The Issue This case involves the issue of whether the certificate of need law applies to Whitehall Boca's intended conversion of 100 beds in an adult congregate living facility to skilled nursing beds. The second issue is, in the event that it is determined that the certificate of need law does apply, whether Whitehall Boca is entitled to convert a limited number of its adult congregate living facility beds to skilled nursing beds without the need for obtaining a certificate of need in accordance with Section 381.494(1)(d), Florida Statutes. At the final hearing Petitioner called Carol J. Wortham, Steve Mulder, and Jeffrey W. Smith. The Respondent called as its only witness Gene Nelson. The Petitioner offered and had admitted into evidence seventeen exhibits. The Respondent offered and had admitted into four exhibits. Subsequent to the final hearing, the parties submitted proposed findings of fact and conclusions of law for consideration by the Hearing Officer. To the extent that those proposed findings and conclusions of law are inconsistent with this Recommended Order, they were rejected by the Hearing Officer as unsupported by the evidence or as unnecessary to the resolution of this cause.
Findings Of Fact Whitehall Boca is a 187-bed health care facility located in Boca Raton, Palm Beach County, Florida. Sixty-nine (69) of Whitehall Boca's beds are licensed by the Department of Health and Rehabilitative Services as skilled nursing beds in accordance with Chapter 400, Part I, Florida Statutes. One hundred eighteen (118) of Whitehall Boca's beds are licensed by the Department as an adult congregate living facility (hereafter ACLF) in accordance with Chapter 400, Part II, Florida Statutes. Whitehall Boca is seeking to convert 100 of its adult congregate living facility beds to skilled nursing beds. Whitehall Boca holds two separate licenses for the nursing home beds and for the ACLF. Whitehall Boca was opened on December 17, 1982, and was the culmination of the owner's goal of attempting to build the finest nursing home that has ever been built. The Whitehall Boca facility has received a superior rating from the Department of Health and Rehabilitative Services' office of licensure. The cost of construction of Whitehall Boca was approximately five and one-half million dollars. The funds for this construction were obtained from 100 percent private funds, which was arranged by Oak Park Trust Bank in Illinois and invested capital provided by the Mulder family. The loans were not guaranteed by the federal government or any governmental entity whatsoever. The 100 existing ACLF beds which Petitioner seeks to convert fully comply with all applicable federal, state and local license requirements for skilled nursing beds in their present condition. Only a few ancillary items such as medicine carts would be needed in order to make the conversion. Such items would involve a capital expenditure of no more than $5,000 to $6,000. The Respondent conceded at the formal hearing that cost of conversion is not an issue. It has been the policy of Whitehall Boca since 1955 not to accept federal funds nor to accept Medicaid or Medicare patients. Whitehall Boca does not accept Medicare and Medicaid patients in any of its homes because they offer an elite type of nursing home care which is not offered in other existing nursing homes. Whitehall Boca did not obtain its initial certificate of need for the 69 skilled nursing home beds by the usual statutory procedure. Whitehall Boca purchased Health Care Corporation, the entity who had originally obtained the certificate of need. However, after Whitehall Boca obtained the certificate of need, it applied for a license from DHRS and specifically informed them in its application that it would not accept Medicare or Medicaid patients. Whitehall Boca, an Illinois limited partnership, owns and operates the 187-bed nursing home complex in Boca Raton, Florida. At present, this is the only home owned by the Petitioner in the State of Florida. Whitehall Boca is owned by a father and a son, Paul and Steve Mulder. They own three nursing homes in Chicago, Illinois. Daily rates for the skilled nursing home beds at Whitehall Boca are $68 per day for three persons to a room, $80 per day for two persons to a room, with private rooms beginning at $125 per day. These rates are substantially higher than most other nursing homes in the area. Whitehall Boca caters to a very small segment of the population that is able to afford the luxuries and amenities available at Whitehall Boca. For most residents who have chosen the luxury accommodations at Whitehall Boca, the only alternative which would provide comparable care and maintenance of their lifestyle, would be private duty nursing arrangements at home. In the alternative to a total exemption from certificate of need review, Whitehall Boca contends it is entitled to convert 18 of its ACLF beds to skilled nursing beds without CON review pursuant to the provisions of Section 381.494(1)(d), Florida Statutes. DHRS does not consider an ACLF a health care facility and contends therefore that Section 381.494(1)(d) is not applicable to Petitioner's request.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered by the Department of Health and Rehabilitative Services denying an exemption for Petitioner to convert ACLF beds to skilled nursing home beds and requiring that such a request be subject to review under Sections 381.493, et seq., Florida Statutes. DONE AND ENTERED this 6th day of July, 1984, at Tallahassee, Florida. MARVIN E. CHAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of July, 1984. COPIES FURNISHED: Jean Laramore, Esquire G. Steven Pfeiffer, Esquire Laramore & Clark, P.A. 325 North Calhoun Street Tallahassee, Florida 32301 Douglas L. Mannheimer, Esquire Culpepper, Turner and Mannheimer Post Office Drawer 11300 Tallahassee, Florida 32301-3300 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1321 Winewood Boulevard Tallahassee, Florida 32301
Findings Of Fact Forum is a national corporation which owns and operates 16 retirement projects in the United States. These projects generally consist of a complex, including apartments for retirement couples, an adult congregate living facility, a nursing home and accessory facilities to provide meals, laundry and other housekeeping requirements. The same type project is proposed in this application to be built in Lee County, Florida, with the 60 bed nursing home the essential ingredient of the complex requiring prior approval before construction. Such projects offer many advantages for elderly people. The proposed nursing facility would be open to the public as well as to members of retirement living. Pursuant to the bed need formula found in Rule 10- 5.011(1)(k), Florida Administrative Code, the "fixed need pool" when calculated identifies a need for no new beds in the Lee County subdistrict of (District VIII) in the July 1990 planning horizon. Lee County is an appropriate subdistrict in District VIII and is so identified in the District VIII Health Plan. There were 1056 licensed community nursing home beds in Lee County on August 1, 1987, the cutoff date used for determining bed need for the applications submitted in the batching cycle for development and operation in the July 1990 planning horizon. There were also 342 approved, but not licensed beds, in Lee County on August 1, 1987. Including these bed with the licensed beds and calculating bed need in Lee County for the July 1990 horizon shows no need for additional beds. To justify need for additional beds, Forum used a different number as approved beds than was used by DHRS in determining no additional beds are needed in the July 1990 planning horizon. Specifically, Forum challenged CON 4748 issued to Careage for 120 beds contending that zero beds should have been used because no CON for 120 beds was ever issued, and the CON for 60 beds was not published until September 4, 1987, after the August 1, 1987, cutoff date for this batch. The January 23, 1987, issue of Florida Administrative Weekly published the issuance of CON 4748 to Careage Southwest Healthcare Center for a new 120 bed skilled and intermediate care facility in Lee County. Due to changes in personnel at DHRS at this time, this CON was not processed promptly, and Forum Group, among others, filed a petition for hearing to challenge the CON (Exhibit No. 18). Prior to the issuance of CON 4748 to Careage, DHRS discovered that on initial processing of CON 4748, only 60 of the 120 beds requested had been approved, and 60 beds had been denied. This error was not corrected until the publication of Florida Administration Weekly on September 4, 1987, where CON 4748 was corrected to show 60 beds issued to Careage. However, prior to August 1, 1987, Careage was notified that DHRS intended to award it 60 nursing home, beds. A good argument can be made for Forum's position that the notice that 120 beds had been awarded to Careage was a clear error which would ultimately be corrected. If that premise is accepted, it must also be accepted that 60 beds were approved for Careage. Reducing the number of approved beds as of August 1, 1987, by 60 and using the calculations for determining the District Projected Bed Need (A) Table III, Exhibit No. 9, to calculate the SA (Subdistrict Allocation) shows the following: SA = A x LBD (Subdistrict Beds) x (OR (Subdistrict Occupancy Rate) LB (District Licensed Beds) .9 or SA = 5650.9 x 1056 x .9347 = 1286.57 4817 .9 Beds Available = LBD + (.9 x Subdistrict Approved Beds (282) = 1056 + 238 = 1308.8 Subtracting this from SA shows approximately 23 beds needed. Under the fixed pool rule, DHRS will not, for any reason, alter the published fixed pool inventory unless an error is brought to its attention during a grace period that will allow DHRS to notify interested parties through publication. Any errors not corrected in the grace period will be corrected in the next fixed pool batching cycle. The grace period is triggered by a letter of intent which extends the filing deadlines for competitive letters of Intent. Correcting fixed pool errors during the grace period allows other applicants to compete for the same pool of beds. Correcting errors after this grace period would not give prospective applicants adequate notice of the need, and they would be unable to timely compete in the batch. Because no errors were brought to the attention of DHRS that could have been corrected within the grace period, DHRS could not make any changes to its published fixed pool need for Lee County. Forum also reduced 30 beds from those approved for construction by Beverly Enterprises in Lee County in CONS 1991 and 1992. CONS 1991 and 1992 were issued December 5, 1986, to Beverly Enterprises and authorized the construction of a 90 bed nursing facility and a 60 bed nursing facility in Lee County. Both of the CONS were in effect on August 1, 1987, the cutoff date for counting approved beds for use in the bed need rule formula. Subsequent to August 1, 1987, Beverly completed construction on a 120 bed nursing facility, and a CON was issued for 120 beds, CON 1992 (for 60 beds) was rescinded and 30 beds were reallocated. On August 1, 1987, all 150 of these beds were approved beds. DHRS defines approved beds to include those applications that have received CON approval either by issuance of a CON, letter of intent to issue a CON, and where a written settlement agreement has been entered to grant a CON to a certain applicant or applicants. DHRS also considers publication of intent to grant or granting a CON as tantamount to issuing a CON or letter of intent to issue. But for the issue of need, Forum met all statutory requirements for the issuance of the requested CON. Absent a need for the requested beds, granting the 60 beds requested by Forum would adversely affect existing providers and would not be economically feasible. No evidence was submitted that special circumstances exist in Lee County which would justify the granting of a CON to Forum despite the lack of need under the appropriate bed need rule.
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 =================================================================
The Issue Whether petitioner's application for a certificate of need to construct a 120-bed nursing home in West Palm Beach, Florida, should be granted, or denied in accordance with DHRS' preliminary agency action.
Findings Of Fact The sole reason given for denying Health Quest's application for a CON is the alleged failure of the application to satisfy the nursing home bed need methodology contained in DHRS Rule 10-5.11(21), Florida Administrative Code. DHRS contends that application of this bed need methodology supports a conclusion that the proposed nursing home is not needed within the three-year planning horizon--1983 through 1986. I. Application of Rule 10-5.11(21): The Nursing Home Bed Need Methodology Under the nursing home bed need methodology expressed by Rule 10- 5.11(21'), DHRS determines if there is a projected need for new or additional community nursing home beds three years into the future by using the following formula: De N = -------- x R x P - Eb Se where: N is area-specific allocation of community nursing home beds for the calendar year for which a projection is being made, De is the percentage of elderly living in poverty in the relevant departmental service district according to the latest available U.S. census. Se is the percentage of elderly living in poverty in the State according to the latest available U.S. census. R is the statewide bed need ratio (27 community nursing home beds per 1,000 population age 65 years and older), P is the population age 65 and older projected three years into the future residing in the relevant departmental district based on latest mid-range projections published by the Bureau of Economics and Business Research at the University of Florida, and Eb is the number of existing and approved community nursing home beds within the relevant departmental service district. The projected bed need derived from this formula is then measured against a "current utilization" threshold. Rule 10-5.11(21)(f). Thus, although bed need may be projected under the formula, an application will not normally be approved unless current nursing home occupancy rates meet minimum standards prescribed in the rule. Finally, if bed need is projected and the current utilization threshold is satisfied, additional beds may be added only to the point at which further bed need additions will cause "prospective utilization rates" for the subdistrict to drop below a base rate prescribed in the rule. Rule 10-5.11(21)(g), (h), Fla. Admin. Code. Under this bed need forum1a, projected need for nursing home beds in 1986 is calculated as follows: N = De ------ Se N = 9.28 ----- = .73 12.70 .73 x 27 ---- = 19.7 beds/1000 65 + 1000 District IX Subdistrict (Palm Beach Co.) 19.7 x 264,326 = 5,207 19.7 x 198,747 = 3,915 Thus the formula shows a projected need for 5,207 nursing beds in 1986 in District IX; and a projected need for 3,915 beds in 1986 in the subdistrict of Palm Beach County. (Testimony of Straughn, R-4, R-5, R-6) The inventory of licensed and approved beds for District IX is 5,487 beds, and for Palm Beach County, is 4,086. Subtracting the projected inventory from the projected need indicates a "no need" of 280 beds. A similar calculation for Palm Beach County indicates a "no need" of 171 beds. (Testimony of Straughn, R-4, R-5, R-6) Under Rule 10-5.11(21)(e) , this is identified as a "c4" need relationship--where neither district nor subdistrict show a need for additional bed capacity. The prescribed current utilization threshold and the prospective bed rate of utilization for "c4" need relationship is 95 percent and 85 percent, respectively. See, 10-5.11(21)(f), (h). These utilization thresholds are not satisfied in the instant case. The current utilization of beds in Palm Beach County is 92.7, which falls short of the required 95 percent threshold. Consequently under the rule, no beds may be added until the 95 percent threshold is met. Even if this current threshold of 95 percent were met, there would still be 1,192 excess beds in Palm Beach County through 1986. 2/ Hence, use of the bed need methodology contained in Rule 10-5.11(21) indicates that the proposed nursing home beds are not needed through 1986. In the absence of unique and peculiar circumstances, and unless other rule or statutory criteria justify issuance, the application must be denied. II. Failure to Show Unique or Peculiar Circumstances, or Other Overriding Criteria Health Quest, having failed to satisfy the numerical bed need standards imposed by DHRS rule, has also failed to show unique and peculiar circumstances which would otherwise justify granting its application. The bed need rule takes into account factors raised by Health Quest, such as the relative wealth and poverty of an affected population. While it is expected that new Medicare regulations may increase the need for nursing home services, increases attributable to Medicare changes remain speculative and uncertain. In any case, changes in need for nursing home services due to Medicare changes will not be unique to District IX or Palm Beach County. Health Quest has also failed to show that it is entitled to a CON based on any other rule or statutory criteria. Its reliance on the provisions of the State Health Plan is misplaced since that plan is largely obsolete.
Recommendation Based on the foregoing, it is RECOMMENDED: That Health Quest's application for a certificate of need to construct a nursing home in West Palm Beach, Florida, be denied. DONE and ENTERED this 7th day of June, 1984, in Tallahassee, Florida. R. L. CALEEN. JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1984. COPIES FURNISHED: Charles M. Loeser, Esquire 315 W. Jefferson Blvd. South Bend, Indiana 46601 Steven W. Huss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
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 =================================================================
Findings Of Fact On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986. On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility. HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application. HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents. On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986. On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties. By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility. (Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application. HCAC's Proposal The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County. The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife. The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI). HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management. The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services. Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital. The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program. The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital. One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days. The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered. HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment. Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility. The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture. The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application. The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations. PROJECT AND CONSTRUCTION COSTS HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6. Table 1 - Source of Funds The estimated total project cost of the 120-bed facility would be $6,469,500. The estimated project cost of the 105-bed facility would be $5,696,940. The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility. Table 2 - Total Debt Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project. Table 3 - New Purchase Equipment HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000. The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project, $80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract. The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of $850,000 to $900,000. Table 7 - Utilization by Class of Pay Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows: Year 1 -- Contract/Indigent 8.64 percent (1989) Medicare 26.10 percent Insurance and Private Pay 65.26 percent Year 2 -- Contract/Indigent 8.48 percent (1990) Medicare 26.15 percent Insurance and Private Pay 65.37 percent The proposed payor mix for the 105-bed facility is, in patient days, as follows: Years 1 and 2 - Medicare 3.3 percent Insurance and Private Pay 90.7 percent Indigent 6.0 percent The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole. Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable. HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection. HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly. Table 8 - Effects on Patient Charges HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge - $214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge - $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare. The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project. Table 10 - Projected Utilization The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization. Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105- bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation. Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at 80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients. The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days. Table 11 - Manpower Requirements For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and 1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project. There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable. For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages. Table 16 - Areas and Square Feet / Table 18 - Space Requirements HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population. HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities. There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage. Table 19 - Nursing Unit Area Summary HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable. Table 25 - Estimated Project Costs Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities. HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940. HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to $95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable. HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low. Table 26 - Project Completion Forecast HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable. Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable. The supplies and other expenses depicted in the pro forma (year one at $55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day. The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue. Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of $395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately $1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000. HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to 8 percent of gross revenue. CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL HEALTH PLAN The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's. HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole. Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy. Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned. Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2. Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3. Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4. Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy. Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f). Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f). Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds. Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan. Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding. Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made. Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1. Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I. Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee. HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent. AVAILABILITY AND ADEQUACY OF ALTERNATIVES There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low. THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care. PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH CARE RESOURCES HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources. The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center). There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County. Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services. FINANCIAL FEASIBILITY HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown. IMPACT ON COSTS AND COMPETITION If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries. Charter is a hospital located in District XI and consists of 88 beds, 80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff. PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent. OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision. The occupancy rate of all psychiatric beds within District XI was below 80 percent. HCAC'S PROPOSED NEED METHODOLOGY At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI. The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care. HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode. HCAC's bed need computation is as follows: Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions) District XI: July 1991 Condition Admission Rate Schizophrenia & Other Psychoses 99 Affective Disorder Psychosis 20 Affective Disorder Neuroses 60 Neuroses and Personality Disorders 199 20 Projected 1991 Population Age 18+ 1,459,437 Total Projected Admissions 2,904 Average Length of Stay 90 Projected Patient Days Target Occupancy 80.00 261,385 percent Total Beds Required 895 Beds Currently Available 438 South Florida State Hospital (450 X .48) Residential Treatment Facilities 216 233 Net Beds Needed 496 The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds. In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days. In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the 135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low. HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds. Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions. In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335. Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors Corporation, Inc. be DENIED. DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida. W. MATTHEW STEVENSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1988. COPIES FURNISHED: Lesley Mendelson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308 Tallahassee, Florida 32308 H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302 William E. Hoffman, Esquire 2500 Trust Company Tower 25 Park Place Atlanta, Georgia 30303 George N. Neros, Jr., Esquire 101 North Monroe Street Monroe-Park Tower Suite 900 Tallahassee, Florida 32301 Donna H. Stinson, Esquire The Perkins House Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Esquire Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Whether Petitioner has standing to initiate the instant challenge to the preliminary determination to issue CON 6254 to Respondent Palms West Hospital, Inc.? If so, whether CON 6254 should be granted?
Findings Of Fact Based upon the record evidence, the following Findings of Fact are made: Palms West Hospital and Wellington Regional Medical Center are general acute care hospitals located five miles apart in western Palm Beach County, Florida (HRS District 9). Due to their proximity to one another, the two hospitals draw from essentially the same patient pool and, as a result, are close competitors. Early on, Wellington was well ahead of Palms West in terms of the number of patient days generated by the facility. Palms West, however, has since surpassed Wellington and now enjoys a slight edge over its competitor in this performance category. Wellington is licensed to operate a total of 120 beds. One-hundred and four of these licensed beds are acute care beds. The remainder are substance abuse beds. Of Wellington's 104 licensed acute care beds, approximately 45 or 46 are staffed. Wellington currently operates at 53% of its licensed total bed capacity and 49% of its licensed acute care bed capacity. During this past calendar year, Wellington has consistently operated at between 50 to 55% of its licensed total bed capacity. Palms West is now, and has been at all times material hereto, licensed to operate 117 acute care beds at its facility in District 9. At no time has Palms West been subject to a license revocation proceeding, nor has it filed any documents with HRS requesting a reduction in its licensed bed capacity. 1/ Palms West's initial license (License No. 1869) was issued on February 17, 1986. The license was effective February 14, 1986, and expired February 13, 1988. Prior to the issuance of License No. 1869, Palms West received a certificate of need (CON 1845) for 117 acute care beds in District 9. Palms West is currently operating under License No. 2701. License No. 2701 was issued on September 1, 1989, with an effective date of September 17, 1989, and an expiration date of September 16, 1991. The license provides, in pertinent part, that Palms West "is authorized to operate a Class I General hospital with 117 Acute beds." License No. 2701 was issued pursuant to a licensure renewal application submitted by Palms West. The application, which had been prepared in May, 1989, made reference to a "renovation" "[b]uilding program . . . in progress" at Palms West with an "[a]nticipated completion date [of] 8/89," but did not provide any additional information regarding the project. The "renovation" project referenced in the application involved the third and fourth floors of the hospital. Space on these floors was being converted to house an eight-bed Labor Delivery Recovery Program. By letter dated February 1, 1989, Palms West, through its Administrator, Paul Pugh, had requested a certificate of need exemption from HRS to initiate this obstetric program at an estimated cost of $1.2 million. Sharon Gordon-Girvin, the then administrator of HRS's Office of Community Health Services and Facilities, sent Pugh a letter, dated February 9, 1989, granting the requested exemption. Girvin explained in the letter that the exemption was being granted pursuant to Section 381.706(3)(f), Florida Statutes, which, she noted, "eliminates Certificate of Need review for initiation or expansion of obstetric services, provided that the licensed bed capacity 2/ does not increase." She also stated in the letter, among other things, that Palms West's "architectural plans [had to] be approved by the Office of Licensure and Certification, Plans and Construction, before construction is undertaken [to] assure conformance with licensure standards." In her letter, Girvin did not purport to authorize a decrease in Palms West's licensed bed capacity. Palms West's architectural plans were approved by Plans and Construction and work on the renovation project commenced. The project's progress was monitored by Plans and Construction. In or around August, 1989, the project was completed. The completed eight-bed obstetric unit occupied space that previously had been used to house 30 general acute care beds. As a result of the project, Palms West no longer had the space necessary to accommodate its licensed complement of 117 acute care beds. It had the physical capacity (hereinafter referred to as "constructed bed capacity") to house only 95 of its 117 licensed beds. Palms West, in undertaking this project, never intended to reduce the number of licensed beds at the facility. While it did not specifically so state in its exemption request, it had every intention of seeking authorization, "sometime soon after the [obstetric] unit was up and going," to expand its facility to accommodate the 22 licensed beds taken out of service as a result of the project. On August 18, 1989, Plans and Construction conducted an inspection of the completed project. The inspection revealed that the project had "permanently reduced" the constructed bed capacity of the facility from 117 to 95 beds. Nonetheless, Plans and Construction found the facility "to be in substantial compliance with the requirements of the licensure regulations." Accordingly, the project was approved for patient care. The first obstetric patient was admitted to the hospital on August 21, 1989. On November 14, 1989, Ira Wagner, an Architect Supervisor in Plans and Construction, sent the following letter to Palms West: 3/ On August 18, 1989 the Plans and Construction Section of the Office of Regulation and Health Facilities ran a final construction survey in your new obstetrical services project. Based on the survey results, we are able to release the area for occupancy. One requirement for the close-out documenta- tion for this type survey is a bed count iden- tifying the previous and new bed capacity. In order for this office to further clarify the information available during the referenced survey, this office would appreciate an in-depth bed count prepared by the facility and forwarded to us. The bed count format should include both the constructed bed count and the licensed capacity (not always the same) both prior and subsequent to this project. Further, the format should be on a floor and bed by bed designation basis. In response to this request, Pugh, on behalf of Palms West, sent Wagner a letter dated December 18, 1989. In his letter, Pugh provided a floor by floor "bed count" showing a total of "117 beds" "[p]rior to 8/18/89" and a total of "95 beds" "[s]ubsequent to 8/18/89" and "as of December, 1989." At Wagner's behest, Pugh sent Wagner a second letter to clarify and confirm the "bed count" figures given in the December 18, 1989, letter. This second letter, which was dated January 1, 1990, contained "bed count" information identical to that which had been reported in Pugh's first letter to Wagner. In neither letter did Pugh indicate whether the pre-8/18/89 and post-8/18/89 "bed counts" reflected licensed bed capacity or constructed bed capacity, or both. It was Pugh's unstated intention, however, to convey in these letters information regarding only the facility's constructed bed capacity. Wagner and Pugh communicated not only in writing, but by telephone as well. During one such telephone conversation, Wagner suggested that Pugh contact Girvin to seek guidance regarding what, if anything, the hospital should do now that its constructed bed capacity had been reduced to 95. Thereafter, Pugh followed Wagner's suggestion and telephoned Girvin. During their telephone conversation, Pugh and Girvin discussed the various alternative courses of action that were available to Palms West given the discrepancy between its licensed bed capacity (117) and its constructed bed capacity (95). Following their conversation, Girvin sent Pugh the following letter, dated January 18, 1990: I enjoyed talking with you by phone on Tuesday, January 9. Our conversation involved various options you have for complying with the licensure requirement that you have the capability for bringing all licensed beds into service within a 24 hour period. At the present time, the obstetrical program utilized existing space within the hospital for expan- sion. The effect was that 22 medical or surgical beds cannot be put into service within the time prescribed by law. Any change in licensed bed capacity is sub- ject to a certificate of need. (Reference Section 381.706(1)(e), F.S.) Therefore, Palms West has no authority to change its licensed bed capacity. Should a licensure inspection occur, the hospital may be found in violation if the 22 beds cannot be put into service. You have four options from which to choose: File a certificate of need application in the next hospital batch (letter of intent due no later than 5:00 p.m. local time on February 26, 1990) to reduce your licensed capacity by 22 beds; File a certificate of need application for a capital expenditure (expedited review) to seek authorization to construct capacity to house the 22 beds (due on or before May 15, 1990); File a letter seeking determination of reviewability if the proposed capital expend- iture to construct the capacity to house the 22 beds is below $1 million; or Do nothing to increase capability which would make the department file an administra- tive complaint to revoke the 22 beds. Based upon our discussion at the time, you found either option 2 or 3 to be the most appropriate one for you. It is similar to the situation at Doctor's Hospital in Coral Gables. I'm enclosing a copy of the corre- spondence between Doctor's Hospital and me. Option 3 would only be applicable if the esti- mated cost of constructing the 22 beds could be accomplished below the $1 million threshold. In my experience, 22 beds including the atten- dant and ancillary space and the equipment exceeds $1 million (especially if any land acquisition is involved.) The situation requires expeditious attention to the matter because the hospital may be found to be in violation. Therefore, I would like to work with you to avoid an adversarial relationship. To that end, the same agreement I reached with Doctor's Hospital is appropriate for Palms West. Please respond in writing by January 31 as to which of the options you will pursue. With any or all of them, I will be glad to discuss them with you or your representative. You may reach me at (904) 488-8673. In declining to take immediate action to institute disciplinary proceedings and instead providing Palms West the opportunity to bring its licensed bed capacity 4/ and constructed bed capacity into balance, HRS was following established non-rule policy and practice. 5/ Because the imbalance was the product of a renovation project that had been undertaken and completed with HRS approval and under its supervision, HRS believed that such a "wait and see" approach was particularly appropriate in the instant case. By letter dated February 2, 1990, Pugh informed Girvin that Palms West intended to pursue the second of the four options presented by Girvin in her January 18, 1990, letter. Pugh's letter read as follows: Thank you for your letter of January 18, 1989 [sic], regarding licensure requirements for Palms West Hospital. I appreciated the infor- mation relative to regulations compliance and the options my facility has at this time to maintain our current licensed capacity at 117 acute care beds. As you know, our recent obstetrical construc- tion project utilized existing space within the hospital for expansion. The effect was that 22 acute care . . . beds cannot presently be placed into service within the time [24 hours] prescribed by law. Accordingly, Palms West Hospital agrees to file a Certifi- cate of Need application for a capital expend- iture (expedited review) to seek authorization to construct capacity to house 22 beds. We agree to file the CON application on or before May 15, 1990. Please call or write my office for clarifica- tion, if necessary. I look forward to confir- mation of our request. Again, my apologies for the delay in our response. Thank you for your input and advice. A very short time after making its decision to exercise this option, Palms West hired a health planning consultant to assist it in preparing the certificate of need application. As promised, on May 11, 1990, Palms West filed the certificate of need application. The application was accompanied by a transmittal letter addressed to Girvin. The letter, which was signed by Palms West's health planning consultant, read as follows: Enclosed is the original copy of an applica- tion for Certificate of Need for the construc- tion of a 23-bed wing of acute care beds to replace a like number of licensed beds which are out of service at Palms West Hospital, Loxahatchee. This application is filed pursuant to an agreement between your office and Mr. Mike Pugh, administrator of the hospital. The filing fee of $10,000 is being submitted under separate cover on May 15, 1990 for attachment to this document, under agreement between Mr. Pugh and your staff. We look forward to working with you on the review of this document. Please contact me at this office for additional information you may need. Contrary to the statement made in the letter, only 22, not 23, of Palms West's licensed acute care beds were "out of service." One of the 23 licensed beds to be housed in the proposed new wing was to be relocated from an area of the existing facility that Palms West intended to convert into a telemetry unit. That bed was at the time of the filing of the application, and still is, operational. In Section I of the application, the project Palms West sought permission to undertake was described as follows: Replacement of existing licensed beds by construction of new bed wing on existing third floor of hospital. Section II of the application contained the following, more detailed description of the proposed project and its purpose: In 1989, in response to rapid service area growth and to local requests for high quality obstetrical service, the hospital opened an eight (8) bed LDRP obstetrical unit on its third floor. This unit and its support areas required conversion or remodeling of twenty-six (26) acute care bed spaces on the third floor. It also required use of another four (4) acute care bed spaces on the second floor for mechan- ical support systems for the C-section room in the third floor obstetrical unit. This reduced available bed space by twenty-two (22) beds. In early 1990, the hospital committed to con- vert one (1) bed space on the second floor to house telemetry equipment for the adjacent nursing unit. When this equipment is placed in service, it will reduce available bed space by an additional bed. As a result, Palms West Hospital will have temporarily lost the use of twenty-three (23) net bed spaces, or some 20% of its licensed bed capacity, in the development of expanded and improved services for patients of its service area. This application proposes to restore the hospital's available bed capacity to its current licensed bed level of one hundred seventeen (117) acute care beds. No addi- tional licensed beds or new services are proposed. The restoration of capacity will be accomplished through construction of a twenty-three (23) bed wing on the second floor of the hospital, containing seven private and eight semiprivate patient rooms. Construction should commence by May of 1991 and be completed by the end of September 1991. The estimated cost of the project is $1,560,888. All required funds will be provided by a cash grant from the applicant's parent company, so that the project itself will not adversely impact the hospital's rates and charges. The project is required if the hospital is to maintain the licensed capacity for which it received CON approval in 1984. Currently only ninety-four bed spaces can be made available for patient occupancy within 24 hours notice. In a high growth service area such as West Palm Beach County, it is not desirable for existing bed resources to be diminished. It is also not appropriate for the hospital to be penalized by reduction in licensure for the development of exempt and appropriate services which improve the quality of care and access to care in its service area. For these and other reasons, the administra- tion of Palms West Hospital and Sharon M. Gordon-Girvin of the Office of Community Health Services and Facilities agreed in early 1990 that the hospital should file this expedited CON proposal to restore its functional bed capacity to the original licensed level. Palms West's application was assigned CON Application No. 6254. In accordance with long-standing HRS non-rule policy and practice, the project proposed in the application was deemed to be a capital expenditure project reviewable only pursuant to subsection (1)(c) of Section 381.706, Florida Statutes, and, as such, it was subjected, not to a full batched comparative review, but to an expedited review that was applicant specific in nature. 6/ Full batched comparative review was considered inappropriate because Palms West was proposing to merely add space to its existing facility in order to accommodate licensed beds for which it had already successfully competed. Inasmuch as they were approved and licensed, these beds, under the bed need methodology established by HRS rule, were already included in the existing acute care bed inventory utilized to determine the number of additional beds, if any, needed in District 9 to meet projected demand (fixed need pool). 7/ Had Palms West's application been subjected to full batched comparative review, it would have been evaluated against this fixed need pool. In declining to subject the application to full batched comparative review, HRS also took into consideration that the bed space Palms West sought to restore had been lost as a result of the hospital's initiation of obstetric services. In the view of the agency, to subject such restoration projects to full batched comparative review would tend to discourage the development and expansion of obstetric programs in the state and therefore run counter to, what it perceived to be, the Legislature's intent in exempting obstetric services projects from certificate-of-need review. On August 17, 1990, following this expedited review of Palms West's application, HRS published a State Agency Action Report in which it announced its preliminary determination to issue the certificate of need requested in CON Application No. 6254.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby recommended that the Department of Health and Rehabilitative Services enter a final order (1) dismissing, for lack of standing, the petition filed by Petitioner in the instant case, and (2) issuing CON 6254 to Palms West. RECOMMENDED in Tallahassee, Leon County, Florida, this 3rd day of July, 1991. STUART M. LERNER 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 3rd day of July, 1991.
Findings Of Fact Petitioner proposes to construct a 90 bed long term skilled facility near a hospital complex on University Boulevard in Jacksonville, and to offer beds to medicare patients immediately upon opening the facility Only one of the four existing nursing homes on the east side of the St. Johns River in Jacksonville has medicare certification. The existing nursing home in Jacksonville with the greatest number of vacant beds does not yet have medicare certification. Petitioner submitted its application for certificate of need on July 1, 1977. Between July 1, 1970, and July 1, 1977, overall occupancy of available nursing home beds in Jacksonville was between 95 and 97 percent. In April of 1977, Riverside Nursing Home had made 58 new beds available, 95 percent of which were occupied within two and a half months, in August of 1977, Riverside Nursing Home made an additional 58 now beds available. The following month 94.4 percent of the beds at Riverside Nursing Home were occupied. On September 19, 1977, a new 180-bed nursing home, Turtle Creek, opened its doors. At the time of the hearing, 82 of Turtle Creek's beds were occupied, although Turtle Creek, which is located on the northern periphery of Jacksonville, had not received medicare certification. Notwithstanding the filling of these new beds, the number of patients in other Jacksonville nursing homes did not decline appreciably. At the time of the hearing, 90.3 percent of all nursing home beds in Jacksonville were occupied, and all authorized beds were available for occupancy. It takes approximately 22 months after the start of construction to make a nursing home like petitioner proposes to build ready for occupancy. Stays in hospital beds are three or four times more expensive than stays in nursing home beds. At the time of the hearing, some medicare patients were staying in hospitals up to a week and a half after their physicians had authorized their discharge to a nursing home, because beds in medicare certified nursing homes were unavailable. This situation should be ameliorated, at least temporarily, if Turtle Creek obtains medicare certification before its beds are filled by non-medicare patients. On the other hand, social workers employed by Memorial Hospital and Riverside Hospital testified to recently increased numbers of persons requiring placement in nursing homes, upon discharge from their respective hospitals. In the four to six months next preceding the hearing, the number of persons requiring nursing home care when discharged by Memorial Hospital doubled. At the time of the hearing, persons otherwise ready to be discharged from hospitals remained hospitalized for lack of available beds in medicare certified nursing homes. Proximity of nursing homes to their residents' families and friends facilitates visiting, which has a beneficial effect on the health of persons confined to nursing homes. The southeast section of Jacksonville, in which petitioner proposes to construct a nursing home, has a large and growing population. Turtle Creek, which has the biggest block of vacant nursing home beds in Jacksonville, is 15 miles north of petitioner's proposed site. Relevant portions of the 1977 State Medical Facilities Plan (the Plan) were received in evidence as petitioner's exhibit No. 6. The Plan utilizes projected population increases in Duval County in projecting how many nursing home beds will be necessary in order to accommodate everybody who will need one, at a 90 percent occupancy rate. On this basis, a projected need by 1982, of 1,845 nursing home beds for Duval County was incorporated into the Plan. After adoption of the Plan, but before August 10, 1977, the 1,845 figure was changed to 1,921 at the instance of Lloyd Bulme end Ronald Fehr Floyd, employees 01 the Health Systems Agency of Northeast Florida Area 3, Inc. (HSA). At the time of the hearing, 1,912 or 1,914 nursing home beds, all that had been authorized, were available for occupancy in Duval County. While embodying projections as to how many nursing home beds would be needed in the future so as to assure a 90 percent occupancy rate, the Plan provides for the possibility of error in these projections. Specifically, the Plan allows for the consideration of "extenuating and mitigating circumstances," including "availability": Availability In those instances whereby a capital expenditure/certificate of need proposal is made for a new or expanded facility and whereby it can be demonstrated and documented by the applicant and verified by the HSA and/or OCMF that: similar facilities in the documented service area have been utilized at an optimum rate (85 percent occupancy for acute general hospitals and 90 percent occupancy for nursing homes) for the previous 12 month period; and, there exists a current, unduplicated waiting list within the documented service area for the services to be offered by the new or expanded facility; these factors will be considered in making a determination on the capital expenditure/ certificate of need proposal. Petitioner's exhibit No. 6. In applying the Plan's 90 percent optimum rate formula, the Office of Community Medical Facilities "would certainly consider the open beds, the occupancy during the preceding twelve months of the open, available for use beds, tempered certainly by beds which have been approved but are not yet available." (T1231) Fifty-nine of the nursing home beds in Jacksonville require "[m]odernization," according to the Plan. Petitioner's application for a certificate of need was initially reviewed by a committee" of the HSA. On August 25, 1977, the Health Needs and Priorities Committee voted to recommend approval of petitioner's application, on condition that Jacksonville's nursing homes' occupancy rate not fall below 90 percent for four months once all the authorized nursing home beds became available for occupancy. This consideration was consistent with the local Health Systems Plan's requirement of 90 percent or better occupancy, calculated the basis of all authorized beds, for four months preceding the grant of a certificate of need for additional nursing home beds. Before the Executive Committee of the HSA acted on the Recommendation of the HSA's Health Needs and Priorities Committee, HSA staff were advised by the Office of Community Medical Facilities in Tallahassee that "December 19, 1977 . . . . [was] the latest possible time for a decision Petitioner's exhibit No. 17. Inasmuch as Turtle Creek began operation on September 19, 1977, only three months before "the latest possible time for a decision," there was not to be a four months' trial with all authorized beds available, before HSA's Executive Committee passed on petitioner's application. Instead, HSA staff calculated the occupancy rate by adding all existing nursing home beds in Jacksonville, and all other authorized nursing home beds expected to become available in Jacksonville, and dividing the sum into the number of occupied nursing home beds in Jacksonville less the number of occupied beds in Regency House Center (because the HSA staff did not have Regency House Center "patient data." Petitioner's exhibit No. 6.) This calculation yielded an occupancy rate of 84.4 percent for the four months preceding the date on which petitioner filed its application. Because 84.4 percent was less than 90 percent called for by the Health Systems Plan, the HSA's Executive Committee disapproved petitioner's application. Subsequently, the Office of Community Medical Facilities also acted unfavorably on petitioner's application, for reasons which the evidence adduced at the hearing did not make entirely clear. The foregoing findings of fact should be road in conjunction with the statement required by Stuckey's of Eastmam, Georgia v. Department of Transportation, 340 So.2d 119 (Fla 1st DCA 1976) , which is attached as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent grant petitioner's application for certificate of need. DONE AND ENTERED this 23rd day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 77-2243 Paragraphs one, two, five, six, seven, nine, ten, eleven, thirteen, fourteen, sixteen, seventeen and eighteen of petitioner's proposed findings of fact accurately report the evidence adduced at the hearing and have been adopted, in substance, insofar as relevant. Paragraphs three and four and most of paragraph nineteen of petitioner's proposed findings of fact are actually proposed conclusions of law. Paragraph eight of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville. The discrepancy between the Health Systems Plan and the State Medical Facilities Plan was 146 beds for the entire area. Paragraph twelve of petitioner's proposed findings or fact has been largely rejected. The evidence did not establish that all 35 beds at Regency House Center were probably full. The charges to the state plan were apparently called to the attention of federal bureaucrats in Atlanta. (T254) Paragraph fifteen of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville; end is otherwise supported only by the speculative testimony of one witness. COPIES FURNISHED: Kenneth F. Hoffman, Esq. Rogers, Towers, Dailey, Jones & Gay Post Office Box 1872 Tallahassee, Florida 32302 Robert M. Eisenberg, Esquire 5920 Arlington Expressway Post Office Box 2417 F Jacksonville, Florida 32231
Findings Of Fact The Petitioner, St. Jude Manor Nursing Home, is a skilled nursing facility within the meaning of Title XIX of the Social Security Act. In the past, and as recently as October 14, 1976, the Petitioner has received permission for a variance in its seven-bed ward which exceeds the number of beds per ward specified by Section 405.1134(e), Code of Federal Regulations (CFR). The most recent permission for variance has been received from the State of Florida, Department of Health and Rehabilitative Services. The terms and conditions of that variance may be found in Petitioner's Exhibit No. 2 admitted into evidence. In particular, that variance was allowed with the proviso that as patients whose needs justified the type of occupancy in excess of the limit were discharged, the seven-bed ward would be reduced to four beds to achieve compliance with the terms of the Code of Federal Regulations. It was further indicated in the statement of permission that the Respondent expected the reduction to be completed by November 30, 1977. The variance of October 14, 1976, came about after an inspection had been performed by the Respondent at the Petitioner's facility. Following that inspection a statement of deficiencies and plan of correction was made and one of the items, which is the sole item in dispute at this time, dealt with the seven-bed-ward. Out of the August 16-18, 1977, inspection performed by the Respondent, a request for waiver was made by the Petitioner that led to the permission found in the October 14, 1976, letter by the Respondent. (The statement of deficiencies and plan of correction which indicates this request may be found as Hearing Officer's Exhibit No. 1 admitted into evidence.) One of the items in support of the request for variance was a letter from Richard J. Wilhelm, M.D., which spoke to the criteria found in Section 405.1134(e), Code of Federal Regulations (CFR), and apparently this explanation and reason for requesting a variance was persuasive, due to the subsequent grant of the variance. (Dr. Wilhelm's letter may be found as Petitioner's Exhibit 3 admitted into evidence for limited purposes as set forth in the transcript of the hearing.) It is not abundantly clear what transpired beyond the suspension date of the variance; however, the action of the parties beyond that time has led to the current hearing. In essence what has occurred is the fact that the Respondent has taken the position that no further variance may be granted beyond the period of the normal attrition of the three extra patients in the seven-bed ward, which patients were in excess of the four patients allowed in any given room under the terms of the aforementioned Code of Federal Regulations. The Respondent has come the conclusion that no further variance may be granted, premised upon its understanding that it is required to operate within the dictates and requirements and interpretations of the Code of Federal Regulations which have been placed by employees within the United States, Department of Health, Education and Welfare. The Respondent has come to this conclusion after receiving a January 30, 1976 communication from John E. Pipes, Director of the Office of Long Term Care Standards Enforcement, Region IV, United States, Department of Health, Education and Welfare, Atlanta, Georgia. A copy of this letter may be found as Respondent's Exhibit No. 1 admitted into evidence. Within the body of that correspondence Mr. Pipes states that Section 405.1134(e), Code of Federal Regulations (CFR), will only allow a variance to last for as long as the needs of the affected patients justify. Subsequent to that correspondence, officials with the Respondent wrote to Mr. Pipes on March 4, 1976, to try to clarify the status of those nursing homes in the state of Florida which had wards with more than four beds per room, and to try to emphasize to Mr. Pipes the potential loss of beds if the opinion of Mr. Pipes was allowed to go forth on the question of not allowing variances after the first attrition of the patients who were housed in the excess beds. (The full details of the March 4, 1976 letter may be found in a copy of that letter which is Respondent's Exhibit No. 3 admitted into evidence. On April 1, 1976, Mr. Pipes responded to the March 4, 1976 letter and refused to change his position on the question of the variance letter. Henceforward, the Respondent has taken the position that Mr. Pipes' opinion of the meaning of Section 405.1134(e), Code of Federal Regulations (CFR), is dispositive of that issue and the Respondent, as the agent for the State of Florida; in the Respondent's opinion, may not use its independent judgment in determining whether a variance may be granted to a facility with more than four beds in a ward. The position taken by the Respondent is contrary both to the language of Section 405.1134(e), Code of Federal Regulations (CFR), and the terms of the State Plan for Medical Assistance, under Title XIX of the Social Security Act, Revision MSA-PI-75-3 August 20, 1974. This conclusion is reached due to the unequivocal statement found within the referenced section of the Code and the written agreement by the State of Florida to take the responsibility for making determinations under the Code of Federal Regulations in matters pertaining to Title XIX of the Social Security Act, without the necessity of the permission of the United States, Department of Health, Education and Welfare or its officials. The efficacy of this conclusion may be seen by a reading of the portion of Section 405.1134(e), Code of Federal Regulations (CFR), which states: * * * "The Secretary (or in the case of a facility participating as a skilled nursing facility under Title XIX only, the survey agency - See Section 249.33(a)(1)(i) of this title) may permit variations in individual cases where the facility demonstrates in writing that such variations are in accordance with the particular needs of the patients and will not adversely affect their health and safety. Each room is equipped with or is conveniently located near, adequate toilet and bathing facilities. Each room has direct access to a corridor and outside exposure, with the floor at or above grade level. The Petitioner is a facility participating as a skilled nursing facility under Title XIX and the State of Florida, Department of Health and Rehabilitative Services, under the terms of its contract with the United States, Department of Health, Education and Welfare, is the surveying agency, within the meaning of the above referenced provision. Moreover, when this is considered in conjunction with the terms and conditions of that contract, the only reasonable interpretation to be given this matter is that the Respondent not only has the power but has the duty to make determinations on various requests make by those skilled nursing facilities operating under Title XIX only, which are found in the state of Florida. (The after-filed exhibit which is the State Plan for Medical Assistance, under Title XIX of the Social Security Act, Revision MSA-PI- 75-3 August 20, 1974, is hereby made Hearing Officer's Exhibit No. 2 admitted into evidence.) Having resolved this issue in favor of the Petitioner, the question then becomes whether or not the Petitioner has sufficiently demonstrated a right to a variance on the merits of his claim as tendered at the time of the hearing. The principle witness in behalf of the Petitioner who appeared at the hearing for purposes of speaking to the substance of the request was Richard Wilhelm, M.D. Dr. Wilhelm attends the patients in the seven-patient ward and feels that the care that those patients are receiving in the seven-patient ward is equal to the care received by others in the four-patient or less wards. He felt that psychologically the patients in the seven-patient ward are progressing as well as patients in the other rooms and some patients who have been in the seven- patient ward have progressed to the point of being sent to intermediate care or home care. Overall, he is extremely impressed with the care and to cutback the number of beds from seven to four would not help the quality of that care. At present, according to Dr. Wilhelm, none of the original patients who were in the seven-bed ward at the time of the variance being granted in October, 1976, are still in that ward. This is born out by Petitioner's Exhibit No. 6 admitted into evidence, which Is a list of admissions in the seven-patient ward, beginning in August, 1976. through January 11, 1978. C. M. Knight, the Petitioner's administrator, testified at the hearing to the effect that there is more staff participation in the seven-patient ward than in other patient rooms. He also indicated that the patients who were in semiprivate rooms and were subsequently moved to the seven-bed ward have improved. He further stated that patients who had been in the seven-bed ward and been moved to other wards had requested to return to the seven-bed ward. Mr. Knight also expressed some concern that removal of the three beds would hurt the ability of the city of Jacksonville, Florida to respond to the needs for skilled nursing care. He had no particular basis for this conclusion, but it does seem consistent with the fears expressed by Joseph C. Thompson, Acting Chief of the Bureau of Health Facilities, State of Florida, Department of Health and Rehabilitative Services, in his March 4, 1976, correspondence to Mr. Pipes, which is Respondent's Exhibit No. 3. As may be recalled, this letter indicated that at that time 144 beds were feared to be lost by a reduction of beds in the wards with more than four patients. After full consideration of the testimony offered by the Petitioner on the question of a variance, it must be concluded that the variance should be rejected at this time, due to the failure of the Petitioner to sufficiently address the issue of safety, adequate toilet and bathing facilities, and access to the corridor and outside exposure, with floors at or above grade level, as required by Section 405.1134(e), Code of Federal Regulations (CFR). Should these areas of consideration be satisfactorily met, and should the excessive number of patients in the subject ward continue to be in accordance with the particular needs of the patients and not adversely affect their health; then the Respondent acting in its own discretion and not that of the United States Department of Health, Education and Welfare, may grant a variance on the number of patients in the seven-patient ward. Notwithstanding any decision on the request for variance by the Petitioner that may be made in the future, the undersigned is absolutely convinced that the Respondent may not arbitrarily refuse to consider the merits of the variance request based upon its interpretation of the Pipes' correspondence which has been referred to in the course of this Recommended Order.
Recommendation It is recommended that the Petitioner's request for variance under Section 405.1134(e), Code of Federal Regulations (CFR) be denied; however, future consideration of variance requests should be made when those requests are tendered and the request should be considered in keeping with the judgment of the Respondent, State of Florida, Department of Health and Rehabilitative Services. DONE and ENTERED this 26th day of May, 1978, In Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: C. M. Knight, Administrator St. Jude Manor Nursing Home 2802 Parental Home Road Jacksonville, Florida 32206 Robert A. Eisenberg, Esquire Department of HRS District IV Counsel Post Office Box 2417F Jacksonville, Florida 32231 Joseph Dowless, Jr., Director Leonard Schaeffer, Esquire Office of Licensure and Certification Suite 1300, 1845 Walnut Department of HRS Philadelphia, Pa. 19103 Post Office Box 210 Jacksonville, Florida 32201
Findings Of Fact The parties present at the hearing stipulated to the following facts which are hereby entered as findings of fact: All letters of intent submitted by the applicants involved herein with the exception of FCC were timely filed on or before December 15, 1984 and the relating applications by these applicants were timely filed on or before January 15, 1985. As a result, these applications addressed a January, 1988 bed need planning horizon. All applications, as mentioned above, were deemed complete by DHRS and were reviewed under a January, 1988 bed need planning horizon. All applications as cited above, were preliminarily denied by DHRS based on a lack of need and notice of these denials were timely published in the Florida Administrative Weekly. All unsuccessful applicants herein thereafter timely filed petitions for formal administrative hearing to contest the denial of their applications. The application filed by FCC for CON number 2738, filed by the applicant in July, 1983, and addressing a July, 1986 bed need was initially denied by DHRS in November, 1983. FCC thereafter timely filed a petition for formal, administrative hearing contesting the denial of this application and on January 10, 1985, DHRS and FCC entered into a stipulated settlement in which DHRS agreed to grant CON Number 2738 to FCC. This CON was issued to FCC on January 19, 1985, for 91 community nursing home beds and on March 15, 1985, a Final Order was entered by DHRS confirming the grant off CON Number 2738 to FCC. FCC's original application under CON Number 2738 was for a 120 bed community nursing home to be located in Indian River County, Florida. DHRS's initial denial of FCC's application was based on a lack of bed need at the time. When DHRS entered into the stipulation with FCC reversing its position and granting a CON to FCC for 91 community nursing home beds, it did so on the basis of bed need figures utilizing statistics relating to the subsequent January, 1988 bed need planning horizon even though FCC's application did not pertain to that planning horizon. In fact the beds taken and awarded to FCC came from the fixed pool of beds that, under the DHRS rule in effect at the time, was reserved for applicants in the January, 1985 batching cycle with a planning horizon of January, 1988. Rule 10-5.11(21)(b), F.A.C., sets out the bed need rule methodology for determining projected need for new or additional community nursing home beds. Pursuant to this rule, need is projected three years into the future. The methodology provided in this rule is clear and reasonable. If this methodology is followed precisely as set forth in the rule and utilizing the DHRS statistics available to personnel in the health care professions, such as its semi-annual nursing home census report as well as the Florida population estimates and projections by DHRS district and county, a net bed need of 116 additional beds in Indian River County is established for the period January, 1988. This figure does not, however, include an award of 91 beds to FCC under CON Number 2738 by DHRS under the terms of its settlement and those 91 beds are included within the 116. The expert testifying for the applicants herein concluded that the award of the 91 beds to FCC outside its planning horizon was erroneous and improper and based on no calculation of bed need appropriate to the applicant's original July, 1986 planning horizon and it was so found. In this case, DHRS, by awarding beds to FCC from a subsequent planning horizon is implementing a bed need policy which establishes a "planning horizon" three years from the date the Petitioners' applications were filed but updating all available data to that existing as of the date of the final hearing. This would include July, 1986 population data, current licensed beds, current approved beds, and the latest occupancy rate. The procedure followed by DHRS here is, however, a DHRS policy interpretation rather than a literal interpretation of the rule and the DHRS expert was unable to establish or in any way justify DHRS' policy of updating all data to the date of hearing in contravention of the terms of its own rule. If the unjustified and unsubstantiated DHRS policy were accepted and utilized here, calculations would reflect a surplus of 70 nursing home beds in Indian River County for the January, 1988 planning horizon as opposed to the more reasonable and rational bed need of 116.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED THAT Certificate of Need Number 2733, previously issued to Florida Convalescent Centers be rescinded and that the 91 beds relating thereto be returned to the January, 1988 planning horizon fixed pool. It is further recommended that the Secretary, Department of Health and Rehabilitative Services remand the case to the Division of Administrative Hearings for the conduct of a comparative hearing to evaluate the pending applicants within that batching cycle. RECOMMENDED this 28th day of January, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 1987. APPENDIX The following constitutes my specific ruling pursuant to Section 120.57(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by National Health Corporation, FMSC and Forum 1. Incorporated in Finding of Fact 4 except for the actual calculations outlined in the formulas which are incomplete. 2 & 3 Incorporated in Finding of Fact 5. 4-6 Incorporated in Finding of Fact 5. 7-13 Incorporated in Finding of Fact 6. 14 Not a Finding of Fact. Rulings on Proposed Findings of Fact Submitted by Health Care and Retirement Corporation Incorporated in Finding of Fact 4 except for the citation of the rule which is incomplete. Accepted. Accepted. Accepted and incorporated. 5-9 Accepted. 10 & 11 Accepted. 12 Rejected as not the best analysis. Rulings on Proposed Findings of Fact Submitted by Beverly Enterprises 1-3 Accepted. 4-6 Incorporated into Findings of Fact. 7 & 8 Accepted. Rejected as legal argument and not a Finding of Fact. & 11 Accepted. Rejected as legal argument and not a Finding of Fact. Cumulative to other findings. Rejected as legal argument and not a Finding of Fact. Incorporated in Finding of Fact. 16-20 Legal Argument not a Finding of Fact. 21-22 Cumulative to other evidence of record. Rulings on Proposed Findings of Fact Submitted by DHRS 1-3 Accepted. 4-8 Rejected as not supported by the weight of the evidence. 9 Accepted as to the calculation including the 91 beds available to FCC. Rejected as to the propriety of the award and the reason. Copies Furnished: William Page, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 200 South Monroe Street Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 R. Terry Rigsby, Esquire Post Office Box 10555 Tallahassee, Florida 32302 John Rodriguez, Esquire, Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
