Findings Of Fact The parties' stipulation The parties have stipulated to the following facts: Forum and Amedex timely filed their respective letters of intent and applications with the Department and the District Local Health Council for the July 1986 batching cycle. The Department ultimately deemed the applications complete and, following review, published its notice of intent to deny the applications. Forum and Amedex each timely filed a petition requesting a formal hearing on the denial of their application. With regard to the Forum application, the Department contends that there is no need for the proposed facility, that such lack of need will render Forum's project financially unfeasible, that the project is not the best use of Forum's resources, and that Forum fails to meet the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. All other statutory and rule criteria are satisfied, at least minimally, based on Forum's 60-bed proposal. With regard to the Amedex application, the Department contends that there is no need for the proposed facility, that such lack of need will render Amedex's project financially unfeasible, and that the project is not the best use of Amedex's resources. The Department further contends that Amedex has not demonstrated that it can provide quality of care, that it has not demonstrated that its project is financially feasible in the short or long term, that it has not provided long range plans and that, even assuming minimal need, the size of Amedex' proposed project will cause difficulty in meeting projected utilization needs based on Broward County's past utilization rates. All other statutory and rule criteria are satisfied, at least minimally, based on Amedex' 240-bed proposal. As between the applicants, they agree that a comparative review is appropriate to determine the best applicant. Further, they agree for purposes of this proceeding that the other meets all statutory and rule criteria, at least minimally, except the following: need beyond 60 beds, ability to provide quality of care, and availability of funds for project accomplishment and operation. The parties have further agreed that there are no special circumstances existent in this case upon which a certificate of need is being sought. The Amedex Proposal In July 1986 Amedex filed an application with the Department for a certificate of need to construct a 240-bed skilled and intermediate care nursing home in Broward County, Florida. The total project cost is projected to be $9,040,228. At hearing, Amedex failed to offer any competent proof to demonstrate the immediate and long-term financial feasibility of its proposed project, that it could provide quality care, or that it had available the necessary funds for project accomplishment and operation. 1/ While the Department contended that the proposed project was not the best use of Amedex's resources, it offered no proof to demonstrate what other health services would be a more appropriate use of the resources. The Forum Proposal In July 1986, Forum also filed an application with the Department for a certificate of need to construct a skilled and intermediate care nursing home in Broward County, Florida. Forum's application sought leave to construct a 60-bed facility. The estimated cost for construction of Forum's proposed nursing home is $2,39,800. Forum has the necessary resources for project accomplishment and operation. While the Department contended that the proposed project was not the best use of Forum's resources, it offered no proof to demonstrate what other health service would be a more appropriate use of such resources. Forum is a publicly held health services company which owns, develops, and operates retirement living centers and nursing homes on a national basis. Pertinent to this case, Forum proposes to develop a retirement living center in Broward County that would consist of 120 apartments for independent living, a 30-bed adult congregate living facility, and the proposed 60-bed skilled and intermediate care nursing home. Forum has packaged its centers to provide these three levels of service to meet the desires of retired persons they hope to attract to their retirement community. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen and heating plant. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. The nursing facility proposed by Forum would offer a wide range of services for its residents including: 24-hour skilled and intermediate nursing care, physical therapy services, and other restorative services. Additionally, Forum proposes to offer, as needed, subacute services such as: intravenous care, continuous bladder irrigation, oxygen therapy, nastrogastric tube feeding, ventilator care, insulin treatment, sterile dressing changes, and sterile care of tracheotomies. Forum also proposes to offer in the future, if need is identified and if any necessary agreements can be reached, respite care, adult day care, meals on wheels and hospice care. Forum proposes to seek medicare and medicaid certification, and will dedicate 25 of its beds to medicaid patients. Forum has a history of providing quality care at its existing facilities, and will provide quality care at the proposed facility. Forum has demonstrated the immediate and long term financial feasibility of its proposed project. Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. Due to the excellent growth potential in Broward County for retirement living centers, Forum should be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible. However, in view of the lack of numeric need for such facility as discussed infra, Forum's success will be to the detriment of existing and approved facilities. Numeric need The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)2, Florida Administrative Code. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides: Need Methodology ... the Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i... The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case, establishes a "planning horizon" of July 1989. Pertinent to this case, subparagraphs 2 a-d provide the methodology for calculating gross bed need for the district/subdistrict (in this case the district and subdistrict are the same--Broward County) in the horizon year. The first step in the calculation of gross need for the horizon year is to derive "BA," the estimated bed rate for the population age-group 65-74. This rate is defined by subparagraph 2b as follows: BA = LB/ (POPC + (6 x POPD) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. The parties concur that the district licensed bed figure (LB) is calculated based on the number of licensed community nursing home beds as of June 1, 1986, and that there were 3,226 licensed beds in the district on that date. 2/ The parties do not, however, agree as to the date on which POPC and POPD should be derived. The formula mandated by the rule methodology for calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived. Forum contends that the appropriate date to establish the "current population" for POPC and POPD is January 1, 1986. The Department contends that the appropriate date is the date of application. In the opinion of David Warner, which opinion is credited, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. January 1, 1986, as the midpoint of that date, is the appropriate date to derive POPC and POPD. Supportive of Dr. Warner's opinion are the past practices of the Department. Between December 1984 and December 1986, the Department routinely used a three and one half year spread between the base population period and the horizon date for "current population" in its semiannual nursing home census report and bed need allocation. That three and one half year spread was adopted by the Department for the same reasons expressed by Dr. Warner. In the batching cycle of January 1987, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one half year spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to use a three year spread between the base population period and the horizon date for "current population" in calculating POPC and POPD. Application of the methodology prescribed by subparagraph 2b to the facts of this case produces the following calculation: BA = 3,226 / (158,878 + (6 x 110,217) BA = 3,226 / (158,878 + 661,302) BA = 3,226 / 820,180 BA = .0039332 The second step in the calculation of gross need for the horizon year is to derive "BB," the estimated bed rate for the population age group 75 and over. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB = 6 x BA BB = 6 x .0039332 BB = .0235992 The third step in the calculation of gross need for the horizon year is to derive "A," the district's "age-adjusted number of community nursing home beds" at the horizon year. This methodology is defined by subparagraph 2a as follows: A = (POPA x BA) + (POPB x BB) Where: POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. The parties concur that POPA and POPB are, respectively, 165,533 and 128,250 for the horizon year. Accordingly, application of the methodology prescribed by subparagraph 2a produces the following calculation: A = (165,533 x .0039332) + (128,250 x .0235992) A = 651.07439 + 3,026.5974 A = 3,677.67 The final step in the calculation of gross need in the horizon year is to derive "SA," the "preliminary subdistrict allocation of community nursing home beds" (gross bed need in this case. 3/ This calculation is defined by subparagraph 2d as follows: SA = A x (LBD/LB) x (OR/.90) Where: LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through June 30. The batching cycle in which these applications were filed occurred before the Department amended its rule to include the fixed need pool concept. Accordingly, the parties agree that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d, but, rather is defined by former rule 10-5.11(21)(b)4 as follows: OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of applications submitted for the July batching cycle shall be based upon occupancy data for the months of October through March preceding that cycle... In Broward County (District X) LB and LBD are the same since the county has not been divided into subdistricts. Application of the foregoing methodology to the facts of this case produces a gross need in July 1989 of 3,453 beds, computed as follows: 4/ SA = 3,677.67 x (3226/3226) x (.845/.9) SA = 3,677.67 x 1 x .938888 SA = 3452.92 The net need calculation The final step in the numeric need methodology is to derive net reed from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed need allocation for a subdistrict, which is the number of beds available for certificate of need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental sub- district from the bed allocation determined under subparagraphs 2.a. through f. Notably, former rule 10-5.11(21)(b)9 comports with the new rule in all material respects. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need previously calculated, it is silent as to the date that inventory should be calculated. The Department asserts, through application of "policy," that the number of licensed beds should be calculated as of June 1, 1986 (the date established by former rule 10-5.11(21)(b)7 for calculating LB and LBD), and the number of approved beds as of December 1, 1986 (the date the Department's supervisory consultant signed the state agency action report). Forum would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no proof to expose and elucidate its policy choice. As discussed below, the dates used by the Department and Forum for purposes of calculating net need were facially unreasonable. 5/ The inventory of licensed and approved beds under subparagraph 2i, as well as former rule 10-5.11(21)(b)9, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's policy choice concerning the dates at which licensed and approved beds are to be counted is neither logical nor rational since it could result in some nursing home beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed in June 1, 1986, but licensed before the supervisory consultant signed the state agency action report (SAAR), they would not be counted in either inventory. Since the purpose of subparagraph 2i is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures, to the greatest extent possible, that the horizon population will not be over or underserved. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated by reducing the gross need calculation by the inventory of licensed and approved beds, from previous batching cycles, existent on that date. As of the date of administrative hearing, there were 3,226 licensed beds and 695 approved beds in the district/subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a surplus of 399 community nursing home beds in the district for the June 1989 planning horizon. Consistency with State and local health plans The parties have stipulated that both proposals are consistent with the State and local health plans except for Forum's facial failure to comply with the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. Pertinent to this issue, the local health plan provides: In addition to controlling capacity in order to discourage the construction of unneeded beds, the certificate of need program addresses cost containment by encouraging efficiencies in operation as a criteria to certificate of need approval. A number of operational models have historically proven to be positive influences on efficiency. Licensure laws, for instance, require nursing home staffing patterns to be structured in minimum modules of 30 bed configurations. As a result, the construction of nursing homes with beds totalling numbers not divisible by 30, has the capability of encouraging over staffing. Similarly, experience has shown that freestanding nursing homes constructed at less than 120 beds also are less cost efficient compared to larger facilities. Likewise, since construction and corresponding debt service retirement is greater for freestanding facilities than for new construction on existing facilities, expansion and conversion as an alternative to new construction frequently acts to reduce costs. The basis for the 120-bed minimum size for a "freestanding" facility in the local health plan is to insure efficiency and economy of scale. The 60- bed project proposed by Forum is not "freestanding" but is an integral part of a retirement center which also includes 120 independent living units and a 30-bed adult congregate living facility. Under the circumstances, the economies and efficiencies contemplated by the local health plan will be achieved, and Forum's proposal is consistent with such plan. The local health plan also provides, as a recommendation, that: ... applications for certificates of need to construct additional nursing home beds should be approved so as to support the State policy of 27 beds/1000 population over age 65 in Broward County. Considering the population over age 65 at the applicants' planning horizon, as well as the number of licensed and approved beds in the district, calculates a 14.36 beds/1000 population over age 65 for July 1989. Accordingly, the applicants' proposal is consistent with state and local health plans regarding bed to population ratio. Comparative Review As between the competing applicants, the proof demonstrates that Forum is the superior applicant, and that were the award of a certificate of need appropriate in this case that its application would be the one of choice. Under no circumstance does the proof support an award to Amedex, since it failed to demonstrate the immediate and long-term financial feasibility of its project, failed to demonstrate that it would provide quality care, and failed to demonstrate that it had sufficient resources for project accomplishment and operation. The criteria on balance In evaluating the applications of Amedex and Forum, none of the criteria established by Section 381.705, Florida Statutes (1987), or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. In the case of Amedex, the lack of need in the district, as well as its failure to demonstrate compliance with relevant criteria as discussed in paragraph 46, demonstrates that, on balance, its application should be denied. In the case of Forum, its application meets all relevant statutory and rule criteria except need. Need is the key criteria in the instant case. Forum's failure to satisfy that criterion by proof of numeric need or special circumstances is dispositive of its application for licensure, and such failure is not outweighed by any other, or combination of any other, criteria.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications for certificate of need filed by Amedex and Forum be DENIED. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of February, 1988. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 1988.
Findings Of Fact By Stipulation it was agreed and it is found that Petitioner's Petition for Administrative Hearing to contest Respondent's initial decision to deny its application was timely filed. On July 15, 1986, Petitioner submitted a Certificate of Need application to construct a 60 bed community nursing home in Collier County, Florida. In December, 1986, this application was denied by the Respondent because of its determination that there was insufficient numeric need according to the rule bed need methodology and because of the low utilization rate of existing facilities in Collier County. The initial intent to deny was appealed by Petitioner which filed a request for formal administrative hearing. Before the matter could be heard, however, Intervenor, Lakeside, filed a Petition for Intervention which was granted by the former Hearing Officer. After the case was set for hearing, Respondent, DHRS, and Petitioner, Surrey, entered into a stipulation and agreement in which DHRS agreed to reverse its position and support Surrey's application at the final hearing and, pursuant to that agreement, on May 14, 1987, DHRS filed a Notice of Change of Agency Position. Health Care Associates was formed in May, 1977, by Dr. John A. McCoy, PhD, in conjunction with an associate, Stanford L. Hoye, each of whom owns 50 percent of the business. This company which, upon approval, will develop and manage the Surrey project, has been involved in the development of several nursing homes in Florida, all but two of which have been managed by the corporation upon development. At the present time, in addition to the instant project, Petitioner is developing three other nursing home projects in Florida at Live Oak, Bradenton, and Crystal River. Dr. McCoy was instrumental in obtaining Certificates of Need for nine of the nursing homes developed by his company. Two of those have not yet been licensed and of the seven remaining facilities, five have been sold by the corporation to other unrelated organizations. In each case, Dr. McCoy personally realized a profit on the sale. Petitioner proposes to build a 60 bed skilled nursing facility in Collier County at a projected project cost of $1,600,000.00. Approximately $250,000.00 of that figure will be utilized for land acquisition and site costs; $150,000.00 for furniture, fixtures, and equipment; $100,000.00 for architectural fees; and $1,100,000.00 for construction costs, insurance, non- movable equipment, and other items. The initial state agency action report on the application, rendered in late November, 1986, recommended the project be denied on the basis there was insufficient bed need shown and because of the low utilization of currently licensed and operating facilities. Nonetheless, on May 6, 1987, the Department changed its position and entered into a stipulation and agreement with the Petitioner, in which it agreed that no CON approved nursing home beds exist in Collier County; the District Health Plan indicates a need for an additional 143 beds in that county in the applicable planning horizon; the bed to population ratio in Collier County for the 65 and older population is the lowest in the Health Care District; and the age 75 and over population is expected to increase by 24 percent within the next three years. On the basis of these factors and others outlined in the stipulation, the Department concluded, inter alia, that Petitioner proposed the lowest total project cost and the highest Medicare and Medicaid commitment, and determined that Petitioner's application should be approved. Petitioner has identified two potential sites for construction of the facility, both located in North Naples. Both sites carry an asking price substantially in excess of the land acquisition estimates outlined in the application, and neither is currently zoned for the operation of a nursing home. Zoning changes or variances are available, but the cost of securing them may be high and time consuming. Albeit each site would be utilized for construction of not only the proposed nursing home facility but also its related personal care unit, Petitioner estimates that 60 percent of the cost of land acquisition would be apportioned to the nursing home component and 40 percent to the personal care unit. That being the case, one of the parcels would fall within the proposed land acquisition figure cited. DHRS District VIII has been divided into subdistricts for the purposes of planning for community nursing home beds. Subdistrict 2 of District VIII consists of Collier County, Florida. The methodology used by DHRS to determine the need for community nursing home beds in Florida is found in Rule-10-5.011, F.A.C. and it provides, among other things, that the need for proposed new community nursing home beds is to be determined based on a planning horizon three years in the future from date of application. In this case, the appropriate planning horizon is July, 1989, three years after Petitioner's application was filed. The population figures relied upon by DHRS for ages 65 through 74 and ages 75 and above for the period July, 1986 and July, 1989 as of the date of the filing of the application were: 131,642 and 79,661 as well as 148, 229 and 96,142, respectively. The need formula contained in the F.A.C. also requires that the application submitted for July batching cycles be based upon the number of licensed beds in the District as of the preceding June 1. On June 1, 1986, District VIII showed 4,600 licensed community nursing home beds of which there were 473 licensed community nursing home beds in Subdistrict 2. As of November 26, 1986, however, there were no approved community nursing home beds in Collier County, a portion of Subdistrict 2. Another factor to be considered in the methodology is the occupancy rate within the district. As of the application period, the occupancy rate in Collier County was 84.44 percent including the occupancy data for Moorings Park. Petitioner and DHRS urge that it is DHRS policy to utilize at the de novo hearing the latest population figures available at the time of the initial application. These figures, cited above, reflect a 55 bed need in Collier county for the period July, 1989. There is, in addition, a factor which Petitioner urges relating to the licensure report submitted by Americana Nursing Home, located in Collier County, which indicates that a number of that facility's semiprivate rooms were converted to private rooms, thereby reducing the number of beds available for use in District VIII during the relevant time period. When this factor is incorporated into the calculations, a higher occupancy rate is indicated which results in a bed need of 66 rather than 55. Intervenor contests any adjustment made on the basis of Americana's conversion of some of its rooms from semiprivate to private rooms and a resultant decrease in the bed inventory thereby. It points out, and properly so, that former semiprivate rooms can be reconstituted as such in a very short period of time if needed and though the beds may not be set up when the room is a single room, the facility is capable of providing those additional beds without further approval when necessary. The removal of those beds, therefore, from the inventory, as a result of a temporary conversion is not an appropriate methodology. It has not been followed by DHRS in the past nor is it provided for in the rule and it should not be done here. Turning to the question of the population estimates and projections appropriate to make the proper calculation of numeric need for the area at the proper time, Intervenor objects to Petitioner's and DHRS' use of the pertinent population projections existing at the time of application on the basis that at a de novo hearing, the proper and most appropriate approach to bed need analysis and calculation would require the use of the most current available statistics. Utilizing the most current population projections for the July, 1989 planning horizon results in a net numeric need for July, 1989 of 21 beds with an error possible to 22 beds. In addition, the occupancy rate would be reduced and in that regard, evidence indicates that occupancy rates in Collier County have been low since 1982. However, there has been a steady and continuous rise in that figure since that time and as of July, 1987, it was 91.1 percent. The date upon which licensed beds are to be counted is provided for specifically in the rule defining need methodology, but the date upon which approved beds are to be counted is not stated in the rule. Similarly, the times for which population data are to be considered is contained in the rule methodology, but the release date of official estimates and projections to be utilized is not specified. Likewise, though the time period for which occupancy rates of existing facilities are to be considered is specifically set out, the input to be utilized when calculating "average occupancy rate" within that time period is not specifically established. In any case, the average occupancy rate as stipulated in the rule methodology for the area has been, until recently, consistently lower than 90 percent which is the figure identified in the rule methodology. Based on all the above, then, it must be found that the more accurate and pragmatic calculation of need utilizing the most current projections and discounting the agency policy for which the agency has not established any firm rationale or justifiable basis, indicates no numeric need for additional beds in the District during the period set forth in the planning horizon. Even if use of the rule methodology does not result in a mathematical showing of bed need sufficient to justify award of a certificate of need, nonetheless such a certificate can be awarded if other conditions and other circumstances establish a need that requires satisfaction within the area and the planning horizon. There was some dispute regarding poverty rates within Collier County and evidence presented at the hearing tends to indicate that the poverty rate in Collier County for the 65 and older population group is generally the lowest in the state. Low poverty rates among the elderly generally coincide with low nursing home utilization since wealthier patients generally have available to them alternatives to inpatient nursing home care. Intervenor urges, and there is no evidence to contradict it, that there are currently available alternatives to nursing home care for wealthy patients not only in Collier County but within District VIII as a whole. The Health Services and Facilities consultant for DHRS who initially reviewed Petitioner's application felt approval was not appropriate at the time he did his analysis. However, since that time additional information has caused him to conclude the application should be granted. He has subsequently learned that two of the four nursing homes in Collier County, which account for more than 50 percent of the beds licensed, have "conditional" quality ratings and there are currently no beds approved for construction in the county even though the county is one of the fastest growing counties in Florida. On the basis of this information, he now agrees with the agency's determination to approve a certificate of need for 60 beds for Petitioner. Based on what Mr. May knows of the three applicants, in his opinion Petitioner is the most appropriate applicant to receive the award. In the Stipulation entered into between Petitioner and the agency, the parties adopted the District VIII Health Council projection of 143 beds needed for Collier County for the 1986 planning horizon. The quarterly nursing home report for the period April through June, 1987, reflects the status of previously issued certificate of needs and includes all reported approved beds up to the date of issuance. This report shows that as of June 30, 1987, two applicants from prior batches received a total of 81 beds which, when subtracted from the 143 identified bed need, still leaves a 62 bed net need. Turning from the question of numeric need to other considerations regarding the applicant in issue, there can be little doubt that the estimates for the design of the proposed facility and construction are appropriate. The figures in Tables 18 and 19 of the application are also appropriate and reasonable. The costs for the project appear to be accurate and appropriate and the completion forecast timetable appears to be more than ample. Mr. Philips, the Vice President in charge of construction lending for the mortgage company which proposes to finance construction of the facility, is familiar with not only the applicant's corporate financial statement, but also those of the two principals, Dr. McCoy and Mr. Hoye. In his opinion, both are capable of providing the initial financing and their operations statements show a history of successful business operation. The 11 percent proposed as an interest rate for the loan supporting the construction is reasonable if not liberal, and the 25 year duration of the loan is also reasonable as is the loan origination fee of two points. If the certificate of need is approved, the lender is ready, willing, and able to lend the applicant sufficient funds to complete construction. Intervenor's expert in nursing home budgeting and financial feasibility analysis, testifying in contravention of Petitioner's experts, believes that approval of Petitioner's operation would have a severe financial impact on the Intervenor's operation as a current provider resulting in a first year bottom line loss of approximately $235,000 and a second year bottom line loss of almost $300,000. It should be noted here, however, that these are not actual operating losses but a projected reduction in profit. These estimates are based on August, 1987 figures adjusted forward for inflation. In short, while the opening of Petitioner's facility may have a negative impact on existing facilities, it would not necessarily result in a deficit operation for any existing provider. This expert also has some difficulty with Petitioner's projections of financial feasibility in its own facility. For example, he questions the 15 percent census of Medicare patients based on the fact that currently Intervenor does not have any Medicare patients though it does accept them. He also considers the estimate of a 96 percent occupancy by the end of six months to be unreasonable, especially in Collier County. He believes Petitioner's proposed expenses are understated and there are inconsistencies between the staffing table and labor costs in that the nursing expense is understated and the hourly rates projected to be paid are much too low. He believes that the projected cash flow is overstated since there is no provision for a reduction of principal. There are, also, other possible negative aspects to approval of Petitioner's application. Intervenor's regional director, who is an expert in nursing home administration, believes that approval of Petitioner's application will have a direct adverse reaction on Intervenor's Lakeside operation in regard to services provided, staffing, and its own financial feasibility. With regard to staffing, there is currently a critical shortage of nurses in Collier County and this factor was confirmed by a representative of another facility in the area. Approval of Petitioner's facility might well worsen the problem. Other service personnel are also in short supply and approval of Petitioner's application will worsen this as well. If these personnel shortages materialize, it may result in a reduction of quality of care, but this is speculative and there is no direct evidence that this would happen. Lakeside's current license is rated as "standard" as opposed to "superior" and this is claimed to be directly related to the nursing shortage which resulted in the facility's inability to attract sufficient nursing personnel to merit a "superior" rating. The witness identified other apparent deficiencies in applicant's submission, but these are either of a minor nature or the subject of opinion or conjecture. In short, the only substantive objection sustainable is the prospective adverse effect on the cost of attracting qualified nursing personnel. Certain other projections by the applicant are considered to be unreasonable by Americana's Director of Operations, such as the 15 percent projection for Medicare patients. Currently Americana, which generally has between 13 and 23 beds open at any time, has 2 Medicare patients and this witness also feels that a 96 per cent fill up rate in 6 months is unreasonable. Based on his experience, Collier County had even a slower than normal fill up rate when compared to other areas of the state. Notwithstanding the negative testimony, there can be little question, and it is so found, that Petitioner would be able to provide quality care if its application were approved. Turning to the question of the relationship of this application to State and Local health plans, the bed need calculation has already been discussed above. That calculation is based on the state methodology. However, the state methodology may be substantially different than a need developed by reference to the local health plan. The local plan looks at need from the county/subdistrict basis whereas the state looks at the district as a whole for establishment of need and then distributes beds on the basis of current bed census. When the smaller counties with fewer existing beds grow faster than the larger counties with a greater number of existing beds, they tend to be caught in a squeeze in that they get fewer beds because they are smaller, while their actual need may be greater than that of the larger county which, by virtue of its size, gets the larger number of beds. This state need rule, which calls for a 90 percent occupancy rate is felt by some to be less valid and less accurate a basis for evaluating the need in reality. As to the question of alternatives, there appear to be none for the vast majority of people in the county. Hospices or internal acute care bed or ambulatory facilities are not truly alternatives to nursing homes. In summary, Petitioner's expert believes that the Department's projected need for 43 beds could justifiably result in an approval of an application for 60 beds because: There were no approved beds at review time, Population trends, growth, and utilization trends indicate a need for new beds, The bed to population ratio in the county is one of the lowest in the district and in the state, (16 or 17/1,000 vs 27/1,000 normal for 65 plus) and the situation has not changed, Although the 65 plus population is used to determine need, the greatest use of nursing home facilities comes from the 75 plus population which is expected to increase in Collier County by July, 1989 by 32 percent, double the statewide average, At the time of application review, no existing facility was rated "superior" (there are now), showing a need for options. The applicant has a record of "superior" ratings statewide, The district health plan shows a bed need exceeding 60 beds for Collier County, The granting of a 60 bed nursing home is not inconsistent with previous actions by the Department when a mathematical need less a bed showed than 60 number. The project also is consistent with the rule criteria as well as statutory criteria, and Given DHRS's methodology and considering the adjustments due to Americana's change, there can be shown a mathematical need greater than the 43 shown by DHRS. Whether the need is 43 or 66 is really not important. The need is there. There is much to be said for these conclusions and they are adopted as findings herein.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Respondent, Department of Health and Rehabilitative Services, approving Petitioner, Health Care Associates, Inc., d/b/a Surrey Place of Collier County' application for a certificate of Need to establish and operated a 60 bed skilled nursing facility in Collier County, Florida. RECOMMENDED this 8th day of January, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK, 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 8th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0691 The following constitutes my specifics rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER AND RESPONDENT JOINT SUBMISSION 1 - 5. Accepted and incorporated herein. 6 - 8. Accepted and incorporated herein. 9. Accepted and incorporated herein. 10 - 15. Accepted and incorporated herein. 16. Accepted as a statement of DHRS policy and the resultant figures determined thereunder but rejected as the appropriate source of information. 17 - 19. Accepted and incorporated herein. Accepted as Petitioner's and Respondent's calculation but rejected as bearing in the Issue of bed need. Rejected as not reducing the number of available beds. Rejected. Accepted and incorporated herein. 24 - 29. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. 32 - 34. Accepted. 35 - 50. Accepted. Accepted. Accepted. 53 - 54. Accepted and incorporated herein. 55 - 56. Accepted. 57. Accepted. 58 - 59. Accepted. 60. Accepted. 61 - 65. Accepted and incorporated herein. 66 - 69. Accepted and incorporated herein. 70. Accepted. FOR INTERVENOR 1 - 6. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. Accepted and incorporated herein. Irrelevant. Accepted. Accepted and incorporated herein in substance. First sentence is rejected. Occupancy rates of other local facilities are not necessarily determinative of the expected occupancy rates of Petitioner in the absence of a showing of similarity of other factors. 16 - 19. Rejected as based on other than the best evidence. No original source was presented. 20. Accepted. 21 - 25. Accepted and incorporated herein. 26 - 27. Accepted. 28 - 29(b). Accepted. 30 - 31. Accepted and incorporated herein. 32. Accepted and incorporated herein. 33 - 34. Accepted and incorporated herein - except for that portion of paragraph 34 indicating the approval of Petitioner's application would be inconsistent with local health plan. Accepted but not determinative. Accepted but not determinative. First sentence rejected as argumentative. Remainder accepted. Rejected as contrary to the weight of the evidence. Rejected. 40-42. Accepted except for the last sentence of paragraph 40 which is rejected. Rejected as not proven. Rejected as not proven. Mr. May was unaware of possible charges during lag time. Accepted. Accepted. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Accepted. Rejected as argument rather than fact. 52 - 53. Irrelevant in light of 53. which is accepted. 54 - 55. Irrelevant in light of Intervenors' paragraph 55 which is accepted. 56 - 58. Accepted and incorporated herein. 59. Accepted. 60 - 64. Accepted. Accepted. Rejected as biased. Accepted. Accepted as to the fact that a reduction in Lakeside's income might occur, but rejected as to its severity. Intervenor presents a "worst case" picture based on speculation and conjecture. Accepted that Petitioner's projected site is near that of Intervenor. Remainder rejected as conjecture. 70 - 71. Accepted. COPIES FURNISHED: Philip F. Blank, Esquire Reynold Meyer, Esquire 204-B South Monroe Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Asst. General Counsel 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 W. David Watkins, Esquire Oertel & Hoffman, P.A. 2700 Blair Stone Road Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the stipulations of the parties and the entire record complied herein, I hereby make the following findings of fact: THE STIPULATIONS OF THE PARTIES The parties stipulated to the following facts: Forum timely filed its letter of intent and application with DHRS and the District IX Local Health Council for the July 1986 batching cycle. DHRS ultimately deemed the application complete and, following review, published its notice of intent to deny the application. Forum timely filed a petition requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The sole issue is whether there is a need for Forum's proposed services; additionally, it is DHRS's position that a lack of need for the project results in the project not being financially feasible in the short or long term. All other statutory and rule criteria were satisfied, at least minimally, except proof of need pursuant to Rule 10-5.011(1)(k) [formerly 10-5.11(21)(b)], Florida Administrative Code, and financial feasibility as it relates to need. FORUM'S PROPOSAL Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Forum proposes to develop a retirement living center in Palm Beach County that would consist of 120 to 150 apartment units for independent living, a separate personal care unit (known in Florida as an adult congregate living facility), and a 60-bed nursing home component certified for skilled and intermediate care. Palm Beach County is in HRS Service District IX, Subdistrict 4. All three components of Forum's retirement living center would be physically connected and share some operational functions, such as dietary facilities and the heating plant. Such a design provides for an efficient operation as well as an economic distribution of costs facility wide. No specific site has been selected , although Forum has narrowed its focus to the eastern half of Palm Beach County. It is not economically feasible to acquire property or pay for an option on property until after receiving CON approval. The projected total cost of Forum's proposed 60-bed nursing home is $2,329,800. Forum has the necessary resources for project accomplishment and operation. Forum proposes to seek Medicare certification and will provide up to 25 of its beds for Medicaid patients. FINANCIAL FEASIBILITY Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. If need for the facility is shown, Forum would be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible while at the same time having no material negative impact on existing providers in the district. NUMERIC NEED Need for new or additional community nursing home beds in Florida is determined, preliminarily, by use of the methodology found in Rule 10- 5.011(1)(k), Florida Administrative Code. Additional beds normally are not approved if there is no need for beds as calculated under the rule. Pursuant to the rule, need for a defined nursing home subdivision is projected to a three- year planning horizon, in this case July 1989. The need methodology prescribed in the rule is as follows: A (POPA x BA) + (POPB x BB) or: The District's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made [A] (The population age 65-74 years in the relevant departmental districts projected three years into the future [POPA] x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]) + (The population age 75 years and older in the relevant departmental district projected three years into the future [POPB] x the estimated current bed rate for the population age 75 years and over in the relevant district [BB].) BA LB/(POPC) + (6 x POPD) or: The estimated current bed rate for the population age 65-74 years in the relevant district [BA] (The number of licensed community nursing home beds in the relevant district [LB]/the current population age 65-74 years [POPC] + (6 x the current population age 75 years and over [POPD]) BB 6 x BA or: The estimated current bed rate for the population age 75 years and over in the relevant district [BB] 6 x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]. SA A x (LBD/LB) x (OR/.90) or: The preliminary subdivision allocation of community nursing home beds [SA] The district's age-adjusted number of community nursing home bids for the review cycle for which a projection is being made [A] x (The number of licensed community nursing home beds in the relevant subdistrict [LBD]/the number of licensed community nursing home beds in the relevant district [LB]) x (The average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district [OR]/.90) Rule 10-5.011(1)(k)(2)(i), Florida Administrative Code, provides that: The new bed allocation for a subdistrict, which is the number of beds available for CON approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs a. through i., unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The appropriate planning horizon for the instant case is July 1989, corresponding to the review cycle which began July 15, 1986, and the subdistrict is Palm Beach County. THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT DISTRICT (LB)/THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT SUBDISTRICT (LBD) Rule 10-5.011(1)(k) requires that "review of applications submitted for the July batching cycle shall be based upon the number of licensed beds (LB and LBD) as of June 1 preceding this cycle..." On June 1, 1986, there were 5,459 licensed community nursing home beds in District XI (LB) and 4,084 licensed community nursing home beds in subdistrict 4 (Palm Beach County LBD). These figures include 220 licensed beds that were previously categorized as sheltered. In the instant case, the appropriate figure for LB is 5,459, and the appropriate figure for LBD is 4,084. APPROVED BEDS WITHIN THE RELEVANT DEPARTMENTAL SUBDISTRICT DHRS's interpretation of the rule is to include in the count of approved beds, those approved up to the date of the supervisor's signature on the State Agency Action Report (SAAR). In this case, there were 640 approved beds in Palm Beach County at that time. As of June 1, 1986, the same date as the licensed bed cutoff, there were 640 approved beds in the subdistrict. In Dr. Warner's opinion, approved beds should be determined as of the same time period as licensed beds in order to have consistency and avoid anomalies in the formula. This opinion is reasonable and appropriate. In the instant case, the figure to be applied in the formula for approved beds in the subdistrict is 640 approved beds. THE POPULATION AGE 65-79 YEARS IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPA). THE POPULATION AGE 75 YEARS AND OVER IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPB). The rule provides that the three year projections of population shall be based upon the official estimates and projections adopted by the Office of the Governor. For the purposes of calculating need, DHRS utilizes at the final hearing the figures for estimated population obtained from data available at the time of initial application and review. The set of population projections which were available when Petitioner's application was filed and reviewed were those published on July 1, 1986. Based on this data, which is reasonable to use, POPA 170,639; and, POPB 122,577. THE CURRENT POPULATION AGE 65-74 YEARS (POPC)/THE CURRENT POPULATION AGE 75 YEARS AND OVER (POPD). In calculating POPC and POPD, DHRS also utilizes at final hearing the most current data available at the time of initial application and review, in this case the July 1, 1986, release. Based on that data, POPC 153,005 and POPD 112,894. In the opinion of Dr. Warner, Forum's expert, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. According to Warner, January 1, 1986, as the midpoint of this time period, is the appropriate date to derive POPC and POPD in this case. The formula mandated by the rule methodology for calculating the estimated current bed rate requires that the "current population" for the two age groups be utilized. It is reasonable and appropriate for the base for POPC and POPD to correspond to the period for which the average occupancy rate is calculated. Supportive of Dr. Warner's opinion are the past practices of DHRS. Between December 1984 and December 1986, DHRS routinely used a three and one half year spread between the base population period and the horizon date in determining "current population" in its semiannual nursing home census report and bed need allocation. In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, DHRS utilized a three and one half year spread between the base population period and the horizon data for "current population" when it awarded beds. DHRS offered In this case, it proposed to use a three year spread between the base population period and the horizon dated for "current population" in calculating POPC and POPD. Using the July 1986 population release, POPC for January 1986 is 149,821 and POPD for January 1986 is 98,933. THE AVERAGE OCCUPANCY RATE FOR ALL LICENSED COMMUNITY NURSING HOMES WITHIN THE SUBDIVISION OF THE RELEVANT DISTRICT (OR). The rule requires the use of occupancy data from the HRS Office of Health Planning and Development for the months of the previous October through March when calculating a July batch of nursing home applicants. However, the rule is not instructive as to how one calculates this number. In this case, DHRS computed average occupancy rates based on the existing occupancy rates at applicable facilities on the first day of each month. Based on this occupancy data, which includes the data for the 220 previously sheltered beds in the subdistrict, occupancy rates for the July 1986 batch of Palm Beach County nursing home applicants is 83.75 percent. Forum's witness, Dr. Warner, determined that the correct occupancy rate was 85.46 percent for Palm Beach County for the period October 1985 to March 1986. Dr. Warner arrived at this figure by including paid reservation days. A paid reservation day is a day which is paid for by the patient or the patient's intermediary during which the patient is not physically in the bed. Typically, the patient will either be in the hospital, visiting relatives or otherwise away from the facility and will continue to pay for the nursing home bed, so that they will be able to return and not have someone occupy the bed. One of the goals and objectives of the District IX Local Health Plan is that paid reservation days be considered when bed need calculations are made. Calculating prepaid reservation days is consistent with the Rule because such beds are no longer available to the public and are therefore in use. Dr. Warner determined that during the applicable period, 1.25 percent of the licensed beds in the subdistrict were paid reservation days. Although taking paid reservation days into account would not be inconsistent with the rule, Forum failed to demonstrate that the 1.25 percent figure arrived at is valid for the applicable period, i.e., October 1985 to March 1986. Dr. Warner merely calculated a two-year average number of paid reservation days, broke this figure down to a six-month average and applied this average to the six-month period specified in the Rule. Gene Nelson, an expert called on behalf of Forum, calculated the occupancy rate as 88.72 percent in Palm Beach County for the appropriate period called for in the Rule. Nelson used the average monthly occupancy data obtained from medicaid cost reports for some facilities rather than first-day of the month data as used by DHRS. In addition, Nelson did not factor in the occupancy date of licensed beds in the extreme western portion of the County based on his belief that the District IX Local Health Plan mandates that the western area not be considered in any way with the eastern coast section of Palm Beach County for purposes of determining competitiveness. While the use of average full-month occupancy data is generally more reliable than using first-day of the month data, it is best, from a health planning prospective, to be able to use either all full-month data or all first- day of the month data. In making his calculations, Mr. Nelson mixed the two types of data, using full-month data when available and in other cases using first-day of the month data when full-month data was not available. It is inappropriate to fail to consider licensed beds in the extreme western portion of the County based solely on the local health plan. Among other reasons, the rule does not provide for exclusions for any of the subdistricts licensed facilities from the methodology. The appropriate and most reasonable occupancy rate (OR) in the instant case for the applicable time period is 83.75 percent. NET NEED Applying the above-referenced variables to the Rule formula produces the following results. July, 1986. District Allocation BA LB (POPC + (6 x POPD) - 5459 [149,821 + (6 x 98,833)] - .007349 BB - 6 x BA .044094 (.007349) July, 1989 Allocation (POPA x BA) + (POPB x BB) - (170,639 x .007349) + (122,577 x .044094) - 6659 Subdivision Allocation and Need SA A x (LBD / LB) x (OR 1.9) - 6659 x (4084 / 5459) x (.8375/.9) - 6659 x .74812236673 x .93055555555 4636 Subdistrict Allocation for Palm Beach County 4084 (Licensed Beds) 576 (90 percent of 640 Approved Beds) -24 (Bed Surplus)
Recommendation Based on the foregoing Findings of Fact, and Conclusions of Law, it is, RECOMMENDED that the application for certificate of need filed by Forum be Denied. DONE AND ORDERED, this 4th day of April, 1988, in Tallahassee, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of April, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0704 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in substance in Finding of Fact 2. Adopted in substance in Finding of Fact 3. Adopted in substance in Finding of Fact 4. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 9. Sentence 1 is rejected as contrary to the weight of the evidence. Rejected as subordinate and/or unnecessary. 11. Adopted in substance in Finding of Fact 9. 12. Adopted in substance in Finding of Fact 9. 13. Adopted in substance in Finding of Fact 10. 14. Adopted in substance in Finding of Fact 12. 15. Adopted in substance in Finding of Fact 1. 16. Adopted in substance in Finding of Fact 14. 17. Adopted in substance in Finding of Fact 21. 18. Adopted in substance in Finding of Fact 20. 19. Adopted in substance in Finding of Fact 22. 20. Adopted in substance in Finding of Fact 22. 21. Adopted in substance in Finding of Fact 18. Adopted in substance in Finding of Fact 15. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 23. Rejected as a recitation of testimony and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 24. Rejected as a recitation of testimony and/or unnecessary. Adopted in substance in Finding of Fact 25. Rejected as a recitation of testimony and/or subordinate. Adopted in substance in Finding of Fact 25. Adopted in substance in Finding of Fact 21. Rejected as contrary to the weight of the evidence. Rejected as not supported by the weight of the evidence and/or unnecessary. Rejected as subordinate and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Rejected as a recitation of testimony and/or subordinate. Rejected as misleading and/or subordinate. Rejected as subordinate and/or unnecessary. Rejected as contrary to the weight of the evidence. Rejected as contrary to the weight of the evidence. Rulings on Proposed Findings of Fact Submitted by the Respondent Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 9. Adopted in substance in Finding of Fact 3. Rejected as contrary to the weight of evidence. Adopted in substance in Finding of Fact 13. Adopted in substance in Finding of Fact 18 and 19. Adopted in substance in Finding of Fact 16. Adopted in substance in Finding of Fact 23. Addressed in Conclusions of Law. Addressed in Conclusions of Law. Rejected as subordinate and/or unnecessary. COPIES FURNISHED: Thomas W. Stahl, Esquire 102 South Monroe Street Tallahassee, Florida 32301 R. Terry Rigsby, Esquire 325 John Knox Road Building C, Suite 135 Tallahassee, Florida 32303 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 John Miller, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power HRS Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Petitioner filed an application for a Certificate of Need for a 180-bed nursing home in Dade County, a subdistrict of Respondent's District 11 service area. The application was not offered into evidence, and no testimony was presented describing Petitioner's proposed project. Respondent reviewed Petitioner's application in accordance with statutory criteria and Section 10-5.11(21), Florida Administrative Code, which contains a formula or methodology for computing whether there is a need for additional community nursing home beds in any health district or subdistrict in Florida. In applying that formula, Respondent utilized the following planning data: the number of licensed and approved beds within the service area, the average patient census data, the number of elderly living in poverty within the service area, and the projected number of persons aged 65 and older residing within the service area three years in the future (the formula's planning horizon). Respondent then projected the theoretical need in the district and subdistrict, subtracted the inventory of licensed and approved beds, and thereby obtained the need / no need ratio. Although a need was demonstrated in both the district and subdistrict, the methodology then further requires a current utilization rate in excess of 85 percent and a prospective utilization rate in excess of 80 percent before additional beds can be approved. In this case, the current utilization rate of 93.4 percent exceeds the 85 percent requirement. However, when the proposed 180 beds are added to the number of already licensed and approved beds, the prospective utilization rate decreases to 69 percent, a figure below the required 80 percent prospective utilization threshold. In accordance with its application of its need methodology, Respondent issued a State Agency Action Report determining there is no need for Petitioner's proposed nursing home facility. Even though District II and the Dade County subdistrict have a current utilization rate of 93.4 percent, Petitioner presented no evidence to show that persons in need of nursing home beds are unable to secure them or that any special or extenuating factors exist to mitigate against the strict application of Respondent's need methodology.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered denying Petitioner's application for a Certificate of Need. DONE and RECOMMENDED this 14th day of November, 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 14th day of November, 1984. COPIES FURNISHED: John D. Whitaker, Esquire 10700 Caribbean Boulevard Suite 202-H Miami, Florida 33189 Culpepper, Turner and Mannheimer 318 North Calhoun Street Post Office Drawer 11300 Tallahassee, Florida 32302-3300 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the stipulations of the parties, the following relevant facts are found: Surrey and Careage each timely filed their letters of intent and applications for Certificates of Need to establish 120-bed nursing homes in Polk County in the July 1986, batching cycle. Pursuant to the nursing home need methodology rule, there is a numeric need for 168 nursing home beds in Polk County in July of 1989. A Stipulation and Settlement Agreement enter into prior to the final hearing resulted in the award of 40 beds to other applicants, thus leaving a numeric need for 128 beds for the planning horizon addressed by the applications at issue in this proceeding. No evidence of numeric need beyond that established by the nursing home need methodology rule was presented by Surrey or Careage. Health Care Associates (HCA) is owned by John A. McCoy and Stanford L. Hoye and was formed in 1977 to develop, design, build and manage skilled nursing facilities and retirement facilities throughout the country. It currently owns, operates or is developing approximately 18 skilled nursing facilities in the State of Florida, including a 120-bed nursing home in Winter Haven, known as Brandywine. All HCA licensed nursing home facilities in Florida hold a "Superior" rating. HCA has a documented history of implementing its Certificates of Need within the statutory time frame. HCA now proposes to establish a second 120-bed skilled nursing home in Winter Haven to be known as Surrey Place of Polk County. The two HCA facilities in Winter Haven will be independent and competing facilities, through there will be a shared utilization of training programs. This proposed facility is to be built in conjunction with a 60-bed personal care facility (an adult congregate living facility) which will share common services, such as administration, laundry and dietary services. The costs related to the personal care facility are not included in Surrey's Certificate of Need application. Surrey has determined that the project will be located on one of two sites in Winter Haven. Both sites are properly zoned, and Surrey already owns one of the sites. The projected total project cost for the proposed Surrey 120-bed skilled nursing home facility is $3,000,000. The costs associated with land acquisition and site development, furniture, fixtures and equipment and architectural fees appear reasonable and are in line with HCA's past experiences in developing nursing homes in Florida. The construction cost for building the facility--$2,146,000 or $48.70 per square foot--is low because HCA owns the company which will construct the facility. Construction will be done at cost and at no separate profit to HCA. The Surrey proposal results in a construction cost per bed figure of $17,883; an equipment cost per bed figure of $2,084; and an operating cost per bed figure of $20,031.75. The total project cost of $3,000,000 results in a cost per bed of $25,000. Surrey proposes to obtain financing for 87% of the total project cost, or $2,600,000, and to provide owner equity for the remaining $400,000. Meritor Savings is ready, willing and able to finance the project and Dr. McCoy and Mr. Hoye, the owners of HCA, have the financial ability to make the equity contribution. Surrey's facility will contain 44,000 gross square feet and will be comprised of 8 private rooms and 56 semiprivate rooms. The schematic drawing contained in the application is now somewhat outmoded compared to how HCA is currently building nursing facilities. In its newer facilities, the patient rooms have vaulted ceilings and bathing units on outside walls with cubical glass which admits more light. HCA's existing nursing home facility in Winter Haven enjoys a good reputation amongst physicians who are on the staff of Winter Haven Hospital and refer patients to that facility. At the proposed facility, Surrey intends to offer a continuum of care by providing independent living units adjacent to the nursing home. In addition to providing skilled and intermediate level nursing services, Surrey intends to offer various programs including physical therapy, speech therapy, hearing and occupational therapy, social services, recreational programs and agreements with other organizations to ensure the highest quality of discharge planning and follow-up services. While not listed in its application, Surrey intends to provide services to Alzheimer patients, though not in a separate and distinct unit. As a part of its social and recreational services, Surrey intends to provide programs such as pet therapy, creative writing, senior olympics and a grandchild program. In addition, Surrey intends to offer adult day Dare and respite care within the confines of the personal care living facility. Surrey does not intend to offer subacute care services at the proposed facility. The total staffing of 72.4 for the proposed Surrey facility includes 5.5 full-time equivalent registered nurses, 5.5 full-time equivalent licensed practical nurses and 34 full-time equivalent nurse's aides. This equates to a ratio of 1 registered nurse per 21.8 patients, 1 licensed practical nurse per 21.8 patients and 1 aide per 3.5 patients. As a means of attracting nursing staff, Surrey offers recruitment seminars at nursing schools and has associated with Polk Community College to aid in training and recruitment. All HCA facilities have accreditation programs for certified nursing assistants (CNAs), and its existing Winter Haven facility is utilized by Polk Community College for the on-site training of CNAs. In order to aid its recruitment efforts, HCA is enhancing its benefit package and also is building child day care centers as an additional benefit for staff members. These centers are also available to visitors to the nursing home. The cost of the child care centers is not included within Surrey's total project cost. HCA's director of quality assurance works with the assistant directors of nurses in each facility to design and promote continuing education programs for the professional nursing staff. HCA has a history of providing services to Medicare and Medicaid patients in its Florida facilities. Surrey proposes to devote 49% of its patient days to Medicaid patients, 15% to Medicare patients, 1% to V.A. patients and 35% to private pay patients. These calculations are based upon HCA's experience in other existing facilities. The elderly poverty rate in Polk County is 16.6%. Upon opening, Surrey proposes the following per diem charges: $53.00 for Medicaid and V.A. patients, $65.00 for Medicare patients, $90.00 for private pay patients in a private room, and $62.00 for private pay patients in a semiprivate room. In answers to interrogatories served in November of 1987, Surrey listed its projected charges as $70.00 for private pay, $76.00 for Medicare and $64.00 for Medicaid patients. The figures used in Surrey's pro forma are based upon the actual experience of HCA in developing similar facilities. The pro forma projections are based upon Surrey's expectation of a 97% occupancy rate at the end of year one and throughout year two. Other than the Administrator's salary being admittedly low, the pro forma projections appear reasonable. Surrey anticipates a net loss in the first year of operation of $349,120 and a net profit in the second year of $121,150. In terms of cash flow, Surrey projects a negative cash flow of $143,440 at the end of its first year and a positive cash flow of $326,770 at the end of its second year of operation. Surrey's proposal is consistent with the goals, objectives and policies contained in the nursing home and long-term care components of the District VI Health Plan and the State Health Plan. Careage Investment, Inc., owned by Gene D. Lynn, has been in existence since May 1, 1962, and has developed and constructed over 250 medical complexes, hospitals, and nursing homes throughout the United States and Puerto Rico. Careage currently has four operating nursing homes, with a fifth having recently been opened. These nursing homes include a 59-bed facility in Coupeville, Washington, a 99-bed facility in Tracy, California, a 232-bed facility in Phoenix, Arizona, a 114-bed facility in Oroville, California, and the new facility of 144 beds in Chico, California. Careage proposes a 120-bed skilled nursing home to be located in Lakeland. The facility will include a separate and distinct 21-bed unit for Alzheimer patients and a 10-bed subacute care unit. While Careage does not presently own property for the proposed facility, it has identified several available four-acre sites which have utilities and direct access to public streets. Its $515,000 figure proposed for land acquisition appears reasonable. The total cost of the proposed Careage project is $4,150,000. The cost of constructing the 45,500 gross square foot facility is $2,583,125 and equates to a construction cost per square foot of $56.77 and a construction cost per bed of $21,526. Careage proposes equipment costs of $420,000 or $3,500 per bed. Its operating cost per bed is $23,395. The overall project cost of $4,150,000 equates to a cost of $34,583 per bed. Careage proposes to obtain 100% financing of the total project cost at an interest rate of 10%, with the term of the loan being 30 years. Based upon Mr. Lynn's personal financial statement and Careage's past ability to obtain financing for other nursing home facilities, these expectations appear reasonable. The architect retained by Careage to design the proposed facility in Lakeland received an award from the Contemporary Long Term Care magazine in 1986 for another nursing home designed and constructed in Bakersfield, California. The proposed Lakeland facility will contain 45,500 square feet, which translates into 379 gross square feet per bed. Its patient room arrangements include two isolation rooms, 7 private rooms, 45 semiprivate rooms and a 21-bed special Alzheimer unit with 10 semiprivate rooms and one private room. The facility will be a one-story building, with aquariums visible from the reception area and the dining room. The design includes a beauty and barber shop, a chapel, a gift shop, recreation areas, a private dining room area and outside courtyards. Each patient room will have a bathroom with a sink, as well as a sink in the outer room in semiprivate rooms. Also, in semiprivate rooms, the beds will be placed on opposite head walls to allow each resident to have a view of the window when the other pulls the curtain. Each room will have its own temperature control. The facility will also have occupational and physical therapy rooms. In order to afford more patient privacy, the service areas are located away from the ancillary spaces. Careage's quality assurance program will include a utilization review committee, a safety committee, an infection control committee, a pharmaceutical committee, a resident advisory council, a community advisory council and employee advisory groups. A corporate representative visits all Careage nursing homes on an interim basis to review the day-to-day operations, facility maintenance and physical environment. As noted, Careage proposes to offer a 10-bed subacute care unit. This unit will provide services for the care of technology dependent children, many of whom are recovering from automobile accidents, severe illness, neuromuscular disease or congenital disorders. The subacute unit will also offer such services as hyperalimintation, IV infusion, morphine drip, use of Hickman catheters and other services traditionally performed in the acute care hospital setting. Alzheimer Disease is a fatal illness evidenced by a progressive deterioration of mental, motor, cognitive, physical, social and psychological processes. The problems suffered by Alzheimer patients include nutritional problems, communication problems, disorientation, loss of memory, problems with elimination and basic personal care, agitation, catastrophic reactions, wandering and problems with safety. The Careage approach in offering a separate and distinct Alzheimer unit is to provide behavioral and environmental care. When more skilled nursing care is required than behavioral or environmental care, the Alzheimer patient is then moved to another skilled bed. The separate Alzheimer unit will utilize a specially trained staff and a team approach to any required changes in treatment. The separate 21-bed unit will provide security and will have its own dining room and recreation area. The decor will be designed to promote less agitation. Careage will provide a separate outdoor exercise courtyard for its Alzheimer patients along with various activity programs, such as short reminiscent programs and music therapy. Careage will also offer family and community education programs regarding the needs and care of Alzheimer patients, and encourages the use of volunteers to help adapt the Alzheimer residents to daily living as much as possible. The advantages of providing a separate and distinct Alzheimer unit include the safety features, the ability to utilize a trained staff and a team approach to patients who may have a wide variety of symptoms, less disruption to other residents in the nursing home, and the provision of a more appropriate decor and specialized programs for the Alzheimer patient. Careage proposes to offer respite care services on a space-available basis. Adult day care services will also be offered in a separate entity adjoining the nursing home facility, but the cost associated with that is not a part of Careage's application for a Certificate of Need. Careage proposes to staff the Lakeland facility with 96 full-time equivalent positions. These include 11.9 registered nurses, 7.4 licensed practical nurses and 42.1 certified nurses aides, which equates to a ratio of 1 registered nurse per 10.1 patients, 1 licensed practical nurse per 16.2 patients, and 1 aide per 2.9 patients. Careage intends to offer three hours of nursing care per patient day for the Alzheimer's and skilled areas, and at least six hours per patient day for the subacute and Medicare-certified residents. The staffing proposed meets and exceeds the requirements of Florida regulations. In recruiting staff for its new facilities, Careage advertises in advance of opening in newspapers and periodicals and contacts are made with nursing schools. It offers a liberal fringe benefit package, competitive salaries, in-service training, continuing education assistance and child day care services in adjoining portions of the nursing home. Careage also attempts to use the elderly both as volunteers and staff members. It intends to utilize its facility as a clinical site for schools of nursing, schools of dentistry and other programs within the medical community. Gene D. Lynn, the owner of Careage, has endowed a program in rural nursing at Seattle University. In its first and second years of operation, Careage proposes a payor mix of 40% Medicaid, 4% Medicare, 6% subacute, 3% VA and 47% private pay. Its philosophy with regard to care for medically underserved groups is to serve all populations, regardless of age, sex, religion, national origin or payor status. The payor mix anticipated by Careage is consistent with that being experienced in other facilities in Polk County. The patient charges proposed by Careage are based upon the experience of other providers within Polk County and Careage's own experience in its other facilities. Careage proposes a Medicaid per diem charge of $57.50, a Medicare all inclusive charge of $105.00, a private and VA per diem charge of $60.00 and a subacute charge of $125.00. The assumptions contained in the Careage financial pro forma are based partly upon the experience of existing nursing homes in Polk County and the experience of Careage in other facilities, and appear reasonable. At the end of its first-year of operation, Careage projects a net loss of $161,994.20. A net income of $127,936.61 is projected for the end of the second year of operation. The Careage proposal conforms with the goals and priorities of the District VI Health Plan's nursing home component as well as the goals and objectives of the Florida State Health Plan. Overall occupancy rates in existing nursing homes in Polk County exceed 90 percent. More than half of the Polk County nursing homes currently have waiting lists for admission. In February of 1985, Winter Haven Hospital opened 100 beds that are classified as subacute beds and are reimbursed as skilled nursing beds. For calendar year 1987, the average occupancy rate of the Winter Haven Hospital subacute unit was 65 or 66%. As of the date of the hearing, the census was 78. Higher utilization throughout the Hospital is typically experienced in the first quarter of the calendar year. While the Administrator of Winter Haven Hospital did not feel there was a need for more subacute beds in Polk County, he also felt that the Careage proposal for 10 subacute beds would have a minimal effect upon Winter Haven Hospital. According to a telephone survey, no nursing homes in Polk County currently accept ventilator dependent patients, pediatric or neonatal patients or technology dependent children. It is estimated that between 3 and 22 technology dependent children will need services in Polk County in 1989. Only five nursing homes in Polk County accept patients on IV therapy. Only one nursing home facility in Polk County has a separate and distinct unit for Alzheimer residents. It is estimated that 1,660 persons with Alzheimer Disease will require nursing home services by the year 1989. When conducting its initial review of the competing applications for nursing home beds in Polk County, as well as other counties, HRS staff attempted to compare the applicants by utilizing a "matrix" which compiled the data and information presented in the respective applications. The information initially displayed revealed numerous errors and omissions. The matrix was then revised and information was again compiled to make it an accurate tool for comparative purposes. With few exceptions, all of the data elements in the matrix are items included in the application forms. After balancing the various items, such as facility size, proposed programs, project and construction costs, per diem charges, payor mix, and levels of staffing, HRS initially determined that Careage was the superior applicant. At the final hearing, additional errors were discovered in the display of information contained in the matrix. The errors were corrected and did not change the opinion of HRS's health planning expert that Careage was the superior applicant.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Surrey to establish a 120-bed nursing home in Polk County be DENIED, and that the application of Careage be GRANTED, conditioned upon the inclusion of a 21-bed separate Alzheimer unit, a 10-bed subacute care unit and the provision of at least 40 percent of patient days to Medicaid patients. Respectfully submitted and entered this 6th day of June, 1988, in Tallahassee, Florida. DIANE D. TREMOR 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 6th day of June 1988. APPENDIX (Case NO. 87-0680) The parties' proposed findings of fact have been fully considered and are accepted and/or incorporated in this Recommended Order, with the following exceptions: SURREY 9. Last two sentences rejected. The first is irrelevant and immaterial to the project under review. The last is refuted by the greater weight of the evidence. 17-19. Rejected as contrary to the evidence. 23. Rejected as contrary to the evidence. 28. Rejected as argumentative and not a proper factual finding. 29,30. Rejected as not being supported by competent, substantial evidence. Rejected as contrary to the evidence. Last sentence rejected as unsupported by competent, substantial evidence. 57. Rejected as contrary to the greater weight of the evidence. First sentence rejected as hearsay and conclusiory. Rejected as to "methods of construction," as not supported by competent, substantial evidence. CAREAGE 2. Factually accepted, but not included as irrelevant. 15. Accepted with reservation. It is unclear from the evidence as to whether adult day care is a part of the nursing home project. Partially rejected insofar as it is argumentative and a mere recitation of testimony. Last sentence rejected as unsupported by the evidence. HRS 11. Rejected. Since Surrey does not intend to use the plans submitted in the application; the net living space cannot be determined. Accepted only if the words "on paper" are added to the end of the sentence. First sentence accepted if "on paper" added. 24. Accepted but not included, as there was no way to make a similar comparison with the Surrey facility. 41. Rejected as legal argument as opposed to factual finding. 42,43. Rejected as irrelevant and immaterial to the issues in dispute. COPIES FURNISHED: Reynold Meyer F. Phillip Blank, P.A. 204-B South Monroe Street Tallahassee, Florida 32301 Edgar Lee Elzie, Jr. MacFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 Robert S. Cohen Haben & Culpepper, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard 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
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 The semi-annual census report by DHRS for District. III dated December 1, 1984, (Exhibit 23) indicated a need for 615 additional nursing home beds for the January 1985 review cycle. Although this report cautioned that changes in reporting and pending litigation or appeals could change the count of approved beds, nevertheless, most of the applicants for beds in the January 1985 batching cycle relied on this report as the basis for their applications. At the time this report was submitted, District III was subdivided into seven sub districts, and the need for each sub district was separately listed. Prior to the completion of the review of the applications in the January 1985 batching cycle, some 500 nursing home beds in District III were allocated to applicants in earlier batching cycles whose applications had been denied for lack of need, and who were in the process of appealing those denials. Many of these applications had been updated and those beds were issued by DHRS pursuant to its then-current policy of issuing beds on a first come-first served basis. As a result, only some beds were allocated to those applicants in the January 1985 batching cycle before the pool of available beds was depleted. Furthermore, rule changes became effective before the January 1985 batching cycle applications were reviewed which eliminated sub districts in District III. Largely because of the allocation of beds to applicants in earlier batching cycles, but also due to population based changes in District III, the bed need methodology, using data current at the time of the hearing and computing need to January 1988, shows there will be an excess of 342 nursing home beds in District III in 1988. (Exhibit 33) Eustis Limited Partnership The initial application of Eustis was for 8 additional beds which involved construction costs. The amended application which was considered in this hearing is for three (3) beds with costs allocated only for the equipment and furniture needed to add a bed to three existing rooms. As amended, Eustis' application is very similar to the application of Oakwood Nursing Center who was granted a CON for the addition of three (3) beds without construction costs. At the time Oakwood's CON was granted, DHRS was in the process of granting CONs for 103 beds. At the time Eustis submitted its application, all of the 615 beds initially available had been dispensed and there was no need for additional beds. At this hearing, Eustis produced no evidence to show a need for the three (3) beds for which Eustis applied. The evidence submitted by Eustis primarily showed that by simply adding a bed to three existing rooms, the cost per bed added was far less than would be the cost of constructing new facilities. Inverness Convalescent Center (ICC) ICC proposes to construct and operate a 120-bed nursing home in Citrus County at a cost of $3,400,000. (Exhibit 15) Citrus County has four licensed nursing homes with a total of 430 beds and an average occupancy rate of less than 90% during the last reported six-month period. (Exhibit 17)- During the last quarter of 1985, the occupancy rate in Citrus County nursing homes was the lowest of the planning areas in District III, and in the first quarter of 1986, it was second lowest. ICC contends the need formula doesn't apply to their application because they propose to serve special needs of the elderly, such as institutionalized patients, head trauma patients, etc. However, the only testimony presented indicating a need in Citrus County for such special services came from ICC owners and employees who live in New Jersey. ICC further contends that since there are less than 27 nursing home beds in Citrus County per 1,000 residents over age 65, that an additional nursing home is needed in Citrus County. However, the 27-beds per 1,000 population is but one factor considered in determining need for nursing home beds. In short, ICC presented no evidence to show that need exists in Citrus County for the proposed facility. Beverly Enterprises Beverly's application is for a CON to add 60 beds to an existing 120-bed nursing home in Live Oak, Suwannee County, Florida, at Suwannee Health Care Center. This facility was opened in 1983 and reached full capacity in seven to nine months. There are two nursing homes in Suwannee County; Suwannee Health Care Center, (HCC) and Advent Christian Village, Dowling Park (ACV). The latter is a church owned retirementc ~B community of 550 residents which provides a continuum of care on five levels. Although Advent Christian is not licensed as a life care community, it gives priority of admission to its 107 licensed nursing home beds to residents of the life care community. As a result, there are few vacancies available for persons living outside the retirement community. Advent - Christian has a waiting list of 32 on the active waiting list and ~20 on an inactive waiting list. People on waiting lists are told the wait is from one to five years for admission. Suwannee HCC has an occupancy rate approaching 100% and a waiting list of approximately 50. As a result, the vast majority of Suwannee County residents needing nursing home care are sent to a nursing home outside Suwannee County, usually in Gainesville, some 65 miles from Live Oak. The planning area in which Suwannee County is located, formerly sub district 1 in District III, has five nursing homes with an average occupancy rate for the last three months of 1985 and the first three months of 1986, ranging from 96.91% to 99.75%. During the first three months of 1986, the occupancy rate of three of these nursing homes was greater than 99%' one as 98.7% and the lowest, Advent Christian, was 96.91% (Exhibit 17). The patient mix at Suwannee ACC is over 80% Medicaid and approximately one-third black. The black population is about 30% of the total population in Suwannee County. Suwannee HCC has had several superior ratings (Exhibits 9, 10), takes patients in order on the waiting list regardless of whether they are Medicaid or private pay, and has a very good reputation in the area for service. DHRS personnel who approve Medicaid placement of patients, hospital employees who have the duty of placing patients in nursing homes, nursing home personnel, and private citizens with relatives in nursing homes, all confirmed the critical access problems of Suwannee County residents for local nursing home placement. Live Oak residents, for example, who need placement in a nursing home are usually sent outside Suwannee County, have their names added to waiting lists at nursing homes in Live Oak, and nursing homes closer to Live Oak than the nursing home in which they are placed, and move to the closer nursing home when a vacancy occurs. As a result, most of the vacancies at Suwannee HCC are filled by patients who were, first transferred outside Suwannee County for nursing home placement, and got on the waiting list at Suwannee HCC. There are very few patients from Suwannee County who are initially placed in a Suwannee County nursing home. Southern Medical Associates (SMA) SMA proposes to construct and operate a free standing, 60-bed, skilled nursing home in Palatka, Putnam County, Florida, at a cost of $1,692,400. (Exhibit 19) When SMA's application was submitted the computation of bed need in Suwannee County under the sub district rule in effect when the application was submitted, showed 30 beds needed in Putnam County. This calculation included 36 beds earlier approved but not yet licensed. At the time of this hearing those approved 36 beds had been revoked by reason of not beginning construction in a timely fashion. The medical consultant who reviewed these applications and prepared most of the State Agency Action reports, (Exhibit 30) initially recommended that SMA'S application be granted. The two existing nursing homes in Putnam County have an occupancy rate in excess of 98 percent for the latest reported 3 month period. (Exhibit 17) 85 to 90 percent of these patients are Medicaid patients. The one nursing home in Palatka, Putnam Memorial Nursing Home, is a 65-bed nursing home with an occupancy rate in excess of 99 percent for the past year, and on the date of hearing had 18 people on the waiting list for a bed. The turnover in this nursing home is about 50 percent each year, with most vacancies resulting from the death of a patient. Two HRS employees whose job it is to determine eligibility of residents of Putnam County for Medicaid reimbursement for nursing home care, testified that they very, seldom see a patient go to Putnam Memorial Nursing Home, that over half of the patients they qualify for eligibility are sent out of the county, and of those placed in the county, almost all are placed at Lakewood Nursing Home which is located 18 miles from Palatka. The only hospital in Putnam County discharges 5 to 6 patients per month who need additional nursing care after discharge. Most of these patients are sent to nursing homes in St. Augustine, Florida, a few are sent to Lakewood, but for very few is a bed available in Palatka.
Findings Of Fact Procedural history In July, 1985, each Petitioner submitted an application for a certificate of need to build a 120 bed community nursing home in Manatee County, Florida. Manatee County is subdistrict 2 of Department of Health and Rehabilitative Services District VI. The application of Meridian was assigned certificate of need number 4154, the application of Manor Care was assigned certificate of need number 4153, and the application of Forum Group was assigned certificate of need number 4159. The applications were comparatively reviewed by HRS. After initial review, all applicants were denied. The state agency action report does not discuss the availability, accessibility or adequacy of existing licensed community nursing homes in Manatee County. Each applicant requested a formal administrative hearing upon the proposed denials of their applications, and those cases were assigned the above cases numbers and consolidated for comparative review and formal administrative hearing. Prior to the hearing, each applicant filed an updated application. M Ex. 1; MC Ex. 1; FG Ex. 2. HRS objected to admission of evidence concerning updated applications, and particularly objected to evidence from Manor Care concerning services to Alzheimer's disease patients, but did not ask that the applications be remanded for further consideration by HRS. The Petitioners' letters of intent, applications, and requests for formal administrative hearing were all timely filed. T. 16-17. The Petitioners agreed that if need exists for 180 beds or more, each applicant would agree to receive certificates of need for one-third of such need. Need The applications of the Petitioners were received in the July, 1985, batching cycle, and the correct planning horizon for determining bed need pursuant to rule 10-5.0011(1)(k), the community nursing home bed rule, is July, 1988. T. 856. Craig Thornton testified as to need on behalf of the Petitioners. Mr. Thornton's calculation of need pursuant to the numeric need rule resulted in a net need of 187 community nursing home beds by July, 1988, in subdistrict 2 (Manatee County) of District VI. T. 814. Mr. Thornton's calculation of need used the following statistics (using the same abbreviations as used in the rule): Licensed beds in the District (LB) of 5,557 as of June 1, 1986, rather than 1985. T. 837. Licensed beds in the subdistrict 2 (LBD) of 1,005 as of June 1, 1986. T. 840. Approved beds in the District (AB) of 508 was as of August 1, 1986. T. 838. Approved beds in subdistrict 2 (AB) as June 1, 1986, was zero. T. 840-41. POPE of 243,978 was July I, 1986 estimates of July 1, 1986 population of persons age 65 and older in District VI. T. 838, 840. The poverty rate in District VI for persons age 65 and older (PBD) is higher than the poverty rate for the same age group for the state (PBS). T. 811. Using these statistics, Mr. Thornton made the following calculations: He calculated the second portion of the test in subparagraph e of the rule to determine whether the poverty adjustment should apply. That calculation, (LB + AB)/POPE, results in 0.02486, rounded. Since the last calculation was less than 27/1000, and since the poverty rate in District VI is higher than the rate statewide, Mr. Thornton next calculated PA, which is the poverty-adjusted number of beds in the District. This calculation pursuant to the rule is (27 X POPE)/1000. The result is 6,587 beds using Mr. Thornton's statistics. Following the next step in the rule, Mr. Thornton calculated SPA, which is the final subdistrict community nursing home allocation where a poverty adjustment is made. SPA pursuant to the rule is (LSD/LB) X PA. Using the above figures already obtained from Mr. Thornton's statistics, SPA is 1,192. T. 813. Finally, Mr. Thornton calculated net bed need by subtracting LSD and 90% of AB in the subdistrict (which was 1,005, using his statistics) from SPA. The result is a net bed need of 187 beds in subdistrict 2. The calculation of net bed need performed by Mr. Thornton is not correct as a matter of law, which will be discussed in the conclusions of law. There were 5,270 licensed community nursing home beds (LB) in District VI as of June 1, 1985. HRS Ex. 3 and 4; T. 863, 866. There were 765 licensed community nursing home beds (LBD) in subdistrict 2 of District VI (Manatee County) as of June 1, 1985. HRS Ex. 3 and 4; T. 866. The July 1, 1985, estimate of population of persons in District VI who were 65 to 74 years of age on July 1, 1985, (POPC) was 126,792, and the July 1, 1985, estimate of population of persons in District VI who were 75 years of age and above on July 1, 1985 (POPD) was 84,723. HRS Ex. 3 and 6; T. 872-73. The total of these two populations is 211,515 (POPE). HRS Ex. 3. The July 1, 1985, estimate of population of persons in District VI who were 65 to 74 years of age on July 1, 1988, (POPA) was 135,921, and the July 1, 1985, estimate of population of persons in District VI who were 75 years of age and above on July 1, 1988 (POPB) was 94,434. HRS Ex. 3 and 6; T. 873. The occupancy rate (OR) for subdistrict 2 (Manatee County) for the period from October, 1984, to March, 1985, was 94.6%. T. 866; HRS Ex. 3 and 4. HRS has a policy of counting beds as approved if approved before the supervisor signs the State Agency Action Report (SAAR) initially determining whether to grant or deny an application. This policy is not applicable to this case since no such beds were approved in the period between June 1, 1985, and the date of signature upon the state agency action report. Additionally, HRS has a policy of counting as approved all beds licensed after the cutoff date for counting licensed beds (here, June 1, 1985) but before the date the supervisor signs the SAAR. HRS Ex. 3, explanation on P. 2; T. 869. Pursuant to the above policy, there were 755 approved beds (AB) in District VI and 240 approved beds (AB) in subdistrict 2. Id. It should be noted that these numbers would be the same if these beds had been counted as approved if approved on June 1, 1985. Thus, application of the policy in this case is unnecessary. Based upon the statistics set forth above, the preliminary subdistrict allocation (5A) of community nursing home beds for July, 1988, is 889. HRS Ex. 3. Based upon the statistics set forth above, the poverty adjustment contained in subparagraph e of the rule does not apply, even though the District VI poverty rate is higher than the statewide rate, because licensed beds (LB) plus approved beds (AS) in District VI divided by the July 1, 1985 estimate of population in the District on July 1, 1985, of age 65 and above (POPE) is more than 27/1000. HRS Ex. 3, step 5. Based upon the statistics set forth above, there is no need for any portion of any of the projections proposed by the Petitioners. The final net bed need for subdistrict 2, pursuant to subparagraph i of the rule, is a surplus of 92 beds. HRS Ex. 3, step 6; T. 862. Suncoast Nursing Center is the former name of the Center at Manatee Springs. T. 879. Suncoast Nursing Center had 120 approved community nursing home beds on March 24, 1984, and these 120 beds became licensed on July 17, 1985. HRS Ex. 5; T. 868. It is located in Bradenton (Manatee County), Florida, J. Ex. 1, pp. and 6, and opened in September, 1985. Id. at p. 6. The Center at Manatee Springs currently provides services only to patients suffering from traumatic brain injury. J. Ex. 1, P. 7. The current operational goal of the Center at Manatee Springs is to seek out patients suffering from traumatic brain injury and that diagnosis is currently one of the Center's admission criteria. Id. at p. 9, 10, 16; J. Ex. 2, p. 10. The Center has expanded its marketing efforts to the entire nation. Id. at p. 26. It recently ordered new brochures to advertise itself for the purposes discussed above. Id. at p. 27. Traumatic brain injury is caused by trauma to the head from the outside, and does not include injuries originating internally, such as due to stroke. J. Ex. 2, pp. 5-6. On December 1, 1986, the Center had 36 traumatic brain injured patients in its 120 beds, and the average age of these patients was 26. Id. None of the patients were over age 65. Id. at p. 7. The Center at Manatee Springs does not currently consider itself to be in competition with community nursing homes in the area. J. Ex. 1, p. 16. The Center has purchased certain kinds of equipment specifically for treatment of traumatic brain injured patients (such as a brain atlas, ventilators for comatose patients, and special audiology equipment for speech pathology and memory loss). J. Ex. 1, p. 10-11. A lot of new equipment is in the process of being ordered. Id. This equipment is usually not found in a community nursing home. Purchase of certain new equipment is in the planning stage, Id. at p. 9, but has been delayed because the census has not yet been that strong. Id. at p. 12. The facility has not been remodeled in any way. Id. at p. 23. The Center is specially staffed to care for patients having traumatic brain injury. J. Ex. 1, p. 13. The Center has a high percentage of nurses on its staff, and has therapists of all types, speech pathologists, and neuropsychologists. Id. at p. 14. The Center informally contacted HRS and obtained approval from HRS to try to increase its occupancy by admitting traumatic brain injured patients. T. 901; J. Ex. 1, p. 22. HRS apparently views the practice of the Center of not taking conventional community nursing home patients as a "problem," and HRS's expert witness was of the opinion that absent permission from HRS, the Center would have to provide services to conventional community nursing home patients. T. 900-01. HRS does not have a rule governing the procedure to be followed in this situation, however, and has proceeded on informal policy. Id. If the Center were to continue indefinitely to refuse to provide services to conventional community nursing home patients, HRS would view that as a significant problem. T. 903. For the long term, the Center has not decided what the patient mix should be, and is still studying the question whether it can continue to provide services only to traumatic brain injured patients. Id. at p. 15. The Center is not limited by its license to treat only traumatic brain injured patients, and could admit community nursing home patients. T. 900. If the census of the Center does not improve, it is possible that it will then broaden its marketing efforts and admit more usual nursing home patients. Id. at p. 23. That has not yet happened, however. The current marketing intent of the Center is to admit only traumatic brain injured patients. The Center at Manatee Springs is currently not operated as a community nursing home, and is currently not accessible to persons needing conventional community nursing home services. The statewide licensed nursing home bed to population ratio was 23.18 beds per 1,000 persons as of the summer of 1986. The ratio in District VI is 24.44, and is higher than the statewide ratio. But the ratio in Manatee County is 20.47, lower than both the District and statewide ratios. T. 54. If 120 additional community nursing home beds were added to Manatee County, its ratio would be 22.92, and thus would still be lower than both the District and statewide ratios. Id. In the planning horizon (the summer of 1988), accounting for both licensed beds and all beds currently approved, the statewide ratio would be 25.46, the District ratio would be 24.86, and the Manatee County ratio would be 19.26, which would increase to 21.56 if 120 additional beds were added to Manatee County. M. Ex. 7; T. 55. HRS has previously granted a certificate of need for a nursing home where the existing numeric need rule showed little or no need and one licensed nursing home in the county was not generally accessible to conventional nursing home patients due to restrictive admission policies and low occupancy rates. T. 1018, 1032-33. The applicability of this as precedent in the case at bar is clouded by the fact that in that case the local health plan explicitly mentioned the problem, and recommended approval of new beds in that county as the first priority. T. 1030. That circumstance does not exist in this case. Moreover, it is unknown in that case pursuant to the then existing rule whether disregarding the nonaccessible beds resulted in a net numeric need sufficient to justify approval of the certificate of need. See T. 1020. The vast majority of persons using community nursing home beds in Florida are age 65 or more. Persons younger than 65 years of age using nursing home services in Florida recently constituted 7.36 percent of the total, and 8.25 percent of the total in District VI. T. 992. Since the 120 licensed community nursing home beds at the Center of Manatee Springs are not available to conventional community nursing home patients in Manatee County, or in District VI, and there is no evidence in this record to conclude that they will be available to such persons in the near future, those 120 beds should be treated as not available for purposes of determining the net bed need in the horizon year. It should be noted that the 120 beds at the Center of Manatee Springs appears in the numeric need rule only as approved beds, not as licensed beds. Thus, deletion of these beds within the context of the numeric rule would not involve deletion from either LB or LBD, and therefore would not give rise to an opportunity to witness the rather bizarre inverse mathematical relationship in the rule between the number of existing beds and "need." If the 120 approved beds at the Center at Manatee Springs are disregarded in the numeric rule, the following consequences occur: The 120 approved beds would be subtracted from the 755 approved beds in the District in step 5, concerning the poverty adjustment, but the result would still be more than 27/1000. The result would be 5,905/211,515 = 0.0279. Thus, the poverty adjustment still would not apply. Ninety percent of the 120 approved beds in the subdistrict would be deleted from the amount to be subtracted in step 6, resulting a net bed need of 16 beds, instead of a net bed surplus of 92 beds. HRS Ex. 3; T. 880-81. Sixteen beds would not be sufficient need to grant any portion of any Petitioner's application. T. 881. Petitioners argue that the 120 beds at the Center should be disregarded in another way external to the numeric need formula. Mr. Nelson, testifying as an expert for the Petitioners, was of the opinion that the problem of the 120 beds at the Center at Manatee Springs was solely an accessibility issue, and not an issue giving rise to an alteration within the numeric need calculation. T. 81-2. He reasoned that since the Center was presumptively needed at one time (because it was approved for a certificate of need for a community nursing home) but is now in fact not accessible to persons needing it, the 120 beds it represents should be replaced. Id. Mr. Nelson's method has been rejected in the conclusions of law. There is no need for any portion of any of the projects proposed by any Petitioner. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need.
Recommendation For these reasons, it is recommended that the Department of Health and Rehabilitative Services enter its final order denying the applications of Meridian, Inc., Meridian Nursing Centers, Inc., and Manatee Meridian Limited Partnership, Manor Care of Manatee County, and Forum Group, Inc., sponsor of Retirement Living of Manatee County, for certificate of need numbers 4154, 4153, and 4159, respectively. DONE and ORDERED this 12th day of May, 1987, in Tallahassee, Florida. WILLIAM C. SHERRILL, 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 12th day of May, 1987. APPENDIX The following are rulings upon proposed findings of fact which have been rejected in this Recommended Order. The numbers used correspond to the numbers of the findings of fact proposed. Findings of fact proposed by Meridian Inc.: Subordinate to primary findings of fact, and not needed. The second sentence is not relevant. 4. That last sentence is not relevant. The second sentence is not supported by the record. The witness was testifying to his current census, not historical experience. Irrelevant. Irrelevant. The words "intensely" and "full-time" are not supported by the record cited. The words "sole purpose" are not supported by the record cite. The witness only testified that its was necessary for that purpose. Subordinate. The word "exclusively" is not supported by the record cited. Cumulative. Cumulative. Cumulative and subordinate. 20. An issue of law, not fact. The words "demographically similar" are not supported by the record cited. The first sentence and last sentence are rejected because, due to lack of numerical need and lack of other legally relevant evidence of a "not normal" condition, reference to only the bed ratios cited is not a sufficient basis for concluding that it would not be unreasonable to add 120 more beds to Manatee County. The numeric need rule already accounts for population growth, so this finding of fact is legally irrelevant. Subordinate. The second sentence is irrelevant. The third and fourth sentences are issues of law, and have been rejected in the conclusions of law. The example provided by M. Ex. 18 is not relevant because the 120 beds at the Center at Manatee Springs appear in the numeric need formula as approved beds, not licensed beds. While this proposed finding of fact is true, it is legally irrelevant since the applicant has the burden of proof of showing a "not normal" condition in Manatee County, and has the burden of proof of showing need for the proposed project. The third sentence is not relevant because it stops short of the relevant issue: whether the deletion of the Moose Haven Health Center beds resulted in sufficient net bed need to grant the beds to Beverly. It is very probable that the "miniscule amount of numerical need" plus the Moose Haven beds resulted in sufficient net beds to grant Beverly's application. 35-77. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need. Findings of fact proposed by Manor Care: Irrelevant. The fact that the Department published a rule change to calculate the poverty adjustment on populations that are "projected three years into the future," instead of as now in the rule, "current," and stated that the proposed amendment "clarifies" the existing provisions of the rule, and then withdrew the proposed amendment, is too ambiguous to rely upon as argued by the Manor Care. One cannot tell from this whether the Department was carelessly using the word "clarify," as agencies often do in a euphemistic way, or actually thought that the word "current" was unclear. Moreover, the fact that the proposed amendment was withdrawn raises another set of unknowns: whether the Department withdrew the amendment because it had second thoughts and decided the word "current" was clear, or because it affirmatively rejected the adoption of a poverty adjustment as the Petitioners would have it on this record. Rejected as explained in the last paragraph. The Department does not rely upon its actions with respect to the proposed amendment to the rule as a basis for its decision in this case, and thus does not have to explicate it on this record. Rejected as more fully explained in the conclusions of law. 11-42. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need. Findings of fact proposed by Forum Group: 1-21. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need. 22-23. The lack of a need calculation in the state agency action report has no relevance to the correctness of the need calculation now offered by HRS. 24. The word "authoritative" must be rejected since the method was not legally correct. 27. Irrelevant since the error was corrected at the formal hearing, and the result of lack of need would not change, in any event. 30. Irrelevant. The prior policy contravened the rule. 34. Irrelevant. Growth in population is already contained in the numeric need rule as a factor. 38-66. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need. Findings of fact proposed by HRS: 4-5. Issues of law, not fact. 7. The first sentence is an issue of law, not fact. The first sentence is an issue of law, not fact. An issue of law, not fact. The second sentence is an issue of law, not fact. No findings of fact have been made with respect to the comparative aspects of the three projects since there is no need. Manor Care has presented evidence concerning its plan to treat Alzheimer's disease patients only in support of the comparative aspects of its project in relation to the projects of the other two applicants. It has not presented such evidence to show need, i.e., evidence that patients having Alzheimer's disease (either specifically or generally) need the services that Manor Care proposes. See proposed findings of fact 14-19 by Manor Care. Thus, it is unnecessary to reach the factual and legal issue raised by HRS as to whether Manor Care may present evidence concerning services to Alzheimer's disease patients. COPIES FURNISHED: Robert D. Newell, Jr. Robert D. Newell, Jr., P.A. 102 South Monroe Street Tallahassee, Florida 32301 Donna H. Stinson, Esquire Moyle, Flanigan, Katz Fitzgerald and Sheehan, P.A. The Perkins House, Suite 100 118 North Gadsden St. Tallahassee, Florida 32301 R. Terry Rigsby, Esquire Moffitt, Hart, Rigsby & Herron, P.A. 215 S. Monroe St. Suite 800 Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact 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.
