The Issue Whether there is a need for a 120 bed nursing home in Manatee County?
Findings Of Fact HCR is a health care corporation. Its sole business is designing and constructing nursing homes. During the twenty years it has been in the business, HCR has built approximately 180 nursing homes. HCR currently operates approximately 10,000 nursing home beds in twelve states including Florida. HCR filed an application for a certificate of need to construct a 120 bed nursing home in Manatee County. The Department denied this request. The only issue in this case is whether there is a need for a 120 bed nursing home facility in Manatee County. If such a need exists, the Department has agreed that HCR "meets all applicable statutory and rule criteria." The need for nursing home beds is determined under Rule 10-5.11(21), Florida Administrative Code. Rule 10-5.11(21)(a), Florida Administrative Code, contains the following Department goal: The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in subsections (21)(b), (c), (d), (e), (f), (g), and (h) of this rule. Rule 10-5.11(21)(b), Florida Administrative Code, provides for a determination of bed need three years into the future "according to the methodology specified under subparagraphs 1 through 10." Under the methodology provided in subparagraphs 1 through 10, need is determined on a subdistrict basis if a departmental service district has been divided into subdistricts. Manatee County is located in District 6. District 6 has been divided into subdistricts for purposes of determining nursing home bed need. Manatee County has been designated as a subdistrict. Rule 10-17.018, Florida Administrative Code. Therefore, nursing home bed need is to be determined under the methodology of Rule 10-5.11(21), Florida Administrative Code, for Manatee County. The parties have agreed and the evidence proves that there is no need for nursing home beds in Manatee County based upon an application of the methodology of Rule 10-5.11(21), Florida Administrative Code (hereinafter referred to as the "Formula"). In fact, an application of the Formula indicates that there will be an excess of 105 nursing home beds in Manatee County three years into the future based upon the following: 876 nursing home beds needed - (765 existing beds + 90 percent of 240 approved beds) = (105). Based upon an application of the Formula, there is clearly no need for any additional nursing home beds in Manatee County. This determination, however, does not totally resolve the issue in this case. Rule 10-5.11(21)(b), Florida Administrative Code, provides that the Department is to determine bed need according to the Formula "[i] n addition to other statutory and rule criteria . . . " Also, Rule 10-5.11(21)(b)10, Florida Administrative Code, provides in relevant part, the following: In the event that the net bed allocation is zero, the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained in the Department's Rule 10-5.11. Based upon these provisions of the Department's rules, it appears clear that if no nursing home bed need is shown to exist based upon an application of the Formula, other statutory and rule criteria should be considered, i.e., are there adequate like and existing services in the subdistrict? Rule 10-5.11(21)(b)10, Florida Administrative Code, however, goes on to provide: Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under this provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed, unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special services, home health services, adult day health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders, assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. As discussed under the Conclusions of Law, infra, this portion of the Department's rule (hereinafter referred to as the "Specific Exception") is not the only alternative method of demonstrating a need for nursing home beds when there appears to be no need based upon an application of the Formula. A need for nursing home beds can be demonstrated even if there is no need indicated under the Formula and the Specific Exception is not complied with based upon a consideration of other statutory and rule criteria. The Specific Exception is, however, the only method by which an applicant can demonstrate the need for a new nursing home facility based upon an access problem in the relevant service district. HCR has attempted to prove there is a need for its proposed 120 bed facility based in part upon a consideration of Rule 10-5.11(3)(a)-(d), Florida Administrative Code. This rule provides generally for a consideration of the extent to which all residents of the service area and, in particular, low income persons, the elderly and others, can access existing nursing home beds. In particular, HCR has attempted to prove that there is a need for a 120 bed nursing home because of alleged access problems under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code, during the "peak season" in Manatee County and alleged access problems of Medicaid patients, Alzheimer patients and respite care patients. As discussed under Conclusions of Law, infra, HCR has failed to comply with the Specific Exception in attempting to demonstrate need for its proposal under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code. Therefore, any evidence concerning access problems cannot be considered. HCR has also attempted to demonstrate need for its proposal based upon an application of Rules 10-5.11(4) and (6), Florida Administrative Code. These rules require a consideration of the availability of alternative, less costly, or more effective methods of providing the proposed health services and the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services. In particular, HCR has attempted to prove that like and existing services in Manatee County are not meeting the needs of Alzheimer patients and respite care patients and that there are no alternative, less costly or more effective methods of providing HCR's proposed services. If HCR had succeeded in demonstrating need for its proposal under these rules, a certificate of need would have been recommended even though the Specific Exception was not complied with. HCR has agreed that its proposed facility will meet the alleged need for Medicaid patients, Alzheimer patients and respite care patients in Manatee County by dedicating a thirty- bed wing to the care of Alzheimer patients, a thirty-bed wing to respite care patients and guaranteeing access to fifty percent of its beds to Medicaid patients. The following findings of fact are made with regard to the specific categories of persons allegedly in need of nursing home care. Although HCR's proposed findings of fact concerning access problems of these groups are not relevant because of its failure to comply with the Specific Exception, findings are made in an abundance of caution in case the Department or a Court ultimately determines that need can be demonstrated based upon access problems even when the Specific Exception is not complied with. Medicaid Patients. Manatee County generally experiences a "peak season" from November to March during which time nursing home bed use increases. The peak season in 1984-1985, however, was only about seven weeks. During the peak season there is some difficulty in placing Medicaid patients in nursing home beds in Manatee County. Between January, 1985 and March, 1985, the Department's Manatee County office placed twenty-two Medicaid patients in nursing home beds located outside of Manatee County. Some Medicaid patients have also been placed in adult congregate living facilities even though such placements are contrary to the prohibition against placing patients in need of skilled nursing home services in such facilities. L. W. Blake Memorial Hospital has also had to place patients in nursing homes on a temporary basis outside of Manatee County. During the past year, only twenty-four patients were placed in nursing homes outside Manatee County. The evidence does not establish how many of those patients were Medicaid patients, however. Alzheimer Patients. Alzheimer's disease is a disease which primarily afflicts persons in their 50's and 60's. It can, however, afflict younger persons also. The disease progresses through three stages and has no cure. During the first stage, the afflicted person experiences forgetfulness, impairment of judgement and inability to perform routine tasks. During the second stage, the afflicted person begins to wander. During the third and final stage, the afflicted person becomes dependent and incontinent. Currently there are approximately 160 Alzheimer patients in the five existing nursing homes in Manatee County. None of these nursing homes has a special program designed for Alzheimer patients. The evidence does not, however, support a finding that Alzheimer patients are not being adequately cared for. The evidence also does not establish how many persons in Manatee County are afflicted by Alzheimer's disease or the number of persons so afflicted who are in need of nursing home care. Generally, it is not until the third stage of the disease that nursing home care becomes necessary. Even then some Alzheimer patients are cared for in the home, private boarding facilities, or mental hospitals. The evidence does establish that no person afflicted with Alzheimer's disease has been refused admittance to a nursing home bed in Manatee County. The evidence also establishes that there is a 303 bed nursing home located in neighboring Hillsborough County which treats only Alzheimer patients. Hillborough County is located in District 6. Finally, the evidence demonstrates that Alzheimer patients would benefit from a special wing dedicated to the care of Alzheimer's disease in its final stages. Respite Care Patients. Respite care is the placement of a person in need of care under the supervision of another person for a short period of time. One purpose of this care is to free-up the primary care giver for a short period of time. The patient needs supervision or may need skilled nursing care. The length of the care can vary from a few hours to several weeks. HCR has proposed to establish a thirty-bed wing in its proposed facility that will be dedicated solely to the care of respite care patients in need of skilled nursing care for a period of one to eight weeks. None of the existing nursing homes in Manatee County provides the type of specialized wing HCR in proposing. The evidence establishes that there is a need for such a service in Manatee County. The evidence does not establish, however, how many nursing home beds are needed. There was testimony that there was a need for fifty nursing home beds. This testimony was, however, purely a "guess". Additionally, this estimate was not limited to the type of respite care HCR proposes to provide; the respite care giving rise to this guess included respite care for as short a period as three to five days. Short-term respite care needs are currently being met by existing programs in Manatee County. DHRS Exhibit 4 does not corroborate the fifty bed estimate because it is not at all clear what the data on this Exhibit means. Based upon the foregoing, there is a need for nursing home beds for Medicaid patients during the "peak season" and for respite care patients in need of skilled nursing care for a period of one to eight weeks because of an access problem. The need of these patients, however, has not been properly demonstrated pursuant to the Specific Exception and therefore cannot be considered. If this need could be considered even though the Specific Exception has not been complied with, the evidence fails to demonstrate how many additional beds are needed. Additionally, two new nursing homes have been approved for construction which will add 240 nursing home beds in Manatee County. The addition of these beds will eliminate some, if not all, of the need of Medicaid patients. There is a need for nursing home beds for respite care patients in need of skilled nursing care for a period of one to eight weeks because of the lack of adequate like and existing services. HCR has, however, failed to prove that this need is sufficient to justify its proposal. The evidence fails to demonstrate a need for Alzheimer patients sufficient to justify HCR's proposal based upon the care presently being given to Alzheimer patients in Manatee County. Although the ability of Alzheimer patients to access beds is not relevant because of HCR's failure to comply with the Specific Exception, the evidence also fails to demonstrate any access problem of Alzheimer patients. Alzheimer patients would benefit from a dedicated nursing home wing. This finding, however, based upon the other findings of fact in this case, does not justify HCR's proposal. Even if it were concluded that HCR does not need to comply with the Specific Exception in this case, the evidence does not support a finding that a 120 bed facility should be approved. The only evidence as to the total number of nursing home beds allegedly needed in Manatee County was presented by Mr. Jay Cushman, an expert in the field of health planning. According to Mr. Cushman there is a need for a minimum of 193 additional nursing home beds in Manatee County. Mr. Cushman's opinion was based upon the criteria of Rules 10- 5.11(3)(a)-(d), (4) and (6), Florida Administrative Code. In particular, Mr. Cushman relied upon the effect on nursing home bed use of Manatee County's peak season and the needs of Alzheimer patients, respite care patients and Medicaid patients. Mr. Cushman's opinion was based upon his determination that there is a need for a total of 1,174 nursing home beds in Manatee County. This figure was arrived at by adding Mr. Cushman's projected need for Medicaid patients (40 beds), Alzheimer patients (121 beds), respite care patients (50 beds) and the current peak census of nursing homes in Manatee County (718 beds). The sum of these figures was multiplied by 1.137 (to account for population growth in Manatee County over the next three years) and the result was divided by ninety percent (to account for a maximum occupancy rate of ninety percent). Mr. Cushman's determination of need, to the extent his figures are based upon purported access problems associated with Medicaid patients, Alzheimer patients, respite care patients and persons in need of care during the peak season, should not and cannot be considered because of the lack of compliance with the Specific Exception. Since Mr. Cushman did take into account alleged access problems without complying with the Specific Exception in arriving at his conclusion that 193 nursing home beds are needed in Manatee County, Mr. Cushman's opinion of need is rejected. Even if it was proper for Mr. Cushman to consider access problems despite the failure to comply with the Specific Exception, the weight of the evidence does not support Mr. Cushman's opinion. In arriving at his estimate of the need for Medicaid patients, Mr. Cushman relied in part upon the fact that twenty-four patients (twenty-five according to Mr. Cushman) had been placed in nursing homes located out of Manatee County by L. W. Blake Memorial Hospital personnel. The evidence, however, does not prove that all of these patients were Medicaid patients. Mr. Cushman's determination that 50 beds are needed for respite care patients was based upon on the opinion of Mr. Russell Kitching. Mr. Kitching's estimate was rejected, supra. The most significant problem with Mr. Cushman's determination of bed need is his estimate of the need for Alzheimer's patients. The evidence does not support a conclusion that there is a need for additional nursing home beds for Alzheimer's patients. The evidence proved that no Alzheimer's patient in Manatee County has been denied access to a nursing home. Finally, Mr. Cushman's opinion is contrary to, and did not take into account, the fact that Manatee County is projected to have an excess of 105 nursing home beds under the Formula. Based upon the foregoing, it is concluded that HCR has failed to prove that there is a need for a 120 bed nursing home in Manatee County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by HCR for a 120-bed nursing home to be located in Manatee County be denied. DONE and ENTERED this 2nd day of August, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 2nd day of August, 1985. COPIES FURNISHED: Jean Laramore, Esquire G. Steven Pfeiffer, Esquire LARAMORE & CLARK, P.A. The Bowen House 325 N. Calhoun Street Tallahassee, Florida 32301 John F. Gilroy, Esquire CULPEPPER, TURNER & MANNHEIMER P. O. Drawer 11300 Tallahassee, Florida 32302 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Whether the applications for certificates of need filed by Petitioners Alachua General Hospital, Inc., Oakhurst Manor Nursing Corporation and Florida Convalescent Centers, Inc., meet the requirements of law and should be approved based on application of the statutory review criteria or upon other considerations.
Findings Of Fact Oakhurst Manor Nursing Center is a community-based skilled nursing facility of 120 beds located in Ocala, Florida. Oakhurst has a history of high occupancy and is a superior rated facility. At hearing, Oakhurst acknowledged a number of inaccuracies in its application. Some staffing ratios were misstated. The data utilized to calculate financial ratios is different from the data set forth in the combined statement. The physical location of the facility was incorrectly identified. The application misstated the existing number of beds in the facility. Section 408.035(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. As to the application of Oakhurst, utilization rates indicate that need exists for additional community nursing care services in Marion County. Oakhurst experiences full occupancy. Projected occupancy levels set forth in the Oakhurst application are reasonable. The evidence establishes that the need for additional beds exists and that the application of Oakhurst is consistent with the applicable district and state health plans. Section 408.035(1)(b), Florida Statutes, requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant. Approval of the Oakhurst application will increase the availability of community nursing care at a superior rated facility and will meet the projected need determined by the AHCA's determination of the fixed pool. Section 408.035(1)(c), Florida Statutes, requires consideration of the applicant's ability to provide quality of care and the applicant's record of providing quality of care. Oakhurst is a superior rated facility with a history of providing high quality care. There is no indication that the 60 bed unit addition will result in a decline in quality of care. Section 408.035(1)(e), Florida Statutes, requires consideration of the probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. The evidence fails to establish that approval of the Oakhurst application will result in probable economies and improvements in service from joint, cooperative, or shared health care operations. Section 408.035(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal. Since purchase by the current owners, Oakhurst's financial performance has been satisfactory. Losses experienced during the two years following the purchase are attributed to accelerated depreciation. The facility is currently profitable. Although there was evidence that insufficient funds are being generated to maintain the facility's physical plant, the evidence is insufficient to establish that Oakhurst is unable to maintain the facility. Projected occupancy rates are reasonable. Funds for capital and operating expenditures are available to Oakhurst. Notwithstanding current operation of the facility and availability of funds, Oakhurst's proposal is not financially feasible. Oakhurst's revenue projections are not reasonable. This finding is based on the credible testimony of expert Charles Wysocki. Mr. Wysocki opined that the Oakhurst application is not financially feasible in the short and long term and that the financial projections in the Oakhurst application are not reliable. Mr. Wysocki's testimony was credible and persuasive. Oakhurst's current Medicaid rate is $71.68. Oakhurst application Schedule 10 projects Medicaid rates as follows: $77.41 during the construction year; $104.69 during operation year one; and $99.75 during operation year two. Oakhurst's projected Medicaid rates are unreasonable. Projected Medicaid rates are overstated and do not appear to account for Medicaid program rate ceilings. Medicaid program payment restrictions will not permit payment of such rates during years one and two. Oakhurst's current Medicare rate is $186.87. Oakhurst application Schedule 10 projects Medicare rates as follows: $340 during the construction year; $361 during operation year one; and $328 during operation year two. Oakhurst's projected Medicare rates are overstated and unreasonable. Medicare program payment restrictions will not permit payment of such rates. Oakhurst's application overstated revenue projections related to private pay patients. Further, according to Mr. Wysocki, Oakhurst has underestimated expenses related to depreciation, amortization and property taxes. Section 408.035(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. Approval of Oakhurst's application can be expected to have a positive competitive impact on the supply of services being proposed based on the fact that the addition of beds will increase the supply of appropriate placements. Section 408.035(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Although Oakhurst has historically participated in the Medicaid program, Oakhurst is currently not subject to Medicaid participation requirements. If the CON at issue in this proceeding is awarded, Oakhurst will be required to provide at least half of the expanded facility's 160 beds to Medicaid patients. Section 408.035(2)(b), Florida Statutes, requires consideration of whether existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. To the extent that such information is available, there is no evidence that these services are used inappropriately or inefficiently. Section 408.035(2)(d), Florida Statutes, requires consideration of whether patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. As to community nursing home beds, the AHCA has determined that a need exists for additional capacity in the planning area's nursing homes. It is likely that failure to meet projected need will result in difficulty in locating appropriate placements. The state health plan sets forth "preferences" which are considered in comparative evaluations of competing CON applications. Preference is given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 percent. The occupancy rate is higher in the Alachua planning area than in the Marion planning area. Oakhurst is in the Marion planning area and has the highest occupancy in the planning area. Oakhurst meets this preference. Preference is given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level care systems. The Marion County Medicaid participation average is 72.93 percent. Oakhurst's application subjects the facility to a 50 percent Medicaid average. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Oakhurst intends to operate a separate 20 bed subunit specializing in skin and wound care. A distinct subacute care program targeted at a specific patient population is a specialized service. Oakhurst does not have specialized Alzheimer services. Oakhurst does not provide care to AIDS patients. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide a continuum of services to community residents, including but not limited to, respite care and adult day care. The Oakhurst proposal does not address respite care or adult day care. Oakhurst does not meet this preference. Preference is given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual room temperature controls, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. Oakhurst's application meets this preference. Preference is given to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. No party proposes to offer any therapeutic programs which may credibly be identified as "innovative." Preference is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are be considered for facilities proposing to serve upper income residents. Oakhurst's projected rates exceed the highest Medicaid per diem rate in the subdistrict, therefore Oakhurst does not meets this preference. Preference is given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. HRS' evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida. AHCA is the successor agency to HRS. All applications meet this preference. Preference is given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents than other applicants shall be given preference. Although FCC and Oakhurst propose reasonable staff levels, Alachua's hospital-based unit, by virtue of location, more closely meets this preference than FCC or Oakhurst. Preference is given to applicants who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. These professionals include physical therapists, mental health nurses, and social workers. All applications meet this preference. Preference is given to applicants who document plans to will ensure residents' rights and privacy, to use resident councils, and to implement a well-designed quality-assurance and discharge-planning program. All applications meet this preference. Preference is given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Oakhurst has higher administrative costs and lower resident care costs compared to the average nursing home in the district. Oakhurst does not meet this preference. The district health plan sets forth preferences which are to be considered in comparative evaluations of CON applications. The first applicable district preference is directed toward providing geographic access to nursing home beds. None of the applications meet this preference. The second applicable district preference requires consideration of existing bed utilization. Based on the percentage of elderly population and utilization of existing beds in each area, relative priorities are established. Oakhurst is in a "high need" planning area. Existing nursing homes in the Marion planning area are experiencing occupancy levels between 80 and 90 percent placing Oakhurst in a "moderate occupancy" planning area. According to the preference matrix set forth in the district plan, Oakhurst is in a priority two planning area (high need and moderate occupancy.) The evidence establishes that Oakhurst meets this preference. The third preference relates to the conversion of acute care beds to skilled nursing use. Oakhurst does not intend to convert underutilized hospital beds into skilled nursing beds for step-down or subacute care. The fourth and fifth preferences apply to new facilities of at least 60 beds. No application meets these preferences. The sixth preference states that priority consideration should be given to facilities which propose to offer specialized services to meet the needs of the identified population. Oakhurst proposes to offer a subunit specializing in skin and wound care. Oakhurst meets this preference.
Recommendation RECOMMENDED that a Final Order be entered determining the application of Oakhurst Manor Nursing Center for Certificate of Need #7326 to be incomplete and withdrawn, GRANTING the application of Florida Convalescent Centers, Inc., for Certificate of Need #7325 for the 60 remaining beds in the applicable fixed need pool and GRANTING the application of Alachua General Hospital for Certificate of Need #7320 to convert 30 existing acute care beds into a skilled nursing unit. DONE and RECOMMENDED this 5th day of October, 1994, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 5th day of October, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-6264 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Alachua General Hospital, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 15. Rejected, irrelevant as to the AHCA's review of the proposals prior to notice of intended award. 16, 20. Rejected, unnecessary. 21-26. Rejected, subordinate. 30. Rejected, recitation of testimony is not finding of fact. 32, 34. Rejected, subordinate. 42-50. Rejected, not supported by the evidence. The preferences set forth in the proposed finding are not those contained within Alachua's exhibit #1, which has been utilized in this Recommended Order. 52. Rejected, immaterial. Rejected, recitation of testimony is not finding of fact. Rejected, evidence fails to establish that therapy offered is "innovative." 62. Rejected, cumulative. 63-64. Rejected, subordinate. 72. Rejected as to SAAR, unnecessary. 73-76. Rejected, recitation of testimony is not finding of fact. Oakhurst Manor Nursing Corp.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 4,6, 8-51. Rejected, unnecessary, application rejected as incomplete and withdrawn from consideration. 52-54, 56-58. Rejected, irrelevant. Although it is true that the application contained the combined audited financial statements for the Harborside facilities, such statement fails to meet the requirement that the application contain an audited financial statement for the applicant. Harborside is not the applicant. 55. Rejected, irrelevant. The agency has cited no authority which would permit the waiver of the statutory requirement. 59. Rejected, immaterial. The document was admitted to demonstrate that the material required by law was not submitted with the CON application. Further consideration constitutes an impermissible amendment to the CON application and is rejected. Florida Convalescent Centers, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, unnecessary. 5-91. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 93. Rejected, unnecessary. 102-143. References to Oakhurst application, rejected, unnecessary. Agency for Health Care Administration's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, irrelevant. 4-5. Rejected, unnecessary. 6. Rejected, subordinate. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Rejected, not supported by the greater weight of evidence. 13-16. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 19. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the greater weight of the evidence, wherein the CON application sets forth such information. Rejected, unnecessary. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Comparison is inappropriate. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence. The CON application sets forth the information which the agency asserts was not provided. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence as related to applicable criteria for review set forth in the statute. 35. Rejected, not supported by credible evidence or the administrative rules cited in the proposed finding of fact. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Dean Bunton, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN 204 South Monroe Street Tallahassee, Florida 32302 Gerald Sternstein, Esquire Frank Rainer, Esquire RUDEN, BARNETT, McCLOSKY, SMITH 215 South Monroe Street Barnett Bank Building, Suite 815 Tallahassee, Florida 32301 Alfred W. Clark, Esquire 117 South Gadsden Street, Suite 201 Tallahassee, FL 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the stipulation of facts "entered into by all parties, the following relevant facts are found: Along with six other applicants, the petitioner, Health Quest Corporation, d/b/a Lake Pointe Woods Health Center, and the respondent, Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center, submitted applications for a Certificate of Need to construct and operate new nursing homes in Sarasota County, In June of 1982, the respondent Department of Health and Rehabilitative Services (HRS) determined to issue the application of Sarasota Health Care Center and deny the remaining seven applications. For the purposes of this proceeding, the parties have stipulated that there is a need for at least a 120-bed skilled and intermediate care nursing home in the Sarasota, Florida area. In November, 1982, respondent HRS adopted Rule 10- 5.11(21) , Florida Administrative Code, which provides a formula methodology for determining the number of nursing home beds needed in areas throughout the State. Briefly summarizing, this formula begins with a bed to population ratio of 27 per thousand population age 65 and over, and then modifies that ratio by applying a poverty ratio calculated for each district. The theoretical bed need ratio established for Sarasota County by this portion of the Rule's formula is 23.2 nursing home beds per thousand elderly population projected three years into the future. The population figures to be utilized in the formula are the latest mid-range projections published by the Bureau of Economic and Business Research (BEBR) at the University of Florida. After determining the theoretical need for nursing home beds in an area, the Rule purports to determine the actual demand for beds by determining the current utilization of licensed community nursing home beds, establishing a current utilization threshold and, if this is satisfied, applying a prospective utilization test too determine the number of beds at any given time. Applying the formula methodology set forth in Rule 10- 5.11(21) to Sarasota County results in a finding that there are currently 807 excess nursing home beds in that County. The need for sheltered nursing home beds within a life care facility are considered separately in Rule 10-5.11(22), Florida Administrative Code. Generally speaking, need is determined on the basis of one nursing home bed for every four residential units in the life care facility. Elderly persons 75 years of age and older utilize nursing homes to a greater extent than those persons between the ages of 65 and 74. Persons under the age of 65, particularly handicapped individuals, also utilize nursing home beds. The formula set forth in Rule 10-5.11(21) does not consider those individuals under the age of 65, and it does not provide a weighted factor for the age 75 and over population. In the past, the BEBR mid-range population projections for Sarasota County, compared with the actual census reached, have been low. Petitioner Health Quest, an Indiana corporation, currently owns and/or operates some 2,400 existing nursing home beds in approximately 13 facilities in Indiana. It holds several Certificates of Need for nursing homes in Florida and construction is under way. Petitioner owns 53 acres of land on the South Tamiami Trail in Sarasota, upon which it is constructing a 474-unit retirement center. It seeks to construct on six of the 53 acres a 120-bed nursing home adjacent to the retirement center. Of the 120 beds, it is proposed that 60 will be for intermediate care and 60 will be for skilled care. The facility will offer ancillary services in the areas of speech, hearing, physical, occupational, and recreational therapy. Thirty-five intermediate care beds would be classified as beds to be used for Medicaid recipients and the facility would be Medicare certified. Retirement center residents will have priority over nursing home beds. The total capital expenditure for the petitioner's proposed nursing home project was estimated in its application to be $3.1 million, with a cost per square foot of $46.29 and a cost per bed of approximately $26,000,00. As of the date of the hearing, the estimated capital expenditure for the petitioner's project as $3.9 million. The respondent Quality Health Facilities, Inc., d/b/a Sarasota Health Care Center (QHF), is a Mississippi corporation and owns nursing homes in Tennessee, North Carolina and Haines City, Florida, the latter site having been opened in August of 1983. It also holds three other outstanding Certificates of Need. QHF proposes to construct a 120-bed nursing home containing intermediate and skilled care beds which will be equally available to all members of the community. It is anticipated that it will have approximately 65 percent Medicaid usage and 5 percent Medicare usage. Though it has not yet selected its site, QHF plans to utilize a four-acre site near the City of Venice in Sarasota County. At the time of the application, the total capital expenditure for QHF's proposed project was estimated to be $2.3 million. Its construction costs were estimated at $1.16 million or $33.14 per square foot. QHF's recently constructed Haines City nursing home facility was completed at a construction cost of $1.22 million, or $31.00, per square foot. The Sarasota County facility will utilize the same basic design as the Haines City facility. At the current time, the cost of construction would be increased by an inflation factor of about ten percent. As of the date of the hearing, the projected capital expenditure for QHF's Sarasota County proposed facility was approximately $2.6 million or about $21,000.00 per bed. The owners of QHF are willing and able to supply the necessary working capital to make the proposed nursing home a viable operation. As depicted by the projected interest and depreciation expenses, the QHF facility will have lower operating expenses than the facility proposed by petitioner, Health Quest. In Sarasota County, there is a direct correlation between high Medicaid utilization and high facility occupancy. The long term financial feasibility of a 120-bed nursing home in Sarasota County is undisputed, as is the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services in the health service area.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Health Quest Corporation d/b/a Lake Pointe Woods Health Care, Inc. for a Certificate of Need to construct a 120-bed nursing home in Sarasota County be DENIED. It is further RECOMMENDED that the application of Quality Health Facilities Inc. d/b/a Sarasota Health Care Center for a Certificate of Need to construct a 120-bed nursing home facility in Sarasota County be GRANTED. Respectfully submitted and entered this 31st Day of October, 1983, in Tallahassee, Florida. DIANE D. TREMOR, 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 31st day of October, 1983. COPIES FURNISHED: John M. Laird, Esquire 315 West Jefferson Blvd. South Bend, Indiana 46601 John T. C. Low, Esquire Paul L. Gunn, Esquire Low & McMullan 1530 Capital Towers Post Office Box 22966 Jackson, Mississippi 39205 James M. Barclay, Esquire Assistant General Counsel 1317 Winewood Blvd. Suite 256 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health & Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact Procedural. 1. Meridian, National, HBA and ten other applicants filed certificate of need applications with the Department in the October, 1987, nursing home bed certificate of need review cycle of the Department for Subdistrict 4 of District This area includes Flagler and Volusia Counties, Florida. Each of the applicants involved in these cases filed a letter of intent with the Department and the District 4 Local Health Council within the time required for the filing of letters of intent for the October, 1987, nursing home bed certificate of need review cycle. Each of the applicants involved in these cases filed their certificate of need applications within the time required for the filing of certificate of need applications for the October, 1987, nursing home bed certificate of need review cycle. The applications were deemed complete by the Department. The Department comparatively reviewed the applications of the applicants involved in these cases and those of ten other applicants. Based upon this review the Department issued a State Agency Action Report for the October, 1987, nursing home bed review cycle (hereinafter referred to as the "SAAR") on February 18, 1988. The SAAR was published by the Department in the Florida Administrative Weekly on March 4, 1988. In the SAAR the Department proposed to approve the certificate of need application filed by HBA and to deny all other applications. Ten of the applicants whose certificate of need applications were denied by the Department filed Petitions pursuant to Section 120.57(1), Florida Statutes, challenging the Department's proposed action. All of the Petitioners except the two Petitioners in these cases and HCR withdrew their Petitions prior to the formal hearing of these cases. HCR participated in the formal hearing of these cases but withdrew its Petition prior to the issuance of this Recommended Order. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for nursing home beds to be located in Flagler and Volusia Counties. Meridian. Meridian, Inc., is a corporation headquartered in Towson, Maryland. The stock of Meridian, Inc., is owned by five individuals. Volusia Meridian Limited Partnership (hereinafter referred to as the "Partnership") is a Maryland limited partnership authorized to conduct business in Florida. Meridian, Inc., is the Partnership's general partner. The Partnership owns a nursing home in Ormond Beach, Florida. The Ormond Beach nursing home is leased to Meridian Nursing Centers, Inc. For the past twenty years, Meridian has owned, operated, developed and managed long-term health care facilities, retirement communities and other health care services for the elderly. Meridian owns and operates thirty-three facilities, in five States. These facilities have approximately 4,800 beds. In Florida, Meridian owns nursing homes in Lakeland, Plantation and Ormond Beach. As of the date of the formal hearing, Meridian had two other facilities under construction in Florida: one located in Longwood, Florida; and the other located in Melbourne, Florida. National. National is a publicly traded Delaware limited partnership, authorized to conduct business in Florida. National's principal offices are located in Murfreesboro, Tennessee. National was created in 1971 with the purchase of fourteen existing nursing homes located in Tennessee, Kentucky, and Georgia. National now operates seventy nursing homes and health care centers in ten different States. Twenty-two of these homes and health care centers are managed, but not owned, by National. National also operates four retirement complexes, eighteen home health agencies and seven to ten specialized Alzheimer's units. In Florida, National owns two health care centers and manages eighteen centers owned by other companies. None of these facilities are located in Flagler or Volusia Counties. HBA. HBA is a Florida corporation engaged in the business of developing, constructing and operating nursing homes. The principals of HBA have owned and operated nursing homes for approximately twenty years and in Florida for approximately fifteen years. HBA's corporate headquarters are located in Ft. Lauderdale, Florida. HBA owns or operates twenty-four nursing homes located in Florida, New Jersey, Pennsylvania and Washington D.C. In Florida, HBA owns or operates six nursing homes. They are located in New Smyrna Beach, Ft. Lauderdale, Plantation, Tamarac and Miami. The New Smyrna Beach nursing home, Ocean View Nursing Home (hereinafter referred to as "Ocean View"), is located in southern Volusia County. The Proposals. Meridian's Proposal. Meridian's Ormond Beach nursing home is located in northeast Volusia County. This facility consist of 60 nursing home beds. It began operation in November, 1987. In this proceeding, Meridian is seeking approval of the addition to its Ormond Beach nursing home of an additional 60 nursing home beds. Meridian is proposing the construction of a 14,531 square foot (329 square feet per bed) addition to its existing Ormond Beach nursing home. The total size of the Ormond Beach facility will be 39,000 gross square feet if Meridian's proposal is approved. The total proposed cost of Meridian's project is $1,247,800.00. The total project cost of the resulting 120-bed Ormond Beach facility will be $4,262,361.00. National's Proposal. In this proceeding, National is seeking approval of a certificate of need authorizing the construction and operation of an 80-bed nursing home to be located in the Palm Coast area of Flagler County, Florida. The exact location of the facility has not been identified by National. National is proposing the construction of a facility consisting of approximately 44,183 gross square feet (552 square feet per bed). The total proposed cost of National's project is $3,786,846.00. HBA'S Proposal. HBA currently owns and operates Ocean View. Ocean View is located in southeast Volusia County. Ocean View currently is licensed to operate 179 nursing home beds. In this proceeding, HBA is seeking approval of the addition to Ocean View of 60 nursing home beds. HBA is proposing the construction of an 18,000 gross square foot (263 square feet per bed) addition to Ocean View. The total size of Ocean View will be 63,000 gross square feet if HBA's proposal is approved. The total proposed cost of HBA's project is Section 381.705(1)(a), Florida Statutes. Numeric Need. Numeric need for additional nursing home beds is determined pursuant to the need methodology provided in Rule 10-5.011(1)(k), Florida Administrative Code (hereinafter referred to as the "Need Methodology"). The Department determines the need for additional nursing home beds by applying the Need Methodology for "planning horizons" three years into the future from the certificate of need batching cycles. For the batching cycle involved in these cases, the Department published pursuant to Rule 10-5.008(2), Florida Administrative Code, the net number of additional nursing home beds, the "fixed need pool," in the Florida Administrative Weekly, for the first time. In these cases, the Need Methodology must be applied to determine the fixed need pool for the July, 1990, planning horizon for Flagler and Volusia Counties. These Counties make up Subdistrict 4 of the Department's District 4. Initially the Department determined that the fixed need pool involved in these cases was zero. Pursuant to Department policy, the Department published a corrected fixed need pool during the grace period of Rule 10- 5.008(1)(b), Florida Administrative Code, on September 18, 1987. Based upon the corrected fixed need pool, the Department determined that there was a need for 80 additional nursing home beds for Subdistrict 4 of District 4. No point of entry was provided by the Department for challenging this fixed need pool. The Department's calculation of a fixed need pool of 80 nursing home beds was based upon a misapplication of the Need Methodology by the Department. Based upon a proper application of the Need Methodology there is a need for 68 additional nursing home beds for the planning horizon at issue in these cases. The applicants involved in these cases filed their applications in reliance upon the Department's published fixed-need pool of 80 additional nursing home beds. The proper components of the Need Methodology for determining the gross number of nursing home beds needed for District 4 in July, 1990, are as follows: The projected population age 65-74 in District 4 for July, 1990, is 125,990 (POPA); The projected population age 75 and older in District 4 for July, 1990, is 91,109 (POPB); The population age 65-74 in District 4 in July, 1987, was 113,083 (POPC); The population age 75 and older in District 4 in July, 1987, was 77,867 (POPD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 (LB); The estimated bed rate for the population aged 65-74 of District 4 is 0.01034836 (BA); The estimated bed rate for the population aged 75 and older of District 4 is 0.06209018 (BB); and The total number of nursing home beds needed for District 4 in July, 1990, is 6,961 beds (A). The proper components of the Need Methodology for allocating the gross number of nursing home beds needed for District 4 in July, 1990, to Subdistrict 4 are as follows: The number of licensed beds in Subdistrict 4 as of July 1, 1987, was 2,290 beds (LBD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 beds (LB); The occupancy rate of Subdistrict 4 was 85.83% (OR); and The gross number of nursing home beds allocated to Subdistrict 4 is 2,532 beds (SA). Rule 10-5.011(1)(k)2.g., Florida Administrative Code, provides the following with regard to determining the number of licensed nursing home beds to be taken into account in calculating gross bed need for the batching cycle involved in these cases: [B]ed rates established prior to the second batching cycle letter of intent deadline shall be calculated on the number of licensed community nursing ads and the population projections as of July 1... Once the gross number of nursing home beds needed in Subdistrict 4 for July, 1990, is determined, the net number of beds needed is determined by subtracting the total number of licensed beds and 90 percent of approved beds in the Subdistrict from the gross number of beds needed. Rule 10-5.011(1)(k)2.i., Florida Administrative Code, provides the manner in which net bed need is to be determined. In particular, this Rule provides the following: The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987; ... The number of licensed beds in Subdistrict 4 as of August 1, 1987, was 2,410 beds. The number of approved licensed beds in Subdistrict 4 as of August 1, 1987, was 60 beds. The increase in licensed beds in Subdistrict 4 from 2,290 beds as of July 1, 1987, to 2,410 beds as of August 1, 1987, was caused by the licensing of the approved 120-bed Indigo Manor nursing home owned by Health Care and Retirement Corporation of America on July 21, 1987. It is not inconsistent for the Department to use the number of licensed nursing home beds as of July 1 for purposes of determining gross bed need and August 1 for calculating net bed need. The use of these dates by the Department is consistent with good health planning and the requirements of the Need Methodology. The State Health Plan. The Florida State Health Plan contains the general goals of fostering cost containment and developing an adequate supply of accessible and appropriately utilized long-term care health services. Each of the applicants will increase the accessibility of nursing home beds and are proposing appropriate utilization of health services. HBA's proposal will enhance the accessibility of nursing home beds in southeast Volusia County. The District Health Plan. The 1987 update to the 1986 district health plan for Subdistrict 4 of the Department's District 4, contains recommendations to be considered in determining community nursing home care bed need. These recommendations, and their application, are as follows: If the state determines that Subdistrict 4 is eligible for additional beds, these beds should be awarded to the Flagler Beach/Palm Coast area of Flagler County if the occupancy rate of Meadowbrook Manor meets or exceeds 85 percent occupancy at the time of CON decision and if it could be shown that the level of occupancy is likely to continue. The average occupancy rate for Meadowbrook Manor for the period of January 1, 1987, through June 30, 1987, was 58 percent. Meadowbrook has never achieved an 85 percent occupancy rate as of the date of the formal hearing of these cases. At the time of the "CON decision" in these cases, Meadowbrook had not achieved an 85 percent occupancy. This recommendation, therefore, does not apply. If a high rate of occupancy at Meadowbrook Manor in Flagler County does not materialize and if the occupancy rate at Ocean View Nursing Home in southeast Volusia County continues at 85 percent or higher and it could be verified that it will remain at a high rate, then 60 nursing home beds should be awarded in the New Smyrna Beach/Edgewater area of southeast Volusia County. The CON applicant must be willing to accept 50 percent Medicaid patients. The remaining portion should be awarded in West Volusia County. The average monthly occupancy of Ocean View for the period of January 1, 1987, through June 30, 1987, was 86 percent. Since September, 1987, the occupancy rate at Ocean View has been 94 percent or higher. This high rate of occupancy should continue. HBA proposes to accept 50 percent Medicaid patients and proposes to add its sought after nursing home beds to the New Smyrna Beach/Edgewater area of southeast Volusia County. HBA is the only applicant that meets this recommendation. If the conditions in Nos. 1[a] and 2[b] are not met, the state should award all beds to West Volusia. The conditions of 2[b] have been met. Therefore, this recommendation does not apply. No nursing home beds should be awarded to East Volusia County out of the New Smyrna Beach/Edgewater area. Refer to recommendation 2[b] above. The Meridian proposal seeks to add beds to its facility located in East Volusia County outside of the New Smyrna/Edgewater area. Meridian's proposal is, therefore, inconsistent with this recommendation. HBA's proposal is consistent with the recommendations of the updated 1986 district health plan. Meridian's and National's proposals are not consistent with these recommendations. The 1988 district health plan does not contain the specific recommendations concerning the allocation of nursing home beds within Subdistrict 4 of District 4, quoted above. The specific recommendations concerning where beds should be located within Subdistrict 4 of District 4 were eliminated in response to a suggestion by the Department that the recommendations were too specific and did not allow more flexibility. Need for Services. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. The evidence did not prove that any of the applicants are proposing services not being provided in Subdistrict 4 of District 4. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Subdistrict 4 (consisting of Flagler and Volusia Counties) of District 4 are not available, efficient, appropriate, accessible, adequate or providing quality of care, except to the extent that existing services cannot meet the need for additional nursing home beds in the subdistrict. The accessibility of nursing home beds in southeast Volusia County has been restricted since September, 1987. Ocean View's occupancy during this period of time has been at or above 95 percent. Nursing home beds in eastern Volusia County have been at 75 percent occupancy. Meadowbrook Manor, located in Bunnell, Flagler County, has not achieved an occupancy rate of 75 percent since it opened in November, 1985. Meadowbrook Manor is a 100-bed nursing home. It has been experiencing one of the lowest, if not the lowest, occupancy rates of all nursing homes in Subdistrict 4. Although the evidence proved that Meadowbrook Manor has experienced difficulties in attracting residents, the evidence failed to prove that Meadowbrook Manor is not an appropriate, available and accessible nursing home or that the difficulties experienced by Meadowbrook Manor will continue in the future. Section 381.705(1)(c), Florida Statutes. Meridian. Meridian's licensed nursing home facility in Plantation, Florida, is currently rated superior. Meridian has been informed by the Department that its nursing home facility in Ormond Beach will be rated superior. Meridian's facility in Lakeland has not been in operation long enough to be eligible for a superior rating. Therefore, the Lakeland nursing home has been rated standard. Meridian will provide extensive training for its staff at its Ormond Beach nursing home. Meridian will provide staff for the Ormond Beach facility in excess of the staffing levels required by the Department. Meridian has an extensive quality assurance program, including its Quality of Life Program. Meridian's findings of fact numbers 5-12 and 14-22 are hereby adopted and incorporated herein by reference. Meridian proposes to provide sufficient services, safeguards and staff. Meridian should be able to provide adequate quality of care in its facility. National. Four of National's fourteen existing nursing home facilities in Florida have been rated superior. The other ten facilities have be rated standard. National has a policy of seeking accreditation by the Joint Commission for Accreditation of Health Care Organizations. National will provide staff for its proposed facility in excess of the staffing levels required by the Department. National has an extensive quality assurance program. National's finding of fact number 24a-g and k is hereby adopted and incorporated herein by reference. National proposes to provide sufficient services, safeguards and staff. National should be able to provide adequate-quality of care in its proposed nursing home facility. HBA. Four of HBA's seven nursing home facilities in Florida have been rated superior. The other three facilities have been rated standard. Ocean View has been rated a superior facility by the Department for the past five years. HBA will provide extensive training and development for its staff at Ocean View. HBA proposes to provide sufficient services, safeguards and staff. HBA should be able to provide adequate quality of care at Ocean View. Section 381.705(1)(e), Florida Statutes. All three of the applicants in these cases operate a number of nursing homes and other health care facilities in Florida and other areas. Each will enjoy the benefits, including joint purchasing power, which inure to multi- facility organizations. None of the applicants, however, proved that they will provide joint, cooperative or shared health care resources more effectively than the other applicants. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all of the residents of Flagler and Volusia Counties. Meridian has proposed to provide 53% and 51% of its patient days during its first year and its second year of operation, respectively, to the care of Medicaid patients. Meridian has proposed to provide 4% of its patient days during its first two years of operation to the care of Medicare patients. National has proposed to provide 57% of its patient days during its first two years of operation to the care of Medicaid patients. National has proposed to provide 10% of its patient days during its first two years of operation to the care of Medicare patients. National has not determined, however, how many nursing home beds it will dedicate to the care of Medicare patients. National has indicated that it will dedicate fourteen to twenty-four beds as a Medicare certified distinct-part unit. Nationally, 8% of National's total patient days for the fiscal year ending September 30, 1986, were Medicare patient days. HBA has proposed to provide 60% of its patient days during its first two years of operation to the care of Medicaid patients. HBA has proposed to provide 5% of its patient days during its first two years of operation to the care of Medicare patients. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. The parties have stipulated to the following with regard to immediate financial feasibility of the proposals in these cases: All applicants are ready, willing and capable of raising all the required capital and obtaining all financing at the rates, conditions and amortizations shown in the applicants' certificate of need applications submitted in this cause. Long-term Financial Feasibility. (1). Meridian. Meridian has projected a profit of $67,976.00 on revenue of $2,536,518.00 for the first year of operation of its proposed 120-bed Ormond- Beach facility and a profit of $136,712.00 on revenue of $2,881,804.00 for the second year of operation of its proposed 120-bed Ormond Beach facility. Meridian has also projected a profit from the operation of its proposed 60-bed addition for the first two years of operation. Meridian has projected a payor mix of 49% Medicaid, 4% Medicare, 44% private pay and 3% other during the first year of operation and 46% Medicaid, 4% Medicare, 46% private pay and 4% other during the second year of operation. These projections are reasonable. Meridian's Ormond Beach facility opened in November, 1987. Although it was projected to fill up in twelve months, it only took five months. The facility had a waiting list of twenty people when it opened. Meridian's projected fill up rate for the additional 60 beds is reasonable. Meridian's projected patient charges are reasonable. Meridian's proposed Medicare charges are the lowest of the three applicants. Meridian's projected revenue and expenses are reasonable. Meridian's project is financially feasible in the long term. (2). National. National has projected a loss of $96,990.00 on revenue of $986,598.00 for the first year of operation of its proposed facility and a profit of $269,603.00 on revenue of $1,847,865.00 for the second year of operation of its proposed facility. National has projected a payor mix of 52% Medicaid, 12% Medicare, 31% private pay and 4% other during the first year of operation and 48% Medicaid, 13% Medicare, 33% private pay and 5% other during the second year of operation. These projections are reasonable. National's projected fill up rate is reasonable. National's projected patient charges are reasonable. National's projected revenue and expenses are reasonable. National's project would be financially feasible in the long term if there was a need for 80 nursing home beds. (3). HBA. HBA has projected a profit of $127,542.00 on revenue of $5,658,984.00 for the first year of operation of its proposed 239-bed facility and a profit of $188,614.00 on revenue of $6,213,164.00 for the second year of operation of its proposed 239-bed facility. HBA has projected a payor mix of 53% Medicaid, 6% Medicare, 34% private pay and 7% other during the first two years of operation. These projections are reasonable. HBA's projected fill up rate for the additional 60 beds is reasonable. HBA's projected patient charges are reasonable. HBA's projected revenue and expenses are reasonable. HBA's project is financially feasible in the long term. Section 381.705(1)(k), Florida Statutes. The evidence failed to prove that this criterion applies in this proceeding. Section 381.705(1)(l), Florida Statutes. Generally, all of the applicants will improve competition if their projects are approved. Based upon projected Medicaid and Medicare rates, Meridian will have the least adverse impact on patient charges. HBA will have the least adverse impact on private-pay patient charges. Section 381.705(1)(m), Florida Statutes. The cost of constructing Meridian's proposed addition is $932,100.00. This amounts to a per square foot cost of $64.14. Meridian's existing Ormond Beach nursing home is located on a 5.5 acre wooded site. The existing building was constructed with sufficient ancillaries for a 120-bed nursing home. Site plans, road work, sewer, utility connections and zoning have been designed and approved for a 120-bed facility. The cost per bed for Meridian's proposed 60-bed addition is $20,797.00, based upon the total projected project cost. The cost per bed for the existing 60-bed facility was $51,242.00. The cost per bed for the proposed 120-bed facility will be $35,519.00. Meridian's projected costs of construction are reasonable. Meridian's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing National's proposed facility is $2,789,346.00. This amounts to a per square foot cost of $63.13. The cost per bed for National's proposed 80-bed nursing home is $47,355.00. National's projected costs of construction are reasonable. National's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing HBA's proposed addition is $1,145,000.00. This amounts to a per square foot cost of $63.61. The cost per bed for HBA's proposed facility is $25,000.00, based upon the total projected project cost. HBA's projected costs of construction are reasonable. HBA has proposed construction of its 60-bed addition as a second floor addition to an existing first floor 60-bed wing at Ocean View. The second floor will be constructed by a method of construction which uses twin T concrete planks. These planks support the second floor. When the planks are placed over the existing wing patients in the existing wing will have to be displaced for a portion of one day. The existing dining room will not be used for approximately 4 to 6 weeks. The construction of HBA's addition will not endanger patients at Ocean View. HBA has successfully constructed second floor additions over existing facilities in the past. Although there will be some inconvenience, quality of care should still be provided during construction. The other applicants have raised a number of questions concerning the appropriateness of HBA's proposed addition. Those questions do not, however, prove that HBA will not provide an adequately designed and constructed addition or cannot provide quality of care. HBA's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The evidence failed to prove that there are alternative, less costly or more effective methods of construction to the construction methods proposed by Meridian, National or HBA available. Section 381.705(1)(n), Florida Statutes. None of the applicants presented evidence concerning past or proposed care of the medically indigent, other than their care of Medicaid patients. Meridian has committed to provide 55% of its patient days in its Ormond Beach nursing home for the care of Medicaid patients. Meridian has not yet reached this level of care of Medicaid patients, however. At the time of the formal hearing Meridian was providing 46% Medicaid care. Meridian has not declined to serve Medicaid patients if a bed was available. During its fiscal year ending September 30, 1986, National provided 20.6% of its company-wide patient days to skilled Medicaid patients and 38.5% to intermediate Medicaid patients. HBA has been providing approximately 65% of its patient days at Ocean View to the care of Medicaid patients. All of the applicants propose to provide adequate care to Medicaid patients. The projected percentages of Medicaid patient days and revenue have been listed in previous findings of fact. Section 381.705(2), Florida Statutes. To the extent applicable, all of the applicants comply with the requirements of Section 381.705(2), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting HBA's application for a certificate of need authorizing the addition of 60 nursing home beds to Ocean View and denying Meridian's and National's applications for certificates of need. DONE and ENTERED this 1st day of June, 1989, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1989. APPENDIX CASE NUMBERS 88-1836 88-1839 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. All of the parties have filed proposed findings of fact which pertain to HCR. HCR also filed a proposed recommended order. In light of the fact that HCR has voluntarily dismissed its case, those proposed findings of fact have not been considered in this Appendix. Meridian's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 9, 11-12 and 46. 2 19-20. 3 90. The last two sentences are hereby accepted. 4 70. 5-12 See 49. 13 The parties stipulated that the criterion to which this proposed finding of fact relates has been met by all the parties. 14-22 See 49. 23 67-73. 24-27 These proposed findings of fact fail to take into account the fact that some of the costs attributable to the additional 60 nursing home beds sought by Meridian in this proceeding have been included in the cost of the existing facility. 28 107. 29 The proposed construction cost per square foot is $64.14. See finding of fact 89. 30-33 90. Hereby accepted. 34-41 Proposed findings of fact pertaining to HCR. 42 16-17. 43 23-25. 44 101 and hereby accepted. 45-49 See 103. Although there was evidence that supported these proposed findings of fact generally, the proposed findings of fact overlook the fact that HBA's drawings are preliminary and will be revised as needed to comply with the Department's requirements. The weight of the evidence supports a conclusion that HBA's proposed methods of construction and costs are reasonable despite the necessary corrections in its preliminary plans. The proposed finding of fact concerning parking spaces is not relevant to this proceeding because the weight of the evidence failed to prove that any costs associated with additional parking spaces which may be needed have been left out of HBA's projected costs. The availability of parking spaces is not a consideration under the criteria of Section 381.705, Florida Statutes, except to the extent that costs associated with parking spaces should be taken into account. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. The first two sentences are not relevant to these proceedings. The rest of this proposed finding of fact is not supported by the weight of the evidence. 52-53 Not supported by the weight of the evidence. The evidence did prove that, as of the date of the hearing of these cases, HBA should have filed a different pro forma which takes into account changes in its projected Medicaid revenue and its salary projections if this proceeding was a completely de novo proceeding. The Department has, however, taken the position that applicants cannot "amend" their applications between the date that an application is reviewed and a formal administrative hearing concerning the application. Therefore, HBA did not change its pro forma to reflect the most current information concerning Medicaid and salaries. HBA's financial expert was aware of the changes in Medicaid and salary expenses. Despite this knowledge, he testified that HBA's proposed facility is financial feasible. This testimony was accepted. 54 14-15. 55 21-22 and 95. Not relevant to this proceeding. 64. The last sentence is not supported by the weight of the evidence. 58 51. 59 Not supported by the weight of the evidence. National presented evidence that it would designate a portion of its proposed facility as a dedicated Medicare unit. 60 18, 21, 24 and 27. 61 26-29. 29. The last sentence is not relevant to this de novo proceeding. Not relevant to this de novo proceeding. 64-65 Contrary to the stipulation of the parties. 66 Contrary to the stipulation of the parties and not relevant. National's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 2 and 21. 2 1 and 3. 3-4 Hereby accepted. 5 4-6. 6 13-14. 15 and hereby accepted. Hereby accepted. 21 and 64 and hereby accepted. 10 21-22. 11 26. 12 27. See 28. Not supported by the weight of the evidence. 31-32 and hereby accepted. Not supported by the weight of the evidence and erroneous conclusion of law. See 34-35. 17 35. Not supported by the weight of the evidence and erroneous conclusion of law. The first sentence is accepted in finding of fact 34. The rest of the proposed finding of fact is not supported by the weight of the evidence or is an erroneous conclusion of law. 20 28. See 37-38 and 45. National's proposal is not consistent with the 1987 district health plan. Subparagraph A. is not relevant to this de novo proceeding. Subparagraph B. is not relevant or not supported by the weight of the evidence. The last sentence of subparagraph C. is not relevant to this de novo proceeding. The last sentence of subparagraph D. and subparagraphs e-h are not supported by the weight of the evidence. Although subparagraph I. is generally correct, it is not sufficient to justify locating the nursing home beds to be awarded in this case in Flagler County. Subparagraph j. is not supported by the weight of the evidence. The first and last sentences are hereby accepted. The second sentence is not supported by the weight of the evidence. Hereby accepted. 49 and 51-55. Subparagraph h. is not supported by the weight of the evidence. See 59. Stipulated by the parties as true of all of the applicants. 27 60 and 63. 28 67 and see 75-79. 29 86. Section 381.705(1)(l), Florida Statutes, is to be applied to all of Subdistrict 4 of District 4 and not just Flagler County. 22, 94, 97 and hereby accepted. 32 64 and 108. 33 See 111. Not supported by the weight of the evidence. Hereby accepted. HBA's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1 2 2-3. 3 4. 4 5. 5 6. 6 7. 7 8. 8 9-12. 9 14-15. National does not have a corporate headquarters since it is not a corporation. 10, 14, 21, 25, 32 and 35 Proposed findings of fact pertaining to HCR. 11 16-17. The evidence proved that HBA owns 6, not 7, nursing homes in Florida. 12 18-20. 13 21-22. 15 23-24. 28, 30 and 34-35. Subparagraph b) is a statement of arguments advanced by Meridian and National. 27, 38 and hereby accepted. Subparagraph's c)1)-4) and 7) pertain to HCR. 18 See 42-45. 19 See 46-47 and 50. Subparagraph b) is not supported by the weight of the evidence. 20 20, 51 and 54. 22 56-58 and hereby accepted. 23 59. 24 60. 26 Stipulated. 27 67. 28 85. See, however, 79. 29-30 Hereby accepted. 31 See 89. 33 18-20, 89 and 93. 34 22 and 96-97. 36 24-25, 101-104 and hereby accepted. 37 111. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 28. 3 30. 4 2-3 and 7. 4 and 6. Not relevant to this proceeding. 7 26 and 28. 8-15 Although there is evidence to support these proposed findings, they are not relevant to this proceeding. As a matter of law, the Department cannot through agency policy circumvent the requirements of the Need Methodology of Rule 10-5.011(1)(k), Florida Administrative Code, by publishing a "fixed need pool" for which no point of entry to challenge has been provided. Not relevant to this de novo proceeding. Hereby accepted. Not relevant because the parties have stipulated that Section 381.705(1)(a), Florida Statutes, applies to these cases. Not supported by the weight of the evidence. 20 32 and 36. 21 Hereby accepted. 22 32. 23 34. 24 33. 25 36. 26 29. 27 28. 28 Hereby accepted. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 Tallahassee, Florida 32316-2174 Charles D. Hood, Jr., Esquire Post Office Box 15200 Daytona Beach, Florida 32015 Lee Elzie, Esquire Post Office Box 82 Tallahassee, Florida 32302 Thomas W. Stahl, Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretarey Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact Heritage Hall is a partnership, domiciled in the State of Virginia, which owns and operates ten nursing homes in that state. Heritage Hall did not, at the time of the close of this record, own or operate, nor have under completed construction, any nursing home in Florida. Heritage Hall filed a "letter of intent to construct, own and operate a 60-bed nursing home in the counties of Collier, DeSoto, Highlands, and Lee. On July 15, 1983, Heritage Hall filed the specific Certificate of Need application at issue with HRS, requesting authorization to construct a 60-bed freestanding nursing home in DeSoto County. That application was deemed complete on September 15, 1983, and a free form decision was made to grant it by HRS on December 1, 1983. The proposed nursing home would be located in the vicinity of Arcadia, in DeSoto County, a subdistrict of HRS District VIII. Diversicare Corporation, Inc. d/b/a DeSoto Manor Nursing Home (DeSoto Manor), (Diversicare), owns and operates DeSoto Manor Nursing Home, an existing 60-bed nursing home facility located in Arcadia, DeSoto County, Florida. On November 3, 1983, Diversicare filed a Letter of Intent with HRS announcing its intention to seek a Certificate of Need for an addition to its DeSoto County facility. It ultimately filed an application seeking authorization for a 36-bed nursing home addition on January 12, 1984. No additional information was requested by HRS and the application became complete by operation of law on March 15, 1984. That application is thus in a separate and later batch for purposes of Rule 10-5.08, Florida Administrative Code, and thus was not comparatively reviewed with the application in the case at bar as a competing application. On May 1, 1984, HRS notified Diversicare of its intent to deny its application for the 36-bed addition. Heritage Hall proposes to construct a 60-bed nursing home at a total cost of $1,597,293. This specific cost of construction, not including land acquisition cost, is proposed to be $1,070,740. The nursing home's cost of construction allocated on a per bed basis would be $26,622. Heritage Hall proposes to finance this project to a tax-exempt bond issue in an aggregate amount of $1,436,075, carrying a 10 percent interest rate with a 30-year maturity. Additionally, the Heritage Hall partnership would invest $161,218. Heritage Hall projects that once it begins operation of the proposed new nursing home, that a 97 percent occupancy level for the proposed 60 beds would be reached within six months. Included within that projection, Heritage Hall projects that 49 percent of the patient revenues would come from Medicaid reimbursement, that 10 percent would come from Medicare reimbursement, and that 40 percent of its revenues would be attributable to private paying patients, not included within any relevant government entitlement programs. The remaining one per cent of its patient revenue base would be charged off and attributable to bad debt, or indigent patients. Heritage Hall proposes charges for its Medicare and Medicaid patients to constitute $62.39 per day, and its charges for private paying patients would be $68.00 a day for a private room, and $65.00 per day for a semiprivate room. It proposes to staff its facility with five registered nurses, six licensed practical nurses (LPN), 17 nurses aides, and an administrative and miscellaneous employee staff of 16, for a total staff for a 60- bed nursing home of 44 employees. DeSoto Manor's present patient population is largely composed of Medicaid and Medicare patients, such that 84 percent of its revenue is derived from Medicaid and Medicare sources. Its private paying patients are a small minority contributing 16 percent of its total patient revenues. DeSoto Manor has consistently experienced 99 - 100 percent occupancy for all of 1983 and 1984, upon which is earned a net income for fiscal year 1983 of approximately $15,000. DeSoto Manor presently employs on its staff 2.2 registered nurses, 5.6 LPN's, 17.1 aides, and 17.4 administrative and miscellaneous employees, those figures being expressed in terms of full-time equivalent employees in those categories. DeSoto Manor's application filed in a later batch is not at issue in this proceeding, in terms of comparative review for the purpose of determining whether Heritages Hall or DeSoto Manor is entitled to a Certificate of Need for DeSoto County nursing home beds as a result of this proceeding. Such a proposal, however, to add additional beds to an existing nursing home, is worthy of consideration as an alternative means of providing nursing home services to the public in District VIII, and specifically the subdistrict of DeSoto County, pursuant to authority cited infra. In that vein, DeSoto Manor proposes to add 36 additional beds at a total cost of $767,337, including involving a construction cost of $541,280, which is equivalent to a $21,260 cost per bed for the proposed 36-bed addition. DeSoto Manor would require the equivalent of 17.3 full time additional staff members, if such an addition (a 36-bed addition) were approved and built. DeSoto Manor charges will be (on January 1, 1985) $45.56 a day for Medicaid and Medicare patients, and $47.00 a day for its private pay patients. If its 36-bed addition were installed, it would charge $49.31 per day for Medicaid and Medicare patients, and $53.00 a day for private paying patients. DeSoto County is a relatively small county geographically, located inland from the counties bordering the Gulf of Mexico in District VIII. It is a rural county in character, as that term relates to its economic base being largely agriculture, and its low population density, with its population center being in the only sizable community of Arcadia, the county seat, located approximately in the geographic center of the county. It is surrounded by Sarasota, Charlotte, Highlands, and Hardee Counties. Highlands and Hardee Counties are in District VI, with Sarasota, Charlotte and DeSoto Counties being in District VIII, as are Lee, Collier, Glades and Hendry Counties. In 1987, DeSoto County is expected to have a population of 3,749 persons age 65 and over. The county is not experiencing a significant rate of growth at this time, nor is it expected to through 1987, the pertinent "horizon" year. Pursuant to Rule 10-5.11(21), Florida Administrative Code, the nursing home bed need methodology, HRS computes a need for additional nursing home beds in its health care districts and sub-districts, first by determining "actual need" or the "area specific bed need allocation." The actual need for additional nursing home beds is computed by means of a population based formula embodied in that rule. The second step of the need/availability determination process involves determining how many beds above or below the actual need determined may be added before the utilization in the district or subdistrict falls below 80 or 85 percent. The actual need or "area specific allocation" is determined by multiplying the poverty ratio for the district or subdistrict by the statewide nursing home bed need ratio of 27 per 1,000 persons age 65 and older, and the population of the district or subdistrict age 65 and older, and then subtracting from this computation the number of existing nursing home beds within the district or subdistrict. Within District VIII, the poverty ratio equals 8.61 divided by 12.70, the relevant population of the district for the applicable year being 213,561, with the population for DeSoto County, as a subdistrict, being 3,749 persons age 65 and older. There were 3,671 licensed nursing home beds in District VIII at the time of the hearing, and there were 1,130 beds approved, but not yet licensed or open in the district. There were 60 licensed and operating nursing home beds in DeSoto County. There were 3,904 actually "needed" or allocated beds in District VIII, which, when added to those beds approved but not yet licensed and operating, total an aggregate of 4,801 licensed and approved beds in the district. Thus, there are 997 excess nursing home beds over and above those actually needed in District VIII by 1987, according to the population based formula used in the first part of the need/availability determination process embodied in the above-cited rule. There is an actual need in DeSoto County alone of nine additional nursing home beds by 1987, based upon the subdistrict actual need allocation determined by the first part of the above methodology process of 69 beds. The second part of the need/availability determination process computes how many additional beds can be added to a district or subdistrict before the occupancy rates of nursing home beds in the district or subdistrict fall below the applicable rule mandated percentage. In DeSoto County, the applicable percentage is 80 per cent, because the subdistrict of DeSoto County indicates some need for additional beds, although the district as a whole has excess beds with no additional actual bed need shown. Thus, based upon the entire applicable computation, 15 beds may be added to DeSoto County before utilization of nursing home beds in the county will drop below the threshold of 80 percent. It has thus been established that if 60 beds are added to the bed supply in DeSoto County, for instance by a grant of the instant application, the utilization of nursing home beds will decline to approximately 50 percent. Under the above rule methodology, HRS, in adhering to the requirements of that rule, would not normally grant a certificate of need when only a small number of additional nursing home beds are computed to be available under that formula, that is, for a new freestanding nursing home facility. It is undisputed that construction of a new nursing home of less than 60 beds is not considered to be financially feasible. That rule of thumb does not apply, however, to the addition of beds to an existing, already-built parent facility, and it is undisputed that the addition of needed beds to an existing facility is more cost-effective in terms of construction costs and staffing, than the construction of a new facility. In its review process, with regard to the instant application and proceeding, HRS did not consider the alternative of adding new needed beds to the existing facility operated by Diversicare (DeSoto Manor), since the Diversicare application was not filed in the same batching cycle as the application at bar filed by Heritage Hall. Although the nursing home bed need determination formula reveals a maximum need of 15 beds for DeSoto County by 1987, HRS proposes to approve 60 beds in conjunction with the Heritage Hall application. In its review process, HRS took into account the fact that DeSoto and surrounding counties in District VIII were experiencing high occupancy rates as to existing licensed beds, and took the position then and in this proceeding that residents of DeSoto County needing nursing home care would have difficulty finding available nursing home beds. HRS failed to take into consideration, in its review process, the additional number of nursing home beds which had been approved in surrounding counties (as pertinent hereto, the surrounding counties of District VIII), but which were not yet licensed and actually operating. Thus, at the time of hearing there were 301 approved but not yet opened beds in Charlotte County, 97 approved but not yet operating beds in Collier County, 222 approved but not yet opened beds in Lee County and 597 approved but not yet operating beds in Sarasota County. Thus, the approved but not yet licensed and operating beds will result in an increase of 1,217 beds available, when open, to the residents of DeSoto and the adjacent counties of District VIII. 1/ The applicant and HRS seek to justify the approval of 60 additional beds in DeSoto County by reference to the high utilization rates being experienced in adjacent counties. As pertinent hereto, Charlotte County was experiencing an occupancy rate of 99 percent, Sarasota was at 88 percent occupancy, Lee County at 91.5 percent, with Collier County at 64.5 percent. Those figures do not take into account the latest nursing home District VIII occupancy figures as of June 29, 1984 which reflect the above-discussed additional approved, but not yet opened beds, and which result in the occupancy rates in these counties falling substantially. Thus, Charlotte is now experiencing only an 80.4 percent occupancy, for instance, with Sarasota County falling to a 78.5 per cent occupancy, with lowered occupancy rates resulting in Lee and Collier County as well with the addition of the approved, but not yet opened beds. These lowered occupancy rates resulting from the opening of these approved, but not yet licensed beds, were not considered by HRS at the time of its initial review, and free form grant of the certificate of need at issue. The opening of these hundreds of additional beds will continue to reduce occupancy in those counties and provide available beds to residents of District VIII and to residents of DeSoto County, to the extent those beds in the other counties are deemed accessible. HRS admitted at hearing that the availability of beds has increased in the district since its first review of the application. The financial feasibility of the Heritage Hall proposal depends upon an assumed 97 percent occupancy in its sixth month of operation, and projects that 40 percent of the revenues will be derived from private, paying patients. The 97 percent occupancy is an optimistic projection however, because only nine beds are shown to be actually needed in the county by 1987, and only 15 beds can be added before occupancy will drop below 80 percent. The addition of 60 beds would drop occupancy at DeSoto Manor and the proposed Heritage Hall facility, if built, to 50 percent. The Heritage Hall projection for revenues from private, paying patients which is 40 percent, is substantially more than the current revenue source from private, paying patients experienced by DeSoto Manor of 16 percent. In order to achieve such an occupancy rate in such a short time, and such a higher percentage of private, paying patient revenues, Heritage Hall must aggressively market its new facility and nursing home service so as to attract private, paying patients. Based upon historical evidence of record, it is likely that the patient base in DeSoto County itself will not support such a high percentage of private, paying patients and such patients will doubtless have to come from other areas or counties in the district, specifically the counties lying along the coast of District VIII. There is no evidence to establish that nursing home patients in the coastal counties have any inclination to seek nursing home care in DeSoto County, particularly because those coastal counties are already experiencing lowered occupancy rates, and nursing homes there need more patients. There is thus no demonstration that residents of the coastal counties in District VIII (or other adjacent counties for that matter) would travel to DeSoto County for nursing home care when there are empty beds available to them closer to their homes or the homes of their families in those counties. Heritage Hall proposes to recruit its staff from DeSoto County and the surrounding geographical area. DeSoto Manor however, itself is currently experiencing severe problems in recruiting registered nurses for its facility, in spite of repeated advertising and recruitment attempts. Potential staff members share a reluctance in becoming employed at DeSoto Manor, which lies in an isolated, rural area, and which must compete with the many nursing homes lying in the coastal areas in the other counties of District VIII for staff, and which areas offer more living amenities in general, than does the isolated, rural, small community setting in which DeSoto Manor is located. Indeed, other District VIII nursing home administrators have contacted the administrator of DeSoto Manor, in her capacity as administrator, as well as in her capacity as president of the Florida Health Care Association for District VIII, seeking assistance in obtaining additional staff for their facilities. Approval of the Heritage Hall application will, in effect, double the competition for staff members for nursing homes in DeSoto County, and will concomitantly, increase DeSoto Manor's present difficulties in obtaining and retaining appropriate employees. In calculating the financial impact which an additional 60-bed nursing home would have on the existing DeSoto Manor facility, DeSoto Manor assumed that the number of nursing home beds said to be available before occupancy dropped below 80 per cent, which includes the proposed 15 additional beds, would be full of patients and that these patients would be evenly split between the two nursing homes in the county. Thus, each nursing home would have approximately 37.5 patients in its respective 60-bed facility. In this event, and taking into account the concomitant reduction in staff, salaries and other per patient expenses because of a reduction in the number of patients, the proposed Heritage Hall facility would likely experience a net loss of approximately $232,587 for the first year of operation of its additional facility. DeSoto Manor's Medicaid reimbursement revenues would fall $31,722 below DeSoto Manor's actual cost of providing Medicaid patient care. Thus, in order to recover lost revenues and achieve a break-even profit and loss status, a significant increase in patient charges over existing charges would be necessary. The weight of such increase in patient charges would have to fall upon the private, paying patients in the revenue mix of each nursing home, because of the inflexible nature of the current Medicaid reimbursement scheme. In evaluating the DeSoto County population's accessibility to nursing home services, HRS admittedly did not take into account the provisions of Rule 10-17.020(2)(b), Florida Administrative Code, which is the local health plan as it relates to nursing home planning adopted in the most current HRS rules. This local health plan provides for nursing home services to be available within a one hour travel time by automobile for at least 95 percent of the residents of District VIII. The president of the District VIII chapter of the Florida Health Care Association, who is the administrator of DeSoto Manor, is aware of at least ten nursing homes within a one hour drive of Arcadia and at least three others within that radius which are under construction, a significant number of which are in District VIII. Arcadia is located in the center of DeSoto County. All counties surrounding DeSoto County in District VIII have substantial numbers of approved beds which have not yet been opened and at least Sarasota and Charlotte Counties, which are adjacent to DeSoto County have occupancy rates in the neighborhood of 80 percent or less. The applicant did not establish, in furtherance of its attempted justification of 60 additional beds for DeSoto County, the lack of accessibility to DeSoto County nursing home patients of beds in the adjoining counties of District VIII, especially Charlotte and Sarasota, inasmuch as it was not established that those nursing homes in those coastal counties are more than an hour's driving time from the center of DeSoto County. Although, as witness Straughn for HRS established, Sarasota or the more westerly parts of Sarasota County, are approximately 49 miles and roughly an hour driving time from DeSoto County, it was not established that there are not nursing homes available in closer parts of Sarasota County which are accessible in less than an hour's driving time to DeSoto County residents and/or patients. Indeed, witness Porter testifying after the hearing by deposition, established that most of the nursing homes in the coastal counties involved in this proceeding, are within "40 some miles" from the present DeSoto Manor facility and the proposed Heritage Hall facility. Indeed, witness Porter established that Port Charlotte, in the immediate vicinity of which are several nursing homes, and which county is experiencing now an 80.4 percent occupancy rate (with the above-mentioned numbers of approved but not yet installed beds) is only 25 miles from the proposed Arcadia location. Thus, the criteria of the above rule which HRS witnesses failed to take into account, encompasses nursing home beds available or approved in the coastal counties referred to, which are accessible to patients in DeSoto County.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the relevant legal authority, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED: That the Department of Health and Rehabilitative Services enter a Final Order DENYING the application of Heritage Hall to construct a new 60-bed nursing home facility in DeSoto County, Florida. DONE and ENTERED this 28th day of January, 1985, in Tallahassee, Florida. P. MICHAEL RUFF, 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 28th day of January, 1985.
Findings Of Fact Petitioner proposes to construct a 90 bed long term skilled facility near a hospital complex on University Boulevard in Jacksonville, and to offer beds to medicare patients immediately upon opening the facility Only one of the four existing nursing homes on the east side of the St. Johns River in Jacksonville has medicare certification. The existing nursing home in Jacksonville with the greatest number of vacant beds does not yet have medicare certification. Petitioner submitted its application for certificate of need on July 1, 1977. Between July 1, 1970, and July 1, 1977, overall occupancy of available nursing home beds in Jacksonville was between 95 and 97 percent. In April of 1977, Riverside Nursing Home had made 58 new beds available, 95 percent of which were occupied within two and a half months, in August of 1977, Riverside Nursing Home made an additional 58 now beds available. The following month 94.4 percent of the beds at Riverside Nursing Home were occupied. On September 19, 1977, a new 180-bed nursing home, Turtle Creek, opened its doors. At the time of the hearing, 82 of Turtle Creek's beds were occupied, although Turtle Creek, which is located on the northern periphery of Jacksonville, had not received medicare certification. Notwithstanding the filling of these new beds, the number of patients in other Jacksonville nursing homes did not decline appreciably. At the time of the hearing, 90.3 percent of all nursing home beds in Jacksonville were occupied, and all authorized beds were available for occupancy. It takes approximately 22 months after the start of construction to make a nursing home like petitioner proposes to build ready for occupancy. Stays in hospital beds are three or four times more expensive than stays in nursing home beds. At the time of the hearing, some medicare patients were staying in hospitals up to a week and a half after their physicians had authorized their discharge to a nursing home, because beds in medicare certified nursing homes were unavailable. This situation should be ameliorated, at least temporarily, if Turtle Creek obtains medicare certification before its beds are filled by non-medicare patients. On the other hand, social workers employed by Memorial Hospital and Riverside Hospital testified to recently increased numbers of persons requiring placement in nursing homes, upon discharge from their respective hospitals. In the four to six months next preceding the hearing, the number of persons requiring nursing home care when discharged by Memorial Hospital doubled. At the time of the hearing, persons otherwise ready to be discharged from hospitals remained hospitalized for lack of available beds in medicare certified nursing homes. Proximity of nursing homes to their residents' families and friends facilitates visiting, which has a beneficial effect on the health of persons confined to nursing homes. The southeast section of Jacksonville, in which petitioner proposes to construct a nursing home, has a large and growing population. Turtle Creek, which has the biggest block of vacant nursing home beds in Jacksonville, is 15 miles north of petitioner's proposed site. Relevant portions of the 1977 State Medical Facilities Plan (the Plan) were received in evidence as petitioner's exhibit No. 6. The Plan utilizes projected population increases in Duval County in projecting how many nursing home beds will be necessary in order to accommodate everybody who will need one, at a 90 percent occupancy rate. On this basis, a projected need by 1982, of 1,845 nursing home beds for Duval County was incorporated into the Plan. After adoption of the Plan, but before August 10, 1977, the 1,845 figure was changed to 1,921 at the instance of Lloyd Bulme end Ronald Fehr Floyd, employees 01 the Health Systems Agency of Northeast Florida Area 3, Inc. (HSA). At the time of the hearing, 1,912 or 1,914 nursing home beds, all that had been authorized, were available for occupancy in Duval County. While embodying projections as to how many nursing home beds would be needed in the future so as to assure a 90 percent occupancy rate, the Plan provides for the possibility of error in these projections. Specifically, the Plan allows for the consideration of "extenuating and mitigating circumstances," including "availability": Availability In those instances whereby a capital expenditure/certificate of need proposal is made for a new or expanded facility and whereby it can be demonstrated and documented by the applicant and verified by the HSA and/or OCMF that: similar facilities in the documented service area have been utilized at an optimum rate (85 percent occupancy for acute general hospitals and 90 percent occupancy for nursing homes) for the previous 12 month period; and, there exists a current, unduplicated waiting list within the documented service area for the services to be offered by the new or expanded facility; these factors will be considered in making a determination on the capital expenditure/ certificate of need proposal. Petitioner's exhibit No. 6. In applying the Plan's 90 percent optimum rate formula, the Office of Community Medical Facilities "would certainly consider the open beds, the occupancy during the preceding twelve months of the open, available for use beds, tempered certainly by beds which have been approved but are not yet available." (T1231) Fifty-nine of the nursing home beds in Jacksonville require "[m]odernization," according to the Plan. Petitioner's application for a certificate of need was initially reviewed by a committee" of the HSA. On August 25, 1977, the Health Needs and Priorities Committee voted to recommend approval of petitioner's application, on condition that Jacksonville's nursing homes' occupancy rate not fall below 90 percent for four months once all the authorized nursing home beds became available for occupancy. This consideration was consistent with the local Health Systems Plan's requirement of 90 percent or better occupancy, calculated the basis of all authorized beds, for four months preceding the grant of a certificate of need for additional nursing home beds. Before the Executive Committee of the HSA acted on the Recommendation of the HSA's Health Needs and Priorities Committee, HSA staff were advised by the Office of Community Medical Facilities in Tallahassee that "December 19, 1977 . . . . [was] the latest possible time for a decision Petitioner's exhibit No. 17. Inasmuch as Turtle Creek began operation on September 19, 1977, only three months before "the latest possible time for a decision," there was not to be a four months' trial with all authorized beds available, before HSA's Executive Committee passed on petitioner's application. Instead, HSA staff calculated the occupancy rate by adding all existing nursing home beds in Jacksonville, and all other authorized nursing home beds expected to become available in Jacksonville, and dividing the sum into the number of occupied nursing home beds in Jacksonville less the number of occupied beds in Regency House Center (because the HSA staff did not have Regency House Center "patient data." Petitioner's exhibit No. 6.) This calculation yielded an occupancy rate of 84.4 percent for the four months preceding the date on which petitioner filed its application. Because 84.4 percent was less than 90 percent called for by the Health Systems Plan, the HSA's Executive Committee disapproved petitioner's application. Subsequently, the Office of Community Medical Facilities also acted unfavorably on petitioner's application, for reasons which the evidence adduced at the hearing did not make entirely clear. The foregoing findings of fact should be road in conjunction with the statement required by Stuckey's of Eastmam, Georgia v. Department of Transportation, 340 So.2d 119 (Fla 1st DCA 1976) , which is attached as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent grant petitioner's application for certificate of need. DONE AND ENTERED this 23rd day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 77-2243 Paragraphs one, two, five, six, seven, nine, ten, eleven, thirteen, fourteen, sixteen, seventeen and eighteen of petitioner's proposed findings of fact accurately report the evidence adduced at the hearing and have been adopted, in substance, insofar as relevant. Paragraphs three and four and most of paragraph nineteen of petitioner's proposed findings of fact are actually proposed conclusions of law. Paragraph eight of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville. The discrepancy between the Health Systems Plan and the State Medical Facilities Plan was 146 beds for the entire area. Paragraph twelve of petitioner's proposed findings or fact has been largely rejected. The evidence did not establish that all 35 beds at Regency House Center were probably full. The charges to the state plan were apparently called to the attention of federal bureaucrats in Atlanta. (T254) Paragraph fifteen of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville; end is otherwise supported only by the speculative testimony of one witness. COPIES FURNISHED: Kenneth F. Hoffman, Esq. Rogers, Towers, Dailey, Jones & Gay Post Office Box 1872 Tallahassee, Florida 32302 Robert M. Eisenberg, Esquire 5920 Arlington Expressway Post Office Box 2417 F Jacksonville, Florida 32231
Findings Of Fact The Parties Manor-Sarasota Manor Health Care Corporation operates 140 nursing centers throughout the country with nine nursing homes and three adult congregate living facilities (ACLF) in Florida. Seven of the nine Florida nursing homes are rated superior and two are standard. Manor-Sarasota is a wholly-owned subsidiary of Manor Health Care Corporation, and currently owns and operates a 120 bed nursing home, with a 120 bed ACLF, at 5511 Swift Road, Sarasota, Florida. The facility opened in December, 1983 and currently has a standard license, although for a period in 1986 its license was conditional. Manor-Sarasota is currently licensed as a skilled nursing home providing trach care, nasogastric feedings, wound care, physical, speech and occupational therapy, as well as Clinatron beds for patients with severe decubitus ulcers. On or about January 15, 1987, Manor-Sarasota filed CON application number 5050 for the addition of sixty community nursing home beds at its facility. The proposed additional beds will include a separate 30-bed specialized unit for elderly persons suffering from Alzheimer's Disease and related disorders. Manor Health Care Corporation currently operates 13 to 15 Alzheimer's units within their existing centers. Between 30 percent - 50 percent of Manor-Sarasota's current patients are diagnosed as having Alzheimer's or related disorders. There are no specialized facilities for Alzheimer's patients in Sarasota at the current time. The current facility is a two-story nursing home, and the additional beds would be configured in a two-story addition of thirty-five beds on the first floor and twenty-five beds on the second floor. The thirty-bed Alzheimer's unit would be located on the first floor. A separate dining room for Alzheimer's patients will also be provided. An additional nurse's station would be added to provide 4 nurse's stations for 180 beds. Total project costs are reasonably projected at $1.85 million, with construction costs of $1.26 million, equipment costs of approximately $170,000, professional services of approximately $137,000 and related costs of approximately $253,000. The proposal would add 16,683 gross square feet to the existing 49,454 gross square feet. The total project cost per additional bed would be $30,872, while the construction cost per square foot would be $55.00. The gross square footage per bed would be 278 feet. Manor-Sarasota projects a 40 percent Medicaid and 60 percent private pay utilization for the 60 bed addition, although its Medicaid utilization at the existing facility has only been between 15 percent and 24 percent. Since there is an upward trend in Medicaid utilization, Manor-Sarasota would accept a 40 percent Medicaid condition on its CON, if approved. Medicare patients will continue to be served within the existing facility. The project will be funded through 25 percent equity and 75 percent financing. Manor Health Care Corporation will finance the project internally through the sale of assets, and the sale of senior subordinated notes and convertible subordinated debentures, and this financing proposal is reasonable and realistic. In Manor-Sarasota's original application, six 3-bed wards were proposed. As a result of criticism of 3-bed wards in the Department's State Agency Action Report (SAAR) concerning this application as well as other facilities, the applicant modified its proposed design to eliminate all 3-bed wards and to include 24 semiprivate and 12 private rooms. The square footage of the addition was also increased by 21 percent from 13,750 to 16,683 square feet. This modification was presented at hearing and was filed subsequent to the application being deemed complete, and the SAAR being prepared. Competent substantial evidence in support of the original application was not offered, but rather evidence was presented in support of the substantially modified proposal. The applicant's existing 120-bed nursing home has experienced over 90 percent occupancy for the months of November, 1987 to the date of hearing, and also experienced an average occupancy of approximately 86 percent for 1986 and the first ten months of 1987. During the first year of operation, 65 percent occupancy is projected for the 60 new beds which are now being sought, and 95 percent occupancy is projected for the second year of operation. Sarasota Healthcare Sarasota Healthcare, Ltd., is a Georgia limited partnership whose general partners are Stiles A. Kellett, Jr. and Samuel B. Kellett. Sarasota Healthcare proposes to enter into a management agreement with Convalescent Services, Inc., (CSI) for the operation and administration of their proposed facility. The Kelletts, as 100 percent owners, comprise the Board of Directors of CSI and also serve as its Chairman and President. CSI operates 21 nursing homes in seven states, and 85 percent of its beds have superior licenses. There are 6 CSI operated nursing homes in Florida, one of which, Pinebrook Place, is located in Sarasota County in the City of Venice. Pinebrook Place is a 120 bed nursing home and has a superior license. Sarasota Healthcare does not own or operate any other nursing homes. A new 120 bed freestanding nursing home is proposed by Sarasota Healthcare in CON application 5025, which was filed with the Department in January, 1987. The project would be located in Sarasota County at a specific site which has not yet been identified. Sarasota Healthcare projects a utilization of 40 percent Medicaid, 5 percent Medicare and 55 percent private pay at its proposed facility, and would accept a 40 percent Medicaid condition of this CON, if approved. The proposed facility would offer skilled, intermediate, respite and hospice care; specialized services for Alzheimer's patients; physical, occupational, speech and rehabilitative therapy; counseling; and social services. Alzheimer's patients will not be located in a separate unit but will be intermingled with other patients while receiving specialized services and protections for their disease. Sarasota Healthcare proposes a 120 bed nursing home comprised of 12 private and 54 semiprivate rooms, 37,7000 gross square feet and a total project cost of $3.9 million The proposed size and cost of this facility are reasonable. The cost per bed would be $32,500 and the construction cost per square foot would be $58.00. Total project costs are reasonable and consist of approximately $2.45 million in construction costs, $385,000 in equipment costs, $145,000 for professional services, land acquisition of $600,000 for 3 to 5 acres, and $324,000 in related costs. The gross square footage per bed would be 314 feet. The project will be funded with 25 percent equity funding from the general partners, Stiles and Samuel Kellett, and 75 percent from a commercial bank, assuming a 9.5 percent interest rate with 1 percent discount point. The proposal is reasonable, but is dependent upon the general partners' ability to personally fund 25 percent of the costs of the project through an equity contribution, and on their ability to obtain commercial financing for the remaining project costs. Financial statements of the Kelletts provided in the record of this proceeding are unaudited, and were not prepared in accordance with generally accepted accounting principles. The Kelletts have 15 CON applications currently pending, and 4 have already been approved. They have a 6 to 1 debt to equity ratio. Health Quest On or about January 15, 1987, Health Quest corporation submitted an application for CON number 5046 on behalf of Regents Park of Lake Pointe Woods for the addition of 58 new beds to its existing 53 sheltered bed nursing home at a projected cost of approximately $1.29 million. The existing sheltered nursing home facility is known as Regents Park of Sarasota which is part of the Lake Point Woods Retirement Center containing a 110 bed ACLF and 212 retirement apartment units. The sheltered nursing home opened in November, 1986, and has achieved 90 percent occupancy since October, 1987. It is licensed under Chapter 651, Florida Statutes, as a continuing care facility. Health Quest owns and operates nine nursing centers in three states, and has received CON approval for 12 additional facilities in three states, including four in Florida. One of these Florida CONs is for 180 new community nursing home beds in Sarasota County. Health Quest's existing Regents Park of Sarasota nursing home is located at 7979 South Tamiami Trail, Sarasota, Florida. Although it is a sheltered nursing home, only one or two beds are generally occupied by Lake Point Woods residents at any one time. During 1987, only 26 admissions to Regents Park came from Lake Pointe Woods, and most of these admissions were for episodic illnesses of less than 30 days rather than for longer term care. Thus, the vast majority of admissions at Regents Park have been from the community, including admissions directly from home, hospitals and other nursing homes, rather than from the retirement center, Lake Pointe Woods, of which Regents Park is a part. However, since existing beds at Regents Park are sheltered, community patients will not be able to be admitted there beyond November, 1991, the expiration of five years from its opening. During its year and a half of operation, Regents Park has not shown a profit, despite original projections of profitability after only one year. In response to the Department's omissions letter dated February 19, 1987, Health Quest notified the Department, by letter dated March 27, 1987, of its amendment to CON application 5046. Rather than pursuing its request for 58 new community nursing home beds, Health Quest amended the application to seek conversion of the 53 sheltered beds to community beds and to add 7 new community nursing home beds. Since no new space is proposed for construction under the amendment, and since virtually all equipment is already in place, Health Quest projected no cost associated with the amended project. However, there would be some minor costs to equip seven new beds, as well as legal and consulting costs associated with this application and hearing. Currently, the Regents Park nursing home has approximately 31,000 total gross square feet, which would result in 520 gross square feet per bed if its application is approved. On April 10, 1987, the Department published its notice of completeness regarding Health Quest's amended CON application 5046 at Florida Administrative Weekly, Volume 13, No. 15, p. 1365. The Department reviewed and evaluated Health Quest's amended application, rather than the original application, in preparing its SAAR on the applications at issue in this case dated June 15, 1987. Despite this notice of completeness, the record shows that Health Quest's conversion proposal was incomplete since no balance sheet, profit and loss statement for precious fiscal years of operation, detailed statement of financial feasibility or pro forma were introduced. Although sheltered beds can be certified to accept Medicaid patients, Health Quest has not sought such certification for any of the 53 existing beds at Regents Park. Health Quest proposes to seek Medicaid certification for 5 beds, and to serve 8 percent Medicaid patients if CON 5046 is approved. Health Quest does not propose a separate unit for Alzheimer's patients, but would offer special outdoor activities for these patients as well as an Alzheimer's club for patients with this primary diagnosis. Health Quest specializes in caring for patients with hip fractures, and offers a wheelchair mobility and ambulation program, rehabilitation and occupational therapy, bowel and bladder rehabilitation, as well as physical and horticulture therapy. Regents Park has patients on intravenous therapy and who require hyperalimentation and total parenteral nutrition. LPN and nurse's aide students from Sarasota Vo/Tech School receive training at the Regents Park nursing home. HCR In 1986, HCR purchased, and currently owns and operates a 147 bed nursing home located at 3250 12th Street, Sarasota, Florida, known as Kensington Manor, which holds a standard license. HCR is a wholly owned subsidiary of Owens-Illinois, a publicly held corporation, and has built over 200 nursing homes in the last 25 years. At the present time, HCR operates approximately 125 facilities with approximately 16,000 beds in 19 States. HCR owns and operates a total of 9 nursing homes in Florida, and has about 10 nursing home projects under development which it intends to operate upon completion. On or about January 14, 1987, HCR filed CON application 5049 with the Department. This application seeks approval of 60 new community nursing home beds at Kensington Manor, at a currently projected cost of $1.82 million, which is a reasonable projection. The cost per new bed would be $30,030. HCR proposes to finance to project with a 25 percent equity contribution, and 75 percent internally financed by HCR through its parent company, Owens-Illinois, and this proposal is realistic and reasonable. Throughout 1986, Kensington Manor had an occupancy level of between 85 percent - 95 percent and is currently operating at 95 percent - 96 percent occupancy. HCR reasonably projects 95 percent occupancy for the 60 new beds in the second year of operation. HCR reasonably proposes a patient mix in the new addition of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay. Kensington Manor is currently 75 percent - 80 percent Medicaid, 1 percent Medicare, and the remainder is private pay, but its proposed patient mix for the new addition is realistic because there will be no three-bed wards in the addition, and sub- acute services will be provided, thereby increasing the Medicare percentage. The HCR proposed addition at Kensington Manor provides a distinct 29 bed wing for Alzheimer's patients where a special care program and special staffing can be made available. Additionally, a 12 person Alzheimer's adult day care center will be physically attached to the new addition where a less intense level of care outside the home can be made available to these patients. Respite care and sub-acute care will also be provided. The project will add a 60 bed, single story addition to Kensington Manor, with a special Alzheimer unit consisting of 1 private and 14 semiprivate rooms, an enclosed courtyard and porch. A second dining room will be added, as well as 2 central bathing areas, multipurpose and physical therapy rooms. The addition would total 18,000 gross square feet, or 267 gross square feet per bed in the new addition. Kensington Manor currently has approximately 30,000 gross square feet, with 1 private and 52 semiprivate rooms, and 14 three-bedroom wards. Therefore with the addition, Kensington Manor would have approximately 48,000 gross square feet which would be approximately 223 square feet per bed for the entire facility. Sisters of Bon Secours The Sisters of Bon Secours, a Catholic religious order, are currently responsible for the operation and ownership, through not-for-profit corporations, of a JCAH accredited 272 community bed nursing home in North Miami having a superior license, a nursing home in Port Charlotte, Charlotte County, and they also have a CON for an additional nursing home to be located in Collier County. On or about January 15, 1987, Sisters filed CON application 5039 for a new 120 community bed nursing home to be located in Sarasota County, and to be known as Villa Maria of Sarasota County. Sisters is the only applicant involved in this case which is not already providing services in Sarasota County. The proposal calls for the development of a teaching nursing home to be designated as a center for training and research in the study of gerontology and long term care. Affiliations with schools and universities will be developed to allow health care administrators, social workers, medical and nursing students, and practitioners interested in developing a specialization to fulfill their clinical studies and requirements. There will be an emphasis on restorative and rehabilitative care, with 20 percent of the beds being designated for sub-acute care patients who could return home after 30-45 days of therapy and transitional care. Sisters will develop a continuum of care by networking in the community. It is the only applicant that proposes to provide a site for education and research in Sarasota County. The proposed facility is intended to serve the needs of members of the Venice Diocese who reside in Sarasota County, where there is currently no Catholic nursing home. The Venice Diocese is now served by the Sisters' nursing home in Charlotte County, and will also be served by the facility to be located in Collier County, for which a CON has already been issued. However, treatment at these nursing homes, including the proposed Villa Maria of Sarasota County, is not limited to Catholics; the Sisters accept, treat and care for persons in need from all religions backgrounds and denominational affiliations. Total project costs are estimated at $6.64 million, including $3.86 million for construction, approximately $592,000 for equipment, $762,000 to acquire a seven acre site, $237,000 for professional services, $888,000 for financing costs and approximately $300,000 in other related costs. The project would encompass almost 60,000 gross square feet, and would cost approximately $55,300 per bed and $64.50 per square foot. Almost 500 gross square feet would be available per bed, which represents the most square footage per bed of any application under consideration. The proposed facility would have 8 private and 56 semiprivate rooms, with in-room tubs and showers, 3 patient lounges, and a 100 seat dining room. Due to the large size of the proposal, some patient rooms exceed 120 feet from nurse's stations. However, this licensure requirement can easily be met with minor design modifications during the licensure process. Sisters project a 33.3 percent Medicaid, 17.6 - 19.7 percent Medicare, 4 percent indigent and 43 percent - 45 percent private pay utilization for the 120 bed nursing home in its first two years of operation. While Medicaid utilization in Dade County during 1987 rose to 68 percent as a county-wide average, Sisters' Dade County nursing home experienced a drop in Medicaid to 14.6 percent. The high Medicare utilization level which has been projected is consistent with, and based on, the experience of the Sisters at their Dade County nursing home which currently has 21 percent Medicare utilization. However, due to the greater number of hospital referral sources, as well as the larger population and fewer competing nursing homes in Dade County compared with Sarasota County, Medicare utilization projections may be overstated, and actually fall between the 3-4 percent historical utilization in the Sarasota area and Sisters' projection. It will be somewhat above 3-4 percent due to the fact that this will be a teaching nursing home which will attract more Medicare patients. The project will be funded with an equity contribution of 10.6 percent ($635,455) and the remaining 89.4 percent ($6 million) will be funded through the issuance of tax exempt bonds. This financing proposal is realistic and reasonable. The proposed nursing home is intended to offer services to AIDS patients, adult day care, and a meals-on-wheels program. However, it was not established at hearing that such patients would definitely be served, or that space would be available at this facility for these services until the Sisters can determine the actual level of need for these services in Sarasota County, if this CON is approved. Department of HRS On or before January 15, 1987, the Department received the CON applications at issue in this case for additional community nursing home beds in Sarasota County. As it relates to this case, the Department issued its SAAR on June 15, 1987, in which the application of HCR (CON 5049) for a 60 community nursing home bed addition to Kensington Manor was approved, and all other applications in this case were denied. In addition to the HCR application, the Department also supported at hearing the applications of Manor Care (CON 5050) for a 60 bed addition to Manor-Sarasota and Sisters of Bon Secours (CON 5039) for a new 120 bed community bed nursing home to be known as Villa Maria of Sarasota County. The Department opposed the issuance of a CON to the remaining applicants. It is the position of the Department that changes or updates to CON applications made after an application has been deemed complete and reviewed in a SAAR, cannot be considered at hearing if such changes or updates are the result of matters or events within the control of the applicant, and which therefore could have been foreseen and considered at the time the application or responses to omissions were filed. However, matters involving payor mix, salaries and charges could result from changes in demographics and economic factors outside of the applicants' control. In such instances, updates or changes to an application based upon current demographics or economics can, and should be, considered at hearing. The updated pro forma submitted by Sarasota Healthcare at hearing resulted from the applicant's desire to reflect current salaries in the Sarasota County labor market, which have increased dramatically since the original application was submitted. As a result of updating salary expense projections, Medicaid and Medicare rates also had to be updated. Associated projections throughout the pro forma which are dependent upon these reimbursement rates, as well as salary expense projections, also had to be updated. The updated pro forma presented by Sarasota Healthcare results from a factor outside of the control of the applicant, inflation, which could not have been foreseen or predicated with certainty in January, 1987. To ignore actual, current inflation data in Sarasota County is to ignore reality. This update is permissible and has been considered. Manor-Sarasota's application presented at hearing includes changes in its proposed payor mix, charges and salaries, as well as its pro forma. These updates are permissible since they result from changes in demographics and inflation outside of the applicant's control which could not have been foreseen in January 1987. However, a 21 percent increase in square footage and elimination of three-bed wards, with associated changes in proposed staffing, capital costs and equipment, while certainly having a positive effect on quality of care, is nevertheless a matter totally within the control of the applicant. The desireability of these changes could have been foreseen at the time the application was filed, and therefore these substantial changes in design represent impermissible amendments to Manor-Sarasota's application. Stipulations The appropriate planning area for these applications is Sarasota County, and the appropriate planning horizon is January, 1990. Sarasota County is in subdistrict 6 of the Department's service district 8. The parties have stipulated that there is a need for 240 additional community nursing home beds in the January, 1990, planning horizon in Sarasota County, in accordance with the bed need formula in Rule 10-5.011(1)(k), Florida Administrative Code. The parties have agreed that Section 381.705(1)(d) and (j), Florida Statutes (1987), have been met, or are not applicable to this case. This statutory criteria deals with the adequacy and availability of alternative health care facilities and the special needs and circumstances of health maintenance organizations. All remaining criteria found at Section 381.705(1) and (2), Florida Statutes (1987), are at issue in this case. Further, the parties stipulate that 1987 amendments to Chapter 381, Florida Statutes, relating to the content of applications, are inapplicable in this proceeding since these applications were filed prior to the effective date of said law. Therefore, application content provisions of Section 381.494(4), Florida Statutes, govern. State and Local Health Plans The 1985 Florida State Health Plan, Volume II, Chapter 8, identifies areas of concern relating to the provision of long-term care services in Florida, which traditionally has been synonymous with nursing home care. These concerns include resource supply, cost containment and resource access. The State Health Plan seeks a reduction in the fragmentation of services and encourages development of a continuum of care. These proposals are consistent with, or do not conflict with, the State Health Plan. The 1984 District Eight Local Health Plan for Nursing Home Care is applicable to these applications for community nursing home beds in Sarasota County. The Local Health Plan contains the following pertinent criteria and standards for review of these applications: Community nursing home services should be available to the residents of each county within District Eight. At a minimum community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy h. occupational therapy laboratory i. physical therapy x-ray j. speech therapy dental care k. mental health visual care counseling hearing care l. social services diet therapy m. medical services New and existing community nursing home bed developments should dedicate 33 1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. New community nursing home facilities may be considered for approval when existing facilities servicing comparable service areas cannot reasonably, economically, or geographically provide adequate service to these service areas. No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. The proposed project should have a formal discharge planning program as well as some type of patient follow-up services with discharge/transfer made available seven days a week. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. The specifically stated goal of the Local Health Plan is to develop new community nursing home facilities in which at least 33 1/3 percent of the total beds should be Medicaid. The impact of this long range recommended action is stated as follows: The provision of Medicaid care beds in existing nursing homes would assure continuity of care for nursing home patients, and should improve placement in appropriate levels of care by hospitals, physicians, social services, health departments, and other referral groups. The provision for Medicaid beds would reduce cost to patients, utilizing skilled care beds, who could adequately be served by Medicaid. With the exception of Health Quest's application, all other applicants meet the above stated standards and criteria contained in the Local Health Plan. Health Quest's application does not conform to the Local Health Plan. All applicants in this proceeding have indicated that they will provide therapies and services recommended in the Local Health Plan. All applicants, except Health Quest, indicate a commitment to dedicate at least 33 1/3 percent of their beds for Medicaid patients. The new nursing home facilities proposed by Sisters and Sarasota Healthcare would each be for 120 beds, consistent with the Local Health Plan standard that new facilities have at least 60 beds. Health Quest has proposed a 60 bed community nursing home through conversion of 53 sheltered nursing home beds and the addition of 7 new community beds. As existing providers, Manor-Sarasota, HCR band Health Quest have patient transfer agreements with one or more hospitals, as well as formal discharge planning programs and patient follow-up services, as recommended in the Local Health Plan. The applications for new facilities of Sarasota Healthcare and Sisters indicate they will also comply with these priorities if approval is granted and their facilities are opened. By virtue of its existing service and transfer agreements through the CSI facility in Sarasota County, Pinebrook Place, Sarasota Healthcare will be able to obtain these necessary agreements. Based upon Sisters' experience in Dade County at Villa Maria, as well as the fact that this will be a teaching nursing home, Sisters will also be able to obtain such agreements. Data has been provided by the existing nursing homes (Manor-Sarasota, HCR and Health Quest) which documents the history of their participation in the Medicaid and Medicare programs. The other applicants (Sarasota Healthcare and Sisters) have provided Medicaid/Medicare data for other existing facilities with which they are affiliated or upon which their application at issue in this case is based. Based upon this data, Pinebrook Place in Sarasota County, which is owned and operated by Sarasota Healthcare's general partners has not met the Medicaid condition on its CON, and the existing Manor-Sarasota facility has had only 24.8 percent Medicaid utilization in fiscal year 1988: Availability, Accessibility and Adequacy of Like and Existing Services HCR and Manor-Sarasota would increase the availability and adequacy of existing services they are now offering with the 60 bed additions each is seeking. The separate 30-bed specialized unit proposed by Manor-Sarasota and the 29-bed wing proposed by HCR for Alzheimer's patients will clearly increase the availability of specialized services for persons with Alzheimer's and related disorders, as well as their families. HCR will also dedicate 10 beds for sub-acute care, while Manor-Sarasota will offer community outreach, as well as respite care. Sarasota Healthcare, Sisters and Health Quest do not propose special units for Alzheimer's patients, but would offer special programs and services for them and their families. It was established that there is a need for additional services and programs to serve nursing home patients with Alzheimer's and related disorders in Sarasota County, as well as a special need for sub-acute, restorative, hospice, respite, and adult day care in the County. It was not established that there is a need for additional Medicare beds in Sarasota County. Sisters have indicated an interest in offering services to patients with AIDS and patients in need of adult day care, for which there is also a need in Sarasota County. In addition, their application will enhance the availability of sub-acute nursing home services, restorative and rehabilitative care, and respite care in Sarasota County. While it would serve patients of all denominations and religious affiliations, it would be the only Catholic nursing home in Sarasota County. The teaching component of the Sisters' application would provide access for students and other health professionals seeking to further their professional training. The Sarasota Healthcare proposal also places special emphasis on increasing the availability of sub-acute services in Sarasota County. Quality of Care The Sisters will seek JCAH accreditation of the proposed facility if their CON is approved, just as their nursing home in North Miami is currently accredited. The proposed affiliation with a college of medicine and nursing school, and the intent to operate this facility as a teaching nursing home will insure quality of care at this nursing home by utilizing state-of-the-art treatment and therapy programs. Florida nursing homes currently owned or operated by each of the applicants or their affiliated corporations have standard or superior licenses which means they meet or exceed State Standards. Licensure status of facilities owned or operated in other states by the applicants, or their affiliated companies, has not been considered since it was not established that licensure standards in other states are similar, or even comparable, to those in Florida. Each applicant has significant experience rendering quality nursing home care, and each has proposed a reasonable and comprehensive quality assurance program which will insure that quality nursing home services will be provided to their residents. The architectural design proposed by each applicant is reasonable and sufficient to allow quality care to be provided at each facility. All instances where an applicant's design fails to meet final construction standards are relatively minor, and can easily be met during the licensure process with slight modifications and adaptations in design. Staffing proposals by each, while different, will all insure that adequate medical, nursing, counseling and therapeutic staff will be trained and available either on-staff or through contract, to implement quality care programs at each facility. Manor-Sarasota's past reliance on temporary nursing services is decreasing and this will have a positive effect on quality of care. HCR has just completed extensive repairs and renovations costing $350,000 at Kensington Manor which will improve the atmosphere, living conditions and overall quality of care at the facility. Sisters' educational affiliations will aid in recruiting and retaining well-trained staff for its facility. Each facility will be equipped to provide quality care. There was extensive testimony about the advantages and disadvantages of central bathing facilities compared with private baths or showers in patient rooms. Sisters and Health Quest would provide private bathing facilities in patient rooms, while the others would have central facilities. Obviously, individual bathing facilities in patient rooms offer more privacy than central facilities, but privacy can also be achieved in a central bathing area by taking only a single, or limited number of patients to a partitioned central facility at any one time. The central facility is less costly than bathing facilities in each room, and also requires less staff time and involvement to assist with, and insure safety in, the patients' bathing. It has not been shown that one type of bathing facility provided in a nursing home, to the exclusion of all others, affects the quality of care in a positive or adverse manner. Quality care can be, and is, provided under both designs. The elimination of 3-bed wards from Manor-Sarasota's application would have a positive impact on quality of care, and be consistent with the Department's position of discouraging the creation of additional 3-bed wards in nursing homes. However, such elimination was proposed after this application was deemed complete by the Department. Patients suffering from Alzheimer's and related disorders can benefit from programs and treatment conducted in separate units, or while comingled with other patients, particularly in the early and middle phases of the disease. In the later phase of the disease it may be less disruptive to other patients if Alzheimer patients reside in a separate wing or unit of the nursing home. Quality care can be rendered through separate or integrated programming, and all applicants in this case that propose to offer specialized services to these patients have proposed programs and facility designs which will provide quality care to persons with Alzheimer's and related disorders. While there are differences in facility design, such as the two-story construction of Manor-Sarasota compared with the single level construction of all other applicants, and the central heating and cooling proposed by Sisters compared with individual wall units to be used by Sarasota Healthcare, the proposed designs of all applicants allow for the rendering of quality care to patients. Access for Chronically Underserved The Health Quest proposal is inconsistent with the Local Health Plan policy that 33 1/3 percent of all nursing home beds should be dedicated for Medicaid patients since it proposes that only 5 of its 60 beds (8 percent) will be certified for Medicaid patients if CON 5046 is approved. Although Medicaid utilization at Manor-Sarasota has not been consistent with the Local Health Plan, it is projected that if CON 5050 is approved Medicaid utilization will rise to 40 percent. Sarasota Healthcare, HCR and Sisters propose to meet or exceed this Local Health Plan policy. HCR has experienced a 75-80 percent Medicaid utilization at Kensington Manor, and proposes a 45 percent Medicaid level in the new addition if CON 5049 is approved. Financial Feasibility The proposals of Manor-Sarasota, HCR and Sisters are financially feasible. Health Quest did not file a pro forma and has not shown a profit in its year and a half of operation at Regents Park. Based upon its actual per patient operating expense at Pinebrook Place, Sarasota Healthcare has underestimated expenses in its second year of operation by approximately $8 per patient day. Its projection of a profit in the second year of operation is questionable due to this underestimation. Manor-Sarasota, HCR and Sisters have established their ability to finance, through equity and debt, the construction, equipment, supplies, and start-up costs associated with their proposals. Health Quest will have no construction costs, and only very minor costs to equip and supply seven new beds it is requesting. The entire financial structure of CSI and Sarasota Healthcare is dependent upon the financial strength of their general partners, the Kelletts, who currently have $76 million in long term debt and $12 million in equity. This is a relatively high debt to equity ratio of 6 to 1 which makes them susceptible to adverse impacts from any downturn in the economy, especially since they have 15 additional CON applications pending in Florida, totaling $60 million in construction costs. In contrast to the Kelletts' high debt to equity ratio, Sisters have $159 million in long term debt and $160 million in equity for a very secure 1 to 1 debt to equity ratio. Projections of revenue and expense, as well as assumptions concerning projected utilization, Medicaid and Medicare rates, private pay rates, and patient mix used by Manor-Sarasota, HCR and Sisters in their pro forma are reasonable, based upon that applicant's experience and the services proposed in their applications at issue. Adequacy of Staffing All proposals have adequate and reasonable staffing patterns, as well as staff training programs, to insure that quality care is provided. Proposed salaries are reasonable and will allow qualified staff to be hired, based upon the recruiting experience and salaries currently offered by Sarasota nursing homes. Adequate staff resources exist in the area. I. Most Effective and Less Costly Alternative Since it is generally not necessary to construct support areas for storage, laundry, kitchen and administration, adding additional beds to existing facilities is a less costly alternative to an entirely new facility. Health Quest, HCR and Manor-Sarasota are, therefore, less costly per bed than Sarasota Healthcare and Sisters' proposals to construct new 120 bed nursing homes. Specifically, there are only minor costs associated with Health Quest's proposal, while the cost per bed of the Manor-Sarasota and HCR proposals are $30,872 and $30,030, respectively, compared with $32,500 per bed for Sarasota Healthcare and $55,295 for Sisters. Health Quest's application is the least costly alternative since it involves no construction costs to add seven beds to the existing 53 sheltered beds which would be converted to community nursing home beds, although minor costs for equipping seven new beds would be incurred. Effect on Costs and Charges Sisters and Health Quest have proposed, or actually experienced, the highest costs and charges of all applicants. Health Quest has not shown any basis upon which it can be reasonably expected that room rates will decrease, as it asserts, if this CON is approved. Due to the large size of its proposed building, higher food costs and number of staff, Sisters projects the highest operating expense per patient day in the second year of operation. Sisters will provide almost 500 gross square feet per bed, while Manor-Sarasota, HCR, and Sarasota Healthcare will provide 278, 267 and 314 gross square feet per bed, respectively. Enhanced Competition Since the other applicants are already represented in the service area, the approval of Sisters' application would enhance competition by adding another provider to Sarasota County. This will provide more choices to nursing home residents, and should increase the quality of long term care in the community with the added emphasis this proposal will place on rehabilitative programming. Costs and Methods of Construction The costs and methods of construction proposed by the applicants are reasonable, as well as energy efficient.
Recommendation Based upon the foregoing, it is recommended that the Respondent enter a Final Order, as follows: Approving HCR's application for CON 5049; Approving Sisters' application for CON 5039; Denying the application of Manor-Sarasota, Sarasota Healthcare and Health Quest for CONs 5050, 5025 and 5046, respectively. DONE AND ENTERED this 9th day of August, 1988, in Tallahassee, Florida. DONALD D. CONN 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 9th day of August, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3471, 87-3473, 87-3475, 87-3478 and 87-3491 Rulings on the Department's Proposed Findings of Fact Adopted in Findings of Fact 3, 12, 17, 19, 24, 30, 37. Adopted in Finding of Fact 37. 3-4. Adopted in Finding of Fact 43. 5. Adopted in Finding of Fact 42. 6-10. Rejected as irrelevant and unnecessary since the parties have stipulated to need. Adopted in Findings of Fact 37, 38. Adopted in Findings of Fact 26, 27, 55, 69, 70. Adopted in Findings of Fact 30, 56, 58, 60. Adopted in Findings of Fact 3, 55. Rejected as irrelevant since the parties have stipulated to need. Rejected in Findings of Fact 48, 57. Rulings on Manor-Sarasota's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Adopted in Findings of Fact 37, 38, 43. Adopted in Findings of Fact 15, 30, 32. Rejected in Finding of Fact 17 and Adopted in Finding of Fact 19. Adopted in Findings of Fact 3, 5, 24. Adopted in Finding of Fact 38. Adopted in Findings of Fact 13, 14 but Rejected in Findings of Fact 71, 73. Adopted in Findings of Fact 29, 31. Adopted in Finding of Fact 34. Adopted in part in Finding of Fact 35, but otherwise Rejected as unnecessary. Adopted in Finding or Fact 2. Rejected as unsupported and unnecessary. Adopted in Findings of Fact 29, 60, 61 but also Rejected in part in Finding of Fact 60. Adopted in Finding of Fact 31. Adopted and. Rejected in Finding of Fact 60, and otherwise Rejected as irrelevant and unsupported in the record. Adopted in Finding of Fact 29 but otherwise Rejected as unsupported argument on the evidence, without any citation to the record, rather than a proposed finding of fact. Rejected in Findings of Fact 63, 76. Adopted in Findings of Fact 32, 33, 82 but Rejected in part in Finding of Fact 33. Rejected as unsupported by the record. Adopted in Findings of Fact 33, 64 in part, but otherwise. Rejected in Finding of Fact 64 and as not supported by the record. Rejected as unnecessary and without citation to the record. Adopted and. Rejected in Findings of Fact 33, 63. Rejected as cumulative and unnecessary. Rejected in Findings of Fact 33, 63. Rejected in Findings of Fact 17. Adopted in Finding of Fact 17, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 17, 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 20, 71. Rejected as cumulative and unnecessary. 33-34. Rejected as irrelevant and unnecessary. 35-36. Adopted in Finding of Fact 81. Adopted in Finding of Fact 21. Rejected as speculative. Adopted in Finding of Fact 18 but otherwise Rejected as irrelevant and unnecessary. Rejected as unnecessary and irrelevant. 41-43. Rejected as not supported by the record and speculative. Adopted in Findings of Fact 19, 80. Adopted in Findings of Fact 48, 51, but Rejected in Finding of Fact 21. Rejected in Findings of Fact 63, 76 and otherwise as unnecessary and irrelevant. Adopted in Findings of Fact 24-26. Adopted in Finding of Fact 23. Adopted in Finding of Fact 79. Adopted in Finding of Fact 27. Adopted in Finding of Fact 1. Adopted in Findings of Fact 61, 63 and otherwise Rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 5, 81. Adopted in Findings of Fact 71, 75. 56-57. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. 58. Adopted in Findings of Fact 3, 55, 56. 59-61. Rejected as irrelevant, unnecessary and cumulative. Rejected in Finding of Fact 66. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 63, 76. Adopted in Findings of Fact 4, 6. Adopted in Finding of Fact l. Adopted in Finding of Fact 81 but otherwise Rejected as unnecessary. Rulings on HCR's Proposed Findings of Fact: 1-2. Adopted in Findings of Fact 42, 43. 3-4. Rejected as unnecessary and irrelevant. 5. Adopted in Finding of Fact 57. 6-7. Rejected as unnecessary. 8-9. Adopted in Finding of Fact 57. 10-15. Rejected in Finding of Fact 66 and otherwise as unnecessary and cumulative. Adopted in Finding of Fact 57. Adopted in Findings of Fact 27, 55. Rejected as unnecessary. Adopted in Finding of Fact 57. Adopted in Findings of Fact 23, 28, 63. Adopted in Finding of Fact 23. Adopted in Findings of Fact 25, 26, 28. Adopted in Findings of Fact 24, 27, 28. 24-25. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. 26-27. Adopted in Finding of Fact 27, but otherwise Rejected as unnecessary. 28-29. Adopted in Finding of Fact 66, but otherwise Rejected as unnecessary. 30. Adopted in Findings of Fact 46-49. 31-37. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. Rejected as unnecessary and irrelevant. Adopted in Finding of Fact 24. 40-42. Adopted in Findings of Fact 25, 26, 71, 75. Adopted in Finding of Fact 71. Rejected as unnecessary. 45-46. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 63, 81. Adopted in Finding of Fact 24. Adopted in Finding of Fact 28, but otherwise Rejected as cumulative and unnecessary. Adopted in Finding of Fact 79. 51-54. Adopted in part in Finding of Fact 24, but otherwise Rejected as unnecessary. 55. Adopted in Finding of Fact 37, but otherwise Rejected as unnecessary and cumulative. 56-57. Rejected as unnecessary. Adopted in part in Finding of Fact 17, but otherwise Rejected as unnecessary. Adopted in Finding of Fact 19. Adopted in part in Findings of Fact 18, 42. Adopted in Finding of Fact 18. 62-63. Adopted in Finding of Fact 20. Adopted in Findings of Fact 22, 55. Adopted in Findings of Fact 21, 49, 51. Adopted in Findings of Fact 32, 33. Adopted and. Rejected in Finding of Fact 33. Adopted in Finding of Fact 82. 69-70. Adopted in Finding of Fact 63. Adopted in Finding of Fact 56. Adopted and Rejected in part in Finding of Fact 34. Rulings on Sisters' Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 43. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 30. Adopted in Findings of Fact 12, 14, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 3. Adopted in Findings of Fact 24, 29. Adopted in Finding of Fact 19, but otherwise Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38. 11-12. Adopted in Finding of Fact 46. 13-15. Adopted in Findings of Fact 47-54. Rejected as unnecessary and not supported by the record. Adopted in Finding of Fact 30. 18-22. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. 23. Adopted in Finding of Fact 34. 24-26. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57, but Rejected in Finding of Fact 34. Adopted in part in Finding of Fact 30, but otherwise Rejected as argument unsupported by any citation to the record. 30-38. Adopted in part in Finding of Fact 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. Adopted in Finding of Fact 40. Rejected in Finding of Fact 40. 41-51. Adopted in Findings of fact 60, 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. 52-58. Adopted in Findings of Fact 29, 60, 61, but otherwise Rejected as unnecessary and irrelevant. 59. Adopted in Finding of Fact 11, but otherwise Rejected as irrelevant. 60-75. Rejected as unnecessary irrelevant, and cumulative. Rejected as unnecessary. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Findings of Fact 33, 82. Adopted in Findings of Fact 33, 82. Adopted in Finding of Fact 33, but Rejected in Finding of Fact 64. 82-83. Rejected as unnecessary. 84. Adopted in Finding of Fact 9. 85-86. Rejected as unnecessary. 87-88. Adopted in Findings of Fact 9, 41. 89. Adopted in Finding of Fact 4, but otherwise Rejected as not supported by the record. 90-91. Rejected in Finding of Fact 63 and otherwise not supported by the record. 92-105. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary, cumulative and irrelevant. Rejected as unsupported in the record and otherwise unnecessary. Adopted in Finding of Fact 29. Adopted in Finding of Fact 11. Rejected as irrelevant, unnecessary and speculative. Rejected as unnecessary. 111-112. Adopted in Finding of Fact 30. 113. Adopted in Finding of Fact 63. 114-115. Rejected as unnecessary and cumulative. 116-120. Adopted in Findings of Fact 60, 63, but otherwise Rejected as unnecessary and cumulative. 121. Adopted in Finding of Fact 30. 122-123. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative. 124. Adopted in Findings of Fact 31, 34, but otherwise Rejected as unsupported in the record. 125-126. Adopted in Finding of Fact 35. 127-129. Rejected as unnecessary and irrelevant since no applicant has locked in interest rates, and therefore these rates will vary and are speculative. Rejected as speculative and irrelevant. Rejected as irrelevant. 132-135. Adopted in Finding of Fact 73. 136. Adopted in Finding of Fact 74. 137-139. Adopted in Finding of Fact 71, but otherwise Rejected as unnecessary and cumulative. 140. Rejected as unnecessary and irrelevant. 141-145. Adopted in Finding of Fact 71. 146-147. Adopted in Finding of Fact 83. Adopted in part in Finding of Fact 71, 84, but Rejected in Findings of Fact 81, 82. Adopted in Finding of Fact 63. Rejected in Finding of Fact 67. Rejected as irrelevant and unnecessary. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Rejected as cumulative and unsupported by the record. 155-158. Adopted in Finding of Fact 54. 159. Rejected as irrelevant and unnecessary. Rulings on Sarasota Healthcare's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38, 43. 4-6. Adopted in Finding of Fact 11, but otherwise Rejected as unnecessary and irrelevant. 7-13. Adopted in Findings of Fact 12-16, but otherwise Rejected as unnecessary and irrelevant. 14-17. Adopted in Finding of Fact 46. Adopted in Finding of Fact 47. Adopted in Finding of Fact 49. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in Findings of Fact 11, 61. 22-23. Rejected as cumulative and unnecessary. 24-41. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in part in Findings of Fact 14, 57, but otherwise. Rejected in Finding of Fact 83 and as unsupported in the record. Rejected in Finding of Fact 54, and otherwise as irrelevant. Adopted in Findings of Fact 13, 51, but Rejected in Finding of Fact 54. Adopted in Finding of Fact 13. Adopted in Findings of Fact 14, 57. 47-49. Adopted in Findings of Fact 56, 66. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. 53-58. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. Adopted in Finding of Fact 14. Adopted in Finding of Fact 53. Adopted in Finding of Fact 81. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. 65-78. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 79-85. Adopted in Findings of Fact 76, 77, but otherwise Rejected as unnecessary and irrelevant. 86-97. Adopted in Findings of Fact 15, 63, 84, but otherwise Rejected as cumulative and unnecessary. Adopted and. Rejected in Finding of Fact 64. Rejected as unsupported in the record. Rejected as cumulative and unnecessary. 101-103. Adopted in Findings of Fact 15, 84. 104. Rejected as unnecessary and cumulative. 105-109. Adopted in Findings of Fact 63, 84, but otherwise Rejected as irrelevant and unnecessary. Rejected as unsupported in the record. Adopted in part in Finding of Fact 16, but Rejected in Finding of Fact 73. 112-116. Adopted and Rejected in part in Findings of Fact 71, 73, 75, but otherwise. Rejected as irrelevant and unnecessary. 117. Adopted in Finding of Fact 16. 118-119. Adopted in Finding of Fact 75. 120-121. Rejected in Finding of Fact 71. 122-126. Adopted in Finding of Fact 40. 127-128. Adopted in Findings of Fact 30, 32. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 31. Adopted in Finding of Fact 33. Adopted and Rejected in Finding of Fact 67. 133-135. Adopted and Rejected in part in Findings of Fact 33, 63, and otherwise. Rejected as irrelevant since all licensure requirements can easily be met with minor modifications. Adopted in Finding of Fact 36. Rejected as unsupported in the record. Adopted in Findings of Fact 15, 30, 32, 33. Adopted in Finding of Fact 31, but otherwise Rejected as simply a summation of testimony. 140-142. Adopted in Finding of Fact 36. Rejected as irrelevant. Adopted in Finding of Fact 34, but Rejected in Finding of Fact 51. 145-146. Adopted in Finding of Fact 34, but otherwise Rejected as unnecessary. 147-148. Adopted in Finding of Fact 30, but Rejected in Finding of Fact 57 and as unsupported in the record. 149-150. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57. Rejected as unnecessary and cumulative 153-156. Rejected in Findings of Fact 63, 76, 77 and otherwise not supported in the record. Rejected as unnecessary. Adopted in Finding of Fact 36. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Finding of Fact s. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 71, but otherwise Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in Finding of Fact 18, but otherwise Rejected as irrelevant and unsupported in the record. Adopted in Findings of Fact 17, 18, but otherwise Rejected as cumulative and as argument on the evidence. Adopted in Findings of Fact 48, 49, 51. Rulings on Health Quest's Proposed Findings of Fact: Adopted in Finding of Fact 24. Adopted in Finding of Fact 3. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 12. Adopted in Finding of Fact 30. 6-10. Adopted in Finding of Fact 37. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 42, 43. Adopted in Finding of Fact 20. Adopted in Findings of Fact 19, 20, 39. Adopted in Finding of Fact 18. Adopted in Findings of Fact 61, 63. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 17. Adopted in Finding of Fact 18. Rejected as argument on the evidence rather than a proposed finding of fact. Rejected as speculative and unsupported in the record. Adopted in Findings of Fact 19, 80. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 80. Rejected in Finding of Fact 71. Rejected as irrelevant. 27-34. Adopted in Findings of Fact 22, 63, 76, but otherwise Rejected as unnecessary and cumulative. 35-39. Adopted in Finding of Fact 22. 40. Adopted in Finding of Fact 66. 41-58. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant. Rejected as simply a statement on the evidence rather than a proposed finding of fact and otherwise irrelevant. Adopted in Finding of Fact 17, but otherwise Rejected as unnecessary. 62-63. Adopted in Finding of Fact 18. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 80. Adopted in Finding of Fact 63. Adopted in Findings of Fact 19, 80. 68-70. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 71. Adopted in Finding of Fact 21. 72-74. Rejected in Findings of Fact 48, 49, 51 and otherwise as irrelevant. 75-76. Rejected as unnecessary, although it is agreed that these matters are irrelevant and speculative. Adopted in Findings of Fact 63, 80. Adopted in Finding of Fact 9. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 9. 81-82. Adopted in Finding of Fact 39. 83. Rejected in Finding of Fact 39. 84-88. Adopted in Finding of Fact 41. Adopted in Finding of Fact 9. Rejected as argument on the evidence and as legal argument rather than a proposed finding of fact. Rejected as unnecessary. 92-94. Adopted in Finding of Fact 41. 95. Adopted and. Rejected in part in Finding of Fact 41. 96-101. Rejected in Findings of Fact 63, 76 and otherwise as irrelevant. 102. Rejected as cumulative. 103-104. Adopted in Finding of Fact 1. Rejected in Findings of Fact 61, 63. Rejected as simply a summation of testimony. 107-109. Rejected in Finding of Fact 63. 110-111. Rejected as unsupported in the record and irrelevant. 112-114. Adopted in Finding of Fact 9, but otherwise Rejected as unsupported by the record. 115. Adopted in Finding of Fact 41. 116-117. Rejected as unnecessary. 118-120. Rejected in Finding of Fact 66 and otherwise simply as a summation of testimony. 121-122. Rejected as irrelevant and as argument on the evidence. Adopted in Finding of Fact 38. Rejected as a conclusion of law rather than a proposed finding of fact. 125-127. Rejected as argument on the evidence and as a summation of testimony. 128. Rejected as cumulative. 129-131. Rejected as simply a summation of testimony rather than a proposed finding of fact. 132-134. Rejected in Findings of Fact 61, 63 and otherwise as irrelevant. 135. Rejected in Findings of Fact 43, 48, 57 and otherwise as irrelevant. 136-142. Rejected as irrelevant. The issue in this case is not the accuracy of the SAAR, but rather whether applicants have sustained their burden of establishing entitlement to a CON based on the record established at hearing. COPIES FURNISHED: Richard A. Patterson, Esquire Department of HRS 2727 Mahan Drive, 3rd Floor Tallahassee, Florida 32308 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House - Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 David Watkins, Esquire Harry F. X. Purnell, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Byron B. Matthews, Jr., Esquire Vicki Gordon Kaufman, Esquire 700 Brickell Avenue Miami, Florida 33131-2802 Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact NATURE OF THE CONTROVERSY In response to a 144 nursing home bed need for southeast Duval County, Florida, Subdistrict 3, HRS Service District IV, several applicants filed nursing home bed certificate of need applications for the review cycle triggered by a December 5, 1990 deadline, including; CVI for a 60-bed addition to an existing 60-bed facility authorized by Certificate of Need No. 5602; Atrium for an 84-bed facility; Marriott for a 30-bed facility; Health Quest for a 41-bed renovation and conversion of assisted-living facility beds, or 24-bed addition to the existing nursing home. Two other applicants, Health Care and Retirement Corporation of America for a 120-bed facility and Health Care Properties of St. Augustine for a 60-bed facility, did not pursue administrative appeals of their applications. HRS found all of the applications to be complete and all proposals were comparatively reviewed on their merits, with the exception of the MCRI 24-bed proposal which HRS found was untimely. The Department noticed its intent to approve the applications filed by CVI and Atrium. MRCI and HQR are Petitioners contesting the HRS intent because their applications were denied. HQR also claimed standing as an alleged substantially affected existing facility; however, HQR did not present any evidence in support of its standing on these grounds. THE HRS REVIEW HRS required the applicants to submit their proposals on an application form designated "HRS Form 1455, Oct.`88". [CVI Ex. 8; Tr. 2461. This application form is not a rule. [E.D. Tr. 1618]. A work group consisting of HRS and nursing home industry representatives developed the application form and HRS review procedures. [S.G., Q. 14; CVI Ex. 10; ANH Ex. 8]. Criteria at Section 381.705, Florida Statutes, form the basis for 13 goals of the HRS review process. (Id. S.G. pp. 4-15, Q. 14-39; ANH Ex. 8, p. 4). The goals are as follows: The first goal promotes the establishment of facilities to provide services when and where needed, intended to implement Sections 381.705(l) (a), (b), (d), (e), (j), (l), (2)(a), (b), (d) and (e) The second goal promotes special resident programs for special population groups, intended to implement Sections 381.705(1)(a), (b), (c), (f), (j), (l), (2) (a), (b) and The third goal promotes the establishment of continuing care-type communities, intended to implement Sections 381.705(1)(a), (b), (d), (e), (j), (2)(a), (b) and (d). The fourth goal promotes use of professionals in a variety of disciplines to meet resident needs, intended to implement Sections 381.705(1)(b),(c), (f), (g), (h), (j), (1) and (n). The fifth goal promotes the establishment of well-designed, comfortable facilities, intended to implement Sections 381.705(1)(b), (c), (m) and (2)(c). The sixth goal promotes residents' rights and residents' quality of life, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b). The seventh goal promotes a full range of social services for nursing home residents, intended to implement Sections 381.705(1)(b), (c), (f), (j), (l) and (2)(b) and (d). The eighth goal promotes provision of services to Medicaid eligible residents, intended to implement Sections 381.705(1)(a), (h), (n) and (2) (e) The ninth goal promotes the establishment of nursing homes which do not intend to secure significant profits at the expense of resid ent care programs and facility design, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (2)(a), (c) and (e) The tenth goal promotes nursing home locations which achieve a geographic distribution of nursing home beds, intended to implement Sections 381.705(1)(a), (b), (d), (e), (h), (j), (2) (a), (b) and (d). The eleventh goal promotes proper projection of construction costs, intended to implement Sections 381.705(1)(b), (e), (i) , (l), (m) , (2)(a) and (c) The twelfth goal promotes the establishment of nursing homes which have a record of implementing superior resident care programs and providing superior quality of care, intended to implement Sections 38 1.705(1) (b), (c), (f), (h), (j), (l), (n) and (2) (b); and The thirteenth goal promotes nursing home charges consistent with industry trends and Medicaid charges which are within Medicaid upper limits, intended to implement Sections 381.705(1)(b), (e), (h), (i), (l), (m), (2)(a) and (e) The working group identified the goals as representing desirable outcomes under the statute to be attained by successful applicants if specific objectives are achieved. Eight objectives, each relating to one or more of the goals are then utilized, with each operationally defined by several items of information. Scoring points are divided among the various items of information solicited under each objective. [SAG. p. 3, Q. 14, p. 17, 18, Q. 45; A.G. Tr. 1330]. The scoring system is not a rule; HRS utilizes it on a case-by-case basis to aid in decision-making. [A.G. Tr. 1273, 1274; S.G. Q. 43, 45, 46]. An application was measured by assessing the responses provided in the application against the point system. [ANH Ex. 8, p. 4; S.G. Q. 43, 45, 46]. The scoring system is a means to accomplish an evaluation of information--the process of forming, qualifying, verifying, and establishing judgments. Applicants are asked to specify concrete procedures or steps that, when implemented, are likely to result in a clear and predictable outcome. [S.G. Q. 44; A.G. Tr. 1320, 1321]. Thus, both operational features and the implementation process for those features are sought. All of the foregoing evaluation procedures, including the goals, objectives, review protocols and scoring system were disclosed to the applicants prior to application preparation and filing. [S.G. Q. 14; CVI Ex. 10; ANH Ex. 8; J.B. Q. 24]. Two HRS review consultants, a primary and a secondary reviewer, assigned a number to each application item which represented that consultant's assessment of how well the applicant's response addressed the particular item. [S.G. Q. 42, 43, 45; ANH Ex. 8, p. 4]. The ultimate score was calculated by a combination of manual and computer scoring which assigned the points available for each item number. [ANH Ex. 8 p. 4; S.G. Q. 45]. The scores assigned by each of the two consultants were then averaged. [ANH Ex. 8, p. 4; S.G. Q. 45]. A statistical reliability analysis of the consultants' assessments was then conducted before further evaluation proceeded. The work group also established protocols for evaluating the information provided by applicants. [S.G. Q. 14, 45]. The protocols utilized by the HRS provide a methodology which results in predictability, uniformity and commonality of judgment in the review of each application insofar as that is possible with subjective judgments of facts [S.G. Q. 42, 43, 45, 46]. Upon completion of the scoring, a final assessment was conducted by HRS managers who evaluated the overall presentation of information in the application available to make a judgment--the application of functional aspects with program components, whether the integration of the elements was internally consistent, and the likelihood that the proposal will have the success predicted by the applicant. [S.G. Q. 43, 46]. These elements serve as verification of the reviewer's actions and reflect the decision-making that occurs when the preliminary decision is made. Under the HRS evaluation system, there is no particular "passing" score. [S.G. Q. 45, 46]. The scores attained were utilized as an aid to evaluating the applications. [A.G. Tr. 1273, 1274]. The goal is to attain the highest possible percentage score possible based upon a potential base score of 1500 points. A successful applicant should demonstrate a consistently high number on each of the eight rated objectives. Reviewer judgment dictates the score; the score does not dictate the judgment. A display of the scores will quickly reveal weak points and inconsistencies in the application which assist HRS in exercising its decision- making discretion in weighing and balancing the statutory criteria. [A.G. Tr. 1273, 1274]. HRS prepared a "State Agency Action Report" which explained the evaluation, summarized the HRS findings, provided the scoring results, and stated HRS' intent to approve the CVI and ANH applications. [ANH Ex. 8]. 22. The scoring results Primary were: Secondary Average Percent of Reviewer Reviewer Score Maximum Atrium 1196.9 1274.33 1235.61 82.37 CVI 1175.28 1178.77 1177.03 78.47 Health Care & Retirement Corp. 1113.92 1185.4 1149.66 76.64 Health Care 1119.25 Properties of St . Augustine Marriott 1110.58 1150.90 1143.67 1135.08 1127.12 75.64 75.14 Health Quest (41 beds) 1079.46 1109.05 1094.26 72.95 Health Quest 1079.46 (24 beds) 1109.05 1094.26 72.95 The staff consultant with primary review responsibility exercised her professional judgment in reviewing the applications. [A.G. Tr. p. 1272]. /1 There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and the high occupancy rates within the subdistrict. There were no alternatives within the subdistrict for the providing the type of care required except construction of additional beds or renovation of existing beds of a similar type. Both of these alternatives were presented by the various applicants. THE CVI APPLICATION CVI is a not-for-profit Florida corporation. [CVI Ex. 3, iiia, iiic; J.B. Q. 28; CVI Ex. 8]. It is a local service unit of the National Benevolent Association of the Christian Church (Disciples of Christ), a Missouri not-for-profit corporation. The NBA was founded in 1887, and is one of the general administrative units of the General Assembly of the Christian Church (Disciples of Christ). The NBA provides care at numerous facilities to older adults, children and persons with developmental disabilities. [Id.; L.W. Q. 14]. Through local service units, (not including the CVI project), the NBA currently operates 13 nursing homes in 8 states. [Id.] CVI is developing a 65-acre adult retirement community on a site adjacent to the Mayo Clinic Jacksonville in southeast Duval County. [Id.]. Construction has been completed on all individual residential components of Phase I. [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q. 19]. The 60 bed addition will be part of Phase 11. [CVI Ex 3, PT 1, p. iiia; J.B. Q. 28]. Phase I consists of independent living apartments, an adult congregate living facility ("ACLF"), a 60-bed skilled nursing facility specifically designed for and dedicated to the care of persons afflicted with Alzheimer's disease and related dementia, and a core service building which contains administrative and other support facilities- [P.R. Tr. 200, 205, 206; K.V. Tr. 53; J.B. Tr. 311, 312; J.B. Q 19; CVI Ex. 3, PT II, p. 50a, supp. after p. 72a]. These elements, as required, have already been granted CON's. Phase I also included a maintenance building which in turn includes a laundry to serve the campus. [Id.; J.B. Q. 78, 79; CVI Ex. 3, PT I, p. 40a]. The Alzheimer's facility was authorized pursuant to Certificate of Need No. 5602 issued to CVI in 1989. [CVI Ex. 9; J.B. Q. 18]. The Alzheimer's facility consists of a 60-bed unit connected to the core service building. The 60 beds proposed by CVI herein will be located in a new nursing unit a.ii so to be /2 connected to the core service center. [Id.; P.R.Q. 12, 13, 14; P.R. Tr. 188, 189]. The Alzheimer's unit will also serve as a research center. [CVI Ex. 3, PT II, p. 71a, 71b; T.W. Q. 46, 47; K.V. Q. 17, 18]. All residents will participate in low-risk research such as diagnostic assessments, tracking the degenerative process through the collection of clinical data, behavioral observation and modification, activity-based therapy, and the use of environmental cues. [Id.; T.W. Q. 13]. Ultimately, dietary and drug therapies will also be the subject of research. [T.W. Q. 13]. The Mayo Clinic Jacksonville has a special Alzheimer's disease research team which will actively participate in the CVI research. [Id.]. CVI will be the only applicant licensed by HRS to operate the Alzheimer's unit. [F.D. Tr. 1565, 1566]. The Alzheimer's unit constitutes the nursing facility to which the proposed 60 nursing unit beds will be added.. [Id.]. CVI PROPOSED NURSING UNIT PROGRAM/QUALITY OF CARE CVI seeks a CON for a 60-bed nursing home addition to the ACLF mentioned above. The majority of the residents for the proposed nursing unit will come from the adult community developed by CVI which will be occupied by residents from within the total district. However, it is not anticipated that the adult community will be a direct source for nursing home residents for at least five years after the nursing unit is opened. [J.B. Q. 52, 103]. The CVI nursing unit will provide nursing care of a more generalized nature compared to the Alzheimer's unit. [J.B. Q. 26; K.V. Q. 28; CVI Ex. 3, PT II, p. iiia]. Consistent with CVI's plan for a continuum of care, the proposed nursing unit beds will also serve residents initially admitted to the Alzheimer's unit but whose disease has progressed to the point where the medical diagnosis becomes primary and, therefore, skilled nursing care becomes the primary need for that resident. [CVI Ex. 3, PT I, iiia; J.B. Q. 26; CVI Ex. 3, PT II, pp. 46a-46c; K.V. Q. 26, 27, 28]. However, utilizing existing Alzheimer's unit resources, these former Alzheimer's unit residents will still receive specialized care and participate in research; CVI Ex. 3, PT II, pp. 71a, 71b; T.W. Q. 46, 47]. CVI defines a "program" as those services designed to correct a resident's problem or condition. [CVII Ex. 3, PT I, p. 46a-46c; K.V. Q. 26, 27, 28]. The CVI nursing unit will offer three different specialized programs: (a) Alzheimer's care offering specific therapies for residents with Alzheimer's disease or related dementias; (b) a medically complex program offering restorative, therapeutic care for residents with acute, medically complex conditions; and (c) an inter-generational enrichment program for the purpose of stimulating nursing residents by daily interaction with children in a structured therapeutic activity. [Id.] Given the experience of the NBA at other local service units, CVI can reasonably be expected to provide excellent quality of care through the support and resources of NBA. [CVI Ex. 3, PT ii, pp. 24a-24c; T.W. Q. 29, 30; K.V. Q. 54]. CVI PROPOSED NURSING UNIT DESIGN SUPPORT FEATURES The nursing unit will comprise 18,720 square feet of new construction, with 28 semiprivate rooms, 3 private rooms, and one isolation room. [CVI Ex. 3, iiia; P.R. Q. 14-16]. The nursing unit will include an activity room, a day room/lounge with an outside activity deck, a nourishment station, and three garden recreation areas. [Id.]. The quality of life and care of the CVI nursing unit resident will be enhanced by resources available in the adjacent core service building which include a kitchen, a large, dividable dining area, activity rooms, physical and occupational therapy areas, beauty and barber shops, administration areas offices, medical treatment rooms, and a visitor lounge. [CVI Ex. 3, PT I, p. iiia; J.B. Q. 28]. Construction of the core service building was completed as part of the construction for the Alzheimer's unit. [P.R. Tr. 205-208]. When HRS reviewed the feasibility of the certificate of need application for the Alzheimer's unit, it also reviewed plans for the core service building. [P.R. 196-203, 207, 208; HQR Ex. 44; J.B. Tr. 255, 256]. The Alzheimer's unit was approved as a 60-bed alternative to a 120-bed nursing home proposed in CVI's earlier application for Certificate of Need No. 5602. [Id.]. Approval of the 60-bed Alzheimer's unit did not change the design nor reduce the total space planned far the core service building. [Id.]. The CVI nursing unit addition will not require the conversion, through renovation or new constructions of any area within the core service building. [P.R. pp. 200-206; J.B. Tr. 311, 312]. After the Alzheimer's unit project construction was underway, HRS allocated 7741 square feet of the core service building to represent the amount of core service area space under HRS nursing home jurisdiction. [P.R. Tr. 196, 199; HQR Ex. 42]. It is unrebutted that this allocated space will be sufficient to support both the proposed nursing unit beds and the Alzheimer's unit. [J.B. Tr. 311, 312; P.R. Tr. 196-203, 205, 206]. The allocated core space includes an allocation for the main dining room. Use of this main dining area is optional for residents of the Alzheimer's unit and the proposed nursing unit, since each unit has its own adequate dining facilities. [P.R. Tr. 188-191, 229; K.V. pp. 59, 60]. CVI will provide child day care for employees, and these children will participate inn the inter-generational enrichment program. [CVI Ex. 3,PT II, pp. 46a, 60a, 60b; K.V. 27, 28, 33, 34]. Ultimately, the child day care center will be located within a new apartment building, but will be temporarily housed in the core service building. [K.V. Tr. 52, 58]. CVI will also eventually construct a chapel to be located on the campus. [CVI Ex. 3, PT II, p. 66b; K.V. Q. 43, 44]. Until then, the nursing home residents will be able to utilize a chapel area located in one of the lounge areas in the existing apartment building. [K.V. Tr. p. 56]. CVI's semiprivate rooms are specially designed to provide a physical separation, through the use of a dividing wall, that approaches the privacy of a single room with the economizes of a semiprivate room, while still allowing each resident to have the very important contact with another person. [CVI Ex. 3, PT I, p. iiia, Appendix 11(4B); P.R. Q. 14-16; P.R. Tr. 182-186]. Each bed will overlook an individual adjacent window. [Id.]. CVI PROJECT COSTS CVI reasonably projects that the nursing unit will involve a total project cost of $3,286,258 - ($301,175 land, $2,174,108 (including $79,880 fixed equipment) building construction, $231,525 moveable equipment, and $571,450 intangible asset and deferred) [CVI Ex. 3, PT I, 24-27c; J.B. Q. 37-39, 41; P.R. Q. 8; T.W. Q. 19-21]. CVI's capital budget also includes the possible development of additional ACLF units on a second floor of the nursing unit building as part of Phase II. [CVI Ex. 3, PT I, pp. 28, 28a; J.B. Q. 42; J.B. Tr. 303, 304]. However, the CVI nursing unit construction cost was conservatively projected on the basis that the nursing unit would, like the Alzheimer's unit, be a one-story building. [P.R. Tr. 193-195]. It thereby accounts for all construction, including the roof, necessary to build the 18,720 square foot nursing unit. [Id.]. CVI's projected construction costs for the proposed nursing unit are reasonable and conservative. [CVI Ex. 3, PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. In the application, they were premised upon the Alzheimer's unit costs as known at the time the application was submitted. [Id.]. The reasonableness of the proposed nursing unit construction cost projections was again verified by the time of hearing in August, 1991. [J.B. Q. 41]. For construction (labor, materials, overhead, construction management, and profit) CVI projected a cost of $1,825,144, or $97.50 per square foot [CVI Ex. 3 PT 1, p. 27a; J.B. Q. 38, 39, 40; P.R. Q. 6; P.R. Tr. 210-212; CVI Ex. 34]. CVI certified to HRS that the final construction cost for the Alzheimer's unit under Certificate of Need No. 5602, including fixed equipment, was $76.33 per square foot. [CVI Ex. 34]. Adding the construction management fee, the final cost was $81.30 per square foot. [Id.]. If CVI's fixed equipment costs of $79,880 were added to the $1,825,144 projected construction cost for CVI's nursing unit, the result would be $101.74 per square foot. If the comparable Alzheimer's unit cost of $81.30 per square foot was conservatively inflated for a two year period (to allow adequate construction commencement after final agency action, see CVI Ex. 3, PT II, p. 57; P.R. 1. 25, 26) the result of $89.63 per square foot again reveals the reasonableness of CVI's projected construction costs. The CVI proposed nursing unit will occupy approximately 3 acres of the total 65 acre campus. [CVI Ex. 3, PT I, pp. iiia, 27a; J.B. Q. 28,38, 39, 46]. CVI reasonably allocated, pursuant to generally accepted accounting principles, a portion of the land's fair market value and land improvement costs to the proposed nursing unit 60-bed project. [CVI Ex. 3, PT I, p. 27a; J.B. Q. 38, 39; J.B. Tr. 294-296]. CVI's ABILITY TO FINANCE THE PROJECT CVI has the ability to finance the nursing unit project. [ANH Ex. 8, p. 22]. Phase I, including: the Alzheimer's unit, of the CVI campus was financed through a $21,960,000 tax exempt bond issue through the Jacksonville Health Facilities Authority. [CVI Ex. 3, PT I, p. 28a, 1990 Audited: Financial Statement, p. 10; CVI Ex. 8; R.B. Tr. 241, 242]. CVI intends to secure the same type of financing for the proposed nursing unit. [CVI Ex. 3, PT I, pp. 30, 30a; J.B. Q. 44-46; CVI Ex. 3, Appendix 5(2.c.1); L.W. Q. 8-10; R.B. Q. 5-13; R.B. Tr. 241,: 242]. The Jacksonville Health Facilities Authority provided the tax exempt bond issue through the authority of Chapter 159, Part II, Florida Statutes. [CVI Ex. 8, p. 1]. Thus, pursuant to the provisions of the statute, CVI Phase I project in its entirety (which includes the core service building and the ACLF) necessarily was found to be financially feasible. See Section 159.29, Florida Statutes. CVI will be primarily responsible for repayment of the bond proceeds but the NBA will guarantee the bond issue, as it did for Phase I. [Id.; M.G. Q. 26]. The NBA has significant financial strength. In 1988, it had total assets of $145,493,840. [CVI Ex. 8; L.W. Q. 16]. In 1989, the total grew to $168,507,027. [Id.]. In 1988, it realized a net income (revenue over expenditures) of $5,670,754. [Id.]. In 1989, the income increased to $11,563,778. [Id.] The NBA has secured third party financing for its local service units on numerous other occasions. [L.W. Q. 7; R.B. pp. 241, 242]. The most recent occasion involved tax exempt bond financing immediately prior to the hearing, ore July 31, 1991. [L.W. Q. 7]. The investment banking firm which has worked on several tax exempt bond financing projects with the NBA, and which handled the financing for Phase I of CVI, has reviewed the financing proposal for the CVI nursing unit and has found it to be reasonable and achievable. [R.B. Q. 1-13]. Raising charitable funds has been a regular activity of the NBA and its local service units. [L.W. Q. 11, 13]. To date, CVI has raised $4,000,000. [Id.]. As of June 30, 1991, $1,327,589 in cash from donations was still available for the proposed nursing unit. [Id.; J.B.Q. 44-46]. The CVI application revealed $24 million in assets consisting primarily of bond issue proceeds. [CVI Ex. 3, PT I, pp. 28-28(b); J.B. Q. 42, 43]. CVI STAFF AND INDEPENDENT CONTRACTORS The staff proposed for CVI's nursing unit significantly exceeds minimum requirements, and would meet the criteria in Florida for a superior rating. [CVI Ex. 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. The superior rating indicates a higher level, and higher quality, of care. [Id.]. Because of the nursing intensity required for Alzheimer's and related dementia patients, the Alzheimer's units staff nursing to patient ratio will be 1:5 or 1:6. [K.V. Tr. 63, 66]. The CVI nursing unit will have a 1:8. The typical ratio for nursing homes in the Jacksonville, Florida area is 1:10. [K.V. Tr. p. 66]. The CVI application presented reasonable levels of anticipated salaries and fringe benefits. [CVI Ex 3, PT I, pp. 36, 37, 37a, 38, 39; K.V. Tr. 31, 32, 39, 40; K.V. Q. 49-53; T.W. Q. 23-26; J.B. Q. 54-63]. CVI accounted for employees, such as the administrator and director of nursing, who were full-time and on a fixed salary. (Id.]. CVI also accounted for those staff who are to be paid on the basis of an hourly wage, such as nurses, calculated according to the number of work hours expected (based on full-time equivalent factors). [Id.]. Under this approach, the CVI salary projections account for vacation, overtime, and sick leave. [Id.; K.V. Tr. 45, CVI did not directly reflect revenues nor expenses attendant to the activities of therapists, pharmacists, dentists, podiatrists, a medical director, for other such consultants because they would serve as independent contractors. [CVI Ex. 3, PT I, pp. 40a, 46b; J.B. Q. 66, Instead, CVI indirectly accounted for the independent contractors by utilizing a "net methodology" pursuant to which the anticipated consulting fees are included within a base rate for private pay residents along with a markup. [Id., Tr. 312-314, 339, 340]. The markup covers the cost to provide the contractual services to Medicaid or Medicare reimbursed residents. [Id.]. In this regard, CV followed the customary accounting approach taken by a not-for-profit nursing home whereby the facility does not attempt to profit from the provision of such contractual services. [Id.] FINANCIAL FEASIBILITY OF CVI'S NURSING; UNIT By the end of the second year of proposed nursing unit operations, it is reasonably anticipated that the 120-bed CVI nursing home will realize a net income of at least $275,300 at 95 percent occupancy. [CVI Ex. 3, PT I, pp. 35 35a, 47-49a (Schedule 18); J.B. Q. 77-81; J.B. Tr. 274, 275]. By the second year of operation, CVI's revenues per patient day will be $99.25, compared to $116.16 for HQR's 24 bed proposal, $117.45 for HQR's 41 bed proposal, $118.15 for Atrium's proposal, and $126.03 for MRCI's proposal. [Comparison of Schedule 18 of applications]. The nursing unit is feasible on an immediate and long-term basis. [J.B. Q. 27]. CVI did not rely upon any non-nursing home revenues to demonstrate feasibility for the nursing unit. [Id.; J.B. Tr. p. 305]. CVI demonstrated nursing home feasibility as a stand-alone project. [Id.] Schedule 18 of the application contains space for the applicant to enter non-nursing home revenues and costs, such as those items associated with the operation of a co-located ACLF. Under HRS policy, the applicant has the option as to whether or not to provide these projections. [E.D. Tr. 1551-1559]. CVI proposes a 35 percent Medicaid utilization condition for the nursing unit which, with a 50 percent rate in the Alzheimer unit, results in a 42.5 percent Medicaid rate for the 120 bed facility. [CVI Ex. 3, PT I, p.iv, p. 46a; H.B. Q. 31, 33, 73-75; A.G. Tr. 1260, 1261, 1320]. Of the completing applicants, only CVI showed all it beds will be Medicaid certified. [J.B. Tr. 263, 265]. It is the financial feasibility of the specific certificate of need being reviewed which is assessed by HRS. [Id.]. HRS does not review the financial feasibility of any other operations of the applicant which are not part of the nursing home certificate of need application. [Id.]. VALIDITY OF CVI'S AUDITED FINANCIAL STATEMENTS The completeness deadline for applications was January 18, 1991. However, the completeness determination for CVI was delayed by approximately one month because, initially, HRS withdrew the CVI application from review. HRS' action was based upon an audited financial statement of CVI covering the first 10 months of 1990. HRS acted upon an apparent non-rule policy that a "combined" audited financial statement would not be `accepted, and the conclusion that the 1990 10-month CVI audit was a "combined" statement. No evidence was adduced at hearing to demonstrate what HRS specifically defined to be a "combined" statement, or specifically why the Department initially felt the 10-month 1990 audit was not an audited financial statement of Cypress Village, Inc. Upon reconsideration, the HRS reinstated the CVI application, specifically finding that another audited financial statement, covering the full 1989. The purpose of an audit is to fairly present, in all material respects, an entity's financial position, results of operations, and cash flows in conformity with generally accepted accounting principles (GAAP). [M.G. Q. 11; M.F. Tr. p. 1813]. This conclusion may be expressed only when the auditor has formed such an opinion on the basis of an audit performed in accordance with general accepted accounting principles which govern auditing standards. [Id.] The certified public accountant has a duty to exercise independent professional judgment with due professional care in preparing the audit and preparing the report. [Id.; M.F., Tr. p. 1811; M.G. Q. 35]. Within the accounting profession, because independent judgment is to be utilized, reasonable persons can disagree on a professional basis as to whether, how, and why certain items should or should not be included in, or appear in, audited financial statements under GAAP for any particular entity. [M.F. Tr. 1918]. The CVI auditors found that `failure to account for all assets, regardless of legal title, exclusively utilized by CVI for its economic benefit would violate the completeness requirement. [M.G. Q. 16, 17, 33]. [M.G.Q. 26]. If CVI's auditors had not reflected the assets to which that liability applies, notwithstanding titled ownership, the audited statements would not have been complete and would not have fairly represented the financial position of CVI. [Id.]. Both CVI audited financial statements meet the test of fairly presenting CVI's financial position results of its operations, and cash flows in conformity with GAAP. [M.G. Q. 1-39]. The CVI auditors exercised independent professional judgment with due care. [Id.; M.G. 34, 36]. Even if reasonable persons disagreed with the results, the application's requirements were met and HRS had information presented to it upon which to base its decision. The balance sheet and income statements contained in both the 1989 and 1990 CVI audited financial statements are based upon the "fund balance" accounting approach. [CVI Ex. 3, p. 9, 1990 audit; M.G. Q. 28, 30; Burcham Q. 11]. Fund balance accounting is unique to not-for- profit and governmental entities. [M.G. Q. 31]. The CVI audit balance sheets and income statements represent the combination of funds from two sources, both directly related to CVI operations and both of which have a material influence upon CVI's financial position, cash flows, and operational results. [M.G. Q. 26, 27, 28, 29, 32, 33, 36]. The 1990 statement is only different from the 1989 audit in terms of the form of presentation and because the passage of time resulted in updated financial information being available to reflect the more mature status of CVI in its development activities. [M.G. Tr. 1536; CVI Ex. 3 1989 & 1990 audits]. The characterization of the audited financial statement as a "combined statement" has no significance from an accounting standpoint because "combined statement" is not a term of art in accounting and has no precise meaning. [Id.; M.F. Tr. 1825, 1826]. To the extent the CVI statements may be deemed "combined", they do portray CVI as a distinct legal entity and do not distort the financial ability of the applicant [M.G.Q. 1-39; M.G.Q. 16, 27-29]. To the extent that CVI's 1990 audited financial statements make a specific reference to "combined financial statements", this reference is not a term of art and does not effect the validity of the audited financial statement. [M.G.Q. 27; Burcham Tr. 330, 331]. The financial statements account for the assets and liabilities shared with the NBA as required by GAAP. [Id.; and M.F. Tr. 1333-1334]. The American Institute of Certified Public Accountant's Technical Division concurs in the type of presentation utilized by CVI's auditors. [I.B.Q. 17]. The Technical Division was asked to comment on an audit for another NBA local which utilized the fund balance presentation. [Burcham Q. 5- 18]. The Division concurred that NBA's assets dedicated to that service unit's retirement program (similar to CVI's) should be included on the audit given the unit's debt and other obligations and economic benefit derived from those assets. [Id.; M.F. Tr. 1744, 1745]. VALIDITY OF CVI'S LETTER OF INTENT NOTICE OF PUBLICATION CVI timely published notice of its letter of intent in the Jacksonville Times Union. The contents of the publication are set forth in Rule 10-5.008(1)(i), Florida Administrative Code. Due to an error which was solely the fault of the newspaper, the newspaper left a zero off the total project costs so that the publication actually said "$30,000.00" instead of $3,000,000. [CVI Ex. 4]. Prior to the application completeness deadline, CVI provided an affidavit to the HRS which revealed that the error was not due to any fault of CVI. [CVI Ex. 4; A.G. Tr. 1266, 1267; E.D. Tr. 1569-1571]. Consistent with its existing policy, HRS found that since the publication error was not the fault of or within the control of the applicant, CVI had satisfied the legal requirements for publication. [Id.; A.G. Tr. 1269-1270]. The rationale for the HRS policy was that it would not be fair to punish an applicant for the `mistake of the newspaper as long as the applicant fulfilled its responsibility to demonstrate that it had no part in creating the error. [Id.]. At the time of the CVI application, this policy had been consistently applied by HRS for numerous other applicants who were found to be in compliance with the law as long as the publication error was not their fault. [Id.]. CONFORMITY WITH THE LOCAL HEALTH PLAN All four applicants conformed generally to the applicable local health plan. The applications of CVI and Atrium were determined by HRS to meet the elements of the local plan better than did the applications of Health Quest and MRCI. Atrium and CVI were the only applicants which provided specialized programs for Alzheimer's patients, a preference for applicants in the local health plan. [Atrium/Nelson PF, pp. 20- 28; Atrium Ex. 8, p. 10-11; HRS/Granger PF, pp. 6-8; ANH Ex 16; A.G. Tr. 1323]. Atrium and CVI had the lowest costs per bed of the applicants. [See p. 249 below]. MCRI failed to address the current District Health Plan (1990-91) and instead used the 1989-90 plan. [Atrium/Nelson PF, p.9]. MRCI proposes to serve the lowest percentage of Medicaid patients in proportion to the average subdistrict-wide experience of nursing homes. Health Quest's existing facility, already at 120 beds, would be substantially over optimal size at 161 beds, if its proposed project is approved. Furthermore, Health Quest was not in compliance with regard to special programs and commitment to serve hard-to-place patients. [Atrium/Nelson PF, pp. 9-20; Atrium Ex. 8; HRS/Granger PF, pp.: 9-10]. There was no evidence that approval of any of the four applicants would have an adverse impact on the costs of providing health services, especially in light of the numeric need and high occupancy rates of the subdistrict. ATRIUM'S APPLICATION The proposed Atrium 84-bed nursing home will be constructed in close proximity to The Atrium Retirement Community of Jacksonville, an existing 176 unit retirement and assisted- living community. The Atrium will be a new facility constructed and developed by owners new to construction and operation of health care facilities. The applicant is a "shell" corporation with assets of $50,000.00 owned by Jack and William Deinetree, two brothers, who have also provided financial data and letters from their bank indicating their financial ability and intent to complete this project. The applicant filed an audited financial statement as required by statute although it revealed a shell corporation waiting CON approval for the infusion of dollars by the shareholders, Jack and William Demetree. HRS does not limit an applicant's documentation in demonstrating how it will be able to finance its project, if approved. Atrium's letter of intent was clearly indicated as such within its application. Atrium's application was deemed complete. [Vol. 15, pp. 1616-17; Atrium Ex. 2, p.123; Atrium Ex. 5]. Personal financial statements of the Demetrees, prepared by their longtime CPA, were also included in Atrium's application. [Atrium/Schramm PF, pp. 10-11]. The Demetrees' financial statements were "compiled" statements. [Vol. 16, p. 1678]. A CPA will not even prepare a compiled statement unless he has personal knowledge of the individual involved and his business operations. [Vol. 16, p. 1678]. `The financial statements of the Demetrees were provided as supplementary material. There is no statutory or rule requirement that they be in a certain form. [Vol. 16, p. 1694] After assessing their financial net worth, DHRS concluded that the Demetrees have more than sufficient liquid assets to make the equity contribution required in Atrium's application. It is a matter of the general business philosophy of the Demetrees that they put equity into all their development projects. [Atrium/Schramm PF, p. 11]. The nursing home application form does not require audited financial statements of stockholders in order to support their ability to make equity contributions. Neither the application Form 1455A, October 1988, nor the instructions thereto, dictate such a requirement. [Atrium Ex. 2, p. 24; Healthy Quest Ex. 9, p. 1-6; MRCI/Beiseigel PF, p. 6; Vol. 1, p. 75; Vol. 5, p. 444]. The ability of the Demetrees to obtain construction and permanent financing, as well as contribute substantial equity and operating capital was demonstrated by competent, substantial evidence. The $100,000 note payable to owners that appears in Schedule 15 of Atrium's application will be a line of credit, used for working capital during the first year of operation, before the cash flow picks up. It is fairly customary in the industry to provide such financing during the initial year or so of operations. (Vol. 6, p. 569; Vol. 16, p. 1682). The Atrium will have the resources available to complete the proposed project if the Demetrees provide the financing. Because the Atrium is a shell corporation in which the Demetrees own all the stock, it is logically assumed that they will provide the financing to the extent they are able. [Vol. 16, p. 1682; p. 1716; p. 1723; HRS/Granger PF, p. 13]. Their ability to finance the project is discussed above, and no evidence was introduced to show they could not finance the project. As a shell corporation, the Atrium currently has no other capital projects or expenditures under development or in the planning stage. Because it has very little capital and is totally dependent upon the infusion of capital by the Demetrees, existence of other project and expenditures is absolutely irrelevant. [Atrium/Schramm PF, pp. 5, 7]. Recent borrowings in amounts of from 3 to 8 million dollars by companies in which the Demetrees are major owners indicate their ability to obtain capital at rates from prime plus one-half to prime plus one. [Vol. 16, pp. 1680-1]. In its application, Atrium provided a letter of interest from First Union National Bank to finance the project, if approved. The Demetrees have a long-standing relationship with the bank, which has financed numerous large scale developments for the Demetrees through construction loans, working capital lines and permanent financing. The Demetrees have a 40-year, unblemished lender-borrower relationship with First Union (formerly Atlantic National Bank); there was no competent substantial testimony to the contrary. [Atrium/Schramm PF, pp. 8-9; Vol. 6, p. 549; Atrium Ex. 2, App.; Vol. 16, pp. 1679-81; Vol. 5, p. 445]. The Atrium's proposed plan is designed to develop innovative quality of life enhancements to minimize the institutional setting characteristic of some nursing homes. The plan utilizes a staggered semiprivate room design that increases residents' privacy and allows each resident to have a window to the exterior. The facility will-meet social needs of the residents, as well as their need for privacy. It is supported by a resident room design as well as a variety of activity and support spaces. (Atrium/Bhide PF, p. 3; Atrium Ex. 8, p. 18) The Atrium's proposed design is both appropriate and reasonable in light of state and local construction standards for a freestanding nursing home. (Atrium/Bhide PF, p. 3-7) The projected construction costs are based on Vasant Bhide's experience with designing and working on at least five (5) nursing home projects in the North Florida area in the past two years. According to Bhide, the proposed project cost estimates (construction costs, fees and equipment) are reasonable, and include almost $200,000 in contingency funds. Bhide's representations are disputed by other equally knowledgeable and experienced builders and architects whose costs estimates on similar facilities exceed Bhide's estimates. (Vol. 7, p. 644; Atrium/Bhide PF, p. 4; Atrium Ex. 3, p. 49; Atrium/Downs PF, p. 6-7) The Atrium's project costs compare favorably with HRS experience, and the actual costs may be lower due to the impact of the current recession. (Vol. 5, P. 434). (Vol. 7, p.644; Atrium/Bhide PF, p. 4-7; Atrium Ex. 3, p. 4-7) The total project cost of Atrium, which is just under $4 million, is deemed reasonable. (Atrium/Nelson PF, p. 29; Atrium/Downs PF, p. 6; Vol. 6, p.570, 572; Vol. 6, p. 552; Vol. 16, p. 1699-1703). The Atrium's projected bed utilization for the first two years is both reasonable and appropriate. (Atrium/Nelson PF, p. 6; Atrium/Downs PF, p. 4) The Atrium's proposed patient charges and expenses are reasonable. (Atrium/Nelson PF, p. 29, 31; Atrium/Mitchell PF, p. 4-6) Although acknowledging he had seen Medicare rates as high as $270 per patient day, Mark Fall challenged the Medicare rates projected by Atrium. (Vol. 18, p. 1888) If Mr. Fall's opinion were credited, Atrium's net income in year two would still exceed $260,000. (Atrium Ex. 4, Sch. 18) reasonable and conservative, based on actual recent financing of other Demetree projects. (Atrium/Schramm PF, p.12) The Atrium's assumptions on Schedule 11, especially regarding fringe benefits, were shown to be reasonable. The total dollar amount of salaries and wages and benefits for Schedule 11 were compared to other historical operations, inflated forward, and found to be well within the reasonable range by Joseph Mitchell, Atrium's expert in Medicaid and Medicare reimbursement and nursing home accounting. (Vol. 6, p. 563-565) The Atrium's proforma assumptions, using fringe benefits of 22 percent, were reasonable. (Vol. 6, p. 565) The Atrium's projected Medicare per diem revenues are reasonable considering this is a start up facility. One cannot compare a start up facility's Medicare rates with those of a long-standing facility, as Medicare imposes a limitation on Medicare rates after the first three (3) years of operation. (Vol. 6, p. 568) Atrium's proposed project is feasible in both the short and long term. Mr. Mitchell tested the reasonableness of the proforma assumptions based on his experience working with 125 to 150 nursing homes on an operational basis. (Atrium/Mitchell PF, p. 9; Vol. 6, p. 578) The Atrium's projected debt schedule is reasonable and conservative based upon recent financing of projects by the Demetrees. (Atrium/Schramm PF, p. 12.) The Atrium's design meets all codes, including building and life safety, energy code, handicap accessibility code, etc. (Atrium/Bhide PF, p. 6) HRS' architects ranked Atrium's plans first among the applicants in this hearing. (Atrium Ex. 8, p. 17-19; HRS/Granger PF, p. 14) The Atrium's application notes a willingness to take AIDS patients and will be bringing on-line 84 beds in a high occupancy subdistrict, which will promote better geographic accessibility. [Atrium/Nelson PF, p. 31]. The Atrium proposes to commit to 61% Medicaid, the most of any applicant. This commitment is attainable in light of the actual experience in the subdistrict (62.1% average) and the overall state average (60.6%). [Atrium/Nelson PF, p. 8- 9]. The proposed operations and quality assurance program submitted by Atrium meet or exceed Florida regulatory standards. [Atrium/Fitzpatrick PF, p.5, 14; Atrium/Downs PF, pp. 4-6; HRS/Granger PF, p. 11]. The Atrium's proposed staffing levels are reasonable and meet or exceed Florida standards. [Atrium/Fitzpatrick PF, p. 7; Health Quest Ex. 11]. The Atrium will develop and implement a training/staff development/internship program, to include students residing in Duval County. [Atrium Ex. 4, p. 70 A-C]. The Atrium will also be associated with an existing 176-unit retirement community known as The Atrium Retirement Community of Jacksonville, through their common ownership. The experience gained, in the five years of operating The Atrium Retirement Community of Jacksonville will be beneficial to the Atrium nursing home project, especially in the areas of housing for elderly residents, security, housekeeping, dietary and nutritional services, activities and counseling. (Atrium Ex. 2, p. 24B) Atrium will have established linkages with its sister retirement community and thereby offer a continuum of care. [Atrium Ex. 4, p. 46 A-c; 58A]. Atrium will have a good recruitment and career ladder programs. The Atrium's description of its patient assessment and care plan, utilization review program, quality assurance program, operations and dietary programs were comprehensive and explicit. The Atrium described very good activities programs, family involvement, mental conditions of residents, restoration/normalization programs and quality of life enhancement programs. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. Overall, the presentation was consistent and thorough and stated the services to be offered by the applicant. [Atrium Ex. 8, p. 15; HRS/Granger PF, pp. 11-12]. However, Atrium has never built or operated a nursing home. The Atrium's inexperience is demonstrated by its failure to properly plan for the cleaning of soiled laundry. The Atrium indicated it may send out the patients' laundry or use the laundry of a nearby retirement community. (T. 171, 549; Atrium Exhibit 4) As additional evidence of its inexperience in operating nursing homes, the Atrium proposes to use a non- wheelchair accessible van for transportation of it's residents, pulling a U-Haul with the wheelchairs. (Atrium Exhibit 4) When the matter was raised at hearing, its representative indicated that Atrium would rent a wheelchair accessible van, and private medical providers might be called on to transport Medicare and Medicaid residents to doctors' appointments, therapy sessions, and related activities. [Atrium Ex. 4, p. 61A; Atrium/Downs PF, p. 9]. Atrium intends to draw upon the management skills of the American Retirement Corporation (ARC) of Nashville, Tennessee. ARC is a national management services company which operates 21 retirement communities in 14 states. Most of the programmatic features set forth in Atrium's application are already utilized successfully at ARC facilities around the country. (Atrium Ex. 2, p. 24 A-B) For more than 10 years, ARC has employed its standard operating methods at a nursing home located at the Burcham Hills Retirement Community in East Lansing, Michigan. (Atrium Exhibit 13, p. 2; T. 520) ARC has been found to be in violation of several nursing home standards at its facility at Burcham Hills, Michigan, including serious failures to provide appropriate care to residents. (Health Quest Exhibit 26, pp. 3-7) The Senior Vice President of Operations for ARC plans to manage Atrium's nursing home using ARC's "`standard operating methods," to describe the programs that would be offered. (Downs PT, pp. 5-12) He asserted that ARC's lack of experience in managing a nursing facility of this size, type, and location is irrelevant because, among other reasons, "a patient is a patient." (T. 618) The Atrium, through its proposed management contract with American Retirement Corporation (ARC), will attempt to provide quality care to its patients. [Atrium/Fitzpatrick PF, p. 3]. MCRI'S APPLICATION FOR CON The MRCI CON is for a 30-bed nursing home. MRCI filed a proper letter of intent and audited financial statement for this CON. (T. 1608, 1609, 1611, 1613). MRCI also filed a CON for a 24 bed nursing home which HRS rejected as incomplete and untimely. Because the completeness issue of the 24 bed CON was undecided, MRCI presented evidence that included the feasibility, etc., of the 24 bed CON. In summary, there were no significant differences between the two CONs, and both were equally feasible. MRCI has developed a prototype facility called "Brighton Gardens". An MRCI Brighton Gardens facility typically includes 30 nursing home beds and 120 ACLF `beds. (Walter PT, p. 5). The concept anticipates carrying for the elderly from their need for an ACLF through nursing home care with minimum disruptions due to changes in environment. MRCI's research has indicated that as people get older, changes become more difficult and residents do not want to transfer back and forth between facilities. (T. 909) MRCI's project minimizes transfer trauma. The more unfamiliar the situation the more serious the transfer trauma. Transfer trauma manifests itself by despair, isolation, a change in a person's behavior and the way they deal with ordinary situations. Some states require transfer trauma plans before a resident is moved out of a facility. (T. 910, 911) At a Brighton Gardens facility, when a resident moves from the ACLF to the nursing home, friends in the ACLF can visit the nursing home on a regular basis. This is particularly beneficial for spouses to be able to visit back and forth without the need for transportation. (T. 907, 908) All of the beds are contained within the same building, although the nursing home is a self-contained unit with its own separate entrance for privacy and ease of access by residents, staff and visitors. (Walter PT, pp. 5, 6). Marriott and Marriott Retirement Communities, Inc. currently own and operate ten retirement centers and manage two other. (Evans PT, p. 4) MRCI operates two Brighton Gardens in Arizona and one in Virginia Beach and one in Houston, Texas. (Evans PT, p. 6) Five retirements communities are currently under construction and are all scheduled to open within 18 months (Evans PT, p. 4). MRCI already operates one facility in Florida which is a full service retirement community and has a superior rating. (Walter PT, p. 18) MRCI has demonstrated that it has the ability to provide superior care at its Brighton Garden facility. MRCI has demonstrated that it can provide the quality and types of programs equal to or exceeding any of the other applicants. MRCI has demonstrated that it can improve the quality of care in existing institutions and successfully operate nursing homes. For example, MRCI began managing a property in Canton, Ohio in June, 1988, when occupancy was less than 50%. When it discontinued management in early 1991, occupancy was approximately 90%. The net loss in income for the property had been reduced substantially from $2.3 million in 1988 to $900,000 in 1990. Reduction in cash loss was even more significant. (T. 874-875) MRCI managed property known as Towne Center, beginning in June, 1988, and discontinued management in early 1991. When MRCI began managing the property occupancy was approximately 55%. Occupancy had increased to over 90% by the time MRCI discontinued management. Efforts to discredit Marriott's management were unsuccessful and rebutted by its representatives. The design of MRCI's proposed project lends itself to quality of care because residents will not be expected to transfer from one entity to another as their needs change and because the small size of the unit allows for more individualized care. (Evans PT, pp. 28, 29; T. 1315) MRCI's proposal provides sufficient staff to provide top quality care. (Evans PT, p. 6) MRCI is proposing to provide 3.0 nursing hours per patient day for the 30-bed project. This does not include direct nursing hours which could be provided by the director of nursing. If you include those hours, direct nursing hours increased to 3.21 nursing hours per patient day. For the 24-bed project, if you include direct nursing hours provided by the director of nursing, 3.25 nursing hours per nursing hours per patient day will be provided. (T. 922-923, 954) There will be a full time administrator on the property of Brighton Gardens of Jacksonville. (T. 872) The administrator will be responsible, for the entire property. (T. 872) MRCI's proposed staffing exceeds the regulations of the State of Florida. In fact, MRCI proposes to provide four licensed nurses five days per week. By regulation, MRCI is required to provide only three licensed nurses. (Evans PT, p. 7) MRCI has an excellent recruitment plan and has designed a variety of enhancement programs for its employees. Some of these programs include a profit sharing program, the employee stock ownership plan, and a benefit trade system. MRCI offers an employee credit union, employee discounts at Marriott Hotels, continuing education, as well as additional training for employees to advance in their areas. MRCI has a working family life program, offers family life-counseling programs and has a guaranteed right to fair treatment policy within the company. MRCI recruitment efforts have been very successful. (Evans PT, p. 10) MRCI has developed a superb quality assurance program which exceeds the federal OBRA requirements and exceeds state requirements for quality assurance committees. (Evans PT, pp. 11, 12, 13-19) The wage assumptions and salary assumptions of both MRCI applications are reasonable projections. (Huber PT, p. 11) The staffing assumptions in both Schedules 11 are reasonable assumptions. The proposed Medicaid rate is reasonable and consistent with the Medicaid requirement in Florida. (Huber PT, p. 13) MRCI has demonstrated that its proposed 30-bed project is a financially feasible project. (Huber PT, p. 6) The proposed capital expenditure is $1,901,507 and first year operating expenses are projected-to be $1,065,108. MRCI has demonstrated that its Jacksonville Brighton Gardens project will be profitable in Year 2 of operation. This is true for the 30-bed application and for the 24-bed application. (Huber PT, pp. 14, 15) The ACLF revenues are a reasonable estimate of revenues for the Duval project. (Huber PT, p. 17) MRCI's land cost is based upon an option contract it entered into in 1989. The land cost for the project is reasonable and based upon a reasonable allocation of cost to the nursing home. (T. 1237, 1238, 12 41) MRCI intends to develop the entire Brighton Gardens of Jacksonville, which includes the ACLF and the nursing home. (T. 800) In conjunction with this type of facility, a nursing home this size is a viable alternative to "optimal sized" facilities because the small complement of beds is offset as part of the larger facility. The data provided attest to the financial feasibility of such a concept. MIRCI does not intend to build a stand-alone 30-bed nursing home. They will only be built in conjunction with the ACLF. (T. 861) The costs of construction for the MRCI proposals are reasonable and are allocated appropriately between the nursing facility and the ACLF. (McPhail PT, p. 20, 21, 22) MRCI allocated the costs of construction of the 30-bed project between the nursing home portions and the ACLF portions. This allocation was performed by determining the cost of the entire Brighton Gardens and conducting an allocation of those costs directly related to the nursing home portion of the building, including construction costs, fixed and movable equipment. Shared area costs, such as those associated with the kitchen, laundry, circulation, beauty-barber, and administrative areas, were allocated on a proportional basis. The kitchen was allocated on a proportion of meals served to the nursing center residents. The construction, site development costs and equipment costs of other shared areas were estimated by function, and these costs were then allocated on the basis of a square footage ratio of the nursing center to the ACLF portion of the building. (McPhail PT, pp. 20, 21) MRCI has three other Brighton Gardens projects which have been constructed. Those projects have been constructed at a cost within 1% of the original cost assumptions prepared at Marriott. (McPhail PT, p. 9) The Brighton Gardens design and schematic plans are consistent with the requirements contained in Chapter 10D-29 and local building codes for the 30-bed project and the 24-bed project. (McDowell PT, p. 5) Marriott has developed a bi-axial room which is one of the best semiprivate rooms available. The residents are situated so that they each have a privacy curtain and each resident still has a window. Semiprivate rooms are more affordable than a private room. Private rooms often lead to a resident feeling isolated, thereby leading to depression. (T. 915, 916, 1012) MRCI's design provides certain advantages for residents of both the ACLF and the nursing components. The bi- axial semiprivate rooms are quite large; there is significant amount of storage space; all resident's bathrooms are handicapped accessible. Residents will be able to take advantage of some of the ACLF common spaces at will, and MRCI's project will have a courtyard which will allow residents to do some secure wandering. The buildings are residential in nature, both in the exterior and interior architecture. (McDowell PT, p. 7) MRCI anticipated that the duration of construction for the Brighton Gardens of Jacksonville will be 12 months. This is a reasonable estimate. (McPhail PT, p. 22) The Brighton Gardens project in Southeast Duval County will be located on an 11 acre parcel on San Jose Boulevard which has ready access to public transportation and is convenient to the elderly population in the service area. (Walter PT, p. 19). MRCI will accept the following conditions on its certificate of need: MRCI will make at least 30% of its patient days available to Medicaid eligible patients, will donate 20 prepared meals per day to a local Meals-on-Wheels program for distribution to elderly residents and will provide respite care at both the nursing home and ACLF levels of care. MRCI will implement its special Homeward Bound Program. (Walter PT, pp. 16, 17, 30; Evans PT, pp. 22, 23,). MRCI has a history of providing nursing care services to Medicaid eligible residents. For example, although MRCI's Calusa Harbour facility carries no Medicaid, condition, approximately 31% of its community patient days were provided to Medicaid residents in 1990. (Walter PT, p. 18). MRCI will provide' services to ACLF residents requiring AIDS care or Alzheimer's care. (Walter PT, p. 19, T 915). MRCI filed an audited financial statement as required by the statute. Nationwide, Marriott has designated approximately $90 million for the development of retirement projects for 1991 and has designated $70 to $80 million for 1992. (T. 1020). Marriott has the resources to fund Brighton Gardens. [Handlon, p. 2]. Schedules 2A and 2B of MRCI's CON application contain a list of other planned capital projects of MRCI. This list of projects changes on a regular basis as projects are either added or rejected from the development process. This list includes projects in the very preliminary stages of planning. (Handlon PT, p. 3). No project has been dropped from Schedule 2 for financial feasibility problem's. (T. 1246). Typically, projects are deleted because of difficulty obtaining suitable property or problems with zoning or other regulatory hurdles. (T. 1253). Furthermore, certain projects listed on the capital project list in Schedule 2 identify expenditures which will occur as late as, or later than, 1998. (T. 798). An omission by MCI of approximately $7 million relating to a Boynton Beach project will have no effect on Marriott's ability to finance these projects. The amount omitted is inconsequential when considering Marriott's total development plans. Furthermore, MRCI has included projects on Schedule 2 which will be financed beyond the' next five years, well after the proposed project is operational and has demonstrated financial feasibility. (Handlon PT, p. 3; T. 1040, 1042). No MRCI or Marriott retirement housing project under construction has been slowed down or stopped for economic reasons. (T. 893). No retirement housing project which has been presented to the Executive Committee of Marriott has been denied or delayed. No project will be delayed once a CON has been issued or if another government timetable requires construction by a particular time. (T. 1223). MRCI is a subsidiary of Marriott Corporation, and the board of MRCI filed a proper letter of intent. Marriott has proven that it is committed to constructing, licensing and operating the project at issue iii this proceeding. MRCI operates five facilities that have had deficiency-free surveys under the new Omnibus Budget Reconciliation Act ("OBRA") guidelines. It is unusual to have no deficiencies found by the survey-team. Under the OBRA guidelines there are 710 elements in the program and surveyors evaluate compliance with the regulations by looking at each item. For each of these facilities, surveyors found that all 710 elements were in compliance with the guidelines and there were no deficiencies. (T. 905, 906). HQR'S APPLICATION Health Quest Realty II, Ltd. ("HQR II") is an Indiana limited partnership, first created prior to March 30, 1987 and authorized to transact business in the State of Florida on July 11, 1991. (HQR II Exhibit 7). HQR II is the authorized licensee of Regents Park of Jacksonville, a 120-bed community nursing home located in Duval County, Florida. HQR II has been the licensee of this facility since it first opened in 1986. HQR II's CON proposes to convert a portion of Regents Woods of Jacksonville, and existing Adult Congregate Living Facility, and thereby add nursing beds to an existing and co-located 120-bed nursing facility licensed as Regents Park of Jacksonville by HQR II. Alternatively, HQR II's CON proposed a 24 beds addition to Regents Park of Jacksonville. The 41-bed addition proposed by HQR II would involve 16,025 gross square feet at an estimated total project cost of approximately $2.6 million. The 24-bed partial request would involve 10,405 gross square feet at an estimated total project cost of $1.76 million. (HQR II App.) Health Quest Management Corporation IV ("HQMC IV") is an Indiana corporation, which filed, on October 3, 1984, a notice of doing business in Jacksonville as Regents Park in compliance with the fictitious name law. On February 12, 1986, HQR II filed a notice under Florida's "fictitious name" law, Section 865.09, Florida Statutes, in the public records of Duval County, Florida, giving notice of doing business as "Regents Park" in Jacksonville. CVI 33 (exhibit indicates document recorded at Duval County Official Records Vol. 6084, Pg. 1948). According to filings in the official records of Duval County, Florida, on September 25, 1987, the persons having an interest in HQR II were Lawrence H. Garatoni, holding a 90% interest, and Judith A. Garatoni,, holding a 10% interest. HQ 41 (exhibit indicates document recorded at Duval County Public Records Vol. 6402, Pg. 1466). An affidavit was filed in the official records of Duval County, Florida, that identified Lawrence H. Garatoni as owning a 190% interest in HQR IV, an Indiana corporation. HQ 40 (exhibit indicates document recorded at Duval County Official Records: Vol. 5860, Pg. 1904). Regents Park of Jacksonville actually is owned by Health Quest Realty XXII, another Indiana general partnership ("HQR XXII") (Krisher 7). The construction of Regents Park was financed by industrial revenue bonds issued by the City of Jacksonville on November 1, 1984. CVI 210. HQR XXII leased the property to HQR IV, which operates the facility. As part of the bond transaction, HQR XXII gave the City of Jacksonville a collateral assignment of its rights as lessor in its lease of the property to HQMC IV. All the Health Quest entities are controlled by one man, Lawrence Garatoni. Mr. Garatoni is the sole general partner of HQR II and owns 90% in that partnership, T. 1908 (Fall); HQ 41. Mr. Garatoni also owns 90% of the stock of HQMC IV, HQ 40, and owns 95% of HQR XXII partnership. T. 1780 (Fall). CVI 32, p. 7. The original CON for Regents Park was issued to HQR II. T. 1381. When Regents Park was first licensed in February of 1986, the license was issued to HQR II. T. 1382 (Krisher). In the process of obtaining renewal of the license for Regents Park in January of 1987 Mr. Krisher realized that the licensee, HQR II, in facet held no interest in the facility; HQR XXII was the owner of the property and HQMC IV the lessee/operator. Mr. Krisher brought this to the attention of Bruce Henderson of the HRS Office of Licensure and Certification ("OLC"). In an attempt to rectify the problem, HQR XXII entered an agreement to retain HQR II, the licensee to provide management services for the facility operated by HQR IV. CVI 23; T. 1382. This agreement was not rescinded. HRS advised that it would not issue a license to HQR II based on HQR II being a management agent because only the owner or lessee of a nursing home was eligible to be licensed. T. 1383. HQR II then approached HRS about obtaining approval for HQR IV to be the licensee of tie facility. HRS indicated to Mr. Krisher that to have the license issued to HQR IV would require a change of ownership. T. 1383. Mr. Garatoni did not want to go through a "change of ownership" since a new licensee could not retain the superior license, which Regents Park had received in December of 1986. T. 1384 (Krisher). In order to enable HQR II to obtain renewal of the license, HQR IV assigned its leasehold to HQR II. T. 1383. However, all profits and losses of Regents Park were recorded in the books of HQR IV because Mr. Garatoni did not wish to change the internal accounting structure of the Jacksonville operation. CVI 32, Wright deposition, p. 25. Conversely, there is only one set of books and records for HQR II, and they related only to the facility located in Merrillville, Indiana. T. 1861 (Fall). Disclosure of all material transactions and circumstances affecting the entity being audited is a key requirement (i.e., "completeness") in order to properly present an audited financial statement under GAAP. (Vol. 14, p. 1534; Vol. 17, p. 1840; Vol. 18, p. 1920). Since the Regents Park began operation in 1986, HQR IV has had and continues to have full operational and financial responsibility for the nursing home. (CVI Ex. 22; Vol. 13, p. 1394; Vol. 14, p. 1455; Vol. 18, p. 1883-4). HQR IV took the benefit of all profits and the risk of all losses from the operation of a nursing home licensed to HQR II and owned by Health Quest Realty XXII. (CVI Ex. 21a, 21b, 21c; Vol. 13, p. 1384, 1407-11; Vol. 14, p. 1430) HQR II claims these circumstances relieved its auditors from any responsibility to even mention, much less adequately disclose, financial data or other disclosure information pertaining to Regents Park. (Vol. 17, p. 1830-1). Neither the 1988 nor 1989 audited financial statements submitted by HQR II with its CON fairly present, in all material respects, the financial position, cash flow and results of operations of Regents Park of Jacksonville under GAAP. To the contrary, both financial statements were the result of a "special audit" of property located in Merrillville, Indiana, which is owned by HQR II and leased to a third party for a retirement community. (HQR II App,.; Vol. 17 p. 1824; Vol. 13, p. 1404-5) Although an audit of the applicant and licensee, HQR II, was presented, the operation of the nursing home upon which determinations of financial feasibility would be based never occurred. When each audit was conducted, HQR II's auditors had no knowledge of the Jacksonville operation. (Vol. 14, p. 1445-46; Vol. 18, p. 1877). The purpose of requiring audited financial statements is to provide HRS with reasonable assurances that an appropriate audit, with all necessary field work, was conducted. (Vol. 15, p. 1563; Vol. 15, p. 1619-22). HQR II did not provide financial statements which reasonably represented and presented the financial status of the applicant because HQR II did not tell the auditors about its Jacksonville operations. If complete field work and independent evaluation by the auditors had been performed, the auditors would have discovered the relationship between Health Quest Realty XXII, HQR II and HQR IV. In considering disclosure of related party transactions, the auditors would have had to reconcile the relationships between the various entities, and present a accurate picture of the finances of the applicant. The Health Quest nursing home has not made a profit in its five years of existence. (Vol. 17, p. 1798, 1799; Vol. 14, p. 1444, 1445) For example, in 1989 it suffered a net loss of $114,000. (Vol. 17, p. 1)98) In 1990, it suffered a net loss of $107,000. (Id.) Health Quest's past history of consistent losses was not disclosed anywhere in its application. (Vol. 14, p. 1444, 1445) Such information is relevant to the financial feasibility of a CON, and is revealed in a proper audited financial statement. (Vol. 12, p. 1324, 1325; Vol. 15, p. 1560- 61) Health Quest projects a profit for its bed addition alternatives. (Health Quest App. Sch. 18) Given the past history of losses, Health Quest did not provide any explanation as to how a profit should now be expected. (Health Quest App.) Health Quest is a foreign limited partnership which did not register to conducts business in the State of Florida until July 11, 1991. (Health Quest Ex. 7) Its petitions for formal administrative proceedings were filed in March and April of this year. Some scores in HRS' s system are objective, i.e., based on specific facts. Other scores in HRS's system are subjective, i.e., based on the reviewer's opinion. On the objective items, Health Quest received 480.3 points, 80% of the possible 602; Atrium received 47911 (80%). MRCI 397.3,7 (66%), and CVI 374.55 (62%). At. 8. On the subjective items, Health Quest received 442.94 points, 68%, of the possible 654; Atrium received 575.61 (88%); MRCI 566.7:5 (87%); and CVI 621.47 (95%). At. 8. Health Quest finished highest among the applicants on the items scored objectively add lowest among the applicants (by a gap of 19% of the maximum s1core available) on the items scored subjectively. Health Quest's is the only nursing home in Duval County that has had a "superior" licensure rating since 1986. Krisher 8. Only about a third of Florida's nursing homes have superior licenses. Brockish 4; HQ 2. Health Quest's facility is considered excellent by local physicians, hospital discharge planners, and home health agencies. HQ 38. The chairman of the District IV Long-Term Care Ombudsman Council described Regent's Park as having a "solid reputation," and as having been identified by the University of Northern Florida as "a model facility and primary site for its newly developed Administrator-in-training program."' 6513, PT 2, Item 3M (1/14/91 letter). A high level of staffing, measured by the ratio of full-time equivalent ("FTE") staff to patients, generally correlates to high quality care. T. 40, 42 (Vroman). Health Quest's existing total direct care staffing pattern, at 3.49 hours per patient day, exceeds the levels proposed by the other applicants. Health Quest's proposed staffing, measured by licensed staff (i.e., RNs & LPNs) or by total direct care staff (i.e., including nursing aides), is higher than that of any other applicant except MRCI's 24-bed proposal. HQ 11. Health Quest provides a broader range of services than most nursing homes, including subacute care such as intravenous antibiotics, respiratory care and tracheostomy care. T. 757, 59 (Janesky). Regents Park provides more physical therapy ("PT") than most nursing homes. Provision of PT is related to Medicare utilization because Medicare residents are the primary recipients of PT in nursing homes. 6513, PT 2, Only one other facility in Duval County provides the type of subacute care which Regents Park provides, and that facility is not an applicant for beds in this cycle, [T. 775 (Janesky), H31] although CVI states that it too will serve high acuity patients. Vroman 6-7. Although the CON application form asks for a description of "specialized programs," HRS has not defined "specialized program" in the application instructions. T. 394 (Gordon-Girvin). HRS gave Health Quest no credit for providing subacute care because subacute care was not considered a "specialized program" although HRS had considered subacute care a specialized program in the past. T. 1286-87 (Granger). The Office of Licensure and Certification, which licenses and monitors nursing homes, recognizes 11 categories of "special care." Regents Park provides all of them. Although Health Quest referred to this in `,its application, HRS gave Health Quest zero points in this category. At. 8 (Ex. B, p. 22). HRS gives the same weight to its consideration of a proposal to provide a particular service and type of care that it gives to actually providing the service or care. The application evaluation process does not differentiate between the promise to perform by a entity which has never engaged in the nursing home business and actual performance by an existing provider with an excellent track record. T. 1295 (Granger). The success of Regents Park in restoring residents to health is objectively demonstrated by the high ratio of patients discharged from Regents Park rather than remaining as residents until death. As reflected in HCCCB reports for 7/89- 6/90, Regents Park discharged 179 patients, i.e., 1.49 times its licensed beds, which was more than twice the rate for all other District IV facilities. 6513, PT 2, p. 43E Health Quest's actual resident care cost per resident day is the highest in the Southeast Duval County, which is considered a favorable factor under State Health Plan Preference #12. Nursing care cost for resident day for Regents Park for fiscal year 1989, per HCCCB reports, at $30.64 was higher than that for any of the other nine Southeast Duval County facilities reporting. 6513, PT 2, p. 45F. Similarly, Regents Park's dietary cost per patient day, at $8.69, exceeded any of the other nine facilities. 6513, PT 2, p. 48C. Health Quest proposes that all but four of its new beds are to be in private rooms. There would be two rooms, each with two beds, sharing an entrance to the hallway but otherwise private. T. 1155. CVI, MRCI and Atrium each plan to provide four to twelve beds in private rooms. HQ 10. Health Quest agreed to condition an approval on the following: The proposed site would be 7130 Southside Boulevard, Jacksonville, Florida. A minimum of 50% of patient days will be devoted to Medicaid patients for the proposed new unit. The facility will continue to use only certified nursing aides ("CNA's"). (Health Quest App.) The conditions, above, to which Health Quest committed are largely redundant. As an existing provider, Health Quest is limited to expansion at its existing site, 7130 Southside Boulevard, and it must use trained personnel. Health Quest listed as special care restraint reduction, and weight maintenance. HRS found that the these programs constitute services which every nursing home must provide, or should provide, as standard care. (Atrium Ex. 8, p. 17; Vol. 8, p. 753-63) Health Quest did not characterize its services to Alzheimer's residents as a special program within its application. (Vol. 12, p. 1288) The care for Alzheimer's patients becomes a special program when it is offered in a discrete unit or when some other unique feature is present, such as a facility design, which specifically takes into account and benefits the needs of residents with Alzheimer's. (Vol. 12, p. 1319, 1323) Health Quest's application did not present any such unique features. Health Quest's willingness to accept hard-to-place patients is reflected its practice of accepting Medicaid residents requiring skilled rather than intermediate care. Per 1989 HCCCB data, the proportion of Medicaid patients receiving skilled care at Regents Park (31.5%) was more than twice the average (11.6%) for other reporting Southeast Duval County facilities. 6513, PT 2, p. 45F. However, the percentage of Medicaid utilization to which Health Quest is committed is ambiguous because its application states: It should be noted that Medicaid residents are to be placed in the facility according to the wishes of the residents themselves, their attending physicians, and the staff. The Agreement on page 6 should not be misconstrued as evidencing an intention to operate the new unit at 50% Medicaid occupancy [sic]. (Health Quest App., Sch. 17, Footnote #16) The reference to "page 6" is the application page wherein the applicant can expressly agree to a particular Medicaid utilization condition. Given its proposal to convert ACLF space, the remoteness of the proposed Health Quest unit from its existing skilled nursing facility will not lend itself to optimal efficiency in utilizing existing nursing home support areas. (Atrium Ex. 8, p. 19) Almost all of the proposed Health Quest beds will be located in private rooms. (Vol. 9, p. 915) The isolation of the elderly in a private room can cause problems with depression. (Id.) Health Quest was deficient in describing how it would measure the outcomes for its programs. (Atrium Ex. 8, p. 21) Health Quest description of its residential quality assurance program was weak. [ANH Ex. 8, pp. 16, 17]. Health Quest was the only applicant proposing renovation rather than new construction. The instructions to the CON application form state: If currently owned land is going to be converted from some other use to be used for this project, the land's original cost plus past improvements made must be included. If the purchase price of the land was previously approved in CON review by this department, it must be excluded when calculating the application fee. * * * The same treatment applies to donated and converted buildings (including partial bed conversion) as apply to donated and converted land, except that cost less accumulated depreciation must be used. Health Quest followed the instructions and included the depreciated cost of the existing ACLF area to be converted to nursing beds. 6513, 6513-P, Sch. 1. HRS in its cost comparisons used the "total cost" figures given by the applicants. Using those figures, the cost per bed were as follows: CON Total Cost Cost Per Bed HQ 41-bed $2,608,646 $63,625 HQ 24-bed $1,765,482 $73,562 CVI $3,286,258 $54,771 Atrium $3,944,324 $46,956 MRCI 30-bed $1,891,507 $63,050 See State Agency Action Report, At. 8, pp. 2-3.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED, in the absence of reconsideration by the Department, that: The application of Health Quest be denied for failure to file a properly audited financial statement and establish its financial feasibility; The CON of Cypress Village be approved for 60 beds; The CON of Atrium be approved for 84 beds; and The beds sought by MRCI should be denied. DONE AND ENTERED this 11 day of February, 1992, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 11 day of February, 1992.
Findings Of Fact FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility. The population of Lee County in 1978 was 184,841 with 41,984 more than 65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day. No significant difference exists in the services proposed by each of the applicants. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.
Findings Of Fact Petitioners' application for a certificate of need to construct a 60- bed skilled nursing home was recommended for approval by the Health Planning Council, the health systems agency (HSA) for the five counties of Martin, Palm Beach, Volusia, Okeechobee and St. Lucie, but was denied by the Department of Health and Rehabilitative Services (HRS), Office of Community Medical Facilities. The latter agency has the ultimate responsibility for granting certificates of need. In recommending the granting of a certificate of need, HSA considered available beds in existing facilities in lieu of licensed beds, found 89.6 percent occupancy of available beds equal to or greater than 90 percent occupancy of licensed beds prescribed by the State Plan for Hospitals and Related Medical Facilities (Exhibit 2), used its own population forecasts rather than State population forecasts, and failed to consider certificates of need approval recently granted to five nursing homes in Palm Beach County, some of which were already under construction. HSA, at the time of this application had Palm Beach County divided into four regions (which has now been expanded to five) and the proposed facility is located in region three. At the time of the application there were three existing nursing homes in region three and two additional facilities had been granted certificates of need in this region. HSA normally uses licensed beds to determine the percentage of occupancy, but for reasons not explained at this hearing, HSA used available beds to determine the percentage of occupancy. Using available beds HSA found the three nursing homes in region three of Palm Beach County to have an 89.6 percent rate of occupancy. Had licensed beds been used, the percentage of occupancy would have been 83. The Office of Community Medical Facilities, in determining the need for additional medical facilities, has divided the State into 60 health care service areas and Palm Beach County is one of those areas. No evidence was submitted to indicate that the service areas so established are not reasonable. At the time of Petitioners' application, there were 1981 licensed nursing home beds in Palm Beach County; and applications had been approved, or recommended for approval and subsequently approved, for an additional 460 beds in Palm Beach County. The projected need in the State Plan for 1977 (Exhibit 2) for nursing home beds for Palm Beach County by 1982 is 2038. Accordingly, at the time of this hearing, nursing homes in Palm Beach County had received approval for 2441 beds which is 403 more nursing home beds than the forecast need for the year 1982. In determining the need for medical and health provider facilities, the usage rate of existing facilities is first determined from actual usage of the facilities. The Projected Average Daily Census is then determined by multiplying the use rate by the forecast population and dividing by 365 days per year. From this figure the bed need is determined by dividing the Projected Average Daily Census by .85 and adding 10. In this manner, HRS determined in the 1977 State Plan for Construction of Hospitals and Related Medical Facilities that Palm Beach County would have a need for 2038 nursing home beds in 1982. At the time Petitioners' application was recommended for approval by HSA, additional certificates of need had been granted for an additional 160 nursing home beds in region three of Palm Beach County. These facilities are designated as Life Care Centers because they are attached to condominiums from which their primary source of patients is expected to come. However, these facilities are essentially nursing homes and provide the same services as nursing homes. Had these authorized additional beds been included in computing the percentage of occupancy of nursing homes in region three the rate would have been approximately 60 percent, assuming no population change when these facilities become operational.
