The Issue At issue in this proceeding is whether respondent committed the offense alleged in the administrative complaint and, if so, what disciplinary action should be taken.
Findings Of Fact Respondent, Adele "Nikki" Leon, holds Florida teaching certificate number 413436, covering the area of emotional disturbances and special learning disabilities. Such certificate is valid through June 30, 1996. At all times material hereto, respondent was employed by the Dade County Public Schools, Palmetto Adult Education Center, as a part-time teacher, and was assigned to teach Adult Basic Education for the Elderly (ABE) at Snapper Creek Nursing Home. Pertinent to this case, respondent's assignment during September and October 1992, included the teaching of an ABE class at Snapper Creek Nursing Home each Tuesday from 3:00 p.m. to 5:00 p.m. According to respondent's attendance reports for that period, twenty-five residents were enrolled in the class. On September 15, 1992, Ivette Morgan, assistant principal of Palmetto Adult Education Center, at the request of Edward Gehret, principal of Palmetto Adult Education Center, visited Snapper Creek Nursing Home to evaluate the adult education program. During the course of that visit, as well as visits on September 22, September 29, and October 20, 1992, Dr. Morgan had an opportunity to observe respondent's Tuesday class. On those occasions, Dr. Morgan noted only four to six residents in the classroom. 4/ Dr. Morgan reported her observations regarding class attendance to Dr. Gehret who, at the time, had been involved with enrollment and attendance review for, inter alia, Snapper Creek Nursing Home. Based on that review, Dr. Gehret observed that respondent had routinely marked all twenty-five residents in her class as "present," which did not square with Dr. Morgan's observations. On October 22, 1992, Dr. Gehret met with respondent to review the discrepancies he perceived in her attendance report procedures. At that time, it was the School Board's policy to mark residents "present" for an ABE class if they appeared at any time during the class period, no matter how briefly; but if they never appeared, to mark them as "absent." 5/ Respondent advised Dr. Gehret that she was of a different perception, and understood that nursing home residents enrolled in an ABE class were not to be marked as "absent" but, rather as "present," whether attending or not, so long as they were still in the facility. Notwithstanding, following the meeting, respondent agreed to conform her attendance procedure to the policy Dr. Gehret outlined. Regarding the discrepancies in respondent's attendance reports, when measured against the School Board's policy, the proof demonstrates that for the attendance reporting periods of September 14-27, September 28-October 11, and October 12-25, 1992, respondent completed and signed the attendance report for her Tuesday class on which she marked as "present" nursing home residents Helen Ambler and Gertrude Monge. Ms. Ambler and Ms. Monge were not, however "present" during such periods since they had died September 2, 1992, and June 15, 1992, respectively. The proof further demonstrated that for the same reporting periods, respondent had marked as "present" nursing home residents Agaton Bolanio, Nazario Lopez, and Martin Ruiz. Mr. Bolanio, Mr. Lopez and Mr. Ruiz were not, however, "present" during such periods since they had been discharged from the nursing home on June 19, 1992, July 20, 1992, and May 14, 1992, respectively. Finally, based on Dr. Morgan's observations of respondent's Tuesday class on September 15, September 22, September 29, and October 20, 1992, wherein she observed no more than four to six residents in attendance, it is reasonable to conclude that a significant number of residents who were marked as "present," other than the residents heretofore mentioned, were likewise not "present" on those dates. Which residents and why they were not present was not, however, established of record. 6/ Regarding the ABE program and the preparation of enrollment and attendance reports at Snapper Creek Nursing Home, the proof demonstrates that the ABE program was under the direction of the nursing home activities director who, without the participation of the instructors, prepared the enrollment for each class. 7/ Accordingly, respondent would not necessarily have known the residents assigned to her class, and reasonably assumed that the list of residents she received from the activities director contained current residents of the nursing home. Likewise, respondent relied on the activities director to advise her when residents died, were discharged or were otherwise no longer able or interested in attending before removing them from the roll; however, such information was rarely provided by the activities director. Finally, absent advice to the contrary from the activities director, respondent did not consider a resident's failure to attend on a given day an absence, as in the traditional classroom setting, and routinely marked them "present." Such practice in the ABE program was reflective of the voluntary nature of the program, as opposed to compulsory attendence in the traditional school setting, and the unavailability of information, except from the activities director, as to the reason a resident did not attend. Notably, residents frequently did not attend because, inter alia, nurses aides failed to bring them to class or they were too ill to attend, as opposed to not wanting to attend the course any longer. That such was the procedure at Snapper Creek Nursing Home, and perhaps other adult education centers in Dade County, finds other support in the record apart from respondent's testimony. For example, another instructor, Evelyn Foster, during the times in question, carried Francies Lambrou as "present" on her attendance record until July 27, 1992, although she was discharged July 2, 1992; and carried Maria Diaz, Carmen Morela, and Lorenzo Legundo as "present" until at least October 9, 1992, although Ms. Diaz and Ms. Morela were discharged September 5, 1992, and Mr. Segundo was discharged September 24, 1992. Moreover, Dr. Morgan found it necessary, at sometime between September 15 and October 26, 1992, to give the activities director specific instructions on how attendance was to be recorded, and Dr. Gehret found it necessary to conduct a "rollbook workshop" at Snapper Creek Nursing Home for all instructors, as well as agreeing to urge the nurses aides to bring the residents who desired to attend to class. [Petitioner's exhibit 1, pages 17 and 21, and respondent's exhibit 12.] Finally, there is of record a memorandum of July 8, 1993, almost one year after the events at issue in this case, from Connie Gilbert, District Director, Division of Adult Education, Dade County Schools, to all adult education center principals, which suggests continued confusion in attendance procedures for off- campus classes and that the practice at Snapper Creek Nursing Home was not an isolated occurance. That memorandum provided, in part, as follows: SUBJECT: ATTENDANCE PROCEDURES Off-campus visitations have revealed problems and confusion about attendance procedures. Please inform all teachers of the following procedures: Students must be present in a teacher's class and participate in the class activities in order for the teacher to mark this student present in that class. * * * Please make sure that off-campus teachers understand that students present "someplace in the facility" can not be considered present in a particular class. Students must be physically present in a class in order to be marked present in that class. Given the proof, it must be concluded that respondent's failure to record attendance in accordance with school board policy was, more likely than not, a consequence of a misunderstanding of, or ignorance of, that policy. In this regard, it is observed that no state policy for recording ABE attendance was established of record, and no proof that any policy established by the school board had been reduced to writing or imparted to respondent, or any other adult education instructor, prior to the events giving rise to the issues in this case. Accordingly, it follows that there was no compelling proof that respondent, by completing the attendance reports in the manner she did, had any intent to deceive the school board.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered dismissing the administrative compliant. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 18th day of May 1995. WILLIAM J. KENDRICK 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 18th day of May 1995.
The Issue Which of three competing applicants for a certificate of need to construct a nursing home in health planning District 4, Subdistrict 3, best meets the statutory and rule criteria for approval.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the department of state government which administers the certificate of need (CON) program for health care facilities and services in Florida, pursuant to Section 408.034, Florida Statutes. For the planning horizon beginning July 2001, AHCA published a numeric need for an additional 121 community nursing beds in nursing home planning District 4, Subdistrict 3, for southeast Duval and St. Johns Counties. Sawgrass Care Centers, Inc. (Sawgrass), Woodlands Extended Care, Inc. (Woodlands), and National Healthcare Corporation (NHC) are competing, mutually exclusive applicants for a CON to construct a 120-bed nursing home in District 4, Subdistrict 3. After reviewing the applications, AHCA preliminarily approved the issuance of CON No. 9125 to NHC. In the Prehearing Stipulation, filed on November 2, 1999, the parties agreed that the following criteria are either not applicable or are not in dispute: Subsections 408.035(1)(d), (e), (f), (g), (j), and (k), and Subsections 408.035(2)(a), (b), (c), and (d), Florida Statutes; Rule 59C- 1.036, Florida Administrative Code; and allocation factors 1, 3, 4, and 9 of the local health plan. During the final hearing, the parties also stipulated that all letters of intent were legally sufficient. The issues requiring resolution in this proceeding, the parties agreed, are: Subsections 408.035(1)(a), (b), (c), (h), (i), (l), (m), (n), and (o); and Subsection 408.035(2)(e), Florida Statutes; allocation factors 2, 5, 6, 7, and 8 of the local health plan; and Section 408.037, Florida Statutes. Sawgrass is the applicant for CON No. 9126 to construct a 120-bed nursing home in northern St. Johns County for approximately $3,967,000 in construction costs for a 56,800 square-foot building. The total project will cost approximately $6.4 million. Mr. S. W. Creekmore, Jr., who is the sole shareholder and president of Sawgrass, has been in the nursing home business over 30 years. Currently, Mr. Creekmore owns and operates between 30 and 40 nursing homes in Arkansas, California, Missouri, New York, Tennessee, Texas, and Nevada. Sawgrass is currently constructing Sawgrass Care Center of North Duval, an 84-bed addition to a 60-bed facility in Duval County. If CON No. 9126 is issued to Sawgrass, it will be on condition that Sawgrass: locate the 120-bed nursing home in northern St. Johns County within zip codes 32082, 32092, 32095, and 32259, in District 4, Subdistrict 3; provide a minimum of 63.51 percent total annual patient days to Medicaid patients; establish a 20-bed Alzheimer's care unit, a 20-bed Medicare unit, hospice services and respite care; admit AIDS patients; and construct the facility according to the schematic drawings. Sawgrass contends that its application should be approved primarily because of its proposed location in northern St. Johns County. An increase of beds in St. Johns County will correct what Sawgrass' expert health planner described as a maldistribution of nursing home beds within the district. Sawgrass also presented evidence questioning the financial feasibility of NHC's proposal. Woodlands is the applicant for CON No. 9123 to construct a 120-bed nursing home in southeast Duval County for approximately $5.2 million in construction costs for 53,155 gross square feet, and $7.9 million in total project costs. Woodlands currently operates Woodlands Terrace Extended Care Center (Woodlands-Deland), a 120-bed nursing home located in Deland, Florida. Woodlands is owned by Mr. Morris Esformes, who also owns EMI Enterprises, Inc. (EMI), a nursing home management company, with its headquarters in Illinois. EMI manages almost 3,000 nursing home beds in Missouri, Illinois, and Florida, including Woodlands-Deland. EMI provides bookkeeping, payroll, purchasing, insurance and other contract negotiation services for the nursing homes it manages. If its CON application is approved, Woodlands is committed to constructing the facility in southeast Duval County, to serving 63.01 percent Medicaid, 1 percent AIDS, and .5 percent indigent care, and to establishing units of 24 beds for subacute care and 20 beds for Alzheimer's care. Woodlands contends that existing nursing home occupancy levels support its decision to build and to condition its CON on a location in southeast Duval County. Woodlands presented evidence intended to demonstrate that the design of its Alzheimer's unit, and its proposed staffing levels are superior to those of NHC. Woodlands also maintained that its estimated construction cost is more reasonable and its design preferable to that of Sawgrass. Woodlands presented evidence to support the accuracy of Schedule 2 of its application and of its projected financing costs. NHC, the applicant for CON No. 9125, started in 1971, with fourteen nursing homes. Currently, NHC owns or manages approximately 100 facilities in nine states, 42 of those in Florida. Ten of the 42 Florida facilities are also owned by NHC. The new facility, NHC HealthCare, St. Augustine, will cost approximately $6.7 million to construct the building with 63,104 gross square feet, and $10.2 million in total project costs. NHC's CON would be issued on condition that NHC (1) provide 63.05 percent of total facility patient days to Medicaid at stabilized occupancy; (2) establish, as special programs, a 16-bed subacute unit and a 30-bed Alzheimer's/Dementia unit, provide adult day care through an existing provider, and offer respite and HIV/AIDS care. In addition, NHC commits to selecting a highly accessible site within one mile of a major artery or within three blocks of a bus stop. Although NHC presented evidence that St. Johns County is the preferable location for a new nursing home, it is not willing to have a condition on the county in which it will build as a condition for the CON. NHC, through the testimony of its assistant vice president for health planning, specifically reserved the right to locate anywhere within the subdistrict so long as the location complies with the local health plan description of a highly accessible site. NHC contends that approval of its CON will bring possibly the first and, among the competing applicants, the largest Alzheimer's unit to St. Johns County. NHC also challenged the financial feasibility of the Sawgrass and Woodlands proposals. 408.035(1)(a) - need for the facility and services proposed in relation to the district plan At issue in this proceeding, from the district health plan for District 4, are the following preferences or allocation factors: 2) For urban areas, applicants who will locate in an area highly accessible in terms of public and private transportation - within one mile from a major artery or within three blocks from a bus stop. Applicants who include in their CON application specific plans detailing how they intend to address the mental health needs of their clients, including having a provider skilled in the recognition and treatment of mental health problems. Applicants who document that their project addresses an unmet need for the nursing home placement of persons with a specific debilitating illness. Applicant must document that a need exists. (In November 1992, hospital discharge planners reported having difficulty placing ventilator and tracheotomy patients). Applicants who have JCAHO accreditation and superior ratings from AHCA in existing facilities. Applicants who propose to locate in a county or defined subcounty area within a subdistrict (such as north, southwest or southeast Duval; east or west Volusia) with a licensed bed occupancy rate of at least 91 percent for the most recent six-month period (January-June or July-December) prior to the start of the current CON review cycle and no additional beds are approved. Sawgrass described the area of St. Johns County in which it will locate as not urban and concluded, therefore, that allocation factor two is inapplicable to the Sawgrass application. Woodlands, which proposed locating in southeast Duval County, identified three alternative sites, all within a mile of major county, state, or interstate roads and highways, and within three blocks of public bus stops. Woodlands is not, however, committed to selecting any of those three sites. NHC's CON would include compliance with preference two as a condition for approval. If it chooses to locate in St. Johns County, NHC cannot comply with the alternative of locating within three blocks of a bus stop because there is no public transportation system in St. Johns County, but NHC can meet the preference by choosing a site in the County which is near a major artery. The three applicants included, in their CON applications, letters from mental health services providers who are willing to enter into agreements to care for residents of the facilities. While an expert witness raised an issue regarding the dates of the supporting letters, which are 1998 and early 1999 for Sawgrass, early in 1999 for Woodlands and, by contrast, late 1997 for NHC, there is no evidence that the services proposed are not still available. Overlapping to some extent with allocation factor five, for providing mental health services, is six, for meeting unmet needs of persons with specific debilitating illnesses, such as Alzheimer's/Dementia. The proposed 20-bed units dedicated to Alzheimer's/Dementia care at Sawgrass and Woodlands, and 30-bed unit at NHC comply with the that factor. Sawgrass and NHC, based on their evaluations of the subdistrict, particularly of St. Johns County, noted an absence of Alzheimer's care in a dedicated unit. There was credible evidence, however, that 40 residents have been placed in a locked 60-bed dedicated dementia unit, established at a facility called Bayview in St. Johns County, subsequent to the filing of these CON applications. There was also evidence that an estimated 50 percent of all nursing home residents suffer from some form of dementia. Ratings by AHCA and the Joint Commission on Accreditation of Health Organizations (JCAHO), are not yet available for the 84-bed Sawgrass facility in Duval County, because it is still under construction. Sawgrass relied on the experience of its principal, Mr. Creekmore, and of Mr. Donald Fike, the president and owner of RFMS, a corporation which manages nursing homes in Florida, Nevada and Illinois. RFMS has an agreement with Mr. Creekmore to manage Sawgrass. Mr. Creekmore, who resides in St. Johns County, owns facilities in Tennessee, California, New York, Nevada, Arkansas, Texas, and Missouri, none of which has had a license revoked or suspended or been in receivership within 36 months prior to the hearing. Currently, RFMS manages and Mr. Fike has a controlling interest in partnerships that own two nursing homes in Florida, 120-bed Surrey Place of Ocala (Surrey Place), which also has 36 assisted living units, and Hawthorne Care Center of Brandon (Brandon) with 90 existing beds, 30 approved beds, and 64 assisted living units which are under construction. An additional facility managed by RFMS and owned by Mr. Fike is under construction in Lakeland. RFMS' employees at its corporate headquarters in Galesburg, Illinois, provide management, budgetary, accounting, and recruiting services. RFMS has never managed a facility for Sawgrass or Mr. Creekmore, but its two Florida facilities, Surrey Place and Brandon, were rated superior until the state eliminated superior licenses on July 1, 1999. Woodlands operates one Florida facility, Woodlands- Deland, which had been rated superior as long as it was eligible for that designation. Woodlands-Deland is not JCAHO-accredited. Woodlands relied on the experience of its owner, Mr. Esformes, and his management company, EMI. Mr. Esformes has been in the nursing home business for approximately 30 years. No specific information on the ratings of the facilities owned by Mr. Esformes or managed by EMI was provided. Of the 42 Florida nursing homes operated by NHC, ten are also owned by NHC. Three of the ten were rated superior, one was not yet eligible, and one was also JCAHO-accredited at the time the CON application was submitted. By February 1999, five of the ten NHC owned and operated facilities in Florida were rated superior. Twenty-eight of the 32 NHC-operated Florida nursing homes were rated superior. From January through June 1998, the average occupancy was 90.84 percent in the subdistrict, 91.3 percent for southeast Duval County, and 89.36 percent for northern St. Johns County. Woodlands is committed to establishing its facility in southeast Duval County, Sawgrass is committed to the northern four zip codes in St. Johns County, and NHC is not committed to either but, in general, supported the need for a nursing home in St. Johns County. Subsequent data on occupancy shows consistency with past levels. In the second six months of 1998, the occupancy levels in nursing homes in St. Johns County was 88 percent, and in southeast Duval, 93 percent. From January through June 1999, St. Johns was 89 percent and southeast Duval was 92.8 percent occupied. Suggesting that occupancy percentages are not the sole indicators of the availability of beds, a health planning expert for Sawgrass noted that significantly more empty beds are available in southeast Duval County as compared to St. Johns County due to the larger total number of beds in the Duval area. Three CONs were issued in 1998 and 1999 to Vantage Health Care Corporation, which was identified as a Beverly Corporation, the first one for 60 beds in St. Johns County, a second one to add 56 beds to the first CON with Duval/St. Johns as the county on the face of the CON, and the third to add four skilled nursing beds to the first two CONs, or a total of 120 beds all together. Although, counties are indicated on each CON, none is specifically conditioned on a particular location within the subdistrict. AHCA lists the Vantage beds in its inventory for St. Johns County, which is supported by the testimony of the Executive Director of the Health Planning Council of Northeast Florida and by the most restrictive location on the face of the first 60-bed CON. Although of questionable value due to the arbitrariness of using zip codes for health planning purposes and due to the relatively minor, 2 percent difference in occupancy rates, preference eight favors a proposal to locate in southeast Duval County. More important in determining the preference for a southeast Duval location is the prior approval of 120 beds for St. Johns County, even though Vantage could build its facility in southern St. Johns County. 408.035(1)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of existing facilities and services in the district In addition to the comparison of occupancy levels in St. Johns and Duval Counties, other factors affecting the availability and utilization of nursing beds have been considered. The total population 65 and over in Duval county was 79,986 as compared to 17,294 for St. Johns County in 1995. Population growth, however, has been and is projected to be greater in St. Johns than in Duval County. From 1998 to 2003, the population 65 years and older is expected to increase from 36,988 to 39,790, or 7.5 percent, in southeast Duval County, and from 8,506 to 9,922, or 17 percent, in the northern four zip codes in St. Johns County. Despite the fact that St. Johns is relatively sparsely populated currently, the data supports a conclusion that the trend from 1990 to 1995, when the over 65 population increased by 12 percent in Duval County and by 26.3 percent in St. Johns County, is continuing. The lower occupancy in St. Johns County was attributed, in part, to two facilities with occupancy rates consistently in the 87 to 88 range which occupy over 30 year-old concrete block buildings with survey problems. Although, in 1998, all of the facilities in St. Johns County were rated superior. Another explanation was the fact that one 57-bed facility, in northern St. Johns County, reserves five beds for residents of its retirement community. A second nursing home, near Ponte Vedra Beach in St. Johns County, is also a sheltered facility, which is limited to residents of the retirement community. Migration patterns, in a study done around 1996, showed significantly more St. Johns County residents placed in Duval County facilities than Duval County residents in St. Johns County facilities. Bed-to-population ratios in St. Johns and southeast Duval Counties are also factors which may indicate the relative availability and accessibility of nursing home services. The health planning experts for Sawgrass and NHC determined that a maldistribution of beds is indicated by the bed-to-population ratio, showing that St. Johns County is underserved as compared to the rest of the district. NHC's health planner testified that, for every one thousand people over the age of 65, there are 32 beds in St. Johns County as compared to 42 beds in Duval County. Sawgrass' health planner noted that 72 percent of the beds but only 66 percent of the district population is located in southeast Duval County, while four percent of the beds and 15 percent of the population are in northern St. Johns County. The discrepancy in bed-to-population ratio is more significant, according to the experts for Sawgrass and NHC, than the two percent difference in occupancy levels between the two areas of the subdistricts. Bed-to-population ratio analyses, however, assume uniform need which is not necessarily valid due to demographic variances in the population. The bed-to-population analysis also assumed that what was, at the time, 116 approved beds for Vantage would be constructed in southern St. Johns County. Considering the Vantage CONs together, the more reasonable conclusion is that Vantage could build the new nursing home anywhere in the County. Woodlands' proposed location was criticized by the health planner for NHC as contributing to a clustering of facilities in Duval County. As a part of that cluster, Woodlands might not greatly enhance accessibility although it does meet the local health plan preferences related to accessibility and occupancy. In addition, NHC argued, that the area is growing in young families not older people due in part to its proximity to Mayport Naval Station, and as indicated by the construction of three new elementary schools in the last six years. Accessibility and availability to specialty programs was another consideration evaluated by the health care planners. There is a need for more complex subacute care in nursing homes. The evidence indicated that Alzheimer's care in a dedicated unit was available in St. Johns County at the time of hearing although it had not been at the time the applications were filed. See also Finding of Fact 18. 408.035(1)(c) - history of providing and ability to provide quality of care As a legal entity, the applicant Sawgrass has no history of providing nursing home care in Florida. Sawgrass, however, through the experiences of Mr. Creekmore and Mr. Fike, has established that the owner and operator have histories of providing high quality of care. Based on the descriptions of operational styles and the policies of RFMS, Mr. Fike's management company, Sawgrass demonstrated the ability to provide a high quality of care if its CON application is approved. See Findings of Fact 20. Woodlands, as to a legal entity operating in Florida, has a limited but excellent history, with a superior rating at Woodlands-Deland beginning in 1997. Woodlands asserted, but without specific information on their other facilities, that its principal, Mr. Esformes, and his management company, EMI, have the ability to provide a high quality of care if CON 9123 is approved. See Findings of Fact 21. NHC has a more inconsistent but improving history, based on licensure, of providing quality of care in its Florida facilities. It is the only applicant with JCAHO accreditation but in only one of its ten Florida nursing homes. NHC has significantly more experience operating nursing homes than either of the other two applicants. See Findings of Fact 22. To determine quality of care, an additional factor urged for consideration is staffing, which overlaps with the following critera: 408.035(1)(h) - availability of resources, including health personnel, management personnel On Schedule 6, the table in the CON application which shows staffing patterns, NHC showed a total of 11.2 full-time equivalent (FTE) registered nurses (RNs). On Schedule 8, which listed the projected income and expenses for the proposal, NHC allocated RN salaries for 7.0 FTEs. NHC's 7.0 FTEs for RNs providing direct patient care is comparable to 5.6 for Sawgrass, and 8.4 for Woodlands. The comparison is valid because NHC included administrative as well as direct care positions in the total of 11.2 FTEs for RNs, including unit directors or managers and an assistant director of nursing. An NHC witness conceded that the RNs in these positions do not, as a routine responsibility, provide direct care. NHC also included a central supply clerk and nursing secretary in the FTEs for nurses aides or CNAs. NHC's regional administrator for Florida, Tennessee and Kentucky testified that staff in these positions also do not, as a routine, provide direct care to patients. NHC included one FTE for a medical director on Schedule 6, but indicated, at hearing, that the position is not full time. When the administrative positions are excluded, NHC's total direct hours of care per patient day (ppd) is approximately 3.18 hours, not 3.29 as described in the CON, as compared to 3.39 for Woodlands, and 3.29 for Sawgrass. When broken down based on the type of nurse providing the care, NHC's 3.18 total hours combines 2.38 hours by certified nurse assistants (CNAs) and 0.8 by licensed nurses (RNs and LPNs). Woodland's total of 3.39, combines 2.32 hours by CNAs and 1.07 hours by licensed nurses. For the Alzheimer's unit, NHC, in the CON application, erroneously described its proposal as providing 5.0 hours of care per resident day, but that was corrected at hearing by NHC's expert in health care financial feasibility and reduced to 2.58 hours. Woodlands provided at its current facility and proposed to provide at a new one approximately 3.9 hours ppd in the Alzheimer's unit. The staffing levels proposed by Sawgrass, NHC, and Woodlands all exceed the minimum state requirements of .06 ppd for licensed staff and 1.7 ppd for CNA, or 2.3 hours ppd total. Direct care staff at NHC perform some functions which would be performed by different personnel in the other two proposals. These duties include evening housekeeping, setting up and cleaning dining tables in the Alzheimer's unit, and answering evening telephone calls. Another indication of the demands on staff time is reflected in NHC's proposal to employ 7 FTEs in housekeeping for a 63,000 square foot building, as contrasted to Woodlands' use of 8 FTEs in its housekeeping department for 53,000 square feet. The staff at Woodlands will provide more direct resident care by higher level staff and reasonably, therefore, presumptively a higher quality of care than Sawgrass or NHC. NHC asserted that it can attract and retain quality staff by paying higher salaries. Using NHC's salary levels, NHC's expert determined that Sawgrass and Woodlands underestimated salary expenses by $573,000 and $522,000 respectively. NHC's total for projected salaries is $2,864,000, as compared to $2,386,653 for Woodlands and $2,318,119 for Sawgrass, although NHC will have seven fewer FTEs than Woodlands and six more than Sawgrass. NHC's comparison used 1998 average salaries, inflated forward, from Palm Gardens of Jacksonville (Palm Gardens), a facility managed by NHC for the owner, Florida Convalescent Centers (FCC). The average salary, for example for nurses, including administrators, such as the assistant director of nursing and Alzheimer's director, was applied to each nurse's position proposed by Woodlands and Sawgrass. NHC's methodology, particularly without any comparison of patient mix and acuity at Palm Gardens to that projected by the applicants, and the use of five percent annual inflation as compared to an actual annual inflation rate of three percent, when two statistical outliers are excluded, renders the analysis unreliable. The testimony of NHC's witness that the opening of new centers forces salaries to go up also indicates that the salary comparison includes some factor over and above actual inflation. 408.035(1)(h) - funds for capital and operating expenses, for project accomplishment and operation; 408.037(1)(a)1. - listing of all capital projects; and 408.035(1)(i) - immediate and long term financial feasibility The ability of Sawgrass to fund and finance the project was, in part, established by the deposition testimony of Jackie Garrett, Vice President, for Commercial Lending, First National Bank, Fort Smith, Arkansas, who is accepted as an expert in banking and finance as well as a fact witness. Having been involved for 30 years in financing projects for the Sawgrass owner, Mr. Creekmore, Ms. Garrett, in her letter of December 28, 1998, and in her testimony expressed the interest of the Bank in financing the Sawgrass project. Ms. Garrett also confirmed the possibility of financing up to 100 percent of the cost at better than an 8 percent fixed rate, as well as providing working capital as long as the loan is guaranteed by Mr. Creekmore. Ms. Garrett's letter to Mr. Creekmore offering to work out any contingencies with him and the inclusion of his personal financial statement in the application, lead to a reasonable conclusion that he can and will guarantee the financing for Sawgrass. Although a specific letter of commitment or the testimony of Mr. Creekmore could have provided a clearer commitment on his part, the documents in the application are sufficient to establish the short-term financial feasibility of Sawgrass. The accuracy of Schedule 2 of the Sawgrass CON application was questioned because it does not include an assisted living facility (ALF) for Duval County, which was proposed for construction on the campus with the nursing home. A financial expert for Sawgrass testified that the ALF is no longer planned, although AHCA was led to believe, in the prior nursing home CON, that an ALF would be built in conjunction with the nursing home. Comparing the historical payer mix and occupancy rates from similar facilities in the service area to staffing, salaries, and other fixed and variable expenses, the financial expert for Sawgrass demonstrated that the project is also financially feasible in the long term. To develop Woodlands-Deland, the general partner, Mr. Esformes, obtained financing primarily from AmSouth Bank in Orlando. The AmSouth loan was guaranteed by Mr. Esformes, who proposes similarly to finance the new Woodlands facility. In a letter dated December 30, 1998, and in her deposition testimony of October 26, 1999, an AmSouth assistant vice president indicates the availability of a loan to cover 75 to 85 percent of the total project cost. On behalf of EMI Enterprises, Inc., Mr. Esformes committed to funding the equity and working capital required from funds which are on deposit. AmSouth's lending limit for a borrower with Mr. Esformes' assigned risk rating is $15 million. NHC argued that Woodlands is not financially feasible in the short term because Mr. Esformes cannot borrow $8 million given his outstanding debt of $12,669,382. That position erroneously ignores the testimony of the bank officer when she stated that such projects, with liquidation of the property as a secondary source of repayment, can be treated separately, not grouped together and not aggregated to come to the $15 million total. She specifically considered Woodlands-Deland, saying, "And his other loan with the Deland property would be isolated for the same reason." See Deposition of Melissa Ann Ledbetter, October 26, 1999, page 11. In addition to the letter from AmSouth Bank, Woodlands presented a letter from and the testimony of Mr. Esformes on his commitment to the project. The evidence showed that Mr. Esformes has sufficient funds available to honor that commitment. Woodlands' proposal is, therefore, financially feasible in the short term. Woodland's long-term financial position was criticized based on Woodlands-Deland's not having achieved the utilization projected as quickly as projected. Utilization goals were adversely affected by the opening or expansion of other nursing homes at approximately the same time in the Deland area, an undesirable consequence which the District 4 health plan seeks to avoid. At the time of the hearing, Woodlands had a 1999 year-to-date profit of $106,000. Considering projected revenues and expenses, based on actual reimbursement rates at Woodlands- Deland, which are extremely high for Medicare, Woodlands' proposal is expected to be profitable in the long term. An expert for Sawgrass questioned NHC's short-term financial feasibility based on the sufficiency, commitment dates and changing investment policies of its funding sources. Schedule 2 of the NHC application lists total capital projects exceeding $436.6 million with approximately $397 million in "funds assured but not in hand and funds currently being sought." The application also includes letters of commitment establishing lines of credit from related companies National Health Investors, Inc. (NHI) for $260 million, and National Health Realty, Inc. (NHR) for $200 million. The letters are expressly valid through December 31, 1999, although what Sawgrass' expert estimated as the 12-month construction period for this project would begin approximately May 1, 2000, to end when operations commence on May 1, 2001. In addition, an examination of documents filed with the Securities and Exchange Commission (SEC) by NHI and NHR, according to the expert for Sawgrass, shows declining available funds and changing company objectives. As real estate investment trust (REIT) companies, NHI and NHR identify their typical financing arrangements mortgages and lease-back agreements, but do not specifically mention the extending of lines of credit. The SEC documents also indicate that NHI had approximately $136.9 million, available to fund health care real estate projects as of December 1998, not $260 million as committed for the line of credit to NHC. By June 1999, the SEC disclosures report a decrease to approximately $15.3 million available to fund health care real estate projects, of which approximately $12 million was available for the next 12 months. NHR's disclosures also indicate that the company will maintain its existing portfolio, not expand further. NHC's net income after taxes decreased from $23.7 million in 1997, to $8.2 million in 1998, adversely affected by declining Medicare reimbursements and increased taxes. The decline in profit from $37 million in 1997 to the projected $14 million for 1999 resulted largely from the expiration, on December 31, 1997, of special tax benefits for corporations. SEC disclosures indicate possible additional declines due to lawsuits over management contracts and a former employee, "whistle-blower" action, neither of which had been finalized at the time of the hearing. NHC's plan to reduce its taxes included the transfer of assets to NHI and NHR. NHC has also off-set losses by providing some therapies in-house and by group purchasing of pharmacy entical and medical supplies. In response to the loss of management agreements with FCC, NHC has successfully secured other management contracts and has eliminated certain regional positions. Reserves of approximately $31 million have been set aside for potential liability resulting from pending litigation, with FCC and in the former employee's qui tam action related to Medicare costs. Despite the efforts of NHC to adjust to changes in its financial position, the termination dates in the NHR and NHI letters of credit are troubling. The position of NHC, as investment advisor to NHI and NHR, and the ability of their Boards of Directors to change investment policies, without stockholder approval, suggests the likelihood of their funding the NHC project, if approved. Stronger support for a determination that at least NHR continues to be a source of funds for NHC comes from the deposition testimony of NHR's Senior Vice President, who signed the NHR line of credit letter. He noted that any projects submitted by NHC in the past have been approved by NHR and thinks it unquestionable that NHC would obtain financing for this project. That testimony rises to the level of the letters of interest by lending institutions submitted on behalf of the other applicants and establishes the short-term financial feasibility of the NHC proposal. NHC projected a net operating profit of $57,000 in year two which, with depreciation of about $350,000, results in a cash flow in excess of $400,000. NHC's proposal is financially feasible in the long term. 408.035(1)(l) - impact on costs; and 408.035(1)(m) - costs and methods of construction The estimated construction cost for Sawgrass is $70 a square foot for a 56,800 square foot building. By comparison NHC's estimated construction cost is $106 a square foot for the nursing home and a separate storage/maintenance building, totaling 63,104 square feet. Woodlands' 53,000 square foot facility will cost an estimated $98 a square foot. Sawgrass' construction costs were considered unreasonably low by some expert. The construction costs were developed by an expert in construction supervision and costs, who works for Medical Holdings Limited, another company which is owned by the Sawgrass President, Mr. Creekmore. The architects for the project work for another related wholly owned subsidiary of Medical Holdings Limited, Healthcare Builders, Incorporated (Healthcare Builders). Healthcare Builders is also owned by and only builds facilities for Mr. Creekmore. The estimated cost, $70 per square foot, is based on the use of local materials and subcontractors and excludes any profit, which alone would add from 8 to 10 percent to the cost. All of the salaries for the supervisors of the project, the general construction superintendent, the regular superintendent, and bookkeeper are paid by Healthcare Builders and excluded from constructions costs. Only one Sawgrass project, over the past 15 years, has required an application for a cost overrun. On this basis, Sawgrass established the reasonableness of the costs for its company. NHC's building is the largest and most expensive, with 71 resident rooms and 9-foot wide corridors, as compared to 66 rooms and 8-foot wide corridors for Woodlands and Sawgrass. NHC has 22 private rooms, but Woodlands and Sawgrass have 12 private rooms in each of their designs. NHC's private rooms range in size from 196.8 to 277 net square feet, as compared to 220 net square feet for Sawgrass, and 194 net square feet for Woodlands. Semiprivate rooms range in size from 196 to 246.7 net square feet for NHC, 198 to 218 for Woodlands, and 220 for Sawgrass. All three exceed the state minimums of 100 square feet for private rooms, and 160 square feet for semiprivate rooms. The schematics for NHC and Woodlands demonstrate more concern for safe outside spaces, with two separate enclosed courtyards, one designated for wandering which is typical of Alzheimer's residents. Woodlands' design also provides for two separate entrances, one for the main facility and one for the subacute unit. The subacute entrance is particularly desirable because the busier pattern of visitors is more akin to that in a hospital setting. NHC has 57 rooms with showers in the bathrooms, as compared to 53 for Woodlands and 18 for Sawgrass. The experts debated the benefits of privacy and the enhanced dignity and the reality that safety necessitates, for many, assistance in bathing. On the one extreme, NHC has unnecessarily included showers on the Alzheimer's unit for residents who are least likely to use them safely and most likely to need assistance, but Sawgrass has so few that the use of central bathing facilities will be necessary for most of its residents and will not enhance their privacy and dignity. Woodlands' design for the purposes intended, is the most reasonable, and its type of construction is the highest rated of the three. Despite the differences in size and construction costs, all three applicants propose relatively similar charges in a very narrow range of lows for Sawgrass and highs for NHC, from $105 to $115 a day for semiprivate rooms to $120 to $130 for private rooms. Reimbursement rates, primarily from Medicare, differ based on differences in acuity levels. 408.035 (1)(n) - past and proposed Medicaid and indigent care Sawgrass has received one CON in Florida with a Medicaid commitment of 87.4 percent of total resident days. Other CON applications prepared for Mr. Creekmore have offered to meet or exceed the prevailing community Medicaid occupancy levels. Woodlands committed to providing a minimum of 63.01 percent Medicaid and 0.5 percent indigent resident days. Woodlands has reached 63 percent but not its committed level of 66 percent Medicaid in its Deland facility, although it expected to do so when final data at full occupancy becomes available for 1999. NHC's proposal includes the provision of 63.05 percent of total resident days to Medicare. AHCA has determined that NHC is not in compliance with its Medicaid commitment in two of its facilities, located in Daytona and on Merritt Island, but due to its extensive operations in Florida, NHC provides substantial Medicaid care. 408.035(1)(o) - continuum of care in multilevel system All three of the applicants plan to offer Alzheimer's hospice, respite and subacute care. Sawgrass included a 60-unit ALF on its schematic design and on its Schedule 2 for a cost of $4 million. The ALF will be connected to the nursing home by a covered entrance. Sawgrass also planned but is not constructing an ALF with its Duval County project. See Finding of Fact 45. Woodlands stated its intention to build an ALF on the same campus with the proposed nursing home in a misleading narrative on page 114 of the application, but did not include it as part of the project in either the schematics or on Schedule 2 of the CON application. At the hearing, Woodlands' witness conceded that an ALF would not be built, if at all, for several years until the nursing home proves to be financially viable and then, by a separate corporation. In addition to the services provided by the other applicants, NHC plans to offer adult day care through existing providers. Only Sawgrass meets the criterion for proposing a multilevel system of care, based on the assumption that it will build the ALF as planned. 408.035(2)(e) - consisting with plans of other state agencies responsible for providing or financing long term care All three proposals are consistent with the policies of other responsible state agencies, including the Department of Elder Affairs. Summary Comparison of Applications This case is difficult, in part, because there is not a great difference among the applicants based on any one of the criteria. In terms of location, southeast Duval has a slight advantage due to its larger population, occupancy levels, and the approved CON for St. Johns County. Woodlands promises to provide a higher quality of care than NHC and Sawgrass based on proposed staffing, but has only operated one other Florida facility, albeit a superior one. Woodlands provided less detailed information on its owner's and manager's operations of out-of-state facilities. All three applicants have what appear to be at this relatively early stage of the process, reliable funding sources and plans to operate profitably. Woodlands' construction cost and design are the most reasonable for the purposes intended, although no appreciable differences in patient room charges were demonstrated. Based on past history and current proposals, all of the applicants will provide adequate and appropriate levels of Medicaid care. Only Woodlands will also provide a small percentage of indigent care. Sawgrass, by offering to construct an ALF in conjunction with nursing home and by designating a funding source to do so, offers the greatest continuum of care in a multilevel setting. On balance, the application submitted by Woodlands is superior.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order of the Agency for Health Care Administration issue CON No. 9123 to Woodlands Extended Care, Inc. to construct a 120-bed nursing home in southeast Duval County on the conditions set forth in the application and in Findings of Fact 10 of this Recommended Order; and deny CON No. 9125 to National Healthcare Corporation, and CON No. 9126 to Sawgrass Care Center, Inc. DONE AND ENTERED this 14th day of August, 2000, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER 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 14th day of August, 2000. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Richard Patterson, Esquire Agency for Health Care Administration 2727 Mahan Drive Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Robert D. Newell, Jr., Esquire Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Sternstein, Rainer & Clarke, P.A. 314 North Calhoun Street Tallahassee, Florida 32301-7606 Theodore E. Mack, Esquire Powell & Mack 803 North Calhoun Street Tallahassee, Florida 32303
Findings Of Fact In the latter part of 1976, Petitioner, chartered in Florida as a corporation on October 23, 1975, applied for licensure as a home health agency to the Office of Licensure and Certification, HRS, under the 1975 edition of Florida Statutes. Petitioner's application, which referred only to lake and Sumter Counties, was referred to the North Central Florida Planning Council (NCFPC), which, at that time, had the responsibility to evaluate the application and issue, if appropriate, a statement of need. Both the Project Review Committee and the Executive Committee of NCFPC reviewed Petitioner's application and recommended a positive statement of need for this project to be established in Lake and Sumter Counties. As a result of those findings and recommendations, and after a public hearing on the matter was held by NCFPC on December 28, 1976, HRS issued License No. 51 to Petitioner on February 14, 1977, to operate a home health agency in Lake and Sumter Counties. The license to operate in Lake and Sumter Counties was renewed annually up to and including the issuance of License No. 1291 by HRS on January 6, 1981, for the period February 1, 1983, through January 31, 1984. On October 29, 1982 Petitioner submitted an application for licensure to operate a home health care program in Citrus and Marion Counties in addition to Lake and Sumter Counties. This change would entail the expansion of geographical area serviced by Petitioner's employees, but would not result in a major increase in either employed personnel or equipment. Only one additional nurse and one additional vehicle would need to be added to Petitioner's operation to serve the expanded area. However, no new office space or equipment would be needed, as Petitioner would continue to operate existing office in Leesburg. The current director of Petitioner's operations, before submitting the expanded license application, spoke with a representative of HRS's Office of Licensure and Certification, Mr. John Adams, and was advised that all that was required was the submission of the application and the fee. Both were submitted, but the application was denied because there was no Certificate of Need issued for the establishment of a new subunit, as required, in the opinion of Respondent, by currently existing rules and statutes. The application submitted, at paragraph 10, listed four "subunits." The term "subunit" is contained only in the printed language of the form, as was the term "parent agency," and neither was used by Petitioner in its description of its operation. Petitioner is a privately owned corporation with a board of directors and corporate officers. It gets referrals from doctors and hospitals in the area for all four counties, but, because of the limitations on its license, can operate only in Lake and Sumter counties. It provides home nursing and various other therapies in several disciplines to individuals in their own residence. According to several physicians in the area, the service rendered by Petitioner is a necessary and, at times, critical portion of their patients' total care and treatment. It is reliable and efficient. At present, all nurses and other personnel report to the Petitioner's office in Leesburg each morning to receive patient assignments before going out to make their visits at the patients' homes. They return to the office in Leesburg at the close of the day, if necessary. The same procedure would be followed if the service were to be expanded into the two additional counties. No new office would be created, nor would anything change except the Petitioner's nurses, and other personnel would have farther to travel from their one office and base of operations. Under the circumstances, and as stipulated to by the parties, Petitioner's proposal does not constitute the establishment of either an autonomous or semiautonomous subunit, nor is the geographic expansion of service a substantial change in health services as defined by Florida Statutes. In a position paper dated February 28, 1983, the NCFPC recognized the existence of a problem in that while an existing home health agency can add new counties to its area of service with a Certificate of Need (CON) if it does not establish a new agency or subunits of the parent agency, and while physical subunits cannot be established without a CON, each of these rules fails to be consistent with the overall goals of planning and regulating health services and facilities, and together they constitute a contradiction and unreasonable set of rules for the home health industry. The agency's recommendations were: (1) A CON should be required prior to the addition of new counties to the service area of any licensed home health agency; (2) CONS should not be required for activities which do not involve substantial changes of services, increased service, or major capital expenditure and (3) CON's should be required for autonomous subunits. On March 9, 1982, James Barclay, an attorney with HRS, issued a written opinion for the agency (HRS) that a CON is not required before a Florida home health agency already licensed to operate within certain counties in a health service area may provide home health services to additional counties within the same health service area. Citrus and Marion Counties, into which Petitioner intends to go, are within the same health service area as Lake and Sumter Counties. Approximately one month after Mr. Barclay's opinion was issued, Mr. Gary J. Clarke, Deputy Assistant Secretary for Health Planning and Development for HRS, in a letter to all Health Service Area Directors, affirmed the position that an agency could provide services in counties when it was not previously providing services in the same health service area so long as there were no establishment of subunits or capital expenditures.
Recommendation Based on the foregoing, it is RECOMMENDED The Petitioner, Home Health Professional Services, Inc., be issued a license to operate in Marion and Citrus Counties. RECOMMENDED this 25th day of January, 1984, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of January, 1984. COPIES FURNISHED: Thomas K. Riden, Esquire Robert Johnson, Esquire 5656 Central Avenue St. Petersburg, Florida 33707 Jonathan S. Grout, Esquire Department of Health and Rehabilitative Services Post Office Box 210 Jacksonville, Florida 32231 Mr. David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32201 =================================================================
The Issue The issue is whether CONs 2760 and 3763, issued to Respondent, Florida Convalescent Centers, Inc., (FCC), should be revoked based on the acts alleged in the Administrative Complaint.
Findings Of Fact Findings of Fact 1-15 are facts stipulated to by the parties in their Prehearing Stipulation HRS is the affected agency and is responsible for agency action concerning certificates of need in Florida. FCC is a Florida corporation whose Florida address is 345 South Magnolia Drive, Suite E-21, Tallahassee, Florida 32301. The pertinent agency file numbers in this matter are CON Action Nos. 2760 and 3763. HRS issued valid certificates of need, CON Nos. 2760 and 3763, to FCC for the construction of a 120-bed nursing home in Bradford County, HRS District 3, Florida. FCC obtained a valid extension of time for the termination date of the validity period of these CONs. The extended date is May 7, 1987. FCC commenced construction of the nursing home authorized by CONs No. 2760 and 3763 on or before the adjusted termination date of these CONs, thereby validating these CONs. By Administrative Complaint dated February 24, 1988, HRS seeks to revoke both of these CONs. No other penalty is requested in the Administrative Complaint. The Administrative Complaint provides the only ultimate facts, statutes, and rules on which HRS relies to justify revocation. FCC received notice of HRS' intended action when the subject Administrative Complaint was served on a representative of FCC in Tallahassee, Florida, by United States Certified Mail, return receipt requested, on February 25, 1988. FCC has timely responded to the Administrative Complaint by requesting an administrative hearing within the time established by law and by the Administrative Complaint. FCC's Petition For Formal Administrative Hearing was filed with HRS on March 14, 1988. From the period May 7, 1987, through February 24, 1988, HRS provided (and FCC received) no written notice that it was failing to comply with any of the requirements of CON law and regulations, particularly with the requirement that this project be under continuous construction beyond site preparation. HRS issued a letter to FCC approving the entire construction plans for the nursing home project authorized by CON Nos. 2760 and 3763 on or about June 23, 1987. The project architect submitted an addendum to the construction plans for CONs 2760 and 3763 on November 30, 1987, which HRS did not approve until December 30, 1987. FCC has a building permit from the local building authorities to construct the nursing home authorized by CON Nos. 2760 and 3763. The only facts upon which HRS bases its intended revocation of these CONs (2760 and 3763) are stated in paragraphs 3(a), (b), and (c) of its Administrative Complaint dated February 24, 1988. HRS does not charge FCC with any violation of CON law or regulation because of any interruption in the construction of this project after January 7, 1988. HRS has not revoked any CON for failure to be under continuous construction, except for CON No. 3639 and 2323 (one project) by HRS letter dated February 12, 1988. HRS has issued no final order under Section 120.59, Florida Statutes, in that matter. The following additional facts are found based on the record in this proceeding: To develop the 120-bed nursing home authorized by CON Nos. 2760 and 3763, FCC, through its owner-stockholder, James McCarver, agreed to form a corporation with James Hall, a licensed nursing home administrator and an experienced developer of nursing homes. Bradford Investments, Inc., (BII) was formed by McCarver and Hall pursuant to that agreement and land was purchased for the project by BII. McCarver and Hall intended to request HRS to transfer these CONs to BII after the construction was complete. FCC validated these CONs by commencing construction of its Bradford County nursing home before the termination of these CONs. FCC satisfied this requirement by constructing the required percentage of footers prior to the May 7, 1987, termination date of these CONs. On May 19, 1987, at the designated construction site for 2760 and 3763 (602 Laura Street, Starke, Florida), there was: 400 feet of concrete footing reinforced with steel rods; cleared land; fill dirt compaction; HRS construction plan approval documents; and building permit No. 1073. On July 21, 1987, HRS notified FCC that the Bradford County nursing home project (CONs 2760 & 3763) was considered under construction and that the CONs would remain valid provided the construction was continuous. Monitoring the progress of CONs 2760 and 3763 and pursuant to a report that construction had ceased, William Wayne McDaniel, HRS' CON monitoring supervisor, made a construction site visit on September 23, 1987. During his visit to the construction site, McDaniel discovered that the foundation was finished; that there was overgrowth on the site; and that there were no construction materials on the site. He was told that there had been no construction on the site since June, 1987, and that there were no contracts for plumbing or electrical sub-contractors. Mr. McDaniel was told by the superintendent that he had no authority to go forward with the project. During an October 1987 meeting, HRS advised FCC that it considered the Bradford County nursing home project (CONs 2760 and 3763) no longer under construction. FCC then assured HRS that the project would be under construction by December, 1987. On January 7, 1988, McDaniel visited the construction site. He found that the project had not significantly progressed beyond the state at which it existed on September 23, 1987. The following construction activities were performed on the Bradford County project for the time period May, 1987 - January, 1988. The general contractor completed the foundation and all footers, plus the stem wall in mid-August 1987. Drainage structures for the two courtyards for the project were constructed October 6 through 16, 1987. The drainage system directs water from the courtyard through pipes which go through the stem wall and under the slab of the nursing home. The foundation for the project was constructed from May through October 1987. The site presented problems for the speedy construction of this project. Because of the front-to-back slope of the site, the contractor added 78,000 yards of fill dirt, an exceptional amount. The contractor also removed 25,000 yards of muck from within the perimeter of the Bradford County nursing home, particularly at the right rear corner of the building. Consequently, it took the contractor four months to do what normally takes three months to accomplish with regard to constructing similar nursing homes. All structures constructed at the site for FCC's Bradford County nursing home satisfied or exceeded specifications. The foundation will support the Bradford County nursing home since the contractor achieved a 98 percent soil compaction and concrete strength of 3,000 pounds per square inch in conformance with the engineer's report. The contractor had up to ten crew members on site constructing this project from May through August. A superintendent has been at the project site from May, 1987, through June, 1988. The project contractor has had a construction trailer on the project site from May, 1987, to the present and heavy equipment was last used on site in August, 1987. Moreover, FCC, through its vice-president for development and project architect, William T. Searcy, submitted to HRS significant addenda to its final construction plans during the period of time of May, 1987 - January, 1988. HRS approved FCC's final construction plans for its Bradford County project by letter dated June 23, 1987, with comments. Mr. Searcy had submitted these plans to HRS on May 6, 1987. HRS' comments more clearly define or specify parts of the project plans or specifications, or make corrections to those plans and specifications. On August 26, 1987, FCC answered HRS' comments to the final construction plans for this project by submitting to HRS Addendum 1 to the plans. This was the first time FCC had built this design, so the contractor and HRS' plan review staff were unfamiliar with FCC's plan. HRS requires approved answers to its comments before it will do a final site visit for licensure of the nursing home. The comments and FCC's addendum addressed every phase of the construction of the project. On September 25, 1987, HRS requested additional comments from FCC concerning the final construction plans for the Bradford County project and FCC addressed these concerns in its second addendum dated November 25, 1987. HRS responded December 30, 1987, approving FCC's second addendum to its final construction plans for the Bradford County project without further commentary. At hearing, but not in its Administrative Complaint, HRS asserted that FCC failed to provide required monitoring reports. In fact, FCC submitted to HRS the required monitoring reports, including an interim cost report not required by rule, in October, 1987, so that HRS could check the progress of the project. Project construction has not proceeded faster because FCC has been unable to obtain the permanent financing it had planned for the project. FCC originally sought bond financing for the project, but changes in federal laws eliminated tax-free bond financing for such projects. Taxable bond financing, while available to the project, costs 20 to 24 percent of the total value of the loan (base points) as compared with 4 or 5 percent for conventional mortgage loan financing. Because of these developments, FCC eventually sought conventional financing of the project since this would significantly enhance project feasibility. Hall began working on financing for the Bradford County project. An application was made to Atlantic Pioneer Savings and Loan, where Hall had borrowed $8 to $10 million dollars for other projects, to finance this project. In July, 1987, Atlantic Pioneer decided not to finance the project. After Atlantic Pioneer turned down the project, Hall requested conventional financing for the project from approximately 12 to 15 lending institutions and made additional inquiries to mortgage brokers. In October, 1987, Hall obtained a letter of interest from a mortgage broker working with a bank that would finance the project. The terms of this financing were not financially feasible because the bank would only finance 75 percent of the total project costs. In December, 1987, another mortgage banker and a lending institution expressed a strong interest in financing FCC's project on sufficient terms to complete the project, however, there was no binding loan commitment. The project can be back under construction within thirty days of obtaining financing. More than $550,000 in expenses has been incurred to develop the Bradford County project. Of this sum, $475,000 has been paid and an additional $75,000 to $80,000 is owed. The investment and expenditure of some of these sums will be lost if the CONs are revoked. FCC paid $105,000 for land costs, architectural plans prepared by Mr. Searcy, engineering costs related to the development of the architectural plans, and other direct costs, such as travel to the site and to HRS FCC does not own the site for this project, though; BII owns the land. Hall personally paid $370,000 for land and construction costs and he incurred an additional $75,000 to $80,000 in unpaid construction costs. These sums include $93,000 in reimbursed and unreimbursed expenditures of the general contractor, Triton Construction. As a general policy HRS helps CON holders to get their project back into construction whenever there has been a work stoppage. In the past, when HRS found that there had been a work stoppage on a CON project, HRS provided written communication to the CON holder to encourage a return to construction. HRS did not present the timetable for the development of FCC's Bradford County project in this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order dismissing the Administrative Complaint filed against Florida Convalescent Centers, Inc. DONE and ENTERED this 1st day of December, 1988, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of December, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-1389 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner Department of Health and Rehabilitative Services Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1); 2(2); 3(4); 4(5); 5- 10(18-23); and 12(46). Proposed finding of fact 11 is unnecessary. Proposed findings of fact 13-15 and 17-19 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 16 is rejected as being irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Florida Convalescent Centers, Inc. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-17(1-17); 18(19); 20(20); 21(10); 22 & 23(22 & 23); 25(10); 27-37(24-34); 39-53(35- 49); and 58(50). Proposed findings of fact 19, 24, 26, and 57 are subordinate to the facts actually found in this Recommended Order. Proposed findings of fact 38, 55, 56, and 59 are unnecessary. Proposed findings of fact 54 and 60 are rejected as being irrelevant. COPIES FURNISHED: Robert P. Daniti Attorney at Law 1017 Thomasville Road, Suite C Tallahassee, FL 32303 John Rodriguez Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, FL 32308 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, FL 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, FL 32399-0700
Findings Of Fact Manor Care, on June 18, 1987, filed with DHRS, its Petition for Formal Administrative Proceeding, to protest the agency's denial of its application for a CON to construct a 120 bed nursing facility in Lee County, Florida for the January, 1990 planning horizon. On July 6, 1987, Bon Secours filed with DHRS its Petition for Formal Administrative Hearing to protest the agency's denial of its application for a CON to construct a 120 bed nursing facility in Lee County, also for the same planning horizon. On July 8, 1987, FHFC filed its Petition for Formal Hearing with DHRS contesting the agency's denial of its application for a 120 bed nursing home for the same planning horizon in Lee County. In that same batching cycle, DHRS also comparatively reviewed the applications of Unicare Health Facilities, Inc., to construct a 60 bed facility; Florida Country Place, to construct a 30 bed facility as a part of a retirement complex; Hillhaven Corporation, to construct a 109 bed community nursing home; Health Quest Corporation to construct a 60 bed facility; and Shive Nursing Center, Inc., to construct a 60 bed facility. DHRS determined there was a need in Lee County for the planning horizon in question for an additional 60 beds and thereafter awarded 42 beds to FHFC and 30 beds to Florida Country Place. As of the hearing, DHRS proposes to award a CON for 60 beds to one of the remaining parties. THE PARTIES Manor Care currently owns and operates nine nursing homes in Florida. Of the presently operating homes, seven are rated superior by the state and the other two are rated as standard. The corporation has a regional office in Winter Park, Florida, headed by a senior regional director under whose supervision, Manor Care has constructed and opened three of the above nine facilities. Each of those three was completed on time and within budget and each holds a superior rating. The Sisters of Bon Secours in The United States, Inc., a not for profit corporation based in the State of Maryland, is a civil corporation of the religious order of the Sisters of Bon Secours. This order was founded in 1824 for the purpose of promoting a health care ministry under the auspices of the Roman Catholic Church. The order owns the Bon Secours Health System which carries out this health care mission. Bon Secours Health Systems is also a not for profit entity and will operate the Lee County facility if construction is approved. Bon Secours Health Systems also operates Bon Secours Hospital and Villa Maria Nursing Center in Miami, Florida. As a nonprofit entity, Bon Secours reinvests any excess revenues in its health care delivery system as opposed to returning a profit to private investors. A nonprofit entity does not, however, necessarily mean that a profit is not earned out of operations. FHFC is a small, family owned corporation which owns and operates nursing homes in Florida, Iowa, and Missouri and, with its related companies, Clark Development, and Village Properties, has been in business since 1967. FHFC currently owns and operates five nursing homes in Florida, none of which have ever been owned or managed by an outside company. Further, neither FHFC nor its related companies have ever sold an issued or approved CON. Pines Village had a conditional rating when opened but is currently rated standard. Pines Villages currently owned and operated by FHFC, is located on a five acre landscaped site in Lee County. Amenities on the property include a pond and fishing deck for the use of the patients, and the local Boy Scout troop has built a gardening area for the residents. Volunteer and professional staff are provided by FHFC to accompany residents on the grounds. The facility was originally opened as a 78 bed facility and has operated at that level until only recently. THE PROPOSALS The applicants propose the following facilities and costs: FHFC MANOR CARE BON SEC. Total Proj. Cost $866,940 $3,108,500 $ 3,596,700 New Total GFT $ 13,420 $ 27,000 $34,000 GFT/Bed $ 291.55 $ 450 $ 566.60 Const. Cost $697,840 $1,377,000 $ 2,073,700 Const. Cost/ft2 $ 52.00 $ 51.00 $ 60.99 Const. Cost/Bed $ 11,630 $ 22,950 $34,562 Total Cost/Bed $ 14,449 $ 51,808 $59,945 Manor Care proposes to finance its project by the issuance of convertible debentures at an estimated interest rate of 12 percent which includes the estimated cost of converting the debentures. In the event that lower interest rates become available, Manor Care will take advantage of them. Bon Secours projects financing by tax exempt bonds at 8 1/2 percent. It has secured similar bond funding in the past and is confident it can secure it here. Florida Health Facilities proposes to utilize a conventional loan at 10 percent interest. There is no reason to believe that such financing is not available. The applicants propose the following patient charges: FHFC MANOR CARE BON SECOURS Private --- $ 83.98 $85.00 Semiprivate $69.00 $ 72.43 $74.00 Medicaid $45.34 $ 73.48 --- Medicare $62.00 $109.96 --- VA $81.00 --- --- Private-Alz. --- $ 88.18 --- Semi-private-Alz.-- $ 78.73 --- Each of the current applicants is highly skeptical of the accuracy of its competitors pro forma cost estimates and thereby concludes the costs and resultant charges proposed are "optimistic," "flawed," "unrealistic," "inaccurate," and "internally inconsistent." Even if these criticisms are true, they apply equally to all applicants, and when evaluating the proposals, allowance is made for proprietary puffing and the recognition that the actuality of the future may vary widely from the recollections of the past and the estimates of the present. Consequently, unless shown to be clearly inaccurate or not capable of belief, the representative of the applicants are accepted here as made. The applicants propose the following commitments to Medicaid patients: FHFC MANOR CARE BON SECOURS Medicaid Util. 50 percent 35 percent 33.5 percent Medicaid Rate $58.39 $73.48 $85.00 (P) $74.00 (SP) Current Medicaid utilization at FHFC is 53 percent, a figure which is comparable to other nursing facilities in Lee County. Bon Secours' commitment of 33 1/2 percent is the minimum Medicaid commitment required by the local health plan. Manor Care projects a 35 percent utilization and places an upper limit of 45 percent on Medicaid participation overall. Manor Care tends to locate its facilities in more affluent neighborhoods, however and caters to a more upscale patient mix. Medicare projections by the parties are Manor Care, 5 percent; FHFC, 2 percent; and Bon Secours, 19.9 percent. The latter figure, Bon Secours', would appear to be high, however, for the area in question where statistics available indicate Medicare utilization has declined. Medicare is generally a high reimbursement service. All three proposals are consistent with the goals of the State Health Plan which are to develop alternatives to Institutionalization; to insure appropriate long term care services are available; and to insure such services are appropriately utilized. They are also consistent with the local health plans although in all cases, compliance may not be as clearly shown. However, of all applicants, Bon Secours best addressed the question of Medicare provision and the need for rehabilitative and subacute care facilities in the county. Bon Secours proposes a facility which will emphasize rehabilitative and restorative care under a program known as short term/long term care (stays of 90 days or less). In addition, Bon Secours proposes to also provide long term care of over 90 days when required. Manor Care proposes to offer long term care services and a segregated Alzheimer's Disease unit with 30 of the new beds going to long term care and 30 to the proposed Alzheimer's unit. FHFC intends to add 60 beds to its existing facility in Lee County without an addition in ancillary space. In other words, construction will be limited to that necessary to provide patient rooms, nursing station and baths but not additions to the common areas, the dining area, or the therapy area. QUALITY OF CARE AND STAFFING Manor Care has a developed, effective quality assurance program. It has identified the nursing home requirements from all states in which it operates and compiled those requirements into a comprehensive manual for internal use which is updated annually. Based on the requirements contained in the manual, an unannounced survey is performed by a team which includes specialists in all areas of nursing home care once a year. If a facility is deficient in any category, a plan of correction and a resurvey are required. In addition, a nurse in Manor Care's regional office acts as a consultant on an ongoing basis to the various nursing homes, and the senior regional director, located in Florida, makes regular visits to all Manor Care homes within the state. A member of the Clark family, the sole owners of FHFC, visits each of the corporation's facilities at least biweekly making an examination and inspection of the kitchen, the grounds, and the patient rooms. Periodic family dinner nights are held at each of the facilities at which patients and their families have an opportunity to meet with the senior staff of the facility. This gives the staff the opportunity to receive feedback from the residents and their families. In addition, FHFC requires the submission of a quarterly quality assurance questionnaire by its facilities, provides all new administrators two weeks in-house training at an FHFC facility, and provides, a management team to periodically inspect each of the FHFC facilities to insure that the facility is being managed and operated consistent with the corporation's internal quality assurance manual. If a facility is not in compliance, the administrator and department heads of that facility are required to prepare a deficiency report and establish a plan for correction of the deficiency. No FHFC facility in Florida has ever had its license downgraded to "conditional" after DHRS inspection. Bon Secours' quality assurance program addresses all quality care concerns. In the operation of the program, each department is involved in quality assessment providing for staff input into the establishment of required standards. Bon Secours' Villa Maria facility currently holds a "superior" license and hopes to acquire that category license for its Lee County facility. Villa Maria is accredited by the Joint Commission on Accreditation of Health Organization and by the Commission of Accreditation on Rehabilitation Facilities. The systems utilized to achieve these accreditations will be utilized in Lee facility. The staffing plan proposed by Bon Secours, if implemented, will provide quality care and professional supervision at all times. Due to its relationship with church affiliated training schools, Bon Secours is more likely to find it easier to recruit health care professionals at the entry level. Manor Care intends to provide 3 nursing hours per patient day as opposed to 3.5 as proposed by Bon Secours. FHFC's proposal is projected at 2.5. Current staffing at the FHFC facility, however, exceeds DHRS minimum requirements and it is anticipated that projected staffing for the 60 bed addition will also exceed DHRS minimum requirements. FHFC also will have activities staff available to the patients eight hours per day, seven days a week. Emergency transfer assistance and referral agreements are in existence with more than five local hospitals and mutual aid agreements have been negotiated with approximately ten local nursing homes. Contracts for therapeutic services, dental services, podiatry services, medical utilization review, and a registered dietician are in operation. The facility offers a full time social worker holding a Bachelor's degree and has consultant arrangements with an individual with a Master's degree in social work. The full time social worker performs admissions and discharge coordination, assists with patient care and planning, and provides referral to community resources. A physical therapy aide is on the premises seven days a week. Rehabilitation, speech, and occupational therapy services are contracted for on an "as needed" basis. The current level of usage is not high, however, and while both other applicants propose providing the service through either in-house or contract personnel, this is not a major factor. Bon Secours' staff level in all areas appears generous and might result in unnecessary cost levels even though salaries paid are reportedly lower than normal. BUILDING DESIGN AND EQUIPMENT Manor Care originally proposed a two-story, 120 bed facility. The currently proposed 60 bed design is essentially the first floor of that facility with minor modifications such as the elimination of three-bed rooms. The facility design calls for 27,000 square feet (AS0 square feet per bed) and includes a separate unit for Alzheimer's Disease patients and their activities. The facility, equipped with high quality furnishings and equipment, is designed to provide a homelike atmosphere. Due to its ability to purchase in bulk, Manor Care can provide custom designed fabrics and wall coverings as opposed to stock products, adding a special touch and warmth to the facility's atmosphere. Bon Secours' 34,000 square foot addition, providing 566.6 square feet per bed, is overly large. Its' projected amenities, including a private shower in each patient room, suggest a facility providing first class comfort. There is no separate activities room, however, as the dining room serves that function. Since the dining room is not immediately adjacent to the kitchen, food service may be impacted. FHFC's proposal contemplates a 13,400 square foot, (291.55 square foot/bed), 60 bed addition to its existing facility. Construction would be of noncombustible framing and trusses fabricated from light gauge steel. The proposed 60 bed addition will reproduce one of the existing wings of the current facility and will add a new nursing station at the juncture of the existing facility with the new wing. The proposed addition meets all DHRS design and construction requirements. The existing dining room, kitchen, and recreational facilities are believed to be sufficient to provide services to the new wing since the original facilities were designed to exceed DHRS requirements and are large enough to accommodate the new patients. Construction as proposed will not violate any travel distance requirements and the outside view from the patient rooms satisfies DHRS' twenty foot setback requirement The construction costs proposed by FHFC are realistic and appear substantially less than those of the other two applicants. This difference may be attributable to several factors including the excess capacity in ancillary spaces designed and built into the existing facility which do not need duplication in the construction of the new facility. Another basis for difference is the lack of need for site preparation and kitchen equipment for much the same reason. FHFC's design does not provide private showers in each patient room, as does Bon Secours', but instead calls for a community shower/tub area which provides privacy for a showering patient. The resident will be transported to and from the bathing area fully clothed, and if able to bathe without assistance, will be offered privacy behind a shower curtain while bathing with an aide waiting outside. No more than one patient will be allowed in the bathing area at a time. All of the exit doors at FHFC's facility are equipped with alarms to indicate opening. Access to the facility cannot be gained through side doors which provide exit in case of emergency. The dining room is adjacent to the kitchen providing for hot food to be served and an ease in substitution in the event the patient changes his or her mind about menu selection. Bon Secours proposes a security guard for its facility. Neither other applicant proposes this nor is it considered needed. SPECIAL PROGRAMS Manor Care is the only one of the three applicants proposing a unit dedicated to the treatment of Alzheimer's Disease patients. There is no such program currently available in Lee County nor was there much evidence of need for it presented. Manor Care's proposal calls for a separate wing for patients with Alzheimer's Disease or related disorders which account for, arguably, approximately 50 percent of all nursing home admissions. This wing would include a separate lounge and dining room and would be decorated with special colors, lighting, wall covers and other details developed with special consideration for the effect on Alzheimer's Disease patients. Special treatment programs incorporating activities, dietary, and the medical needs of this type of patient would be provided. Patients with Alzheimer's Disease are difficult to care for and hard to place and it has been suggested that in an appropriate type unit, the patient's condition may possibly improve. Manor Care has extensive experience in operating units of this nature with ten currently operating around the country and others in development. MISCELLANEOUS Manor Care provides a chaplaincy program at all its facilities in Florida, to attend to the religious needs of its residents. Bon Secours, a religious organization, would expect to reflect the religious affiliation of the area which may not necessarily be consistent with the Catholicism of the sponsoring order. The majority of patients at Villa Maria, for example, are Jewish. FHFC currently provides, in its facility, for Catholic, Jewish, and multi-denominational Protestant worship on a regular basis, along with Bible study groups and other religiously oriented gatherings. All three applicants indicate that the programs and proposals offered by its competitors are inadequate and not demonstrably financially feasible. The argument made by each against the submissions of its competitors are, however, not persuasive. Each is a projection of future activity based on historical background in an entirely different area. Nonetheless, it should not be forgotten that each, itself, applied for an equivalent facility. There is little substantive difference in the proposals of the three applicants. All would provide quality in facilities that would meet the standards of the department. Each has applied for a facility in which it anticipates providing a service while at the same time, generating an excess of income over expenses. In evaluating the three applicants, therefore, while considering the negative comments by one toward the others, one is not necessarily persuaded by the detailed objections and criticisms voiced by each. While Bon Secours proposes joint educational programs with institutions of higher learning, none of these are local but are, instead, for the most part in Miami and Tampa. Use of Lee County facilities by these institutions is not considered likely to be heavy absent implementation of local training programs.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered granting Certificate of Need 5030, for 60 community nursing home beds in Lee County, Florida, for the planning horizon of January, 1990, to Florida Health Facilities Corporation/Lee County. RECOMMENDED this 29th day of June, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK 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 29th day of June, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3511,3514, & 3516 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. BY MANOR CARE: 1 & 2. Accepted and incorporated herein. Irrelevant. Accepted. 5 & 6. Accepted and incorporated herein. Accepted and incorporated herein except for the last sentence which, as to motive, is not supported by the evidence of record. Accepted and incorporated herein. 9 &1 0. Accepted and incorporated herein except for the last phrase starting, "without analyses... " which was not established. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 14-17. Accepted and incorporated herein. 18 & 19. Accepted but not probative of any matter in issue. 20-22. Accepted and incorporated herein. Accepted. Accepted 25-27. Accepted except for the characterization of FHFC's figures 28 & 29. Accepted and incorporated herein. 30 & 31. Accepted. 32-34. Accepted and incorporated herein. 35. Rejected as written. 36-40. Accepted in substance and incorporated herein. 41 & 42. Accepted and incorporated herein. 43 Accepted but suggested problems not identified or shown. Accepted. Rejected as not supported by evidence of record. Accepted and incorporated herein. Accepted and incorporated herein. 48 & 49. Accepted. 50. Accepted and incorporated herein. 51-53. Accepted, but descriptive comments are considered opinion rather than fact. 54. Accepted and incorporated herein. & 60. Accepted. & 57. Accepted and incorporated herein. Accepted and incorporated herein except for last phrase of last sentence. Accepted and incorporated herein. 61. Accepted and incorporated herein except for first sentence which is rejected. BY BON SECOURS: 1-3. Accepted and incorporated herein. 4. Considered as background and not fact. 5 - 8. Accepted and incorporated herein. 9 - 11. Accepted and incorporated herein. 12 - 14. Accepted and incorporated herein. 15. Accepted and incorporated herein. 16 - 20. Accepted and incorporated herein. 21 & 22. Accepted and incorporated herein. 23 & 24. Accepted as opinion and not as fact. 25. Rejected. 26 & 27. Accepted and incorporated herein. 28 & 29. Accepted as opinion and not as fact. 30 - 32. Accepted. 33 - 35. Accepted. 36. Accepted and incorporated herein. 37 - 39. Accepted. 40 - 43. Accepted and incorporated herein. First sentence rejected, second sentence accepted. Accepted. Rejected as not an appropriate Finding of Fact. 47 - 50. Accepted and incorporated herein. 51. Accepted and incorporated herein except for third sentence which is speculation 52 & 53. Accepted. Rejected as an unjustified conclusion. Rejected as not established. 56 & 57. Accepted as to allegations of proposal but conclusions rejected. 58 & 59. Accepted and incorporated herein. 60 & 61. Accepted and incorporated herein. 62 & 63. Rejected as speculation and unjustified conclusion drawn. 64. Accepted. 65 & 66. Accepted and incorporated herein. 67. Rejected as irrelevant without evidence of circumstances. 68 & 69. Accepted and incorporated herein. 70 & 71. Accepted. Accepted and incorporated herein. Budget fact accepted-balance rejected as conclusion. 74 & 75. Accepted and incorporated herein. 76 & 77. Accepted. 78 & 79. Accepted. 80 & 81. Accepted. Accepted. First sentence rejected as opinion-balance accepted. First sentence accepted and incorporated herein second sentence rejected as not being a Finding of Fact third sentence rejected as opinion only. 85 - 87. Accepted and incorporated herein. 88 & 89. Accepted. Accepted as different and pleasing but not necessarily better. Accepted. Rejected as not proven. Accepted. 94 & 95. Accepted as evidence of difference but not necessarily superiority. Accepted. Rejected as not proven. Accepted and incorporated herein. 99 & 100. Accepted. Details accepted Conclusion rejected. Accepted. First sentence accepted but not considered dispositive of any issue second sentence rejected as not proven. 104 & 105. Accepted. 106-108. Accepted as opinion evidence. 109. Accepted. 110-112. Accepted. 113-116. Accepted. 117. Irrelevant. 118-121. Accepted. 122-124. Accepted. 125-128. Accepted. 129. Accepted but discounted. 130 & 131. Accepted and incorporated herein. Rejected. Accepted and incorporated herein. 134-137. Accepted and incorporated herein. Rejected as contra to the evidence. Accepted. First sentence rejected-Second sentence accepted and incorporated herein. 141-143. Accepted. 144-146. Accepted except for the last sentence in the paragraph which is rejected. 147-149. Accepted. 150 & 151. Rejected as irrelevant and not supported by competent evidence. 152-154. Accepted and, except for 154, incorporated herein. Accepted. Accepted and incorporated herein. Rejected as contra to the evidence. Accepted. BY FHFC: 1 & 2. Accepted and incorporated herein. 3. Accepted and incorporated herein. 4 & 5. Accepted and incorporated herein. 6 & 7. Accepted and incorporated herein. 8. Accepted. 9 - 11. Accepted and incorporated herein. 12 & 13. Accepted. 14 & 15. Accepted. 16. Accepted. 17 & 18. Accepted and incorporated herein. 19. Accepted. 20-22. Accepted. 23-25. Accepted and incorporated herein. 26-28. Rejected as conclusions/opinions and not Findings of Fact. 29 & 30. Accepted but considered more as argument. 31-33. Accepted and, in part, incorporated herein. Accepted. Accepted. 36 & 37. Accepted and incorporated herein. 38-42. Accepted and incorporated herein. 43 & 44. Accepted and incorporated herein. Accepted. Accepted but also considered a comment on the evidence and not necessarily a Finding of Fact Accepted. 48 & 49. Accepted and incorporated herein. 50 & 51. Accepted. 52-54. Accepted and incorporated herein. 55-57. Accepted and incorporated herein. Accepted. Rejected as opinion and not fact. Accepted. Accepted. Accepted and incorporated herein. Accepted. 64 & 65. Accepted and incorporated herein. 66-68. Accepted. 69 & 70. Accepted and incorporated herein. 71. First sentence accepted-second sentence rejected as a recital of the evidence 72 & 73. Accepted and incorporated herein. COPIES FURNISHED: Donna Stinson, Esquire Moyle, Flanigan, Katz, Fitzgerald and Sheehan 118 North Gadsden Street Tallahassee, Florida 32301 Byron Matthews, Esquire Vicki Gordon Kaufman, Esquire H. Guy Collier, Esquire McDermott, Will & Emery North Monroe Street Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire Newell & Stahl, P.A. South Monroe Street Tallahassee, Florida 32301 John Stone, Esquire Neiman, Neiman, Stone & Spellman 1119 High Street Des Moins, Iowa 50310 Richard Patterson, Esquire 2727 Mahan Drive Tallahassee, Florida 32308
Findings Of Fact Since April 23, 1975, Tampa Health Care Center, Inc., d/b/a Habana Villa Health Care Center (the provider), has leased and operated a 150-bed skilled nursing facility which initially opened November 23, 1970. The land and physical plant of Habana Villa Health Care Center are owned by Twin Oaks Realty Company, a New York partnership. In July 1974, prior to the present provider's involvement, the land and physical plant of the present provider were leased and operated by an entity known as Habana Plaza Nursing Center, Inc. In July 1974, the then-operators of Habana Plaza Nursing Center were experiencing a financial crisis. Before, during and after July 1974, the then-operators of Habana Plaza Nursing Center were repeatedly cited for violations of both local laws and federal regulations governing the operation of nursing homes. In early 1975, Habana Plaza Nursing Center filed in bankruptcy in the United States District Court for the Middle District of Florida, Tampa Division (No. 75-241-T) and on April 4, 1975, was adjudicated bankrupt by default. In April 1975, Habana Plaza Nursing Center was providing nursing care for 137 patients of whom at least six (4 percent) were Medicare beneficiaries and at least 96 (70 percent) were beneficiaries of the Medicaid Program. Habana Plaza Nursing Center was located in Hillsborough County, Florida. In April 1975, Hillsborough County and the surrounding area suffered a severe shortage of nursing home beds, making placement of patients from Habana Plaza Nursing Center in other nursing homes very difficult if Habana Plaza Nursing Center was forced to close. Because of the severe shortage of nursing home beds in the Hillsborough County area, the Trustee in Bankruptcy, William Martin, was unable to place the patients of Habana Plaza Nursing Center in other Hillsborough County Nursing homes. Concern that the patients at Habana Plaza Nursing Center not be abruptly displaced and denied nursing care by the facility's impending bankruptcy caused the Bankruptcy Court, the Trustee in Bankruptcy and Twin Oaks Realty Company to vigorously pursue the possibility of finding a lessee for the facility who would be capable of operating it. In February 1975, Twin Oaks Realty Company and Tampa Health Care Center, Inc. negotiated tentative terms for Tampa Health Care Center, Inc. to take over and operate the facility. The tentative agreement was voidable at the option of Twin Oaks if all necessary permits, licenses, and authorizations sufficient to operate the premises as a nursing home facility were not obtained from Florida state officials. Because at least 74 percent of the patients treated at the former Habana Plaza Nursing Center were beneficiaries of either the Medicare or Medicaid Program, capital expenditure reimbursement for treatment of such patients was and is, as a practical matter, essential to continued operation of the premises as a nursing home. Section 1122, 42 USCA Section 1320a-1, approval is not a statutory prerequisite to continued operation of a nursing home. In the Spring of 1975, because of concern that the impending bankruptcy might force Habana Plaza Nursing Center to close, resulting in displacement of 123 patients, state officials form the Department of Health and Rehabilitative Services, but no employees of the Bureau of Community Medical Facilities Planning, assisted and encouraged the representatives of Tampa Health Care Center, Inc. to effect the takeover of the operations of Habana Plaza Nursing Center. Officials of the Florida Department of Health and Rehabilitative Services were intimately involved in and fully and completely informed of the efforts by both the Bankruptcy Court and Twin Oaks Realty Company to transfer and the efforts of Tampa Health Care Center, Inc. to assume operation of Habana Plaza Nursing Center, Inc., but no employees of the Bureau of Community Medical Facilities were ever so involved or advised. On April 14, 1978 Habana Plaza Nursing Center was adjudicated a bankrupt and the Court directed that the receiver transfer both the premises and the operations of Habana Plaza Nursing Center to Tampa Health Care Center, Inc. The lease between Twin Oaks Realty Company and the bankrupt Habana Plaza Nursing Center, Inc. tied rent to the United States Consumer Price Index so that the rent due for 1974 would have been $200,400; for 1975, $214,500 and for 1976, $224,850. The lease entered between Twin Oaks Realty Company and Tampa Health Care Center, Inc. required annual rent of $135,000 per year over a seven year term. (See Exhibits 2-3) As of this date of the lease between Twin Oaks Realty and Tampa Health Care Center, Inc., Tampa Health Care Center, Inc. owned, leased or operated no health care facilities as that term is defined in 42 CFR Section 100.102(e). Generally accepted accounting principles require that the lease of the facility by Tampa Health Care Center, Inc. be classified in the provider's financial statements as an expense of operation. (See Exhibits 5-6) The provider has always classified the rental expense in its financial statements and on its Medicare and Medicaid cost reports as an expense of operation and maintenance. The lease of the subject facility to Tampa Health Care Center, Inc. did not transfer ownership of the property to the lessee at the end of the lease term. The lease of the subject facility did not contain a bargain purchase option. On April 15, 1975, the day on which Tampa Health Care Center, Inc. leased the subject facility from Twin Oaks Realty Co., and at all times prior to April 17, 1975, the Office of Community Medical Facilities Planning, the designated Planning agency for the State of Florida, took the position that a transaction such as the lease between Tampa Health Care Center, Inc. and Twin Oaks Realty Co. was not subject to review under Section 1122, 42 U.S.C. Section 1320a-1, although both HEW and the Office of Community Medical Facilities Planning presently and since April 17, 1975, take the position that said lease transaction is subject to review under Section 1122. Even if personnel in the Bureau (now Office) of Community Medical Facilities Planning had been contacted directly and advised of the lease of the subject facility, that Bureau would have in all likelihood ruled that the transaction was not reviewable under Section 1122, 42 U.S.C. Section 1320a-1, and declined to review the lease under such statute. The lease of the subject facility to Tampa Health Care Center, Inc., resulted in no duplication, growth, expansion or modernization of the provider or health care facilities or services in the planning area. The lease of the subject facility reduces Medicare and Medicaid reimbursable costs by $79,500 in the first year of operation by Tampa Health Care Center, Inc., and by increasingly greater amounts in subsequent years. The subject facility was re-licensed by the Bureau of Health Facilities for 150 skilled and intermediate care beds effective April 23, 1975. The subject facility is located at 2916 Habana Way, Tampa, Hillsborough County, Florida, in health service area IV-1. In January 1978 Medicaid auditors for the State of Florida disallowed the $135,000 rental expense of the provider on the grounds that no Section 1122 approval had been obtained. Disallowance of the rental expense by the Medicaid auditors was the first notification to the provider by state officials that Section 1122 review may have been necessary. On March 23, 1978 the provider completed and returned the required applications for Section 1122 approval. (See Exhibit 7) On June 27, 1978 the Florida Gulf Health Systems Agency unanimously found that the lease of the subject facility conformed to relevant plans, criteria, policies and guidelines and approved the expenditure for reimbursement. The subject facility had an average occupancy rate of 98.3 percent in 1977, 97.5 percent in 1976. The Bureau of Community Medical Facilities Planning of the Department of Health and Rehabilitative Services was in April 1975 the designated planning agency for the State of Florida charged with responsibility for conducting Section 1122 capital expenditure review, pursuant to an agreement with the Federal Department of Health, Education and Welfare, said agreement being attached and made a part of this stipulation. The designated planning agency, the Office of Community Medical Facilities of the Department of Health and Rehabilitative Services, found the lease of the subject facility conformed to relevant plans, criteria policies and guidelines and approved the expenditure. Operation of the facility by Tampa Health Care Center, Inc., and implementation of effective management and cost control techniques resulted in increased utilization and a decrease in cost per patient day from over $25.00 in April 1975 to $22.49 by year end, and to under $20.00 for the six months ended September 30, 1976. The Federal Department of Health, Education and Welfare is aware of Tampa Health Care Center, Inc.'s alleged lack of timely notice to make a capital expenditure under Section 1122, 42 USCA Section 1320a-1 by virture of Atlanta, Georgia Regional HEW officials, John Forrest and Earl Wright, being copied with letters sent to Progressive Medical Group, Inc. and Tampa Health Care Center, Inc. informing them of preliminary determinations that Tampa Health Care Center, Inc. had violated the policy on lack of timely notice, with said letters dated 27 January 1978 and 31 January 1978 being attached and made a part of this stipulation. In order to obtain all necessary permits, licenses, and authorizations necessary for the continued operation of the nursing facility, representatives of Tampa Health Care Center, Inc. met in February 1975 with Joseph Thompson, Charles Carter and Joseph Dowless Licensure and Medicaid - Medicare certification officials of the Florida Department of Health and Rehabilitative Services, but not with employees of the Bureau of Community Medical Facilities Planning. State officials made no mention of the necessity of capital expenditure (Section 1122, 42 USCA Section 1320a-1) review despite numerous inquiries by Tampa Health Care Center, Inc., regarding the licenses, permits and authorizations necessary for continued operation of the premises as a nursing home. Representatives of Tampa Health Care Center, Inc. never specifically mentioned the requirements of Section 1122, USCA Section 1320a-1 in their contacts with State Officials prior to the lease of Habana Plaza Nursing Center. Tampa Health Care Center made a reasonable good faith effort as defined in the policy on lack of timely notice 42 CFR Section 100.108 (note p.1)(1977) to determine prior to leasing the subject facility whether the expenditure was reviewable under Section 1122, 42 USC Section 1320a-1. (See Exhibit 4) On April 23, 1975, contemporaneously with the adjudication of bankruptcy, Tampa Health Care Center, Inc. and Twin Oaks Realty Company, believing that all necessary licenses permits and approvals had been applied for or obtained, entered a lease transferring the premises and operations of Habana Plaza Nursing Center, Inc. to Tampa Health Care Center, Inc. Subsequent to the lease of the facility by Tampa Health Care Center, Inc., the local health planning agencies including the Bureau (now Office) of Community Medical Facilities Planning, at all times considered and treated the beds available in the facility in reviewing and in determining a need for proposals submitted by proponents of capital expenditures subject to Section 1122 42 USCA Section 1320a-1 review. Representatives of Tampa Health Care Center, Inc. met with officials of the Department of Health and Rehabilitative Services but not with any employees of the Bureau of Community Medical Facilities, prior to leasing the facility from Twin Oaks Realty Company and inquired regarding all licenses, permits and approvals necessary to operate the facility as a nursing home.
Recommendation That Respondent report to the Secretary of HEW that Petitioner failed to provide timely notice of its intent to make a capital expenditure, but recommend that reimbursement related to said expenditure not be withheld pursuant to current Department of HEW policy. DONE and ENTERED this 15th day of February, 1979, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Albert P. Lima, Esquire Dixon Building 620 Twiggs Street Tampa, Florida 33603 Malcolm J. Harkins, III, Esquire 1100 Watergate Office Building 2600 Virginia Avenue, N.W. Washington, D.C. 20037 Eric J. Haugdahl, Esquire Assistant General Counsel Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32301
