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Florida Laws (8) 120.57, 408.032, 408.034, 408.035, 408.037, 408.039, 6.05, 90.108 Florida Administrative Code (3) 59C-1.008, 59C-1.036, 59C-1.037

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HOLMES/VHA LONG TERM CARE JOINT VENTURE, D/B/A HOLMES REGIONAL NURSING CENTER vs AGENCY FOR HEALTH CARE ADMINISTRATION, 94-002393CON (1994)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida May 03, 1994 Number: 94-002393CON Latest Update: Aug. 24, 1995

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.

Florida Laws (4) 120.57, 408.035, 408.037, 408.039 Florida Administrative Code (2) 59C-1.008, 59C-1.036

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HEALTH CARE ASSOCIATES, INC., D/B/A SURREY PLACE OF MARION COUNTY vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 87-000691 (1987)

Division of Administrative Hearings, Florida Number: 87-000691 Latest Update: Jan. 08, 1988

Findings Of Fact By Stipulation it was agreed and it is found that Petitioner's Petition for Administrative Hearing to contest Respondent's initial decision to deny its application was timely filed. On July 15, 1986, Petitioner submitted a Certificate of Need application to construct a 60 bed community nursing home in Collier County, Florida. In December, 1986, this application was denied by the Respondent because of its determination that there was insufficient numeric need according to the rule bed need methodology and because of the low utilization rate of existing facilities in Collier County. The initial intent to deny was appealed by Petitioner which filed a request for formal administrative hearing. Before the matter could be heard, however, Intervenor, Lakeside, filed a Petition for Intervention which was granted by the former Hearing Officer. After the case was set for hearing, Respondent, DHRS, and Petitioner, Surrey, entered into a stipulation and agreement in which DHRS agreed to reverse its position and support Surrey's application at the final hearing and, pursuant to that agreement, on May 14, 1987, DHRS filed a Notice of Change of Agency Position. Health Care Associates was formed in May, 1977, by Dr. John A. McCoy, PhD, in conjunction with an associate, Stanford L. Hoye, each of whom owns 50 percent of the business. This company which, upon approval, will develop and manage the Surrey project, has been involved in the development of several nursing homes in Florida, all but two of which have been managed by the corporation upon development. At the present time, in addition to the instant project, Petitioner is developing three other nursing home projects in Florida at Live Oak, Bradenton, and Crystal River. Dr. McCoy was instrumental in obtaining Certificates of Need for nine of the nursing homes developed by his company. Two of those have not yet been licensed and of the seven remaining facilities, five have been sold by the corporation to other unrelated organizations. In each case, Dr. McCoy personally realized a profit on the sale. Petitioner proposes to build a 60 bed skilled nursing facility in Collier County at a projected project cost of $1,600,000.00. Approximately $250,000.00 of that figure will be utilized for land acquisition and site costs; $150,000.00 for furniture, fixtures, and equipment; $100,000.00 for architectural fees; and $1,100,000.00 for construction costs, insurance, non- movable equipment, and other items. The initial state agency action report on the application, rendered in late November, 1986, recommended the project be denied on the basis there was insufficient bed need shown and because of the low utilization of currently licensed and operating facilities. Nonetheless, on May 6, 1987, the Department changed its position and entered into a stipulation and agreement with the Petitioner, in which it agreed that no CON approved nursing home beds exist in Collier County; the District Health Plan indicates a need for an additional 143 beds in that county in the applicable planning horizon; the bed to population ratio in Collier County for the 65 and older population is the lowest in the Health Care District; and the age 75 and over population is expected to increase by 24 percent within the next three years. On the basis of these factors and others outlined in the stipulation, the Department concluded, inter alia, that Petitioner proposed the lowest total project cost and the highest Medicare and Medicaid commitment, and determined that Petitioner's application should be approved. Petitioner has identified two potential sites for construction of the facility, both located in North Naples. Both sites carry an asking price substantially in excess of the land acquisition estimates outlined in the application, and neither is currently zoned for the operation of a nursing home. Zoning changes or variances are available, but the cost of securing them may be high and time consuming. Albeit each site would be utilized for construction of not only the proposed nursing home facility but also its related personal care unit, Petitioner estimates that 60 percent of the cost of land acquisition would be apportioned to the nursing home component and 40 percent to the personal care unit. That being the case, one of the parcels would fall within the proposed land acquisition figure cited. DHRS District VIII has been divided into subdistricts for the purposes of planning for community nursing home beds. Subdistrict 2 of District VIII consists of Collier County, Florida. The methodology used by DHRS to determine the need for community nursing home beds in Florida is found in Rule-10-5.011, F.A.C. and it provides, among other things, that the need for proposed new community nursing home beds is to be determined based on a planning horizon three years in the future from date of application. In this case, the appropriate planning horizon is July, 1989, three years after Petitioner's application was filed. The population figures relied upon by DHRS for ages 65 through 74 and ages 75 and above for the period July, 1986 and July, 1989 as of the date of the filing of the application were: 131,642 and 79,661 as well as 148, 229 and 96,142, respectively. The need formula contained in the F.A.C. also requires that the application submitted for July batching cycles be based upon the number of licensed beds in the District as of the preceding June 1. On June 1, 1986, District VIII showed 4,600 licensed community nursing home beds of which there were 473 licensed community nursing home beds in Subdistrict 2. As of November 26, 1986, however, there were no approved community nursing home beds in Collier County, a portion of Subdistrict 2. Another factor to be considered in the methodology is the occupancy rate within the district. As of the application period, the occupancy rate in Collier County was 84.44 percent including the occupancy data for Moorings Park. Petitioner and DHRS urge that it is DHRS policy to utilize at the de novo hearing the latest population figures available at the time of the initial application. These figures, cited above, reflect a 55 bed need in Collier county for the period July, 1989. There is, in addition, a factor which Petitioner urges relating to the licensure report submitted by Americana Nursing Home, located in Collier County, which indicates that a number of that facility's semiprivate rooms were converted to private rooms, thereby reducing the number of beds available for use in District VIII during the relevant time period. When this factor is incorporated into the calculations, a higher occupancy rate is indicated which results in a bed need of 66 rather than 55. Intervenor contests any adjustment made on the basis of Americana's conversion of some of its rooms from semiprivate to private rooms and a resultant decrease in the bed inventory thereby. It points out, and properly so, that former semiprivate rooms can be reconstituted as such in a very short period of time if needed and though the beds may not be set up when the room is a single room, the facility is capable of providing those additional beds without further approval when necessary. The removal of those beds, therefore, from the inventory, as a result of a temporary conversion is not an appropriate methodology. It has not been followed by DHRS in the past nor is it provided for in the rule and it should not be done here. Turning to the question of the population estimates and projections appropriate to make the proper calculation of numeric need for the area at the proper time, Intervenor objects to Petitioner's and DHRS' use of the pertinent population projections existing at the time of application on the basis that at a de novo hearing, the proper and most appropriate approach to bed need analysis and calculation would require the use of the most current available statistics. Utilizing the most current population projections for the July, 1989 planning horizon results in a net numeric need for July, 1989 of 21 beds with an error possible to 22 beds. In addition, the occupancy rate would be reduced and in that regard, evidence indicates that occupancy rates in Collier County have been low since 1982. However, there has been a steady and continuous rise in that figure since that time and as of July, 1987, it was 91.1 percent. The date upon which licensed beds are to be counted is provided for specifically in the rule defining need methodology, but the date upon which approved beds are to be counted is not stated in the rule. Similarly, the times for which population data are to be considered is contained in the rule methodology, but the release date of official estimates and projections to be utilized is not specified. Likewise, though the time period for which occupancy rates of existing facilities are to be considered is specifically set out, the input to be utilized when calculating "average occupancy rate" within that time period is not specifically established. In any case, the average occupancy rate as stipulated in the rule methodology for the area has been, until recently, consistently lower than 90 percent which is the figure identified in the rule methodology. Based on all the above, then, it must be found that the more accurate and pragmatic calculation of need utilizing the most current projections and discounting the agency policy for which the agency has not established any firm rationale or justifiable basis, indicates no numeric need for additional beds in the District during the period set forth in the planning horizon. Even if use of the rule methodology does not result in a mathematical showing of bed need sufficient to justify award of a certificate of need, nonetheless such a certificate can be awarded if other conditions and other circumstances establish a need that requires satisfaction within the area and the planning horizon. There was some dispute regarding poverty rates within Collier County and evidence presented at the hearing tends to indicate that the poverty rate in Collier County for the 65 and older population group is generally the lowest in the state. Low poverty rates among the elderly generally coincide with low nursing home utilization since wealthier patients generally have available to them alternatives to inpatient nursing home care. Intervenor urges, and there is no evidence to contradict it, that there are currently available alternatives to nursing home care for wealthy patients not only in Collier County but within District VIII as a whole. The Health Services and Facilities consultant for DHRS who initially reviewed Petitioner's application felt approval was not appropriate at the time he did his analysis. However, since that time additional information has caused him to conclude the application should be granted. He has subsequently learned that two of the four nursing homes in Collier County, which account for more than 50 percent of the beds licensed, have "conditional" quality ratings and there are currently no beds approved for construction in the county even though the county is one of the fastest growing counties in Florida. On the basis of this information, he now agrees with the agency's determination to approve a certificate of need for 60 beds for Petitioner. Based on what Mr. May knows of the three applicants, in his opinion Petitioner is the most appropriate applicant to receive the award. In the Stipulation entered into between Petitioner and the agency, the parties adopted the District VIII Health Council projection of 143 beds needed for Collier County for the 1986 planning horizon. The quarterly nursing home report for the period April through June, 1987, reflects the status of previously issued certificate of needs and includes all reported approved beds up to the date of issuance. This report shows that as of June 30, 1987, two applicants from prior batches received a total of 81 beds which, when subtracted from the 143 identified bed need, still leaves a 62 bed net need. Turning from the question of numeric need to other considerations regarding the applicant in issue, there can be little doubt that the estimates for the design of the proposed facility and construction are appropriate. The figures in Tables 18 and 19 of the application are also appropriate and reasonable. The costs for the project appear to be accurate and appropriate and the completion forecast timetable appears to be more than ample. Mr. Philips, the Vice President in charge of construction lending for the mortgage company which proposes to finance construction of the facility, is familiar with not only the applicant's corporate financial statement, but also those of the two principals, Dr. McCoy and Mr. Hoye. In his opinion, both are capable of providing the initial financing and their operations statements show a history of successful business operation. The 11 percent proposed as an interest rate for the loan supporting the construction is reasonable if not liberal, and the 25 year duration of the loan is also reasonable as is the loan origination fee of two points. If the certificate of need is approved, the lender is ready, willing, and able to lend the applicant sufficient funds to complete construction. Intervenor's expert in nursing home budgeting and financial feasibility analysis, testifying in contravention of Petitioner's experts, believes that approval of Petitioner's operation would have a severe financial impact on the Intervenor's operation as a current provider resulting in a first year bottom line loss of approximately $235,000 and a second year bottom line loss of almost $300,000. It should be noted here, however, that these are not actual operating losses but a projected reduction in profit. These estimates are based on August, 1987 figures adjusted forward for inflation. In short, while the opening of Petitioner's facility may have a negative impact on existing facilities, it would not necessarily result in a deficit operation for any existing provider. This expert also has some difficulty with Petitioner's projections of financial feasibility in its own facility. For example, he questions the 15 percent census of Medicare patients based on the fact that currently Intervenor does not have any Medicare patients though it does accept them. He also considers the estimate of a 96 percent occupancy by the end of six months to be unreasonable, especially in Collier County. He believes Petitioner's proposed expenses are understated and there are inconsistencies between the staffing table and labor costs in that the nursing expense is understated and the hourly rates projected to be paid are much too low. He believes that the projected cash flow is overstated since there is no provision for a reduction of principal. There are, also, other possible negative aspects to approval of Petitioner's application. Intervenor's regional director, who is an expert in nursing home administration, believes that approval of Petitioner's application will have a direct adverse reaction on Intervenor's Lakeside operation in regard to services provided, staffing, and its own financial feasibility. With regard to staffing, there is currently a critical shortage of nurses in Collier County and this factor was confirmed by a representative of another facility in the area. Approval of Petitioner's facility might well worsen the problem. Other service personnel are also in short supply and approval of Petitioner's application will worsen this as well. If these personnel shortages materialize, it may result in a reduction of quality of care, but this is speculative and there is no direct evidence that this would happen. Lakeside's current license is rated as "standard" as opposed to "superior" and this is claimed to be directly related to the nursing shortage which resulted in the facility's inability to attract sufficient nursing personnel to merit a "superior" rating. The witness identified other apparent deficiencies in applicant's submission, but these are either of a minor nature or the subject of opinion or conjecture. In short, the only substantive objection sustainable is the prospective adverse effect on the cost of attracting qualified nursing personnel. Certain other projections by the applicant are considered to be unreasonable by Americana's Director of Operations, such as the 15 percent projection for Medicare patients. Currently Americana, which generally has between 13 and 23 beds open at any time, has 2 Medicare patients and this witness also feels that a 96 per cent fill up rate in 6 months is unreasonable. Based on his experience, Collier County had even a slower than normal fill up rate when compared to other areas of the state. Notwithstanding the negative testimony, there can be little question, and it is so found, that Petitioner would be able to provide quality care if its application were approved. Turning to the question of the relationship of this application to State and Local health plans, the bed need calculation has already been discussed above. That calculation is based on the state methodology. However, the state methodology may be substantially different than a need developed by reference to the local health plan. The local plan looks at need from the county/subdistrict basis whereas the state looks at the district as a whole for establishment of need and then distributes beds on the basis of current bed census. When the smaller counties with fewer existing beds grow faster than the larger counties with a greater number of existing beds, they tend to be caught in a squeeze in that they get fewer beds because they are smaller, while their actual need may be greater than that of the larger county which, by virtue of its size, gets the larger number of beds. This state need rule, which calls for a 90 percent occupancy rate is felt by some to be less valid and less accurate a basis for evaluating the need in reality. As to the question of alternatives, there appear to be none for the vast majority of people in the county. Hospices or internal acute care bed or ambulatory facilities are not truly alternatives to nursing homes. In summary, Petitioner's expert believes that the Department's projected need for 43 beds could justifiably result in an approval of an application for 60 beds because: There were no approved beds at review time, Population trends, growth, and utilization trends indicate a need for new beds, The bed to population ratio in the county is one of the lowest in the district and in the state, (16 or 17/1,000 vs 27/1,000 normal for 65 plus) and the situation has not changed, Although the 65 plus population is used to determine need, the greatest use of nursing home facilities comes from the 75 plus population which is expected to increase in Collier County by July, 1989 by 32 percent, double the statewide average, At the time of application review, no existing facility was rated "superior" (there are now), showing a need for options. The applicant has a record of "superior" ratings statewide, The district health plan shows a bed need exceeding 60 beds for Collier County, The granting of a 60 bed nursing home is not inconsistent with previous actions by the Department when a mathematical need less a bed showed than 60 number. The project also is consistent with the rule criteria as well as statutory criteria, and Given DHRS's methodology and considering the adjustments due to Americana's change, there can be shown a mathematical need greater than the 43 shown by DHRS. Whether the need is 43 or 66 is really not important. The need is there. There is much to be said for these conclusions and they are adopted as findings herein.

Florida Laws (1) 120.57

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COMMUNITY HEALTH ASSOCIATION, INC. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, OFFICE OF HEALTH PLANNING & DEVELOPMENT, 83-000615 (1983)

Division of Administrative Hearings, Florida Number: 83-000615 Latest Update: Sep. 26, 1983

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

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HEALTH QUEST CORPORATION (SARASOTA COUNTY) vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES AND TRECOR, INC., D/B/A BURZENSKI NURSING HOME, 88-001945 (1988)

Division of Administrative Hearings, Florida Number: 88-001945 Latest Update: Mar. 14, 1989

The Issue Whether a certificate of need for an additional 60 nursing home beds to be located in Sarasota County, Florida, in July, 1990, should be granted to any of the four competing certificate of need applicants in these proceedings?

Florida Laws (1) 120.57

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BROOKWOOD-JACKSON COUNTY CONVALESCENT CENTER, INC. (I) vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 88-001890 (1988)

Division of Administrative Hearings, Florida Number: 88-001890 Latest Update: Sep. 07, 1988

The Issue The issues under consideration concern the request by Petitioner, Brookwood-Jackson County Convalescent Center (Brookwood) to be granted a certificate of need for dual certification of skilled and immediate care nursing home beds associated with the second review cycle in 1987. See Section 381.494, Florida Statutes (1985) and Rule 10-5.011(1)(k) , Florida Administrative Code.

Findings Of Fact On October 5, 1987 Brookwood filed an application with HRS seeking to expand its facility in Graceville, Jackson County, Florida, one with 120 licensed beds and 30 beds approved effective June 12, 1986, to one with 30 additional beds for a total of 180 beds. Beds being sought in this instance were upon dual certification as skilled and intermediate nursing home beds. The nursing home is located in Subdistrict A to District II which is constituted of Gadsden, Holmes, Jackson and Washington counties. This applicant is associated with Brookwood, Investments, a Georgia corporation qualified to do business and registered in the State of Florida and other states in the southeastern United States. That corporation has as its principal function the development and operation of nursing homes and other forms of residential placement of the elderly. The actual ownership of the applicant nursing home is through a general partnership. Kenneth Gummels is one of two partners who own the facility. The Brookwood group has a number of nursing home facilities which it operates in the southeastern United States. Florida facilities that it operates are found in DeFuniak Springs, Walton County, Florida; Panama City, Bay County, Florida; Chipley, Washington County, Florida; Homestead, Dade County, Florida; Hialeah Gardens, Dade County, Florida, as well as the present applicant's facility. The applicant as to the beds which it now operates, serves Medicare, Medicaid, Veteran Administration, private pay and other third party pay patients. The number of Medicaid patients in the 120 licensed beds is well in excess of 90 percent. The ratio of Medicaid patients with the advent of the 30 approved beds was diminished. As to those beds, 75 percent were attributed to Medicaid. If the 30 beds now sought were approved, the projection is for 87 percent private pay and 13 percent Medicaid for those new beds. The nursing home administration feels that the new beds must be vied for under those ratios in order for it to continue to be able to serve a high number of Medicaid patients, an observation which has not been refuted by the Respondent. Nonetheless, if these beds are approved the percentage of Medicaid patients would be reduced to the neighborhood of 80 percent within the facility which compares to the approximately 81 percent experience of Medicaid beds within the district at present and the approximately 88 percent of Medicaid beds within the subdistrict at present. The cost of the addition of the 30 beds in question would be $495,000. Financial feasibility of this project has been stipulated to by the parties assuming that need is found for the addition of those beds. The basic area within the Florida panhandle wherein the applicant facility may be found, together with other facilities in the Florida panhandle is depicted in a map found at page 101 of Petitioner's Exhibit 1 admitted into evidence. This map also shows that a second licensed nursing home facility is located in Jackson County in Marianna, Florida, known as Marianna Convalescent Center. The applicant facility is directly below the Alabama-Florida border, immediately south of Dothan, Alabama, a metropolitan community. The significance of the relative location of the applicant's facility to Dothan, Alabama concerns the fact that since 1984 roughly 50 percent of its nursing home patients have been from out-of-state, the majority of those out-of-state patients coming from Alabama. Alabama is a state which has had a moratorium on the approval of new nursing home beds for eight years. The proximity of one of that state's relatively high population areas, Dothan, Alabama, has caused its patients to seek nursing home care in other places such as the subject facility. The applicant has encouraged that arrangement by its business practices. Among the services provided by the nursing home facility are physical therapy, physical examination and treatment, dietary services, laundry, medical records, recreational activity programs and, by the use of third party consultants, occupational and social therapy and barber and beauty services, as well as sub-acute care. The facility is adjacent to the Campbellton-Graceville Hospital in Graceville, Florida. The nursing home was developed sometime in 1978 or 1979 with an original complement of 90 beds expanding to 120 beds around 1983 or 1984. The Chamber of Commerce of Marianna, Florida had held the certificate of need upon the expectation that grant funds might be available to conclude the project. When that did not materialize, the County Commissioners of Jackson County, Florida sought the assistance of Brookwood Investments and that organization took over the development of the 90 beds. The original certificate holder voluntarily terminated and the Brookwood partnership then took over after receiving a certificate of need for Brookwood-Jackson County Convalescent Center. The nursing home in Marianna, Florida which is located about 16 miles from Graceville has 180 beds having undergone a 60 bed expansion several years ago. Concerning the Brookwood organization's nursing home beds in Florida, the Walton County Convalescent Center was a 100 bed facility that expanded to 120 beds at a later date and has received permission to expand by another 32 beds approved in the same review cycle associated with the present applicant. Gulf Coast Convalescent Center in Panama City, is a 120 bed facility of Brookwood. Brookwood also has the Washington County Convalescent Center in Washington County, in particular in Chipley, Florida which has 180 beds. That facility was expanded by 60 beds as licensed in October, 1987 and those additional beds have been occupied by patients. Brookwood has a 120 bed facility in Homestead and a 180 bed facility in Hialeah Gardens. With the exception of its two South Florida facilities in Homestead and Hialeah Gardens, recent acquisitions under joint ownership, the Brookwood group has earned a superior performance rating in its Florida facilities. No attempt has been made by this applicant to utilize the 30 beds which were approved, effective June 12, 1986. Its management prefers to await the outcome in this dispute before determining its next action concerning the 30 approved beds. The applicant asserted that the 30 beds that had been approved would be quickly occupied based upon experience in nursing home facilities within Subdistrict A to District II following the advent of nursing home bed approval. That surmise is much less valuable than the real life experience and does not lend effective support for the grant of the certificate of need in this instance. The waiting list for the 120 licensed beds in the facility has been reduced to five names. This was done in recognition of the fact that there is very limited patient turnover within the facility. Therefore, to maintain a significant number of people on the waiting list would tend to frustrate the sponsors for those patients and social workers who assist in placement if too many names were carried on the waiting list. At the point in time when the hearing was conducted, the facility was not in a position to accept any patients into its 120 licensed facility. This condition of virtually 100 percent occupancy has been present since about 1984 or 1985. The applicant has transfer agreements with Campbellton-Graceville Hospital and with two hospitals in Dothan, Alabama, they are Flower's Hospital and Southeast Alabama Medical Center. The applicant also has a transfer agreement with the Marianna Community Hospital in Marianna, Florida. The referral arrangements with the Alabama hospitals were made by the applicant in recognition of the proximity of those hospitals to the nursing home facility and the belief in the need to conduct its business, which is the provision of nursing home care, without regard for the patient origin. Early on in its history with the nursing home, Brookwood promised and attempted in some fashion to primarily serve the needs of Jackson County, Florida residents, but the explanation of its more recent activities in this regard does not portray any meaningful distinction between service to the Jackson County residents and to those from other places, especially Alabama. This reflects the concern expressed by Kenneth Gummels, owner and principal with the applicant nursing home, who believes that under federal law the nursing home may not discriminate between citizens in Florida and Alabama when considering placement in the nursing home. In this connection, during 1987 the experience within the applicant nursing home was to the effect that for every patient admitted from Florida five Florida patients were turned away. By contrast, to deal with the idea of priority of placing patients some effort was made by Gummels to explain how priority is still given to Jackson County residents in the placement for nursing home care. Again, in the end analysis, there does not seem to be any meaningful difference in approach and this is evidenced by the fact that the level of out-of-state patients in the facility has remained relatively constant after 1984. If there was some meaningful differentiation in the placement of Florida patients and those from out-of-state, one would expect to see a change in the number of patients from out-of-state reflecting a downward trend. As described, historically the experience which Brookwood has had with the facility occupancy rates is one of high utilization except for brief periods of time when additional beds were added at the facility or in the Marianna Nursing Home. At time of the application the primary service area for the applicant was Jackson County with a secondary service area basically described as a 25 mile radius outside of Graceville extending into Alabama and portions of Washington and Holmes Counties. As stated, at present the occupancy rate is as high as it has ever been, essentially 100 percent, with that percentage only decreasing on those occasions where beds come empty based upon transfers between nursing homes or between the nursing home and a hospital or related to the death of a resident. Those vacancies are filled through the waiting list described or through recommendations of physicians who have a referral association with the facility. The patients who are in the facility at the place of consideration of this application were 50 percent from Florida and 50 percent from out-of-state, of which 56 of the 60 out-of-state patients were formerly from Alabama, with one patient being from Ohio and three others from Georgia. More specifically, related to the history of out-of-state patients coming to reside in the nursing home, in 1984 basically 25 percent patients were from Alabama, moving from there into 1985 at 47 percent of the patient population from Alabama, in 1986 50 percent from Alabama, in 1987 48 percent from Alabama and in 1988 the point of consideration of the case at hearing the figure was 47 percent of Alabama patients, of the 50 percent patients described in the preceding paragraph. Of the patients who are in the facility from Florida, the majority of those are believed to be from Jackson County. Those patients who come to Florida from Alabama, by history of placement, seem to be put in the applicant's facility in Graceville as a first choice because it is closest to the Dothan, Alabama area. The next preference appears to be Chipley and the Brookwood nursing home facility in Chipley, and thence to Bonifay and then to other places in the Florida panhandle, in particular Panama City. In the Brookwood-Washington County facility at Chipley, Florida 35 percent of the patients are from Alabama which tends to correspond to the observation that the Alabama placements as they come into Florida are highest in Graceville and decrease in other places. This is further borne out by the experience in the Brookwood-Walton County facility at DeFuniak Springs, Florida which has an Alabama patient percentage of approximately 10 to 12 percent. When the nursing home facilities in Chipley and Bonifay received 60 additional beds each in October, 1987, they began to experience rapid occupancy in those beds as depicted in the Petitioner's Exhibit 1 at pages 228 through 230. The other facility in Jackson County, namely Jackson County Convalescent Center, within the last six months has shown an occupancy rate in excess of 98 percent, thereby being unavailable to attend the needs of additional Jackson County patients who need placement and other patients within the subdistrict. This same basic circumstance has existed in other facilities within Subdistrict A to District II. When the applicant is unable to place patients in its facility it then attempts placement in Chipley, Bonifay, DeFuniak Springs, and Panama City, Florida, and from there to other places as nearby as possible. The proximity of the patient to family members and friends is important for therapeutic reasons in that the more remote the patient placement from family and friends, the more difficult it is for the family and friends to provide support which is a vital part of the therapy. Consequently, this is a significant issue. Notwithstanding problems in achieving a more desirable placement for some patients who must find space in outlying locales, there was no showing of the inability to place a patient who needed nursing home care. Most of the Alabama referrals are Medicaid referrals. Those patient referrals are treated like any other resident within the nursing home related to that payment class for services. Effectively, they are treated in the same way as patients who have come from locations within Florida to reside in the nursing home. Notwithstanding the management choice to delay its use of the 30 approved beds dating from June 12, 1986, which were challenged and which challenge was resolved in the fall, 1987, those beds may not be ignored in terms of their significance. They must be seen as available for patient placement. The fact that the experience in this service area has been such that beds fill up rapidly following construction does not change this reality. This circumstance becomes more significant when realizing that use of the needs formula for the project at issue reveals a surplus of 19 beds in Subdistrict A to District II for the planning horizon associated with July, 1990. See Rule 10-5.011(1)(k), Florida Administrative Code. The 19 bed surplus takes into account the 30 approved beds just described. Having recognized the inability to demonstrate need by resort to the formula which is found within the rule's provision referenced in the previous paragraph, the applicant sought to demonstrate its entitlement to a certificate through reference to what it calls "special circumstances." Those circumstances are variously described as: Patient wishing to be located in Jackson County. Lack of accessibility to currently approved CON beds. High rate of poverty, Medicaid utilization and occupancy. Jackson County Convalescent Center utilization by out-of- state patients. The applicant in asking for special relief relies upon the recommendation of the Big Bend Health Council, District II in its health plan and the Statewide Health Council remarks, whose suggestions would modify the basis for calculation of need found in the HRS rule with more emphasis being placed on the adjustment for poverty. Those suggestions for health planning are not controlling. The HRS rule takes precedence. Consequently, those suggestions not being available to substitute for the HRS rule, Petitioner is left to demonstrate the "special circumstances" or "exceptional circumstances" in the context of the HRS rule and Section 381.494(6), Florida Statutes (1985). Compliance per se with local and statewide planning ideas is required in the remaining instances where those precepts do not conflict with the HRS rule and statute concerning the need calculations by formula. Turning to the claim for an exception to the rule on need, the first argument is associated with the patient wishing to be located in Jackson County. This would be preferable but is not mandated. On the topic of this second reason for exceptions to the need formula, the matter is not so much a lack of accessibility to currently approved CON beds as it is an argument which is to the effect that there are no beds available be they licensed or approved. This theory is not convincing for reasons to be discussed, infra. Next, there is an extremely high rate of poverty in District II. It has the highest rate of poverty in the state. Moreover Subdistrict A to District II has an even greater degree of poverty and this equates to high Medicaid use and contributes to high occupancy. This coincides with the observation by the Big Bend Health Council when it takes issue with the HRS methodology rule concerning recognition of the significance of poverty within the HRS rule and the belief by the local health council that given the high poverty rates in District II some adjustments should be made to the need formula in the HRS rule. Under its theory, 161 additional beds would be needed at the planning horizon for July 1990 in Subdistrict A. Concerning the attempt by the applicant to make this rationalization its own, the record does not reflect reason to defer to the Big Bend Health Council theory as an exception to the normal poverty adjustment set forth in the HRS rule. When the applicant describes the effects of the out-of-state patients, in particularly those from Alabama in what some have described as in-migration, it argues that Rule 10-5.011(1)(k), Florida Administrative Code makes no allowance for those influences. The applicant chooses to describe these beds, the beds used by out-of-state residents, as unavailable or Inaccessible. This concept of inaccessibility is one which departs from the definition of inaccessibility set forth at Rule 10-5.011(1)(k)2.j., Florida Administrative Code. The specific exception to the requirement for compliance with the numeric need methodology in demonstration of a net need is set forth in that reference, and the proof presented did not show entitlement to the benefits of that exception. That leaves the applicant arguing in favor of recognition of its entitlement to a certificate of need premised upon a theory not specifically announced in that reference. This is the in-migration idea. It ties in the basic idea of poverty but does not depend on rigid adherence to the Big Bend Health Council idea of a substitute element in the HRS needs formula related to poverty. It also promotes the significance of problems which a number of physicians, who testified by deposition in this case, observed when attempting to place patients in the subject nursing home and other nursing homes in the surrounding area. They found high occupancy rates in the present facility and others within Subdistrict A to District II. These problems with placement as described by the physicians can have short term adverse effects on the patient and the family members, but they are not sufficient reason to grant the certification. In considering the formula for deriving need as promulgated by HRS, the proof does not seem to suggest that the nursing home residents themselves who came from out-of-state are excluded from the population census for Florida. On the other hand, unlike the situation in Florida in which the population at large is considered in trying to anticipate future nursing home bed needs, it make no assumptions concerning the Alabama population at large. Ultimately, it becomes a question of whether this unknown factor, given the history of migration of patients from Alabama into Florida and in particular into the subject nursing home, together with other relevant considerations, may properly form the basis for granting the certificate of need to the applicant. It is concluded that there is a fundamental difference in the situation found within this application compared to other planning areas within Florida which do not have to contend with the level of poverty, the proximity to Alabama and the advent of Alabama placements in this nursing home, the high occupancy rates in the subdistrict and the resulting difficulty in placement of patients near their homes. Posed against this troublesome circumstance is the fact that the applicant has failed to use its 30 approved beds or to make a decision for such use, that it had invited and continues to invite the placement of Alabama residents through the referral arrangements with the two Dothan, Alabama hospitals, realizing that such an arrangement tends to exclude opportunities for Florida residents to some extent, and the recognition that patients are being placed; that is patients are not going without nursing home care. The two Alabama hospitals with whom the applicant has referral agreements provide a substantial number of the patients who are admitted. This recount acknowledges what the ownership considers to be their obligation in law and morally to serve the interest of all patients without regard for their home of origin; however, the thrust of the certificate of need licensing process in Florida is to develop the apparatus necessary to service the needs of Florida residents, not Alabama residents. This does not include the necessity of trying to redress the circumstance which appears to exist in Alabama in which the government in that state is unable or unwilling to meet the needs of its citizens. On balance, the applicant has not demonstrated a sufficient reason to depart from the normal requirements of statute and rule, which departure would have as much benefit for Alabama residents as it would for Florida Residents. Contrary to the applicant's assertions it could legitimately de-emphasize its association with Alabama. It has chosen not to and should not be indulged In this choice in an enterprise which is not sufficiently related to the needs of Florida residents to condone the licensure of the beds sought, even when other factors described are taken into account. The applicant has also alluded to a certificate of need request made by Walton County Convalescent Center, a Brookwood facility in District I which sought a certificate of need in the same batch which pertains to the present applicant. The application and the review and comment by HRS may be found within Composite Exhibit 2 by the Petitioner admitted as evidence. Petitioner asserts that the Walton County experience in which 32 beds were granted is so similar to the present case that it would be inappropriate for the agency to act inconsistently in denying the present applicant after having granted a certificate of need to the Walton County applicant. Without making a line-by- line comparison, it suffices to say that in many respects these projects are similar. In other respects they are not. On the whole, it cannot be found that the agency is acting unfairly in denying the present applicant while granting a certificate to the applicant in the Walton County case. The differences are substantial enough to allow the agency to come to the conclusion that the present applicant should be denied and the applicant in Walton County should have its certificate granted. Likewise, no procedural impropriety on the part of HRS in its review function has been shown.

Florida Laws (2) 120.57, 90.202

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MANOR CARE, INC. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 85-002937 (1985)

Division of Administrative Hearings, Florida Number: 85-002937 Latest Update: Dec. 23, 1986

Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.

Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854

Florida Laws (1) 120.57

# 9

FORUM GROUP, INC. vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, 87-000704 (1987)

Division of Administrative Hearings, Florida Number: 87-000704 Latest Update: Apr. 01, 1988

Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the stipulations of the parties and the entire record complied herein, I hereby make the following findings of fact: THE STIPULATIONS OF THE PARTIES The parties stipulated to the following facts: Forum timely filed its letter of intent and application with DHRS and the District IX Local Health Council for the July 1986 batching cycle. DHRS ultimately deemed the application complete and, following review, published its notice of intent to deny the application. Forum timely filed a petition requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The sole issue is whether there is a need for Forum's proposed services; additionally, it is DHRS's position that a lack of need for the project results in the project not being financially feasible in the short or long term. All other statutory and rule criteria were satisfied, at least minimally, except proof of need pursuant to Rule 10-5.011(1)(k) [formerly 10-5.11(21)(b)], Florida Administrative Code, and financial feasibility as it relates to need. FORUM'S PROPOSAL Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Forum proposes to develop a retirement living center in Palm Beach County that would consist of 120 to 150 apartment units for independent living, a separate personal care unit (known in Florida as an adult congregate living facility), and a 60-bed nursing home component certified for skilled and intermediate care. Palm Beach County is in HRS Service District IX, Subdistrict 4. All three components of Forum's retirement living center would be physically connected and share some operational functions, such as dietary facilities and the heating plant. Such a design provides for an efficient operation as well as an economic distribution of costs facility wide. No specific site has been selected , although Forum has narrowed its focus to the eastern half of Palm Beach County. It is not economically feasible to acquire property or pay for an option on property until after receiving CON approval. The projected total cost of Forum's proposed 60-bed nursing home is $2,329,800. Forum has the necessary resources for project accomplishment and operation. Forum proposes to seek Medicare certification and will provide up to 25 of its beds for Medicaid patients. FINANCIAL FEASIBILITY Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. If need for the facility is shown, Forum would be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible while at the same time having no material negative impact on existing providers in the district. NUMERIC NEED Need for new or additional community nursing home beds in Florida is determined, preliminarily, by use of the methodology found in Rule 10- 5.011(1)(k), Florida Administrative Code. Additional beds normally are not approved if there is no need for beds as calculated under the rule. Pursuant to the rule, need for a defined nursing home subdivision is projected to a three- year planning horizon, in this case July 1989. The need methodology prescribed in the rule is as follows: A (POPA x BA) + (POPB x BB) or: The District's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made [A] (The population age 65-74 years in the relevant departmental districts projected three years into the future [POPA] x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]) + (The population age 75 years and older in the relevant departmental district projected three years into the future [POPB] x the estimated current bed rate for the population age 75 years and over in the relevant district [BB].) BA LB/(POPC) + (6 x POPD) or: The estimated current bed rate for the population age 65-74 years in the relevant district [BA] (The number of licensed community nursing home beds in the relevant district [LB]/the current population age 65-74 years [POPC] + (6 x the current population age 75 years and over [POPD]) BB 6 x BA or: The estimated current bed rate for the population age 75 years and over in the relevant district [BB] 6 x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]. SA A x (LBD/LB) x (OR/.90) or: The preliminary subdivision allocation of community nursing home beds [SA] The district's age-adjusted number of community nursing home bids for the review cycle for which a projection is being made [A] x (The number of licensed community nursing home beds in the relevant subdistrict [LBD]/the number of licensed community nursing home beds in the relevant district [LB]) x (The average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district [OR]/.90) Rule 10-5.011(1)(k)(2)(i), Florida Administrative Code, provides that: The new bed allocation for a subdistrict, which is the number of beds available for CON approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs a. through i., unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The appropriate planning horizon for the instant case is July 1989, corresponding to the review cycle which began July 15, 1986, and the subdistrict is Palm Beach County. THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT DISTRICT (LB)/THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT SUBDISTRICT (LBD) Rule 10-5.011(1)(k) requires that "review of applications submitted for the July batching cycle shall be based upon the number of licensed beds (LB and LBD) as of June 1 preceding this cycle..." On June 1, 1986, there were 5,459 licensed community nursing home beds in District XI (LB) and 4,084 licensed community nursing home beds in subdistrict 4 (Palm Beach County LBD). These figures include 220 licensed beds that were previously categorized as sheltered. In the instant case, the appropriate figure for LB is 5,459, and the appropriate figure for LBD is 4,084. APPROVED BEDS WITHIN THE RELEVANT DEPARTMENTAL SUBDISTRICT DHRS's interpretation of the rule is to include in the count of approved beds, those approved up to the date of the supervisor's signature on the State Agency Action Report (SAAR). In this case, there were 640 approved beds in Palm Beach County at that time. As of June 1, 1986, the same date as the licensed bed cutoff, there were 640 approved beds in the subdistrict. In Dr. Warner's opinion, approved beds should be determined as of the same time period as licensed beds in order to have consistency and avoid anomalies in the formula. This opinion is reasonable and appropriate. In the instant case, the figure to be applied in the formula for approved beds in the subdistrict is 640 approved beds. THE POPULATION AGE 65-79 YEARS IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPA). THE POPULATION AGE 75 YEARS AND OVER IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPB). The rule provides that the three year projections of population shall be based upon the official estimates and projections adopted by the Office of the Governor. For the purposes of calculating need, DHRS utilizes at the final hearing the figures for estimated population obtained from data available at the time of initial application and review. The set of population projections which were available when Petitioner's application was filed and reviewed were those published on July 1, 1986. Based on this data, which is reasonable to use, POPA 170,639; and, POPB 122,577. THE CURRENT POPULATION AGE 65-74 YEARS (POPC)/THE CURRENT POPULATION AGE 75 YEARS AND OVER (POPD). In calculating POPC and POPD, DHRS also utilizes at final hearing the most current data available at the time of initial application and review, in this case the July 1, 1986, release. Based on that data, POPC 153,005 and POPD 112,894. In the opinion of Dr. Warner, Forum's expert, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. According to Warner, January 1, 1986, as the midpoint of this time period, is the appropriate date to derive POPC and POPD in this case. The formula mandated by the rule methodology for calculating the estimated current bed rate requires that the "current population" for the two age groups be utilized. It is reasonable and appropriate for the base for POPC and POPD to correspond to the period for which the average occupancy rate is calculated. Supportive of Dr. Warner's opinion are the past practices of DHRS. Between December 1984 and December 1986, DHRS routinely used a three and one half year spread between the base population period and the horizon date in determining "current population" in its semiannual nursing home census report and bed need allocation. In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, DHRS utilized a three and one half year spread between the base population period and the horizon data for "current population" when it awarded beds. DHRS offered In this case, it proposed to use a three year spread between the base population period and the horizon dated for "current population" in calculating POPC and POPD. Using the July 1986 population release, POPC for January 1986 is 149,821 and POPD for January 1986 is 98,933. THE AVERAGE OCCUPANCY RATE FOR ALL LICENSED COMMUNITY NURSING HOMES WITHIN THE SUBDIVISION OF THE RELEVANT DISTRICT (OR). The rule requires the use of occupancy data from the HRS Office of Health Planning and Development for the months of the previous October through March when calculating a July batch of nursing home applicants. However, the rule is not instructive as to how one calculates this number. In this case, DHRS computed average occupancy rates based on the existing occupancy rates at applicable facilities on the first day of each month. Based on this occupancy data, which includes the data for the 220 previously sheltered beds in the subdistrict, occupancy rates for the July 1986 batch of Palm Beach County nursing home applicants is 83.75 percent. Forum's witness, Dr. Warner, determined that the correct occupancy rate was 85.46 percent for Palm Beach County for the period October 1985 to March 1986. Dr. Warner arrived at this figure by including paid reservation days. A paid reservation day is a day which is paid for by the patient or the patient's intermediary during which the patient is not physically in the bed. Typically, the patient will either be in the hospital, visiting relatives or otherwise away from the facility and will continue to pay for the nursing home bed, so that they will be able to return and not have someone occupy the bed. One of the goals and objectives of the District IX Local Health Plan is that paid reservation days be considered when bed need calculations are made. Calculating prepaid reservation days is consistent with the Rule because such beds are no longer available to the public and are therefore in use. Dr. Warner determined that during the applicable period, 1.25 percent of the licensed beds in the subdistrict were paid reservation days. Although taking paid reservation days into account would not be inconsistent with the rule, Forum failed to demonstrate that the 1.25 percent figure arrived at is valid for the applicable period, i.e., October 1985 to March 1986. Dr. Warner merely calculated a two-year average number of paid reservation days, broke this figure down to a six-month average and applied this average to the six-month period specified in the Rule. Gene Nelson, an expert called on behalf of Forum, calculated the occupancy rate as 88.72 percent in Palm Beach County for the appropriate period called for in the Rule. Nelson used the average monthly occupancy data obtained from medicaid cost reports for some facilities rather than first-day of the month data as used by DHRS. In addition, Nelson did not factor in the occupancy date of licensed beds in the extreme western portion of the County based on his belief that the District IX Local Health Plan mandates that the western area not be considered in any way with the eastern coast section of Palm Beach County for purposes of determining competitiveness. While the use of average full-month occupancy data is generally more reliable than using first-day of the month data, it is best, from a health planning prospective, to be able to use either all full-month data or all first- day of the month data. In making his calculations, Mr. Nelson mixed the two types of data, using full-month data when available and in other cases using first-day of the month data when full-month data was not available. It is inappropriate to fail to consider licensed beds in the extreme western portion of the County based solely on the local health plan. Among other reasons, the rule does not provide for exclusions for any of the subdistricts licensed facilities from the methodology. The appropriate and most reasonable occupancy rate (OR) in the instant case for the applicable time period is 83.75 percent. NET NEED Applying the above-referenced variables to the Rule formula produces the following results. July, 1986. District Allocation BA LB (POPC + (6 x POPD) - 5459 [149,821 + (6 x 98,833)] - .007349 BB - 6 x BA .044094 (.007349) July, 1989 Allocation (POPA x BA) + (POPB x BB) - (170,639 x .007349) + (122,577 x .044094) - 6659 Subdivision Allocation and Need SA A x (LBD / LB) x (OR 1.9) - 6659 x (4084 / 5459) x (.8375/.9) - 6659 x .74812236673 x .93055555555 4636 Subdistrict Allocation for Palm Beach County 4084 (Licensed Beds) 576 (90 percent of 640 Approved Beds) -24 (Bed Surplus)

Florida Laws (1) 120.57

# 10

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