Findings Of Fact The Agency For Health Care Administration (AHCA) is responsible for the administration of certificate of need laws for health care services and facilities in Florida. Life Care Centers of America, Inc. (Life Care) owns, leases and/or operates 157 nursing and retirement facilities in 27 states. It is one of the largest nursing home companies in the United States. AHCA considers Life Care a "major health care provider" for CON review purposes. In response to the fixed need pool published by AHCA in October 1993, Life Care filed a CON application, subsequently numbered CON 7501, for a 34-bed addition to a previously approved 77-bed nursing home in Clay County in AHCA District 4, Subdistrict 2. The Letter of Intent ("LOI") deadline for Life Care's application for the December, 1993 batching cycle was November 1, 1993. Rule 59C-1.008(5)(h), Florida Statutes, requires a listing of the total approximate amount of capital projects at the time of letter of intent deadline. The application filing date for this batching cycle was December 1, 1993, with an omissions response deadline of January 14, 1994. Section 408.037(2)(a), Florida Statutes, requires a complete list of capital projects at the time of application. Life Care application 7501 was deemed complete by AHCA on January 14, 1994. AHCA preliminarily denied Life Care's application for CON 7501 for failing to include the total project costs attributable to CON applications which were preliminarily denied by AHCA, but pending due to administrative challenges filed by Life Care. The amount listed on Schedule 2 of Life Care's application on the line described as "allowance for projects denied and appealed various" is $6,020,387. In the May, 1992 nursing home batching cycle, Life Care applied for a CON to build a 120-bed nursing home in Orange County, AHCA District 7, Subdistrict 2. That application (CON 7028) was preliminarily denied and, by Petition for Formal Administrative Hearing dated June 25, 1993, Life Care challenged AHCA's action. Life Care failed to include CON 7028 based on pending settlement negotiations on November 1, 1993, which resulted in the filing on January 12, 1994, of a Notice of Voluntary Dismissal of its challenge to the denial of CON 7028. See, DOAH Case No. 93-3912. Life Care's CON 7028 proposed total project cost was $5,644,047. In the June, 1993 nursing home batching cycle, Life Care applied for a 69-bed nursing home addition in Citrus County, AHCA District 3. That application (CON 7322) was subsequently denied and by Petition for Formal Administrative Hearing dated October 5, 1993, Life Care challenged that preliminary agency action. By Notice dated March 7, 1994, Life Care voluntarily dismissed its challenge to the denial of CON 7322. See DOAH Case No. 93-6009. Life Care's CON 7322 proposed total project cost was $1,473,000. However, Life Care entered into a settlement for a 9-bed partial award for a total project cost of $82,100. In June 1993, Life Care also applied for a CON to build a new 120-bed nursing home in Flagler County, in AHCA District 4, Subdistrict 4. That application (CON 7330) was subsequently denied and, by Petition dated October 6, 1993, Life Care challenged that preliminary agency action. Life Care failed to list CON 7330 on its Clay County application, based on pending settlement negotiations which resulted in its voluntary dismissal of its petition on January 14, 1994. See, DOAH Case No. 93-6011. Life Care's CON 7330 proposed total project cost was $5,656,000. In the same June 1993 cycle, Life Care applied for a CON to construct a new 42-bed nursing home in Polk County, AHCA District 6, Subdistrict 5. That application (CON 7355) was subsequently denied, and the denial challenged by Petition dated September 27, 1993. As of the date of this hearing, that application was pending at DOAH. See, DOAH Case No. 93-5747. Life Care's CON 7355 proposed total project cost was $2,925,871. Life Care also applied, in June 1993, for a CON to construct a new 120-bed nursing home in Palm Beach County, AHCA District 9, Subdistrict 4. That application (CON 7386) was subsequently denied, and that denial challenged by Petition dated October 6, 1993. At the time of this hearing, that application was pending at DOAH. See, DOAH Case No. 93-6006. Life Care's CON 7368 proposed total project cost was $6,101,000. The combined total of the projects costs equals $21,799,918 for CONs 7028, 7322, 7330, 7355 and 7368, not $6,020,387 as Life Care reported for "allowance for projects denied and appealed." Life Care also reported $15,000,000 as "other capitalization." Accepting AHCA's claim that $21,799,918 in project costs should have been reported, Life Care asserts that the total of $21,020,387 ($6,020,387 + $15,000,000) is available to fund the five projects, leaving an insignificant omission of 9/10 of 1 percent of total reported projects and expenditures, or $779,531 of $92,709,260. The Clay County CON application described the line item of $6,020,387 as "Allowance for projects denied and appealed" as follows: (3) An allowance for potential approval of a portion of the Life Care projects applied for in Florida for the batching cycles May 1992, November 1992, and May 1993 which were denied by the Agency and have been appealed by Life Care. These projects are for Orange County, Polk County (second project), Citrus County, Palm Beach County, and Flagler County. All of these projects were anticipated to be funded through a combination of Life Care equity and bank loans as outlined in the individual CON applications. Life Care described "Other Capitalization" as follows: (4) To be conservative, an allowance of $15,000,000 for currently unidentified capital projects which may occur over the next three years, including items such as facility renovations or additions, acquisitions, and exercising purchase options for leased facilities. These projects will be funded as they materialize, as it is anticipated that funding will be primarily through bank loans. Life Care also listed separately the costs for projects in eleven Florida counties for which AHCA had indicated an intent to issue it CONs or for which applications were filed simultaneously with the Clay County application. These project costs total $47,830,873. All together, approved Florida projects, other states projects, CONs with intents to deny but appealed, renovations, projects exempt from CON review and other capitalization cost reported by Life Care on Schedule 2 total $92,709,260. The notes drafted by Life Care to explain schedule 2 make it clear that Life Care did not expect to use the additional $15,000,000, reported to AHCA, to cover denied but appealed projects. The same is true of the other itemized projects listed on Schedule 2. Life Care clearly states which line item was intended to apply to Orange, Polk, Citrus, Palm Beach and Flagler Counties. On the date that Life Care filed its letter of intent the total amount of these pending projects was $21,799,918 not $6,0202,387, as reported. The notes indicate that the cost estimates are based on expectations of potential approvals of the denied but appealed CONs. In effect, as Life Care's witness testified, it expected to prevail in 25 percent of its pending administrative challenges. The notes attached to Schedule 2 do support Life Care's claim that $15,000,000 designated as "other capitalization" is available for an additional projects approved after administrative proceedings. By describing its availability for "unidentified projects," Life Care demonstrated that no obstacle exists to the use of the additional $15,000,000 on preliminarily denied CON projects if Life Care is more successful in administrative proceedings than it anticipates. Life Care's claim that it does not have to apply these funds to any planned capital expenditures, is also supported by an additional note attached to Schedule 2 explaining how estimated capital budget expenditures would be funded, which is as follows: (5) Estimated capital expenditures for 1995 at Life Care facilities and the corporate, regional and divisional offices to be funded through a combination of operating cash flow and bank loans. These expenditures are pending approval when they are incorporated into the annual budget prior to each respective year. Life Care has established that the $15,000,000 for unidentified capital projects is not otherwise committed and is available to fund preliminarily denied, but challenged CONs, if more than the expected potential projects are approved. If Life Care prevails on all pending challenges, then its projections of capital project costs fall short by $779,531. If Life Care's projections of its commitments are inaccurate by $779,531, with total project costs of $92,709,260, then the omission does not render Life Care's application incomplete for failing to include the total approximate amount of capital projects. AHCA gives a preference for expanding nursing homes with fewer than 120 beds for enhanced efficiency and economics of scale. AHCA also agreed that if the $15,000,000 had been identified as available for the denied but challenged capital projects, it would have been considered by AHCA, and that Life Care has the financial resources to complete the 34-bed addition. For these reasons, Life Care's proposed 34-bed addition to its approved 77-bed construction CON is financially feasible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Life Care for CON No. 7501 to construct a 34-bed nursing home addition in Clay County, AHCA District 4, Subdistrict 2, be GRANTED. DONE AND ENTERED this 15th day of September, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of September, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2409 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 3. Accepted in or subordinate to Finding of Fact 3. Subordinate to Finding of Fact 2. Accepted in Findings of Fact 5. Accepted in Findings of Fact 4. Accepted in Findings of Fact 5. Accepted in Findings of Fact 6. Subordinate to Finding of Fact 6. 10-13. Accepted in or subordinate to Findings of Fact 7 and 13. 14-15. Accepted in Findings of Fact 16-17. 16-(16-B) Accepted in Findings of Fact 17. Accepted in Findings of Fact 18. Accepted in Findings of Fact 7 and subordiante to preliminary statement. Accepted in Findings of Fact 7. Accepted in Finding of Fact 14. Accepted in Findings of Fact 8. Accepted in Findings of Fact 10. 23-24. Issue not reached. 25. Accepted in Findings of Fact 20. 26-30. Accepted in or subordinate to Finding of Fact 21. Accepted in Findings of Fact 14 and 23. Issue not reached. Accepted in Finding of Fact 21. 34-39. Accepted in or subordinate to Findings of Fact 14 and 23. 40-49. Accepted in or subordinate to Finding of Fact 24. Respondent's Proposed Findings of Fact. Accepted in or subordinate to Finding of Fact 3. Accepted in or subordinate to Findings of Fact 4 and 7. Accepted in Findings of Fact 8. Accepted in Findings of Fact 9. Accepted in Findings of Fact 10. Accepted in Findings of Fact 11. Accepted in Findings of Fact 12. 8-10. Accepted in part in Findings of Fact 13-24 and rejected in part. 11. Accepted in Finding of Fact 7. COPIES FURNISHED: R. Bruce McKibben, Jr., Esquire PENNINGTON & HAVEN, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Richard Patterson, Esquire Agency for Health Care Administration 301 The Atrium, 325 John Knox Road Tallahassee, Florida 32303-4131 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue The broad issue for resolution is whether FHFC's application meets the criteria contained in Section 381.494(6)(c) F.S. and Rule 10-5.011 F.A.C. FHFC contends that its application meets all the criteria in Section 381.494(6)(c) F.S., and when (1)(k) of Rule 10-5.011 F.A.C. is properly applied, a net need for at least 93 beds results. DHRS contends that a need for only 17 beds exists when the numerical need methodology is applied consistent with its current policy. DHRS did not present any evidence on any criteria other than need. The more specific issue to be determined in this proceeding is focused on the data for current and future population used to calculate numerical need under Rule 10-5.011(1)(k) F.A.C. FHFC contends that the most recently released population estimates and projections should be used; DHRS asserts that the data available at the time of the application should be used. The parties' differing results in the net bed need (93 beds, as opposed to 17 beds) are based upon those separate theories for application of the rule.
Findings Of Fact FHFC currently operates a 120-bed nursing home in Polk County, on the northeastern outskirts of the City of Lakeland. Its application for an additional 60 beds was submitted in July 1985, in time for the July 1985 batching cycle. The application was deemed complete and was later denied in December 1985. The cover letter from HRS dated December 9, 1985, accompanying the State Agency Action Report, "SAAR", states the basis for denial: "There is insufficient need for the project proposed for this subdistrict at this time." Comments within the SAAR explain that the application of the methodology in Rule 10-5.011(1)(k) F.A.C. results in insufficient need for the project proposed by the applicant. "...Further, nursing home utilization within Polk County does not warrant the addition of nursing home beds at this time." (SAAR, P. 9, Petitioner's exhibit No. 2) Walter Eugene Nelson is a health planning consultant and former administrator of the HRS Office of Comprehensive Health Planning, the office responsible for administering the certificate of need program. He was tendered by Petitioner and was accepted, without objection, as an expert in health care planning and nursing home CON reviews. Mr. Nelson prepared a break-out of the need methodology described in Rule 10-5.011(1)(k) F.A.C. With one significant exception, his application of the methodology conforms to that of Herbert Straughn, HRS' expert witness. For the factors related to current and projected population (POPA, POPB, POSC and POSD), Mr. Nelson used data released from the Office of the Governor in January 1987. Mr. Straughn used data available as of the date of the application, that is, data released on July 1, 1985. Both parties agree that "current population" is that population at the time of application, July 1985. The projected horizon year population is three years later, or July 1988. Both parties agree that the source of the data is the official estimates and projections adopted by the Office of the Governor. Actual population census counts are made every ten years. During the decennium, population figures are extrapolated and updated through current data on utility hook-ups, building permits, employment, school enrollment and similar sources. When the data is applied to population in a future date, the resultant population count is called a "projection"; when the data is applied to population for a current or past date, the population count is called an "estimate". The Office of the Governor revises and updates its population estimates and projections every six months. Sometimes the figures are adjusted upward, sometimes downward. In the opinion of Eugene Nelson, the later-released figures are more accurate. In this instance, as to the figures released in July 1985, for the current (July 1985) population, the "estimates" were really projections since the data was collected in Spring 1985, before the relevant period. By January 1987, the estimates for the July 1985 population had the advantage of hindsight and the projections for the population in July 1988 had the advantage of data collected between July 1985 and January 1987. Herbert Straughn contends that the estimates and projections released in July 1985 are more appropriate. His explanation is best expressed in his own words: * * * [direct examination by Mr. Powell] Q What set of population figures did you use in your calculations? [response by Mr. Straughn] A I used the populations that were current at the time of the submission of the application, that being of July, 1985, and then the proper planning horizon of July, 1988. Q Why did you use those figures? A Because it more truly reflects the entire set of data that the Department sees fit to use on calculating bed need during or prior to, an administrative hearing. Q Why do you-all consider that to be more appropriate? A Because, well, because it more truly reflects the entire set of data by which to derive the methodology, that, you know, including the population, the occupancy, the number of licensed beds, and the number of approved beds. Q Well, just referring to the population, which Mr. Nelson has used a different set of figures, which set is the better set of figures to use, current as of the date of the application? A Well, I know it could be the current, or the date of the application, because then it truly reflects the input of the other set of data to derive the methodology to come up to the number of beds either needed, or not needed. Q Which figures do you consider more accurate, so far as population figures? A I would consider these that were current at the time that we did the analysis. Q Why? A Well, contrary, I think, to what Mr. Nelson says, that the closer that you can get to the population at the time you do the review, based on the ten-year span of when the population, or census, is taken, because it's taken every ten years, the further you get away from the base year, I think that the calculations that get further away from the base year, therefore, become less accurate. Q Would you say less reliable? A And less reliable. * * * (transcript, pgs. 89-90) As recently as September 1986, HRS used the most current available population data in its bed need methodology. Even now HRS still uses the approved bed figures available at the time the SAAR is signed, rather than at the time the application is submitted. Herbert Staughn's break-out of the methodology, Respondent's exhibit No. 1, reflects on its face the updated adjustment of another variable: "licensed beds" ("LBD" in the rule formula). His break-out initially included 1685 licensed beds, but shortly before the hearing this figure was adjusted downward to 1655 licensed beds after it was determined that Johnson Health Center's 30 beds were sheltered nursing home beds which are not applied in computing net need for community nursing home beds. Both parties apply an occupancy rate in the Polk County subdistrict of 84.9 percent. Herbert Straughn contends that this rate indicates lack of need, as it is less than an alleged minimum standard of 90 percent occupancy. This "minimum standard" is not described by rule or statute, nor was it adequately explained by the HRS expert. The CON review criteria listed in the SAAR correspond, in substance, to the review criteria in Section 381.494(b)(c) F.S. and Rule 10-5.011 F.A.C. The SAAR is used by the agency as a convenient check list to inform an applicant of the extent to which the criteria are satisfied. There are criteria, other than need, identified in the checklist. In its case FHFC presented affirmative testimony that each criteria was met by the applicant. The only evidence presented by HRS related to need as addressed in paragraphs Nos. 8, 9 and 10, above. FHFC presented no evidence of special circumstances pursuant to Rule 10-5.011(1)(k)2.j. F.A.C. This provision applies in the event that the net bed allocation is zero. FHFC's break out of the bed need methodology yielded a net bed allocation of 93 beds for the planning horizon year 1988. HRS' break out yielded an allocation of 17 beds.
The Issue As stipulated to by the parties, the issue in this case is: Whether there is a numerical need for FHFC's proposed facility when the need is calculated in accordance with Rule 10-5.11(21), F.A.C. [sic].
Findings Of Fact In July of 1985 the Petitioner filed an application for a certificate of need (number 4123), for the construction of a 120-bed nursing home in Citrus County Florida. The Petitioner's application was initially denied by the Respondent and the Petitioner timely filed a Petition for Formal hearing contesting this proposed agency action. The Amended Prehearing Stipulation contains the following stipulation: 2. DHRS and FHFC stipulate, as a matter of fact and law, that, providing FHFC demonstrates in accordance with Rule 10- 5.11(21), F.A.C., a numerical need for not less than 60 beds [sic] nursing home beds in Citrus County, then FHFC's application for 60 community nursing home beds in Citrus County meets all the remaining applicable criteria in S.381.494(6)(c) & (d), Fla. Stat., Rule 10-5.11, F.A.C. The Petitioner is willing to accept a certificate of need for 60 nursing home beds for Citrus County. The following procedures generally apply in reviewing certificate of need applications filed in a July batching cycle, as the Petitioner's application was: Thirty days prior to the application due date, a letter of intent must be filed with the Respondent and the local health council; The application must be filed by July 15; Approximately one month after the application is received, an error and omissions letter is sent by the Respondent to the applicant; A reply to the error and omissions letter is due 45 days after the omissions letter is sent; The application is deemed complete or incomplete; An opportunity for public comment is given; and A decision to approve or disapprove the application is made. In this case, the letter of intent was filed in June, 1985, and the application was filed on July 15, 1985. The error and omissions letter was sent in August, 1985, and completeness was determined in September, 1985. A State Agency Action Report (hereinafter referred to as the "SAAR") was signed on November 7, 1985, by the reviewer of the application and on November 29, 1985, by the unit supervisor. The parties have stipulated that if there is sufficient numerical bed need for at least 60 nursing home beds, the Petitioner's application should be granted. Numerical bed need is determined pursuant to Rule 10-5.011(1)(k)2, Florida Administrative Code (formerly Rule 10-5.11(21)(b), Florida Administrative Code). Pursuant to Rule 10-5.011(1)(k)2, Florida Administrative Code (hereinafter referred to as the "Need Methodology"), need for nursing home beds is determined for the relevant planning district and for the relevant planning horizon. Citrus County is located in the Respondent's planning district 3. For purposes of the Need Methodology, bed need is to be determined on a district- wide basis. The planning horizon in this case is July, 1988. The calculation of bed need pursuant to the Need Methodology requires a calculation of gross need and a calculation of net need. The calculation of gross bed need pursuant to the Need Methodology is based upon certain population figures, occupancy rates and the number of licensed beds in the district. In this case, the parties agreed that the relevant population figures (see Joint exhibit 1) are as follows: June 1, 1985 65 to 74 years population of 96,130; June 1, 1985 75 and over population of 56,717; July, 1988 projected 65 to 74 years population of 107,914; and July, 1988 projected 75 and over population of 68,413. The relevant population figures were released on July 1, 1985, and were applied to applications submitted on July 15, 1985. Occupancy data used in the Need Methodology is for the period October, 1984 through March, 1985. The parties agreed that the occupancy data collected by the local health council was the appropriate data. That data indicated an occupancy rate of .9037. The relevant number of licensed beds for purposes of calculating gross bed need in district 3 is the number of licensed beds as of June 1, 1985. Rule 10-5.011(1)(k)2g, Florida Administrative Code. There were 3,789 licensed beds in district 3 as of June 1, 1985. Although the Petitioner presented evidence that the Respondent had published a report of the number of licensed beds in district 3 indicating that there were 3,849 licensed beds on June 1, 1985, the evidence proved that 60 beds were included on that report in error. Those 60 beds were listed as licensed beds of Suwannee Valley Nursing Center on Joint exhibit 2. The evidence proved that those beds were not in fact licensed as of June 1, 1985, and were not even licensed as of November 27, 1985. The Petitioner also argued in its proposed recommended order that the Respondent had failed to take into account 60 additional licensed beds at Lake Highlands Nursing Home. This is not correct. Although it is true that the 60 beds in question were not included on the Semiannual Nursing Home Census Report and Bed Need Application report of June 3, 1985 (Joint exhibit 2), that report also indicates that there were 60 licensed beds at Suwannee Valley Nursing Center. Those beds were not, however, licensed. If the 60 beds at Suwannee are taken out and the 60 additional beds at Lake Highlands are added in, the June 3, 1985 report indicates that there were 3,789 licensed nursing home beds as of June 1, 1985. Additionally, the list of licensed nursing home beds attached to the SAAR includes the 60 additional nursing home beds at Lake Highlands. The SAAR list also includes 60 beds at Suwannee and 15 too many beds at Eustis Manor. If these 75 beds are subtracted from the correct total of 3,864 licensed beds listed on the SAAR attachment, there were 3,789 licensed nursing home beds as of June 1, 1985. In calculating gross bed need, the Need Methodology also provides for a poverty adjustment. The parties agreed, however, that the poverty adjustment does not apply in this case because there were more than 27 beds per 1,000 population at the time the application was filed. The Need Methodology also provides that the district-wide gross bed need is to be allocated to subdistricts where appropriate. The parties agreed that a subdistrict allocation of gross bed need is not required or appropriate in this case. The Need Methodology provides specific times or time periods for the determination of occupancy rates, population estimates and licensed beds for purposes of determining gross bed need. Once gross bed need is determined pursuant to the Need Methodology, net bed need must be determined. Rule 10-5.011(1)(k)2i, Florida Administrative Code, provides that net need is determined as follows: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs 1 through 9 [sic] unless the subdistrict's average estimated occupancy rate-for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. [Emphasis added]. In calculating net bed need, the parties have disputed the point in time when approved beds are to be inventoried. The Need Methodology does not provide a specific date for determining approved beds (or licensed beds) for purposes of calculating net bed need. The Respondent has taken the position that the inventory of approved beds is to be determined immediately prior to the signing of the SAAR by the unit supervisor. This non-rule policy is based upon Policy Memorandum No. 26 (FHFC exhibit 3). This Policy Memorandum contains no explanation of the policy or the rationale for counting approved beds in this manner. Although Mr. Carter, the Respondent's only witness, speculated (he did not know why the Respondent adopted the policy) that the policy was implemented to prevent a proliferation of beds, the weight of the evidence does not support a conclusion that the policy is reasonable. Based upon the Respondent's policy as to the relevant date for determining the number of approved beds, there were 933 approved beds as of November 29, 1985. The Petitioner has taken the position that the inventory of approved beds for purposes of determining net bed need should be determined prior to the application filing deadline, at the same time data used to calculate gross bed need are determined. There were 753 approved nursing home beds for district 3 at the time the Petitioner's application was filed. The Office of Community Medical Facilities of the Respondent prepares monitoring reports in order to periodically capture the inventory of approved beds. Based upon the Respondent's position with regard to the calculation of net bed need, there is a net surplus of 109 beds for district 3 in July, 1988: 4,520 gross beds needed minus (3,789 licensed beds plus 840 approved beds (90 percent of 933 total approved beds))(109). Based upon the Petitioner's position with regard to the calculation of net bed need and using the correct number of licensed beds in the' calculation of gross bed need there is a net need for 53 beds for district 3 in July, 1988: 4,520 gross beds needed minus (3,789 licensed beds plus 678 approved beds (90 percent of 753 total approved beds)) 53. Although the parties did not dispute the date for determining the number of licensed beds for purposes of determining the net need for nursing home beds, it has been concluded as a matter of law that the number of licensed beds for purposes of determining net bed need is to be determined based upon on the most current information as of the date of the final hearing. It has also been determined that the appropriate date for the determination of approved beds is also the date of the final hearing. The Petitioner has failed to prove what the number of licensed beds and approved beds was as of the date of the final hearing. In light of the fact that the evidence fails to prove the number of licensed and approved beds as of the date of the final hearing, the net need for nursing home beds in district 3 in July, 1988, cannot be determined. The most current information concerning the number of licensed beds was the number of beds relied upon by the Respondent: 3,789 licensed beds. The most current information concerning the number of approved beds is contained in the Quarterly Status Report of the Office of Community Medical Facilities dated January 7, 1987 (DHRS exhibit 1): 1,029 approved beds for district 3. Applying the Need Methodology to the facts in this case indicates a gross need for 4,250 nursing home beds in district 3 in July, 1988: STEP 1: BA = LB / (POPC + (6 X POPDD)): 3789 / (90,130 + (6 X 56,717)) 3789 / 436,432 BA = .008681764 STEP 2: BB = 6 X BAs 6 X .008681764 BB = .052090554 STEP 3: A (POPA X BA) + (POPB X BB) (107,914 X .008681764) + (68,413 X .052090584) 936.88 + 3563.67 A = 4501 STEP 4: SA = A X (LBD/LB) X (OR/.90) 4501 X l X (.9037/.90) SA = 4520 Using the most recent information as to the number of licensed and approved beds in calculating net bed need, there is a surplus of 195 nursing home beds for district 3 in July, 1988: 4,520 gross beds needed minus (3,789 licensed beds plus 926 approved beds (90 percent of 1,029))(195). Based upon the foregoing, there is insufficient need pursuant to the Need Methodology to warrant approval of the Petitioner's application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner's application for certificate of need number 4123 be DENIED. DONE and ORDERED this 25th day of March, 1987, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0049 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s), if any, in the Recommended Order where they have been accepted. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Paragraph numbers in the Recommended Order are refereed to as "RO ." Petitioner's Proposed Findings of Fact: Proposed Finding RO Number of Acceptance of Fact Number or Reason for Rejection RO 5. RO 6. 3 RO 13-14. 4 RO 13. See RO 16 and 31. Although it is proper to count the number of licensed beds as of June 1, 1985, for purposes of determining gross bed need, it has been concluded as a matter of law that it is not proper to count the number of licensed beds as of June 1, 1985 for purposes of determining net bed need pursuant to the Need Methodology. The first sentence is accepted in RO 17. Although the second and third sentences are technically correct, the weight of the evidence established that there were 3,789 licensed nursing home beds as of June 1, 1985. Irrelevant. Although Mr. McElreath did so testify, the weight of the evidence supports a finding of fact that there were 3,789 licensed nursing home beds as of June 1, 1985. See RO 17. Not supported by the weight of the evidence. The additional 60 beds of Lake Highlands Nursing Home (for a total of 142) were taken into account in the SAAR. Although the first sentence is correct, there was evidence that indicates there was an error in the report. The last sentence is not supported by the weight of the evidence. See RO 17. 11 RO 15. 12 RO 18. The first sentence is generally true-- the specific point in time for the calculation of licensed beds is only for purposes of calculating gross bed need. See RO 20 and 31. The last sentence is irrelevant. The first sentence is accepted in RO 21. The second sentence is rejected to the extent that it suggests that a date is specified for inventoring licensed beds for purposes of determining net bed need. See RO 20 and 31. The first sentence is accepted in RO 28. The last sentence is irrelevant. Irrelevant. 17 RO 23. 18 RO 23. The evidence did not prove that there is not "any other published statement of the rationale...." The testimony only proved that none of the witnesses were aware of any such publication. 19 RO 24. Irrelevant. Not supported by the weight of the evidence. Mr. Carter gave a reason for the policy. 22-23 and 25-31 Irrelevant. These proposed findings of fact are proposed in support of the Petitioner's proposed interpretation of the Need Methodology. The correct interpretation of the Need Methodology is a question of law. 24 Not supported by the weight of the evidence. The witnesses were not aware of any such statement and no evidence was presented to find that such a statement exists, but the evidence did not prove that none exist. 32 Not supported by the weight of the evidence. See RO 36-37. The Respondent's Proposed Findings of Fact: 1 RO 1-2. RO 3. RO 4. Although the parties stipulated that for purposes of this case, approval of the Petitioner's application would depend upon whether need exists under the Need Methodology, this conclusion of law is not generally correct. The determination depends upon a weighing of all the criteria, absent a stipulation of the parties, of Section 381.494(6)(c) , Florida Statutes (1985). RO 9. Not supported by the weight of the evidence. See RO 36-37. Although this is the Respondent's position, the evidence failed to support a conclusion that the Respondent has adopted a valid policy. See RO 23 and 24. COPIES FURNISHED: Robert D. Newell, Jr., Esquire 200 South Monroe Street Suite B Tallahassee, Florida 32301 Paul V. Smith, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Petitioner filed an application for a Certificate of Need for a 180-bed nursing home in Dade County, a subdistrict of Respondent's District 11 service area. The application was not offered into evidence, and no testimony was presented describing Petitioner's proposed project. Respondent reviewed Petitioner's application in accordance with statutory criteria and Section 10-5.11(21), Florida Administrative Code, which contains a formula or methodology for computing whether there is a need for additional community nursing home beds in any health district or subdistrict in Florida. In applying that formula, Respondent utilized the following planning data: the number of licensed and approved beds within the service area, the average patient census data, the number of elderly living in poverty within the service area, and the projected number of persons aged 65 and older residing within the service area three years in the future (the formula's planning horizon). Respondent then projected the theoretical need in the district and subdistrict, subtracted the inventory of licensed and approved beds, and thereby obtained the need / no need ratio. Although a need was demonstrated in both the district and subdistrict, the methodology then further requires a current utilization rate in excess of 85 percent and a prospective utilization rate in excess of 80 percent before additional beds can be approved. In this case, the current utilization rate of 93.4 percent exceeds the 85 percent requirement. However, when the proposed 180 beds are added to the number of already licensed and approved beds, the prospective utilization rate decreases to 69 percent, a figure below the required 80 percent prospective utilization threshold. In accordance with its application of its need methodology, Respondent issued a State Agency Action Report determining there is no need for Petitioner's proposed nursing home facility. Even though District II and the Dade County subdistrict have a current utilization rate of 93.4 percent, Petitioner presented no evidence to show that persons in need of nursing home beds are unable to secure them or that any special or extenuating factors exist to mitigate against the strict application of Respondent's need methodology.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered denying Petitioner's application for a Certificate of Need. DONE and RECOMMENDED this 14th day of November, 1984, in Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 1984. COPIES FURNISHED: John D. Whitaker, Esquire 10700 Caribbean Boulevard Suite 202-H Miami, Florida 33189 Culpepper, Turner and Mannheimer 318 North Calhoun Street Post Office Drawer 11300 Tallahassee, Florida 32302-3300 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact Prior to the hearing, the parties filed a Pretrial Stipulation which essentially sets forth the following facts contained in paragraphs 1 through 9: The Intervenors Beverly Enterprises, Inc. (hereafter "Beverly"), and Provincial House of Florida (hereafter "Provincial House"), filed their applications for certificates of need on March 18, 1981, and January 28, 1981, respectively. At the time Beverly and Provincial House filed their applications for 120-bed nursing home facilities, they were batched together with Health Care Management, Inc. (hereafter "Health Care"). Shortly thereafter, Health Care was granted a certificate of need to construct a 120-bed nursing home facility and Beverly's and Provincial House's applications were denied on July 8, 1981, and June 3, 1981, respectively. Beverly and Provincial House timely filed petitions with the Division of Administrative Hearings contesting the denial of their respective applications. By Stipulation dated December 29, 1981, Beverly and Provincial House were granted certificates of need which gave each the right to construct a 96- bed nursing home facility. This Stipulation was later amended on February 21, 1982, to authorize construction of two 72-bed nursing homes in Lee County, Florida. Based upon the new 1982 Health Systems Plan for Lee County, an additional 143 beds were determined to be needed for Lee County for the year 1985. Neither Beverly nor Provincial House resubmitted their applications when the new bed need was established. Rather, as part of the settlement in Provincial House, Inc. v. Department of Health and Rehabilitative Services, Case No. 81-1793, and Beverly Enterprises v. Department of Health and Rehabilitative Services, Case No. 81-2037, the certificates of need were granted based upon receipt of ". . . updated population figures which demonstrated additional need for nursing home beds in the County." Petitioner's Exhibit 3. At the time the Department entered into the Stipulation with Beverly and Provincial House, it did not consider Gulf Court's then pending application. The sole reason the certificate of need was denied to Gulf Court Nursing Center on March 30, 1982, was that there were no longer beds available and there was no need as a direct result of granting the two certificates of need to Beverly and Provincial House. Since Gulf Court's application was never simultaneously reviewed or considered by the Department with either Beverly or Provincial House's applications, a comparative hearing was not held in this case. Gulf Court, Beverly and Provincial House all meet the criteria for issuance of a certificate as set forth in Rule 10-5.11, Florida Administrative Code. The Respondent Department routinely awards certificates of need on a first-come, first-serve basis to applicants denied certificates due to a lack of need in a previous cycle, who file Chapter 120 appeals, without reviewing pending applications filed in the current cycle.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order finding that, under the circumstances presented in this case, Gulf Court is entitled to a comparative and competitive review with Provincial House and Beverly Enterprises, Inc. DONE AND ENTERED this 10th day of February 1984 in Tallahassee, Florida. SHARYN L. SMITH 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 10th day of February 1984. COPIES FURNISHED: John C. Dent, Jr., Esquire DENT PFLUGNER ROSIER AND HENDRICKS 2 North Tuttle Avenue Sarasota, Florida 33577 Steven Huss, Esquire Department of Health and Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 G. Boone, Esquire Susan Lee Stockham, Esquire 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 32484 Alicia Jacobs, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue The issue in this case is whether the Certificate of Need (CON) Application of either South Florida Baptist Hospital, Inc., (Hospital) or John A. McCoy Florida SNF Trust (Trust), or both, meet the statutory and rule criteria for a CON for nursing home beds in Hillsborough County, Florida, and whether the Department of Health and Rehabilitative Services (Department) should approve either, or both, of these CON Applications.
Findings Of Fact The Parties The Trust The applicant for CON 5924 is John A. McCoy, Trustee, John A. McCoy Florida SNF Trust (Trust). This is the first application for a CON which has been filed on behalf of the Trust. The Trust has never filed income tax returns and has no federal employee identification number. It has never been the licensee, owner or manager of a nursing home. The Trust was formed on April 3, 1989, through a document signed by John A. McCoy, as trustee of the SNF Trust and as trustee of seven individual land trusts, primarily because John A. McCoy always considered himself the owner of all nursing home facilities associated with these various trusts, but felt the Department was not giving him credit for his previous CON approvals. The assets of the Trust are seven individual land trusts designated as: Florida Land Trust 4376, d/b/a Brandywyne Convalescent Center; Florida Land Trust 11, d/b/a/ Sutton Place Convalescent Center; Florida Land Trust 8, d/b/a Surrey Place of Live Oak; Florida Land Trust 9, d/b/a Surrey Place of Ocala; Florida Land Trust 32OR, d/b/a Surrey Place of Orlando; Florida Land Trust 33H, d/b/a Surrey Place of Hillsborough County; and Florida Land Trust 34SL, d/b/a Surrey Place of St. Lucie. The beneficiaries of these individual land trusts are John A. McCoy (47.5%), Stanford L. Hoye (47.5%), and James W. McCoy (5%). The formation of the Trust did not change the ownership of these individual land trusts in any way, and the interests of the beneficiaries of the individual trusts have not been sold, conveyed, or otherwise transferred to the Trust. There are no other documents transferring any beneficial interests to the Trust. Hoye has assigned his beneficial interest in these individual trusts to S&E Partnership. Under the terms of the Trust, the beneficiaries have the power to direct the Trustee, John A. McCoy, concerning the management and control of trust assets. The Trustee has the authority to convey assets of the Trust only when authorized in writing by the beneficiaries. There is no evidence in the record that the beneficiaries have authorized, in writing, the Trustee to convey assets of the Trust. The right to manage, sell, rent or otherwise handle assets of the Trust resides solely with the beneficiaries. Although the document forming the Trust on April 3, 1989, refers to John A. McCoy as trustee for individual land trust 4376, the trustee for this land trust is, in fact, the Bank of Palm Beach and Trust Company. Individual land trusts 32OR, 33H and 34SL do not hold any interest in real property. Land trust 32OR was established for a nursing home facility to be known as Surrey Place of Orlando, but the CON application for that facility has been denied. Land trust 33H was established for the nursing home facility in Hillsborough County that is the subject of this proceeding, and will only hold an interest in property if this application is approved. Land trust 34SL was established for another nursing home facility, the application for which is also pending at this time, and which will, therefore, only hold an interest in property if this other application is approved. John A. McCoy has executed a promissory note in the amount of $1,050,000 as part of the Trust's contribution to be used to develop the facility at issue in this case, as well as two others. However, payment of this note is contingent upon receiving approval of three CONs for facilities to be owned and operated through individual land trusts 32OR, 33H and 34SL. Individual land trusts 4376, 11, 8 and 9 all involve leasehold interests in existing nursing homes, and not interests involving fee simple ownership. There are four other individual land trusts which hold the ownership interest in the real property associated with these existing facilities. Land trust 4375 involves the land associated with the leasehold which is the subject of individual land trust 4376; land trust 10 involves the real property associated with the leasehold which is the subject of individual land trust 11; land trust 7 involves the property associated with the leasehold that is the subject of individual land trust 8; and land trust 6 relates to the real property associated with the leasehold that is the subject of individual land trust 9. Land trusts 4375, 10, 7 and 6 are not included within the Trust which is the applicant in this proceeding, although the Trust's purported audited financial statement that was included with its application included the combined accounts of these non-included land trusts, as well as the accounts of land trusts 4376, 11, 8 and 9 which are included within the Trust. The Trust's expert in nursing home accounting and reimbursement, Ray Bolt, testified that he included the accounts of all these land trusts because he assumed that McCoy, as Trustee, had absolute control over all of these various trusts. This was an erroneous assumption. He testified that it was consistent with generally accepted accounting principles to include the combined accounts of all individual land trusts in the Trust's audit, as long as a disclosure was included in the Trust's audited financial statement. However, the Department requires that the audited financial statements filed with a CON application be of the applicant alone, and if information about entities other than the applicant is included, the financial statement is not considered to be of the applicant. On the other hand, although individual land trusts 32OR, 33H and 34SL are included within the Trust, they were not included within the Trust's financial statement. John A. McCoy is the trustee of several additional land trusts not associated with, or a part of, the Trust which is the applicant in this case. These other trusts include land trust 17-CR and 16-B, to which CONs have previously been issued. At the time the Trust submitted its application for this CON, it included nursing home facilities associated with individual land trusts 4376, 11, 8 or 9, although it was not the licensee for any of these facilities. Subsequent to the submission of the Trust's CON application, the three facilities relating to individual land trusts 4376, 11 and 8 have been sold to National Health Care Affiliates, Inc., and there is no longer any real property interest in these land trusts. McCoy testified that the three facilities associated with these land trusts at the time this application was filed are no longer a part of the Trust. John A. McCoy is also the President of Health Care Associates (HCA), the ownership of which is common with that of the Trust. HCA will develop and manage the facility in Hillsborough County which is the subject of this case, if the Trust's CON application is approved. The Department allows the holder of an approved CON to contract with another entity for the day to day operation and management of a facility after it is licensed. Although its letter of intent did not specifically so state, this facility will be licensed in the name of the Trust, which will be ultimately responsible for its operations despite this common ownership and the contractual relationship which will exist between HCA and the Trust for the development and management of the facility in Hillsborough County. This will be in contrast with the facility associated with individual land trust 9 where HCA was the applicant for licensure and currently holds the license for said facility. The Hospital The Hospital is a 147 bed licensed acute care, not for profit, hospital located in Plant City, Hillsborough County, Florida. Fifteen of the Hospital's licensed beds are designated as skilled nursing beds. During 1989, the occupancy rate for the Hospital was 45-46%, which was a drop from 1988. The skilled nursing beds had an occupancy rate of only 37-38% in 1989 due to a lesser need for skilled care than anticipated, seasonal variation in the area, and the Hospital's failure to obtain a Medicaid provider number that would allow it to accept Medicaid patients. The Hospital provides care to residents outside its immediate service area and outside the service district. There is local community support for a nursing home at the Hospital. Other than its experience with the fifteen skilled nursing beds, the Hospital has no experience operating a nursing home. The Department The Department is the state agency responsible for reviewing CON applications in Florida under the provisions of Sections 381.701 - 381.715, Florida Statutes, in order to determine compliance with the criteria and standards for approval set forth therein, as well as in rules which it has adopted thereunder. The Applications In order for an application for a CON to be valid, the applicant must be an existing entity at the time its application is filed. The Department has rejected CON applications because it has determined that the applicant shown on the application form was not in fact the actual applicant. The Department expects that if a CON is issued, the CON holder will be the licensee of the facility since it is the licensee that has control and is responsible for operations. The Fixed Need Pool published by the Department projected a need for 99 nursing home beds in District VI, Subdistrict 1, Hillsborough County, for the January 1992 planning horizon. For the second half of 1988, occupancy rates for the Subdistrict were 95.45%, with 3076 licensed beds and 549 approved beds. The Subdistrict Medicaid average was 74.40%. In response to this published need, five applicants, including the Trust and the Hospital, timely filed CON applications. The Trust application was numbered CON 5924, and the Hospital application was designated as CON 5982. The other three applicants are not parties to this proceeding, and have not sought further consideration of their applications. The Trust proposes to construct a 90 bed community nursing home facility in Hillsborough County consisting of a single story structure of approximately 36,500 gross square feet, at a total cost of $3,650,500. It will also have an associated 58 bed ACLF and adult day care program. The Hospital proposes to construct a 99 bed nursing home to serve skilled and intermediate care patients, located adjacent to its existing hospital facility with a covered walkway connecting the nursing home with the hospital. The facility proposed by the Hospital would consist of approximately 26,256 gross square feet, at a cost of $3,688,044. Although its application is not for an addition to an existing facility, the Hospital proposes to share certain services and activities provided in its existing facility with its proposed nursing home, such as food preparation, some therapies, kitchen, laundry, housekeeping, chapel and gift shop. The site proposed by the Hospital in its application for the nursing home is not of adequate size since the foot print of the nursing home facility will encompass the entire site, without any allowance for parking, outside recreation, or view, other than what is already provided for the existing hospital facility. Instead of a .6 acre site as proposed by the Hospital, a site of from 4 to 5 acres is required for a 99 bed nursing home facility which meets minimum requirements for licensure. Additionally, the proposed square footage of this 99 bed facility is approximately 10% below what would be required to meet licensure standards, and the amendment of this proposal to add this additional square footage would be a substantial amendment which is not permitted at this stage of the CON application and review process. After review, the Department deemed both applications complete, and issued its SAAR on or about October 26, 1989, noticing its intent to approve the Trust's application for CON 5924 and to deny all other applications, including that of the Hospital, CON 5982. Therafter, the Hospital timely filed a petition for formal hearing to challenge the Department's notice of intent to deny its CON and to approve the Trust's, and this comparative hearing was subsequently held. The Department's determination that the Trust's application was complete is in error. First, the Trust has not been shown to be an existing entity with the capacity to file an application for CON 5924. Second, in order to be complete, an application must include an audited financial statement of the applicant, and the financial statement filed with the Trust's application contains information about other entities not included within the Trust. Thus, the Trust has not filed its own audited financial statement, but rather one containing the combined accounts of several individual land trusts, including some which do not comprise the Trust. The Department's determination that the Hospital's application was complete is also in error. It was not established that there was an authorized certification to the Hospital's board resolution that purportedly authorized the filing of this CON application and as a result, it was not shown that the Hospital's board of directors has consented to this filing. Additionally, the employee who signed the application was not the authorized representative of the applicant, as filed. State Health Plan Based upon the testimony of Thomas Konrad, Sharon Gordon-Girvin, and Edward Perrine, who were accepted as experts in health planning, it is found that both applications are consistent with relevant portions of the State Health Plan. Specifically, the State Plan sets forth three generalized goals for nursing homes, including supply, appropriateness and adequacy of utilization. Supply is dealt with in the fixed need pool determination, and each application addresses and responds to the need for 99 beds which has been determined and published by the Department. Each applicant proposes the use of its facility to provide long-term nursing home services that are accessible, geographically and financially, to all residents. Local Health Plan The 1988 District VI Local Health Plan identifies 9 recommendations for use in determining preference among CON applicants. The first recommendation is that the subdivision priority need rankings, set forth in the Local Plan, should be considered along with numeric bed need for the Subdistrict. Hillsborough County is a Subdistrict of District VI, and within District VI, northwest Hillsborough County is given the highest subdivision priority ranking, based upon the elderly poverty rate and the population 85 years of age and older in each subdivision. Although the Trust application does not specifically designate a site for its proposed facility, the record in this proceeding clearly reflects the Trust's commitment to locate a suitable site for its facility in northwest Hillsborough County. The Hospital is located in Plant City, in northeast Hillsborough County, and its proposed facility will be adjacent to its existing acute care hospital. Thus, the Trust application is consistent with this first recommendation of the Local Health Plan, while the Hospital's proposal is not. The Trust application is more accessible to the area of greatest need in Hillsborough County. A specific site does not have to be identified in a CON application, although a Subdistrict identification does have to be included. Both applications meet the provision of the Local Health Plan which recommends that beds in a Subdistrict have a 90% or greater occupancy rate for six continuous months before additional beds are approved. In Hillsborough County, the occupancy rate for 1988 exceeded 95%. Both applicants have committed to serve Medicaid patients in proportion to the representation of elderly poor in the Subdistrict, and both are, therefore, consistent in their application statements with this recommendation of the Local Plan. However, the Hospital has yet to serve one Medicaid patient in the fifteen skilled nursing home beds at its existing facility, and has not been successful in obtaining a Medicaid provider number. The Hospital has been consistently below the average among hospitals in Hillsborough County for Medicaid patient days. Neither applicant has a well documented history of implementing CONs within statutory timeframes and without cost overruns. As previously found, this is the first CON application filed by the Trust, although John A. McCoy, as trustee of other individual land trusts, has filed other CON applications. The Hospital has not filed a CON application for new nursing home beds prior to this one. The CON which it received in order to relocate its fifteen skilled nursing beds had to be amended to add additional square footage, increasing this unit from the 5,082 square feet in its application to 8,500 square feet. Neither applicant has previously applied for, and obtained, CONs and licensure for nursing homes which were rated as superior by the Department. For this reason, the Local Plan's recommendation that a well documented history of timely implementation of superior rated facilities should be given preference in review of CON applications does not pertain to either of these applications. Quality of Care The Hospital's proposed design and floor plan raise serious questions about the quality of care which could be rendered at its facility. The floor plan and design which it submitted with its application would have to be substantially amended to meet minimum licensure requirements and to provide for quality of care to patients. Its proposal to share essential services between its existing hospital and the proposed nursing home, such as food preparation, laundry and housekeeping, nursing staff, administrators, janitorial services, and therapies is not well integrated, and as presented could reasonably be expected to impair the quality of care available for nursing home residents. As an example, the residents would not have separate rooms for recreation, dining, family visiting and patient lounges, but rather, the same room may serve several of these functions. No evidence was presented to establish that the Hospital's existing kitchen and food service facilities can accommodate the additional workload which would result from serving an additional 99 beds in the proposed nursing home. The atmosphere for residents of the Hospital's proposed facility would be more institutional than the atmosphere presented in the Trust's application. The Hospital's proposal to transfer patients from the nursing home to the existing hospital facility for therapies and some other services would require that they be regularly moved, via a covered walkway, from the nursing home to the hospital, and such an arrangement is not preferred from a health planning, architectural or quality of care perspective. It was not established that the Hospital has maintained a superior rating for its existing facility, although this assertion was included in its application. At the time of application, the Hospital had not finalized an Alzheimer's or AIDS program, although it states in its application that it is committed to serving these patients. In order to provide quality care to residents and to meet the minimum standards for licensure which are set forth in Chapter 10D-29, Florida Administrative Code, the Hospital's application would have to be substantially amended. For example, it would have to move and increase the size of the soiled and clean utility rooms, add storage rooms, move one wing of the proposed building in order to provide a sufficient view from patient rooms, enlarge its dining and medication rooms, and enclose the proposed covered walkway connecting the nursing home with the existing hospital. The Trust will seek a superior rating for its facility, and although the Trust does not have a documented history of superior ratings of nursing homes for which it has been the applicant, John A. McCoy has had approximately thirteen years experience in designing, developing and operating nursing homes. The Trust's proposed facility would provide an integrated, self-contained program for its residents in a residential atmosphere with natural lighting, wide corridors, and a separation of service areas from areas utilized by residents. The lounges, dining spaces, treatment rooms, 15,000 square foot courtyards, and public spaces in the Trust application all exceed those in the Hospital's. The visitor's lounge is designed to allow privacy while residents are visiting with family or friends. The size of the residents' rooms significantly exceed the minimum standard set forth in Chapter 10D-29. There are several lounges for residents with covered patios leading to the courtyard, and a large screened porch off the dining room. While each semi-private room has a residential toilet, rather than an institutional flush valve type, bathing facilities are centralized in order to provide greater supervision and less hazard for the residents. A safe and secure separate unit for Alzheimer patients, with safety fire doors, is proposed in the Trust application, and these residents will have their own dining facility and lounges which will lessen the stress that they tend to feel when in crowded dining rooms with other patients. The building which the Trust proposes to construct will be made of concrete, which offers greater fire resistence than a wooden structure, and will meet or exceed all Chapter 10D-29 requirements for life, fire and safety code regulations. Availability and Access The addition of these two new programs would obviously increase the availability of services in the District. Existing nursing homes in the District are operating at a very high utilization rate, and demand for nursing home beds is significant. The Hospital has committed to provide 74% of its services to Medicaid recipients, while the Trust has committed to only 60% Medicaid utilization. The Hospital agreed, in its CON for fifteen skilled nursing home beds, to a condition to provide 5% Medicaid, but has yet to serve the first Medicaid patient. The reason for this failure is that it has been unable to obtain a Medicaid provider number from the Florida Medicaid program because its skilled nursing beds remain licensed as hospital beds. The Trust's location in northwest Hillsborough County will increase accessibility for patients in the highest priority area of the District. The Trust's proposed Alzheimer program is more complete in its presentation than that proposed by the Hospital. The Hospital's design plans do not adequately address the location and facilities for an Alzheimer or AIDS unit. Alternatives Considered The Hospital's fifteen skilled nursing beds are not an alternative for the beds sought in this proceeding. Since Medicaid will not, at this time, pay for services to patients in these fifteen beds, they are not available for indigent care to nursing home patients. The construction of a new facility to meet the need determined by the Department to exist is the best alternative available since existing nursing homes in the District have experienced very high occupancy rates and no existing provider is proposing the expansion of an existing facility to meet this need. Personnel Availability and Costs The Trust has not provided any revision of its FTE staffing data for the second year of its operation when compared with its FTE figures for year one, although for year one its proposal exceeds staffing requirements. It is reasonable to expect that a facility's occupancy rate will increase in its second year of operation, and that therefore, its staffing needs would also increase. In several instances, the Hospital has failed to include an estimate of expenses and supplies associated with various personnel, such as housekeeping, administration, nursing, and dietary. The Hospital's estimate of such expenses was understated by approximately $327,000. In its application, the Hospital proposes to pay its Director of Nursing a lower hourly wage than registered nurses on staff, an unrealistic and unreasonable proposal. The Hospital has not included sufficient staff in its application to provide quality care to residents, or to meet the minimum requirements for licensure found in Chapter 10D-29, Florida Administrative Code. The estimate of aids and LPNs required for a 99 bed facility is insufficient. It has failed to include a social services director or activities director. Where functions are proposed to be performed by existing hospital employees, the allocation of FTE's for these individuals to the proposed nursing home is unclear and incomplete. It was established that each applicant can identify and recruit sufficent personnel to staff its proposed facility. The Hospital has a record of successful staff recruitment and training for its existing facility, and has an extensive ongoing volunteer program which includes 150 volunteers who provided 35,000 hours of service to the Hospital last year. Financial Feasibility Although there is no requirement that final architectural plans be included with a CON application, an applicant cannot increase square footage after CON approval. The deficiencies in the Hospital's proposed floor plan and design are substantial and would require extensive changes and increases in square footage in order to meet the licensure requirements of Chapter 10D-29, Florida Administrative Code. Specifically, the square footage of the proposed nursing home would have to be increased by approximately 10% according to Dennis O'Keefe, an expert in nursing home architecture, design and cost estimation, and this increase would add approximately $175,000 to the construction costs indicated in the Hospital's application. Further, in order to simply provide the services and facilities described in the Hospital's application narrative, the square footage of its proposal would have to be increased by 25%. Even the Hospital's architecture expert, Larry Fusaro, conceded that its proposal would have to be increased by 800 square feet. At $52.25 per square foot, the Hospital has underestimated the square footage costs to construct its facility, and was unable at hearing to establish that this estimate is reasonable. In its application, the Hospital proposes financing at least $600,000 more than is necessary for the capital expenditures associated with this project. Additionally, the Hospital is proposing to obtain a cash contribution from its existing hospital of $383,798 in funds over the amount of projected capital expenditures. This extra $600,000 financing and excess funding of $383,798 are significant factors in the Hospital's projection of financial feasibility in the first and second years of operation. The Hospital has failed to include an estimate of the cost to provide food to its residents. While there are a number of additional expense items that do not appear on the Hospital's expense statement because they are being provided through the existing hospital facility, it was not shown that the Hospital has specifically and completely accounted, through the existing facility's budget, for all such expense items which are missing from this proposal. Since the nursing home proposed by the Hospital will not be a cost center of the existing facility's operations, but will be a separate entity with its own financial records, these deficiencies and uncertainties in sharing arrangements are all the more significant. The income from private pay rooms was overstated in the Hospital's application by $82,000. Additionally, its non-nursing home revenue was overstated by $29,000, and "other revenue" was also overstated by approximately $110,000. When errors and underestimates in the Hospital's estimate of project costs, as well as its overestimates of revenue are considered, the Hospital's project is shown to lack financial feasibility. In its application, the Hospital's letter of commitment for financing only indicates an interest in studying the feasibility for financing the project, rather than setting forth an actual commitment for financing. There have been cost overruns in four CONs previously issued in which John A. McCoy was involved, and three of these overruns were significant, ranging from $399,000 to $496,000. The purported audited financial records upon which the Trust proposal is based include a $1,050,000 unsecured note from John A. McCoy, and $475,000 from this unsecured note is listed as a source of funds for the Trust project. It was not established that John A. McCoy has the financial ability to cover this note, which is contingent upon the approval of several CONs. Due to the unsecured, contingent nature of a significant portion of its financing, the Trust proposal is not financially feasible in the short-term. The current financial ratio reflected in the parties' applications is a measure of each applicant's ability to meet short term obligations. Based solely on the information presented by each applicant in their applications, the Hospital would be able to meet short term obligations, but the Trust's current ratio is such that it would be reasonable to expect that it would have difficulty meeting short term obligations. The Hospital would have a significantly lower long term debt to equity ratio than that reflected in the Trust's application. The Trust's application is highly leveraged, with a significant amount of debt in its balance sheet as compared to equity. This can reasonably be expected to make financing of this project more difficult. The times interest earned ratio for each applicant indicates that while the Hospital would be able to meet debt service payments, the Trust would not. Similarly, the Hospital's operating margin return on assets and return on equity ratios are all positive, indicating it would be able to generate profit on sales revenue from patients, return on assets and on equity. However, these ratios for the Trust's second year of operation indicate that it would experience a loss during this fiscal period. Thus, the Trust proposal has not been shown to be financially feasible in the long-term, according to the data supplied in its own application. Effect on Competition and Costs It cannot be determined whether there will be a significant difference between the charges proposed by each of these applicants and the actual charges at existing providers. The Trust has indicated a charge of $81 for a private room and $72.34 for semi-private, while the Hospital has proposed a $92 private room charge and $79 for semi-private. Comparison of Applicants The Trust application is superior to that of the Hospital in terms of the applicable statutory and rule criteria against which these applications are reviewed. Specifically, the Trust application is superior in terms of structural design, ability to meet life, fire and safety code requirements, ability to provide quality care to residents, and in terms of its proposed programs, including its program for Alzheimer's patients. Its construction cost estimates and projected costs of fixed and movable equipment are reasonable and adequate. However, as set forth above, there are deficiencies in the completeness of this application, as well as its financial feasibility, which preclude its approval. The Trust's projected capital expenditures are estimated at $3,630,500 for a facility of 36,500 gross square feet, while the Hospital's proposal is for 26,256 gross square feet at a capital cost of $3,688,044. Thus, while the Hospital is seeking 99 beds and the Trust is only seeking approval for 90 beds, the Hospital is proposing a facility that is substantially smaller, and yet more costly, than that which is proposed by the Trust. As stated above, the Hospital's cost estimates are substantially understated, and therefore, its proposal would be even more costly than is reflected simply by a comparison of the proposed cost estimates contained in these applications. While the Hospital's proposal could provide for easier access to a hospital facility for nursing home residents requiring hospitalization, a balanced consideration of all criteria for approval establishes that the Hospital's application should not be approved, even if the Trust's application is denied. Specifically, its design is incomplete, inadequate, and institutional in nature. The site proposed for this facility is inadequate. It could not expand this facility to 120 beds at this site since the site is entirely encompassed by the footprint of the proposed nursing home. The Hospital's construction costs are unrealistically low, contributing to the understated nature of cost estimates in its application. The program and facility proposed by the Hospital is dependent upon the existing hospital facility for sharing of essential services, such as dietary and therapy programs, and it was not established that the existing hospital facility would be able to provide such services, or what their cost would be. In contrast, the Trust proposes an independent, self supporting, integrated facility and program. The Hospital does not propose to locate its facility in an area of priority need within the Subdistrict, as does the Trust.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order which denies the application of South Florida Baptist Hospital, Inc., for CON 5982, and of John A. McCoy Florida SNF Trust for CON 5924. DONE AND ENTERED this 14th day of September 1990 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 14th day of September 1990. APPENDIX Rulings on Proposed Findings of Fact filed by the Hospital 1-2. Adopted in Finding 12. 3-5. Adopted in Finding 21. 6. Adopted in Findings 14, 42. 7-8. Adopted in Finding 14. 9. Adopted in Finding 18. 10-12. Rejected as immaterial and unnecessary. 13. Adopted in Finding 22. 14. Adopted in Finding 17. 15. Adopted in Finding 1. 16. Adopted in Finding 4. 17. Adopted in Finding 2. 18. Adopted in Findings 1, 2. 19. Adopted in Finding 2. 20. Adopted in Findings 7, 8. 21. Adopted in Finding 5. 22. Adopted in Finding 9. 23. Rejected as unnecessary. 24-25. Adopted in Finding 2. 26-27. Rejected as immaterial and unnecessary. 28-29. 30. Rejected as an excerpt of testimony and not finding of fact. Adopted in Finding 1. a proposed 31. Rejected as immaterial and unnecessary. 32. Adopted in Findings 28, 31. 33-34. Adopted in Finding 1. 35. Adopted in Finding 10. 36. Adopted in Finding 5. 37. Adopted in Finding 11. 38. Adopted in Finding 10. 39-41. Adopted in Finding 11. 42-43. Adopted in Finding 17. 44-46. Adopted in Findings 8, 23. 47. Rejected as unnecessary and immaterial. 48-50. Adopted in Finding 11. 51-52. Rejected as unnecessary and immaterial. 53-54. Adopted in Finding 1. 55-56. Adopted in Finding 8. 57. Rejected as unnecessary. 58. Adopted in Finding 18. 59. Adopted in Findings 24, 26-27, but Rejected in Findings 25, 28. Adopted in Finding 24. Rejected in Findings 25, 28. Adopted in Findings 21, 46. Rejected in Finding 25. Adopted and Rejected in Finding 29. 65-67. Rejected in Finding 29, and as immaterial and irrelevant. Adopted in Finding 18. Adopted in Finding 21. Adopted in Finding 13. Adopted in Findings 18, 32. Rejected in Findings 29, 30. 73-74. Rejected as irrelevant. 75. Rejected in Findings 29, 30. 76-77. Rejected in Finding 41. Adopted in Finding 57. Adopted and Rejected in Finding 39. 80-82. Adopted in Finding 37. 83-84. Adopted in Finding 38. 85. Rejected in Findings 29, 40, 41, 46. 86-87. Adopted in Findings 21, 29. 88. Adopted in Findings 14, 42. 89-90. Adopted in Findings 21, 29. 91. Adopted and Rejected in part in Findings 40, 41. 92-94. Adopted in Finding 41. 95. Adopted in Finding 46. 96-99. Rejected in Findings 40, 44-48. 100-101 Rejected as immaterial and unnecessary. 102-104 Adopted in Finding 51. Rejected as immaterial and unnecessary. Adopted in Finding 52. Rejected in Findings 53, 54. Adopted and Rejected in Finding 28. 109-112 Adopted and Rejected in Findings 21, 43. Rejected as unnecessary and immaterial. Adopted in part in Finding 43. Rejected as immaterial. 116-117 Rejected as not based on competent substantial evidence. 118. Rejected as irrelevant. 119-121 Rejected in Findings 43, 44. 122-123 Rejected as unnecessary and immaterial. 124-125 Adopted in Finding 50. Adopted in Finding 34. Adopted in Finding 33. 128-129 Rejected in Finding 27. Rejected in Finding 27, and as irrelevant and immaterial. Rejected in Finding 57. Rejected in Finding 36. 133-136 Rejected as unnecessary and cumulative. 137. Adopted in Finding 52. 138-141 Rejected as immaterial and irrelevant. Adopted in Finding 39. Rejected as unnecessary. Adopted in Finding 57. Adopted in Finding 25. Adopted in Finding 33. Rulings on Proposed Findings of Fact filed by the Trust: Adopted in Finding 17. Adopted in Finding 20. Rejected in Findings 10, 11. Adopted in Finding 25. 5-6. Adopted in Finding 11. Adopted in Findings 1, 11. Adopted in Finding 23. Adopted in Finding 22. Adopted in Finding 31. Adopted and Rejected in Findings 1-3, 31. Adopted in Finding 20. Rejected in Finding 50, and as irrelevant. Adopted in Findings 20, 51, but Rejected in Findings 51, 52. Adopted and Rejected in Findings 8, 23. Adopted in Findings 1, 5, 7, 8. Adopted and Rejected in Finding 8. Adopted in Finding 19. Adopted in Finding 21. Adopted in Finding 13. Adopted in Finding 15. Adopted in Findings 21, 45. Adopted in Finding 21. Adopted in Finding 12. Adopted in Finding 46. Rejected as irrelevant. Adopted in Finding 23. Adopted in Findings 22, 57. Adopted in Finding 25. Adopted in Finding 27. Adopted in Finding 26. Rejected as unnecessary. Rejected in Finding 28. Adopted in Finding 24. Adopted in Finding 38. Adopted in Finding 26. Rejected as unnecessary. Adopted in Finding 25. Adopted in Finding 15. Adopted in Findings 27, 34. Rejected as irrelevant and not based on competent substantial evidence. Adopted in Finding 28. 43 Adopted in Finding 15. Adopted in Findings 24, 25. Adopted in Findings 29, 55. Adopted in Finding 25. Adopted in Finding 26. Adopted in Finding 21, but otherwise Rejected as irrelevant. Adopted in Finding 25. Adopted in Findings 29, 55. 51-54. Adopted in Finding 31. 55. Adopted and Rejected in part in Finding 39. 56-57. Adopted in Finding 31. 58-61. Adopted in Findings 21, 29, 30. Adopted in Finding 40. Adopted in Finding 29. 64-65. Adopted in Findings 40, 41. Adopted in Finding 33, but otherwise Rejected as unnecessary. Adopted in Findings 27, 34. 68-74. Rejected as unnecessary due to Finding 52. 75. Rejected in Findings 8, 23. 76-80. Rejected in Finding 52, and otherwise as immaterial and unnecessary. Rejected in Findings 51, 52. Adopted in Findings 40, 46. Adopted in Finding 47. Adopted in Finding 48. 85-87. Adopted and Rejected in part in Findings 39, 42. 88-91. Adopted in Findings 40, 41. 92-94. Adopted in Finding 56. 95-97. Adopted in Finding 54, but otherwise Rejected as unnecessary. 98-99. Rejected as cumulative. 100. Adopted in Finding 43. 101-115 Adopted in Finding 31, but otherwise Rejected as unnecessary and cumulative. 116-117 Adopted in Finding 55. 118-119 Rejected as unnecessary and cumulative. 120-145 Adopted in Findings 21, 29, 43, 44, 57, but otherwise Rejected as cumulative, immaterial and unnecessary. Adopted in Finding 21. Adopted in Finding 29. Adopted in Finding 43. Adopted in Finding 57. Adopted in Finding 29. Rulings on Proposed Findings of Fact filed by the Department: 1-2. Adopted in Finding 1. 3. Adopted in Findings 1, 2. 4-5. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 2. Adopted in Finding 3. 9-10. Rejected as immaterial. 11-13. Adopted in Finding 5. 14-18. Adopted in Finding 7. 19-20. Adopted in Finding 10. 21-23. Adopted in Finding 9. Adopted in Finding 11. Adopted in part in Finding 11. 26-31. Adopted in Finding 8. 32. Adopted in Finding 6. 33-35. Adopted in Findings 21, 29, 30, 43. Adopted in Finding 44. Adopted in Findings 21, 43. 38-39. Adopted in Finding 21. Adopted in Findings 43-48. Adopted in Findings 21, 43. Adopted in Finding 29. Adopted in Finding 28. Adopted in Findings 40, 41. Adopted in Finding 40. Adopted in Finding 49. Adopted in Finding 29. 48-53. Adopted in Finding 30. 54. Adopted in part in Finding 43. 55-56. Adopted in Finding 29. Adopted in Finding 55. Adopted in Finding 57. Rejected as unnecessary and cumulative. Adopted in Finding 29. Adopted in Findings 21, 57. Adopted in Findings 12, 29. 63-64. Adopted in Finding 45. 65-66. Adopted in Finding 40. Adopted in Finding 47. Adopted in Finding 45. 69-70. Adopted in Finding 40. 71-73. Adopted in Finding 41. Adopted in Finding 55. Adopted in Finding 57. Rejected as unnecessary and immaterial. 77-78. Adopted in Finding 17. 79. Adopted in Findings 8, 23. Copies furnished: Theodore E. Mack, Esquire 315 South Calhoun Street Suite 500 Tallahassee, FL 32301 R. Terry Rigsby, Esquire F. Philip Blank, Esquire 204-B South Monroe Street Tallahassee, FL 32301 Edgar Lee Elzie, Jr., Esquire P. O. Box 82 Tallahassee, FL 32302 R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Linda Harris, Acting General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler, Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700
The Issue The broad issue in this proceeding is whether either of the petitioners should be granted a community nursing home CON. The parties disagree as to the appropriate application of the need methodology described in Rule 10-5.011(1)(k), F.A.C. Both Petitioners argue that the approved bed inventory should be determined as of December 1, 1986, at the same time that the number of licensed beds was determined for the January 1987 batching cycle. HRS computed approved beds as of the date that the supervisor signed its State Agency Action Report (SAAR), in May 1987. The parties further disagree as to the effect of subsequent changes to a Final Order in Wuesthoff Health Services, Inc., et al. v. HRS, cited above, originally entered in April 1987.
Findings Of Fact BMI's application number 5010, and Manor's application number 5022, were timely filed for review by HRS in the January 1987 batching cycle. Both applications were denied in HRS' State Agency Action Report (SAAR) dated May 19, 1987. BMI previously received a CON for 73 nursing home beds in Brevard County. Its current application is for 47 additional beds, to create a single 120-bed facility. The entire facility is currently under construction, with the intention that the portion unlicensed as nursing home beds will be utilized as a distinct section of adult congregate living facility (ACLF) beds. Manor also previously received a CON for 60 nursing home beds in Brevard County. CON number 3828 was granted in a prior batching cycle after the current application for 120 beds was filed. At the final hearing, Manor explained that it is now seeking only 60 more beds as it intends to construct a 120-bed facility in Brevard County. In their pre-hearing stipulation the parties agreed that if numeric need is demonstrated, numeric need would first be met through partial or total approval of BMI's application. If the need exceeds 47 beds, the excess should be applied toward determination of approval of Manor's application. The parties also stipulated that all criteria, except those directly related to numeric need for the projects, have either been satisfied by both applicants or are not applicable to this proceeding. In calculating bed need for Brevard County, the parties have agreed, through their exhibits and testimony, that the first portion of the need methodology in Rule 10-5.011(1)(k), F.A.C., yields a subdistrict allocation of 1560 community nursing home beds. It is further undisputed that the relevant number of licensed beds for the period in question is 1,180 beds. The version of Rule 10-5.011(1)(k) F.A.C. in effect at the time of review requires that licensed beds be counted as of December 1, 1986, for the January 1987 batching cycle. The rule is silent as to when approved beds should be counted. Both applicants argue that approved beds should be counted at the same time as licensed beds for consistency and planning purposes. The current version of Rule 10-5.011(1)(k) F.A.C., known as the fixed pool rule, establishes a bed need for each batching cycle, thus providing the certainty and consistency sought by Petitioners' health planners. Prior to its adoption of the fixed pool rule, HRS experimented with various policies as to the determination of "current" data utilized in the need methodology. At the time of the January 1987 batching cycle, HRS' non-rule policy regarding approved beds was to count those beds as of the date that health services and facilities consultant supervisor signs off on the SAAR. In this case, that individual was Reid Jaffe, and the date was May 11, 1987. At the hearing, Mr. Jaffe explained the policy was an attempt to reach a balance between deriving a proper number of beds and minimizing the duplication of services and overbedding. Because the need for future beds is partially predicated on how many beds have already been approved, the Department felt it necessary to take into consideration all those beds which had been approved up until its decision time. Generally the difference between the number of beds published in initial projections of need by HRS' Office of Comprehensive Health Planning and the number of approved beds considered at the time of the decision, are those beds which were approved in final orders issued during that period. Contrary to Petitioners'assertions, those beds which became licensed after the December 1st cut-off date, but before the SAAR sign off, were not lost, but rather were computed by HRS as "approved" beds under the policy. The policy described by Reid Jaffe in his testimony at final hearing is also reflected in HRS' Final Order in Broward Healthcare, Ltd., d/b/a Broward Convalescent Center v. Department of Health and Rehabilitative Services, 9 FALR 1974 (DOAH #86- 2708, Order dated March 21, 1987), aff. per curiam, without opinion, January 21, 1988, 1st DCA case no. BT-258. Utilizing the HRS policy of counting approved beds at the time the supervisor signs the SAAR yields the following total: Approved Facilities Beds Date Approved West Melbourne Health Care 60 7/27/84 Unicare Health Facility of Brevard 120 5/30/86 Brevard Medical Investors 73 9/02/86 Meridian 60 2/ /87 Palm Bay Care Center 60 4/17/87 Forum Group 60 4/17/87 Courtney Springs 36 4/17/87 Total 469 In its SAAR, HRS neglected to include the 60 beds approved for Meridian. These beds were properly included by the applicants' health care planner in her adjustment to the SAAR count and HRS agrees the beds should be included. (See transcript, p. 20 and HRS proposed finding of fact #6.) In June 1985, Courtney Springs received a CON for 36 beds in Broward County. The action was challenged, and the proceeding was consolidated with challenges by other applicants who were denied CONs in the same batching cycle. Wuesthoff Health Services, Inc., et al. v. Department of Health and Rehabilitative Services and Courtney Springs, consolidated cases #85-2868, 85- 2936, 85-2934, 85-3243, 85-3322, 85-3365, 85-3366. In its Final Order, filed on April 17, 1987, HRS granted 60 beds each to Palm Bay Care Center, Forum Group and Courtney Springs. The Final Order was corrected on May 19, 1987, to provide that the award to Courtney Springs was 36, rather than 60 beds, as there was no intent to award the facility more beds than originally provided. In all other respects the final order of April 17, 1987, remained in full force and effect. On July 6, 1987, another order was entered and styled "Amended Final Order." The stated purposes of the amendment were to correct a scrivener's error in failing to serve the final order on a moving party, Brevard Medical Investors, Ltd., (BMI) and to give that party an "opportunity to exercise its right to judicial review." The Amended Final Order addressed BMI's lack of standing for failure to file a timely petition to intervene in the consolidated Wuesthoff cases. This is the only subject of the amended final order. The original final order, dated April 17, 1987, did not address this subject. It is not at all clear that the "Amended Final Order" dated July 6, 1987, amends the April 17, 1987, Final Order, since it references only an April 9th Final Order, not the April 17th Final Order. The record in this proceeding does not include a subsequent correction of "scriveners error", if indeed the referenced date was an error. The applicants argue that the 120 beds awarded to Forum Group and Palm Care should not be regarded as ?approve even under HRS' policy, since the amended final order was dated in July 1987, well after the SAAR was signed by Reid Jaffe in May. Application of this theory would result in 349 approved beds, and a net bed need of 66 beds in the January 1990 planning horizon. (Manor Care, exhibit #5) Application of Petitioners' theory that approved beds should be counted on December 1, 1986, results in 289 approved beds, and a need for 120 beds in the January 1990 planning horizon. HRS' application of its policy regarding the time at which approved beds are to be counted results in 469 approved beds, and a surplus of 42 beds in the January 1990 planning horizon. There is no evidence in this proceeding of circumstances which would justify the approval of beds in excess of a net bed allocation derived through the bed need methodology in Rule 10-5.011(1)(k), F.A.C.
Recommendation Based on the foregoing, it is, hereby RECOMMENDED: That the CON applications by BMI and Manor for nursing home beds in Brevard County be denied DONE and RECOMMENDED this 1st day of April, 1988, in Tallahassee, Florida. MARY CLARK 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 1st day of April, 1987. APPENDIX TO RECOMMENDED ORDER The following reflect on my specific rulings on the findings of fact proposed by the parties: Petitioners' Proposed Findings Adopted in paragraph 1. Adopted in paragraph 5. Adopted in paragraph 4. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Reid Jaffe testified that need for 12 beds exists, but this conclusion did not include the 60 beds approved for Meridian in February 1987. Rejected as contrary to the weight of evidence and to the legal effect of the changes to HRS' April 1987 Final Order. Adopted, as to the characterization of applicants' position, in paragraph 7. Adopted in paragraph 7. Rejected as contrary to the weight of evidence. Rejected as unnecessary. 11-12. Adopted in paragraph 8. Rejected as contrary to the evidence and law. Rejected as contrary to the evidence. Rejected as unnecessary. Rejected as immaterial. Rejected as irrelevant. 18-19. Rejected as immaterial. Adopted in paragraph 7. Adopted in paragraph 3. 22-26. Rejected as immaterial and irrelevant. Respondents' Proposed Findings 1-2. Adopted in paragraph 1. Adopted in paragraph 3. Adopted in paragraph 2. Addressed in paragraph 11. Adopted in paragraphs 9 and 10. Adopted in paragraph 8. Adopted in paragraph 10. 9-11. Rejected as unnecessary. Adopted in paragraph 6. Adopted in paragraph 9. Adopted in paragraph 15. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 Donna H. Stinson, Esquire Moyle, Flanigan, Katz, Fitzgerald & Sheehan, P. A. The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 Theodore E. Mack, Esquire Department of Health and Rehabilitative Services Regulation and Health Facilities 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 =================================================================
The Issue The general issue is whether Health Quest is entitled to a Certificate of Need for nursing home beds in Seminole County for the July 1985 batching cycle. The more limited issues on which this case focused are whether July 1985, or July 1987, is the appropriate release date for population data; whether the base period for "current population" is January 1985, or July 1985; and whether the applicant could, at the final hearing, scale down its request for beds to a number substantially less than the 120 beds requested in its July 1985 application.
Findings Of Fact Health Quest Corporation maintains its home office in South Bend, Indiana. As described by its Vice-President for Planning, the company is a moderately-sized, long-term care and assisted living company. Health Quest has been in existence since 1969, under its President and CEO, Larry Garratoni. The Company has approximately twelve facilities, including three Florida facilities: a 120-bed freestanding nursing home, a 107- bed nursing home with 80 attached assisted living units, and a facility in Sarasota with 300 retirement units. In July 1985, Health Quest filed its application for a new 120-bed nursing home in Seminole County, HRS District VII. After an exchange of correspondence and information relating to omissions to the application, the application was deemed complete effective September 30, 1985, and the application was denied on December 17, 1985. At the final hearing, Health Quest presented two exhibits with updated information to support its original 120-bed application, and updated information to support a scaled-down 60-bed Certificate of Need. These two exhibits, Petitioner's Exhibits 10 and 11, were admitted over HRS objection that they constituted amendments to the completed application, prohibited by HRS Rule 10- 5.008(3), Florida Administrative Code. Health Quest argued that the updates were intended to present a more current description of the cost structure and operating structure that Health Quest would be using, and to support partial approval of the original application. The relevance of these documents is addressed in my conclusions of law, below. The basis for HRS' denial of the Health Quest original application is, "... insufficient need for an additional 120 bed nursing home in the subdistrict." (Petitioner's No. 7) A determination of need in this case depends largely upon the proper application of the methodology described in HRS Rule 10-5.011(1)(k), Florida Administrative Code, which provides, in pertinent part: Community Nursing Home Beds. A community nursing home bed is a nursing home bed not located within a life care facility certified under Chapter 651, Florida Statutes. Departmental Goal. The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in sub- paragraphs (k)2., 3., and 4., of this rule. Need Methodology. In addition to other relevant statutory and rule criteria to be used in considering the allocation of new or additional community nursing home beds, the Department will determine if there is a projected need for new or additional beds 3 years in the future according to the methodology specified under Sub-subparagraphs through j. This methodology provides for adjustments to current community nursing home bed rates based upon expected changes in the proportion of district residents age 75+ and the current utilization of community nursing home beds in the subdistricts designated by local health councils. In districts with a high proportion of elderly residents living in poverty, the methodology specifies a minimum bed rate. A = (POPA x BA) + (POPB x BB) Where: A is the district's age- adjusted number of community nursing home beds for the review cycle for which a projection is being made. POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. BA is the estimated current bed rate for the population age 65-74 years in the relevant district. BB is the estimated current bed rate for the population age 75 years and over in the relevant district. BA = LB/(POPC + (6 x POPD) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. BB 6 x BA SA A x (LBD/LB) x (OR/.90) Where: SA is the preliminary subdistrict allocation of community nursing home beds. LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of appli- cations submitted for the July batching cycle shall be based upon occupancy rate data for the months of October through March pre- ceeding that cycle; appli- cations submitted for the January batching cycle shall be based upon occu- pancy rate data for the months of April through September proceeding the cycle. For the purposes of this rule, the occupancy data to be considered shall be that collected by the Department's Office of Health Planning and Development or a contractor assigned to collect the data. * * * For purposes of applying the methodology, the parties have agreed to the following factors: Occupancy rate (OR) is .9366. Licensed beds in the subdistrict (LBD) is 725. The number of approved beds in the subdistrict is 179 Licensed beds in the district (LB) is 4425. July 1988 is the planning horizon. (Petitioner's Exhibit No. 12, Respondent's Exhibit No. 1, Prehearing Stipulation filed 11/13/87). While the parties have not agreed which figures are applicable, they have stipulated to the population figures for the following periods: (1) January 1, 1988, as of July 1, 1985: Pop A: 93,987 Pop B: 56,612 (2) July 1, 1985, as of July 1, 1985: Pop C: 96,295 Pop D: 58,307 (3) July 1, 1988, as of July 1, 1985: Pop A: 110,788 Pop B: 69,020 (4) January 1, 1985, as of August 1987: Pop C: 96,741 Pop D: 57,545 (5) July 1, 1985, as of August 1987: Pop C: 100, 276 Pop D: 60,133 (6) July 1, 1988, as of August 1987: Pop A: 119, 915 Pop B: 75,704 (Prehearing Stipulation filed 11/13/87) The source of the population figures are the official estimates and projections adopted by the Office of the Governor. These are prepared by the Bureau of Economic and Business Research at the University of Florida and are released periodically. Because better data is available, the July 1987 releases of estimates and projections is more accurate than the July 1985 releases of estimates and projections. The rule does not specify which version must be used. HRS relied on the July 1985 releases that were available at the time the application was first received. HRS did not present evidence to support that policy in this proceeding. HRS does include updated data for other factors in the methodology, for example, occupancy rate and number of licensed beds. Health Quest advocates the use of the July 1987 releases that were available at the time of hearing and presented competent expert testimony from a demographer to support its position. The parties also disagree on the base period for current population, ages 65-74 and 75+ (POPC and POPD). With the exception of the January 1987 batching cycle, HRS' Certificate of Need review staff have consistently applied a three year planning horizon; that is, the base period is considered the date of the batching cycle (here, July 1985). It appears that in its state agency action report, HRS originally used January 1985 as the current population base period. HRS' Office of Comprehensive Health Planning, a separate office within the agency, uses a base period six months prior to the application date in its published semiannual bed need reports. Health Quest advocates use of the earlier base period and argues that it is consistent with good health planning because the earlier period is the midpoint of the six-month occupancy period prescribed by the rule. The rule does not explicitly state that current population is determined as of the batching cycle, but the context strongly supports that interpretation, as discussed in the conclusions of law. Health Quest submitted four iterations of the methodology, including one utilizing the July 1985 base population, a July 1987 release date, and the other values stipulated by the parties. (Petitioner's Exhibit 12). This is adopted as follows, with a resulting bed need of 53.58: NET BED ALLOCATION: SEMINOLE COUNTY, 7/88 PLANNING HORIZON (Using 7/85 base population and the 7/87 population set) 1. BA = LB + 4425 POPC + (6 X POPD) 100,276 + (6 x 60,133) = 4,425 = 9.597 Per 1000 461,074 2. BB = 6 x BA = 6 x 9.597 = 57.582 Per 1000 3. A = (POPA x BA) + (POPB x BB) = (119,915 x 9.597/K) + (75,704 x 57.582/K) = 1,150.82 + 4,359.19 = 5,510.01 4. SA = A x LBD X OR = 5,510.01 x 725 LB .90 4,425 x 0.9366 x 939.48 .90 5. Net Bed Allocation SA - (LBD + (AB x .90) = 939.48 - [725 + (179 x .90)] = 939.48 - 886.10 53.38 The Local Health Council of East Central Florida (District VII,) has adopted a standard that the minimum size of new nursing homes should be 120 beds in all counties, except Osceola, where the minimum size should be 60 beds. (Petitioner's Exhibit 26). Health Quest's expert conceded that a 120-bed home is more efficient to operate. (Transcript, p. 77) It is a generally accepted standard that nursing home units should be organized in groups of 60 beds. Health Quest's expert urged that if a need for 54 beds is found, the approved number should be rounded up to 60 beds. With the exception of need and the above-mentioned policy of the District Health Council, Health Quest's proposed facility (both 120-bed and 60- bed version) meets the applicable criteria for Certificate of Need approval, including quality of care and financial feasibility. In advance of hearing, the parties stipulated that most non-need related criteria were met. (Prehearing stipulations filed 11/13/87 and 11/16/87). In addition, .Health Quest presented perfunctory, unrebutted testimony with regard to the facility's compliance with statutory and rule criteria. Approval of either a 60-bed or 120-bed new nursing home in Seminole County would result in a surplus of beds for the July 1988 planning horizon. Health Quest did not present evidence of special circumstances to justify approval of additional beds, as provided in Rule 10-5.011(1)(k)2.j., Florida Administrative Code.
Recommendation Based upon the foregoing, it is hereby RECOMMENDED: that Health Quest's application for Certification of Need for nursing home beds in Seminole County be denied. that the applications by R. H. Little and Gulf South be dismissed, in accordance with those parties' earlier notices of voluntary dismissal. DONE and RECOMMENDED this 15th day of March, 1988, in Tallahassee, Florida. MARY CLARK 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 15th day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-0136, 86-0355, 86-0638 The following constitute my specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings of Fact Addressed in Preliminary Statement. Addressed in paragraph's 1 and 2. Adopted in paragraph 2. 4-5. Rejected as unnecessary. 6-12. Adopted in substance in paragraph 3. 13-14. Rejected as unnecessary 15-16. Adopted in paragraph 4. 17-72. Rejected as unnecessary, except as summarized in paragraph 14. Rejected as unnecessary Adopted in paragraph 7 and 8. 75-76. Adopted in paragraph 10. 78-80. Adopted in paragraph 7. 81-82. Rejected as unnecessary. Rejected as contrary to the weight of evidence and contrary to the rule. Adopted in paragraph 11, except for the conclusion relating to "rounding-up." Rejected as unnecessary. 86-93. Adopted in substance in paragraph 9. 94. Rejected as argument. 95-96. Rejected as unnecessary. Rejected as cumulative and unnecessary. Rejected as irrelevant. Rejected as contrary to the rule. Rejected as irrelevant. Further, while HRS has used the 3-1/2 year horizon in a single batching cycle, that horizon in CON review has not been accepted by HRS. Rejected as irrelevant. Adopted in paragraph 10. Rejected as contrary to the rule. However, the sentence regarding need calculation in the SAAR is adopted in paragraph 10. Rejected as cumulative and irrelevant. 105-170. Rejected as unnecessary. That Health Quest meets the criteria except those related to need is adopted in summary, in paragraph 14. Respondent's Proposed Findings of Fact Adopted in paragraph 3. Adopted in paragraph 5. Adopted in paragraph 6. Rejected as contrary to the evidence and contrary to the rule. Rejected as contrary to the evidence. Rejected as irrelevant, except as addressed in paragraph 4. Adopted in paragraph 7. Adopted in paragraph 10. Rejected as irrelevant. Adopted in paragraph 15. COPIES FURNISHED: Robert Powell, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Steven W. Huss, Esquire 1017 Thomasville Road Tallahassee, Florida 32303 Gregory L. Coler Secretary 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 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700
The Issue The issue in the case is whether the Agency for Health Care Administration (Respondent) used the correct nursing home bed capacity in calculating the Medicaid per diem rate for Apollo Health and Rehabilitation Center (Petitioner) for the rate period beginning July 1, 2009.
Findings Of Fact The Respondent is the state agency responsible for administering the Florida Medicaid (Medicaid) program. The Petitioner operates a Florida-licensed nursing home and participates as an institutional provider in the Medicaid program. The Medicaid program pays nursing home operators based on a prospective per diem rate which is calculated using cost reports submitted to the Respondent by the nursing home providers. The cost reports are filed pursuant to the "Florida Title XIX Long-Term Care Reimbursement Plan" (the Plan), which the Respondent has adopted by rule. The Plan incorporates guidelines and policies regarding reimbursement and accounting principles set forth by the federal Centers for Medicare and Medicaid Services (CMS) in "CMS Publication 15-1." The Plan establishes the manner in which cost reports are submitted to the Respondent, provides an explanation of allowable costs, and sets forth the methodology by which cost reports are used to establish nursing home per diem rates. The rates are effective for a period of time referred to as the "rate semester." The Respondent's Division of Health Quality Assurance (HQA) is responsible for Certificate of Need (CON) programs, related regulations and procedures, licensure determinations, and identification of licensed bed capacity. Bed capacity is one of the factors used to determine per diem rates. The calculation of the per diem rate is affected by various cost limitations, including a ceiling based, in part, on the classification of the facility by bed capacity. Neither the Plan nor the cost report instructions identify how to calculate the quantity of nursing home beds to be stated in a cost report. The Respondent has historically utilized the number of beds listed on a Medicaid provider's license at the start and the close of the cost reporting period to establish the bed count applicable to calculation of the per diem reimbursement rates. The cost reporting period relevant to this proceeding was calendar year 2008. At all times during calendar year 2008, the Petitioner's licensed bed capacity was 120 beds. In May 2008, Lexington Health and Rehabilitation Center (Lexington), an existing nursing home operator affiliated with the Petitioner, applied through the CON process to expand its facility by 21 beds, from 134 beds to 155 beds. Lexington is not a party to this proceeding. A statutorily-adopted moratorium in effect at all times material to this case prohibited the licensure of new nursing home beds. Because of the moratorium on new beds, Lexington was required to procure the transfer of 21 licensed beds from an existing nursing home operator in order to proceed with the proposed expansion. The Petitioner agreed to transfer 21 beds to Lexington. The Lexington CON application was approved on August 22, 2008. The approval was unchallenged and became final on September 26, 2008. On September 20, 2008, the Respondent issued a renewal license to the Petitioner for a 120-bed facility, valid through September 19, 2010. Based on the approval of the Lexington CON application, the Petitioner began to reduce capacity by removing beds from service. The beds that were removed from service were no longer ready for immediate occupancy and could not be made so within a 48-hour period. The Petitioner initiated alterations to the physical plant to reflect the reduced number of beds, and such alterations precluded meeting minimum space requirements for the 21 beds. The Petitioner's patient census began to decline as the beds were decommissioned to that which would be anticipated given the reduction in available beds. As included in the CON application, the Lexington plans were "approved for construction" by letter dated October 23, 2008, from the Respondent's Office of Plans and Construction (OPC). The OPC had the responsibility to review, and approve or deny, construction plans. The OPC also had final authority to determine, post-construction, whether the facility met applicable requirements and was ready for occupancy. The OPC's October 23, 2008, letter required that all local permits and approvals be obtained prior to commencement of construction and stated that the project would be considered abandoned and the approval terminated if construction had not commenced within one year. On October 27, 2008, both the Petitioner and Lexington applied to amend their respective licenses to the post-transfer bed capacities, 155 beds at Lexington and 99 beds at the Petitioner. Both applications identified the effective date of the amendments as "[u]pon final approval by Plans and Construction," referencing the Respondent's OPC. The Respondent's "approval for construction" on October 23, 2008, of the plans included in the Lexington CON was not sufficient to constitute the "final approval by Plans and Construction" referenced in the applications filed October 27, 2008. Through the removal of beds from service, the Petitioner's actual nursing home bed capacity on December 31, 2008, was 99 beds. According to a Licensed Bed Service Memorandum ("Bed Memo") dated January 22, 2009, the Lexington project was essentially complete and ready for occupancy on that date. On February 10, 2009, the Respondent issued an amended license to the Petitioner to decrease the bed capacity to 99 beds and an amended license to Lexington to increase the bed capacity to 155 beds. By letter dated February 24, 2009, the Respondent advised Lexington that based on the January 22, 2009, inspection, the Lexington project was "approved for its intended purpose." On August 17, 2009, the Petitioner filed an amended cost report for the year ending December 31, 2008, wherein the Petitioner stated a "Total Bed Capacity" of 120 beds at the beginning of the period and 99 beds at the end of the period. The Respondent initially calculated the per diem rate based on the Petitioner's representation of a 99-bed capacity; however, on August 19, 2009, the Respondent issued an amended notice of per diem rates, indicating that the Petitioner's reimbursement rate had been calculated to reflect a capacity of 120 licensed beds at the end of the 2008 calendar year. The impact of reducing the Petitioner's licensed bed capacity from 120 to 99 beds is to reduce the prospective per diem reimbursement rate by $4.34 due to the impact of a cost limitation based on capacity.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order identifying the Petitioner's nursing home bed capacity on December 31, 2008, as 99 beds and making the appropriate adjustment to the per diem rate calculations for the relevant rate semester. DONE AND ENTERED this 5th day of May, 2010, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 5th day of May, 2010. COPIES FURNISHED: Kelly Ann Bennett, Esquire Sheryl Rosen, Legal Intern Agency for Health Care Administration Fort Knox Building 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Peter A. Lewis, Esquire Law Offices of Peter A. Lewis, P.L. 3023 North Shannon Lakes Drive, Suite 101 Tallahassee, Florida 32309 Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Justin Senior, General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Thomas W. Arnold, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308
The Issue The ultimate issue to be resolved in this proceeding is whether the Petitioner should be granted a Certificate of Need to construct a 120-bed nursing home in Hillsborough County, Florida. Petitioner contends that there is a need for such a facility; that the Department's rules do not apply in determining need; and that to the extent the Department's rules do apply, they are not a reasonable measure of the need for a nursing home facility. The Department contends that its rules are reasonable and applicable to this proceeding, and that there is no need for the proposed facility.
Findings Of Fact Petitioner is seeking a Certificate of Need authorizing the construction of a 120-bed nursing home facility on Fowler Avenue between Interstate Highway 10 and 56th Street in Hillsborough County, Florida. At the time that the Application for Certificate of Need was filed, the total project cost was estimated at $3,688,523. Cost estimates have been revised since that time, and at the time of the hearing, it was estimated that the total capital expenditure required would be $5.3 million. Petitioner proposes to provide intermediate and skilled care facilities and to secure Medicare and Medicaid approval. Petitioner has built and operated, numerous nursing home facilities in states other than Florida. Petitioner has the necessary resources, competence and experience to build and operate the proposed nursing home facility. Prior to the adoption of Rule 10-5.11(21), Florida Administrative Code, the Department was utilizing a 1980 Health services Plan adopted by the Florida Gulf Health Services Agency to determine the need for nursing home facilities in Hillsborough County. Under the plan, the need for nursing home facilities was basically determined by estimating the population of persons 65 years old and older in the services area three years in the future and using a ratio of 27 nursing home beds per 1,000 persons in that population category. A reasonable estimate of the total population of persons 65 years of age and older in Hillsborough County for 1986 is 86,090. Using the 27 beds per 1,000 ratio, total nursing home beds needed in the area by 1986 would be 2,324. There are at present 2,828 nursing home ,beds that are licensed or that have been approved for licensure in Hillsborough County. Therefore, under the Health Services Plan, there will be 507 more nursing home beds than needed by 1986. The Health Services Plan allowed for an increased allocation of 5 percent of existing nursing home beds when the percent of occupancy of nursing home beds within the area exceeded 90 percent for the previous six months. That percentage has been exceeded in Hillsborough County, and a demand for 111 additional nursing home beds therefore exists under the Health Services Plan. More new beds than that have already been allocated through Certificates of Need issued to applicants who filed prior to the time that the Petitioner filed its application. Under the Health Services Plan, there is, therefore, no need for the facility proposed by the Petitioner. In determining the need and demand for nursing home facilities, the Department now utilizes a formula set out in its Rule 10-5.11(21), Florida Administrative Code. Under the rule, the Department will not normally approve applications for additional nursing home beds in any service district unless a need for the beds is demonstrated by application of a formula set out in the rule. Under the formula, a ratio of 27 nursing home beds per 1,000 persons age 65 or older in the population is utilized. This formula historically allows for construction of nursing home beds which exceeds need. Persons who live in poverty have a historic need for nursing home services that exceeds that for the remainder of the population. The Department's formula thus applies a poverty ratio to the 27 beds per 1,000 formula. The percentage of poverty in Hillsborough County exceeds the state average. The bed need ratio for Hillsborough County under the Department's rule is therefore 33.1 beds per 1,006 of aged population. Under its rule, the Department utilizes the most recent mid-range population projections published by the Bureau of Economic and Business Research at the University of Florida to determine the population of the service district. In Hillsborough County, the population age 65 and above was estimated by that bureau for 1986 to be 86,090. Applying the 33.1 beds per 1,000 ratio, the theoretical bed need for Hillsborough County for 1986 is 2,845 beds. Only 2,692 beds have actually been licensed or approved for Certificates of Need, however. Under this circumstance, the Department, utilizing its rule, would determine "actual demand" by multiplying licensed beds times the actual percentage of occupancy within Hillsborough County to get a current daily occupancy. The percentage of occupancy in Hillsborough County is 94.8 percent. There is therefore a current daily occupancy of licensed beds of 2,097. Under the rule, beds can be added to reach a prospective occupancy rate of 80 percent when theoretical need exceeds the number of licensed, and approved beds. This establishes an actual demand for nursing home beds. In Hillsborough County, this is 2,621 beds, or 409 beds more than are presently licensed 480 beds have been approved for licensure, however, and there is therefore no actual demand for nursing home beds in Hillsborough County that would justify the issuance of a Certificate of Need to Petitioner. The Department's Rule 10-5.11(21), Florida Administrative Code, is a reasonable method of determining theoretical need and actual demand for nursing home beds. There are other reasonable methodologies that could be followed. The Department's methodology is not, however, unreasonable, arbitrary, or capricious. Even if application of the formula does not demonstrate any need or demand for nursing home services, the Department can grant a Certificate of Need if other circumstances exist that would justify the addition of new nursing home beds. The applicant has failed to establish that any such conditions exist in Hillsborough County. It has not been established that persons who live in poverty, Medicaid or Medicare patients, or any segment of the population are unable to obtain nursing home services. It has not been established that existing facilities are providing inferior services. The Department's Rule 10-5.11(21), Florida Administrative Code, allows for the construction of more nursing home beds in districts with a high degree of poverty than would be allowed in districts where there is a lesser degree of poverty. This factor has been placed in the formula because it has been established that persons who live in poverty have a greater need for nursing home facilities than do other segments of the population. The formula does not operate to discriminate against persons who do not live in poverty. Rather, it serves to allow the placement of facilities where they are needed.
