Findings Of Fact Petitioner first applied for licensure as a nursing home administrator with the Board on September 21, 1978 and subsequently passed the Nursing Home Administrators Examination on December 12, 1980 but was denied licensure by letter from the Board on March 3, 1981. Upon denial of licensure by the Boards Petitioner timely requested a formal hearing in accordance with Section 120.57(1), Florida Statutes, but on April 23, 1981 Petitioner, by letter to the Hearing Officers withdrew his request for a formal hearing and the file was closed on April 28, 1981 by the Hearing Officer. Petitioner reapplied for licensure as a nursing home administrator on April 20, 1984 and the Board relying on Petitioner's previous passing score did not require Petitioner to retake the examination. The Board again denied Petitioner licensure and by letter dated May 31, 1984 stated as grounds for denial the Petitioner's record as owner of Lakeview Manor Nursing Home and Royal Nursing Home, as more specifically set out in the Board's letter of March 3, 1981. The Board concluded: You are not of good characters as required by Section 468.1685, F.S., and Rule 21Z-11.01, F.A.C. The consistent failure of Lakeview Nursing Home and Royal Nursing Home to show compliance with the law concerning patient trust funds is attributable to you, and is a violation of Section 468.1755(g)(k), and (m), F.S. The consistent pattern of late payment of bills of Royal Nursing Home and Lakeview Manor Nursing Home and the consequent narrow escapes from the termination of utility services and cessation of delivery of food and necessary supplies is attributable to you and is a violation of Section 468.1755(g), (k) and (m), F.S. The pattern of inadequate supplies of cleaning materials, food, and other supplies at Lakeview Nursing Home and Royal Nursing Home is attributable to you and constitutes a violation of Section 468.1755(g)(k) and (m), F.S. Instances of inadequate staffing of nurses at Royal Nursing Home are attributable to you and constitute violations of Section 468.1755(g)(k) and (m), F.S. The failure of Lakeview Manor Nursing Home and Royal Nursing Home to pay administrative fines levied by the Department of Health and Rehabilitative Services is attributable to you and constitutes a violation of Section 468.1755(m), F.S. The failure of Royal Nursing Home to pay unemployment taxes for over one year, which was not remedied until a suit seeking a hiring freeze was imminent, is attributable to you and constitutes a violation of Section 468.1755(g)(k) and (m), F.S. Between the time of Petitioner's application on September 21, 1978 and passing the examination on December 12, 1980, Petitioner had provided the Board with documents and information sufficient for the Board to make a determination as to Petitioner's eligibility for licensure provided he had sufficient experience as a nursing home administrator. Apparently, required information on Petitioner's experience was furnished to the Board at a later date because neither the Board's denial of March 3, 1981 nor May 31, 1984 were based on lack of experience. Background investigations of applicants are part of the application process conducted by the Board. In certifying an applicant for licensure, the Board must consider the applicant's good character and suitability to be an administrator, including ability in financial management and administration, in addition to the qualifications for examination set out in Section 468.1695, Florida Statutes. See Section 468.1685(1)(2)(3), Florida Statutes and Rule 21Z.11.01, Florida Administrative Code. Prior to moving to Florida, Petitioner owned and operated nursing homes in Canada but was not required to be licensed as a nursing home administrator. From 1978 until sometime after filing his application on April 20, 1984, Petitioner was President of V & C Enterprises, Inc. (V&C) which owned and operated Lakeview Manor Nursing Home (Lakeview) during this entire period. V & C was wholly owned by Rose Chadee, Petitioner's mother. V & C surrendered its license to operate Lakeview in early 1985. Petitioner was president and majority stockholder (90 percent) of V & L Nursing Home Services, Inc. (V & L) which owned and operated Royal Nursing Home, a/k/a Palms Nursing Home (Royal/Palms) during 1980-82 but ceased operations of Royal/Palms in 1982 because of financial difficulties. Pursuant to Chapter 400, Florida Statutes and Rules 10D-29, Florida Administrative Code the Department of Health and Rehabilitative Services (HRS) licenses facilities to operate as nursing homes. Such a license is issued to the owner of the home. In accordance with its licensing function, HRS conducts an annual survey of each facility, to determine compliance with Chapter 400, Florida Statutes and Rule 10D-29, Florida Administrative Code. As a total process, HRS looks at: (a) the financial ability of the facility to operate, (b) direct nursing care, (c) dietary, (d) patient's diets (e) supplies needed to meet the needs of the patients, (f) physical plant, (g) housekeeping, (h) maintenance, (i) linens, and (j) infection control practices in the nursing home. At other times, HRS visits the facilities to investigate complaints, for appraisal units based on other agencies' reports, and for other surveillance visits. When deficiencies are noted on any visit, the facility is given an opportunity to correct the deficiency but if the correction is not timely made then the facility is subject to sanctions in the form of an administrative fine, moratorium on admissions or revocation of license. The performance at Lakeview prior to October, 1982 resulted in an increase in the number of visits by HRS to Lakeview and from October 1982 until January 1985 HRS inspected Lakeview weekly to biweekly because of the continuing lack of compliance with HRS rules. As a result of these visits, Lakeview was often cited by HRS for deficiencies during this period. Petitioner was present at Lakeview during some of these visits, and was aware of Lakeview's noncompliance. During 1980-81 administrative complaints were filed against the license of V & L which V & L failed to answer and in at least two (2) instances fines were imposed but never paid. The types of deficiencies cited during the surveys, and which formed the basis of the administrative complaints and sanctions, included problems relating to patient care, maintenance of adequate supplies, infection control procedures, and violations of regulations governing control and accounting of patient trusts funds. During Petitioner's service as president of V & C and V & L there was a great deal of turnover in nursing home administrators of the facilities. There were at least ten administrators within the two year period of 1979 to 1981. As president, Petitioner had the authority to hire and fire administrators. Petitioner sought to control his business. Administrators were "disciplined accordingly" for failure to manage the homes in accordance with how Petitioner felt it should be run. Much of the difficulty encountered by V & C and V & L in the operations of Lakeview and Royal/Palms related to financial management and the availability of funds to adequately operate the homes. There were significant problems relating to the timely payment of creditors. Amounts owing to Peoples Gas System were in a constant arrears status during 1980 and part of 1981. At Lakeview, supplies had to be obtained on a C.O.D. basis. At Royal/Palms, it was the usual situation to have a shortage of supplies and linens and a restricted food service department because of financial constraints. Administrators did not have access to funds to administer the home without the intervention of the corporation and its president, the Petitioner. V & L did not pay unemployment taxes to the State of Florida for the period of October 1979 to December 1980, until February 1981. Other examples of poor financial management are: (a) Patient trust funds were not adequately maintained or accounted for, (b) Payments of Petitioner's personal expenses were made with corporate funds, some of which were included in a cost report of the Royal/Palms for purposes of Medicaid reimbursement. As a result of these financial difficulties- Royal/Palms and Lakeview each ceased operations. Melvin C. Rhodes, a former Administrator of Lakeview found 62 deficiencies assessed against Lakeview when he became administrator in November 1978 but 58 were corrected within 3 weeks and petitioner was credited by Rhodes with hiring him and cooporating with him to correct the deficiencies. During the period in which Lakeview was being closely monitored by HRS, similar inspections were being conducted by the Pinellas County Health Departments Nursing Home Section (PCHD). A Pinellas County ordinance charges the PCHD with the duty to inspect nursing homes for compliance, using HRS standards found in Rule 10D-29, Florida Administrative Code. Like HRS, PCHD cites deficiencies and sets time limits for correction. In the event of a continuing lack of compliance, the administrator or owner is asked to appear at an informal conference to determine guidelines and methods of compliance. Continued failure to comply results in action before the County Health Permit Board, for revocation of the permit. Lakeview and Royal/Palms were inspected on almost a daily basis because of failure to correct deficiencies. The types of deficiencies cited included shortage of necessary supplies, poor housekeeping, shortage of life- saving supplies, and failure to maintain a seven-day emergency food supply. Petitioner attended one such conference as a representative of the management of Lakeview. Petitioner was the person "in charge", to the understanding of the PCHD.
Recommendation Based on the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that the Board enter a final order DENYING Petitioner licensure as a nursing home administrator. Respectfully submitted and entered this 19th day of February, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9673 Filed with the Clerk of the Division of Administrative Hearings this 19th day of February, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-2225 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Petitioner did not number the paragraphs in his Proposed Findings of Fact but for purposes of this Appendix a number has been assigned to each paragraph. Adopted in Finding of Fact No. 1. First sentence adopted in Finding of Fact 4. Second and third sentences adopted in Finding of Fact 5. Fourth and sixth sentences adopted in Finding of Fact 6. Fifth sentence rejected as not supported by substantial competence evidence -- see Petitioner's testimony page 31, lines 16-17 and page 37, lines 11-15. First, second and third sentences adopted in Finding of Fact 17 but clarified. The fourth sentence rejected as immaterial, irrelevant and unnecessary. First and second sentences adopted in Finding of Fact 2. The third and fourth sentences rejected as immaterial, irrelevant and unnecessary. Rejected as not supported by substantial competent evidence. Rulings On Proposed Findings of Fact Submitted by the Respondent Respondent did not number the paragraphs in its Proposed Findings of Fact but for purposes of this Appendix a number has been assigned to each paragraph. Adopted in Finding of Fact No. 1. First sentence adopted in Finding of Fact 4. The second and third sentences adopted in Finding of Fact 5. Fourth sentence adopted in Finding of Fact 6. First sentence adopted in Finding of Fact 6. Second sentence adopted in Finding of Fact 5. Adopted in Finding of Fact No. 7. Adopted in Findings of Fact No. 8 and 9. Adopted in Finding of Fact 10. Adopted in Findings of Fact 10 and 11. Adopted in Finding of Fact 11. Adopted in Finding of Fact 12. Adopted in Finding of Fact 13. Adopted in Finding of Fact 14. Adopted in Finding of Fact 15. First sentence adopted in Finding of Fact 16. Second sentence rejected as not supported by substantial competent evidence. Adopted in Finding of Fact 18. First sentence rejected as immaterial. Seconds third fifth and sixth sentences adopted in Finding of Fact 19. Fourth sentence rejected as not supported by substantial competent evidence. Adopted in Finding of Fact 3 as clarified. Adopted in Finding of Fact 3 as clarified. COPIES FURNISHED: Douglas A. Mulligan, Esquire 1327 Ninth Street St. Petersburg, Florida 33705 Deborah D. Hart, Esquire Assistant Attorney General Suite 1601, The Capitol Tallahassee, Florida 32301 Salvatore A. Carpino, Esquire General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Fred Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Mildred Gardner, Executive Director Board of Nursing Home Administrators Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 =================================================================
The Issue The central issue for disposition is whether Certificate of Need no. 7750, for 24 hospital-based skilled nursing unit beds should be awarded to Petitioner, St. Joseph’s Hospital, Inc. (St. Joseph’s). To resolve that issue it is necessary to resolve factual issues regarding the need for the proposed beds and a legal issue regarding the impact of Health Care and Retirement Corp. of America v. Tarpon Springs Hospital Foundation, Inc. 671 So.2d 217 (Fla 1st DCA 1996) (Tarpon Springs) on the fixed need pool published in the first nursing home batching cycle of 1994 in Hillsborough County, District 6, Subdistrict 1.
Findings Of Fact The Parties St. Joseph’s Hospital, Inc. (St. Joseph’s) is a not- for-profit hospital which has operated in the Tampa, Florida area for over fifty years. It is currently licensed for 883 acute- care beds; it owns John Knox Village, which includes an adult congregate living facility and medical center nursing home; and it offers other services in a continuum of health care. St. Joseph’s also has a 19-bed, in-hospital skilled nursing care unit which became operational in early 1995. The Agency for Health Care Administration (agency or AHCA) is the state agency responsible for administering and enforcing the certificate of need (CON) process described in sections 408.031 through 408.045, Florida Statutes (“the Health Facility and Services Development Act”). The Process The fixed need pool published by AHCA in vol. 20, number 15, April 15, 1994, Florida Administrative Weekly, projected a need for 94 additional nursing home beds in Hillsborough County, District 6, Subdistrict 1, for the January 1997 planning horizon. There is no evidence that this fixed need pool was challenged. Approximately eleven health care providers, including St. Joseph’s, responded to the fixed need pool notice with applications for CON’s ranging from 10 to 94 beds. Some of those applicants, like St. Joseph’s, were hospitals seeking hospital- based skilled nursing beds. After comparative review of the applications, AHCA issued its state agency action report (SAAR) on September 16, 1994, denying some and granting others, and explaining the basis for its intended actions. Some of the beds were awarded for a hospital-based skilled nursing unit; St. Joseph’s application for 24 in-hospital beds was denied in the comparative review that determined St. Joseph’s application was inferior to others in meeting statutory and rule criteria. The applicants’ petitions for formal hearing were forwarded to the Division of Administrative Hearings by AHCA and were consolidated in a single proceeding relating to the 94 beds in District 6, Subdistrict 1. On October 19, 1995, during the pendancy of appeal of the DOAH Final Order in Tarpon Springs, all of the parties in the consolidated cases executed and filed a stipulation which disposes of 93 out of the 94 available beds in the fixed need pool. The stipulation provides that all of the applicants, except St. Joseph’s, withdrew their petitions for formal hearing. As to St. Joseph’s, the stipulation provides: St. Joseph’s has previously withdrawn its opposition to the applications of all other parties to this proceeding by its Notice of Voluntary Dismissal of Petitions for Administrative Hearing and Notice of Lack of Opposition, dated September 13, 1995. St. Joseph’s and AHCA stipulate that Case No. 94-6236, wherein St. Joseph’s challenged the denial of its application for certificate of need 7750 to add 24 skilled nursing unit beds, should be held in abeyance pending the final judicial determination of Tarpon Springs Hospital Foundation, et al. v. Agency for Health Care Administration, et al. (Proceeding below DOAH Case Nos. 94-0958RU and 94-1165RU, reported at 16 FALR 3420, presently on appeal before the First District Court of Appeal). St. Joseph’s acknowledges that the terms of this settlement will deplete the fixed bed need pool determined to be available for this application cycle, assents to the same, and maintains its position that its application should be approved notwithstanding the lack of availability of community nursing home beds within the fixed bed need pool. All other parties to this agreement except for AHCA hereby withdraw their petitions filed in this proceeding in opposition to the application of St. Joseph’s for certificate of need 7750 and waive any challenge or protest that they may have to the issuance of certificate of need 7750. St. Joseph’s hereby agrees not to oppose the transfer of up to seven (7) beds from this application cycle to TGH. After remand of all of the consolidated cases except St. Joseph’s (DOAH no. 94-6236), AHCA entered its final order on December 13, 1995, awarding CON’s for 93 beds to various of the applicants. Some of those 93 beds were awarded for hospital- based skilled nursing units. This final order depleted the fixed need pool of all but one bed. In their prehearing stipulation filed on August 29, 1996, AHCA and St. Joseph’s admitted these relevant facts: The appropriate planning area is Hillsborough County; The appropriate planning horizon for the application is January 1997. Rule 59C-1.036, Florida Administrative Code was appropriately used in determining the bed need for Hillsborough County, District 6, Subdistrict 1, for the first nursing home batching cycle of 1994; and The numbers used to derive the project pool of 94 beds in Hillsborough County, District 6, Subdistrict 1 for the January 1997 planning horizon were accurate and appropriate. At the hearing and in its proposed recommended order, St. Joseph’s concedes that it did not apply for beds under “not normal” circumstances. The Project St. Joseph’s proposes to establish a 24 bed, hospital- based skilled nursing unit in an area of its main hospital building by converting 24 acute care beds to this use. The project involves 19,600 square feet of renovation at a total project cost of $684,731, including conversion costs of $331,940. Actual out-of-pocket costs for the project are $352.791. The skilled nursing beds within the hospital facility are intended to contribute to St. Joseph’s goal of providing a full continuum of care for its patients, with services provided at different levels for a medically-appropriate and cost- effective outcome. St. Joseph’s anticipates that the patient using the skilled nursing (also called “subacute care”) unit would be one coming from the acute care setting and requiring less-acute care, but a more intensive level of care and a shorter length of stay than generally offered in a typical nursing home. All ancillary services and therapies will be available at the hospital seven days a week. Rehabilitative services, which are critical to the patient likely to use the skilled nursing beds, include physical therapy, occupational therapy, speech and language therapy, and recreation therapy. Need Analysis/Impact on Existing Programs Virtually all of the referrals to the proposed new beds will come from within St. Joseph’s. This is the experience of the new 19 bed unit. The hospital’s doctors and their patients prefer to not transfer to an outside facility and they plan in advance, as part of their treatment goals, that the subacute rehabilitative phase of treatment will be in St. Joseph’s own skilled nursing unit. The multi-discipline health care team evaluates and identifies patients who will benefit from such treatment; patients are not automatically shifted down to the unit. The existing unit enjoys a near-100 percent occupancy rate and has a waiting list for patients. Sometimes patients are held in an acute care bed while awaiting transfer to a vacant bed in the skilled nursing unit. This is an inappropriate use of the acute care bed. Few, if any patients would come from other hospitals. Since many hospitals now have their own skilled nursing units, there is little exchange of patients. In the experience of St. Joseph’s staff, other hospitals generally fill their own units from within in their own “continuum of care” system. John Knox Village is not an alternative for patients who need to “step-down” from acute to subacute care. John Knox is eleven miles from St. Joseph’s and does not provide the intensity of care that is offered in the hospital-based skilled nursing unit. There are subacute care, or skilled nursing care, beds in Hillsborough County in free-standing, not hospital-based units. These alternative facilities are not all fully occupied and some offer similar services and treat patients comparable to those treated in the hospital-based units. Evidence that the free-standing skilled nursing facilities are not appropriate alternatives to St. Joseph’s new beds was largely anecdotal. Although Dr. Wasylik, St. Joseph’s chief of orthopedics, is generally familiar with facilities in which he has patients, his observation that transfer of patients from St. Joseph’s would not be appropriate is based on his concern that the “continuity of care” would be disrupted. In other words, even before surgery and admission to an acute care bed, a “critical pathway” in the patient’s rehabilitation is developed. Another facility might have a different pathway that would disrupt the rehabilitative process. Better continuity of care, in Wasylik’s view, translates into quicker, and thereby more cost-effective, recovery. Financial Considerations Although the agency found some inconsistencies in the financial data included in St. Joseph’s application, those inconsistencies affected only the scoring of the application in a competitive batching cycle. The agency witness who provided financial review of the application conceded there was no problem with funding the project, and due to the small size of the project in relation to the size of St. Joseph’s, the project would not have a significant impact on the cost of other services provided by St. Joseph’s. The proposed project would generate a positive financial return for St. Joseph’s. In the proforma financial statement included with the application, the hospital used an occupancy rate of 74%; the actual occupancy rate experienced in the new 19 bed unit is higher. Some of the problems the agency found when reviewing St. Joseph’s application were adequately explained at hearing. For example, the actual cost of the project is less than what the agency found in the financial projections in the application. Also, if, as the agency contends, St. Joseph’s has over-stated its projection of Medicaid patients, a lower Medicaid utilization rate will actually inure to the benefit of St. Joseph’s, since the Medicaid reimbursement rate is lower than for other payor sources. While not obvious on the face of the application, the financial assumptions provided by St. Joseph’s were sufficient to extrapolate valid projected salary expenses in the second year of operation. In summary, a CON application, by necessity, includes estimates and projections of expenses and revenue generated by the proposed project. St. Joseph’s now has the experience, which it did not have when the application was prepared, of the actual expenses and revenue from its 19 bed unit. That actual experience helps validate its prediction of financial feasibility for the proposed 24 beds. Architectural Issues At hearing, St. Joseph’s clarified its intent to not delicense nor relocate acute care beds to make room for the proposed 24 bed skilled nursing unit. Nor does it intend to “phase in” the skilled nursing beds, if approved. Neither of these intentions is clear from the face of the application and the architectural review by the agency raised questions on these issues. The questions affected St. Joseph’s overall standing in a competitive review process, but are not serious enough to foreclose approval if the application is considered on its own merit. The application states that the new beds would be co- located with the existing 19 beds. But if there is not sufficient room, as long as St. Joseph’s can accomplish the project at or below the approved project cost, and as long as St. Joseph’s obtains agency approval for placing the beds elsewhere (which approval is routinely granted), the precise location of the beds within St. Joseph’s facility is not a problem. The beds may not, nor are they intended to be, co-mingled with acute care beds in the hospital. Upon construction, the 24 beds will meet all of the licensure, building code and other regulations applicable to a skilled nursing unit within an acute care hospital. Balancing the Criteria and Summary of Findings There is little dispute that St. Joseph’s has the financial resources to complete the approved project and to operate it successfully. Nor is quality of care, either in the existing facility and projected in the future, an issue of dispute. The questions raised in the financial review and architectural review are not impediments to approval. There are two significant problems with St. Joseph’s proposal. St. Joseph’s serves the entire planning district, and the impact of new beds must be considered in that district-wide health-planning perspective. St. Joseph’s generates enough patients from within its own hospital to fill the beds close to capacity. Other facilities providing similar services in the district are not at full capacity. The possibility of those existing facilities serving as an alternative to new beds was not adequately explored by St. Joseph’s, but was rejected out of an abundance of pride in its own fine services, or physician and patient loyalty. Patient and physician preference does impact “real world” utilization of health care facilities but cannot drive the health planning decisions that are made in the CON process. The second, and most significant impediment to St. Joseph’s application is that only one bed remains in the fixed need pool established for the relevant planning horizon. As discussed below, Tarpon Springs did not invalidate that fixed need pool. St. Joseph’s application does not reflect a willingness to accept any fewer than the requested beds, much less an award of only one single bed. (See, Respondent’s Exhibit 12, CON application, p. 34)
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: that the Agency for Health Care Administration enter its final order denying CON number 7750 to St. Joseph’s Hospital, Inc. DONE and ENTERED in Tallahassee, Leon County, Florida, this 23rd day of January 1997. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1997. COPIES FURNISHED: Ivan Wood, Esquire Baker & Hostetler Suite 2000 100 Louisiana Houston, Texas 77002 Steven A. Grigas, Esquire Agency for Health Care Administration Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, Esquire General Counsel 2727 Mahan Drive Tallahassee, Florida 32308-5403
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.
Findings Of Fact The Parties The Agency For Health Care Administration (AHCA) is responsible for administration of the certificate of need (CON) program pursuant to section 408.034, Florida Statutes. Clearwater Land Company (CLC) is a Florida corporation which owns, operates, and is the license holder of the Regency Oaks Continuing Care Retirement Community (Retirement Community) and Regency Oaks Nursing Center (Regency Oaks) located in Clearwater, Florida. The Johnson Ezell Corporation is a closely held private corporation owned by two shareholders who are also shareholders of CLC. Johnson Ezell provides management, financial services, data processing services, collective purchasing, and other aspects of management for CLC. CLC and Johnson Ezell Corporation are affiliates; two shareholders of Johnson Ezell comprise two out of the four shareholders of CLC. Johnson Ezell is also the contract manager of CLC. Three of the four shareholders of CLC own 100 percent of two other large continuing care retirement communities (CCRC) in Florida. One of these communities, located in Port Charlotte, is known as South Port Square. A second retirement community, Lake Port Square, is in the mid-development stage in Leesburg, Lake County, Florida. Typically, CCRCs offer a broad spectrum of services or a continuum of care ranging from independent living apartments, to assisted living, to skilled nursing which often includes home health care. South Port Square has 440 independent living apartments in which the holders of continuing care agreements reside. South Port also has a 120-bed community skilled nursing facility, originally CON approved in 1984. There are 140 additional units of assisted living. The first phase of the 240 independent living units opened in October of 1987, and the second and final phase of 200 continuing care apartments opened in October of 1990. Lake Port Square currently has 200 continuing care apartments with 205 additional apartments currently under construction. Lake Port also has a 60-bed skilled nursing facility which was originally licensed as a sheltered nursing home facility. It is now a licensed community nursing home. Lake Port also has 35 units of assisted living. Beverly Savana Cay Manor, Inc., is a wholly-owned subsidiary of Beverly Enterprises-Florida, Inc., which is a wholly owned subsidiary of Beverly Enterprises, Inc. The Beverly family of companies operates 838 nursing homes in 48 states. It is the largest provider of long-term care services in the country. Beverly Savana Cay Manor will receive substantial financial, managerial, operational and program support from Beverly Enterprises Florida's regional office. These are specific services which will be available to Beverly's proposed project from its parent's Florida regional office: A nurse consultant who is a former director of nursing will monitor the overall performance of the nursing staff and will assist in maintaining quality assurance and proper staffing patterns; a registered dietician will provide consulting dietary services; and a financial consultant will monitor and assist with the orientation of staff on all financial matters, including implementation of the billing system for Medicare and Medicaid. An area manager who is a licensed nursing home administrator will coordinate the support services. Other consulting services available through the Florida regional office include: an activities consultant, a trained social services consultant, a rehabilitation program coordinator, a rehabilitation clinical coordinator, an accounting-finance department, and a quality assurance department that conducts inspections and reviews the facility's compliance with governmental requirements. The regional maintenance department will oversee the care and maintenance of the physical plant. The regional purchasing department coordinates purchases of food, chemicals, and other items more economically purchased in large volumes. The human resources department assists in the implementation of uniform personnel and wage policies, the training of supervisory and managerial personnel, and the monitoring of facility participation in government programs. CLC Project: Regency Oaks CLC filed two CON applications: In CON Application No. 7503 (now withdrawn), it requested approval of a new 120-bed community nursing home through the conversion of 60 sheltered nursing home beds and the addition of 60 community nursing home beds. CLC also filed CON Application No. 7503P, the subject of this de novo review, to convert Regency Oaks Nursing Center's 60 sheltered nursing home beds to 60 community nursing home beds. CLC's project calls for a reclassification of existing services and assets. There is no capital required, no renovation costs, and no new equipment. The project basically involves moving from one state classification category to another, i.e., sheltered nursing home beds to community nursing home beds. The project under consideration involves Regency Oaks Nursing Center, a 60-bed facility which commenced operations and was licensed in August of 1991. Regency Oaks is a part of a 40-acre campus. The Regency Oaks Retirement Community has approximately 200 units located in a separate five-story structure which also commenced operations in August or September of 1991. There are an additional 201 independent living units in a separate phase that is also located in a separate five-story structure on the campus that is currently under construction. When fully developed, the retirement community's independent living units will be roughly equivalent in size and substantially the same as the operations at its sister communities at Lake Port and South Port. Sheltered nursing home beds are often located in a CCRC. A continuing care provider is authorized to provide a certain number of sheltered nursing home beds based upon the number of independent living apartments that are being constructed, operated and licensed pursuant to Chapter 651, Florida Statutes. Chapter 651 first authorized CCRC's to apply for and receive sheltered nursing home beds in 1986. A CCRC is regulated by statute and markets and provides services pursuant to a continuing care agreement in which the continuing care resident is provided with shelter, food, and some element of health care in exchange for a specified lump sum payment of money and the payment of a monthly maintenance or service fee. The business was largely unregulated until major revisions were incorporated into Chapter 651. Pursuant to section 651.118(4), Florida Statutes, Regency Oaks originally applied for and was granted a CON to construct a 60-bed sheltered nursing home based upon the ratio of one sheltered nursing home bed for every four residential units in the retirement community. The prevailing wisdom in the early 1980's, when Chapter 651 was enacted, held that the 1:4 ratio was appropriate. The underlying assumption was the utilization of the sheltered nursing homes by the residents in the retirement community on a 1:4 ratio should result in a fully occupied and financially feasible nursing center. The ratio also ensured that residents could gain access to nursing home care. In the last half of the 1980's the prevailing wisdom held that the 1:4 ratio was still appropriate but only after allowing for several years of "aging in place" by the residents of the retirement community. To provide needed occupancy during the initial years of operation, subsection 651.118(7) allows the sheltered nursing home to admit residents from outside the resident community for a period of up to five years from the date of the issuance of the original license. For the first five years of operation, the nursing home beds are available to residents and nonresidents of the senior living community. However, at the end of the five year period, the nursing home is not allowed to accept any additional patients from outside the senior living facility because residents alone are expected to need the beds. In 1986, CLC had no intention of converting its CON approved beds to community nursing home beds. For several reasons, including the general health of retirement community residents and their willingness to pay for home health services in order to stay in their own apartment, the 1:4 ratio is no longer a reasonable projection of sheltered nursing home bed need. In the last two years at Regency Oaks, there was an average daily census of 3.5 to 5 patients in Regency Oaks originating from the independent living facility. Of the 200 units, an average daily census of 5 patients converts to a 1:40 ratio rather than the 1:4 ratio that was included in the sheltered bed model. Currently over 90 percent of Regency Oaks' patient days are patients who do not live in the senior housing facility. Without the approval of this project, by September 1996, Regency Oaks will no longer be able to admit outside community residents. Based upon current and projected ratios, this will have an impact on the ability of Regency Oaks to continue to operate in an economical and financially feasible manner. CLC's experience at South Port Square illustrates this problem. The first phase of South Port's independent living apartments has been in operation for 7.5 years. Phase Two has been in operation more than 4.5 years. The demographics of the population area served by Regency Oaks and South Port are almost identical. The South Port community has had 7.5 years to "age in place." For the first ten months of South Port's 1994 fiscal year, 27 percent of the patient days of the South Port's 120-bed skilled nursing center were attributable to contractual requirements of residents of the independent living apartments. Twenty-three percent of the patient days were attributable to campus residents (non- contractual) who were either private pay or some other source of payment. At the top end of the scale, Regency Oaks expects to experience between 25 percent to 30 percent, and up to 40 percent, of its admissions from independent living apartments on campus. CLC does not intend to apply for new sheltered nursing home beds to complement the additional 201 independent living units now under construction. According to its qualified health care planning expert, Mark Richardson, at full build-out, CLC will need to hold (at the high end of the range) 30 beds to fulfill its contractual obligations to its life care residents. (Transcript, pp. 332-3) At full build-out, the approximately 400 independent living units will house 550 to 600 residents, all eligible for nursing home care, when needed, under their continuing care agreements. Beverly's Project: New Crown Beverly proposes a new, 120-bed community nursing home in the Seminole Park area of Pinellas County (New Crown) using 66 beds from the fixed need pool and 54 beds made available from the delicensure of its existing Crown Nursing Center (Old Crown). Granted by CON No. 7505, Old Crown originally was constructed as a motel in the 1940's and has been a nursing home since the 1960's. Although Old Crown currently holds a superior license, the facility is outmoded and is reaching the end of its useful life as a nursing home. There is no room to expand or renovate the existing physical plant, and it is perpetually in need of costly repairs. It is not in compliance with modern building codes and is allowed to continue to operate only by virtue of grandfather clauses. Resident rooms are undersized, and corridors are only 5.5 feet wide rather than the 8 feet currently required. Room doors are narrower than those required in new facilities and will not accommodate moveable beds. Bathroom doors will not accommodate wheelchairs, and there is no central air conditioning. The floor plan also is inconsistent with modern nursing home standards. The building is multistory with outside stairs. This configuration is highly undesirable because it restricts the freedom of movement of residents who are physically impaired, makes it difficult to monitor resident movement, requires extra nursing stations, and slows evacuation in an emergency. Old Crown has one four-bed ward and eight three-bed wards. Space limitations at times require that men and women reside in the same ward. There is no room for specialized services such as adult day care, subacute services or separate Alzheimer's care. Nursing stations are undersized and medical/chemical supplies must be kept in an outdoor shed. Laundry space is inadequate, and linens must be stored outside and in hallways. One room serves as the employee break room, the uniform storage room and the beauty parlor. The kitchen is too small and there is inadequate food storage. The dining area is located in the old motel lobby. Outdoor activities must be conducted in the back parking lot and there is no outdoor ambulation/recreation space. There is only one small space for physical, occupational and speech therapy, requiring that therapies sometimes be administered in hallways or bedside. This arrangement is particularly undesirable for residents receiving speech therapy, as they tend to be self- conscious about their inability to speak, eat and swallow. There is only one activities room, and it is located on the second floor. The second floor contains asbestos, and removal would require the evacuation of the entire second floor. In contrast, New Crown will meet or exceed all existing licensure requirements for construction and safety codes. It will contain 53,310 square feet of space on a single story, and is designed to optimize operational efficiency, minimize institutional effects, and emphasize a home-like atmosphere. All areas within the facility will meet federal guidelines for handicapped accessibility and use. Corridors will be 8 feet wide, and the doors to resident rooms will accommodate moveable beds. These features will eliminate the movement, monitoring and safety shortcomings inherent in Old Crown's two- story motel floor plan. There will be plenty of storage, a modern kitchen and laundry facility. Residents at New Crown will reside only in private and double occupancy semi-private rooms. Each room will feature private toilets, telephone, cable T.V., and individual thermostat controls. Homelike furnishings will be used throughout the facility. There will be two large day rooms adjacent to the nursing stations with access to three enclosed outdoor courtyards, a large restaurant-like dining area, a secured patio and an activity room. The day rooms will have aquariums, large screen televisions and VCRs. A large solarium/greenhouse will be located adjacent to the dining area. AHCA's approval of Beverly's application for New Crown is expressly contingent on the approval of expedited CON application 7505 to delicense Old Crown. This CON has been granted. Beverly will not allow operation of the two facilities to overlap. Old Crown will remain fully operational until New Crown is operational and placement is made for every Old Crown resident. Beverly will transfer Old Crown residents to New Crown, and will assist residents who choose not to move to New Crown in making whatever other arrangements the resident chooses. No resident will be "put out on the street." Compliance With The Local Health Plan The Health Council of West Central Florida, Inc. has identified three preferences, the first of which is a preference to new nursing homes which commit to serve Medicaid patients in proportion to the average number of Medicaid residents in existing nursing homes in the "health service area." That relevant average (subdistrict) is 55.32 percent. Beverly commits to 56 percent total Medicaid days for New Crown; Old Crown is at 59.24 percent; and other Beverly facilities have a high record of Medicaid services (nationally at 68.5 percent, and in Florida an average of 66 percent). CLC commits to 31.58 percent, which is a reasonable expectation since the Medicaid days will be generated primarily, if not exclusively, from patients drawn from the community at large and not from the independent living facility. CLC's Regency Oaks market is dominated by residents and potential residents from a narrow service area with higher financial resources than the southern end of Pinellas County. The second allocation factor gives a preference to applicants who propose specialized services, including adult day care, to meet identified needs. Beverly has conditioned its application on the provision of a wide range of specialized services. New Crown will provide distinct subacute care in a 20-bed Medicare certified subacute unit with four ventilator-dependent beds, and comprehensive rehabilitation in a 3,404 square foot physical therapy site with physical therapy gym, hydrotherapy area, "activities of daily living" room and outdoor ambulation court. It also will provide adult day care services in a 987-square foot Adult Day Care Center, Alzheimer's care in an 18-bed Alzheimer's wing that includes separate dining/activity areas and an enclosed courtyard, respite care services, care to individuals with mental disorders, care to individuals who are HIV+ or who have AIDS, and hospice care. Beverly also will make a $10,000 grant to Florida State University School of Nursing for research into gerontological issues in the nursing home environment and will make its facility available to nursing students for clinical rotations. CLC proposes intensive rehabilitation services, respite care, subacute care, hospice care and care to mental health patients. Its current facility has not provided respite care and it does not propose a separate unit for Alzheimer's patients. The third local health plan allocation factor gives preference to applicants who demonstrate an intent to serve HIV-infected patients. Both applicants commit to provide AIDS and HIV-positive health care. Beverly has documented its experience with these patients at its Old Crown and other facilities. CLC simply has stated that it does not discriminate in admissions of these patients; it also asserts that it has no idea which, if any, of its patients have been HIV-positive or AIDS patients since that information is not disclosed by the patient. Compliance With The State Health Plan The State Health Plan contains twelve allocation factors. Factor 1 gives preference to applicants locating in areas within subdistricts with occupancy rates exceeding 90 percent. Pinellas County's occupancy rate of 90.23 percent qualifies both Beverly and CLC. Allocation Factor 2 gives preference to applicants who propose to serve Medicaid residents at the subdistrict Medicaid average. Exceptions are considered for applicants who propose the development of multi-level care systems. The applicants' Medicaid commitments are addressed above in paragraphs 23 and 24. The applicants' experts disagree on whether the Regency Oaks facility is truly "multi-level," as contemplated by the exception. The availability of different levels of care: independent living, assisted living and nursing home, on a single campus does represent a "multi-level" care system. State Health Plan Allocation Factor 3 gives preference to applicants proposing specialized services to special needs residents, including AIDS and Alzheimer's residents and the mentally ill. Both applicants, as discussed in paragraphs 26-28, above, have described in detail their proposals for specialized services. Beverly's experience in the past and specific plans for discrete subacute, ventilator-dependent and Alzheimer's units lend credibility to its commitment to those specialized services. CLC's commitment is more general. Its proposed staffing is too low to provide the level of care proposed for New Crown's subacute unit, but its staffing would be increased as needed by the patient population. Regency Oaks has 12 Medicare certified skilled nursing beds in the general nursing home population. None can accommodate a ventilator- dependent patient. Allocation 4 encourages a continuum of services, including adult day care and respite care. Both applicants propose to meet this requirement of the State Health Plan. Again, Beverly's commitment is evidenced by a specific description of discrete programs, while CLC's plans are more general. CLC contends that there is "insufficient demand" in the area to support adult day care; Beverly proposes a 987 square foot "Adult Day Care Center" with its own staff, staff office and storage, to accommodate up to 8 guests, 8 a.m. to 6 p.m., five days a week. Day care guests will have an individual care plan prepared by professional staff and will have access to the full facility and its recreational, therapeutic and social services. Beverly will implement a respite program at New Crown and has such programs at its other facilities. CLC offers respite care but has never had a respite care patient. Allocation Factor 5 gives preference to applicants proposing facilities which provide maximum comfort and quality of care. Both applicants qualify for this preference with outstanding designs and programs. Both applicants propose therapeutic programs consistent with Allocation Factor 6. Specialized rehabilitation, restorative care and normalizing training are described in both applications and are committed to by the applicants. Both propose a more aggressive, intensive rehabilitation than other nursing homes in the area. The highest Medicaid per diem rate in Pinellas County is $100.74 (January, 1994). Inflated forward to 1996, the planning horizon, that rate becomes $113.00. New Crown's proposed rate of $100.14, and Regency Oaks' proposed rate of $102.75 (for 1995) do not exceed that highest rate (even when Regency Oaks' rate is inflated 5 percent for 1996). Both applicants are entitled to the preference in Allocation Factor 7. Both applicants qualify for the preference under Allocation Factor 8, as both enjoy the highest (superior) rating. Three of Beverly's four facilities, including Old Crown, currently hold superior licenses, and the fourth has been recommended for a superior license. Regency Oaks was eligible for a superior license shortly after issuance of its original license and actually received the superior license, after some logistical mix-up, in December of 1994. State Health Plan Allocation Factor 9 gives preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. As a well-run existing facility Regency Oaks maintains appropriate staffing levels. The staffing proposed in its application omits one certified nurse assistant (CNA) on the 11:00 to 7:00 shift. The director of nursing monitors the patient population to assure that staff is added when needed. Beverly's proposed staffing plainly meets or exceeds standards, including statutory and regulatory requirements at all levels. Both Beverly and CLC use professionals from a variety of disciplines and both are entitled to the preference described in State Health Plan Allocation Factor 10. Likewise, both applications describe, and the applicants' experience bears out, a respect for residents' rights and privacy and a well- designed quality assurance and discharge planning program, as required in Allocation Factor 11. State Health Plan Allocation Factor 12 gives preference to applicants proposing lower administrative costs and higher resident care costs than the average nursing home costs in the district. As conceded by Beverly's expert health care planner, both applicants meet this preference criteria; however, Beverly's proposed administrative costs are lower, and patient costs are higher, than CLC's. Need and the Availability of Alternatives Nursing home occupancy rates in District V, subdistrict 2, Pinellas County, currently exceed 90 percent, and the need for 68 more nursing home beds in this district is undisputed. Evidence in this proceeding also established the need for such specialized services as subacute care (sometimes referred to as "step down" care), adult day care, HIV/AIDS care, Alzheimer's care and mental health care. Both applicants propose to meet a portion of the numerical need: Beverly with 66 new beds; and CLC with 60 beds converted from sheltered to community beds. Beverly's project more closely meets the numerical need; CLC concedes that some, and perhaps as many as 30, of its beds will be utilized by the residents of its independent living community. Both applicants propose outstanding programs for subacute care and other specialized services. As discussed above, Beverly's actual experience lends greater credibility to its commitment. Maintenance of the status quo in either case is not a viable alternative. Old Crown is only 54 beds; as of 1996, none of Regency Oaks' sheltered beds will be available for new community admissions. Without approval of one application or the other, the 68 bed need will remain wholly unmet. Availability of Resources, Including Staffing and Short-Term Funds Regency Oaks maintains a recruitment and staff development program designed to attract pools of qualified applicants for each personnel vacancy which occurs at the facility. This program has been effective in the recruitment and retention of high quality nurses and other professionals. Regency Oaks also maintains effective staff training and competency enhancement programs. The facility has a solid core staff in place. The parties have stipulated that Beverly will be able to hire the staff it needs at the proposed salaries and that Beverly's proposed recruitment plan career ladder, incentives and opportunities for advancement and efforts to recruit disciplines in short supply are reasonable and capable of being accomplished by the applicant. New Crown has the advantage of access to a statewide network of consultants who will draw from the expertise and resources of the Beverly companies. Since Regency Oaks is already built and in place, very little additional financial resources are needed in the short-term. The incremental project costs of $22,000 filing fee and $15,000 in consulting fees have already been expended. Whether it is a "zero cost" project or whether its cost should include the construction of the facility in 1991 for $2,634,441, as suggested by Beverly, CLC has the financial resources for short-term support of the project. Beverly likewise will be able to finance its total project cost of $6,361,751. Beverly's parent company has committed its substantial resources, including $80 million cash on hand, to finance the project. An issue arose in this proceeding regarding Beverly's failure to include on Schedule 2 of its application three nursing home facilities which it acquired on January 13, 1994. Two facilities, Old Crown and Beach Convalescent Center, were transferred to Beverly from its sister corporation, Petersen Health Care, Inc. The third facility, Clewiston Health Care Center, was transferred to Beverly from its "grandparent," Beverly California Corporation. Change of ownership applications addressing the transfers were filed with AHCA on October 15, 1993. CLC contends that these inter-company transfers involved expenditures that were "capital projects" within the meaning of section 408.037(2)(a), Florida Statutes, and therefore, Beverly should have included them on its Schedule 2. CLC introduced a closing statement and two deeds from the Beach and Old Crown change of ownership files in an attempt to suggest that Beverly had purchased the facilities in exchange for cash payments. Beverly established, however, that it gave no value of any kind in exchange for the transfers, which were accomplished simply by changing the corporate name on each facility's general ledger. Beverly prepared the documents in question only after the AHCA indicated that it would not approve the change of ownership applications until it received closing statements and deeds. No long-term debt was transferred, and each transferred facility had a positive asset value net of accumulated depreciation and amortization. Consequently, the transfers resulted in permanent additions to Beverly's equity (i.e. plant, property and equipment) valued at $3,882,033. Future Beverly audited financial statements will reflect the transfers as additions to paid-in capital. The operational assets of each facility far exceeded the operational liabilities (e.g. accounts payable) of each facility, and Beverly received net working capital in the total amount of $600,116. For reimbursement purposes, the transfers were treated as "related party transfers" and did not result in any change in Medicare or Medicaid reimbursement rates. Beverly California Corporation paid all the incidental expenses associated with the transfers such as application and legal fees. Beverly would not capitalize these expenses. Contrary to CLC's contention, Financial Accounting Standards Board (FASB) statements 11 and 14 do not require that these transfers be treated as "capital expenditures." FASB Statement 11 deals with accounting for contingencies, and does not offer any insight into the proper characterization of the intercompany transfers at issue here. FASB Statement 14 requires that financial statements of a business enterprise include information about its "segments," i.e., operations representing at least 10 percent of the company's total revenues. There is no evidence that Beverly is a "segment," nor does FASB 14 define "expenditure" or "capital expenditure." FASB Statement 14 mentions capital expenditures only once. Paragraph 27 is titled "Other Related Disclosures." Paragraph 27(b) requires that "information for reportable segments shall be made as follows: . . . Disclosure shall be made of the amount of each reportable segment's capital expenditures, i.e., additions to its property, plant and equipment." (Transcript, pp. 623) This passing reference does not define capital expenditures for all purposes, or require that all additions to plant property and equipment be characterized as capital expenditures. Paragraph 27(b) of FASB Statement 14 merely advises accountants that the financial statement of a company must disclose the capital expenditures --- as opposed to expense items --- that a reportable segment of the company has made. Read in context, the reference to additions to plant, property and equipment is meant only as an example of transactions that, under circumstances not defined in FASB 14, might involve a capital expenditure. In the universe of additions to plant property and equipment, some may involve capital expenditures. However, the transfers here at issue demonstrate that a company can obtain additions to plant, property and equipment without incurring any expenditure at all. FASB Statement 6, at paragraph 66, provides that an increase in the equity of a business entity resulting from the transfer to it of something of value to obtain or increase an equity interest in the entity is considered an investment by owners, not an expenditure by the receiving entity. Health Care Financial Management Association Principles and Practices Board Statement No. 12 similarly would characterize the transfers at issue as equity investments by affiliated companies, not expenditures. This is the proper characterization of the transactions between Beverly and its affiliated companies. The equity contributions of its affiliated companies made Beverly a financially stronger and wealthier entity that was more capable of undertaking the proposed project, and did not involve an expenditure of any kind on the part of Beverly, and therefore cannot be characterized as "capital projects" according to credible, competent expert opinion. AHCA's sample Schedule 2 form does not provide a place to list the receipt of equity, but rather asks only for "expenditures." Had Beverly incorrectly included the transfers as "expenditures" in its Schedule 2, it would have had to show them as negative expenditures, thereby reducing the total amount of reported capital projects and improving Beverly's reported financial position. Upon inquiry, AHCA properly advised Beverly that since the transfers did not involve any expenditures by the applicant, it should not disclose them. Accessibility To All Residents of the Service District Regency Oaks has never turned away a Medicaid or other patient based on payor status and affirmatively accepts patients regardless of ability to pay. Regency Oaks also accepts AIDS/HIV patients, Alzheimer's and other specialty needs patients. Beverly also has this type of "open door" policy. Its experience, however, as discussed above, has been more successful in attracting and serving Medicaid patients and patients with special needs. As an integral part of a beautifully designed, upscale retirement community, Regency Oaks has not drawn the payor mix that Old Crown and its sister facilities have served. As the residents of the independent living units age in place and increase in number with completion of the additional units, accessibility to all residents of the service district is diminished, not enhanced, if the conversion from sheltered to community beds is approved for Regency Oaks. Long Term Financial Feasibility Review of financial feasibility of Regency Oaks is simplified by the fact that it has actual operating experience to support its projections. Opened in Fall 1991, the nursing home, as typically expected, showed losses for the first few years. It turned a profit in 1993. Regency Oaks has the necessary resources to continue to operate the continuing care apartments as well as the nursing home with net operating income, including net operating income from the completion and opening of the new 200 independent living units and further supplemented by the resources of the shareholders of CLC. The four CLC shareholders are personal guarantors on the mortgage indebtedness of all the property at Regency Oaks. Their net worth is in excess of $60 million and cash reserve is greater than $10 million. If the CON is approved and Regency Oaks is permitted to accept community bed patients it will be financially healthy. If, however, the facility is restricted in 1996 and the beds will be filled only from its continuing care units, the nursing home will become financially stressed. Neil Ezell, the corporate representative of CLC and chief financial officer for the Johnson Ezell Corporation, acknowledges the difficulty in making a profit in a smaller 60-bed nursing home because of the high fixed administrative costs. If the high-end estimate that 30 beds will be filled from the continuing care facility is accurate, Regency Oaks will be operating at 50 percent capacity in 1996 or shortly thereafter. The contractual obligations to Regency Oaks residents would still be honored in some fashion, but with substantial difficulty. Absent CON approval, Regency Oaks' cost per patient day will increase and will negatively impact Medicare since Medicare is a cost-based reimbursement system for skilled nursing facilities. Beverly's proposal for a new 120-bed facility at New Crown is financially more efficient than either Regency Oaks or the existing 54-bed Old Crown facility, even considering the $6,361,751.00 total project cost. The old facility is too dated and too small to be efficiently operated much longer. The 120-bed proposal meets the need for new beds and effectively puts to rest the old well-used beds. The patients at New Crown will come from the community at large and will also be transferred from the existing Crown facility. The projected utilization is reasonable and the projected pre-tax net income of approximately $299,000.00 at the end of the second year is likewise realistic. The proposal is financially feasible. SUMMARY OF FINDINGS AND BALANCING THE CRITERIA Both applicants presented outstanding proposals. There is no question that they have provided, and will continue to provide, superior quality of care in attractive, well-equipped and well-staffed facilities. Beverly's proposal enjoys the financial "economies of scale" advantage of a larger facility; CLC's proposal is financially appealing because it requires little or no additional start-up expenditures. Beverly effectively countered CLC's assertions that the application was defective for failure to include the three recently-acquired facilities as "capital expenditures". Beverly also appropriately addressed CLC's claim that it failed to consider the transfer of Old Crown residents in its projected utilization of beds at the new 120-bed facility. Approval of Beverly's application for 120 beds will not result in approval of an excess of beds left in the fixed need pool. Approval is conditioned on approval of delicensure. The old and new facilities will not be concurrently licensed. It strains common sense to find that the concurrent approval and delicensure process should somehow result in creating a need in some future planning horizon, rather than the immediate planning horizon. Both applicants avow their commitment to serve Medicaid and specialty needs population and to remain accessible to persons regardless of ability to pay. Beverly's commitment is underscored with an existing record of service and with its willingness to accept conditions of approval. More troubling than the Medicaid and special needs accessibility issue, however, is the concern that CLC's existing 60-bed facility at Regency Oaks will, upon conversion, fall substantially short of meeting the need for 68 beds. Its continuing care community is expanding and the demand for nursing home beds by that population will increase. Somewhere between 10 and 30 beds will be filled, leaving only 30 to 50 beds available to the population at large. CLC's financial dilemma is the result of a considered decision to build 60 sheltered nursing home beds to support a 200 unit continuing care facility. The only explanation in the record for exceeding the 1:4 ratio is that initially the plan was for 240 units. Even with 50, rather than 60 sheltered beds, the facility would have problems, since the prevailing wisdom based on actual utilization experience is that far fewer sheltered beds are needed. Although the anticipated financial dilemma will have some impact on Medicare reimbursement in the Regency Oaks' facility, there is no major health care planning impact from denial of the conversion. The impact is facility- specific and was at least partially foreseeable five years ago. That is, the statute, then as now, provided a fixed 5-year period for the use of sheltered care beds by the community at large. Balancing of the criteria and weighing the evidence results in a finding that Beverly's, rather than CLC's, application should be approved.
Recommendation Based on the foregoing it is hereby RECOMMENDED: That the agency enter its Final Order denying Clearwater Land Company's application for CON #7503P and approving Beverly Savana Cay, Inc.'s application for CON #7508, conditioned upon 56 percent of patient days of care to Medicaid residents, and appropriate specific conditions for a ventilator-dependent unit, respite care, adult day care, Alzheimer's unit, and AIDS/HIV+ care. DONE and ORDERED this 30th day of June, 1995, in Tallahassee, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1995. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Clearwater Land Company's Proposed Findings 1. and 2. Adopted in paragraph 2. Adopted in paragraph 3. and 5. Adopted in paragraph 4. 6. and 7. Adopted in paragraph 5. Adopted in paragraph 9. and 10. Rejected as unnecessary. Adopted in paragraph 24. Adopted in paragraph 9. Adopted in paragraph 72. Adopted in substance in paragraph 24. Adopted in paragraph 10. Adopted in paragraph 11. - 19. Adopted in paragraph 12. Adopted in substance in paragraph 13. Adopted in substance in paragraph 14. Rejected as unnecessary. and 24. Adopted in paragraph 15. Adopted in paragraph 64. and 27. Adopted in substance in paragraph 13. Covered in Preliminary Statement. Covered in Conclusions of Law, paragraph 79. and 31. Rejected as unnecessary. Rejected as contrary to the evidence and law. Rejected as contrary to the greater weight of evidence. and 35. Adopted in substance in paragraphs 17 and 22. Adopted in substance in paragraphs 23 and 24. Adopted in substance in paragraph 27. Adopted in substance in paragraph 28. and 40. Adopted in paragraph 29. Adopted in paragraph 30. Adopted in paragraph 31. Adopted in substance in paragraph 32. Adopted in paragraph 33. Adopted in paragraph 34. Adopted in paragraph 35. Adopted in paragraph 36. Adopted in substance in paragraph 37. and 50. Adopted in paragraph 38. Adopted in paragraph 39. - 55. Rejected as cumulative and unnecessary. 56. and 57. Adopted in substance in paragraphs 47 and 64. 58. and 59. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected, as to the comparative conclusion; otherwise accepted generally. - 64. Rejected as unnecessary and cumulative. Adopted in paragraph 62. - 71. Rejected as unnecessary. Adopted in substance in paragraph 64. Adopted in substance in paragraph 64, except as to the impact if Beverly is approved. That finding is rejected as unsupported by the evidence. and 75. Adopted generally in paragraphs 64 and 65. Accepted, as to no impact on existing providers; rejected, as to impact by Beverly. Adopted in paragraph 67 (as to Beverly's cost). - 82. Rejected generally as contrary to the greater weight of evidence. Adopted in paragraph 10. - 86. Rejected as unnecessary. Rejected as contrary to the greater weight of evidence. - 94. Rejected as unnecessary or cumulative. Findings regarding the high quality of care and range of services are addressed above. 95. and 96. Adopted in part in paragraph 37; the one staffing omission was conceded by CLC's director of nursing. 97. - 99. Adopted in substance in paragraph 45. 100. - 117. Rejected as unnecessary or cumulative. 118. Addressed in Preliminary Statement. Beverly's Proposed Findings Addressed in Preliminary Statement. and 3. Rejected as unnecessary. Adopted in paragraph 17. Adopted in paragraph 18. and 7. Adopted in paragraph 19. Adopted in paragraph 20. Adopted in paragraph 21. Adopted in paragraph 26. Adopted in paragraph 22. Adopted in substance in paragraphs 9 and 12. Adopted in paragraph 6. Adopted in paragraph 7. Adopted in paragraph 8. and 17. Rejected as unnecessary. Adopted in summary in paragraph 70. Adopted in paragraph 50. Adopted in paragraph 51. Adopted in paragraph 52. Adopted in substance in paragraph 53, although the testimony was related to both Medicare and Medicaid reimbursement. and 24. Adopted in paragraph 54. Adopted in paragraph 55. Adopted in paragraph 56. Adopted in paragraph 57. and 29. Rejected as unnecessary. Adopted generally in paragraph 24. Adopted generally in paragraph 26. Adopted generally in paragraph 27. Adopted generally in paragraph 28. Rejected as unnecessary. Adopted in paragraph 28. Adopted in paragraph 29. Adopted generally in paragraph 30, although "multi-level" was not defined, and CLC's assertion that it is a "multi-level" facility is generally accepted. Adopted in paragraph 31. - 64. Rejected as cumulative and unnecessary. Rejected as to the characterization of CLC's rate; otherwise adopted in substance in paragraph 35. Adopted in paragraph 36. and 68. Rejected as cumulative and unnecessary. 69. and 70. Adopted in paragraph 38, except as to the conclusion that CLC does not meet the preference. 71. and 72. Adopted in part; rejected in part in paragraph 39. Adopted in paragraphs 40 and 75. - 100. Rejected as cumulative or unnecessary. 101. Adopted generally in paragraphs 72 and 73. COPIES FURNISHED: Robert Griffin, Esq. Charles A. Stampelos, Esq. MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 215 S. Monroe Street, Ste. 600 Tallahassee, FL 32301 Douglas L. Mannheimer, Esq. Michael Manthei, Esq. BROAD & CASSEL 215 S. Monroe Street, Ste. 400 Tallahassee, FL 32302 Samuel D. Bunton, Esq. Agency for Health Care Administration The Atrium Building, Ste. 301 325 John Knox Road Tallahassee, FL 32303 Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308 Jerome W. Hoffman, General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32309 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Bldg. 3, Ste. 3431 2727 Mahan Drive Tallahassee, FL 32308-5403
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Health Quest Corporation Health Quest Corporation has been in operation for approximately 20 years and currently operates 11 nursing centers in the States of Indiana, Illinois and Florida. Its three existing Florida facilities are located in Jacksonville, Boca Raton and Sarasota. It also has nursing centers under construction in Winter Park, Kendall and Sunrise, Florida, as well as four more in Indiana. Health Quest has a Certificate of Need to build a new 180-bed nursing center in Sarasota County, and that project is currently under development. Health Quest also holds Certificates of Need for nursing centers in Pembroke Pines, Duval County and Safety Harbor. The Safety Harbor approved Certificate of Need for 120 beds is in Pinellas County. Due to a revision of its development plans for Florida, Health Quest now plans to transfer or sell its CONs and sites in Pembroke Pines, Duval County and Safety Harbor. Whereas the company had formerly planned to build seven new Florida facilities simultaneously, it has now decided to build only four facilities in each generation of Florida projects. The decision to trim its development schedule is based upon Health Quest's reluctance to temporarily expand its present staff of management personnel and its refusal to compromise its quality standards for the sake of developing a larger quantity of new facilities. It is contemplated that the proposed facility in Pinellas County would be built after the completion of its nursing and retirement centers in Winter Park and Sunrise. The Letter of Intent filed with HRS noticed Health Quest's intent to request a Certificate of Need for 120 community nursing home beds in Pinellas County. However, the actual application filed with HRS, and the project being pursued in this proceeding, is for a 180-bed nursing center. HRS accepted the 180-bed application, and no party has demonstrated prejudice from the discrepancy between Health Quest's Letter of Intent and its application. The nursing center is proposed for the northern area of Pinellas County and is to be integrated with a 124-apartment assisted living residence. The nursing center will contain a specialized 60-bed unit for the care of residents suffering from organic brain syndrome, which includes Alzheimer's disease and related dementias. Health Quest currently operates organic brain syndrome units at two of its Indiana nursing centers. In this unit, Health Quest proposes a nursing staff ratio of 3.5 hours per patient day. A non-supervisory nursing staff ratio of approximately 3.0 hours per patient day is proposed for the remaining 120 beds. Its proposed staffing is sufficient to provide 24-hour registered nursing coverage on each of the three proposed nursing units, and its staffing level is slightly higher than that proposed by the other applicants in this proceeding. Health Quest intends to offer sub-acute care, including hyperalimentation and intravenous treatment, respite care and vacation care and, possibly, adult day care. Therapy treatment, including physical, occupational, speech, audiology and psychosocial, will be provided through an affiliate of the Health Quest Corporation, known as Achievement Rehabilitation Corporation. Health Quest maintains a quality assurance program based on a system of peer review. Its Jacksonville and Boca Raton nursing centers hold superior licenses. Its Sarasota nursing center is not yet eligible for a superior license because it has only been open since November of 1986. It also offers orientation and staff training programs and participates in education programs in conjunction with local schools of nursing. As did many of the applicants in this proceeding, Health Quest updated its application at the hearing. The updates were based upon a survey of existing facilities in Pinellas County, which survey was not completed at the time its application was reviewed; additional beds having been approved in Pinellas County as a result of a Settlement Agreement executed subsequent to the review date of this batching cycle; the effects of inflation; and the passage of time. Also, Health Quest determined subsequent to the filing of its application to build all its resident rooms at 216 net square feet, rather than some at 216 and others at 200. Its architectural and engineering fees were increased to reflect the fact that it now contracts out more of its design tasks than it did at the time the original application was reviewed. Its equipment costs were updated because it was decided that the original estimate was unrealistically low. Health Quest estimates the total costs of the nursing home center to be $5,546,812. Health Quest did not include a set of floorplans with its application, nor did it offer any at the hearing. The one-story design of its proposed nursing center is described in narrative form in Section III.G. of its application and the tables in the application form requesting the square footage of certain areas were completed. HRS did not request floorplans or any kind of schematic drawings in its notification of omissions, and HRS deemed the Health Quest application complete. While the application form contains a space for the inclusion of "schematic/diagrammatic drawings," and it is common practice to include such drawings with a Certificate of Need application, neither the statutes governing application content nor HRS's rules specifically require the submission of floorplans or drawings. Health Quest plans a facility with 71,142 total square feet, at a cost of $30,816 per bed and a total of 395 square feet per bed. With the exception of VHA/Oxford, Health Quest projects the lowest cost per bed. The patient rooms will each encompass 216 square feet, thereby exceeding the minimum requirements for room sizes. The facility will have 18 single rooms and 81 semi-private rooms. The reasonableness of the Health Quest project completion schedule is questionable inasmuch as Table 26 calls for a one-month period from the time it contracts with an architect to HRS approval of final plans for licensure purposes. Health Quest projects that 30 percent of its patient days will be Medicaid, that 4.1 percent will be Medicare and that 65.9 percent will be private pay. The Medicaid projection is comparable to that experienced at its Jacksonville nursing home facility, but much higher than that experienced at its Boca Raton and Sarasota facilities. The total project cost of $5.5 million is comparable to other similar- sized nursing hones. While Health Quest's financial analysis and feasibility expert testified as to the reasonableness of Health Quest's pro formas, which show the project as breaking even at 54 percent occupancy at the beginning of the second year of operation, this witness had not conducted an independent analysis of the individual items upon which the pro formas were based. Instead, he relied upon the contents of the application and its updates, neither of which were prepared by him. The witness had not reviewed the 1987 or 1988 quarterly audited financial statements of Health Quest. The data reviewed was for the year ending March 31, 1986. The witness did not know whether Health Quest had money in hand to make the 10 percent equity contribution, nor whether it had $5 million assured but not in hand for conventional financing for this project. It is therefore difficult to assess the short and long-term financial feasibility of the project proposed by Health Quest. Florida Country Place Limited Partnership Florida Country Place Limited Partnership is a foreign limited partnership authorized to do business in Florida. The general partners are Scott Phillips and Kim Phillips and the limited partner is the Jack E. Phillips Trust. The managing entity will be Phillips Florida Healthcare, Inc., a foreign corporation authorized to do business in Florida. The principals of Country Place have been involved in designing, constructing and operating nursing homes, apartment complexes and other health related facilities for over 15 years. The family now owns and operates three multilevel delivery of care facilities such as the one proposed herein. These include a 170-bed facility in Cuyahoga Falls, Ohio, a 109-bed facility in Wickliffe, Ohio, and a 103-bed facility in Clearwater, Florida. The long range plans of Country Place are to develop homes in clusters, currently concentrating on the central west coast area of Florida, and eventually to develop a southern headquarters. It has previously been granted Certificates of Need in Lee County and Polk County and has been recommended by HRS for a Certificate of Need in Hillsborough County. The current proposal is for the construction of a 30-bed nursing unit, consisting of 14 new community nursing home beds and the transfer of 16 existing beds, as part of a 120-unit continuum of care facility for the elderly. The facility would also contain 60 independent living apartments and 30 adult congregate living units. The 16-bed transfer from Florida Country Place's existing facility in Pinellas County would allow the conversion of triple- occupancy rooms to double occupancy, thus enhancing the living environment for the residents of that facility. The site and design of the existing facility, known as Country Place of Clearwater (and formerly known as Druid Hills), renders it impossible to eliminate the 3-bed wards through new construction of replacement bed space. While the owner of the existing nursing home in Clearwater did not join in the application filed with HRS for the current proposal, one of the general partners of both the transferor facility and the applicant is authorized by the transferor to seek the proposed transfer. HRS never sought additional or clarifying information about the transfer proposal in its omissions request, and its authorized representative deemed the application complete. Florida Country Place made some revisions in its application at the time of the hearing. The changes included a reduction in the common area space in its facility design, changes resulting from an inflation adjustment and a change in the way the common costs and expenses among the three components of the project were allocated in order to conform to HRS's allocation methodology, which was first revealed in the State Agency Action Report. Florida Country Place proposes a three-story facility designed with a residential appearance to implement the philosophy of deinstitutionalization. There are many support services and activities areas, and the exterior amenities include a pond, an exercise course, a sitting deck and a putting green. The center core is designed to encourage interaction among the residents of all the different levels of care. The 30-bed size is designed to enable more personalized care and a more family- type personal concept. The 3-story design has as its purpose minimizing the amount of travel distance for the resident at the farthest unit to the amenities of the center core and its services. The first floor will consist of independent living apartments and the second floor will be adult congregate living units and the laundry. The 30-bed nursing unit is on the smallest floor, the third and top floor, so that travel distance to the central core is the shortest while still providing the nursing home residents with the greatest amount of privacy and quiet time. The plans for the nursing home include semi-private rooms with a permanent partial partition separating the two beds so as to effectively create two private rooms. Each resident will have his or her own thermostat, window, storage space, television and telephone accommodation. The total project cost allocated to the nursing home component of the project is $1,605,113, or $53,504 per bed. This cost per bed is far greater than the other applicants propose, as is the square feet per bed of 603. Even with the higher cost per bed, construction and development costs are reasonable. Some economies of scale will be realized through the sharing of administration, common areas, maintenance and the kitchen and laundry. The design of the entire facility will conform with state regulations for mixed use facilities and will utilize energy conservation measures. Services and programs, in addition to the continuum of care concept proposed for this facility, include adult day care, respite care, intensive rehabilitative services, community involvement, care for Alzheimer's patients and subacute care. Ease of movement through the facility from less to more intensive levels of care, and vice versa, is anticipated. Numerous physical and recreational activities will be offered. The proposed staffing levels exceed the minimum required. Florida Country Place encourages the hiring of elderly workers in every area of their nursing home facilities, and it has an active recruitment program to attract sufficient qualified staff. The projected salaries are reasonable. The proposed facility will be available for pharmacology and nurse training. Florida Country Place has not yet selected a site for its proposed facility, but desires to locate in north Pinellas County, wish Dunedin or Palm Harbor being the target area. It proposes to provide 45 percent of its patient days to Medicaid patients. The principals' Ohio nursing home facilities do not participate in Medicaid because they believe that the reimbursement mechanism is unfair and would require a reduction in services to avoid an economic burden on private pay patients. The per diem charges proposed are at the high end of the scale of reasonableness. Private pay patient charges will be individualized based upon need and level of care required, and the charges will be revised on an ongoing basis. The proposed nursing home project can be successfully financed, and the required equity contribution is available. While the total project will have a loss in it second year of operation, it will be profitable thereafter. The nursing home component will be viable in its first year and thereafter. During 1986 and 1987, the existing Clearwater facility (formerly Druid Hills) was experiencing low occupancy, in part because of the three-bed wards and in part because of the negative reputation of the previous ownership. A public relations marketing program was instituted, and the census increased from 70 percent to 90 percent in the early part of 1988. An in-house survey revealed that key personnel were not keeping staff recruitment and development in step with the rapid census growth. At about the same time, a new staff development coordinator and new nursing staff were hired. During the training of new personnel, the HRS audit team arrived for the annual survey. The facility did not have adequate trained staff to handle the increased census and, on May 20, 1988, HRS imposed a moratorium on new admissions. At the time of the hearing, Country Place had recruited new staff for that facility, believed it was now ready to accept new admissions and had requested a resurvey by HRS. There is a structural deficiency at the existing Clearwater facility, which was built in the early 1960s and purchased by the Phillips in the early 1980s. This deficiency is currently undergoing repair, and review for a superior rating will be requested after completion of the repairs. The Forum Group, Inc. The Forum Group, Inc. is a national, publicly held company which started in 1981 and currently owns, develops and operates sixteen retirement living centers and twenty freestanding nursing homes in a number of states. Forum has sold or transferred many of its acute care, psychiatric and smaller nursing home facilities so that it can concentrate on the retirement living center concept. It currently has only one other operating facility in Florida. This facility is Park Summit, which consists of 200 independent living apartments and 35 nursing home beds. Park Summit currently has a standard rating and has only two Medicaid-approved beds. The Park Summit facility is not typical of the facility proposed for Pinellas County in that it contains no adult congregate living facility units. Some of Forum's facilities in other states hold superior license ratings, and it has never had a license denied, revoked or suspended. The 120-bed nursing home facility proposed by Forum for Pinellas County will be part of a total retirement living center containing two other levels of care--assisted living (or adult congregate living facility units) and independent apartment units. There will be 30 assisted living units and 120 to 150 independent apartment units. While a specific site has not yet been selected for the project, Forum is focusing its attention on the eastern portion of Pinellas County. The total cost of the nursing home component of Forum's proposed retirement living center is estimated to be $5,053,301. This figure is the highest for those applicants proposing 120-bed nursing homes, but is consistent with similar projects recently developed by Forum. Forum is a solvent company and has the financial resources to finance the construction and initial operation of the proposed facility. While the price of Forum stock has declined in the past year, this does not affect the intrinsic value of the company, whose cash alone exceeds its liabilities and which has a 3 to 1 ratio of assets to liabilities. The revenues and expenses projected by Forum are reasonable and are based upon Forum's corporate experience. Forum projects a positive net income in its second year of operation and thereafter, and has demonstrated the financial feasibility of the project on both a short-term and long-term basis. Forum's nursing home project will encompass approximately 49,000 square feet, with a cost per bed of $42,111. Its proposed estimate of equipment and construction costs are reasonable and consistent with other Forum projects. By combining the nursing home project with the remainder of the proposed retirement living center, Forum will realize some operating efficiencies and economies through the use of common heating and cooling, kitchens, laundry and maintenance. Forum provided single-line drawings with its original application, indicating the general arrangement of spaces for the proposed nursing home facility. While the corridor length in the drawings did exceed state requirements, a slight modification to the configuration can be made to cure this problem without exceeding the estimated project cost by more than ten percent and without exceeding the proposed total square footage of the project. Forum's project will involve a two-story structure, will be finally designed to comply with all licensure requirements and will not create a safety hazard for patients. Forum may ultimately utilize an architectural plan different than the single-line drawings submitted with its application. The project would have energy conservation features such as heavy roof insulation, double glazed insulated windows and heat pumps. Forum projects a utilization of 28.5 percent Medicaid patient days, which is the lowest projection of all applicants. It projects a utilization of 66.7 percent private pay patient days, with private room rates being $110.00 per day and semi-private room rates being $85.00 per day. Its proposed design contemplates about 40 private rooms. Contrary to a statement in Forum's application, Forum no longer maintains a separate fund for indigent care. Its projected patient charges for Medicaid and Medicare are somewhat low, inasmuch as there have been increases since January of 1987. An update to account for this would create an increase in the total revenues projected by Forum. Forum's proposed staffing and salaries are consistent with Forum's other facilities, and are comparable to those proposed by the other applicants. Forum has a quality assurance program with written standards for monitoring resident care. It has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent, trained staff. Twenty-four hour coverage by registered nurses and licensed practical nurses will be provided. Forum's solution to the nursing shortage is to pay higher wages with greater benefits, to provide higher quality surroundings and to utilize re-entry nurses. In the event of a nursing deficit, Forum would utilize as a source of staffing the personnel available from the home health care that will be provided to the apartment residents of the retirement living facility. Forum will offer all services required under skilled and intermediate care, as well as respite care. Forum makes its facilities available to educational institutions for community training programs. Pinellas Healthcare, Ltd./Convalescent Services, Inc. Pinellas Healthcare, Ltd. (PHL) is a Georgia Limited partnership owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. Although PHL will own the proposed facility, it will be managed and operated by Convalescent Services, Inc. (CSI). CSI is also 100 percent owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. CSI was formed in 1978 for the purpose of operating extended care facilities, including nursing homes and retirement centers. It currently operates 21 nursing homes and 3 retirement centers located in 7 states. Six of the nursing homes, including one 120-bed facility in Pinellas County, and two of the retirement centers (adult congregate living facilities) are located in Florida. It also has another Certificate of Need approval to establish 120 community nursing home beds in Pinellas County. It is the Company's plan to gear its growth toward those markets where CSI already operates facilities or has a management network in place, thus allowing CSI to provide high quality care both more effectively and more efficiently than if development took place in new markets without existing resources. After receipt of its initial Certificate of Need application, HRS notified CSI that certain elements had been omitted from the proposal, and requested CSI to provide the number of registered nurses per shift and the patient bill of rights. In response thereto, CSI submitted another entire application which varied, in some respects, from the initial application filed. The revisions involved a reduction in the square footage of the proposed facility and an increase in the project costs associated with financing. HRS accepted the revised application and deemed the application complete. There was no evidence adduced to demonstrate that the revisions resulted from a review of the applications submitted by the other parties in this proceeding. The project proposed herein is a free-standing 120-bed nursing facility in Pinellas County. A site has not yet been selected. A utilization of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay is anticipated. These projections are based upon a review of historical occupancy data in Pinellas County as well as CSI's own experience in Pinellas County and at its other existing facilities. Medicaid utilization within its existing certified nursing home beds currently averages approximately 40 percent of all patient days. The nursing home would offer a comprehensive range of services, including subacute, skilled and intermediate care; respite care; hospice care; special services for patients with Alzheimer's and related disorders; physical, speech, occupational and recreational therapy; social services; case management services and counseling services. The charge for respite care will be the same as for regular admissions. CSI does not intend to segregate its Alzheimer's patients in a separate and distinct unit, and is of the philosophy that such patients do better in an integrated environment whereby the more alert patients tend to prevent the Alzheimer's sufferers from deteriorating as quickly. A "wander guard" system will be installed to monitor the Alzheimer's patients. CSI has developed a manual containing standards of nursing care for Alzheimer's patients, and its nursing personnel will be specially trained to provide services to such patients. Due to its management of an existing facility in Pinellas County, CSI has existing agreements with the providers of services and transfer agreements with area hospitals. CSI has existing affiliations with the Pinellas County School Board and St. Petersburg Junior College, and intends to enter into educational relationships with these and other institutions to ensure the continuing education of its own staff and to serve as a clinical training ground for faculty and students. CSI intends to implement numerous activity programs especially tailored to the needs of the individual residents, to encourage volunteer participation and to engage its nursing home residents in various community service projects. The proposed nursing home facility would be comprised of twelve single-bed rooms and 54 two-bed rooms. The nursing home would consist of 37,700 total gross square feet, and the total facility gross square feet per bed will be 314 feet. The one-bed rooms would consist of 159 net square feet and the double bed rooms would consist of 191 net square feet. The most energy efficient equipment available will b installed in the facility. The total project cost is estimated to be $3,900,000, or $32,500 per bed. The projected costs for construction, professional services, equipment and site preparation are consistent with its past experience. CSI's quality assurance program includes the employment of a nursing services coordinator responsible for ensuring the quality of care provided at its facilities, a quality assurance manual which contains standards covering all departments within each facility, a resident care plan, resident counsels and pre-service and in-service training for nursing personnel. Of the 21 nursing homes currently managed by CSI, 17 are located in states which utilize a superior rating system. Of those facilities eligible to receive superior licenses, CSI maintains superior ratings in over 80 percent of its beds. Only one of its 6 Florida nursing homes is eligible for a licensure rating, and that facility currently holds a standard rating. Several deficiencies have been cited against the Centerville Care Center in Tallahassee. In March 1988, HRS imposed a moratorium on admissions to that facility, partly because the minimum standards for nursing staff were not being met. That moratorium on admissions was administratively challenged by CSI and had not been finally resolved as of the time of the hearing. CSI's nursing staff proposal in the instant proceeding is on the low range of all the applicants, though the numbers and classifications of positions meet or exceed state licensing requirements. The tables in the application, as revised, were updated at the hearing to account for "skyrocketing" nursing salaries and recent salary changes in the marketplace (which also necessitated an adjustment in the Medicaid and Medicare rates), inflation, and a new Medicaid payment system adopted on January 1, 1988. The pro formas project a loss during the first year of operation and a profit during the second year of operation with a 95 percent occupancy rate. The project is to be financed through a 25 percent equity contribution provided by the general partners and a 75 percent commercial financing arrangement for a period of 30 years. This proposed method of financing is consistent with past CSI experience in Florida and elsewhere. The Kelletts have a $40 million renewable credit facility through a series of banks, with $13-$14 million currently available. The Mediplex Group, Inc. The Mediplex Group, Inc. was formed about 25 years ago, and is now, since April of 1986, a wholly-owned subsidiary of Avon Products, Inc. Avon is a multi-million dollar national corporation which had $73.8 million cash on hand as of December 31, 1987. The Board of Directors of Avon has approved the instant proposed project and Avon will provide the long-term financing for this project. The applicant, through Mediplex, has the funds available to make the 10 percent equity contribution for the proposed project. Mediplex currently has approximately 18 to 22 projects in various stages of development and construction, which represent approximately $125 million. It has never defaulted or become delinquent on payments due on any of the loans associated with these projects. The applicant, Florida Convalescent Associates of Pinellas County, is a partnership of Mediplex Management of Pinellas County, Inc., which is a wholly-owned subsidiary of The Mediplex Group, Inc. The Mediplex Group will develop and manage the facility on behalf of the partnership. Mediplex currently manages one other nursing home facility in Florida -- Manatee Springs in Bradenton. Mediplex now seeks a Certificate of Need for a 120-bed nursing home facility to be located in northern Pinellas county. It intends to offer a continuum of care, and will include respite care and adult day care among its services. It will accept Alzheimer's patients and integrate them into the system with other patients. A "wander guard" system will be utilized to protect such patients and other dementia patients from wandering. There will be no subacute care unit, per se. The facility proposed by Mediplex contains 44,722 total square feet and 369 square feet per bed. There will be 8 private rooms and 56 semi-private rooms, several multi-use rooms and two dining rooms. There will be two central bathing areas in each nursing unit. The design of the facility incorporates energy saving features. The schematic floorplans do not show toilet facilities in the kitchen, and do not indicate a quiet lounge, sunroom or chapel as represented in the Certificate of Need application. The total cost of the proposed project is estimated to be $4,550,879, or $37,924 per bed. The Mediplex philosophy of care is to bring each patient up to his or her maximum level of participation, and to accomplish this through a continuum of care policy. Each Mediplex facility must comply with policy standards which comport with the highest minimum standards of the states in which Mediplex facilities exist. Mediplex employs a national director of quality assurance who is responsible for overseeing the operations of the various facilities, as well as the quality of care offered. When new facilities are opened, key employees of other Mediplex facilities go to the new facility to assist in orientation. There will be an infection control program at the facility, and it will be Mediplex's policy to always have a registered nurse on duty in the building. Mediplex will attempt to involve residents in community activities. The hiring and training of appropriate employees will be emphasized. Recognizing that there is a shortage of nurses, Mediplex has, in the past, successfully recruited nurses from Ireland and England. An HRS survey of Mediplex's Manatee Springs nursing home facility in Bradenton, Florida, conducted in March, 1987, resulted in a finding that 6 licensing standards had not been met. This facility currently holds a standard rating. Several of its facilities in Massachusetts and Connecticut have been cited for deficiencies relating to patient care and proper infection control techniques. The proposed facility will provide 52 percent of its patient days for Medicaid residents, and has a policy of accepting any resident regardless of the source of payment. The total staff per patient day proposed by Mediplex is higher than that proposed by the other applicants. While the salaries listed in the application were consistent with Mediplex current policies, no witness called by Mediplex was familiar with salaries in Pinellas County, and thus their reasonableness was not established. A pro forma statement of revenues and expenses for the first year of operation of the proposed facility has never been submitted by Mediplex, though there was testimony that Mediplex would suffer a loss of approximately $300,000 after its first year of operation. Section 381.494(4)(e), Florida Statutes, in effect at the time the current applications were filed (as well as the current Section 381.707(2)(c)) requires a statement of the projected revenues and expenses for the first two years of operation after completion of the proposed project. The pro formas submitted by Mediplex encompass years two and three of operation, and appear to be stated in terms of current dollars. In preparing the pro formas, Mediplex relied on the average of all Mediplex Group facilities companywide, and not upon information relevant to either Pinellas County or Florida. Although Medicaid and Medicare per diems are computed by different reimbursement methodologies, Mediplex's second year per diem for Medicare and Medicaid are projected as identical. The inflation assumptions appearing on the updated pro formas were not established or substantiated. In summary, while Mediplex established that its financial projections were consistent with its experience in constructing and operating other nursing home facilities around the country, it did not establish that the projections were reasonable for a facility to be opened in Pinellas County in the year 1990. Manor Care of Florida, Inc. Manor Care of Florida, Inc., is a wholly-owned subsidiary of Manor HealthCare Corporation, a publicly held corporation which owns and operates about 150 nursing homes in 26 or 27 states. Manor HealthCare Corporation is the fifth largest nursing home provider in the country, and has been in business for approximately 30 years. Manor Care owns and operates nine nursing homes and three adult congregate living facilities in Florida. It currently has a 120-bed nursing home in Pinellas County, as well as approval for 60 more beds. Three of its Florida nursing homes opened within the last three years were built without a cost overrun, are operating profitably and are superior rated. Manor Care has never sold a Certificate of Need or a nursing home in Florida. Each of its five Certificates of Need received since 1981 has been timely implemented. In order to have greater control over operations, Manor Care owns and manages all its Florida nursing home facilities. Manor Care now proposes to establish a 120-bed nursing home in Northern Pinellas County at a total project cost of $4,821,150. A five acre parcel of band in Palm Harbour, just east of Highway 19, has been purchased for this purpose. The initial design of the facility was revised to reflect HRS's preliminary intention to grant a certificate of Need to Manor Care upon the condition that there be no 3-bed rooms and to comply with some of the comments contained in the HRS architectural report which accompanied the State Agency Action Report. The present facility design contains one story with four wings all connected to a common area. There will be two nurses stations, with 60-beds each. The central area of the facility contains the administrative area, the dining room, kitchen, laundry and facility support area. The facility will have 30 private rooms and 45 semi-private rooms, and will contain 46,850 gross square feet, and 390 square feet per bed. The total cost per bed is $46,850. One of the four wings will house a separate and distinct 30-bed area specially designed for Alzheimer's patients. That area will be divisioned off from the rest of the facility by double doors, and will have its own separate dining room, activity area and outdoor garden area. This design will allow patients to wander within a restricted area and reduce concern over patients leaving the facility. Manor Care has been developing dedicated Alzheimer's units within its nursing homes around the country for the past two and a half years, and currently operates 16 Alzheimer's units. Its program is geared toward treating middle stage Alzheimer's disease, which is characterized by combative behavior, incontinence, gait disturbances and eating problems. The goal of Manor Care's program is to provide a comforting environment in which residents and families can cope with the mental and physical deterioration associated with the disease. The Manor Care Alzheimer's program emphasizes five components of care: environment, specialized staffing and training (with a higher nurse to resident ratio than the rest of the facility), programming, specialized medical services through the use of consultants, and family support. The A.D.R.D.A. (Alzheimer's Disease and Related Disorders Association) has officially recognized that the most appropriate treatment and care of Alzheimer's patients is accomplished in a dedicated and separate unit. In addition to its Alzheimer's program, Manor Care intends to offer programs in the areas of respite care (a short-term nursing home stay designed to give the caregiver a rest), chaplaincy (whereby chaplains from all different faiths are recruited to serve as liaisons for the religious and spiritual needs of the residents), and an "In Touch Program" to help patients and families upon admission into the nursing home. It also provides a comprehensive corporate- wide quality assurance program which audits the services provided at all Manor Care nursing homes and provides follow-up and education for staff. The inter- disciplinary quality assurance team is comprised of professionals in nursing, rehabilitative therapy, activities, dietary and environmental services. Annual unannounced assessments are conducted in every Manor Care nursing home and action plans are developed and implemented. In addition, each facility conducts ongoing self-assessments. Manor Care uses a corporate quality assurance manual which contains standards based on federal regulations and the most stringent state regulations in the country. It provides mandatory in-service training for staff and emphasizes promotion within the company. Manor Care has a regional office in Orlando to serve its Florida nursing homes, and a regional nurse works with the Florida directors of nursing and nursing departments and acts as a quality assurance liaison to conduct mini-quality assurance reviews upon visits to the facilities. Manor Care will provide 46 percent of its patient days to Medicaid patients. Its proposed patient charges are reasonable, as is its projections for utilization. Its projected expenses are based upon actual experience at its existing Dunedin facility, and are reasonable. Discounts from retail purchasing are realized by Manor Care through volume purchasing. It is projected that the proposed facility would incur a first year loss of $305,500 and a second year profit of $89,000. The project will be funded by working capital and senior subordinated notes. The funds for the project are currently available. The project is financially feasible in both the short and long-term. Health Care and Retirement of America HCR currently owns and operates 127 nursing home facilities containing 16,000 beds in 19 different states. It has designed and built over 200 nursing homes and related health care facilities, along with 10 nursing home facilities in Florida, with 6 more in various stages of design and construction. HCR's current proposal consists of a 60-bed addition to its existing Pasadena Manor 126-bed nursing home located in southwestern Pinellas County, which is within the area designated by the local health council as the East Subdivision. Pasadena Manor, consisting of approximately 34,280 gross square feet, has been rated by HRS as a superior nursing home for several years and had no deficiencies on its most recent licensure survey. The 60-bed addition will be a two-story structure connected to the existing building by a corridor. It will have 30 beds on each floor, two nurses' stations, two dining rooms, two multi-purpose rooms, two physical therapy areas and the standard functional elements required to meet licensure standards. The first floor will have a 15-bed dedicated Alzheimer's Disease wing, as well as space for adult day care. The second floor will have 30 beds, including a dedicated 10 to 15-bed subacute unit. The subacute care provided will include high tech services and ventilator care, I-V therapy, pulmonary aids, tube feeding and hyperalimentation. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there is a need for nursing home beds and services available to patients requiring subacute care. The 60-bed addition will contain 4 private rooms and 28 semi-private rooms. Respite care will also be offered when beds are available. Adult day care and respite care provide alternatives to institutional long-term care in a nursing home. Such services aid in preventing premature nursing home admissions and promote cost containment. There is no known nursing home in Pinellas County which provides a distinct and separate care unit for patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as memory loss progresses, the need for ever-increasing personal care is required. Victims encounter more serious physical problems and exhibit symptoms such as wandering, significant weight loss, clumsiness, incontinence and antisocial behavior. Intense medical attention is required in the last stages of the disease. Historically, Alzheimer's patients have been mixed with other patients nursing homes, often disrupting other patients and presenting problems of control for the staff. Because of behavior problems, some nursing homes avoid admitting Alzheimer patients and others control problem behavior with sedation and physical restraint. A separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient and allows the patient to maintain his cognitive capabilities for as long as possible without restraint and sedation. A separate unit provides a smaller, safer, specially designed area with specially trained staff to address the unique needs of the Alzheimer's Disease and related disorders victim. The proposed Alzheimer's special care unit will incorporate special design features, patient activities and programs and higher staffing levels to meet the unique needs of the patients. The architectural design of the addition will accommodate the tendency of Alzheimer's victims to wander and will prevent inadvertent exit from the nursing home. HCR facilities, including Pasadena Manor, are subject to extensive quality assurance standards and guidelines utilized to cover all areas of operation and patient care. The level of staffing proposed for the 60-bed addition exceeds state licensure requirements, and the staffing is designed to accommodate the needs of the skilled and intermediate care patients, as well as the special needs of the Alzheimer's and subacute patients. The projected salaries and benefits are reasonable. HCR's projections of a payor mix of 45 percent Medicaid, 51 percent private pay and 4 percent Medicare are reasonable. Its fill-up and occupancy projections and its projections of revenues and expenses are also reasonable. The total project cost for the 60-bed addition to Pasadena Manor is estimated to be $2,054,000. The components making up the total are reasonable and consistent with HCR's prior experience. The entire addition, including the 2,000 square feet adult day care center, consists of approximately 24,000 square feet, providing 367 square feet per bed. Construction of an addition is more efficient and cost effective than construction of a new, free-standing facility because it will not be necessary to duplicate ancillary spaces, such as laundry and administrative areas. The current operations of Pasadena Manor will benefit from improvements in services, special programs and the high level of staffing. HCR has available the financial resources necessary to accomplish the 60-bed addition to Pasadena Manor. If HCR does not finance the project internally, it has the ability to obtain financing from a commercial lender. Its pro formas for the proposed project are reasonable and are indicative of the financial feasibility of the project both immediately and in the long term. While the addition itself would show a loss the first year of operation, the total facility would show a profit the first year. The addition would show a second year profit, as would the entire Pasadena Manor facility. VHA/Oxford Senior Living Ventures The applicant is VHA/Oxford Senior Living Ventures, d/b/a Oxford- Pinellas Nursing Associates. The joint venture partners of VHA/Oxford are VHA Development Company and Oxford Development Enterprises, Inc. No copy of the joint venture agreement between these two entities was produced at the hearing, though it is apparently a 50-50 joint venture. Oxford's parent company is Oxford Development Corporation, a national real estate services company. Oxford Development Enterprises, Inc., with offices in Maitland, Florida, has developed about 2,000 apartment units and two senior living communities in Florida. VHA Development Company is one of the many subsidiaries of VHA Enterprises, Inc. VHA Enterprises also has a consulting company, a behavioral medical care company involved in substance abuse and psychiatric care, an ambulatory services company and a long term care company (VHA Long Term Care) that develops and manages nursing homes. The parent company, VHA, Inc. (Voluntary Hospitals of America) is a for-profit cooperative owned by the VHA shareholder hospitals. There are approximately 900 hospitals nationally affiliated with VHA. The applicant VHA/Oxford proposes a 120-bed nursing home in southeastern Pinellas County in affiliation with an acute care hospital, Bayfront Medical Center, which is a VHA affiliate. The proposal contemplates that the applicant VHA/Oxford will hold the real estate and lease the nursing home to Bayfront. The only revenues to be received by the joint venture would be the lease payments. Bayfront would, according to the application, engage VHA Long Term Care to manage the facility on the hospital's behalf. Although witnesses employed by VHA Long Term Care testified that the proposed facility would be managed by VHA Long Term Care on behalf of the hospital sponsor, witnesses testifying on behalf of the applicant, the joint venture, expressed some confusion as to whether the day-to-day operation of the nursing home would be the responsibility of the leasing hospital or VHA Long Term Care. VHA Long Term Care does have a quality assurance program and a staff training program that it implements at all nursing homes managed by it. At the time of the hearing, no formal relationship between Bayfront Medical Center and the applicant was established and no lease agreement with Bayfront had been prepared. Bayfront has, however, "expressed an interest in" having a relationship with a nursing home because they are having difficulty in placing patients. Some 600 to 800 patients a year discharged from Bayfront, a 518-bed acute care hospital, are discharged to nursing homes. Approximately 47 to 50 percent of the total Medicaid patients in southeast Pinellas County are treated at Bayfront Medical Center. The advantages of operating a nursing home in conjunction with a hospital include the quick and cost-effective availability of ancillary services, such as physical therapy, speech therapy, occupational therapy, respiratory therapy and other services, as well as the ability to care for patients who require a heavier degree of care. As recognized by other applicants, VHA Long Term Care recognizes that the acuity level of patients has increased as a result of DRGs. The applicant proposes to designate 30 of its 120 beds for skilled nursing care. The present proposal by VHA/Oxford contemplates, in its first phase, to establish 30 skilled beds and 90 intermediate-level care beds within the nursing home component of the project. The second phase of the project would add independent and assisted living units to the project. While VHA/Oxford states that its proposed nursing home facility would include 12 private rooms and 54 semi-private rooms, the drawings submitted in support of its application provide for only 12 private rooms and 50 semi-private rooms, thus accommodating only 112 patients. The drawings also fail to show a toilet facility in the kitchen and showers near the nurses' stations. Four of the patient rooms do not have the twenty-foot vista required by applicable regulations. The floor plan for the nursing home is square, with an enclosed courtyard, and includes two patient care units. It will have 41,380 gross square feet, or 345 square feet per bed. The total cost of the project is estimated to be $3,579,680 or $29,830 per bed. The proposed nursing home would include traditional nursing home care, physical therapy, occupational therapy and respite care. While it will accept Alzheimer's patients, its approach is to "mainstream" (or not segregate) such patients, so that the more alert patients in the facility will assume some responsibility for the confused patients and, hopefully, slow their deterioration. It is difficult to assess the financial feasibility of the proposed project. While many of its projected revenues and expenses are similar to those of the other applicants, the witnesses called upon to establish the reasonableness of the financial projections were not familiar with nursing staff salaries in Pinellas County or with current Florida Medicaid or Medicare reimbursement. The applicant proposes that over 54 percent of its patient days will be attributable to Medicaid patients. Updated Tables 7 and 8 suffer from internal inconsistencies with regard to Medicaid and Medicare charges and revenues. There was confusion as to which years the pro formas were based upon. There appears to be an inadequate number of registered nurses available to provide 24-hour nursing coverage. The opinions offered by the applicant were based upon many unsubstantiated assumptions, such as a leasing arrangement with Bayfront Medical Center, the validity of room rates, and staffing salaries. The total project costs are considerably less than the other applicants proposing 120-bed facilities. In addition, this joint venture has never financed any project. The VHA subsidiary responsible for financing its half of the project does not have any lines of credit and has never itself financed a project. Oxford Development Corporation is experiencing some financial problems, and is presently undergoing a restructuring. The President of the VHA joint venture is not familiar with Oxford's financial statements. The applicant projects no preopening expenses in its total project cost. In any event, if the assumptions made are valid, the applicant projects a first year loss of 142,714 and a second year profit of $241,967. At the time of the hearing in this proceeding, VHA/Oxford Senior Living Venture had a preliminary approval from HRS for a 120-bed nursing home facility in Hillsborough county. This proposed facility was almost identical to the facility proposed for Pinellas County. The Senior Development Manager for Oxford Development and a member of the executive committee of the joint venture testified that the Hillsborough County Certificate of Need had not been offered for sale. When confronted with a letter written by him to National Facilities Corporation stating that "VHA/Oxford has made the decision to seek a purchaser for the [Hillsborough County] CON," the witness attempted to explain the discrepancy by stating that he was offering to sell only a completed and licensed facility. This testimony is not credible. The letter, received into evidence as CSI's Exhibit 18, clearly proposes that VHA/Oxford would transfer the CON, if awarded, at the earliest possible date following final award and certification and would seek, as compensation therefore, $400,000. It defies logic to assume that a completed and licensed facility would be sold for $400,000. The letter also offered to allow the purchaser to be in control of the appeal process. Department of Health and Rehabilitative Services Other than its counsel, no representatives from HRS attended the three and a half week-long hearing except for the time during which the two HRS witnesses provided testimony. The opinions offered by HRS's one expert health care planner were based upon the information available to him on June 18, 1987, the date upon which the State Agency Action Report (SAAR) was signed. This report encompassed a comparative review of 12 applications submitted in January of 1987 for community nursing home beds in Pinellas County and announced HRS's intent to grant four of the applications. HRS admits that the report contains errors regarding the services to be provided by some of the applicants, the licensed beds counted and the occupancy rates utilized in the need methodology, and the number of new beds sought by one applicant. At the time of the initial agency review (the SAAR) and at the time of the hearing, HRS was of the opinion that all the applicants were in substantial compliance with the State Health Plan, the District Health Plan and the applicable statutory and regulatory criteria for review of Certificate of Need applications. It was determined that all the applicants in this proceeding would increase availability and access to the services being proposed, would improve the quality of care, efficiency, appropriateness and adequacy of nursing home services in the area, would promote access to underserved groups, would provide quality care, would have sufficient manpower and financial resources to accomplish and operate the project, proposed reasonable costs and methods of construction, and would be financially feasible in the short and long-term. However, since HRS calculated the need for new nursing home beds in Pinellas County to be substantially less than the total number of beds for which these applicants were seeking, HRS proposed to grant only the Certificate of Need applications submitted by HCR (for 58 of the 60 beds), Mediplex (120 beds), Manor Care (120 beds) and VHA/Oxford (120 beds). These applicants were chosen because they were deemed the best overall, offering the most services and programs for patients and their projects were within the parameters of size and cost that HRS felt would be most suitable. In addition, at the time of initial review HRS was sensitive to criticism that only existing Florida entities were receiving Certificates of Need from HRS. Consequently, additional consideration was given to those applicants who had not previously done business in Florida and whose proposals were worthy. Throughout the hearing, counsel for HRS objected to evidence from any of the applicants regarding updates to their applications as they were deemed complete by HRS prior to its initial review. It was the position of the HRS counsel that the only appropriate evidence of changed conditions after the date the application was deemed complete are those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation add other current circumstances external to the application. The majority of the "updated" material offered by the applicants at the hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of the final hearing, changes in the marketplace regarding nursing salaries, changes in the Medicaid and Medicare reimbursement system and typographical errors in the application. Some changes in design were offered as a result of the applicants' experience with other construction projects and in order to comply with licensing regulations. There were also some changes which resulted from better information having been secured through market surveys conducted after the applications were deemed complete. None of the applicants attempted to change their planning horizon, the number of beds proposed, the proposed location of the facility or the services to be offered. As noted above, HRS's position at the time of the hearing was the same as it was at the time of the initial review and does not take into account any information not available at the time of initial review. It was the opinion of HRS's expert in health planning as it relates to Certificate of Need review that if the initial agency review (SAAR) contained errors, at least with respect to a listing of the services or programs intended to be offered by the various applicants, this would be minimal and its initial decision would not be in error. HRS did not object to evidence concerning Manor Care's redesign of its facility because HRS had conditioned its initial approval upon two-bed rooms rather than three-bed rooms. The Need for Nursing Home Beds in Pinellas County No documentation of need other than that established by the numeric need methodology set forth in Rule 10-5.011(1)(k)(1), Florida Administrative Code, was offered by any applicant. HRS normally will not approve applications for new or additional community nursing home beds in a service district if approval would cause the number of beds in that district to exceed the number calculated by use of the rule methodology. It is the appropriate application of the formula, along with the issue of the applicability of Florida Statutes, Section 381.713(4), which produced a range of expert opinion regarding the number of beds needed in Pinellas County. The range was from a low of 440 beds to a high of 860 beds needed in Pinellas County for the planning horizon of January, 1990. In its application of the numeric need formula, HRS initially determined a need for 434 new beds. Shortly before the hearing, HRS changed its opinion and found a need for 391 beds. At the hearing, HRS found a need For 440 beds. The various changes resulted from an adjustment in the number of licensed beds to include sheltered beds which were converted to community beds by Chapter 651, Florida Statutes, and to exclude beds in a Christian Science facility, and a revision of the occupancy rate utilized in the formula. The evidence supports the HRS final revisions of these two components of the formula, and establishes that the overall number of beds needed in Pinellas County for January of 1990 is 8,292. From this figure, the number of licensed beds and 90 percent of the number of approved beds must be subtracted in order to determine the net bed need. The evidence establishes that, as of December 1, 1986, there were 7,394 licensed beds in Pinellas County. The dispute in this proceeding concerns the appropriate number of approved beds to be counted. Rule 10-5.011(1)(k), Florida Administrative Code, is silent as to the cutoff date for counting approved beds. HRS interprets the rule to use the date that the supervisor signs the State Agency Action Report as the cutoff date for counting the number of approved beds. In counting approved beds, HRS included an approved Certificate of Need for 60 beds granted to Careage (CON No. 4691). Based upon the testimony of HRS's expert health planner as to the definition of an "approved" bed, the 60 beds awarded to Careage should not have been counted as approved beds. The witness stated that in order for approved but unlicensed beds to be included in the bed need calculation, the Certificate of Need authorizing such beds must have been "received" at the time that the supervisor signed off on the State Agency Action Report. "Approved" beds to be counted were further described as those "which have been issued their Certificate of Need," those "which have received initial approval," those for which HRS "has entered into stipulated agreements," and those "which have final orders." The series of events regarding Careage's CON Number 4691 are as follows: In the January 23, 1987, edition of the Florida Administrative Weekly, HRS published notice that on January 7, 1987, it had made a decision to grant a Certificate of Need to Careage to construct a 60-bed nursing home in Pinellas County. The evidence demonstrates that the "decision to grant" was simply a tentative or proposed decision, and that such a decision was internally reviewed by HRS subsequent to January 7, 1987. Indeed, the CON to Careage was not "issued" until July 30, 1987. The State Agency Action Report stating the basis for the approval of CON 4691 was not issued until August of 1987, and the CON was not actually transmitted to Careage until September of 1987. It is the practice of HRS, as apparently required by Rule 10-5.010, Florida Administrative Code, to provide its notice of intent to issue or deny a Certificate of Need through the vehicle of the State Agency Action Report. Thus, Careage had not "received initial approval," and the Careage 60-bed Certificate of Need was not received, issued, the subject of a stipulated settlement or a final order as of the date the State Agency Action Report was prepared in this proceeding, which was June 18, 1987. The 60 beds awarded to Carriage should not have been included in the inventory of "approved" beds with respect to the January, 1987, batching cycle. Certificates of Need Numbers 2379, 2976 and 2978, each for 120-bed nursing home facilities in Pinellas County, were issued by HRS prior to February 14, 1986. Each of the three CON holders had expended at least $50,000 in reliance upon their CONs prior to June 16, 1987. A petition challenging the validity of CONs 2379, 2976 and 2978 was filed with HRS on June 16, 1987. None of the beds authorized by such CONs were licensed as of June 17, 1987. According to Section 381.713(4), Florida Statutes (1987), these 360 beds should not have been considered or utilized in the determination of need or included in the inventory of approved nursing home beds by HRS. HRS's rationale for including the 360 beds as "approved" beds was that the petition challenging their validity was not "effective" for purposes of Section 381.713(4) because it was dismissed by HRS as being untimely and was never referred to the Division of Administrative Hearings. This interpretation of the statute was not sufficiently explicated by HRS at the hearing. It is clear from a reading of the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA, 1986), and subsequent cases holding that later-batched applicants should have availed themselves of the proper remedy of challenging previously-issued CONS belatedly, as well as the language of Section 381.713(4), that the "initiation of proceedings" referred to in the new statute was intended to refer to petitions which HRS viewed as "untimely." Another reason for excluding the beds approved by CONS 2379, 2976 and 2978 from the inventory of approved beds for this batching cycle is the stipulation by HRS in Hillhaven, et al. v. DHRS, (DOAH Case No. 86-0132) that once Section 381.713(4) is applied in a given subdistrict, it must be similarly applied in every review cycle in that subdistrict up through and including the January, 1987, review cycle. This recognition has been applied by HRS in at least two other cases -- Forum Group , Inc. v. DHRS (DOAH Case No. 87-0722) and Manor Care, Inc., et al. v. DHRS (DOAH Case No. 87-3471). In order to accept the testimony presented by HRS that Section 381.713(4) has never been applied in Pinellas County, one would have to assume that HRS grants Certificates of Need in a vacuum and without reference to the bed need calculation rule. Without unduly lengthening this Recommended Order by a discussion of the events which led to a settlement in the case of Imperial Palms Apartments, et al. v. DHRS (DOAH Case No. 85-2639), it is found that HRS's settlement of that case was in fact based upon the recognition that Section 381.713(4) required exclusion of CONS 2379, 2976 and 2978 for purposes of need calculations under Rule 10- 5.011(1)(k), Florida Administrative Code. (For an accurate discussion of the facts involved in the Imperial Palms proceeding, see the Recommended Order entered on October 18, 1988, by Hearing Officer Linda M. Rigot in Health Quest Corporation, d/b/a Regents Park of Dade County v. DHRS, DOAH Case No. 86-1351.) Having once applied Section 381.713(4) to Pinellas County, HRS is bound to apply it in this January, 1987, review cycle. Accordingly, the 360 beds must be excluded from the inventory of approved beds. The number of additional community nursing home beds needed in Pinellas County for the planning horizon of January, 1990, is 818. This figure is derived by an acceptance of HRS's calculation of bed need under the formula up to the calculation of the appropriate number of "approved" beds. The Careage CON (60 beds) and CONs No. 2379, 2976 and 2978 (360 beds) should be excluded from the inventory of approved beds, leaving 78 beds to be counted as approved. After adding the number of licensed beds and 90 percent of the number of approved beds existing in Pinellas County, and subtracting that number from the total bed need in the County, there is a net need for 818 beds.
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that Certificates of Need for the establishment of community nursing home beds in Pinellas County be GRANTED to HCR for 60 beds, Manor Care for 120 beds, Forum for 120 beds, Florida Country Place for 14 new beds and 16 transfer beds, CSI for 120 beds, Mediplex for 120 beds, and Health Quest for 180 beds. It is further RECOMMENDED that the application of VHA/Oxford for 120 beds be DENIED. Respectfully submitted and entered this 3rd day of November, 1988, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3447, 87-3448, 87-3449, 87-3453, 87-3455, 87-3456, 87-3463, and 87-3465 The proposed findings of fact submitted by each of the parties have been carefully considered and are accepted, incorporated and/or summarized in this Recommended Order, with the following exceptions: Health Quest 63. Rejected insofar as the evidence demonstrates that Health Quest is selling or transfering 3 of its Florida nursing home CONs. Rejected as to individual line items. Rejected factually as unsupported by competent, substantial evidence (but see Conclusions of law regarding financial feasibility.) 140. Rejected as contrary to the greater weight of the evidence. 149. Second sentence rejected as unsupported by the evidence. All but first sentence rejected as improper factual findings. Last sentence rejected as unsupported by competent, substantial evidence. 162. Last sentence rejected as argumentative. 176. Second sentence rejected as unsupported by competent, substantial evidence. Figure $3(0,000 rejected as unsupported by the evidence. Rejected. See Conclusions of Law. Florida Country Place 51. Rejected as to range of need. See Finding of Fact 68. 58. Rejected as an improper factual finding. Forum 20. Rejected. See Finding of Fact 73. CSI 19(i) Accepted, with the exception of CSI's Tallahassee facility. 47. The words "do better" rejected as unsupported by the greater weight of the evidence. 120. As noted in Finding of Fact 57, there was some discrepancy in the testimony as to which entity would manage the day-to-day operations of the facility. Mediplex 7. Second sentence rejected as unsubstantiated by competent evidence. See Findings of Fact 41 and 42. 11. Rejected. See Finding of Fact 42. 13, 18, and 21 - 23. Rejected. See Findings of Fact 41 and 42. 43. Accepted, except with regard to toilet facilities in kitchen. 63. Rejected as unsupported by substantial competent evidence. 71. Last sentence rejected as unsupported by the evidence. Partially rejected. See discussion in Conclusions of Law regarding preliminary plans or drawings. Rejected as contrary to the evidence. 97. Rejected as contrary to the evidence. Manor Care 129 - 131. Rejected. See Findings of Fact 68 - 73. HCR 4 and 9. Rejected as to the number of beds awarded to Careage; contrary to the evidence. VHA/Oxford 12. Figure of 860 rejected. See Finding of Fact 73. 14 and 42. As noted in Finding of Fact 57, there was some discrepancy in the testimony as to which entity would manage the day-to-day operations of the facility. 30. The number of private rooms on the floor-plan is rejected as contrary to the evidence. 50. Rejected as not supported by competent substantial evidence. 56. Rejected. The testimony demonstrates 600 to 800 patients. 59. Rejected. The evidence demonstrates that the total project cost is $3,579,680. 63 - 66. Rejected as not sufficiently established by the evidence of record. 73. Rejected if the statements are intended to apply to salaries in Pinellas County. 76 and 78. Last sentences rejected as unsupported by competent substantial evidence 81. Accepted only if other assumptions in pro formas are reasonable. 87. Rejected as an improper factual finding. 90. The words "tremendous" and "terrible hindrance" are rejected as unsupported by competent substantial evidence. First sentence rejected as unsupported by the evidence. Rejected insofar as it is intended to imply that review of other applications did occur. HRS 6 - 9. Rejected. See Findings of Fact 68 - 73. Rejected insofar as it purports to state anything other than HRS's position in this proceeding. (the first 14) Factually accepted, but irrelevant to the application at issue. 15 - 38. The changes stated are factually accepted; however, see Finding of Fact 66 and discussion of "updates" in Conclusions of Law. COPIES FURNISHED: Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 R. S. Powers, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Douglas L. Mannheimer, Esquire Sandra P. Stockwell, Esquire 820 East Park Avenue, Bldg. F Tallahassee, Florida 32301 R. Terry Rigsby, Esquire J. David Holder, Esquire 325 John Knox Road Suite C-135 Tallahassee, Florida 32303 W. David Watkins, Esquire Harold F. X. Purnell, Esquire Post Office Box 6507 Tallahassee, Florida 32314 Karen L. Goldsmith, Esquire Jonathan S. Grout, Esquire Post Office Box 10651 Tallahassee, Florida 32302 James C. Hauser, Esquire Joy Heath Thomas, Esquire 215 South Monroe Street Suite 701 Tallahassee, Florida 32301 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Paul Amundsen, Esquire Guy Collier, Esquire Byron E. Mathews, Esquire Vicki Kaufman, Esquire 700 Brickell Avenue Miami, Florida 33131-2802 Edgar Lee Elzie, Esquire 215 South Monroe Street Suite 804 Tallahassee, Florida 32301
The Issue The issues for determination are: (1) whether the noncompliance as alleged during the August 30, 2001, survey and identified as Tags F324 and F242, were Class II deficiencies; (2) whether the "Conditional" licensure status, effective August 30, 2001, to September 30, 2001, based upon noncompliance is appropriate; and (3) whether a fine in the amount of $5,000 is appropriate for the cited noncompliance
Findings Of Fact Charlotte is a nursing home located at 5405 Babcock Street, Northeast, Fort Myers, Florida, with 180 residents and is duly licensed under Chapter 400, Part II, Florida Statutes. AHCA is the state agency responsible for evaluating nursing homes in Florida pursuant to Section 400.23(7), Florida Statutes. As such, in the instant case it is required to evaluate nursing homes in Florida in accordance with Section 400.23(8), Florida Statutes (2000). AHCA evaluates all Florida nursing homes at least every 15 months and assigns a rating of standard or conditional to each licensee. In addition to its regulatory duties under Florida law, AHCA is the state "survey agency," which, on behalf of the federal government, monitors nursing homes that receive Medicaid or Medicare funds. On August 27 through 30, 2001, AHCA conducted an annual survey of Charlotte's facility and alleged that there were deficiencies. These deficiencies were organized and described in a survey report by "Tags," numbered Tag F242 and Tag F324. The results of the survey were noted on an AHCA form entitled "Statement of Deficiencies and Plan of Correction." The parties refer to this form as the HCFA 2567-L or the "2567." The 2567 is the document used to charge nursing homes with deficiencies that violate applicable law. The 2567 identified each alleged deficiency by reference to a Tag number. Each Tag on the 2567 includes a narrative description of the allegations against Charlotte and cites a provision of the relevant rule or rules in the Florida Administrative Code violated by the alleged deficiency. To protect the privacy of nursing home residents, the 2567 and this Recommended Order refer to each resident by a number (i.e., Resident 24) rather than by the name of the resident. AHCA must assign a class rating of I, II or III to any deficiency that it identifies during a survey. The ratings reflect the severity of the identified deficiency, with Class I being the most severe and Class III being the least severe deficiency. There are two Tags, F242 and F324 at issue in the instant case, and, as a result of the August 2001 survey, AHCA assigned each Tag a Class II deficiency rating and issued Charlotte a "Conditional" license effective August 30, 2001. Tag F242 Tag F242 generally alleged that Charlotte failed to meet certain quality of life requirements for the residents, based on record review, group interviews, and staff interviews, and that Charlotte failed to adequately ensure that the residents have a right to choose activities that allow them to interact with members of the community outside the facility. On or about August 24, 2001, AHCA's surveyors conducted group interviews. During these interviews, 10 of 16 residents in attendance disclosed that they had previously been permitted to participate in various activities and interact with members of the community outside the facility. They were permitted to go shopping at malls, go to the movies, and go to restaurants. Amtrans transportation vans were used to transport the residents to and from their destinations. The cost of transportation was paid by Charlotte. An average of 17 to 20 residents participated in those weekly trips to dine out with other community members at the Olive Garden and other restaurants. During those trips, Charlotte would send one activity staff member for every four to six residents. The record contains no evidence that staff nurses accompanied those select few residents on their weekly outings. The outings were enjoyed by those participants; however, not every resident desired or was able to participate in this particular activity. Since 1985, outside-the-facility activities had been the facility's written policy. However, in August 2000, one year prior to the survey, Matthew Logue became Administrator of the facility and directed his newly appointed Activities Director, Debbie Francis, to discontinue facility sponsored activities outside the facility and in its stead to institute alternative activities which are all on-site functions. Those residents who requested continuation of the opportunity to go shopping at the mall or dine out with members of the community were denied their request and given the option to have food from a restaurant brought to the facility and served in-house. The alternative provided by the facility to those residents desiring to "interact with members of the community outside the facility" was for each resident to contact the social worker, activity staff member, friends or family who would agree to take them off the facility's premises. Otherwise, the facility would assist each resident to contact Dial-A-Ride, a transportation service, for their transportation. The facility's alternative resulted in a discontinuation of all its involvement in "scheduling group activities" beyond facility premises and a discontinuation of any "facility staff members" accompanying residents on any outing beyond the facility's premises. As described by its Activities Director, Charlotte's current activities policy is designed to provide for residents' "interaction with the community members outside the facility," by having facility chosen and facility scheduled activities such as: Hospice, yard sales, barbershop groups for men and beautician's day for women, musical entertainment, antique car shows, and Brownie and Girl Guides visits. These, and other similar activities, are conducted by "community residents" who are brought onto the facility premises. According to the Activities Director, Charlotte's outside activities with transportation provided by Amtrans buses were discontinued in October of 2000 because "two to three residents had been hurt while on the out trip, or on out-trips."1 Mr. Logue's stated reason for discontinuing outside activities was, "I no longer wanted to take every member of the activities department and send them with the resident group on an outing, thereby leaving the facility understaffed with activities department employees." The evidence of record does not support Mr. Logue's assumption that "every member of the facility's activities department accompanied the residents on any weekly group outings," as argued by Charlotte in its Proposed Recommended Order. Charlotte's Administrator further disclosed that financial savings for the facility was among the factors he considered when he instructed discontinuation of trips outside the facility. "The facility does not sponsor field trips and use facility money to take people outside and too many staff members were required to facilitate the outings." During a group meeting conducted by the Survey team, residents voiced their feelings and opinions about Charlotte's no longer sponsoring the field trips on a regular basis in terms of: "feels like you're in jail," "you look forward to going out," and being "hemmed in." AHCA's survey team determined, based upon the harm noted in the Federal noncompliance, that the noncompliance should be a State deficiency because the collective harm compromised resident's ability to reach or maintain their highest level of psychosocial well being, i.e. how the residents feel about themselves and their social relationships with members of the community. Charlotte's change in its activities policy in October of 2000 failed to afford each resident "self- determination and participation" and does not afford the residents the "right to choose activities and schedules" nor to "interact with members of the community outside the facility." AHCA has proved the allegations contained in Tag F242, that Charlotte failed to meet certain quality of life requirements for the residents' self-determination and participation. By the testimonies of witnesses for AHCA and Charlotte and the documentary evidence admitted, AHCA has proven by clear and convincing evidence that Charlotte denied residents the right to choose activities and schedules consistent with their interests and has failed to permit residents to interact with members of the community outside the facility. Tag F324 As to the Federal compliance requirements, AHCA alleged that Charlotte was not in compliance with certain of those requirements regarding Tag F324, for failing to ensure that each resident receives adequate supervision and assistance devices to prevent accidents. As to State licensure requirements of Sections 400.23(7) and (8), Florida Statutes (2000), and by operation of Florida Administrative Code, Rule 59A-4.1288, AHCA determined that Charlotte had failed to comply with State established rules, and under the Florida classification system, classified Tag F324 noncompliance as a Class II deficiency. Based upon Charlotte's patient record reviews and staff interviews, AHCA concluded that Charlotte had failed to adequately assess, develop and implement a plan of care to prevent Resident 24 from repeated falls and injuries. Resident 24 was admitted to Charlotte on April 10, 2001, at age 93, and died August 6, 2001, before AHCA's survey. He had a history of falls while living with his son before his admission. Resident 24's initial diagnoses upon admission included, among other findings, Coronary Artery Disease and generalized weakness, senile dementia, and contusion of the right hip. On April 11, 2001, Charlotte staff had Resident 24 evaluated by its occupational therapist. The evaluation included a basic standing assessment and a lower body assessment. Resident 24, at that time, was in a wheelchair due to his pre-admission right hip contusion injury. On April 12, 2001, two days after his admission, Resident 24 was found by staff on the floor, the result of an unobserved fall, and thus, no details of the fall are available. On April 23, 2001, Resident 24 was transferred to the "secured unit" of the facility. The Survey Team's review of Resident 24's Minimum Data Set, completed April 23, 2001, revealed that Resident 24 required limited assistance to transfer and to ambulate and its review of Resident 24's Resident Assessment Protocols (RAPs), completed on April 23, 2001, revealed that Resident 24 was "triggered" for falls. Charlotte's RAP stated that his risk for falls was primarily due to: (1) a history of falls within the past 30 days prior to his admission; (2) his unsteady gait; (3) his highly impaired vision; and (4) his senile dementia. On April 26, 2001, Charlotte developed a care plan for Resident 24 with the stated goal that the "[r]esident will have no falls with significant injury thru [sic] July 25, 2001," and identified those approaches Charlotte would take to ensure that Resident 24 would not continue falling. Resident 24's care plan included: (1) place a call light within his reach; (2) do a falls risk assessment; (3) monitor for hazards such as clutter and furniture in his path; (4) use of a "Merry Walker" for independent ambulation; (5) placing personal items within easy reach; (6) assistance with all transfers; and (7) give Resident 24 short and simple instructions. Charlotte's approach to achieving its goal was to use tab monitors at all times, to monitor him for unsafe behavior, to obtain physical and occupational therapy for strengthening, and to keep his room free from clutter. All factors considered, Charlotte's care plan was reasonable and comprehensive and contained those standard fall prevention measures normally employed for residents who have a history of falling. However, Resident 24's medical history and his repeated episodes of falling imposed upon Charlotte a requirement to document his records and to offer other assistance or assistive devices in an attempt to prevent future falls by this 93-year-old, senile resident who was known to be "triggered" for falls. Charlotte's care plan for Resident 24, considering the knowledge and experience they had with Resident 24's several falling episodes, failed to meet its stated goal. Charlotte's documentation revealed that Resident 24 did not use the call light provided to him, and he frequently refused to use the "Merry Walker" in his attempts of unaided ambulation. On June 28, 2001, his physician, Dr. Janick, ordered discontinuation of the "Merry Walker" due to his refusal to use it and the cost involved. A mobility monitor was ordered by his physician to assist in monitoring his movements. Charlotte's documentation did not indicate whether the monitor was actually placed on Resident 24 at any time or whether it had been discontinued. Notwithstanding Resident 24's refusal to cooperatively participate in his care plan activities, Charlotte conducted separate fall risk assessments after each of the three falls, which occurred on April 12, May 12, and June 17, 2001. In each of the three risk assessments conducted by Charlotte, Resident 24 scored above 17, which placed him in a Level II, high risk for falls category. After AHCA's surveyors reviewed the risk assessment form instruction requiring Charlotte to "[d]etermine risk category and initiate the appropriate care plan immediately," and considered that Resident 24's clinical record contained no notations that his initial care plan of April 23, 2001, had been revised, AHCA concluded that Charlotte was deficient. On May 13, 2001, Dr. Janick visited with Resident 24 and determined that "there was no reason for staff to change their approach to the care of Resident 24." Notwithstanding the motion monitors, on June 17, 2001, Resident 24 fell while walking unaided down a corridor. A staff member observed this incident and reported that while Resident 24 was walking (unaided by staff) he simply tripped over his own feet, fell and broke his hip. Charlotte should have provided "other assistance devices," or "one-on-one supervision," or "other (nonspecific) aids to prevent further falls," for a 93-year-old resident who had a residential history of falls and suffered with senile dementia. Charlotte did not document other assistive alternatives that could have been utilized for a person in the condition of Resident 24. AHCA has carried its burden of proof by clear and convincing evidence regarding the allegations contained in Tag F324.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Agency enter a final order upholding the assignment of the Conditional licensure status for the period of August 30, 2001 through September 30, 2001, and impose an administrative fine in the amount of $2,500 for each of the two Class II deficiencies for a total administrative fine in the amount of $5,000. DONE AND ENTERED this 13th day of February, 2003, in Tallahassee, Leon County, Florida. FRED L. BUCKINE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of February, 2003.
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.
The Issue Whether Respondent committed deficient practices as alleged in violation of 42 C.F.R. Section 483.13(b) and 42 C.F.R. Section 483.13(c)(1)(ii), adopted by reference in Florida Administrative Code Rule 59A-4.1288; and if so, whether Petitioner should impose a civil penalty in the amount of $5,000 and issue a conditional license to Respondent.
Findings Of Fact Petitioner is the state agency charged with licensing and regulating nursing homes in Florida under state and federal statutes. Petitioner is charged with evaluating nursing homes facilities to determine their degree of compliance with established rules as a basis for making the required licensure assignment. Additionally, Petitioner is responsible for concluding federally-mandated surveys of those long-term care facilities receiving Medicare and Medicaid funds for compliance with federal statutory and rule requirements. These federal requirements are made applicable to Florida nursing home facilities. Pursuant to the statute, Petitioner must classify deficiencies according to the nature and scope of the deficiency when the criteria established under the statute are not met. The classification of any deficiencies discovered is determinative of whether the licensure status of a nursing home is "standard" or "conditional." Respondent is a 98-bed nursing home located at 1024 Willow Springs Drive, Winter Springs, Florida, and is licensed as a skilled nursing facility. On May 30, 2003, Petitioner's staff conducted an inspection, also known as a survey, at Respondent's facility. Upon completion of the survey, Petitioner issued a document entitled, Center for Medicare and Medicaid Services, CMS Form 2567L, also known as a "2567," which contains a statement of the alleged violations of regulatory requirements, also referred to as "deficiencies," titled "Statement of Deficiencies and Plan of Correction." The evaluation or survey of a facility includes a resident review and, depending upon the circumstances, may consist of a record, reviews, resident observations, and interviews with family and facility staff. Surveyors note their findings on the 2567 Form, and if violations of regulations are found, the violations are noted and referred to as "Tags." A tag identifies the applicable regulatory standard that the surveyors believe has been violated, provides a summary of the violation, sets forth specific factual allegations that they believe support the violation, and indicates the federal scope and severity of the noncompliance. Petitioner's surveyors use the "State Operations Manual," a document prepared by the United States Department of Health and Human Services, Center for Medicare and Medicaid Services, as guidance in determining whether a facility has violated 42 C.F.R. Chapter 483. Count I In Count I of the Administrative Complaint, Petitioner alleges that Respondent's staff subjected three residents (Resident Nos. 6, 13, and 18) to verbal and mental abuse in violation of 42 C.F.R. Section 483.13(b), which provides that a nursing home resident has the right to be free from verbal and mental abuse. As to Resident No. 6, Petitioner contends that this resident stated to a surveyor that the resident had "overheard" a certified nursing assistant (CNA) loudly tell another staff member that the resident was "going to the bathroom 25 times a day." Petitioner believes the CNA's statement, which was allegedly "overheard," occurred sometime during the month of March 2003, based upon nurses' notes which indicate Resident No. 6 had an episode of diarrhea during this time. However, the nurses notes also reveal that during this time Resident No. 6 was subject to confusion and nonsensical outbursts. Petitioner's belief that Resident No. 6 was a reliable historian is based on Petitioner's mistaken belief that Resident No. 6 was admitted about March 30, 2003, and was alert and oriented and not confused upon admission. Petitioner's staff exhibited a lack of understanding of the timing and significance of the Multiple Data Set (MDS) forms describing Resident No. 6's mental condition upon which they relied. In fact, Resident No. 6 was admitted in mid-February 2003 and exhibited confused and eccentric behavior. The "overheard" comment was not reported to Respondent until the survey. Therefore, the evidence that this incident occurred as described by Petitioner is unreliable hearsay. Surveyors reviewed Respondent's records, which contained a complaint from a family member of Resident No. 6 that the same CNA had noticed that the resident had a physical anomaly. The CNA called other CNAs to view this anomaly, which was located in Resident No. 6's genital area. Respondent learned of the allegations relating to Resident No. 6's physical anomaly on April 21, 2003, from a family member of Resident No. 6. Respondent immediately began an investigation, including an interview with and physical examination of Resident No. 6 and an interview with the CNA. The resident only stated that she did not want this CNA taking care of her any longer. The CNA denied the allegations. The CNA was suspended pending investigation and later terminated based upon directions from Respondent's corporate office based on additional, unrelated information. The incident was reported to the Department of Children and Families (DCF) Abuse Hot Line on April 22, 2003. Although Resident No. 6 and her family member had frequent contact and conversation with Respondent's director of nursing (DON), neither had ever complained about the CNA's conduct. Respondent's DON observed no mental distress on the part of Resident No. 6 after Respondent's DON learned of the allegations. Petitioner alleges that this CNA had observed the physical anomaly for the first time. If that is true, it would be expected that the CNA would consult other nursing staff to address potential nursing issues. As to Resident No. 13, Petitioner alleges verbal abuse based upon the allegation that Resident No. 13 reported to a surveyor that she found a male resident sitting on her bed in her room. When this was reported by Resident No. 13 to one of the Respondent's nurses, the resident alleged that the nurse "laughed at" the resident. This incident was reported by Resident No. 13 to Respondent's DON shortly after it happened. Respondent's DON interviewed the resident and the two nurses who were on duty at the time. The nurses reported that they assured Resident No. 13 that everything was okay, escorted the male resident to his room, and Resident No. 13 went to bed with no complaint or distress. This incident was reported by Resident No. 13 to Respondent's DON in a joking manner, as an event and not as a complaint. Although Respondent's DON was concerned that the nurses should respond appropriately and was also concerned that the wandering resident be identified, Respondent's DON did not believe that the incident constituted any form of abuse. Respondent's DON did not observe this incident to have any adverse impact on Resident No. 13. During the survey, Petitioner's surveyor advised Respondent that the incident should have been investigated and reported to the DCF Abuse Hot Line. Respondent's DON completed a written report and called the DCF Abuse Hot Line and related the incident. The incident did not meet the DCF guidelines for the reporting of abuse. On or about March 30, 2003, two surveyors observed Resident No. 18 in her wheelchair as she approached the nurse's station. One of Respondent's nursing staff spoke in a "curt, loud voice" to Resident No. 18. The resident had approached the nurses' station to ask for her medication, to which the nurse replied: "I told you I will give you your medicine." Resident No. 18 was hearing-impaired and was documented in her medical record as one to whom staff "must speak loudly." This resident did not wear any hearing assistance devices. Respondent's staff credibly described this resident as one to whom staff had to speak loudly and in clipped words for the resident to understand. Petitioner's surveyors did not speak to this resident after the alleged incident. There is no evidence that this incident had any effect on the resident or even that the resident heard the staff member. The incident does not rise to the level of verbal abuse of the resident. Count II Count II of the Administrative Complaint alleges a violation of 42 C.F.R. Section 483.13(c)(1)(ii), which provides that a nursing home must develop and implement written policies and procedures that prohibit mistreatment, neglect, and abuse; and that the nursing home must not employ individuals who have been found guilty of abuse or neglect or are listed in the state nursing aide registry with a finding of abuse, neglect, or mistreatment. Count II is based on the allegation that Respondent failed to report to Petitioner (the appropriate "state agency") the incidents involving Resident No. 13 and 18 and other allegations of abuse or neglect, which the surveyor allegedly identified in Respondent's log of grievances. Respondent has in place written policies and procedures regarding abuse and neglect and its staff receive regular training regarding these policies and procedures. Petitioner has offered no evidence that these written policies and procedures or the staff's knowledge of these policies and procedures is inadequate. With regard to Resident No. 13, when Respondent's DON learned of the incident from the resident, Respondent's DON made inquiries of nursing staff who were on duty at the time, in addition to interviewing the resident. Respondent's DON did not consider any aspect of the incident to constitute abuse or neglect. Later, after Petitioner alleged, during the survey, that the incident should have been reported to DCF, Respondent's DON prepared a written report of the incident and called and related the incident to the DCF Abuse Hot Line. Respondent's DON was advised by DCF that the incident did not meet DCF's requirements for reporting. Respondent is required to report all allegations of abuse and neglect to the DCF's Abuse Hot Line. Petitioner does not dispute this fact. Instead, Petitioner contends that Respondent is also required to report allegations of abuse and neglect to the "state agency" and that Respondent failed to do so. The "state agency" for the purpose of federal regulations is Petitioner. Petitioner's allegations are based upon its review of Respondent's grievance log, which Petitioner's surveyors say allegedly records 18 incidents of alleged abuse, none of which was reported to the state agency. At the time of the survey, Respondent was a part of the Mariner Corporation. It has since disassociated from that corporation and changed its name to Tuskawilla Nursing and Rehabilitation Center, effective October 1, 2003. At the time of the survey, all reporting of abuse allegations were done by the corporate regional risk management department, and it is not known if they reported any of the incidents cited by the surveyors to Petitioner. However, the document received in evidence, which has many more than 18 entries in summary style, is almost completely illegible. Petitioner's witness was unable to identify any entries on this document which could be identified as alleged abuse and which had not been properly reported. Understanding this document requires substantial explanation, which was never provided. Standing alone, this document is not probative of any fact. Petitioner offered no evidence that Respondent employed any individuals who had been found guilty of or who had been listed on the nurse aide registry of abusing, neglecting, or mistreating residents. Even if it is assumed that Respondent should have reported but did not report to Petitioner the 18 alleged incidents or the incident regarding Resident No. 13, Petitioner offered no evidence that reporting this information to DCF, but not to Petitioner, had any impact on any resident or prevented a resident from maintaining or achieving the resident's highest practicable physical, mental, or psychosocial well-being. Count III Since there is no proof of Class II deficiencies, there is no basis for imposing a conditional license status on Respondent for the period May 30, 2003, until July 8, 2003.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that a final order of dismissal of the Administrative Complaint be entered in this case. DONE AND ENTERED this 31st day of March, 2004, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 2004. COPIES FURNISHED: Alfred W. Clark, Esquire 117 South Gadsden Street, Suite 201 Post Office Box 623 Tallahassee, Florida 32302-0623 Gerald L. Pickett, Esquire Agency for Health Care Administration Sebring Building, Suite 330K 525 Mirror Lake Drive, North St. Petersburg, Florida 33701 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
Findings Of Fact In April, 1984, the Petitioner, Health Care and Retirement Corporation of America d/b/a Heartland of Palm Beach, applied for a certificate of need for 120 community nursing home beds in Palm Beach County, Florida. In July, 1984, the Respondent, the Department of Health and Rehabilitative Services (HRS) gave notice of initial intention to deny the application. HRS Exhibit 5. The instant proceedings are the result of the request of the Petitioner for a formal administrative hearing from that denial. On January 22, 1986, the parties jointly moved for a continuance of the final hearing in this case then scheduled to commence on February 3, 1986, and in paragraphs 3 through 6, represented that the purpose of the requested continuance was to allow the Petitioner to gather data as to two alleged underserved groups: patients suffering from Alzheimer's disease and sub-acute care patients. The Petitioner asserted that such data would support an amended, updated application for certificate of need to be filed by the Petitioner for the purpose of showing need pursuant to the special exception allowed in the rules. In paragraph 8 of the motion, HRS agreed to give serious consideration to the updated application and supporting documents. The motion was granted by order dated February 3, 1986, and at the request of both parties, the final hearing was reset for April 3, 1986. The parties have agreed that all statutory and rule criteria have been satisfied by the Petitioner in this case except for the issue of need as determined by rule 10-5.11(21), Florida Administrative Code, and that question is the sole issue in this case. T. 5; Hearing Officer Exhibit 1. Petitioner's initial application did not mention the intention to provide special services for victims of Alzheimer's disease, and the Petitioner did not amend or update its application with HRS in that respect, except to the extent that it presented such testimony in the formal administrative hearing. T. 104. The application is not in evidence. The initial review of Petitioner's application by HRS did not consider special services to Alzheimer's patients. T. 117; HRS Exhibit 5. HRS has adopted rule 10-5.11(21), Florida Administrative Code, to determine need for additional community nursing home beds. Using a planning horizon of 1987, which is 3 years after the date of application, the rule calculates a net surplus of 511 community nursing home beds for Palm Beach County. Even using the 1989 planning horizon, there is still a net zero bed need using the rule formula for Palm Beach County. T. 100; HRS Exhibit 2; T. 97 and 102. Alzheimer's disease is a degenerative process of the brain characterized primarily by loss of memory and impairment of a variety of routine functions. T. 160-161. Diagnosis of the disease is difficult since there are related degenerative mental disorders. Moreover, positive diagnosis typically requires examination of brain tissue, and the process of obtaining brain tissue is intrusive. T. 162-163. For these reasons, the diagnosis is typically of "senile dementia of the Alzheimer-type," or Alzheimer's disease or related disorders. T. 163. The cause of the condition is not known, although research into possible surgical techniques to ameliorate the effects is being conducted in the Jupiter, Florida, area. T. 73. Alzheimer's disease primarily afflicts elderly persons, although some younger persons may also be victims. T. 163. Person suffering from Alzheimer's disease typically have memory loss, communicative problems, aphasia, trouble understanding, confusion, disorientation, inability to recognize care givers, waking at night, interrupting the care giver's sleep, wandering, mealtime problems, inappropriate sexual activity, incontinence, and social disfunctions. T. 184. Such persons exhibit negative behavior such as resistence to care, demanding, aggression, anger, emotional outbursts due to inability to perform routine tasks, and delusions. Id. Four stages of progressive degeneration are expected with Alzheimer's disease. The first is forgetfulness and loss of ability to perform complex tasks which formerly could be performed. In the second stage, communication problems occur and also loss of memory as to the names of common objects. Wandering and becoming lost also may occur. Stage three is characterized by physical deterioration such as loss of weight, incontinence, and loss of control of other bodily functions. In the fourth stage, a patient will become unable to communicate at all, and may become comatose and bedridden. The course of the disease is from 12 to 16 years or longer and can involve many of the problems described above. T. 217-218. A family member is usually the person first required to provide care for an Alzheimer's victim. T. 165. The responsibilities caused by such care, and the manner in which the symptoms of Alzheimer's disease are exhibited, cause the family care-giver to feel trapped, fatigued, depressed, angry, resentful, and frustrated. T. 167. At times, the family care-giver is elderly and can suffer health problems from the responsibility. T. 82-83. The burden upon the family member can be alleviated by day care, which involves care only during the day, and respite care, which can involve overnight care for several days. T. 167, 147-148. Day care and respite care can also serve the function of establishing a relationship with staff and collection of data and records, both of which become useful for the time when the patient's disease progresses to the point that continuous inpatient care is required. T. 83, 220-223. Alzheimer's patients in a nursing home need special care directed toward their particular disability described above. Of primary concern is that the nursing home be structured to provide an environment that minimizes confusion and compensates for the disabilities of the Alzheimer's disease victim. Separation from other elderly residents, who are not cognitively impaired, is important to prevent confusion of the Alzheimer's patient and to protect the other residents from disruptive intrusions. The physical facility should be constructed and furnished so as to minimize confusion and stimulation. Colors should be subdued, flooring should not mute the sound of footsteps, patterns should not be used, and common appliances should have distinguishing shapes and be clearly identified or labeled. Spaces for quiet and for wandering should be provided. Features to compensate for forgetfulness, such as lights which automatically turn on when a door is opened, should be provided. T. 219- 227, 57-58, 63-64, 81. Staffing must be trained to recognize and help alleviate problems that arise from behavior caused by Alzheimer's disease. T. 74-75, 234- 235, 80, 83-84. Finally, since Alzheimer's disease patients become upset with change due to recognition and memory impairment, continuity of care (staffing and physical surroundings) becomes important. T. 221, 223, 78, 82-83. Alzheimer's disease victims who need inpatient care also need all of the normal forms of skilled nursing care that other elderly persons need. This may occur over a course of years, or may be the results of a sudden injury, such as a broken hip. T. 220-223, 147-148, 79. As discussed above, it is important to be able to provide such care in the same facility since continuity of care is so important, and transfers to new surroundings are disruptive. Any current holder of a certificate of need for community nursing home beds in Palm Beach County may, if it wishes, provide special services to persons suffering from Alzheimer's disease. T. 122. Existing nursing homes in Palm Beach County accept Alzheimer's disease victims, but none provide special services for these patients except perhaps Darcy Hall, which provides adult day care. T. 143, 76, 82, 168-169, 171, 200-201, 210-211. Existing adult congregate living centers and adult day care centers in Palm Beach County similarly do not have special services or programs for victims of Alzheimer's disease. T. 145. Existing nursing homes could provide such services to Alzheimer's patients, though approval of HRS by expedited review to change substructure might be required, but none has done so. T. 154. Alzheimer's patients are often inappropriately restrained, or mixed with non-Alzheimer's disease patients. T. 77. Dr. Eugene Loeser is a physician, board certified in neurology, and is in private practice in Jupiter, Florida. T. 157-158. Dr. Loeser created a list of questions to ask physicians in Palm Beach County to explore the need for special nursing home programs for Alzheimer's disease patients, and that list of questions is HRS Exhibit 8. T. 169, 186-189. Using these questions Dr. Loeser conducted a survey of 36 physicians in Palm Beach County, which included 8 family practitioners, 10 internists, 14 neurologists, 2 neurosurgeons, and 2 psychiatrists. T. 170. There are approximately 1,000 physicians in Palm Beach County, T. 31, and Dr. Loeser admitted that his survey was only of a small percentage. T. 170. Dr. Loeser did not attempt to make the survey statistically valid. T. 178. The physicians contacted were selected from the telephone book from Jupiter in the north to Lake Worth in the south. T. 171, 183. Dr. Loeser attempted to contact representatives of several specialities. T. 181. The specialities were selected as those likely to see Alzheimer's patients. T. 170. Of the 36 physicians contacted, 35 had seen patients having Alzheimer's disease. Petitioner's Exhibit 5. Of these, 27 physicians had "difficulty in finding appropriate placement" for these patients in terms of supervision, care and treatment. Petitioner's Exhibit 5; HRS Exhibit 8. The same number of physicians felt that facilities with appropriate programs for placement of Alzheimer's disease or similar disorder patients were not presently available in Palm Beach County. Id. From the responses, Dr. Loeser estimated that these physicians had seen somewhat more than 600 patients suffering from Alzheimer's disease or related disorders in the last year. T. 171. Dr. Loeser personally estimated that he typically had difficulty finding a treatment and care facility for about 10 Alzheimer's disease patients annually. T. 185. He then estimated from responses received that the physicians surveyed were unable to find an appropriate program for about 135 patients annually. Petitioner's Exhibit 5. Dr. Loeser further estimated that among his own patients, about one or two per week needed some form of day care, T. 185, and from the responses of the physicians in the survey, estimated that such physicians annually had 150 patients needing day care. T. 175. Determination of placement problems for Alzheimer's disease patients from actual patient records or placement orders from physicians would be difficult because these records are confidential. Consent from the patient would be needed, and consent from an Alzheimer patient would be difficult due to the nature of the mental impairment caused by the disease. T. 173. The survey conducted by Dr. Loeser was not unreasonable for failure to contact more physicians. The survey accurately reflects a group of Alzheimer's disease patients treated by the physicians contacted, and does not purport to account for Alzheimer's disease patients treated by other physicians. Thus, the need identified by Dr. Loeser's survey, while underinclusive of total need, is reasonably accurate for the need identified. Palm Beach County currently has at least an estimated 16,597 persons suffering from Alzheimer's disease, and this number is expected to be 18,172 by 1988. T. 24. HRS itself estimates that the number of Alzheimer's victims in Palm Beach County in 1986 to be 27,200. Petitioner's Exhibit 6. It is further estimated that approximately 80 percent of such patients will require some sort of custodial care in the future. T. 76. Based upon the foregoing statistics, as well as the fact that existing Palm Beach County nursing homes do not provide special services or care for Alzheimer's disease patients, there is a need for the Alzheimer facility proposed by the Petitioner. The Petitioner proposes to establish a 120 bed nursing home in Palm Beach County designed and staffed to provide care and treatment to meet the special needs of persons suffering from Alzheimer's disease and related disorders. T. 45. The Petitioner, Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, is willing to have any certificate of need issued in this case to be conditioned upon it building, developing, and operating the proposed nursing home limited as it has proposed in this formal administrative hearing. T. 48-49. Thus, findings of fact 18 through 21 which follow relate to the manner in which the Petitioner proposes that a certificate of need may be conditioned and limited. The proposed physical design of the nursing facility is set forth in Petitioner's Exhibit 1. T. 49. The cost is estimated to be $3.7 million. T. The design includes a courtyard to allow patients to wander safely. T. 41. It also includes a shaded porch, an outdoor patio, and a lounge off the patio. Id. Security from wandering is proposed to be provided by a "Wanderguard" system of wristbands and sensing devices that sound an alarm as a patient passes an exit point. Id. Additionally, the proposed facility would have a therapeutic residential kitchen for patients still able to use a residential kitchen. Id. One room would be set aside as a quiet room. T. 42. It is contemplated that such a room will minimize the need for calming drugs. T. 224. Also to be provided are separate dining areas, areas for therapy, and separate nursing wings and sub-acute care wings. T. 42-43. Alzheimer patients would be separated from non-Alzheimer patients, fixtures would have shapes, colors, and labels to facilitate identification; wall and floor coverings would not use patterns, and the flooring would be vinyl or tile instead of carpet. T. 42, 225-228. The proposed plan of the facility contemplates that there be space for all stages of care for Alzheimer's patients: day care, respite care, nursing care, and sub-acute care. Petitioner's Exhibit 1; T. 221-222, 39-40, 56. The Petitioner also proposes to provide individual treatment plans, to include physical therapy, occupational therapy, social work, and recreational therapy. T. 230-231. Support groups for family members of the patient will be provided. T. 233. The Petitioner states that the staff for the proposed facility must be appropriately trained to know Alzheimer's disease and the special needs of these patients. T. 234. Ongoing education for staff is viewed as being imperative. Id. The Petitioner recognizes the need to provide greater staffing for peak periods. T. 235. Monthly in-service training will be provided by the parent corporation. T. 236. Moreover, the parent corporation, Health Care and Retirement Corporation of America, will develop and implement a program of staff training specifically for Alzheimer's disease. T. 237. Staff for the proposed facility will be adequately trained to properly deal with the problems of Alzheimer's patients. For a 24 hour period, a staff to patient ratio of 1 to 2.5 will be provided. T. 238. This ratio includes only nursing staff, aides, and activities and occupational rehabilitation staff. Id. The Petitioner proposes to designate and commit its entire facility to Alzheimer's patients. T. 60. But from a fiscal point of view, the Petitioner proposes to not deny admission to persons not having Alzheimer's disease. T. 66-68. At least 60 beds will be dedicated to patients with Alzheimer's disease, and these are expected to fill with persons in stages two and three of the disease. T. 67-68. When these patients reach more advanced stages of their disease, it is expected that they will be treated in the other 60 bed section, which is skilled nursing and sub-acute care. T. 68; Petitioner's Exhibit 1. Thus, the Petitioner expects ultimately to fill its entire facility with Alzheimer's disease patients consistent with its dedication and purpose. The facility proposed by the Petitioner would meet the unique needs of Alzheimer's disease patients and their families, and would be the only facility in Palm Beach County to provide a wide spectrum of care for Alzheimer's disease patients. Petitioner's proposal is consistent with priorities IV, V 3 and 4, and VI, Long Term Care section, District IX Health Plan (1985). T. 150-152. On March 6, 1986, the General Counsel of the Department of Health and Rehabilitative Services sent a memorandum to "all attorneys" construing and implementing the decision in the Gulf Court case, Gulf Court Nursing Center v. DHRS, 10 F.L.W. 1983 (Fla. 1st DCA 1985). On the next day, Robert E. Maryanski, Administrator, Community Medical Facilities, Officer of Health Planning and Development, sent the memorandum to his staff and told them to use the opinion as a guideline for the initial review of a CON application settlement and preparation for hearings. HRS Exhibit 6. HRS recognizes that there are three ways that an applicant for a certificate of need for nursing home beds can show need even though the rule shows a zero bed need. The third way is for "equivalent assessments" to be submitted by "attending physician." T. 113; HRS Exhibit 4, rule 10- 5.11(21)(b)10, F.A.C. HRS staff construes rule 10-5.11(21)(b)10, F.A.C., as requiring that each attending physician of each Alzheimer's patient document that his or her patient is in need of specialized services and that the patient is without access to those special services. T. 124. The issuance of certificate of need 4194 to the Joseph L. Morse Geriatric Center was issued pursuant to the special circumstances exception of rule 10-5.11(21)(b)10, F.A.C., since the rule did not show bed need. T. 127. There was nothing in the application in that case to show that elderly Jewish persons were denied access to existing nursing home facilities in Palm Beach County. Id. See also T. 130. There was, however, evidence that a large group of elderly Jewish persons were not being provided kosher dietary services at existing nursing homes. T. 129, 134. This evidence was not presented by attending physicians, however. T. 136. The certificate of need 4194 to the Joseph L. Morse Geriatric Center was also approved using priority VI, long term care section, District 9 local health plan, which provides in the second sentence for consideration of "ethnic- type services including special dietary requirements . . . ." HRS Exhibit 7; T. 134. Due to changes in federal funding, patients needing sub-acute care (less than hospital care, but more than an ordinary nursing home) do not qualify for cost reimbursement. T. 85-88. It appears that about one-half of all nursing home admissions in Palm Beach County are for three months or less. This may be a pool of persons needing sub-acute care. Petitioner's Exhibit 3, Long Term Care Section, page 4; T. 27-28. There was other general testimony that there was a "need for sub-acute care in Palm Beach County, T. 88, 146, and the local health plan, priority V 4, page 31, supports the grant of a certificate of need to an applicant that will provide such care. Petitioner Exhibit 3. There is also a need for sub-acute care in the final stages of Alzheimer's disease to provide continuity of care. T. 221. See also finding of fact 10. No one has petitioned to intervene in this case.
Recommendation Based upon the foregoing, it is recommended that the Department of Health and Rehabilitative Services, pursuant to Rule 10-5.11(21)(b)10, Florida Administrative Code, and Section 381.494(8)(c), Florida Statutes, issue a certificate of need to Health Care and Retirement Corporation of American, d/b/a Heartland of Palm Beach, for 120 community nursing home beds limited and conditioned upon all such beds being dedicated only to the provision of such services and facilities for victims of Alzheimer's disease as described by the Petitioner in this case and set forth in findings of fact 18 through 21 of this order, with 30 of such beds established for sub-acute care needs of Alzheimer's disease patients. It is further recommended that the certificate of need not contain approval for general community nursing home beds, but be limited to Alzheimer's disease patients. DONE and ORDERED this 8th day of July, 1986, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of July, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-3337 Pursuant to section 120.59(2), Fla. Stat., the following are specific rulings upon all proposed findings of fact submitted by the parties which have been rejected in this Recommended Order. Findings of Fact Proposed by the PETITIONER: 7. Sentences 3 and 4 have been rejected because the evidence was not sufficiently complete to describe nursing homes in Florida in general, and because the issue in this case is the need in Palm Beach County, thus making these proposed facts not relevant. 10. Sentence 3 is rejected since the testimony did not clearly show that therapeutic kitchens "should be available." 13. Sentences 9 and 10 are rejected because the evidence did not categorically show that it "would not be possible" to use actual physician orders, or that "physicians do not typically arrange their records so that orders of that kind could be extracted from their records." Similarly sentence 12 is rejected for lack of categorical evidence to prove impossibility. 17. Evidence that the entire facility is "completely fenced and enclosed" cannot be located in the record, and thus sentence 7 is rejected. The bulk of the discussion in proposed finding of fact 20 has been rejected because it is argument or conclusions of law. Those portions of this proposed finding which propose a finding that the Respondent's interpretation of rule 10-5.11(21)(b)10, Florida Administrative Code, is wrong or unreasonable are rejected as argument or conclusions of law. Most of the factual statements were adopted. Findings of Fact Proposed by the RESPONDENT: All proposed findings of fact by the Respondent have been adopted in substance. COPIES FURNISHED: Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire G. Steven Pfeiffer, Esquire Laramore & Clark, P.A. 325 North Calhoun Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue Which of the applications for certificates of need for community nursing home beds for the Palm Beach County July, 1991, planning horizon filed by Whitehall Boca, an Illinois limited partnership; Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton; Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center; and Maple Leaf of Palm Beach County Health Care, Inc., should be granted, if any?
Findings Of Fact In November, 1988, the applicants in this proceeding filed applications for certificates of need for nursing home beds in District IX, subdistrict 4 (Palm Beach County) for the July, 1991, planning horizon. The Department of Health and Rehabilitative Services (hereinafter "HRS") published a fixed need pool applicable to this batching cycle of 62 additional nursing home beds for Palm Beach County. Maple Leaf of Palm Beach County Health Care, Inc., a wholly-owned subsidiary of Health Care and Retirement Corporation of America (hereinafter "HCR") proposes to add 30 nursing home beds to its approved 90-bed nursing home to be located in the Jupiter area of northern Palm Beach County. HCR's 30-bed addition would be accomplished by construction of a new 20-bed wing and the conversion of 10 private rooms to semi-private rooms. HCR will license and operate its nursing home through Maple Leaf of Palm Beach County Health Care, Inc., a corporation wholly-owned by HCR and established expressly for the development of this project. There is no operational difference between Maple Leaf of Palm Beach County Health Care, Inc., and HCR. HCR has been in the business of developing and operating nursing homes for over 25 years and operates 130 facilities with 16,000 nursing home beds in 19 states. In Florida, HCR operates 10 nursing homes and has several additional facilities under development. The 90-bed approved nursing home to which HCR seeks to add 30 beds will offer extensive rehabilitation, subacute care, high tech services and a 20-bed special care unit for Alzheimer's Disease and dementia victims. HCR's application for the 30-bed addition does not propose any additional special programs, but the rehabilitative and restorative care capability of the nursing home will be available to the patients admitted to the 30 additional beds. The new construction proposed by HCR consists of a sixth 20-bed wing (pod) added to the nursing home. Upon completion, the 120-bed nursing home will consist of 46,000 square feet with six individual resident pods and a central core area for administrative and support services. Each pod consists of 20 beds, and three pods comprise one nursing unit. One nursing unit is located on each end of the nursing home. Each three-pod unit has its own dining and activities areas. It will not be necessary to construct any additional support services for the proposed 30-bed addition. The pod design proposed by HCR provides unique and innovative benefits to the residents of the nursing home. The pod design breaks down the traditional institutional corridor design into smaller, residential-like increments. Instead of long corridors with rooms on each side, living areas are constructed in 20-bed increments (pods) clustered around a home-like living area or atrium located in the center of the pod. Each atrium is intended to have an identity of its own, such as a sitting area, activity area, library, living room, or game room. The pod design is much more residential in character than the traditional nursing home. HCR nursing homes, including this 30-bed addition, incorporate design elements necessary for both skilled nursing care and subacute care. The 30-bed addition proposed by HCR will meet subacute care standards. Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center (hereinafter "Vari-Care or Boulevard") suggests than its design is superior because it proposes to provide piped-in oxygen to rooms designated for subacute care. However, there is no requirement for oxygen supplies to be built into a room in order to provide subacute care. In today's technology, equipment for oxygen is brought into the room. HCR's allocation of equipment costs for this addition include equipment for the provision of subacute care. The project cost for the 30-bed addition proposed by HCR is $706,000 or $23,533 per bed. The total project cost for the approved 90 beds would be $3,865,000, or $42,944 per bed. Combining the 90- and 30-bed projects results in a total project cost of $4,571,000, or $38,092 per bed. Economies of scale make HCR's 120-bed nursing home more cost effective than construction of only the 90-bed nursing home. Purchase of additional land is not required for the HCR addition. HCR's total project costs for its 30-bed addition and for its resulting 120-bed facility are lower than those of any competing applicant. HCR enjoys economies of scale in its purchase of equipment for nursing homes because of the number of projects that it has under development at any given time and because of the national contracts which it has with material and equipment suppliers. HCR's volume purchasing allows HCR to obtain substantial discounts which, in turn, allows HCR to provide higher quality furnishings and equipment at competitive prices. HCR projects a second year utilization of 93.1% for the 30 additional beds, comprised of 42% Medicaid patients, 10% Medicare patients and 48% private pay and insurance patients. The 90-bed approval has a Certificate of Need (hereinafter "CON") condition which requires a minimum 33% Medicaid payor mix. The overall Medicaid payor mix at the 120-bed nursing home is projected to be 35%. All of the beds including the added beds at the HCR nursing home will be certified to serve Medicaid patients. HCR's most recent history of service to Medicaid patients is 59.4% companywide, which includes a range of 26.7% to 90.4% in Florida facilities. HCR will be able to fulfill its commitment to Medicaid patients in the addition. HCR intends to meet any conditions which include a requirement of 42% Medicaid utilization in the 30 added beds. HCR's utilization projections are reasonable. The HCR nursing home will be accessible to all residents of the service district. HCR proposes the following patient charges for 1992: private room, $101.66; semi-private room, $87.17; Medicaid, $83; and Medicare, $86. HCR's patient charges for 1992, the only year for which each applicant submitted charges, are lower than any competing applicant's charges. In determining the financial feasibility of this 30-bed project, HCR took into consideration financial feasibility of the approved 90-bed nursing home as well as the financial feasibility of the total 120-bed project. The 30- bed addition proposed by HCR as well as the resulting 120-bed nursing home are financially feasible. HCR has never had a nursing home license denied, revoked, or suspended and has never had a nursing home placed into receivership. HCR has never experienced a condition in one of its nursing homes which threatened or resulted in direct significant harm to any of its residents. At the time of hearing, HCR operated four nursing homes in Florida which had superior ratings, including one nursing home which, though continuing to be operated by HCR, underwent a technical change of ownership and thus became ineligible for a superior rating. HCR also operates nursing homes in West Virginia, which has a licensure rating system similar to that of Florida's. In West Virginia, all of HCR's nursing homes have licensure ratings comparable to Florida's superior rating. HCR adheres to extensive quality assurance (hereinafter "QA") standards which are based upon, and in some instances more stringent than, state and federal regulations. The purpose of the QA standards is to ensure the highest possible quality care for the residents of the nursing home. HCR utilizes a multi-tiered system to monitor compliance with the QA standards. Each nursing home performs quarterly a quality assurance audit to determine its compliance with the quality assurance standards. From the regional level, HCR provides professional services consultants, typically registered nurses or registered dieticians, who serve as problem solvers and trouble shooters for facilities within their region and typically visit each facility at least once a month. These professional consultants, who are employees of HCR, act as support for the nursing homes within their region, working with directors of nursing, administrators, registered dieticians, and the department heads in the individual nursing homes to ensure compliance with QA standards and monitor the quality of care provided in the nursing homes. Each HCR nursing home is subjected to an annual QA audit performed pursuant to a contract by an independent, outside organization. After the annual survey, the nursing home is provided with a written report and is required to submit a written plan of correction for any identified deficiencies. Implementation of the plans of correction and ongoing compliance with the QA program are monitored by the professional services consultants and management. HCR utilizes a formalized acuity program which provides for a total assessment and evaluation of each resident to determine the level of care needed for each resident. After admission, the required level of care may change. It is common for the condition of a nursing home resident to change during the nursing home stay. HCR's formalized acuity program takes into account these changes in condition and allows the nursing home to provide the level of staffing appropriate to the level of care required by each resident. The staffing proposed by HCR exceeds state requirements. There will be 13.6 total FTE RN, LPN, and nurse aide staff for the 30-bed addition, organized with 6.126 FTE staff on the first shift, 4.374 on the second shift, and 3.1 on the third shift. This is equivalent to a total staff per resident ratio for the 30 additional beds of .493, and a shift staff per bed ratio for the three shifts of .20, .15, and .10, respectively. HCR's 120-bed nursing home will have 78.4 total FTE RN, LPN, and nurse aide staff, or .653 total nursing staff per resident. The shift staffing in the 120-bed HCR nursing home will consist of 35 FTE for the first shift, 25.2 for the second, and 18.2 for the third, which is equivalent to a shift staff per bed ratio of .29, .21, and .15, respectively. The level of staffing proposed by HCR will enable HCR to provide high quality patient care. The staffing proposed by HCR in its 30-bed addition is higher than any competing applicant except Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton (hereinafter "Manor Care") and the staffing for HCR's 120-bed facility is the highest of any of the applicants. Vari-Care sought to demonstrate that its design of providing showers in each resident's room was superior. There are safety concerns relating to providing showers in each patient room. Residents receiving skilled and subacute care usually have to be assisted in and out of tubs or showers. Most residents in the HCR nursing home will not be able to enter or bathe unassisted in a shower or tub. Although it is possible for some patients to be rolled into showers in wheel chairs, baths are superior to showers for increasing circulation and preventing decubitus (skin breakdown). Each HCR nursing unit provides a central bathing unit each for males and for females. Central tubs and showers are easier for disabled residents because of the availability of hydraulic lifting devices to assist the residents in and out of the tubs and showers. There are no hydraulic lifting devices in individual rooms. HCR's QA standards establish procedures for protecting patient privacy and patient dignity during times of bathing, and HCR always uses privacy curtains and individual showers for men and women. HCR and each other applicant provided a description of their plans for various operational details of their proposed nursing homes, including plans for recruitment, career ladders, preadmission screening, appropriateness review, discharge planning, utilization review, QA programs and procedures, specialized programs, resident surveys, residents' councils, security and protection of residents' property, dietary services, linkage with local providers, activity coordination, spiritual development, mental health services, restorative and normalizing activities, quality of life enhancements, training-related plans for staff development and improvement of staff skills, and the availability of the facility for training programs. Compliance with these plans and procedures is important in providing high quality of care to nursing home residents. The plans and procedures described in the HCR application are appropriate. Nursing home beds in Palm Beach County are clustered into three distinct areas: the northern area near Jupiter, the middle area near West Palm Beach and Boynton Beach, and the southern area near Boca Raton and Delray Beach. The social and economic environments of these areas and the highway support system suggest the reasonableness of these divisions, although the Local Health Council has not subdivided Palm Beach County into these three areas for formal health planning purposes. At the time of hearing, there were eight approved nursing home projects with 584 new nursing home beds under development in Palm Beach County: 210 of these approved beds were to be located in southern Palm Beach County; 284 beds were to be located in the mid-Palm Beach County area; and 90 beds were to be located in the northern Palm Beach County area. The only new nursing home in the northern Palm Beach County area is the HCR nursing home. HCR will be located in one of the least affluent sections of Palm Beach County. The HCR nursing home will enhance competition in the service area, because it is the only new nursing home to be located in the northern Palm Beach County area and the quality of services to be offered by HCR will challenge existing facilities to enhance their quality of care. Whitehall Boca, an Illinois limited partnership (hereinafter "Whitehall") is an existing, combined ACLF and nursing home located in Boca Raton in southern Palm Beach County. Whitehall is licensed for 73 skilled nursing beds and 115 ACLF beds. However, because Whitehall has converted some semi-private ACLF rooms to private rooms, its effective ACLF capacity is 62. Whitehall proposes to convert 27 ACLF beds to nursing home beds. Whitehall's expressed purpose for the conversion is to meet the demand for nursing home beds from some of their existing ACLF residents. Structurally, the facility is two-stories and consists of two "V"- shaped wings on each floor. Three of the four wings have identical floor plans. The other wing consists of laundry, kitchen, and mechanical facilities, and nine semi-private ACLF resident rooms. The three identical wings each contain 28 resident rooms, two community tubs, and two showers. One of these wings is currently used for ACLF residents only, another is exclusively designated for skilled nursing, and the third wing is divided between 14 ACLF rooms and 14 skilled nursing rooms. Whitehall proposes to convert the 25 ACLF beds located in these 14 rooms of this third wing to 24 skilled nursing beds. Additionally, three existing skilled nursing rooms located on the first floor will be converted from private to semi-private rooms. In total, the conversion will result in Whitehall's nursing home beds increasing from 73 to 100, configured in 12 private and 44 semi-private bed, rooms. This conversion can be accomplished without construction or additional equipment and would involve only $70,000 in new expenditures (representing attorneys' and consultants fees). During the three years prior to filing its CON application, and as long as it has been eligible, Whitehall has received superior licensure ratings. Whitehall directs its marketing so as to attract residents from outside Palm Beach County and from outside the State of Florida. The visibility that this marketing provides Whitehall makes it better able than its competitors to fill the new beds to be awarded in this proceeding, but makes it less likely that any approved additional nursing home beds would be available to residents of Palm Beach County. Therefore, granting Whitehall's CON application could result in the need for new beds in Palm Beach County remaining unsatisfied. To foster career advancement, Whitehall pays 100% tuition for courses of study that relate directly to its employees' jobs. Whitehall also pays 50% tuition for any course of study an employee pursues that does not pertain to their position at Whitehall. Whitehall Boca contracts with Professional Medical Review, a quality assurance review organization. Whitehall Boca's procedure for quality assurance is that Whitehall's Director of Nursing provides to Professional Medical Review data which quantifies the quality of care that is provided at Whitehall. Professional Medical Review then assembles the data and, with guidelines established by that organization, provides Whitehall with its analysis of that data. With that data, Whitehall plans a method of correction. In addition, Whitehall performs its own in-house, day-to-day quality assurance. This level of quality assurance involves documentation of the quality of patient care, infection control, and safety. Because incoming residents may have difficulty adapting to the nursing home setting, Whitehall has created the "newcomers" Sunshine Group to assist in this transition. If further assistance in the transition process is necessary, Whitehall refers the resident to specialized counseling. Whitehall staffs more dietary personnel than other facilities its size because it offers individual catering throughout the entire facility through its contract for food services provided by the Marriott Corporation. It also makes room service available to all residents. Whitehall has in place a restorative dining program. This program is designed for residents who are not eating independently, but are capable of being restored to this level. The restorative dining program at Whitehall stresses the use of special utensils, modifications of diet, and independent eating training. Whitehall provides hospice services on two levels. The first is Whitehall's in-house social worker who is available to the facility's terminally ill residents on a day-to-day basis. The second consists of Whitehall's association with Hospice by the Sea, a private organization that provides counseling to terminally ill patients. Whitehall arranges with amateur entertainers, school children groups, The Humane Society, the YMCA, and the Girl Scouts to provide its residents with entertainment and linkages to the outside world. Whitehall's architectural design provides extraordinary amenities that improve the residents' quality of life. Whitehall's facility features original artwork and elaborate moldings in the corridors, hallways and patient rooms, making it residential in nature. Whitehall's patient rooms are home-like in design and are all equipped with brand name residential furniture. Each room has a quilted bed spread and a designer headboard. The ceilings in the rooms are nine feet high rather than the standard eight feet required by code. Additionally, each room is centrally heated and cooled and has an individual thermostat and fan speed control. The Whitehall facility features a "market square" which provides an outdoor street setting for a dental office, podiatry office, saloon where beer and wine are served, gift shop and a designated chapel for religious services. Whitehall's dining room is large and elegant. The tables are covered with linens, and fresh flowers are placed on each table. Whitehall has an outdoor patio with an awning to provide shade. Entrance to the patio is facilitated by automatic sliding glass doors which allow residents in wheelchairs to move about conveniently. The corridors in the Whitehall facility are ten feet wide rather than eight feet as required by code. Wall coverings and fixtures are used in the corridors. At Whitehall, breakfast is served by special order at any time during the morning. For lunch, Whitehall serves hot and cold foods, i.e., sliced meats and salads (egg and tuna). For dinner, Whitehall serves a variety of meals which are posted on a daily menu. Whitehall offers an Alzheimer support group for families of Alzheimer patients - these groups are open to residents' families as well as to the public generally. Whitehall coordinates a diabetes support group that meets regularly at the facility. Whitehall also conducts an annual health fair, seminars on a variety of subjects and brings in speakers on health related issues all of which are open to the general public. In terms of geographic accessibility to necessary medical services, Whitehall is strategically located. It is conveniently situated between I-95 and the Florida Turnpike in southern Palm Beach County. It is further west than any of the competing applicants which is the area where the majority of growth in the county is taking place. In terms of offering new techniques and quality of care for patients through relationships with research entities, Whitehall is currently the site of a clinical research project of the F.A.U. School of Nursing into the "life cycle of humans." The purpose of the project is to acquaint nursing students with an understanding of the role of the elderly in American society, to develop in them a more thorough understanding of the many functions of a long-term care facility. The Florida Board of Nursing requires nurses to undergo continuing education and obtain a certain number of continuing education units (CEU) in order to maintain their licensure. The nurse training seminars conducted by Whitehall are recognized by the Board of Nursing for CEU credit. These seminars are also open to the public. The costs and methods of conversion proposed by Whitehall are not in question. The beds Whitehall seeks to convert were originally constructed to nursing home code. As a result, the only modification necessary to implement its conversion is the installation of curtain tracks in rooms being converted from private to semi-private. Whitehall maintains referral agreements and other contacts to link it to the surrounding community. Whitehall maintains links with the following hospitals in the area: Boca Community Hospital; Delray Community Hospital and West Boca Hospital. Whitehall estimates that the total project cost for the 27-bed conversion will be $1,368,188 or $50,674 per bed. Whitehall's estimates include $209,090 for land costs or $7,744 per bed. The original costs for the Whitehall building was over $8,000,000. Financially, the Whitehall operation is a highly-leveraged investment, which results in Whitehall paying a high rate of interest. Interest costs on the Whitehall construction mortgage are approximately $1,100,000 per year. Whitehall has never admitted Medicaid-eligible residents to its facility and does not offer to serve any Medicaid-eligible residents in its proposed 27-bed conversion. Although Whitehall's refusal to accept Medicaid- eligible residents is based upon Whitehall's belief that the level of reimbursement for those patients is insufficient for Whitehall to continue to maintain its existing levels of amenities and service, Whitehall has performed no calculations to determine what its Medicaid reimbursement would be or whether it would have to decrease its level of care or amenities in order to accept Medicaid-eligible residents. Whitehall has accepted a small percentage of Medicare-eligible patients in the past, but Whitehall does not propose to certify any portion of the 27-bed conversion to provide care to Medicare- eligible patients. Whitehall has distributed $909,000 to its partners since Spring, 1988. Whitehall's projection of revenues and expenses after the 27-bed conversion assumes a yearly disbursement to partners of $500,000. Thus, high charges are necessary to cover the substantial mortgage interest and partnership dividends. Whitehall projects patient room charges in 1992 of $181 for a standard private room, $115 for a semi-private room, and $96 for Medicare reimbursement. This room rate applies to both nursing home and ACLF residents at Whitehall. The private pay charges projected by Whitehall are higher than those of any other applicant. Whitehall's semi-private room charge is the highest in Palm Beach County. Whitehall projects that it will have 79 total FTE direct care staff in the combined nursing home/ACLF in the second year of operation after conversion of the 27 beds. However, Whitehall's staffing projections are based upon a patient census of 130, which includes ACLF residents. Upon conversion of the 27 ACLF beds, Whitehall will have only 100 nursing home beds, not 130. Whitehall did not fully describe its staffing per shift. It is not possible to determine how Whitehall's nursing home beds will be staffed. Whitehall does not propose to change its staffing levels as a result of the conversion of 27 ACLF beds to nursing beds. An ACLF resident does not require as high a level of staffing as a nursing home resident. Because 27 ACLF beds are being converted to 27 nursing home beds, Whitehall's level of staffing for nursing home patients will be reduced if Whitehall does not add staff. Approximately 10% of Whitehall's nursing home residents come from outside Florida. Approximately 15% to 20% of Whitehall's nursing home residents come from outside Palm Beach County. Whitehall has been operating 62 ACLF beds rather than its full licensed complement of ACLF beds for approximately six years. Whitehall's 62 ACLF beds are occupied at approximately 80% to 85% occupancy. Most of the beds which Whitehall proposed to convert to nursing home beds are occupied by ACLF residents, who tend to be long-term residents. Whitehall's occupancy projections require its 27 converted beds to be filled to 95% occupancy within the first quarter of their operation. However, Whitehall does not assume that it is going to fill the 27 additional nursing home beds with its ACLF patients (in spite of Whitehall's stated purpose to convert the beds for use by ACLF residents) and Whitehall does not intend to atop admitting ACLF residents to its facility. Whitehall was unable to explain how it could continue to accommodate its ACLF patients while at the same time meeting its nursing home occupancy projections. The financial projections and schedules prepared in support of the Whitehall application are based upon facility-wide revenues and expenses for nursing home and ACLF residents. Whitehall prepared no financial feasibility projections for the 100-bed nursing home which will result from the 27-bed conversion or for the 27-bed conversion. It is not possible to determine from the evidence submitted by Whitehall whether this 27-bed conversion or the resulting 100 nursing home bed operation will be financially feasible in the long term. Boulevard is an existing nursing home located in Boynton Beach in the mid-Palm Beach County area. Boulevard currently operates 110 nursing home beds. Boulevard has a license to operate 44 additional beds acquired from Mason's Nursing Home. Boulevard is constructing a new wing to house the 44 beds. During construction, those 44 beds are inactive. Twenty-five (22.7%) of Boulevard's existing 110 beds are certified for Medicaid and 56 are certified for Medicare. When the 44 additional beds become operational, Boulevard's Medicaid certified beds will increase to 43 (27.9%). Vari-Care, Inc., a Delaware public corporation established in 1968, operates 25 nursing care facilities throughout the country, 20 of which are nursing homes. Since its inception, Vari-Care has operated its nursing facilities consistent with its corporate credo, "health care hospitality," that is, providing a health care environment with many of the hospitality characteristics commonly offered by the hotel and restaurant industries. Vari-Care operates three superior-rated nursing homes in Florida including Boulevard Manor Nursing Center, located on Seacrest Boulevard in Boynton Beach, Palm Beach County, Florida, which it has operated since 1976 and purchased in 1988. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, have received superior ratings since the rating system has been in effect in Florida. Vari-Care's nursing homes outside Florida have always received the highest or next-to-highest rating in states having a nursing home rating system. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, comply with or exceed staffing ratio requirements established by applicable laws, rules, and regulations. Boulevard Manor is currently medicare certified, does not have any outstanding deficiencies with the Health Care Financing Administration, has satisfied the Health Care Financing Administration's conditions of participation during its past three surveys, and has never been the subject of any certification or licensure revocation proceeding or moratorium. Vari-Care has never owned or operated a nursing home which has had its license revoked, been decertified from Medicare, or had its Medicare participation status revoked. Vari-Care provides managerial, programmatic, and operational resources to nursing homes it owns and operates, including the provision of a full-time Operations Director, who performs an operational review in each facility on a quarterly basis. Vari-Care's quality assurance program at Boulevard Manor incorporates the use of a regional nurse to perform approximately 25 to 30 quality assurance audits in a nursing home for each visit. After conducting the audit, the nurse confers with the nursing home's Director of Nursing and Administrator to review the scoring results and analyze any problems discovered. The Director of Nursing then turns the audits over to an established quality assurance committee within the nursing home to review the audits and determine what corrective actions need to be taken. The quality assurance committee makes recommendations to the Administrator and Director of Nursing, who formulate and institute an action plan. Vari-Care's quality assurance program meets or exceeds legal requirements. Boulevard Manor's utilization review plan evaluates the effectiveness and appropriateness of care rendered to Medicaid and Medicare patients. Reviews are performed by a committee comprised of two physicians having no financial interest in Boulevard Manor, the Administrator, the Director of Nursing, the Assistant Director of Nursing, and other professional personnel. The utilization review committee meets at a minimum on a monthly basis and on an on- call basis if there is a need. Boulevard Manor's activity program offers 4 to 5 activities on a daily basis, including educational programs, entertainment, and religious activities. Residents of Boulevard Manor are apprised of daily activities through rounds made by Boulevard Manor's staff, daily announcements posted on the facility's bulletin board, and a monthly newsletter designed to inform the residents, staff, community, and families of activities and events at the nursing home. Quality of life enhancements available to Boulevard Manor residents include: an ice cream and gift shop; non-institutional, residential-style furniture throughout the facility; a private dining room for residents and their family members; a chapel and library; a special foster grandparents program; color televisions and private baths within each room; an on-site laundry facility; and a barber and beauty shop. Community programs at Boulevard Manor include: participation in a Meals-on-Wheels program in conjunction with a neighboring church; a "speakers bureau" where nursing home residents go out into the community; visits with students from area schools, including Atlantic High School; a volunteer program for community activities; a voter registration program for residents that are not currently registered voters; and a respite care program for residents requiring care for a short period of time to relieve their usual caretaker. Boulevard Manor has extensive links within the community through informal and formal agreements with acute care hospitals, HMOs, physicians, rehabilitation facilities, the area's Veteran's Administration hospital and clinics, mental health and substance abuse programs, other nursing homes, ACLFs, adult day care programs, adult foster homes, hospice and home health agencies, social service agencies, and other related health care and human services programs. Intensive rehabilitative services available to residents at Boulevard Manor include speech, occupational, physical, and musical therapies, extra- nutritional therapy and dietary training, reality therapy for dementia and other patients, chemical therapy for sufferers of terminal illnesses and severe pain, bladder/bowel retraining and managing of incontinence, active and passive range of motion exercises, and ambulation programs to learn or relearn how to use walking aids and prostheses. Boulevard Manor's provisions for treatment of residents with mental health problems include a contract with a local psychiatrist, Dr. Tom O'Leary, a contract with Hospice-by-the-Sea, in-house programs offered by specially trained staff for treatment of Alzheimer's patients, and relationships with other community mental health resources. The majority of Vari-Care's facilities, including Boulevard Manor, are "clustered" in a particular geographic region with at least two other facilities operated by Vari-Care. Economies of scale resulting from this "clustering" concept include the use of one Regional Director and QA Nurse for all facilities in a particular area, and the ability to enter into regional food vendor contracts which contemplate a similar menu at all area facilities for better quality food at significant savings. Boulevard Manor's educational program includes ongoing affiliations with training programs and schools in the immediate area including Palm Beach Junior College, in which professors from the college teach training courses on such subjects as sexuality, motivation, and controlling personal stress. The addition of a subacute care unit would expand the availability of training programs for professional staff. Career advancement opportunities and other incentives and employee benefits such as tuition reimbursement and recruitment bonuses enable Boulevard Manor to recruit and maintain highly qualified staff at all levels. Boulevard Manor is geographically accessible to its community. It is located 1/2 mile east of 1-95, is directly accessible by public transportation, and is adjacent to Bethesda Memorial Hospital. Boulevard Manor makes use of the out-patient services provided at Bethesda Memorial Hospital including patient therapy, chemotherapy, radiation therapy, X-rays, and blood transfusions. Vari-Care integrates its "health care hospitality" philosophy into the design of its proposed bed addition at Boulevard Manor by offering non- institutional, residential-style furniture throughout the facility, corridors that are not straight but are avenues with room offsets, ceilings that are not flat but vary in height, and a mall concept around a courtyard with landscaping. Unique design features at Boulevard Manor include a drive-up entrance with a covered canopy, a large lobby with hotel-like furniture, a reception area, accent lighting, a beauty shop, a chapel and a study off the lobby, an ice cream and gift shop, a private dining room, a staff lounge and dining area, and a child day-care center for staff. Vari-Care's proposed 26 beds will be housed in semi-private accommodations wherein a partition wall enables each resident to have his or her own window, air conditioning unit, television, full bath, "roll-in" shower to accommodate wheelchairs, and walk-in closet. A partition in the room creates, in effect, a private room within a semi-private accommodation. There will be 120 square feet per resident in the semi-private rooms, which exceeds the State of Florida requirement for semi-private space in nursing homes. Vari-Care proposes to add 26 beds to its facility. Ten of the beds will be added by new construction in each wing of the existing 110-bed structure, bringing that structure up to 120 beds with two nurses stations. The remaining 16 beds will be added by converting 16 private rooms in the new 44-bed addition to semi-private rooms. There are no design changes required in the new wing, other than the conversion of 16 private rooms to semi-private rooms. Vari-Care proposes to certify 15 (58%) of the 26 additional beds to serve Medicaid-eligible residents. Vari-Care does not propose to certify any additional Medicare beds. Vari-Care projects a 32% Medicaid payor mix after addition of the 26 beds. This projection is based solely upon Vari-Care's intent to certify 58 (32% of 180) beds for Medicaid. Vari-Care's application describes a "high demand" for Medicaid beds and Vari-Care testified to a need for additional Medicaid beds. Nevertheless, only 25 of Boulevard's existing beds and 58 of Boulevard's proposed 180 beds will be Medicaid certified. Vari- Care's ability to serve Medicaid patients will be limited by the fact that it will certify only a portion of its beds. Vari-Care's projections of a 32% Medicaid payor mix are inconsistent with its historical payor mix of approximately 20%. Vari-Care's testimony that it will achieve 32% Medicaid simple because it will certify 32% of its beds is inconsistent with Vari-Care's testimony that it has never reached its maximum capacity for Medicaid patients in its existing facility. Vari-Care owns two other nursing homes in Palm Beach County, Medicana located in Lake Worth and The Fountains located in Boca Raton. Boulevard provided 18% of its patient days to Medicaid-eligible residents in calendar year 1988, and provided approximately 20% for the year to date at the time of hearing. In 1988, Medicana provided 15.5% of its patient days to Medicaid- eligible residents, and The Fountains provided 19.6%. Vari-Care's total project cost for the 26-bed addition will be $1,095,353 or $42,129 per bed. This cost includes the cost overrun anticipated by Vari-Care in its new wing but not included in the application estimates. The portion of that cost overrun allocable to the 16-bed conversion in the new wing is $106,408, or $6,650 per bed. Vari-Care's project cost estimates include land purchase costs of $107,620, or $4,139 per bed. Vari-Care projects patient charges in 1992 of $117 for a private room, $107 for a semi-private room, $87 as its Medicaid reimbursement, and $161 as its Medicare reimbursement. The long-term financial feasibility of Vari-Care's proposal is demonstrated by a positive net income for the first two years of operation, the ability of Vari-Care to service its debt adequately, its low debt-to-equity ratio, and its strong projected current ratio. Vari-Care testified that it does not intend to provide subacute care in its new 44-bed wing but that it would provide subacute care in the additional 16 beds in that wing. Boulevard's new wing incorporates design elements intended by Vari-Care to facilitate subacute care, such as piped-in oxygen. However, neither the design nor the construction of this new wing are contingent upon the approval of the 16-bed conversion. From a design standpoint, nothing proposed by Vari-Care in its application will enhance Boulevard's ability to provide subacute care. Boulevard's physical plant will be constructed to provide subacute care in the new wing, regardless of whether this application is approved. Vari-Care presented a schematic with its application which designated those private rooms to be converted to semi-private rooms. At final hearing, Vari-Care identified those rooms to be designated as the distinct subacute care unit. However, the rooms which Vari-Care designated for subacute care are not the same rooms to be converted from private to semi-private. Four of the rooms in the subacute care area are already semi-private rooms. Only four of the beds to be converted to semi-private use are located within the designated subacute care area. Therefore, except for four beds, Boulevard's designated subacute care unit will be in place upon completion of the 44-bed addition. Vari-Care described subacute care as care between acute hospital therapy and nursing home therapy or services not normally provided in a nursing home because of expense, specialized equipment and additional staffing that is necessary. Vari-Care cited examples of subacute care which it would provide to be respirator and ventilator care, tracheotomy care, IV services and decubitus care. However, Boulevard already provides subacute care, including tracheotomies, IV therapy, antibiotic therapy, pain management, dehydration and nutritional services, and decubitus care. Currently, subacute care at Boulevard is provided in the dedicated Medicare wing. The only type of subacute care which Boulevard will add is respirator and ventilator care. However, Vari-Care has not attempted to quantify the number of ventilator or respirator patients that it would treat. In any event, a CON is not required to provide ventilator or respirator care. The subacute care patients which Boulevard currently treats in the existing 110 beds are predominantly Medicare patients. Vari-Care expects 50% of the patients in the new 16 subacute beds and 10% of the patients in the 44 new beds to be Medicare patients. However, Boulevard does not propose to certify any additional Medicare beds, and only 1% of its Medicare patients will be treated in the existing 110 beds after construction of the new wing. Although Boulevard mist recently experienced a 14% Medicare utilization, or about 15 Medicare patients, Vari-Care's application assumes a 7.22% Medicare utilization, or about 12 patients (.0722 x 170), after the addition of a subacute care unit. The new subacute care beds will not increase the number of Medicare patients which Boulevard treats. Virtually all of the Medicare patient load which Boulevard now treats in its existing 110 beds will be treated in the new wing, and about half of Boulevard's current Medicare patient load will move to the new 16 subacute care beds. Subacute care requires a much higher level of staffing. The administrator of the Boulevard nursing home testified that the staffing ratios for the new addition, "as one of the conditions of the CON", are "much higher than" the current staffing levels, because of the planned subacute care. The CON condition referred to by the administrator was the condition imposed by HRS in its intent to approve the Vari-Care application. This condition would require a direct care staff to bed ratio (RNs, LPNs, and nurse aides) of .18 for the first shift, .12 for the second shift, and .08 for the third shift. Actually, these staff ratios reflect the current staffing levels at Boulevard's 110-bed facility. The testimony of the Boulevard administrator was contradicted by Vari-Care's Vice President of Operations, who testified that Boulevard's current staffing ratios will be maintained by Boulevard in the 26 new beds. There is no evidence that Boulevard will provide a much higher level of staffing in the addition. Boulevard's staffing is lower than that of any other applicant. Boulevard's proposed total nurse staffing for the second year of operation of the 180-bed nursing home is 73.5 total FTE, which is equivalent to a staff per resident ratio of .432. The shift staffing proposed by Boulevard is 33 FTE for the first shift, 24 FTE for the second, and 17 FTE for the third, which is equivalent to a shift staff per bed ratio of .18, .13, and .09 respectively. These staff ratios are roughly equivalent to those required by HRS in its condition for the 26-bed addition. Boulevard's proposed 16-bed subacute unit is closely related to its new 44-bed wing. However, the staffing proposed by Vari-Care for the new 44-bed wing is inconsistent with the staffing proposed by Vari-Care for the 16-bed subacute unit. When Vari-Care submitted its CON application for the new 44-bed wing, it proposed a direct care nursing staff of 88.02 total FTE for the resulting 154-bed facility. The staffing described by Vari-Care for the 154-bed facility is higher than the staffing which Vari-Care now proposes for the 180- bed facility. The staffing proposed by Vari-Care is inconsistent with its testimony that it did not intend to provide subacute care in the 44-bed addition and that higher staffing is required to provide subacute care. Vari-Care has not submitted an application consistent with its proposal for subacute care. Vari-Care has not quantified any need for the only two forms of subacute care, ventilator care and respirator care, which it does not currently provide. Although subacute care is acknowledged to require a higher level of staffing, the level of staffing proposed by Vari-Care is essentially the same as that in its existing 110-bed facility and is lower than that proposed for its 154-bed home. Boulevard's facility design is not dependent upon its proposal to provide subacute care. The rooms designated for subacute care are not the same as the rooms containing the beds to be converted from private to semi-private beds. The level of staffing proposed by Vari-Care is actually lower than that proposed by any other applicant, none of whom proposes to add subacute care through these pending applications. Manor Care is a 120-bed skilled nursing home facility in Boca Raton, south Palm Beach County. It holds final CON approval for a 30-bed dedicated Alzheimer unit. The Alzheimer unit will open in June, 1990. Manor Care currently holds a superior license and has held a superior license for as long as the facility has been eligible for one. Currently, 30% of its total patient days are for Medicaid residents. Of Manor Care's existing 120 beds, 36 beds (30%) are licensed for Medicaid. That is consistent with the CON condition on the original facility that 30% of the beds be licensed for Medicaid. Manor Care offers full physical therapy, occupational therapy, and speech therapy services. Manor Care offers a full complement of skilled nursing care, including tracheotomy, IV therapy and decubitus care. Manor Care classifies these specific services as skilled nursing care," not "subacute care." Manor Care characterizes "subacute care" as those services which would normally be delivered in a rehabilitation hospital. Subacute care requires 3 times the staffing normally provided in a nursing home. Manor Care believes that examples of subacute care are spinal cord injury and head trauma. On the other hand, Vari-Care chooses to characterize the services of tracheotomy, IV therapy and decubitus care as "subacute" care, and that is what it proposed to provide in its dedicated subacute unit. Manor Care offers these skilled services throughout its facility; it does not utilize a dedicated unit to provide them. Medicare patients in nursing homes normally require skilled nursing care. In this regard, 11.6% of total patient days at Manor Care in 1988 were for Medicare residents. That represents the highest Medicare percentage in Palm Beach County. Manor Care employs the state-of-the-cart approach for providing nursing home services. For example, Manor Care holds CON-approval to establish a 30-bed dedicated Alzheimer unit with specialized staff and programming. Manor Care is the only existing provider in this proceeding which treats Alzheimer disease in a segregated modality. (HCR's approved facility will also house a dedicated Alzheimer unit.) Manor Care has neither transferred nor voided any CON. Manor Care has had no Medicare conditions of non-compliance. Its license has never been revoked, suspended or denied. Manor Care has had no beds decertified by Medicare or Medicaid. Manor Care has no intention of selling its facility. Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton is a wholly-owned subsidiary of Manor Healthcare Corp. Manor Healthcare Corp. owns 155 nursing homed in 28 states. It has 9 nursing homes and 3 ACLFs in the State of Florida. Manor Healthcare has established six regional-based offices with a full complement of staff to assist its individual nursing homes in all areas of operations. It has a regional office in Orlando to service Florida. Through its corporate and regional offices, Manor Healthcare employs a team of professionals who are responsible for providing support functions to the nursing centers, such as: quality assurance, nursing training, administration, purchasing, facility planning, assisted living, Alzheimer care, managed care, accounting, dietary, marketing, staff recruitment, and chaplaincy. This centralized support system enhances operational capabilities and efficiencies. Manor Healthcare's primary goals are quality assurance and quality of care. It seeks to return nursing home residents to the community as soon as possible. In this regard, Manor Healthcare, on the average, returns 45% of its residents to the community. Manor Care proposes to add 30 skilled beds to its facility by locating them on the 2nd Floor above the 30-bed Alzheimer unit. This addition will include 15 semi-private rooms, lounge space, office space, conference space, an elevator, and a nursing station. Manor Care will offer the same quality, level and scope of skilled nursing services in the 30-bed addition as currently offered at its facility. The proposed addition will be integrated into the existing facility. The addition will be adjacent to existing therapy areas and near several dining room and lounge areas. Due to substantial existing ancillary areas, these 30 beds can be added without adding much ancillary spaces. Manor Care expressly agrees to the following CON conditions: 30 skilled nursing beds; 2.8 nursing hours per patient day; 37% Medicaid patient days in the addition; and 9400 square feet on the 2nd Floor. The total project cost (before CON application fee) for the 30-bed addition is $1,270,700. Manor Care projects that the 30-bed addition will be in use by June 1, 1991. The project cost will be 51% debt-financed; the rest will be financed with equity funds. The nursing and other staff at Manor Care are well qualified; its staffing ratios exceed licensure requirements by at least 25%. The proposed staffing levels, including the 30-bed addition, also exceed licensure requirements by at least 25%. Manor Care maintains an educational program plan to improve the ability of staff to meet the demands of its nursing home residents. These programs will continue to be employed at the Manor Care facility. All employees are required to attend educational programs pertinent to the improvement of skills within their respective disciplines. All employees are required to attend annual programs on fire prevention, accident prevention, infection control, effective communication, and the psychosocial/psychophysical aspects of aging. Health care seminars are sponsored by Manor Care on a quarterly basis. Topics cover a wide range of subjects related to enhancing quality of care in nursing homes. These seminars are available to facility staff and community health care professionals. Manor Care maintains a restorative program intended to enable each resident to achieve maximum function with the ultimate goal of returning patients back to the community whenever possible. For those unable to return home, the program seeks to ensure that all residents continue to function at their maximum potential. Examples of specific restorative programs include: progressive ambulation; bowel management; bladder management; self-feeding training; activities of daily living training; pain management for chronic and post operative pain; muscle control training and others. In this regard, Manor Care utilizes its "Excel Care" computerized system intended to document and evaluate the success of its restorative and rehabilitative programs. This program allows for the efficient monitoring of residents' responses to therapy and nursing care. Per this system, every unit of care is measured by outcome standards. The outcome standards describe the expected results in the patient's condition if treatment and therapy is successfully carried out. Manor Care maintains a utilization review committee comprised of three physicians, the administrator, the social services director, and the Director of Nursing. Its purpose is to meet every 30 days to assess patients and to ensure that appropriate and effective utilization of services is being provided. The purpose of Manor Care's QA program is to promote and support optimum quality standards in all disciplines. This objective is accomplished through: continuing in-service education programs; on-going consultation among corporate quality standards staff and QA regional specialists; unannounced annual surveys conducted by a Manor Healthcare QA team of health care professionals; and on-going surveying of guarantor/resident satisfaction with nursing home services. The Manor Care nursing home is reviewed annually on an unannounced basis by the QA interdisciplinary team of Manor Healthcare Corp. specialists. The QA review criteria meet all the minimum standards set by Medicare and exceed the most stringent state regulations throughout the country, including Florida. The unannounced annual review covers the following areas: resident care, dietary, activities, housekeeping, laundry, physician services, maintenance, medical records, pharmacy services, social services, administrative records and safety. Manor Care of Boca Raton was internally surveyed in January, 1989. It rated within the top 10% of all 150 Manor Healthcare facilities in the country. Within 30 days of an admission, the patient's guarantor is mailed a "satisfaction survey" form. The guarantor is asked to evaluate Manor Care's performance as to nursing, dietary, activities, therapies, etc. The form is self-addressed and is to be mailed to the Manor Healthcare corporate offices. Manor Care maintains an 800 toll-free health care hotline that is a direct line to the QA department of Manor Healthcare. This is available to all persons who want to ask questions, obtain information, make suggestions, or who require follow-up on unresolved concerns at the individual nursing home level. In effect, this serves as a consumer hotline. Manor Care designs and maintains activity programs that are responsive and appropriate to meet the physical, mental, and social needs of its residents. They include at least the following: various therapy activities; large group activities weekly; at least two religious activities per week; facility-wide general visits from the public; special events; birthday parties; activities after the evening meal; therapeutic programs for residents with special needs (such as stroke victims or blind persons); outings away from the nursing home; music activities; and special holiday events. Manor Care maintains a formalized program for involving families and community volunteers to promote the quality of life for its residents. Community volunteers participate on a routine basis in providing services to the residents, such as: reading to residents, distributing newspapers and magazines, assisting on community outings, and assisting with correspondence. These services bring the community closer to the nursing home residents. Manor Care establishes and maintains linkages with state and local health care providers to ensure that a continuum of care is available to residents and to facilitate community involvement by the nursing center. These community linkages and referral agreements include: local hospitals, physician specialists, therapists, home health agencies, adult day-care centers, area agencies on aging, homemaker services, private insurance companies, ACLFs, and other community agencies. Manor Care currently holds transfer agreements with four local hospitals. Manor Care works very closely with local agencies to ensure that residents are located in the most appropriate setting for their needs. Manor Care maintains linkages and agreements with less intensive institutions to meet the needs of those persons or residents who do not require or no longer require nursing home care, such as: adult day-care, meals-on-wheels, and senior centers. Due to existing ancillary space, Manor Care can add its proposed 30- bed unit at a relatively small cost. Manor Care already has ample dining room space, activity areas, therapy areas, and social areas which can accommodate an additional 30 beds without difficulty. In addition, Manor Care already retains the core nursing, administrative, therapy, and other staff required to operate a nursing home. As such, additional staff for the 30-bed addition is not substantial. The Manor Care application therefore provides a cost-effective approach to add nursing home beds to the community. Manor Care currently offers and will continue to offer clinical and training opportunities to students currently enrolled in nursing educational programs at local technical schools and universities. Manor Care also provides services to persons seeking to become certified nursing assistants. Manor Care serves as a clinical site for gerontological rotations for nursing students at Palm Beach Community College. Manor Care is developing a similar internship program with Atlantic Vocational Technical School and seeks to develop clinical affiliations with South Technical Vocational School and Florida Atlantic University. This working relationship not only trains students and health care professionals, but also provides Manor Care valuable resources in staff recruitment and development. Manor Care sponsors and will continue to sponsor nurse "refresher" courses which are taught by local area nursing school instructors. Persons wishing to renew their nursing licenses and certification can do so through this course work. Manor Care finances these nurse refresher programs. Manor Care sponsors and finances various health care seminars on a quarterly basis. These seminars are advertised in local hospitals, adult day- care centers, and other agencies. These seminars are available to both Manor Care staff and community health care professionals. Manor Care maintains a "career ladder" program which enables Manor Care employees (both at the facility and within the Manor Healthcare Corp. system) to reach their career goals through promotion, career advancement programs, and tuition support for additional schooling. Both the financial statements of Manor Care of Boca Raton and Manor Healthcare Corp. (which will provide the debt financing) demonstrate the financial strength and financial resource availability to accomplish and operate the proposed 30-bed addition. Manor Care has historically been very accessible to Medicare and Medicaid residents. In 1988, 11.9% total patient days were for Medicare patients. This represented the highest percentage in Palm Beach County. In calendar year 1989 to date, Manor Care has provided 30% of total patient days to Medicaid patients. For its proposed 30-bed addition, Manor Care commits to a minimum of 37% Medicaid If the 30 beds are approved, Manor Care's total facility after one year of operation would provide 34% Medicaid. Manor Care's historical and projected Medicare/Medicaid commitment is substantial, particularly when considered with the other existing providers/applicants in this case: Actual Actual Projected 1988 Medicare 1988 Medicaid Total Facility Medicaid After First Year of Operation Whitehall 1.3% 0 0 Vari-Care 5% 18.0% 26.65% Manor Care 11.9% 26.8% 34% The pro formas in the Manor Care application are reasonable. These pro formas demonstrate that the Manor Care proposal is financially feasible in the long-term. The pro formas are based on reasonable assumptions. The projected utilization underlying the pro formas is reasonable. The projected charges are reasonable. The projected staffing levels, staff salaries, and the other expenses were based on existing data and expense levels, and then reasonably inflated forward. Manor Care's proposed 30-bed addition will be integrated into the existing facility. The addition will benefit from existing, innovative quality of life features designed to enhance privacy and personal choice options for residents and family members. These features include: beauty/barber shop, formal private dining room, lobby areas, therapy areas, activity/recreational areas, specially-equipped rehabilitation dining room, distinct lounge area for families, self-contained Alzheimer's unit, carpeted conference room, several private room accommodations, outdoor patio areas, each patient room with its own bathroom, and reading rooms. In addition, the patient rooms are larger than the state requires and are very proximate to the nursing stations. The Manor Care facility incorporates many residential design and home-like features. Color schemes are emphasized for a home-like atmosphere, such as: muted vinyl wall covering; color-coordinated draperies, bedspreads and curtains (residents can choose their color scheme at admission); and lounges which are theme-decorated around particular purposes, such as a game room. Patients are permitted to exercise choice in furnishings and decorations. Patient room size is a major factor in controlling construction costs. At Manor Care, the rooms are rectangular with the shorter walls on the outside. This design minimizes exterior wall space, which is more expensive to construct than interior wall space. Minimized exterior walls also improve energy efficiency. The proximity of nursing stations to the patient rooms at Manor Care is cost-effective. The rectangular room shape reduces the cost of construction by reducing corridor length and square footage. Shorter corridors are less costly and also are more operationally efficient. The central core area at the facility concentrates the ancillary and support areas. Administrative areas are centrally located for easy access by residents and families. Resident lounges are located near the nursing station, thereby facilitating supervision by nursing staff. The State Health Plan consists of three broadly-stated goals. Goal 1 is to develop an adequate supply of long-term care services throughout Florida. Each of the four proposals for additional beds is consistent with this goal in that each proposal contributes to the supply of beds determined to be needed in Palm Beach County. Goal 2 of the State Health Plan is to develop a supply of appropriate long-term care services that are accessible to all residents. The HCR, Manor Care, and Vari-Care proposals are consistent with this goal in that each would supply nursing home services to those in need of such services, and their nursing homes will be accessible to all residents of the planning district, including Medicaid patients. Further, HCR will be the only new facility in northern Palm Beach County, and Manor Care is located in southern Palm Beach County, which experiences the highest demand for nursing home beds in Palm Beach County. Lastly, all three of those applicants will accept a significant number of Medicaid and Medicare patients. On the other hand, the Whitehall application is not consistent with this goal. First, Whitehall has never served Medicaid residents and does not propose to do so. Second, Whitehall does not provide substantial Medicare: .7% in 1987, and 1.3% in 1988. Third, Whitehall may not be affordable for many Palm Beach County residents. Its charges are the highest in Palm Beach County. Fourth, Whitehall markets itself to non-Florida residents. About 20% of its nursing home and ACLF patients reside outside Florida. Hence, approval of Whitehall's 27-beds does not promote access for Palm Beach County or Florida residents. Goal 3 is to insure that long-term care services are appropriately utilized throughout Florida. All four applicants have in place utilization and pre-admission screening programs for appropriate utilization of nursing home services. Accordingly, the proposals of HCR, Vari-Care, and Manor Care are consistent with the State Health Plan; however, the proposal of Whitehall is not. The District IX Local Health Council has adopted five long-term care CON allocation factors which are applicable to proposals for additional nursing home beds in Palm Beach County. The first factor is that freestanding nursing homes should have a minimum of 120 beds in urban subdistricts. Palm Beach County is an urban subdistrict in District IX. HCR's proposal is consistent with this recommendation in that the HCR proposal will bring HCR's nursing home up to the minimum 120-bed size unit. Manor Care is consistent with this recommendation in that it is an existing 120-bed facility with a 30-bed Alzheimer unit approval. Likewise, Vari-Care meets this recommendation since it is a 154-bed facility. Whitehall, however, fails to meet this recommendation since it only has 73 nursing home beds and only seeks approval for 27 more, for a total of 100 beds. Within this first recommendation is a recommendation that priority be given to additions to nursing homes so that the total capacity would reach, but not be greater than, 120 beds. The HCR proposal is consistent with this recommendation in that its proposal, if granted, would increase the number of beds in that facility to only 120. Accordingly, HCR should be given priority in this proceeding in order to meet the first recommendation in the Local Health Council. To the contrary, Whitehall should be given no priority since it does not propose to meet the first recommendation of the Local Health Council. The second recommendation of the Local Health Council is that all new nursing homes and expansions should agree that a minimum of 30% of its patient days will be provided to Medicaid-eligible patients, if such patients are available within the subdistrict. Medicaid-eligible are available within the subdistrict and accounted for more than 700,060 patient days in Palm Beach County in calendar year 1988. HCR's proposal for 42% of its additional patient days to be devoted to Medicaid-eligible patients exceeds the recommendation of the Local Health Council, and the facility-wide commitment to 35% of its patient days to Medicaid-eligible patients likewise exceeds the recommendation. Similarly, Manor Care agrees to a 37% Medicaid condition to its CON approval and, therefore, this factor is satisfied. Likewise, Vari-Care projects a 32% Medicaid payor mix. Whitehall will serve no Medicaid patients, and, accordingly, fails to comply with this recommendation of the Local Health Council. The third recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a range of long-term care services. HCR's 120-bed facility would offer a range of services to all of its patients including those in the proposed addition. Similarly, Manor Care Vari- Care, and Whitehall propose and provide a range of services to their patients and will do so in their proposed additions. The fourth recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a documented history of providing good residential care, staff ratios that exceed minimum requirement, provisions for the treatment of residents with mental health problems, and the inclusion of intensive rehabilitation services The HCR, Manor Care and Vari-Care proposals are consistent with this recommendation in that their staffing ratios exceed minimum requirements, they provide treatment for residents -with mental health problems, they have documented their ability to provide good quality care by operating facilities with superior licenses, and intensive rehabilitation services will be available to their residents. Medicare participation often indicates the level of intensity of skilled services offered at a facility. In this regard, Whitehall's Medicare participation of .7% in 1987 and 1.3% in 1988 does not demonstrate a substantial commitment to intensive skilled or rehabilitation services. The fifth recommendation of the Local Health Council is that priority should be given to applicants who propose service to a distinct patient population that currently is not being served within the Subdistrict. No applicant identified a distinct patient population that is not currently being served within the Subdistrict. Whitehall suggests that its application promotes this factor since it has Jewish patients. It does not suggest that the other applicants do not have Jewish patients. However, there are already three dedicated Jewish nursing homes in Palm Beach County. The presence of three dedicated Jewish nursing homes clearly indicates that the Jewish population is currently being served within the Subdistrict. Whitehall further concedes that its services (frozen Kosher dinners) is not the equivalent of those services of offered at a dedicated Jewish nursing home. Accordingly, no applicant should receive priority pursuant to this final recommendation of the Local Health Council since no applicant has identified a distinct population not currently being served, and no applicant has proposed to serve such a population. Accordingly, the HCR, Vari-Care, and Manor Care proposals comply with the District IX Local Health Council plan, but the Whitehall application does not. HCR's proposed facility will be located in northern Palm Beach County, Vari-Care's facility is located in central Palm Beach County, and Manor Care and Whitehall are located in very close proximity to each other in southern Palm Beach County. The two facilities in southern Palm Beach County both have licensure ratings of superior. It is clear that Whitehall's facility is more luxurious than that of Manor Care (and the other applicants for that matter), and its patient charges are high enough to offer many quality of life enhancements which other facilities are unable to offer. For example, Whitehall offers its patients room service, complimentary beer and wine, and a chauffeur- driven Cadillac for excursions outside the nursing home. However, Manor Care offers services more indicative of a high quality of care than Whitehall. Per its application, Whitehall will not staff its 3-11 or its 11-7 shift with nursing administrators, therapists, nurse-aides, activity directors, or social services. In comparison, Manor Care will provide such staff in its 3- 11 shift, and nurse-aides in the 11-7 shift. Whitehall does not provide in- house physical therapists. Manor Care employs physical therapists. Whitehall provides minimal skilled nursing services based on its small levels of Medicare participation. Whitehall proposes no additional Medicare-certified beds. Manor Care maintained the highest level of Medicare participation in Palm Beach County in 1988. At Whitehall, Alzheimer's patients are mingled in with other nursing home patients. Manor Care has final CON approval to establish a 30-bed dedicated Alzheimer unit so as to treat Alzheimer disease in the most appropriate modality. Whitehall mixes its ACLF and nursing home residents. They share dining rooms, activities, staff, and occupy the same floor. That is very uncommon. Regents Park of Boca Raton (hereinafter "Regents Park"), operated by Petitioner Health Quest Management Corporation III, is a 120-bed nursing center located in Boca Raton. Whitehall is located only about one mile from Regents Park, and Manor Care is located three to five miles from Regents Park. Approximately 90% of Regents Park's patients come from the Boca Raton area. Most are referred to the facility by Boca Hospital and West Boca Hospital. Like Regents Park, Manor Care and Whitehall also receive referrals from Boca Hospital and West Boca Hospital. Regents Park's general nursing program is the bedrock of the facility's service program. Additionally, Regents Park offers an established rehabilitation program. The facility maintains a fully equipped rehabilitation department housed in a specialized module that was built onto the facility some years ago. All of Regents Park's Medicare patients, as well as a substantial proportion of its skilled care patients, participate in the rehabilitation program. Boca Raton's local hospitals refer patients to Regents Park for rehabilitation. Most nursing homes experience less than half the Medicare utilization of Regents Park and Manor Care. These two facilities have historically ranked among the largest providers of Medicare services in Palm Beach County, despite their close proximity. Regents Park also offers an established program for low-functioning patients, which includes Alzheimer's patients and patients suffering from other dementias. Approximately thirty residents participate in the low-functioning program, and the program has four specialized staff. Health Quest claims that it would lose staff and patient days if Whitehall or Manor Care were approved. At the same time, Health Quest admits: it would not release staff; it would not limit current services; Health Quest is an excellent provider and can compete in the future for new residents; and Health Quest staffs well above minimum licensure requirements. Hence, by its own admission, Health Quest failed to show any credible or meaningful adverse impact if Manor Care or Whitehall were approved. Health Quest estimates it might suffer only a $12,000 or a $26,000 net loss if either application were approved. That amount does not constitute substantial, adverse impact.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that HRS enter a Final Order Approving the application of HCR for a CON for 30 additional nursing home beds; Approving the application of Manor Care for a CON for 30 additional nursing home beds; Denying the application of Vari-Care for a CON for 26 additional nursing home beds; and Denying the application of Whitehall for a CON for 27 additional nursing home beds. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd of January, 1990. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NUMBERS 89-2502, 89-2504, 89-2505, 89-2506, and 89-2507 Health Quest's proposed findings of fact numbered 1, 2, 5, 6, 8, 10, 26, 28, and 31 have been adopted either verbatim or in substance in this Recommended Order. Health Quest's proposed findings of fact numbered 3, 7, 27, and 32 have been rejected as unnecessary for determination of the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 4, 11-15, 21, 23-25, 29, 30, and 33-35 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Health Quest's proposed findings of fact numbered 9, 16-20, 22, and 36 have been rejected as being subordinate to the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 37 and 38 have been rejected as being immaterial to the issues involved herein. Health Quest's proposed findings of fact numbered 39-48 have been rejected as not constituting' findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Health Quest's proposed findings of fact numbered 49-79 have been rejected as being irrelevant to the issues involved in this proceeding. HRS' proposed findings of fact numbered 1, 4, and 5 have been adopted either verbatim or in substance in this Recommended Order. HRS' proposed findings of fact numbered 2 and 6 have been rejected as being unnecessary for determination of the issues involved in this proceeding. HRS' proposed findings of fact numbered 3 and 7 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. HRS' proposed finding of fact numbered 8 has been rejected as being subordinate to the issues involved in this proceeding. HRS' proposed finding of fact numbered 9 has been rejected as not being supported by the weight of the credible evidence in this proceeding. HRS" proposed finding of fact numbered 10 has been rejected as being contrary to the weight of the credible evidence in this proceeding. HCR's proposed findings of fact numbered 1-29 and 31-54 have been adopted either verbatim or in substance in this Recommended Order. HCR's proposed finding of fact numbered 30 has been rejected as being irrelevant to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 1-3, 5-8, 13, 15, 18- 23, 31, 33, 34, 37, 38, 41 42, 48, 50-54, 58, 61, 64, 70, 75, 76, 78, 79, and 82 have been adopted either verbatim or in substance in this Recommended Order. Vari-Care's proposed findings of fact numbered 4, 12, 24-27, 66, 69, 74, and 91 have been rejected as not being supported by the weight of the credible evidence in his proceeding. Vari-Care's proposed findings of fact numbered 9-11, 28, 30, 40, 43, 44, 63, 77, 80, 84, 85, and 90 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Vari-Care's proposed findings of fact numbered 14, 16, 32, 35, 36, 39, 45-47, 49, 59, and 73 have been rejected as being subordinate to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 17, 29, 55, 65, 67, 68, and 72 have rejected as being unnecessary for determination of the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 56 and 81 have been rejected as being immaterial to the issues involved herein. Vari-Care's proposed findings of fact numbered 57, 60, 62, 71, 83, and 86-89 have been rejected as being irrelevant to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 39, 47, 75-77, 82, 84, 85, 93, 118, 119, 146, and 151 have been rejected as being immaterial to the issues involved herein. Whitehall's proposed findings of fact numbered 1, 6, 11, 16, 21, 30, 34, 41, 48, 51, 54-56, 58, 59, 61, 65, 66, 74, 78, 88-90, 92, 96, 97, 99, 106, 121, 124, 126, 137, 139, 141, 142, 147, 148, and 150 have been adopted either verbatim or in substance in this Recommended Order. Whitehall's proposed findings of fact numbered 2, 7-9, 12, 13, 17-19, 29, 31, 40, 43-46, 63, 64, 83, 86, 91, 107, 128, 131, 136, 140, and 152 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Whitehall's proposed findings of fact numbered 3, 50, 101, 111-117, 125, 129, 155, and 156 have been rejected as being irrelevant to the issues involved in this proceeding Whitehall's proposed findings of fact numbered 20, 23-25, 27, 38, 42, 49, 52, 57, 60, 67, 69, 70, 72, 73, 79-81, 87, 94, 95, 98, 100, 102-105, 108- 110, 120, 122, 123, 127, 130, 134, 135, 143-145, and 149 have been rejected as being subordinate to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Whitehall's proposed findings of fact numbered 10, 22, 26, 28, 36, 37, 53, 62, 68, 71, 132, 133, 138, 153, and 154 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 14, 15, 32, 33, and 35 have been rejected as being contrary to the weight of the credible evidence in this proceeding. Manor Care's proposed findings of fact numbered 1, 2, 4, 5, 7-9, 11, 13-24, 27-37, 39, 40, 42, 43, 45, 47, 48, 50, 51, 53, 54, 57, 58, 60, 63, 64, 66, 69, 71-73, 75-78, 80, 81, 83, 89, 93-99, 102, 103, 107, 108, 110-113, 121, 130-141, 143-145, 147, and 149 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 3, 101, 104, 106, 117, and 148 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Manor Care's proposed findings of fact numbered 6, 12, 38, 49, 55, 56, 59, 65, 67, 68, 74, 82, 90, 92, 100, 114, 116, and 118-120 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 10, 26, 41, 44, 46, 52, 61, 62, 70, 79, 86-8, 105, 109, 115, 122, 142, 146, 150, and 151 have been rejected as being subordinate to the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 25, 84, 91, and 123- 129 have been rejected as being irrelevant to the issues involved in this proceeding. Manor Care's proposed finding of fact numbered 85 has been rejected as being immaterial to the issues involved herein. COPIES FURNISHED: Samuel J. Dubbin, Esquire Gerald M.Cohen, Esquire STEEL HECTOR & DAVIS 4000 Southeast Financial Center Miami, Florida 33131-2398 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601 Byron B. Mathews, Jr., Esquire 700 Brickell Avenue Miami, Florida 33131 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 James C. Hauser, Esquire Messer, Vickers, Caparello, French & Madsen, P.A. Post Office Box 1876 Tallahassee, Florida 32302 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
