OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of applications submitted for the July batching cycle shall be based upon occupancy data for the months of October through March preceding that cycle... In calculating the occupancy rate (OR) for the licensed community nursing homes in the subdistrict (Lee County) the Department derived a figure of 91.91. The Department arrived at this figure based on the first day of the month patient census of each facility considered to have community beds (LBD=1,056), which included the 60 beds at Shell Point Nursing Pavilion; assumed that such census was maintained throughout the entire month; and then divided such patient days by the actual number of beds available. The Department's methodology is an accepted health planning technique, and comports with its previous practice. Some of the parties disagree with the technique utilized by the Department to calculate OR, and advocate the use of actual patient day occupancy to derive OR. This technique differs from the "first of the month" technique by utilizing the actual number of patient days experienced by the facility, as opposed to assuming a constant census based on first of the month data. This alternative methodology is, likewise, an accepted health planning technique, and if proper assumptions are utilized will yield a more meaningful result than the Department's methodology. In this case, the proponents of the "actual patient day occupancy" methodology, erroneously assumed that 160 beds at Shell Point Nursing Pavilion were community nursing homes beds, as opposed to 60 beds; and, based on an erroneous LBD of 1,156, derived a subdistrict occupancy rate of 92.97. Under such circumstances, these proponents calculations are not reliable, and the subdistrict occupancy rate derived by the Department is accepted. Applying the facts of this case to the methodology prescribed by subparagraph 2d produces the following gross need calculation for the subdistrict: 5A 5,585.12 x (1,056/4,600) x (.9191/.9) SA 5,585.12 x .2295652 x 1.0212222 SA 1309.36 The final step in the numeric need methodology is to derive net need from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant department subdistrict from the bed allocation determined under subparagraphs 2.a. through f. unless the subdistrict's average occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987, in subsequent nursing home batching cycles, the number of licensed and approved beds to be used in establishing net need for a particular batching cycle shall be determined as of the agency's initial decision for the immediately preceding nursing home batching cycle. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" In the subdistrict from the cross need previously calculated, it is silent as to the date that inventory should be calculated when, as here, the batching cycle at issue predates its enactment. In the face of this dilemma, the parties rely on the provisions of former rule 10-5.11(21)(b) , Florida Administrative Code, which was existent when their applications were filed to resolve their dispute. Under the circumstances, reference to former rule 10-5.11(21)(b), is appropriate. Former rule 10-5.11(21)(b)9 provides: The net bed allocation for a subdistrict, which is the number of beds available, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subaragraphs 1 through 9 (sic 8).... (Emphasis added) While the former rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need calculated under subparagraphs (b)1-8, it is silent as to the date that inventory should be calculated. The Department asserts that the number of licensed beds should be calculated as of June 1, 1986 (the date established by subparagraph (b)7 of the former rule as the data base for calculating LB and LBD, and the number of approved beds as of December 18, 1986 (the date the Department's supervisory consultant signed the state agency action report). The other parties would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no reasonable evidentiary basis for its interpretation of the date at which the total number of licensed and approved beds are to be calculated under subparagraph (b)9 of the former rule. As discussed below, the dates used by the Department and the other parties for purposes of calculating net need were facially unreasonable. The Inventory of licensed and approved beds under subparagraph (b)9 of the former rule, as well as subparagraph 2i of the current rule, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's interpretation of the dates at which licensed and approved beds are to be counted is neither logical nor rational, since it could result in some beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed on June 1, 1986, but licensed before the consultant supervisor signed the SAAR (state agency action report), they would not be counted in either inventory. On the other hand, the other parties' approach would ignore all beds licensed or approved from previous batching cycles after June 1, 1986 which beds were intended to serve at least a portion of the future population. The fundamental flaw in the parties' approach to establishing an inventory date under subparagraph (b)9, was the assumption that subparagraph (b)7 of the former rule defined licensed bed inventory for purposes of subparagraph (b)9. The Department's rule must be construed in its entirety, and all parts of the rule must be construed so as to work harmoniously with its other parts. So construed, the only logical conclusion to be drawn, as hereinafter demonstrated, is that subparagraph (b)7 defines LB and LBD ("current" licensed beds) for the cross need calculation under the methodology defined by subparagraphs (b)1-4, and does not presume to define licensed beds for the net need calculation under subparagraph (b)9. Subparagraphs (b)1-4 and 7 of the numeric need methodology prescribed by the former rule is designed to yield a gross bed need for the horizon year. The keys to this methodology are the calculation of a current bed rate (BA) and current occupancy rate (OR) for the current using population, and the projection of those rates on the population to be served in the horizon year. A meaningful calculation of the current bed rate cannot, however, be derived without a current inventory of licensed beds (LB and LBD). Accordingly, the relationship between subparagraph (b)7, which defines the data base (June 1, 1986 in this case) for defining LB and LBD (the "current" licensed bed inventory) to the gross bed need calculation is apparent. The parties' suggestion that subparagraph (b)7 defines licensed bed inventory under subparagraph (b)9 not only ignores the inextricable link between subparagraph (b)7 and the gross bed need methodology, but also the language and purpose of subparagraph (b)9. The purpose of that subparagraph is to derive a realistic estimate of actual (net) bed need in the horizon year. Since all licensed and approved beds from previous batching cycles were intended to serve at least a portion of the horizon population, it would be illogical to ignore any of those beds when calculating net need. Accordingly, it would be unreasonable in this case not to count any beds that were licensed or approved from previous batching cycles between June 1, 1986, and the date a decision is rendered on these applications. Indeed, subparagraph (b)9 speaks to "the total number" of licensed and approved beds, not beds existent on June 1, 1986. In sum, subparagraph (b)7 cannot be read to define licensed bed inventory under subparagraph (b)9, and the parties' suggestion that it can is rejected as contrary to the clear language of the rule methodology. See: Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986). Since the purpose of subparagraph (b)9 is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures to the greatest extent possible that the horizon population will not be over or undeserved. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated reducing the gross need calculation by the inventory of licensed and approved beds from previous batching cycles existent on that date. As of the date of administrative hearing there were 1,056 licensed beds and 120 approved beds in the subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a net need of 145 community nursing home beds for the July 1989 planning horizon. Special Circumstances. The Department will not normally approve an application for new or additional nursing home beds in any service district in excess of the number calculated by the aforesaid methodology. Rule 10-5.011(1)(k), Florida Administrative Code. Succinctly, the need for nursing home services, whether they be general or special, is a product of the rule methodology, and not relevant to a calculation of need absent a demonstration of special circumstances. The Department has adopted by rule the methodology to be utilized in demonstrating special circumstances that would warrant a consideration of factors other than the numeric need methodology in deciding the need for nursing home services. That rule, 10-5.011(1)(k)2; Florida Administrative Code, provides: In the event that the net bed allocation is zero the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained at Section 10-5.011. Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under the provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special 505 home health services, adult day health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders, assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. In the instant case, some of the applicants have proposed special services, including an Alzheimer's unit, subacute care unit, and beds for technology dependent children. They offered, however, no proof that any person with a documented need for such services had been denied access to available beds that the number of persons with a documented need exceeded the number of available beds. Succinctly, there is no credible proof that the need for nursing home services in Lee County exceeds that calculated pursuant to the numeric need methodology. While there are no special circumstances existent in this case that would justify an award of beds in excess of that calculated by the rule methodology, that does not mean that consideration of the Alzheimer's, subacute and technology dependent children services offered by some of the applicants is not relevant to the comparative review of the subject applications. Rather, it means that the need for such services will presumptively be met within the need calculated by the rule methodology. How the applicants propose to address that need is, however, a matter for consideration in a comparative review of their applications. Each of the applicants propose to provide subacute care, with Careage proposing a special 10-bed subacute care unit which would accommodate technology dependent children. HCR and Careage propose special Alzheimer's care units; a 15-bed unit by HCR and a 21-bed unit by Careage. Hillhaven will admit Alzheimer's disease patients as presented, and will develop a dedicated Alzheimer's unit if demand should subsequently develop. The prevalence of Alzheimer's disease and the increased demand for subacute services brought about by DRGs, demonstrates that there will be a demand for such services within existing and proposed facilities. There was, however, no persuasive proof of any demand for technology dependent services in Lee County. While there is a demand for Alzheimer's disease care, and the preferred mode of care is in a separate unit specifically designed, staffed, and equipped to deal with this degenerative disease, there was no persuasive proof that the demand is such as to warrant the creation of a separate unit such as proposed by HCR and Careage. 10/ Absent such quantifiable demand, the application of Hillhaven more realistically addresses the need for Alzheimer's disease patients than does that of the other applicants. With regard to subacute care services, the proof likewise fails to quantify the demand for such services. Under such circumstances, Careage's proposed 10-bed subacute care unit is not objectively warranted, and does not serve to better its proposal to provide such services over the proposals of the other applicants. Consistency with district plan and state plan The District 8 health plan contains the following pertinent standards and criteria: Community nursing home services should be available to the residents of each county, 4 within District Eight. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: a. pharmacy h. occupational therapy b. laboratory i. physical therapy c. x-ray j. speech therapy c. dental care k. mental health counseling e. visual care l. social services f. hearing care m. medial services g. diet therapy New and existing community nursing bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. No new community nursing home facility should be constructed having less than 60 beds... Each nursing facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same county. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs. ... The State Health Plan contains the following pertinent goals: GOAL 1: TO DEVELOP AN ADEQUATE SUPPLY OF LONG TERM CARE SERVICES THROUGHOUT FLORIDA. GOAL 2: TO ENSURE THAT APPROPRIATE LONG TERM, CARE SERVICES ARE ACCESSIBLE TO ALL RESIDENTS OF FLORIDA. Each of the applicants demonstrated that their proposal would conform, at least minimally, with the foregoing provisions of the state and local health plans. Of particular significance to Lee County is, however, an applicant's commitment to Medicaid service. The District 8 Council has reported that hospitals in Lee County are having difficulty placing Medicaid patients in nursing homes due to the unavailability of Medicaid beds. The current Medicaid experience is 46 percent. Therefore, the local council has directed that new and existing community nursing home developments should dedicate at least 33-1/3 percent of their beds for Medicaid patients. While all applicants propose to meet this standard, Hillhaven's proposal to dedicate 53 percent of its beds to Medicaid care is substantially greater than the commitment of the other applicants, and is consistent with its current experience in meeting a community's need for nursing home care. Availability, appropriateness, and extent of utilization of existing health care services Section 381.705(1)(b), Florida Statutes, requires Consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district. When the subject applications were filed, there were 1,056 licensed beds in Lee County with an occupancy rate of 91.91 percent. The nursing home bed supply in Lee County is obviously strained, and there exist no reasonable alternatives to the addition of new beds to the subdistrict. To coordinate with existing health facilities, each applicant proposes to establish appropriate transfer agreements and affiliations with local physicians, hospitals, and other health care providers. While some of the applicants have proposed an Alzheimer's unit and subacute care unit, the proof failed to demonstrate any quantitative need for such units in the subdistrict. Some applicants also proposed to provide day care in conjunction with their nursing home. Currently, there exists adequate day care in Lee County at little or no expense to the patient, and there was no persuasive proof of a need for additional day care services. Economies derived from joint health care resources HCR and Hillhaven each proposed 120-bed facilities which would provide for a more efficient and economical operation than a 60-bed facility. The 60-bed facilities proposed by Forum and Health Quest are, however, part of a larger complex which likewise lends itself to an efficient and economical operation. HCR, Hillhaven, Forum and Health Quest are major operators of nursing home facilities, and are thereby able to negotiate and obtain bulk prices for food, medical and nursing supplies. These savings are ultimately passed on to the residents. Additionally, by drawing upon a broad spectrum of expertise existent within their corporate networks, these applicants are best able to maintain and improve the services they offer. The criteria on balance In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. As between the competing applicants, consideration of those criteria demonstrates that Hillhaven is the superior applicant whether it is evaluated on its application as initially reviewed by the Department or as updated at hearing. Among other things, the Hillhaven facility is spacious with large and well appointed patient rooms, its project costs are most reasonable (whether type 5 or type 4 construction), its programmatic proposal and staffing levels are most reasonable in light of existing demand, its provision for Medicaid services is the highest, and its patient charges are the lowest.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered granting Hillhaven's application for a certificate of need to construct a new 20-bed community nursing home in Lee County, and denying the applications of HCR, Forum, Health Quest and Careage. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of November, 1988. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of November, 1987.
The Issue The parties have stipulated that Petitioner is a "prevailing small business party" as defined in Section 57.111, F.S., and that the attorney fees requested are reasonable, up to the $15,000.00 statutory limit. The issue remaining for resolution is whether the expungement proceeding had a "reasonable basis in law and fact at the time it was initiated by [the] state agency", as provided in Section 57.111, F.S.
Findings Of Fact The following findings are adduced from the record, consisting of the transcript and exhibits in cases number 89-4151C/89-6087C, from the stipulations of the parties, and from the final order of the agency adopting the recommended order of Hearing Officer, K.N. Ayers, dated March 20, 1990. Petitioners are sole proprietors of Forest Haven, an unincorporated adult congregate living facility (ACLF) licensed by the State of Florida pursuant to Chapter 400, Part II, F.S., and located at 8207 Forest City Road, Orlando, Florida. Petitioners and Forest Haven have their principal office in Orlando, Florida and are domiciled in Orlando, Florida. They have less than 25 full-time employees and a net worth of less than $2 million. On March 17, 1989, a Department of Health and Rehabilitative Services (HRS) survey team visited Forest Haven to conduct an annual survey of the facility. The survey team was comprised of 10 persons, enlarged due to a training exercise. Several of the team members were registered nurses; several members were Office of Licensure and Certification supervisors. During the course of the visit and observations of the residents, members of the team determined that eight residents required a higher level of care than could be provided at the ACLF. As found in the recommended order adopted by the agency, the basis for this determination was, As to T.M., age 81, the need for a restraining vest, and the existence of bruises and gashes on the face and head; As to H.L., age 89, the presence of a foley catheter, total disorientation, low weight and poor skin turgor (brittle skin); As to F.W., age 72, the presence of a foley catheter, observation of fresh blood in the catheter bag, and low body weight; As to M.B., age 81, incontinence and nonambulatory status; As to R.T., age 84, a foley catheter and contraction of both legs; As to L.O., age 94, edema of lower extremities, contracture of both knees, low body weight, skin tear on left buttocks, and possible bed sore on right buttocks; As to P.B., age 88, incontinence, low body weight, and inability to transfer from wheelchair to bed without assistance; and As to F.H., age 89, one-half inch bed sore on coccyx, pitting edema of legs, incontinence and somewhat confused state. An adult protective services investigator was summoned, as well as law enforcement personnel, and the above residents were removed from the facility on an emergency basis and were placed in a nursing home. They were evaluated at the nursing home the following day by Carolyn Lyons, a Registered Nurse Specialist with HRS, who found that intermediate or skilled nursing home services were required. A ninth resident, C.K., was evaluated by a medical review team nurse and an adult protective services worker at the ACLF on March 20, 1989, and was removed from the facility and placed in a nursing home the same day. C.K., age 89, was found to be confused, incontinent, with bruises, a swollen foot, non- ambulatory, and with a red rash on the trunk of her body. HRS obtained orders from the Circuit Court to provide protective services for seven of the above-mentioned residents. Of the remaining two, one was competent to consent to the nursing home placement and another was returned to his own home by relatives. On March 22, 1989, HRS Protective Services worker, Annette Hair, classified the report in her investigation as "confirmed" medical neglect by S.G. and J.G. of the eight residents who had been removed from the ACLF. She relied on her own observations of the individuals, on the medical assessments performed by the survey team nurses at the ACLF, and the subsequent assessment of Carolyn Lyons, the HRS staff person responsible for making an evaluation of the level of care required for medicaid nursing home placement. The narrative "investigative conclusion" of Ms. Hair's report provides, in pertinent part: * * * Based on the facts obtained during the course of this investigation this case is being classified as CONFIRMED. In accordance with F.S. Section 415.102(4) it is clearly estab- lished that [S. and J.G.] were the caregivers of the eight alleged victims of this report as they had been entrusted with the care of said individuals. The allegation of neglect is verified for each of the eight alleged victims in that [S. and J.G.] failed to provide the care and service necessary to maintain the physical and mental health of an aged person that a prudent person would deem essential for the well-being of an aged person (F.S. Section 415.102(13)). Specifically each of the eight alleged victims has a medical condition which required twenty-four hour skilled nursing care and supervision which the caregivers, [S. and J.G.] failed to provide for said individuals. Five of the eight alleged victims, [H.L., L.O., T.M., F.H. and P.B.] had Scabies (a highly contagious disease caused by parasitic mites that burrow under the skin. This disease is associated with unsanitary conditions and causes a painful itch). [S. and J.G.] failed to provide the supervision necessary to detect this disease and in so doing jeopardized the health and well-being of the other residents in the facility. [H.L.] in addition to having Scabies, was semi-comatose, had bed sores on her buttocks and pelvic area and had a foley catheter. [T.M.] had open lacerations on her face, was extremely mentally confused and was known to wander and fall which required her to be physically restrained. [L.O.] had two open skin areas and Edema. [M.B.] has an excoriated area on her buttocks, Edema of the feet, and her right knee was swollen. [R.T.] had a cough of unknown origin, contraction of both legs, and an in-dwelling catheter. [F.W.] had an in-dwelling catheter which was draining bloody urine and appeared malnourished. [P.B.] appeared malnourished and was incontinent of both bowels and bladder, was extremely confused, and had an open draining wound. [F.H.] had bed sores, and Pitting Edema in addition to Scabies. [S. and J.G.], in addition to being negligent for failing to provide the care and services necessary to maintain the physical and mental health of the alleged victims, were in direct violation of F.S. Section 400.426(1) as they did not perform their responsibility of determining the appropriateness of residence of said individuals in their facility. (Petitioner's exhibit 2, in cases number 89-4151C/89-6087C) On April 4, 1989, HRS Protective Services worker, Kathleen C. Schirhman, classified the report in her investigation as "confirmed" medical neglect by S.G. and J.G. She relied on her own assessment of the resident, and on the medical assessments by Nurse Lyons, and by medical staff at the receiving nursing home, including a physician, Dr. Parsons. The narrative "investigative conclusion" of Ms. Schirhman's report provides: Based upon the facts obtained during the course of this investigation, both alle- gations of medical neglect and other neglect were determined to be verified, and the case is being classified as CONFIRMED. [J.G. and S.G.] assumed the responsibility of care for [C.K.] and, therefore, became her caregivers. They did not provide the care and services necessary to maintain the physical and mental health of [C.K.] that a prudent person would deem essential for her well-being. She required medical services and nursing supervision in a skilled nursing facility. Pursuant to F.S. 400.426 "the owner or Admini- strator of a facility is responsible for determining the appropriateness of admission of an individual to the facility and for deter- mining the continued appropriateness of resi- dence of an individual in the facility." The assessment by the CARES nurse determined that [C.K.] was being medically neglected, because she required 24 hour nursing care, which she was not receiving. She had Scabies, for which she was not being treated. The CARES nurse believed that the alleged victim was at risk and requiring immediate nursing home placement. Allegation of "other neglect" was added to the original report. [C.K.] was being neglected, because she was a total transfer patient, who required restraints, which were not used and cannot be used in an ACLF. Furthermore, the potential for harm to her was great: She was blind, confused, and unable to self-preserve. (Petitioner's exhibit number 1 in cases number 89-4151C/89-6087C) S.G. and J.G. requested expungement of the reports but the request was denied on July 10, 1989. Thereafter, through counsel, they made a timely request for a formal evidentiary hearing. The hearing was conducted on February 14 and 15, 1990, by DOAH Hearing Officer, K.N. Ayers. Depositions of David J. Parsons, M.D. and Gideon Lewis, M.D. were filed after the hearing, by leave of the Hearing Officer. In his recommended order issued on March 20, 1990, Hearing Officer Ayers found that the HRS investigators did not contact the physicians who had signed the admissions forms when each of the residents at issue had been admitted to the ACLF. Nor did the HRS staff obtain records from the home health agency which, at the treating physicians' direction, was providing, or had provided, home health care to most of the residents at Forest Haven. Skin lesions (decubitus) and scabies were found to be frequently present in nursing home and ACLF residents. Edema and underweight conditions are also common in these residents. Dr. Lewis, the treating physician for most of the residents at Forest Haven, had ordered the vest restraint for T.M.'s protection. He had also written to HRS about a year prior to the survey, recommending that efforts be made to relocate H.L. to a skilled nursing facility. The recommended order found that no evidence of exploitation or neglect, other than medical neglect, was presented at the hearing. The order also found that evidence of medical neglect by S.G. and J.G. was not presented, but rather, "[t]o the contrary, the evidence was unrebutted that Respondents [Petitioners in this proceeding] promptly reported to the resident's physician all changes in the resident's physical condition." The agency's final order was filed on May 29, 1990, adopting the findings of fact and conclusions of law recommended by Hearing Officer Ayers, and granting J.G. and S.G.'s requests for expungement. The Final Order addressed the department's exceptions to the recommended order, as follows: RULING ON EXCEPTIONS FILED BY THE DEPARTMENT The dispositive issue is whether retention of a resident (or residents) in an ACLF whose medical condition is more serious than the established criteria for residence in an ACLF (see Section 10A-5.0181, Florida Administra- tive Code for the criteria) constitutes per se neglect under Chapter 415. Inappropriate retention of a resident may constitute grounds for disciplinary sanctions under the licensure rules, but it does not automatically consti- tute abuse under Chapter 415. See State vs. E. N. G., Case Number 89-3306C (HRS 2/13/90). The evidence of medical neglect was based on the inappropriate retention of certain resi- dents. The Hearing Officer's finding that these residents were not medically neglected is based on competent, substantial evidence; therefore, the department is obligated to accept this finding. Johnson vs. Department of Professional Regulation, 456 So2d 939 (Fla. 1st DCA 1981), B. B. vs. Department of Health and Rehabilitative Services, 542 So2d 1362 (Fla. 3rd DCA 1989). In pursuing expungement, Petitioners incurred fees, costs and interest in the total amount of $22,772.49. The amount of interest included in that total is $1,000.91. As stipulated, the fees, up to the $15,000.00 statutory maximum, are reasonable.
Findings Of Fact Each applicant in this proceeding submitted its application in the January, 1986 batching cycle for the January, 1989 planning horizon, each requesting a certificate of need to build a 120-bed nursing home in Brevard County, Florida. The parties have stipulated that each applicant's letter of intent and application was timely filed, that there is a need in the January, 1989 planning horizon for additional community nursing home beds, and that 120 of those beds should be awarded to one of these applicants. They further stipulated that there are sufficient professional staff available in the Brevard County area to completely staff a new nursing home facility and that each of the applicants is able to obtain the funds necessary to construct its project. Maple Leaf of Brevard County Health Care, Inc., a new corporation to be formed as a wholly-owned subsidiary of HCR proposes a 120-bed community nursing home to be located in central Brevard County in the area of Rockledge and Cocoa. In addition to traditional skilled and intermediate care, the nursing home will provide services for sub-acute patients, and a separate wing of the nursing home will be set aside for Alzheimers and related dementia disease patients (hereinafter "Alzheimers patients"). The HCR proposal includes an adult day- care unit for Alzheimers patients and respite care on a bed- availability basis. At final hearing, HCR submitted an application supplement which provided updated calculations, projections and program descriptions to account for changes occurring as a result of the elapse of time between submission of the original application and the final hearing. The application supplement does not include any programmatic changes from the original application and does not add any new concepts or elements to the original HCR proposal. The adult day-care unit will provide care to Alzheimers patients for four to eight hours a day and from one to five days a week, depending upon the needs of the patient and caregiver. The program will be staffed by a nurse director and an assistant. Patients will be provided with various activities of daily living in an environment developed for Alzheimers disease victims. This program provides placement for the patient who does not need inpatient care but whose caregiver needs rest or an opportunity to attend to matters outside of the home, such as employment. Respite care at the HCR facility is intended to provide placement for patients on a 24-hour basis while the family or caregiver attends to needs such as vacation or hospitalization incompatible with overnight care of the patient at home. Respite care provides inpatient nursing home care for short periods of time, typically a week or two. Sub-acute care is a more intensive form of skilled nursing care than typically has been provided in nursing homes. Historically, this care was provided in hospitals, but adoption of the DRG (diagnostically related group) system of acute care reimbursement has resulted in an earlier discharge from hospitals of elderly patients who continue to need an intense level of nursing care. Sub-acute care includes the provision of high-tech services such as ventilator care IV therapy, pulmonary aids, tube feeding, hyperalimentation and short- and long-term rehabilitation. HCR provides a wide variety of these sub- acute care services in its existing facilities. Hospitals in Brevard County report difficulty in placing patients who require sub-acute care and high-tech services. Particularly difficult to place are these patients whose care is reimbursed by Medicaid. The availability of sub-acute care also provides continuity of care for bedridden Alzheimers patients in the later stages of the disease when they require life support systems. HCR proposes to devote a 29-bed wing of the facility to the care of Alzheimers patients. Special design features, patient activities and programs and modified staffing will be provided to meet the special needs of Alzheimers patients. Alzheimers disease, a form of dementia, is a degenerative condition of the brain which results in a progressive dementia and loss of Previously- acquired intellectual functions and memory. Generally, the disease has three or four stages. In the earliest stages, the victims experience some mild memory loss, behavioral changes, loss of interest in previous hobbies, depression, anxiety and increased difficulty handling some routine day-to-day affairs. In the early stages, victims often are in reasonably good physical condition and symptoms tend to be fairly subtle. In stage two memory loss is much more apparent, and victims begin to have problems with the use of language. They may have increased difficulty with spatial relationships and become lost in familiar surroundings. These victims experience more noticeable problems with their memory in terms with dealing with their family and friends; as the disease progresses to stage three, those problems tend to worsen and become apparent even to people who are not otherwise familiar with the patient. The victims may have additional behavioral or psychiatric difficulties associated with depression or severe anxiety. A delusional stage is frequent. These victims experience disruption of their sleeping cycles and sleep during the day and wander during the night. Seizures may become a problem. In stage three, the victims usually require supervision. As the disease progresses through stage three, the victims have difficulty with personal hygiene, difficulty getting dressed and difficulty performing the simplest human task. As the disease progresses into stage four the victim becomes bedridden and requires total nursing care. There is no cure for the disease. It is terminal. Nursing home care is probably appropriate for everyone in stage four of Alzheimers disease. Most patients in stage three require nursing home care. Some patients in stage two may require nursing home care, depending upon the type of care that is available at home. According to some estimations, approximately 2.5 million American adults suffer from Alzheimers disease and approximately one-half of existing nursing home patients, and 15 percent of the population age 75 and over suffer from Alzheimers disease (4 - 5 percent 65 and over, 20 - 30 percent 85 and older). There are eleven nursing homes in Brevard County, but there is only one nursing home in Brevard County which provides a separate unit for Alzheimers patients. This facility is located in West Melbourne in south Brevard County. There is no nursing home which provides a separate Alzheimers program in central or north Brevard County. Historically, Alzheimers patients in nursing homes have been mixed with other patients. The Alzheimers patient in the nursing home has often created management problems because of wandering, incontinence, confusion, loss of cognitive and communicative capabilities, unusual sensitivity to normal environmental stress, and socially, unacceptable behavior. Because of these characteristics, nursing homes have sometimes avoided admitting Alzheimers patients. Often, when such patients were admitted, their behavior was controlled by sedation and physical restraints. Nursing home patients who do not suffer from Alzheimers disease are often agitated and disrupted by the Alzheimers patient. The Alzheimers patient exhibits such unacceptable social behavior as going through other patients' belongings, sleeping in other patients' beds, violent behavior, being unresponsive to attempted communications and continually wandering. A separate unit for the Alzheimers disease victim also accommodates the needs of the non- Alzheimers patient. It is medically appropriate to separate Alzheimers patients from other nursing home patients. Frequently, the Alzheimers patient is suffering from mental problems resulting in confusion and disorientation but is otherwise physically healthy and ambulatory. Other patients in the nursing home often have a variety of medical problems which require more intensive nursing care. Placing Alzheimers patients in the same area with those patients with medical problems requiring more nursing care can be disruptive to the nursing care being provided to the non- Alzheimers patient, The design of the HCR facility is intended to reduce the environmental stress on Alzheimers disease victims and allow them to maintain their cognitive capabilities for as long as possible. Special wall coverings, floor coverings, labeling and color coding features are provided. Separate dining and activities areas are provided. Wandering is permitted. A fenced courtyard is provided. A monitoring system will alert the facility staff when a patient begins to wander out of the facility. Bathrooms are designed to avoid fright and confusion by automatic lighting systems, coloring and distinctly shaped fixtures and waste baskets. Safe dinnerware and tables which enhance the Alzheimers victim's ability to continue to feed himself or herself are provided. Additional staffing in the Alzheimers unit and staff training in Alzheimers care will be provided. The goal of the Alzheimers design and program is to maintain the patient's activities of daily living and assist in the retention of the patient's cognitive capabilities for as long as possible. Separate, specialized Alzheimers care units are beneficial for several reasons. They are safer for the Alzheimers patient. They reduce the agitation and disruption of the Alzheimer's and non-Alzheimer's patient. They provide programs for Alzheimers patients which are within the patient's cognitive abilities. The units are smaller, and each patient receives more individual attention. Sedation and physical restraint is eliminated or reduced. Individual dignity is enhanced. HCR confirmed the need for an Alzheimers program in Brevard County by calculations based upon nationally-accepted statistics and contact in Brevard County with individuals knowledgeable of the availability of care being provided to Alzheimers disease patients. Special units for Alzheimers patients are a fairly new phenomenon. HCR proposes to develop Alzheimers units in other nursing homes in Florida and has submitted applications to add Alzheimers wings to existing nursing homes in Florida. HCR also proposes to convert a wing in an existing facility in Dade County to provide care for Alzheimers patients. HCR will locate its nursing home in the Rockledge- Cocoa area, about thirty miles north of Melbourne and thirty miles south of Titusville, in central Brevard County. All 120 nursing home beds in the HCR nursing home will be certified for Medicaid reimbursement. New equipment for the HCR nursing home is projected to cost $412,079. This represents an increase in cost over the original estimate of $370,000 because of a general increase in equipment cost since the original application and an allocation of approximately $13,800 for equipment for the daycare unit, a cost which was not included in the original estimate. HCR's estimate for purchase of new equipment is reasonable. Projections of payor-mix, facility utilization and revenue and expenses of a nursing home are useful to evaluate the financial feasibility of the project. All projections utilized by HCR to evaluate financial feasibility are conservative projections. The updated projections presented by HCR at final hearing are more conservative than the projections presented in HCR's original application. If the projections found in HCR's original application were realized, the facility simply would be more profitable. HCR's estimate of an 11 percent interest rate for the funds to be borrowed for this project is a reasonable and conservative estimate. HCR's estimate of 50 percent intermediate care patients and 50 percent skilled care patients is a reasonable estimate for the patients expected to be found in this facility and is a conservative estimate. No other applicant provided such an estimate. In computing revenues and expenses, HCR assumed an inflation factor of 3 percent for Medicare and Medicaid revenues, 5 percent for other revenues and 5 percent for expenses. These inflation factors are reasonable. HCR's projections of 22 percent in year one and 25 percent in year two for payroll taxes and fringe benefits are reasonable and consistent with HCR's actual experience. HCR utilized reasonable and appropriate depreciation periods of 40 years for the building and 10 years for equipment. These are the depreciation periods used by HCR in its regular course of business. The patient charges projected by HCR, including Medicaid, Medicare and private room rates and ancillary charges, are reasonable projections. HCR projected that private pay room charges at the nursing home would be $75 for a semi-private room and $85 for a private room in July, 1989. These updated projections are consistent with existing (1987) private pay rates in Brevard County, which range from $59 for a semi-private room to $90 for a private room. The HCR rates, inflated forward to 1989, are reasonable and consistent with the existing private pay charges in Brevard County. Private pay room rates charged at nursing homes tend to reflect the market for private pay rates in the vicinity of the nursing home. HCR's updated projection of payor-mix is consistent with the actual experience in central Brevard County and an open admissions policy for Medicaid patients. HCR projects that the facility will reach 95 percent occupancy within 12 months of operation. This projection is based upon HCR's experience subsequent to filing the original application. This projection is reasonable and more conservative than those of the other applicants. HCR anticipates a loss in the first year of operation of $293,885, but a profit in the second year of Operation of $241,084. These projections reveal that the project proposed by HCR is financially feasible, and these projections are reasonable. Staffing of the HCR nursing home is comprised of an administrator, a director of nursing, an assistant director of nursing, an Alzheimers program director, 8.4 FTE (full time equivalent) registered nurses, 6.3 FTE licensed practical nurses, 39.9 FTE nurse-aides, 1 full time occupational therapy aide, 1 full time recreational therapy aide, a social worker, an activities director, 10 FTE dietary personnel, 3 FTE laundry personnel, 8 FTE housekeeping personnel, a maintenance person, 2 clerical workers, and 1 medical records worker. Physical therapy, occupational therapy, recreational therapy, and speech therapy will be provided by licensed therapists on a contract basis. The updated staffing pattern represents minor changes from the staffing pattern in the original application. These changes are a direct result of HCR's experience in operating an Alzheimers wing within a nursing home. HCR's staffing level for staff who provide direct patient care (RNs, LPNs and Aides) exceeds that of Wuesthoff and Unicare. Staff levels in the HCR nursing home are designed to meet the special needs of the Alzheimers patients. An Alzheimers program director will be responsible for the Alzheimers wing and will be an advisor for the day-care facility. HCR's staffing pattern assumes 15 wandering Alzheimers patients in the Alzheimers wing. Care for Alzheimers patients requires increased staffing. Higher nurse-aides staffing is required in the Alzheimers wing during the evening and night hours than in the remainder of the nursing home because Alzheimers patients tend to wander without regard to the time of day. HCR estimates construction costs to be $2,200,000, not including site preparation, which is estimated to cost $275,000. Construction costs per square foot are estimated at $55 and $61.87 when site preparation is included. The estimates of construction cost and construction cost per square foot include an allocation of 2,000 square feet and $110,000 for the day-care unit. The cost per square foot projected in the updated application differs from that projected in the original application because the original application included site preparation, assumed a facility size of 36,000 square feet and was not changed when the original design was changed to add day- care in the original application supplement. The actual size is approximately 40,000 gross square feet. The original HCR application submitted a blueprint which is somewhat different in shape from that which HCR currently intends to build. When HCR added day-care in its Original application supplement, a change in the shape of the building was required and a new design was submitted, but cost estimates were not changed. The design which HCR will use for this facility is similar to the design being used in four ongoing HCR projects in Florida, and which, therefore, meets HRS' requirements. The design relied upon by HCR at final hearing is not substantially different from the design presented to HRS in the original application supplement. HCR's estimates of construction cost, construction cost per square foot, construction cost per bed, equipment cost per bed and total project costs are reasonable and adequate to accomplish the construction of the proposed facility. HCR's updated construction cost estimates are based upon its construction experience in Florida, its experience in having built the design proposed and its discussions with contractors and subcontractors on the east coast of Florida. HCR is currently building two facilities on the east coast of Florida. HCR does not anticipate any cost overruns on any of the facilities currently under construction. All HCR facilities under construction are being constructed within the certificate of need budgets for those facilities. HCR estimates project development costs, including feasibility studies, surveys, legal and accounting fees, planning and HRS's plan review, to be $55,000, which represents an increase over the estimate in the original application due to the passage of time. HCR estimates professional services required for the construction of the facility to cost $90,000. These services include architectural and engineering fees and a site survey and soil investigation report. These costs are approximate1y $5,000 less than the original estimate. This reduction in cost is a direct result of HCR's new staff of civil engineers. Previously, HCR had contracted for site survey work with outside engineers. Thus, while architectural and engineering fees increase, the costs for site surveys and soil investigation reports decrease. The HCR nursing home will be located on approximately 5 acres. HCR estimates land cost for the facility to be approximately $500,000. This - represents an increase over the original land cost estimate because HCR intends to acquire a site which requires less site preparation, located near a hospital. The HCR estimates for land cost are reasonable and consistent with other applicants' estimates. Site preparation costs are estimated at $275,000, a reduction from the original site preparation cost estimate of $315,000. This change is accounted for by HCR's intention to acquire a more costly site which will require less site preparation. HCR intends to build and operate the nursing home proposed for Brevard County and is willing to accept a condition to that effect on any certificate of need issued. HCR estimates a project completion schedule which will result in its nursing home being occupied and in use in July, 1989, and this project completion forecast is a reasonable forecast. HCR has taken steps to ensure that failure to initiate construction within statutory requirements will not occur. HCR has undertaken numerous nursing home projects since 1983 and has successfully constructed or initiated construction on all of those projects. At this time HCR has approximately six projects under construction, four projects have been completed, and one project is under construction for a third party. The design of the HCR facility incorporates numerous energy conservation measures and efficiencies. The HCR facility will comply with all energy code requirements. HCR owns and operates seven nursing homes in Florida. Three of these facilities have superior licenses, and the remaining facilities have standard licenses. HCR nursing homes adhere to extensive quality assurance standards and guidelines. These standards and guidelines regulate such areas as patients' rights, staff development and orientation, physician and nurses services, pharmacy services and medication administration, social services, patient activities, infection control, patient care planning, safety and the physical environmental, menus, diets, nutritional care and scheduling and staffing of dietary personnel, personal appearance and hygiene for dietary personnel, and food storage, preparation and sanitation. These standards and guidelines will be applicable to this proposed project. The standards and guidelines cover all areas of operations and patient care and incorporate survey tools used by the state of Florida and the Health Care and Finance Administration of the federal government for their annual licensure surveys. Additionally, administrators of HCR facilities have a financial incentive to optimize the performance and the quality of care of their facilities. HCR estimates that approximately 60 percent of the patient days in the facility (53 percent of the revenue) will result from Medicaid patients. This estimate is consistent with the experience in the Rockledge-Cocoa area, where one facility has a very low percentage of Medicaid patients and the remaining facilities have very high Medicaid populations (over 60 percent). HCR's estimate also takes into account HCR's recent experience in staffing a facility which includes an Alzheimers wing. HCR will not restrict the number of Medicaid patients in the Alzheimers wing or the remainder of the home. HCR's original application assumed approximately 45 percent of the patient days (42 percent of the revenues) would be accounted for by Medicaid patients. This assumption was based upon HCR's assumption at that time that, in order to cover the assumed high cost of additional staffing in the Alzheimers wing, a greater percentage of private patients (at a higher daily charge) would be required. Subsequent to submission of the original application, HCR has gained actual experience which has demonstrated that the level of staffing proposed by the original application is not necessary and that the cost of staffing can be reduced. The result is that HCR can reduce its reliance on the additional revenue generated by the private paying patient. HCR's design for its Brevard County Alzheimers unit is based upon a state-of-the-art Alzheimers wing at its facility in Perrysburg, Ohio, and HCR's experience gained there. In addition, HCR operates two other facilities which have separate units for Alzheimers patients. The HCR application is consistent with both state and local health plans. HCR projects a charge for Medicaid patients to be $60.93 and, for Medicare patients to be $76 in July, 1989. The increase in charges between the updated projections and the original projections is due to increases in costs during the passage of time since the original estimates were made. The cost of care for patients who are unable to pay is subsidized by the general revenue of the nursing home. Although HCR and Unicare have not projected a percentage of "charity" patients who will not be paying for their services, there will always be some patients who do not pay for all of their care. Patients who do not qualify for Medicaid but who cannot afford standard private pay rates are charged at lower contract rates. The loan fees projected by HCR of $57,000 for the amount of the project financed by debt are reasonable projections based upon current discussions with lenders. HCR estimates that interest during construction will cost $225,000. This amount represents the interest expense paid during the period of construction. This estimate is reasonable. HCR estimates $50,000 will be required for preopening expenses - those incurred in preparing the facility for the opening day. These expenses include marketing and the hiring of an administrator, a director of nursing, and other employees prior to opening. $50,000 is an adequate amount to cover the pre- opening expenses for the proposed facility. HCR's pro forma assumptions, proposed patient charges, projections of revenue and expense, staffing and projections of salaries are reasonable. Each HCR nursing home provides individual patient care plans for each patient, a statement of patients' rights and a resident council (which is a unit of individuals selected by the patients to afford an opportunity to have a formalized, direct method to state preferences, grievances and other opinions related to the operation of the nursing home), and each HCR nursing home has transfer agreements with local-hospitals. The planning director of the Local Health Council responsible for Brevard County performed an analysis of the need for nursing home beds in Brevard County. The results of the study demonstrate that the central part of Brevard County has a lower number of nursing home beds per thousand population over 65 than the remainder of Brevard County. If additional nursing home beds are to be approved for Brevard County, the beds should be located in the central part of the county because the need for nursing home beds in Brevard County is greatest in central Brevard. The HCR architectural design best accommodates the needs of the nursing home patient. Wuesthoff Health Services, Inc., is a non-profit corporation affiliated with Wuesthoff Hospital, Inc., a 305-bed non-profit hospital serving Brevard County, through a common parent Wuesthoff Health Systems, Inc. Wuesthoff Hospital provides some indigent medical care in central Brevard County, and the Wuesthoff nursing home certificate of need application commits to providing some indigent care at the proposed nursing home facility. Wuesthoff, through its affiliated non-profit companies, operates within Brevard County a home health agency, a hospice, four family practice clinics, Life Line for the elderly or disabled who live alone, and Brevard Medical Transport, a no- cost transportation service for the elderly. It also operates a retail pharmacy through a for-profit affiliated corporation. The hospital has for several years maintained a senior citizens' advisory council which concerns itself with the needs of the elderly in Brevard County. It also intends to compete with other businesses in operating Brevard County's Meals On Wheels due to a recent expansion of the size of the Hospital's kitchen. The proposed nursing home will be located on a tract of land owned by Wuesthoff Hospital which will make the property available to Wuesthoff Health Services, Inc., at either the nominal rental of $1 per year for the useful life of the nursing home or by outright contribution if required by HRS. The land has been owned for several years by Wuesthoff Hospital, but Wuesthoff included $48,000 for land costs in its original certificate of need application. The site for the Wuesthoff nursing home is part of a large tract of land which already has located thereon a 20,000 square feet ambulatory care center, diagnostic testing center, family practice physician, dental facility, and retail pharmacy, all of which are owned by one of the Wuesthoff corporations. The ambulatory care center includes laboratory services, physical therapy services, radiology services, two out-patient surgery suites, and 24- hour physician coverage. The nursing home will be connected to the ambulatory care center by an air conditioned, enclosed corridor through which the nursing home patients will be transported to receive any therapies or services which they require. The farthest distance from any patient room in the nursing home to the ambulatory care center, including physical therapy rooms, is approximately 400 feet. Wuesthoff's nursing home would be located in the area which the Local Health Council recognizes as having the greatest need for nursing home beds, i.e., central Brevard County in the Cocoa/Rockledge area. According to Wuesthoff's updated application the total project cost for its 120-bed nursing home would be $2,901,213, and the facility will consist of 37,500 square feet. The project size actually includes 1,000 square feet for the corridor which connects the nursing home to the ambulatory care center. Therefore, the facility itself consists of only 36,500 square feet. It is unclear whether that figure should be further reduced since Wuesthoff decreased the size of its kitchen in its amended application so that the nursing home would no longer have a full-service kitchen. Similarly, the total project cost was substantially higher in Wuesthoff's original application wherein the total project cost was given as $4,417,884. Wuesthoff made changes from its original to its updated application either because the applications were prepared by different persons or because decisions were made to change Wuesthoff's application, as follows: The original application included a full-service kitchen, while the updated application contemplates meals will be prepared at Wuesthoff Hospital and transported seven miles to the nursing home. The removal of the kitchen affects the square footage of the facility along with equipment costs, staffing costs and other costs associated with the operation of the proposed nursing home, such as the increased costs associated with transporting the food to the nursing home. In its original application, one individual was listed as both the nursing home administrator and director of nursing. In its updated application, Wuesthoff treated these as separate positions. Wuesthoff proposed $376,000 for equipment costs in its original application and projected $187,400 for equipment costs in its updated application. Wuesthoff projected 45 percent Medicaid and 15 percent Medicare in its original application and 50 percent Medicaid and 2 percent Medicare in its updated application without any evidence that the needs in the community had changed. Wuesthoff removed the debt service, in its updated application, thus reducing the financing costs. The underwriter's fees between the original and updated application were reduced based upon a dimunition of the bond size as a result of reduction of square footage in the facility and the elimination of the debt service. Wuesthoff reduced land cost from $48,000 in its original application to no cost in its updated application despite the fact that the land was owned by Wuesthoff at the time the original application was filed. Wuesthoff changed the equity contribution between its original and updated applications without any testimony of extrinsic factors while evidence showed that the funds were available to make the equity contribution at the time of the submittal of the Original certificate of need application. Although Wuesthoff's application' represents that approximately 3 percent of the revenues from private pay patients would be devoted to indigent or charity patients, the 3 percent actually applies to both charity and bad debt. Wuesthoff failed to demonstrate how much of its revenues, if any, would be allocated to charity care alone. Wuesthoff projected charges of $65 for a semi- private room for a private paying patient and $73 for a private room for a private paying patient. These charges, projected for mid-1989, are below existing (1987) charges at nursing homes in Brevard County. The projections of financial feasibility and the pro formas for the Wuesthoff facility are based upon the assumption that the Wuesthoff nursing home will be owned and operated by Wuesthoff Health Services, Inc. The only financial statements provided by Wuesthoff in support of its application are those relating to Wuesthoff Memorial Hospital. Wuesthoff Memorial Hospital is a corporation separate and distinct from Wuesthoff Health Services, Inc. Further, the financial statements of Wuesthoff Memorial Hospital provided by Wuesthoff do not include the "notes" normally appended to those statements. The "notes" to the audited financial statements are typically included in any complete financial statements and are required for a full understanding of the financial statements. The pro formas of Wuesthoff assume that 15 percent of salaries would be allocated to fringe benefits. This assumption is based upon the assumption that the employees of the nursing home will not be unionized and, therefore, their fringe benefits will not be as high as those for unionized employees. The nurses at Wuesthoff Memorial Hospital are unionized and have higher benefits than proposed for the nursing home. Unionization is a decision made by employees and not by management. Wuesthoff's assumptions for fringe benefits do not assume any increase in the fringe benefits from year to year. Wuesthoff agrees that there are required increases in fringe benefits, such as increases in required contributions to social security programs over the next few years. Thus, the amount for fringe benefits assumed by Wuesthoff understates the amount likely to be paid. A participant in the Medicaid reimbursement system is entitled to reimbursement on the basis of fair rental value of the nursing home. Although the fair rental value aspect of the reimbursement plan includes consideration of the value of land upon which a nursing home is situated, and although Wuesthoff assumes that it would receive reimbursement under this element of the plan, Wuesthoff does not include in that reimbursement any value for land value. Wuesthoff would be entitled to that form of reimbursement, but Wuesthoff was unable to specify "how that's going to be done." The Medicaid reimbursement system incorporates certain caps on reimbursement, including caps for patient care costs, operating costs and property costs. Wuesthoff is unable to specify which Medicaid reimbursement caps it utilized when calculating its Medicaid charges. It is not possible to calculate Wuesthoff's Medicaid reimbursement and Medicaid charges based upon the exhibits presented by Wuesthoff, including its applications. The Wuesthoff application does not contain any description of patient care costs or costs of operation of the Wuesthoff facility upon which Medicaid charges can be determined. Wuesthoff represented that certain services would be provided to the Wuesthoff nursing home by Wuesthoff Health Services or Wuesthoff Memorial Hospital at no charge to the nursing home. The exact nature of the services and their value are unspecified. Although Wuesthoff contends fewer staff will be needed at the nursing home, Wuesthoff has not determined how many additional staff would be required at the hospital and has not calculated the cost of transporting food to the nursing home. Ordinarily, a related entity providing services to a nursing home is entitled to reimbursement for the cost of those services under the Medicaid reimbursement system. Wuesthoff has not determined whether the Medicaid statutes and regulations will allow a related entity to waive its entitlement to such reimbursement. Wuesthoff's parent company, Wuesthoff Health Systems, and Wuesthoff Memorial Hospital will incur costs for providing those services to Wuesthoff which Wuesthoff represents will not be reimbursed. These entities' budgets and Medicaid reimbursement are regulated and audited by HRS and the Hospital Cost Containment Board. By providing services to the nursing home and no longer allocating 100 percent of costs to operation of the hospital, the hospital's reimbursement and budget will have to be adjusted. These required adjustments have not been taken into consideration by Wuesthoff. In preparing its budget to be submitted to the Hospital Cost Containment Board, the hospital will be required to allocate a certain amount of time for those persons providing services to the nursing home. The hospital will not be reimbursed for those services by Medicaid or Medicare. The total cost of providing care to nursing home residents must be reported by the nursing home in its Medicaid cost report. If a nursing home does not include allowable Medicaid costs in its cost report, HRS will include those costs when HRS audits the cost report. When those additional costs are included, the nursing home's reimbursement (Medicaid charge) will increase. It is not a generally accepted accounting principle to exclude allowable costs in a Medicaid cost report. By not including certain costs, expenses are understated and profit is overstated. Wuesthoff attempted to present evidence that a hospital-based nursing home facility maintains lower costs which can be passed on to its patients, because of an absence of taxation and the presence of group purchasing. However, this evidence also revealed that the hospital-based nursing home to which Wuesthoff sought comparison had patient care and operating costs which exceed the caps for Medicaid reimbursement. Additionally, Wuesthoff's Medicaid costs are higher than those of HCR. Wuesthoff proposes an architectural plan for its nursing home which has never been built in Florida. Wuesthoff is the only applicant which proposes three nurses' stations for 120 beds. The 120-bed nursing home with two nurses' stations is more efficient to operate than a 120-bed nursing home with three nurses' stations. Three nurses' stations result in a higher cost per patient day than two nurses' stations. Wuesthoff's architect was unable to estimate the cost of site preparation and was unable to specify the exact nature of site preparation required. However, site preparation will be required. There is confusion concerning the cost of equipment for the Wuesthoff project, particularly with regard to food service equipment. Although the Wuesthoff architect testified that Wuesthoff originally had consulted with him concerning the cost of equipment, the witness was unable to identify the equipment costs listed in the application. The equipment list relied upon by Wuesthoff and the list of used equipment and food service equipment was not prepared until the first week of the final hearing. Wuesthoff's projection of construction cost ($57 per square foot) was not prepared by Wuesthoff's architect and the source of the projection is unspecified. The project is not based upon any actual experience of nursing home construction in Florida. The original estimate was provided by the architect to Wuesthoff several years earlier and was lower than $57 per square foot. Wuesthoff proposes to connect its nursing home to a nearby ambulatory surgical center by a corridor. There are no physical therapy or Occupational therapy rooms provided at the nursing home. Although recreational therapy and speech therapy must be provided at the nursing home, only small meeting rooms are available for these purposes. A nursing home patient transported from a nursing home to a location outside the nursing home for therapies must remain in the care of nursing home staff. This mode of operation requires more staff than one in which all therapies are provided within the physical confines of the nursing home. Wuesthoff did not include in its estimate of project development cost any estimate for attorney's fees or consulting fees of the planners and financial consultants retained for the purpose of obtaining a certificate of need. The shared services referred to by Wuesthoff are not free services, and no evidence was offered to show that the sharing of those services would be cost efficient. The corridor between the ambulatory surgical center and the nursing home is estimated by Wuesthoff to be 1,000 square feet. The cost for the corridor is -included in the costs projected for the nursing home, and the corridor is included in the total size (37,500 square feet) of the nursing home. Wuesthoff proposes to equip the nursing home with used equipment and furniture. The used hospital beds which Wuesthoff proposes to use at the nursing home are eight to twelve years old. Although Wuesthoff proposes to provide therapy through professional staff from Wuesthoff Memorial Hospital, Wuesthoff could not estimate how many additional therapists must be hired by the hospital in order to provide therapy for the nursing home patients. Wuesthoff contends that it will provide a high level of charity care in its nursing home at the same level that is provided at the hospital. However, when calculating the percentage of charity care at the hospital, Wuesthoff included care provided within programs where some form of governmental funding was available to pay for care. For instance, Brevard County contributes funding toward the care of patients who are not eligible for Medicaid or Medicare reimbursement. There is also a state fund for indigent care and Wuesthoff expects to receive revenues from that fund. The total allowance for bad debt and charity care proposed by Wuesthoff is 1.1 percent of gross patient revenues. Wuesthoff will require financial screening of patients prior to admission. Unicare proposes as total project cost in both its original and updated applications the amount of $3,360,000. The project cost cannot be relied upon, however, since it will be necessary for Unicare to modify its design. As further set forth below, Unicare's projected revenues and expenses are suspect. Unicare has never constructed a new nursing home in Florida or built the design proposed. When filing a cost report and determining Medicaid reimbursement for a new nursing home, all costs incurred throughout the process of developing and constructing the project, including feasibility studies, attorney's fees, accounting fees, consulting fees and certificate of need fees must be included. Unicare failed to include all project development costs in its application. The pro formas and projections of revenues and expenses for Unicare were prepared solely by Unicare's certificate of need consultants, based upon the consultants' experience in their own nursing homes and not upon any information (other than home office costs) concerning the operation of Unicare nursing homes. Unicare's in-house financial expert agreed that it is difficult to project revenues and expenses for operation of the proposed Unicare nursing home without having knowledge of what Unicare's general costs and expenses are. Two Unicare homes have failed to comply with the isolation room requirements of Rule 10D-29, Florida Administrative Code, which governs the licensure of nursing homes. The Unicare design does not provide any single, licensed isolation room as required by HRS licensure regulations. The Unicare architectural design provides only one toilet room between two patient rooms to meet the needs of four nursing home patients. The company which designed and expects to construct the Unicare facility has not performed any nursing home construction work in Florida since 1983 or 1984 when the company remodeled a nursing home. The last nursing home which this company completed for Unicare was prior to 1985. This company did not prepare the construction cost estimates relied upon by Unicare. Calculation of the size of the Unicare facility did not include a reduction of 9 square feet for each indented, V-shaped window in the facility. There are 23 such windows proposed for the Unicare facility. Accordingly, the Unicare facility is 207 square feet smaller than represented in the application. Licensure regulations require an unobstructed view (vista) of 20 feet from the window of a nursing home resident's room. At least four Unicare patient rooms have an unobstructed view of less than 20 feet. Therefore, the design presented by Unicare at final hearing does not comply with the rules for licensure of a new nursing home, pursuant to Chapter 10D-29, Florida Administrative Code. The Unicare design has never been built, although it was prepared more than five years ago. The design was intended for patient programs not now proposed by Unicare. The original facility design accommodated residents who require a degree of care below and can participate in activities above typical nursing home residents, such as residents found in adult congregate living facilities. The design and location of the sinks in the Unicare patient rooms do not allow sufficient space for a patient in a wheelchair to have access to the sink at the same time that the door to the toilet room is open. Unicare proposes to locate its facility in the Titusville area in north Brevard County. The local health plan shows the greatest need for additional nursing home beds to be in central, not north, Brevard County. Unicare's selection of Titusville as the area for location of its nursing home was not based upon any demographic analysis or determination of need for additional nursing home beds in the Titusville area. Rather, the selection of Titusville would avoid competition with another of Unicare's facilities located in the Rockledge/Cocoa area. In determining equipment needs, Unicare's certificate of need consultants did not refer to the design of the Unicare nursing home. Unicare projects that its facility will reach 97 percent occupancy in the first nine months of operation. However, the last nursing home to open in the Titusville area, Vista Manor, did not reach 97 percent occupancy until after the first year of operation. Unicare will staff at skilled levels. Its proposed staff salaries are reasonable. Unicare has not yet settled on any site in the Titusville area although it has narrowed its search down to four sites which vary between four and seven acres with prices ranging from $25,000 to $90,000 per acre. Its current total project cost of $3,360,000 computes to a project cost per bed of exactly $28,000. Unicare's parent, United Health, Inc., is the entity that must fund this project and has, by resolution, committed to such funding "provided that said expenditure shall not exceed $28,000 per bed." Consequently, it is highly likely that the proposed design, which has never been built anywhere, which must be redone to comply with HRS codes, and which will be built on land that is yet to be acquired but which will likely require a zoning variance, will cost more than $28,000 per bed. The HCR nursing home is larger and provides more area for patient care than the facilities proposed by Wuesthoff and Unicare. The HCR facility will provide more gross square feet per bed and a larger nursing unit area (which includes patient rooms, the nursing support unit and corridor areas). The entire facility proposed by HCR will be 40,000 square feet, 2,000 of which is allocated to day-care; the day-care area will be available to nursing home residents during those hours in which the day-care area is not in use by day- care residents. The Wuesthoff facility is said to be 37,500 square feet, but 1,000 square feet consists of an outside corridor; thus, the net usable space at the Wuesthoff nursing home is only 36,5' 00 square feet. The smallest proposed facility is the Unicare facility, said to be 34,121.5 square feet, but actually less than 34,000 feet when accurately measured. The nursing homes proposed by Wuesthoff and Unicare are at or below the low gross square foot average determined by HRS. Larger patient care areas are desirable. It is not desirable to place only one toilet room between two patient rooms to accommodate four patients, as proposed by Unicare. It is a generally accepted standard for nursing home skilled nursing units to be organized in groups of 60 beds. Units of this size offer the best efficiencies of operation in terms of economics and quality of care. Each nursing unit must include, in addition to patient bedrooms, toilet rooms and bathing facilities, one nurses' station, a clean utility room, a soiled utility room, a medication preparation room, a nourishment room, a janitors closet, an equipment storage room, a stretcher and wheel chair alcove, a clean linen closet and a nurses' toilet and lavatory. By providing three nursing units, Wuesthoff must devote more space to meet these requirements than would be required for two nursing units.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order: Granting HCR's application for a certificate of need; Denying Unicare's application for a certificate of need; Denying Wuesthoff's application for a certificate of need; and Dismissing the Petition to Intervene of Brevard Medical Investors, Inc. DONE and RECOMMENDED this 30th day of July, 1987, in Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2686, 86-2687, 86-2688 and 86-2690 Unicare's proposed findings of fact numbered 14, 22, and 25 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Unicare's proposed findings of fact have been rejected as follows: 1, 3, 8, 10, 11, and 13 as being contrary to the evidence in this cause; 2, 4-7, 12, 15-17, 19-21, 23, 24, and 26 as not being supported by the weight of the evidence in this cause; 9 and 18 as being subordinate to the issues in this cause; and 27 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. Wuesthoff's proposed findings of fact numbered 2-6, 36, 39, and 40 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Wuesthoff's proposed findings of fact have been rejected as follows: 31 as being contrary to the evidence in this cause; 1, 7-18, 22-30, 32, 34, and 41 as not being supported by the weight of the evidence in this cause; 19-21, 33, 35, 37 and 38 as being subordinate to the issues in this cause; and 42 - 43 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. HCR's and HRS' proposed findings of fact numbered 1-66, 68, 70-81, 83, 85- 92, 94, 96-104, and 106-123 have been adopted either verbatim or in substance in this Recommended Order. The remainder of HCR's and HRS' proposed findings of fact have been rejected as follows: 67 as being subordinate to the issues in this cause; 69 as being cumulative; 82 and 95 as being irrelevant; 84 as being unnecessary; 93 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law; and 105 as being not supported by the weight of the evidence in this cause. COPIES FURNISHED: Harold F. X. Purnell, Esquire Kenneth Hoffman, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Richard Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Frank J. Santry, Esquire Post Office Box 14129 Tallahassee, Florida 3231 Jonathan S. Grout, Esquire Karen L. Goldsmith, Esquire Dempsey & Goldsmith, P.A. Post Office Box 1980 Orlando, Florida 32802 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
The Issue Whether Petitioners' applications for Certificates of Need should be approved?
Findings Of Fact Ocala Ocala is a general partnership composed of three partners: Ocala Health Care Associates, Inc., Casterfield, Ltd., and Big Sun Healthcare Systems, the lessee and operator of Munroe Regional Medical Center. Ocala is the current holder of an approved CON for 35 community beds in Marion County. If the 21-bed transfer of sheltered beds to community beds is approved, Ocala intends to operate a 56-bed facility. A 56-bed facility is more viable than a 35-bed facility. At the time of the hearing, there were 642 approved and licensed beds and 215 approved not yet licensed beds in Marion County. The 215 beds include Ocala's 35-bed CON. A patient needing subacute care is one who has been released from acute care status by a physician and is ready to be released from a hospital (acute care) to a less costly facility, e.g. a skilled nursing home. Subacute care patients are those needing, e.g., intravenous tubes, respirators, IV medication, decubitus ulcer care, tracheotomy tubes, or antibiotic therapy. Patients needing subacute care should be placed in a nursing home, since this is less costly than hospital care and it allows for acute care beds in a hospital to be used for patients needing acute care. Skilled nursing homes are authorized to provide subacute care, but are not required to do so. In order to provide subacute care, a nursing home may need additional staff and equipment. There is a problem in Marion County with the placement of subacute care patients in nursing homes. This problem is caused by a variety of factors and usually results in a patient remaining in a hospital longer than is necessary. One factor is that some of the existing nursing homes will not accept patients needing certain types of subacute care, e.g., patients needing ventilators or feeding tubes. Another equally important factor is that the nursing homes want to make sure they will get paid and there is usually some delay in determining how the nursing home will be compensated. Other factors include the patients inability to pay and, on occasion, the unavailability of beds. Ocala intends to use its 35-bed approved CON to provide subacute care. Country Club While the application shows the applicant's name as "Country Club Retirement Center," that is the name of the project. The applicant is Mr. J. E. Holland. Mr. Holland's application is for a 60-bed nursing home which will be part of a 250-apartment continuing care community. The facility is to be located in Clermont, in Lake County. Lake County is in Planning Area VII of HRS District III. Planning Area VII also includes Sumter County. Mr. Keach, the only witness presented by Country Club, is Vice President of National Health Care. National Health Care operates a nursing home in Gainesville, Florida. In addition to operating the nursing home, National Health Care assists persons seeking a CON with preparation of the CON application. Mr. Keach and other National Health Care employees assisted Mr. Holland with the preparation of the CON application submitted in this case. National Health Care will not own or operate Mr. Holland's facility. Mr. Keach is of the opinion that there is need in Clermont for a 60- bed nursing home. He bases his opinion on letters of support for the construction of the facility, on petitions signed by persons attending a public hearing, and on four or five visits to the area. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home. At the time HRS issued its State Agency Action Report there were 958 beds approved and licensed in Planning Area VII. Of these, 838 are located in Lake County, with 142 located in a nursing home in Clermont. Also these are swing-beds providing long-term care at a hospital in Clermont. Finally, there were 236 beds approved not yet licensed in Planning Area VII, with 176 to be located in Lake County. The occupancy rate for the nursing home facility located in Clermont is approximately 89 percent. For the six months ending March, 1988, the occupancy rate for Planning Area VII was below 80 percent. There are at least two nursing homes in operation within a 20-mile radius of Clermont. These two nursing homes are located in Winter Garden and one of them has received a CON to add 89 beds. Twenty-Eight Corporation The applicant in this case is Twenty-Eight Corporation. "The owner of the nursing home will be the Levy Nursing Care Center, a limited partnership, which will be owned and secured by Twenty-Eight Corporation." (28 Corporation, Composite Exhibit 1.) Twenty-Eight corporation seeks approval of a CON for 60 nursing home beds to be operated as part of a continuing care project which will include a 50-unit apartment complex. The facility is to be located in Chiefland, Florida, in Levy County. Levy County is in Planning Area II of HRS District III. Planning Area II also includes Alachua, Gilchrist and Dixie counties. At the time HRS issued its State Agency Action Report, there were 1112 licensed nursing home beds in Planning Area II. Of these, 120 are located in Trenton, in Gilchrist County, 180 are located in Williston, in Levy County, and the rest are located in Alachua County. Also, there are 147 beds approved not yet licensed to be located in Alachua County. Chiefland is approximately 12 miles from Trenton. Williston is approximately 27 miles from Trenton. Mr. Keach was the only witness who testified on behalf of Twenty-Eight Corporation. Mr. Keach is vice-president of National Health Care. (See Finding of Fact 17, supra.) Mr. Keach is of the opinion that there is need in the Chiefland area for a 60-bed nursing home. His opinion is based on letters of support and petitions of support he received for the project. Also, his opinion is based on the fact that there is no nursing home located in Chiefland and the nearest nursing home is located in Trenton, 12 miles away. The 1986 District III Health Plan shows the Trenton facility having an occupancy rate of 99.93 percent. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order denying Petitioners' applications in these three cases. DONE and ENTERED this 3rd day of March, 1989, in Tallahassee, Leon County, Florida. JOSE A. DIEZ-ARGUELLES Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1862, 88-1863, 88-1864 Rulings on Proposed Findings of Fact Ocala's Proposed Findings of Fact: 1. Accepted. 2-4. Supported by competent, substantial evidence but unnecessary to the decision reached. 5-7. Accepted. Irrelevant. Accepted. Rejected as not supported by the weight of the evidence. There is not an absolute absence of facilities willing to accept all patients needing subacute care. Irrelevant. "Serious concerns" are not what is needed under the Rule. First sentence rejected as recitation of testimony. Second sentence irrelevant; issue is whether nursing homes will accept patients, not whether nursing homes will enter into agreement with MRMC. 13-16. True, but irrelevant. Accepted. (a) Rejected to the extent it implies that the approved facilities would not provide subacute care. Mr. Bailey's testimony is that the facilities refused to enter into a relationship with MRMC; this does not establish that the facilities would not provide subacute care. Rejected as a recitation of testimony. The weight of the evidence shows that some facilities would accept same subacute patients. True, but it is unclear if these are the physician's notations the HRS witness referred to. True that charts and logs were provided, but they did not establish the number of patients in need of subacute care in excess of licensed or approved beds. 19-26. Irrelevant. 27-29. Accepted-for what they are, but insufficient to establish need. Twenty-Eight Corporation's Proposed Findings of Fact: 1-4 Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Accepted. Rejected as hearsay. But see Finding of Fact 31. Mr. Keach testified that Chiefland is 40 miles from Williston. The road map published by the Department of Transportation shows the distance between the two cities at 27 miles. True, but irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. Rejected as hearsay. True, but irrelevant. Rejected as hearsay. Also, a determination by a family member does not establish medical "need". True that this is Mr. Keach's opinion. However, Mr. Keach's opinion is rejected. His opinion of need is not based on what the Rule requires or on what health planners rely on to establish need. Mr. Keach is not able to testify as to the financial feasibility of the facility because he has no first- hand knowledge of the finances. 21-22. Irrelevant. 23. Rejected. See ruling on 10., supra. 24-26. Irrelevant. Rejected as contrary to the weight of the evidence. Irrelevant. Irrelevant; this is not a rule challenge. Irrelevant. True, but irrelevant. Irrelevant. Accepted. Rejected as hearsay. Rejected as not supported by the weight of the evidence. Rejected as argument. Also, unable to determine what the "second portion" is. 37-38. Irrelevant. First phrase accepted. Second phrase rejected to extent implies that only need to show that no other facility exists within 20 miles. Irrelevant. Country Club's Proposed Findings of Fact: 1-4. Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. 14-17. Irrelevant. Rejected as contrary to the weight of the evidence. Accepted. Rejected as not supported by competent evidence; hearsay. Accepted. Rejected as not supported by competent evidence; hearsay. Irrelevant. Rejected as not supported by competent evidence; hearsay. True, but irrelevant. See ruling on 11, supra. Irrelevant. Rejected as not supported by competent evidence; hearsay. Irrelevant. The Rule also recognizes this. Irrelevant. Rejected as not supported by the weight of the evidence and irrelevant. True, but irrelevant. True, but irrelevant. 33-34. True, but irrelevant. This is a de novo proceeding. 35-39. Irrelevant. 40. Rejected as argument. Also, unable to determine what the "second portion" is. 41-42. Accepted 43. Rejected as contrary to the weight of the evidence. 44. True, but irrelevant. Also, there are approved beds within 20 miles, but located in a different HRS District. Leesburg's Proposed Findings of Fact 1-7. Accepted. Rejected as not a finding of fact. Accepted. 10-15. See Conclusions of Law section of RO. Accepted. Rejected as argument. Accepted. Rejected. Fact that need does not exist under HRS rule doesn't necessarily mean that that facility will not be financially feasible. In any event, Country Club was not able to establish financial feasibility. 20-21. See Conclusions of Law. 22. Rejected as argument. 23-28. Supported by competent substantial evidence but unnecessary to the decision reached. Accepted. Rejected as a recitation of testimony. Accepted.- HRS's Proposed Findings of Fact 1-19. Accepted. Rejected. The HRS witness did not specifically state that HRS needs to see the actual physician referral. Accepted. See Conclusions of Law. 22-28. Accepted. See Conclusions of Law. 29. Not a finding of fact. 30-37. Accepted. 38. Irrelevant. 39-42. Unnecessary to the decision reached. Irrelevant. Accepted. 45-46. See Conclusions of Law. Accepted. Accepted. Not a finding of fact. 50-65. Accepted. See Conclusions of Law. 66. Not a finding of fact. 67-71. Accepted, but Ocala's Exhibits 6 & 7 are not amendments to the application but simply more of the same information that was provided with the application. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 First Florida Bank Building Suite 600 215 South Monroe Street Tallahassee, Florida 32301 Theodore Mack, Esquire Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 R. Bruce McKibben, Jr., Esquire 307 West Park Avenue Post Office Box 10651 Tallahassee, Florida 32302 Grafton Wilson, II, Esquire 711 NW 23rd Avenue, Suite #4 Gainesville, Florida 32609 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue In their Prehearing Stipulation the original parties described the background and general nature of the controversy as follows: In January, 1985, HCR filed an application for certificate of need to develop a new 120 bed nursing home in Collier County, Florida. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceeding, and the proceeding was forwarded to the Division of Administrative Hearings. By application supplement dated May 15, 1986, HCR has reduced this application to a 90-bed new nursing home. The nursing home will provide skilled nursing care to Alzheimer's patients and to patients discharged from hospitals in need of additional intensive nursing care, in addition to the typical nursing home patient. HRS has denied HCR's application because, pursuant to Rule 10-5.11(21), Florida Administrative Code there is insufficient need for the additional nursing home beds proposed by HCR. In the Prehearing Statement the Petitioner described its position as follows: HCR contends that there is an identifiable need for a nursing home in Collier County, Florida, to serve the needs of patients who suffer from Alzheimer's disease and similar disorders and patients who are discharged from hospitals with a continuing need for a high level of intensive care, often provided through sophisticated technical or mechanical means. Existing nursing homes in Collier County do not offer adequate facilities for such patients and refuse admission to such patients. These patients have experienced an inability to obtain such care in Collier County. HCR's proposed nursing home will provide needed care which is otherwise unavailable and inaccessible in Collier County. The application meets all criteria relevant to approval of a certificate of need. HCR further contends that the nursing home formula shows a need for additional nursing home beds in Collier County. Previously, in circumstances where a need for additional nursing home services has been identified, HRS has approved certificates of need even though the nursing home formula showed a need for zero additional beds or a small number of additional beds. In the Prehearing Statement the Respondent described its position as follows: HRS contends, pursuant to the formula contained in Rule 10-5.11(21), Florida Administrative Code, that there is insufficient need in the January, 1988 planning horizon demonstrated for additional nursing home beds in Collier County to warrant approval of a-new nursing home. Therefore, HRS contends that the HCR application should be denied. Further in its original application, HCR did not identify services proposed specially for Alzheimer's disease patients or "sub-acute" patients. HCR did not and has not complied with provision of Chapter 10-5.11(21)(b 10., Florida Administrative Code, regarding mitigated circumstances. The Respondent also identified the following as an issue of fact to be litigated. "HRS contends that it should be determined whether HCR's supplement dated May 15, 1986, is a significant change in scope for which the application was originally submitted." Because of its late intervention into this case, the Intervenor's position is not described in the Prehearing Statement. In general, the Intervenor urges denial of the application on the same grounds as those advanced by the Respondent. The Intervenor did not attempt to become a party to this case until the morning of the second day of the formal hearing. Respondent had no objection to the Petition To Intervene. The original Petitioner objected on the grounds that the effort at intervention was untimely and that the Intervenor was without standing. The objection to intervention was overruled and the Intervenor was granted party status subject to taking the case as it found it. Accordingly, intervention having been granted at the conclusion of the evidentiary presentation of the other parties, the Intervenor was not permitted to call any witnesses or offer any exhibits. Intervenor's participation before the Division of Administrative Hearings was limited to an opportunity to file proposed findings of fact and conclusions of law. Following the hearing a transcript of proceedings was filed on July 8, 1986. Thereafter, all parties filed Proposed Recommended Orders containing proposed findings of fact. Careful consideration has been given to all of the Proposed Recommended Orders in the formulation of this Recommended Order. A specific ruling on all proposed findings of fact proposed by all parties is contained in the Appendix which is attached to and incorporated into this Recommended Order. The Petitioner also filed an unopposed post-hearing motion requesting that its name be corrected in the style of this case. The motion is granted.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Findings based on admitted facts The parties agree that HCR properly filed a letter of intent and application for certificate of need for a new nursing home to be located in Collier County. The application was reviewed by HRS in the ordinary course of its activities, and HRS initially denied the application. HRS continues to oppose issuance of a CON because (a) there is an insufficient need, pursuant to Rule 10-5.11(21), Florida Administrative Code, for additional nursing home beds to warrant approval of a new nursing home [Section 381.494(6)(c)1., Florida Statutes]; (b) the long term financial feasibility and economic impact of the proposal is questionable because of low occupancy being experienced by existing nursing homes "Section 381.494(6)(c)9., Florida Statutes]. HRS proposes no other basis for denial of the application. The parties agree that HCR meets all criteria for a certificate of need, with the exception of those two criteria listed in the immediately foregoing paragraph relating to need and financial feasibility/economic impact (relevant to low occupancy), which HRS contends have not been met. The parties agree that HCR would provide good quality care to patients, that the project would be financially feasible if the occupancy projections asserted by HCR were obtained, that the costs and methods of proposed construction are appropriate and reasonable, and that the proposed facility would be adequately available to underserved population groups. The rest of the findings In January 1985, HCR filed an application for a certificate of need to develop a new 120-bed nursing home facility in Collier County, Florida. The original application described a traditional approach to nursing home care. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceedings and this proceeding ensued. By application supplement dated May 15, 1986, HCR made certain changes to its original application. These changes included reducing the size of the proposed nursing home from 120 to go beds and changing the-concept of the nursing home from a traditional nursing home to one specifically designed to address the treatment of Alzheimer's disease patients and sub-acute care patients. The supplement specifically provided that 30 of the 90 proposed beds would be "set aside to offer a therapeutic environment for patients with Alzheimer's or similar disorders." The project description in the original application contained no such provision. HCR's proposed facility would consist of 90 nursing home beds, 30 assisted living beds, and an adult day care facility located adjacent to the nursing home portion of the facility. Those portions of the facility relating to assisted living and adult day care do not require certificate of need review. The estimated cost of the portion of the project which requires certificate of need review is $3.5 million. HCR estimates that approximately 33 1/3 per cent of the patients in the facility will be Medicaid reimbursed. It is proposed that 30 of the 90 nursing home beds be designed and staffed specifically to provide care and treatment necessary to meet the special needs of certain patients who suffer from Alzheimer's disease and dementia and exhibit need for care different from that found in the typical nursing home. It is proposed that another 30-bed wing be staffed and equipped to provide sub-acute, high-tech services such as ventilator, I.V. therapy, pulmonary aids, tube feeding, hyperalimentation and other forms of care more intensive than those commonly found in a nursing home and necessary for the care of patients discharged from hospitals and patients in the last stages of Alzheimer's disease. The remaining 30-bed wing would be devoted to traditional nursing home care. HRS has adopted a rule which establishes a methodology for estimating the numeric need for additional nursing home beds within the Department's districts or subdistricts. This methodology is set out in Rule 10-5.11(21), Florida Administrative Code. This rule determines historic bed rates and projects those bed rates to a three-year planning horizon. Allocation to a subdistrict such as Collier County is adjusted by existing occupancy in the subdistrict and the subdistrict's percentage of beds in relationship to the total number of beds in the district. Additional beds normally are not authorized if there is no need for beds as calculated under the rule. HRS calculated need utilizing current population estimates for January 1986 and projected need for the population estimated for January 1988, arriving at a need of approximately 16 additional nursing home beds for the January 1988 planning horizon. HCR projected need to the January 1989 planning horizon and projected a numeric need of approximately 38 additional nursing home beds. There are no applicants for additional nursing home beds in the January 1989 planning horizon (batching cycle). Alzheimer's disease is a primary degenerative disease of the central nervous system which results in a breakdown of the nerve cells in the brain. The disease is progressive, in that it begins subtly, often with forgetfulness or simple personality changes, and ultimately results in death following a phase in which the patient is bedridden and totally dependent upon others for survival. The cause of the disease is not known. The disease is much more common in the older age groups and is very common in the southwest Florida area. (However, nothing in the evidence in this case suggests that Alzheimer's disease is more common in southwest Florida than in other parts of the state.) There is no known cure for Alzheimer's disease. Alzheimer's disease patients are characterized by such symptoms as memory loss, communication problems, difficulty understanding, confusion, disorientation, inability to recognize care givers, waking at night, wandering, inability to socialize appropriately, and incontinence. The progress of the disease can be divided into stages. During the initial stage, the patients will display forgetfulness and subtle personality changes. As the disease progresses, the patients encounter increasing difficulty performing more than simple tasks, tend to be more emotional, become more confused, encounter difficulty with concentration and retaining thoughts, and often display poor judgment and a denial of the significance of their actions. In the next stage, the patients begin to require assistance to survive. Forgetfulness and disorientation increase and wandering patients are often unable to find their way. The patients become incontinent, experience sleep disturbances, become restless at night, and wander during the day, leading to considerable family distraction and difficulties for the care givers. The patients encounter difficulty recognizing family members and often become paranoid and fearful of those family members within the house. violence and aggressive outbursts may occur. Finally, the patients progress to a stage in which they are totally inattentive to their features physical needs, requiring total care. These Patients are totally incontinent, experience frequent falls, develop seizures, and eventually become bedridden, going into a fetal position and becoming totally unable to provide any care for themselves. Traditionally, most nursing homes offer no special programs for patients who suffer from Alzheimer's disease and mix these patients with other patients in the nursing home. There is no nursing home in Collier County which provides program specifically designed for the treatment of Alzheimer's disease patients. The nearest nursing home where such care can be found is in Venice, some 92 miles from Naples. The total facility proposed by HCR is designed to provide a continum of care for Alzheimer's disease patients and their family care givers. The adult day care portion of the facility would enable family members to place Alzheimer's disease patients in day care for a portion of the day in order for the family care givers to maintain employment, perform normal household chores, and find relief from the extremely demanding task of constantly supervising and caring for an Alzheimer's disease victim. The adult day care portion of the facility would be designed and staffed to provide a therapeutic program for the Alzheimer's disease patient and the patient's family. The assisted living portion of the facility would allow an Alzheimer's disease patient in the early stages of the disease to live in an environment, with his or her spouse if desired, where immediate care and routine supervision at a level lower than that required by a nursing home patient would be provided. Thirty nursing home patient and who do not display those characteristics which are disruptive to non-Alzheimer's patients, such as wandering, combativeness, and incontinence. For those Alzheimer's patients who should not be mixed with other nursing home patients because of their disruptive routines and who require unique programs and facility design features to meet their specific needs, a 30-bed wing would be set aside. Finally, for Alzheimer's patients in the final stages of the disease who require total care and are bedridden, and for patients discharged from local hospitals who require high-tech services, a 30-bed wing designed, staffed and equipped to provide such services would be set aside. The facility would provide a high level of staffing to meet the demanding, personal care needs of Alzheimer's patients and would provide 24-hour nursing supervision in that portion of the facility dedicated to intensive services for the bedridden and high-tech patient. The design and equipment of the proposed facility are particularly addressed to the needs of Alzheimer's disease patients. Physically, the facility would allow patients freedom of movement both inside the facility and in an outside courtyard with porches, but the facility would be sufficiently secure to prevent the patient from wandering away from the facility. There would be amenities such as therapeutic kitchens which would allow patients still able to cook to do so. Fixtures in the facility would be designed so that the Alzheimer's disease patients could easily identify the functions of fixtures such as wastebaskets, toilets, and sinks. Features such as low frequency sound systems, lever door knobs, square instead of round tables, barrier-free doorways, special floor coverings, appropriate labeling, automatic bathroom lighting, and provisions for seating small groups of patients together would all provide the special care required by the Alzheimer's patient. The concept of a separate unit for Alzheimer's disease patients is a new one, growing out of increased medical awareness of the disease. The proposed unit would be a prototype for the Petitioner. There are four nursing homes in Collier County and 413 licensed nursing home beds. There are no approved but unlicensed nursing home beds in Collier County. At the time that HRS initially reviewed the HCR application, Collier County nursing homes were reporting an average occupancy of approximately 70 percent. At the time of the hearing, average occupancy of existing nursing home beds in Collier County was 83.5 per cent. Existing nursing home beds in Collier County are underutilized and there are a number of nursing home beds available to the public. Also there are available alternatives to nursing homes in Collier County. HCR has projected reaching 95 per cent occupancy within one year of opening. This projection seems overly optimistic and unwarranted by prior history, as only one existing facility has an occupancy rate that high. HCR's occupancy projections are based on assumptions that the future growth will be similar to that experienced between 7/1/85 and 12/1/85. But more recent data shows that growth has been decreasing and that there was no growth for the most recent period prior to the hearing. If projected occupancy is not met, projected revenues will not be realized, and projections of financial feasibility will not materialize. The record in this case does not contain evidence of patients' need for nursing home care documented by the attending physicians' plans of care or orders, assessments performed by the staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. The local health plan (Policy 1, priority 4) requires an occupancy level of at least 90 per cent before new nursing homes can be approved. The local health plan (Policy 1, priority 6) also provides, "No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility."
Recommendation For all of the foregoing reasons, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order in this case denying the Petitioner's application for a certificate of need to construct either its original proposal or its supplemented proposal. DONE AND ENTERED this 14th day of October, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1986.
The Issue Whether Respondent nursing home violated Florida statutes and Department rules (and should be subject to a civil penalty) as alleged by the Department for (1) failing to provide adequate health care to an injured patient, and (2) failing to meet nursing staffing requirements.
Findings Of Fact Upon consideration of the evidence presented at the hearing, including the demeanor and credibility of the witnesses, and posthearing filings by counsel, the following findings of fact are determined: Respondent Nursing Home, the Apalachicola Valley Nursing Center, is a nursing care facility located immediately west of Blountstown, Florida. It is licensed by the Department, and has been in operation since June, 1975. (Testimony of Margaret Brock) Injury to and Standard of Care Provided Myrtle White On July 4, 1979, Dora M. Keifer was the licensed practical nurse on duty during the Nursing Home's night shift. At approximately 1:30 a.m., nurse Keifer heard a noise coming from the nearby room of an elderly patient, Myrtle White. The nurse immediately investigated, and found Myrtle White lying on the floor, and against the wall. Nurse Keifer then visually examined Mrs. White's head and extremities for bruises, discolorations, swelling, lacerations, and other signs of possible fractures. Finding only a slight abrasion on her elbow, nurse Keifer then manually examined the patient's leg and hip for signs of a bone fracture or associated pain. The patient responded by complaining of pain on her right side from her knee to her hip. However, no swelling of that area could be detected; nor were there any other physical symptoms of a bone fracture which were detectable by visual or manual examination. (Testimony of Dora Keifer) After completing the examination, nurse Keifer, with the assistance of four aides, placed Mrs. White on a blanket and carefully lifted her directly onto her bed, placing her on her back. This is a lifting procedure which minimizes sudden movement and is recommended for use with patients who are suspected of suffering from bone fractures. Nurse Keifer then raised the bed side rails to prevent the patient from falling off the bed, and checked the patient's vital signs. Except for slightly elevated blood pressure, the patient's vital signs were within normal limits. Nurse Keifer, then pushed the bed to within 10 feet of her nursing station to ensure that the patient would-be constantly observed during the remainder of her shift. (Testimony of Dora Keifer, Dr. E. B. White) Except on the two occasions when she made her routine rounds, nurse Keifer kept Mrs. White under constant personal observation until her shift ended at 7:00 a.m. on July 4, 1979. When she made her rounds, nurse Keifer advised her aides to keep Mrs. White under constant observation. During the remainder of her shift, nurse Keifer periodically reexamined Mrs. White. Physical symptoms of a fracture, or other injury resulting from the patient's fall, continued to be absent. At 4:30 a.m., nurse Keifer checked the patient's urine sample and detected no blood or other unusual signs. (Testimony of Dora Keifer) At the time of her accident on July 4, 1979, Mrs. White, an 88-year-old woman, was suffering from deafness, senility, disorientation, poor eyesight and arthritis. She had previously fractured her right hip, and a prosthetic device had been inserted. Her ailments caused her to frequently suffer, and complain of pain in the area of her right hip, for which her doctor (Dr. Manuel E. Lopez) had prescribed, by standing (continuing) order, a pain medication known as Phenophen No. 4. The standing order authorized the nursing staff to administer this pain medication to the patient, without further authorization from a physician, four times daily, and on an "as needed" basis to relieve Mrs. White's pain. (Testimony of Dora Keifer, Mr. Manuel Lopez, Margaret Brock) Previous to and at the time of Mrs. White's accident, nurse Keifer was aware of Mrs. White's ailments, and frequent complaints of discomfort, as well as the standing order of Dr. Lopez which authorized the administering of Phenophen No. 4 to Mrs. White on an "as needed" basis to relieve pain. In addition, nurse Keifer, by background and training was qualified to examine, make judgments concerning, and render care to patients requiring emergency medical treatment. For several years, she had served as a part-time nurse on the night shift at the Nursing Home, and had served for 6 years in the emergency room and obstetric ward at Calhoun County Hospital. At the hospital, she had engaged in the detection and treatment of traumatic injuries and broken bones on a daily basis, and was familiar with the proper nursing and medical techniques used in caring for such injuries. (Testimony of Dora Keifer, Dr. E. B. White) Nurse Keifer had been instructed by local physicians (including Dr. Lopez) practicing at the Nursing Home that they should not be telephoned during the late evening and early morning hours unless, in the nurse's judgment, the patient required emergency care. Because Blountstown suffers a severe shortage of physicians, the judgment of licensed nurses necessarily assumes on increasingly important role in providing adequate medical care. (Testimony of Dora Keifer, Dr. E. B. White, Margaret Brook, Dr. Manuel Lopez) Between 1:30 a.m. (the time of Mrs. Trite's accident) and 7:00 a.m., on July 4, 1979, nurse Keifer administered Phenophen No. 4 two times to Mrs. White for the purpose of relieving pain. The initial dose was given Mrs. White shortly after she had complained of pain and been moved near nurse Keifer's duty station for observation. The drug appeared to alleviate Mrs. White's discomfort. Three or four hours later, after Mrs. White again complained of pain, a second dose was administered. (Testimony of Dora Keifer) Nurse Keifer administered the two doses of Phenophen No. 4 to Mrs. White during the early morning hours of July 4, 1979, without contacting, or seeking the further authorization of a physician. Having detected no symptoms of a bone fracture, or other injury to Mrs. White resulting from her fall, nurse Keifer concluded that administration of the medication to relieve pain was authorized by Dr. Lopez's standing order, and justified under the circumstances. She further made a judgment that Mrs. White was not suffering from an injury which justified emergency treatment, and the immediate contacting of a physician. (Testimony of Dora Keifer, Dr. Manuel Lopez, Dr. E. B. White) At 5:30 a.m. on July 4, 1979, nurse Keifer telephoned Calhoun County Hospital and left a message requesting Dr. Lopez to come to the Nursing Home and examine Mrs. White as soon as he completed his rounds at the hospital. Nurse Keifer was aware, at the time, that Dr. Lopez began his daily hospital rounds at 6:00 a.m. Later that morning, at the direction of Dr. Lopez, Mrs. White was taken to the hospital for x-rays which revealed that Mrs. White had fractured her right hip. She was returned to the Nursing Home that day, and transferred to Tallahassee Memorial Hospital for several days. No surgical repairs were ever made to the hip fracture, however, and Mrs. White was subsequently returned to the Nursing Home, for bed-side care. (Testimony of Dora Keifer, Dr. Lopez, Dr. E. B. White) It was nurse Keifer's professional judgment, based upon the facts known to her at that time, that Mrs. White's fall, and physical condition neither required emergency medical treatment nor justified the immediate contacting of a physician. Nurse Keifer further concluded that the administration of Phenophen No. 4 to relieve Mrs. White's pain, without further authorization of a physician, was necessary and authorized by the standing order of Dr. Lopez. These professional nursing judgments and actions were reasonable, justified by the facts, consistent with established health care standards applied in the Blountstown area, and did not endanger the life, or create a substantial probability of harm to Mrs. White. Although the Department's Medical Facilities Program Supervisor, Howard Chastain, testified that nurse Keifer's failure to immediately notify a physician concerning Mrs. White's fall presented an imminent danger to the patient, it is concluded that the contrary testimony of two experienced medical doctors constitutes the weight of the evidence on this issue. As to the meaning of Dr. Lopez's standing order con cerning administration of Phenophen No. 4 to Mrs. White, the Department's witnesses on this matter, James L. Myrah and Christine Denson, conceded that they would net disagree with Dr. Lopez if the doctor testified that nurse Keifer's action was consistent with the standing order. Dr. Lopez, subsequently, so testified. (Testimony of Dr. M. Lopez, Dr. E. B. White, James L. Myrah) Shortage of One Nurse on Night Shift During the period of June 1 through June 30, 1979, and July 1, through July 21, 1979, for a total of fifty-one (51) nights, the Nursing Home employed only one licensed nurse on the 11:00 p.m. - 7:00 a.m. night shift. (Testimony of Margaret Brook, J. L. Myrah) During this same 51-day time period, the number of patients at the Nursing Home fluctuated between 70 and 80 patients. (Testimony of Margaret Brook, J. L. Myrah, Petitioner's Exhibit No. 2) The Nursing Home is managed by a licensed nursing home administrator, and provides a full range of health and related services to patients requiring skilled or extensive nursing home care. Most of the patients require nursing services on a 24-hour basis and are seriously incapacitated, mentally or physically. (Testimony of Margaret Brook) The Administrator of the Nursing Home was aware that Department rules required the employment of two licensed nurses on the night shift during June and July, 1979. She made numerous unsuccessful efforts to recruit, locate, and employ an additional nurse for the night shift. Her failure to hire the additional nurse required by Department rules was not a willful act of misfeasance or nonfeasance on her part--but was due to a statewide nursing shortage which is particularly severe in rural northwest Florida. Other nursing homes have experienced similar difficulty in recruiting and hiring the requisite number of licensed nurses. The Nursing Home received no economic benefit from its failure to employ the additional night nurse during the time in question because the cost of such an employee is fully reimbursed by the State. On approximately March 1, 1980, the Nursing Home located, and has since employed, the additional licensed nurse required by Department rules for the night shift. (Testimony of Dora Keifer, Margaret Brook) Due to the widespread shortage of qualified nursing personnel, the Department ordinarily brings enforcement actions against nursing homes for noncompliance with the minimum nursing staff requirements only if the noncompliance is adversely affecting patient care. (Testimony of James L. Myrah, Margaret Brock) The shortage of one licensed nurse on the night shift during the time in question did not adversely affect the level of patient care provided by the Nursing Home. (Testimony of Dora Keifer, Margaret Brock) The parties have submitted proposed Findings of Fact and Conclusions of Law. To the extent that those findings and conclusions are not adopted in this Recommended Order, they are specifically rejected as being irrelevant to the issues in this cause, unsupported by the evidence, or law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department's Administrative Complaint, and the charges against Respondent contained therein, be DISMISSED. DONE and ENTERED this 2nd day of May, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: John L. Pearce, Esquire District II Legal Counsel Department of Health and Rehabilitative Services 2639 North Monroe Street Suite 200-A Tallahassee, Florida 32303 Stephen D. Milbrath, Esquire Dempsey & Slaughter, P.A. Suite 610 - Eola Office Center 605 East Robinson Street Orlando, Florida 32801
The Issue Whether the applications for certificates of need filed by Petitioners Alachua General Hospital, Inc., Oakhurst Manor Nursing Corporation and Florida Convalescent Centers, Inc., meet the requirements of law and should be approved based on application of the statutory review criteria or upon other considerations.
Findings Of Fact Oakhurst Manor Nursing Center is a community-based skilled nursing facility of 120 beds located in Ocala, Florida. Oakhurst has a history of high occupancy and is a superior rated facility. At hearing, Oakhurst acknowledged a number of inaccuracies in its application. Some staffing ratios were misstated. The data utilized to calculate financial ratios is different from the data set forth in the combined statement. The physical location of the facility was incorrectly identified. The application misstated the existing number of beds in the facility. Section 408.035(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. As to the application of Oakhurst, utilization rates indicate that need exists for additional community nursing care services in Marion County. Oakhurst experiences full occupancy. Projected occupancy levels set forth in the Oakhurst application are reasonable. The evidence establishes that the need for additional beds exists and that the application of Oakhurst is consistent with the applicable district and state health plans. Section 408.035(1)(b), Florida Statutes, requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant. Approval of the Oakhurst application will increase the availability of community nursing care at a superior rated facility and will meet the projected need determined by the AHCA's determination of the fixed pool. Section 408.035(1)(c), Florida Statutes, requires consideration of the applicant's ability to provide quality of care and the applicant's record of providing quality of care. Oakhurst is a superior rated facility with a history of providing high quality care. There is no indication that the 60 bed unit addition will result in a decline in quality of care. Section 408.035(1)(e), Florida Statutes, requires consideration of the probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. The evidence fails to establish that approval of the Oakhurst application will result in probable economies and improvements in service from joint, cooperative, or shared health care operations. Section 408.035(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal. Since purchase by the current owners, Oakhurst's financial performance has been satisfactory. Losses experienced during the two years following the purchase are attributed to accelerated depreciation. The facility is currently profitable. Although there was evidence that insufficient funds are being generated to maintain the facility's physical plant, the evidence is insufficient to establish that Oakhurst is unable to maintain the facility. Projected occupancy rates are reasonable. Funds for capital and operating expenditures are available to Oakhurst. Notwithstanding current operation of the facility and availability of funds, Oakhurst's proposal is not financially feasible. Oakhurst's revenue projections are not reasonable. This finding is based on the credible testimony of expert Charles Wysocki. Mr. Wysocki opined that the Oakhurst application is not financially feasible in the short and long term and that the financial projections in the Oakhurst application are not reliable. Mr. Wysocki's testimony was credible and persuasive. Oakhurst's current Medicaid rate is $71.68. Oakhurst application Schedule 10 projects Medicaid rates as follows: $77.41 during the construction year; $104.69 during operation year one; and $99.75 during operation year two. Oakhurst's projected Medicaid rates are unreasonable. Projected Medicaid rates are overstated and do not appear to account for Medicaid program rate ceilings. Medicaid program payment restrictions will not permit payment of such rates during years one and two. Oakhurst's current Medicare rate is $186.87. Oakhurst application Schedule 10 projects Medicare rates as follows: $340 during the construction year; $361 during operation year one; and $328 during operation year two. Oakhurst's projected Medicare rates are overstated and unreasonable. Medicare program payment restrictions will not permit payment of such rates. Oakhurst's application overstated revenue projections related to private pay patients. Further, according to Mr. Wysocki, Oakhurst has underestimated expenses related to depreciation, amortization and property taxes. Section 408.035(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. Approval of Oakhurst's application can be expected to have a positive competitive impact on the supply of services being proposed based on the fact that the addition of beds will increase the supply of appropriate placements. Section 408.035(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Although Oakhurst has historically participated in the Medicaid program, Oakhurst is currently not subject to Medicaid participation requirements. If the CON at issue in this proceeding is awarded, Oakhurst will be required to provide at least half of the expanded facility's 160 beds to Medicaid patients. Section 408.035(2)(b), Florida Statutes, requires consideration of whether existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. To the extent that such information is available, there is no evidence that these services are used inappropriately or inefficiently. Section 408.035(2)(d), Florida Statutes, requires consideration of whether patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. As to community nursing home beds, the AHCA has determined that a need exists for additional capacity in the planning area's nursing homes. It is likely that failure to meet projected need will result in difficulty in locating appropriate placements. The state health plan sets forth "preferences" which are considered in comparative evaluations of competing CON applications. Preference is given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 percent. The occupancy rate is higher in the Alachua planning area than in the Marion planning area. Oakhurst is in the Marion planning area and has the highest occupancy in the planning area. Oakhurst meets this preference. Preference is given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level care systems. The Marion County Medicaid participation average is 72.93 percent. Oakhurst's application subjects the facility to a 50 percent Medicaid average. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Oakhurst intends to operate a separate 20 bed subunit specializing in skin and wound care. A distinct subacute care program targeted at a specific patient population is a specialized service. Oakhurst does not have specialized Alzheimer services. Oakhurst does not provide care to AIDS patients. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide a continuum of services to community residents, including but not limited to, respite care and adult day care. The Oakhurst proposal does not address respite care or adult day care. Oakhurst does not meet this preference. Preference is given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual room temperature controls, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. Oakhurst's application meets this preference. Preference is given to 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. No party proposes to offer any therapeutic programs which may credibly be identified as "innovative." Preference is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are be considered for facilities proposing to serve upper income residents. Oakhurst's projected rates exceed the highest Medicaid per diem rate in the subdistrict, therefore Oakhurst does not meets this preference. Preference is given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. HRS' evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida. AHCA is the successor agency to HRS. All applications meet this preference. Preference is given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents than other applicants shall be given preference. Although FCC and Oakhurst propose reasonable staff levels, Alachua's hospital-based unit, by virtue of location, more closely meets this preference than FCC or Oakhurst. Preference is given to applicants who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. These professionals include physical therapists, mental health nurses, and social workers. All applications meet this preference. Preference is given to applicants who document plans to will ensure residents' rights and privacy, to use resident councils, and to implement a well-designed quality-assurance and discharge-planning program. All applications meet this preference. Preference is given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Oakhurst has higher administrative costs and lower resident care costs compared to the average nursing home in the district. Oakhurst does not meet this preference. The district health plan sets forth preferences which are to be considered in comparative evaluations of CON applications. The first applicable district preference is directed toward providing geographic access to nursing home beds. None of the applications meet this preference. The second applicable district preference requires consideration of existing bed utilization. Based on the percentage of elderly population and utilization of existing beds in each area, relative priorities are established. Oakhurst is in a "high need" planning area. Existing nursing homes in the Marion planning area are experiencing occupancy levels between 80 and 90 percent placing Oakhurst in a "moderate occupancy" planning area. According to the preference matrix set forth in the district plan, Oakhurst is in a priority two planning area (high need and moderate occupancy.) The evidence establishes that Oakhurst meets this preference. The third preference relates to the conversion of acute care beds to skilled nursing use. Oakhurst does not intend to convert underutilized hospital beds into skilled nursing beds for step-down or subacute care. The fourth and fifth preferences apply to new facilities of at least 60 beds. No application meets these preferences. The sixth preference states that priority consideration should be given to facilities which propose to offer specialized services to meet the needs of the identified population. Oakhurst proposes to offer a subunit specializing in skin and wound care. Oakhurst meets this preference.
Recommendation RECOMMENDED that a Final Order be entered determining the application of Oakhurst Manor Nursing Center for Certificate of Need #7326 to be incomplete and withdrawn, GRANTING the application of Florida Convalescent Centers, Inc., for Certificate of Need #7325 for the 60 remaining beds in the applicable fixed need pool and GRANTING the application of Alachua General Hospital for Certificate of Need #7320 to convert 30 existing acute care beds into a skilled nursing unit. DONE and RECOMMENDED this 5th day of October, 1994, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 5th day of October, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-6264 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Alachua General Hospital, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 15. Rejected, irrelevant as to the AHCA's review of the proposals prior to notice of intended award. 16, 20. Rejected, unnecessary. 21-26. Rejected, subordinate. 30. Rejected, recitation of testimony is not finding of fact. 32, 34. Rejected, subordinate. 42-50. Rejected, not supported by the evidence. The preferences set forth in the proposed finding are not those contained within Alachua's exhibit #1, which has been utilized in this Recommended Order. 52. Rejected, immaterial. Rejected, recitation of testimony is not finding of fact. Rejected, evidence fails to establish that therapy offered is "innovative." 62. Rejected, cumulative. 63-64. Rejected, subordinate. 72. Rejected as to SAAR, unnecessary. 73-76. Rejected, recitation of testimony is not finding of fact. Oakhurst Manor Nursing Corp.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 4,6, 8-51. Rejected, unnecessary, application rejected as incomplete and withdrawn from consideration. 52-54, 56-58. Rejected, irrelevant. Although it is true that the application contained the combined audited financial statements for the Harborside facilities, such statement fails to meet the requirement that the application contain an audited financial statement for the applicant. Harborside is not the applicant. 55. Rejected, irrelevant. The agency has cited no authority which would permit the waiver of the statutory requirement. 59. Rejected, immaterial. The document was admitted to demonstrate that the material required by law was not submitted with the CON application. Further consideration constitutes an impermissible amendment to the CON application and is rejected. Florida Convalescent Centers, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, unnecessary. 5-91. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 93. Rejected, unnecessary. 102-143. References to Oakhurst application, rejected, unnecessary. Agency for Health Care Administration's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, irrelevant. 4-5. Rejected, unnecessary. 6. Rejected, subordinate. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Rejected, not supported by the greater weight of evidence. 13-16. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 19. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the greater weight of the evidence, wherein the CON application sets forth such information. Rejected, unnecessary. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Comparison is inappropriate. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence. The CON application sets forth the information which the agency asserts was not provided. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence as related to applicable criteria for review set forth in the statute. 35. Rejected, not supported by credible evidence or the administrative rules cited in the proposed finding of fact. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Dean Bunton, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN 204 South Monroe Street Tallahassee, Florida 32302 Gerald Sternstein, Esquire Frank Rainer, Esquire RUDEN, BARNETT, McCLOSKY, SMITH 215 South Monroe Street Barnett Bank Building, Suite 815 Tallahassee, Florida 32301 Alfred W. Clark, Esquire 117 South Gadsden Street, Suite 201 Tallahassee, FL 32301
Findings Of Fact Procedural. 1. Meridian, National, HBA and ten other applicants filed certificate of need applications with the Department in the October, 1987, nursing home bed certificate of need review cycle of the Department for Subdistrict 4 of District This area includes Flagler and Volusia Counties, Florida. Each of the applicants involved in these cases filed a letter of intent with the Department and the District 4 Local Health Council within the time required for the filing of letters of intent for the October, 1987, nursing home bed certificate of need review cycle. Each of the applicants involved in these cases filed their certificate of need applications within the time required for the filing of certificate of need applications for the October, 1987, nursing home bed certificate of need review cycle. The applications were deemed complete by the Department. The Department comparatively reviewed the applications of the applicants involved in these cases and those of ten other applicants. Based upon this review the Department issued a State Agency Action Report for the October, 1987, nursing home bed review cycle (hereinafter referred to as the "SAAR") on February 18, 1988. The SAAR was published by the Department in the Florida Administrative Weekly on March 4, 1988. In the SAAR the Department proposed to approve the certificate of need application filed by HBA and to deny all other applications. Ten of the applicants whose certificate of need applications were denied by the Department filed Petitions pursuant to Section 120.57(1), Florida Statutes, challenging the Department's proposed action. All of the Petitioners except the two Petitioners in these cases and HCR withdrew their Petitions prior to the formal hearing of these cases. HCR participated in the formal hearing of these cases but withdrew its Petition prior to the issuance of this Recommended Order. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for nursing home beds to be located in Flagler and Volusia Counties. Meridian. Meridian, Inc., is a corporation headquartered in Towson, Maryland. The stock of Meridian, Inc., is owned by five individuals. Volusia Meridian Limited Partnership (hereinafter referred to as the "Partnership") is a Maryland limited partnership authorized to conduct business in Florida. Meridian, Inc., is the Partnership's general partner. The Partnership owns a nursing home in Ormond Beach, Florida. The Ormond Beach nursing home is leased to Meridian Nursing Centers, Inc. For the past twenty years, Meridian has owned, operated, developed and managed long-term health care facilities, retirement communities and other health care services for the elderly. Meridian owns and operates thirty-three facilities, in five States. These facilities have approximately 4,800 beds. In Florida, Meridian owns nursing homes in Lakeland, Plantation and Ormond Beach. As of the date of the formal hearing, Meridian had two other facilities under construction in Florida: one located in Longwood, Florida; and the other located in Melbourne, Florida. National. National is a publicly traded Delaware limited partnership, authorized to conduct business in Florida. National's principal offices are located in Murfreesboro, Tennessee. National was created in 1971 with the purchase of fourteen existing nursing homes located in Tennessee, Kentucky, and Georgia. National now operates seventy nursing homes and health care centers in ten different States. Twenty-two of these homes and health care centers are managed, but not owned, by National. National also operates four retirement complexes, eighteen home health agencies and seven to ten specialized Alzheimer's units. In Florida, National owns two health care centers and manages eighteen centers owned by other companies. None of these facilities are located in Flagler or Volusia Counties. HBA. HBA is a Florida corporation engaged in the business of developing, constructing and operating nursing homes. The principals of HBA have owned and operated nursing homes for approximately twenty years and in Florida for approximately fifteen years. HBA's corporate headquarters are located in Ft. Lauderdale, Florida. HBA owns or operates twenty-four nursing homes located in Florida, New Jersey, Pennsylvania and Washington D.C. In Florida, HBA owns or operates six nursing homes. They are located in New Smyrna Beach, Ft. Lauderdale, Plantation, Tamarac and Miami. The New Smyrna Beach nursing home, Ocean View Nursing Home (hereinafter referred to as "Ocean View"), is located in southern Volusia County. The Proposals. Meridian's Proposal. Meridian's Ormond Beach nursing home is located in northeast Volusia County. This facility consist of 60 nursing home beds. It began operation in November, 1987. In this proceeding, Meridian is seeking approval of the addition to its Ormond Beach nursing home of an additional 60 nursing home beds. Meridian is proposing the construction of a 14,531 square foot (329 square feet per bed) addition to its existing Ormond Beach nursing home. The total size of the Ormond Beach facility will be 39,000 gross square feet if Meridian's proposal is approved. The total proposed cost of Meridian's project is $1,247,800.00. The total project cost of the resulting 120-bed Ormond Beach facility will be $4,262,361.00. National's Proposal. In this proceeding, National is seeking approval of a certificate of need authorizing the construction and operation of an 80-bed nursing home to be located in the Palm Coast area of Flagler County, Florida. The exact location of the facility has not been identified by National. National is proposing the construction of a facility consisting of approximately 44,183 gross square feet (552 square feet per bed). The total proposed cost of National's project is $3,786,846.00. HBA'S Proposal. HBA currently owns and operates Ocean View. Ocean View is located in southeast Volusia County. Ocean View currently is licensed to operate 179 nursing home beds. In this proceeding, HBA is seeking approval of the addition to Ocean View of 60 nursing home beds. HBA is proposing the construction of an 18,000 gross square foot (263 square feet per bed) addition to Ocean View. The total size of Ocean View will be 63,000 gross square feet if HBA's proposal is approved. The total proposed cost of HBA's project is Section 381.705(1)(a), Florida Statutes. Numeric Need. Numeric need for additional nursing home beds is determined pursuant to the need methodology provided in Rule 10-5.011(1)(k), Florida Administrative Code (hereinafter referred to as the "Need Methodology"). The Department determines the need for additional nursing home beds by applying the Need Methodology for "planning horizons" three years into the future from the certificate of need batching cycles. For the batching cycle involved in these cases, the Department published pursuant to Rule 10-5.008(2), Florida Administrative Code, the net number of additional nursing home beds, the "fixed need pool," in the Florida Administrative Weekly, for the first time. In these cases, the Need Methodology must be applied to determine the fixed need pool for the July, 1990, planning horizon for Flagler and Volusia Counties. These Counties make up Subdistrict 4 of the Department's District 4. Initially the Department determined that the fixed need pool involved in these cases was zero. Pursuant to Department policy, the Department published a corrected fixed need pool during the grace period of Rule 10- 5.008(1)(b), Florida Administrative Code, on September 18, 1987. Based upon the corrected fixed need pool, the Department determined that there was a need for 80 additional nursing home beds for Subdistrict 4 of District 4. No point of entry was provided by the Department for challenging this fixed need pool. The Department's calculation of a fixed need pool of 80 nursing home beds was based upon a misapplication of the Need Methodology by the Department. Based upon a proper application of the Need Methodology there is a need for 68 additional nursing home beds for the planning horizon at issue in these cases. The applicants involved in these cases filed their applications in reliance upon the Department's published fixed-need pool of 80 additional nursing home beds. The proper components of the Need Methodology for determining the gross number of nursing home beds needed for District 4 in July, 1990, are as follows: The projected population age 65-74 in District 4 for July, 1990, is 125,990 (POPA); The projected population age 75 and older in District 4 for July, 1990, is 91,109 (POPB); The population age 65-74 in District 4 in July, 1987, was 113,083 (POPC); The population age 75 and older in District 4 in July, 1987, was 77,867 (POPD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 (LB); The estimated bed rate for the population aged 65-74 of District 4 is 0.01034836 (BA); The estimated bed rate for the population aged 75 and older of District 4 is 0.06209018 (BB); and The total number of nursing home beds needed for District 4 in July, 1990, is 6,961 beds (A). The proper components of the Need Methodology for allocating the gross number of nursing home beds needed for District 4 in July, 1990, to Subdistrict 4 are as follows: The number of licensed beds in Subdistrict 4 as of July 1, 1987, was 2,290 beds (LBD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 beds (LB); The occupancy rate of Subdistrict 4 was 85.83% (OR); and The gross number of nursing home beds allocated to Subdistrict 4 is 2,532 beds (SA). Rule 10-5.011(1)(k)2.g., Florida Administrative Code, provides the following with regard to determining the number of licensed nursing home beds to be taken into account in calculating gross bed need for the batching cycle involved in these cases: [B]ed rates established prior to the second batching cycle letter of intent deadline shall be calculated on the number of licensed community nursing ads and the population projections as of July 1... Once the gross number of nursing home beds needed in Subdistrict 4 for July, 1990, is determined, the net number of beds needed is determined by subtracting the total number of licensed beds and 90 percent of approved beds in the Subdistrict from the gross number of beds needed. Rule 10-5.011(1)(k)2.i., Florida Administrative Code, provides the manner in which net bed need is to be determined. In particular, this Rule provides the following: The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987; ... The number of licensed beds in Subdistrict 4 as of August 1, 1987, was 2,410 beds. The number of approved licensed beds in Subdistrict 4 as of August 1, 1987, was 60 beds. The increase in licensed beds in Subdistrict 4 from 2,290 beds as of July 1, 1987, to 2,410 beds as of August 1, 1987, was caused by the licensing of the approved 120-bed Indigo Manor nursing home owned by Health Care and Retirement Corporation of America on July 21, 1987. It is not inconsistent for the Department to use the number of licensed nursing home beds as of July 1 for purposes of determining gross bed need and August 1 for calculating net bed need. The use of these dates by the Department is consistent with good health planning and the requirements of the Need Methodology. The State Health Plan. The Florida State Health Plan contains the general goals of fostering cost containment and developing an adequate supply of accessible and appropriately utilized long-term care health services. Each of the applicants will increase the accessibility of nursing home beds and are proposing appropriate utilization of health services. HBA's proposal will enhance the accessibility of nursing home beds in southeast Volusia County. The District Health Plan. The 1987 update to the 1986 district health plan for Subdistrict 4 of the Department's District 4, contains recommendations to be considered in determining community nursing home care bed need. These recommendations, and their application, are as follows: If the state determines that Subdistrict 4 is eligible for additional beds, these beds should be awarded to the Flagler Beach/Palm Coast area of Flagler County if the occupancy rate of Meadowbrook Manor meets or exceeds 85 percent occupancy at the time of CON decision and if it could be shown that the level of occupancy is likely to continue. The average occupancy rate for Meadowbrook Manor for the period of January 1, 1987, through June 30, 1987, was 58 percent. Meadowbrook has never achieved an 85 percent occupancy rate as of the date of the formal hearing of these cases. At the time of the "CON decision" in these cases, Meadowbrook had not achieved an 85 percent occupancy. This recommendation, therefore, does not apply. If a high rate of occupancy at Meadowbrook Manor in Flagler County does not materialize and if the occupancy rate at Ocean View Nursing Home in southeast Volusia County continues at 85 percent or higher and it could be verified that it will remain at a high rate, then 60 nursing home beds should be awarded in the New Smyrna Beach/Edgewater area of southeast Volusia County. The CON applicant must be willing to accept 50 percent Medicaid patients. The remaining portion should be awarded in West Volusia County. The average monthly occupancy of Ocean View for the period of January 1, 1987, through June 30, 1987, was 86 percent. Since September, 1987, the occupancy rate at Ocean View has been 94 percent or higher. This high rate of occupancy should continue. HBA proposes to accept 50 percent Medicaid patients and proposes to add its sought after nursing home beds to the New Smyrna Beach/Edgewater area of southeast Volusia County. HBA is the only applicant that meets this recommendation. If the conditions in Nos. 1[a] and 2[b] are not met, the state should award all beds to West Volusia. The conditions of 2[b] have been met. Therefore, this recommendation does not apply. No nursing home beds should be awarded to East Volusia County out of the New Smyrna Beach/Edgewater area. Refer to recommendation 2[b] above. The Meridian proposal seeks to add beds to its facility located in East Volusia County outside of the New Smyrna/Edgewater area. Meridian's proposal is, therefore, inconsistent with this recommendation. HBA's proposal is consistent with the recommendations of the updated 1986 district health plan. Meridian's and National's proposals are not consistent with these recommendations. The 1988 district health plan does not contain the specific recommendations concerning the allocation of nursing home beds within Subdistrict 4 of District 4, quoted above. The specific recommendations concerning where beds should be located within Subdistrict 4 of District 4 were eliminated in response to a suggestion by the Department that the recommendations were too specific and did not allow more flexibility. Need for Services. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. The evidence did not prove that any of the applicants are proposing services not being provided in Subdistrict 4 of District 4. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Subdistrict 4 (consisting of Flagler and Volusia Counties) of District 4 are not available, efficient, appropriate, accessible, adequate or providing quality of care, except to the extent that existing services cannot meet the need for additional nursing home beds in the subdistrict. The accessibility of nursing home beds in southeast Volusia County has been restricted since September, 1987. Ocean View's occupancy during this period of time has been at or above 95 percent. Nursing home beds in eastern Volusia County have been at 75 percent occupancy. Meadowbrook Manor, located in Bunnell, Flagler County, has not achieved an occupancy rate of 75 percent since it opened in November, 1985. Meadowbrook Manor is a 100-bed nursing home. It has been experiencing one of the lowest, if not the lowest, occupancy rates of all nursing homes in Subdistrict 4. Although the evidence proved that Meadowbrook Manor has experienced difficulties in attracting residents, the evidence failed to prove that Meadowbrook Manor is not an appropriate, available and accessible nursing home or that the difficulties experienced by Meadowbrook Manor will continue in the future. Section 381.705(1)(c), Florida Statutes. Meridian. Meridian's licensed nursing home facility in Plantation, Florida, is currently rated superior. Meridian has been informed by the Department that its nursing home facility in Ormond Beach will be rated superior. Meridian's facility in Lakeland has not been in operation long enough to be eligible for a superior rating. Therefore, the Lakeland nursing home has been rated standard. Meridian will provide extensive training for its staff at its Ormond Beach nursing home. Meridian will provide staff for the Ormond Beach facility in excess of the staffing levels required by the Department. Meridian has an extensive quality assurance program, including its Quality of Life Program. Meridian's findings of fact numbers 5-12 and 14-22 are hereby adopted and incorporated herein by reference. Meridian proposes to provide sufficient services, safeguards and staff. Meridian should be able to provide adequate quality of care in its facility. National. Four of National's fourteen existing nursing home facilities in Florida have been rated superior. The other ten facilities have be rated standard. National has a policy of seeking accreditation by the Joint Commission for Accreditation of Health Care Organizations. National will provide staff for its proposed facility in excess of the staffing levels required by the Department. National has an extensive quality assurance program. National's finding of fact number 24a-g and k is hereby adopted and incorporated herein by reference. National proposes to provide sufficient services, safeguards and staff. National should be able to provide adequate-quality of care in its proposed nursing home facility. HBA. Four of HBA's seven nursing home facilities in Florida have been rated superior. The other three facilities have been rated standard. Ocean View has been rated a superior facility by the Department for the past five years. HBA will provide extensive training and development for its staff at Ocean View. HBA proposes to provide sufficient services, safeguards and staff. HBA should be able to provide adequate quality of care at Ocean View. Section 381.705(1)(e), Florida Statutes. All three of the applicants in these cases operate a number of nursing homes and other health care facilities in Florida and other areas. Each will enjoy the benefits, including joint purchasing power, which inure to multi- facility organizations. None of the applicants, however, proved that they will provide joint, cooperative or shared health care resources more effectively than the other applicants. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all of the residents of Flagler and Volusia Counties. Meridian has proposed to provide 53% and 51% of its patient days during its first year and its second year of operation, respectively, to the care of Medicaid patients. Meridian has proposed to provide 4% of its patient days during its first two years of operation to the care of Medicare patients. National has proposed to provide 57% of its patient days during its first two years of operation to the care of Medicaid patients. National has proposed to provide 10% of its patient days during its first two years of operation to the care of Medicare patients. National has not determined, however, how many nursing home beds it will dedicate to the care of Medicare patients. National has indicated that it will dedicate fourteen to twenty-four beds as a Medicare certified distinct-part unit. Nationally, 8% of National's total patient days for the fiscal year ending September 30, 1986, were Medicare patient days. HBA has proposed to provide 60% of its patient days during its first two years of operation to the care of Medicaid patients. HBA has proposed to provide 5% of its patient days during its first two years of operation to the care of Medicare patients. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. The parties have stipulated to the following with regard to immediate financial feasibility of the proposals in these cases: All applicants are ready, willing and capable of raising all the required capital and obtaining all financing at the rates, conditions and amortizations shown in the applicants' certificate of need applications submitted in this cause. Long-term Financial Feasibility. (1). Meridian. Meridian has projected a profit of $67,976.00 on revenue of $2,536,518.00 for the first year of operation of its proposed 120-bed Ormond- Beach facility and a profit of $136,712.00 on revenue of $2,881,804.00 for the second year of operation of its proposed 120-bed Ormond Beach facility. Meridian has also projected a profit from the operation of its proposed 60-bed addition for the first two years of operation. Meridian has projected a payor mix of 49% Medicaid, 4% Medicare, 44% private pay and 3% other during the first year of operation and 46% Medicaid, 4% Medicare, 46% private pay and 4% other during the second year of operation. These projections are reasonable. Meridian's Ormond Beach facility opened in November, 1987. Although it was projected to fill up in twelve months, it only took five months. The facility had a waiting list of twenty people when it opened. Meridian's projected fill up rate for the additional 60 beds is reasonable. Meridian's projected patient charges are reasonable. Meridian's proposed Medicare charges are the lowest of the three applicants. Meridian's projected revenue and expenses are reasonable. Meridian's project is financially feasible in the long term. (2). National. National has projected a loss of $96,990.00 on revenue of $986,598.00 for the first year of operation of its proposed facility and a profit of $269,603.00 on revenue of $1,847,865.00 for the second year of operation of its proposed facility. National has projected a payor mix of 52% Medicaid, 12% Medicare, 31% private pay and 4% other during the first year of operation and 48% Medicaid, 13% Medicare, 33% private pay and 5% other during the second year of operation. These projections are reasonable. National's projected fill up rate is reasonable. National's projected patient charges are reasonable. National's projected revenue and expenses are reasonable. National's project would be financially feasible in the long term if there was a need for 80 nursing home beds. (3). HBA. HBA has projected a profit of $127,542.00 on revenue of $5,658,984.00 for the first year of operation of its proposed 239-bed facility and a profit of $188,614.00 on revenue of $6,213,164.00 for the second year of operation of its proposed 239-bed facility. HBA has projected a payor mix of 53% Medicaid, 6% Medicare, 34% private pay and 7% other during the first two years of operation. These projections are reasonable. HBA's projected fill up rate for the additional 60 beds is reasonable. HBA's projected patient charges are reasonable. HBA's projected revenue and expenses are reasonable. HBA's project is financially feasible in the long term. Section 381.705(1)(k), Florida Statutes. The evidence failed to prove that this criterion applies in this proceeding. Section 381.705(1)(l), Florida Statutes. Generally, all of the applicants will improve competition if their projects are approved. Based upon projected Medicaid and Medicare rates, Meridian will have the least adverse impact on patient charges. HBA will have the least adverse impact on private-pay patient charges. Section 381.705(1)(m), Florida Statutes. The cost of constructing Meridian's proposed addition is $932,100.00. This amounts to a per square foot cost of $64.14. Meridian's existing Ormond Beach nursing home is located on a 5.5 acre wooded site. The existing building was constructed with sufficient ancillaries for a 120-bed nursing home. Site plans, road work, sewer, utility connections and zoning have been designed and approved for a 120-bed facility. The cost per bed for Meridian's proposed 60-bed addition is $20,797.00, based upon the total projected project cost. The cost per bed for the existing 60-bed facility was $51,242.00. The cost per bed for the proposed 120-bed facility will be $35,519.00. Meridian's projected costs of construction are reasonable. Meridian's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing National's proposed facility is $2,789,346.00. This amounts to a per square foot cost of $63.13. The cost per bed for National's proposed 80-bed nursing home is $47,355.00. National's projected costs of construction are reasonable. National's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing HBA's proposed addition is $1,145,000.00. This amounts to a per square foot cost of $63.61. The cost per bed for HBA's proposed facility is $25,000.00, based upon the total projected project cost. HBA's projected costs of construction are reasonable. HBA has proposed construction of its 60-bed addition as a second floor addition to an existing first floor 60-bed wing at Ocean View. The second floor will be constructed by a method of construction which uses twin T concrete planks. These planks support the second floor. When the planks are placed over the existing wing patients in the existing wing will have to be displaced for a portion of one day. The existing dining room will not be used for approximately 4 to 6 weeks. The construction of HBA's addition will not endanger patients at Ocean View. HBA has successfully constructed second floor additions over existing facilities in the past. Although there will be some inconvenience, quality of care should still be provided during construction. The other applicants have raised a number of questions concerning the appropriateness of HBA's proposed addition. Those questions do not, however, prove that HBA will not provide an adequately designed and constructed addition or cannot provide quality of care. HBA's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The evidence failed to prove that there are alternative, less costly or more effective methods of construction to the construction methods proposed by Meridian, National or HBA available. Section 381.705(1)(n), Florida Statutes. None of the applicants presented evidence concerning past or proposed care of the medically indigent, other than their care of Medicaid patients. Meridian has committed to provide 55% of its patient days in its Ormond Beach nursing home for the care of Medicaid patients. Meridian has not yet reached this level of care of Medicaid patients, however. At the time of the formal hearing Meridian was providing 46% Medicaid care. Meridian has not declined to serve Medicaid patients if a bed was available. During its fiscal year ending September 30, 1986, National provided 20.6% of its company-wide patient days to skilled Medicaid patients and 38.5% to intermediate Medicaid patients. HBA has been providing approximately 65% of its patient days at Ocean View to the care of Medicaid patients. All of the applicants propose to provide adequate care to Medicaid patients. The projected percentages of Medicaid patient days and revenue have been listed in previous findings of fact. Section 381.705(2), Florida Statutes. To the extent applicable, all of the applicants comply with the requirements of Section 381.705(2), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting HBA's application for a certificate of need authorizing the addition of 60 nursing home beds to Ocean View and denying Meridian's and National's applications for certificates of need. DONE and ENTERED this 1st day of June, 1989, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1989. APPENDIX CASE NUMBERS 88-1836 88-1839 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. All of the parties have filed proposed findings of fact which pertain to HCR. HCR also filed a proposed recommended order. In light of the fact that HCR has voluntarily dismissed its case, those proposed findings of fact have not been considered in this Appendix. Meridian's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 9, 11-12 and 46. 2 19-20. 3 90. The last two sentences are hereby accepted. 4 70. 5-12 See 49. 13 The parties stipulated that the criterion to which this proposed finding of fact relates has been met by all the parties. 14-22 See 49. 23 67-73. 24-27 These proposed findings of fact fail to take into account the fact that some of the costs attributable to the additional 60 nursing home beds sought by Meridian in this proceeding have been included in the cost of the existing facility. 28 107. 29 The proposed construction cost per square foot is $64.14. See finding of fact 89. 30-33 90. Hereby accepted. 34-41 Proposed findings of fact pertaining to HCR. 42 16-17. 43 23-25. 44 101 and hereby accepted. 45-49 See 103. Although there was evidence that supported these proposed findings of fact generally, the proposed findings of fact overlook the fact that HBA's drawings are preliminary and will be revised as needed to comply with the Department's requirements. The weight of the evidence supports a conclusion that HBA's proposed methods of construction and costs are reasonable despite the necessary corrections in its preliminary plans. The proposed finding of fact concerning parking spaces is not relevant to this proceeding because the weight of the evidence failed to prove that any costs associated with additional parking spaces which may be needed have been left out of HBA's projected costs. The availability of parking spaces is not a consideration under the criteria of Section 381.705, Florida Statutes, except to the extent that costs associated with parking spaces should be taken into account. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. The first two sentences are not relevant to these proceedings. The rest of this proposed finding of fact is not supported by the weight of the evidence. 52-53 Not supported by the weight of the evidence. The evidence did prove that, as of the date of the hearing of these cases, HBA should have filed a different pro forma which takes into account changes in its projected Medicaid revenue and its salary projections if this proceeding was a completely de novo proceeding. The Department has, however, taken the position that applicants cannot "amend" their applications between the date that an application is reviewed and a formal administrative hearing concerning the application. Therefore, HBA did not change its pro forma to reflect the most current information concerning Medicaid and salaries. HBA's financial expert was aware of the changes in Medicaid and salary expenses. Despite this knowledge, he testified that HBA's proposed facility is financial feasible. This testimony was accepted. 54 14-15. 55 21-22 and 95. Not relevant to this proceeding. 64. The last sentence is not supported by the weight of the evidence. 58 51. 59 Not supported by the weight of the evidence. National presented evidence that it would designate a portion of its proposed facility as a dedicated Medicare unit. 60 18, 21, 24 and 27. 61 26-29. 29. The last sentence is not relevant to this de novo proceeding. Not relevant to this de novo proceeding. 64-65 Contrary to the stipulation of the parties. 66 Contrary to the stipulation of the parties and not relevant. National's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 2 and 21. 2 1 and 3. 3-4 Hereby accepted. 5 4-6. 6 13-14. 15 and hereby accepted. Hereby accepted. 21 and 64 and hereby accepted. 10 21-22. 11 26. 12 27. See 28. Not supported by the weight of the evidence. 31-32 and hereby accepted. Not supported by the weight of the evidence and erroneous conclusion of law. See 34-35. 17 35. Not supported by the weight of the evidence and erroneous conclusion of law. The first sentence is accepted in finding of fact 34. The rest of the proposed finding of fact is not supported by the weight of the evidence or is an erroneous conclusion of law. 20 28. See 37-38 and 45. National's proposal is not consistent with the 1987 district health plan. Subparagraph A. is not relevant to this de novo proceeding. Subparagraph B. is not relevant or not supported by the weight of the evidence. The last sentence of subparagraph C. is not relevant to this de novo proceeding. The last sentence of subparagraph D. and subparagraphs e-h are not supported by the weight of the evidence. Although subparagraph I. is generally correct, it is not sufficient to justify locating the nursing home beds to be awarded in this case in Flagler County. Subparagraph j. is not supported by the weight of the evidence. The first and last sentences are hereby accepted. The second sentence is not supported by the weight of the evidence. Hereby accepted. 49 and 51-55. Subparagraph h. is not supported by the weight of the evidence. See 59. Stipulated by the parties as true of all of the applicants. 27 60 and 63. 28 67 and see 75-79. 29 86. Section 381.705(1)(l), Florida Statutes, is to be applied to all of Subdistrict 4 of District 4 and not just Flagler County. 22, 94, 97 and hereby accepted. 32 64 and 108. 33 See 111. Not supported by the weight of the evidence. Hereby accepted. HBA's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1 2 2-3. 3 4. 4 5. 5 6. 6 7. 7 8. 8 9-12. 9 14-15. National does not have a corporate headquarters since it is not a corporation. 10, 14, 21, 25, 32 and 35 Proposed findings of fact pertaining to HCR. 11 16-17. The evidence proved that HBA owns 6, not 7, nursing homes in Florida. 12 18-20. 13 21-22. 15 23-24. 28, 30 and 34-35. Subparagraph b) is a statement of arguments advanced by Meridian and National. 27, 38 and hereby accepted. Subparagraph's c)1)-4) and 7) pertain to HCR. 18 See 42-45. 19 See 46-47 and 50. Subparagraph b) is not supported by the weight of the evidence. 20 20, 51 and 54. 22 56-58 and hereby accepted. 23 59. 24 60. 26 Stipulated. 27 67. 28 85. See, however, 79. 29-30 Hereby accepted. 31 See 89. 33 18-20, 89 and 93. 34 22 and 96-97. 36 24-25, 101-104 and hereby accepted. 37 111. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 28. 3 30. 4 2-3 and 7. 4 and 6. Not relevant to this proceeding. 7 26 and 28. 8-15 Although there is evidence to support these proposed findings, they are not relevant to this proceeding. As a matter of law, the Department cannot through agency policy circumvent the requirements of the Need Methodology of Rule 10-5.011(1)(k), Florida Administrative Code, by publishing a "fixed need pool" for which no point of entry to challenge has been provided. Not relevant to this de novo proceeding. Hereby accepted. Not relevant because the parties have stipulated that Section 381.705(1)(a), Florida Statutes, applies to these cases. Not supported by the weight of the evidence. 20 32 and 36. 21 Hereby accepted. 22 32. 23 34. 24 33. 25 36. 26 29. 27 28. 28 Hereby accepted. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 Tallahassee, Florida 32316-2174 Charles D. Hood, Jr., Esquire Post Office Box 15200 Daytona Beach, Florida 32015 Lee Elzie, Esquire Post Office Box 82 Tallahassee, Florida 32302 Thomas W. Stahl, Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretarey Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
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 =================================================================
The Issue Which of two competing applications for nursing home beds better meets the statutory and rule criteria to satisfy the numeric need for 79 additional beds in Agency for Health Care Administration District 7, Subdistrict 1, Brevard County.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the single agency responsible for the administration of certificate of need ("CON") laws in Florida. AHCA published a numeric need for an additional 79 beds in District 7, Subdistrict 1, for Brevard County for the July 1996 planning horizon. There was no challenge to the numeric need determination. After reviewing the applications of Holmes/VHA Long Term Care Joint Venture ("Holmes/VHA") and National Health Corporation d/b/a NHC of Merritt Island ("NHC"), among others, AHCA published its intent to approve the application of NHC and to deny that of Holmes/VHA. The State Agency Action Report ("SAAR") issued on March 13, 1994, for the July 1996 Planning Horizon, summarizes AHCA's review of the applications and the reasons for its decision. Holmes/VHA timely challenged AHCA's preliminary approval of CON 7527 to NHC and denial of CON 7539 to Holmes/VHA. In a pre-hearing stipulation, the parties agreed that the specific statutory criteria at issue, related to the contents of the letter of intent and application are subsections 408.037(2)(a), (2)(c), (4) and 408.039(2)(c), Florida Statutes. The parties also agreed that the CON review criteria at issue are subsections 408.035(1)(a), (b), (d), (e), (h), (i), (l), (m), (n) and (0), and 408.035(2)(e), Florida Statutes. The parties stipulated to the need for 79 additional community nursing home beds in the subdistrict. At the formal hearing the parties also agreed that quality of care is not at issue and that staffing schedules and proposals to fund or finance both projects are reasonable, thereby removing from consideration subsections 408.035(1)(c) and portions of (1)(h). HOLMES/VHA Holmes/VHA, the applicant for CON 7539, is a Florida general partnership formed between Holmes Regional Enterprises, Inc. ("Holmes Enterprises"), a Florida not-for-profit corporation, in Brevard County, Florida, and Vantage Health Systems, Inc., d/b/a VHA Long Term Care ("VHA"). The partnership, Holmes/VHA, owns and operates an existing 120-bed nursing home, Holmes Regional Nursing Center ("Holmes Nursing Center") in Melbourne. VHA is a division of Service Master Diversified Health Services of Memphis, Tennessee, which manages 106 facilities in 30 states. Holmes Enterprises operates Holmes Regional Medical Center ("Holmes Regional"), a 528-bed acute care hospital, with open heart surgery and neonatal intensive care services and approval for 30 skilled nursing beds. Sixty of Holmes Regional's licensed beds are located at Palm Bay Community Hospital in Palm Bay, approximately 8 to 15 miles south of Holmes Regional. Although it is a separate municipality, Palm Bay was described as a suburb of and contiguous to Melbourne. The site for the Palm Bay Center, which is across the street from Palm Bay Community Hospital, is in another community known as Mallibar. VHA has entered into similar partnerships with acute care hospitals in Jacksonville, Florida, and Greensboro, North Carolina, to operate nursing homes in those areas. The Service Master organization provides management and support services, including data processing, legal, personnel, dietary, and architectural and design services for nursing homes. Holmes/VHA, the joint venture general partnership, has a management committee of four people, two from the hospital and two from the VHA company. The management committee, functioning like a board of directors, adopted a resolution authorizing Holmes/VHA to file the Con application. When formed, the joint venture obtained an older 60-bed facility, and then constructed a replacement facility. During the construction, it obtained a 60-bed CON from another company and combined beds to build its existing 120-bed nursing home, Holmes Nursing Center. Holmes Nursing Center is rated superior and offers inpatient and outpatient rehabilitative and restorative services, including a head and spinal cord injury program. The rehabilitative services are directed by Holmes Regional, which is located a block and a half from the nursing home. The original CON for Holmes Nursing Center required that 35 percent of total patient days be provided to Medicaid. The requirement was increased to 45 percent with the 60-bed addition, which Holmes Nursing Center has exceeded. The 120 beds are divided into 20 percent Medicare certified, 50 percent Medicaid certified and 30 percent non-certified or private pay. Holmes Nursing Center also operates a 24-bed subacute unit for persons qualifying under Medicare criteria for skilled nursing care. Patients in the unit receive intensive assessments on each nursing shift and services which include pain, respiratory, and wound management. Holmes Regional Hospice, Inc. ("the hospice") is an affiliate of Holmes Enterprises, for which Holmes Regional holds the CON to take care of hospitalized hospice patients The current hospice census of over 200 patients includes 70 percent cancer, 9 percent AIDS, and 21 percent other terminal illnesses, such as heart disease and Alzheimers. Holmes/VHA applied for a CON to construct the 79-bed Palm Bay Nursing and Rehabilitation Center ("Palm Bay Center") conditioned on the provision of 61 percent of total patient days to Medicaid and the establishment of a 12-bed sub- acute unit, one room for hospice patients, inpatient and outpatient rehabilitative therapy, and respite care. The total gross square footage is 42,691 square feet. The Holmes Enterprises affiliates propose to provide support services for the Palm Bay Center, as they do for Holmes Nursing Center. The estimated total project cost for the Palm Bay Center is $4,732,790, of which the construction cost is $82,720,000 or $63.71 a square foot. An equity contribution of land valued at $420,000, will be provided by the hospital. Service Master will provide the funds or obtain financing for the project. The assumptions in the pro forma, including the expectation that interest may be due for a commercial loan, are reasonable. AHCA's expert's conclusion that the project is financially feasible is accepted. The financing by Service Master can be structured to avoid being treated as a related party transaction, which would adversely affect Medicaid and Medicare reimbursements. Holmes/VHA listed as capital projects three other pending CON and an additional $25,000 in annual capitalized routine expenses for furniture, fixtures and equipment attributable to Holmes Regional Nursing Center. The total of the capital projects listed on Schedule 2 of the application is $13,256,701. NHC National HealthCorp, L.P. ("NHC"), the applicant for CON 7527, began operations in 1986, with 14 nursing homes. Currently, NHC owns or manages 96 nursing homes primarily in the southeast United States. It manages 36 nursing homes in Florida, 6 of which are also owned by NHC. NHC proposes to add 60 beds to National Healthcare Center of Merritt Island ("NHC-Merritt Island"), a superior rated, 120-bed community nursing home on a 7 acre site in Merritt Island, Brevard County. NHC-Merritt Island has a 22-bed Alzheimers' unit. NHC's regional office provides support services, including speech, occupational, and physical therapies, nursing, dietary, and administrative services to NHC-Merritt Island. With the addition of 60 beds, NHC intends to provide respite care, a dedicated 20-bed subacute unit, and an additional 16-bed Alzheimers' unit. Without a subacute unit, NHC already has an average census of 9 subacute patients. NHC will triple the size of the therapy space and more than double the size of the building. The projected total capital expenditure is $3,891,850, with construction costs of $2,955,000, or $85.00 a square foot. To accommodate the addition, NHC has entered into a contract to purchase an additional 1.3 acres, adjacent to the current 7 acres, for a cost of $175,000. For the past few years, NHC has experienced 94 to 100 percent occupancy. Fifty-four people are on NHC's waiting list and an additional 16 are on the waiting list for the Alzheimers' unit. The projected annual fill-up rates for NHC's additional beds are supported by the demand for its service and its historical experience, even though the monthly fill-up rates in the application are not adjusted to reflect the specific number of days in each month. Medicaid resident days are 55 percent to 57 percent of the total at present, below the 60.31 percent average in the subdistrict and the current 60 percent CON condition. If the expansion CON is approved, NHC will commit to providing 60.31 percent Medicaid patient days and will increase the number of Medicaid certified beds from 77 to 108. NHC was profitable in 1992 and 1993, by approximately $100,000 and $250,000, respectively, but currently is not profitable, with an approximate deficit of $8,000. The deficit is attributable to (1) a decline in the Medicaid reimbursement rate, which was initially higher due to start up costs, (2) the expiration of a new provider exemption from Medicare cost limits, and (3) the transfer of assets by NHC, in exchange for stock, to a newly formed subsidiary, from which NHC-Merritt Island is now leased. Lease payments are $517,000 a year whether the facility has 120 or 180 beds, and profits are returned to stockholders, including NHC. Using Medicaid rates, calculated by the state, as inflated forward, and Medicare rates in excess of routine cost limits, based on the current experience of NHC-Merritt Island, NHC reasonably projected its costs and profit margin. NHC-Merritt Island has a positive cash flow and its expenses and revenues are at the goal set by NHC. With a total of 180 beds, the projections are reasonable that NHC-Merritt Island will be profitable. As AHCA's expert opined, NHC's proposal is financially feasible. Subsection 408.035(1)(a) - need in relation to district and state health plans The 1991 District 7 health plan has three preferences related to nursing homes, one favoring a section of Orange County, is inapplicable to the Brevard County applications. A second, for applicants proposing pediatric services, is inapplicable because both proposals in this batch are to provide adult services. The third preference favors applicants proposing to establish units providing psychiatric or subacute services, with emphasis on treating medically complex patients and AIDS/HIV positive patients. Holmes/VHA's health planner considers the subacute care and AIDS/HIV services proposed by Holmes/VHA superior to those proposed by NHC. NHC, however, proposes to provide specialized care in designated units for both subacute and Alzheimers's patients. Although Holmes/VHA argues that Alzheimers' care is required in every nursing home and is, therefore, not a specialized program, the physical design of a separate unit for such patients was shown to enhance their comfort. No AIDS/HIV positive patient has been treated at either Holmes Nusing Center or at NHC-Merritt Island. NHC-Merritt Island has accepted AIDS/HIV positive patients who did not come to the facility. The state health plan has twelve allocation factors for use in comparing nursing home applications. Both applicants comply with the factors favoring locations in a subdistrict in which occupancy levels exceed 90 percent, proposals to meet or exceed that average subdistrict Medicaid occupancy of 60.31 percent, proposals with respite care and innovative therapies, multi- disciplinary staffing, for staffing in excess of minimum state requirements, and which document means to protect residents' rights and privacy. Both Holmes/VHA and NHC also meet the preference for proposing charges that do not exceed the highest Medicaid per diem in the subdistrict. NHC asserted, but failed to demonstrate that its therapy services with in-house staff are superior to those provided to Holmes/VHA by contract staff from Holmes Regional. The state health plan factor number 3, for specialized services, is largely duplicative of district health plan preferences. Neither applicant meets the part of one preference for providing adult day care, or the preference for proposing lower than average administrative costs and higher than average resident care costs. The fifth state allocation factor, for maximizing resident comfort and the criterion of subsection 408.035(1)(m), Florida Statutes, related to the cost and methods of construction, are at issue. NHC questions the adequacy of three acres for the building proposed by Holmes/VHA and the design of the building. Holmes Regional Nursing Center has 120 beds and approximately the same building area as that proposed for Palm Bay Center. The architects of the building have constructed a 163-bed facility on four acres in Jacksonville, and a 240-bed facility in Memphis, Tennessee on approximately six acres. Homes/VHA expects to construct the building in half the time required for completion of NHC's proposed addition. AHCA's architect noted, however, that Holmes/VHA has no Alzheimers unit and that its subacute area is not separated from the areas used by other patients and their families. Holmes/VHA has showers only in the 13 private rooms. By contrast, NHC has an Alzheimers unit with its own lounge and courtyard and a subacute unit at the end of a wing with a separate waiting room. NHC's rooms are larger, with larger windows. NHC's costs are higher than Holmes/VHA's, but not above the high average cost guidelines for construction used by AHCA. NHC has one nursing station for 60 beds, which meets the state requirement while Holmes/VHA is better equipped with two nurses stations for 79 beds. In general, Holmes/VHA established that its building could be built on 3 acres, and that its interior spaces exceed the requirements to be licensed. NHC established that its building and grounds will be larger, higher quality construction with more non-combustible materials, and better meet the preference for maximizing resident comfort. The preference for superior resident care is met by both Holmes/VHA and NHC-Merritt Island. An NHC facility in Stuart was rated conditional for 80 days of the 36 months, prior to the filing of the application. NHC had just purchased the Stuart facility at the time of the conditional rating, and had, in total, many more months of superior operations. In addition, the parties stipulated to quality of care issues at the hearing. Subsection 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, extent of utilization of like and existing services; alternatives to the applicants' proposals Brevard County is 80 miles long from north to south, 22 miles wide at its widest point, with 62 percent of its population in the southern area of the county. Holmes/VHA contends that its application should be approved based on the greater need for nursing home beds in southern Brevard County. Using ratios of beds in existing or approved nursing homes as compared to the population ages 65 and older, and 75 and older, a need is shown for more beds in the southern area, including Palm Bay. In the central area, there are 31.52 beds per 1000 people over 65, as compared to 26.53 in the southern area of Brevard County. For the population over 75, the ratios are 82.53 in the central and 68.47 in the southern area. The over 75 population is also projected to increase by a greater percentage in the southern as contrasted to the central areas of the county. AHCA claims to reject the use of any "sub-subdistrict" analysis of need, other than the test for geographically underserved areas, as defined by Rule 59C-1.036, Florida Administrative Code. That test which applies to proposed sites more than 20 miles from a nursing home, is not met by Holmes/VHA or NHC. However, AHCA has, in at least one other case, considered geographic accessibility within the planning area in determining which applicant should be approved, without the applicants having to demonstrate that the proposed sites are geographically underserved areas. NHC takes issue with Holmes/VHA's data on bed availability in the southern and central portions of the county. NHC maintains that its central location better serves the entire county. NHC's expert also criticized the methodology used by Holmes/VHA for demonstrating need in the southern area. The comparison of existing beds to population, shows a lack of county-wide parity, but not necessarily need. Other factors related to the need for nursing homes were not presented, such as poverty, migration, mortality and occupancy rates. In addition, NHC's expert questioned Holmes/VHA's experts calculations of bed- to-population ratios. The ratios arguably were skewed by using beds for Wuesthoff Hospital Progressive Care in the central area data, but including the population of the zip code in which Wuesthoff is located in the southern area. Holmes/VHA noted that the majority of the population in the zip code is in the southern area. Subsection 408.035(1)(n) - past and proposed Medicaid/indigent care Holmes/VHA's expert criticized NHC because two of its facilities, Merritt Island and Stuart, have been below the subdistrict average for Medicaid occupancy. For 3 six month periods during the last 4 years, they also were below their CON Medicaid commitments. One other NHC facility, in Hudson, has been below the subdistrict average, but significantly above its CON condition. NHC claims that it treats its Medicaid condition as a minimum, while Holmes/VHA uses its conditions as an artificial ceiling or maximum. Subsection 408.035(1)(e),(1)(o) - cooperative or shared health care resources; continuum of care Holmes/VHA has established linkages to its various related companies to provide cooperative care and shared resources. Palm Bay Nursing Center would enhance the multi-level care provided by the Holmes Enterprises group and provide another integral step in the continuum, particularly in rehabilitative therapies. NHC, however, as an existing provider, is part of a well-established network of health care providers in the community. NHC has also purchased land to build an adult congregate living facility near or adjacent to NHC-Merritt Island. Subsections 408.039(2)(a), (2)(c) and 408.037(4), and Rule 59C-1.008, Florida Administrative Code - capital projects list; board resolutions; and impacts on costs AHCA interprets the requirements for the submission of a board resolution to allow an original resolution accompanying the letter of intent to be treated as a part of the complete application. A board resolution with an application, which the statute requires "if applicable," applies to expedited applications for which a letter of intent would not have been received, according to AHCA. NHC submitted an original board resolution with its letter of intent, and a copy of that resolution with its application for CON 7527. The authority of Holmes/VHA's management committee to authorize the construction of a new nursing home, and the authority to operate a nursing home outside the city of Melbourne was questioned. The testimony that the joint venture agreement authorizes the management committee to adopt a resolution authorizing the filing of CON 7539 was not refuted. In addition, the testimony that operations are restricted to the "Melbourne area" as opposed to some more specifically defined geographic area was not refuted. Repeatedly, witnesses described Palm Bay, although a separate municipal corporation, as a suburb of Melbourne. Holmes/VHA claims that NHC failed to disclose certain capital equipment leases from its schedule 2 list of capital projects and failed to evaluate the impact on costs, as required by subsection 408.037, Florida Statutes. In NHC's annual reports, the costs of capital equipment leases were $204,000 in 1991, $43,000 in 1992, and $88,000 in 1993. In fact, the NHC witness who prepared schedule 2 included a total of $21,653,468 for the category "Renovations (Including Furnishings and Equipment) 1994", taken from the capital expenditure budget of each NHC facility. The listing is consistent with the footnote indicating the budget items "are subject to final approval and cash reserves availability." In addition, $100,000 is also listed under "Other Capitalization" for equipment, for which a footnote explains "[a]mount included in an abundance of caution to cover any items unknown at the time of filing." NHC, according to Holmes/VHA, also failed to provide a detailed evaluation of the impact of the proposed project on the cost of other services it provides, as required by subsection 408.037(2)(c), Florida Statutes. NHC merely states that the impact is "nominal" and "negligible." NHC satisfied the impact analysis requirement in the notes to schedule 2 and in schedules 11, 13 and 14 of the application. The incremental pro forma analysis of the effect on costs with or without the proposed project, and projected financial ratios and costs, give detail support for the statements in the application. Assuming, arguendo, that Holmes/VHA omitted $50,000 in capital costs from schedule 2, the omission is not material or fatal to consideration of the application on the merits. Holmes/VHA's financial expert testified that $50,000 is less than on-half of one percent of the total project expenditures listed on schedule 2 and is, therefore, immaterial. As AHCA concedes, Holmes/VHA and NHC have the resources to establish their projects and to provide the services described in their applications. On balance, the demand for additional beds, the enhancement of a superior, existing physical plant and the expansion of specialized services at NHC outweigh the community linkages demonstrated by Holmes/VHA and the desirability of county- wide parity in the distribution of nursing homes beds, at this time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration issue a Final Order approving CON No. 7527 for the construction of an additional 60 community nursing home beds by National Healthcorp, L.P., conditioned on the provision of 60.31 percent of total patient days to Medicaid patients. DONE AND ENTERED this 17th day of April, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2393 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner NHC's Proposed Findings of Fact. Accepted in Findings of Fact 13. Accepted in Findings of Fact 3. Accepted in or subordinate to Findings of Fact 14-18. Accepted in or subordinate to Findings of Fact 14-18, except last phrase. Accepted in or subordinate to Findings of Fact 6 and 10. 6-17. Accepted in or subordinate to Findings of Fact 30 and conclusions of law. 18-21. Accepted in Findings of Fact 32. 22. Accepted in Findings of Fact 3. 23-30. Accepted in or subordinate to Findings of Fact 5 and 31. Rejected in Findings of Fact 6 and 31. Accepted in Findings of Fact 33. Rejected in Findings of Fact 33. Accepted in preliminary statement and Finding of Fact 1. 35-36. Accepted in part and rejected in part in Findings of Fact 21-25. 37-38. Accepted in Findings of Fact 21. 39. Rejected conclusion in Findings of Fact 20, 23 and 34. 40. Accepted in Findings of Fact 21 and 23. 41. Accepted in Findings of Fact 24. 42. Accepted in Findings of Fact 21. 43. Accepted in Findings of Fact 20. 44-45. Accepted in Findings of Fact 21. 46-48. Accepted in Findings of Fact 25. 49. Rejected in Findings of Fact 25. 50. Accepted in Findings of Fact 21. 51. Rejected in Findings of Fact 21. 52. Accepted in Findings of Fact 21. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 19. 56-57. Accepted in Findings of Fact 20. Accepted in Findings of Fact 34. Accepted in Findings of Fact 27 and 28. Accepted in Findings of Fact 26 and 27. Rejected in Findings of Fact 26 and 27. Accepted in or subordinate to Findings of Fact 26 and 27. Accepted in Findings of Fact 19. Accepted in Findings of Fact 19, 26 and 27. Rejected in Findings of Fact 26-27 and conclusions of law. Rejected in Findings of Fact 26-27 and conclusions of law. Accepted in Findings of Fact 2. 68-77. Accepted in part and rejected in part in Findings of Fact 27. Accepted in Findings of Fact 20. Rejected in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in or subordinate to Findings of Fact 9, 10 and 20. Accepted in or subordinate to Findings of Fact 20. 84-88. Accepted in or subordinate to Findings of Fact 10, and 20. 89-95. Accepted in or subordinate to Findings of Fact 15, and 20. 96-97. Accepted in Findings of Fact 10, 15, and 21. 98-100. Accepted in Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 15, 16 and 20. Accepted in or subordinate to Findings of Fact 16. Accepted in or subordinate to Findings of Fact 8 and 15. 104-108. Accepted in or subordinate to Findings of Fact 13 and 14. 109-110. Accepted in or subordinate to Findings of Fact 34. Subordinate to Finding of Fact 4. Accepted in or subordinate to Findings of Fact 34. 113-117. Accepted in Findings of Fact 21. Accepted in Findings of Fact 34. Accepted in Findings of Fact 11, 18 and 34. 120-123. Rejected conclusion in Findings of Fact 11. 124-130. Rejected in or subordinate to Findings of Fact 18. 131. Accepted in Findings of Fact 32. 132. Accepted in or subordinate to Findings of Fact 21. 133. Accepted in or subordinate to Findings of Fact 21. 134-136. Accepted in or subordinate to Findings of Fact 24. 137. Rejected first sentence in Findings of Fact 24. 138. Accepted in or subordinate to Findings of Fact 24. 139. Rejected as subordinate to Finding of Fact 24. 140. Accepted in or subordinate to Findings of Fact 15 and 24. 141-150. Accepted in or subordinate to Findings of Fact 24. 151. Rejected as not entirely supported by the record. 152-162. Accepted in or subordinate to Findings of Fact 24. 163-172. Accepted in or subordinate to Findings of Fact 21 and 28. 173-175. Accepted in or subordinate to Findings of Fact 29. 176. Rejected conclusion that "NHC better . . ." in or subordinate to Findings of Fact 29. 177. Accepted. Petitioner Holmes/VHA's Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 3.. 4. Accepted in or subordinate to Findings of Fact 3 and 4. 5. Accepted in Findings of Fact 26. 6-8. Accepted in or subordinate to Findings of Fact 10 and 31. 9. Accepted in Findings of Fact 10. 10. Accepted in Findings of Fact 2. 11. Accepted in Findings of Fact 30 and 31. 12. Rejected in Findings of Fact 30 and 32. 13. Conclusion rejected in Findings of Fact 30 and conclusions of law 37-40. 14. Accepted in Findings of Fact 2. 15. Accepted in Findings of Fact 3 and 31. 16. Accepted in Findings of Fact 26. 17-21. Accepted in or subordinate to Findings of Fact 26 and 27. 22. Accepted, except last sentence, in Findings of Fact 27. 23-24. Accepted in or subordinate to Findings of Fact 26 and 27. 25. Conclusions cannot be reached in Findings of Fact 26 and 27. 26-29. Accepted in or subordinate to Findings of Fact 11. 30-36. Accepted in Findings of Fact 11, 12, 33 and 34. Rejected in Findings of Fact 18 and 34. Rejected in or subordinate to Finding of Fact 32. Accepted in or subordinate to Findings of Fact 16. Accepted in Findings of Fact 40. Rejected in Findings of Fact 16. Rejected conclusion in Findings of Fact 18. 43-44. Rejected in Findings of Fact 18. 45-48. Rejected conclusion in Findings of Fact 18. 49-51. Accepted in or subordinate to Findings of Fact 3-10 and 29. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 7 and 8. Accepted in Findings of Fact 20. Accepted in or subordinate to Findings of Fact 3. Accepted in or subordinate to Findings of Fact 3 and 24. Accepted in Findings of Fact 29. 58-59. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in Findings of Fact 29. Accepted in Findings of Fact 19. Accepted in Findings of Fact 20. 63-65. Accepted in or subordinate to Findings of Fact 21. Accepted, except conclusion, in Findings of Fact 21 and 28. Rejected conclusions in Findings of Fact 20. Accepted in Findings of Fact 21 and 22. Accepted in Findings of Fact 24. 70-71. Accepted in Findings of Fact 21. 72. Accepted as corrected in Findings of Fact 25. 73-74. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 10 and 21. 77-78. Accepted in or subordinate to Findings of Fact 28. Rejected conclusion in Findings of Fact 28. Accepted in Findings of Fact 28. 81-89. Accepted in or subordinate to Findings of Fact 10, 21 and 29. 90-96. Accepted in or subordinate to Findings of Fact 9 and 10. 97. Accepted in Findings of Fact 20. 98. Accepted in Findings of Fact 21. 99. Accepted in Findings of Fact 20. 100. Accepted in Findings of Fact 8. 101. Accepted in or subordinate to Findings of Fact 20. 102. Accepted in Findings of Fact 8. 103-105. Accepted in or subordinate to Findings of Fact 20. 106. Accepted in or subordinate to Findings of Fact 10 and 21. 107-108. Accepted in or subordinate to Findings of Fact 21. 109. Accepted in or subordinate to Findings of Fact 4. 110-112. Accepted in or subordinate to Findings of Fact 21 and 25. 113-115. Accepted in or subordinate to Findings of Fact 21. 116-118. Accepted in or subordinate to Findings of Fact 20. 119-136. Accepted in or subordinate to Findings of Fact 24. 137. Accepted in Findings of Fact 10. 138-143. Accepted in or subordinate to Findings of Fact 11 and 24. COPIES FURNISHED: P. Timothy Howard, Esquire John F. Gilroy, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Darrell White, Esquire Charles Stampelos, Esquire MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 600 First Florida Bank Tower 215 South Monroe Street Tallahassee, Florida 32301 Robert M. Simmons, Esquire 5050 Poplar Avenue 18th Floor Memphis, Tennessee 38157 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Ruden, Barnett, McClosky, et al. Monroe-Park Tower, Suite 815 215 South Monroe Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome W. Hoffman General Counsel Agency For Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303
