Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED That Manor Care be issued a CON for the construction of a 60 bed nursing home; Palm Bay Care Center be awarded a CON for the construction of a 60 bed nursing home; Forum Group be awarded a CON for a 40 bed nursing home and Courtenay Springs be awarded a CON for 36 nursing home beds. RECOMMENDED this 26th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-99675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 1987. COPIES FURNISHED: William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Jean Laramore, Esquire Kenneth Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Thomas B. Smith, Esquire Post Office Box 633 Orlando, Florida 32802 John Grout, Esquire Post Office Box 180 Orlando, Florida 32802 Donna H. Stinson, Esquire Suite 100 Perkins House 118 North Gadsden Street Tallahassee, Florida 32301 Susan G. Tuttle, Esquire 402 South Florida Avenue Tampa, Florida 33602 Robert D. Newell, Jr., Esquire Suite B 200 South Monroe Street Tallahassee, Florida 32301 John F. Gilroy, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 APPENDIX The following constitutes my specific rulings pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties herein. 1-13 Accepted. 14 & 15 Accepted. 16-18 Rejected as a recitation of the evidence. 19-23 Accepted. 24 Accepted. 25-29 Accepted. 30 & 31 Accepted. 32 Irrelevant. 33-34 Accepted. 35-37 Accepted. 38-46 Accepted. 47 & 48 Accepted. 49 & 50 Accepted. 51 Discussion, not Finding of Fact. 52-56 Accepted. Rejected as a recitation of the evidence. Accepted. Accepted to the fact that there were no sheltered beds in existence. Irrelevant. 61-63 Accepted but not of substantial positive value. 64 & 65 Accepted. Opinion not Finding of Fact. Accepted. 68-75 Accepted. 76-80 Irrelevant based on part operation and evidence shows facility is to be sold. 81-85 Irrelevant - see next 86-90 Rejected as a conclusion of law and not a Finding of Fact. 91 Not a Finding of Fact. 92-94 Accepted. 95 Irrelevant as to local district. 96-103 Accepted. 104-105 Rejected as contrary to the weight of the evidence. Accepted as to what Dr. Hoffman supported. Accepted as to what Dr. Hoffman indicated. 108-110 Accepted. Rejected as contrary to the weight of the evidence. Accepted. Not a Finding of Fact. 114-118 Accepted. 119&120 Not a Finding of Fact. 121&122 Accepted. 123 Accepted as to the one facility currently operated. 124-127 Accepted. Speculation insufficient to support a Finding of Fact. Argument, not a Finding of Fact. Accepted. 131-133 Accepted. 134 Not a Finding of Fact. 135-137 Accepted. 138 Not supported by the weight of the evidence. 139-147 Accepted. 148&149 Not a Finding of Fact. 150-164 Accepted. Rejected as a summary of testimony, not a Finding of Fact. Irrelevant. 167-176 Accepted. Rejected as contrary to the weight of the evidence Rejected as a summary of testimony. Accepted. 180&181 Accepted. 182 Irrelevant. 183&184 Accepted. 185 Rejected as a conclusion. 186&187 Rejected as contrary to the weight of the evidence. As to Manor Care 1 Accepted. 2&3 Rejected as not a part of the case. 4 Accepted. 5-7 Accepted. Accepted. Accepted. 10-11 Accepted. 12 Accepted. 13-19 Accepted. 20-22 Accepted. As to Forum 1-13 Accepted. 14-16 Accepted. 17-22 Accepted. 23&24 Accepted. 25-27 Accepted. 28-31 Accepted. 32 Accepted. 33-35 Accepted. 36 Rejected as speculation. 37-42 Accepted. 43 Accepted. 44-47 Accepted. 48&49 Accepted. 50-55 Accepted. Rejected as a conclusion not consistent with the evidence. Accepted. 58&59 Accepted. 60-64 Accepted. 65-69 Accepted. 70&71 Irrelevant. 72&73 Accepted. 74-76 Accepted. Accepted as to the first sentence. Second sentence is not a Finding of Fact. Accepted. As to PBCC 1&2 Accepted. 3 Rejected as a Conclusion of Law. 46 Accepted. Accepted. Rejected as contrary to the weight of the evidence. Accepted. 10-12 Accepted. Rejected as contrary to the weight of the evidence except for the first sentence which is accepted. Rejected. 15-20 Accepted. 21-27 Accepted. 28 Rejected as an overstatement and not supported by the evidence. 29&30 Accepted. 31 Rejected as contrary to the weight of the evidence. 32-38 Accepted. 39-43 Accepted. 44-50 Accepted. 51-57 Accepted. Accepted except for the first sentence which is unsupported by credible evidence of record. Accepted. Rejected. Accepted. As to Courtenay This party failed to number or otherwise identify its Findings of Fact individually. Therefore, no specific ruling as to each Finding of Fact is hereby made. In light of the ultimate recommendation of the Hearing Officer that the party's CON be approved, no prejudice to this party can be said to have occurred. As to DHRS 1-4 Accepted 5 Summary of testimony and not a Finding of Fact. 6-1 Is an argument of the party's position, not a Finding of Fact. 12-14 Rejected as matters not a part of the party's position at hearing. Accepted. Accepted. Accepted. Accepted. 19-22 Accepted. Rejected as a summary of testimony and not a Finding of Fact. Accepted. 25-28 Accepted. 29-31 Accepted.
Findings Of Fact Heritage Hall is a partnership, domiciled in the State of Virginia, which owns and operates ten nursing homes in that state. Heritage Hall did not, at the time of the close of this record, own or operate, nor have under completed construction, any nursing home in Florida. Heritage Hall filed a "letter of intent to construct, own and operate a 60-bed nursing home in the counties of Collier, DeSoto, Highlands, and Lee. On July 15, 1983, Heritage Hall filed the specific Certificate of Need application at issue with HRS, requesting authorization to construct a 60-bed freestanding nursing home in DeSoto County. That application was deemed complete on September 15, 1983, and a free form decision was made to grant it by HRS on December 1, 1983. The proposed nursing home would be located in the vicinity of Arcadia, in DeSoto County, a subdistrict of HRS District VIII. Diversicare Corporation, Inc. d/b/a DeSoto Manor Nursing Home (DeSoto Manor), (Diversicare), owns and operates DeSoto Manor Nursing Home, an existing 60-bed nursing home facility located in Arcadia, DeSoto County, Florida. On November 3, 1983, Diversicare filed a Letter of Intent with HRS announcing its intention to seek a Certificate of Need for an addition to its DeSoto County facility. It ultimately filed an application seeking authorization for a 36-bed nursing home addition on January 12, 1984. No additional information was requested by HRS and the application became complete by operation of law on March 15, 1984. That application is thus in a separate and later batch for purposes of Rule 10-5.08, Florida Administrative Code, and thus was not comparatively reviewed with the application in the case at bar as a competing application. On May 1, 1984, HRS notified Diversicare of its intent to deny its application for the 36-bed addition. Heritage Hall proposes to construct a 60-bed nursing home at a total cost of $1,597,293. This specific cost of construction, not including land acquisition cost, is proposed to be $1,070,740. The nursing home's cost of construction allocated on a per bed basis would be $26,622. Heritage Hall proposes to finance this project to a tax-exempt bond issue in an aggregate amount of $1,436,075, carrying a 10 percent interest rate with a 30-year maturity. Additionally, the Heritage Hall partnership would invest $161,218. Heritage Hall projects that once it begins operation of the proposed new nursing home, that a 97 percent occupancy level for the proposed 60 beds would be reached within six months. Included within that projection, Heritage Hall projects that 49 percent of the patient revenues would come from Medicaid reimbursement, that 10 percent would come from Medicare reimbursement, and that 40 percent of its revenues would be attributable to private paying patients, not included within any relevant government entitlement programs. The remaining one per cent of its patient revenue base would be charged off and attributable to bad debt, or indigent patients. Heritage Hall proposes charges for its Medicare and Medicaid patients to constitute $62.39 per day, and its charges for private paying patients would be $68.00 a day for a private room, and $65.00 per day for a semiprivate room. It proposes to staff its facility with five registered nurses, six licensed practical nurses (LPN), 17 nurses aides, and an administrative and miscellaneous employee staff of 16, for a total staff for a 60- bed nursing home of 44 employees. DeSoto Manor's present patient population is largely composed of Medicaid and Medicare patients, such that 84 percent of its revenue is derived from Medicaid and Medicare sources. Its private paying patients are a small minority contributing 16 percent of its total patient revenues. DeSoto Manor has consistently experienced 99 - 100 percent occupancy for all of 1983 and 1984, upon which is earned a net income for fiscal year 1983 of approximately $15,000. DeSoto Manor presently employs on its staff 2.2 registered nurses, 5.6 LPN's, 17.1 aides, and 17.4 administrative and miscellaneous employees, those figures being expressed in terms of full-time equivalent employees in those categories. DeSoto Manor's application filed in a later batch is not at issue in this proceeding, in terms of comparative review for the purpose of determining whether Heritages Hall or DeSoto Manor is entitled to a Certificate of Need for DeSoto County nursing home beds as a result of this proceeding. Such a proposal, however, to add additional beds to an existing nursing home, is worthy of consideration as an alternative means of providing nursing home services to the public in District VIII, and specifically the subdistrict of DeSoto County, pursuant to authority cited infra. In that vein, DeSoto Manor proposes to add 36 additional beds at a total cost of $767,337, including involving a construction cost of $541,280, which is equivalent to a $21,260 cost per bed for the proposed 36-bed addition. DeSoto Manor would require the equivalent of 17.3 full time additional staff members, if such an addition (a 36-bed addition) were approved and built. DeSoto Manor charges will be (on January 1, 1985) $45.56 a day for Medicaid and Medicare patients, and $47.00 a day for its private pay patients. If its 36-bed addition were installed, it would charge $49.31 per day for Medicaid and Medicare patients, and $53.00 a day for private paying patients. DeSoto County is a relatively small county geographically, located inland from the counties bordering the Gulf of Mexico in District VIII. It is a rural county in character, as that term relates to its economic base being largely agriculture, and its low population density, with its population center being in the only sizable community of Arcadia, the county seat, located approximately in the geographic center of the county. It is surrounded by Sarasota, Charlotte, Highlands, and Hardee Counties. Highlands and Hardee Counties are in District VI, with Sarasota, Charlotte and DeSoto Counties being in District VIII, as are Lee, Collier, Glades and Hendry Counties. In 1987, DeSoto County is expected to have a population of 3,749 persons age 65 and over. The county is not experiencing a significant rate of growth at this time, nor is it expected to through 1987, the pertinent "horizon" year. Pursuant to Rule 10-5.11(21), Florida Administrative Code, the nursing home bed need methodology, HRS computes a need for additional nursing home beds in its health care districts and sub-districts, first by determining "actual need" or the "area specific bed need allocation." The actual need for additional nursing home beds is computed by means of a population based formula embodied in that rule. The second step of the need/availability determination process involves determining how many beds above or below the actual need determined may be added before the utilization in the district or subdistrict falls below 80 or 85 percent. The actual need or "area specific allocation" is determined by multiplying the poverty ratio for the district or subdistrict by the statewide nursing home bed need ratio of 27 per 1,000 persons age 65 and older, and the population of the district or subdistrict age 65 and older, and then subtracting from this computation the number of existing nursing home beds within the district or subdistrict. Within District VIII, the poverty ratio equals 8.61 divided by 12.70, the relevant population of the district for the applicable year being 213,561, with the population for DeSoto County, as a subdistrict, being 3,749 persons age 65 and older. There were 3,671 licensed nursing home beds in District VIII at the time of the hearing, and there were 1,130 beds approved, but not yet licensed or open in the district. There were 60 licensed and operating nursing home beds in DeSoto County. There were 3,904 actually "needed" or allocated beds in District VIII, which, when added to those beds approved but not yet licensed and operating, total an aggregate of 4,801 licensed and approved beds in the district. Thus, there are 997 excess nursing home beds over and above those actually needed in District VIII by 1987, according to the population based formula used in the first part of the need/availability determination process embodied in the above-cited rule. There is an actual need in DeSoto County alone of nine additional nursing home beds by 1987, based upon the subdistrict actual need allocation determined by the first part of the above methodology process of 69 beds. The second part of the need/availability determination process computes how many additional beds can be added to a district or subdistrict before the occupancy rates of nursing home beds in the district or subdistrict fall below the applicable rule mandated percentage. In DeSoto County, the applicable percentage is 80 per cent, because the subdistrict of DeSoto County indicates some need for additional beds, although the district as a whole has excess beds with no additional actual bed need shown. Thus, based upon the entire applicable computation, 15 beds may be added to DeSoto County before utilization of nursing home beds in the county will drop below the threshold of 80 percent. It has thus been established that if 60 beds are added to the bed supply in DeSoto County, for instance by a grant of the instant application, the utilization of nursing home beds will decline to approximately 50 percent. Under the above rule methodology, HRS, in adhering to the requirements of that rule, would not normally grant a certificate of need when only a small number of additional nursing home beds are computed to be available under that formula, that is, for a new freestanding nursing home facility. It is undisputed that construction of a new nursing home of less than 60 beds is not considered to be financially feasible. That rule of thumb does not apply, however, to the addition of beds to an existing, already-built parent facility, and it is undisputed that the addition of needed beds to an existing facility is more cost-effective in terms of construction costs and staffing, than the construction of a new facility. In its review process, with regard to the instant application and proceeding, HRS did not consider the alternative of adding new needed beds to the existing facility operated by Diversicare (DeSoto Manor), since the Diversicare application was not filed in the same batching cycle as the application at bar filed by Heritage Hall. Although the nursing home bed need determination formula reveals a maximum need of 15 beds for DeSoto County by 1987, HRS proposes to approve 60 beds in conjunction with the Heritage Hall application. In its review process, HRS took into account the fact that DeSoto and surrounding counties in District VIII were experiencing high occupancy rates as to existing licensed beds, and took the position then and in this proceeding that residents of DeSoto County needing nursing home care would have difficulty finding available nursing home beds. HRS failed to take into consideration, in its review process, the additional number of nursing home beds which had been approved in surrounding counties (as pertinent hereto, the surrounding counties of District VIII), but which were not yet licensed and actually operating. Thus, at the time of hearing there were 301 approved but not yet opened beds in Charlotte County, 97 approved but not yet operating beds in Collier County, 222 approved but not yet opened beds in Lee County and 597 approved but not yet operating beds in Sarasota County. Thus, the approved but not yet licensed and operating beds will result in an increase of 1,217 beds available, when open, to the residents of DeSoto and the adjacent counties of District VIII. 1/ The applicant and HRS seek to justify the approval of 60 additional beds in DeSoto County by reference to the high utilization rates being experienced in adjacent counties. As pertinent hereto, Charlotte County was experiencing an occupancy rate of 99 percent, Sarasota was at 88 percent occupancy, Lee County at 91.5 percent, with Collier County at 64.5 percent. Those figures do not take into account the latest nursing home District VIII occupancy figures as of June 29, 1984 which reflect the above-discussed additional approved, but not yet opened beds, and which result in the occupancy rates in these counties falling substantially. Thus, Charlotte is now experiencing only an 80.4 percent occupancy, for instance, with Sarasota County falling to a 78.5 per cent occupancy, with lowered occupancy rates resulting in Lee and Collier County as well with the addition of the approved, but not yet opened beds. These lowered occupancy rates resulting from the opening of these approved, but not yet licensed beds, were not considered by HRS at the time of its initial review, and free form grant of the certificate of need at issue. The opening of these hundreds of additional beds will continue to reduce occupancy in those counties and provide available beds to residents of District VIII and to residents of DeSoto County, to the extent those beds in the other counties are deemed accessible. HRS admitted at hearing that the availability of beds has increased in the district since its first review of the application. The financial feasibility of the Heritage Hall proposal depends upon an assumed 97 percent occupancy in its sixth month of operation, and projects that 40 percent of the revenues will be derived from private, paying patients. The 97 percent occupancy is an optimistic projection however, because only nine beds are shown to be actually needed in the county by 1987, and only 15 beds can be added before occupancy will drop below 80 percent. The addition of 60 beds would drop occupancy at DeSoto Manor and the proposed Heritage Hall facility, if built, to 50 percent. The Heritage Hall projection for revenues from private, paying patients which is 40 percent, is substantially more than the current revenue source from private, paying patients experienced by DeSoto Manor of 16 percent. In order to achieve such an occupancy rate in such a short time, and such a higher percentage of private, paying patient revenues, Heritage Hall must aggressively market its new facility and nursing home service so as to attract private, paying patients. Based upon historical evidence of record, it is likely that the patient base in DeSoto County itself will not support such a high percentage of private, paying patients and such patients will doubtless have to come from other areas or counties in the district, specifically the counties lying along the coast of District VIII. There is no evidence to establish that nursing home patients in the coastal counties have any inclination to seek nursing home care in DeSoto County, particularly because those coastal counties are already experiencing lowered occupancy rates, and nursing homes there need more patients. There is thus no demonstration that residents of the coastal counties in District VIII (or other adjacent counties for that matter) would travel to DeSoto County for nursing home care when there are empty beds available to them closer to their homes or the homes of their families in those counties. Heritage Hall proposes to recruit its staff from DeSoto County and the surrounding geographical area. DeSoto Manor however, itself is currently experiencing severe problems in recruiting registered nurses for its facility, in spite of repeated advertising and recruitment attempts. Potential staff members share a reluctance in becoming employed at DeSoto Manor, which lies in an isolated, rural area, and which must compete with the many nursing homes lying in the coastal areas in the other counties of District VIII for staff, and which areas offer more living amenities in general, than does the isolated, rural, small community setting in which DeSoto Manor is located. Indeed, other District VIII nursing home administrators have contacted the administrator of DeSoto Manor, in her capacity as administrator, as well as in her capacity as president of the Florida Health Care Association for District VIII, seeking assistance in obtaining additional staff for their facilities. Approval of the Heritage Hall application will, in effect, double the competition for staff members for nursing homes in DeSoto County, and will concomitantly, increase DeSoto Manor's present difficulties in obtaining and retaining appropriate employees. In calculating the financial impact which an additional 60-bed nursing home would have on the existing DeSoto Manor facility, DeSoto Manor assumed that the number of nursing home beds said to be available before occupancy dropped below 80 per cent, which includes the proposed 15 additional beds, would be full of patients and that these patients would be evenly split between the two nursing homes in the county. Thus, each nursing home would have approximately 37.5 patients in its respective 60-bed facility. In this event, and taking into account the concomitant reduction in staff, salaries and other per patient expenses because of a reduction in the number of patients, the proposed Heritage Hall facility would likely experience a net loss of approximately $232,587 for the first year of operation of its additional facility. DeSoto Manor's Medicaid reimbursement revenues would fall $31,722 below DeSoto Manor's actual cost of providing Medicaid patient care. Thus, in order to recover lost revenues and achieve a break-even profit and loss status, a significant increase in patient charges over existing charges would be necessary. The weight of such increase in patient charges would have to fall upon the private, paying patients in the revenue mix of each nursing home, because of the inflexible nature of the current Medicaid reimbursement scheme. In evaluating the DeSoto County population's accessibility to nursing home services, HRS admittedly did not take into account the provisions of Rule 10-17.020(2)(b), Florida Administrative Code, which is the local health plan as it relates to nursing home planning adopted in the most current HRS rules. This local health plan provides for nursing home services to be available within a one hour travel time by automobile for at least 95 percent of the residents of District VIII. The president of the District VIII chapter of the Florida Health Care Association, who is the administrator of DeSoto Manor, is aware of at least ten nursing homes within a one hour drive of Arcadia and at least three others within that radius which are under construction, a significant number of which are in District VIII. Arcadia is located in the center of DeSoto County. All counties surrounding DeSoto County in District VIII have substantial numbers of approved beds which have not yet been opened and at least Sarasota and Charlotte Counties, which are adjacent to DeSoto County have occupancy rates in the neighborhood of 80 percent or less. The applicant did not establish, in furtherance of its attempted justification of 60 additional beds for DeSoto County, the lack of accessibility to DeSoto County nursing home patients of beds in the adjoining counties of District VIII, especially Charlotte and Sarasota, inasmuch as it was not established that those nursing homes in those coastal counties are more than an hour's driving time from the center of DeSoto County. Although, as witness Straughn for HRS established, Sarasota or the more westerly parts of Sarasota County, are approximately 49 miles and roughly an hour driving time from DeSoto County, it was not established that there are not nursing homes available in closer parts of Sarasota County which are accessible in less than an hour's driving time to DeSoto County residents and/or patients. Indeed, witness Porter testifying after the hearing by deposition, established that most of the nursing homes in the coastal counties involved in this proceeding, are within "40 some miles" from the present DeSoto Manor facility and the proposed Heritage Hall facility. Indeed, witness Porter established that Port Charlotte, in the immediate vicinity of which are several nursing homes, and which county is experiencing now an 80.4 percent occupancy rate (with the above-mentioned numbers of approved but not yet installed beds) is only 25 miles from the proposed Arcadia location. Thus, the criteria of the above rule which HRS witnesses failed to take into account, encompasses nursing home beds available or approved in the coastal counties referred to, which are accessible to patients in DeSoto County.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the relevant legal authority, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order DENYING the application of Heritage Hall to construct a new 60-bed nursing home facility in DeSoto County, Florida. DONE and ENTERED this 28th day of January, 1985, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1985.
The Issue The issue is whether a certificate of need should be issued to permit Tamarac Hospital, Inc. d/b/a University Community Hospital (Tamarac) to convert 10 acute care medical/surgical beds to skilled nursing facility beds. Based on their presentations at the final hearing and their proposed findings of fact and conclusions of law, the central issue is whether there is a need for the proposed nursing home beds.
Findings Of Fact Tamarac proposes to convert 10 currently licensed medical/surgical acute care beds into skilled nursing facility beds. The skilled nursing beds would be available at the hospital to treat patients who no longer require acute hospital care but do require skilled nursing services beyond those required by ordinary nursing home patients. (Tr. 15-16) 1/ The capital cost of the project would be approximately $20,000 for renovation to provide a private bathroom in the existing group of hospital rooms which would be converted to use as the skilled nursing facility (Tr. 25). The testimony of the petitioner with respect to the financial feasibility of the project was undisputed (Tr. 25, PX 1, p.14). Tamarac has encountered problems in placing patients who no longer require acute hospital care in nursing homes in HRS District 10, Broward County, when those patients require more than normal nursing home services. These patients, due to their diagnosis or treatment, require more skilled nursing care, more technical assistance, supplies or more frequent checking than traditional nursing home patients (Tr. 15). These are patients with infectious diseases or draining wounds who require isolation; patients requiring ongoing intravenous administration of medications including antibiotics and narcotics; patients on chronic ventilator support; patients with tracheostomies requiring respiratory support, suctioning or oxygen; patients with naso-gastric feeding tubes and patients receiving total parenteral nutrition (PX 1, application, p. 2). Tamarac introduced a study it had conducted concerning discharge delays for the one year period prior to its application which included 70 patients (Tr. 12, PX 3). The study is anecdotal in nature. The director of social services for Tamarac, who is in charge of discharge planning coordination, testified that the 70 cases were representative and randomly sampled (Tr. 12, 21). There was no specific evidence of the sampling methodology, however. In the absence of better evidence of the sampling methodology it is not possible to determine what inferences validly may be drawn from the information presented in PX 3. For example, the evidence fails to show whether the 70 cases included represent 1 percent or 100 percent of the instances where a discharge was delayed. All that is known is that in 53 percent of those 70 cases studied the discharge delay occurred because the patient could not be placed in a nursing home (Tr. 12). These 37 patients might have been served at Tamarac if a skilled nursing facility had been in operation. Due to the limited evidence of how the sample was chosen, the study has been given little weight. In addition, the application and Tamarac's study focuses solely on the experience of Tamarac in attempting to place patients who no longer required acute care in a nursing home. There is no basis for determining whether there is a general community need for the project proposed. The narrowness of the proof offered is apparently due to the restriction Tamarac made in the application that "this project is for [Tamarac] hospitalized patients only". Application, PX 1, page 6 paragraph 4. Tamarac also conducted a survey of Broward nursing homes to determine what services they provide, PX 4. That survey indicates that there are some specialized nursing services that are not available in nursing homes in Broward County, e.g., services for patients on chronic ventilators and patients with acquired immune deficiency syndrome (although Tamarac did not indicate that it proposed to offer services to AIDS patients). There are also services which are not commonly available. Many nursing homes will not accept patients on intravenous medication in the form of chemotherapy or narcotics or patients with draining wounds, and the few that do generally require no pathogenic organism be present as shown by negative culture test. Even when some nursing home in Broward County provides a specific service, a bed at that nursing home may not be available to a patient in Tamarac Hospital ready for discharge from acute care when the bed is requested (Tr. 14- 15). Tamarac's placement problem is made more difficult because it is to some extent in competition with other Broward County hospitals for the available nursing home beds for patients needing skilled, subacute nursing services (Tr. 16). This generalized evidence of competition does not rise to the level of demonstrating a need in HRS Service District 10 for the proposed skilled nursing facility. Tamarac has attempted to persuade existing nursing homes to expand services to accept on a routine basis patients needing the type services which Tamarac proposes to provide, but has been unsuccessful (Tr. 16). The bed need calculation methodology set out in Rule 10-5.11(21), Florida Administrative Code, for the July 1988 planning horizon shows a surplus of 92 nursing home beds in Broward County (RX 1 and 2, Tr. 32-44). Approximately 258 nursing home beds are unoccupied in Broward County on a daily basis, assuming 100 percent occupancy actually could be achieved (Tr. 39). The availability of empty nursing home beds in the district does not necessarily mean that beds are available for a particular patient at Tamarac Hospital who needs more than normal nursing services on a specific day (Tr. 55). Individual patients requiring subacute care may remain in the hospital (Tr. 18). Patients ready for discharge from acute care are not eligible for Medicare coverage (Tr. 17), and are potentially liable for their hospital costs incurred awaiting placement. If they were transferred to a skilled nursing facility such as that proposed by Tamarac, those patients would be eligible for the Medicare benefits for the first 20 days, with an additional 80 days of co- insurance reimbursement thereafter (Tr. 26). The average hospital room, board, and ancillary charges at Tamarac is $900 per patient and per day. The charge to be made in Tamarac's proposed skilled nursing facility would be $115 per day (Tr. 26). According to the application (PX 1, table 7, utilization by the class of pay), 65.6 percent of its patient days of service are provided by Tamarac to Medicare patients. Tamarac would recover approximately $115 per patient per day for patients utilizing its skilled nursing facility, rather than writing off, as it does now, approximately $900 per day for those Medicare patients requiring subacute care who remain in Tamarac due to an inability to identify an appropriate skilled nursing facility in Broward County to accept them when their care requirements are greater than that normally provided by Broward County nursing homes (Tr. 29). Few Medicaid patients utilize the services of Tamarac because of the nature of the population surrounding the hospital. Referring again to the evidence of utilization by class of pay, only one tenth of one percent of the patient days spent at Tamarac during the period January 84 through December 84 were days spent by Medicaid patients. There would be no restriction on access to the skill nursing facility unit if one of the rare Medicaid patients at Tamarac Hospital required those services (Tr. 27-28).
Recommendation It is recommended that the application of Tamarac Hospital, Inc., d/b/a University Community Hospital to convert 10 medical/surgical beds to skilled nursing facility beds be denied. DONE AND ORDERED this 20th day of October 1986 in Tallahassee, Leon County, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of October, 1986.
Findings Of Fact Originally, each Petitioner filed an application for a Certificate Of Need for the construction and operation of nursing home facilities in Broward County as follows: HCR - 120 beds, Richmond - 240 beds, Health Quest - 180 beds, and FPM - 240 beds. The applications were reviewed by Respondent comparatively and competitively, and they were denied in a State Agency Action Report on August 12, 1982 solely on the basis that there was no need for additional nursing home beds in Broward County. The formal hearing thereafter requested by all Petitioners was continued several times due to scheduling conflicts and due to the expected promulgation of a new methodology by which the need for nursing home beds is computed. As a result of Respondent's Quarterly Census Report dated November 30, 1983, Respondent determined that in fact there was a need for an additional 101 nursing home beds in Broward County. Accordingly, just prior to the formal hearing and by letter dated January 4, 1984, Respondent's attorney invited each Petitioner to amend its application for the purpose of being eligible to receive a Certificate Of Need for those 101 beds. Each Petitioner so complied. At the final hearing, each Petitioner proceeded on both its original application and its amended application. In spite of the singular ground for denial of each application contained in the State Agency Action Report, Respondent's attorney contended from the inception of this proceeding and into the final hearing that whether any of the applications met all statutory and rule criteria for approval was disputed by Respondent, including the financial feasibility of each proposed project. According to Respondent's only witness, Thomas F. Porter, however, all four applications meet all statutory and rule criteria for approval including financial feasibility. Accordingly, the only facts to be determined herein will relate to the issue of the number of beds needed. Since Respondent stipulated that 101 beds were available to be awarded to one of the applicants in this proceeding (Tr. 17, 36-40, 952), the threshold issue is how many beds in excess of 101, if any, are needed in Broward County. Respondent uses the most recently available information in analyzing applications for nursing home beds, including the Quarterly Census Report which it publishes, and a mathematical methodology contained in Section 10-5.11(21), Florida Administrative Code, the purpose of which methodology is to project the need for nursing home beds on a three year basis to determine the availability of those beds for award to Certificate Of Need applicants in relation to a projected need. The methodology contains several steps. The first part of the methodology projects the number of beds that will be needed based upon an adjustment of a standard of 27 beds per thousand for the population aged 65 and over to reflect the percentage of those in poverty in the HRS district in relation to those living in poverty in the state. The second part of the methodology contains the present and prospective occupancy rates. Before any of the new beds which are determined to be needed can be added, the average occupancy rate for existing homes must exceed eighty five Percent (85), as the rule is applied to Broward County, the only county in Florida constituting its own HRS district and having no sub-districts. Furthermore, the second part of the formula provides that no additional beds which have been determined to be needed can actually be added if, theoretically, the prospective occupancy rate after the beds are added will be reduced below eighty percent (80 percent). Respondent's determination as to the number of beds needed and the number of beds available for Certificate of Need applicants according to "part two" of the formula is based on its Quarterly Census Reports. The November 30, 1983 Quarterly Census Report revealed that 1,419 community nursing home beds (4,058 needed beds, less 2,789 existing and 300 previously approved but not constructed beds) will be needed in Broward county in 1986, the horizon year for these applicants. The occupancy rate of existing nursing home beds for the six months preceding that report was 91.5 percent. According to that report, since the prospective occupancy rate is 80 percent for Broward County, then the addition of more than 101 beds at the present time will theoretically reduce the prospective occupancy rate below 80 percent. Under normal circumstances Respondent will issue Certificates of Need in accordance with the need methodology set forth above. However, Respondent has discretion to approve applications for nursing home beds which do not conform to the need methodology if the existence of special circumstances can be proven. Special circumstances do exist in Broward County which warrant a determination that more nursing home beds are needed than is demonstrated by a strict application of Respondent's need methodology. One of those special circumstances is the existence in the district comprised of Broward County of an older population than in the other districts in Florida. Broward County's 65 and over population is fairly typical of Florida at the present time, but there is a significant difference in the proportion of the population which is 75 and over and which will be 75 and over in the near future. In 1980 Florida as a whole had 6.5 percent of its 65 and over population in the 75 and over category which was projected to increase to 9 percent by the year 2000. By contrast, according to studies performed by Dr. Robert Weller, in Broward County 35.4 percent of the 65 and over population was 75 and over, and by 1986 this number was projected to increase to 53.6 percent. This difference was classified by Dr. Weller as "very meaningful" to the point where he would be very "uncomfortable" with any attempt to plan for Broward County using statewide averages. This large difference in the composition of the elderly population of the state as a whole and Broward County is a significant special circumstance because the older the population the greater the demand for nursing home beds. In fact, the big predictors of need for nursing home beds are illness and age. The average age of entry into a nursing home is 81. While the population group of 85 and older utilize nursing home beds at a rate 15 times greater than the 65 and older group, the over 75 age category constitutes 70 percent of all nursing home users. Respondent's need methodology does not make an adjustment for differences in the 65 and over category between the various districts. This failure to adjust for an older population may not significantly affect districts with more normal population composition, but since Broward County's population departs substantially from the norm, it is an essential consideration. The failure to consider this situation results in a gross understatement of need in Broward County. Diagnostically Related Groups (hereinafter "DRG") regulations are amendments to the Social Security Act effective in 1983 which alter the method by which hospitals will receive reimbursement for Medicare patients. Under the DRG regulations, which hospitals are required to adhere to by the end of 1984, reimbursement for Medicare patients will be based upon an established length of stay for each type of illness. For example a hospital might be reimbursed for an eight day hospital stay for a coronary by-pass operation whether the patient actually stays in the hospital for seven or for 12 days. The effect of the DRG regulations is the earlier discharge of many patients in need of intensive nursing care. Every expert witness and professional administrator opined at the hearing in this cause that DRG regulations will result in an increased demand for nursing home beds. In addition to the effect the DRG regulations will have in a normal situation, the characteristics of the Broward County will accentuate this effect. The nationwide average for percent of Medicare funding in acute care hospitals is approximately 50 percent while the average for Broward County in last 12 months ranges from 53 percent to about 64 percent. The characteristics of Broward's elderly population also increases the effect of the DRG regulations because the population in Broward County is older than that in the remainder of the state. A study of the effects of the DRG regulations on the need for additional nursing home beds was recently conducted for Palm Beach County. That county has a high percentage of elderly (although not as high as Broward) and a high percentage of Medicaid funding. That study indicated that the DRG regulations would increase demand there by about 225 to 300 beds. Theodore J. Foti, an expert in health planning, utilized the Palm Beach study to estimate that from 325 to 400 additional beds are needed in Broward County to compensate for the DRG regulations alone. In Broward County there are three facilities which Respondent counts as nursing home facilities but which do not provide nursing home services. The Daystar Nursing Home, which contains 44 beds, is a Christian Science facility which does not provide the level of care associated with nursing homes. The Manor Oaks facility, which contains 116 beds, has a hospital license as an extended care facility and is a licensed specialty hospital, not a nursing home. St. Johns Nursing and Rehabilitation Center, which contains 100 beds, is a specialty hospital. Respondent includes the 340 beds in these facilities in computing the total of existing nursing home beds. Since these facilities are not truly nursing homes, they are displacing beds which normally provide nursing home services. The need methodology, therefore, does not include the true number of existing nursing home beds in Broward County, and, therefore, even if all other data used in the methodology be accurate, the bed need as determined by the methodology is understated by 340 beds. Barbara Palmer is employed by Respondent in its Office of Aging and Adult Services. Her job duties include writing proposed rules, manual material and legislative budget requests for Respondent's program known as Community Care for the Elderly (hereinafter "CCE"). CCE services include case management as well as CORE services, adult day care, chore, emergency alert response systems, home delivered meals, home health aid, medical transportation and personal care. Each of these programs is generally designed to provide services to the clients in the client's home. None of these services are provided to persons who are already in nursing homes. In order to compute need for CCE services, Palmer and Respondent rely on research by Dr. Carter Osterbind which identifies the incidence of "homebound" and "bedfast" individuals in the population aged 65 and over. Respondent defines bedfast as a person who, because of physical or other infirmities, remains in bed and is incapable of being in any other place. Similarly homebound individuals are those who cannot leave their homes without assistance. Respondent routinely uses Osterbind's 8 percent incidence factor to calculate the percentage of the population in the State of Florida 65 and over that can be characterized as homebound and bedfast. Subject to revisions, Palmer prepares the budget proposal for Aging and Adult Services which is then approved by the Secretary of the Department of Health and Rehabilitative Services for submission to the Governor and which then becomes Services for part of the Governor's budget request which is ultimately submitted to the Legislature. Palmer uses two documents to prepare her budget request: Dr. Osterbind's paper "Older People in Florida" and "Florida Decade of the 80's", a technical appendix provided by the Office of the Governor as a reference for population statistics for use in developing legislative budget requests. Using these two documents, a projected need is compared with the historical data of how many people have been served with the money which was received in a previous budget year. By subtracting the historically met need from the projected need, Palmer arrives at the projected unmet need, which is presented in a table depicting the total number of homebound and bedfast clients who will not receive services. Palmer also uses a factor, developed by Respondent's Community Care for the Elderly Program, to determine how many individuals, but for the fact that their need is going to be met, are at risk of institutionalization. Respondent's Office of Evaluation has developed and published a 42 percent factor and utilizes it as a basis to determine how many of those persons in a category whose needs will be unmet because of lack of budget dollars in the future will actually end up in nursing homes if more dollars are not appropriated. In other words, Respondent utilizes a document promulgated in 1981 by its Office of Evaluation which indicates that a 42 percent factor should be applied to an 8 percent statewide percent of the population 65 and older to determine how many are at risk of institutionalization in a nursing home, and this methodology has been used routinely by Respondent to prepare Respondent's budget requests through 1985. Palmer's approach in preparing the budget request has a purpose of persuading the Legislature that unless money is provided, 42 of all homebound and bedfast individuals will have to be institutionalized but for provision for home health care services. Palmer's last budget request shows that in the decade of the 80's Respondent expects a 69.8 percent increase in the population group 65 and over. The 10 year plan for CCE and CORE services gives the estimated percentage of need which Respondent intends to meet with CCE and CORE services for various budget years through 1990. Respondent will only provide those services to 23.84 percent of those persons needing them in 1985-86 and only 26.48 percent in 1986-87. Estimated unduplicated clients that will be served in those same years are 41,448 and 47,869 respectively. Expert witness, Michael Schwartz, used Respondent's population figures for Broward County and Respondent's methodology according to Palmer to determine how many of those individuals aged 65 and over in Broward County will be homebound and bedfast in the planning horizon year of 1986. Multiplying the number of homebound and bedfast by the percentile of persons that are at risk of institutionalization yields the figure of 9,760 persons for the horizon year. The number of persons projected by Respondent's Office of Aging and Adult Services to actually receive the CCE-CORE services in that horizon year is 3,956. Thus, the number of individuals unable to obtain those services and needing a nursing home bed in that year will be 5,802. These people will need nursing home beds for an average length of stay of two and one-half years (national average). The current inventory of nursing home beds in Broward County, including approved but not built beds, is 3,089. When the existing inventory is subtracted from the number of needed beds, as computed by the Aging and Adult Services methodology, the net need is an additional 2,715. Thus, when Respondent's methodology for determining the need for nursing home beds in the absence of alternatives of CCE and CORE services is applied to Broward County for the year 1986, it yields a need for 2,715 beds in addition to existing and approved beds to accommodate the homebound and bedfast who will not receive those services. However, when Respondent's methodology in Section 10-5.11(21), Florida Administrative Code, is applied to Broward County for the year 1986 it yields a need for 1,419 beds in addition to existing and approved beds. Yet, when the theoretical prospective occupancy feature contained in that rule is applied to Broward County, only 101 beds are needed to be built in time for service in 1986. It is noteworthy that the formula used by Respondent to induce the Legislature to fund programs for the diversion of the elderly from nursing homes yields double the need for nursing home beds in Broward County in 1986 than use of the formula established by Respondent to evaluate applications for new nursing home beds. Schwartz identified the reason for the difference: The CCE funding formula takes into account those below the poverty level as well as those above the poverty level in determining the number of people who are at risk of institutionalization unless CCE services are provided. However, Respondent's bed need methodology uses a poverty ratio (number of impoverished in the county relative to number of impoverished in the state) to adjust the statewide standard of 27 beds per thousand downward to 15.5 beds per thousand in Broward County. Since the first part of the bed need methodology only measures nursing home bed need for the impoverished (by adjusting 27 beds per one thousand by a poverty ratio) while the formula used by Aging and Adult Services contemplates all persons at risk of institutionalization, whether impoverished or not, and since the Aging and Adult Services methodology yields a higher need figure, tie difference between the two figures must represent the extent to which private pay patients (not impoverished) are using, and will continue to use, nursing home beds in Broward County to the exclusion of Medicaid patients. Utilizing the first part of the bed need methodology, Respondent has determined that Broward County will need a total of 4,508 beds in 1986 and that, when licensed and approved beds are subtracted, 1,419 additional beds will be needed. However, the second part of the methodology which purports to determine the prospective utilization of nursing home beds limits the number of beds which can be added to 101. The premise behind the prospective utilization test is that the addition of more than 101 beds will result in the occupancy rate for nursing homes in Broward County being reduced below 80 percent. Because of the particular situation existing in Broward County this premise is not valid. In November 1983, Richmond's newly-constructed Sunrise facility had 120 beds in service, but Respondent counted all 240 approved beds as being in service for determining its occupancy rate. These 240 beds were, therefore, occupied at a rate of 24.4 percent. In November 1982, the occupancy rate for nursing homes in Broward County was 89.8 percent, while a year later after including all 240 licensed beds in Richmond's Sunrise facility, the occupancy rate had only fallen 3 points to 86.7 percent. Expert witness Schwartz concludes that if 240 beds can be added In Broward County and only drop the occupancy rate from 89.8 percent to 86.7 percent, then certainly more than 101 beds can be added before the occupancy rate will drop below 80 percent. He further concludes that when One examines what actually happened in Broward County rather than what could theoretically happen, the prospective utilization test may well be a valid predictor of future occupancy rates under normal circumstances, but it fails to be in Broward County. Rather, Schwartz concluded that approximately 1,000 nursing home beds can be added in Broward County without lowering the occupancy rate below 80. Expert witness Theodore Foti explained the effect of Respondent's bed need methodology when applied to Broward County. The methodology is based on the premise that the only people who need nursing homes in Florida are the impoverished since the standard 27 beds per one thousand is adjusted only by the poverty ratio. However, nursing home providers prefer private patients because they pay more. In Broward County there are facilities that only accept private pay patients. The provider receives about 25 percent more profit than he would if he had two individuals to care for in the same room when the difference between private and semi-private rates and the decrease in staffing that is possible with the lesser number of patients are taken into consideration. Because of the shortage of supply and the ever-growing demand in Broward County, it is economically beneficial to a 60 bed nursing home for example to take 20 beds out of service and operate with 40 beds because the owner can increase the rates and lower the costs simultaneously. According to Foti, a review of the occupancy rates in Broward County shows that beds in certain facilities have been taken out of use over a period of time by those facilities. Those providers have chosen to serve primarily the private paying individual since it is to their financial benefit to do so. The corresponding result is that the demand for nursing home beds by the medicaid recipient cannot be satisfied because the private pay patient has "squeezed out" the Medicaid patient. The existence of this phenomena in Broward County rises to the level of an exceptional circumstance since Respondent uses a formula to prescribe prospective occupancy rates which are directly controlled by the number of beds that the existing owners place in service or take out of service. Considering the "private pay phenomena" in Broward County, and considering that the number of beds per 1,000 in Broward County is the lowest in the state, and considering that the number of beds per 1,000 in the state is the lowest in the country, Foti calculates a need currently in Broward County to be an additional 800 beds as a minimum figure even without considering the DRG regulations which clearly will accentuate that need. Respondent's witness Porter acknowledged that Respondent would look favorably upon applications for Certificates of Need for additional beds in an area where indications are that Medicaid patients are being denied access to beds although Respondent's bed need methodology simultaneously shows that no new beds are needed. He explained that as an extenuating circumstance if there is evidence that a particular population group is being denied access and that Respondent would look favorably upon applications proposing substantial Medicaid beds (such as those under consideration herein) if accessibility for Medicaid clients is limited. He further acknowledged that the Medicaid program office of the division of Adult and Aging Services would be an appropriate authority upon which he would rely in making such a determination. He further acknowledged that the accessibility to Medicaid beds would be increased in Broward County by issuing Certificates of Need with a Medicaid bed condition attached to them since the Medicaid utilization rate has been increasing in Broward County even though the total number of beds has remained constant. Lynn Raichelson as the supervisor of Respondent's Adult Payments Unit for Broward County is responsible for gathering data reflecting the number of people placed in Medicaid beds during the month in Broward County for Medicaid payment purposes. Both her reports admitted in evidence and her testimony at the final hearing noted an overall difficulty in finding placements in Broward County for Medicaid patients. Her reports indicate a number of entries where all Broward County and Dade County nursing homes were contacted but there were no nursing home beds available. The number of days for placement ranged from 23 to in excess of 83 days. Most of the patients were in acute care hospital beds while awaiting nursing home beds. Several health care professionals testified as to the actual need in Broward County as opposed to the projected need based upon Respondent's mathematical formula. One hospital administrator had no problem placing private pay patients but found that Medicaid placements are extremely difficult to make in Broward County. His hospital alone holds 8 to 12 patients on any given day who should have been discharged into a nursing home. The executive director of the North Broward Hospital District which encompasses three hospitals encounters difficulty in placing Medicaid and Medicare patients in nursing homes in Broward County since the nursing homes are at full operational occupancy. Approximately 25 percent of the patients discharged from hospitals in the District are referred to and placed in nursing homes. Of this 25 percent, the District encounters difficulty in placing 10 to 15 percent of the patients. The problems persist year round but are especially difficult during the winter "peak" season. Alan Mahar is the administrator of the Primary Health Care Division of the Health and Public Safety Department for Broward County. He was the supervisor of nursing home placement from 1975 to 1981 when Broward County was making nursing home placements. Between June 1981 and September 1983 he participated in a Medicaid demonstration project called Pentastar which was sponsored by Respondent's District 10 Aging and Adult Program Office. The purpose of the project was to determine if an alternative existed to keep persons out of nursing homes. An important part of the program was the identification of persons aged 60 and over who were potentially at risk of being placed into a nursing home within one year. Those enrolled in the program had to qualify for Medicaid payments. Although he expected he would need to interview approximately 300 to find 150 persons for the program, everyone he interviewed qualified. At the conclusion of the program, none of the persons who received services through pentastar were any less at risk than they were before those services commenced. Services under that program terminated in September 1983. Since Broward County does not have a publicly operated nursing home, Mahar experienced extreme difficulty in placing Medicaid patients and found that it frequently took weeks and sometimes months to find an available nursing home bed for a Medicaid patient. Mahar's opinion that there is not a sufficient number of beds available to Medicaid patients in Broward County is also based on his identification of the trend over the last three years he has been involved in auditing Medicaid matching funds. The money which Broward County has been paying for hospital care for Medicaid persons has almost doubled in the last three years, while the Medicaid match money for nursing home care has gone up only 15 or 20 percent during that same period. The poverty ratio included in Respondent's bed need formula results in an underestimation of bed need for wealthy counties such as Broward County where the majority of nursing home patients are private pay patients. Broward County is the wealthiest county in the state and has the lowest Medicaid usage in the state. The poverty ratio results in a calculated bed-need ratio in Broward County of 15.5 beds per thousand whereas the statewide need ratio is 27 beds per thousand. There is overwhelming competent substantial evidence to show an actual need for community nursing home beds in Broward County currently and in 1986 for in excess of the 780 beds Petitioners collectively seek herein. Substantial competent evidence was presented to show several special circumstances, and respondent's sole witness acknowledged that one of those was sufficient for the grant of all applications filed by the four Petitioners in this cause. The overwhelming need proven herein was uncontroverted by Respondent, and the special circumstances prohibit Respondent from applying the bed need methodology in Broward County at this time. In view of the overwhelming and uncontroverted evidence, there is no need to determine which of the applicants herein is best qualified for the award of the 101 beds in issue in this cause. Additionally, the evidence in this record is insufficient to proclaim any of the applicants to be best qualified. At the final hearing there were a few attempts at a comparative analysis, and none was credible. The attempts at comparative analysis simply resulted in a further substantiation of the fact that all of the applicants are equally qualified. Respondent's witness gave his personal opinion that one of the applicants was preferable but was unable to assign any weight to any of the factors utilized in reaching that individual opinion. Rather, the one factor that he did testify to at length in the hearing as the most important - accessibility by Medicaid patients - was the one item that that applicant would not guarantee. HCR's application for the 101 beds indicated that it would not commit to the number of Medicaid patients that it would serve. In short, the testimony at the hearing and the evidence presented provide very little basis, if any, for choosing one applicant over another. Rather, all applicants meet all criteria, and the need for the number of beds originally requested clearly exists.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is recommended that a Final Order be entered: Granting to Richmond Healthcare, Inc. a Certificate of Need for 240 beds in Broward County in accordance with its original application; Granting to Health Care and Retirement Corporation of America a Certificate of Need 120 beds in Broward County in accordance with its original application; Granting to Health Quest Corporation a Certificate of Need for 180 beds in Broward County in accordance with its original application; and Granting to Federal Property Management a Certificate of Need for 240 beds in Broward County in accordance with its original application. DONE and RECOMMENDED this 15th day of October, 1984 in Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1984. COPIES FURNISHED: Richard G. Coker, Jr., Esquire 1107 South East Fourth Avenue Fort Lauderdale, Florida 33316 Jean Laramore, Esquire and Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601-1568 Robert D. Newell, Jr., Esquire Lewis State Bank Building, Suite 464 Tallahassee, Florida 32301 Claire D. Dryfuss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact 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 Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
Findings Of Fact NATURE OF THE CONTROVERSY In response to a 144 nursing home bed need for southeast Duval County, Florida, Subdistrict 3, HRS Service District IV, several applicants filed nursing home bed certificate of need applications for the review cycle triggered by a December 5, 1990 deadline, including; CVI for a 60-bed addition to an existing 60-bed facility authorized by Certificate of Need No. 5602; Atrium for an 84-bed facility; Marriott for a 30-bed facility; Health Quest for a 41-bed renovation and conversion of assisted-living facility beds, or 24-bed addition to the existing nursing home. Two other applicants, Health Care and Retirement Corporation of America for a 120-bed facility and Health Care Properties of St. Augustine for a 60-bed facility, did not pursue administrative appeals of their applications. HRS found all of the applications to be complete and all proposals were comparatively reviewed on their merits, with the exception of the MCRI 24-bed proposal which HRS found was untimely. The Department noticed its intent to approve the applications filed by CVI and Atrium. MRCI and HQR are Petitioners contesting the HRS intent because their applications were denied. HQR also claimed standing as an alleged substantially affected existing facility; however, HQR did not present any evidence in support of its standing on these grounds. THE HRS REVIEW HRS required the applicants to submit their proposals on an application form designated "HRS Form 1455, Oct.`88". [CVI Ex. 8; Tr. 2461. This application form is not a rule. [E.D. Tr. 1618]. A work group consisting of HRS and nursing home industry representatives developed the application form and HRS review procedures. [S.G., Q. 14; CVI Ex. 10; ANH Ex. 8]. Criteria at Section 381.705, Florida Statutes, form the basis for 13 goals of the HRS review process. (Id. S.G. pp. 4-15, Q. 14-39; ANH Ex. 8, p. 4). The goals are as follows: The first goal promotes the establishment of facilities to provide services when and where needed, intended to implement Sections 381.705(l) (a), (b), (d), (e), (j), (l), (2)(a), (b), (d) and (e) The second goal promotes special resident programs for special population groups, intended to implement Sections 381.705(1)(a), (b), (c), (f), (j), (l), (2) (a), (b) and The third goal promotes the establishment of continuing care-type communities, intended to implement Sections 381.705(1)(a), (b), (d), (e), (j), (2)(a), (b) and (d). The fourth goal promotes use of professionals in a variety of disciplines to meet resident needs, intended to implement Sections 381.705(1)(b),(c), (f), (g), (h), (j), (1) and (n). The fifth goal promotes the establishment of well-designed, comfortable facilities, intended to implement Sections 381.705(1)(b), (c), (m) and (2)(c). The sixth goal promotes residents' rights and residents' quality of life, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b). The seventh goal promotes a full range of social services for nursing home residents, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b) and (d). The eighth goal promotes provision of services to Medicaid eligible residents, intended to implement Sections 381.705(1)(a), (h), (n) and (2) (e) The ninth goal promotes the establishment of nursing homes which do not intend to secure significant profits at the expense of resid ent care programs and facility design, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (2)(a), (c) and (e) The tenth goal promotes nursing home locations which achieve a geographic distribution of nursing home beds, intended to implement Sections 381.705(1)(a), (b), (d), (e), (h), (j), (2) (a), (b) and (d). The eleventh goal promotes proper projection of construction costs, intended to implement Sections 381.705(1)(b), (e), (i) , (l), (m) , (2)(a) and (c) The twelfth goal promotes the establishment of nursing homes which have a record of implementing superior resident care programs and providing superior quality of care, intended to implement Sections 38 1.705(1) (b), (c), (f), (h), (j), (l), (n) and (2) (b); and The thirteenth goal promotes nursing home charges consistent with industry trends and Medicaid charges which are within Medicaid upper limits, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (m), (2)(a) and (e) The working group identified the goals as representing desirable outcomes under the statute to be attained by successful applicants if specific objectives are achieved. Eight objectives, each relating to one or more of the goals are then utilized, with each operationally defined by several items of information. Scoring points are divided among the various items of information solicited under each objective. [SAG. p. 3, Q. 14, p. 17, 18, Q. 45; A.G. Tr. 1330]. The scoring system is not a rule; HRS utilizes it on a case-by-case basis to aid in decision-making. [A.G. Tr. 1273, 1274; S.G. Q. 43, 45, 46]. An application was measured by assessing the responses provided in the application against the point system. [ANH Ex. 8, p. 4; S.G. Q. 43, 45, 46]. The scoring system is a means to accomplish an evaluation of information--the process of forming, qualifying, verifying, and establishing judgments. Applicants are asked to specify concrete procedures or steps that, when implemented, are likely to result in a clear and predictable outcome. [S.G. Q. 44; A.G. Tr. 1320, 1321]. Thus, both operational features and the implementation process for those features are sought. All of the foregoing evaluation procedures, including the goals, objectives, review protocols and scoring system were disclosed to the applicants prior to application preparation and filing. [S.G. Q. 14; CVI Ex. 10; ANH Ex. 8; J.B. Q. 24]. Two HRS review consultants, a primary and a secondary reviewer, assigned a number to each application item which represented that consultant's assessment of how well the applicant's response addressed the particular item. [S.G. Q. 42, 43, 45; ANH Ex. 8, p. 4]. The ultimate score was calculated by a combination of manual and computer scoring which assigned the points available for each item number. [ANH Ex. 8 p. 4; S.G. Q. 45]. The scores assigned by each of the two consultants were then averaged. [ANH Ex. 8, p. 4; S.G. Q. 45]. A statistical reliability analysis of the consultants' assessments was then conducted before further evaluation proceeded. The work group also established protocols for evaluating the information provided by applicants. [S.G. Q. 14, 45]. The protocols utilized by the HRS provide a methodology which results in predictability, uniformity and commonality of judgment in the review of each application insofar as that is possible with subjective judgments of facts [S.G. Q. 42, 43, 45, 46]. Upon completion of the scoring, a final assessment was conducted by HRS managers who evaluated the overall presentation of information in the application available to make a judgment--the application of functional aspects with program components, whether the integration of the elements was internally consistent, and the likelihood that the proposal will have the success predicted by the applicant. [S.G. Q. 43, 46]. These elements serve as verification of the reviewer's actions and reflect the decision-making that occurs when the preliminary decision is made. Under the HRS evaluation system, there is no particular "passing" score. [S.G. Q. 45, 46]. The scores attained were utilized as an aid to evaluating the applications. [A.G. Tr. 1273, 1274]. The goal is to attain the highest possible percentage score possible based upon a potential base score of 1500 points. A successful applicant should demonstrate a consistently high number on each of the eight rated objectives. Reviewer judgment dictates the score; the score does not dictate the judgment. A display of the scores will quickly reveal weak points and inconsistencies in the application which assist HRS in exercising its decision- making discretion in weighing and balancing the statutory criteria. [A.G. Tr. 1273, 1274]. HRS prepared a "State Agency Action Report" which explained the evaluation, summarized the HRS findings, provided the scoring results, and stated HRS' intent to approve the CVI and ANH applications. [ANH Ex. 8]. 22. The scoring results Primary were: Secondary Average Percent of Reviewer Reviewer Score Maximum Atrium 1196.9 1274.33 1235.61 82.37 CVI 1175.28 1178.77 1177.03 78.47 Health Care & Retirement Corp. 1113.92 1185.4 1149.66 76.64 Health Care 1119.25 Properties of St . Augustine Marriott 1110.58 1150.90 1143.67 1135.08 1127.12 75.64 75.14 Health Quest (41 beds) 1079.46 1109.05 1094.26 72.95 Health Quest 1079.46 (24 beds) 1109.05 1094.26 72.95 The staff consultant with primary review responsibility exercised her professional judgment in reviewing the applications. [A.G. Tr. p. 1272]. /1 There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and the high occupancy rates within the subdistrict. There were no alternatives within the subdistrict for the providing the type of care required except construction of additional beds or renovation of existing beds of a similar type. Both of these alternatives were presented by the various applicants. THE CVI APPLICATION CVI is a not-for-profit Florida corporation. [CVI Ex. 3, iiia, iiic; J.B. Q. 28; CVI Ex. 8]. It is a local service unit of the National Benevolent Association of the Christian Church (Disciples of Christ), a Missouri not-for-profit corporation. The NBA was founded in 1887, and is one of the general administrative units of the General Assembly of the Christian Church (Disciples of Christ). The NBA provides care at numerous facilities to older adults, children and persons with developmental disabilities. [Id.; L.W. Q. 14]. Through local service units, (not including the CVI project), the NBA currently operates 13 nursing homes in 8 states. [Id.] CVI is developing a 65-acre adult retirement community on a site adjacent to the Mayo Clinic Jacksonville in southeast Duval County. [Id.]. Construction has been completed on all individual residential components of Phase I. [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q. 19]. The 60 bed addition will be part of Phase 11. [CVI Ex 3, PT 1, p. iiia; J.B. Q. 28]. Phase I consists of independent living apartments, an adult congregate living facility ("ACLF"), a 60-bed skilled nursing facility specifically designed for and dedicated to the care of persons afflicted with Alzheimer's disease and related dementia, and a core service building which contains administrative and other support facilities- [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q 19; CVI Ex. 3, PT II, p. 50a, supp. after p. 72a]. These elements, as required, have already been granted CON's. Phase I also included a maintenance building which in turn includes a laundry to serve the campus. [Id.; J.B. Q. 78, 79; CVI Ex. 3, PT I, p. 40a]. The Alzheimer's facility was authorized pursuant to Certificate of Need No. 5602 issued to CVI in 1989. [CVI Ex. 9; J.B. Q. 18]. The Alzheimer's facility consists of a 60-bed unit connected to the core service building. The 60 beds proposed by CVI herein will be located in a new nursing unit a.ii so to be /2 connected to the core service center. [Id.; P.R.Q. 12, 13, 14; P.R. Tr. 188, 189]. The Alzheimer's unit will also serve as a research center. [CVI Ex. 3, PT II, p. 71a, 71b; T.W. Q. 46, 47; K.V. Q. 17, 18]. All residents will participate in low-risk research such as diagnostic assessments, tracking the degenerative process through the collection of clinical data, behavioral observation and modification, activity-based therapy, and the use of environmental cues. [Id.; T.W. Q. 13]. Ultimately, dietary and drug therapies will also be the subject of research. [T.W. Q. 13]. The Mayo Clinic Jacksonville has a special Alzheimer's disease research team which will actively participate in the CVI research. [Id.]. CVI will be the only applicant licensed by HRS to operate the Alzheimer's unit. [F.D. Tr. 1565, 1566]. The Alzheimer's unit constitutes the nursing facility to which the proposed 60 nursing unit beds will be added.. [Id.]. CVI PROPOSED NURSING UNIT PROGRAM/QUALITY OF CARE CVI seeks a CON for a 60-bed nursing home addition to the ACLF mentioned above. The majority of the residents for the proposed nursing unit will come from the adult community developed by CVI which will be occupied by residents from within the total district. However, it is not anticipated that the adult community will be a direct source for nursing home residents for at least five years after the nursing unit is opened. [J.B. Q. 52, 103]. The CVI nursing unit will provide nursing care of a more generalized nature compared to the Alzheimer's unit. [J.B. Q. 26; K.V. Q. 28; CVI Ex. 3, PT II, p. iiia]. Consistent with CVI's plan for a continuum of care, the proposed nursing unit beds will also serve residents initially admitted to the Alzheimer's unit but whose disease has progressed to the point where the medical diagnosis becomes primary and, therefore, skilled nursing care becomes the primary need for that resident. [CVI Ex. 3, PT I, iiia; J.B. Q. 26; CVI Ex. 3, PT II, pp. 46a-46c; K.V. Q. 26, 27, 28]. However, utilizing existing Alzheimer's unit resources, these former Alzheimer's unit residents will still receive specialized care and participate in research; CVI Ex. 3, PT II, pp. 71a, 71b; T.W. Q. 46, 47]. CVI defines a "program" as those services designed to correct a resident's problem or condition. [CVII Ex. 3, PT I, p. 46a-46c; K.V. Q. 26, 27, 28]. The CVI nursing unit will offer three different specialized programs: (a) Alzheimer's care offering specific therapies for residents with Alzheimer's disease or related dementias; (b) a medically complex program offering restorative, therapeutic care for residents with acute, medically complex conditions; and (c) an inter-generational enrichment program for the purpose of stimulating nursing residents by daily interaction with children in a structured therapeutic activity. [Id.] Given the experience of the NBA at other local service units, CVI can reasonably be expected to provide excellent quality of care through the support and resources of NBA. [CVI Ex. 3, PT ii, pp. 24a-24c; T.W. Q. 29, 30; K.V. Q. 54]. CVI PROPOSED NURSING UNIT DESIGN SUPPORT FEATURES The nursing unit will comprise 18,720 square feet of new construction, with 28 semiprivate rooms, 3 private rooms, and one isolation room. [CVI Ex. 3, iiia; P.R. Q. 14-16]. The nursing unit will include an activity room, a day room/lounge with an outside activity deck, a nourishment station, and three garden recreation areas. [Id.]. The quality of life and care of the CVI nursing unit resident will be enhanced by resources available in the adjacent core service building which include a kitchen, a large, dividable dining area, activity rooms, physical and occupational therapy areas, beauty and barber shops, administration areas offices, medical treatment rooms, and a visitor lounge. [CVI Ex. 3, PT I, p. iiia; J.B. Q. 28]. Construction of the core service building was completed as part of the construction for the Alzheimer's unit. [P.R. Tr. 205-208]. When HRS reviewed the feasibility of the certificate of need application for the Alzheimer's unit, it also reviewed plans for the core service building. [P.R. 196-203, 207, 208; HQR Ex. 44; J.B. Tr. 255, 256]. The Alzheimer's unit was approved as a 60-bed alternative to a 120-bed nursing home proposed in CVI's earlier application for Certificate of Need No. 5602. [Id.]. Approval of the 60-bed Alzheimer's unit did not change the design nor reduce the total space planned far the core service building. [Id.]. The CVI nursing unit addition will not require the conversion, through renovation or new constructions of any area within the core service building. [P.R. pp. 200-206; J.B. Tr. 311, 312]. After the Alzheimer's unit project construction was underway, HRS allocated 7741 square feet of the core service building to represent the amount of core service area space under HRS nursing home jurisdiction. [P.R. Tr. 196, 199; HQR Ex. 42]. It is unrebutted that this allocated space will be sufficient to support both the proposed nursing unit beds and the Alzheimer's unit. [J.B. Tr. 311, 312; P.R. Tr. 196-203, 205, 206]. The allocated core space includes an allocation for the main dining room. Use of this main dining area is optional for residents of the Alzheimer's unit and the proposed nursing unit, since each unit has its own adequate dining facilities. [P.R. Tr. 188-191, 229; K.V. pp. 59, 60]. CVI will provide child day care for employees, and these children will participate inn the inter-generational enrichment program. [CVI Ex. 3,PT II, pp. 46a, 60a, 60b; K.V. 27, 28, 33, 34]. Ultimately, the child day care center will be located within a new apartment building, but will be temporarily housed in the core service building. [K.V. Tr. 52, 58]. CVI will also eventually construct a chapel to be located on the campus. [CVI Ex. 3, PT II, p. 66b; K.V. Q. 43, 44]. Until then, the nursing home residents will be able to utilize a chapel area located in one of the lounge areas in the existing apartment building. [K.V. Tr. p. 56]. CVI's semiprivate rooms are specially designed to provide a physical separation, through the use of a dividing wall, that approaches the privacy of a single room with the economizes of a semiprivate room, while still allowing each resident to have the very important contact with another person. [CVI Ex. 3, PT I, p. iiia, Appendix 11(4B); P.R. Q. 14-16; P.R. Tr. 182-186]. Each bed will overlook an individual adjacent window. [Id.]. CVI PROJECT COSTS CVI reasonably projects that the nursing unit will involve a total project cost of $3,286,258 - ($301,175 land, $2,174,108 (including $79,880 fixed equipment) building construction, $231,525 moveable equipment, and $571,450 intangible asset and deferred) [CVI Ex. 3, PT I, 24-27c; J.B. Q. 37-39, 41; P.R. Q. 8; T.W. Q. 19-21]. CVI's capital budget also includes the possible development of additional ACLF units on a second floor of the nursing unit building as part of Phase II. [CVI Ex. 3, PT I, pp. 28, 28a; J.B. Q. 42; J.B. Tr. 303, 304]. However, the CVI nursing unit construction cost was conservatively projected on the basis that the nursing unit would, like the Alzheimer's unit, be a one-story building. [P.R. Tr. 193-195]. It thereby accounts for all construction, including the roof, necessary to build the 18,720 square foot nursing unit. [Id.]. CVI's projected construction costs for the proposed nursing unit are reasonable and conservative. [CVI Ex. 3, PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. In the application, they were premised upon the Alzheimer's unit costs as known at the time the application was submitted. [Id.]. The reasonableness of the proposed nursing unit construction cost projections was again verified by the time of hearing in August, 1991. [J.B. Q. 41]. For construction (labor, materials, overhead, construction management, and profit) CVI projected a cost of $1,825,144, or $97.50 per square foot [CVI Ex. 3 PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. CVI certified to HRS that the final construction cost for the Alzheimer's unit under Certificate of Need No. 5602, including fixed equipment, was $76.33 per square foot. [CVI Ex. 34]. Adding the construction management fee, the final cost was $81.30 per square foot. [Id.]. If CVI's fixed equipment costs of $79,880 were added to the $1,825,144 projected construction cost for CVI's nursing unit, the result would be $101.74 per square foot. If the comparable Alzheimer's unit cost of $81.30 per square foot was conservatively inflated for a two year period (to allow adequate construction commencement after final agency action, see CVI Ex. 3, PT II, p. 57; P.R. 1. 25, 26) the result of $89.63 per square foot again reveals the reasonableness of CVI's projected construction costs. The CVI proposed nursing unit will occupy approximately 3 acres of the total 65 acre campus. [CVI Ex. 3, PT I, pp. iiia, 27a; J.B. Q. 28,38, 39, 46]. CVI reasonably allocated, pursuant to generally accepted accounting principles, a portion of the land's fair market value and land improvement costs to the proposed nursing unit 60-bed project. [CVI Ex. 3, PT I, p. 27a; J.B. Q. 38, 39; J.B. Tr. 294-296]. CVI's ABILITY TO FINANCE THE PROJECT CVI has the ability to finance the nursing unit project. [ANH Ex. 8, p. 22]. Phase I, including: the Alzheimer's unit, of the CVI campus was financed through a $21,960,000 tax exempt bond issue through the Jacksonville Health Facilities Authority. [CVI Ex. 3, PT I, p. 28a, 1990 Audited: Financial Statement, p. 10; CVI Ex. 8; R.B. Tr. 241, 242]. CVI intends to secure the same type of financing for the proposed nursing unit. [CVI Ex. 3, PT I, pp. 30, 30a; J.B. Q. 44-46; CVI Ex. 3, Appendix 5(2.c.1); L.W. Q. 8-10; R.B. Q. 5-13; R.B. Tr. 241,: 242]. The Jacksonville Health Facilities Authority provided the tax exempt bond issue through the authority of Chapter 159, Part II, Florida Statutes. [CVI Ex. 8, p. 1]. Thus, pursuant to the provisions of the statute, CVI Phase I project in its entirety (which includes the core service building and the ACLF) necessarily was found to be financially feasible. See Section 159.29, Florida Statutes. CVI will be primarily responsible for repayment of the bond proceeds but the NBA will guarantee the bond issue, as it did for Phase I. [Id.; M.G. Q. 26]. The NBA has significant financial strength. In 1988, it had total assets of $145,493,840. [CVI Ex. 8; L.W. Q. 16]. In 1989, the total grew to $168,507,027. [Id.]. In 1988, it realized a net income (revenue over expenditures) of $5,670,754. [Id.]. In 1989, the income increased to $11,563,778. [Id.] The NBA has secured third party financing for its local service units on numerous other occasions. [L.W. Q. 7; R.B. pp. 241, 242]. The most recent occasion involved tax exempt bond financing immediately prior to the hearing, ore July 31, 1991. [L.W. Q. 7]. The investment banking firm which has worked on several tax exempt bond financing projects with the NBA, and which handled the financing for Phase I of CVI, has reviewed the financing proposal for the CVI nursing unit and has found it to be reasonable and achievable. [R.B. Q. 1-13]. Raising charitable funds has been a regular activity of the NBA and its local service units. [L.W. Q. 11, 13]. To date, CVI has raised $4,000,000. [Id.]. As of June 30, 1991, $1,327,589 in cash from donations was still available for the proposed nursing unit. [Id.; J.B.Q. 44-46]. The CVI application revealed $24 million in assets consisting primarily of bond issue proceeds. [CVI Ex. 3, PT I, pp. 28-28(b); J.B. Q. 42, 43]. CVI STAFF AND INDEPENDENT CONTRACTORS The staff proposed for CVI's nursing unit significantly exceeds minimum requirements, and would meet the criteria in Florida for a superior rating. [CVI Ex. 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. The superior rating indicates a higher level, and higher quality, of care. [Id.]. Because of the nursing intensity required for Alzheimer's and related dementia patients, the Alzheimer's units staff nursing to patient ratio will be 1:5 or 1:6. [K.V. Tr. 63, 66]. The CVI nursing unit will have a 1:8. The typical ratio for nursing homes in the Jacksonville, Florida area is 1:10. [K.V. Tr. p. 66]. The CVI application presented reasonable levels of anticipated salaries and fringe benefits. [CVI Ex 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. CVI accounted for employees, such as the administrator and director of nursing, who were full-time and on a fixed salary. (Id.]. CVI also accounted for those staff who are to be paid on the basis of an hourly wage, such as nurses, calculated according to the number of work hours expected (based on full-time equivalent factors). [Id.]. Under this approach, the CVI salary projections account for vacation, overtime, and sick leave. [Id.; K.V. Tr. 45, CVI did not directly reflect revenues nor expenses attendant to the activities of therapists, pharmacists, dentists, podiatrists, a medical director, for other such consultants because they would serve as independent contractors. [CVI Ex. 3, PT I, pp. 40a, 46b; J.B. Q. 66, Instead, CVI indirectly accounted for the independent contractors by utilizing a "net methodology" pursuant to which the anticipated consulting fees are included within a base rate for private pay residents along with a markup. [Id., Tr. 312-314, 339, 340]. The markup covers the cost to provide the contractual services to Medicaid or Medicare reimbursed residents. [Id.]. In this regard, CV followed the customary accounting approach taken by a not-for-profit nursing home whereby the facility does not attempt to profit from the provision of such contractual services. [Id.] FINANCIAL FEASIBILITY OF CVI'S NURSING; UNIT By the end of the second year of proposed nursing unit operations, it is reasonably anticipated that the 120-bed CVI nursing home will realize a net income of at least $275,300 at 95 percent occupancy. [CVI Ex. 3, PT I, pp. 35 35a, 47-49a (Schedule 18); J.B. Q. 77-81; J.B. Tr. 274, 275]. By the second year of operation, CVI's revenues per patient day will be $99.25, compared to $116.16 for HQR's 24 bed proposal, $117.45 for HQR's 41 bed proposal, $118.15 for Atrium's proposal, and $126.03 for MRCI's proposal. [Comparison of Schedule 18 of applications]. The nursing unit is feasible on an immediate and long-term basis. [J.B. Q. 27]. CVI did not rely upon any non-nursing home revenues to demonstrate feasibility for the nursing unit. [Id.; J.B. Tr. p. 305]. CVI demonstrated nursing home feasibility as a stand-alone project. [Id.] Schedule 18 of the application contains space for the applicant to enter non-nursing home revenues and costs, such as those items associated with the operation of a co-located ACLF. Under HRS policy, the applicant has the option as to whether or not to provide these projections. [E.D. Tr. 1551-1559]. CVI proposes a 35 percent Medicaid utilization condition for the nursing unit which, with a 50 percent rate in the Alzheimer unit, results in a 42.5 percent Medicaid rate for the 120 bed facility. [CVI Ex. 3, PT I, p.iv, p. 46a; H.B. Q. 31, 33, 73-75; A.G. Tr. 1260, 1261, 1320]. Of the completing applicants, only CVI showed all it beds will be Medicaid certified. [J.B. Tr. 263, 265]. It is the financial feasibility of the specific certificate of need being reviewed which is assessed by HRS. [Id.]. HRS does not review the financial feasibility of any other operations of the applicant which are not part of the nursing home certificate of need application. [Id.]. VALIDITY OF CVI'S AUDITED FINANCIAL STATEMENTS The completeness deadline for applications was January 18, 1991. However, the completeness determination for CVI was delayed by approximately one month because, initially, HRS withdrew the CVI application from review. HRS' action was based upon an audited financial statement of CVI covering the first 10 months of 1990. HRS acted upon an apparent non-rule policy that a "combined" audited financial statement would not be `accepted, and the conclusion that the 1990 10-month CVI audit was a "combined" statement. No evidence was adduced at hearing to demonstrate what HRS specifically defined to be a "combined" statement, or specifically why the Department initially felt the 10-month 1990 audit was not an audited financial statement of Cypress Village, Inc. Upon reconsideration, the HRS reinstated the CVI application, specifically finding that another audited financial statement, covering the full 1989. The purpose of an audit is to fairly present, in all material respects, an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles (GAAP). [M.G. Q. 11; M.F. Tr. p. 1813]. This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an audit performed in accordance with general accepted accounting principles which govern auditing standards. [Id.] The certified public accountant has a duty to exercise independent professional judgment with due professional care in preparing the audit and preparing the report. [Id.; M.F., Tr. p. 1811; M.G. Q. 35]. Within the accounting profession, because independent judgment is to be utilized, reasonable persons can disagree on a professional basis as to whether, how, and why certain items should or should not be included in, or appear in, audited financial statements under GAAP for any particular entity. [M.F. Tr. 1918]. The CVI auditors found that `failure to account for all assets, regardless of legal title, exclusively utilized by CVI for its economic benefit would violate the completeness requirement. [M.G. Q. 16, 17, 33]. [M.G.Q. 26]. If CVI's auditors had not reflected the assets to which that liability applies, notwithstanding titled ownership, the audited statements would not have been complete and would not have fairly represented the financial position of CVI. [Id.]. Both CVI audited financial statements meet the test of fairly presenting CVI's financial position results of its operations, and cash flows in conformity with GAAP. [M.G. Q. 1-39]. The CVI auditors exercised independent professional judgment with due care. [Id.; M.G. 34, 36]. Even if reasonable persons disagreed with the results, the application's requirements were met and HRS had information presented to it upon which to base its decision. The balance sheet and income statements contained in both the 1989 and 1990 CVI audited financial statements are based upon the "fund balance" accounting approach. [CVI Ex. 3, p. 9, 1990 audit; M.G. Q. 28, 30; Burcham Q. 11]. Fund balance accounting is unique to not-for- profit and governmental entities. [M.G. Q. 31]. The CVI audit balance sheets and income statements represent the combination of funds from two sources, both directly related to CVI operations and both of which have a material influence upon CVI's financial position, cash flows, and operational results. [M.G. Q. 26, 27, 28, 29, 32, 33, 36]. The 1990 statement is only different from the 1989 audit in terms of the form of presentation and because the passage of time resulted in updated financial information being available to reflect the more mature status of CVI in its development activities. [M.G. Tr. 1536; CVI Ex. 3 1989 & 1990 audits]. The characterization of the audited financial statement as a "combined statement" has no significance from an accounting standpoint because "combined statement" is not a term of art in accounting and has no precise meaning. [Id.; M.F. Tr. 1825, 1826]. To the extent the CVI statements may be deemed "combined", they do portray CVI as a distinct legal entity and do not distort the financial ability of the applicant [M.G.Q. 1-39; M.G.Q. 16, 27-29]. To the extent that CVI's 1990 audited financial statements make a specific reference to "combined financial statements", this reference is not a term of art and does not effect the validity of the audited financial statement. [M.G.Q. 27; Burcham Tr. 330, 331]. The financial statements account for the assets and liabilities shared with the NBA as required by GAAP. [Id.; and M.F. Tr. 1333-1334]. The American Institute of Certified Public Accountant's Technical Division concurs in the type of presentation utilized by CVI's auditors. [I.B.Q. 17]. The Technical Division was asked to comment on an audit for another NBA local which utilized the fund balance presentation. [Burcham Q. 5- 18]. The Division concurred that NBA's assets dedicated to that service unit's retirement program (similar to CVI's) should be included on the audit given the unit's debt and other obligations and economic benefit derived from those assets. [Id.; M.F. Tr. 1744, 1745]. VALIDITY OF CVI'S LETTER OF INTENT NOTICE OF PUBLICATION CVI timely published notice of its letter of intent in the Jacksonville Times Union. The contents of the publication are set forth in Rule 10-5.008(1)(i), Florida Administrative Code. Due to an error which was solely the fault of the newspaper, the newspaper left a zero off the total project costs so that the publication actually said "$30,000.00" instead of $3,000,000. [CVI Ex. 4]. Prior to the application completeness deadline, CVI provided an affidavit to the HRS which revealed that the error was not due to any fault of CVI. [CVI Ex. 4; A.G. Tr. 1266, 1267; E.D. Tr. 1569-1571]. Consistent with its existing policy, HRS found that since the publication error was not the fault of or within the control of the applicant, CVI had satisfied the legal requirements for publication. [Id.; A.G. Tr. 1269-1270]. The rationale for the HRS policy was that it would not be fair to punish an applicant for the `mistake of the newspaper as long as the applicant fulfilled its responsibility to demonstrate that it had no part in creating the error. [Id.]. At the time of the CVI application, this policy had been consistently applied by HRS for numerous other applicants who were found to be in compliance with the law as long as the publication error was not their fault. [Id.]. CONFORMITY WITH THE LOCAL HEALTH PLAN All four applicants conformed generally to the applicable local health plan. The applications of CVI and Atrium were determined by HRS to meet the elements of the local plan better than did the applications of Health Quest and MRCI. Atrium and CVI were the only applicants which provided specialized programs for Alzheimer's patients, a preference for applicants in the local health plan. [Atrium/Nelson PF, pp. 20- 28; Atrium Ex. 8, p. 10-11; HRS/Granger PF, pp. 6-8; ANH Ex 16; A.G. Tr. 1323]. Atrium and CVI had the lowest costs per bed of the applicants. [See p. 249 below]. MCRI failed to address the current District Health Plan (1990-91) and instead used the 1989-90 plan. [Atrium/Nelson PF, p.9]. MRCI proposes to serve the lowest percentage of Medicaid patients in proportion to the average subdistrict-wide experience of nursing homes. Health Quest's existing facility, already at 120 beds, would be substantially over optimal size at 161 beds, if its proposed project is approved. Furthermore, Health Quest was not in compliance with regard to special programs and commitment to serve hard-to-place patients. [Atrium/Nelson PF, pp. 9-20; Atrium Ex. 8; HRS/Granger PF, pp.: 9-10]. There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and high occupancy rates of the subdistrict. ATRIUM'S APPLICATION The proposed Atrium 84-bed nursing home will be constructed in close proximity to The Atrium Retirement Community of Jacksonville, an existing 176 unit retirement and assisted- living community. The Atrium will be a new facility constructed and developed by owners new to construction and operation of health care facilities. The applicant is a "shell" corporation with assets of $50,000.00 owned by Jack and William Deinetree, two brothers, who have also provided financial data and letters from their bank indicating their financial ability and intent to complete this project. The applicant filed an audited financial statement as required by statute although it revealed a shell corporation waiting CON approval for the infusion of dollars by the shareholders, Jack and William Demetree. HRS does not limit an applicant's documentation in demonstrating how it will be able to finance its project, if approved. Atrium's letter of intent was clearly indicated as such within its application. Atrium's application was deemed complete. [Vol. 15, pp. 1616-17; Atrium Ex. 2, p.123; Atrium Ex. 5]. Personal financial statements of the Demetrees, prepared by their longtime CPA, were also included in Atrium's application. [Atrium/Schramm PF, pp. 10-11]. The Demetrees' financial statements were "compiled" statements. [Vol. 16, p. 1678]. A CPA will not even prepare a compiled statement unless he has personal knowledge of the individual involved and his business operations. [Vol. 16, p. 1678]. `The financial statements of the Demetrees were provided as supplementary material. There is no statutory or rule requirement that they be in a certain form. [Vol. 16, p. 1694] After assessing their financial net worth, DHRS concluded that the Demetrees have more than sufficient liquid assets to make the equity contribution required in Atrium's application. It is a matter of the general business philosophy of the Demetrees that they put equity into all their development projects. [Atrium/Schramm PF, p. 11]. The nursing home application form does not require audited financial statements of stockholders in order to support their ability to make equity contributions. Neither the application Form 1455A, October 1988, nor the instructions thereto, dictate such a requirement. [Atrium Ex. 2, p. 24; Healthy Quest Ex. 9, p. 1-6; MRCI/Beiseigel PF, p. 6; Vol. 1, p. 75; Vol. 5, p. 444]. The ability of the Demetrees to obtain construction and permanent financing, as well as contribute substantial equity and operating capital was demonstrated by competent, substantial evidence. The $100,000 note payable to owners that appears in Schedule 15 of Atrium's application will be a line of credit, used for working capital during the first year of operation, before the cash flow picks up. It is fairly customary in the industry to provide such financing during the initial year or so of operations. (Vol. 6, p. 569; Vol. 16, p. 1682). The Atrium will have the resources available to complete the proposed project if the Demetrees provide the financing. Because the Atrium is a shell corporation in which the Demetrees own all the stock, it is logically assumed that they will provide the financing to the extent they are able. [Vol. 16, p. 1682; p. 1716; p. 1723; HRS/Granger PF, p. 13]. Their ability to finance the project is discussed above, and no evidence was introduced to show they could not finance the project. As a shell corporation, the Atrium currently has no other capital projects or expenditures under development or in the planning stage. Because it has very little capital and is totally dependent upon the infusion of capital by the Demetrees, existence of other project and expenditures is absolutely irrelevant. [Atrium/Schramm PF, pp. 5, 7]. Recent borrowings in amounts of from 3 to 8 million dollars by companies in which the Demetrees are major owners indicate their ability to obtain capital at rates from prime plus one-half to prime plus one. [Vol. 16, pp. 1680-1]. In its application, Atrium provided a letter of interest from First Union National Bank to finance the project, if approved. The Demetrees have a long-standing relationship with the bank, which has financed numerous large scale developments for the Demetrees through construction loans, working capital lines and permanent financing. The Demetrees have a 40-year, unblemished lender-borrower relationship with First Union (formerly Atlantic National Bank); there was no competent substantial testimony to the contrary. [Atrium/Schramm PF, pp. 8-9; Vol. 6, p. 549; Atrium Ex. 2, App.; Vol. 16, pp. 1679-81; Vol. 5, p. 445]. The Atrium's proposed plan is designed to develop innovative quality of life enhancements to minimize the institutional setting characteristic of some nursing homes. The plan utilizes a staggered semiprivate room design that increases residents' privacy and allows each resident to have a window to the exterior. The facility will-meet social needs of the residents, as well as their need for privacy. It is supported by a resident room design as well as a variety of activity and support spaces. (Atrium/Bhide PF, p. 3; Atrium Ex. 8, p. 18) The Atrium's proposed design is both appropriate and reasonable in light of state and local construction standards for a freestanding nursing home. (Atrium/Bhide PF, p. 3-7) The projected construction costs are based on Vasant Bhide's experience with designing and working on at least five (5) nursing home projects in the North Florida area in the past two years. According to Bhide, the proposed project cost estimates (construction costs, fees and equipment) are reasonable, and include almost $200,000 in contingency funds. Bhide's representations are disputed by other equally knowledgeable and experienced builders and architects whose costs estimates on similar facilities exceed Bhide's estimates. (Vol. 7, p. 644; Atrium/Bhide PF, p. 4; Atrium Ex. 3, p. 49; Atrium/Downs PF, p. 6-7) The Atrium's project costs compare favorably with HRS experience, and the actual costs may be lower due to the impact of the current recession. (Vol. 5, P. 434). (Vol. 7, p.644; Atrium/Bhide PF, p. 4-7; Atrium Ex. 3, p. 4-7) The total project cost of Atrium, which is just under $4 million, is deemed reasonable. (Atrium/Nelson PF, p. 29; Atrium/Downs PF, p. 6; Vol. 6, p.570, 572; Vol. 6, p. 552; Vol. 16, p. 1699-1703). The Atrium's projected bed utilization for the first two years is both reasonable and appropriate. (Atrium/Nelson PF, p. 6; Atrium/Downs PF, p. 4) The Atrium's proposed patient charges and expenses are reasonable. (Atrium/Nelson PF, p. 29, 31; Atrium/Mitchell PF, p. 4-6) Although acknowledging he had seen Medicare rates as high as $270 per patient day, Mark Fall challenged the Medicare rates projected by Atrium. (Vol. 18, p. 1888) If Mr. Fall's opinion were credited, Atrium's net income in year two would still exceed $260,000. (Atrium Ex. 4, Sch. 18) reasonable and conservative, based on actual recent financing of other Demetree projects. (Atrium/Schramm PF, p.12) The Atrium's assumptions on Schedule 11, especially regarding fringe benefits, were shown to be reasonable. The total dollar amount of salaries and wages and benefits for Schedule 11 were compared to other historical operations, inflated forward, and found to be well within the reasonable range by Joseph Mitchell, Atrium's expert in Medicaid and Medicare reimbursement and nursing home accounting. (Vol. 6, p. 563-565) The Atrium's proforma assumptions, using fringe benefits of 22 percent, were reasonable. (Vol. 6, p. 565) The Atrium's projected Medicare per diem revenues are reasonable considering this is a start up facility. One cannot compare a start up facility's Medicare rates with those of a long-standing facility, as Medicare imposes a limitation on Medicare rates after the first three (3) years of operation. (Vol. 6, p. 568) Atrium's proposed project is feasible in both the short and long term. Mr. Mitchell tested the reasonableness of the proforma assumptions based on his experience working with 125 to 150 nursing homes on an operational basis. (Atrium/Mitchell PF, p. 9; Vol. 6, p. 578) The Atrium's projected debt schedule is reasonable and conservative based upon recent financing of projects by the Demetrees. (Atrium/Schramm PF, p. 12.) The Atrium's design meets all codes, including building and life safety, energy code, handicap accessibility code, etc. (Atrium/Bhide PF, p. 6) HRS' architects ranked Atrium's plans first among the applicants in this hearing. (Atrium Ex. 8, p. 17-19; HRS/Granger PF, p. 14) The Atrium's application notes a willingness to take AIDS patients and will be bringing on-line 84 beds in a high occupancy subdistrict, which will promote better geographic accessibility. [Atrium/Nelson PF, p. 31]. The Atrium proposes to commit to 61% Medicaid, the most of any applicant. This commitment is attainable in light of the actual experience in the subdistrict (62.1% average) and the overall state average (60.6%). [Atrium/Nelson PF, p. 8- 9]. The proposed operations and quality assurance program submitted by Atrium meet or exceed Florida regulatory standards. [Atrium/Fitzpatrick PF, p.5, 14; Atrium/Downs PF, pp. 4-6; HRS/Granger PF, p. 11]. The Atrium's proposed staffing levels are reasonable and meet or exceed Florida standards. [Atrium/Fitzpatrick PF, p. 7; Health Quest Ex. 11]. The Atrium will develop and implement a training/staff development/internship program, to include students residing in Duval County. [Atrium Ex. 4, p. 70 A-C]. The Atrium will also be associated with an existing 176-unit retirement community known as The Atrium Retirement Community of Jacksonville, through their common ownership. The experience gained, in the five years of operating The Atrium Retirement Community of Jacksonville will be beneficial to the Atrium nursing home project, especially in the areas of housing for elderly residents, security, housekeeping, dietary and nutritional services, activities and counseling. (Atrium Ex. 2, p. 24B) Atrium will have established linkages with its sister retirement community and thereby offer a continuum of care. [Atrium Ex. 4, p. 46 A-c; 58A]. Atrium will have a good recruitment and career ladder programs. The Atrium's description of its patient assessment and care plan, utilization review program, quality assurance program, operations and dietary programs were comprehensive and explicit. The Atrium described very good activities programs, family involvement, mental conditions of residents, restoration/normalization programs and quality of life enhancement programs. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. Overall, the presentation was consistent and thorough and stated the services to be offered by the applicant. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. However, Atrium has never built or operated a nursing home. The Atrium's inexperience is demonstrated by its failure to properly plan for the cleaning of soiled laundry. The Atrium indicated it may send out the patients' laundry or use the laundry of a nearby retirement community. (T. 171, 549; Atrium Exhibit 4) As additional evidence of its inexperience in operating nursing homes, the Atrium proposes to use a non- wheelchair accessible van for transportation of it's residents, pulling a U-Haul with the wheelchairs. (Atrium Exhibit 4) When the matter was raised at hearing, its representative indicated that Atrium would rent a wheelchair accessible van, and private medical providers might be called on to transport Medicare and Medicaid residents to doctors' appointments, therapy sessions, and related activities. [Atrium Ex. 4, p. 61A; Atrium/Downs PF, p. 9]. Atrium intends to draw upon the management skills of the American Retirement Corporation (ARC) of Nashville, Tennessee. ARC is a national management services company which operates 21 retirement communities in 14 states. Most of the programmatic features set forth in Atrium's application are already utilized successfully at ARC facilities around the country. (Atrium Ex. 2, p. 24 A-B) For more than 10 years, ARC has employed its standard operating methods at a nursing home located at the Burcham Hills Retirement Community in East Lansing, Michigan. (Atrium Exhibit 13, p. 2; T. 520) ARC has been found to be in violation of several nursing home standards at its facility at Burcham Hills, Michigan, including serious failures to provide appropriate care to residents. (Health Quest Exhibit 26, pp. 3-7) The Senior Vice President of Operations for ARC plans to manage Atrium's nursing home using ARC's "`standard operating methods," to describe the programs that would be offered. (Downs PT, pp. 5-12) He asserted that ARC's lack of experience in managing a nursing facility of this size, type, and location is irrelevant because, among other reasons, "a patient is a patient." (T. 618) The Atrium, through its proposed management contract with American Retirement Corporation (ARC), will attempt to provide quality care to its patients. [Atrium/Fitzpatrick PF, p. 3]. MCRI'S APPLICATION FOR CON The MRCI CON is for a 30-bed nursing home. MRCI filed a proper letter of intent and audited financial statement for this CON. (T. 1608, 1609, 1611, 1613). MRCI also filed a CON for a 24 bed nursing home which HRS rejected as incomplete and untimely. Because the completeness issue of the 24 bed CON was undecided, MRCI presented evidence that included the feasibility, etc., of the 24 bed CON. In summary, there were no significant differences between the two CONs, and both were equally feasible. MRCI has developed a prototype facility called "Brighton Gardens". An MRCI Brighton Gardens facility typically includes 30 nursing home beds and 120 ACLF `beds. (Walter PT, p. 5). The concept anticipates carrying for the elderly from their need for an ACLF through nursing home care with minimum disruptions due to changes in environment. MRCI's research has indicated that as people get older, changes become more difficult and residents do not want to transfer back and forth between facilities. (T. 909) MRCI's project minimizes transfer trauma. The more unfamiliar the situation the more serious the transfer trauma. Transfer trauma manifests itself by despair, isolation, a change in a person's behavior and the way they deal with ordinary situations. Some states require transfer trauma plans before a resident is moved out of a facility. (T. 910, 911) At a Brighton Gardens facility, when a resident moves from the ACLF to the nursing home, friends in the ACLF can visit the nursing home on a regular basis. This is particularly beneficial for spouses to be able to visit back and forth without the need for transportation. (T. 907, 908) All of the beds are contained within the same building, although the nursing home is a self-contained unit with its own separate entrance for privacy and ease of access by residents, staff and visitors. (Walter PT, pp. 5, 6). Marriott and Marriott Retirement Communities, Inc. currently own and operate ten retirement centers and manage two other. (Evans PT, p. 4) MRCI operates two Brighton Gardens in Arizona and one in Virginia Beach and one in Houston, Texas. (Evans PT, p. 6) Five retirements communities are currently under construction and are all scheduled to open within 18 months (Evans PT, p. 4). MRCI already operates one facility in Florida which is a full service retirement community and has a superior rating. (Walter PT, p. 18) MRCI has demonstrated that it has the ability to provide superior care at its Brighton Garden facility. MRCI has demonstrated that it can provide the quality and types of programs equal to or exceeding any of the other applicants. MRCI has demonstrated that it can improve the quality of care in existing institutions and successfully operate nursing homes. For example, MRCI began managing a property in Canton, Ohio in June, 1988, when occupancy was less than 50%. When it discontinued management in early 1991, occupancy was approximately 90%. The net loss in income for the property had been reduced substantially from $2.3 million in 1988 to $900,000 in 1990. Reduction in cash loss was even more significant. (T. 874-875) MRCI managed property known as Towne Center, beginning in June, 1988, and discontinued management in early 1991. When MRCI began managing the property occupancy was approximately 55%. Occupancy had increased to over 90% by the time MRCI discontinued management. Efforts to discredit Marriott's management were unsuccessful and rebutted by its representatives. The design of MRCI's proposed project lends itself to quality of care because residents will not be expected to transfer from one entity to another as their needs change and because the small size of the unit allows for more individualized care. (Evans PT, pp. 28, 29; T. 1315) MRCI's proposal provides sufficient staff to provide top quality care. (Evans PT, p. 6) MRCI is proposing to provide 3.0 nursing hours per patient day for the 30-bed project. This does not include direct nursing hours which could be provided by the director of nursing. If you include those hours, direct nursing hours increased to 3.21 nursing hours per patient day. For the 24-bed project, if you include direct nursing hours provided by the director of nursing, 3.25 nursing hours per nursing hours per patient day will be provided. (T. 922-923, 954) There will be a full time administrator on the property of Brighton Gardens of Jacksonville. (T. 872) The administrator will be responsible, for the entire property. (T. 872) MRCI's proposed staffing exceeds the regulations of the State of Florida. In fact, MRCI proposes to provide four licensed nurses five days per week. By regulation, MRCI is required to provide only three licensed nurses. (Evans PT, p. 7) MRCI has an excellent recruitment plan and has designed a variety of enhancement programs for its employees. Some of these programs include a profit sharing program, the employee stock ownership plan, and a benefit trade system. MRCI offers an employee credit union, employee discounts at Marriott Hotels, continuing education, as well as additional training for employees to advance in their areas. MRCI has a working family life program, offers family life-counseling programs and has a guaranteed right to fair treatment policy within the company. MRCI recruitment efforts have been very successful. (Evans PT, p. 10) MRCI has developed a superb quality assurance program which exceeds the federal OBRA requirements and exceeds state requirements for quality assurance committees. (Evans PT, pp. 11, 12, 13-19) The wage assumptions and salary assumptions of both MRCI applications are reasonable projections. (Huber PT, p. 11) The staffing assumptions in both Schedules 11 are reasonable assumptions. The proposed Medicaid rate is reasonable and consistent with the Medicaid requirement in Florida. (Huber PT, p. 13) MRCI has demonstrated that its proposed 30-bed project is a financially feasible project. (Huber PT, p. 6) The proposed capital expenditure is $1,901,507 and first year operating expenses are projected-to be $1,065,108. MRCI has demonstrated that its Jacksonville Brighton Gardens project will be profitable in Year 2 of operation. This is true for the 30-bed application and for the 24-bed application. (Huber PT, pp. 14, 15) The ACLF revenues are a reasonable estimate of revenues for the Duval project. (Huber PT, p. 17) MRCI's land cost is based upon an option contract it entered into in 1989. The land cost for the project is reasonable and based upon a reasonable allocation of cost to the nursing home. (T. 1237, 1238, 12 41) MRCI intends to develop the entire Brighton Gardens of Jacksonville, which includes the ACLF and the nursing home. (T. 800) In conjunction with this type of facility, a nursing home this size is a viable alternative to "optimal sized" facilities because the small complement of beds is offset as part of the larger facility. The data provided attest to the financial feasibility of such a concept. MIRCI does not intend to build a stand-alone 30-bed nursing home. They will only be built in conjunction with the ACLF. (T. 861) The costs of construction for the MRCI proposals are reasonable and are allocated appropriately between the nursing facility and the ACLF. (McPhail PT, p. 20, 21, 22) MRCI allocated the costs of construction of the 30-bed project between the nursing home portions and the ACLF portions. This allocation was performed by determining the cost of the entire Brighton Gardens and conducting an allocation of those costs directly related to the nursing home portion of the building, including construction costs, fixed and movable equipment. Shared area costs, such as those associated with the kitchen, laundry, circulation, beauty-barber, and administrative areas, were allocated on a proportional basis. The kitchen was allocated on a proportion of meals served to the nursing center residents. The construction, site development costs and equipment costs of other shared areas were estimated by function, and these costs were then allocated on the basis of a square footage ratio of the nursing center to the ACLF portion of the building. (McPhail PT, pp. 20, 21) MRCI has three other Brighton Gardens projects which have been constructed. Those projects have been constructed at a cost within 1% of the original cost assumptions prepared at Marriott. (McPhail PT, p. 9) The Brighton Gardens design and schematic plans are consistent with the requirements contained in Chapter 10D-29 and local building codes for the 30-bed project and the 24-bed project. (McDowell PT, p. 5) Marriott has developed a bi-axial room which is one of the best semiprivate rooms available. The residents are situated so that they each have a privacy curtain and each resident still has a window. Semiprivate rooms are more affordable than a private room. Private rooms often lead to a resident feeling isolated, thereby leading to depression. (T. 915, 916, 1012) MRCI's design provides certain advantages for residents of both the ACLF and the nursing components. The bi- axial semiprivate rooms are quite large; there is significant amount of storage space; all resident's bathrooms are handicapped accessible. Residents will be able to take advantage of some of the ACLF common spaces at will, and MRCI's project will have a courtyard which will allow residents to do some secure wandering. The buildings are residential in nature, both in the exterior and interior architecture. (McDowell PT, p. 7) MRCI anticipated that the duration of construction for the Brighton Gardens of Jacksonville will be 12 months. This is a reasonable estimate. (McPhail PT, p. 22) The Brighton Gardens project in Southeast Duval County will be located on an 11 acre parcel on San Jose Boulevard which has ready access to public transportation and is convenient to the elderly population in the service area. (Walter PT, p. 19). MRCI will accept the following conditions on its certificate of need: MRCI will make at least 30% of its patient days available to Medicaid eligible patients, will donate 20 prepared meals per day to a local Meals-on-Wheels program for distribution to elderly residents and will provide respite care at both the nursing home and ACLF levels of care. MRCI will implement its special Homeward Bound Program. (Walter PT, pp. 16, 17, 30; Evans PT, pp. 22, 23,). MRCI has a history of providing nursing care services to Medicaid eligible residents. For example, although MRCI's Calusa Harbour facility carries no Medicaid, condition, approximately 31% of its community patient days were provided to Medicaid residents in 1990. (Walter PT, p. 18). MRCI will provide' services to ACLF residents requiring AIDS care or Alzheimer's care. (Walter PT, p. 19, T 915). MRCI filed an audited financial statement as required by the statute. Nationwide, Marriott has designated approximately $90 million for the development of retirement projects for 1991 and has designated $70 to $80 million for 1992. (T. 1020). Marriott has the resources to fund Brighton Gardens. [Handlon, p. 2]. Schedules 2A and 2B of MRCI's CON application contain a list of other planned capital projects of MRCI. This list of projects changes on a regular basis as projects are either added or rejected from the development process. This list includes projects in the very preliminary stages of planning. (Handlon PT, p. 3). No project has been dropped from Schedule 2 for financial feasibility problem's. (T. 1246). Typically, projects are deleted because of difficulty obtaining suitable property or problems with zoning or other regulatory hurdles. (T. 1253). Furthermore, certain projects listed on the capital project list in Schedule 2 identify expenditures which will occur as late as, or later than, 1998. (T. 798). An omission by MCI of approximately $7 million relating to a Boynton Beach project will have no effect on Marriott's ability to finance these projects. The amount omitted is inconsequential when considering Marriott's total development plans. Furthermore, MRCI has included projects on Schedule 2 which will be financed beyond the' next five years, well after the proposed project is operational and has demonstrated financial feasibility. (Handlon PT, p. 3; T. 1040, 1042). No MRCI or Marriott retirement housing project under construction has been slowed down or stopped for economic reasons. (T. 893). No retirement housing project which has been presented to the Executive Committee of Marriott has been denied or delayed. No project will be delayed once a CON has been issued or if another government timetable requires construction by a particular time. (T. 1223). MRCI is a subsidiary of Marriott Corporation, and the board of MRCI filed a proper letter of intent. Marriott has proven that it is committed to constructing, licensing and operating the project at issue iii this proceeding. MRCI operates five facilities that have had deficiency-free surveys under the new Omnibus Budget Reconciliation Act ("OBRA") guidelines. It is unusual to have no deficiencies found by the survey-team. Under the OBRA guidelines there are 710 elements in the program and surveyors evaluate compliance with the regulations by looking at each item. For each of these facilities, surveyors found that all 710 elements were in compliance with the guidelines and there were no deficiencies. (T. 905, 906). HQR'S APPLICATION Health Quest Realty II, Ltd. ("HQR II") is an Indiana limited partnership, first created prior to March 30, 1987 and authorized to transact business in the State of Florida on July 11, 1991. (HQR II Exhibit 7). HQR II is the authorized licensee of Regents Park of Jacksonville, a 120-bed community nursing home located in Duval County, Florida. HQR II has been the licensee of this facility since it first opened in 1986. HQR II's CON proposes to convert a portion of Regents Woods of Jacksonville, and existing Adult Congregate Living Facility, and thereby add nursing beds to an existing and co-located 120-bed nursing facility licensed as Regents Park of Jacksonville by HQR II. Alternatively, HQR II's CON proposed a 24 beds addition to Regents Park of Jacksonville. The 41-bed addition proposed by HQR II would involve 16,025 gross square feet at an estimated total project cost of approximately $2.6 million. The 24-bed partial request would involve 10,405 gross square feet at an estimated total project cost of $1.76 million. (HQR II App.) Health Quest Management Corporation IV ("HQMC IV") is an Indiana corporation, which filed, on October 3, 1984, a notice of doing business in Jacksonville as Regents Park in compliance with the fictitious name law. On February 12, 1986, HQR II filed a notice under Florida's "fictitious name" law, Section 865.09, Florida Statutes, in the public records of Duval County, Florida, giving notice of doing business as "Regents Park" in Jacksonville. CVI 33 (exhibit indicates document recorded at Duval County Official Records Vol. 6084, Pg. 1948). According to filings in the official records of Duval County, Florida, on September 25, 1987, the persons having an interest in HQR II were Lawrence H. Garatoni, holding a 90% interest, and Judith A. Garatoni,, holding a 10% interest. HQ 41 (exhibit indicates document recorded at Duval County Public Records Vol. 6402, Pg. 1466). An affidavit was filed in the official records of Duval County, Florida, that identified Lawrence H. Garatoni as owning a 190% interest in HQR IV, an Indiana corporation. HQ 40 (exhibit indicates document recorded at Duval County Official Records: Vol. 5860, Pg. 1904). Regents Park of Jacksonville actually is owned by Health Quest Realty XXII, another Indiana general partnership ("HQR XXII") (Krisher 7). The construction of Regents Park was financed by industrial revenue bonds issued by the City of Jacksonville on November 1, 1984. CVI 210. HQR XXII leased the property to HQR IV, which operates the facility. As part of the bond transaction, HQR XXII gave the City of Jacksonville a collateral assignment of its rights as lessor in its lease of the property to HQMC IV. All the Health Quest entities are controlled by one man, Lawrence Garatoni. Mr. Garatoni is the sole general partner of HQR II and owns 90% in that partnership, T. 1908 (Fall); HQ 41. Mr. Garatoni also owns 90% of the stock of HQMC IV, HQ 40, and owns 95% of HQR XXII partnership. T. 1780 (Fall). CVI 32, p. 7. The original CON for Regents Park was issued to HQR II. T. 1381. When Regents Park was first licensed in February of 1986, the license was issued to HQR II. T. 1382 (Krisher). In the process of obtaining renewal of the license for Regents Park in January of 1987 Mr. Krisher realized that the licensee, HQR II, in facet held no interest in the facility; HQR XXII was the owner of the property and HQMC IV the lessee/operator. Mr. Krisher brought this to the attention of Bruce Henderson of the HRS Office of Licensure and Certification ("OLC"). In an attempt to rectify the problem, HQR XXII entered an agreement to retain HQR II, the licensee to provide management services for the facility operated by HQR IV. CVI 23; T. 1382. This agreement was not rescinded. HRS advised that it would not issue a license to HQR II based on HQR II being a management agent because only the owner or lessee of a nursing home was eligible to be licensed. T. 1383. HQR II then approached HRS about obtaining approval for HQR IV to be the licensee of tie facility. HRS indicated to Mr. Krisher that to have the license issued to HQR IV would require a change of ownership. T. 1383. Mr. Garatoni did not want to go through a "change of ownership" since a new licensee could not retain the superior license, which Regents Park had received in December of 1986. T. 1384 (Krisher). In order to enable HQR II to obtain renewal of the license, HQR IV assigned its leasehold to HQR II. T. 1383. However, all profits and losses of Regents Park were recorded in the books of HQR IV because Mr. Garatoni did not wish to change the internal accounting structure of the Jacksonville operation. CVI 32, Wright deposition, p. 25. Conversely, there is only one set of books and records for HQR II, and they related only to the facility located in Merrillville, Indiana. T. 1861 (Fall). Disclosure of all material transactions and circumstances affecting the entity being audited is a key requirement (i.e., "completeness") in order to properly present an audited financial statement under GAAP. (Vol. 14, p. 1534; Vol. 17, p. 1840; Vol. 18, p. 1920). Since the Regents Park began operation in 1986, HQR IV has had and continues to have full operational and financial responsibility for the nursing home. (CVI Ex. 22; Vol. 13, p. 1394; Vol. 14, p. 1455; Vol. 18, p. 1883-4). HQR IV took the benefit of all profits and the risk of all losses from the operation of a nursing home licensed to HQR II and owned by Health Quest Realty XXII. (CVI Ex. 21a, 21b, 21c; Vol. 13, p. 1384, 1407-11; Vol. 14, p. 1430) HQR II claims these circumstances relieved its auditors from any responsibility to even mention, much less adequately disclose, financial data or other disclosure information pertaining to Regents Park. (Vol. 17, p. 1830-1). Neither the 1988 nor 1989 audited financial statements submitted by HQR II with its CON fairly present, in all material respects, the financial position, cash flow and results of operations of Regents Park of Jacksonville under GAAP. To the contrary, both financial statements were the result of a "special audit" of property located in Merrillville, Indiana, which is owned by HQR II and leased to a third party for a retirement community. (HQR II App,.; Vol. 17 p. 1824; Vol. 13, p. 1404-5) Although an audit of the applicant and licensee, HQR II, was presented, the operation of the nursing home upon which determinations of financial feasibility would be based never occurred. When each audit was conducted, HQR II's auditors had no knowledge of the Jacksonville operation. (Vol. 14, p. 1445-46; Vol. 18, p. 1877). The purpose of requiring audited financial statements is to provide HRS with reasonable assurances that an appropriate audit, with all necessary field work, was conducted. (Vol. 15, p. 1563; Vol. 15, p. 1619-22). HQR II did not provide financial statements which reasonably represented and presented the financial status of the applicant because HQR II did not tell the auditors about its Jacksonville operations. If complete field work and independent evaluation by the auditors had been performed, the auditors would have discovered the relationship between Health Quest Realty XXII, HQR II and HQR IV. In considering disclosure of related party transactions, the auditors would have had to reconcile the relationships between the various entities, and present a accurate picture of the finances of the applicant. The Health Quest nursing home has not made a profit in its five years of existence. (Vol. 17, p. 1798, 1799; Vol. 14, p. 1444, 1445) For example, in 1989 it suffered a net loss of $114,000. (Vol. 17, p. 1)98) In 1990, it suffered a net loss of $107,000. (Id.) Health Quest's past history of consistent losses was not disclosed anywhere in its application. (Vol. 14, p. 1444, 1445) Such information is relevant to the financial feasibility of a CON, and is revealed in a proper audited financial statement. (Vol. 12, p. 1324, 1325; Vol. 15, p. 1560- 61) Health Quest projects a profit for its bed addition alternatives. (Health Quest App. Sch. 18) Given the past history of losses, Health Quest did not provide any explanation as to how a profit should now be expected. (Health Quest App.) Health Quest is a foreign limited partnership which did not register to conducts business in the State of Florida until July 11, 1991. (Health Quest Ex. 7) Its petitions for formal administrative proceedings were filed in March and April of this year. Some scores in HRS' s system are objective, i.e., based on specific facts. Other scores in HRS's system are subjective, i.e., based on the reviewer's opinion. On the objective items, Health Quest received 480.3 points, 80% of the possible 602; Atrium received 47911 (80%). MRCI 397.3,7 (66%), and CVI 374.55 (62%). At. 8. On the subjective items, Health Quest received 442.94 points, 68%, of the possible 654; Atrium received 575.61 (88%); MRCI 566.7:5 (87%); and CVI 621.47 (95%). At. 8. Health Quest finished highest among the applicants on the items scored objectively add lowest among the applicants (by a gap of 19% of the maximum s1core available) on the items scored subjectively. Health Quest's is the only nursing home in Duval County that has had a "superior" licensure rating since 1986. Krisher 8. Only about a third of Florida's nursing homes have superior licenses. Brockish 4; HQ 2. Health Quest's facility is considered excellent by local physicians, hospital discharge planners, and home health agencies. HQ 38. The chairman of the District IV Long-Term Care Ombudsman Council described Regent's Park as having a "solid reputation," and as having been identified by the University of Northern Florida as "a model facility and primary site for its newly developed Administrator-in-training program."' 6513, PT 2, Item 3M (1/14/91 letter). A high level of staffing, measured by the ratio of full-time equivalent ("FTE") staff to patients, generally correlates to high quality care. T. 40, 42 (Vroman). Health Quest's existing total direct care staffing pattern, at 3.49 hours per patient day, exceeds the levels proposed by the other applicants. Health Quest's proposed staffing, measured by licensed staff (i.e., RNs & LPNs) or by total direct care staff (i.e., including nursing aides), is higher than that of any other applicant except MRCI's 24-bed proposal. HQ 11. Health Quest provides a broader range of services than most nursing homes, including subacute care such as intravenous antibiotics, respiratory care and tracheostomy care. T. 757, 59 (Janesky). Regents Park provides more physical therapy ("PT") than most nursing homes. Provision of PT is related to Medicare utilization because Medicare residents are the primary recipients of PT in nursing homes. 6513, PT 2, Only one other facility in Duval County provides the type of subacute care which Regents Park provides, and that facility is not an applicant for beds in this cycle, [T. 775 (Janesky), H31] although CVI states that it too will serve high acuity patients. Vroman 6-7. Although the CON application form asks for a description of "specialized programs," HRS has not defined "specialized program" in the application instructions. T. 394 (Gordon-Girvin). HRS gave Health Quest no credit for providing subacute care because subacute care was not considered a "specialized program" although HRS had considered subacute care a specialized program in the past. T. 1286-87 (Granger). The Office of Licensure and Certification, which licenses and monitors nursing homes, recognizes 11 categories of "special care." Regents Park provides all of them. Although Health Quest referred to this in `,its application, HRS gave Health Quest zero points in this category. At. 8 (Ex. B, p. 22). HRS gives the same weight to its consideration of a proposal to provide a particular service and type of care that it gives to actually providing the service or care. The application evaluation process does not differentiate between the promise to perform by a entity which has never engaged in the nursing home business and actual performance by an existing provider with an excellent track record. T. 1295 (Granger). The success of Regents Park in restoring residents to health is objectively demonstrated by the high ratio of patients discharged from Regents Park rather than remaining as residents until death. As reflected in HCCCB reports for 7/89- 6/90, Regents Park discharged 179 patients, i.e., 1.49 times its licensed beds, which was more than twice the rate for all other District IV facilities. 6513, PT 2, p. 43E Health Quest's actual resident care cost per resident day is the highest in the Southeast Duval County, which is considered a favorable factor under State Health Plan Preference #12. Nursing care cost for resident day for Regents Park for fiscal year 1989, per HCCCB reports, at $30.64 was higher than that for any of the other nine Southeast Duval County facilities reporting. 6513, PT 2, p. 45F. Similarly, Regents Park's dietary cost per patient day, at $8.69, exceeded any of the other nine facilities. 6513, PT 2, p. 48C. Health Quest proposes that all but four of its new beds are to be in private rooms. There would be two rooms, each with two beds, sharing an entrance to the hallway but otherwise private. T. 1155. CVI, MRCI and Atrium each plan to provide four to twelve beds in private rooms. HQ 10. Health Quest agreed to condition an approval on the following: The proposed site would be 7130 Southside Boulevard, Jacksonville, Florida. A minimum of 50% of patient days will be devoted to Medicaid patients for the proposed new unit. The facility will continue to use only certified nursing aides ("CNA's"). (Health Quest App.) The conditions, above, to which Health Quest committed are largely redundant. As an existing provider, Health Quest is limited to expansion at its existing site, 7130 Southside Boulevard, and it must use trained personnel. Health Quest listed as special care restraint reduction, and weight maintenance. HRS found that the these programs constitute services which every nursing home must provide, or should provide, as standard care. (Atrium Ex. 8, p. 17; Vol. 8, p. 753-63) Health Quest did not characterize its services to Alzheimer's residents as a special program within its application. (Vol. 12, p. 1288) The care for Alzheimer's patients becomes a special program when it is offered in a discrete unit or when some other unique feature is present, such as a facility design, which specifically takes into account and benefits the needs of residents with Alzheimer's. (Vol. 12, p. 1319, 1323) Health Quest's application did not present any such unique features. Health Quest's willingness to accept hard-to-place patients is reflected its practice of accepting Medicaid residents requiring skilled rather than intermediate care. Per 1989 HCCCB data, the proportion of Medicaid patients receiving skilled care at Regents Park (31.5%) was more than twice the average (11.6%) for other reporting Southeast Duval County facilities. 6513, PT 2, p. 45F. However, the percentage of Medicaid utilization to which Health Quest is committed is ambiguous because its application states: It should be noted that Medicaid residents are to be placed in the facility according to the wishes of the residents themselves, their attending physicians, and the staff. The Agreement on page 6 should not be misconstrued as evidencing an intention to operate the new unit at 50% Medicaid occupancy [sic]. (Health Quest App., Sch. 17, Footnote #16) The reference to "page 6" is the application page wherein the applicant can expressly agree to a particular Medicaid utilization condition. Given its proposal to convert ACLF space, the remoteness of the proposed Health Quest unit from its existing skilled nursing facility will not lend itself to optimal efficiency in utilizing existing nursing home support areas. (Atrium Ex. 8, p. 19) Almost all of the proposed Health Quest beds will be located in private rooms. (Vol. 9, p. 915) The isolation of the elderly in a private room can cause problems with depression. (Id.) Health Quest was deficient in describing how it would measure the outcomes for its programs. (Atrium Ex. 8, p. 21) Health Quest description of its residential quality assurance program was weak. [ANH Ex. 8, pp. 16, 17]. Health Quest was the only applicant proposing renovation rather than new construction. The instructions to the CON application form state: If currently owned land is going to be converted from some other use to be used for this project, the land's original cost plus past improvements made must be included. If the purchase price of the land was previously approved in CON review by this department, it must be excluded when calculating the application fee. * * * The same treatment applies to donated and converted buildings (including partial bed conversion) as apply to donated and converted land, except that cost less accumulated depreciation must be used. Health Quest followed the instructions and included the depreciated cost of the existing ACLF area to be converted to nursing beds. 6513, 6513-P, Sch. 1. HRS in its cost comparisons used the "total cost" figures given by the applicants. Using those figures, the cost per bed were as follows: CON Total Cost Cost Per Bed HQ 41-bed $2,608,646 $63,625 HQ 24-bed $1,765,482 $73,562 CVI $3,286,258 $54,771 Atrium $3,944,324 $46,956 MRCI 30-bed $1,891,507 $63,050 See State Agency Action Report, At. 8, pp. 2-3.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED, in the absence of reconsideration by the Department, that: The application of Health Quest be denied for failure to file a properly audited financial statement and establish its financial feasibility; The CON of Cypress Village be approved for 60 beds; The CON of Atrium be approved for 84 beds; and The beds sought by MRCI should be denied. DONE AND ENTERED this 11 day of February, 1992, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11 day of February, 1992.
The Issue The issue presented for determination herein is whether or not F.A.C. Health Care, Inc., d/b/a Spring Hill Health Facility (Petitioner) is entitled to a Certificate of Need to establish a 60-bed nursing home to serve Hernando County.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at hearing, including the pre-hearing stipulation, the following relevant facts are found. F.A.C. Health Care, Inc. is a wholly-owned subsidiary of First American Corporation. First American Corporation has owned, operated and developed approximately 75 long-term care and retirement facilities over the past 15 years. These operations are primarily located in the southeastern United States. At present, First American Corporation operates 20 facilities and has seven Certificates of Need in the developmental stages. (TR. 35, Fulmer) On January 14, 1984, Petitioner filed an application with the Respondent for a Certificate of Need to construct and operate a community nursing home in the City of Spring Hill in Hernando County, at a total cost of $3,180,000. (Petitioner's Exhibit 1) The letter of denial accompanying the state agency action report dated April 30, 1984, noted the basis for denial as follows: Existing and approved bed capacity in Citrus/Hernando Counties is sufficient to satisfy projected need for 1986. There are 60 nursing home beds that have been approved but have not been constructed at the present time, which, when added to the existing nursing home bed supply in Citrus/Hernando Counties, will serve to satisfy a portion of the projected need for skilled nursing home beds in the sub-district through 1986. The proposed 120 beds are in excess of the 37 beds needed to reduce the prospective base utilization rate to a reasonable level by 1986. (TR. 36, Fulmer; Petitioner's Exhibit 2) On September 26, 1984, Petitioner amended its original application to reflect a reduction from 120 to 60 nursing home beds. Documents reflecting the corresponding reduction in project costs from 53,180,000 to 51,780,000 were submitted with the amended proposal. (Petitioner's Exhibit 3) FINANCIAL FEASIBILITY OF THE PROPOSED SPRING HILL FACILITY The immediate and long-term financial feasibility of a project is one criteria considered during the Certificate of Need review process. Section 381.494(6)(c)9., Florida Statutes. The total cost of the project of 51,780,000 appears reasonable and in line with similar projects. Funds for full 100 per cent financing of the project are available through industrial revenue bonds at 14 per cent interest over 30 years. In order to acquire an industrial revenue bond application, Petitioner would maintain a $150.000 debt service reserve fund. (Petitioner's Exhibit 3) Other methods of financing available to finance the subject project include conventional financing, syndicated equity programs and insurance investment programs. (Testimony of Fulmer at TR. 39-40) Due to the largely rural setting, projected utilization for the first year would be 81 per cent Medicaid, 5 per cent Medicare and 14 per cent private pay. Occupancy is projected to reach 97 per cent by the fifth full month of operation and would be supported in part by the increased utilization of nursing home beds as a direct result of the implementation of diagnostic related groupings. Pro forma statements for the first and second years of operation show a net operating profit beginning in the ninth month and continuing through the second year. The equipment costs, staffing patterns and personnel budget also appear reasonable for this type of project. METHODS AND CONSTRUCTION COSTS Another issue in this proceeding was whether Spring Hill satisfied the criteria in Section 381.494(6)(c)13., Florida Statutes, regarding the cost and methods of construction. Spring Hill's proposed facility will provide 11,981 square feet devoted to patient care and 9,710 square feet for administrative and common service areas at a construction cost of $41.50 per square foot. (Petitioner's Exhibit 3) Proposed construction costs and methods of construction efficiently minimize square footage space requirements and related construction costs and will permit the most efficient operation of the facility at a low per diem cost. The construction cost appears reasonable and is also supportive of a primarily Medicaid based facility. Finally, Respondent offered no evidence to controvert the reasonableness of construction costs and methods proposed by Petitioner. IMPACT ON HEALTH CARE COSTS Section 381.494(6)(c)12., Florida Statutes provides that as part of the Certificate of Need review, probable impact of the proposed project on the cost of providing health care services be considered. Petitioner's expert, Fulmer, urges that there would either be no impact on the cost of care or due to the availability of additional Medicaid beds, costs would be reduced since the private pay demands of family and relatives having to pay for the care of an individual rather than participating in the Medicaid program would reduce the costs of health care to the community rather than increase the financial burden. In this regard, Petitioner offered no evidence to substantiate the claim that the demand for Medicaid beds exceeded the supply, or that Medicaid patients had been refused health services by the available Medicaid health care providers. AVAILABILITY AND ACCESSIBILITY OF EXISTING SERVICES Hernando County lies within HRS District III which is composed of 16 counties in north-central Florida, stretching from the Gulf of Mexico north of Tampa to the Georgia border. (Petitioner's Exhibit 6) The District is further divided into sub-districts. Hernando County represents a separate sub-district. Petitioner's facility is proposed to be located in the City of Spring Hill, located in the fastest growing area of Hernando County. (Petitioner's Exhibits 1 and 2) The latest bulletin (No. 69) from the University of Florida, Bureau of Economic and Business Research, shows a 90 per cent projected growth between 1980 and 1990. Much of the population in the Spring Hill area falls in the 65 and older age bracket. County age group projections released by HRS on September 24, 1984, reveal that the elderly population of 65 and over in Hernando County in 1985 is projected as 17,616, or approximately 27 per cent of total population. By 1990, those projections will grow to 24,887 or approximately 29 per cent of total population. (Respondent's Exhibit 2) The growth trend in Hernando County is an extension of the rapid coastline development occurring in the New Port Richey- Clearwater areas and the counties to the south of Hernando. Previously, the only major development in Hernando County was centered in Brooksville, the middle of the county. Consequently, the existing community nursing home services in Hernando County are concentrated in the Brooksville area. Although Petitioner, through its expert (Konrad) testified that there is a mal-distribution of existing beds and community nursing home services which renders them neither available nor accessible to the rapidly growing elderly population in the southwestern Hernando County corridor and that high occupancy rates in existing community nursing homes in the area and the existence of waiting lists corroborates the lack of availability and accessibility of community nursing home services in the area, the evidence introduced herein failed to establish either the existence of waiting lists or that the existing community nursing homes in the area were overcrowded. SHELTERED VERSUS COMMUNITY NURSING HOME BEDS Petitioner contends that certain nursing home beds associated with the adult congregate living facility at Evergreen Woods in the Spring Hill area are not actually available and accessible to the general public but instead are functioning as sheltered nursing home beds. Respondent, on the other hand, considers the 60 nursing home beds associated with Evergreen Woods to be available and accessible to the general public. A review of the entire record compiled herein failed to substantiate Petitioner's claim that those beds at Evergreen Woods are unavailable and/or inaccessible to the general public. DETERMINATION OF NEED, SECTION 381.494(6)(c)1., FLORIDA STATUTES. In determining need for nursing home beds, a Certificate of Need project is reviewed on a 3-year planning horizon. In this case, predicted need for nursing home beds in District III and the sub-district of Hernando County is calculated through 1987. Hernando County is a single county sub-district located within in HRS planning District III in north central Florida. HRS has determined the overall nursing home bed need for District III as well as sub-district allocations by applying the uniform nursing home bed need methodology for community nursing home services contained in Florida Administrative Code Rule 10- 5.11(21). (Petitioner's Exhibit 5) Respondent provided a step-by-step application of the community nursing home bed need rule and introduced their exhibits supporting the calculation period (Testimony of expert medical facilities consultant, R. Jaffe and Respondent's Exhibits 1 and 2). Briefly stated, application of the pertinent rules reveals an extrapolated need for 31 beds which are available for CON approval based on data available to Respondent on June 29, 1984 and that 36 beds are available based on later data released on September 24, 1984. (TR. 91, Conrad; TR. 130, Jaffe and Petitioner's Exhibit 6) The census report applicable herein reflects that there were 360 licensed beds in the Hernando sub-districts and no approved beds for a total of 360 beds. 2/ Application of the nursing home bed need methodology is not the sole factor used in determining whether a CON application should be granted. Other factors, such as access, high occupancy rates, chronically underserved population and high Medicaid utilization are definite factors in approval of additional beds in cases where the rule shows either no need or only slight need. Respondent has, on several occasions, granted 60-bed applications where accessibility issues justified the grant of a minimum-sized facility in spite of the lesser numerical need indicated under the rules. 3/ Petitioner referred to instances wherein Respondent had granted approval for CON's in other districts where there were unusual circumstances such as accessibility issues as referred to herein above. A review of those cases reveals that a departure from the usual bed-need methodology is warranted in cases of extremely high occupancy rates (95 per cent or higher) or the facilities with lower occupancy rates, e.g. 85.7 per cent for homes in Sarasota County, which were located in inaccessible distances away from the population concentration. Petitioner has not demonstrated sufficient basis herein to warrant a departure from the usual bed need rule methodology. The instances wherein a departure from the usual bed need rule methodology has occurred are distinguishable, inasmuch as in the instant case, there are three existing facilities presently in Hernando County offering 360 nursing home beds. Current occupancy rate has been shown to be reasonable and is standing at or below average for District III. Additionally, Respondent introduced a "Stipulation of Settlement" dated September 28, 1984 which was entered into by and between Evergreen Woods Health Care Center and Respondent. The substance of that stipulation reveals that during October of 1983, Evergreen Woods Health Care Center (EWHCC) as Petitioner, filed an application with Respondent for a Certificate of Need to add 60 beds to its existing 60-bed nursing home located in Spring Hill, Hernando County, Florida. The application sought 45 community beds and 15 sheltered beds. As a means of amicably resolving that proceeding and based on available need data based on applicable quarterly census reports and application of the need criteria, EWHCC, as Petitioner in that proceeding, amended its Certificate of Need application filed October, 1983, to add a total of 60 beds to its existing facility; 31 beds to be designated as community beds and 29 to be designated as sheltered beds. A review of the public records reveal that the Certificate of Need has been issued (amended CON No. 2959 issued early October, 1984) pursuant to that stipulation of settlement. 4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: The application of First American Corporation d/b/a Spring Hill Health Facility for establishment of a 60-bed nursing home facility in Hernando County, Florida, be DENIED. RECOMMENDED this 14th day of February, 1985, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1985.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the stipulations of the parties and the entire record complied herein, I hereby make the following findings of fact: THE STIPULATIONS OF THE PARTIES The parties stipulated to the following facts: Forum timely filed its letter of intent and application with DHRS and the District IX Local Health Council for the July 1986 batching cycle. DHRS ultimately deemed the application complete and, following review, published its notice of intent to deny the application. Forum timely filed a petition requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The sole issue is whether there is a need for Forum's proposed services; additionally, it is DHRS's position that a lack of need for the project results in the project not being financially feasible in the short or long term. All other statutory and rule criteria were satisfied, at least minimally, except proof of need pursuant to Rule 10-5.011(1)(k) [formerly 10-5.11(21)(b)], Florida Administrative Code, and financial feasibility as it relates to need. FORUM'S PROPOSAL Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Forum proposes to develop a retirement living center in Palm Beach County that would consist of 120 to 150 apartment units for independent living, a separate personal care unit (known in Florida as an adult congregate living facility), and a 60-bed nursing home component certified for skilled and intermediate care. Palm Beach County is in HRS Service District IX, Subdistrict 4. All three components of Forum's retirement living center would be physically connected and share some operational functions, such as dietary facilities and the heating plant. Such a design provides for an efficient operation as well as an economic distribution of costs facility wide. No specific site has been selected , although Forum has narrowed its focus to the eastern half of Palm Beach County. It is not economically feasible to acquire property or pay for an option on property until after receiving CON approval. The projected total cost of Forum's proposed 60-bed nursing home is $2,329,800. Forum has the necessary resources for project accomplishment and operation. Forum proposes to seek Medicare certification and will provide up to 25 of its beds for Medicaid patients. FINANCIAL FEASIBILITY Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. If need for the facility is shown, Forum would be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible while at the same time having no material negative impact on existing providers in the district. NUMERIC NEED Need for new or additional community nursing home beds in Florida is determined, preliminarily, by use of the methodology found in Rule 10- 5.011(1)(k), Florida Administrative Code. Additional beds normally are not approved if there is no need for beds as calculated under the rule. Pursuant to the rule, need for a defined nursing home subdivision is projected to a three- year planning horizon, in this case July 1989. The need methodology prescribed in the rule is as follows: A (POPA x BA) + (POPB x BB) or: The District's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made [A] (The population age 65-74 years in the relevant departmental districts projected three years into the future [POPA] x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]) + (The population age 75 years and older in the relevant departmental district projected three years into the future [POPB] x the estimated current bed rate for the population age 75 years and over in the relevant district [BB].) BA LB/(POPC) + (6 x POPD) or: The estimated current bed rate for the population age 65-74 years in the relevant district [BA] (The number of licensed community nursing home beds in the relevant district [LB]/the current population age 65-74 years [POPC] + (6 x the current population age 75 years and over [POPD]) BB 6 x BA or: The estimated current bed rate for the population age 75 years and over in the relevant district [BB] 6 x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]. SA A x (LBD/LB) x (OR/.90) or: The preliminary subdivision allocation of community nursing home beds [SA] The district's age-adjusted number of community nursing home bids for the review cycle for which a projection is being made [A] x (The number of licensed community nursing home beds in the relevant subdistrict [LBD]/the number of licensed community nursing home beds in the relevant district [LB]) x (The average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district [OR]/.90) Rule 10-5.011(1)(k)(2)(i), Florida Administrative Code, provides that: The new bed allocation for a subdistrict, which is the number of beds available for CON approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs a. through i., unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The appropriate planning horizon for the instant case is July 1989, corresponding to the review cycle which began July 15, 1986, and the subdistrict is Palm Beach County. THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT DISTRICT (LB)/THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT SUBDISTRICT (LBD) Rule 10-5.011(1)(k) requires that "review of applications submitted for the July batching cycle shall be based upon the number of licensed beds (LB and LBD) as of June 1 preceding this cycle..." On June 1, 1986, there were 5,459 licensed community nursing home beds in District XI (LB) and 4,084 licensed community nursing home beds in subdistrict 4 (Palm Beach County LBD). These figures include 220 licensed beds that were previously categorized as sheltered. In the instant case, the appropriate figure for LB is 5,459, and the appropriate figure for LBD is 4,084. APPROVED BEDS WITHIN THE RELEVANT DEPARTMENTAL SUBDISTRICT DHRS's interpretation of the rule is to include in the count of approved beds, those approved up to the date of the supervisor's signature on the State Agency Action Report (SAAR). In this case, there were 640 approved beds in Palm Beach County at that time. As of June 1, 1986, the same date as the licensed bed cutoff, there were 640 approved beds in the subdistrict. In Dr. Warner's opinion, approved beds should be determined as of the same time period as licensed beds in order to have consistency and avoid anomalies in the formula. This opinion is reasonable and appropriate. In the instant case, the figure to be applied in the formula for approved beds in the subdistrict is 640 approved beds. THE POPULATION AGE 65-79 YEARS IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPA). THE POPULATION AGE 75 YEARS AND OVER IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPB). The rule provides that the three year projections of population shall be based upon the official estimates and projections adopted by the Office of the Governor. For the purposes of calculating need, DHRS utilizes at the final hearing the figures for estimated population obtained from data available at the time of initial application and review. The set of population projections which were available when Petitioner's application was filed and reviewed were those published on July 1, 1986. Based on this data, which is reasonable to use, POPA 170,639; and, POPB 122,577. THE CURRENT POPULATION AGE 65-74 YEARS (POPC)/THE CURRENT POPULATION AGE 75 YEARS AND OVER (POPD). In calculating POPC and POPD, DHRS also utilizes at final hearing the most current data available at the time of initial application and review, in this case the July 1, 1986, release. Based on that data, POPC 153,005 and POPD 112,894. In the opinion of Dr. Warner, Forum's expert, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. According to Warner, January 1, 1986, as the midpoint of this time period, is the appropriate date to derive POPC and POPD in this case. The formula mandated by the rule methodology for calculating the estimated current bed rate requires that the "current population" for the two age groups be utilized. It is reasonable and appropriate for the base for POPC and POPD to correspond to the period for which the average occupancy rate is calculated. Supportive of Dr. Warner's opinion are the past practices of DHRS. Between December 1984 and December 1986, DHRS routinely used a three and one half year spread between the base population period and the horizon date in determining "current population" in its semiannual nursing home census report and bed need allocation. In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, DHRS utilized a three and one half year spread between the base population period and the horizon data for "current population" when it awarded beds. DHRS offered In this case, it proposed to use a three year spread between the base population period and the horizon dated for "current population" in calculating POPC and POPD. Using the July 1986 population release, POPC for January 1986 is 149,821 and POPD for January 1986 is 98,933. THE AVERAGE OCCUPANCY RATE FOR ALL LICENSED COMMUNITY NURSING HOMES WITHIN THE SUBDIVISION OF THE RELEVANT DISTRICT (OR). The rule requires the use of occupancy data from the HRS Office of Health Planning and Development for the months of the previous October through March when calculating a July batch of nursing home applicants. However, the rule is not instructive as to how one calculates this number. In this case, DHRS computed average occupancy rates based on the existing occupancy rates at applicable facilities on the first day of each month. Based on this occupancy data, which includes the data for the 220 previously sheltered beds in the subdistrict, occupancy rates for the July 1986 batch of Palm Beach County nursing home applicants is 83.75 percent. Forum's witness, Dr. Warner, determined that the correct occupancy rate was 85.46 percent for Palm Beach County for the period October 1985 to March 1986. Dr. Warner arrived at this figure by including paid reservation days. A paid reservation day is a day which is paid for by the patient or the patient's intermediary during which the patient is not physically in the bed. Typically, the patient will either be in the hospital, visiting relatives or otherwise away from the facility and will continue to pay for the nursing home bed, so that they will be able to return and not have someone occupy the bed. One of the goals and objectives of the District IX Local Health Plan is that paid reservation days be considered when bed need calculations are made. Calculating prepaid reservation days is consistent with the Rule because such beds are no longer available to the public and are therefore in use. Dr. Warner determined that during the applicable period, 1.25 percent of the licensed beds in the subdistrict were paid reservation days. Although taking paid reservation days into account would not be inconsistent with the rule, Forum failed to demonstrate that the 1.25 percent figure arrived at is valid for the applicable period, i.e., October 1985 to March 1986. Dr. Warner merely calculated a two-year average number of paid reservation days, broke this figure down to a six-month average and applied this average to the six-month period specified in the Rule. Gene Nelson, an expert called on behalf of Forum, calculated the occupancy rate as 88.72 percent in Palm Beach County for the appropriate period called for in the Rule. Nelson used the average monthly occupancy data obtained from medicaid cost reports for some facilities rather than first-day of the month data as used by DHRS. In addition, Nelson did not factor in the occupancy date of licensed beds in the extreme western portion of the County based on his belief that the District IX Local Health Plan mandates that the western area not be considered in any way with the eastern coast section of Palm Beach County for purposes of determining competitiveness. While the use of average full-month occupancy data is generally more reliable than using first-day of the month data, it is best, from a health planning prospective, to be able to use either all full-month data or all first- day of the month data. In making his calculations, Mr. Nelson mixed the two types of data, using full-month data when available and in other cases using first-day of the month data when full-month data was not available. It is inappropriate to fail to consider licensed beds in the extreme western portion of the County based solely on the local health plan. Among other reasons, the rule does not provide for exclusions for any of the subdistricts licensed facilities from the methodology. The appropriate and most reasonable occupancy rate (OR) in the instant case for the applicable time period is 83.75 percent. NET NEED Applying the above-referenced variables to the Rule formula produces the following results. July, 1986. District Allocation BA LB (POPC + (6 x POPD) - 5459 [149,821 + (6 x 98,833)] - .007349 BB - 6 x BA .044094 (.007349) July, 1989 Allocation (POPA x BA) + (POPB x BB) - (170,639 x .007349) + (122,577 x .044094) - 6659 Subdivision Allocation and Need SA A x (LBD / LB) x (OR 1.9) - 6659 x (4084 / 5459) x (.8375/.9) - 6659 x .74812236673 x .93055555555 4636 Subdistrict Allocation for Palm Beach County 4084 (Licensed Beds) 576 (90 percent of 640 Approved Beds) -24 (Bed Surplus)
Recommendation Based on the foregoing Findings of Fact, and Conclusions of Law, it is, RECOMMENDED that the application for certificate of need filed by Forum be Denied. DONE AND ORDERED, this 4th day of April, 1988, in Tallahassee, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of April, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0704 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in substance in Finding of Fact 2. Adopted in substance in Finding of Fact 3. Adopted in substance in Finding of Fact 4. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 9. Sentence 1 is rejected as contrary to the weight of the evidence. Rejected as subordinate and/or unnecessary. 11. Adopted in substance in Finding of Fact 9. 12. Adopted in substance in Finding of Fact 9. 13. Adopted in substance in Finding of Fact 10. 14. Adopted in substance in Finding of Fact 12. 15. Adopted in substance in Finding of Fact 1. 16. Adopted in substance in Finding of Fact 14. 17. Adopted in substance in Finding of Fact 21. 18. Adopted in substance in Finding of Fact 20. 19. Adopted in substance in Finding of Fact 22. 20. Adopted in substance in Finding of Fact 22. 21. Adopted in substance in Finding of Fact 18. Adopted in substance in Finding of Fact 15. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 23. Rejected as a recitation of testimony and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 24. Rejected as a recitation of testimony and/or unnecessary. Adopted in substance in Finding of Fact 25. Rejected as a recitation of testimony and/or subordinate. Adopted in substance in Finding of Fact 25. Adopted in substance in Finding of Fact 21. Rejected as contrary to the weight of the evidence. Rejected as not supported by the weight of the evidence and/or unnecessary. Rejected as subordinate and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Rejected as a recitation of testimony and/or subordinate. Rejected as misleading and/or subordinate. Rejected as subordinate and/or unnecessary. Rejected as contrary to the weight of the evidence. Rejected as contrary to the weight of the evidence. Rulings on Proposed Findings of Fact Submitted by the Respondent Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 9. Adopted in substance in Finding of Fact 3. Rejected as contrary to the weight of evidence. Adopted in substance in Finding of Fact 13. Adopted in substance in Finding of Fact 18 and 19. Adopted in substance in Finding of Fact 16. Adopted in substance in Finding of Fact 23. Addressed in Conclusions of Law. Addressed in Conclusions of Law. Rejected as subordinate and/or unnecessary. COPIES FURNISHED: Thomas W. Stahl, Esquire 102 South Monroe Street Tallahassee, Florida 32301 R. Terry Rigsby, Esquire 325 John Knox Road Building C, Suite 135 Tallahassee, Florida 32303 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 John Miller, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power HRS Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 =================================================================
The Issue Whether a certificate of need for an additional 60 nursing home beds to be located in Sarasota County, Florida, in July, 1990, should be granted to any of the four competing certificate of need applicants in these proceedings?
Findings Of Fact Procedural. Arbor, Health Quest, HCR, Trecor and fourteen 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 Sarasota County. Each of the applicants involved in these cases filed a letter of intent with the Department 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 application 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 completed its State Agency Action Report for the October, 1987, nursing home bed review cycle on February 19, 1988. The State Agency Action Report relevant to these cases was published by the Department in the Florida Administrative Weekly on March 4, 1988. The Department proposed to approve the certificate of need application filed by Trecor and to deny all other applications. Eleven 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 Petitioner's except the three Petitioners in these cases withdrew their Petitions. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for or nursing home beds to be located in Sarasota County, Florida. Arbor. Arbor is a nursing home company that designs, develops, constructs and operates nursing homes. Arbor's corporate headquarters are located in Lima, Ohio. Arbor owns and operates eighteen nursing home and adult congregate living facilities comprising approximately 2,218 beds. In Florida, Arbor owns Lake Highlands Nursing and Retirement Center in Clermont, The Village at Brandon, and The Village at Countryside. In Florida, Arbor is currently developing certificate of need approved facilities in Clay, Orange, Polk, Pinellas and Sarasota Counties. Arbor formed Sarasota Health Center, Inc., to hold the certificate of need it is seeking in this proceeding. Although this corporation is in form the applicant, Arbor is in substance the applicant in these proceedings. Health Quest. Health Quest is an Indiana corporation which has been in the business of constructing and operating nursing homes and retirement housing facilities for approximately twenty years. Health Quest currently operates eleven nursing centers and three retirement housing developments. In Florida, Health Quest operates three nursing centers and two retirement housing developments. The nursing centers are located in Sarasota, Jacksonville and Boca Raton, Florida. The Jacksonville center is located adjacent to, and is operated in conjunction with, a retirement facility. The facility located in Sarasota is Regents Park of Sarasota (hereinafter referred to as "Regents Park"), a 53-bed sheltered nursing center. Regents Park is located at Lake Pointe Woods, a Health Quest retirement community, which includes 212 independent living apartments and 110 assisted living apartments. The assisted living apartments qualify as an adult congregate living facility. The 53 sheltered nursing home beds are authorized as part of a living care complex pursuant to Chapter 651, Florida Statutes. Health Quest has received approval from the Department to locate 60 nursing home beds, which Health Quest has received as part of a certificate of need for 180 nursing home beds, at Regents Park. The other 120 approved nursing home beds will be located at another facility to be constructed in Sarasota County by Health Quest. Health Quest also has two other projects under construction in Florida: a new facility in Winter Park, Florida, and a new facility in Sunrise, Florida. HCR. HCR is a corporation engaging in the business of designing, developing, constructing and operating nursing homes and related facilities. HCR is a wholly-owned subsidiary of Owens Illinois Corporation. HCR operates approximately 125 facilities with approximately 16,000 beds. HCR has designed and built over 200 nursing homes and related health care facilities. 24 HCR owns and operates ten nursing homes in Florida, including Kensington Manor, a 147-bed nursing center located in Sarasota County, Florida. HCR also has ten other projects being developed in Florida. Trecor. Trecor is a Florida corporation formed to engage in the business of developing and operating facilities within the full spectrum of the health care industry. Trecor was founded in 1985 when it acquired Burzenski Nursing Home (hereinafter referred to as "Burzenski"). Trecor does not own or operate any other health care facility. Burzenski is an existing nursing home with 60 dually certified beds located in the City of Sarasota. The facility was built in 1955 as a private residence. An addition to the facility was constructed in 1962. The Proposals. Arbor's Proposal. Pursuant to a stipulation with the Department dated September 9, 1987, Arbor received certificate of need 4182. Certificate of need 4182 authorizes Arbor to construct a 60-bed nursing home in Sarasota County. 20. Arbor's approved 60-bed nursing home facility will consist of 18,000 gross square feet. Costs of $2,200,000.00 have been approved by the Department in the certificate of need issued for the facility. Arbor intends to develop certificate of need 4182 by building a facility large enough for 120 beds. This facility will house the approved 60 nursing home beds and, if Arbor's application in this case is not approved, an additional 60 beds, licensed as adult congregate living facility beds. In this proceeding Arbor is requesting approval of a proposed conversion of the 60 adult congregate living facility beds to 60 nursing home beds. Arbor has proposed the construction of an additional 18,000 gross square feet to house the additional 60 nursing home beds sought in this proceeding. The proposed cost of the proposal is $2,380,000.00. The total cost of 120 bed facility will be $4,580,000.00. Health Quest's Proposal. Health Quest is seeking approval to convert its 53 sheltered nursing center beds at Regents Park to nursing home beds and to add 7 nursing home beds. The 60 nursing home beds are to be housed in the new community nursing home facility at Regents Park. The beds will be housed in 30,945 square foot of the Regents Park facility. Health Quest also intends to add 60 nursing home beds, which have already been approved by the Department, to Regents Park. The certificate of need application filed by Health Quest indicates that its proposal involves no capital costs. This is incorrect. There will be minimal costs associated with the addition of the 7 additional nursing home beds being sought by Health Quest which it has failed to include in its proposal. Health Quest did not present evidence concerning the total cost of the facility it plans to use to house the proposed 60 beds or the cost of the 60 beds already approved by the Department which it plans to add to Regents Park. HCR's Proposal. HCR is seeking approval to construct a new, freestanding 60-bed nursing home in Sarasota County. HCR's proposal also includes a 31-bed adult congregate living facility. The nursing home component will consist of 25,600 gross square feet (including 2,300 square feet to be used for adult day care). The total facility will consist of 43,000 gross square feet. Total capital cost for the nursing home component is estimated to be $2,519,000.00. The total cost, including the costs attributable to proposed adult day care services, is $2,657,000.00. The cost of the 31-bed adult congregate living portion of the project will be $1,800,000.00. The total cost of HCR's planned facility is $4,457,000.00. Trecor's Proposal. Trecor is seeking approval to construct a 60-bed addition to the Burzenski 60-bed nursing home. Burzenski is located at 4450 Eighth Street, Sarasota, Florida. The building in which the existing 60 nursing home beds are housed will be replaced by Trecor with a new building. The existing Burzenski building has out-lived its useful life and contains several structural deficiencies. Operations are severely restricted and inefficient. Existing three and four bed wards limit the placement of residents. The existing building does not comply with all current licensure requirements. The noncompliance, however, was "grandfathered" in. In order to replace its existing building with a modern building which meets all current licensure requirements, Trecor applied for a certificate of need in 1985 to build a replacement facility on an adjoining parcel of real estate for which Trecor held an option to purchase at the time. This application was approved on December 4, 1985. After an error by Trecor caused the time established for exercising the certificate of need to pass and a requested six-month extension of the certificate of need was denied by the Department, the certificate of need to construct the replacement facility lapsed. Another application for a replacement facility was filed in January, 1987. This application was approved by the Department in May, 1987. The replacement facility was not, however, constructed. Subsequently, in April and May, 1988, the Department determined that replacement of the existing building was exempt from certificate of need review. Trecor now proposes to add 60 nursing home beds at the same time that it builds its replacement facility for its existing 60 nursing home beds. The new nursing home beds will be housed on a second floor to be built on the replacement facility. In Trecor's application for (30 additional nursing home beds, Trecor has proposed the addition of 12,061 gross square feet to its replacement facility and a project cost of $885,210.00. The cost of Trecor's replacement facility will be $1,303,424.00 plus a $1,400,000.00 debt on the existing building. The total cost of Trecor's 120 bed facility will be $3,588,634.00. Section 381.705(1)(a), Florida Statutes. Numeric Need. Pursuant to the need methodology of Rule 10- 5.011(1)(k)(2), Florida Administrative Code, there is a need for an additional 75 community nursing home beds for Sarasota County for July, 1990, the planning horizon applicable in these cases. All of the applicants have agreed with the Department's determination of the need for additional nursing home beds for Sarasota County. All of the applicants are seeking to provide 60 of the needed nursing home beds. The District Health Plan. The district health plan for the Department's District 8, which includes Sarasota County, provides certain standards and criteria to be considered in determining community nursing home care need. The policy guidelines and their application, if applicable to the applicants in this proceeding, are as follows: Community nursing home services should be available to the residents of each county within District Eight. Sarasota County is a separate planning subdistrict for community nursing home beds. Therefore, this guideline should be applied to Sarasota County. All of the applicants will increase the availability of nursing home services to the residents of Sarasota County. Community nursing home beds should be geographically distributed throughout the counties of District Eight to promote optimal availability and accessibility. The 2,264 existing licensed and 283 approved community nursing home beds located, or to be located in Sarasota County, are already geographically distributed throughout Sarasota County. All of the applicants will increase geographic distribution of beds throughout Sarasota County, regardless of where they may be located. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy g. occupational therapy laboratory h. physical therapy x-ray i. speech therapy dental care j. mental health counseling visual care k. social services diet therapy l. medical services All of the applicants will meet thin guideline. New and existing community nursing home bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. The applicants have proposed to provide the following percentage of care to Medicaid patients: Arbor: 45% Health Quest: 16.7% HCR: 42% Burzenski: 59% 1st Year; 60% 2d Year. All of the applicants except Health Quest comply with this guideline. Community nursing home facilities in District Eight should expand their financial base to include as many reimbursement mechanisms as are available to them including Medicare, Medicaid, Champus, VA, and other third-party payers, and private pay. This guideline applies to existing facilities. None of the applicants are proposing to "expand their financial bases" in the manner suggested in this guideline. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. This guideline has been filled. New community nursing home facilities may be considered for approval when existing facilities servicing comparable services areas cannot reasonably, economically, or geographically provide adequate service to these service areas. Existing facilities cannot reasonably meet the need for the 75 additional nursing home beds in Sarasota County for July, 1990. 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. All of the applicants meets this guideline. Expansion of existing facilities to 120 beds should be given priority over construction of new facilities in the health service area. The proposals of Arbor, Health Quest and Trecor meet this guideline. The proposal of HCR does not meet this guideline. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. All of the applicants meet, or will meet, this guideline. The proposed project should have a formal discharge planning program as well as some type of patient follow-up service with discharge/transfer made available seven days a week. All of the applicants meet this guideline. Nursing home services should be within at least one hour typical travel time by automobile for at least 95 percent of all residents of District Eight. This guideline is not applicable. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All of the applicants meet this guideline. Health Quest meets this guideline less than the other applicants because of its minimal Medicaid commitment. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. All of the applicants meet this guideline. Health Quest has not, however, provided Medicaid care at Regents Park. Health Quest does provide Medicaid at all its other nursing centers and will obtain Medicaid certification at Regents Park if its application for a certificate of need in this case is approved. Medicare is not provided at Burzenski at this time. Burzenski will, however, provide Medicare at its proposed facility. Failure of a holder of a certificate of need to substantially comply with statements of intent made in the application and relied upon the Department of Health and Rehabilitative Services as set forth in the Certificate shall be cause for the Department to initiate an action for specific performance, fines as specified in s. 381.495(3), or injunctive relief. This guideline is not applicable. Need for Services. HCR conducted a "non-numeric community need survey" in Sarasota County. Based upon this survey, HCR has suggested that there is an unmet need for 1,600 nursing home beds for Sarasota County for Alzheimer patients and other dementia patients. HCR's conclusions concerning unmet need for services for Sarasota County are unrealistic. HCR failed to prove that any need in Sarasota County for services for Alzheimer patients and others is not being met adequately. Services for Alzheimer patients are currently being provided by Trecor and Health Quest. HCR and Trecor have proposed to dedicate 30 of their proposed nursing home beds to the care of Alzheimer patients and patients with other forms of dementia. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. Other Considerations. Health Quest's avowed purpose for the proposed conversion of its 53 sheltered beds is to insure that Regents Park remains available for use by the general public. Florida law allows sheltered nursing home beds to be used by persons other than residents of an adult congregate living facility for five years from the issuance of a license for the sheltered nursing home beds. Regents Park received its license in November, 1986. Therefore, its sheltered nursing home beds can remain available for use by the general public until November, 1991. Health Quest has received a certificate of need for 180 nursing home beds for Sarasota. Health Quest intends on placing 60 of those beds at Regents Park. The other 120 beds will be placed at another facility to be constructed in Sarasota County. Health Quest may be able to use some of its 180 approved nursing home beds to avoid the closing of Regents Park to the general public. Health Quest has not, however, explored this alternative. Health Quest's decision not to pursue this course of action is based in part on its decision that the 43% Medicaid care required for its certificate of need for 180 nursing home beds is not acceptable at Regents Park. Health Quest has failed to prove that its proposal is needed because of its desire to convert its sheltered beds to community nursing home beds. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Sarasota County are not available, efficient, appropriate, accessible, adequate or providing quality of care except to the extent that existing services cannot meet the need for 75 additional nursing home beds in Sarasota County. Section 381.705(1)(c), Florida Statutes. Arbor. Two of Arbor's three licensed facilities in Florida are currently rated superior. The other facility is rated standard. Arbor's proposal may qualify it for a superior rating at its proposed facility. Arbor proposes to provide sufficient services, safeguards and staff. Arbor should be able to provide adequate quality of care in its proposed facility. Health Quest. Health Quest has a corporate policy of emphasizing quality of care. It attempts to obtain the highest quality rating in every community it serves. Health Quest's facilities in Jacksonville and Boca Raton have been rated superior. Health Quest's Sarasota facility has not been in operation long enough to qualify for a superior rating. Health Quest's Sarasota facility offers a high level of staffing, including a Human Resources Director, who is responsible for personnel administration and training, a full time social activities director and an activities coordinator. It also has a high nursing ratio. Health Quest is proposing the highest level of staffing of the applicants in this proceeding. Extensive training and development of staff at Health Quest's Sarasota facility is provided. Orientation training and in-service training on an on- going basis will be provided. Health Quest proposes to provide sufficient services, safeguards and staff. Health Quest should be able to provide adequate quality of care in its proposed facility. HCR. HCR's existing Sarasota nursing home has received a license with a standard rating. Other HCR facilities have received standard ratings, including some facilities which were acquired by HCR with superior ratings. HCR also has facilities which have been rated superior. HCR will enhance the quality of care available by providing a full range of services, from the least intensive level (adult day care) to the most intensive levels (i.e., sub- acute care). HCR's proposal to provide adult day care, a dedicated Alzheimer's unit, sub-acute care and respite care, and its adult congregate living facility will enhance quality of care in Sarasota County. HCR adheres to extensive quality assurance standards and guidelines. HCR provides adequate training, exceeding state minimum requirements, for its staff. HCR proposes to provide sufficient services, safeguards and staff. HCR should be able to provide adequate quality of care in its proposed facility. Trecor. Trecor has contracted with Central Care, Inc., a Florida corporation providing a full spectrum of health care and retirement living services, to manage its facility. Trecor provides education and training for its staff on an ongoing basis. Even though Trecor is operating in an inadequate building, Trecor received a superior rating in 1986-1987 and 1987-1988. Trecor proposes to provide sufficient services, safeguards and staff. Trecor should be able to provide adequate quality of care in its proposed facility. Section 381.705(1)(e), Florida Statutes. None of the applicants provided sufficient proof to conclude that they will provide joint, cooperative or shared health care resources sufficient to provide them with an advantage over the other applicants. Section 381.705(1)(f), Florida Statutes. None of the applicants proved that there is any need in the service district for special equipment or services which are not reasonably and economically accessible in adjoining areas. Section 381.705(1)(g), Florida Statutes. None of the applicants proved that this criterion applies in this proceeding. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all residents of the service district. Health Quest will, however, provide less access to Medicaid residents than the other applicants. Trecor will attempt to initiate internship and training programs for area nursing and allied health programs, and provide clinical placements. Health Quest participates in training programs for nurses from Sarasota Vocational/Technical school. A certified nursing aide program is also offered by Health Quest through Sarasota Vocational/Technical School. All of the applicants will be able to attract and maintain the staff necessary to operate their proposed facilities. HCR is proposing to provide the highest salaries and benefits for staff. Health Quest already has staff for its existing 53 beds. Health Quest is adding, however, 60 nursing home beds to Regents Park. HCR failed to prove that all of the existing staff will be used to staff the proposed 60 nursing home beds and not the already approved 60 nursing home beds. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. Short-term financial feasibility is the ability of an applicant to finance a project. Arbor. The total projected cost of Arbor's proposed 60-bed addition is $2,380,000.00. The total cost for its 120-bed facility is $4,580,000.00. Arbor's projected costs are reasonable. Arbor is proposing to contribute 10% of the cost of its proposal and finance the remaining 90%. Arbor has $39,000,000.00 in bank lines of credit, of which $34,000,000.00 remain available for development of Arbor's proposed project. Arbor also has sufficient money market funds to meet its projected equity contribution of 10%. Arbor has demonstrated immediate financial feasibility of its proposed project. Health Quest. Health Quest indicated in its application that there were no capital costs associated with its proposal. This is not correct. It will have some minor costs for the addition of the seven new nursing home beds it is seeking. Health Quest's proposal is the lowest in terms of additional capital costs which must be incurred. Most of the capital costs associated with the 53 nursing home beds it is seeking were already incurred when it built Regents Park. Health Quest did not provide proof of the cost of Regents Park. The unaudited financial statements of Health Quest indicate that it experienced a loss of $3,200,000.00 in 1986 and a loss of $5,000,000.00 in 1987. Health Quest has net worth and equity of $300,000.00 on over $200,000,000.00 in assets. The losses Health Quest has been experiencing have been the result of Health Quest's development activities. Health Quest can finance its project with internal funds. The evidence failed to prove that Health Quest must liquidate assets to generate operating funds. Health Quest demonstrated immediate financial feasibility of its proposed project. HCR. HCR's total estimated project costs for its 60-bed facility is $2,657,000.00. This amount includes the cost of the portion of the project to be used for adult day care ($138,000.00). The costs to be incurred for the adult congregate living facility is $1,800,000.00. HCR's projected costs are reasonable. HCR intends to contribute 25% of the total project costs and finance the remaining 75%. HCR has sufficient funds on hand to fund 25% of its project costs. In fact, HCR has the ability to contribute 100% of the total project costs. HCR has lines of credit with banks and other sources of obtaining financing for the project, including a loan from its parent corporation. HCR has demonstrated immediate financial feasibility of its proposed project. Trecor. The total cost of Trecor's proposed 60-bed nursing home addition is $885,210.00. The total cost of replacing the existing Burzenski building is projected as $3,588,634.00 ($885,210.00 for the proposed addition; $1,400,000.00 debt on the existing building; and $1,303,424.00 for the replacement of the existing building). Trecor is proposing to contribute 10% of the proposed project costs, or $88,521.00, and to finance the remaining 90%. To finance the entire project will require an equity contribution of over $300,000.00. Trecor has experienced operating losses in 1986 and 1987 and has a negative net worth of $259,000.00. Trecor has a positive cash flow, however. Trecor does not have sufficient equity to contribute 10% of the proposed project costs. The Board of Directors of Trecor has, however, adopted a resolution indicating Trecor's intent to provide the necessary contribution. Trecor can obtain the necessary funds from its owners if necessary. NCNB has expressed an interest in financing the rest of the project. Although NCNB has not legally committed to such an arrangement, it is reasonable to conclude that a satisfactory loan agreement can be reached with NCNB or Barnett Bank. Trecor has demonstrated immediate financial feasibility of its proposed project. Long-Term Financial Feasibility. Long-term financial feasibility is the ability of an applicant to operate a project at a profit, generally measured at the end of the second year of operation. Arbor. At the formal hearing Arbor presented an updated pro forma. Arbor suggested that the purpose of the updated pro forma was to reflect increased personnel costs and reduced utilization from 97% to 95%. According to Arbor, the changes reflect changes caused by inflation and "actual experience." The updated pro forma submitted by Arbor includes substantial increases in salary expense ranging from 10% to 30% (and one increase of 50%). The updated pro forma also includes at least one position not included in the original pro forma filed with Arbor's application. Arbor's original pro forma understated salary expenses. The updated salary expenses were foreseeable, and should have been foreseen, when Arbor filed its application. The updated pro forma was accepted into evidence over objection. In the updated pro forma, Arbor has projected a loss of $347,043.00 from revenue of $2,034,837.00 for the first year of operation and a profit of $41,833.00 from revenue of $3,016,512.00 for the second year of operation. Arbor has projected a payor mix of 45% Medicaid, 5% Medicare and 50% private pay. These projections are reasonable. Arbor's projected fill-up rate is reasonable. Arbor's projected charges are reasonable. The evidence failed to prove that Arbor's projected revenue and expenses as contained in its original application are reasonable. The evidence also failed to prove that Arbor's projected expenses as contained in its updated pro forma are reasonable either. Arbor has failed to prove that its project is feasible in the long term. Health Quest. Health Quest is operating at close to capacity at Regents Park and is already charging close to its projected patient charges. The facility has been operating at a loss. The facility experienced a profit only during its latest month of operation. The addition of Medicaid beds will erode Health Quest's revenues to some extent. Health Quest has projected a profit of $16,663.00 from revenue of $1,771,303.00 for the first year of operation and a profit of $40,698.00 from revenue of $1,850,156.00 for the second year of operation. Health Quest is projecting a payor mix of 16.7% Medicaid, 4.2% medicare and 79.2% private pay. These projections are reasonable. Regents Park opened in November, 1986, and filled up rapidly. It has been operating at full occupancy and with a waiting list. Health Quest's estimated fill up rate is reasonable in light of this fact. Health Quest has failed to prove that its project is feasible in the long term. HCR. HCR has projected a loss of $267,436.00 on $1,068,427.00 of revenue for its first year of operation and a profit of $62,729.00 on $1,772,399.00 of revenue for its second year of operation. HCR has projected a payor mix of 42% Medicaid, 4% medicare and 54% private pay. These projections are reasonable. HCR's projected fill-up rate to 95% occupancy is reasonable. HCR's projected patient charges are reasonable. HCR's projected revenue and expenses are reasonable. HCR's project is feasible in the long term. (4). Trecor. Trecor has projected a profit of $77,458.00 on revenue of $2,481,229.00 for the first year of operation and a profit of $367,896.00 on revenue of $3,106,152.00 for the second year of operation. The pro forma submitted by Trecor is for the 120-bed nursing home facility and not just the proposed 60-bed project. Trecor has a negative net worth and Trecor has been operating at a loss. Trecor has projected a payor mix of 59% Medicaid, 3.5% medicare, 34% private pay and 3.5% V.A. These projections are reasonable. Trecor has estimated it will achieve 50% occupancy in the first month of operation and an occupancy of 96% by the seventh month. This is a fill up rate of 2 residents a week. Arbor and HCR have projected fill up rates of 2 residents a month. Trecor does not expect to lose any patients during construction of its facility. Trecor is currently at full occupancy and has a waiting list. Trecor's projected fill up rate is achievable. Trecor's projected patient charges are reasonable. They are the lowest of the competing applicants. Trecor has failed to include some expenses in its projections. Trecor left $50,000.00 of administrative salaries out of its projections and FICA is underestimated because Trecor used the old rate. When these expenses are taken into account, Trecor's project is still financially feasible. Trecor's projected revenue and expenses, except as noted above, are reasonable. Trecor's project is feasible in the long term. Section 381.705(1)(1), Florida Statutes. Based upon the projected rates for nursing home services to be charged by the applicants, Arbor and Trecor will have the least adverse impact on patient charges, followed by HCR. Health Quest will have the greatest adverse impact on patient charges. Generally, all of the applicants will enhance competition if their projects are approved. Section 381.705(1)(m), Florida Statutes. Arbor. Arbor's building will contain 36,000 gross square feet, with 18,000 gross square feet attributable to the 60 nursing home beds it is seeking in this proceeding. The cost of Arbor's proposed 60-bed addition is $2,380,000.00 ($132.22 per square foot) and the cost of its entire project is $4,580,000.00. The projected cost of construction is $1,228,000.00, a cost of $68.22 per square foot. Arbor's projected costs are reasonable. Arbor's proposed building will provide 300 square feet per bed. Arbor plans to build its prototype 120-bed nursing home facility. It has used its 120-bed nursing home plans for other Florida projects. These plans have been approved by the Department's Office of Licensure and Certification. Arbors' building will comply with all code and regulatory requirements. The building will be constructed on a 6.5 acre site which is appropriately zoned and of sufficient size. The design of Arbor's proposed building and the proposed methods of construction are reasonable. Health Quest. Health Quest has already constructed the building in which its proposed 60 nursing home beds dire to be located. The building is already licensed. The building complies witch all code and regulatory requirements. A total of 30,945 square feat will be devoted to the nursing home portion of Regents Park. This is the largest of the proposed facilities. The proposed building will have 515 square feet per bed. There are no construction costs to be incurred for Health Quest's proposal. Construction costs have already been incurred to construct the facility in which Health Quest's proposed beds will be housed. Health Quest's building design is of the highest quality. HCR. HCR is proposing to construct a 60-bed nursing home. Additional space for 31 adult congregate living beds and for an additional 60 nursing home beds will also be built. The facility will include a dedicated 30-bed Alzheimer's unit. The inclusion of this unit requires more space. The proposed HCR building will consist of 25,600 square feet for the 60-bed nursing home. This includes the $138,240.00 cost and the 2,300 square feet of the adult day care unit. The projected cost of HCR's project is $2,657,000.00 or $103.79 per square foot. The projected cost of constructing HCR's proposed building is $1,536,000.00 or $60.00 a square foot. HCR's projected costs are reasonable. 166. HCR's facility will consist of 426 square feet per bed. 167. HCR's facility will comply with code and regulatory requirements. 168. HCR's design and methods of construction are reasonable. 169. HCR's facility will incorporate energy conservation measures. Trecor. The Trecor proposal entails the addition of a 60-bed patient wing on the second floor of a two-story building. The first floor of the building will be constructed by Trecor to replace its existing building. Approval of the replacement facility is not part Trecor's proposal at issue in this proceeding. The plans for the replacement building and the addition thereto have been developed together. The plans can be modified to insure that all of the proposed services can be accommodated in the building. The proposed Trecor building will be constructed in phases. First, the portion of the new building which will house the 120 nursing home beds will be constructed. Patients will then be transferred to the newly constructed facility. All of the existing building except the kitchen and administration facilities will then be demolished. Patients will be fed out of the existing kitchen and the administrative functions will be handled form the old administrative facilities. The new kitchen, dining and administrative offices will then be constructed. When this portion of the building is completed, the old kitchen and administrative offices will be demolished. Although inconvenient, Trecor should be able to continue to provide quality of care during the construction period. The other applicants have raised a number of issues concerning the Trecor building. The issues do not, however, involve violations of code or regulatory requirements for nursing home facilities. Trecor's building will contain a total of 31,398 square feet. This total includes 19,337 square feet attributable to the existing 60 nursing home beds and 12,061 square feet attributable to the 60 nursing home beds at issue in this proceeding. The proposed building is relatively small. Trecor's architect did a very good job of properly using the relatively small parcel of real estate he had to work with. The small size of the building, however, accounts for the lower cost of the Trecor proposal. The evidence failed to prove that Trecor cannot provide adequate care, despite the building's size. The cost of Trecor's proposed 60-bed addition is $885,210.00 ($73.39 per square foot) and the cost of its replacement facility is $1,303,424.00. The projected cost of construction for Trecor's proposed 60-bed addition is $592,500.00, a cost of $49.13 per square foot. Questions have been raised concerning the project development costs and the estimated architecture/engineer fees for Trecor's project. Trecor did not include all of the expenses for these items in the projected costs of its proposed 60-bed addition because the costs were included as part of building the replacement facility. Some of those costs could have been included as part of the cost of the proposal being reviewed in this proceeding. If those costs had been included, their inclusion would not affect the conclusions reached in this proceeding concerning the reasonableness of Trecor's project. Trecor's projected costs are reasonable. Trecor's proposed building will provide 201 square feet for the proposed 60 nursing home beds, 322 square feet for the existing 60 nursing home beds and 261 square feet for the total 120 nursing home beds. Trecor's building will comply with all code and regulatory requirements. The Trecor facility will be located on 1.97 acres. The design of the Trecor building and the proposed methods of construction are reasonable. Trecor's facility will incorporate energy conservation measures. Section 381.705(1)(n), Florida Statutes. All of the applicants have a history of providing care to Medicaid patients. Health Quest, however, does not provide care to Medicaid patients at Regents Park. If Health Quest's application is approved, Regents Park will become Medicaid certified. The projected Medicaid of the applicants is as follows: Arbor: 45% Health Quest 16.7% HCR 42% Burzenski 59% first year; 60% second year All of the applicants except Health Quest are proposing to provide at least 42% Medicaid, which is the average Medicaid provided in Sarasota County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting Trecor's application for certificate of need number 5443 and denying Arbor's application for certificate of need number 5841, Health Quest's application for certificate of need number 5442 and HCR's application for certificate of need number 5437. DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Florida. LARRY J. SARTIN 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 14th day of March, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1945; 88-1949; 88-1950 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. Arbor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 10-13. 2 1 and 29-33. 3 15-21 and hereby accepted. 4 19-20, 34 and 36. 5 22-25. 6 37-40. 7 26-27. 28, 41 and 44-47. Trecor applied for a certificate of need in January, 1987, not May, 1987. Hereby accepted. Not all of the applicants in this proceeding, however, have met the minimum criteria for the issuance of a certificate of need. Not supported by the weight of the evidence and a statement concerning the proceedings. 51. The last two sentences are argument. 51. The fifth through ninth sentences are argument. The evidence proved that Health Quest is adding 60 nursing home beds to its existing facility. Therefore, if its application in this case is approved it will have a 120-bed nursing home facility. 51. The last five sentences are statements of law and argument. Statement of law or not supported by the weight of the evidence. 15 64-66. 16 67-69 and 73. 74 and hereby accepted. The last two sentences are not supported by the weight of the evidence. 43 and 81. The fifth, sixth and eighth sentences are not supported by the weight of the evidence. The third, fourth and seventh sentences are hereby accepted. Although this proposed finding of fact, except the last sentence, is generally correct, this is not the only factor to consider in determining whether an applicant can provide quality of care. Argument, not relevant to this proceeding or not supported by the weight of the evidence. 52-55 and hereby accepted. The last sentence, except the reference to the state health plan, is hereby accepted. The second, sixth, ninth, tenth and eleventh sentences are not supported by the weight of the evidence or are argument. See 52-56. Argument. 56 and hereby accepted. 85, 87-88 and hereby accepted. The last sentence is not supported by the weight of the evidence. 51, 60-61 and 86. The second, third, sixth, eighth, ninth and tenth sentences are not relevant to this proceeding, not supported by the weight of the evidence or argument. 26 92 and 114. 27 95-97 and 106-107. 28 98 and 100. 109-111. The last five sentences are argument and not supported by the weight of the evidence. See 111-113. 97 and 107. Short-term financial feasibility of Health Quest is not moot and Trecor can finance its project with the assistance of its shareholders. Hereby accepted. The last sentence is not supported by the weight of the evidence. 115 and 118. The last four sentences are not supported by the weight of the evidence or are argument. 119-120. The last two sentences are not relevant to this proceeding or are not supported by the weight of the evidence. See 123. 34 130 and 134. 125, 127 and 132. The fifth sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. The last sentence is hereby accepted. 136-137 and 143. The first and last sentences are not supported by the weight of the evidence. 38-39 Not supported by the weight of the evidence, argument, not relevant to these proceedings or taken into account in determining the weight to be accorded to testimony. 40 Hereby accepted. The first and last sentences are not supported by the weight of the evidence. 41 139-141. 42 See 97, 103, 107, 113, 124, 129, 135 and 145. Arbor has not proven that it is financially feasible in the long term. The last three sentences are not supported by the weight of the evidence. 43, 46 and 56 Statements of law. 146 and hereby accepted. Hereby accepted. 47 148 and 153-155. 48 157-158, 160 and 175. 49 161-163 and 175. 171, 175, 180 and hereby accepted. The sixth, ninth and tenth sentences are not supported by the weight of the evidence. 171. The last sentence is not supported by the weight of the evidence. 52-54 Not supported by the weight of the evidence, argument or not relevant to this proceeding. 55 185 and 187-188. The last sentence is argument. 57-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. Health Quest's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 32, 34, 37 and 41. 3 2. 4 3. 4 and 6. 7. Not all of the applicants filed petitions. 7 48. 8 15-16. 9 67-68. 10 17-19. 11 21. 12 19. 13 58-59. See 57. The weight of the evidence did not prove that Regents Park will be closed to the public "unless Health Quest's application for conversion to community status is approved." 14-15 Not supported by the weight of the evidence and not relevant to this proceeding. 16 See 36. Not supported by the weight of the evidence. 17-19 Not supported by the weight of the evidence or not relevant to this proceeding. 20 70 and hereby accepted. 21, 24, 27, 30-48, 52, 54-57, 61, 64, 70, 77, 88-89, 93, 95, 97, 107-108, 110-111, 113, 118, 124, 126, 128-129, 132, 135-136 and 138-139. Hereby accepted. 22 Hereby accepted and summary of testimony. The last two sentences are not supported by the weight of the evidence. See 91. 23 72. 25-26 88 and hereby accepted. 56 and hereby accepted. Not relevant to this proceeding. 49 Hereby accepted. The last two sentences are not relevant to this proceeding, are based upon hearsay and constitute opinion testimony from a nonexpert witness. 50 69. 51 Not relevant to this proceeding or based upon hearsay. 53 126 and 128. 58 Hereby accepted. The last sentence is not supported by the weight of the evidence. 59 157. 60, 65-67, 71, 91, 112, 114-116, 121-122 and 125 Not supported by the weight of the evidence. 62 Not relevant to this proceeding. 63 51 and 185-186. 68 100-101. 69 102. 72 51. The last sentence is rejected. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. The parties did not indicate that Section 381.703(1)(b)1, Florida Statutes, was at issue in this proceeding or that Section 381.705(1)(a), Florida Statutes, does not apply. 73-76 Not relevant to this proceeding. The issue is not just whether nursing home services are available to all residents of the service area. Also at issue is whether each applicant is proposing to serve all of the residents of the service area. Health Quest's proposal does indicate Health Quest intends on serving a significant portion of Sarasota County's Medicaid population. 78 60-61. The portion of this proposed finding of fact prior to subparagraph a, the portion of subparagraph a appearing on page 19 of the proposed recommended order and subparagraphs b-d are rejected as argument, statements of law or as not being supported by the weight of the evidence. 79-82 Although generally correct, these proposed findings of fact are argument. 83 Not relevant to this proceeding. 84-86 Summary of testimony and argument. 87 Hereby accepted. The last sentence is not relevant to this proceeding or supported by the weight of the evidence. 90, 92 Not relevant to this proceeding. 94 Summary of testimony and argument. 96 Hereby accepted. The last sentence and the last half of the second sentence are rejected as not being relevant to this proceeding. 98-106 These proposed findings of fact were taken into account in determining the weight to be given testimony and other evidence. 109 Although the first sentence is correct, the rest of the proposed finding of fact is not relevant to this proceeding or not supported by the weight of the evidence. 117, 119-120 Not relevant to this proceeding. 123 108. The portion of this proposed finding of fact contained on page 30 of the proposed recommended order is primarily argument and not supported by the weight of the evidence. 127 143. 130-131 and 133-134 Not supported by the weight of the evidence, cumulative or not relevant to this proceeding. 137 The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence, argument or not relevant to this proceeding. Summary of testimony. Not supported by the weight of the evidence. The first two sentences are hereby accepted. The rest of the proposed finding of fact is argument and not supported by the weight of the evidence. HCR's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2, 4-9, 13-14, 16, 19-20, 22-23, 27, 30-32, 35, 41-42, 45, 47, 49-51, 53, 63-67, 71 and 75 Hereby accepted. 3, 15 and 33 Not supported by the weight of the evidence. Hereby accepted. The last sentence, as it applies to Sarasota County, is not supported by the weight of the evidence. Although generally true, this proposed finding of fact, as it applies to Sarasota County, is not supported by the weight of the evidence. 12 55. 17 37-4 and 55. 18 Hereby accepted, except that the first sentence is not supported by the weight of the evidence. 21 51 and 86. 24 51. The parties stipulated that the state health plan has been met by all of the applicants. 25 22-25. 26 76-78 and hereby accepted. 77 and hereby accepted. 78 and hereby accepted. 34 106-107. 36 Although generally true, the evidence failed to prove that HCR would provide these benefits without cost to its proposed Sarasota facility. 37 131-132. 38 133. 39 134-135. 40 89-90. 43 39-40, 163-164 and 166. 44 152, 167-170, and 180. 46 169-170. 48 165-166. 52 Hereby accepted. The weight of the evidence failed to prove that appropriate services for "AD patients" are not adequately available. 54 The parties stipulated that the state health plan has been met by all of the applicants. 55 2-3. 56-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. 59 148-149. 60 Taken into account in determining the weight to be given to testimony. Not supported by the weight of the evidence. 61 123. 62 Hereby accepted except the last two sentences which are not supported by the weight of the evidence. 68-69 115-117. 70 Not relevant to this proceeding. 72 41, 45-47, 175-176, 180 and hereby accepted. Hereby accepted except the third through fifth sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence and not relevant to this proceeding. Hereby accepted except the last sentence is not supported by the weight of the evidence. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. Taken into account in determining the weight to be given testimony and other evidence. Not relevant to this proceeding. 80-81 Not supported by the weight of the evidence. 109-110. The last three sentences are not relevant to this proceeding. Hereby accepted, except for the first two sentences, which are not supported by the weight of the evidence. Hereby accepted except the third and last sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence. See 136. Not relevant to this proceeding. Trecor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-6, 20-24, 27, 29-32, 35, 37-39 and 56. Hereby accepted. 7 28 and 41-42. 8 41, 43 and 81. 9 26-27. 10 41, 44 and 81. 11 44-45. 12 46 and 171. 13 173. 14 46, 171-172 and 174. 15-16 173. The last sentence of proposed finding of fact 16 is not supported by the weight of the evidence. 17 181. 18 54-55 and hereby accepted. 19 79. 25 40, 47, 109, 111-112 and hereby accepted. 26 175 and 177. 28 178 and hereby accepted. 33 184 and hereby accepted. 34 138 and 142. 36 139-141. 40 50. 41 51. 42 51. The last three sentences are not supported by the weight of the evidence. Although the Arbor site was not disclosed, the weight of the evidence supports a conclusion that Arbor's proposal meets this portion of the district plan. 43-47 51. 48 51. The last sentence is not supported by the weight of the evidence. 49-50 51 and hereby accepted. 51 51 and hereby accepted. The last sentence is not supported by the weight of the evidence. 52-53 51. Argument. 51 and hereby accepted. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2-3 49. 4 Not relevant to this proceeding. 5-6 Conclusions of law. Not supported by the weight of the evidence. Contrary to a stipulation of the parties that all of the parties meet the state health plan to the extent that it is applicable. See 63. 10, 13, 15 and 17 Hereby accepted. 11 See 64-84 concerning Section 381.705(1)(c), Florida Statutes. The parties stipulated that Section 381.705(1)(d), Florida Statutes, had been met or did not apply. 12 86 and 129. 14 Not relevant in this de novo proceeding and not supported by the weight of the evidence. 16 See 60-62. COPIES FURNISHED: Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Charles M. Loeser Assistant General Counsel Health Quest Corporation 315 West Jefferson Boulevard South Bend, Indiana 46601 James M. Barclay, Esquire 231 A East Virginia Street Tallahassee, Florida 32301 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32308 Jay Adams, Esquire Jay Adams, P.A. 1519 Big Sky Way Tallahassee, Florida 32301 Theodore E. Mack Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
