Findings Of Fact Prior to the hearing, the parties filed a Pretrial Stipulation which essentially sets forth the following facts contained in paragraphs 1 through 9: The Intervenors Beverly Enterprises, Inc. (hereafter "Beverly"), and Provincial House of Florida (hereafter "Provincial House"), filed their applications for certificates of need on March 18, 1981, and January 28, 1981, respectively. At the time Beverly and Provincial House filed their applications for 120-bed nursing home facilities, they were batched together with Health Care Management, Inc. (hereafter "Health Care"). Shortly thereafter, Health Care was granted a certificate of need to construct a 120-bed nursing home facility and Beverly's and Provincial House's applications were denied on July 8, 1981, and June 3, 1981, respectively. Beverly and Provincial House timely filed petitions with the Division of Administrative Hearings contesting the denial of their respective applications. By Stipulation dated December 29, 1981, Beverly and Provincial House were granted certificates of need which gave each the right to construct a 96- bed nursing home facility. This Stipulation was later amended on February 21, 1982, to authorize construction of two 72-bed nursing homes in Lee County, Florida. Based upon the new 1982 Health Systems Plan for Lee County, an additional 143 beds were determined to be needed for Lee County for the year 1985. Neither Beverly nor Provincial House resubmitted their applications when the new bed need was established. Rather, as part of the settlement in Provincial House, Inc. v. Department of Health and Rehabilitative Services, Case No. 81-1793, and Beverly Enterprises v. Department of Health and Rehabilitative Services, Case No. 81-2037, the certificates of need were granted based upon receipt of ". . . updated population figures which demonstrated additional need for nursing home beds in the County." Petitioner's Exhibit 3. At the time the Department entered into the Stipulation with Beverly and Provincial House, it did not consider Gulf Court's then pending application. The sole reason the certificate of need was denied to Gulf Court Nursing Center on March 30, 1982, was that there were no longer beds available and there was no need as a direct result of granting the two certificates of need to Beverly and Provincial House. Since Gulf Court's application was never simultaneously reviewed or considered by the Department with either Beverly or Provincial House's applications, a comparative hearing was not held in this case. Gulf Court, Beverly and Provincial House all meet the criteria for issuance of a certificate as set forth in Rule 10-5.11, Florida Administrative Code. The Respondent Department routinely awards certificates of need on a first-come, first-serve basis to applicants denied certificates due to a lack of need in a previous cycle, who file Chapter 120 appeals, without reviewing pending applications filed in the current cycle.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order finding that, under the circumstances presented in this case, Gulf Court is entitled to a comparative and competitive review with Provincial House and Beverly Enterprises, Inc. DONE AND ENTERED this 10th day of February 1984 in Tallahassee, Florida. SHARYN L. SMITH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of February 1984. COPIES FURNISHED: John C. Dent, Jr., Esquire DENT PFLUGNER ROSIER AND HENDRICKS 2 North Tuttle Avenue Sarasota, Florida 33577 Steven Huss, Esquire Department of Health and Rehabilitative Services 1317 Winewood Boulevard Tallahassee, Florida 32301 G. Boone, Esquire Susan Lee Stockham, Esquire 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 32484 Alicia Jacobs, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue The issue is whether A Professional Nurse, Inc., is entitled to an award of attorney's fees and costs under the Equal Access to Justice Act, Section 57.111, Florida Statutes, for fees and costs incurred in a prior formal proceeding in which A Professional Nurse, Inc., sought a certificate of need to become a Medicare certified home health agency and prevailed.
Findings Of Fact The Stipulated Facts Prior to the final hearing, the parties stipulated to the following: This is an action for attorney's fees pursuant to Section 57.111, Florida Statutes. The fees sought by A Professional Nurse arise from pursuing its right to a formal hearing under Section 120.57(1), Florida Statutes, in Case No. 87- 0451, A Professional Nurse Inc. v. Department of Health and Rehabilitative Services. In that prior proceeding, the Department had notified A Professional Nurse by letter dated November 17, 1986, that its application for a certificate of need as a home health agency was denied. The letter also advised A Professional Nurse of its right to request a Section 120.57(1) hearing. A Professional Nurse prevailed in the proceedings in Case No. 87-0451, and a final order was entered by the Department of Health and Rehabilitative Services granting A Professional Nurse Certificate of Need No. 4636 as a home health agency. A Professional Nurse qualifies as a "small business party" under Section 57.111, Florida Statutes. The $14,144 in attorney's fees requested by A Professional Nurse in this proceeding is a reasonable fee. The issue to be determined is whether the Department's decision to deny the certificate of need application was "substantially justified" as defined in Section 57.111(3)(e) Florida Statutes. The Acts Found Based Upon the Hearing The following findings are made based upon the evidence presented at the hearing in this case: A Professional Nurse provides home-based skilled nursing care, nurses aide care, homemakers' services, and related professional and institutional staffing services. In June of 1986 it filed an application for a certificate of need as a Medicare certified home health agency to serve HRS District IX. A decision was due on that application in October 1986. On September 16, 1986, an employee of the Department requested an extension of time for the Department's decision until January 1987 because the Department had no rule methodology for determining need for home health agencies, but hoped to have one by January 1987. A Professional Nurse agreed to a three-week extension but did not agree to defer a decision until January 1987. On November 17, 1986, the Department notified A Professional Nurse that its application had been reviewed pursuant to Section 381.493 through 499, Florida Statutes, and Chapter 10-6, Florida Administrative Code. The State Agency Action Report issued by the Department that day proposed to deny the application. At the time the application was reviewed in November 1986, the Department had no numeric need methodology promulgated by rule for determining the need for additional Medicaid certified home health agencies. At no tide during the application process was A Professional Nurse told how the Department would determine the need for additional home health agencies, given the absence of any need methodology properly adopted in rule form. At the time the application was filed, the Department was using a numeric need formula. The formula was not found in any rule, it was a modification of a proposed numeric need rule which had been declared to be invalid. Home Health Services and Staffing v. Department of Health and Rehabilitative Services, Case 85-1377R (DOAH March 12, 1986). The modifications were made by the Department to correct deficiencies the hearing officer had identified, which among other things, were that the proposed rule was too restrictive, stifled competition, and therefore was invalid. This modified need formula had been used by the Department in evaluating CON applications submitted in the batching cycle immediately preceding the batch in which A Professional Nurse's application was filed. That methodology had not been published as a proposed rule or adopted as a rule. After A Professional Nurse's application was filed, but before any preliminary decision was made on it, the Department ceased using its unpromulgated numeric need methodology. Why the Department abandoned the non- rule numeric need methodology cannot be determined from the record in this proceeding. The unpromulgated numeric need methodology the Department had been using showed a need for additional health agencies in District IX, and would have led the Department to grant A Professional Nurse's application. In reviewing A Professional Nurse's application, the Department utilized the thirteen statutory criteria found in Section 381.494(6)(c), Florida Statutes (1985). The pivotal criteria, the assessment of need for an additional home health agency, is listed in the statute, but no method for evaluating need is prescribed. After abandoning its unpromulgated numeric need methodology, the Department's position was that an applicant had to demonstrate "unmet need" by showing that individuals were being denied home health care they were seeking in order for an applicant to obtain a certificate of need as a new home health agency. When the Department reviewed A Professional Nurse's application it did not know, and could not determine, how many home health agencies were needed in District IX. The Department's new policy on need imposed a nearly impossible burden on applicants to demonstrate need without identifying for applicants the appropriate means to show that people-seeking services were not being served, and that additional home health care agencies were needed in a district. In an effort to deal with the problem of implementing the general statutory requirement that the Department assess the need for additional home health agencies when reviewing CON applications, A Professional Nurse presented a methodology to the Department as a "addendum" to its certificate of need application during the public hearing which was conducted on the application. The methodology A Professional Nurse presented was a variation on the invalidated rule. The proposed methodology demonstrated a need for additional home health agencies in HRS District IX. The administrator of the Department's certificate of need office, Mr. Maryanski, took the position at the time the methodology was proposed by A Professional Nurse, that even if an applicant presented a need methodology to the Department, it would be "more appropriate" for a hearing officer to determine the validity of a proposed methodology than for the Department to accept an applicant's proposed need methodology formula when reviewing the application. This position, in effect, requires all applicants to request Section 120.57(1) administrative hearings, and bear the expense of such hearings, if they hoped to obtain a certificate of need. The alternative was for applicants for CONs for home health agencies to grant the Department repeated extensions of time in which to evaluate their applications until a new methodology was chosen by the Department and promulgated as a rule. The District Court of Appeal, First District, issued an opinion on July 22, 1986, in the case of Upjohn Healthcare Services, Inc. v. Department of Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986) published at 11 Florida Law Weekly 1592, holding that the Department had a statutory duty to have a methodology for review of home health agency certificate of need applications. At the time of the review of the application by a A Professional Nurse in November 1986, no such methodology yet existed, and consequently, none could be applied by the Department.
Findings Of Fact The Agency for Health Care Administration ("AHCA") is responsible for the administration of the Certificate of Need ("CON") program in Florida, pursuant to Section 408.034, Florida Statutes (1992 supp.) AHCA initially published a need for 313 community nursing home beds in the 16 county area encompassing District III on April 17, 1992, which was subsequently corrected and published as a revised total of 321 net bed need for District III. On September 17, 1992, with a cover letter signed by Elizabeth Dudek, AHCA issued notice that it intended to issue: CON No. 6983P to Unicare Health Facilities, Inc. ("Unicare"), for construction of a 60 bed community nursing home in Hernando County; CON No. 6985 to Beverly Enterprises-Florida, Inc. ("Beverly"), for the construction of a 120-bed community nursing home in Hernando County; and CON No. 6986 to Life Care Centers of America, Inc. ("Life Care"), for the construction of a 120-bed community nursing home in Hernando County; and, intended to deny, among others: CON 6983 to Unicare for the construction of a 120-bed community nursing home in Hernando County; CON No. 6989 to Lake Port Properties ("Lake Port") for either the conversion of 60 sheltered nursing beds to 60 community nursing home beds or the conversion of the 60 beds and the construction of an additional 60 community nursing beds to be located in Lake County; CON No. 6991 to Unicare for the addition of 51 community nursing home beds to New Horizon Rehabilitation Center, in Marion County; CON No. 6992 to Ocala Health Care Associates, G.P., for the addition of 60 community nursing home beds to TimberRidge Nursing and Rehabilitation Center in Marion County; and CON No. 6993 to Southern Medical Associates, Inc. (Southern Medical) for the addition of 60 community nursing beds to Palatka Health Care Center in Putnam County. Prior to the hearing, the parties stipulated that all participants have standing, except Heartland. Additional stipulations, accepted during the hearing, in the absence of a representative for Ocala Health Care Associates, are as follows: subsection 408.035 (1)(m) is not in dispute; proposed project costs and design are reasonable; the applicants' Schedules 1, notes and assumptions, the schematics, and the narrative responses to all of objective 4 in each application are in evidence, not in dispute, and are reasonable. The parties also stipulated to the approval of CON 6991 for Unicare to add 51 beds to its New Horizon Rehabilitation Center in Marion County, and the denial of CONS 6983 and 6983P to Unicare. LIFE CARE Life Care Centers of America, Inc. ("Life Care"), a privately-held corporation established in 1976, by its sole shareholder, Forrest L. Preston, owns, operates or manages 131 nursing homes and 14 retirement centers in 26 states. In Florida, Life Care manages four facilities with superior licenses, located in Altamonte Springs, Punta Gorda, and two in Palm Beach County, Lakeside and Darcy Hall. Life Care also owns, as well as operates, the facility in Altamonte Springs. Life Care owns and operates 28 nursing homes through leases, 6 or 7 of which are capital leases. Under the terms of the capital leases, Life Care is responsible for capital expenditures and projects. Life Care is not responsible for capital expenditures and projects at approximately 91 of its 131 facilities. Life Care proposes to construct and operate a 120-bed nursing home in the southwest section of Hernando County, near Spring Hill, and to finance the total project cost of approximately $5 1/2 million from bank loans. Life Care has not identified a specific site for its facility. Life Care has proposed to accept a CON condition to provide 75 percent of its patient days to Medicaid beneficiaries, to establish a separate 20-bed wing for Alzheimers and related dementia ("ARD") residents, and to provide intravenous therapy, inpatient and outpatient rehabilitative therapy, wound care and adult day care. Life Care's proposed Medicaid condition exceeds the 1991 district average of 73.78 percent, and is consistent with its experience in Altamonte Springs of up to 73 percent Medicaid without a CON condition, and over 80 percent Medicaid in West Palm Beach. The Medicaid percentages indicate that Life Care will offer mainly traditional nursing home services. BEVERLY Beverly Enterprises, Inc., the ultimate corporate parent of the applicant, owns 830 nursing homes, with a total of 89,000 beds in 35 states. Beverly Enterprises-Florida, Inc., the applicant in this proceeding, is a wholly-owned subsidiary of Beverly California Corporation, a wholly owned subsidiary of Beverly Enterprises, Inc. Beverly Enterprises-Florida ("Beverly") owns 41 of the total 68 nursing homes owned in Florida by Beverly-related companies. Of the 40 nursing homes owned by Beverly at the time the application was filed, 31 had superior licenses. Three facilities had moratoria within the preceding 36 months, one a facility built in 1929, another with a two-week moratorium which is now licensed superior, and a third which is still conditional while physical plant improvements are underway. See, Finding of Facts 28, infra. Beverly proposes to construct a 120-bed nursing home in Spring Hill, Hernando County, for $5,213,077, with its CON conditioned on the provision of 74 percent of annual patient days to Medicaid residents and a $10,000 grant for gerontology research at Hernando-Pasco Community College. Beverly proposes four beds for a ventilator-dependent unit, two beds for respite care, 20 beds on a separate wing for ARD residents, and to establish an adult care program. Beverly commits to group patients with ARD or other losses in cognitive functioning together in a 20-bed area, to offer subacute rehabilitative care in a 24 bed Medicare skilled nursing unit, and to provide intravenous therapy. Beverly also intends to establish a dedicated four-bed ventilator unit staffed with at least one registered nurse with a minimum of two years experience in critical care continuously on duty, a separately staffed adult day care program, and respite care. Beverly's would be the first ventilator beds other than in hospitals and the first licensed adult day care program in Hernando County. One of Beverly's existing Florida nursing homes is Eastbrooke which is also located in Hernando County, approximately 10 miles from the proposed Spring Hill site. Beverly expects its experienced personnel from Eastbrooke to train and assist in establishing Spring Hill. Beverly has identified a site for the Spring Hill facility which is across the street from an acute care hospital. Spring Hill is in southern Hernando County, near Pasco County. UNICARE By stipulation of the parties, the Unicare Health Facilities, Inc. ("Unicare") proposal to add 51 beds to New Horizon Rehabilitation Center in Marion County was recommended for approval on May 12, 1993. Unicare withdrew its requests for the approval of CONs 6983P and 6983 in Hernando County. As a result, the parties agreed that the number of beds needed was reduced from 321 beds to 270 beds. LAKE PORT Lake Port is a 60-bed licensed skilled nursing center, with a superior rating, located at the Lake Port Properties Continuing Care Retirement Community, in Leesburg, Lake County. Lake Port Properties is a partnership, for which Johnson Simmons Company serves as the managing general partner. The Lake Port community includes independent living residences, a 66-bed adult congregate living facility, and the 60 sheltered nursing beds. Among the services provided are post-operative care and orthopedic rehabilitative therapy for patients who have had knee or hip replacement surgery or shoulder injuries, neurological therapies for stroke injuries, pain management, subacute, open wound and respite care, and hospice services. Lake Port currently has 11 Medicare certified beds, and has had from 8 to 22 Medicare certified beds at a time. Lake Port has a contract with Hospice of Lake-Sumter County to provide interdisciplinary services to approximately five hospice residents a year. Rehabilitation services are also provided by contract at Lake Port. Lake Port has a relatively high volume of residents who are discharged home following intensive therapy within an average of three weeks. As an indicator of the intensity of therapeutic services, Lake Port has provided 26 percent Medicare, while the Lake/Sumter planning area average was 7.2 percent. Life Care projected a Medicare rate of 6.7 percent, Beverly projected 10 percent Medicare, and the Hernando County average is 9.3 percent. In this proceeding, Lake Port proposes either to convert the existing 60 skilled nursing beds to 60 community nursing beds at no cost, or the 60 bed conversion and the approval to construct an additional 60 community nursing home beds, for a total 120-bed community facility at a cost of $1.4 million. Lake Port proposes to have either CON, if approved, conditioned on the provision of 29.2 percent and 33.81 percent Medicaid, in years one and two, and respite, subacute, and intense rehabilitative care. Historically, the payer mix has included 25-30 percent Medicare and 30-35 percent Medicaid. All of the proposed services are provided currently at Lake Port. The effect of the change in licensure categories is to eliminate the requirement that the facility serve exclusively the retirement community residents after five years in operation, or after August 1995. Lake Port would still be obligated to provide nursing home care to Lake Port community residents at discounted costs, pursuant to the terms of their continuing care contracts. Occupancy levels at Lake Port exceed 95 percent, with 7 to 8 percent of patient days attributable to retirement community, and the remainder to patients in a service area which includes West Lake and Sumter Counties. Lake Port asserts that its financial viability depends on its ability to continue to serve all residents of its service area. SOUTHERN MEDICAL Southern Medical Associates, Inc. ("Southern Medical") is a Florida corporation which owns two nursing homes, one with 60 beds in Okaloosa County and one with 120 beds in Palatka, in Putnam County. Palatka Health Care Center opened with 60 beds in May 1989, added 60 beds in November 1990. Both nursing homes have superior licenses and are managed and staffed by National HealthCorp, L.P., which was founded in 1971, and manages 86 nursing homes, twenty-nine of those in Florida. The management fee is 6 percent of net revenues. In its application for CON number 6993, Southern Medical proposes to add 60 beds to the existing 120-bed nursing home, known as Palatka Health Care Center. Occupancy levels at the Palatka Center ranged between 96 and 99 percent in 1992-1993. Total project costs of $2.1 million will be financed by or through National HealthCorp. Southern Medical proposes that its CON be conditioned on the establishment of a 20-bed distinct Alzheimer's wing and the provision of 74 percent of total patient days to Medicaid patients. Southern Medical provides rehabilitation services in a 14-bed Medicare certified unit, antibiotic intravenous therapy, hospice and respite care. It exceeds the 73 percent Medicaid condition of its CON. SUBSECTION 408.035(1)(a) - NEED IN RELATION TO STATE AND LOCAL HEALTH PLANS The Florida State Health Plan includes 12 preferences to consider in reviewing nursing home CON applications, most of which overlap statutory review criteria in Section 408.035, Florida Statutes. Preference 1 encourages more nursing homes beds in subdistricts with 90 percent or higher occupancy in existing beds. District 3 is not subdistricted, but its nursing home bed occupancy rate was 91 percent in 1991. Therefore, all applicants for nursing homes in District 3 meet the preference. District 3 has been divided into planning areas by the local health council. The applications filed in this proceeding coincide with the planning areas for Hernando, Putnam, and Lake/Sumter Counties. In 1991, occupancy rates averaged 92 percent for Hernando, 96 percent for Putnam, and 93 percent for Lake/Sumter planning areas. Each applicant meets preference 1 using planning areas as substitutes for subdistricts. Preference 2 favors applicants whose Medicaid commitments equal or exceed the subdistrict-wide average. In the absence of subdistricts, the district wide average is used, which is 73.78 percent. Beverly's 74 percent commitment, Life Care's 75 percent commitment, and Southern Medical's 74 percent commitment, entitle them to be favored under preference 2. In addition, Beverly cites its 76.9 percent Medicaid patient days in 1991 at Eastbrooke, but it has failed to achieve its Medicaid commitment at one Florida nursing home in Cape Coral. Lake Port committed to provide a minimum of 33.81 percent Medicaid patient days and argued that it meets the exception to the preference for providing multi-level care. As described in the 1989 Florida State Health Plan, multi-level health systems offer a continuum of care which may range from acute care and ambulatory surgery centers to home health and education, including traditional nursing care. Special emphasis is placed on short-term intensive rehabilitation programs. Although Lake Port's proposal includes some of the features of a multi-level system, such as post-operative rehabilitative therapy and respite care, the Medicaid exception is inappropriate for Lake Port, because the same services are also proposed by Beverly and Southern Medical. See, also, Section 408.035(1)(n), Florida Statutes. Preference 3 relates to providing specialized services, including acquired immune deficiency syndrome ("AIDS") services to residents, ARD residents, and the mentally ill. This preference is met by Beverly, Life Care, and SMA, particularly for ARD patients for which all three applicants proposed to establish separate 20-bed units. The preference is also met by Lake Port, particularly with its emphasis on specialized, intense rehabilitative services. See, also Subsection 408.205(1)(f), Florida Statutes. Preference 4 supports applicants proposing to provide a "continuum of services to community residents," including respite and adult day care. Beverly and Life Care propose to offer both respite and adult day care. Lake Port and Southern Medical propose to provide respite and hospice care. Preference 5, for the construction of facilities which provide maximum comfort and quality of care, was stipulated as being met by all the parties. The applicants also stipulated that project costs and construction plans are reasonable. See, also, Subsection 408.035(1)(m),(2)(a) and (2)(c), Florida Statutes. Preference 6 is met by all of the applicants: . . . proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. Life Care, Beverly and Southern Medical propose to offer specialized services to ARD residents. Lake Port and Southern Medical emphasize physical rehabilitation. All of the applicants meet the requirements for preference 6. Preference 7 is for applicants whose charges do not exceed the highest Medicaid per diem rate in the subdistrict, which, for District 3, is $74.05, or $93.49 inflated at 6 percent to 1996. Life Care Care's proposed Medicaid charges are $93.69 for year 1, and $94.46 for year 2. Beverly projected that the average Medicaid per diem rate in the subdistrict will be $93.49 in 1996, its charge will be $95.00, but it will expect Medicaid reimbursement to be $93.30 for that year. Lake Port projected proposed charges to Medicaid patients as $90 to $93.92 in year one and $93 to $97.37 in year two, for the full 120 beds or the partial 60 beds, respectively. Southern Medical's Medicaid charges will be $90.22 in year one and $94.28 in year two. Preference 8 applies to applicants with a history of providing superior resident care programs, as indicated by licensure ratings. Of Beverly's 40 Florida facilities, 31 held superior licenses at the time the application was filed. Of the nine Beverly nursing homes with conditional ratings, six are now superior. Renovations or, in the case of one facility built in 1929, construction of a replacement building, are underway at the three others. Life Care, Southern Medical and Lake Port have histories of consistently superior license ratings. See, also, Subsection 408.035(1)(c), Florida Statutes. Preference 9 favors applicants proposing staffing levels exceeding minimum standards. Due to the ventilator, intravenous and rehabilitative services proposed, Beverly will staff in excess of that required by the state, with at least one registered nurse with a minimum of two years experience on all shifts and a full-time physical therapist. It intends to rely on its current Hernando County facility, Eastbrooke's relationship with Hernando-Pasco Community College, for recruitment and training of staff, although Beverly has not opened a new nursing home in Florida since 1987. Life Care similarly intends to rely on a CON approved facility in adjacent Citrus County. Southern Medical employs St. Augustine Vocational College students who are certified nurse assistants training to become licensed practical nurses, and licensed practical nurses training to become registered nurses are employed at Palatka, which also has internships for health sciences students from the University of North Florida. Its occupational, speech and physical therapists are full-time employees. Lake Port's staffing ratios will also exceed the minimums, in order to provide intensive rehabilitative therapies. See, also Subsection 408.035(1)(h), Florida Statutes. Each applicant meets preference 10 based on their proposed or current use of a variety of professional disciplines. See, Finding of Fact 29. Preference 11 seeks to ensure resident rights and privacy as well as implementing plans for quality assurance and discharge planning. All of the applicants were shown to follow well established residents' rights and privacy policies, and to have effective quality assurance programs. Pre-admission screening programs include discharge planning. Beverly has the most highly standardized corporate structure of incentives to maintain quality. Preference 12 relates to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the District. Average costs in District III are expected to be $54.79 for resident care and $13.97 for administrative overhead by 1996. Life Care expects resident care costs of $51.97 a day and administrative costs of $17.43 a day. Beverly projects its resident care to cost $61.89, with administrative costs of $8.86. Southern Medical proposes administrative costs of $19.88 per patient day and patient care costs of $46.23 per patient day. Lake Port's administrative costs are expected to be $27.80 for 60 beds or $22.12 for 120 beds, with patient care costs of $43.04 for 60 beds or $45.08 for 120 beds. Beverly, best meets the preference and expects enhanced economics and efficiency from combining some overhead for the operation of two nursing homes in Hernando County. Life Care, however, notes that its proposal enhances competition in view of the existence of one Beverly facility in Hernando County. See, Subsection 408.035(1)(e),(1)(h) and (1)(l), Florida Statutes, which also relate to costs, resources, and competition. District III includes 16 west central Florida counties, from Hamilton, Columbia, Union Bradford and Putnam in the North to Hernando, Sumter and Lake in the south. The allocation factors in the plan for District III are prepared by the North Central Florida Health Planning Council, the local health council for the district. The district has not been subdivided by agency rule. Using its planning areas, the local health council has given priority rankings for applicants in certain areas of the district. Dixie, Lafayette and Union Counties, which have no nursing homes, are favored by the local plan. If, as in this case, there are no applicants from these counties, Hernando should be favored, followed by Putnam County. No priority was given to Lake County. The council also quantified bed need by planning area for the January 1995 planning horizon, with additional beds needed, ranging from 120 to 180 in Hernando, and up to 60 in Putnam. The parties agree generally that the council may establish planning areas in the discharge of its duties, but they disagree whether the establishment of upper limits, or caps in numeric need by planning area is authorized by law. Section 408.034, Florida Statutes, requires a uniform need methodology, which the agency has established by enacting the nursing home rule, Rule 59C-1.036(1)(c), Florida Administrative Code. Once the agency determines numeric need for a district and the district driving time standard, the local plan cannot alter these determinations. The local plan also includes certain fundamental principles for the allocation of new beds: (1) to promote geographic access, (2) to consider the locations of at-risk population need factors, and (3) to increase supply based on demand. In order of importance, the local plan lists three allocation factors (1) for counties without nursing homes, (2) for new nursing homes 20 miles or 25 minutes drive from existing or approved beds, and (3) for locations without approved beds and with existing nursing homes averaging occupancy levels at least 95 percent for the most recent six month or 90 percent for the most recent 12 months. With respect to the specific allocation factors, Life Care, Beverly, Southern Medical and Lake Port are in areas with over 90 percent average occupancy within a 20 mile radius. Life Care, Beverly and Southern Medical are proposing to establish facilities in areas of greater need than that in the area of Lake Port. Hernando and Putnam Counties also have lower ratios of nursing home beds to population than Lake County. The local health council's determination of the greatest need in Hernando County, was confirmed by expert testimony, based on analyzing licensed and approved beds, occupancy rates, distribution of population ages 65 and older, and 75 and older, and most importantly, projected growth of population 65 and older, and of 75 and older. The bed to population ratio for Hernando was, in 1992, 15.5 percent for 65 and older, and 44.9 percent for the population 75 and older, both of which are below the ratios for any other planning areas in the District. The projected increase in population 75 and older for the state is 12 percent, in contrast to the projected increase of 38 percent for Hernando County. Expert testimony for Beverly supported the addition of up to 300 beds in Hernando County to bring Hernando County's bed distribution in line with that of the entire district. The only approved provider in the county, Hernando Health Care, has surrendered its CON to add 18 nursing home beds in Hernando County. On the contrary, Heartland's expert calculated numeric need of only 119 additional beds in Hernando County. AHCA, however, gave no consideration to the effect on occupancy, fill- up rates, or financial feasibility of it preliminarily approving all new beds in Hernando County. The experience was compared, by Southern Medical's expert, to that in Clay County, in which 555 beds were 95 percent occupied, prior to the opening of two 120-bed facilities, one in December 1989, and the other in April 1990. At the end of the first year of operation, the facility that opened first was 48.5 percent occupied, the second was 21.7 percent occupied, and district occupancy was 77.7 percent. At the end of the second year, the rates were 81 percent, 55.6 percent, and 85.6 percent. However, by 1992, the nursing homes in that subdistrict averaged 93 percent occupancy. Opponents to the AHCA proposal to locate all new facilities in Hernando County, contend that the bed-to- population ratio or "parity" approach used to support the approval of 240 beds in that county does not take into account demographic variables among the counties in the district. While the bed-to-population ratio is not reliable in and of itself, alternative analyses for the determination of the location of greatest need within the district support the same conclusions. Those analyses relied upon current nursing homes occupancy levels, poverty, and population migration trends and available alternatives to distinguish among the various proposed locations. Based on occupancy levels, the District III counties of greatest need for additional beds are Putnam, Lake and Sumter, and Hernando, in that order. Putnam County residents are being placed in facilities outside the county due to the lack of available nursing home beds. In terms of poverty level and mortality levels, the figures for Putnam and Marion Counties indicated their populations were less healthy than those in Hernando and Lake. Hernando had 6.05 percent of its over 65 population, which is 85 and older, as compared to 9.34 percent in Lake, 8 percent in Putnam, and 8.28 percent as the district average. Hernando and Putnam Counties also had lower percentages of people 75 and older than did Lake and Marion Counties. ALTERNATIVES AND EXISTING NURSING HOMES IN DISTRICT 3 Subsections 408.035(1)(b) and (d) require consideration of other like and existing facilities in the district, as well as health care services which are alternatives to nursing homes. Currently, there are 4 nursing homes in Hernando County, and 12 in Lake County. In Putnam County, there are 3 nursing homes and 15 additional "swing beds," which may be used for acute care or long term care, approved for Putnam Community Hospital. Those beds are not available to serve Medicaid patients and are not included on the inventory of community nursing home beds. In the 511 existing nursing home beds in Hernando, there is an average daily census of 45 beds occupied by residents originating from other counties, while 23 Hernando residents constituted the average daily census leaving the County. Hernando cannot expect to retain in-migrating patients with the development of nursing homes in those residents' counties of origin, particularly, Citrus and Pasco. Given the decrease in nursing home patient days form 1991 to 1992, there is also no reason to expect any significant increase in use rate for the population in Hernando. The most compelling support for need in Hernando County is that the rate of growth of its over 75 population, which is more than three times that of the State. Putnam County has the lowest migration and a greater demand for nursing home services for the population age 85 and older. Putnam County nursing homes exceed 95 percent occupancy. Lake County area nursing homes were 93 percent occupied for the same period of time, and with the relinquishment of an approved CON for 60 beds by Leesburg Regional Hospital, that occupancy rate rises to approximately 95 percent. The award to Leesburg Regional established a need for 60 beds in Lake County, but there is also an approved CON for a 120-bed facility in Mount Dora. According to Lake Port's expert witnesses, the Mount Dora nursing home will not alleviate the need for beds in western Lake County. That facility, owned by the Adventist health group, is expected to be a referral facility from the nearby Adventist Hospital in Orlando and Sanford. Based on the alternative considerations of occupancy levels, poverty and morality rates, the need for additional beds in Putnam County is greater than the need in Lake County. Projected population increases and the limited alternatives also support the conclusion that a greater need exists in Hernando than in Lake County. Heartland of Brooksville ("Heartland"), is an existing 120-bed community nursing home in Brooksville, which is licensed superior. Heartland contends that the virtually simultaneous establishment of both Beverly and Life Care will adversely impact Heartland, and make it difficult for the new nursing homes to meet their projected utilizations. The trend of twice as many people migrating to, as there are leaving Hernando County for nursing home services, will be reversed as more nursing homes are established in surrounding counties. See, Finding of Fact 45. Heartland reasonably expects gradually to lose up to 30 percent of its residents who came from the Spring Hill area, where Beverly and Life Care intend to build new nursing homes. Heartland also reasonably expects to lose Medicare patients among the group from Spring Hill. Medicare residents average 9.3 percent of the total mix in the county, but account for 15 percent of the patient mix at Heartland. Heartland will be adversely affected for at least the first two years if both Life Care and Beverly are approved. See, Finding of Fact 40, supra. FINANCIAL FEASIBILITY Heartland, Southern Medical and Lake Port assert that Beverly will be successful in Hernando County, but that Life Care will not. Beverly is already established in the county, will provide services not currently available in nursing homes, and will open its facility seven months before Life Care. Life Care projected a net loss of $589,042 in year one, and a net gain of $254,991 in year two of operation. Life Care's projections fail to consider the company's 6.5 percent management fee, income taxes, and Medicaid reimbursement rate ceilings. By contrast to the other proposals and to the Hernando County average of 9.3 percent, Life Care is relying on a payor mix of only 6.7 percent Medicare, the group for which competition will be most intense. That mix parallels its Florida experience, which has historically allowed it to achieve a profit margin of 16 to 22 percent of net revenues in the third year of operation. Life Care's experience and audited financial statements support its contention that it can borrow essentially 100 percent of the funds necessary to support the project and complete the proposed project, a debt arrangement it has successfully used in the past, without defaulting on loans. Life Care's resources are also potentially subject to a $12 to $18 million judgment, due to litigation which is on appeal. Life Care has a contingency fund of $8 million to satisfy the judgment and has sufficient equity in its properties to pay the balance through refinancing. The deficiencies in Life Care's pro forma and its potential liabilities are off-set by the size and strength of the company, and its Hernando County project is financially feasible in the short and long terms. Beverly projects opening at Spring Hill 15 1/2 months after issuance of a CON, reaching 90 percent utilization within 15 months of opening. Beverly reasonably expects an after tax profit of $239,489 in the second year of operation. Beverly estimates project costs of $5.2 million, financed by the parent corporation, Beverly-California. Beverly-California has from $35 to 45 million available to contribute a 40 percent ($2 million) equity investment, and a $35 million loan commitment from which it will draw the balance to finance the project. Southern Medical has a letter of interest for financing of the total project costs of $2.1 million at 12 percent rate of interest by National HealthCorp. During the construction period, Southern Medical estimates that the existing 120 beds will remain 94 percent full, and that the new beds once open will fill at a rate of 10 percent a month, which is consistent with the experience of the management company, National HealthCorp. Southern Medical's actual experience in Palatka was, in fact, better. The first 60 beds were filled after 5 months while the additional 60 beds were filled in 7 to 8 months. Projected revenues of $290,000 during construction, $323,000 after year one, and $488,000 after year two are reasonable. Southern Medical's balance sheet shows short term debt of approximately $1.4 million attributable to the construction of the Okaloosa nursing home. Although Southern Medical secured a $3 million loan commitment for the Okaloosa facility, it has drawn from that account $473,000. That debt will be refinanced and recategorized as long term debt. Southern Medical's project is financially feasible in the short and long term, based on its actual experience in the existing 120-bed facility. Lake Port has the financial resources to construct 60 additional beds for $1.4 million. Lake Port's proposed conversion of the licensure category for its existing 60 beds is at no cost, except for approximately $37,000 in filing and consultants fees. In its third year of operation, Lake Port has achieved 97 percent occupancy. At present, delays of up to a week may be experienced in transfering patients from acute care hospitals to nursing homes in the Leesburg area. From October to May, due to the influx of northerners, beds are generally not available in the Leesburg area of western Lake and Sumter Counties. Lake Port's projections of occupancy and its financial ability to complete either 60-bed conversion and/or 60-bed addition make either proposal financially feasible in the short or long term.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That AHCA issue CON 6985 to Beverly Enterprises-Florida, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the operation of a 4-bed ventilator-dependent unit, 2 beds for respite care, an adult day care program, and a 20-bed separate unit for residents with Alzheimer's and related dementia. That AHCA issue CON 6986 to Life Care Centers of America, Inc. to construct a 120-bed nursing home in Hernando County, conditioned on the provision of a minimum of 75 percent of total annual patient days to Medicaid residents, the operation of a 20-bed dedicated wing for residents with Alzheimer's and related dementia, and the operation of an adult day care. That AHCA issue CON 6993 to Southern Medical Associates, Inc. for the addition of 60 community nursing home beds at Palatka Health Care Center in Putnam County, conditioned on the provision of 74 percent of total annual patient days to Medicaid residents, and the establishment of a 20-bed district Alzheimer's wing. That AHCA deny CON 6989P and CON 6989 to Lake Port Properties. DONE AND ENTERED this 20th day of July, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6656 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast-Florida, Inc.'s Proposed Findings of Fact. 1. Accepted in Preliminary Statement and Finding of Fact 3. 2-9. Accepted in or subordinate to Findings of Fact 8-10, 24 and 25. 10. Accepted in Preliminary Statement. 11-15. Accepted in relevant part in Finding of Fact 33. 16-19. Accepted in part in Findings of Fact 9, 20-21, 37-39. 20-23. Accepted in Findings of Fact 19-32. 24-30. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 31. Accepted in Findings of Fact 19-32. 32-38. Accepted in Findings of Fact 9, 23, 24, 29 or 30. 39-42. Accepted in or subordinate to Finding of Fact 28. 43-48. Accepted in or subordinate to Findings of Fact 29-31. 49. Accepted in or subordinate to Findings of Fact 29-30. 50-56. Accepted in or subordinate to Findings of Fact 50-51. 57-62. Accepted in or subordinate to Findings of Fact 29 or 30. 63-64 Accepted in or subordinate to Findings of Fact 32, 39 and 46-47. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. 67-68. Accepted in Findings of Fact 9-10. 69. Subordinate to Finding of Fact 6. 70-71. Accepted in or subordinate to Findings of Fact 6, 7 and 10. 72-75. Accepted in or subordinate to Findings of Fact 5-7, 8-10 and 48-51. 76. Accepted in Finding of Fact 32. 77-79. Accepted in or subordinate to Findings of Fact 48-49. Petitioner, Southern Medical's, Proposed Findings of Fact 1-2. Accepted in Finding of Fact 16. Accepted in Finding of Fact 34. Accepted in Findings of Fact 16 and 17. 5-14. Subordinate to preliminary statement. 15. Accepted in Finding of Fact 2. 16-17. Accepted in Finding of Fact 20. 18-19. Accepted in Finding of Fact 17. 20-22. Rejected in conclusions of law 4. 23. Accepted in Finding of Fact 36. 24-41. Accepted in or subordinate to Findings of Fact 21 and 33-45. Accepted in Finding of Fact 19. Accepted in Findings of Fact 20-21. Accepted in Finding of Fact 22. Accepted in Finding of Fact 23. Accepted in Finding of Fact 24. Accepted in Finding of Fact 25. Accepted in Finding of Fact 26. Accepted in Finding of Fact 27. Accepted in Finding of Fact 28. Accepted in Finding of Fact 29. Accepted in Finding of Fact 30. Accepted in Finding of Fact 31. Accepted in part in Finding of Fact 32. Accepted in part in Findings of Fact 19-32. 56-57. Accepted in part in Findings of Fact 43-45. 58-60. Accepted in or subordinate to Finding of Fact 28. 61-62. Accepted in Findings of Fact 18, 22 and 28. Subordinate to Finding of Fact 28. Accepted in Finding of Fact 28. 65-69. Accepted in or Subordinate to Finding of Fact 34 and 43-45. 70-72. Accepted in Findings of Fact 17-18 and 22-23. 73-74. Accepted in Findings of Fact 29-30. 75. Accepted in Finding of Fact 24. 76-77. Accepted in Finding of Fact 29. 78-96. Accepted in Findings of Fact 52-53. Accepted in Finding of Fact 25. Accepted in Finding of Fact 22. Rejected in Findings of Fact 34-39 and 45. 100-101. Rejected in Findings of Fact 41-42 and 45. 102. Accepted in relevant part in Findings of Fact 43-45. 103-109. Rejected in relevant part and accepted in relevant part in Findings of Fact 41-45. 110-112. Rejected in Finding of Fact 45. Accepted in Findings of Fact 48 and 49. Rejected in Finding of Fact 45. Accepted in conclusions of law 60. 116-120. Accepted in relevant part in Findings of Fact 48 and 49. 121. Rejected in Finding of Fact 5. 122-123. Rejected in Findings of Fact 39 and 40. 124-125. Issue not addressed at hearing. Accepted in relevant part in Finding of Fact 48. Rejected in Finding of Fact 29. Petitioner, HCR Limited Partnership I d/b/a Heartland of Brooksville's Proposed Findings of Fact Accepted in part in Findings of Fact 8-10. Accepted in part in Findings of Fact 5-7. Accepted in part in Findings of Fact 12-14. Accepted in part in Findings of Fact 16-18. Accepted in Preliminary Statement and Findings of Fact 2 and 11. Accepted in Finding of Fact 40. Accepted in Finding of Fact 33. Accepted in Finding of Fact 34. 9-16. Accepted in Findings of Fact 34-38. 17. Accepted in Findings of Fact 21 and 43. 19-22. Accepted in Findings of Fact 21, 42 and 43. 23-33. Accepted in Findings of Fact 38, 42 and 43. Rejected in Finding of Fact 45. Accepted in Finding of Fact 39. 36-41. Accepted in or Subordinate to Findings of Fact 45 and 47. 42-44. Rejected in Finding of Fact 5. 45. Accepted in Findings of Fact 45, 48 and 49. Petitioner, Lake Port Properties's Proposed Findings of Fact Accepted in Finding of Fact 2. Accepted in Finding of Fact 3. Accepted in Findings of Fact 3 and 40. Accepted in preliminary statement. Accepted in Findings of Fact 4 and last sentence rejected in preliminary statement. Accepted in Preliminary Statement. 7-28. Accepted in Findings of Fact 12-15. 29. Rejected in Finding of Fact 45. 30-34. Accepted in Findings of Fact 39-43 and 46. 35. Rejected in Finding of Fact 46. 36-38. Accepted in Findings of Fact 12-15. 39-42. Facts accepted, conclusions rejected in Findings of Fact 44-46. 43-47. Accepted in Findings of Fact 33-39. 48. Rejected in Finding of Fact 39. 49-54. Conclusion in first sentence rejected in Finding of Fact 39. Facts accepted in Findings of Facts 39-45. 55-60. Not solely relied upon but not disregarded. Facts generally accepted in Findings of Fact 39-45. 61-74. Accepted in part and rejected in part in Findings of Fact 19-32. 75-82. Accepted in part in Findings of Fact 33-38. 83-93. Accepted in or subordinate to Findings of Fact 28-29. 94-100. Accepted in Findings of Fact 54-55. 101-103. Accepted in Findings of Fact 15 and 54. 104. Accepted in Finding of Fact 31. 105-106. Accepted in Finding of Fact 22. 107-111. Rejected first sentence in Findings of Fact 39 and 40. Remainder of 107-111 accepted in Findings of Fact 8-10 and 19-38. 112-113. Conclusion rejected in Findings of Fact 45, 48, and 49. 114-117. Accepted in Findings of Fact 45, 48 and 49. Rejected in Findings of Fact 45, 48 and 49. Accepted in Finding of Fact 6. 120-121. Subordinate to Finding of Fact 7. 122-125. Accepted in Findings of Fact 7 and 48. 126-130. Rejected in Finding of Fact 5. Respondent, Life Care Centers of America, Inc.'s, Proposed Findings of Fact. 1-9. Accepted in Findings of Fact 33-43. 10-12. Accepted in Findings of Fact 12-15. 13. Rejected in Finding of Fact 12. 14(a-d)-20. Accepted in Findings of Fact 33-40. 21(a-d). Accepted in Findings of Fact 19-32. 22. Accepted in Finding of Fact 34. 23-28. Accepted in Findings of Fact 44-47. Accepted in Finding of Fact 7. Accepted in Finding of Fact 39. Accepted in part or subordinate to Findings of Fact 43-45. Subordinate to Finding of Fact 45. Subordinate to Finding of Fact 17. 34-40. Accepted in relevant part or subordinate to Findings of Fact 5-7. 41(a-c). Accepted in Findings of Fact 8-10 and 29. 42. Rejected in relevant part in Finding of Fact 12. 43-45. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Subordinate to Finding of Fact 17. Rejected in Findings of Fact 44. 47-48. Subordinate to Finding of Fact 45. 49-50. Accepted in Findings of Fact 5-7. 51-54. Subordinate to Finding of Fact 29. 55-62. Accepted in Findings of Fact 48-49. 63-64. Accepted in Finding of Fact 29. 65-69. Accepted in Findings of Fact 48-49. Subordinate to Findings of Fact 54-55. Subordinate to Finding of Fact 52. Subordinate to Finding of Fact 29. 73-74. Accepted. 75. Accepted in Finding of Fact 4. 76-77. Accepted in Findings of Fact 40-43. 78-79. Accepted in Finding of Fact 29. Subordinate to Finding of Fact 52. Accepted in Finding of Fact 25. 82-85. Accepted in or subordinate to Finding of Fact 22. Subordinate to Finding of Fact 47. Accepted in conclusions of law. Accepted in preliminary statement. Issue not reached. Subordinate to preliminary statement. Conclusion rejected in Finding of Fact 16. Respondent, AHCA's Proposed Findings of Fact Accepted in or subordinate to preliminary statement and Findings of Fact 1-3. Accepted in preliminary statement. Accepted in Findings of Fact 2 and 21 and conclusions of law 66. Accepted in Finding of Fact 2 and 21. Accepted in Finding of Fact 2 and 4. Accepted in preliminary statement and Finding of Fact 3. Accepted in Findings of Fact 12-15. Accepted in Findings of Fact 16-18.8. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 5-7. Subordinate to preliminary statement and Finding of Fact 3. Accepted in relevant part in Findings of Fact 5-7 and 19-33. Relevant as to availability due to occupancy ratio in Findings of Fact 37-45. Accepted in Finding of Fact 28. Accepted in Findings of Fact 48-49. Accepted, except first sentence in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 19-20 and 44. Accepted in Findings of Fact 8-10 and 19-32. Accepted in Findings of Fact 50-51. Accepted in Findings of Fact 33-39. Conclusions rejected in Findings of Fact 19-32. Accepted facts in 19-20 and 44. Accepted in Findings of Fact 8-10. Accepted in Findings of Fact 52-53. Accepted in Findings of Fact 12-15 and 19-32. Rejected in Findings of Fact 19 and 20. Accepted in Finding of Fact 28. Accepted in Findings of Fact 54 and 55. COPIES FURNISHED: Douglas L. Manheimer, Attorney Dennis LaRosa, Attorney Broad & Cassel 215 South Monroe Street Post Office Box 11300 Tallahassee, Florida 32302 Alfred W. Clark, Attorney at Law Post Office Box 623 Tallahassee, Florida 32308 James C. Hauser, Attorney Lachlin Waldoch, Attorney Messer, Vickers, Caparello, Madsen Lewis, Goldman & Metz, P.a. Post Office Box 1876 Tallahassee, Florida 32301 Gary Anton, Attorney Stowell, Anton & Kraemer Post Office Box 11059 Tallahassee, Florida 32302 Edward Labrador, Attorney Richard Patterson, Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 W. David Watkins, Attorney Robert Downey, Attorney Oretel, Hoffman, Fernandez, et al. 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 R. Bruce McKibben, Jr., Attorney Pennington & Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32302 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Attorney Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact On September 29, 1988, HRS published its July 1991 Planning Horizon Florida Community Nursing Home Bed Need Projections ("the Original Bed Need Projections"). According to the Original Bed Need Projections, there is a need for 86 additional beds in HRS District 4, Subdistrict 3 (i.e., St. Johns County and southeast Duval County, hereafter, "Subdistrict 3"), a need for 187 additional nursing beds in Orange County, and a need for 35 additional nursing beds in Palm Beach County. On October 7, 1988, HRS published notice of the Original Bed Need Projections in the Florida Administrative Weekly ("FAW"), Vol. 14, No. 40, pages 3838-3839. On October 19, 1988, HRS published a memorandum and attached errata sheet ("the Errata Memorandum") detailing certain errors in the Original Bed Need Projections. The Errata Memorandum notes that the errors which had been discovered up to that time do not affect the number of additional beds that are projected to be needed by the Original Bed Need Projections. On October 24, 1988, Health Quest filed three petitions: A "Petition for Formal Hearing" was filed with HRS. Health Quest served an "Amendment to the Petition for Formal Hearing," correcting wordprocessing errors in the original Petition, on November 10, 1988, which "Amendment to the Petition for Formal Hearing" was forwarded by HRS to the Division of Administrative Hearings (DOAH) on November 28, 1988 simultaneously with the original "Petition for Formal Hearing", and these pleadings together are here considered as the "120.57 Petition." They/it was assigned DOAH Case No. 88-5848 and are the basis for the instant proceeding. A Petition for Determination of Invalidity of Rule 10-5.008 (2)(a) F.A.C., the fixed need rule, pursuant to Section 120.56, F.S. ("the 120.56 Rule Challenge"), was filed with DOAH and was subsequently assigned DOAH Case No. 88-5228R; and A Petition for Determination of Invalidity of Non-Rule Policy, referencing the same fixed need rule, pursuant to Sections 120.54 and 120.56, F.S. ("the NonRule Policy Challenge"), was filed with DOAH and subsequently assigned DOAH Case No. 88-5230R. Each of the three petitions challenged HRS' determination that additional nursing beds were needed in Subdistrict 3, Orange County, and in Palm Beach County. The petitions also note that Petitioner Health Quest owns and operates nursing homes in Subdistrict 3, Orange County, and Palm Beach County. On October 31, 1988, HRS published its Revised July 1991 Planning Horizon Florida Community Nursing Bed Need Projections ("the Revised Bed Need Projections"). In contrast with both HRS' Original Bed Need Projections and its Errata Memorandum, the Revised Bed Need Projections change the number of additional beds that are needed for Orange County and Palm Beach County. Specifically, the Revised Bed Need Projections decrease the number of beds that are needed in Orange County from 187 to )15, and increase the number of beds that are needed in Palm Beach County from 35 to 62. On November 4, 1988, HRS published a Notice of Correction to Nursing Home Fixed Pools ("the Correction Notice") in the FAW, Vol. 14, No. 44, page 4404. The Correction Notice altered the number of additional beds that are needed for Orange County and Palm Beach County "based on recalculations of net need," as described above in paragraph 6. On November 14, 1988, Health Quest and HRS executed a Stipulation and Agreement ("the Stipulation"). The Stipulation states that HRS acknowledges Health Quest's standing to contest the Original Bed Need Projections, as corrected pursuant to the Revised Bed Need Projections. HRS therefore agreed to refer the 120.57 Petition (this instant case) to DOAH. In reliance on such acknowledgment and agreement, Health Quest voluntarily dismissed both the Rule Challenge (DOAH Case No. 88-5228R) and the Non-Rule Policy Challenge (DOAH Case No. 88-5230R). See Finding of Fact 4, above. The undersigned hearing officer scheduled the instant case (the 120.57 Petition) for final formal hearing at a date stipulated by Health Quest and HRS; however, subsequent to the filing of unilateral prehearing statements by the parties, the undersigned cancelled the formal hearing and by Order of March 20, 1989, required memoranda of law upon the issues discussed in the following Conclusions of Law. Prior to the date for filing such memoranda, Arbor Health Care Company was granted Intervenor status by a March 23, 1989 Order, upon the basis that it had received written notice on March 14, 1989 that HRS intended to issue CON No. 5785, effective March 10, 1989 to Arbor for construction of an 86-bed nursing home to be located in St. John's County, Florida. Arbor had applied for the CON on or before November 23, 1988 in response to the Summary Bed Need Projections published in FAW by HRS on October 7, 1988.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that HRS enter a final order dismissing the Petition herein. DONE and ENTERED this 3rd day of May, 1989, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of May, 1989.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made: Case background and the parties: The Department is the state agency charged with the responsibility of issuing, revoking, or denying certificates of need for health care facilities or services. In that regard the Department has promulgated a rule for computing the need for new or additional community nursing home beds. The methodology of the rule (now Rule 10-5.036, Florida Administrative Code) calculates a specific number of beds anticipated to be needed for a given planning horizon. Once calculated, the Department publishes the calculated need for the district/subdistrict. Additional beds are generally not authorized if their approval would cause the total number of beds approved to exceed the number of beds calculated to be needed under the rule. The Department is not, however, obligated to approve beds so that the total number of beds calculated to be needed are approved, i.e. the Department may, as in this case, approve only a portion of those beds thought to be needed. In this case, the Department published a projected need for 165 additional beds in Orange County, Florida. That bed pool was calculated for the January, 1993 planning horizon and was published in the Florida Administrative Weekly on April 13, 1990. The calculated need published in this case has not been challenged and, therefore, was not at issue in these proceedings. At the time need was computed, there were 2,797 licensed beds in Orange County with an additional 505 approved nursing beds. The occupancy rate for the county was just under 93 percent. Following the publication of the need figures, letters of intent and applications were filed by health care providers seeking to obtain approvals for the available nursing beds. Coordinated Care, Inc. filed an application (CON #6287) for approval to develop a new, freestanding 120 bed community nursing home. The project was estimated to require a capital expenditure of $6,000,000 and would provide 24 beds in a subacute care unit. Florida Convalescent Centers, Inc. filed an application (CON #6292) for approval to develop a 60 bed addition to its existing facility known as Palm Garden of Orlando (CON #2991). If approved, the total number of nursing beds for that facility would then be 120 beds. The project cost for the expansion was estimated at $1,648,638. It was proposed that financing and management for the facility would be provided by National HealthCorp., Ltd. Marriott Retirement Communities, Inc. filed an application (CON #6290) for approval of a 39 bed community nursing home facility to be built as a component of a retirement community to be known as Brighton Gardens Nursing Center. The project cost for the Marriott proposal was $2,613,919. The Department's preliminary action in this case was to grant the CONs requested by Marriott and Florida Convalescent and to deny the application filed by Coordinated Care. Health Quest Management Corporation VII (Health Quest) operates an existing 120 bed nursing home in Orange County, Florida. That nursing home is known as Regents Park. Health Quest also operates Regents Woods, an adult congregate living facility, in Orange County. Health Quest opposes the proposed approval of CON #6290 for Marriott. Coordinated Care opposes the proposed approval of CON #6292 for Florida Convalescent and affirmatively alleges it is entitled, as the superior co-batched applicant, to the approval of its application. The petitions filed by Coordinated Care and Health Quest challenging the Department's preliminary action were timely. As to Case no. 90-7563: At the outset of the hearing, the parties stipulated that the following review criteria found in Section 381.705, Florida Statutes, were not at issue or were inapplicable to this case: Subsections 381.705(1)(d),(e),(f),(g),(j),(k),(m), and (2)(b) and (c). As to all other relevant criteria, Florida Convalescent and Coordinated Care were comparatively reviewed for CON approval by the Department and are so reviewed in this order. Florida Convalescent is a nursing home company currently operating twelve nursing homes in Florida, including Palm Garden of Orlando (Palm Garden). Palm Garden is a 60 bed facility that was constructed according to a 120 bed prototype. The facility was designed to have three sections: two 60 bed patient wings and a center, nonliving area for the operations of the facility. The kitchen, dining room area, therapy spaces, office spaces and open areas have already been constructed and are currently utilized for the existing 60 bed unit. The approval of the CON here would allow the completion of the final 60 bed wing. Palm Garden is managed by National Healthcorp, Ltd. (National), a nursing home company headquartered in Murfreesboro, Tennessee. National provides financial, developmental, and management services to nursing home companies in nine states. National prepared the CON application in this case on behalf of Florida Convalescent. If approved, National will continue to manage the Palm Garden facility in Orlando. As part of the 60 bed extension, Palm Garden will have specialized programs for Alzheimer's patients, subacute care, and special respite care. The approval of the 60 extension will allow these programs to be expanded and Florida Convalescent has indicated its willingness to accept as a condition of its CON an obligation to provide such special care programs. Currently, the profile of Palm Garden patients can be summarized as follows: 70 percent Medicaid, 25 percent private pay, and 5 percent Medicare. Florida Convalescent has agreed to commit to providing 58 percent of its services to Medicaid patients, and has indicated its willingness to accept as a condition of its CON such a provision. National has agreed to finance 1.6 million dollars of expenses for the Florida Convalescent proposal. The total project cost associated with the proposal is $3,333,119. Coordinated Care is a management company whose principals, Fred A. Lane and Patricia Lane, his wife, operate four nursing home facilities in Volusia County, Florida. If approved, Mr. Lane will administer Coordinated Care's facility in Orange County. It is proposed that the Coordinated Care facility will have 120 beds with a 24 bed subacute unit. The subacute unit will provide care for AIDS patients, ventilator dependent patients, and IV therapy. Additionally, the Coordinated Care proposal offers a program for mentally impaired patients including those with Alzheimer's and will also offer a respite care program. Coordinated Care is willing to accept as conditions on its certificate of need the following commitments: to exceed minimums on direct care staff to patient ratios by 10 percent; to provide service to AIDS patients; to offer 48 percent Medicaid and 15 percent Medicare; and to provide the subacute programs previously described. The Department's District 7, subdistrict Orange County, has a need for additional nursing home beds. The District 7 Local Health Plan cites recommendations regarding new nursing home beds for the District. Those recommendations speak to the needs of the District as a whole and are not ranked by priority of interest. In this case, both applicants, Coordinated Care and Florida Convalescent, will provide nursing services to AIDS patients. The Coordinated Care application recognized the need for a staff education program to provide AIDS training and committed the applicant to provide care for AIDS patients. The Florida Convalescent application did not address AIDS patients specifically because no AIDS patient has sought admission at the existing facility. Florida Convalescent will conduct staff education for AIDS patients, however, and will not deny admission to AIDS patients. Both Coordinated Care and Florida Convalescent will provide, and will commit to provide, specific levels of Medicaid patients. In this context, Florida Convalescent's history (63 percent) and proposed commitment (58 percent) to Medicaid utilization is greater than that offered by Coordinated Care (48 percent). With regard to indigent or charity care, Florida Convalescent currently provides such care at Palm Garden of Orlando. Both Coordinated Care and Florida Convalescent have demonstrated a commitment to high quality nursing home care. Palm Garden of Orlando is a superior rated nursing home and has, additionally, established a high quality service rating among homes managed by National. Similarly, the Lane family homes have experienced superior ratings and are committed to quality care. Both Coordinated Care and Florida Convalescent have demonstrated good track records for employee recruitment, training, and benefits. Additionally, the salary and bonus offers make both providers an attractive employer. Palm Garden of Orlando currently has ties to nursing programs in the Orlando area and is close geographically to Valencia Community College and the University of Central Florida. It is anticipated that Coordinated Care will be able to establish such ties in the Orlando area since it has done so in Volusia County. Both Florida Convalescent and Coordinated Care have demonstrated that their proposals in Orange County meet the State Health Plan preferences. By virtue of it being an existing provider, it is anticipated that Florida Convalescent will lower its administrative costs with the addition of 60 beds since there is recognized an economy of scale at that level. There is no demonstrated problem related to availability, accessibility, extent of utilization, or adequacy of nursing care services in this case. It is likely that resources, including health care manpower, will be available for project accomplishment and operation. Both applicants have demonstrated the immediate and long-term financial feasibility of the proposals. It is anticipated that the addition of 60 beds to the Florida Convalescent facility will have the least impact on the costs of providing health services and will promote cost-effectiveness. It is anticipated that the Florida Convalescent's proposal will best provide services to Medicaid patients and the medically indigent. The Florida Convalescent expansion is the most efficient and more appropriate alternative for providing nursing home services. The Florida Convalescent expansion will minimize the numbers of patients who were not admitted because of lack of beds at the Palm Garden facility. The Florida Convalescent expansion is consistent with other agencies and is in compliance with the local plans for providing long term care. The application submitted by Florida Convalescent was complete and its consolidated financial statement was consistent with the Department's rules and policies. The consolidated financial statement submitted by Florida Convalescent was prepared in accordance with generally accepted accounting principles and is sufficient for all purposes for which such statements are required by the Department. Florida Convalescent has demonstrated it has the financial resources to accomplish the project expansion and that the methods of construction, including equipment costs, are reasonable. On balance, when comparatively reviewed, the application submitted by Florida Convalescent is superior to the proposal submitted by Coordinated Care. As to Case No. 90-7565 Marriott filed an application for a certificate of need, designated by the Department CON # 6290, to construct a 39 bed nursing unit to be built in conjunction with an 133 bed adult congregate living facility (ACLF) in Orange County, Florida. The Marriott proposal in this case is based upon a design it has utilized before and is commonly known as a "Brighton Gardens" project. In accordance with Department statutes and rules, a certificate of need (CON) is necessary in order for Marriott to pursue the nursing component of its project. A CON is not required for the ACLF component. The Marriott project will be financed by its parent company. That Marriott entity has $400 million in cash or cash equivalents, generates $600 million annually in cash flow, and can easily afford the project addressed by this application. The Marriott proposal substantially meets the preferences and recommendations of the State and Local Health Plans. The Marriott proposal specifies 30 percent of its patient days will be available for Medicaid patients. Marriott is able to provide a high quality of care. The Marriott proposal will establish links with the nursing school community so that recruitments and staffing may be enhanced. Additionally, Marriott will offer continuing education for staff with reasonable salary and benefit opportunities. The costs of construction for the Marriott proposal are reasonable, allocated appropriately between the nursing facility and the ACLF, and meet or exceed all applicable code requirements. Both as to the manner of allocation and costs of allocation, Marriott has disclosed sufficient detail to adequately assess the nursing component of its proposed development. Marriott's proposed project both in the immediate and long-term is financially feasible. The granting of Marriott's proposal will not adversely affect Health Quest's ability to recruit personnel. The granting of Marriott's proposal will not adversely affect Health Quest's rate of occupancy. If Health Quest's occupancy should decrease following the approval of Marriott's request, such result is not attributable to the approval since Health Quest currently has a lower than district average for occupancy and since Health Quest currently charges more than the average amount charged by other nursing facilities. The number of beds requested by Marriott represents approximately 1 percent of the total number of beds currently approved in Orange County. Marriott's application substantially complies with all review criteria set forth in Chapter 381, Florida Statutes.
Recommendation Based on the foregoing, it is recommended that the Department of Health and Rehabilitative Services enter a final order approving the applications filed by Marriott and Florida Convalescent, denying the application of Coordinated Care, and dismissing the petition filed by Health Quest. RECOMMENDED this 31st day of October, 1991, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of October, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 90-7563 and 90-7565 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE DEPARTMENT: Paragraphs 1 through 5 are accepted. The first sentence of paragraph 6 is accepted; the remainder of the paragraph is not a statement of fact. Paragraphs 7 through 13 are accepted. With the deletion of the word "well" in the last sentence, paragraph 14 is accepted. Paragraph 15 is accepted. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY MARRIOTT: Paragraphs 1 through 3 are accepted. With the clarification that at most 120 beds are in dispute, paragraph 4 is accepted. With regard to paragraph 5 it is accepted that Marriott's application is consistent with the state and local health plans; otherwise rejected as irrelevant. Paragraphs 6 through 8 are accepted. With regard to paragraph 9, it is rejected as argument or response to a position argued by Health Quest. The weight of the credible evidence showed that Marriott appropriately disclosed its projects and that it will be able to finance the project which is at issue. Paragraphs 10 through 19 are accepted. With the exception of the last sentence which is accepted; paragraph 20 is rejected as irrelevant. Paragraphs 21 through 23 are accepted. The first sentence of paragraph 24 is accepted, the remainder rejected as irrelevant. The first two sentences of paragraph 25 are accepted; the remainder rejected as irrelevant or argument. With the deletion of the words "by far" which are rejected as argument, paragraph 26 is accepted. With the deletion of the words "serious" and "numerous" which are rejected as contrary to the weight of the evidence, paragraph 27 is accepted. Paragraph 28 is rejected as contrary to the weight of the evidence. Paragraphs 29 and 30 are accepted. Paragraphs 31 through 33 are rejected as argument, contrary to the weight of the evidence, or irrelevant. It is not found, however, that Health Quest will suffer adversely from the approval of Marriott's application, to the contrary it will not. Paragraph 34 is accepted. Paragraphs 35 and 36 are rejected as argument. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY HEALTH QUEST: Paragraphs 1 through 3 are accepted. Paragraph 4 (a) is accepted. Paragraphs 4 (b), 4 (c), and 4 (d) are rejected as contrary to the weight of the evidence. Paragraphs 5 and 6 are accepted. With regard to paragraph 7, it is rejected as irrelevant or argument; in this case Marriott has allocated and identified appropriately to establish the support areas needed for the nursing component of its proposal. Those areas have been computed in the cost and fairly and reasonably been considered in the financial feasibility of the project. To the extent addressed in the findings of fact or as accepted elsewhere in this appendix, paragraphs 8 through 36 are accepted, otherwise rejected as contrary to the weight of the evidence or irrelevant. It is specifically found that Marriott appropriately and accurately disclosed and allocated costs of the nursing facility and that those costs fairly depict the expenses reasonably expected to be incurred by this project. As to the suggestion by Health Quest that Marriott's proposal could not survive as a stand alone facility, such suggestion is rejected as irrelevant given the total circumstances and financial disclosures made in this case. Paragraph 37 is accepted. Paragraph 38 is rejected as contrary to the weight of the evidence, hearsay, or not supported by the evidence in this case. Paragraphs 39 through 147 are rejected as recitation of testimony, irrelevant, argument, contrary to the weight of credible evidence or not supported by the evidence in this case. Paragraph 148 is accepted. Paragraph 149 is rejected as contrary to the weight of the evidence or irrelevant. Paragraphs 150 through 169 are rejected as irrelevant, contrary to the weight of the evidence, or not supported by the evidence. Paragraphs 170 through 179 are accepted. Paragraph 180 is rejected as irrelevant. Paragraphs 181 through 185 are rejected as irrelevant, argument, or contrary to the weight of the evidence. Paragraph 186 is accepted. Paragraph 187 is rejected as irrelevant. Paragraph 188 is accepted. Paragraphs 189 through 199 are rejected as contrary to the weight of the evidence, irrelevant, or argument. It is found that the allocations of space and costs in this case accurately describe the project and would allow for the financial feasibility of the nursing component. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY COORDINATED CARE: Paragraphs 1 through 3 are accepted. With regard to paragraph 4 it is accepted that the mathematical calculations are correct but such are not depositive of this case. Paragraph 5 is accepted. With the deletion of the phrase "Contrasted to the management style of FCC, which does not manage any of its facilities," which is rejected as argument or irrelevant, paragraph 6 is accepted. Paragraphs 7 through 21 are accepted. Paragraph 22 is rejected as contrary to the weight of the evidence. Paragraph 23 is rejected as irrelevant. Paragraph 24 is rejected as irrelevant. The first two sentences of paragraph 25 are accepted; the remainder is rejected as contrary to the weight of the evidence presented, irrelevant, or unsupported by the record. Paragraphs 26 through 31 are accepted. Paragraph 32 is rejected as repetitive. Paragraph 33 is rejected as repetitive. Paragraphs 34 through 36 are accepted. Paragraph 37 is rejected as repetitive. Paragraphs 38 through 44 are rejected as contrary to the weight of the evidence, irrelevant, or, where accurate as to fact, considered to be not dispositive of the issues of this case. Paragraph 45 is accepted. Paragraph 46 is accepted (assuming numbers have been rounded off). Paragraph 47 is rejected as contrary to the weight of the evidence. Paragraphs 48 and 49 are accepted. Paragraphs 50 through 64 are rejected as irrelevant, contrary to the weight of the evidence presented or argument. Paragraphs 65 and 66 are accepted. Paragraphs 67 through 72 are rejected as argument, irrelevant, or contrary to the weight of the evidence. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY FLORIDA CONVALESCENT CENTERS: Paragraphs 1 through 19 are accepted. Paragraph 20 is rejected as argument. Paragraphs 21 through 24 are accepted. Paragraph 25 and 26 are rejected to the extent that they suggest the Palm Garden facility enjoys a higher quality of care than the Lane family facilities. Both applicants provide a high quality of care and must be ranked equally in this regard. It is expected that the expansion of Palm Garden will assure that facility's continued high care and only to that extent has Palm Garden been considered the better applicant in this batch. Paragraph 27 is accepted to the extent it details the history of Florida Convalescent, otherwise rejected as irrelevant or contrary to the weight of the evidence. Paragraphs 28 and 29 are rejected as irrelevant. Paragraph 30 is accepted to the extent that it suggests both Florida Convalescent and Coordinated Care have established good recruitment and training programs, etc. To the extent that Florida Convalescent is already established in the Orlando community it is advantaged; but, it is expected that Coordinated Care will be able to duplicate its efforts and successes (as in Volusia) in the Orange County venue. It is because it has an established program that Florida Convalescent gets the nod in this category. Paragraphs 31 through 38 are accepted. Paragraph 39 is accepted to the extent that it states both applicants have superior programs and quality of care; otherwise, rejected as contrary to the weight of the evidence. With regard to paragraphs 40 through 42 it is found that both applicants meet the preferences addressed in the state health plan and that neither ranks higher in the categories listed in these paragraphs. Paragraphs 43 through 45 are accepted. Paragraph 46 is rejected as contrary to the weight of the evidence. Paragraphs 47 (all subparts) through 52 are accepted. The first sentence of paragraph 53 is accepted; the remainder is rejected as contrary to the weight of the evidence or irrelevant. Paragraphs 54 through 74 are accepted. Paragraphs 75 through 91 are rejected as contrary to the weight of the evidence or irrelevant. Paragraphs 92 through 109 are accepted. COPIES FURNISHED: James M. Barclay Theodore E. Mack Cobb Cole & Bell 315 South Calhoun Street Suite 500 Tallahassee, Florida 32301 Elizabeth McArthur Aurell, Radey, Hinkle & Thomas 101 N. Monroe Street Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 Charles M. Loeser 315 West Jefferson Boulevard South Bend, Indiana 46601 Darrell White Gerald B. Sternstein McFARLAIN, STERNSTEIN, WILEY & CASSEDY, P.A. Post Office Box 2174 Tallahassee, Florida 32316-2174 Donna Stinson Thomas M. Beason Moyle, Flanigan, Katz, Fitzgerald & Sheehan, P.A. 118 North Gadsden Street Suite 100 Tallahassee, Florida 32301 Richard Patterson Assistant General Counsel Department of Health and Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Slye, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Whether Rule 10-17.015, Florida Administrative Code, is an invalid exercise of delegated legislative authority.
Findings Of Fact Petitioner, National Health Corporation (NHC), a Tennessee corporation doing business in Florida, applied in January 1985 for certificates of need to construct nursing homes in Alachua, Lake and Suwannee counties. When the Department of Health and Rehabilitative Services (HRS) proposed to deny its applications, NHC filed petitions for formal proceedings with HRS, which transmitted the petitions to the Division of Administrative Hearings, where they were docketed in cases Nos. 85-2855 (Alachua), 85-2900 (Lake), and 85-2883 (Suwannee), which have now been consolidated for hearing. Alachua, Lake and Suwannee Counties all lie within HRS District III. At a prehearing conference in the substantial interest proceeding, HRS announced its reliance on Rule 10-17.105, Florida Administrative Code, among other things, as a basis for proposing to turn down NHC's applications. The parties stipulated that NHC is now, and will continue to be, substantially, immediately and adversely impacted by the use of Rule 10-17.015 as the basis for the Department's allocation of beds to competing applicants in District III, since each priority assigned by the local health council is a function of the number of beds awarded in all other planning areas. Petitioner has standing to challenge Rule 10-17.015, Florida Administrative Code, and the parties so stipulated. Prior to its most recent amendment, Rule 10-17.015, Florida Administrative Code, provided: 10-17.015 Local Health Plan Elements Against Which Applications for Nursing Homes Beds Shall Be Evaluated in Local Health Council District 3. Nursing Home Subdistrict Designation. Local Health Council District 3 has been divided into seven subdistricts for the purpose of planning for community nursing home bed need. Subdistrict 1 consists of Lafayette, Suwannee, Hamilton, Columbia, Union, and Bradford Counties. Subdistrict 2 consists of Dixie, Gilchrist, Alachua, and Levy Counties. Subdistrict 3 consists of Putnam County. Subdistrict 4 consists of Marion County. Subdistrict 5 consists of Citrus County. Subdistrict 6 consists of Hernando County. Subdistrict 7 consists of Lake and Sumter counties. Local Policies and Priorities. In addition to the statewide criteria against which community nursing home applications are evaluated, applications from District 3 will be evaluated against the following local criteria: (a) Special consideration should be given to proposals to establish a nursing home to serve residents who are more than 25 miles from an existing or approved nursing home. The designated subdistricts were used for "purposes of allocating nursing home beds in the district by applying uniform statewide methodology," (T. 74) set out in Rule 10-5.11(21), Florida Administrative Code. "When . . . [the uniform statewide] methodology was revised, . . . (by an amendment to Rule 10- 5.11(21), Florida Administrative Code, effective December 25, 1984] it had the effect of allocating beds to areas of. [District III] which already had the largest share of the nursing home bed supply for the district . . . [even though] there existed a pattern of maldistribution" (T. 74) to begin with. Under the uniform state methodology, embodied in Rule 10- 5.11(21), Florida Administrative Code, the allocation of nursing home beds to subdistricts is "simply supply-based," (T. 75) so that once the need for the district as a whole is determined, nursing home beds are distributed to subdistricts based only on how many nursing home beds are already there. Before Rule 10- 17.015, Florida Administrative Code, was amended, a quarter of the nursing home beds in District III were in Subdistrict 2, where only 15 percent of District III's population 75 and older lived, while Subdistrict 4, with 15 percent of the District III population 75 and over, had only 13 percent of the nursing home beds in District III. Since the amendment, District III, like HRS District X, comprises a "subdistrict of the whole." Use of such subdistricts of the whole rarely results in a difference in the number of beds added to a district, and "it's not generally greater than 2 percent if there is difference." (T. 103) Betty Roberts, who works in HRS's Office of Community Health Planning, drafted the current version of Rule 10-17.015, Florida Administrative Code, in consultation with Carol Gormley, Executive Director of the North Central Florida Health Planning Council, and under the supervision of Sharon Gordon-Girvin. Those involved had earlier considered and rejected the idea of simply repealing Rule 10-17.015, Florida Administrative Code, without replacing it. The amendment, in fact adopted and here challenged, provides: Local Health Plan Elements Against which Applications for Nursing Home Beds Be Evaluated In Local Health Council District 3. Nursing Home Subdistrict Designation. Local Health Council District 3 has divided into seven subdistricts for the purpose of planning for community nursing home bed need. Subdistrict 1 consists of Lafayette, Suwannee, Hamilton, Columbia, Union and Bradford Counties. Subdistrict 2 consists of Dixie, Gilchrist, Alachua, and Levy County. Subdistrict 3 consists of Putnam County. Subdistrict 4 consists of Marion County. Subdistrict 5 consists Citrus County. Subdistrict 6 consists of Hernando County. Subdistrict 7 consists of Lake and Sumter Counties. Decided not to designate any nursing home subdistricts. The allocation of new nursing home beds to locations within the district shall proceed according to policies established in the local health plan. Local Policies and Priorities. In addition to the statewide criteria against which community nursing home applications are evaluated, applications from District 3 will be evaluated against the following local criteria. Special consideration should be given to proposals to establish who are more 25 miles from an existing or approved nursing home local health plan policies and priorities contained in the approved plan. The effect of current Rule 10-17.015, Florida Administrative Code, is to make allocation of nursing home beds within District III wholly dependent on "policies and priorities established in the local health plan." Rule 10-17.015(1), Florida Administrative Code. Deposition of Sharon Gordon-Girvin, pages 8-10. (T. 62). HRS "specifically advised that . . . [the Health Planning Council] should develop policies as a component of the plan, which were not for rule promulgation." (T. 80). See Gormley deposition, Exhibit No. 38. The local health plan in effect when the challenged rule was promulgated and still in effect at the time of hearing, sets out a method for assigning priorities for nursing home bed allocation to each of seven planning areas within District III. These planning areas correspond to the subdistricts enumerated in prior Rule 10-17.015, Florida Administrative Code. In pertinent part, District III's local health plan provides: 1. Priority for allocation of nursing home beds in District III will be established by applying the policies set forth below. These policy statements are presented in an estab- lished order of importance. No nursing home beds should be added in an area until the occupancy rate of existing and approved beds has sustained an average of 80 percent or greater for six months or more. Nursing home beds should be added in an area with sufficiently high utilization of existing beds when that area's share of the District bed supply is less than the proportion of the District's population age 75+ who reside in that area. The first step in establishing relative priority standing of planning areas in District III compares the population characteristics to the bed distribution. The percent of the District's bed supply in the area is subtracted from the percent of the District's 75+ popu- lation residing in the area. High need is defined as a difference greater than or equal to 3.50; Moderate need is defined as a difference greater than or equal to 2.00 but less than 3.50; Low need is defined as a difference less than 2.00. The priority order of areas in need established under statement C will be adjusted by a consideration of occupancy levels of existing and approved facilities in each planning area during the last six months: High occupancy is defined as an average of 90 percent or greater; Moderate occupancy is defined as an average greater than or equal to 80 percent but less than 90 percent; Low Occupancy is defined as an average less than 80 percent. Final priority status is determined as follows: Areas with high need and high occupancy receive first priority; Areas with high need and moderate occupancy receive second priority; Areas with moderate need and high occupancy receive third priority; Areas with low need and high occupancy receive fourth priority; Areas with moderate or low need and moderate or low occupancy receive no priority. To the extent possible, all areas ranked in one of the four categories of priority established above should be approved to add some new beds. Relative allocation of available beds should be determined in the following manner: First priority areas should be allowed add at least 120 and no more than 240 beds; Second priority areas should be allowed to add at least 120 and no more than 180 beds; Third priority areas should be allowed to add at least 60 beds and no more than 120 beds; Fourth priority areas should be allowed to add up to 60 beds; Areas with no priority should not be allowed to add beds. The local health plan was not filed with the Secretary of State at the time present Rule 10-17.015, Florida Administrative Code, was adopted. The prioritization element of the local health plan above quoted is the basis for semiannual calculations by the North Central Florida Health Planning Council which are set out for the benefit of HRS employees reviewing certificate of need applications in tables like the following for the six-month period ending in May of 1985: PRIORITY RANK PLANNING AREA APPROVAL BEDS BEDS APPROVED 1 NET NEED 2 1 IV 120-240 60 60-180 VII 149 91 3 2 -- 120-180 -- -- 3 III 60-120 -- 60-120 4 I 60 111 -- Unranked II -- 120 -- V -- 9 -- VI -- -- -- District III 597 2 449 -- Approvals between December 1, 1984 and March 30, 1985. Calculation of district-wide need as of January, 1984, using DHRS bed need rule (10.5.11(21). The minimum number of approval beds (120) for this priority rank has already been awarded. Approval of an additional 91 beds would bring the bed allocation up to the maximum number (240). Exhibit No. 37 to the Deposition of Carol Gormley. The numbering of planning areas is the same as the numbering of the subdistricts which they replaced. As between competing applications for nursing home certificates of need for planning areas with difference priorities, the local health plan might well be dispositive; and would, in any event, be essential to review of the applications in accordance with 1018 rules. Deposition of Gordon-Girvin. In explaining the putative difference between subdistricts and planning areas, Ms. Gormley stated: We understand a subdistrict to be a geographic area specifically designated for use in a mathematical formula in a methodology, like the statewide methodology or, for example, in the case of acute care, perhaps in a methodology promulgated as rule after being developed by a local health council. The difference in our looking at planning areas is that we don't in fact apply a methodology, a mathematical calculation for need. We accept the need as determined solely by the statewide methodology, but we use those smaller geographic areas as a tool for determining whether or not any part of the district should have priority over any other part of the district when applications for additional beds are considered. (T-84). The need methodology set out in Rule 10-5.11(21), Florida Administrative Code, determines how many nursing home beds, if any, may be added to District III as a whole. Only when the state methodology indicates a need for additional beds in District III, does the question of allocation within the district arise, and only then do the local health plan policies and priorities come into play.
Findings Of Fact The Petitioner desires to construct a 180-bed nursing home facility. The proposed facility was originally conceived by the Winter Haven Hospital. The hospital was seeking to construct the facility adjacent to its present location. The hospital planned to utilize Federal Economic Development Agency funds to finance the construction. Under Federal regulations, Economic Development Agency funds are not available to a private hospital, but are available to local governmental units. The Petitioner agreed to seek the certificate of need, to apply for Economic Development Agency funds, and to construct the facility. After construction it is the Petitioner's plan to contract with the Winter Haven Hospital to operate the facility. Petitioner's request for certificate of need was forwarded to the South Central Florida Health Systems Council, Inc., and to the Respondent. The Health Systems Council, by a seven to six vote, recommended to the Respondent against the issuance of a certificate of need. The Council's written recommendation to the Respondent was never forwarded to the Petitioner, or to the Winter Haven Hospital. The Respondent denied the request for issuance of certificate of need by letter dated December 30, 1976. The Respondent's denial was based upon a mechanical application of the Florida State Plan for Construction of Hospitals and Related Medical Facilities. The sole basis for the denial was that in accordance with population figures set out in the State Plan, and in accordance with the application of a Federally required formula to the population figures, there is no need for the additional nursing home beds proposed by the Petitioner. No independent determination was made by the Respondent as to actual needs for nursing home facilities that might exist in Polk County. In the Florida State Plan for Construction of Hospitals and Related Medical Facilities, it was determined that 252 additional long-term care beds were needed in Polk County. At the time that the plan was promulgated, Kennedy Center, a new nursing home facility located in Lakeland, Florida, was not actively under construction. Since the plan was adopted, active construction of the Kennedy Center has commenced. At the time of the hearing 120 beds had been opened and made available at the Kennedy Center, and an additional 120 beds were being constructed. When the Kennedy Center is considered, there remains a need of only 12 additional long-term care beds in Polk County. Obviously the Petitioner's proposed 180-bed facility would greatly exceed the need envisioned in the State Plan. Petitioner offered evidence in the form of a publication of the Bureau of Economic and Business Research at the College of Business Administration, University of Florida, which indicates that the population of Polk County is somewhat higher than that set out in the State Plan (Petitioner's Exhibit 3). If these population figures, rather than those set out in the State Plan were utilized, there would remain a need for 252 long-term care beds in Polk County, even after construction of the Kennedy Center (Petitioner's Exhibit 5). There is no means of determining from the evidence whether the population figures submitted by the Petitioner are more or less accurate than those set out in the State Plan. Petitioner offered evidence that it has had difficulty placing certain classes of patients in nursing home facilities. This difficulty in fact prompted the Petitioner to seek a certificate of need for a new nursing home facility. Petitioner takes the responsibility for placing indigent persons in need of nursing home care. The State Medicade Program contributes the bulk of the cost of the care. Three categories of nursing home care are identified for Medicade purposes. These are "skill care", "intermediate I" and "intermediate II" patients. Skill care patients are the most infirm, and intermediate II care patients are the least infirm. The Medicade program allots more money for skill care patients than it does for intermediate care patients. Because of this private nursing home facilities often reject intermediate care patients in favor of skill care patients. The Petitioner has accordingly experienced difficulty in placing indigent intermediate care patients. The Petitioner has had to place 86 patients in nursing home facilities outside of Polk County. The opening of the Kennedy Center will alleviate most of the placement difficulties that the Petitioner has experienced. Approximately 100 beds at the Kennedy Center will be available for "intermediate II" patients. In addition, the operator of the "Grovemont Home" in Winter Haven, Florida, appeared at the hearing and stated that his facility would accept Medicade intermediate care patients, and that they are not running at full capacity. The Petitioner had not previously been placing Medicade patients in the Grovemont Home.
The Issue Whether the Petitioner is barred by the doctrine of res judicata from maintaining its challenge to rule 59A-4.128, Florida Administrative Code, which governs the evaluation and rating of nursing homes, as an invalid exercise of delegated legislative authority.
Findings Of Fact Based on the representations of counsel at the hearing and on the entire record of this proceeding, the following findings of fact are made: Advantage Therapy and Nursing Center (Beverly Health and Rehabilitative Services, Inc.) is the licensee of a nursing home in Fort Pierce, Florida. Rule 59A-4.128, Florida Administrative Code, governs the evaluation and rating of nursing homes in Florida. The rule provides: 59A-4.128 Evaluation of Nursing Homes and Rating System. The agency shall, at least every 15 months, evaluate and assign a rating to every nursing home facility. The evaluation and rating shall be based on the facility's compliance with the requirements contained in Sections 59A-4.100 through 59A-4.128, of this rule, Chapter 400, Part II and the requirements contained in the regulations adopted under the Omnibus Budget Reconciliation Act (OBRA) of 1987 (Pub. L. No. 100-203) (December 22, 1987), Title IV (Medicare, Medicaid, and Other Health Related Programs), Subtitle C (Nursing Home Reform), as amended and incorporated by reference. The evaluation shall be based on the most recent licensure survey report, investigations conducted by the AHCA and those persons authorized to inspect nursing homes under Chapter 400, Part II, Florida Statutes. The rating assigned to the nursing home facility will be either conditional, standard or superior. The rating is based on the compliance with the standards contained in this rule and the standards contained in the OBRA regulations. Non-compliance will be stated as deficiencies measured in terms of severity. For rating purposes, the following deficiencies are considered equal in severity: Class I deficiencies; Class II deficiencies; and those Substandard Quality of Care deficiencies which constitute either immediate jeopardy to resident health or safety or a pattern of or widespread actual harm that is not immediate jeopardy. Further for rating purposes, the following deficiencies are considered equal in severity: Class III deficiencies; and those Substandard Quality of Care deficiencies which constitute a widespread potential for more than minimal harm to resident health or safety, but less than immediate jeopardy with no actual harm. Class I deficiencies are those which present either an imminent danger, a substantial probability of death or serious physical harm and require immediate correction. Class II deficiencies are those deficiencies that present an immediate threat to the health, safety, or security of the residents of the facility and the AHCA establishes a fixed period of time for the elimination and correction of the deficiency. Substandard Quality of Care deficiencies are deficiencies which constitute either: immediate jeopardy to resident health or safety; a pattern of or widespread actual harm that is not immediate jeopardy; or a widespread potential for more than minimal harm, but less than immediate jeopardy, with no actual harm. Class III deficiencies are those which present an indirect or potential relationship to the health, safety, or security of the nursing home facility residents, other than Class I or Class II deficiencies. A conditional rating shall be assigned to the facility: if at the time of relicensure survey, the facility has one or more of the following deficiencies: Class I; Class II; or Substandard Quality of Care deficiencies which constitute either immediate jeopardy to resident health or safety or a pattern of or widespread actual harm that is not immediate jeopardy; or if at the time of the relicensure survey, the facility has Class III deficiencies, or Substandard Quality of Care deficiencies which constitute a widespread potential for more than minimal harm to resident health or safety, but less than immediate jeopardy, with no actual harm and at the time of the follow-up survey, such deficiencies are not substantially corrected within the time frame specified by the agency and continue to exist, or new Class I or Class II or Substandard Quality of Care deficiencies which constitute either immediate jeopardy to resident health or safety or a pattern of or widespread actual harm that is not immediate jeopardy are found at the time of the follow- up survey. A facility receiving a conditional rating at the time of the relicensure survey shall be eligible for a standard rating if: all Class I deficiencies, Class II deficiencies, and those Substandard Quality of Care deficiencies which constitute either immediate jeopardy to resident health or safety or a pattern of or widespread actual harm that is not immediate jeopardy are corrected within the time frame established by the AHCA and all Class III deficiencies and those Substandard Quality of Care deficiencies which constitute a widespread potential for more than minimal harm to resident health or safety, but less than immediate jeopardy, with no actual harm are substantially corrected at the time of the follow-up survey. A facility receiving a conditional rating at the time of the relicensure survey shall not be eligible for a superior rating until the next relicensure survey. A standard rating shall be assigned to a facility, if at the time of the relicensure survey, the facility has: No Class I or Class II deficiencies and no Substandard Quality of Care deficiencies which constitute either immediate jeopardy to resident health or safety or a pattern of or widespread actual harm that is not immediate jeopardy, and Corrects all Class III deficiencies and those Substandard Quality of Care deficiencies which constitute a widespread potential for more than minimal harm to resident health or safety, but less than immediate jeopardy, with no actual harm within the time frame established by the AHCA. A superior rating shall be assigned to a facility, if at the time of the relicensure survey, the facility has received a standard rating and meets criteria for a superior rating through enhanced programs and services as contained in (7) of this Section. In order to qualify for a superior rating, the nursing facility must provide at least three enhanced programs or services which encompass the following areas: Nursing services. Dietary or nutritional services. Physical environment. Housekeeping and maintenance. Restorative therapies and self help activities. Social services. Activities and recreational therapy. In order to facilitate the development of special programs or facility wide initiatives and promote creativity, these areas may be grouped or addressed individually. In establishing the facility's qualification for a superior rating, the AHCA survey team will use the Rating Survey and Scoring Sheet, Form No. AHCA 3110-6007, Nov., 1994, incorporated by reference, and may be obtained from the Agency for Health Care Administration. Upon initial licensure, a licensee can receive no higher than a standard license. After six months of operation, the new licensee may request that the agency evaluate the facility to make a determination as to the degree of compliance with minimum requirements under Chapter 400, Part II, F.S., and this rule to determine if the facility can be assigned a higher rating. Nursing facilities will be surveyed on this Section of the rule beginning March 1, 1995. Advantage Therapy filed a petition pursuant to Section 120.56(1) and (3), Florida Statutes (Supp. 1996), challenging the validity of existing rule 59A-4.128 and asserting in paragraph five of the petition: Rule 59A-4.128, F. A. C., as applied to the issuance of conditional licenses, is an invalid exercise of delegated legislative authority in that it is vague, fails to establish adequate standards for agency decisions, and vests unbridled discretion in employees of the agency, and violates . . . [Section] 400.23(8)(h) which requires that the agency have uniform procedures in place for the evaluation of nursing homes. Advantage Therapy focuses its challenge on the Agency's alleged failure to interpret or apply the rule in a manner consistent with the federal rules relating to nursing homes adopted pursuant to the Omnibus Budget Reconciliation Act of 1987 and on alleged inconsistencies in the interpretation and application of the provisions of the rule by the Agency and by the various Agency survey teams which are responsible for identifying and classifying deficiencies in nursing homes. In a Final Order entered July 16, 1996, Administrative Law Judge David M. Maloney concluded that proposed rule 59A-4.128 was not an invalid exercise of delegated legislative authority in a challenge brought by the Florida Health Care Association, Inc. Florida Health Care Association, Inc. v. Agency for Health Care Administration, DOAH Case Number 95-4367RP (1996). No appeal was taken from this Final Order. The Florida Health Care Association's challenge to proposed rule 59A-4.128 was brought pursuant to Section 120.54(4), Florida Statutes (1995), which provided in subsection (a) that "any substantially affected person may seek an administrative determination of the invalidity of any proposed rule on the ground that the proposed rule is an invalid exercise of delegated legislative authority." "Invalid exercise of delegated legislative authority" was defined in Section 120.52, Florida Statutes (1995), as follows: "Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply: The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54; The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7); The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7); The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or The rule is arbitrary or capricious. Florida Health Care Association's challenge to proposed rule 59A- 4.128 was brought pursuant to this 1995 definition of "invalid exercise of delegated legislative authority." Advantage Therapy's challenge to existing rule 59A-4.128 was brought pursuant to Section 120.56, Florida Statutes (Supp. 1996), which provides that "[a]ny person substantially affected by a rule or a proposed rule may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority." Section 120.56(1)(a), Florida Statutes (Supp. 1996). Sections 120.56(2) and (3), Florida Statutes (Supp. 1996), include special provisions which apply to challenges of proposed rules and to challenges of existing rules, respectively. In Section 120.52(8), Florida Statutes (Supp. 1996), the legislature added to the five bases included in Section 120.52(8), Florida Statutes (1995), two new bases for finding that a proposed or existing rule constitutes an invalid exercise of delegated legislative authority : The rule is not supported by competent substantial evidence; or The rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives. Section 120.52(8), Florida Statutes (Supp. 1996). Advantage Therapy's rule challenge does not implicate either of these two new bases for finding that a proposed or existing rule is an invalid exercise of delegated legislative authority; rather, it asserts that "[t]he rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency." Section 120.52(8)(d), Florida Statutes (1995 and Supp. 1996).2 The party challenging either a proposed or an existing rule pursuant to Sections 120.54(4) or 120.56, Florida Statutes (1995), was required to prove by a preponderance of the evidence that the proposed rule was an invalid exercise of delegated legislative authority. Agrico Chemical Co. v. Department of Environmental Regulation, 365 So. 2d 759, 762 (Fla. 1st DCA 1978). In Section 120.56(2)(a), the legislature changed the allocation of the burden of proof in challenges to proposed rules, but no change in the allocation of the burden of proof is included in Section 120.56(3) with respect to challenges to existing rules. Beverly Health and Rehabilitation Services, Inc., which does business as Advantage Therapy, is, and was at the time of the challenge to proposed rule 59A-4.128, a member of the Florida Health Care Association, Inc. The language in proposed rule 59A-4.128 is identical to the language in existing rule 59A-4.128.
The Issue Whether Respondent failed to protect one of the residents of its facility from sexual coercion. Whether Respondent failed to report the alleged violation immediately to the administrator.
Findings Of Fact Petitioner is the state agency charged with licensing and regulating nursing homes in Florida, under state and federal statutes. Respondent is a licensed nursing facility located in Orlando, Florida. Respondent is a small not-for-profit facility, overseen by a voluntary board of directors. Resident 2 is a Hispanic male, 57 years of age, who speaks English and Spanish fluently. He was a self-admitted resident at Respondent's nursing home facility during the relevant time period. Respondent is a small, not-for-profit facility, overseen by a voluntary board of directors. Respondent receives its funds to operate through various types of sources such as United Way, City of Orlando, Orange County, and many foundations. At all times material hereto, Petitioner is the state agency charged with licensing of nursing homes in Florida and the assignment of a licensure status. The statute charges Petitioner with evaluating nursing home facilities to determine their degree of compliance with established rules as a basis for making the required licensure assignment. Additionally, Petitioner is responsible for conducting federally mandated surveys of those long-term care facilities receiving Medicare and Medicaid funds for compliance with federal statutory and rule requirements. These federal requirements are made applicable to Florida nursing home facilities. Pursuant to the statute, Petitioner must classify deficiencies according to the nature and scope of the deficiency when the criteria established under the statute are not met. The classification of any deficiencies discovered is determinative of whether the licensure status of a nursing home is "standard" or "conditional." The evaluation, or survey, of a facility includes a resident review and, depending upon the circumstances, may consist of record reviews, resident observations, and interviews with family and facility staff. Surveyors note their findings on a standard prescribed Center for Medicare and Medicaid Services Form 2567, titled "Statement Deficiencies and Plan of Correction" and is commonly referred to as a "2567" form. During the survey of a facility, if violations of regulations are found, the violations are noted and referred to as "Tags." A "Tag" identifies the applicable regulatory standard that the surveyors believe has been violated, provides a summary of the violation, sets forth specific factual allegations that they believe support the violation and indicates the federal scope and severity of the noncompliance. Agency surveyors use the "State Operations' Manual," a document prepared by the U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services, as guidance in determining whether a facility has violated 42 Code of Federal Regulations (C.F.R.), Chapter 483. In March 2003, Petitioner conducted a survey to investigate a complaint that Respondent failed to protect a resident from sexual coercion. The allegation of the deficient practice was based upon an incident involving Resident 2. Pursuant to 42 C.F.R. Section 483.13(b), a nursing facility must assure that a resident has the right to be free from verbal, sexual, and mental abuse. Failure to do so constitutes a deficiency under Florida Statutes. At hearing, Petitioner presented the testimony of Jane Woodson, nursing program specialist, employed by Petitioner. Woodson testified that she does state and federal surveys in both state and federal licensure and federal institutions to identify or define any noncompliance. She visited Respondent's facility on or about March 26, 2003, and prepared a 2567 form based on her observations, interviews, and record review. It details the results of her investigation, including her interviews with the director of nursing, the administrator, the social worker, the compliance officer, a licensed practical nurse (LPN), and the assistant director of nursing. She also toured the total facility, observed its residents and also observed Resident 2. Woodson observed that Resident 2 was a well-dressed, alert male, and she spoke to him about the incident on March 15, 2003. Woodson did not have an interpreter present at any time when she interviewed Resident 2, nor did she consider it necessary to do so. At no time did she have any concern that Resident 2 was not mentally competent to understand her when she interviewed him. Woodson was not aware that Resident 2 signed his own financial responsibility forms, patient's rights statement, or that he voluntarily checked himself into the facility. She was not aware that Resident 2 made his own medical decisions in the facility. Following her investigation, Woodson conducted an exit interview with the administrator, the director of nursing, the assistant director of nursing, the social worker, and the compliance offer. Woodson included in her report a document filled out by Sharon Ebanks (Ebanks), registered nurse (RN), but she did not personally interview Ebanks. She also did not interview Marilyn Harrilal, LPN, nor did she interview the employee involved in the incident. She advised the administrator of her finding a Class II deficiency and provided a correction date of April 17, 2003. She also concluded that this was an isolated incident. Ebanks was the weekend charge nurse on March 15, 2003, and was in charge of the facility on that date. Ebanks was working on the north wing when she was called by Mr. Daniels, a LPN working on the south wing. Daniels told Ebanks about the alleged incident between Resident 2 and the staff person. Ebanks then called Resident 2; the employee, Marcia Dorsey (Dorsey); and the certified nursing assistants (CNAs), Ms. Polysaint and Ms. Mezier (first names not in the record), who had witnessed the incident, to the green room. She also asked Harrilal to act as a witness to her interviews with the individuals involved. Ebanks first spoke to Resident 2 and Dorsey, both of whom stated that nothing had happened. She then questioned the two CNAs about what they had witnessed. Ebanks concluded, after interviewing both the participants and the witnesses, that the incident was not abuse, but rather, was inappropriate behavior on the part of both Resident 2 and the employee. She based this conclusion on the fact that Dorsey is a trainable Dows Syndrome individual, who was supposed to be working when the incident occurred. Ebanks concluded that Resident 2 had not been abused or hurt in any manner and had participated voluntarily. Ebanks noted that Resident 2 makes his own medical decisions, is considered to be mentally competent, has never been adjudicated mentally incompetent and has not had a legal guardian appointed for him. Ebanks concluded that Resident 2 had not been abused. Ebanks testified that she completed a Resident Abuse Report on March 20, 2003, concerning the incident, after being asked to do so by Respondent's compliance officer. The resident abuse report was admitted into evidence as Respondent's Exhibit 1. At the time of the initial investigation of the incident, Ebanks asked Harrilal to accompany her to the green room. While there, Harrilal listened as Ebanks first questioned Resident 2 and then Dorsey. Both stated that nothing happened. Harrilal then witnessed Ebanks question the CNAs, Polysaint and Mezier. Woodson did not interview Harrilal during her investigation. Ann Campbell, RN, a nurse for more than 38 years, was functioning in the role of assistant director of nursing on March 15, 2003. She was not in the facility on that day and was not made aware of the incident on the date of its occurrence, but became aware when she returned to work. Campbell is familiar with Resident 2. He was initially admitted with a diagnosis of alcohol abuse and dementia. She observed that he was a little confused and forgetful when first admitted, but has since became more alert and responsive. Michael Annichiarico, administrator of the facility and custodian of records, including medical records and personnel files, reviewed the personnel file of the employee, Dorsey. There were no disciplinary actions or counseling prior to the incident of March 15, 2003. Annichiarico is familiar with Resident 2 and has interacted with him. Annichiarico testified that, according to the resident's medical record, Resident 2 has never been declared mentally incompetent and that he makes his own medical and financial decisions. The Progress Note of Gideon Lewis, M.D., dated October 9, 2003, with transcription, was admitted into evidence as Respondent's Exhibit 2 and indicates that Resident 2 is mentally competent and is responsible for his actions as his cognitive functions are intact. Patricia Collins, RN, testified as an expert in the areas of nursing, long-term care, nursing home rules and regulations, and survey procedures. Collins is a RN, currently working in consulting work. She reviewed documents related to the incident. She went to the facility on two different occasions and interviewed the staff. She also reviewed the documents contained in the report of Woodson's survey. Collins interviewed the two CNAs, Ebanks, Resident 2, the medical records custodian, the director of nursing, the social worker, and Harrilal. She spent approximately four to five hours in the facility. After speaking with Resident 2, Collins concluded that he was cognitively intact and very alert. He appeared to be mentally competent. Before interviewing Resident 2, Collins reviewed his resident chart and the documents used to sign himself into the facility. She also reviewed physician's orders for medication, progress notes, nurses' notes, the MDS and the care plan. Collins testified that she reviewed the resident's financial responsibility statement and patient's rights statement, both of which were signed by the resident himself. The resident had no legal guardian. Collins concluded that during the incident of March 15, 2003, there was some inappropriate behavior that needed to be addressed and that this behavior was properly addressed by staff. The inappropriate behavior was the observation of hugging and kissing between Dorsey and Resident 2 in an empty resident's room while the employee was on duty. Collins was of the opinion that the behavior was mutual and not abuse. Collins found no reason to conclude that any harm had been done to Resident 2. Collins testified that a nursing home resident has the right to associate with whomever he desires. He also has the right to have voluntary and willing sexual contact with other people. The inappropriateness in this incident was due to the fact that Resident 2 had involvement with someone with mental deficits. The incident was inappropriate on the part of the employee as well, since she was participating in it during her working time. Collins disagrees with the findings of Petitioner's surveyor. Collins testified that the investigator should have determined the abuse allegation was unfounded. According to Collins' expert testimony, the facility staff acted appropriately. The CNA who initially observed the activity called another CNA as a witness. They then went to their supervisor, who then went to the ranking nurse at the facility at that point in time, which was Ebanks. Ebanks questioned the employee, Resident 2 and the witnesses. She had the presence of mind to have a witness there as well, which was Harrilal. Ebanks made the determination, based on her nursing judgment and in her authority as nurse in charge of the facility on that day, that there was inappropriate behavior on behalf of Resident 2 and the employee. She put a care plan in place as to Resident 2, separated the employee and Resident 2, and sent the CNAs back to work. Collins testified there was no need to report the incident to the Department of Children and Family Services because there was no evidence of abuse or harm to Resident 2. Collins' testimony is found to be credible. Based on all the evidence, it is found and determined that an incident occurred at Respondent's facility on Saturday, March 15, 2003, at approximately 11:00 a.m., involving Resident 2 and a staff employee of Respondent, Dorsey. Resident 2 and the employee were seen by staff employees sitting on a bed hugging and kissing each other in a resident's room that was not being used at the time. Two CNA employees witnessed and reported the incident to the charge nurse. Ebanks was the charge nurse on duty on March 15, 2003. Ebanks was advised of the incident shortly after it occurred and interviewed both Resident 2 and the employees involved, as well as the employees who witnessed the incident. The interviews were conducted in the presence of Harrilal. She completed a Resident Abuse Report on March 20, 2003, at the request of the risk manager within four business days of the incident, and the administrator was advised of the incident on the first business day after the incident. Resident 2 was alert and oriented on the date of the incident. Although he had a low level of dementia, he was mentally competent at the time of the incident. He does not meet the definition of an "elderly person" or "vulnerable adult" under Chapter 415, Florida Statutes.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order of dismissal of the Administrative Complaint be entered in this case. DONE AND ENTERED this 28th day of January, 2004, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 2004. COPIES FURNISHED: George F. Indest, III, Esquire The Health Law Firm Center Pointe Two 220 East Central Parkway, Suite 2030 Altamonte Springs, Florida 32701 Gerald L. Pickett, Esquire Agency for Health Care Administration Sebring Building, Suite 330K 525 Mirror Lake Drive, North St. Petersburg, Florida 33701 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308
