The Issue The issue presented is whether the applications for certificates of need filed by Petitioners Beverly Enterprises-Florida, Inc. d/b/a Beverly Gulf Coast- Florida, Inc.; JFK Medical Center, Inc.; and Manor Care of Boynton Beach, Inc., should be granted.
Findings Of Fact Petitioner Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast- Florida, Inc. (hereinafter "Beverly"), is a wholly-owned subsidiary of Beverly- California Corporation which is a wholly-owned subsidiary of Beverly Enterprises, Inc., one of the largest providers of long-term care services in the country. Beverly operates 41 nursing homes in the state of Florida, with all of these facilities receiving substantial financial, managerial, operational, and program support from Beverly's Florida regional office. Three of those nursing homes are located in Palm Beach County, Florida. Beverly proposes in its certificate of need (hereinafter "CON") application #7372 to construct a 120-bed community nursing home in zip code 33414, which is the Wellington area of Palm Beach County, to be known as Wellington Terrace. The facility would provide high acuity nursing services with an emphasis on rehabilitation. The proposed special programs include an adult day care program, respite care services, and an Alzheimer's unit, and the facility will accept patients with AIDS. The proposed facility will encompass 53,348 square feet and will have a total project cost of approximately $5.6 million. The facility is designed to minimize institutional effects and emphasize a home-like atmosphere for residents, featuring such amenities as a large day room with an aquarium and wide-screen television and VCR, a screened gazebo, and a greenhouse. Quality of life enhancements will be a consideration in all aspects of the facility. The building will meet or exceed all licensure requirements for construction and safety codes. Beverly's goal is to achieve a superior-rated facility. Beverly has agreed, if it is awarded a CON in this proceeding, that its CON for this facility will be conditioned upon the facility having a 25-bed Medicare-certified sub-acute unit which will include 4 beds dedicated to ventilator-dependent care. Wellington Terrace's CON will also be conditioned upon the provision of 56 percent of its annual patient days to Medicaid patients, and Beverly will give Florida State University's Institute on Aging a grant in the amount of $10,000 to be used for gerontological research. Petitioner Manor Care of Boynton Beach, Inc. (hereinafter "Manor Care"), is a Florida-based operating subsidiary of Manor Care Healthcare Corporation, one of the largest operators of nursing homes in the country. Manor Care Healthcare Corporation is a wholly-owned subsidiary of Manor Care, Inc., a publicly-traded company listed on the New York Stock Exchange. Through its corporate structure, Manor Care, Inc., devotes substantial financial, manpower, and other resources to its individual nursing homes. The individual facilities are directed by corporate policies in the areas of finance, quality of care, quality assurance, prototype services, structural design, and all areas of nursing home operations. Manor Care's parent owns 10 nursing homes and 4 adult congregate living facilities in Florida. Two additional nursing homes are under construction in Florida, including one in Palm Beach County. In the last 4 years, Manor Care has constructed and opened 2 nursing homes in Florida, and both received superior-rated licenses as soon as they were eligible. Manor Care seeks in its CON application #7375 to construct a 120-bed community nursing home in the Lake Worth area of Palm Beach County. The facility is a one-story fully equipped nursing center, using a design which conforms with all federal, state, and local regulations. It incorporates residential features to meet the physical, social, and psychological needs of the residents and promote independence. The space-efficient design emphasizes a home-like atmosphere which ensures quality of care and quality of life. The design is patterned after Manor Care's "prototype" facility and is very similar to Manor Care's two newest Florida nursing centers in Hillsborough and Pinellas Counties. The facility encompasses approximately 49,500 square feet and has a total project cost of approximately $6.8 million. The facility will contain 16 private rooms and 52 semi-private rooms. The proposed facility includes a 30-bed self-contained unit for residents with Alzheimer's disease and a 15-bed self-contained sub-acute unit. The sub-acute unit will be adjacent to speech, physical and occupational therapy/rehabilitation/dining spaces to facilitate patient recovery. The therapy spaces are 50 percent larger than Manor Care's standard therapy spaces to better accommodate the sub-acute patients. Like Beverly's, the proposed facility will offer skilled care, intermediate care, rehabilitative care, respite care, restorative care, sub- acute care, and specialized care for Alzheimer's disease and related dementia. It will also provide the following support services: pre-admission screening, appropriateness review, resident care plans, discharge plans, quality assurance, pharmacy, consulting (for physician visits, and dental, radiology, podiatry, and other diagnostic evaluations), community outreach, family programs, and chaplaincy. Beverly offers similar support services. Manor Care has agreed, if it is awarded a CON in this proceeding, to condition its CON on its 30-bed dedicated, secured Alzheimer's unit and its 15- bed sub-acute unit. Manor Care has also agreed to condition its project on providing a minimum of 55.5 percent of its total patient days to Medicaid residents, and on providing an adult Alzheimer's day-care program, a respite care program, and 2.8 nursing hours per patient day for the Alzheimer's unit. Petitioner JFK Medical Center, Inc. (hereinafter "JFK"), is a general acute care hospital located in the Atlantis/Lake Worth area, in central Palm Beach County. It is licensed to operate 369 beds. JFK enjoys tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. JFK provides services to patients of high acuity. Its overall case mix index, which serves to measure acuity, is 1.56. The normal case mix for acute care hospitals is 1.0. JFK's case mix index places it among the top five percent of all hospitals in the state. JFK focuses its acute care services in three specific areas. It serves as a regional referral center for cardiovascular services. It serves as a regional referral center for oncology and is the only hospital in Palm Beach County accredited by the American College of Surgeons as a comprehensive cancer center. JFK also has a large orthopedic surgery program. JFK serves predominantly an elderly patient population. Approximately 75 percent of its patients exceed 65 years of age. JFK's patient population includes many patients with multiple system medical problems. Such patients are more difficult to care for than patients with single system problems. In addition to acute care services, JFK provides a full range of outpatient and ambulatory services. JFK operates a diagnostic breast institute, an ambulatory surgery center, an outpatient cancer center, and a home health agency. JFK also employs twenty-three primary care physicians. JFK's outpatient and physician services constitute a portion of JFK's continuum of care, as do its acute care services. Sub-acute services are the only link missing from JFK's continuum of care. By its CON application #7374, JFK seeks authority to convert 26 existing adult psychiatric and substance abuse beds to establish a 20-bed sub- acute skilled nursing unit. JFK proposes to treat patients: (1) who have experienced an episode of acute care; (2) who no longer have need for acute care; and, (3) whose medical needs require higher intensity of care than is provided in a community nursing home. These "sub-acute care" patients fit somewhere in the continuum between acute care and nursing home care. The project involves 14,100 square feet of renovated space, a capital expenditure of $633,285 to be funded from internal sources, and the conversion of underutilized beds to a highly-utilized service. Sub-acute care is a comprehensive inpatient care program designed for patients who have experienced an acute illness or injury. Sub-acute care is designed to treat complex medical conditions through coordinated complex medical treatments. The rendition of sub-acute care requires an interdisciplinary team of professionals and paraprofessionals. In order to render sub-acute care to its patient population, the JFK program will provide the following staffing and service components: 24-hour registered nurse coverage; 5-6 hours of hands-on nursing care daily per patient, which is twice the care required of a community nursing home; and, 7 day/week, 24-hour access to all of JFK's ancillary services, including laboratory, pharmacy, respiratory therapy, blood transfu- sions, emergency services, and physician services. The JFK program will provide a full range of rehabilitative, restorative, and therapeutic services to patients, including radiation therapy, intravenous therapy, chemotherapy, complex tracheotomy, ventilator, and hyperalimentation care. JFK will provide services to the following patient groups: orthopaedic patients including joint replacement, fracture or amputation patients, cerebrovascular patients including stroke and other CVA accident patients, post-operative open-heart surgery patients requiring transitional care, oncology/radiation therapy patients requiring high level sub-acute care, pulmonary disorder patients including respiratory/ventilator dependent or other chronic pulmonary disease patients, patients with drug resistant infections including MRSA or tuberculosis patients, HIV-infected patients, patients with severe decubitus ulcers, and psychiatric patients with skilled medical care requirements. The JFK program is not designed to compete with community nursing homes. JFK proposes in its application a condition that 90 percent of the patients served in the sub-acute unit will originate from within JFK. JFK also proposes a condition that 90 percent of the patient days provided in the unit be provided to Medicare patients, or non-Medicare patients requiring physician certified rehabilitative or restorative care. JFK also proposes a condition that it serve high acuity or "heavy care" patients. In order to be awarded a CON, an application must be evaluated to determine compliance with the priorities or preferences stated in the appropriate District or Local Health Plan and in the State Health Plan. The District 9 Local Health Plan includes 3 allocation factors to be used in evaluating nursing home applications. The first states that priority should be given to applicants for new nursing homes or expansion of existing homes who agree to provide a minimum of 30 percent Medicaid days to their patients. Both Manor Care and Beverly comply with this priority in that they have committed to a minimum of 55.5 percent and 56 percent, respectively. The slight difference in their commitments does not give Beverly an advantage. JFK is not specifically proposing to provide care to Medicaid patients in its sub-acute unit. JFK's proposal is to serve primarily Medicare patients with the remaining patients being without resources or having other insurance. Medicaid-eligible patients occasionally need sub-acute services, and Medicaid does reimburse currently for nursing services provided in hospital-based skilled nursing beds. However, at the time that JFK filed its CON application, Medicaid did not reimburse hospitals for such services. More importantly, the allocation factor does not apply to JFK's application since it only applies to applicants for new nursing homes or expansion of existing homes, and JFK is neither. The second allocation factor in the District 9 Local Health Plan provides that priority shall be given to applicants who demonstrate (a) a documented history of providing good residential care; (b) staffing ratios, particularly for registered nurses and aides, that exceed the minimum requirements; (c) provision for the treatment of residents with mental health problems; and (d) the inclusion of intensive rehabilitation services for those short-stay patients who require rehabilitation below the level of an acute care hospital. Manor Care meets this allocation factor better than Beverly. As to the first criterion in the second allocation factor, during some of the 36 months prior to the filing of its application, two of Manor Care's ten Florida nursing homes held a conditional license. Currently, nine of those ten nursing homes hold superior licenses, and the other holds a standard license. Manor Care's two nursing homes opened most recently received superior licenses as soon as they were eligible. On the other hand, during some of the 36 months prior to the filing of its application, 17 of Beverly's 41 Florida facilities held a conditional license. Beverly's most recent composite shows that 31 of its 41 Florida facilities are superior-rated, with three of those 41 facilities rated conditional. Hospitals do not provide residential care, and JFK, therefore, has no history of "residential care" to evaluate; however, JFK has met stringent quality of care requirements by obtaining accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The second criterion in the second allocation factor is met by the staffing ratios of all three applicants. Similarly, all three applicants will treat residents with mental health problems, the third criterion. The last criterion of the second allocation factor seeks applicants offering intensive rehabilitation services below the level of an acute care hospital. All three applicants comply with this criterion since JFK's application is for a sub-acute unit including intensive rehabilitation services, and Manor Care and Beverly each include such a unit within their proposed nursing home facilities. The Local Health Plan's third allocation factor seeks applicants proposing to serve a distinct population that is currently not being served within the subdistrict, Palm Beach County. As written, none of the applicants meets the third allocation factor since none has identified a distinct patient population that is not being served. However, the Agency interprets this allocation factor as being fulfilled by an applicant who addresses a distinct population which is being underserved rather than unserved. As interpreted by the Agency, all three applicants meet this allocation factor, Manor Care and Beverly with their Alzheimer's units, and all three applicants with their sub- acute units. Both services are greatly needed by Palm Beach County residents. Beverly suggests that it meets the third allocation factor as it is written because it will provide Jewish services, Kosher food, care to AIDS patients, and bi-lingual services. However, there are facilities with bi- lingual and multi-lingual employees, and patients with AIDS are receiving services. Further, there are dedicated Jewish nursing homes in Palm Beach County, and Beverly's project design does not include a Kosher kitchen. Beverly also suggests that its application is more consistent with the Local Health Plan than Manor Care's. Beverly relies on language within the Plan which states an interest in increasing access to nursing home services to the westernmost region of Palm Beach County. First, that language is not contained in any of the allocation factors utilized by the Agency in reviewing CON applications. Second, Beverly does not include the westernmost regions of the county in its primary service area for the proposed facility. Third, Beverly's Royal Manor facility is already serving the area which Beverly proposes as the primary service area for its Wellington Terrace facility. The State Health Plan contains 12 allocation factors. The first states that preference shall be given to applicants proposing to locate a nursing home in areas within the subdistrict with occupancy rates exceeding 90 percent. Palm Beach County has an occupancy rate in excess of 90 percent, and all applicants meet this preference. The second allocation factor states that preference shall be given to an applicant who proposes to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. It further provides that exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds, or who propose the development of multi-level care systems. The average percentage of nursing home Medicaid patients in the Palm Beach County subdistrict is 55.44 percent. Since Manor Care proposes a minimum of 55.5 percent and Beverly proposes a minimum of 56 percent, they both meet this preference. Beverly's reliance on a higher state-wide average to obtain an advantage over Manor Care as to this factor is misplaced since the factor does not call for any statewide average but rather speaks to the Medicaid commitment of the specific facility being proposed. Although JFK, as a hospital, does not meet the average subdistrict-wide percentage of Medicaid usage, JFK is still entitled to preference under this allocation factor since its proposal is specifically for the development of a multi-level care system. JFK specifically proposes its sub-acute unit to fill in the only gap in its vertical continuum of care. The third allocation factor in the State Health Plan gives preference to an applicant proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. All applicants meet this allocation factor. JFK meets this factor with its unique hospital-based sub-acute unit proposal. Manor Care meets this factor with its dedicated, secured Alzheimer's unit, sub-acute unit, and comprehensive rehabilitation program. Beverly meets this factor with its sub-acute unit and comprehensive rehabilitation program and its Alzheimer's unit. Further, all three applicants will provide services to AIDS patients and to the mentally ill. Factor four gives preference to applicants proposing a continuum of services to community residents including, but not limited to, respite care and adult day care. Manor Care will provide Alzheimer's adult day care, respite care, a 30-bed Alzheimer's unit, and a 15-bed sub-acute unit. It will provide skilled and intermediate care, rehabilitative care, hospice care, restorative care, telephone re-assurance, referral and counseling services, and various community outreach programs. Manor Care meets this allocation factor. Beverly proposes a continuum of services, including its sub-acute unit, Alzheimer's unit, adult day care, and respite care. Beverly proposes an outpatient adult day care program for up to eight guests, with services available five days a week. The Wellington Terrace design allocates 735 square feet to multi-purpose space for adult day care. Direct care staff, consisting of a nursing assistant and a part-time activity aide along with volunteer programs staff, meals, and snacks will be offered in conjunction with the full array of recreational, personal care, therapeutic, and social services activities available at the facility. Manor Care also offers a full array of services to the participants in its Alzheimer's day care program. Although Manor Care has fewer slots available, its program will operate seven days a week. The respite care programs offered by both Beverly and Manor Care provide short-term nursing and therapeutic care for elderly adults who require care currently provided by family and other caretakers but whose caretakers require relief from their care-giving activities. All of the services available to in-patients will be available to respite residents. Although JFK's proposal does not include respite care or day care, its proposal would result in a continuum of services to community residents ranging from acute care services through home health care services. JFK, accordingly, also meets this preference. The fifth allocation factor gives preference to applicants proposing to construct facilities which provide maximum residents' comfort and quality of care. The factor states that the special features may include, but are not limited to, larger rooms, individual rooms, temperature control, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. This allocation factor envisions services offered in a traditional community nursing home rather than services provided in a hospital-based skilled nursing unit. JFK, like any hospital, cannot meet the portion of this preference which evaluates the level of comfort in a residential, custodial setting, but it does meet the portion relating to quality of care. Beverly's facility seeks to minimize the effects of institutionalization on residents through patient rooms which exceed state requirements, private toilets in each room, a physical therapy suite with a physical therapy gym and hydrotherapy area, an outdoor ambulation court, outside courtyard with screened gazebo, and a solarium/greenhouse. Private dining space and separate areas for visitation are provided, and thermostat controls are placed in every room. Its Wellington Terrace facility will feature 50 semi- private rooms and 20 private resident rooms in a single-story structure. Manor Care's facility would have many of these amenities. Its design incorporates residential features that support the physical, social, and psychological needs of the residents and which emphasizes a comfortable atmosphere that ensures quality of care and quality of life for the residents. Both Beverly and Manor Care meet this factor. The sixth allocation factor in the State Health Plan gives preference 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. All three applicants meet this preference. Beverly's comprehensive rehabilitation program at Wellington Terrace will encompass physical therapy, occupational therapy, and speech/language pathology. Rehabilitation programs will be offered seven days per week in order to provide continuity, decrease the time associated with recovery and rehabilitation, and serve the increased needs for rehabilitation services attendant to the sub-acute patient. Upon admission, every resident will be screened by all therapies to assess the need for specific services with periodic screenings during all stays. Out-patient rehabilitation services will be offered to the community in a physical therapy suite with a separate entrance. Manor Care envisions a similar comprehensive rehabilitation program offering the same therapies with the same intended results. Its rehabilitation program for its sub-acute unit offers one advantage not proposed by Beverly, i.e., the patients in the sub-acute unit will receive care under the supervision of a physiatrist. Manor Care's physical and occupational therapy will be designed to increase tolerance and maximize function in relation to the disease process. The frequency and duration of therapy will increase as the patient's tolerance, skill level, and confidence improve. Manor Care will provide a restorative and normalizing program to enable each resident to achieve maximum functioning and independence. An inter- disciplinary team of specialists will develop an individualized resident care plan. Restorative care for sub-acute patients will incorporate the same approach and will focus on achieving medical stability and discharging patients to their homes. Beverly's Wellington Terrace will provide therapeutic programs which enhance the residents' physical and mental functioning and emphasize restorative care. Specialized rehabilitation programs, a restorative nursing program, and normalizing activities are three main components of Beverly's approach. Its therapists work as a team to develop a treatment program designed to improve the residents' ability. Training is provided in the use of prostheses, pain management, rehabilitative dining, and other restorative therapies. Allocation factor number seven gives preference to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions shall be considered for facilities proposing to serve upper income residents. Both Manor Care and Beverly meet this preference. JFK has not proposed a specific charge for Medicaid patients since it expects to serve few of them, and it is anticipated that its Medicaid charges would be higher than those in a community nursing home. JFK does not meet this factor in that it will be serving Medicare patients, and the cost of providing care to Medicare skilled patients is higher than the cost of providing services to Medicaid patients. Allocation factor number eight gives preference to applicants with a record of providing superior resident care programs in existing facilities in Florida or other states and calls for consideration of the current licensure ratings of Florida facilities. Nine of the ten Manor Care facilities in Florida are rated superior, and its two newest facilities received superior ratings as soon as they were eligible. Accordingly, Manor Care has a documented history of providing superior resident care programs to its residents in Florida. On the other hand, Beverly has a superior rating for 31 of its 41 Florida facilities, and three of the facilities are rated conditional. Manor Care better meets this allocation factor than Beverly. JFK does not have a record of providing residential nursing home care, but JFK does provide a high quality of patient care as evidenced by its accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The ninth allocation factor gives a preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules and further provides that applicants proposing higher ratios of RNs and LPNs to residents than other applicants shall be given preference. All three applicants propose staffing levels exceeding state minimum standards. As to the higher ratios, Manor Care's Schedule 6 for Year 2 shows 8.4 RNs and 14.9 LPNs. In comparison, Beverly's schedule 6 for Year 2 shows 8 RNs and 10 LPNs. Thus, Manor Care has a greater number of RNs and LPNs even though Beverly projects more utilization than Manor Care, and Manor Care is entitled to preference over Beverly on this factor. Allocation factor number ten gives preference to applicants who will use professionals from a variety of disciplines to meet the resident needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. It provides that the professionals used shall include physical therapists, mental health nurses, and social workers. All three applicants propose an interdisciplinary approach to meet the residents' needs in nursing, all therapies, nutrition, social services, and spiritual guidance, and JFK is likely to have a wider variety of professionals available than the two community nursing home applicants. The eleventh allocation factor of the State Health Plan states that preference shall be given to an applicant who provides documentation as to how it will ensure residents' rights and privacy, use resident councils, and implement a well-designed quality assurance and discharge planning program. All three applicants ensure residents' rights and privacy, and all have a well- designed quality assurance program in addition to a detailed discharge planning program. All three applicants meet this preference. The twelfth allocation factor gives preference to an applicant proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. This factor is difficult to accurately assess because the terms "administrative costs" and "resident care costs" are not defined, and there is no uniformity in reporting by county nursing homes. For example, some facilities such as Manor Care include salary benefits as an administrative cost, while others such as Beverly include that considerable expense as a resident care cost. Although it is also unknown how those costs are reported by the "average nursing home" or even what an average nursing home is, it is apparent that this factor seeks to encourage nursing homes to devote resources for direct delivery of care. Manor Care and Beverly comply with this preference. However, their applications in Schedule 6 reflect that Manor Care will have more staff for nursing, ancillary, and dietary services than Beverly and that Manor Care will have overall more full-time employees than Beverly. JFK will have higher resident care costs than the average nursing home, but any hospital-based program will have higher administrative costs than a free-standing nursing home because of the infrastructure required to operate a hospital. To the extent that this factor is intended to apply to a hospital-based skilled nursing unit, JFK cannot meet this factor. There is a need for the proposed Manor Care facility in Palm Beach County. First, Manor Care proposes to locate its facility in the west Lake Worth area of Palm Beach County. This area has a very high concentration of elderly people. In zip code 33467 (the western Lake Worth area), 14.7 percent of the projected 1997 population will be 75 years of age or older. It is good health planning to locate a new facility there. Second, there is a great need for additional Alzheimer's nursing home beds in a dedicated, secured unit. While the demand for Alzheimer's beds is substantially increasing, there are only a few dedicated Alzheimer's units in the entire county. Manor Care's 30- bed unit would help meet this need. Third, there is a need for additional sub- acute beds. Manor Care's proposed 15-bed unit will help meet this need particularly where Manor Care proposes to locate its facility. Fourth, Manor Care's commitment to provide a minimum of 55.5 percent Medicaid will enhance access to nursing home services. Fifth, Manor Care's application includes many letters of support from health care providers and practitioners, which substantiate the need and demand for another Manor Care nursing home in the county. It is not required for a CON applicant to propose a specific site for its facility. However, Beverly's application asserts that its proposed facility, Wellington Terrace, will be located in zip code 33414, which is the zip code for Wellington, a planned unit development. Beverly's witnesses also asserted that the facility would be built in Wellington, and Beverly's vice president in charge of nursing home development offered in his testimony to add as a condition for the award of a CON in this proceeding that Beverly would build its facility in Wellington. Beverly's proposed facility is not needed in the Wellington area of Palm Beach County. First, Beverly's proposed facility would not promote Medicaid access. Zip code 33414 has the highest income per elderly resident in Palm Beach County. Locating nursing home beds in the wealthiest elderly section of the county does not promote Medicaid access. Second, the small elderly population in Wellington does not show need for a new nursing home. The 75+ age cohort is that population group which truly demands nursing home services. Only 2.5 percent of the zip code 33414 residents are 75+. In comparison, the Palm Beach County average is 10.8 percent and the Lake Worth area where Manor Care proposes to locate is 14.7 percent. The other four zip codes in Beverly's primary service area (33414, 33411, 33470, 33467, and 33413) do not show need for the facility in Wellington. Zip codes 33470 and 33413 are scantly populated. Zip code 33411 is where Beverly's Royal Manor facility is located. Zip code 33467 is where Manor Care proposes to locate. Third, the closest nursing home to the proposed Beverly facility is Beverly's Royal Manor facility, which is only five miles from the proposed facility. Royal Manor already serves the Wellington area. The two Beverly facilities would be inappropriately competing with each other and duplicating each other's services, which is not logical given the limited elderly population in that area of the county. Fourth, Beverly is currently developing a sub- acute unit at Royal Manor and has indicated that unit might include ventilator- dependent beds. Royal Manor, therefore, already serves the limited sub-acute care and ventilator-dependent needs of elderly patients in that area. There is no need for an additional 25-bed sub-acute unit just five miles from Royal Manor. Also, Royal Manor currently has in place the same rehabilitative program proposed by Beverly in its new facility. Fifth, maximizing the resources at Royal Manor is a better alternative than building a new facility in zip code 33414. Notably, Beverly's application includes letters of support for a bed addition at Royal Manor, not the new proposed facility at Wellington. Beverly proposes a condition of a 25-bed Medicare-certified sub-acute level unit as a integral part of its project, following a company-wide focus which began in 1991. The goal for sub-acute residents is functional improvement rather than wellness. The majority of sub-acute patients will be discharged home or into an assisted living center. Beverly describes its sub-acute program as a level of medical/rehabilitative health services rendered to individuals who have completed the acute phase of recovery. The individual is medically stable, but continues to require complex medical intervention from nurses and therapists. Frequent diagnoses/conditions include post-operative fractured hip, renal failure (dialysis), cardiac rehabilitation, spinal cord injury, and respiratory conditions. Many patients will need IV therapy, parenteral nutrition and chemotherapy. A physician specializing in pulmonary medicine serves as medical director of the unit. That physician supervises a unit staff consisting of an RN, clinical coordinator, licensed nurses with critical care experience, and respiratory services contractual staff. As a condition to the award of a CON in this proceeding, Beverly will dedicate four of its sub-acute beds to a respiratory recovery program for ventilator-dependent patients. An RN with critical care/ventilator experience and a respiratory therapist will be on duty at the facility seven days per week, 24 hours per day. The ventilator-dependent residents will be those with a strong potential for being weaned from the respirator, with an average length of stay from four to six months. The goal is to discharge these patients to their homes or to a setting offering a lower level of care. The four rooms in the sub-acute unit closest to the nursing station will be equipped with headwall units, containing oxygen, vacuum, and compressed air systems. Four beds for ventilator-dependent patients is a good aspect of Beverly's application but does not approach the need of Palm Beach County residents for ventilator beds. The proposed 15-bed sub-acute unit at Manor Care is patterned on its "prototype" sub-acute program. This prototype provides a progressive therapeutic environment for patients who require medical monitoring along with an aggressive rehabilitation program. The interdisciplinary approach establishes measurable functional outcomes while avoiding re-hospitalization. The program is individualized and geared toward assisting patients and their families in coping with traumatic injury and disease to assist them in their return home. There are six primary features to Manor Care's prototype. First is a special physical layout of the unit, including a separate entrance, which creates an atmosphere for short-term stay. The second is a separate unit director who has both clinical and administrative experience. The third feature is the staffing model of the unit, which provides a minimum of 5.0 nursing hours per patient day. Most of the nursing hours are provided by licensed staff. The fourth feature is a case manager who is assigned to insure individualized treatment for each resident. The fifth feature is a dedicated staff for the unit, who have specific education and background in sub-acute care. The sixth feature is a physiatrist who oversees the operation of the unit. Manor Care's clinical profile of diagnoses to be treated in its sub- acute include: cardiac disorders, wound/skin care, renal disorders, general rehabilitation needs, pulmonary disease, brain injury, neurological disorder, medical, post-surgical, and orthopedic. Manor Care's prototype has been very successful; 83 percent of all sub-acute residents are discharged directly home. Many of Manor Care's sub- acute units are accredited by the Commission for Accreditation of Rehabilitation Facilities. On the other hand, Beverly's witnesses did not even know that CARF accreditation was available for comprehensive rehabilitation services in nursing homes. Further, while Beverly is still in the development stages of its sub- acute program, Manor Care has an established prototype with measured outcome. Lastly, Beverly's prototype does not include a physiatrist, and Manor Care's does. Alzheimer's disease affects the ability to remember, to communicate properly, and to perform activities of daily living. The needs of Alzheimer's patients are distinct from other nursing home residents. Their special needs require them to be treated in specialized units. Beverly will offer Alzheimer's services in an 18-bed area specifically designed for Alzheimer's patients. The unit includes separate dining and activity areas with an enclosed courtyard. This design allows for controlled wandering, with Wanderguard alarms placed on all exit doors throughout the facility. The goal of the program is to maintain the resident's sense of dignity and improve his or her quality of life. Mealtimes and therapeutic activities will be focused in small groups and will allow for individual assistance and partialization of activities. The program will have its own dedicated staff, trained to understand the symptoms and manifestations of Alzheimer's residents. Beverly currently operates similar Alzheimer's programs in Florida. Manor Care created a task force which lead to the development of Manor Care's prototype Alzheimer's unit. Currently, the Manor Care group operates over 90 dedicated units throughout the country. Manor Care's prototype encompasses five components: environment, staffing and training, programming, specialized medical services, and family support. The proposed 30-bed unit is self-contained, with its own dining room, activities room, lounge, quiet/privacy room, nurses' sub-station, director's office, day care lounge, and outdoor courtyard. A separate lounge area is provided for family visits. The enclosed, outdoor courtyard allows residents to walk outside freely. The unit is especially designed to reduce environmental stress. Manor Care's Alzheimer's unit has specialized staff including a unit director, activities director, and nursing staff. The unit is staffed with a high "nurse to resident" ratio. The staffing patterns emphasize continuity to ensure that residents receive individualized care. The goal of programming and activities is to improve quality of life. This specialized programming results in reducing the use of medications and restraints necessary to manage these residents. The activity program is success-oriented. The use of consultant medical specialists is an integral part of Manor Care's program. Specialists provide diagnostic treatment services for the Alzheimer's resident upon admission to the unit and thereafter when deemed medically appropriate. Families are very supportive of the unit programming and have benefited from the understanding and support available to them. The benefits of Manor Care's prototype Alzheimer's unit include: minimizing the use of physical restraints, decreasing the use of medications, improvement in residents' nutrition, reduction in agitation and combative behavior, a freer and safer living environment, an increase in independence and functional abilities, enhancement of family involvement, and better guarantor satisfaction. The uncontroverted medical evidence is that Manor Care's Alzheimer's unit is state-of-the-art and Beverly's is not. In addition to being dedicated and self-contained, Manor Care's unit is secured, i.e., the doors are locked, preventing the Alzheimer's patients from leaving that unit unaccompanied. On the other hand, Beverly proposes to use the Wanderguard system which sounds an alarm when an Alzheimer's patient leaves the unit or facility. The alarm alerts staff that they must stop what they are doing and go after the Alzheimer's resident to return the patient to the proper location. Although other nursing homes use the Wanderguard system, such is done only when Alzheimer's patients are distributed throughout the facility. It is not used in conjunction with a dedicated unit where all the Alzheimer's residents are located in one area. Accordingly, Manor Care's Alzheimer's unit is superior to Beverly's. Manor Care establishes links with state and local health care providers to maintain a continuum of care for admissions, treatment, referral, and discharge coordination. In addition to building upon the linkages already established by Manor Care's two facilities in Palm Beach County, Manor Care will pursue working relationships, referral arrangements, and transfer agreements with advocacy groups, adult day care groups, home health services, hospitals, recreational and senior citizen organizations, and respite care centers. Beverly establishes similar links and can utilize the linkages already established by its nearby Royal Manor facility. Manor Care will affiliate with local nursing schools, such as the South County Vocational Technical Center, Palm Beach County Community College, and the North County Vocational Technical Center to promote clinical rotations and internship programs at its facility. Through working relationships with health professional training programs, students will benefit from the training and practical experience gained within an operating facility. The proposed facility will offer the advantage of training in specialty Alzheimer's care and sub-acute care programs. Additionally, the research programs at Manor Care's parent company will assist the proposed facility in its provision of nursing home services, particularly in the areas of Alzheimer's care and sub-acute care, by developing new programs and services for its nursing centers. Manor Care has a team of staff, outside consultants, and other research entities conducting studies of health care needs, including studies on rehabilitation programs, sub-acute programs, diabetes programs, wound care management, adult day care, and Alzheimer's disease. This multi-disciplinary task force researches new technologies, with the ultimate goal of providing the highest quality of care. Beverly will also use Wellington Terrace as a clinical rotation training site for long-term care nursing students. Arrangements for training rotations have been made with the Institute on Aging and School of Nursing at Florida State University. Further, if Beverly is awarded a CON in this proceeding, it will establish a research fund of $10,000 allocated to a long- term care issue to be determined in conjunction with the Institute on Aging. Manor Care's project cost of $6,835,130 is reasonable. The costs and methods of construction, including energy provision, are reasonable and appropriate. There are no less costly or more effective methods of construction available. Its project cost is similar to the cost of a 120-bed facility that Manor Care currently has under construction in Palm Beach County, which gives Manor Care a credible benchmark for estimating its project cost. The estimated project cost is broken out by cost items, which, in turn, are reasonable. Manor Care estimates a total land cost of $1.42 million. Of this, $900,000 is for the purchase of land, and $520,000 is for land improvement costs. In evaluating land, Manor Care considers the distribution of other Manor Care nursing homes in the county, whether there are utilities available to service the land, and whether there is sufficient zoning and land use approval to develop the land for a nursing home. There are several available 5-acre sites in the west Lake Worth area that meet these land eligibility requirements, all in the range of $900,000. The estimate of $520,000 for land improvement is based on Manor Care's experience in Palm Beach County. These improvement costs include water and sewer hook-up. Manor Care estimates approximately $3.87 million for the building cost and $840,000 for total equipment costs: $150,000 for fixed equipment and $690,000 for movable equipment. These costs are reasonable and based on Manor Care's experience in Florida, including the facility under construction in Palm Beach County. Equipping a sub-acute unit is more expensive than regular residents' rooms. It requires more expensive beds, diagnostic machines, special support tables, and expensive nurse station equipment. Manor Care's total equipment cost includes appropriate equipment for its 15-bed sub-acute unit. Manor Care reasonably projects $67,000 for development costs and $339,000 for construction interest. It estimates $300,000 in start-up costs: $125,000 for pre-opening salaries and recruitment, $125,000 for marketing, and $50,000 for pre-opening inventories and miscellaneous costs. The expenses are reasonable and consistent with Manor Care's recent experience in opening two nursing homes in Florida. To the contrary, Beverly's projected project cost is likely understated due to the questionable reasonableness of several components. First, Beverly commits to locating its facility in zip code 33414. There is no land available in that zip code with the necessary zoning and the necessary land use designation for nursing home development. Beverly would have to obtain a change in zoning and may also have to obtain a change in the land use designation which requires a modification of the Palm Beach County Comprehensive Land Use Plan, which requires approval of both the county and the state. Beverly's chances for success are speculative. Further, of the four sites which Beverly has considered for locating its facility, one of those sites is smaller than the five acres which Beverly requires to develop its facility. Another of those sites does not have utilities in place to service the site, an expense Beverly has not included in its projected costs. Two of the sites are not located in zip code 33414. Even if land is available in Beverly's selected zip codes, Beverly's estimate of $350,000 for the purchase of land is unreasonably low. Second, Beverly underestimated its land development costs. For example, Beverly included no monies for water, sewer, or utility hook-up. In comparison, Manor Care assumed $165,000 for such hook-ups. Third, Beverly's total equipment cost appears understated. Equipping a sub-acute room is substantially more expensive than a normal room. Beverly proposed ten more sub- acute beds than Manor Care, yet its total equipment cost is almost $200,000 less. Fourth, Beverly's building cost per square foot is significantly less than Manor Care's. In three applications for a CON filed six months later than the one involved in this proceeding, Beverly estimates its construction cost as being $400,000 greater than the instant project for the same nursing home design. In explanation of this disparity, Beverly presented evidence that the subsequent applications were for an improved facility which would have a steel frame instead of the wood frame to be utilized at Wellington Terrace, and the HVAC system would be enhanced. Constructing its intended facility at Wellington rather than using the improved construction materials Beverly will use elsewhere is not a reason to approve Beverly's CON application in this proceeding. Fifth, Beverly's start-up cost of $75,000 is unreasonably low. That figure does not represent a calculation of specific items; rather, it is simply an aggregate figure which Beverly used. Beverly did not adequately explain the disparity between its start-up cost and Manor Care's $300,000 start-up cost, which is a reasonable figure. Finally, Beverly's construction period interest has not been shown to be reasonable and its application is not consistent with regard to financing and equity contribution. Although the Agency can authorize a cost overrun of up to 10 percent of an applicant's project cost, it is uncertain that Beverly has underestimated its project cost by only 10 percent. It is not good health planning to approve a project which will, in turn, require further Agency approval to implement. Further, this proceeding is a comparative review of the applications filed and the representations made therein. It would be inappropriate to approve an application containing projections which are suspect. Since both Manor Care and Beverly are able to secure the financing necessary for project accomplishment, both of their proposals have immediate financial feasibility. Manor Care's proposal also has long-term financial feasibility. The financial projections for Years 1 and 2 are based on reasonable utilization, revenue, and expense assumptions. Manor Care reasonably projects that it will be profitable in Year 2 of operation. Beverly is a large corporation with substantial resources. Because of this, it can be expected that Beverly's project, which will likely cost substantially more than Beverly projected, will be financially feasible in the long term although perhaps not as early as Year 2. Either Manor Care's or Beverly's project would enhance the existing long-term care system in Palm Beach County by providing needed skilled nursing services, services for Alzheimer's and related dementia disorders, sub-acute services, respite care, and adult day care. Both applicants have a corporate quality assurance program which is utilized and implemented at all nursing homes operated by that applicant. Those programs are intended to promote quality of life and quality of care for the residents. Both facilities would enjoy high utilization, and both proposed charges which are reasonable. Both projects will utilize corporate resources in a cost-efficient and cost-effective manner. Both Manor Care and Beverly have committed as a condition to the award of a CON to provide more Medicaid patient days than the nursing home average for Palm Beach County. Thus, both proposals promote access to Medicaid residents for nursing home services. Although Beverly's county-wide and statewide Medicaid averages are higher than Manor Care's, each facility of either applicant has met its CON condition regarding its Medicaid commitment. As required, JFK's application has been reviewed against the state and local health plan allocation factors as set forth in this Recommended Order. Its application meets the majority of those allocation factors. Moreover, some of those factors require that preference be given to programs which are of the specific nature proposed by JFK. Patients with a documented need for sub-acute skilled nursing services of the type proposed by JFK have been denied access to licensed but unoccupied skilled community nursing home beds in Palm Beach County. Those patients' needs for sub-acute skilled nursing services are documented in physician orders and plans of care contained in the patients' medical records. Generally, patients requiring a high level of nursing and restorative care have been denied access. Further, there are several specific categories of patients who have been unable to obtain timely discharges to skilled nursing facilities in Palm Beach County. These categories include: patients with chronic illness; patients who are ventilator dependent; diabetic patients; terminally ill patients; patients who require chemotherapy; AIDS patients; and patients with chronic obstructive lung disease. The difficulty in discharging these patients is a "daily to weekly" issue at JFK. Ventilator-dependent patients requiring skilled nursing care are routinely denied access to licensed but unoccupied skilled nursing beds in Palm Beach County. There are no long-term care beds in Palm Beach County that provide ventilator services, although some purport to do so. Palm Beach County patients who require long-term ventilator care must seek admission to Vencor Hospital in Fort Lauderdale, which is approximately forty-five miles from JFK. During peak season, Vencor generally does not have beds readily available. Patients who require long-term ventilator care often remain in acute care beds at JFK longer than warranted by their medical condition because there are not available appropriate facilities in Palm Beach County for their post-acute care. Patients discharged from JFK to Vencor for long-term ventilator care lose contact with their attending physicians, which impairs the continuity of care rendered to those patients. Patients placed at Vencor are further compromised by their family and friends' inability to travel to Fort Lauderdale to visit them. The support of family and friends is important in helping ventilator-dependent patients to wean themselves from the ventilator. JFK has experienced and anticipates it will continue to experience a significant increase in the number of its patients whose care is reimbursed under managed care plans. JFK's 1995 budget projects that 33 percent of the hospital's patient days will be attributable to managed care patients. Managed care plans have exerted pressure on JFK physicians to discharge patients as quickly as possible. Accordingly, patients discharged from JFK are often in a more acute phase of illness or injury than were comparable patients in past years. Patients discharged from JFK who require a heavier level of care have not, as a rule, been adequately served by Palm Beach County skilled nursing facilities. Community nursing homes in Palm Beach County do not offer sub-acute care of the nature proposed by JFK. As a result of patients being discharged "quicker and sicker" from JFK to community nursing facilities, JFK has experienced an increase in the rate of readmissions from community nursing facilities to JFK. The number of readmissions has grown from 115 in JFK's fiscal year 1991 to greater than 200 during its fiscal year 1993. This evidence confirms that existing community nursing home facilities do not serve as adequate or appropriate discharge alternatives for many JFK patients who require sub-acute care. JFK has the ability to provide a high quality of care to patients requiring sub-acute services. The Agency has determined JFK's quality assurance, utilization review, and resident care plans to be acceptable. JFK proposes a substantially higher number of nursing hours than required by licensure rules. Moreover, JFK proposes to provide RNs on a 24-hour basis, and to make available on a 24-hour basis to sub-acute patients its full panoply of ancillary and support services. The development of JFK's sub-acute unit will enhance the post-acute care provided to patients discharged from JFK's acute care beds. JFK has available the financial resources necessary to implement its sub-acute program and will be able to recruit the nursing and technical staff necessary. There is sufficient demand for the JFK program to assure that the program will be highly utilized. JFK's project will be financially feasible in the immediate and in the long-term. JFK's program will result in several cost related benefits, both to JFK and to the community it serves. First, because JFK will be able to discharge certain patients more rapidly to the sub-acute unit, it will avoid substantial operational expenses associated with caring for those patients in acute care beds. Based solely on the sample of patients referenced in JFK Exhibit 5, JFK would have avoided approximately $600,000 in annual operational expenses had a sub-acute unit been available at the hospital during 1992 and 1993. A contractual adjustment is the difference between the amount a hospital charges for a service and the amount it actually receives in payment for the service. The contractual adjustment is exacerbated where a patient's acute care length of stay extends beyond the number of days necessary to care for the acute needs of the patient. During the period March 1992-March 1994, JFK experienced a contractual adjustment of approximately $3,000,000 relative to the sample of 287 patients reflected in JFK Exhibit 5. That contractual adjustment is significant from a health care reimbursement perspective. JFK's contractual adjustments relative to patients who require post-discharge sub- acute care would be reduced if JFK were to establish a sub-acute unit, which would ameliorate JFK's financial losses associated with that category of patients. The development of a sub-acute program at JFK will benefit the Palm Beach County health care delivery system. The marginal or operational cost per day of providing acute care services at JFK is $350-$400 higher than the projected marginal cost per day of providing sub-acute care services. For every day that a JFK patient receives services in JFK's sub-acute unit, rather than in an acute care unit, the health care delivery system will save money. As JFK will incur significantly less expense in providing services to patients in a sub-acute unit, JFK will not have to subsidize the care it currently provides to sub-acute patients in the acute care setting. Accordingly, the development of JFK's sub-acute unit will have a downward pressure on future JFK rate increases, promoting cost containment, and will lower the cost of providing the sub-acute care services proposed by JFK. The development of JFK's sub-acute unit will allow the hospital to allocate its resources more efficiently, which further promotes cost containment. Further, the development of JFK's sub-acute unit constitutes an innovation in the delivery of health care services, which innovation will have a positive effect on competition. JFK is a not-for-profit hospital. It is JFK's policy to care for all persons regardless of financial condition, and JFK has outreach programs for persons with limited financial resources. While JFK's general admissions policy will apply to the sub-acute unit, JFK does not propose to serve a large number of Medicaid and indigent patients in that unit. JFK anticipates that Medicare will be the primary payor for approximately 90 percent of the patients served in the unit, given the unit's emphasis on restorative and rehabilitative care. Beverly or Manor Care will provide a majority of its services to Medicaid patients, thereby complementing JFK's proposal. JFK provides a full array of inpatient and outpatient health care services, including a diagnostic breast institute, an ambulatory surgery center, an outpatient comprehensive cancer center, primary care physician services, and home health services. Each of those services constitutes part of JFK's continuum of care. Sub-acute care services are the only link missing. The approval of its application will allow JFK to achieve full "vertical integration" i.e., a multi-level health care system, in that JFK will be able to provide its patients with services appropriate to their needs from pre-admission to JFK through post-discharge. Achieving vertical integration will enhance JFK's ability to contract with managed care companies, who endeavor to contract with organizations that offer a full continuum of care. JFK's establishment of a sub-acute unit will allow it to meet managed care companies' demand for capitated relationships, wherein the insurer pays an organization a flat amount, per covered life, to provide complete health care to its insured. The establishment of a sub-acute unit at JFK will allow the organization to reduce the cost of providing health care services to patients throughout its multi-level health care system and allow it to respond to the growing capitation market. Placing patients in the sub-acute environment, where they will consume fewer resources, will enable JFK to decrease the cost of providing health care to managed care companies and their subscribers. Finally, approval of JFK's application will allow JFK's patients to be followed by the same physicians who attended to them during their acute care hospitalization. Those patients who are capable of being transported elsewhere and are transferred to a sub-acute unit at a nursing home will seldom receive follow-up care from the physicians who performed their surgeries and otherwise attended to them during their acute episode. The overwhelming support of JFK's proposed sub-acute unit by the primary care and other specialized physicians at JFK, as evidenced by their testimony during the final hearing or by deposition admitted in evidence, is based upon their concern for their inability to follow up on their patient's care if those patients are elsewhere than in JFK. Those doctors who run office practices and work at JFK cannot spend a great deal of their day traveling around Palm Beach County from nursing home to nursing home to assure that their patients' recovery is progressing in addition to the time they spend visiting patients in the hospital and performing surgery and otherwise treating patients. Those physicians do not favor retaining the patients in acute care beds longer than is necessary, and that concern is not a result of concern for their personal incomes as was suggested by the Agency. Physicians are reimbursed at a higher rate for hospital visits than for visits to patients in skilled nursing units. Both continuity of care and successful outcome for the patient relate to continued care by the same physician.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered Granting Manor Care's CON application # 7375; Denying Beverly's CON application # 7372; and Granting JFK's CON application # 7374. DONE and ENTERED this 7th day of March, 1995, at Tallahassee, Florida. LINDA M. RIGOT 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 7th day of March, 1995. APPENDIX TO RECOMMENDED ORDER Beverly's proposed findings of fact numbered 5, 6, 8, 9, 13-19, 21, 23, 25-27, 31, 32, 34-43, 45-47, 51-54, 57, 60, 61, and 81 have been adopted either verbatim or in substance in this Recommended Order. Beverly's proposed findings of fact numbered 1, 3, 4, 63, and 67 have been rejected as not constituting findings of fact. Beverly's proposed findings of fact numbered 2, 24, 28, and 80 have been rejected as being irrelevant. Beverly's proposed findings of fact numbered 7, 22, 44, 48, 59, 64-66, 69-72, 75, 76, 82, and 84 have been rejected as not being supported by the weight of the evidence. Beverly's proposed findings of fact numbered 10, 11, 20, 29, 30, 33, 49, 50, 55, 56, 58, 62, 68, 73, 74, 77, and 78 have been rejected as being subordinate to the issues to be determined. Beverly's proposed findings of fact numbered 12, 79, and 83 have been rejected as being unnecessary. JFK's proposed findings of fact numbered 14-59 have been adopted either verbatim or in substance in this Recommended Order. JFK's proposed findings of fact numbered 1-13 have been rejected as being unnecessary. Manor Care's proposed findings of fact numbered 1-6, 13-42, 44-57, 59- 78, 82, 83, 89-114, 116, 118-120, 122-125, and 128-131 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 8-12, 43, 115, and 117 have been rejected as not constituting findings of fact. Manor Care's proposed findings of fact numbered 7, 79, 80, 87, and 88 have been rejected as being unnecessary. Manor Care's proposed finding of fact numbered 58 has been rejected as not being supported by the weight of the evidence. Manor Care's proposed findings of fact numbered 81, 84-86, 121, 126, and 127 have been rejected as being subordinate to the issues to be determined. The Agency's proposed findings of fact numbered 1-6, 9-26, 28, 34, 38, 39, 53, 54, 57-61, and 65-69 have been adopted either verbatim or in substance in this Recommended Order. The Agency's proposed findings of fact numbered 7, 41, 55, 62, and 63 have been rejected as being subordinate to the issues to be determined. The Agency's proposed finding of fact numbered 8 has been rejected as being unnecessary. The Agency's proposed findings of fact numbered 27, 29-33, 35-37, 40, 42-46, 48-52, 56, and 70 have been rejected as not being supported by the weight of the evidence. The Agency's proposed finding of fact numbered 47 has been rejected as not constituting a finding of fact. The Agency's proposed finding of fact numbered 64 has been rejected as being irrelevant. COPIES FURNISHED: James C. Hauser, Esquire Parker, Skelding, Labasky, Corry, Eastman & Hauser, P.A. 318 North Monroe Street Tallahassee, Florida 32301 Douglas L. Mannheimer, Esquire Broad & Cassel 215 South Monroe Street, Suite 400 Post Office Drawer 11300 Tallahassee, Florida 32302 Robert A. Weiss, Esquire 118 North Gadsden Street, Suite 200 The Perkins House Tallahassee, Florida 32301 Lesley Mendelson, Esquire Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131
The Issue The issue for consideration in this hearing is whether Respondent should be issued a Conditional License rating for the period effective April 9, 1999 through October 31, 1999, because of deficiencies alleged as a result of an Agency survey conducted on April 9, 1999.
Findings Of Fact At all times pertinent to the issues herein the Agency was the state agency responsible for the licensing and regulation of health care facilities, including long-term care nursing homes in Florida. Respondent, Beverly Enterprises-Florida, operated a licensed long-term care nursing home under the name Emerald Oaks, located at 1507 South Tuttle Avenue in Sarasota, Florida. On April 9, 1999, as a result of a complaint of lack of supervision resulting in injury to residents, Mary Patricia O'Connell, a surveyor for the Agency, visited Respondent's facility to inquire into the injury to two residents that took place in early April 1999. Ms. O'Connell is a registered nurse with in excess of 25 years' experience in nursing homes, including ten years as a director of nursing. She has been a surveyor for the Agency for the past six years. During the course of her survey of the facility, Ms. O'Connell examined the records pertaining to Residents 1 and 2, the individuals regarding whose injuries the complaint was filed. Ms. O'Connell's review indicated that the incidents in question constituted failures to meet the standards set up under Tags F224 and F324, as identified on the Form 2567-L of the U.S. Department of Health and Human Services' Health Care Financing Administration. Tag F224, reflecting the requirements of Section 483.13(c)(1)(I), Florida Statutes, requires a facility to develop and implement written policies and procedures that prohibit mistreatment, neglect, and abuse of residents. Tag F-324, reflecting the requirements of Section 483.25(h)(2), Florida Statutes, requires a facility to ensure that each resident receives adequate supervision and assistance devices to prevent accidents. Petitioner limited its evidence to the facts and circumstances surrounding Tag F324, contending that the evidence regarding this tag applies to Tag F224 as well. Ms. O'Connell, the only witness for the Petitioner, was asked her opinion only regarding the facility's compliance with the requirements of Tag F324. The nursing notes and medical records upon which she relied in part were not written by her, and were, in some cases, not the personal knowledge of the author. As such they are clearly hearsay evidence. Resident 2 was, at the time of the incident, an 85-year- old female suffering from hypertension and dementia. On February 10, 1999, the facility completed a Minimum Data Set (MDS) on the resident which described her as requiring extensive assistance with one person to physically assist for transferring and dressing, using full bed rails on all open sides of her bed. Her medical records reflected that she had fallen on March 12, April 13, April 25, May 9, May 14, July 24, August 16 and 23, November 19, and December 11, 1998, and on March 12, 1998, her physician ordered two bed rails as an enabler while the resident was in bed. The doctor subsequently also directed the use of a wedge cushion for wheelchair positioning on April 12, 1998, and a TABS unit an alarm system in bed and in the wheelchair, in the event the resident tried to get out of the chair or bed unassisted. During the course of her investigation, Ms. O'Connell spoke with the Certified Nursing Assistant (CNA) assigned to care for Resident 2 on April 3, 1999, who related that she had removed the TABS unit and placed Resident 2 on the side of the bed with the bed rails down and turned away from the resident to call out to another CNA for help in moving Resident 2 to her chair. When the assigned CNA turned back to the resident, she found the resident on the floor. The resident did not complain at the time, and the only injury found at that time was a light abrasion to both knees. She was placed into her wheel chair. The resident's records reflect that although she was observed several times in the interim, as late as 2:00 a.m., on April 6, 1999, without complaint or evidence of any problem, at 9:30 a.m., on April 6, 1999, a swelling in the area of the resident's knees was noticed. X-rays of both legs were taken which reflected fractures of both femurs. The resident was taken to the hospital where surgery was done to reduce the fractures. In Ms. O'Connell's opinion, and based on the information the facility had on the resident to the effect she had a low safety awareness and needed total supervision, the facility, through its employee, was negligent in placing the resident on the side of the bed with the rails down and thereafter turning away from her. Amy Weyant, the facility’s assistant director of nursing, also reviewed the facility’s records regarding the residents in issue here. These records, as to Resident 2, reflect that on February 12, 1999, when she first came to the facility, she was evaluated for risk of falls and found to be at risk. A care plan was developed for this resident which provided that whenever the resident was to be moved, two individuals were required to do so. The evaluation also considered the resident’s stability while in a sitting position and it was noted that the resident maintained her balance for sitting without any difficulty, but had poor standing balance and was unable to walk. Resident 3 was also, at the time of the incident, an 85-year-old female diagnosed with osteoarthritis and degenerative joint disease. A quarterly MDS was completed for this resident on January 29, 1999, which described her as requiring extensive assistance with one person to physically assist with transferring and ambulation. The care plan developed for this resident on November 13, 1998, noted the resident had a history of falls and was a risk for further falls due to her poor safety awareness and chronic pain in her back and knees. After the resident sustained a fall on August 24, 1998, an approach calling for her to be supervised when out of bed was identified. The resident was to be placed in a wheel chair when out of bed so that she could be kept at or near the nurses’ station. Unfortunately, this procedure was not added to the prevention care plan. Review of the nurses’ notes regarding this resident reveals that she fell in the bathroom on March 5, 1999. Investigation into the incident indicated that the CNA responsible for this resident was in the resident’s room getting clothes for her from her closet at the time of the fall. As a result of this fall, the resident sustained a fractured hip, for which she was transported to the hospital. According to Ms. Weyant, this resident was also assessed for stability in a sitting position prior to the fall and was found to require physical support because she was unable to follow directions. The resident’s rest room was equipped with hand rails and a call bell. Since the incident in question, the resident has again been evaluated for stability in a sitting position and found to be able to sit without fear of falling. Ms. Weyant also noted that both the residents in issue sustained their falls from a sitting position. While their stability while sitting was questionable, at no time, prior to the falls in issue here had either fallen from a sitting position. Ms. Weyant reports that even notwithstanding the falls sustained, the families or doctor/caregivers of these residents considered the facility reliable enough for the residents to be returned there after release from the hospital. The facility was resurveyed on May 17, 1999, and was found to have cleared all deficiencies as of that date or even earlier. The facility earlier had made a "credible allegation" that it would be in compliance by May 9, 1999. On the May 17, 1999, follow-up, it was found to be in compliance with an effective date of compliance of May 9, 1999. It is a goal of nursing homes to provide necessary care in an environment that is "as normal as possible." The facility must balance the residents’ need for care with the residents’ desire for independence. One of the issues faced by nursing home personnel is to balance restraint against freedom. This requires the facility to develop a method of care designed to prevent falls and injury. Respondent contends that the Administrative Complaint is based on the fact that two falls occurred, and urges that falls are common in nursing homes. The mere fact that an fall occurred does not form the basis for an inspection write-up. The write-up, when done, is based on the qualified surveyor’s determination that there was a lack of necessary supervision. If a facility has done an appropriate assessment and developed a plan to provide necessary supervision, and if the facility has complied with all the provisions called for in the care plan, a subsequent injury to a resident would not result in a deficiency write-up. To ensure as best as is possible against injuries, most nursing homes assign a CNA to every resident. In both cases in issue here, a CNA was assigned to each resident. Sometimes a CNA remains assigned to a particular resident for an extended period. When that happens, a relationship often develops between them through which the CNA gets to know the needs and peculiarities of the resident. In these cases, Ms. O’Connell opines that the facility’s fault lay in its failure to use its own identified interventions: In the one case, the failure to use side rails as called for in the care plan; and in the other, the failure of the CNA to remain in the bathroom with the resident providing the constant supervision called for. In both cases, this translates to an inappropriate lack of supervision, and Ms. O’Connell classified both incidents as Class II deficiencies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration enter a final order rescinding the issuance of the Class II deficiencies noted and the Conditional license issued, and determining that Emerald Oaks is entitled to the issuance of a standard rating for the period from April 9, 1999 to May 9, 1999. DONE AND ENTERED this 26th day of May, 2000, in Tallahassee, Leon County, Florida. ARNOLD H. POLLOCK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of May, 2000. COPIES FURNISHED: Karel L. Baarslag, Esquire Agency for Health Care Administration Post Office Box 60127 Fort Myers, Florida 33906-6127 Jay Adams, Esquire Broad & Cassel 215 South Main Street, Suite 400 Post Office Box 11300 Tallahassee, Florida 32302 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308
The Issue The ultimate issue to be resolved in this proceeding is whether the Petitioner should be granted a Certificate of Need to construct a 120-bed nursing home in Volusia County, Florida. Petitioner contends that there is a need for such a facility; that the Department's rule do not apply in determining need; and that to the extent the Department's rules do apply, they are not a reasonable measure of the need for a nursing home facility. The Department contends that its rules are reasonable and applicable to this proceeding, and that there is no need for the proposed facility.
Findings Of Fact Petitioner is seeking a Certificate of Need authorizing the construction of a 120-bed nursing home facility in Daytona Beach, Volusia County, Florida. At the time that the Application for Certificate of Need was filed, the total project cost was estimated at $3,688,523. Cost estimates have been revised since that time, and at the time of the hearing, it was estimated that the total capital expenditure required would be $5.3 million. Petitioner proposes to provide intermediate and skilled care facilities and to secure Medicare and Medicaid approval. Petitioner has built and operated numerous nursing home facilities in states other than Florida. Petitioner has the necessary resources, competence and experience to build and operate the proposed nursing home facility. Prior to the adoption of Rule 1( -5.11(21), Florida Administrative Code, the Department utilized health services plans adopted by local health services agencies to determine the need for nursing home facilities. There was no evidence offered at the hearing from which it could be concluded that there is a need for the proposed facility under any such plan. In determining the need and demand for nursing home facilities, the Department now utilizes a formula set out in its Rule 10-5.11(,21), Florida Administrative Code. Under the rule, the Department will not normally approve applications for additional nursing home beds in any service district unless a need for the beds is demonstrated by application of a formula set out in the rule. Under the formula, a ratio of 27 nursing home beds per 1,000 persons age 65 or older in the population is utilized. This formula historically allows for construction of nursing home beds which exceeds need. Persons who live in poverty have a historic need for nursing home services that exceeds that for the remainder of the population. The Department's formula thus applies a poverty ratio to the 27 beds per 1,000 formula. The percentage of poverty in Volusia County exceeds the state average. The bed need ratio for Volusia County under the Department's rule is therefore 32.6 beds per 1,000 of aged population. Under its rule, the Department utilizes the most recent mid-range population projections published by the Bureau of Economic and Business Research at the University of Florida to determine the population of the service district. In Volusia County, the population age 65 and above was estimated by that bureau for 1986 to be 69,157. Applying the 32.6 beds per 1,000 ratio, the theoretical bed need for Volusia County for 1986 is 2,225 beds. Only 1,988 beds have actually been licensed or approved for Certificates of Need, however. Under this circumstance, the Department, utilizing its rule would then consider whether there is an "actual demand" for nursing home beds. Under the rule, new beds are authorized beyond those currently licensed so that the current daily occupancy would equal 80 percent of the authorized beds. Accordingly, there could be as many as 1,960 beds eligible for licensure in Volusia County 1,568 (current daily occupancy assuming 100 percent occupancy of currently licensed beds) divided by 0.803. In addition to the 1,568 currently licensed beds, the Department has issued Certificates of Need for 420 additional beds that are not yet on line. There have thus been 1,988 beds licensed or approved for licensure more than 1,960, which is the most that could possibly be approved. There is, therefore, no actual demand for new beds under the Department's rule. The rule does not operate to foreclose placing new beds in an area where theoretical demand exceeds the number of licensed beds. Instead, the rule, which is applied to new projections quarterly, serves to bring new beds into an area gradually. The Department's Rule 10-5.11(21), Florida Administrative Code, is a reasonable method of determining theoretical need and actual demand for nursing home beds. There are other reasonable methodologies that could be followed. The Department's methodology is not, however, unreasonable, arbitrary, or capricious. Even if application of the formula does not demonstrate any need or demand for nursing home services, the Department can grant a Certificate of Need if other circumstances exist that would justify the addition of new nursing home beds. The applicant has failed to establish that any such conditions exist in Volusia County. It has not been established that persons who live in poverty, Medicaid or Medicare patients, or any segment of the population are unable to obtain nursing home services. It has not been established that existing facilities are providing inferior services. The Department's Rule 10-5.11(21), Florida Administrative Code, allows for the construction of more nursing home beds in districts with a high degree of poverty than would be allowed in districts where there is a lesser degree of poverty. This factor has been placed in the formula because it has been established that persons who live in poverty have a greater need for nursing home facilities than do other segments of the population. The formula does not operate to discriminate against persons who do not live in poverty. Rather, it serves to allow the placement of facilities where they are needed.
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses, and on the exhibits received in evidence, I make the following findings of fact. By application dated April 15, 1983, Beverly Enterprises-Florida, Inc., (hereinafter "Beverly" or "Petitioner") applied to the Department of Health and Rehabilitative Services for the issuance of a certificate of need for the construction of a new 120-bed nursing home in Marco Island, Collier County, Florida. The application was deemed by HRS to be complete effective September 15, 1983. (Pet. Ex. 1) By letter dated December 5, 1983, HRS advised Beverly that its application was denied. (Pet. Ex. 2) The letter included the following reasons for denial: The proposed project is not consistent with Chapter 10-5.11(21), Florida Administrative Code, nursing home bed need methodology. With a six month occupancy of 58.2 percent in the subdistrict of Collier County, the utilization threshold of 90 percent developed from the application of Chapter 10-5.11(e), (f), and (h), Florida Administrative Code, is not satisfied and no further bed need is demonstrated for this subdistrict. There are 97 approved but unlicensed beds in the subdistrict which, when added to the existing licensed bed supply, should effectively maintain the county-wide occupancy at a reasonable level through 1986. Further explication was contained in the State Agency Action Report which accompanied the HRS letter of December 5, 1983. Florida Administrative Code Rule 10-5.11(21)(a), adopted by HRS, reads as follows: Departmental Goal. The Department will consider applications for community nursing home beds in context with the 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), (a), (f), (g), and (h) of this rule. (Pet. Ex. 3) A step-by-step application of the methodology described in Rule 10- 5.11(21)(b) through (h) to the facts in this case is as follows. Under the formula, bed need is determined by first looking at the poverty level in District VIII and in Collier County (Pet. Ex. 5, Tr.252). The poverty level is computed by comparing the number of elderly living in poverty in the district, which is 8.61, to the number of elderly living in poverty in the State, which is 12.70, resulting in a poverty ratio of .68 (Tr.252). The bed need ratio is computed by multiplying the poverty ratio of .68 times 27 beds per thousand population 65 or older, which results in a bed need ratio of 18.3 beds per thousand residents 65 years or older (Tr.252). When the bed need ratio is applied to the 65 and over population in District VIII, the total bed need is 3,858. The bed need for the subdistrict of Collier County is 514 beds (Tr.252). The number of licensed and approved beds in the district is 4,618 and the number of licensed and approved beds in the subdistrict is 429 (Tr.252). When the need for beds is subtracted from the total number of licensed and approved beds, there is a surplus of 760 beds in District VIII, but a need for 85 beds in the subdistrict of Collier County (Tr.253). When a need for beds exists in the subdistrict but not the district as a whole, subsection (g) of the rule allows new beds to be added only if existing beds are being utilized at a 90 percent or greater occupancy rate (Pet. Ex. 5, Tr.253-255). The current utilization rate for nursing home beds in Collier County is 61.1 percent (Pet. Ex. 7, Tr.255). Since the current utilization rate is less than 90 percent, no additional beds are needed in Collier County (Tr.256). Approval of the Beverly application to construct a 120-bed nursing home in Marco Island would, in the words of the applicable rule, "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), and (h) . . . " of Rule 10-5.11(21), Florida Administrative Code. (Pet. Ex. 2, 5, 6, and 7; testimony of expert witnesses Mr. Knight and Ms. Dudek.) HRS is presently considering the adoption of amendments to the nursing home need methodology provisions presently found in Florida Administrative Code Rule 10-5.11 (21)(b) through (h). If the present form of the tentative amendments to Rule 10-5.11(21)(b) through (h) were to be adopted and become effective soon enough to be applicable to Beverly's application in this case the result would be the same as under the current rule. Approval of Beverly's application would cause the number of community nursing home beds in HRS District VIII to exceed the number of community nursing home beds calculated by the methodology of both the existing rule and the tentative amendments to the rule. (Testimony of expert witness Knight.) Florida Administrative Code Rule 10-17.020(2)(b), adopted by HRS, reads as follows: (2) Policies and Priorities. In addition to the statewide criteria against which applications are evaluated, applications from District 8 will be evaluated against the following local criteria: a. * * * b. Nursing home services should be available within at least one hour typical travel time by automobile for at least 95 percent of all residents of District 8. (Pet. Ex. 3) HRS District VIII consists of seven counties. The current population estimate of these seven counties is 679,019. According to the most recent census information, the permanent population of Marco Island is 8,605. Four community nursing homes are located in Naples, which is also in Collier County. Typical travel time by automobile from the center of Marco Island to the center of Naples is approximately 30 to 45 minutes, depending on the season of the year. (Tr.59-60, 83, 118, and 151) In arriving at the current utilization rates for purposes of applying the need determination methodology, HRS relied on the latest available quarterly nursing home census reports. (Pet. Ex. 7; Tr.255-256) In compiling the Collier County average occupancy rate for purposes of applying the need determination methodology, HRS counted as existing beds all of the licensed beds of all of the community nursing homes in Collier County, which included 114 beds licensed for Gulf Drive Residence, Inc., and 120 beds for Americana Healthcare Center. (Pet. Fx. 2)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that the Department of Health and Rehabilitative Services enter a final order in this case DENYING the application of Beverly Enterprises-Florida, Inc., for a certificate of need to construct a new community nursing home in Marco Island, Collier County, Florida. DONE and ORDERED this 20th day of September, 1984 in Tallahassee, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of September, 1984.
Findings Of Fact The Agency For Health Care Administration (AHCA) is responsible for the administration of certificate of need laws for health care services and facilities in Florida. Life Care Centers of America, Inc. (Life Care) owns, leases and/or operates 157 nursing and retirement facilities in 27 states. It is one of the largest nursing home companies in the United States. AHCA considers Life Care a "major health care provider" for CON review purposes. In response to the fixed need pool published by AHCA in October 1993, Life Care filed a CON application, subsequently numbered CON 7501, for a 34-bed addition to a previously approved 77-bed nursing home in Clay County in AHCA District 4, Subdistrict 2. The Letter of Intent ("LOI") deadline for Life Care's application for the December, 1993 batching cycle was November 1, 1993. Rule 59C-1.008(5)(h), Florida Statutes, requires a listing of the total approximate amount of capital projects at the time of letter of intent deadline. The application filing date for this batching cycle was December 1, 1993, with an omissions response deadline of January 14, 1994. Section 408.037(2)(a), Florida Statutes, requires a complete list of capital projects at the time of application. Life Care application 7501 was deemed complete by AHCA on January 14, 1994. AHCA preliminarily denied Life Care's application for CON 7501 for failing to include the total project costs attributable to CON applications which were preliminarily denied by AHCA, but pending due to administrative challenges filed by Life Care. The amount listed on Schedule 2 of Life Care's application on the line described as "allowance for projects denied and appealed various" is $6,020,387. In the May, 1992 nursing home batching cycle, Life Care applied for a CON to build a 120-bed nursing home in Orange County, AHCA District 7, Subdistrict 2. That application (CON 7028) was preliminarily denied and, by Petition for Formal Administrative Hearing dated June 25, 1993, Life Care challenged AHCA's action. Life Care failed to include CON 7028 based on pending settlement negotiations on November 1, 1993, which resulted in the filing on January 12, 1994, of a Notice of Voluntary Dismissal of its challenge to the denial of CON 7028. See, DOAH Case No. 93-3912. Life Care's CON 7028 proposed total project cost was $5,644,047. In the June, 1993 nursing home batching cycle, Life Care applied for a 69-bed nursing home addition in Citrus County, AHCA District 3. That application (CON 7322) was subsequently denied and by Petition for Formal Administrative Hearing dated October 5, 1993, Life Care challenged that preliminary agency action. By Notice dated March 7, 1994, Life Care voluntarily dismissed its challenge to the denial of CON 7322. See DOAH Case No. 93-6009. Life Care's CON 7322 proposed total project cost was $1,473,000. However, Life Care entered into a settlement for a 9-bed partial award for a total project cost of $82,100. In June 1993, Life Care also applied for a CON to build a new 120-bed nursing home in Flagler County, in AHCA District 4, Subdistrict 4. That application (CON 7330) was subsequently denied and, by Petition dated October 6, 1993, Life Care challenged that preliminary agency action. Life Care failed to list CON 7330 on its Clay County application, based on pending settlement negotiations which resulted in its voluntary dismissal of its petition on January 14, 1994. See, DOAH Case No. 93-6011. Life Care's CON 7330 proposed total project cost was $5,656,000. In the same June 1993 cycle, Life Care applied for a CON to construct a new 42-bed nursing home in Polk County, AHCA District 6, Subdistrict 5. That application (CON 7355) was subsequently denied, and the denial challenged by Petition dated September 27, 1993. As of the date of this hearing, that application was pending at DOAH. See, DOAH Case No. 93-5747. Life Care's CON 7355 proposed total project cost was $2,925,871. Life Care also applied, in June 1993, for a CON to construct a new 120-bed nursing home in Palm Beach County, AHCA District 9, Subdistrict 4. That application (CON 7386) was subsequently denied, and that denial challenged by Petition dated October 6, 1993. At the time of this hearing, that application was pending at DOAH. See, DOAH Case No. 93-6006. Life Care's CON 7368 proposed total project cost was $6,101,000. The combined total of the projects costs equals $21,799,918 for CONs 7028, 7322, 7330, 7355 and 7368, not $6,020,387 as Life Care reported for "allowance for projects denied and appealed." Life Care also reported $15,000,000 as "other capitalization." Accepting AHCA's claim that $21,799,918 in project costs should have been reported, Life Care asserts that the total of $21,020,387 ($6,020,387 + $15,000,000) is available to fund the five projects, leaving an insignificant omission of 9/10 of 1 percent of total reported projects and expenditures, or $779,531 of $92,709,260. The Clay County CON application described the line item of $6,020,387 as "Allowance for projects denied and appealed" as follows: (3) An allowance for potential approval of a portion of the Life Care projects applied for in Florida for the batching cycles May 1992, November 1992, and May 1993 which were denied by the Agency and have been appealed by Life Care. These projects are for Orange County, Polk County (second project), Citrus County, Palm Beach County, and Flagler County. All of these projects were anticipated to be funded through a combination of Life Care equity and bank loans as outlined in the individual CON applications. Life Care described "Other Capitalization" as follows: (4) To be conservative, an allowance of $15,000,000 for currently unidentified capital projects which may occur over the next three years, including items such as facility renovations or additions, acquisitions, and exercising purchase options for leased facilities. These projects will be funded as they materialize, as it is anticipated that funding will be primarily through bank loans. Life Care also listed separately the costs for projects in eleven Florida counties for which AHCA had indicated an intent to issue it CONs or for which applications were filed simultaneously with the Clay County application. These project costs total $47,830,873. All together, approved Florida projects, other states projects, CONs with intents to deny but appealed, renovations, projects exempt from CON review and other capitalization cost reported by Life Care on Schedule 2 total $92,709,260. The notes drafted by Life Care to explain schedule 2 make it clear that Life Care did not expect to use the additional $15,000,000, reported to AHCA, to cover denied but appealed projects. The same is true of the other itemized projects listed on Schedule 2. Life Care clearly states which line item was intended to apply to Orange, Polk, Citrus, Palm Beach and Flagler Counties. On the date that Life Care filed its letter of intent the total amount of these pending projects was $21,799,918 not $6,0202,387, as reported. The notes indicate that the cost estimates are based on expectations of potential approvals of the denied but appealed CONs. In effect, as Life Care's witness testified, it expected to prevail in 25 percent of its pending administrative challenges. The notes attached to Schedule 2 do support Life Care's claim that $15,000,000 designated as "other capitalization" is available for an additional projects approved after administrative proceedings. By describing its availability for "unidentified projects," Life Care demonstrated that no obstacle exists to the use of the additional $15,000,000 on preliminarily denied CON projects if Life Care is more successful in administrative proceedings than it anticipates. Life Care's claim that it does not have to apply these funds to any planned capital expenditures, is also supported by an additional note attached to Schedule 2 explaining how estimated capital budget expenditures would be funded, which is as follows: (5) Estimated capital expenditures for 1995 at Life Care facilities and the corporate, regional and divisional offices to be funded through a combination of operating cash flow and bank loans. These expenditures are pending approval when they are incorporated into the annual budget prior to each respective year. Life Care has established that the $15,000,000 for unidentified capital projects is not otherwise committed and is available to fund preliminarily denied, but challenged CONs, if more than the expected potential projects are approved. If Life Care prevails on all pending challenges, then its projections of capital project costs fall short by $779,531. If Life Care's projections of its commitments are inaccurate by $779,531, with total project costs of $92,709,260, then the omission does not render Life Care's application incomplete for failing to include the total approximate amount of capital projects. AHCA gives a preference for expanding nursing homes with fewer than 120 beds for enhanced efficiency and economics of scale. AHCA also agreed that if the $15,000,000 had been identified as available for the denied but challenged capital projects, it would have been considered by AHCA, and that Life Care has the financial resources to complete the 34-bed addition. For these reasons, Life Care's proposed 34-bed addition to its approved 77-bed construction CON is financially feasible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Life Care for CON No. 7501 to construct a 34-bed nursing home addition in Clay County, AHCA District 4, Subdistrict 2, be GRANTED. DONE AND ENTERED this 15th day of September, 1994, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of September, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2409 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 3. Accepted in or subordinate to Finding of Fact 3. Subordinate to Finding of Fact 2. Accepted in Findings of Fact 5. Accepted in Findings of Fact 4. Accepted in Findings of Fact 5. Accepted in Findings of Fact 6. Subordinate to Finding of Fact 6. 10-13. Accepted in or subordinate to Findings of Fact 7 and 13. 14-15. Accepted in Findings of Fact 16-17. 16-(16-B) Accepted in Findings of Fact 17. Accepted in Findings of Fact 18. Accepted in Findings of Fact 7 and subordiante to preliminary statement. Accepted in Findings of Fact 7. Accepted in Finding of Fact 14. Accepted in Findings of Fact 8. Accepted in Findings of Fact 10. 23-24. Issue not reached. 25. Accepted in Findings of Fact 20. 26-30. Accepted in or subordinate to Finding of Fact 21. Accepted in Findings of Fact 14 and 23. Issue not reached. Accepted in Finding of Fact 21. 34-39. Accepted in or subordinate to Findings of Fact 14 and 23. 40-49. Accepted in or subordinate to Finding of Fact 24. Respondent's Proposed Findings of Fact. Accepted in or subordinate to Finding of Fact 3. Accepted in or subordinate to Findings of Fact 4 and 7. Accepted in Findings of Fact 8. Accepted in Findings of Fact 9. Accepted in Findings of Fact 10. Accepted in Findings of Fact 11. Accepted in Findings of Fact 12. 8-10. Accepted in part in Findings of Fact 13-24 and rejected in part. 11. Accepted in Finding of Fact 7. COPIES FURNISHED: R. Bruce McKibben, Jr., Esquire PENNINGTON & HAVEN, P.A. Post Office Box 10095 Tallahassee, Florida 32302 Richard Patterson, Esquire Agency for Health Care Administration 301 The Atrium, 325 John Knox Road Tallahassee, Florida 32303-4131 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
Findings Of Fact Petitioner, Health Care and Retirement Corporation of America, d/b/a Heartland of Broward, filed an application with respondent, Department of Health and Rehabilitative Services (HRS), for a certificate of need to construct a 120- bed nursing home in Broward County, Florida. After reviewing the application, respondent issued its proposed agency action in the form of a letter dated January 28, 1983 denying the application on the ground no need for 120 additional nursing home beds was demonstrated under the existing bed need methodology set forth in Rule 10-5.11(21), Florida Administrative Code. The parties now agree, and have so stipulated, that a numerical need for 101 nursing home beds exists in Broward County at the present time. They have also agreed that petitioner meets all statutory and rule criteria for the issuance of a certificate of need for those 101 beds. There are four other pending applications, including a second one by petitioner herein, for nursing home beds in Broward County. These applications were evaluated and denied by HRS in an earlier batching cycle than that of applicant. However, their final hearing was not conducted until after the hearing in this cause. Despite a contention by HRS counsel that under HRS policy or practice an earlier applicant has first priority over a later applicant to any available beds, there was no evidence to support that policy.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that petitioner's application for a Certificate of Need be granted in part and that it be authorized to construct a 101-bed nursing home facility in Broward County, Florida. DONE and ENTERED this 16th day of February, 1984, in Tallahassee, Florida. DONALD R. ALEXANDER 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 16th day of February, 1984.
Findings Of Fact Petitioner is a nonprofit corporation located in Lehigh Acres, Lee County, Florida, with a membership of approximately 900 persons. The association's goals are to insure that quality health care services, including, but not limited to, long-term care services, are available to that community. The Community Health Association, Inc., was preceded by a non-profit corporation known as Lehigh Acres General Hospital, Inc. This corporation managed and operated the Lehigh Acres General Hospital, located in Lehigh Acres, Florida. In June, 1981, the corporation sold its license to operate this acute care hospital to Hospital Corporation of America (HCA). HCA took over management of the facility July 1, 1981. HCA is currently leasing the facility from Community Health Association, Inc. HCA applied for and received a Certificate of Need to construct a new hospital in Lehigh Acres, Florida. Construction of this hospital is underway and is to be completed on or about January 1, 1984, at which time HCA will turn the old hospital facility back to Community Health Association. At the time of the licensure sale by Community Health Association (Lehigh Acres General Hospital, Inc.) to HCA, the Lehigh Acres General Hospital operated an 88-bed acute care facility which had utilized, since 1970, 20 of the 88 beds as nursing home beds. In July, 1981, Community Health Association, Inc., filed a letter of intent with Respondent for a 60-bed nursing home to be operated in Lehigh Acres, Florida. Respondent advised Community Health Association, Inc., that its application for a CON was premature due to the pending CON issued to HCA to construct a hospital in Lehigh Acres. In early 1982, Community Health Association, Inc., employed Herman Smith & Associates, of Chicago, Illinois, health care consultants, to perform a long-term study concerning need for a nursing home or nursing home beds in the Lehigh Acres area. On the basis of its study, Herman Smith & Associates recommended that Petitioner seek authority to provide 110 nursing home beds in two phases. The first phase of the project would involve converting the 1970 wing of the previous hospital building for use as a 50-bed nursing unit at a cost of approximately $350,000. The second phase consisting of construction of a 60-bed addition, costing $1,380,000 for 15,527 square feet, would be completed in early 1985. The sale of the license to HCA brought Petitioner $1,000,000. These funds will cover the first phase and part of the second phase costs. Petitioner's prior experience in health care delivery and its community support, along with these financial resources, will enable it to construct and operate the proposed nursing facility. There are no existing or approved nursing homes or nursing home beds to be located in Lehigh Acres, Florida. Except as noted below, all existing and approved nursing home beds are located in western Lee County in Ft. Myers, Cape Coral or in other communities located approximately 30 minutes or more by automobile from Lehigh Acres. Upon completion of construction and abandonment of the old Lehigh Acres hospital building by HCA, the new hospital will discontinue the 20 nursing home beds currently operated. Approximately 75 percent of this hospital's patients are Lehigh Acres residents, with few if any patients from Ft. Myers or western Lee County. All the nursing home referrals from the new hospital will be required to leave Lehigh Acres unless Petitioner's proposed nursing home is constructed. Petitioner filed a letter of intent with Respondent, followed by an application for a CON on or about October 1, 1982, proposing the project as recommended by Herman Smith & Associates. Following the submission of the instant application, Respondent adopted Rule 10-5.11(21), Florida Administrative Code (F.A.C.), which became effective on November 9, 1982. That rule establishes the "Methodology to Determine and Calculate the Need for Community Nursing Home Beds" in a service district. About January 29, 1983, Respondent advised Petitioner that its application for a 110-bed nursing home in Lehigh Acres was denied as not consistent with the Section 10-5.11, F.A.C., nursing home bed need methodology. Respondent's State Agency Action Report stated that "A need does not exist to add nursing home beds in Lee County through 1985. There are 347 approved but not constructed beds in the county. The bed need methodology produces an excess of 494 nursing home beds in the county through 1985." The State Agency Action Report reflected 970 existing and approved nursing home beds in Lee County. The report also projected a need for 1,400 community nursing home beds for the year 1985 in Lee County. The testimony of its author established that the same portion of the rule applied to 1986 protected population figures would yield a need for 1,522 beds in Lee County in 1986. At the time Petitioner's application was evaluated by Respondent, nursing homes in Lee County had an average 95.8 percent occupancy rate. Based on the application of the current utilization formula contained in Chapter 10-5.11(21), F.A.C., Respondent calculated that 494 excess nursing home beds in Lee County are licensed or approved. Projected population of persons age 65 and over living in Lee County in 1985 is 60,463 and ir 1986 is 65,708. The application of these population figures to the formula contained in Ch. 10-5.11(21)(b), F.A.C., yields a nursing home bed need in Lee County for 1985 of 1,400 and for 1986 of 1,522. As noted above, there are currently 970 licensed and approved nursing home beds in Lee County. The "Nursing Home Plan Component" of the Local Health Plan of the District Eight Health Council of Sarasota, Florida, of which Lee County is a portion, adopted June 29, 1983, indicates a need for 501 additional beds in Lee County for the year 1986. In applying Rule 10-5.11(21), F.A.C., Respondent's determination was subject to two errors. The first, a mathematical error, caused a miscalculation of beds which could be added in Lee County using current patient count data and avoid falling below the desired 80 percent occupancy rate. The formula, properly applied, indicates there would be 239 excess beds rather than the 494 shown in the State Agency Action Report. The second error concerns Respondent's failure to reconcile and compare the determinations made under the need methodology contained in paragraph (b) of the rule and other portions of the rule, particularly the current utilization sections contained in subparagraphs (d) and (f). Section 10-5.11(21)(f), F.A.C., stated that "consideration of applications for additional nursing home beds will be premised on both the projected need for new bed capacity and current utilization." (emphasis added) The requirement for additional nursing home beds based on the projected need for new bed capacity, as well as current utilization, establishes a need for the 110 beds proposed by Petitioner. Further, the proposed location is consistent with the goal of accessibility and community need in Lehigh Acres.
Recommendation Based on the foregoing, it is RECOMMENDED that Respondent enter a Final Order granting Petitioner's application. DONE and ENTERED this 26th day of September, 1983, in Tallahassee, Florida. R. T. CARPENTER 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 26th day of September, 1983. COPIES FURNISHED: Ronald A. Labasky, Esquire Robert S. Cohen, Esquire 318 N. Monroe Street Tallahassee, Florida 32302 James M. Barclay, Esquire DeparLment of Health and Rehabilitative Services 1317 Winewood Blvd., Suite 256 Tallahassee, Florida 32301 David H. Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
The Issue Whether the application of Elysium Rehabilitation Center Inc., (“Elysium”) for a certificate of need (CON) to construct and operate a 120-bed nursing home along with a CON application for an included 20-bed subacute unit in Palm Beach County, Florida, and the application of Good Samaritan Hospital (“Good Samaritan”) for a CON to convert 27 acute care beds to a 27-bed hospital-based skilled nursing unit (SNU), also known as a “subacute unit”, should be approved or denied.
Findings Of Fact AHCA published a “Notice of Community Nursing Home Fixed Need Pool” on April 19, 1996, in the Florida Administrative Weekly, Volume 22, No. 16. In District 9, Subdistrict 4, the published numerical need, as acknowledged by the parties, was zero for the January 1999 planning horizon. The published need resulted from calculation of projected need for additional community nursing beds in accordance with need methodology contained in Rule 59C-1.036(2), Florida Administrative Code. On May 24, 1996, AHCA published a “Notice To Potential Applicants” for CONs. The notice stated the following: In the review of applicants seeking beds from the January, 1999 Nursing Home Fixed Need Pool, as published in the April 19, 1996 F.A.W., which includes the same need for long and short term beds, the agency will consider the need for short and long term beds separately. Those applicants seeking both short and long term [beds] must file applications for each type of bed. As acknowledged by the parties, the notice specifically set out a “Need For Short Term Beds” in AHCA’s Subdistrict 9-4 of zero. Neither the April 19 published fixed need pool or the May 24 notice was challenged by any of the parties. Although the term “subacute” is not defined in federal or Florida law, the weight of expert testimony in this case establishes that for health planning purposes in the current environment, measurement of Medicare certified skilled nursing days or services (“Short Term Beds”) is a fair and reasonable surrogate for “subacute” care. Good Samaritan’s Application By letter of intent and application for CON filed in the batching cycle applicable to the January, 1999 planning horizon, Good Samaritan seeks to convert 27 acute beds at its Palm Beach County facility in AHCA District 9, Subdistrict 4, to a 27-bed subacute unit or SNU. Good Samaritan has attempted to demonstrate a need for the proposed beds through the presentation of an “internal survey,” in addition to calculations under three different methodologies. The internal survey results relied upon by Good Samaritan to show the existence of need is a product of the social work staff of Good Samaritan and its affiliate, St. Mary’s Hospital. The purpose of the survey was to identify patients who could, on the day of the survey, have received subacute as opposed to acute care. The survey results were compiled from 36 patients who, at that time, were in acute care beds and, according to Rehabilitation Services Expert Joan Horvath, needed to be in a subacute program. Survey documentation includes descriptive columns documenting “Reason for SNU Potential” and “Reason for Occupying Acute Bed.” Short, non-specific statements of the “reasons” for a patient’s occupation of an acute bed are listed for most of those surveyed. Reasons are varied with some having little to do with availability of an appropriate subacute bed. Of all survey results, only one patient case arguably reports unavailability of subacute care. There is no contention that attempts were made to provide placement to the patients in the survey. Karen Rivera, AHCA’s CON review consultant testified that the survey “raised more questions than it answered.” Good Samaritan’s application confirms that most patients included in the survey were subsequently placed in free standing SNU facilities without any substantiation by Good Samaritan of unnecessary delays. Good Samaritan has failed to demonstrate or document any lack of patient access to needed services. Dr. Jeffrey Farber, slated to be the medical director of Good Samaritan’s proposed subacute unit, testified “from an anecdotal level” that certain physicians may retain patients longer than necessary in acute care because of a lack of physician comfort with available facilities. Farber is unaware of any quantification of patient need related to systematic or chronic lack of availability of subacute care services. Evidence related to physician convenience or patient preference is not responsive to the rule-based criteria which requires a finding of a lack of reasonable access to appropriate medical care. Reasons advanced by Dr. Farber to support a finding of need for additional access to subacute services are, as he conceded, “those same issues [that] would exist as to any acute care patient at any acute care facility which did not have a subacute care unit.” Several methodologies presented in Good Samaritan’s application seek to support the conclusion that the proposed project is needed. Reliance is primarily on a health planning product called the Subacute Care Market Analysis Model, developed and marketed by Dr. Harold Ting as a means to estimate demand for subacute care in a given market. A “normative” demand model, the Ting methodology attempts to project potential demand for subacute services based on a subjective ideal, the number of patients that should or could have been provided subacute care—as opposed to actual experience with patients. Without regard to any specific infirmities in the Ting theory, the Ting methodology cannot be credited as a means of determining need in this case. It is a proprietary collection of calculations which, as a result, cannot be expressly described or tested. It can be discerned, however, that the theory may be flawed in its application inasmuch as it uses an inflated average length of stay for patients in subacute facilities of 36 days for purpose of need calculation, as opposed to the median length of stay for patients in subacute units in hospitals in Florida of approximately 24 days. An adjustment to calculations for this inflation factor which were then run at the final hearing by Jay Cushman, Good Samaritan’s expert in the field of health planning, did not demonstrate any need for additional hospital-based subacute capacity. Neither of the other two numeric methodologies presented by Good Samaritan at the final hearing demonstrated need for the proposed project sufficient to warrant its approval. Hospital-based SNUs or subacute units, beyond convenience and preference issues, in relation to free standing skilled nursing facilities, offer more immediate availability of emergency and acute services and the possibility that laboratory tests are completed in a shorter time. Good Samaritan maintains that the need pool for community nursing homes published by AHCA on April 19, 1996, is inapplicable to its application, although Good Samaritan filed no challenge to that bed need pool. Since affirmation by the First District Court of Appeal in Health Care and Retirement Corp. v. Tarpon Springs, 671 So.2d 217 (Fla. App. 1st DCA 1996)of Administrative Law Judge James York’s decision invalidating Rule 59C-1.036(1), Florida Administrative Code, no comparative review of SNU beds in hospitals in relation to all community nursing home beds has been conducted and AHCA no longer conducts such reviews. Subsequent to publication of the court’s opinion in Tarpon Springs, AHCA published the fixed need pool for the planning horizon at issue in this case based upon a calculation of need using the same numeric methodology contained in Rule 59C- 1.036(2), Florida Administrative Code. The calculation includes consideration of the entire Subdistrict population, and the need for all of the various categories of services included under the heading of skilled nursing care, including subacute and Alzheimer’s care. AHCA’s calculation also accounts fully for the number and occupancy rates of skilled nursing beds within the Subdistrict’s hospitals and free standing nursing homes. The published fixed need of zero represents “overall” need for skilled nursing beds, including Medicare certified and non-Medicare certified (also referred to as “short term” and “long term”). AHCA’s expert health planner, responsible for CON rule development, testified at final hearing that the need number calculated under the methodology contained in Rule 59C-1.036(2), Florida Administrative Code, represents the “overall” need for all nursing beds except for private contract “sheltered beds” requiring entry fees which are a specific category regulated by another government agency and not available to the public at large. This need number also includes all skilled nursing facility beds, whether located in freestanding nursing homes or hospitals. After determination of overall need, AHCA determined the need for Medicare certified beds in each subdistrict, based upon existing utilization of such beds. In response to the decision in Tarpon Springs, AHCA explored options and proceeded to determine, as reflected in the April 19 and May 24, 1996 notices published in this case, the need for Medicare certified nursing home beds separately from non-Medicare certified or “long term” beds, without regard to the location of those beds in hospitals or nursing homes. AHCA segregated nursing home beds into two groups, Medicare certified and non-medicare certified, for need determinations and comparative review purposes. Under this approach, comparison of applicants is made on the character of the services being provided. Good Samaritan’s position is that AHCA’s need determination is inconsistent with the court’s holding in Tarpon Springs. As established by proof at the final hearing, there has been no showing that subdividing the applications into short-term and long-term services is flawed or irrational. Additionally, Good Samaritan has not shown any rational alternative means of creating subgroups of skilled nursing applications or determining need for short-term beds on anything broader than an institution- specific basis. AHCA’s position is that the actual need methodology in Rule 59C-1.036(2), Florida Administrative Code was not invalidated by Tarpon Springs. The court’s decision in that case is limited to a prohibition of comparative review between hospital-based SNUs or subacute care beds and all community nursing home beds. Elysium’s Application Elysium, like Good Samaritan, did not challenge the April 19, 1996, published notice of the fixed need pool for the January 1999 planning horizon. As noted above, the notice, published in the Florida Administrative Weekly, established a projected bed need of zero (0) for community nursing homes in AHCA’s planning district 9, Subdistrict 4, Palm Beach County. Elysium’s timely filed application for a CON to construct a 120 bed skilled nursing facility containing a 20 bed subacute care unit (medicare certified) and a 16 bed Alzheimer’s Disease and Related Dementia Unit, however, seeks approval pursuant to provisions of Rule 59C-1.036(2)(h) and Rule 59C- 1.030(2), Florida Administrate Code for CON issuance to meet “special circumstances” despite the lack of numeric need. It is Elysium’s contention that elderly Jews who keep kosher are an identifiable ethnic minority in Palm Beach County with unique ethnic, religious, cultural and dietary needs who will be effectively denied access to long term care absent CON issuance. However, the applicant, Elysium Rehabilitation Center, Inc., owns no nursing homes and operates no nursing homes. The applicant has virtually no operating assets and no businesses. Sole shareholder of Elysium is John Fiorella, Jr. He is not a licensed nursing home administrator. He has never worked full time in a nursing home. He has not operated or opened a nursing home. The board of directors of Elysium include Fiorella and his mother and father. Both of the parents are experienced in the nursing home industry, but stopped working in 1986. A related corporation is Elysium of Boca Raton, Inc., which owns an assisted living facility (ALF) in Boca Raton, Florida, but no nursing homes. The ALF has a kosher kitchen. Elysium proposes to locate its nursing home facility on the ALF campus. The proposed facility is a freestanding building to be connected by an enclosed walkway to the ALF operated by Elysium of Boca Raton, Inc. The proposed facility’s connection to the existing ALF is intended to allow residents of the facility to be visited by spouses who are residing in the adjacent ALF, to allow use of common staff elements, and to allow for sharing of the common space of the existing facility. The projected cost of the proposed facility approximates 7.9 million dollars and includes proposals for a 20 bed subacute care unit and a 16 bed Alizheimer’s disease/related dementia unit. Elysium projects 65 percent occupancy in year one and 90 percent occupancy in year two. The proposed payor mix is: 7.1 percent private, 16.6 percent semiprivate, 55.5 percent Medicaid, 16.7 percent Medicare, 0 percent HMO or insurance and 4.2 percent “other”. The facility will admit Jewish and non-Jewish residents. While proposing to “provide a predominantly Jewish environment and meet the dietary laws of glatt kosher for the large number of elderly Jewish citizens residing in the area”, Elysium’s application also documents that the proposed facility will have a “predominately non-Jewish staff.” The proposed nursing home will not have an in-house kosher kitchen since the kosher kitchen at the adjoining ALF has been designated as glatt kosher by the Va’ad Hakashrut section of the Rabbinical Association. Elysium also proposes to offer its residents Hebrew classes, Yiddish discussion groups, religious studies, programs at the local Jewish Community Center and holiday celebrations. Need Per Section 408.035(1)(b) and (2), Florida Statutes And Rule 59C-1036(2), Florida Administrative Code Section 408.035(1)(b) and (2) requires that consideration be given to the availability, need, accessibility, extent of utilization, and adequacy of like and existing health care services in a District. By Rule 59C-1.036(2), Florida Administrative Code, AHCA projects bed need on a county-wide basis. The need formula considers elderly population in a county, projected growth in the elderly population, the occupancy of existing nursing homes, number of licensed and CON-approved beds in a county, and other health variables. The formula projects need for all nursing home services, inclusive of custodial care, Alzheimer/related dementia disease, and subacute care. AHCA has published a zero need for additional nursing home beds in Palm Beach County. Elysium does not dispute AHCA’s finding. Additionally, there are 630 CON-approved, but not yet opened, nursing home beds in Palm Beach County. As established by the testimony at the final hearing of Dan Sullivan, an expert in health care planning and health care finance, the zero fixed need for Palm Beach County is attributable to these already approved beds. Many of the CON-approved beds will serve the same geographic area as that proposed by Elysium. Further, all nursing homes in Palm Beach County provide custodial care, Alzheimer’s care, subacute care, and Medicaid services. As conceded at final hearing by Elysium’s expert in health planning, Sharon Gordon-Girvin, custodial care, Alzheimer’s care, subacute care, and Medicaid services are provided at all nursing homes in Palm Beach County and are not unique or “not normal” services. Jewish residents in Palm Beach County currently receive Alzheimer’s services and subacute services with no problem in regard to clinical outcomes or quality of care issues. Subacute bed need is subsumed within AHCA’s need methodology. The specific subacute disorders proposed to be dealt with by Elysium are commonly provided in any subacute unit and, clinically, subacute care is the same regardless of religion. Per Rule 59C-1.036(2)(h), Florida Administrative Code, proof of need in the absence of fixed need requires proof of an access problem. Documented need means persons must be denied access or demonstrate that actual need exceeds the number of available beds. The testimony of Dan Sullivan at hearing establishes that Elysium’s allegation of unique need is not proven in that there has not been identification of “a single patient who had been denied services or refused services in nursing home” due to a lack of glatt kosher services. The lack of documentation of an “access” problem for glatt kosher food is illustrated by the lack of demand for same. Diane Karolkowski was the admissions director at Menorah House, a Jewish facility, in 1996. An in-house survey conducted by her documented that of 115 patients, only 2 preferred kosher foods. Jewish residents are adequately served at existing nursing homes in Palm Beach County. As established by testimony of Dr. Ira Sheskin, Elysium’s expert in Jewish demography, the majority of Jewish residents in south Palm Beach County nursing homes are in nursing homes other than Jewish nursing homes. About 60 percent of patients at Intervenor Manor Care’s facility are Jewish, including orthodox and conservative Jews. Kosher foods are made available to residents requesting same, but such foods are rarely requested by even the orthodox Jewish residents. Manor Care’s Boynton, Florida facility has conducted studies of residents’ food preferences with the result that residents simply do not prefer the kosher foods. The ALF owned by Elysium of Boca Raton, Inc. has a kosher kitchen. With 144 beds, the ALF averages only 55 residents—a very low occupancy demonstrative of the little demand for kosher kitchen services. Elysium’s submittal that 20 percent of elderly Jews in south Palm Beach County keep kosher does not establish a demand or need for kosher kitchen services in a nursing home. Occupancy rates are expressly incorporated in the calculation of fixed need. The occupancy rates of the two Jewish nursing homes in the area accordingly do not justify deviation from the zero fixed need. Waiting lists at nursing homes do not demonstrate need. As indicators of bed need, such list are not meaningful. Nursing homes with empty beds have waiting lists. Waiting lists can reflect patient preference for a particular accommodation such as a private room or need for a Medicaid bed, a subacute bed, an Alzheimer’s bed, or simply a desire to be with a friend. Additionally, such lists become outdated when people change their minds or develop other placement options without removing themselves from other waiting lists. Waiting for a Medicaid bed, not kosher foods, is the primary reason given by those on waiting lists. Elysium And Quality Of Care Section 408.035(1)(c), Florida Statutes. Elysium is without any record of providing quality of care. Neither owner nor operator of any nursing home, this applicant has no experience or record of nursing home operations. A premium is placed on nursing home provider experience and competence since people are discharged earlier from hospitals than in the past and are consequently sicker than in previous years. Elysium’s ability to provide quality of care is not demonstrated. Schedule 6 in Elysium’s application presents projected staffing patterns. The projected staffing is not proposed by specific unit. Staffing will vary between the proposed facility’s 20-bed subacute unit, the 16-bed Alzheimer’s unit, and the custodial care units but this variance is not indicated in the application. Also, Elysium’s sole shareholder could not testify concerning the different staffing ratios for different units. There is no indication in Elysium’s application regarding whether a dedicated staff is contemplated for the subacute or Alzheimer’s units. Lack of a dedicated staff for these units is not reasonable. A minimum of 2.7 nursing hours per day for the subacute patient is reflected by on page 1b-5 of Elysium’s application, an unreasonable number since subacute units usually require at least 4.7 nursing hours per day to properly service the complexity and acuity of subacute disorders. Special Alzheimer’s units require 2.8 nursing hours per patient day. Elysium’s application fails to state what the ratio will be for such units in its facility. Assuming a standard of 4.7 nursing hours per day for subacute, 2.8 nursing hours per day for an Alzheimer’s unit and 1.9 nursing hours per day for custodial patients, measures established at final hearing by testimony of Marta Meers, Manor Care’s expert on Nursing, Nursing Administration and Clinical Services, the nursing full time equivalency (FTEs)required per Elysium’s utilization projections in year two for Registered Nurses (RNs), Licensed Practical Nurses (LPNs), and Certified Nursing Assistants (CNAs) is as follows: UNIT RN/LPN CNA TOTAL Alzheimer’s 4.2 10 14.2 Subacute 8.2 8.2 16.4 Long-Term 6.3 24 30.3 (Custodial) TOTAL FTEs 60.9 The 30.3 FTEs for custodial beds presumes that all 72 custodial, non-specialty beds are in one contiguous unit. Under Elysium’s proposal these units are to be located on separate floors of the proposed facility and would require more FTEs. Elysium’s projections in year two show requirements for 5.6 RNs, 8.5 LPNs, and 34.1 CNAs for a total of 48.2 positions. This is at least 12.7 FTEs low, as established by testimony of expert Meers. Elysium’s professed intent, as documented on Schedule 6, to contract for therapists (physical, speech, occupational, and audiological) instead of hiring these professionals as employees does not promote quality of care or quality assurance since contract staff provides less continuity. Many companies send different therapists to nursing homes at different times. Elysium’s application fails to state the volume of therapy that will be provided to subacute patients. Normal practice is to provide three hours of physical, occupational and speech therapy to patients requiring same. While stating that subacute programmatic policies and procedures will be developed, Elysium’s application is absent any such formulated policies—evidence of an inexperienced provider. The Elysium application also projects zero HMO or insurance days for its subacute program. In Palm Beach County, 30 to 40 percent of subacute patients are managed care with the likelihood that this percentage will increase in the future. Deficiencies of the proposed facility include mixing custodial and subacute patients; location of the physical therapy room on the second floor while subacute patients are located on the first floor; and a nurses’ station layout that complicates the possibility of a dedicated staff by locating the one station to service the subacute unit, the Alzheimer’s Unit, and custodial beds. Successful subacute programs require a dedicated, trained staff who normally exhibit a higher level of skill and professionalism than the custodial bed staff. Elysium’s application lacks established protocols of care and has not identified any employee who will serve in the capacity of therapist, unit director, or nurses for the subacute program. Elysium’s proposed 16-bed Alzheimer’s unit provides no nursing station within the unit, no separate dining room, no activity space, therapy space, family visitation area or quiet time room. These spaces are necessary for a quality, operational unit. Elysium’s proposal to mainstream Alzheimer’s residents for various services and activities is at variance with the fundamental reason for a special unit, particularly in view of the special needs of latter stage Alzheimer patients which make separate services appropriate. Mainstreaming these patients does not promote quality of care or quality assurance, and the application fails to indicate what mainstreaming for what stage of disease is contemplated. Elysium’s application promotes a less than ideal bracelet security system for the Alzheimer’s unit. Patients will be fitted with bracelets that will trigger and lock doors as the patients approach them. Safer measures would include the locked ward concept where doors are locked and alarms sound when the door is opened. Adequate And Available Alternatives Section 408.035(1)(d), Florida Statutes. Consideration of adequate alternatives to the proposed project is required by Section 408.035(1)(d), Florida Statutes. The many available and accessible nursing homes already existent in the area illustrate such alternatives to Elysium’s proposal. Most of the existing nursing homes provide the same services proposed by Elysium. Additionally, many of the CON-approved beds that are still to come on line will provide further alternatives. Most of the nursing homes in the southern part of Palm Beach County admit Jewish residents, observe Jewish holidays, and allow other cultural practices and customs for the Jewish population, inclusive of religious services. Kosher foods can and are provided without kosher kitchens in many of the area nursing homes, but, as noted earlier, demand for such foods is rare. Catering kosher food, if necessary, from the under-utilized ALF which would supply Elysium’s proposed facility is a cheaper, better alternative to meeting the occasional need for kosher food than building an unneeded nursing home. Improvements In Services Through Joint Resources Section 408.035(1)(e), Florida Statutes. Section 408.035(1)(e), Florida Statutes, addresses whether improvements in services may be derived from operation of joint, cooperative, or shared health care resources. With exception of limited discussion regarding joint use of the ALF’s kosher kitchen, the Elysium application does not meet this criterion. Additionally, financial projections in the application fail to indicate any economies, reduction in staff, reduction in non-salary expense, or other expense relief resulting from locating the nursing home next to the ALF. There is no discussion in the application of shared services with other health care providers. The ALF administrator, Claire Bojanoski, even professes no knowledge of the application or involvement in discussions about coordination between the existing ALF and the proposed facility. Applicant Resources For Project Accomplishment Section 408.035(1)(h), Florida Statutes. Section 408.035(1)(h), Florida Statutes, considers whether the applicant has available resources in personnel, management, and funds for project accomplishment and operation. Elysium’s application does not meet this criterion. As noted above, Elysium neither owns or operates nursing homes. The sole shareholder has no ownership or operational experience in the field. The applicant has no employees or specific individuals employed in any key operational or management positions. With regard to funding, the applicant proposes to borrow 5.8 million in long-term debt for project development. The only evidence in the application with regard to availability of such funding are two “letters of interest” from banks. The letters are casual, in no way binding, and cannot be viewed as firm commitments to provide debt funding. The applicant does have 250,000 dollars in capital for the nearly 8 million dollar project. Such a small percentage of the initial requirement for funding, plus the need for working capital when the facility opens, necessitates a finding that Elysium has not demonstrated in its application that it can firmly secure funds for project accomplishment and operation. Project Financial Feasibility Section 408.035(1)(i), Florida Statutes. Immediate financial feasibility is the ability to finance construction and initial operations. It is similar to the criterion of funds availability for capital and operating expenditures and, based on findings set forth above in that regard, it is found that the project lacks immediate financial feasibility. Long term feasibility addresses whether a project is financially viable after two years of operation. Elysium’s position that the large and growing Jewish population in the southern part of Palm Beach County will be adequate to assure long term feasibility is not sufficient to meet this criterion, particularly in view of the present usage of the ALF (less than 40 percent occupancy) and the lack of documented need for a facility that will target primarily a Jewish population. Utilization projections advanced by Elysium in Schedule 5 of its application are not reasonable. There is inadequate demand for glatt kosher in Palm Beach County to justify the high occupancy and rapid fill up of occupancy projected by Elysium. Physical needs of patients primarily direct nursing home placement as opposed to cultural or dietary preferences, and the zero fixed need also illustrates the lack of need on that basis for the Alzheimer’s services, subacute care, Medicaid services, and custodial services associated with the typical nursing home. Elysium projects, in Schedule 10 of the application, that it will capture 6,588 Medicare days. Equated to subacute days, such a figure amounts to 337 subacute admissions for which no specific referral sources are identified. Subacute services are increasingly funded by managed care, yet Elysium projects zero days from managed care for the entire facility. With regard to projected Medicare revenues, a significant portion of total revenues, Elysium did not calculate Medicare costs on the basis of actual cost of delivering subacute services, but chose instead to assume that Medicare reimbursement would equal the average Medicare reimbursement for all Palm Beach County nursing homes. Such an assumption for an alleged unique facility is not reasonable. Additionally, projected Medicare revenues do not indicate staffing patterns or amount of therapy to be provided subacute patients. With respect to projected expenses, Elysium projected these expenses merely as a percentage of projected revenues. No consideration was given to the purported unique aspects of the proposed facility. Salary expenses, the largest expense item for a nursing home, are very understated in view of the dramatic understated number of nursing home employees required to operate the specialized units and the total facility. As established at the final hearing by testimony of the expert on health care planning and health care finance, Dan Sullivan, Elysium’s projection on Schedule 11 of $61.58 patient care costs per day in year 2000, the second year of operation, is unrealistic. Palm Beach County nursing homes averaged $61.27 in 1994. If the 1994 figure is inflated 4 percent per year, that would increase Elysium’s patient care costs by $15 per day. Multiplication of $15 per day times 39,528 patient days (utilization projections in year two) generates an additional expense of almost $600,000. Elysium projected a profit of $300,000, which, as Sullivan opined, becomes a $300,000 loss with the additional $600,000 cost. Promotion Of Competition, Quality Assurance, Or Cost-Effectiveness Section 408.035(1)(l), Florida Statutes. There are no competitive benefits associated with Elysium’s application in view of the lack of Fixed Need and the existence of many nursing homes that presently provide the same services proposed by this applicant. Additionally, Jewish residents now receive adequate, available, and accessible cultural and religious services at existing facilities. For the same facts set forth earlier, finding that Elysium’s application fails to meet the “quality of care” criterion, the criterion of quality assurance is not met. With regard to cost effectiveness, there is no specific cost savings or cost effectiveness for health care delivery systems identified by Elysium’s application. Elysium has substantially understated its expenses and has expended no effort to share costs with the ALF or to provide any meaningful economic linkage with the ALF. Reasonableness Of Project Cost And Design Section 408.035(1)(m), Florida Statutes. The layout of Elysium’s Alzheimer’s unit and subacute unit, as previously noted, are not reasonable. Additionally, Elysium’s projected “start-up” costs of $25,000 shown on Schedule 1 manifests a misapprehension of what is involved in developing and operating a nursing home. Testimony of Marta Meers establishes that start-up involves hiring an administrator and other key staff six to eight months before opening; hiring and training other staff prior to opening; marketing and promotion. A projection of $25,000 for these costs is unrealistic and fails to meet this criterion. Elysium is inconsistent with regard to whether there will be a separate kosher kitchen for the proposed facility. Page 3-16 of the application states there will not be a separate kitchen, contrary to the project architect’s testimony that the proposed facility could accommodate preparation of kosher and non-kosher foods. The architect’s testimony is not credited on this point. Applicant’s Past And Proposed Provision Of Medicaid And Indigent Services Section 408.035(1)(n), Florida Statutes. Elysium has no history and therefore has no history of providing service to Medicaid or indigent persons. Elysium projects 55 percent Medicaid which is the Palm Beach County nursing home average. Elysium makes no attempt to quantify Medicaid need for nursing home residents demanding glatt kosher foods and puts further in question whether the applicant seeks to offer a unique service. Elysium does not satisfy this criterion. Continuum Of Care In A Multi-Level Health Care System Section 408.035(1)(o), Florida Statutes. This proposed facility is not linked to any other element in the health care system of Palm Beach County with the exception of the ALF which is not particularly viable. There are no letters of support from hospitals or other nursing homes. The applicant has failed to establish that the proposed facility is an integrated part of a continuum of services. Local And State Health Plan Satisfaction Section 408.035(1)(a), Florida Statutes. Local Health Plan The District 9 Local Health Plan includes preferences for consideration in the review of applications for nursing home beds. The first preference gives priority to applicants for new nursing homes who agree to provide a minimum of 30 percent Medicaid patient days. Elysium has proposed a minimum of 55 percent Medicaid patient days and, therefore, meets this preference. The second preference contains four subparts that establish priorities for applicants: documented history of providing good residential care; staffing ratios, particularly for registered nurses and aids, that exceed staffing requirements; provision for the treatment of residents with mental health problems; and the inclusion of intensive rehabilitation services for those short stay patients requiring rehabilitation below the level of an acute care hospital. Elysium has not operated a skilled nursing facility to date and therefore does not have a rating history to report. With regard to staffing ratios, provision of treatment of residents with mental health problems, the inclusion of intensive rehabilitation services for those short stay patients requiring rehabilitation such as a subacute unit, these preferences are not met by Elysium in view of the facts found above documenting the applicant’s failure to demonstrate an ability to provide high quality of care and quality assurance for its specialized services. The third priority under the local/district health plan establishes a priority for applicants who propose to serve a distinct population that is not currently being served within the Subdistrict. As noted above, the distinct population in this instance is already well served by other nursing homes in Palm Beach County which meet the ethnic, religious, cultural and dietary needs of the elderly Jewish population who keep kosher. Florida State Health Plan The Florida State Health Plan contains twelve allocation factors for reviewing CON applications for community nursing home beds. Factor 1 provides a preference for applicants proposing to locate in subdistricts with occupancy rates exceeding 90 percent. Elysium conforms to this preference since occupancy rates in Palm Beach County have exceeded 90 percent throughout 1995. Factor 2 provides a preference to those proposing to serve Medicaid residents in proportion to the subdistrict average. At risk to its claim that it proposes a truly unique facility, Elysium conforms to this preference. Factor 3 provides a preference to applicants proposing specialized services to special care residents, including AIDS, Alzheimer’s and mentally ill residents. As previously noted above, the applicant’s failure to demonstrate an ability to provide high quality of care and quality assurance for its specialized services prevents conformance with this preference. Factor 4 provides a preference to applicants proposing a continuum of services, including but not limited to, respite care and adult day care. As previously noted, Elysium’s failure to demonstrate an ability to provide quality of care or quality assurance precludes consideration of this preference. Factor 5 of the State Health Plan is for applicants proposing reasonable facility design. As found above, Elysium’s proposal is unreasonable in design, particularly with regard to the specialized units for Alzheimer’s and subacute patients. Factor 6 provides a preference to applicants providing innovative and therapeutic programs that enhance residents’ physical and mental functional level and emphasize restorative care. Elysium’s proposed subacute program does not offer services not provided at other nursing homes in the area. Additionally, Elysium does not demonstrate an ability to provide quality of care in its programs. Factor 7 provides a preference to applicants proposing charges that do not exceed the highest Medicaid per diem rate in the Subdistrict. Elysium conforms with this preference. Factor 8 provides a preference to applicants with a history of providing superior residential care in existing facilities in Florida and other states. Elysium has not operated a skilled nursing facility to date and therefore does not have a rating history to report. Factor 9 provides a preference to applicants proposing staffing levels that exceed the minimum staffing standards contained in licensure administrative rules. The staffing ratios proposed by Elysium’s application do not meet minimum staffing ratios under the licensure rules due to understatement by the applicant of the number of nursing employees needed to operate its proposed facility. Factor 10 provides preference to applicants who will use professionals from a variety of disciplines to meet the residents’ needs for social services, specialized therapies, nutrition, recreation and spiritual guidance. Elysium minimally complies, with proposed contractual services, with requirements for this preference. Factor 11 provides a preference to applicants who document how they will ensure residents’ rights and privacy, if they use residents’ councils, and if they plan to implement a well-designed quality assurance and discharge planning program. Absent quality assurance concerns, Elysium qualifies for priority under this factor. Factor 12 provides preference to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Elysium does not meet this preference in that proposed patient care costs are lower than average. Adverse Impact To Other Facilities Manor Care is a 180 bed nursing home. Superior-rated, it has a 32-bed Alzheimer’s unit and provides subacute services. Service is provided to the Medicaid population and 60 percent of its residents are Jewish. It is located 1.5 miles from Elysium’s proposed site. Presuming that Elysium reached projected utilization, 20 percent of that business would come at the expense of Manor Care in an amount equal to the loss of 8,000 patient days. Currently generating a contribution margin of $60 per resident day, the loss to Manor Care would approximate $480,000 should Elysium’s application be approved. This is a substantial and adverse financial loss.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That a final order be entered denying the applications of Elysium and Good Samaritan which are at issue in this proceeding. DONE AND ENTERED this 2nd day of June, 1997, in Tallahassee, Leon County, Florida. DON W. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 1997. COPIES FURNISHED: Thomas A. Sheehan, III, Esquire Moyle, Flanigan, Katz, et al. 625 North Flagler Drive West Palm Beach, FL 33402 David K. Friedman, Esquire Weiss and Handler, P.A. 2255 Glades Road, Suite 218A Boca Raton, FL 33431 James C. Hauser, Esquire Skelding, Labasky, Corry et al. 318 North Monroe Street Tallahassee, FL 32301 John Gilroy, Esquire Agency for Health Care Administration 2727 Mahan Drive, Suite 3426 Tallahassee, FL 32308 R. Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Suite 3431 Tallahassee, FL 32308-5403 Jerome W. Hoffman, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308-5403 Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, FL 32308-5403
The Issue Which of two competing applications for nursing home beds better meets the statutory and rule criteria to satisfy the numeric need for 79 additional beds in Agency for Health Care Administration District 7, Subdistrict 1, Brevard County.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the single agency responsible for the administration of certificate of need ("CON") laws in Florida. AHCA published a numeric need for an additional 79 beds in District 7, Subdistrict 1, for Brevard County for the July 1996 planning horizon. There was no challenge to the numeric need determination. After reviewing the applications of Holmes/VHA Long Term Care Joint Venture ("Holmes/VHA") and National Health Corporation d/b/a NHC of Merritt Island ("NHC"), among others, AHCA published its intent to approve the application of NHC and to deny that of Holmes/VHA. The State Agency Action Report ("SAAR") issued on March 13, 1994, for the July 1996 Planning Horizon, summarizes AHCA's review of the applications and the reasons for its decision. Holmes/VHA timely challenged AHCA's preliminary approval of CON 7527 to NHC and denial of CON 7539 to Holmes/VHA. In a pre-hearing stipulation, the parties agreed that the specific statutory criteria at issue, related to the contents of the letter of intent and application are subsections 408.037(2)(a), (2)(c), (4) and 408.039(2)(c), Florida Statutes. The parties also agreed that the CON review criteria at issue are subsections 408.035(1)(a), (b), (d), (e), (h), (i), (l), (m), (n) and (0), and 408.035(2)(e), Florida Statutes. The parties stipulated to the need for 79 additional community nursing home beds in the subdistrict. At the formal hearing the parties also agreed that quality of care is not at issue and that staffing schedules and proposals to fund or finance both projects are reasonable, thereby removing from consideration subsections 408.035(1)(c) and portions of (1)(h). HOLMES/VHA Holmes/VHA, the applicant for CON 7539, is a Florida general partnership formed between Holmes Regional Enterprises, Inc. ("Holmes Enterprises"), a Florida not-for-profit corporation, in Brevard County, Florida, and Vantage Health Systems, Inc., d/b/a VHA Long Term Care ("VHA"). The partnership, Holmes/VHA, owns and operates an existing 120-bed nursing home, Holmes Regional Nursing Center ("Holmes Nursing Center") in Melbourne. VHA is a division of Service Master Diversified Health Services of Memphis, Tennessee, which manages 106 facilities in 30 states. Holmes Enterprises operates Holmes Regional Medical Center ("Holmes Regional"), a 528-bed acute care hospital, with open heart surgery and neonatal intensive care services and approval for 30 skilled nursing beds. Sixty of Holmes Regional's licensed beds are located at Palm Bay Community Hospital in Palm Bay, approximately 8 to 15 miles south of Holmes Regional. Although it is a separate municipality, Palm Bay was described as a suburb of and contiguous to Melbourne. The site for the Palm Bay Center, which is across the street from Palm Bay Community Hospital, is in another community known as Mallibar. VHA has entered into similar partnerships with acute care hospitals in Jacksonville, Florida, and Greensboro, North Carolina, to operate nursing homes in those areas. The Service Master organization provides management and support services, including data processing, legal, personnel, dietary, and architectural and design services for nursing homes. Holmes/VHA, the joint venture general partnership, has a management committee of four people, two from the hospital and two from the VHA company. The management committee, functioning like a board of directors, adopted a resolution authorizing Holmes/VHA to file the Con application. When formed, the joint venture obtained an older 60-bed facility, and then constructed a replacement facility. During the construction, it obtained a 60-bed CON from another company and combined beds to build its existing 120-bed nursing home, Holmes Nursing Center. Holmes Nursing Center is rated superior and offers inpatient and outpatient rehabilitative and restorative services, including a head and spinal cord injury program. The rehabilitative services are directed by Holmes Regional, which is located a block and a half from the nursing home. The original CON for Holmes Nursing Center required that 35 percent of total patient days be provided to Medicaid. The requirement was increased to 45 percent with the 60-bed addition, which Holmes Nursing Center has exceeded. The 120 beds are divided into 20 percent Medicare certified, 50 percent Medicaid certified and 30 percent non-certified or private pay. Holmes Nursing Center also operates a 24-bed subacute unit for persons qualifying under Medicare criteria for skilled nursing care. Patients in the unit receive intensive assessments on each nursing shift and services which include pain, respiratory, and wound management. Holmes Regional Hospice, Inc. ("the hospice") is an affiliate of Holmes Enterprises, for which Holmes Regional holds the CON to take care of hospitalized hospice patients The current hospice census of over 200 patients includes 70 percent cancer, 9 percent AIDS, and 21 percent other terminal illnesses, such as heart disease and Alzheimers. Holmes/VHA applied for a CON to construct the 79-bed Palm Bay Nursing and Rehabilitation Center ("Palm Bay Center") conditioned on the provision of 61 percent of total patient days to Medicaid and the establishment of a 12-bed sub- acute unit, one room for hospice patients, inpatient and outpatient rehabilitative therapy, and respite care. The total gross square footage is 42,691 square feet. The Holmes Enterprises affiliates propose to provide support services for the Palm Bay Center, as they do for Holmes Nursing Center. The estimated total project cost for the Palm Bay Center is $4,732,790, of which the construction cost is $82,720,000 or $63.71 a square foot. An equity contribution of land valued at $420,000, will be provided by the hospital. Service Master will provide the funds or obtain financing for the project. The assumptions in the pro forma, including the expectation that interest may be due for a commercial loan, are reasonable. AHCA's expert's conclusion that the project is financially feasible is accepted. The financing by Service Master can be structured to avoid being treated as a related party transaction, which would adversely affect Medicaid and Medicare reimbursements. Holmes/VHA listed as capital projects three other pending CON and an additional $25,000 in annual capitalized routine expenses for furniture, fixtures and equipment attributable to Holmes Regional Nursing Center. The total of the capital projects listed on Schedule 2 of the application is $13,256,701. NHC National HealthCorp, L.P. ("NHC"), the applicant for CON 7527, began operations in 1986, with 14 nursing homes. Currently, NHC owns or manages 96 nursing homes primarily in the southeast United States. It manages 36 nursing homes in Florida, 6 of which are also owned by NHC. NHC proposes to add 60 beds to National Healthcare Center of Merritt Island ("NHC-Merritt Island"), a superior rated, 120-bed community nursing home on a 7 acre site in Merritt Island, Brevard County. NHC-Merritt Island has a 22-bed Alzheimers' unit. NHC's regional office provides support services, including speech, occupational, and physical therapies, nursing, dietary, and administrative services to NHC-Merritt Island. With the addition of 60 beds, NHC intends to provide respite care, a dedicated 20-bed subacute unit, and an additional 16-bed Alzheimers' unit. Without a subacute unit, NHC already has an average census of 9 subacute patients. NHC will triple the size of the therapy space and more than double the size of the building. The projected total capital expenditure is $3,891,850, with construction costs of $2,955,000, or $85.00 a square foot. To accommodate the addition, NHC has entered into a contract to purchase an additional 1.3 acres, adjacent to the current 7 acres, for a cost of $175,000. For the past few years, NHC has experienced 94 to 100 percent occupancy. Fifty-four people are on NHC's waiting list and an additional 16 are on the waiting list for the Alzheimers' unit. The projected annual fill-up rates for NHC's additional beds are supported by the demand for its service and its historical experience, even though the monthly fill-up rates in the application are not adjusted to reflect the specific number of days in each month. Medicaid resident days are 55 percent to 57 percent of the total at present, below the 60.31 percent average in the subdistrict and the current 60 percent CON condition. If the expansion CON is approved, NHC will commit to providing 60.31 percent Medicaid patient days and will increase the number of Medicaid certified beds from 77 to 108. NHC was profitable in 1992 and 1993, by approximately $100,000 and $250,000, respectively, but currently is not profitable, with an approximate deficit of $8,000. The deficit is attributable to (1) a decline in the Medicaid reimbursement rate, which was initially higher due to start up costs, (2) the expiration of a new provider exemption from Medicare cost limits, and (3) the transfer of assets by NHC, in exchange for stock, to a newly formed subsidiary, from which NHC-Merritt Island is now leased. Lease payments are $517,000 a year whether the facility has 120 or 180 beds, and profits are returned to stockholders, including NHC. Using Medicaid rates, calculated by the state, as inflated forward, and Medicare rates in excess of routine cost limits, based on the current experience of NHC-Merritt Island, NHC reasonably projected its costs and profit margin. NHC-Merritt Island has a positive cash flow and its expenses and revenues are at the goal set by NHC. With a total of 180 beds, the projections are reasonable that NHC-Merritt Island will be profitable. As AHCA's expert opined, NHC's proposal is financially feasible. Subsection 408.035(1)(a) - need in relation to district and state health plans The 1991 District 7 health plan has three preferences related to nursing homes, one favoring a section of Orange County, is inapplicable to the Brevard County applications. A second, for applicants proposing pediatric services, is inapplicable because both proposals in this batch are to provide adult services. The third preference favors applicants proposing to establish units providing psychiatric or subacute services, with emphasis on treating medically complex patients and AIDS/HIV positive patients. Holmes/VHA's health planner considers the subacute care and AIDS/HIV services proposed by Holmes/VHA superior to those proposed by NHC. NHC, however, proposes to provide specialized care in designated units for both subacute and Alzheimers's patients. Although Holmes/VHA argues that Alzheimers' care is required in every nursing home and is, therefore, not a specialized program, the physical design of a separate unit for such patients was shown to enhance their comfort. No AIDS/HIV positive patient has been treated at either Holmes Nusing Center or at NHC-Merritt Island. NHC-Merritt Island has accepted AIDS/HIV positive patients who did not come to the facility. The state health plan has twelve allocation factors for use in comparing nursing home applications. Both applicants comply with the factors favoring locations in a subdistrict in which occupancy levels exceed 90 percent, proposals to meet or exceed that average subdistrict Medicaid occupancy of 60.31 percent, proposals with respite care and innovative therapies, multi- disciplinary staffing, for staffing in excess of minimum state requirements, and which document means to protect residents' rights and privacy. Both Holmes/VHA and NHC also meet the preference for proposing charges that do not exceed the highest Medicaid per diem in the subdistrict. NHC asserted, but failed to demonstrate that its therapy services with in-house staff are superior to those provided to Holmes/VHA by contract staff from Holmes Regional. The state health plan factor number 3, for specialized services, is largely duplicative of district health plan preferences. Neither applicant meets the part of one preference for providing adult day care, or the preference for proposing lower than average administrative costs and higher than average resident care costs. The fifth state allocation factor, for maximizing resident comfort and the criterion of subsection 408.035(1)(m), Florida Statutes, related to the cost and methods of construction, are at issue. NHC questions the adequacy of three acres for the building proposed by Holmes/VHA and the design of the building. Holmes Regional Nursing Center has 120 beds and approximately the same building area as that proposed for Palm Bay Center. The architects of the building have constructed a 163-bed facility on four acres in Jacksonville, and a 240-bed facility in Memphis, Tennessee on approximately six acres. Homes/VHA expects to construct the building in half the time required for completion of NHC's proposed addition. AHCA's architect noted, however, that Holmes/VHA has no Alzheimers unit and that its subacute area is not separated from the areas used by other patients and their families. Holmes/VHA has showers only in the 13 private rooms. By contrast, NHC has an Alzheimers unit with its own lounge and courtyard and a subacute unit at the end of a wing with a separate waiting room. NHC's rooms are larger, with larger windows. NHC's costs are higher than Holmes/VHA's, but not above the high average cost guidelines for construction used by AHCA. NHC has one nursing station for 60 beds, which meets the state requirement while Holmes/VHA is better equipped with two nurses stations for 79 beds. In general, Holmes/VHA established that its building could be built on 3 acres, and that its interior spaces exceed the requirements to be licensed. NHC established that its building and grounds will be larger, higher quality construction with more non-combustible materials, and better meet the preference for maximizing resident comfort. The preference for superior resident care is met by both Holmes/VHA and NHC-Merritt Island. An NHC facility in Stuart was rated conditional for 80 days of the 36 months, prior to the filing of the application. NHC had just purchased the Stuart facility at the time of the conditional rating, and had, in total, many more months of superior operations. In addition, the parties stipulated to quality of care issues at the hearing. Subsection 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, extent of utilization of like and existing services; alternatives to the applicants' proposals Brevard County is 80 miles long from north to south, 22 miles wide at its widest point, with 62 percent of its population in the southern area of the county. Holmes/VHA contends that its application should be approved based on the greater need for nursing home beds in southern Brevard County. Using ratios of beds in existing or approved nursing homes as compared to the population ages 65 and older, and 75 and older, a need is shown for more beds in the southern area, including Palm Bay. In the central area, there are 31.52 beds per 1000 people over 65, as compared to 26.53 in the southern area of Brevard County. For the population over 75, the ratios are 82.53 in the central and 68.47 in the southern area. The over 75 population is also projected to increase by a greater percentage in the southern as contrasted to the central areas of the county. AHCA claims to reject the use of any "sub-subdistrict" analysis of need, other than the test for geographically underserved areas, as defined by Rule 59C-1.036, Florida Administrative Code. That test which applies to proposed sites more than 20 miles from a nursing home, is not met by Holmes/VHA or NHC. However, AHCA has, in at least one other case, considered geographic accessibility within the planning area in determining which applicant should be approved, without the applicants having to demonstrate that the proposed sites are geographically underserved areas. NHC takes issue with Holmes/VHA's data on bed availability in the southern and central portions of the county. NHC maintains that its central location better serves the entire county. NHC's expert also criticized the methodology used by Holmes/VHA for demonstrating need in the southern area. The comparison of existing beds to population, shows a lack of county-wide parity, but not necessarily need. Other factors related to the need for nursing homes were not presented, such as poverty, migration, mortality and occupancy rates. In addition, NHC's expert questioned Holmes/VHA's experts calculations of bed- to-population ratios. The ratios arguably were skewed by using beds for Wuesthoff Hospital Progressive Care in the central area data, but including the population of the zip code in which Wuesthoff is located in the southern area. Holmes/VHA noted that the majority of the population in the zip code is in the southern area. Subsection 408.035(1)(n) - past and proposed Medicaid/indigent care Holmes/VHA's expert criticized NHC because two of its facilities, Merritt Island and Stuart, have been below the subdistrict average for Medicaid occupancy. For 3 six month periods during the last 4 years, they also were below their CON Medicaid commitments. One other NHC facility, in Hudson, has been below the subdistrict average, but significantly above its CON condition. NHC claims that it treats its Medicaid condition as a minimum, while Holmes/VHA uses its conditions as an artificial ceiling or maximum. Subsection 408.035(1)(e),(1)(o) - cooperative or shared health care resources; continuum of care Holmes/VHA has established linkages to its various related companies to provide cooperative care and shared resources. Palm Bay Nursing Center would enhance the multi-level care provided by the Holmes Enterprises group and provide another integral step in the continuum, particularly in rehabilitative therapies. NHC, however, as an existing provider, is part of a well-established network of health care providers in the community. NHC has also purchased land to build an adult congregate living facility near or adjacent to NHC-Merritt Island. Subsections 408.039(2)(a), (2)(c) and 408.037(4), and Rule 59C-1.008, Florida Administrative Code - capital projects list; board resolutions; and impacts on costs AHCA interprets the requirements for the submission of a board resolution to allow an original resolution accompanying the letter of intent to be treated as a part of the complete application. A board resolution with an application, which the statute requires "if applicable," applies to expedited applications for which a letter of intent would not have been received, according to AHCA. NHC submitted an original board resolution with its letter of intent, and a copy of that resolution with its application for CON 7527. The authority of Holmes/VHA's management committee to authorize the construction of a new nursing home, and the authority to operate a nursing home outside the city of Melbourne was questioned. The testimony that the joint venture agreement authorizes the management committee to adopt a resolution authorizing the filing of CON 7539 was not refuted. In addition, the testimony that operations are restricted to the "Melbourne area" as opposed to some more specifically defined geographic area was not refuted. Repeatedly, witnesses described Palm Bay, although a separate municipal corporation, as a suburb of Melbourne. Holmes/VHA claims that NHC failed to disclose certain capital equipment leases from its schedule 2 list of capital projects and failed to evaluate the impact on costs, as required by subsection 408.037, Florida Statutes. In NHC's annual reports, the costs of capital equipment leases were $204,000 in 1991, $43,000 in 1992, and $88,000 in 1993. In fact, the NHC witness who prepared schedule 2 included a total of $21,653,468 for the category "Renovations (Including Furnishings and Equipment) 1994", taken from the capital expenditure budget of each NHC facility. The listing is consistent with the footnote indicating the budget items "are subject to final approval and cash reserves availability." In addition, $100,000 is also listed under "Other Capitalization" for equipment, for which a footnote explains "[a]mount included in an abundance of caution to cover any items unknown at the time of filing." NHC, according to Holmes/VHA, also failed to provide a detailed evaluation of the impact of the proposed project on the cost of other services it provides, as required by subsection 408.037(2)(c), Florida Statutes. NHC merely states that the impact is "nominal" and "negligible." NHC satisfied the impact analysis requirement in the notes to schedule 2 and in schedules 11, 13 and 14 of the application. The incremental pro forma analysis of the effect on costs with or without the proposed project, and projected financial ratios and costs, give detail support for the statements in the application. Assuming, arguendo, that Holmes/VHA omitted $50,000 in capital costs from schedule 2, the omission is not material or fatal to consideration of the application on the merits. Holmes/VHA's financial expert testified that $50,000 is less than on-half of one percent of the total project expenditures listed on schedule 2 and is, therefore, immaterial. As AHCA concedes, Holmes/VHA and NHC have the resources to establish their projects and to provide the services described in their applications. On balance, the demand for additional beds, the enhancement of a superior, existing physical plant and the expansion of specialized services at NHC outweigh the community linkages demonstrated by Holmes/VHA and the desirability of county- wide parity in the distribution of nursing homes beds, at this time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration issue a Final Order approving CON No. 7527 for the construction of an additional 60 community nursing home beds by National Healthcorp, L.P., conditioned on the provision of 60.31 percent of total patient days to Medicaid patients. DONE AND ENTERED this 17th day of April, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2393 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner NHC's Proposed Findings of Fact. Accepted in Findings of Fact 13. Accepted in Findings of Fact 3. Accepted in or subordinate to Findings of Fact 14-18. Accepted in or subordinate to Findings of Fact 14-18, except last phrase. Accepted in or subordinate to Findings of Fact 6 and 10. 6-17. Accepted in or subordinate to Findings of Fact 30 and conclusions of law. 18-21. Accepted in Findings of Fact 32. 22. Accepted in Findings of Fact 3. 23-30. Accepted in or subordinate to Findings of Fact 5 and 31. Rejected in Findings of Fact 6 and 31. Accepted in Findings of Fact 33. Rejected in Findings of Fact 33. Accepted in preliminary statement and Finding of Fact 1. 35-36. Accepted in part and rejected in part in Findings of Fact 21-25. 37-38. Accepted in Findings of Fact 21. 39. Rejected conclusion in Findings of Fact 20, 23 and 34. 40. Accepted in Findings of Fact 21 and 23. 41. Accepted in Findings of Fact 24. 42. Accepted in Findings of Fact 21. 43. Accepted in Findings of Fact 20. 44-45. Accepted in Findings of Fact 21. 46-48. Accepted in Findings of Fact 25. 49. Rejected in Findings of Fact 25. 50. Accepted in Findings of Fact 21. 51. Rejected in Findings of Fact 21. 52. Accepted in Findings of Fact 21. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 19. 56-57. Accepted in Findings of Fact 20. Accepted in Findings of Fact 34. Accepted in Findings of Fact 27 and 28. Accepted in Findings of Fact 26 and 27. Rejected in Findings of Fact 26 and 27. Accepted in or subordinate to Findings of Fact 26 and 27. Accepted in Findings of Fact 19. Accepted in Findings of Fact 19, 26 and 27. Rejected in Findings of Fact 26-27 and conclusions of law. Rejected in Findings of Fact 26-27 and conclusions of law. Accepted in Findings of Fact 2. 68-77. Accepted in part and rejected in part in Findings of Fact 27. Accepted in Findings of Fact 20. Rejected in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in or subordinate to Findings of Fact 9, 10 and 20. Accepted in or subordinate to Findings of Fact 20. 84-88. Accepted in or subordinate to Findings of Fact 10, and 20. 89-95. Accepted in or subordinate to Findings of Fact 15, and 20. 96-97. Accepted in Findings of Fact 10, 15, and 21. 98-100. Accepted in Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 15, 16 and 20. Accepted in or subordinate to Findings of Fact 16. Accepted in or subordinate to Findings of Fact 8 and 15. 104-108. Accepted in or subordinate to Findings of Fact 13 and 14. 109-110. Accepted in or subordinate to Findings of Fact 34. Subordinate to Finding of Fact 4. Accepted in or subordinate to Findings of Fact 34. 113-117. Accepted in Findings of Fact 21. Accepted in Findings of Fact 34. Accepted in Findings of Fact 11, 18 and 34. 120-123. Rejected conclusion in Findings of Fact 11. 124-130. Rejected in or subordinate to Findings of Fact 18. 131. Accepted in Findings of Fact 32. 132. Accepted in or subordinate to Findings of Fact 21. 133. Accepted in or subordinate to Findings of Fact 21. 134-136. Accepted in or subordinate to Findings of Fact 24. 137. Rejected first sentence in Findings of Fact 24. 138. Accepted in or subordinate to Findings of Fact 24. 139. Rejected as subordinate to Finding of Fact 24. 140. Accepted in or subordinate to Findings of Fact 15 and 24. 141-150. Accepted in or subordinate to Findings of Fact 24. 151. Rejected as not entirely supported by the record. 152-162. Accepted in or subordinate to Findings of Fact 24. 163-172. Accepted in or subordinate to Findings of Fact 21 and 28. 173-175. Accepted in or subordinate to Findings of Fact 29. 176. Rejected conclusion that "NHC better . . ." in or subordinate to Findings of Fact 29. 177. Accepted. Petitioner Holmes/VHA's Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 3.. 4. Accepted in or subordinate to Findings of Fact 3 and 4. 5. Accepted in Findings of Fact 26. 6-8. Accepted in or subordinate to Findings of Fact 10 and 31. 9. Accepted in Findings of Fact 10. 10. Accepted in Findings of Fact 2. 11. Accepted in Findings of Fact 30 and 31. 12. Rejected in Findings of Fact 30 and 32. 13. Conclusion rejected in Findings of Fact 30 and conclusions of law 37-40. 14. Accepted in Findings of Fact 2. 15. Accepted in Findings of Fact 3 and 31. 16. Accepted in Findings of Fact 26. 17-21. Accepted in or subordinate to Findings of Fact 26 and 27. 22. Accepted, except last sentence, in Findings of Fact 27. 23-24. Accepted in or subordinate to Findings of Fact 26 and 27. 25. Conclusions cannot be reached in Findings of Fact 26 and 27. 26-29. Accepted in or subordinate to Findings of Fact 11. 30-36. Accepted in Findings of Fact 11, 12, 33 and 34. Rejected in Findings of Fact 18 and 34. Rejected in or subordinate to Finding of Fact 32. Accepted in or subordinate to Findings of Fact 16. Accepted in Findings of Fact 40. Rejected in Findings of Fact 16. Rejected conclusion in Findings of Fact 18. 43-44. Rejected in Findings of Fact 18. 45-48. Rejected conclusion in Findings of Fact 18. 49-51. Accepted in or subordinate to Findings of Fact 3-10 and 29. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 7 and 8. Accepted in Findings of Fact 20. Accepted in or subordinate to Findings of Fact 3. Accepted in or subordinate to Findings of Fact 3 and 24. Accepted in Findings of Fact 29. 58-59. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in Findings of Fact 29. Accepted in Findings of Fact 19. Accepted in Findings of Fact 20. 63-65. Accepted in or subordinate to Findings of Fact 21. Accepted, except conclusion, in Findings of Fact 21 and 28. Rejected conclusions in Findings of Fact 20. Accepted in Findings of Fact 21 and 22. Accepted in Findings of Fact 24. 70-71. Accepted in Findings of Fact 21. 72. Accepted as corrected in Findings of Fact 25. 73-74. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 10 and 21. 77-78. Accepted in or subordinate to Findings of Fact 28. Rejected conclusion in Findings of Fact 28. Accepted in Findings of Fact 28. 81-89. Accepted in or subordinate to Findings of Fact 10, 21 and 29. 90-96. Accepted in or subordinate to Findings of Fact 9 and 10. 97. Accepted in Findings of Fact 20. 98. Accepted in Findings of Fact 21. 99. Accepted in Findings of Fact 20. 100. Accepted in Findings of Fact 8. 101. Accepted in or subordinate to Findings of Fact 20. 102. Accepted in Findings of Fact 8. 103-105. Accepted in or subordinate to Findings of Fact 20. 106. Accepted in or subordinate to Findings of Fact 10 and 21. 107-108. Accepted in or subordinate to Findings of Fact 21. 109. Accepted in or subordinate to Findings of Fact 4. 110-112. Accepted in or subordinate to Findings of Fact 21 and 25. 113-115. Accepted in or subordinate to Findings of Fact 21. 116-118. Accepted in or subordinate to Findings of Fact 20. 119-136. Accepted in or subordinate to Findings of Fact 24. 137. Accepted in Findings of Fact 10. 138-143. Accepted in or subordinate to Findings of Fact 11 and 24. COPIES FURNISHED: P. Timothy Howard, Esquire John F. Gilroy, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Darrell White, Esquire Charles Stampelos, Esquire MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 600 First Florida Bank Tower 215 South Monroe Street Tallahassee, Florida 32301 Robert M. Simmons, Esquire 5050 Poplar Avenue 18th Floor Memphis, Tennessee 38157 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Ruden, Barnett, McClosky, et al. Monroe-Park Tower, Suite 815 215 South Monroe Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome W. Hoffman General Counsel Agency For Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303
The Issue Whether petitioner's application for a certificate of need to construct a 120-bed nursing home in West Palm Beach, Florida, should be granted, or denied in accordance with DHRS' preliminary agency action.
Findings Of Fact The sole reason given for denying Health Quest's application for a CON is the alleged failure of the application to satisfy the nursing home bed need methodology contained in DHRS Rule 10-5.11(21), Florida Administrative Code. DHRS contends that application of this bed need methodology supports a conclusion that the proposed nursing home is not needed within the three-year planning horizon--1983 through 1986. I. Application of Rule 10-5.11(21): The Nursing Home Bed Need Methodology Under the nursing home bed need methodology expressed by Rule 10- 5.11(21'), DHRS determines if there is a projected need for new or additional community nursing home beds three years into the future by using the following formula: De N = -------- x R x P - Eb Se where: N is area-specific allocation of community nursing home beds for the calendar year for which a projection is being made, De is the percentage of elderly living in poverty in the relevant departmental service district according to the latest available U.S. census. Se is the percentage of elderly living in poverty in the State according to the latest available U.S. census. R is the statewide bed need ratio (27 community nursing home beds per 1,000 population age 65 years and older), P is the population age 65 and older projected three years into the future residing in the relevant departmental district based on latest mid-range projections published by the Bureau of Economics and Business Research at the University of Florida, and Eb is the number of existing and approved community nursing home beds within the relevant departmental service district. The projected bed need derived from this formula is then measured against a "current utilization" threshold. Rule 10-5.11(21)(f). Thus, although bed need may be projected under the formula, an application will not normally be approved unless current nursing home occupancy rates meet minimum standards prescribed in the rule. Finally, if bed need is projected and the current utilization threshold is satisfied, additional beds may be added only to the point at which further bed need additions will cause "prospective utilization rates" for the subdistrict to drop below a base rate prescribed in the rule. Rule 10-5.11(21)(g), (h), Fla. Admin. Code. Under this bed need forum1a, projected need for nursing home beds in 1986 is calculated as follows: N = De ------ Se N = 9.28 ----- = .73 12.70 .73 x 27 ---- = 19.7 beds/1000 65 + 1000 District IX Subdistrict (Palm Beach Co.) 19.7 x 264,326 = 5,207 19.7 x 198,747 = 3,915 Thus the formula shows a projected need for 5,207 nursing beds in 1986 in District IX; and a projected need for 3,915 beds in 1986 in the subdistrict of Palm Beach County. (Testimony of Straughn, R-4, R-5, R-6) The inventory of licensed and approved beds for District IX is 5,487 beds, and for Palm Beach County, is 4,086. Subtracting the projected inventory from the projected need indicates a "no need" of 280 beds. A similar calculation for Palm Beach County indicates a "no need" of 171 beds. (Testimony of Straughn, R-4, R-5, R-6) Under Rule 10-5.11(21)(e) , this is identified as a "c4" need relationship--where neither district nor subdistrict show a need for additional bed capacity. The prescribed current utilization threshold and the prospective bed rate of utilization for "c4" need relationship is 95 percent and 85 percent, respectively. See, 10-5.11(21)(f), (h). These utilization thresholds are not satisfied in the instant case. The current utilization of beds in Palm Beach County is 92.7, which falls short of the required 95 percent threshold. Consequently under the rule, no beds may be added until the 95 percent threshold is met. Even if this current threshold of 95 percent were met, there would still be 1,192 excess beds in Palm Beach County through 1986. 2/ Hence, use of the bed need methodology contained in Rule 10-5.11(21) indicates that the proposed nursing home beds are not needed through 1986. In the absence of unique and peculiar circumstances, and unless other rule or statutory criteria justify issuance, the application must be denied. II. Failure to Show Unique or Peculiar Circumstances, or Other Overriding Criteria Health Quest, having failed to satisfy the numerical bed need standards imposed by DHRS rule, has also failed to show unique and peculiar circumstances which would otherwise justify granting its application. The bed need rule takes into account factors raised by Health Quest, such as the relative wealth and poverty of an affected population. While it is expected that new Medicare regulations may increase the need for nursing home services, increases attributable to Medicare changes remain speculative and uncertain. In any case, changes in need for nursing home services due to Medicare changes will not be unique to District IX or Palm Beach County. Health Quest has also failed to show that it is entitled to a CON based on any other rule or statutory criteria. Its reliance on the provisions of the State Health Plan is misplaced since that plan is largely obsolete.
Recommendation Based on the foregoing, it is RECOMMENDED: That Health Quest's application for a certificate of need to construct a nursing home in West Palm Beach, Florida, be denied. DONE and ENTERED this 7th day of June, 1984, in Tallahassee, Florida. R. L. CALEEN. JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1984. COPIES FURNISHED: Charles M. Loeser, Esquire 315 W. Jefferson Blvd. South Bend, Indiana 46601 Steven W. Huss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
