Findings Of Fact On or about July 15, 1986, Petitioner filed an application with Respondent to construct a 60 bed community nursing home with a 45 bed adult congregate living facility (ACLF) in Highlands County, Florida. This application was identified as CON 4700. After preliminary review, Respondent denied this application on or about December 23, 1986, and Petitioner timely filed its petition for formal administrative hearing. Highlands County is in Respondent's Service District VI, Subdistrict IV. The parties stipulated that there was a net bed need in the July, 1989 planning horizon for Highlands County of an additional 28 community nursing home beds, based upon the bed need calculation set forth in Rule 10-5.011(1)(k), Florida Administrative Code. It was further stipulated by the parties that Petitioner's original application met all statutory and rule criteria for the issuance of a CON, but for the issue of need. Since the parties did stipulate to a need for 28 community nursing home beds, Petitioner sought, at hearing, to offer evidence in support of only an "identifiable portion" of its original application. Thus, Petitioner offered no evidence in support of the application it filed with Respondent, and which was preliminarily denied on December 23, 1986. Rather, Petitioner sought consideration and approval of either 28 nursing home beds with 32 ACLF beds, or 30 nursing home beds with 30 ACLF beds. Since the stipulation of the parties could not cover the financial feasibility of either alternative because they were presented for the first time at hearing, Petitioner offered evidence to establish the financial feasibility of these alternatives. Based upon the testimony of Herbert E. Straughn, it is found that Respondent does not normally approve nursing home CON applications for less than 60 nursing home beds. However, Respondent has approved a CON application for 30 nursing home beds in association with 30 ACLF beds or some other similar service when the need for 30 nursing home beds was shown to exist. Respondent has also approved a CON for less than 30 nursing home beds in connection with an existing 60 bed facility when the stipulated need did not reach 30. In this case, Petitioner's original application was for 60 community nursing home and 45 ACLF beds, and it was at hearing that Petitioner sought to down-size its application to meet the stipulated need of 28 nursing home beds. There are no accessibility problems with regard to special programs or services, or any other problems of accessibility, in District VI, Subdistrict IV. Petitioner's request for partial consideration and approval of its application, which was presented at hearing, would not introduce any new services or construction not originally contemplated in its application, although the size of the project and number of beds sought would be reduced. In its original application, Petitioner proposed a nursing home with two 30-bed units, and now seeks approval for only one 28 or 30-bed unit. From a health planning standpoint, nursing home bed units usually occur in multiples of 60 due to staffing and equipment considerations. No evidence was offered to show why the Respondent should deviate from its usual practice in this case, other than the fact that a need for only 28 beds exists. At hearing, Petitioner introduced revised pro formas for 28 and 30 nursing home beds, associated with 32 and 30 ACLF beds, respectively. These revised pro formas were based on the same ratios of patients by payor class as in the original pro forma. The equity to loan ratios in the revised pro formas to finance the project remained the same as in the original application. The revised pro formas combine revenue and expenses for nursing home and ACLF beds. However, if revenue and expenses for nursing home beds is segregated from ACLF beds, it is found that a 30 bed nursing home facility would not be financially feasible in either 1989 or 1990, and a 28 bed nursing home facility would be even less financially feasible than a 30 bed facility. When revenues and expenses for the ACLF component of the project are considered along with nursing home bed income and expenses, the project shows only a marginal profit in the second year of operation with the 30 nursing home bed-30 ACLF bed alternative. It is barely break-even in the second year under the 28 nursing home bed-32 ACLF bed alternative. Thus, under either alternative, the project is not financially feasible in 1989, and the nursing home component of this project, standing alone under either alternative presented at hearing, is not financially feasible in either 1989 or 1990. The 30 nursing home bed-30 ACLF bed alternative is more financially feasible than the 28-32 alternative since the 28-32 alternative is barely break even in the second year of operation. Specifically, under the 28-32 alternative, pretax income of less than $9000 is projected in the second year of operation with total revenues of approximately $1.321 million and total expenses of approximately $1.312 million.
Recommendation Based upon the foregoing, it is recommended that Respondent enter a Final Order denying Petitioner's application for CON 4700. DONE AND ENTERED this 7th day of January, 1988, in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0667 Rulings on Petitioner's Proposed Findings of Fact: Adopted in Findings of Fact 1, 2. Adopted in Finding of Fact 2. Rejected as unnecessary. Adopted in Finding of Fact 4. Adopted in Findings of Fact 5, 6. Adopted in Finding of Fact 8. Adopted in Findings of Fact 5, 6, 9. 8-10 Adopted in Finding of Fact 10. Rejected as simply a statement of position and not a proposed finding of fact. Adopted in Finding of Fact 6. 13-16 Rejected as conclusions of law and not proposed findings of fact; this legal argument has been considered in the preparation of conclusions of law contained in this Recommended Order. Adopted in part in Findings of Fact 8, 9, 10. However the last sentence in the proposed finding of fact is rejected as unclear. Rejected as unnecessary. Rejected as not based on competent substantial evidence, although from a health planning viewpoint a 30 nursing home bed unit is more functional and cost effective than a 28; it is also more financially feasible in this case. Adopted in Finding of Fact 11. Adopted and Rejected in part in Findings of Fact 9, 11, and otherwise rejected as unnecessary and cumulative. Rejected as not based on competent substantial evidence, although adopted in part in Findings of Fact 9, 11. Rulings on Respondent's Proposed Findings of Fact: 1 Adopted in Findings of Fact 1, 2. 2 Adopted in Finding of Fact 2. 3 Adopted in Finding of Fact 3. 4 Adopted in Finding of Fact 4. 5 Adopted in Finding of Fact 6. 6 Adopted in Findings of Fact 5, 6. 7 Adopted in Finding of Fact 11. 8-9 Adopted in Finding of Fact 7. COPIES FURNISHED: Jay Adams, Esquire 215 East Virginia Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
The Issue The issues under consideration concern the request by Petitioner, Brookwood-Jackson County Convalescent Center (Brookwood) to be granted a certificate of need for dual certification of skilled and immediate care nursing home beds associated with the second review cycle in 1987. See Section 381.494, Florida Statutes (1985) and Rule 10-5.011(1)(k) , Florida Administrative Code.
Findings Of Fact On October 5, 1987 Brookwood filed an application with HRS seeking to expand its facility in Graceville, Jackson County, Florida, one with 120 licensed beds and 30 beds approved effective June 12, 1986, to one with 30 additional beds for a total of 180 beds. Beds being sought in this instance were upon dual certification as skilled and intermediate nursing home beds. The nursing home is located in Subdistrict A to District II which is constituted of Gadsden, Holmes, Jackson and Washington counties. This applicant is associated with Brookwood, Investments, a Georgia corporation qualified to do business and registered in the State of Florida and other states in the southeastern United States. That corporation has as its principal function the development and operation of nursing homes and other forms of residential placement of the elderly. The actual ownership of the applicant nursing home is through a general partnership. Kenneth Gummels is one of two partners who own the facility. The Brookwood group has a number of nursing home facilities which it operates in the southeastern United States. Florida facilities that it operates are found in DeFuniak Springs, Walton County, Florida; Panama City, Bay County, Florida; Chipley, Washington County, Florida; Homestead, Dade County, Florida; Hialeah Gardens, Dade County, Florida, as well as the present applicant's facility. The applicant as to the beds which it now operates, serves Medicare, Medicaid, Veteran Administration, private pay and other third party pay patients. The number of Medicaid patients in the 120 licensed beds is well in excess of 90 percent. The ratio of Medicaid patients with the advent of the 30 approved beds was diminished. As to those beds, 75 percent were attributed to Medicaid. If the 30 beds now sought were approved, the projection is for 87 percent private pay and 13 percent Medicaid for those new beds. The nursing home administration feels that the new beds must be vied for under those ratios in order for it to continue to be able to serve a high number of Medicaid patients, an observation which has not been refuted by the Respondent. Nonetheless, if these beds are approved the percentage of Medicaid patients would be reduced to the neighborhood of 80 percent within the facility which compares to the approximately 81 percent experience of Medicaid beds within the district at present and the approximately 88 percent of Medicaid beds within the subdistrict at present. The cost of the addition of the 30 beds in question would be $495,000. Financial feasibility of this project has been stipulated to by the parties assuming that need is found for the addition of those beds. The basic area within the Florida panhandle wherein the applicant facility may be found, together with other facilities in the Florida panhandle is depicted in a map found at page 101 of Petitioner's Exhibit 1 admitted into evidence. This map also shows that a second licensed nursing home facility is located in Jackson County in Marianna, Florida, known as Marianna Convalescent Center. The applicant facility is directly below the Alabama-Florida border, immediately south of Dothan, Alabama, a metropolitan community. The significance of the relative location of the applicant's facility to Dothan, Alabama concerns the fact that since 1984 roughly 50 percent of its nursing home patients have been from out-of-state, the majority of those out-of-state patients coming from Alabama. Alabama is a state which has had a moratorium on the approval of new nursing home beds for eight years. The proximity of one of that state's relatively high population areas, Dothan, Alabama, has caused its patients to seek nursing home care in other places such as the subject facility. The applicant has encouraged that arrangement by its business practices. Among the services provided by the nursing home facility are physical therapy, physical examination and treatment, dietary services, laundry, medical records, recreational activity programs and, by the use of third party consultants, occupational and social therapy and barber and beauty services, as well as sub-acute care. The facility is adjacent to the Campbellton-Graceville Hospital in Graceville, Florida. The nursing home was developed sometime in 1978 or 1979 with an original complement of 90 beds expanding to 120 beds around 1983 or 1984. The Chamber of Commerce of Marianna, Florida had held the certificate of need upon the expectation that grant funds might be available to conclude the project. When that did not materialize, the County Commissioners of Jackson County, Florida sought the assistance of Brookwood Investments and that organization took over the development of the 90 beds. The original certificate holder voluntarily terminated and the Brookwood partnership then took over after receiving a certificate of need for Brookwood-Jackson County Convalescent Center. The nursing home in Marianna, Florida which is located about 16 miles from Graceville has 180 beds having undergone a 60 bed expansion several years ago. Concerning the Brookwood organization's nursing home beds in Florida, the Walton County Convalescent Center was a 100 bed facility that expanded to 120 beds at a later date and has received permission to expand by another 32 beds approved in the same review cycle associated with the present applicant. Gulf Coast Convalescent Center in Panama City, is a 120 bed facility of Brookwood. Brookwood also has the Washington County Convalescent Center in Washington County, in particular in Chipley, Florida which has 180 beds. That facility was expanded by 60 beds as licensed in October, 1987 and those additional beds have been occupied by patients. Brookwood has a 120 bed facility in Homestead and a 180 bed facility in Hialeah Gardens. With the exception of its two South Florida facilities in Homestead and Hialeah Gardens, recent acquisitions under joint ownership, the Brookwood group has earned a superior performance rating in its Florida facilities. No attempt has been made by this applicant to utilize the 30 beds which were approved, effective June 12, 1986. Its management prefers to await the outcome in this dispute before determining its next action concerning the 30 approved beds. The applicant asserted that the 30 beds that had been approved would be quickly occupied based upon experience in nursing home facilities within Subdistrict A to District II following the advent of nursing home bed approval. That surmise is much less valuable than the real life experience and does not lend effective support for the grant of the certificate of need in this instance. The waiting list for the 120 licensed beds in the facility has been reduced to five names. This was done in recognition of the fact that there is very limited patient turnover within the facility. Therefore, to maintain a significant number of people on the waiting list would tend to frustrate the sponsors for those patients and social workers who assist in placement if too many names were carried on the waiting list. At the point in time when the hearing was conducted, the facility was not in a position to accept any patients into its 120 licensed facility. This condition of virtually 100 percent occupancy has been present since about 1984 or 1985. The applicant has transfer agreements with Campbellton-Graceville Hospital and with two hospitals in Dothan, Alabama, they are Flower's Hospital and Southeast Alabama Medical Center. The applicant also has a transfer agreement with the Marianna Community Hospital in Marianna, Florida. The referral arrangements with the Alabama hospitals were made by the applicant in recognition of the proximity of those hospitals to the nursing home facility and the belief in the need to conduct its business, which is the provision of nursing home care, without regard for the patient origin. Early on in its history with the nursing home, Brookwood promised and attempted in some fashion to primarily serve the needs of Jackson County, Florida residents, but the explanation of its more recent activities in this regard does not portray any meaningful distinction between service to the Jackson County residents and to those from other places, especially Alabama. This reflects the concern expressed by Kenneth Gummels, owner and principal with the applicant nursing home, who believes that under federal law the nursing home may not discriminate between citizens in Florida and Alabama when considering placement in the nursing home. In this connection, during 1987 the experience within the applicant nursing home was to the effect that for every patient admitted from Florida five Florida patients were turned away. By contrast, to deal with the idea of priority of placing patients some effort was made by Gummels to explain how priority is still given to Jackson County residents in the placement for nursing home care. Again, in the end analysis, there does not seem to be any meaningful difference in approach and this is evidenced by the fact that the level of out-of-state patients in the facility has remained relatively constant after 1984. If there was some meaningful differentiation in the placement of Florida patients and those from out-of-state, one would expect to see a change in the number of patients from out-of-state reflecting a downward trend. As described, historically the experience which Brookwood has had with the facility occupancy rates is one of high utilization except for brief periods of time when additional beds were added at the facility or in the Marianna Nursing Home. At time of the application the primary service area for the applicant was Jackson County with a secondary service area basically described as a 25 mile radius outside of Graceville extending into Alabama and portions of Washington and Holmes Counties. As stated, at present the occupancy rate is as high as it has ever been, essentially 100 percent, with that percentage only decreasing on those occasions where beds come empty based upon transfers between nursing homes or between the nursing home and a hospital or related to the death of a resident. Those vacancies are filled through the waiting list described or through recommendations of physicians who have a referral association with the facility. The patients who are in the facility at the place of consideration of this application were 50 percent from Florida and 50 percent from out-of-state, of which 56 of the 60 out-of-state patients were formerly from Alabama, with one patient being from Ohio and three others from Georgia. More specifically, related to the history of out-of-state patients coming to reside in the nursing home, in 1984 basically 25 percent patients were from Alabama, moving from there into 1985 at 47 percent of the patient population from Alabama, in 1986 50 percent from Alabama, in 1987 48 percent from Alabama and in 1988 the point of consideration of the case at hearing the figure was 47 percent of Alabama patients, of the 50 percent patients described in the preceding paragraph. Of the patients who are in the facility from Florida, the majority of those are believed to be from Jackson County. Those patients who come to Florida from Alabama, by history of placement, seem to be put in the applicant's facility in Graceville as a first choice because it is closest to the Dothan, Alabama area. The next preference appears to be Chipley and the Brookwood nursing home facility in Chipley, and thence to Bonifay and then to other places in the Florida panhandle, in particular Panama City. In the Brookwood-Washington County facility at Chipley, Florida 35 percent of the patients are from Alabama which tends to correspond to the observation that the Alabama placements as they come into Florida are highest in Graceville and decrease in other places. This is further borne out by the experience in the Brookwood-Walton County facility at DeFuniak Springs, Florida which has an Alabama patient percentage of approximately 10 to 12 percent. When the nursing home facilities in Chipley and Bonifay received 60 additional beds each in October, 1987, they began to experience rapid occupancy in those beds as depicted in the Petitioner's Exhibit 1 at pages 228 through 230. The other facility in Jackson County, namely Jackson County Convalescent Center, within the last six months has shown an occupancy rate in excess of 98 percent, thereby being unavailable to attend the needs of additional Jackson County patients who need placement and other patients within the subdistrict. This same basic circumstance has existed in other facilities within Subdistrict A to District II. When the applicant is unable to place patients in its facility it then attempts placement in Chipley, Bonifay, DeFuniak Springs, and Panama City, Florida, and from there to other places as nearby as possible. The proximity of the patient to family members and friends is important for therapeutic reasons in that the more remote the patient placement from family and friends, the more difficult it is for the family and friends to provide support which is a vital part of the therapy. Consequently, this is a significant issue. Notwithstanding problems in achieving a more desirable placement for some patients who must find space in outlying locales, there was no showing of the inability to place a patient who needed nursing home care. Most of the Alabama referrals are Medicaid referrals. Those patient referrals are treated like any other resident within the nursing home related to that payment class for services. Effectively, they are treated in the same way as patients who have come from locations within Florida to reside in the nursing home. Notwithstanding the management choice to delay its use of the 30 approved beds dating from June 12, 1986, which were challenged and which challenge was resolved in the fall, 1987, those beds may not be ignored in terms of their significance. They must be seen as available for patient placement. The fact that the experience in this service area has been such that beds fill up rapidly following construction does not change this reality. This circumstance becomes more significant when realizing that use of the needs formula for the project at issue reveals a surplus of 19 beds in Subdistrict A to District II for the planning horizon associated with July, 1990. See Rule 10-5.011(1)(k), Florida Administrative Code. The 19 bed surplus takes into account the 30 approved beds just described. Having recognized the inability to demonstrate need by resort to the formula which is found within the rule's provision referenced in the previous paragraph, the applicant sought to demonstrate its entitlement to a certificate through reference to what it calls "special circumstances." Those circumstances are variously described as: Patient wishing to be located in Jackson County. Lack of accessibility to currently approved CON beds. High rate of poverty, Medicaid utilization and occupancy. Jackson County Convalescent Center utilization by out-of- state patients. The applicant in asking for special relief relies upon the recommendation of the Big Bend Health Council, District II in its health plan and the Statewide Health Council remarks, whose suggestions would modify the basis for calculation of need found in the HRS rule with more emphasis being placed on the adjustment for poverty. Those suggestions for health planning are not controlling. The HRS rule takes precedence. Consequently, those suggestions not being available to substitute for the HRS rule, Petitioner is left to demonstrate the "special circumstances" or "exceptional circumstances" in the context of the HRS rule and Section 381.494(6), Florida Statutes (1985). Compliance per se with local and statewide planning ideas is required in the remaining instances where those precepts do not conflict with the HRS rule and statute concerning the need calculations by formula. Turning to the claim for an exception to the rule on need, the first argument is associated with the patient wishing to be located in Jackson County. This would be preferable but is not mandated. On the topic of this second reason for exceptions to the need formula, the matter is not so much a lack of accessibility to currently approved CON beds as it is an argument which is to the effect that there are no beds available be they licensed or approved. This theory is not convincing for reasons to be discussed, infra. Next, there is an extremely high rate of poverty in District II. It has the highest rate of poverty in the state. Moreover Subdistrict A to District II has an even greater degree of poverty and this equates to high Medicaid use and contributes to high occupancy. This coincides with the observation by the Big Bend Health Council when it takes issue with the HRS methodology rule concerning recognition of the significance of poverty within the HRS rule and the belief by the local health council that given the high poverty rates in District II some adjustments should be made to the need formula in the HRS rule. Under its theory, 161 additional beds would be needed at the planning horizon for July 1990 in Subdistrict A. Concerning the attempt by the applicant to make this rationalization its own, the record does not reflect reason to defer to the Big Bend Health Council theory as an exception to the normal poverty adjustment set forth in the HRS rule. When the applicant describes the effects of the out-of-state patients, in particularly those from Alabama in what some have described as in-migration, it argues that Rule 10-5.011(1)(k), Florida Administrative Code makes no allowance for those influences. The applicant chooses to describe these beds, the beds used by out-of-state residents, as unavailable or Inaccessible. This concept of inaccessibility is one which departs from the definition of inaccessibility set forth at Rule 10-5.011(1)(k)2.j., Florida Administrative Code. The specific exception to the requirement for compliance with the numeric need methodology in demonstration of a net need is set forth in that reference, and the proof presented did not show entitlement to the benefits of that exception. That leaves the applicant arguing in favor of recognition of its entitlement to a certificate of need premised upon a theory not specifically announced in that reference. This is the in-migration idea. It ties in the basic idea of poverty but does not depend on rigid adherence to the Big Bend Health Council idea of a substitute element in the HRS needs formula related to poverty. It also promotes the significance of problems which a number of physicians, who testified by deposition in this case, observed when attempting to place patients in the subject nursing home and other nursing homes in the surrounding area. They found high occupancy rates in the present facility and others within Subdistrict A to District II. These problems with placement as described by the physicians can have short term adverse effects on the patient and the family members, but they are not sufficient reason to grant the certification. In considering the formula for deriving need as promulgated by HRS, the proof does not seem to suggest that the nursing home residents themselves who came from out-of-state are excluded from the population census for Florida. On the other hand, unlike the situation in Florida in which the population at large is considered in trying to anticipate future nursing home bed needs, it make no assumptions concerning the Alabama population at large. Ultimately, it becomes a question of whether this unknown factor, given the history of migration of patients from Alabama into Florida and in particular into the subject nursing home, together with other relevant considerations, may properly form the basis for granting the certificate of need to the applicant. It is concluded that there is a fundamental difference in the situation found within this application compared to other planning areas within Florida which do not have to contend with the level of poverty, the proximity to Alabama and the advent of Alabama placements in this nursing home, the high occupancy rates in the subdistrict and the resulting difficulty in placement of patients near their homes. Posed against this troublesome circumstance is the fact that the applicant has failed to use its 30 approved beds or to make a decision for such use, that it had invited and continues to invite the placement of Alabama residents through the referral arrangements with the two Dothan, Alabama hospitals, realizing that such an arrangement tends to exclude opportunities for Florida residents to some extent, and the recognition that patients are being placed; that is patients are not going without nursing home care. The two Alabama hospitals with whom the applicant has referral agreements provide a substantial number of the patients who are admitted. This recount acknowledges what the ownership considers to be their obligation in law and morally to serve the interest of all patients without regard for their home of origin; however, the thrust of the certificate of need licensing process in Florida is to develop the apparatus necessary to service the needs of Florida residents, not Alabama residents. This does not include the necessity of trying to redress the circumstance which appears to exist in Alabama in which the government in that state is unable or unwilling to meet the needs of its citizens. On balance, the applicant has not demonstrated a sufficient reason to depart from the normal requirements of statute and rule, which departure would have as much benefit for Alabama residents as it would for Florida Residents. Contrary to the applicant's assertions it could legitimately de-emphasize its association with Alabama. It has chosen not to and should not be indulged In this choice in an enterprise which is not sufficiently related to the needs of Florida residents to condone the licensure of the beds sought, even when other factors described are taken into account. The applicant has also alluded to a certificate of need request made by Walton County Convalescent Center, a Brookwood facility in District I which sought a certificate of need in the same batch which pertains to the present applicant. The application and the review and comment by HRS may be found within Composite Exhibit 2 by the Petitioner admitted as evidence. Petitioner asserts that the Walton County experience in which 32 beds were granted is so similar to the present case that it would be inappropriate for the agency to act inconsistently in denying the present applicant after having granted a certificate of need to the Walton County applicant. Without making a line-by- line comparison, it suffices to say that in many respects these projects are similar. In other respects they are not. On the whole, it cannot be found that the agency is acting unfairly in denying the present applicant while granting a certificate to the applicant in the Walton County case. The differences are substantial enough to allow the agency to come to the conclusion that the present applicant should be denied and the applicant in Walton County should have its certificate granted. Likewise, no procedural impropriety on the part of HRS in its review function has been shown.
The Issue In their Prehearing Stipulation the original parties described the background and general nature of the controversy as follows: In January, 1985, HCR filed an application for certificate of need to develop a new 120 bed nursing home in Collier County, Florida. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceeding, and the proceeding was forwarded to the Division of Administrative Hearings. By application supplement dated May 15, 1986, HCR has reduced this application to a 90-bed new nursing home. The nursing home will provide skilled nursing care to Alzheimer's patients and to patients discharged from hospitals in need of additional intensive nursing care, in addition to the typical nursing home patient. HRS has denied HCR's application because, pursuant to Rule 10-5.11(21), Florida Administrative Code there is insufficient need for the additional nursing home beds proposed by HCR. In the Prehearing Statement the Petitioner described its position as follows: HCR contends that there is an identifiable need for a nursing home in Collier County, Florida, to serve the needs of patients who suffer from Alzheimer's disease and similar disorders and patients who are discharged from hospitals with a continuing need for a high level of intensive care, often provided through sophisticated technical or mechanical means. Existing nursing homes in Collier County do not offer adequate facilities for such patients and refuse admission to such patients. These patients have experienced an inability to obtain such care in Collier County. HCR's proposed nursing home will provide needed care which is otherwise unavailable and inaccessible in Collier County. The application meets all criteria relevant to approval of a certificate of need. HCR further contends that the nursing home formula shows a need for additional nursing home beds in Collier County. Previously, in circumstances where a need for additional nursing home services has been identified, HRS has approved certificates of need even though the nursing home formula showed a need for zero additional beds or a small number of additional beds. In the Prehearing Statement the Respondent described its position as follows: HRS contends, pursuant to the formula contained in Rule 10-5.11(21), Florida Administrative Code, that there is insufficient need in the January, 1988 planning horizon demonstrated for additional nursing home beds in Collier County to warrant approval of a-new nursing home. Therefore, HRS contends that the HCR application should be denied. Further in its original application, HCR did not identify services proposed specially for Alzheimer's disease patients or "sub-acute" patients. HCR did not and has not complied with provision of Chapter 10-5.11(21)(b 10., Florida Administrative Code, regarding mitigated circumstances. The Respondent also identified the following as an issue of fact to be litigated. "HRS contends that it should be determined whether HCR's supplement dated May 15, 1986, is a significant change in scope for which the application was originally submitted." Because of its late intervention into this case, the Intervenor's position is not described in the Prehearing Statement. In general, the Intervenor urges denial of the application on the same grounds as those advanced by the Respondent. The Intervenor did not attempt to become a party to this case until the morning of the second day of the formal hearing. Respondent had no objection to the Petition To Intervene. The original Petitioner objected on the grounds that the effort at intervention was untimely and that the Intervenor was without standing. The objection to intervention was overruled and the Intervenor was granted party status subject to taking the case as it found it. Accordingly, intervention having been granted at the conclusion of the evidentiary presentation of the other parties, the Intervenor was not permitted to call any witnesses or offer any exhibits. Intervenor's participation before the Division of Administrative Hearings was limited to an opportunity to file proposed findings of fact and conclusions of law. Following the hearing a transcript of proceedings was filed on July 8, 1986. Thereafter, all parties filed Proposed Recommended Orders containing proposed findings of fact. Careful consideration has been given to all of the Proposed Recommended Orders in the formulation of this Recommended Order. A specific ruling on all proposed findings of fact proposed by all parties is contained in the Appendix which is attached to and incorporated into this Recommended Order. The Petitioner also filed an unopposed post-hearing motion requesting that its name be corrected in the style of this case. The motion is granted.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Findings based on admitted facts The parties agree that HCR properly filed a letter of intent and application for certificate of need for a new nursing home to be located in Collier County. The application was reviewed by HRS in the ordinary course of its activities, and HRS initially denied the application. HRS continues to oppose issuance of a CON because (a) there is an insufficient need, pursuant to Rule 10-5.11(21), Florida Administrative Code, for additional nursing home beds to warrant approval of a new nursing home [Section 381.494(6)(c)1., Florida Statutes]; (b) the long term financial feasibility and economic impact of the proposal is questionable because of low occupancy being experienced by existing nursing homes "Section 381.494(6)(c)9., Florida Statutes]. HRS proposes no other basis for denial of the application. The parties agree that HCR meets all criteria for a certificate of need, with the exception of those two criteria listed in the immediately foregoing paragraph relating to need and financial feasibility/economic impact (relevant to low occupancy), which HRS contends have not been met. The parties agree that HCR would provide good quality care to patients, that the project would be financially feasible if the occupancy projections asserted by HCR were obtained, that the costs and methods of proposed construction are appropriate and reasonable, and that the proposed facility would be adequately available to underserved population groups. The rest of the findings In January 1985, HCR filed an application for a certificate of need to develop a new 120-bed nursing home facility in Collier County, Florida. The original application described a traditional approach to nursing home care. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceedings and this proceeding ensued. By application supplement dated May 15, 1986, HCR made certain changes to its original application. These changes included reducing the size of the proposed nursing home from 120 to go beds and changing the-concept of the nursing home from a traditional nursing home to one specifically designed to address the treatment of Alzheimer's disease patients and sub-acute care patients. The supplement specifically provided that 30 of the 90 proposed beds would be "set aside to offer a therapeutic environment for patients with Alzheimer's or similar disorders." The project description in the original application contained no such provision. HCR's proposed facility would consist of 90 nursing home beds, 30 assisted living beds, and an adult day care facility located adjacent to the nursing home portion of the facility. Those portions of the facility relating to assisted living and adult day care do not require certificate of need review. The estimated cost of the portion of the project which requires certificate of need review is $3.5 million. HCR estimates that approximately 33 1/3 per cent of the patients in the facility will be Medicaid reimbursed. It is proposed that 30 of the 90 nursing home beds be designed and staffed specifically to provide care and treatment necessary to meet the special needs of certain patients who suffer from Alzheimer's disease and dementia and exhibit need for care different from that found in the typical nursing home. It is proposed that another 30-bed wing be staffed and equipped to provide sub-acute, high-tech services such as ventilator, I.V. therapy, pulmonary aids, tube feeding, hyperalimentation and other forms of care more intensive than those commonly found in a nursing home and necessary for the care of patients discharged from hospitals and patients in the last stages of Alzheimer's disease. The remaining 30-bed wing would be devoted to traditional nursing home care. HRS has adopted a rule which establishes a methodology for estimating the numeric need for additional nursing home beds within the Department's districts or subdistricts. This methodology is set out in Rule 10-5.11(21), Florida Administrative Code. This rule determines historic bed rates and projects those bed rates to a three-year planning horizon. Allocation to a subdistrict such as Collier County is adjusted by existing occupancy in the subdistrict and the subdistrict's percentage of beds in relationship to the total number of beds in the district. Additional beds normally are not authorized if there is no need for beds as calculated under the rule. HRS calculated need utilizing current population estimates for January 1986 and projected need for the population estimated for January 1988, arriving at a need of approximately 16 additional nursing home beds for the January 1988 planning horizon. HCR projected need to the January 1989 planning horizon and projected a numeric need of approximately 38 additional nursing home beds. There are no applicants for additional nursing home beds in the January 1989 planning horizon (batching cycle). Alzheimer's disease is a primary degenerative disease of the central nervous system which results in a breakdown of the nerve cells in the brain. The disease is progressive, in that it begins subtly, often with forgetfulness or simple personality changes, and ultimately results in death following a phase in which the patient is bedridden and totally dependent upon others for survival. The cause of the disease is not known. The disease is much more common in the older age groups and is very common in the southwest Florida area. (However, nothing in the evidence in this case suggests that Alzheimer's disease is more common in southwest Florida than in other parts of the state.) There is no known cure for Alzheimer's disease. Alzheimer's disease patients are characterized by such symptoms as memory loss, communication problems, difficulty understanding, confusion, disorientation, inability to recognize care givers, waking at night, wandering, inability to socialize appropriately, and incontinence. The progress of the disease can be divided into stages. During the initial stage, the patients will display forgetfulness and subtle personality changes. As the disease progresses, the patients encounter increasing difficulty performing more than simple tasks, tend to be more emotional, become more confused, encounter difficulty with concentration and retaining thoughts, and often display poor judgment and a denial of the significance of their actions. In the next stage, the patients begin to require assistance to survive. Forgetfulness and disorientation increase and wandering patients are often unable to find their way. The patients become incontinent, experience sleep disturbances, become restless at night, and wander during the day, leading to considerable family distraction and difficulties for the care givers. The patients encounter difficulty recognizing family members and often become paranoid and fearful of those family members within the house. violence and aggressive outbursts may occur. Finally, the patients progress to a stage in which they are totally inattentive to their features physical needs, requiring total care. These Patients are totally incontinent, experience frequent falls, develop seizures, and eventually become bedridden, going into a fetal position and becoming totally unable to provide any care for themselves. Traditionally, most nursing homes offer no special programs for patients who suffer from Alzheimer's disease and mix these patients with other patients in the nursing home. There is no nursing home in Collier County which provides program specifically designed for the treatment of Alzheimer's disease patients. The nearest nursing home where such care can be found is in Venice, some 92 miles from Naples. The total facility proposed by HCR is designed to provide a continum of care for Alzheimer's disease patients and their family care givers. The adult day care portion of the facility would enable family members to place Alzheimer's disease patients in day care for a portion of the day in order for the family care givers to maintain employment, perform normal household chores, and find relief from the extremely demanding task of constantly supervising and caring for an Alzheimer's disease victim. The adult day care portion of the facility would be designed and staffed to provide a therapeutic program for the Alzheimer's disease patient and the patient's family. The assisted living portion of the facility would allow an Alzheimer's disease patient in the early stages of the disease to live in an environment, with his or her spouse if desired, where immediate care and routine supervision at a level lower than that required by a nursing home patient would be provided. Thirty nursing home patient and who do not display those characteristics which are disruptive to non-Alzheimer's patients, such as wandering, combativeness, and incontinence. For those Alzheimer's patients who should not be mixed with other nursing home patients because of their disruptive routines and who require unique programs and facility design features to meet their specific needs, a 30-bed wing would be set aside. Finally, for Alzheimer's patients in the final stages of the disease who require total care and are bedridden, and for patients discharged from local hospitals who require high-tech services, a 30-bed wing designed, staffed and equipped to provide such services would be set aside. The facility would provide a high level of staffing to meet the demanding, personal care needs of Alzheimer's patients and would provide 24-hour nursing supervision in that portion of the facility dedicated to intensive services for the bedridden and high-tech patient. The design and equipment of the proposed facility are particularly addressed to the needs of Alzheimer's disease patients. Physically, the facility would allow patients freedom of movement both inside the facility and in an outside courtyard with porches, but the facility would be sufficiently secure to prevent the patient from wandering away from the facility. There would be amenities such as therapeutic kitchens which would allow patients still able to cook to do so. Fixtures in the facility would be designed so that the Alzheimer's disease patients could easily identify the functions of fixtures such as wastebaskets, toilets, and sinks. Features such as low frequency sound systems, lever door knobs, square instead of round tables, barrier-free doorways, special floor coverings, appropriate labeling, automatic bathroom lighting, and provisions for seating small groups of patients together would all provide the special care required by the Alzheimer's patient. The concept of a separate unit for Alzheimer's disease patients is a new one, growing out of increased medical awareness of the disease. The proposed unit would be a prototype for the Petitioner. There are four nursing homes in Collier County and 413 licensed nursing home beds. There are no approved but unlicensed nursing home beds in Collier County. At the time that HRS initially reviewed the HCR application, Collier County nursing homes were reporting an average occupancy of approximately 70 percent. At the time of the hearing, average occupancy of existing nursing home beds in Collier County was 83.5 per cent. Existing nursing home beds in Collier County are underutilized and there are a number of nursing home beds available to the public. Also there are available alternatives to nursing homes in Collier County. HCR has projected reaching 95 per cent occupancy within one year of opening. This projection seems overly optimistic and unwarranted by prior history, as only one existing facility has an occupancy rate that high. HCR's occupancy projections are based on assumptions that the future growth will be similar to that experienced between 7/1/85 and 12/1/85. But more recent data shows that growth has been decreasing and that there was no growth for the most recent period prior to the hearing. If projected occupancy is not met, projected revenues will not be realized, and projections of financial feasibility will not materialize. The record in this case does not contain evidence of patients' need for nursing home care documented by the attending physicians' plans of care or orders, assessments performed by the staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. The local health plan (Policy 1, priority 4) requires an occupancy level of at least 90 per cent before new nursing homes can be approved. The local health plan (Policy 1, priority 6) also provides, "No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility."
Recommendation For all of the foregoing reasons, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order in this case denying the Petitioner's application for a certificate of need to construct either its original proposal or its supplemented proposal. DONE AND ENTERED this 14th day of October, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1986.
The Issue The ultimate issue, by comparative hearing, is which applicant has submitted an application best meeting the criteria of Section 381.494(6)(c), Florida Statutes and Rule 10-5.11, Florida Administrative Code. STIPULATIONS At the formal hearing, all parties stipulated that, as a matter of law and fact, there are 60 nursing hone beds needed to be allocated to one of the parties in these proceedings; that the criteria in Section 381.494(6)(c)(4), (6), (10), and (11) Florida Statutes were not applicable to this case and that the parties need not demonstrate compliance therewith.
Findings Of Fact The stipulations immediately above are adopted in toto as a finding of fact. (See January 30, 1984 Order herein). It is typically more cost-efficient to add 60 beds to an existing nursing home than to construct a free-standing 60-bed nursing home. In comparing competing projects' costs, total cost per bed (including financing, development, and construction costs) is a more accurate indicator of true financial cost of a project than is cost per square foot. Also, cost per bed is more accurate reflection of what the community must pay for a nursing facility than cost per square foot, since cost per bed takes into account the financing, developing, and construction costs. By comparison, BEVERLY's cost per bed is $19,000, FLC's cost per bed is 21,083 and FLNC's cost per bed is .$18,335. 1/ BEVERLY is a for-profit corporation. By its revised CON application, it proposes a 60-bed addition to its existing 120-bed nursing home, Longwood Health Care Center, located in Seminole County, Florida. BEVERLY has operated the Longwood facility for only 3 years. It is operated under an assumption of lease. Dan Bruns, Director of Acquisitions and Development for BEVERLY, testified that the corporate resolution (B-3) is the authorization for BEVERLY's CON application but that exhibit does not reference the revised 60 bed CON application. Upon the lease terms at Longwood and the corporate resolution, BEVERLY's authority to carry through with a 60 bed addition is suspect. FLC is a six-person investment group which has as yet selected no site and has no firm commitment to a specific site or geographic area within Seminole County for its project. Indeed, the entity which will own the FLC project's physical plant has not yet been created. FLC's revised CON application proposes construction of a 120-bed facility with 60 skilled nursing home beds and 60 beds dedicated for an "adult congregate living facility" (ACLF). ACLFs are exempt from Florida statutory and Florida Administrative Code requirements of qualifying for a CON through Respondent HRS. An effect of this exemption is to make FLC's 60/60 plan generally cost-competitive in light of this order's Fact Paragraph 2, above. 2/ FLC's ACLF portion is designed to comply with all regulations for a skilled nursing facility. FLNC, is a not-for-profit corporation. FLNC is within the health and educational hierarchy of the Seventh Day Adventist faith. Under a recent lease, FLNC is currently operated by Sunbelt Health Care Systems, which operates 26 hospitals and 4 nursing homes, two of which are in Florida. FLNC proposes a 60- bed addition on the same level as its existing 104-bed nursing home in Forest City, Seminole County, Florida. This is to be accomplished by constructing on the north side of the existing nursing home a two story structure with 60 nursing beds on the second floor and the bottom or first floor to be shelled-in space. Shelled-in space in nursing homes is permitted by HRS policy and FLNC proposes this bottom or first floor will be designed to meet all construction and fire codes for a nursing home as well as for an ACLF. Since FLNC's property falts off severely to the north, this proposal constitutes the best and highest use of the property owned by FLNC from an architectural and design point of view. The roofing concept is energy-efficient and the top floor or proposed 60-nursing bed area will be accessible from the existing facility without ever leaving covered or heated space. There will be no significant emergency evacuation problem resulting from this FLNC design and no undue inconvenience to visitors utilizing the parking lot. FLC's and FLNC's proposals have the potential advantage for future "CON competitions" of conversion space if HRS ever allocates more nursing beds to Seminole County in the future. This aspect is immaterial to the issues presented by the present CON applications. BEVERLY is the largest nursing home corporation in the United States and encourages the inference to be drawn that its centralized management has the plus of "corporate giant" purchasing power enabling it to obtain best prices for commodities and to obtain the choicest of staff applicants. FLC asserts similar superiority in national recruitment and hiring practices although upon a much narrower base. Neither of these applicants' assertions was established as a significant variable by competent substantial evidence. FLNC makes no similar assertions. FLC further asserts that it is in an advantageous position with regard to quality of care because it is able to transfer nurses and much of its other staff from facility to facility among its several nursing homes. This assertion has some merit but its financial advantage is offset by FLC's pattern of staffing at a higher level than necessary, the costs of which must eventually be passed on to the patients. As to affirmatively demonstrating superior quality of care, it has limited weight as applied to the facts of this case. BEVERLY's projected total cost for the 60-bed addition is $1,140,000. On a per bed basis, that computes to $19,000 per bed. BEVERLY's total construction cost (including labor, material, contingency, and inflation) is $804,000 but an unknown amount per square foot. By this finding, BEVERLY's premise that its total projected construction cost computes at $50.77 per square foot and the other parties' contention that BEVERLY's cost is $61.84 per square foot are both specifically rejected. 3/ FLC's projected total cost of its facility is $2,300,000. BEVERLY's premise with regard to a contingency fund for FLC was not affirmatively demonstrated, but FLC somewhat arbitrarily allocates 55 percent of its total (or $1,265,000) to the 60-bed nursing home segment. On a per bed basis, this is $21,083 per bed contrary to FLC's assertion of $19,166 per bed. FLC's projected total construction cost of the total proposed facility (nursing wing and ACLF) is $1,488,800, which FLC breaks down as $818,840 or $44.82 per square foot within the nursing home segment/wing. This testimony is, however, somewhat suspect because FLC's architect, Monday, admitted he had not personally prepared these construction costs and because the figure set aside by FLC for land/site acquisition is pure speculation in light of FLC's failure to commit to a specific geographical location. Real property prices and availability are clearly notstatic, known factors, and fluctuations in price have not been adequately accounted for by this FLC estimate. Further, FLC admits its figures on the basis of 55 per cent, are not as accurate as using dollar figures. FLNC's projected total cost for its 60-bed nursing home segment/wing addition is $1,100,113. On a per bed basis, that computes to $18,335 per bed. FLNC's total construction cost is $854,913 or a projected $51.00 per square foot within the new nursing segment/wing addition. FLNC is the only applicant whose projected cost per square foot falls within the HRS' experience concerning average cost per square foot of nursing homes. BEVERLY's premise that FLNC should have allowed a contingency fund for adjustments in design and construction so as to comply with local ordinances, for sewerage connection, for drainage, for retainage walls and for a variety of other purely speculative construction problems which BEVERLY failed to affirmatively demonstrate would inevitably develop from FLNC's existing site or proposed project is specifically rejected. Also rejected hereby is BEVERLY's suggestion that FLNC's method of calculating fixed and moveable equipment costs together somehow camouflages FLNC's construction costs. While that may be the ultimate result of this method in some situations, both HRS regulations and good accounting practices permit fixed equipment to be broken out as either construction or equipment costs. It is not appropriate for the finder of fact to adjust a reasonably allowable calculation of an applicant in the absence of clear evidence rendering such reasonably allowable calculation inappropriate to specific circumstances. BEVERLY provided only an outline of its existing Longwood building on the site. It gives no elevations. (B-13) FLC submitted a schematic drawing (FLC-12) but did not submit a site plan. FLNC submitted both a site plan and a schematic drawing of its existing facility as well as its proposed facility (FLNC-11). Further, FLNC-2 (Table 16) shows FLNC's ancillary areas as adequate and available to that applicant's proposed 60 nursing bed addition. 4/ As stated, BEVERLY did not submit floor or site plans for its existing 120 nursing bed facility. Without such plans, it is difficult to analyze the existing ancillary areas or the proposed room relationships/configuration which will result from construction of the new 60 bed nursing segment/wing. BEVERLY proposes to add 60 beds to the Longwood facility by "repeating" a patient wing. The existing facility currently consists of right and left patient wings branching off from an ancillary area hub. The new 60-bed segment wing is planned to contain 28 semi-private (2 bed) rooms and four private (1 bed) rooms, but since there is no architect's design schematic drawing, blueline, etc., to establish precisely how the rooms will be laid out, to a degree, the configuration must be conjectured on whether a left or right wing is the wing repeated. Because of the lack of a clear architectural plan, there is no resolution of much conflicting evidence offered by BEVERLY's own expert witnesses including total square footage. Also, for its new proposed segment/wing, BEVERLY only submitted a site plan drawing so that particularly wanting is any valid method by which the undersigned may compare BEVERLY's application and proposed plans for its bathroom facilities to be located in the new 60 nursing bed segment/wing proposed for the BEVERLY Longwood facility with bathroom facilities proposed by the other two CON applicants. BEVERLY's architect, Fletcher, testified there will be two central baths in the new wing to serve the private rooms, but even he could not confirm the number of baths in the new wing. Therefore, much information concerning bathroom facilities is missing from BEVERLY's revised application. FLC's nursing home segment will amount to 18,270 square feet of new construction which computes to 305 gross square feet per bed unless the shared ancillary areas are considered. Because ancillary areas must be considered, the foregoing figures are reduced by 5,500 square feet to 12,770 square feet or a low of 212.8 gross square feet per bed in FLC's proposed nursing home segment/wing. FLNC's proposed 60 nursing bed segment/wing will amount to 16,763 square feet, or 279 gross square feet per bed. FLNC's existing ancillary facilities will also adequately and efficiently service the proposed 60 nursing bed segment/wing. One reason for this is that FLNC's existing ancillary facilities space is excessive by current licensure requirements. For instance, modern regulations require only 9 square feet per bed for the dining area. Due to Hill-Burton grant standards requiring 30 square feet when FLNC's existing facility was built, this and all other existing ancillary areas at FLNC were built considerably larger than if the existing facility were being constructed today solely to comply with HRS licensure requirements. FLNC's proposal takes advantage of this situation to reduce construction costs. FLC's floor plan is a "cookie-cutter" concept already successfully applied by this corporate applicant in several locations. In particular, it differs from BEVERLY's plan (or lack of plan) and FLNC's plan because it contemplates allocating four beds instead of two beds per toilet and provides a communal shower layout for the same four beds. FLNC's application plans contemplate 26 semiprivate (2 bed) rooms and eight private (single bed) rooms. Each room, regardless of designation, will have its own toilet. At FLNC, the maximum number of patients obliged to share a toilet or lavatory will be two. All three applicants meet the state minimum requirements of ratio of toilets to beds, but it is axiomatic that the two persons per toilet ratio as apparently proposed by BEVERLY and as definitely proposed by FLNC is a preferable factor in rating quality of care than is the four persons per toilet proposed by FLC. FLC's plan is less desirable for encouraging privacy, dignity, and independence of nursing home patients than are the other two plans. BEVERLY's proposed wing will be 100 per cent financed by a bank letter of credit with an interest rate of 13 percent over 20 years, however, this letter only references BEVERLY's original 120 new-bed CON application and is silent as to its subsequent (revised) 60-bed application. In short, its financing commitment is dependent upon BEVERLY's being named the successful CON applicant. FLC's financing situation involves a combination of equity and bank financing and is not firm. Its investment group will seek a loan for 90 percent of the amount needed from Barnett Bank. Financing is not solidly committed as to loan amount, loan term, or interest rate and is therefore inadequate. Analyses of "creditworthiness" of an applicant and "financial feasibility" pronouncements by a lending institution do not equate with a firm commitment to loan amount, term and interest. FLNC's financing is guaranteed up to $1,300,000 by a letter of commitment from the Florida Conference Association of Seventh Day Adventists at 12 per cent interest for 20 years. The background of FLNC's relationship with this denominational financial "parent" provides an encouraging prognosis for long range as well as immediate success and stability of FLNC's project if it is the successful CON applicant. The projected Medicaid and Medicare utilization figures of all three of the applicants contain elements of speculation. 5/ Moreover, after a facility has been opened for 5 or 6 years there is a greater incentive to seek private pay patients because the reimbursement is higher than Medicaid. However, the actual commitment figures provided by the parties does provide a valid comparison factor. BEVERLY's commitment to Medicare is 2 percent. BEVERLY has not committed and is not prepared to commit a specific percentage of the stipulated 60 beds to Medicaid participation. Although BEVERLY's application projects 33 percent Medicaid in the second year of operation, its Director of Acquisitions and Development, Dan Bruns, could not definitely commit to continue admission of 83 percent Medicaid beds in the 120 + 60-bed configuration using Longwood. FLC has committed 10 percent of the total stipulated 60 beds to Medicare., FLC has committed 52 percent of the stipulated 60 beds to Medicaid participation, but in light of FLC's withdrawal from Medicaid participation at one of its facilities and subsequent transfer of Medicaid patients, FLC's commitment here may be viewed as revocable as well. Although FLNC does not project strong Medicare involvement, FUN will be Medicaid and Medicare certified and has committed 50 per cent (50 percent) of the beds in the total facility [existing beds (104) + proposed beds if it is the successful CON applicant (60) for a total commitment of 164/2 = 84 beds] to Medicaid participation. FLNC intends only to enlarge Medicare beds in its existing 104 bed facility. FLNC intends to seek Veteran's Administration Certification. Moreover, FLNC's existing facility was principally funded with Hill-Burton grant money and FLNC annually repays its original loan through delivery of free service to indigent persons. Among the three applicants, FLNC's Hill-Burton obligation, enforced by financial considerations, demonstrates both a strong (14 years) "track record" of FLNC's accessibility to the medically indigent and traditionally underserved in the community as well as a strong indicator of continued accessibility to this segment of the community. FLNC has the lowest charge rate of all three applicants while spending more dollars on patient care than the respective averages of the other two applicant's facilities and this ratio is significant in assessing and comparing both quality of care and availability to the medically underserved of the Seminole County "community." BEVERLY's existing Longwood facility has been a BEVERLY operation less than three years (since August, 1982) and has had a "standard" rating up through the date of hearing. FLC plans to construct an entirely new facility and so has no current license to review. All of its existing homes have standard ratings. FLNC's existing facility has been operating 14 years and has had a "standard" or equivalent rating except for a three months "conditional" rating before return to "standard". BEVERLY staffs all of its beds for skilled patients and commingles its skilled and intermediate patients. FLC staffs all its beds for skilled patients. Although HRS encourages "higher" staffing, this policy can increase costs to patients. FLNC's plan is to create a discreet intermediate wing which, although licensed for skilled beds, will be primarily used for intermediate level patients. Except as indicated infra geographic location of BEVERLY's Longwood facility and of FLNC within Seminole County is not a significant variable. FLC cannot be compared geographically because it has not yet selected a site. FLC proposes one administrator for the combined ACLF and nursing home. The administrator's salary will be allocated between the ACLF and the nursing home. FLC does not specify the proportion of salary attributable to the ACLF. FLNC has had the same administrator for fourteen years BEVERLY's Longwood facility and FLNC have established monthly in- service training for staff members. All three applicants project in-service training and volunteer activity programs if granted the CON. FLC has demonstrated its other existing nursing homes have the most varietal and aggressive patient activity programs utilizing outside community volunteers This and its in-service programs are part of an internal quality control system labelled "Quest for quality". FLC also embraces the idea of using numerous visiting contract consultants in a variety of disciplines such as psychology and nutrition. FLC nursing homes also are active members of a number of national quality control professional groups. By contract, the Orange County Board of Education uses FLNC's existing nursing home as a laboratory for nurses' aide training for the Apopka High School. Also, FLNC permits use of its existing facility as a laboratory for the geriatric training program of Florida Hospital's Licensed Practical Nurse School. These programs could be extended to include the proposed segment/wing and are symbiotic relationships significantly benefiting the quality of care of nursing home patients as well as the student interns. FUC participates with HRS in a program for those adjudicated to do community service in Seminole County. BEVERLY's recent creation of an assistant to the president slot to oversee quality of patient life is commendable, but located at the highest corporate level, and in another state, this benefit will be somewhat diluted at the point of delivery in Seminole County, Florida. This individual's first responsibility is to the corporate shareholders not to a specific nursing home's patients and staff. As to all three applicants, administrative complaints by themselves are both irrelevant and immaterial to this de novo proceeding. Particularly, complaints are immaterial unless they result in an adjudication. Dismissals and settlements without adjudication or admission of guilt are of no probative value. Moreover, in light of testimony of the HRS licensure representative that there is no nursing home in Florida which has not been cited at least once, deficiency ratings brief in duration in proportion to many years of operation are of little significance or probative value. 6/ BEVERLY and FLC contended that FLNC's affiliation with the Christian religious denomination of Seventh Day Adventists somehow diminishes FLNC's application. This position was not established by direct credible evidence on any of the strategic tangents it took at the formal hearing. Admission data provided for the existing FLNC facility indicates that whether measured by policy and statistics or by admissions, FLNC is not restricted by religious faith or affiliation. By this finding of fact, a convenient "draw" of FLNC from a nearby Seventh Day Adventist retirement center has not been ignored nor has evidence that many of the admissions drawn from this retirement community appear to be "repeaters" at the existing FLNC nursing home been ignored, but this corollary may be attributed to the natural proclivity of the retired and elderly to account for a large percentage of the nursing home beds consumed in any locality, and upon this analysis the 15 per cent to 20 per cent (15-20 percent) draw of FLNC from this source could be as much geographically as religiously induced. Failure to repeat attempts at placement of patients at FLNC color the credibility of the testimony of most witnesses who infer a religious barrier to placement of patients at FLNC. Teresa S. Shaw is Director of Social Services, Florida Hospital, Altamonte. In light of that acute care hospital being Part of the Seventh Day Adventist faith's health and educational hierarchy, somewhat greater weight might be placed on her analysis if she felt religion played a part in FLNC's acceptance or rejection of patients. However, she testified she did not know of FLNC's affiliation. This, together with the actual admissions data provided by FLNC, supports this finding of no religious barrier. Unavailability of beds at FLNC has no probative value for charges of religious discrimination either. 7/ Suggestions that the Seventh Day Adventist dietary restrictions against consumption of animal-protein and caffeine and against tobacco-smoking in its nursing homes somehow reduces the quality of nursing home care at FLNC are rejected as unproved. First, it was never established that smoking benefits quality of care, but in any case, FLNC, like all certified nursing homes, complies with the requirement of providing a smoking area. Second, consumption of caffeine and animal-protein can obviously create numerous health and sanitary problems for those incontinent patients who often comprise a large percentage of any nursing home population. Third, it was never established that caffeine or animal-protein benefits the quality of nursing home care. Moreover testimony of FLNC's administrator clearly indicates that at FLNC patients' diets are established by the attending physician and that patients' families may bring in items not normally served by FLNC if this supplementation is permitted on the diet prescribed by the attending physician. It is the physician, not the nursing home, that has ultimate dietary authority.
Recommendation After considering all submissions of counsel, and upon the foregoing findings of fact and conclusions of law determined after reviewing those submissions, it is, RECOMMENDED: That HRS issue a certificate of need for a 60-bed addition to FLORIDA LIVING NURSING CENTER, INC's Seminole County facility, with total project cost not to exceed $1,100,113.00 and area not to exceed 16,763 square feet and deny the other applications. DONE and ENTERED this 8th day of May, 1985 in Tallahassee, Florida. ELLA JANE P. DAVIS 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 8th day of May, 1985.
The Issue Whether Petitioner's application for a Certificate of Need ("CON") authorizing establishment of a 60-bed sheltered nursing home adjacent to a 75-unit life care residential facility in HRS Health District IX, Palm Beach County, Florida, should be granted (in whole or in part), or denied.
Findings Of Fact I. The Proposal Petitioner is a not-for-profit Florida corporation organized to provide retirement and nursing home services to aged Episcopalians in the three Episcopal Dioceses in Florida: Central, Southwest and Southeast. Since 1951, Petitioner has operated a life care facility or community, with adjacent nursing home, in Davenport, Florida. It has 71 residential (well-care) units and 60 nursing home beds, operates at nearly full capacity, and has a 3-to-5 year waiting list. There are 128 residents at the facility, 57 of whom live in the nursing home. Petitioner now seeks to replicate the (Davenport) Crane Gray Inn in Lake Worth, Palm Beach County, Florida, in order to better serve the needs of older Episcopalians. The life care community, consisting of a 60-bed skilled nursing home and a 75- unit retirement facility, would be convenient to the residents of the Southeast Florida diocese, but is expected to draw residents throughout Florida. The 60-bed skilled nursing home, for which a CON is required, would be a one-story building measuring 19,100 square feet. Initially estimated to cost $1,705,515, or $68.06 per square foot to construct and equip, actual bids subsequently received have reduced the expected cost to $60.00 per square foot. The total cost of the entire project, including the well- care and nursing-care facilities, is estimated to be $3,600,000. Petitioner intends to obtain certification of the entire project as a continuing care facility in accordance with Chapter 651, Florida Statutes. In March, 1985, the State of Florida Department of Insurance and Treasurer issued Petitioner a provisional license to operate the proposed facility as a continuing care facility.2 Petitioner intends to comply with the reporting and escrow requirements which Chapter 651, Florida Statutes, imposes on life-care facilities. The admission requirements for the proposed life care facility are the same as those which have applied to the Davenport Crane Gray Inn ("Inn"). Before admission, a resident must execute a continuing care or "Resident's Agreement" with the Inn. Under that agreement, in exchange for the future maintenance and support of the resident at the Inn for the remainder of the applicant's life, the applicant transfers all of his or her real and personal property to the Inn. The resident also agrees to execute a will to the Inn to effectuate the transfer of property then owned or later acquired. No entrance fee is charged. The Inn promises to provide the resident with a personal living unit (including all utilities); three meals a day; health care (including medicine, physician fees, dental care, and hospitalization); recreational, educational, social and religious programs; funeral and burial costs; a monthly allowance for personal expenses; weekly maid service and laundry facilities; and transportation for shopping trips and other activities. Either party may terminate the agreement under specified conditions. On termination, the Inn will transfer back to the resident the property previously conveyed, or a sum equal to the value thereof, without interest and deducting therefrom an amount sufficient to compensate the Inn for the resident's care and support while at the Inn. If the resident becomes eligible for social security or government assistance, such assistance is paid to the Inn for the support of the resident. If the resident dies while at the Inn, all property transferred to the Inn on admission is considered to have been earned and becomes the property of the Inn. (Joint Exhibit I) There is no requirement that a prospective resident have any assets and applicants are ostensibly admitted without regard to their financial condition. (However, in the past ten years, only two Medicaid patients or indigent residents have been admitted to the Davenport Inn.) An account for each resident is maintained, to which earnings are transferred and costs of care deducted. Residents without assets are treated the same as those with assets and the account information is treated confidentially. Over time, the accounts of residents are depleted. Currently, 68% of the patients at the Davenport nursing home are Medicaid patients. The per diem rate reimbursed by Medicaid is $51.25. No resident has ever been transferred for lack of funds. However, the average resident, when admitted, transfers assets worth approximately $24,000 to the Inn. Prospective residents of the proposed nursing home will ordinarily come from the adjacent well-care retirement units. The purpose of the nursing home is to serve the individuals residing in the life care community who, as their needs intensify, require skilled nursing care. Only on rare occasions will an individual be admitted directly to the nursing home without first residing in the well-care portion of the life care community. At the Davenport Inn, this has happened only once. Petitioner acknowledges that prospective nursing home patients may come from eligible Episcopalians who reside in nursing homes in the local community. Actual residence in the well-care units will not be a prerequisite to admission to the nursing home. However, no person has been, or will be, admitted to the nursing home without first executing a continuing care agreement. Direct admission of nursing home patients from outside the life care center is permissible under "sheltered nursing home" rules, as construed by HRS officials. Robert E. Maryanski, Administrator of HRS' Community Medical Facilities Office of Health Planning and Development (which implements the CON licensing process) advised Petitioner's counsel on September 20, 1985, that under HRS rules, patients may--if necessary--be admitted directly to the proposed nursing home without first residing in the well-care units. Individuals who have paid for membership with the particular life care center, finding themselves in immediate need of nursing home care, may be directly admitted into the nursing home. (Petitioner's Ex. No. 11) If HRS rules were interpreted otherwise, perfunctory stops in well-care units "on the way to the nursing home" would be encouraged, a practice which would burden patients and serve no useful purpose. Although Petitioner's CON application does not specify a minimum age for admission to the life care community, Petitioner's life care centers are oriented toward members of the Episcopal Protestant Churches who are at an advanced age and "need a place to go for their last days... [In] a lot of cases they have outlived their own children." (TR-34) The average age of the patients in the Davenport nursing home is 89; in the well-care retirement units, 82. The average overall age of members of the Davenport life care community is 84 or 85. Approximately one-half of the residents eventually need nursing care. At Davenport, the minimal age for admission is 71. (TR- 12) According to a member of the Board of Directors of Petitioner, only patients 70 or over will be admitted to the life care community proposed for Palm Beach County. (TR-35) There is already a waiting list of ninety (90) qualified persons for the proposed life care community in Palm Beach County. Out of that figure, only five people currently require nursing home services. After executing the standard continuing care agreement, these five people would be admitted directly to the nursing home facility, without first residing in a well-care unit. Waiting lists are compiled six times a year, with the most recent completed only a week prior to hearing. Petitioner does not intend to utilize all the nursing home beds, since it must keep some beds open to meet the needs of well-care residents. Nursing home beds at the Palm Beach facility would be filled gradually, approximately two per week, so it would take six months to reach optimum capacity. The parties stipulate that all criteria for evaluating CON applications under Section 381.494(6)(c) and Rule 10-5.11, Florida Administrative Code, have been met or are inapplicable except for the following: The long-term financial feasibility of the project, the availability of operating capital, and the economic impact on other providers (Section 381.494(6) (c)8, 9, Fla. Stat.); The cost of construction (Section 381.494(6) (c)13, Fla. Stat.); The ratio of beds to residential units (Rule 10-5.11(22)(a), Fla. Admin. Code). II. Financial Feasibility The historical track record of the Davenport facility over the last 13 years and projections for the proposed facility demonstrate that the proposed nursing home is financially feasible and that Petitioner has, or can obtain sufficient funds to meet its operating costs. Moreover, as a licensed Chapter 651 life care facility, the financial viability of the entire operation will be monitored by the Department of Insurance. Assets available to support the costs of operating the life care community include income and assets derived from incoming residents; estates and bequests; and a fund of 1,300,000.00, functioning as an endowment, to be placed in escrow. The cost for a resident in the well-care units is approximately $27 per day; the cost in the nursing home is approximately $54 per day. Although there is a deficit of approximately $300 per month in the well-care section of the Davenport facility, there is no deficiency in the nursing home. Medicaid payments are sufficient to cover the costs of providing nursing care. Philanthropy should not be required to sustain the operation of the proposed nursing home. Petitioner has never had difficulty in obtaining financial support for its Davenport well-care units. More than one-half of the operating deficit for the well-care units was met by funds at work and did not depend on philanthropy. There are over 200 Episcopal Churches in the three Florida dioceses with 90-100,000 parishioners, who have been responsive to fund- raising efforts in the past. Last year, Petitioner raised $693,000 from fund raising drives. It is reasonably expected that this source of financial support will also be available to support the proposed life care facility, including the nursing home. An endowment fund of $1,300,000 is also available. These funds will be made available to support the proposed life care community. In addition, each new resident contributes an average of $24,000, which is used to defray operating costs. Barnett Bank will finance construction of the project at one-half percent over prime. Petitioner intends to pay off the capital debt in two or three years. The land has already been acquired and some land preparation costs have been paid. Petitioner has expended over $800,000, to date, on the proposed life care community. Petitioner has $120, 000 on hand for the project, in addition to escrowed reserves. An HRS health care planner has misgivings about the financial viability of the project since Petitioner has relied on philanthropy to support its Davenport facility, and would rely on it to some extent to support the proposed facility. However, Petitioner projects that 77% of the nursing home patients at the proposed facility will be Medicaid eligible. Due to efficiencies in operation, Medicaid payments should be sufficient to cover the costs of nursing home patients at the proposed facility, just as they have been at the Davenport nursing home. The various sources of funds available to Petitioner--proven wholly adequate in the past--should be sufficient to cover the other costs of operation and ensure the continued financial viability of the nursing home, as well as the associated well-care units. III. Cost of Construction HRS contends that the initial estimate of construction costs for the proposed nursing home ($68.00 per square foot) is excessive when compared to other 60-bed nursing facilities, where the cost is approximately $10.00 less per square foot. But, through various cost-cutting measures, the cost of the project has now been reduced to approximately $60.00 per square foot, which is reasonable and in line with the other nursing home projects. IV. Ratio of Nursing Rome Beds to Residential Units Rule 10-5.11(22)(a), Florida Administrative Code, provides that HRS "will not normally approve an application for new or additional sheltered nursing home beds if approved would result in the number of sheltered nursing home beds that exceed one for every four residential units in the life care facility." The parties stipulate that, absent unusual or exceptional circumstances, this rule would preclude approval of more than 19 of Petitioner's 60 proposed nursing home beds. The proposed nursing home, like the Davenport facility it duplicates, will be unique, unusual or extraordinary, when compared with other nursing homes in Florida, due to the advanced age of its patients. No one under 70 will be admitted. The average age of its patients is expected to approach 89 with the average age of well-care residents approaching 82. Approximately one-half of the well-care residents will eventually require transfer into the nursing home. People of advanced age are more likely to require nursing home care. Based on Petitioner's historical experience at its Davenport facility, it is likely that 60 nursing home beds will be required to meet the needs of residents of the proposed well- care units. It has been shown that the proposed 60 nursing beds will be needed to serve the needs of well-care residents as they age and their health care needs intensify. That has been the case at the Davenport facility, where rarely has a patient been admitted to the nursing home who did not first reside in the well-care units. The proposed nursing home and life care center will draw patients and residents similar to those drawn by the Davenport facility--the state-wide applicant "pool" of both is expected to be the same. For this reason, the proposed nursing home should have no significant impact on the census of, or need for, community nursing homes in Palm Beach County. It appears that the rationale behind the four-to-one (residential units to nursing home beds) ratio of the HRS rule is that, under normal or ordinary conditions, only one nursing home bed will be required to serve the residents of four well- care units. In the instant case, actual experience has shown this assumption to be patently erroneous. If only 19 nursing home beds were allowed Petitioner--because of the ratio cast in HRS rules--it is likely that many well-care residents at the proposed life care center would be forced to find nursing care outside of the center. Displaced, placed in nursing homes distant from the life care community, such patients would lose close contact with spouses and friends. The HRS rule, embracing a numerical ratio for the norm, allows flexibility in particular situations which are shown to be abnormal. The circumstances of the instant case show it to be an abnormal situation, fully justifying approval of 60-beds sought, rather than the 19 otherwise permitted by the HRS rule.
Recommendation Accordingly, based on the foregoing, it is RECOMMENDED: That Petitioner's application for a CON authorizing establishment of a 60-bed nursing home in Palm Beach County be GRANTED; and that the CON, on its face, state that issuance is predicated on Petitioner's statement of intent (during Section 120.57(1) licensing proceedings) that (i.) no one under 70 years of age will be admitted to the life care community (including both well-care and nursing-care sections) and (ii.) that, only in relatively rare and unusual cases, will patients be directly admitted to the nursing home without first residing in the well- care residential units of the life care communities.3 See, Section 381.494(8)(g), Florida Statutes (1985). DONE and ORDERED this 14th day of March, 1986, in Tallahassee, Florida. R. L. CALEEN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1986.
The Issue Whether petitioner should be granted a certificate of need to build a 120- bed nursing and extended care facility in West Palm Beach, Florida.
Recommendation Based on the foregoing, it is RECOMMENDED: That the application be denied for failure to meet licensing criteria contained in Rule 10-5.11(21), Florida Administrative Code. DONE and ENTERED this 8th day of December, 1983, in Tallahassee, Florida. R. L. CALEEN, 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 8th day of December, 1983.
Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
Findings Of Fact Petitioner is a nonprofit corporation located in Lehigh Acres, Lee County, Florida, with a membership of approximately 900 persons. The association's goals are to insure that quality health care services, including, but not limited to, long-term care services, are available to that community. The Community Health Association, Inc., was preceded by a non-profit corporation known as Lehigh Acres General Hospital, Inc. This corporation managed and operated the Lehigh Acres General Hospital, located in Lehigh Acres, Florida. In June, 1981, the corporation sold its license to operate this acute care hospital to Hospital Corporation of America (HCA). HCA took over management of the facility July 1, 1981. HCA is currently leasing the facility from Community Health Association, Inc. HCA applied for and received a Certificate of Need to construct a new hospital in Lehigh Acres, Florida. Construction of this hospital is underway and is to be completed on or about January 1, 1984, at which time HCA will turn the old hospital facility back to Community Health Association. At the time of the licensure sale by Community Health Association (Lehigh Acres General Hospital, Inc.) to HCA, the Lehigh Acres General Hospital operated an 88-bed acute care facility which had utilized, since 1970, 20 of the 88 beds as nursing home beds. In July, 1981, Community Health Association, Inc., filed a letter of intent with Respondent for a 60-bed nursing home to be operated in Lehigh Acres, Florida. Respondent advised Community Health Association, Inc., that its application for a CON was premature due to the pending CON issued to HCA to construct a hospital in Lehigh Acres. In early 1982, Community Health Association, Inc., employed Herman Smith & Associates, of Chicago, Illinois, health care consultants, to perform a long-term study concerning need for a nursing home or nursing home beds in the Lehigh Acres area. On the basis of its study, Herman Smith & Associates recommended that Petitioner seek authority to provide 110 nursing home beds in two phases. The first phase of the project would involve converting the 1970 wing of the previous hospital building for use as a 50-bed nursing unit at a cost of approximately $350,000. The second phase consisting of construction of a 60-bed addition, costing $1,380,000 for 15,527 square feet, would be completed in early 1985. The sale of the license to HCA brought Petitioner $1,000,000. These funds will cover the first phase and part of the second phase costs. Petitioner's prior experience in health care delivery and its community support, along with these financial resources, will enable it to construct and operate the proposed nursing facility. There are no existing or approved nursing homes or nursing home beds to be located in Lehigh Acres, Florida. Except as noted below, all existing and approved nursing home beds are located in western Lee County in Ft. Myers, Cape Coral or in other communities located approximately 30 minutes or more by automobile from Lehigh Acres. Upon completion of construction and abandonment of the old Lehigh Acres hospital building by HCA, the new hospital will discontinue the 20 nursing home beds currently operated. Approximately 75 percent of this hospital's patients are Lehigh Acres residents, with few if any patients from Ft. Myers or western Lee County. All the nursing home referrals from the new hospital will be required to leave Lehigh Acres unless Petitioner's proposed nursing home is constructed. Petitioner filed a letter of intent with Respondent, followed by an application for a CON on or about October 1, 1982, proposing the project as recommended by Herman Smith & Associates. Following the submission of the instant application, Respondent adopted Rule 10-5.11(21), Florida Administrative Code (F.A.C.), which became effective on November 9, 1982. That rule establishes the "Methodology to Determine and Calculate the Need for Community Nursing Home Beds" in a service district. About January 29, 1983, Respondent advised Petitioner that its application for a 110-bed nursing home in Lehigh Acres was denied as not consistent with the Section 10-5.11, F.A.C., nursing home bed need methodology. Respondent's State Agency Action Report stated that "A need does not exist to add nursing home beds in Lee County through 1985. There are 347 approved but not constructed beds in the county. The bed need methodology produces an excess of 494 nursing home beds in the county through 1985." The State Agency Action Report reflected 970 existing and approved nursing home beds in Lee County. The report also projected a need for 1,400 community nursing home beds for the year 1985 in Lee County. The testimony of its author established that the same portion of the rule applied to 1986 protected population figures would yield a need for 1,522 beds in Lee County in 1986. At the time Petitioner's application was evaluated by Respondent, nursing homes in Lee County had an average 95.8 percent occupancy rate. Based on the application of the current utilization formula contained in Chapter 10-5.11(21), F.A.C., Respondent calculated that 494 excess nursing home beds in Lee County are licensed or approved. Projected population of persons age 65 and over living in Lee County in 1985 is 60,463 and ir 1986 is 65,708. The application of these population figures to the formula contained in Ch. 10-5.11(21)(b), F.A.C., yields a nursing home bed need in Lee County for 1985 of 1,400 and for 1986 of 1,522. As noted above, there are currently 970 licensed and approved nursing home beds in Lee County. The "Nursing Home Plan Component" of the Local Health Plan of the District Eight Health Council of Sarasota, Florida, of which Lee County is a portion, adopted June 29, 1983, indicates a need for 501 additional beds in Lee County for the year 1986. In applying Rule 10-5.11(21), F.A.C., Respondent's determination was subject to two errors. The first, a mathematical error, caused a miscalculation of beds which could be added in Lee County using current patient count data and avoid falling below the desired 80 percent occupancy rate. The formula, properly applied, indicates there would be 239 excess beds rather than the 494 shown in the State Agency Action Report. The second error concerns Respondent's failure to reconcile and compare the determinations made under the need methodology contained in paragraph (b) of the rule and other portions of the rule, particularly the current utilization sections contained in subparagraphs (d) and (f). Section 10-5.11(21)(f), F.A.C., stated that "consideration of applications for additional nursing home beds will be premised on both the projected need for new bed capacity and current utilization." (emphasis added) The requirement for additional nursing home beds based on the projected need for new bed capacity, as well as current utilization, establishes a need for the 110 beds proposed by Petitioner. Further, the proposed location is consistent with the goal of accessibility and community need in Lehigh Acres.
Recommendation Based on the foregoing, it is RECOMMENDED that Respondent enter a Final Order granting Petitioner's application. DONE and ENTERED this 26th day of September, 1983, in Tallahassee, Florida. R. T. CARPENTER 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 26th day of September, 1983. COPIES FURNISHED: Ronald A. Labasky, Esquire Robert S. Cohen, Esquire 318 N. Monroe Street Tallahassee, Florida 32302 James M. Barclay, Esquire DeparLment of Health and Rehabilitative Services 1317 Winewood Blvd., Suite 256 Tallahassee, Florida 32301 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
The Issue The issue presented for determination herein is whether or not F.A.C. Health Care, Inc., d/b/a Spring Hill Health Facility (Petitioner) is entitled to a Certificate of Need to establish a 60-bed nursing home to serve Hernando County.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at hearing, including the pre-hearing stipulation, the following relevant facts are found. F.A.C. Health Care, Inc. is a wholly-owned subsidiary of First American Corporation. First American Corporation has owned, operated and developed approximately 75 long-term care and retirement facilities over the past 15 years. These operations are primarily located in the southeastern United States. At present, First American Corporation operates 20 facilities and has seven Certificates of Need in the developmental stages. (TR. 35, Fulmer) On January 14, 1984, Petitioner filed an application with the Respondent for a Certificate of Need to construct and operate a community nursing home in the City of Spring Hill in Hernando County, at a total cost of $3,180,000. (Petitioner's Exhibit 1) The letter of denial accompanying the state agency action report dated April 30, 1984, noted the basis for denial as follows: Existing and approved bed capacity in Citrus/Hernando Counties is sufficient to satisfy projected need for 1986. There are 60 nursing home beds that have been approved but have not been constructed at the present time, which, when added to the existing nursing home bed supply in Citrus/Hernando Counties, will serve to satisfy a portion of the projected need for skilled nursing home beds in the sub-district through 1986. The proposed 120 beds are in excess of the 37 beds needed to reduce the prospective base utilization rate to a reasonable level by 1986. (TR. 36, Fulmer; Petitioner's Exhibit 2) On September 26, 1984, Petitioner amended its original application to reflect a reduction from 120 to 60 nursing home beds. Documents reflecting the corresponding reduction in project costs from 53,180,000 to 51,780,000 were submitted with the amended proposal. (Petitioner's Exhibit 3) FINANCIAL FEASIBILITY OF THE PROPOSED SPRING HILL FACILITY The immediate and long-term financial feasibility of a project is one criteria considered during the Certificate of Need review process. Section 381.494(6)(c)9., Florida Statutes. The total cost of the project of 51,780,000 appears reasonable and in line with similar projects. Funds for full 100 per cent financing of the project are available through industrial revenue bonds at 14 per cent interest over 30 years. In order to acquire an industrial revenue bond application, Petitioner would maintain a $150.000 debt service reserve fund. (Petitioner's Exhibit 3) Other methods of financing available to finance the subject project include conventional financing, syndicated equity programs and insurance investment programs. (Testimony of Fulmer at TR. 39-40) Due to the largely rural setting, projected utilization for the first year would be 81 per cent Medicaid, 5 per cent Medicare and 14 per cent private pay. Occupancy is projected to reach 97 per cent by the fifth full month of operation and would be supported in part by the increased utilization of nursing home beds as a direct result of the implementation of diagnostic related groupings. Pro forma statements for the first and second years of operation show a net operating profit beginning in the ninth month and continuing through the second year. The equipment costs, staffing patterns and personnel budget also appear reasonable for this type of project. METHODS AND CONSTRUCTION COSTS Another issue in this proceeding was whether Spring Hill satisfied the criteria in Section 381.494(6)(c)13., Florida Statutes, regarding the cost and methods of construction. Spring Hill's proposed facility will provide 11,981 square feet devoted to patient care and 9,710 square feet for administrative and common service areas at a construction cost of $41.50 per square foot. (Petitioner's Exhibit 3) Proposed construction costs and methods of construction efficiently minimize square footage space requirements and related construction costs and will permit the most efficient operation of the facility at a low per diem cost. The construction cost appears reasonable and is also supportive of a primarily Medicaid based facility. Finally, Respondent offered no evidence to controvert the reasonableness of construction costs and methods proposed by Petitioner. IMPACT ON HEALTH CARE COSTS Section 381.494(6)(c)12., Florida Statutes provides that as part of the Certificate of Need review, probable impact of the proposed project on the cost of providing health care services be considered. Petitioner's expert, Fulmer, urges that there would either be no impact on the cost of care or due to the availability of additional Medicaid beds, costs would be reduced since the private pay demands of family and relatives having to pay for the care of an individual rather than participating in the Medicaid program would reduce the costs of health care to the community rather than increase the financial burden. In this regard, Petitioner offered no evidence to substantiate the claim that the demand for Medicaid beds exceeded the supply, or that Medicaid patients had been refused health services by the available Medicaid health care providers. AVAILABILITY AND ACCESSIBILITY OF EXISTING SERVICES Hernando County lies within HRS District III which is composed of 16 counties in north-central Florida, stretching from the Gulf of Mexico north of Tampa to the Georgia border. (Petitioner's Exhibit 6) The District is further divided into sub-districts. Hernando County represents a separate sub-district. Petitioner's facility is proposed to be located in the City of Spring Hill, located in the fastest growing area of Hernando County. (Petitioner's Exhibits 1 and 2) The latest bulletin (No. 69) from the University of Florida, Bureau of Economic and Business Research, shows a 90 per cent projected growth between 1980 and 1990. Much of the population in the Spring Hill area falls in the 65 and older age bracket. County age group projections released by HRS on September 24, 1984, reveal that the elderly population of 65 and over in Hernando County in 1985 is projected as 17,616, or approximately 27 per cent of total population. By 1990, those projections will grow to 24,887 or approximately 29 per cent of total population. (Respondent's Exhibit 2) The growth trend in Hernando County is an extension of the rapid coastline development occurring in the New Port Richey- Clearwater areas and the counties to the south of Hernando. Previously, the only major development in Hernando County was centered in Brooksville, the middle of the county. Consequently, the existing community nursing home services in Hernando County are concentrated in the Brooksville area. Although Petitioner, through its expert (Konrad) testified that there is a mal-distribution of existing beds and community nursing home services which renders them neither available nor accessible to the rapidly growing elderly population in the southwestern Hernando County corridor and that high occupancy rates in existing community nursing homes in the area and the existence of waiting lists corroborates the lack of availability and accessibility of community nursing home services in the area, the evidence introduced herein failed to establish either the existence of waiting lists or that the existing community nursing homes in the area were overcrowded. SHELTERED VERSUS COMMUNITY NURSING HOME BEDS Petitioner contends that certain nursing home beds associated with the adult congregate living facility at Evergreen Woods in the Spring Hill area are not actually available and accessible to the general public but instead are functioning as sheltered nursing home beds. Respondent, on the other hand, considers the 60 nursing home beds associated with Evergreen Woods to be available and accessible to the general public. A review of the entire record compiled herein failed to substantiate Petitioner's claim that those beds at Evergreen Woods are unavailable and/or inaccessible to the general public. DETERMINATION OF NEED, SECTION 381.494(6)(c)1., FLORIDA STATUTES. In determining need for nursing home beds, a Certificate of Need project is reviewed on a 3-year planning horizon. In this case, predicted need for nursing home beds in District III and the sub-district of Hernando County is calculated through 1987. Hernando County is a single county sub-district located within in HRS planning District III in north central Florida. HRS has determined the overall nursing home bed need for District III as well as sub-district allocations by applying the uniform nursing home bed need methodology for community nursing home services contained in Florida Administrative Code Rule 10- 5.11(21). (Petitioner's Exhibit 5) Respondent provided a step-by-step application of the community nursing home bed need rule and introduced their exhibits supporting the calculation period (Testimony of expert medical facilities consultant, R. Jaffe and Respondent's Exhibits 1 and 2). Briefly stated, application of the pertinent rules reveals an extrapolated need for 31 beds which are available for CON approval based on data available to Respondent on June 29, 1984 and that 36 beds are available based on later data released on September 24, 1984. (TR. 91, Conrad; TR. 130, Jaffe and Petitioner's Exhibit 6) The census report applicable herein reflects that there were 360 licensed beds in the Hernando sub-districts and no approved beds for a total of 360 beds. 2/ Application of the nursing home bed need methodology is not the sole factor used in determining whether a CON application should be granted. Other factors, such as access, high occupancy rates, chronically underserved population and high Medicaid utilization are definite factors in approval of additional beds in cases where the rule shows either no need or only slight need. Respondent has, on several occasions, granted 60-bed applications where accessibility issues justified the grant of a minimum-sized facility in spite of the lesser numerical need indicated under the rules. 3/ Petitioner referred to instances wherein Respondent had granted approval for CON's in other districts where there were unusual circumstances such as accessibility issues as referred to herein above. A review of those cases reveals that a departure from the usual bed-need methodology is warranted in cases of extremely high occupancy rates (95 per cent or higher) or the facilities with lower occupancy rates, e.g. 85.7 per cent for homes in Sarasota County, which were located in inaccessible distances away from the population concentration. Petitioner has not demonstrated sufficient basis herein to warrant a departure from the usual bed need rule methodology. The instances wherein a departure from the usual bed need rule methodology has occurred are distinguishable, inasmuch as in the instant case, there are three existing facilities presently in Hernando County offering 360 nursing home beds. Current occupancy rate has been shown to be reasonable and is standing at or below average for District III. Additionally, Respondent introduced a "Stipulation of Settlement" dated September 28, 1984 which was entered into by and between Evergreen Woods Health Care Center and Respondent. The substance of that stipulation reveals that during October of 1983, Evergreen Woods Health Care Center (EWHCC) as Petitioner, filed an application with Respondent for a Certificate of Need to add 60 beds to its existing 60-bed nursing home located in Spring Hill, Hernando County, Florida. The application sought 45 community beds and 15 sheltered beds. As a means of amicably resolving that proceeding and based on available need data based on applicable quarterly census reports and application of the need criteria, EWHCC, as Petitioner in that proceeding, amended its Certificate of Need application filed October, 1983, to add a total of 60 beds to its existing facility; 31 beds to be designated as community beds and 29 to be designated as sheltered beds. A review of the public records reveal that the Certificate of Need has been issued (amended CON No. 2959 issued early October, 1984) pursuant to that stipulation of settlement. 4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: The application of First American Corporation d/b/a Spring Hill Health Facility for establishment of a 60-bed nursing home facility in Hernando County, Florida, be DENIED. RECOMMENDED this 14th day of February, 1985, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1985.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: The petitioner and remaining intervenor are corporations engaged in the business of constructing and operating nursing homes in Florida. Each has pending before MRS applications for Certificates of Need for new nursing homes in Florida, and the challenged Rule 10-5.11(21) , Florida Administrative Code, is applicable to these applications. The respondent MRS has applied and relied upon the challenged rule to deny certificates of need to these parties. Prior to the adoption of Rule 10-5.11(21) , there was no uniform statewide methodology for the determination of the need for additional community nursing home beds. The different health planning districts utilized various methodologies to determine the nursing home bed need in their communities. The majority of the districts utilized a formula of 27 beds per thousand population 65 years of age and older. Application of the formula was adjusted or deviated from in some districts to account for other considerations, such as occupancy levels of existing facilities, the waiting lists for existing facilities, travel times and the exclusion of sheltered beds. In order to develop a uniform statewide methodology for determining the need for additional nursing home beds, the Statewide Health Coordinating Council (SHCC) established a work group to review the various existing methodologies and recommend a uniform methodology. This work group met over a period of some six months. Its recommendation, accepted by the SHCC, was the adoption of a statewide nursing home bed ratio of 27 beds per thousand population age 65 and over, with an area specific allocation based upon the poverty level in the service area compared to the statewide poverty level. In the July 23, 1982 issue of the Florida Administrative Weekly, HRS gave notice of its intent to adopt Rule 10-5.11(21) relating to community nursing home beds. The need methodology originally proposed was that recommended by the work group and SHCC--the 27/1000 ratio, adjusted by the poverty factor, with a population projected three years into the future. A public hearing on the proposed rule was held on August 10, 1982, and the record of the rule-adoption proceedings was held open until September 10, 1982, for the filing of any additional comments on the proposed rule. written comments were received by ERS after the public hearing. As a result of and in response to comments received regarding the originally proposed rule, HRS changed the methodology to he utilized for determining nursing home bed need by adding further steps to the application of the formula. Notice of the changes was published in the October 22, 1982 Florida Administrative weekly, and the rule became effective on November 15, 1982. No further public hearings were held on the challenged rule. The challenged existing rule states that applications for community nursing home beds will be considered in context with applicable statutory and rule criteria. The rule then sets forth a formula methodology for determining nursing home bed need in the various service districts and provides that applications for new or additional nursing home beds "will not normally [be] approve[d]" if approval would cause the number of beds in that district to exceed the number of beds calculated by the rule's methodology. Basically, the methodology prescribed in the challenged rule contains three specific steps or screens which must be met before additional beds may be approved. The three- step process begins with the 27/1000 bed need ratio, adjusted by the poverty indicator, as originally proposed. This results in a theoretical bed need. The number of existing and approved beds in the subdistrict is then subtracted from the number obtained by using the ratio to determine whether additional beds are needed in the district and the subdistrict. The subdistrict is then classified into one of four categories, depending on whether there is a need or lack of need in the district and subdistrict under analysis. Each of the four categories is assigned a current and prospective utilization or occupancy level ranging from 80 to 95 percent. The occupancy levels of existing nursing home facilities are utilized to reflect existing community behavior patterns which could not be captured by a general or theoretical need estimator alone. The prospective utilization screen, the last step in the methodology, purports to specify how many beds will be made available when a demand for beds exists. In essence, the rule defines an area-specific generalized or theoretical need for nursing home beds based upon the degree of poverty in an "area, and then looks to community behavior through actual utilization of beds to determine how and when additional beds should he added. The rule is designed to pace the issuance of new beds by examining the actual utilization of nursing home facilities in operation. Bed availability is paced in response to actual demand as evidenced by community behavior toward existing and new nursing home facilities. The formula methodology contained in the challenged rule does not take into consideration the use of nursing home beds by individuals under the age of 65. The rule assigns no weighted factor for the various age groups 65 and over. It is estimated that some 13 percent of all patients in nursing homes are under The vast majority of those persons presently in nursing homes are 75 and over, and the segment of the elderly population over age 75 is growing much more rapidly than that segment between 65 and 74. Many states utilize a higher nursing home bed per elderly population ratio than 27 per thousand. However, the types of beds included in those higher numbers were not established. It is the policy and practice in Florida to recognize and encourage alternative forms of long-term care for the elderly, such as sheltered nursing home beds within a life care facility and adult congregate living facility beds. These tvpes of beds are not included in the 27 figure set forth in the challenged rule. The use of the 27 bed standard is based upon a trend line analysis of historical nursing home utilization, and is intended to be a cap on the number of approvable beds. Use of the poverty index factor to adjust theoretical need achieved by a simple bed to population ratio is based upon an actual positive correlation in Florida between the degree of ooverty in an area and the supply of existing nursing home beds in that area. The poverty indicator takes into account only those elderly persons defined according to the latest available United States census. No separate consideration is given to those persons who may be "medically indigent" or "near Poor," though not falling into the poverty category as defined by the United States Census Bureau. It often takes between two and three years to place a Certificate of Need approved nursing home into operation. Some 30 of all licensed and approved nursing homes in Florida are not presently in operation. In some counties, such as Dade and Monroe, only 30 percent to 35 percent of the beds approved are in a position to become operational. The effect of the challenged rule is to approve additional beds only after those beds previously approved become operational and occupied. Because the prospective utilization screen counts beds approved but not yet operational and assumes a zero patient census for these beds, application of this screen may result in a determination that no additional beds should be approved regardless of the lack of existing available nursing home facilities. This is the result of the rule's current application in Dade County. One of the purposes of the challenged methodology is to measure the actual demand for new nursing home beds in a cautious manner while allowing the market to respond to the beds approved prior to the rule. The methodology prevents the approval of all potentially needed beds in one hatching cycle by waiting to examine how utilization experience in the community may modify need. The rule's methodology does not provide a mechanism for making accurate long-range predictions as to the future need for nursing home beds in any specific area. As occupancy levels change, there will he great fluctuations in the resulting need for beds under the prescribed formula. In order to "run" the formula, it is necessary to have information concerning current and projected population figures, the poverty factor, occupancy levels of existing facilities and the actual number of existing and approved nursing home beds in the district and subdistrict. The newly enacted Medicare hospital reimbursement system based upon diagnostic related groupings (DRGs) is likely to have a tremendous impact upon the utilization of nursing home beds and other long-term care facilities. With reimbursement levels based upon the nature of the illness as opposed to the length of stay, hospitals will have an incentive to release patients earlier. An economic impact statement (EIS) was prepared for the challenged rule. The statement contains an estimate of the respondent's printing and distribution costs involved in implementing the rule. The EIS relates that the rule implements a statewide standard of 27 community nursing home beds per 1,000 population 65 years of age and older, and concludes that this standard does not exceed the current bed need standard applied in Certificate of Need decisions. It was noted that this rule establishes a cap on nursing home growth and thereby restricts public expenditures. A comparison of Medicaid expenditures if a higher bed to population ratio were adopted was provided. With regard to the effect of the rule on competition, the EIS relates that the rule will restrain the development of costly excess capacity and restrain competition among nursing home providers with the intent of containing public expenditures. Increased competition was noted among providers who serve patients whose care is funded with private resources. Before preparing the EIS, the author reviewed the suggested methodology of the State Health Plan and analyzed the various methodologies previously utilized in the various health planning districts throughout the State. She determined that the challenged rule would not basically change the existing methodologies applied throughout the State, and therefore concluded there would he no economic impact beyond the costs associated with the promulgation of a rule. According to calculations performed by the author of the EIS subsequent to the adoption of the challenged rule, the statewide bed to population ratio in Florida as of June, 1983, was 27.3. This result is derived by adding together the existing licensed beds, the Certificate of Need approved beds and the beds available on a statewide basis as a result of the rule's application, and dividing that number by the 1983 population age 65 and over.
