Findings Of Fact Health Quest filed an application for a Certificate of Need (CON) to construct a 120-bed nursing home facility in Lee County, Florida. The application was dated June 24, 1983, was filed on June 27, 1983, and projected the project cost to be $5,557,000. The application was denied by DHRS by letter dated December 19, 1983. Based on the stipulation of the parties, the application met all of the criteria of Section 381.494(6)(c), Florida Statutes, and Rule 10-5.11, Florida Administrative Code, except for Rule 10-5.11(21), hereinafter referred to as "the bed need methodology." The relevant service area for determination of need is the Lee County subdistrict of DHRS District B. The district poverty ratio is .68; the bed need ratio is 18.3 beds per 1000 for District B. For District 8, the projected 1987 elderly population is 213,561, and for Lee County it is 69,649. By applying the bed need ratio to the projected elderly population, a raw numeric need is established of 3,910 beds for District 8 and 1,275 beds for Lee County. In District 8 there are 3,671 beds licensed and 1,053 beds approved, for a total bed inventory of 4,724 beds. This exceeds the numeric need of 3,910 and results in no need showing. In Lee County there are 808 beds licensed and 332 beds approved, for a total bed inventory of 1,140 beds. This is less than the numeric need of 1,275 and results in a need showing for Lee County. Where there is no need in the District and need in the subdistrict, subsection 10-5.11(21)(e)(1) becomes operative and the situation is denoted as "c2". For category c2, the current utilization threshold is 90 percent occupancy in the subdistrict. Lee County, with a current utilization of 95.5 percent meets this threshold. By applying the occupancy rate of 95.5 percent to the 808 licensed beds, it is determined that the patient census for Lee County is 772. For a c2 subdistrict the prospective base rate of utilization is 80 percent. The limit for projected need for the subdistrict is the maximum number of beds for which the census would produce an occupancy rate of 80 percent. Here, patient census of 772 divided by 80 percent produces a limit of 965. The inventory of 1,140 beds in the subdistrict is greater than the limit for projected need. Approval of additional beds would be inconsistent with these calculations of need under Rule 10-5.11(21). Lee County has a low supply of nursing home beds in comparison with the remainder of District 8. District 8 has a low supply of nursing home beds in comparison with the remainder of the State of Florida. The beds currently in operation in Lee County are being fully utilized. Nursing home facilities do not operate at 100 percent capacity. For all practical purposes, a 95.5 percent occupancy rate indicates full utilization. There are currently four approved nursing home facilities in Lee County. DHRS has received no correspondence from residents of Lee County or other interested persons indicating the presence of waiting lists at existing nursing home or claiming the unavailability of accessible nursing home facilities in the service area.
Recommendation Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, DIANE K. KIESLING, held a formal hearing in this case on September 11, 1984, in Tallahassee, Florida.
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?
Findings Of Fact Procedural. Arbor, Health Quest, HCR, Trecor and fourteen other applicants filed certificate of need applications with the Department in the October, 1987, nursing home bed certificate of need review cycle of the Department for Sarasota County. Each of the applicants involved in these cases filed a letter of intent with the Department within the time required for the filing of letters of intent for the October, 1987, nursing home bed certificate of need review cycle. Each of the applicants involved in these cases filed their certificate of need application within the time required for the filing of certificate of need applications for the October, 1987, nursing home bed certificate of need review cycle. The applications were deemed complete by the Department. The Department completed its State Agency Action Report for the October, 1987, nursing home bed review cycle on February 19, 1988. The State Agency Action Report relevant to these cases was published by the Department in the Florida Administrative Weekly on March 4, 1988. The Department proposed to approve the certificate of need application filed by Trecor and to deny all other applications. Eleven of the applicants whose certificate of need applications were denied by the Department filed Petitions pursuant to Section 120.57(1), Florida Statutes, challenging the Department's proposed action. All of the Petitioner's except the three Petitioners in these cases withdrew their Petitions. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for or nursing home beds to be located in Sarasota County, Florida. Arbor. Arbor is a nursing home company that designs, develops, constructs and operates nursing homes. Arbor's corporate headquarters are located in Lima, Ohio. Arbor owns and operates eighteen nursing home and adult congregate living facilities comprising approximately 2,218 beds. In Florida, Arbor owns Lake Highlands Nursing and Retirement Center in Clermont, The Village at Brandon, and The Village at Countryside. In Florida, Arbor is currently developing certificate of need approved facilities in Clay, Orange, Polk, Pinellas and Sarasota Counties. Arbor formed Sarasota Health Center, Inc., to hold the certificate of need it is seeking in this proceeding. Although this corporation is in form the applicant, Arbor is in substance the applicant in these proceedings. Health Quest. Health Quest is an Indiana corporation which has been in the business of constructing and operating nursing homes and retirement housing facilities for approximately twenty years. Health Quest currently operates eleven nursing centers and three retirement housing developments. In Florida, Health Quest operates three nursing centers and two retirement housing developments. The nursing centers are located in Sarasota, Jacksonville and Boca Raton, Florida. The Jacksonville center is located adjacent to, and is operated in conjunction with, a retirement facility. The facility located in Sarasota is Regents Park of Sarasota (hereinafter referred to as "Regents Park"), a 53-bed sheltered nursing center. Regents Park is located at Lake Pointe Woods, a Health Quest retirement community, which includes 212 independent living apartments and 110 assisted living apartments. The assisted living apartments qualify as an adult congregate living facility. The 53 sheltered nursing home beds are authorized as part of a living care complex pursuant to Chapter 651, Florida Statutes. Health Quest has received approval from the Department to locate 60 nursing home beds, which Health Quest has received as part of a certificate of need for 180 nursing home beds, at Regents Park. The other 120 approved nursing home beds will be located at another facility to be constructed in Sarasota County by Health Quest. Health Quest also has two other projects under construction in Florida: a new facility in Winter Park, Florida, and a new facility in Sunrise, Florida. HCR. HCR is a corporation engaging in the business of designing, developing, constructing and operating nursing homes and related facilities. HCR is a wholly-owned subsidiary of Owens Illinois Corporation. HCR operates approximately 125 facilities with approximately 16,000 beds. HCR has designed and built over 200 nursing homes and related health care facilities. 24 HCR owns and operates ten nursing homes in Florida, including Kensington Manor, a 147-bed nursing center located in Sarasota County, Florida. HCR also has ten other projects being developed in Florida. Trecor. Trecor is a Florida corporation formed to engage in the business of developing and operating facilities within the full spectrum of the health care industry. Trecor was founded in 1985 when it acquired Burzenski Nursing Home (hereinafter referred to as "Burzenski"). Trecor does not own or operate any other health care facility. Burzenski is an existing nursing home with 60 dually certified beds located in the City of Sarasota. The facility was built in 1955 as a private residence. An addition to the facility was constructed in 1962. The Proposals. Arbor's Proposal. Pursuant to a stipulation with the Department dated September 9, 1987, Arbor received certificate of need 4182. Certificate of need 4182 authorizes Arbor to construct a 60-bed nursing home in Sarasota County. 20. Arbor's approved 60-bed nursing home facility will consist of 18,000 gross square feet. Costs of $2,200,000.00 have been approved by the Department in the certificate of need issued for the facility. Arbor intends to develop certificate of need 4182 by building a facility large enough for 120 beds. This facility will house the approved 60 nursing home beds and, if Arbor's application in this case is not approved, an additional 60 beds, licensed as adult congregate living facility beds. In this proceeding Arbor is requesting approval of a proposed conversion of the 60 adult congregate living facility beds to 60 nursing home beds. Arbor has proposed the construction of an additional 18,000 gross square feet to house the additional 60 nursing home beds sought in this proceeding. The proposed cost of the proposal is $2,380,000.00. The total cost of 120 bed facility will be $4,580,000.00. Health Quest's Proposal. Health Quest is seeking approval to convert its 53 sheltered nursing center beds at Regents Park to nursing home beds and to add 7 nursing home beds. The 60 nursing home beds are to be housed in the new community nursing home facility at Regents Park. The beds will be housed in 30,945 square foot of the Regents Park facility. Health Quest also intends to add 60 nursing home beds, which have already been approved by the Department, to Regents Park. The certificate of need application filed by Health Quest indicates that its proposal involves no capital costs. This is incorrect. There will be minimal costs associated with the addition of the 7 additional nursing home beds being sought by Health Quest which it has failed to include in its proposal. Health Quest did not present evidence concerning the total cost of the facility it plans to use to house the proposed 60 beds or the cost of the 60 beds already approved by the Department which it plans to add to Regents Park. HCR's Proposal. HCR is seeking approval to construct a new, freestanding 60-bed nursing home in Sarasota County. HCR's proposal also includes a 31-bed adult congregate living facility. The nursing home component will consist of 25,600 gross square feet (including 2,300 square feet to be used for adult day care). The total facility will consist of 43,000 gross square feet. Total capital cost for the nursing home component is estimated to be $2,519,000.00. The total cost, including the costs attributable to proposed adult day care services, is $2,657,000.00. The cost of the 31-bed adult congregate living portion of the project will be $1,800,000.00. The total cost of HCR's planned facility is $4,457,000.00. Trecor's Proposal. Trecor is seeking approval to construct a 60-bed addition to the Burzenski 60-bed nursing home. Burzenski is located at 4450 Eighth Street, Sarasota, Florida. The building in which the existing 60 nursing home beds are housed will be replaced by Trecor with a new building. The existing Burzenski building has out-lived its useful life and contains several structural deficiencies. Operations are severely restricted and inefficient. Existing three and four bed wards limit the placement of residents. The existing building does not comply with all current licensure requirements. The noncompliance, however, was "grandfathered" in. In order to replace its existing building with a modern building which meets all current licensure requirements, Trecor applied for a certificate of need in 1985 to build a replacement facility on an adjoining parcel of real estate for which Trecor held an option to purchase at the time. This application was approved on December 4, 1985. After an error by Trecor caused the time established for exercising the certificate of need to pass and a requested six-month extension of the certificate of need was denied by the Department, the certificate of need to construct the replacement facility lapsed. Another application for a replacement facility was filed in January, 1987. This application was approved by the Department in May, 1987. The replacement facility was not, however, constructed. Subsequently, in April and May, 1988, the Department determined that replacement of the existing building was exempt from certificate of need review. Trecor now proposes to add 60 nursing home beds at the same time that it builds its replacement facility for its existing 60 nursing home beds. The new nursing home beds will be housed on a second floor to be built on the replacement facility. In Trecor's application for (30 additional nursing home beds, Trecor has proposed the addition of 12,061 gross square feet to its replacement facility and a project cost of $885,210.00. The cost of Trecor's replacement facility will be $1,303,424.00 plus a $1,400,000.00 debt on the existing building. The total cost of Trecor's 120 bed facility will be $3,588,634.00. Section 381.705(1)(a), Florida Statutes. Numeric Need. Pursuant to the need methodology of Rule 10- 5.011(1)(k)(2), Florida Administrative Code, there is a need for an additional 75 community nursing home beds for Sarasota County for July, 1990, the planning horizon applicable in these cases. All of the applicants have agreed with the Department's determination of the need for additional nursing home beds for Sarasota County. All of the applicants are seeking to provide 60 of the needed nursing home beds. The District Health Plan. The district health plan for the Department's District 8, which includes Sarasota County, provides certain standards and criteria to be considered in determining community nursing home care need. The policy guidelines and their application, if applicable to the applicants in this proceeding, are as follows: Community nursing home services should be available to the residents of each county within District Eight. Sarasota County is a separate planning subdistrict for community nursing home beds. Therefore, this guideline should be applied to Sarasota County. All of the applicants will increase the availability of nursing home services to the residents of Sarasota County. Community nursing home beds should be geographically distributed throughout the counties of District Eight to promote optimal availability and accessibility. The 2,264 existing licensed and 283 approved community nursing home beds located, or to be located in Sarasota County, are already geographically distributed throughout Sarasota County. All of the applicants will increase geographic distribution of beds throughout Sarasota County, regardless of where they may be located. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy g. occupational therapy laboratory h. physical therapy x-ray i. speech therapy dental care j. mental health counseling visual care k. social services diet therapy l. medical services All of the applicants will meet thin guideline. New and existing community nursing home bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. The applicants have proposed to provide the following percentage of care to Medicaid patients: Arbor: 45% Health Quest: 16.7% HCR: 42% Burzenski: 59% 1st Year; 60% 2d Year. All of the applicants except Health Quest comply with this guideline. Community nursing home facilities in District Eight should expand their financial base to include as many reimbursement mechanisms as are available to them including Medicare, Medicaid, Champus, VA, and other third-party payers, and private pay. This guideline applies to existing facilities. None of the applicants are proposing to "expand their financial bases" in the manner suggested in this guideline. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. This guideline has been filled. New community nursing home facilities may be considered for approval when existing facilities servicing comparable services areas cannot reasonably, economically, or geographically provide adequate service to these service areas. Existing facilities cannot reasonably meet the need for the 75 additional nursing home beds in Sarasota County for July, 1990. No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility. All of the applicants meets this guideline. Expansion of existing facilities to 120 beds should be given priority over construction of new facilities in the health service area. The proposals of Arbor, Health Quest and Trecor meet this guideline. The proposal of HCR does not meet this guideline. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. All of the applicants meet, or will meet, this guideline. The proposed project should have a formal discharge planning program as well as some type of patient follow-up service with discharge/transfer made available seven days a week. All of the applicants meet this guideline. Nursing home services should be within at least one hour typical travel time by automobile for at least 95 percent of all residents of District Eight. This guideline is not applicable. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All of the applicants meet this guideline. Health Quest meets this guideline less than the other applicants because of its minimal Medicaid commitment. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. All of the applicants meet this guideline. Health Quest has not, however, provided Medicaid care at Regents Park. Health Quest does provide Medicaid at all its other nursing centers and will obtain Medicaid certification at Regents Park if its application for a certificate of need in this case is approved. Medicare is not provided at Burzenski at this time. Burzenski will, however, provide Medicare at its proposed facility. Failure of a holder of a certificate of need to substantially comply with statements of intent made in the application and relied upon the Department of Health and Rehabilitative Services as set forth in the Certificate shall be cause for the Department to initiate an action for specific performance, fines as specified in s. 381.495(3), or injunctive relief. This guideline is not applicable. Need for Services. HCR conducted a "non-numeric community need survey" in Sarasota County. Based upon this survey, HCR has suggested that there is an unmet need for 1,600 nursing home beds for Sarasota County for Alzheimer patients and other dementia patients. HCR's conclusions concerning unmet need for services for Sarasota County are unrealistic. HCR failed to prove that any need in Sarasota County for services for Alzheimer patients and others is not being met adequately. Services for Alzheimer patients are currently being provided by Trecor and Health Quest. HCR and Trecor have proposed to dedicate 30 of their proposed nursing home beds to the care of Alzheimer patients and patients with other forms of dementia. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. Other Considerations. Health Quest's avowed purpose for the proposed conversion of its 53 sheltered beds is to insure that Regents Park remains available for use by the general public. Florida law allows sheltered nursing home beds to be used by persons other than residents of an adult congregate living facility for five years from the issuance of a license for the sheltered nursing home beds. Regents Park received its license in November, 1986. Therefore, its sheltered nursing home beds can remain available for use by the general public until November, 1991. Health Quest has received a certificate of need for 180 nursing home beds for Sarasota. Health Quest intends on placing 60 of those beds at Regents Park. The other 120 beds will be placed at another facility to be constructed in Sarasota County. Health Quest may be able to use some of its 180 approved nursing home beds to avoid the closing of Regents Park to the general public. Health Quest has not, however, explored this alternative. Health Quest's decision not to pursue this course of action is based in part on its decision that the 43% Medicaid care required for its certificate of need for 180 nursing home beds is not acceptable at Regents Park. Health Quest has failed to prove that its proposal is needed because of its desire to convert its sheltered beds to community nursing home beds. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Sarasota County are not available, efficient, appropriate, accessible, adequate or providing quality of care except to the extent that existing services cannot meet the need for 75 additional nursing home beds in Sarasota County. Section 381.705(1)(c), Florida Statutes. Arbor. Two of Arbor's three licensed facilities in Florida are currently rated superior. The other facility is rated standard. Arbor's proposal may qualify it for a superior rating at its proposed facility. Arbor proposes to provide sufficient services, safeguards and staff. Arbor should be able to provide adequate quality of care in its proposed facility. Health Quest. Health Quest has a corporate policy of emphasizing quality of care. It attempts to obtain the highest quality rating in every community it serves. Health Quest's facilities in Jacksonville and Boca Raton have been rated superior. Health Quest's Sarasota facility has not been in operation long enough to qualify for a superior rating. Health Quest's Sarasota facility offers a high level of staffing, including a Human Resources Director, who is responsible for personnel administration and training, a full time social activities director and an activities coordinator. It also has a high nursing ratio. Health Quest is proposing the highest level of staffing of the applicants in this proceeding. Extensive training and development of staff at Health Quest's Sarasota facility is provided. Orientation training and in-service training on an on- going basis will be provided. Health Quest proposes to provide sufficient services, safeguards and staff. Health Quest should be able to provide adequate quality of care in its proposed facility. HCR. HCR's existing Sarasota nursing home has received a license with a standard rating. Other HCR facilities have received standard ratings, including some facilities which were acquired by HCR with superior ratings. HCR also has facilities which have been rated superior. HCR will enhance the quality of care available by providing a full range of services, from the least intensive level (adult day care) to the most intensive levels (i.e., sub- acute care). HCR's proposal to provide adult day care, a dedicated Alzheimer's unit, sub-acute care and respite care, and its adult congregate living facility will enhance quality of care in Sarasota County. HCR adheres to extensive quality assurance standards and guidelines. HCR provides adequate training, exceeding state minimum requirements, for its staff. HCR proposes to provide sufficient services, safeguards and staff. HCR should be able to provide adequate quality of care in its proposed facility. Trecor. Trecor has contracted with Central Care, Inc., a Florida corporation providing a full spectrum of health care and retirement living services, to manage its facility. Trecor provides education and training for its staff on an ongoing basis. Even though Trecor is operating in an inadequate building, Trecor received a superior rating in 1986-1987 and 1987-1988. Trecor proposes to provide sufficient services, safeguards and staff. Trecor should be able to provide adequate quality of care in its proposed facility. Section 381.705(1)(e), Florida Statutes. None of the applicants provided sufficient proof to conclude that they will provide joint, cooperative or shared health care resources sufficient to provide them with an advantage over the other applicants. Section 381.705(1)(f), Florida Statutes. None of the applicants proved that there is any need in the service district for special equipment or services which are not reasonably and economically accessible in adjoining areas. Section 381.705(1)(g), Florida Statutes. None of the applicants proved that this criterion applies in this proceeding. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all residents of the service district. Health Quest will, however, provide less access to Medicaid residents than the other applicants. Trecor will attempt to initiate internship and training programs for area nursing and allied health programs, and provide clinical placements. Health Quest participates in training programs for nurses from Sarasota Vocational/Technical school. A certified nursing aide program is also offered by Health Quest through Sarasota Vocational/Technical School. All of the applicants will be able to attract and maintain the staff necessary to operate their proposed facilities. HCR is proposing to provide the highest salaries and benefits for staff. Health Quest already has staff for its existing 53 beds. Health Quest is adding, however, 60 nursing home beds to Regents Park. HCR failed to prove that all of the existing staff will be used to staff the proposed 60 nursing home beds and not the already approved 60 nursing home beds. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. Short-term financial feasibility is the ability of an applicant to finance a project. Arbor. The total projected cost of Arbor's proposed 60-bed addition is $2,380,000.00. The total cost for its 120-bed facility is $4,580,000.00. Arbor's projected costs are reasonable. Arbor is proposing to contribute 10% of the cost of its proposal and finance the remaining 90%. Arbor has $39,000,000.00 in bank lines of credit, of which $34,000,000.00 remain available for development of Arbor's proposed project. Arbor also has sufficient money market funds to meet its projected equity contribution of 10%. Arbor has demonstrated immediate financial feasibility of its proposed project. Health Quest. Health Quest indicated in its application that there were no capital costs associated with its proposal. This is not correct. It will have some minor costs for the addition of the seven new nursing home beds it is seeking. Health Quest's proposal is the lowest in terms of additional capital costs which must be incurred. Most of the capital costs associated with the 53 nursing home beds it is seeking were already incurred when it built Regents Park. Health Quest did not provide proof of the cost of Regents Park. The unaudited financial statements of Health Quest indicate that it experienced a loss of $3,200,000.00 in 1986 and a loss of $5,000,000.00 in 1987. Health Quest has net worth and equity of $300,000.00 on over $200,000,000.00 in assets. The losses Health Quest has been experiencing have been the result of Health Quest's development activities. Health Quest can finance its project with internal funds. The evidence failed to prove that Health Quest must liquidate assets to generate operating funds. Health Quest demonstrated immediate financial feasibility of its proposed project. HCR. HCR's total estimated project costs for its 60-bed facility is $2,657,000.00. This amount includes the cost of the portion of the project to be used for adult day care ($138,000.00). The costs to be incurred for the adult congregate living facility is $1,800,000.00. HCR's projected costs are reasonable. HCR intends to contribute 25% of the total project costs and finance the remaining 75%. HCR has sufficient funds on hand to fund 25% of its project costs. In fact, HCR has the ability to contribute 100% of the total project costs. HCR has lines of credit with banks and other sources of obtaining financing for the project, including a loan from its parent corporation. HCR has demonstrated immediate financial feasibility of its proposed project. Trecor. The total cost of Trecor's proposed 60-bed nursing home addition is $885,210.00. The total cost of replacing the existing Burzenski building is projected as $3,588,634.00 ($885,210.00 for the proposed addition; $1,400,000.00 debt on the existing building; and $1,303,424.00 for the replacement of the existing building). Trecor is proposing to contribute 10% of the proposed project costs, or $88,521.00, and to finance the remaining 90%. To finance the entire project will require an equity contribution of over $300,000.00. Trecor has experienced operating losses in 1986 and 1987 and has a negative net worth of $259,000.00. Trecor has a positive cash flow, however. Trecor does not have sufficient equity to contribute 10% of the proposed project costs. The Board of Directors of Trecor has, however, adopted a resolution indicating Trecor's intent to provide the necessary contribution. Trecor can obtain the necessary funds from its owners if necessary. NCNB has expressed an interest in financing the rest of the project. Although NCNB has not legally committed to such an arrangement, it is reasonable to conclude that a satisfactory loan agreement can be reached with NCNB or Barnett Bank. Trecor has demonstrated immediate financial feasibility of its proposed project. Long-Term Financial Feasibility. Long-term financial feasibility is the ability of an applicant to operate a project at a profit, generally measured at the end of the second year of operation. Arbor. At the formal hearing Arbor presented an updated pro forma. Arbor suggested that the purpose of the updated pro forma was to reflect increased personnel costs and reduced utilization from 97% to 95%. According to Arbor, the changes reflect changes caused by inflation and "actual experience." The updated pro forma submitted by Arbor includes substantial increases in salary expense ranging from 10% to 30% (and one increase of 50%). The updated pro forma also includes at least one position not included in the original pro forma filed with Arbor's application. Arbor's original pro forma understated salary expenses. The updated salary expenses were foreseeable, and should have been foreseen, when Arbor filed its application. The updated pro forma was accepted into evidence over objection. In the updated pro forma, Arbor has projected a loss of $347,043.00 from revenue of $2,034,837.00 for the first year of operation and a profit of $41,833.00 from revenue of $3,016,512.00 for the second year of operation. Arbor has projected a payor mix of 45% Medicaid, 5% Medicare and 50% private pay. These projections are reasonable. Arbor's projected fill-up rate is reasonable. Arbor's projected charges are reasonable. The evidence failed to prove that Arbor's projected revenue and expenses as contained in its original application are reasonable. The evidence also failed to prove that Arbor's projected expenses as contained in its updated pro forma are reasonable either. Arbor has failed to prove that its project is feasible in the long term. Health Quest. Health Quest is operating at close to capacity at Regents Park and is already charging close to its projected patient charges. The facility has been operating at a loss. The facility experienced a profit only during its latest month of operation. The addition of Medicaid beds will erode Health Quest's revenues to some extent. Health Quest has projected a profit of $16,663.00 from revenue of $1,771,303.00 for the first year of operation and a profit of $40,698.00 from revenue of $1,850,156.00 for the second year of operation. Health Quest is projecting a payor mix of 16.7% Medicaid, 4.2% medicare and 79.2% private pay. These projections are reasonable. Regents Park opened in November, 1986, and filled up rapidly. It has been operating at full occupancy and with a waiting list. Health Quest's estimated fill up rate is reasonable in light of this fact. Health Quest has failed to prove that its project is feasible in the long term. HCR. HCR has projected a loss of $267,436.00 on $1,068,427.00 of revenue for its first year of operation and a profit of $62,729.00 on $1,772,399.00 of revenue for its second year of operation. HCR has projected a payor mix of 42% Medicaid, 4% medicare and 54% private pay. These projections are reasonable. HCR's projected fill-up rate to 95% occupancy is reasonable. HCR's projected patient charges are reasonable. HCR's projected revenue and expenses are reasonable. HCR's project is feasible in the long term. (4). Trecor. Trecor has projected a profit of $77,458.00 on revenue of $2,481,229.00 for the first year of operation and a profit of $367,896.00 on revenue of $3,106,152.00 for the second year of operation. The pro forma submitted by Trecor is for the 120-bed nursing home facility and not just the proposed 60-bed project. Trecor has a negative net worth and Trecor has been operating at a loss. Trecor has projected a payor mix of 59% Medicaid, 3.5% medicare, 34% private pay and 3.5% V.A. These projections are reasonable. Trecor has estimated it will achieve 50% occupancy in the first month of operation and an occupancy of 96% by the seventh month. This is a fill up rate of 2 residents a week. Arbor and HCR have projected fill up rates of 2 residents a month. Trecor does not expect to lose any patients during construction of its facility. Trecor is currently at full occupancy and has a waiting list. Trecor's projected fill up rate is achievable. Trecor's projected patient charges are reasonable. They are the lowest of the competing applicants. Trecor has failed to include some expenses in its projections. Trecor left $50,000.00 of administrative salaries out of its projections and FICA is underestimated because Trecor used the old rate. When these expenses are taken into account, Trecor's project is still financially feasible. Trecor's projected revenue and expenses, except as noted above, are reasonable. Trecor's project is feasible in the long term. Section 381.705(1)(1), Florida Statutes. Based upon the projected rates for nursing home services to be charged by the applicants, Arbor and Trecor will have the least adverse impact on patient charges, followed by HCR. Health Quest will have the greatest adverse impact on patient charges. Generally, all of the applicants will enhance competition if their projects are approved. Section 381.705(1)(m), Florida Statutes. Arbor. Arbor's building will contain 36,000 gross square feet, with 18,000 gross square feet attributable to the 60 nursing home beds it is seeking in this proceeding. The cost of Arbor's proposed 60-bed addition is $2,380,000.00 ($132.22 per square foot) and the cost of its entire project is $4,580,000.00. The projected cost of construction is $1,228,000.00, a cost of $68.22 per square foot. Arbor's projected costs are reasonable. Arbor's proposed building will provide 300 square feet per bed. Arbor plans to build its prototype 120-bed nursing home facility. It has used its 120-bed nursing home plans for other Florida projects. These plans have been approved by the Department's Office of Licensure and Certification. Arbors' building will comply with all code and regulatory requirements. The building will be constructed on a 6.5 acre site which is appropriately zoned and of sufficient size. The design of Arbor's proposed building and the proposed methods of construction are reasonable. Health Quest. Health Quest has already constructed the building in which its proposed 60 nursing home beds dire to be located. The building is already licensed. The building complies witch all code and regulatory requirements. A total of 30,945 square feat will be devoted to the nursing home portion of Regents Park. This is the largest of the proposed facilities. The proposed building will have 515 square feet per bed. There are no construction costs to be incurred for Health Quest's proposal. Construction costs have already been incurred to construct the facility in which Health Quest's proposed beds will be housed. Health Quest's building design is of the highest quality. HCR. HCR is proposing to construct a 60-bed nursing home. Additional space for 31 adult congregate living beds and for an additional 60 nursing home beds will also be built. The facility will include a dedicated 30-bed Alzheimer's unit. The inclusion of this unit requires more space. The proposed HCR building will consist of 25,600 square feet for the 60-bed nursing home. This includes the $138,240.00 cost and the 2,300 square feet of the adult day care unit. The projected cost of HCR's project is $2,657,000.00 or $103.79 per square foot. The projected cost of constructing HCR's proposed building is $1,536,000.00 or $60.00 a square foot. HCR's projected costs are reasonable. 166. HCR's facility will consist of 426 square feet per bed. 167. HCR's facility will comply with code and regulatory requirements. 168. HCR's design and methods of construction are reasonable. 169. HCR's facility will incorporate energy conservation measures. Trecor. The Trecor proposal entails the addition of a 60-bed patient wing on the second floor of a two-story building. The first floor of the building will be constructed by Trecor to replace its existing building. Approval of the replacement facility is not part Trecor's proposal at issue in this proceeding. The plans for the replacement building and the addition thereto have been developed together. The plans can be modified to insure that all of the proposed services can be accommodated in the building. The proposed Trecor building will be constructed in phases. First, the portion of the new building which will house the 120 nursing home beds will be constructed. Patients will then be transferred to the newly constructed facility. All of the existing building except the kitchen and administration facilities will then be demolished. Patients will be fed out of the existing kitchen and the administrative functions will be handled form the old administrative facilities. The new kitchen, dining and administrative offices will then be constructed. When this portion of the building is completed, the old kitchen and administrative offices will be demolished. Although inconvenient, Trecor should be able to continue to provide quality of care during the construction period. The other applicants have raised a number of issues concerning the Trecor building. The issues do not, however, involve violations of code or regulatory requirements for nursing home facilities. Trecor's building will contain a total of 31,398 square feet. This total includes 19,337 square feet attributable to the existing 60 nursing home beds and 12,061 square feet attributable to the 60 nursing home beds at issue in this proceeding. The proposed building is relatively small. Trecor's architect did a very good job of properly using the relatively small parcel of real estate he had to work with. The small size of the building, however, accounts for the lower cost of the Trecor proposal. The evidence failed to prove that Trecor cannot provide adequate care, despite the building's size. The cost of Trecor's proposed 60-bed addition is $885,210.00 ($73.39 per square foot) and the cost of its replacement facility is $1,303,424.00. The projected cost of construction for Trecor's proposed 60-bed addition is $592,500.00, a cost of $49.13 per square foot. Questions have been raised concerning the project development costs and the estimated architecture/engineer fees for Trecor's project. Trecor did not include all of the expenses for these items in the projected costs of its proposed 60-bed addition because the costs were included as part of building the replacement facility. Some of those costs could have been included as part of the cost of the proposal being reviewed in this proceeding. If those costs had been included, their inclusion would not affect the conclusions reached in this proceeding concerning the reasonableness of Trecor's project. Trecor's projected costs are reasonable. Trecor's proposed building will provide 201 square feet for the proposed 60 nursing home beds, 322 square feet for the existing 60 nursing home beds and 261 square feet for the total 120 nursing home beds. Trecor's building will comply with all code and regulatory requirements. The Trecor facility will be located on 1.97 acres. The design of the Trecor building and the proposed methods of construction are reasonable. Trecor's facility will incorporate energy conservation measures. Section 381.705(1)(n), Florida Statutes. All of the applicants have a history of providing care to Medicaid patients. Health Quest, however, does not provide care to Medicaid patients at Regents Park. If Health Quest's application is approved, Regents Park will become Medicaid certified. The projected Medicaid of the applicants is as follows: Arbor: 45% Health Quest 16.7% HCR 42% Burzenski 59% first year; 60% second year All of the applicants except Health Quest are proposing to provide at least 42% Medicaid, which is the average Medicaid provided in Sarasota County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting Trecor's application for certificate of need number 5443 and denying Arbor's application for certificate of need number 5841, Health Quest's application for certificate of need number 5442 and HCR's application for certificate of need number 5437. DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1945; 88-1949; 88-1950 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Arbor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 10-13. 2 1 and 29-33. 3 15-21 and hereby accepted. 4 19-20, 34 and 36. 5 22-25. 6 37-40. 7 26-27. 28, 41 and 44-47. Trecor applied for a certificate of need in January, 1987, not May, 1987. Hereby accepted. Not all of the applicants in this proceeding, however, have met the minimum criteria for the issuance of a certificate of need. Not supported by the weight of the evidence and a statement concerning the proceedings. 51. The last two sentences are argument. 51. The fifth through ninth sentences are argument. The evidence proved that Health Quest is adding 60 nursing home beds to its existing facility. Therefore, if its application in this case is approved it will have a 120-bed nursing home facility. 51. The last five sentences are statements of law and argument. Statement of law or not supported by the weight of the evidence. 15 64-66. 16 67-69 and 73. 74 and hereby accepted. The last two sentences are not supported by the weight of the evidence. 43 and 81. The fifth, sixth and eighth sentences are not supported by the weight of the evidence. The third, fourth and seventh sentences are hereby accepted. Although this proposed finding of fact, except the last sentence, is generally correct, this is not the only factor to consider in determining whether an applicant can provide quality of care. Argument, not relevant to this proceeding or not supported by the weight of the evidence. 52-55 and hereby accepted. The last sentence, except the reference to the state health plan, is hereby accepted. The second, sixth, ninth, tenth and eleventh sentences are not supported by the weight of the evidence or are argument. See 52-56. Argument. 56 and hereby accepted. 85, 87-88 and hereby accepted. The last sentence is not supported by the weight of the evidence. 51, 60-61 and 86. The second, third, sixth, eighth, ninth and tenth sentences are not relevant to this proceeding, not supported by the weight of the evidence or argument. 26 92 and 114. 27 95-97 and 106-107. 28 98 and 100. 109-111. The last five sentences are argument and not supported by the weight of the evidence. See 111-113. 97 and 107. Short-term financial feasibility of Health Quest is not moot and Trecor can finance its project with the assistance of its shareholders. Hereby accepted. The last sentence is not supported by the weight of the evidence. 115 and 118. The last four sentences are not supported by the weight of the evidence or are argument. 119-120. The last two sentences are not relevant to this proceeding or are not supported by the weight of the evidence. See 123. 34 130 and 134. 125, 127 and 132. The fifth sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. The last sentence is hereby accepted. 136-137 and 143. The first and last sentences are not supported by the weight of the evidence. 38-39 Not supported by the weight of the evidence, argument, not relevant to these proceedings or taken into account in determining the weight to be accorded to testimony. 40 Hereby accepted. The first and last sentences are not supported by the weight of the evidence. 41 139-141. 42 See 97, 103, 107, 113, 124, 129, 135 and 145. Arbor has not proven that it is financially feasible in the long term. The last three sentences are not supported by the weight of the evidence. 43, 46 and 56 Statements of law. 146 and hereby accepted. Hereby accepted. 47 148 and 153-155. 48 157-158, 160 and 175. 49 161-163 and 175. 171, 175, 180 and hereby accepted. The sixth, ninth and tenth sentences are not supported by the weight of the evidence. 171. The last sentence is not supported by the weight of the evidence. 52-54 Not supported by the weight of the evidence, argument or not relevant to this proceeding. 55 185 and 187-188. The last sentence is argument. 57-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. Health Quest's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 32, 34, 37 and 41. 3 2. 4 3. 4 and 6. 7. Not all of the applicants filed petitions. 7 48. 8 15-16. 9 67-68. 10 17-19. 11 21. 12 19. 13 58-59. See 57. The weight of the evidence did not prove that Regents Park will be closed to the public "unless Health Quest's application for conversion to community status is approved." 14-15 Not supported by the weight of the evidence and not relevant to this proceeding. 16 See 36. Not supported by the weight of the evidence. 17-19 Not supported by the weight of the evidence or not relevant to this proceeding. 20 70 and hereby accepted. 21, 24, 27, 30-48, 52, 54-57, 61, 64, 70, 77, 88-89, 93, 95, 97, 107-108, 110-111, 113, 118, 124, 126, 128-129, 132, 135-136 and 138-139. Hereby accepted. 22 Hereby accepted and summary of testimony. The last two sentences are not supported by the weight of the evidence. See 91. 23 72. 25-26 88 and hereby accepted. 56 and hereby accepted. Not relevant to this proceeding. 49 Hereby accepted. The last two sentences are not relevant to this proceeding, are based upon hearsay and constitute opinion testimony from a nonexpert witness. 50 69. 51 Not relevant to this proceeding or based upon hearsay. 53 126 and 128. 58 Hereby accepted. The last sentence is not supported by the weight of the evidence. 59 157. 60, 65-67, 71, 91, 112, 114-116, 121-122 and 125 Not supported by the weight of the evidence. 62 Not relevant to this proceeding. 63 51 and 185-186. 68 100-101. 69 102. 72 51. The last sentence is rejected. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. The parties did not indicate that Section 381.703(1)(b)1, Florida Statutes, was at issue in this proceeding or that Section 381.705(1)(a), Florida Statutes, does not apply. 73-76 Not relevant to this proceeding. The issue is not just whether nursing home services are available to all residents of the service area. Also at issue is whether each applicant is proposing to serve all of the residents of the service area. Health Quest's proposal does indicate Health Quest intends on serving a significant portion of Sarasota County's Medicaid population. 78 60-61. The portion of this proposed finding of fact prior to subparagraph a, the portion of subparagraph a appearing on page 19 of the proposed recommended order and subparagraphs b-d are rejected as argument, statements of law or as not being supported by the weight of the evidence. 79-82 Although generally correct, these proposed findings of fact are argument. 83 Not relevant to this proceeding. 84-86 Summary of testimony and argument. 87 Hereby accepted. The last sentence is not relevant to this proceeding or supported by the weight of the evidence. 90, 92 Not relevant to this proceeding. 94 Summary of testimony and argument. 96 Hereby accepted. The last sentence and the last half of the second sentence are rejected as not being relevant to this proceeding. 98-106 These proposed findings of fact were taken into account in determining the weight to be given testimony and other evidence. 109 Although the first sentence is correct, the rest of the proposed finding of fact is not relevant to this proceeding or not supported by the weight of the evidence. 117, 119-120 Not relevant to this proceeding. 123 108. The portion of this proposed finding of fact contained on page 30 of the proposed recommended order is primarily argument and not supported by the weight of the evidence. 127 143. 130-131 and 133-134 Not supported by the weight of the evidence, cumulative or not relevant to this proceeding. 137 The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence, argument or not relevant to this proceeding. Summary of testimony. Not supported by the weight of the evidence. The first two sentences are hereby accepted. The rest of the proposed finding of fact is argument and not supported by the weight of the evidence. HCR's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2, 4-9, 13-14, 16, 19-20, 22-23, 27, 30-32, 35, 41-42, 45, 47, 49-51, 53, 63-67, 71 and 75 Hereby accepted. 3, 15 and 33 Not supported by the weight of the evidence. Hereby accepted. The last sentence, as it applies to Sarasota County, is not supported by the weight of the evidence. Although generally true, this proposed finding of fact, as it applies to Sarasota County, is not supported by the weight of the evidence. 12 55. 17 37-4 and 55. 18 Hereby accepted, except that the first sentence is not supported by the weight of the evidence. 21 51 and 86. 24 51. The parties stipulated that the state health plan has been met by all of the applicants. 25 22-25. 26 76-78 and hereby accepted. 77 and hereby accepted. 78 and hereby accepted. 34 106-107. 36 Although generally true, the evidence failed to prove that HCR would provide these benefits without cost to its proposed Sarasota facility. 37 131-132. 38 133. 39 134-135. 40 89-90. 43 39-40, 163-164 and 166. 44 152, 167-170, and 180. 46 169-170. 48 165-166. 52 Hereby accepted. The weight of the evidence failed to prove that appropriate services for "AD patients" are not adequately available. 54 The parties stipulated that the state health plan has been met by all of the applicants. 55 2-3. 56-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. 59 148-149. 60 Taken into account in determining the weight to be given to testimony. Not supported by the weight of the evidence. 61 123. 62 Hereby accepted except the last two sentences which are not supported by the weight of the evidence. 68-69 115-117. 70 Not relevant to this proceeding. 72 41, 45-47, 175-176, 180 and hereby accepted. Hereby accepted except the third through fifth sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence and not relevant to this proceeding. Hereby accepted except the last sentence is not supported by the weight of the evidence. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. Taken into account in determining the weight to be given testimony and other evidence. Not relevant to this proceeding. 80-81 Not supported by the weight of the evidence. 109-110. The last three sentences are not relevant to this proceeding. Hereby accepted, except for the first two sentences, which are not supported by the weight of the evidence. Hereby accepted except the third and last sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence. See 136. Not relevant to this proceeding. Trecor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-6, 20-24, 27, 29-32, 35, 37-39 and 56. Hereby accepted. 7 28 and 41-42. 8 41, 43 and 81. 9 26-27. 10 41, 44 and 81. 11 44-45. 12 46 and 171. 13 173. 14 46, 171-172 and 174. 15-16 173. The last sentence of proposed finding of fact 16 is not supported by the weight of the evidence. 17 181. 18 54-55 and hereby accepted. 19 79. 25 40, 47, 109, 111-112 and hereby accepted. 26 175 and 177. 28 178 and hereby accepted. 33 184 and hereby accepted. 34 138 and 142. 36 139-141. 40 50. 41 51. 42 51. The last three sentences are not supported by the weight of the evidence. Although the Arbor site was not disclosed, the weight of the evidence supports a conclusion that Arbor's proposal meets this portion of the district plan. 43-47 51. 48 51. The last sentence is not supported by the weight of the evidence. 49-50 51 and hereby accepted. 51 51 and hereby accepted. The last sentence is not supported by the weight of the evidence. 52-53 51. Argument. 51 and hereby accepted. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2-3 49. 4 Not relevant to this proceeding. 5-6 Conclusions of law. Not supported by the weight of the evidence. Contrary to a stipulation of the parties that all of the parties meet the state health plan to the extent that it is applicable. See 63. 10, 13, 15 and 17 Hereby accepted. 11 See 64-84 concerning Section 381.705(1)(c), Florida Statutes. The parties stipulated that Section 381.705(1)(d), Florida Statutes, had been met or did not apply. 12 86 and 129. 14 Not relevant in this de novo proceeding and not supported by the weight of the evidence. 16 See 60-62. COPIES FURNISHED: Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Charles M. Loeser Assistant General Counsel Health Quest Corporation 315 West Jefferson Boulevard South Bend, Indiana 46601 James M. Barclay, Esquire 231 A East Virginia Street Tallahassee, Florida 32301 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32308 Jay Adams, Esquire Jay Adams, P.A. 1519 Big Sky Way Tallahassee, Florida 32301 Theodore E. Mack Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact In April, 1984, the Petitioner, Health Care and Retirement Corporation of America d/b/a Heartland of Palm Beach, applied for a certificate of need for 120 community nursing home beds in Palm Beach County, Florida. In July, 1984, the Respondent, the Department of Health and Rehabilitative Services (HRS) gave notice of initial intention to deny the application. HRS Exhibit 5. The instant proceedings are the result of the request of the Petitioner for a formal administrative hearing from that denial. On January 22, 1986, the parties jointly moved for a continuance of the final hearing in this case then scheduled to commence on February 3, 1986, and in paragraphs 3 through 6, represented that the purpose of the requested continuance was to allow the Petitioner to gather data as to two alleged underserved groups: patients suffering from Alzheimer's disease and sub-acute care patients. The Petitioner asserted that such data would support an amended, updated application for certificate of need to be filed by the Petitioner for the purpose of showing need pursuant to the special exception allowed in the rules. In paragraph 8 of the motion, HRS agreed to give serious consideration to the updated application and supporting documents. The motion was granted by order dated February 3, 1986, and at the request of both parties, the final hearing was reset for April 3, 1986. The parties have agreed that all statutory and rule criteria have been satisfied by the Petitioner in this case except for the issue of need as determined by rule 10-5.11(21), Florida Administrative Code, and that question is the sole issue in this case. T. 5; Hearing Officer Exhibit 1. Petitioner's initial application did not mention the intention to provide special services for victims of Alzheimer's disease, and the Petitioner did not amend or update its application with HRS in that respect, except to the extent that it presented such testimony in the formal administrative hearing. T. 104. The application is not in evidence. The initial review of Petitioner's application by HRS did not consider special services to Alzheimer's patients. T. 117; HRS Exhibit 5. HRS has adopted rule 10-5.11(21), Florida Administrative Code, to determine need for additional community nursing home beds. Using a planning horizon of 1987, which is 3 years after the date of application, the rule calculates a net surplus of 511 community nursing home beds for Palm Beach County. Even using the 1989 planning horizon, there is still a net zero bed need using the rule formula for Palm Beach County. T. 100; HRS Exhibit 2; T. 97 and 102. Alzheimer's disease is a degenerative process of the brain characterized primarily by loss of memory and impairment of a variety of routine functions. T. 160-161. Diagnosis of the disease is difficult since there are related degenerative mental disorders. Moreover, positive diagnosis typically requires examination of brain tissue, and the process of obtaining brain tissue is intrusive. T. 162-163. For these reasons, the diagnosis is typically of "senile dementia of the Alzheimer-type," or Alzheimer's disease or related disorders. T. 163. The cause of the condition is not known, although research into possible surgical techniques to ameliorate the effects is being conducted in the Jupiter, Florida, area. T. 73. Alzheimer's disease primarily afflicts elderly persons, although some younger persons may also be victims. T. 163. Person suffering from Alzheimer's disease typically have memory loss, communicative problems, aphasia, trouble understanding, confusion, disorientation, inability to recognize care givers, waking at night, interrupting the care giver's sleep, wandering, mealtime problems, inappropriate sexual activity, incontinence, and social disfunctions. T. 184. Such persons exhibit negative behavior such as resistence to care, demanding, aggression, anger, emotional outbursts due to inability to perform routine tasks, and delusions. Id. Four stages of progressive degeneration are expected with Alzheimer's disease. The first is forgetfulness and loss of ability to perform complex tasks which formerly could be performed. In the second stage, communication problems occur and also loss of memory as to the names of common objects. Wandering and becoming lost also may occur. Stage three is characterized by physical deterioration such as loss of weight, incontinence, and loss of control of other bodily functions. In the fourth stage, a patient will become unable to communicate at all, and may become comatose and bedridden. The course of the disease is from 12 to 16 years or longer and can involve many of the problems described above. T. 217-218. A family member is usually the person first required to provide care for an Alzheimer's victim. T. 165. The responsibilities caused by such care, and the manner in which the symptoms of Alzheimer's disease are exhibited, cause the family care-giver to feel trapped, fatigued, depressed, angry, resentful, and frustrated. T. 167. At times, the family care-giver is elderly and can suffer health problems from the responsibility. T. 82-83. The burden upon the family member can be alleviated by day care, which involves care only during the day, and respite care, which can involve overnight care for several days. T. 167, 147-148. Day care and respite care can also serve the function of establishing a relationship with staff and collection of data and records, both of which become useful for the time when the patient's disease progresses to the point that continuous inpatient care is required. T. 83, 220-223. Alzheimer's patients in a nursing home need special care directed toward their particular disability described above. Of primary concern is that the nursing home be structured to provide an environment that minimizes confusion and compensates for the disabilities of the Alzheimer's disease victim. Separation from other elderly residents, who are not cognitively impaired, is important to prevent confusion of the Alzheimer's patient and to protect the other residents from disruptive intrusions. The physical facility should be constructed and furnished so as to minimize confusion and stimulation. Colors should be subdued, flooring should not mute the sound of footsteps, patterns should not be used, and common appliances should have distinguishing shapes and be clearly identified or labeled. Spaces for quiet and for wandering should be provided. Features to compensate for forgetfulness, such as lights which automatically turn on when a door is opened, should be provided. T. 219- 227, 57-58, 63-64, 81. Staffing must be trained to recognize and help alleviate problems that arise from behavior caused by Alzheimer's disease. T. 74-75, 234- 235, 80, 83-84. Finally, since Alzheimer's disease patients become upset with change due to recognition and memory impairment, continuity of care (staffing and physical surroundings) becomes important. T. 221, 223, 78, 82-83. Alzheimer's disease victims who need inpatient care also need all of the normal forms of skilled nursing care that other elderly persons need. This may occur over a course of years, or may be the results of a sudden injury, such as a broken hip. T. 220-223, 147-148, 79. As discussed above, it is important to be able to provide such care in the same facility since continuity of care is so important, and transfers to new surroundings are disruptive. Any current holder of a certificate of need for community nursing home beds in Palm Beach County may, if it wishes, provide special services to persons suffering from Alzheimer's disease. T. 122. Existing nursing homes in Palm Beach County accept Alzheimer's disease victims, but none provide special services for these patients except perhaps Darcy Hall, which provides adult day care. T. 143, 76, 82, 168-169, 171, 200-201, 210-211. Existing adult congregate living centers and adult day care centers in Palm Beach County similarly do not have special services or programs for victims of Alzheimer's disease. T. 145. Existing nursing homes could provide such services to Alzheimer's patients, though approval of HRS by expedited review to change substructure might be required, but none has done so. T. 154. Alzheimer's patients are often inappropriately restrained, or mixed with non-Alzheimer's disease patients. T. 77. Dr. Eugene Loeser is a physician, board certified in neurology, and is in private practice in Jupiter, Florida. T. 157-158. Dr. Loeser created a list of questions to ask physicians in Palm Beach County to explore the need for special nursing home programs for Alzheimer's disease patients, and that list of questions is HRS Exhibit 8. T. 169, 186-189. Using these questions Dr. Loeser conducted a survey of 36 physicians in Palm Beach County, which included 8 family practitioners, 10 internists, 14 neurologists, 2 neurosurgeons, and 2 psychiatrists. T. 170. There are approximately 1,000 physicians in Palm Beach County, T. 31, and Dr. Loeser admitted that his survey was only of a small percentage. T. 170. Dr. Loeser did not attempt to make the survey statistically valid. T. 178. The physicians contacted were selected from the telephone book from Jupiter in the north to Lake Worth in the south. T. 171, 183. Dr. Loeser attempted to contact representatives of several specialities. T. 181. The specialities were selected as those likely to see Alzheimer's patients. T. 170. Of the 36 physicians contacted, 35 had seen patients having Alzheimer's disease. Petitioner's Exhibit 5. Of these, 27 physicians had "difficulty in finding appropriate placement" for these patients in terms of supervision, care and treatment. Petitioner's Exhibit 5; HRS Exhibit 8. The same number of physicians felt that facilities with appropriate programs for placement of Alzheimer's disease or similar disorder patients were not presently available in Palm Beach County. Id. From the responses, Dr. Loeser estimated that these physicians had seen somewhat more than 600 patients suffering from Alzheimer's disease or related disorders in the last year. T. 171. Dr. Loeser personally estimated that he typically had difficulty finding a treatment and care facility for about 10 Alzheimer's disease patients annually. T. 185. He then estimated from responses received that the physicians surveyed were unable to find an appropriate program for about 135 patients annually. Petitioner's Exhibit 5. Dr. Loeser further estimated that among his own patients, about one or two per week needed some form of day care, T. 185, and from the responses of the physicians in the survey, estimated that such physicians annually had 150 patients needing day care. T. 175. Determination of placement problems for Alzheimer's disease patients from actual patient records or placement orders from physicians would be difficult because these records are confidential. Consent from the patient would be needed, and consent from an Alzheimer patient would be difficult due to the nature of the mental impairment caused by the disease. T. 173. The survey conducted by Dr. Loeser was not unreasonable for failure to contact more physicians. The survey accurately reflects a group of Alzheimer's disease patients treated by the physicians contacted, and does not purport to account for Alzheimer's disease patients treated by other physicians. Thus, the need identified by Dr. Loeser's survey, while underinclusive of total need, is reasonably accurate for the need identified. Palm Beach County currently has at least an estimated 16,597 persons suffering from Alzheimer's disease, and this number is expected to be 18,172 by 1988. T. 24. HRS itself estimates that the number of Alzheimer's victims in Palm Beach County in 1986 to be 27,200. Petitioner's Exhibit 6. It is further estimated that approximately 80 percent of such patients will require some sort of custodial care in the future. T. 76. Based upon the foregoing statistics, as well as the fact that existing Palm Beach County nursing homes do not provide special services or care for Alzheimer's disease patients, there is a need for the Alzheimer facility proposed by the Petitioner. The Petitioner proposes to establish a 120 bed nursing home in Palm Beach County designed and staffed to provide care and treatment to meet the special needs of persons suffering from Alzheimer's disease and related disorders. T. 45. The Petitioner, Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, is willing to have any certificate of need issued in this case to be conditioned upon it building, developing, and operating the proposed nursing home limited as it has proposed in this formal administrative hearing. T. 48-49. Thus, findings of fact 18 through 21 which follow relate to the manner in which the Petitioner proposes that a certificate of need may be conditioned and limited. The proposed physical design of the nursing facility is set forth in Petitioner's Exhibit 1. T. 49. The cost is estimated to be $3.7 million. T. The design includes a courtyard to allow patients to wander safely. T. 41. It also includes a shaded porch, an outdoor patio, and a lounge off the patio. Id. Security from wandering is proposed to be provided by a "Wanderguard" system of wristbands and sensing devices that sound an alarm as a patient passes an exit point. Id. Additionally, the proposed facility would have a therapeutic residential kitchen for patients still able to use a residential kitchen. Id. One room would be set aside as a quiet room. T. 42. It is contemplated that such a room will minimize the need for calming drugs. T. 224. Also to be provided are separate dining areas, areas for therapy, and separate nursing wings and sub-acute care wings. T. 42-43. Alzheimer patients would be separated from non-Alzheimer patients, fixtures would have shapes, colors, and labels to facilitate identification; wall and floor coverings would not use patterns, and the flooring would be vinyl or tile instead of carpet. T. 42, 225-228. The proposed plan of the facility contemplates that there be space for all stages of care for Alzheimer's patients: day care, respite care, nursing care, and sub-acute care. Petitioner's Exhibit 1; T. 221-222, 39-40, 56. The Petitioner also proposes to provide individual treatment plans, to include physical therapy, occupational therapy, social work, and recreational therapy. T. 230-231. Support groups for family members of the patient will be provided. T. 233. The Petitioner states that the staff for the proposed facility must be appropriately trained to know Alzheimer's disease and the special needs of these patients. T. 234. Ongoing education for staff is viewed as being imperative. Id. The Petitioner recognizes the need to provide greater staffing for peak periods. T. 235. Monthly in-service training will be provided by the parent corporation. T. 236. Moreover, the parent corporation, Health Care and Retirement Corporation of America, will develop and implement a program of staff training specifically for Alzheimer's disease. T. 237. Staff for the proposed facility will be adequately trained to properly deal with the problems of Alzheimer's patients. For a 24 hour period, a staff to patient ratio of 1 to 2.5 will be provided. T. 238. This ratio includes only nursing staff, aides, and activities and occupational rehabilitation staff. Id. The Petitioner proposes to designate and commit its entire facility to Alzheimer's patients. T. 60. But from a fiscal point of view, the Petitioner proposes to not deny admission to persons not having Alzheimer's disease. T. 66-68. At least 60 beds will be dedicated to patients with Alzheimer's disease, and these are expected to fill with persons in stages two and three of the disease. T. 67-68. When these patients reach more advanced stages of their disease, it is expected that they will be treated in the other 60 bed section, which is skilled nursing and sub-acute care. T. 68; Petitioner's Exhibit 1. Thus, the Petitioner expects ultimately to fill its entire facility with Alzheimer's disease patients consistent with its dedication and purpose. The facility proposed by the Petitioner would meet the unique needs of Alzheimer's disease patients and their families, and would be the only facility in Palm Beach County to provide a wide spectrum of care for Alzheimer's disease patients. Petitioner's proposal is consistent with priorities IV, V 3 and 4, and VI, Long Term Care section, District IX Health Plan (1985). T. 150-152. On March 6, 1986, the General Counsel of the Department of Health and Rehabilitative Services sent a memorandum to "all attorneys" construing and implementing the decision in the Gulf Court case, Gulf Court Nursing Center v. DHRS, 10 F.L.W. 1983 (Fla. 1st DCA 1985). On the next day, Robert E. Maryanski, Administrator, Community Medical Facilities, Officer of Health Planning and Development, sent the memorandum to his staff and told them to use the opinion as a guideline for the initial review of a CON application settlement and preparation for hearings. HRS Exhibit 6. HRS recognizes that there are three ways that an applicant for a certificate of need for nursing home beds can show need even though the rule shows a zero bed need. The third way is for "equivalent assessments" to be submitted by "attending physician." T. 113; HRS Exhibit 4, rule 10- 5.11(21)(b)10, F.A.C. HRS staff construes rule 10-5.11(21)(b)10, F.A.C., as requiring that each attending physician of each Alzheimer's patient document that his or her patient is in need of specialized services and that the patient is without access to those special services. T. 124. The issuance of certificate of need 4194 to the Joseph L. Morse Geriatric Center was issued pursuant to the special circumstances exception of rule 10-5.11(21)(b)10, F.A.C., since the rule did not show bed need. T. 127. There was nothing in the application in that case to show that elderly Jewish persons were denied access to existing nursing home facilities in Palm Beach County. Id. See also T. 130. There was, however, evidence that a large group of elderly Jewish persons were not being provided kosher dietary services at existing nursing homes. T. 129, 134. This evidence was not presented by attending physicians, however. T. 136. The certificate of need 4194 to the Joseph L. Morse Geriatric Center was also approved using priority VI, long term care section, District 9 local health plan, which provides in the second sentence for consideration of "ethnic- type services including special dietary requirements . . . ." HRS Exhibit 7; T. 134. Due to changes in federal funding, patients needing sub-acute care (less than hospital care, but more than an ordinary nursing home) do not qualify for cost reimbursement. T. 85-88. It appears that about one-half of all nursing home admissions in Palm Beach County are for three months or less. This may be a pool of persons needing sub-acute care. Petitioner's Exhibit 3, Long Term Care Section, page 4; T. 27-28. There was other general testimony that there was a "need for sub-acute care in Palm Beach County, T. 88, 146, and the local health plan, priority V 4, page 31, supports the grant of a certificate of need to an applicant that will provide such care. Petitioner Exhibit 3. There is also a need for sub-acute care in the final stages of Alzheimer's disease to provide continuity of care. T. 221. See also finding of fact 10. No one has petitioned to intervene in this case.
Recommendation Based upon the foregoing, it is recommended that the Department of Health and Rehabilitative Services, pursuant to Rule 10-5.11(21)(b)10, Florida Administrative Code, and Section 381.494(8)(c), Florida Statutes, issue a certificate of need to Health Care and Retirement Corporation of American, d/b/a Heartland of Palm Beach, for 120 community nursing home beds limited and conditioned upon all such beds being dedicated only to the provision of such services and facilities for victims of Alzheimer's disease as described by the Petitioner in this case and set forth in findings of fact 18 through 21 of this order, with 30 of such beds established for sub-acute care needs of Alzheimer's disease patients. It is further recommended that the certificate of need not contain approval for general community nursing home beds, but be limited to Alzheimer's disease patients. DONE and ORDERED this 8th day of July, 1986, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of July, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-3337 Pursuant to section 120.59(2), Fla. Stat., the following are specific rulings upon all proposed findings of fact submitted by the parties which have been rejected in this Recommended Order. Findings of Fact Proposed by the PETITIONER: 7. Sentences 3 and 4 have been rejected because the evidence was not sufficiently complete to describe nursing homes in Florida in general, and because the issue in this case is the need in Palm Beach County, thus making these proposed facts not relevant. 10. Sentence 3 is rejected since the testimony did not clearly show that therapeutic kitchens "should be available." 13. Sentences 9 and 10 are rejected because the evidence did not categorically show that it "would not be possible" to use actual physician orders, or that "physicians do not typically arrange their records so that orders of that kind could be extracted from their records." Similarly sentence 12 is rejected for lack of categorical evidence to prove impossibility. 17. Evidence that the entire facility is "completely fenced and enclosed" cannot be located in the record, and thus sentence 7 is rejected. The bulk of the discussion in proposed finding of fact 20 has been rejected because it is argument or conclusions of law. Those portions of this proposed finding which propose a finding that the Respondent's interpretation of rule 10-5.11(21)(b)10, Florida Administrative Code, is wrong or unreasonable are rejected as argument or conclusions of law. Most of the factual statements were adopted. Findings of Fact Proposed by the RESPONDENT: All proposed findings of fact by the Respondent have been adopted in substance. COPIES FURNISHED: Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301 Kenneth A. Hoffman, Esquire G. Steven Pfeiffer, Esquire Laramore & Clark, P.A. 325 North Calhoun Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 =================================================================
The Issue The broad issue for resolution is whether FHFC's application meets the criteria contained in Section 381.494(6)(c) F.S. and Rule 10-5.011 F.A.C. FHFC contends that its application meets all the criteria in Section 381.494(6)(c) F.S., and when (1)(k) of Rule 10-5.011 F.A.C. is properly applied, a net need for at least 93 beds results. DHRS contends that a need for only 17 beds exists when the numerical need methodology is applied consistent with its current policy. DHRS did not present any evidence on any criteria other than need. The more specific issue to be determined in this proceeding is focused on the data for current and future population used to calculate numerical need under Rule 10-5.011(1)(k) F.A.C. FHFC contends that the most recently released population estimates and projections should be used; DHRS asserts that the data available at the time of the application should be used. The parties' differing results in the net bed need (93 beds, as opposed to 17 beds) are based upon those separate theories for application of the rule.
Findings Of Fact FHFC currently operates a 120-bed nursing home in Polk County, on the northeastern outskirts of the City of Lakeland. Its application for an additional 60 beds was submitted in July 1985, in time for the July 1985 batching cycle. The application was deemed complete and was later denied in December 1985. The cover letter from HRS dated December 9, 1985, accompanying the State Agency Action Report, "SAAR", states the basis for denial: "There is insufficient need for the project proposed for this subdistrict at this time." Comments within the SAAR explain that the application of the methodology in Rule 10-5.011(1)(k) F.A.C. results in insufficient need for the project proposed by the applicant. "...Further, nursing home utilization within Polk County does not warrant the addition of nursing home beds at this time." (SAAR, P. 9, Petitioner's exhibit No. 2) Walter Eugene Nelson is a health planning consultant and former administrator of the HRS Office of Comprehensive Health Planning, the office responsible for administering the certificate of need program. He was tendered by Petitioner and was accepted, without objection, as an expert in health care planning and nursing home CON reviews. Mr. Nelson prepared a break-out of the need methodology described in Rule 10-5.011(1)(k) F.A.C. With one significant exception, his application of the methodology conforms to that of Herbert Straughn, HRS' expert witness. For the factors related to current and projected population (POPA, POPB, POSC and POSD), Mr. Nelson used data released from the Office of the Governor in January 1987. Mr. Straughn used data available as of the date of the application, that is, data released on July 1, 1985. Both parties agree that "current population" is that population at the time of application, July 1985. The projected horizon year population is three years later, or July 1988. Both parties agree that the source of the data is the official estimates and projections adopted by the Office of the Governor. Actual population census counts are made every ten years. During the decennium, population figures are extrapolated and updated through current data on utility hook-ups, building permits, employment, school enrollment and similar sources. When the data is applied to population in a future date, the resultant population count is called a "projection"; when the data is applied to population for a current or past date, the population count is called an "estimate". The Office of the Governor revises and updates its population estimates and projections every six months. Sometimes the figures are adjusted upward, sometimes downward. In the opinion of Eugene Nelson, the later-released figures are more accurate. In this instance, as to the figures released in July 1985, for the current (July 1985) population, the "estimates" were really projections since the data was collected in Spring 1985, before the relevant period. By January 1987, the estimates for the July 1985 population had the advantage of hindsight and the projections for the population in July 1988 had the advantage of data collected between July 1985 and January 1987. Herbert Straughn contends that the estimates and projections released in July 1985 are more appropriate. His explanation is best expressed in his own words: * * * [direct examination by Mr. Powell] Q What set of population figures did you use in your calculations? [response by Mr. Straughn] A I used the populations that were current at the time of the submission of the application, that being of July, 1985, and then the proper planning horizon of July, 1988. Q Why did you use those figures? A Because it more truly reflects the entire set of data that the Department sees fit to use on calculating bed need during or prior to, an administrative hearing. Q Why do you-all consider that to be more appropriate? A Because, well, because it more truly reflects the entire set of data by which to derive the methodology, that, you know, including the population, the occupancy, the number of licensed beds, and the number of approved beds. Q Well, just referring to the population, which Mr. Nelson has used a different set of figures, which set is the better set of figures to use, current as of the date of the application? A Well, I know it could be the current, or the date of the application, because then it truly reflects the input of the other set of data to derive the methodology to come up to the number of beds either needed, or not needed. Q Which figures do you consider more accurate, so far as population figures? A I would consider these that were current at the time that we did the analysis. Q Why? A Well, contrary, I think, to what Mr. Nelson says, that the closer that you can get to the population at the time you do the review, based on the ten-year span of when the population, or census, is taken, because it's taken every ten years, the further you get away from the base year, I think that the calculations that get further away from the base year, therefore, become less accurate. Q Would you say less reliable? A And less reliable. * * * (transcript, pgs. 89-90) As recently as September 1986, HRS used the most current available population data in its bed need methodology. Even now HRS still uses the approved bed figures available at the time the SAAR is signed, rather than at the time the application is submitted. Herbert Staughn's break-out of the methodology, Respondent's exhibit No. 1, reflects on its face the updated adjustment of another variable: "licensed beds" ("LBD" in the rule formula). His break-out initially included 1685 licensed beds, but shortly before the hearing this figure was adjusted downward to 1655 licensed beds after it was determined that Johnson Health Center's 30 beds were sheltered nursing home beds which are not applied in computing net need for community nursing home beds. Both parties apply an occupancy rate in the Polk County subdistrict of 84.9 percent. Herbert Straughn contends that this rate indicates lack of need, as it is less than an alleged minimum standard of 90 percent occupancy. This "minimum standard" is not described by rule or statute, nor was it adequately explained by the HRS expert. The CON review criteria listed in the SAAR correspond, in substance, to the review criteria in Section 381.494(b)(c) F.S. and Rule 10-5.011 F.A.C. The SAAR is used by the agency as a convenient check list to inform an applicant of the extent to which the criteria are satisfied. There are criteria, other than need, identified in the checklist. In its case FHFC presented affirmative testimony that each criteria was met by the applicant. The only evidence presented by HRS related to need as addressed in paragraphs Nos. 8, 9 and 10, above. FHFC presented no evidence of special circumstances pursuant to Rule 10-5.011(1)(k)2.j. F.A.C. This provision applies in the event that the net bed allocation is zero. FHFC's break out of the bed need methodology yielded a net bed allocation of 93 beds for the planning horizon year 1988. HRS' break out yielded an allocation of 17 beds.
The Issue Whether petitioner's application for a certificate of need to construct a 120-bed nursing home in West Palm Beach, Florida, should be granted, or denied in accordance with DHRS' preliminary agency action.
Findings Of Fact The sole reason given for denying Health Quest's application for a CON is the alleged failure of the application to satisfy the nursing home bed need methodology contained in DHRS Rule 10-5.11(21), Florida Administrative Code. DHRS contends that application of this bed need methodology supports a conclusion that the proposed nursing home is not needed within the three-year planning horizon--1983 through 1986. I. Application of Rule 10-5.11(21): The Nursing Home Bed Need Methodology Under the nursing home bed need methodology expressed by Rule 10- 5.11(21'), DHRS determines if there is a projected need for new or additional community nursing home beds three years into the future by using the following formula: De N = -------- x R x P - Eb Se where: N is area-specific allocation of community nursing home beds for the calendar year for which a projection is being made, De is the percentage of elderly living in poverty in the relevant departmental service district according to the latest available U.S. census. Se is the percentage of elderly living in poverty in the State according to the latest available U.S. census. R is the statewide bed need ratio (27 community nursing home beds per 1,000 population age 65 years and older), P is the population age 65 and older projected three years into the future residing in the relevant departmental district based on latest mid-range projections published by the Bureau of Economics and Business Research at the University of Florida, and Eb is the number of existing and approved community nursing home beds within the relevant departmental service district. The projected bed need derived from this formula is then measured against a "current utilization" threshold. Rule 10-5.11(21)(f). Thus, although bed need may be projected under the formula, an application will not normally be approved unless current nursing home occupancy rates meet minimum standards prescribed in the rule. Finally, if bed need is projected and the current utilization threshold is satisfied, additional beds may be added only to the point at which further bed need additions will cause "prospective utilization rates" for the subdistrict to drop below a base rate prescribed in the rule. Rule 10-5.11(21)(g), (h), Fla. Admin. Code. Under this bed need forum1a, projected need for nursing home beds in 1986 is calculated as follows: N = De ------ Se N = 9.28 ----- = .73 12.70 .73 x 27 ---- = 19.7 beds/1000 65 + 1000 District IX Subdistrict (Palm Beach Co.) 19.7 x 264,326 = 5,207 19.7 x 198,747 = 3,915 Thus the formula shows a projected need for 5,207 nursing beds in 1986 in District IX; and a projected need for 3,915 beds in 1986 in the subdistrict of Palm Beach County. (Testimony of Straughn, R-4, R-5, R-6) The inventory of licensed and approved beds for District IX is 5,487 beds, and for Palm Beach County, is 4,086. Subtracting the projected inventory from the projected need indicates a "no need" of 280 beds. A similar calculation for Palm Beach County indicates a "no need" of 171 beds. (Testimony of Straughn, R-4, R-5, R-6) Under Rule 10-5.11(21)(e) , this is identified as a "c4" need relationship--where neither district nor subdistrict show a need for additional bed capacity. The prescribed current utilization threshold and the prospective bed rate of utilization for "c4" need relationship is 95 percent and 85 percent, respectively. See, 10-5.11(21)(f), (h). These utilization thresholds are not satisfied in the instant case. The current utilization of beds in Palm Beach County is 92.7, which falls short of the required 95 percent threshold. Consequently under the rule, no beds may be added until the 95 percent threshold is met. Even if this current threshold of 95 percent were met, there would still be 1,192 excess beds in Palm Beach County through 1986. 2/ Hence, use of the bed need methodology contained in Rule 10-5.11(21) indicates that the proposed nursing home beds are not needed through 1986. In the absence of unique and peculiar circumstances, and unless other rule or statutory criteria justify issuance, the application must be denied. II. Failure to Show Unique or Peculiar Circumstances, or Other Overriding Criteria Health Quest, having failed to satisfy the numerical bed need standards imposed by DHRS rule, has also failed to show unique and peculiar circumstances which would otherwise justify granting its application. The bed need rule takes into account factors raised by Health Quest, such as the relative wealth and poverty of an affected population. While it is expected that new Medicare regulations may increase the need for nursing home services, increases attributable to Medicare changes remain speculative and uncertain. In any case, changes in need for nursing home services due to Medicare changes will not be unique to District IX or Palm Beach County. Health Quest has also failed to show that it is entitled to a CON based on any other rule or statutory criteria. Its reliance on the provisions of the State Health Plan is misplaced since that plan is largely obsolete.
Recommendation Based on the foregoing, it is RECOMMENDED: That Health Quest's application for a certificate of need to construct a nursing home in West Palm Beach, Florida, be denied. DONE and ENTERED this 7th day of June, 1984, in Tallahassee, Florida. R. L. CALEEN. JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1984. COPIES FURNISHED: Charles M. Loeser, Esquire 315 W. Jefferson Blvd. South Bend, Indiana 46601 Steven W. Huss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32301
Findings Of Fact The Parties Manor-Sarasota Manor Health Care Corporation operates 140 nursing centers throughout the country with nine nursing homes and three adult congregate living facilities (ACLF) in Florida. Seven of the nine Florida nursing homes are rated superior and two are standard. Manor-Sarasota is a wholly-owned subsidiary of Manor Health Care Corporation, and currently owns and operates a 120 bed nursing home, with a 120 bed ACLF, at 5511 Swift Road, Sarasota, Florida. The facility opened in December, 1983 and currently has a standard license, although for a period in 1986 its license was conditional. Manor-Sarasota is currently licensed as a skilled nursing home providing trach care, nasogastric feedings, wound care, physical, speech and occupational therapy, as well as Clinatron beds for patients with severe decubitus ulcers. On or about January 15, 1987, Manor-Sarasota filed CON application number 5050 for the addition of sixty community nursing home beds at its facility. The proposed additional beds will include a separate 30-bed specialized unit for elderly persons suffering from Alzheimer's Disease and related disorders. Manor Health Care Corporation currently operates 13 to 15 Alzheimer's units within their existing centers. Between 30 percent - 50 percent of Manor-Sarasota's current patients are diagnosed as having Alzheimer's or related disorders. There are no specialized facilities for Alzheimer's patients in Sarasota at the current time. The current facility is a two-story nursing home, and the additional beds would be configured in a two-story addition of thirty-five beds on the first floor and twenty-five beds on the second floor. The thirty-bed Alzheimer's unit would be located on the first floor. A separate dining room for Alzheimer's patients will also be provided. An additional nurse's station would be added to provide 4 nurse's stations for 180 beds. Total project costs are reasonably projected at $1.85 million, with construction costs of $1.26 million, equipment costs of approximately $170,000, professional services of approximately $137,000 and related costs of approximately $253,000. The proposal would add 16,683 gross square feet to the existing 49,454 gross square feet. The total project cost per additional bed would be $30,872, while the construction cost per square foot would be $55.00. The gross square footage per bed would be 278 feet. Manor-Sarasota projects a 40 percent Medicaid and 60 percent private pay utilization for the 60 bed addition, although its Medicaid utilization at the existing facility has only been between 15 percent and 24 percent. Since there is an upward trend in Medicaid utilization, Manor-Sarasota would accept a 40 percent Medicaid condition on its CON, if approved. Medicare patients will continue to be served within the existing facility. The project will be funded through 25 percent equity and 75 percent financing. Manor Health Care Corporation will finance the project internally through the sale of assets, and the sale of senior subordinated notes and convertible subordinated debentures, and this financing proposal is reasonable and realistic. In Manor-Sarasota's original application, six 3-bed wards were proposed. As a result of criticism of 3-bed wards in the Department's State Agency Action Report (SAAR) concerning this application as well as other facilities, the applicant modified its proposed design to eliminate all 3-bed wards and to include 24 semiprivate and 12 private rooms. The square footage of the addition was also increased by 21 percent from 13,750 to 16,683 square feet. This modification was presented at hearing and was filed subsequent to the application being deemed complete, and the SAAR being prepared. Competent substantial evidence in support of the original application was not offered, but rather evidence was presented in support of the substantially modified proposal. The applicant's existing 120-bed nursing home has experienced over 90 percent occupancy for the months of November, 1987 to the date of hearing, and also experienced an average occupancy of approximately 86 percent for 1986 and the first ten months of 1987. During the first year of operation, 65 percent occupancy is projected for the 60 new beds which are now being sought, and 95 percent occupancy is projected for the second year of operation. Sarasota Healthcare Sarasota Healthcare, Ltd., is a Georgia limited partnership whose general partners are Stiles A. Kellett, Jr. and Samuel B. Kellett. Sarasota Healthcare proposes to enter into a management agreement with Convalescent Services, Inc., (CSI) for the operation and administration of their proposed facility. The Kelletts, as 100 percent owners, comprise the Board of Directors of CSI and also serve as its Chairman and President. CSI operates 21 nursing homes in seven states, and 85 percent of its beds have superior licenses. There are 6 CSI operated nursing homes in Florida, one of which, Pinebrook Place, is located in Sarasota County in the City of Venice. Pinebrook Place is a 120 bed nursing home and has a superior license. Sarasota Healthcare does not own or operate any other nursing homes. A new 120 bed freestanding nursing home is proposed by Sarasota Healthcare in CON application 5025, which was filed with the Department in January, 1987. The project would be located in Sarasota County at a specific site which has not yet been identified. Sarasota Healthcare projects a utilization of 40 percent Medicaid, 5 percent Medicare and 55 percent private pay at its proposed facility, and would accept a 40 percent Medicaid condition of this CON, if approved. The proposed facility would offer skilled, intermediate, respite and hospice care; specialized services for Alzheimer's patients; physical, occupational, speech and rehabilitative therapy; counseling; and social services. Alzheimer's patients will not be located in a separate unit but will be intermingled with other patients while receiving specialized services and protections for their disease. Sarasota Healthcare proposes a 120 bed nursing home comprised of 12 private and 54 semiprivate rooms, 37,7000 gross square feet and a total project cost of $3.9 million The proposed size and cost of this facility are reasonable. The cost per bed would be $32,500 and the construction cost per square foot would be $58.00. Total project costs are reasonable and consist of approximately $2.45 million in construction costs, $385,000 in equipment costs, $145,000 for professional services, land acquisition of $600,000 for 3 to 5 acres, and $324,000 in related costs. The gross square footage per bed would be 314 feet. The project will be funded with 25 percent equity funding from the general partners, Stiles and Samuel Kellett, and 75 percent from a commercial bank, assuming a 9.5 percent interest rate with 1 percent discount point. The proposal is reasonable, but is dependent upon the general partners' ability to personally fund 25 percent of the costs of the project through an equity contribution, and on their ability to obtain commercial financing for the remaining project costs. Financial statements of the Kelletts provided in the record of this proceeding are unaudited, and were not prepared in accordance with generally accepted accounting principles. The Kelletts have 15 CON applications currently pending, and 4 have already been approved. They have a 6 to 1 debt to equity ratio. Health Quest On or about January 15, 1987, Health Quest corporation submitted an application for CON number 5046 on behalf of Regents Park of Lake Pointe Woods for the addition of 58 new beds to its existing 53 sheltered bed nursing home at a projected cost of approximately $1.29 million. The existing sheltered nursing home facility is known as Regents Park of Sarasota which is part of the Lake Point Woods Retirement Center containing a 110 bed ACLF and 212 retirement apartment units. The sheltered nursing home opened in November, 1986, and has achieved 90 percent occupancy since October, 1987. It is licensed under Chapter 651, Florida Statutes, as a continuing care facility. Health Quest owns and operates nine nursing centers in three states, and has received CON approval for 12 additional facilities in three states, including four in Florida. One of these Florida CONs is for 180 new community nursing home beds in Sarasota County. Health Quest's existing Regents Park of Sarasota nursing home is located at 7979 South Tamiami Trail, Sarasota, Florida. Although it is a sheltered nursing home, only one or two beds are generally occupied by Lake Point Woods residents at any one time. During 1987, only 26 admissions to Regents Park came from Lake Pointe Woods, and most of these admissions were for episodic illnesses of less than 30 days rather than for longer term care. Thus, the vast majority of admissions at Regents Park have been from the community, including admissions directly from home, hospitals and other nursing homes, rather than from the retirement center, Lake Pointe Woods, of which Regents Park is a part. However, since existing beds at Regents Park are sheltered, community patients will not be able to be admitted there beyond November, 1991, the expiration of five years from its opening. During its year and a half of operation, Regents Park has not shown a profit, despite original projections of profitability after only one year. In response to the Department's omissions letter dated February 19, 1987, Health Quest notified the Department, by letter dated March 27, 1987, of its amendment to CON application 5046. Rather than pursuing its request for 58 new community nursing home beds, Health Quest amended the application to seek conversion of the 53 sheltered beds to community beds and to add 7 new community nursing home beds. Since no new space is proposed for construction under the amendment, and since virtually all equipment is already in place, Health Quest projected no cost associated with the amended project. However, there would be some minor costs to equip seven new beds, as well as legal and consulting costs associated with this application and hearing. Currently, the Regents Park nursing home has approximately 31,000 total gross square feet, which would result in 520 gross square feet per bed if its application is approved. On April 10, 1987, the Department published its notice of completeness regarding Health Quest's amended CON application 5046 at Florida Administrative Weekly, Volume 13, No. 15, p. 1365. The Department reviewed and evaluated Health Quest's amended application, rather than the original application, in preparing its SAAR on the applications at issue in this case dated June 15, 1987. Despite this notice of completeness, the record shows that Health Quest's conversion proposal was incomplete since no balance sheet, profit and loss statement for precious fiscal years of operation, detailed statement of financial feasibility or pro forma were introduced. Although sheltered beds can be certified to accept Medicaid patients, Health Quest has not sought such certification for any of the 53 existing beds at Regents Park. Health Quest proposes to seek Medicaid certification for 5 beds, and to serve 8 percent Medicaid patients if CON 5046 is approved. Health Quest does not propose a separate unit for Alzheimer's patients, but would offer special outdoor activities for these patients as well as an Alzheimer's club for patients with this primary diagnosis. Health Quest specializes in caring for patients with hip fractures, and offers a wheelchair mobility and ambulation program, rehabilitation and occupational therapy, bowel and bladder rehabilitation, as well as physical and horticulture therapy. Regents Park has patients on intravenous therapy and who require hyperalimentation and total parenteral nutrition. LPN and nurse's aide students from Sarasota Vo/Tech School receive training at the Regents Park nursing home. HCR In 1986, HCR purchased, and currently owns and operates a 147 bed nursing home located at 3250 12th Street, Sarasota, Florida, known as Kensington Manor, which holds a standard license. HCR is a wholly owned subsidiary of Owens-Illinois, a publicly held corporation, and has built over 200 nursing homes in the last 25 years. At the present time, HCR operates approximately 125 facilities with approximately 16,000 beds in 19 States. HCR owns and operates a total of 9 nursing homes in Florida, and has about 10 nursing home projects under development which it intends to operate upon completion. On or about January 14, 1987, HCR filed CON application 5049 with the Department. This application seeks approval of 60 new community nursing home beds at Kensington Manor, at a currently projected cost of $1.82 million, which is a reasonable projection. The cost per new bed would be $30,030. HCR proposes to finance to project with a 25 percent equity contribution, and 75 percent internally financed by HCR through its parent company, Owens-Illinois, and this proposal is realistic and reasonable. Throughout 1986, Kensington Manor had an occupancy level of between 85 percent - 95 percent and is currently operating at 95 percent - 96 percent occupancy. HCR reasonably projects 95 percent occupancy for the 60 new beds in the second year of operation. HCR reasonably proposes a patient mix in the new addition of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay. Kensington Manor is currently 75 percent - 80 percent Medicaid, 1 percent Medicare, and the remainder is private pay, but its proposed patient mix for the new addition is realistic because there will be no three-bed wards in the addition, and sub- acute services will be provided, thereby increasing the Medicare percentage. The HCR proposed addition at Kensington Manor provides a distinct 29 bed wing for Alzheimer's patients where a special care program and special staffing can be made available. Additionally, a 12 person Alzheimer's adult day care center will be physically attached to the new addition where a less intense level of care outside the home can be made available to these patients. Respite care and sub-acute care will also be provided. The project will add a 60 bed, single story addition to Kensington Manor, with a special Alzheimer unit consisting of 1 private and 14 semiprivate rooms, an enclosed courtyard and porch. A second dining room will be added, as well as 2 central bathing areas, multipurpose and physical therapy rooms. The addition would total 18,000 gross square feet, or 267 gross square feet per bed in the new addition. Kensington Manor currently has approximately 30,000 gross square feet, with 1 private and 52 semiprivate rooms, and 14 three-bedroom wards. Therefore with the addition, Kensington Manor would have approximately 48,000 gross square feet which would be approximately 223 square feet per bed for the entire facility. Sisters of Bon Secours The Sisters of Bon Secours, a Catholic religious order, are currently responsible for the operation and ownership, through not-for-profit corporations, of a JCAH accredited 272 community bed nursing home in North Miami having a superior license, a nursing home in Port Charlotte, Charlotte County, and they also have a CON for an additional nursing home to be located in Collier County. On or about January 15, 1987, Sisters filed CON application 5039 for a new 120 community bed nursing home to be located in Sarasota County, and to be known as Villa Maria of Sarasota County. Sisters is the only applicant involved in this case which is not already providing services in Sarasota County. The proposal calls for the development of a teaching nursing home to be designated as a center for training and research in the study of gerontology and long term care. Affiliations with schools and universities will be developed to allow health care administrators, social workers, medical and nursing students, and practitioners interested in developing a specialization to fulfill their clinical studies and requirements. There will be an emphasis on restorative and rehabilitative care, with 20 percent of the beds being designated for sub-acute care patients who could return home after 30-45 days of therapy and transitional care. Sisters will develop a continuum of care by networking in the community. It is the only applicant that proposes to provide a site for education and research in Sarasota County. The proposed facility is intended to serve the needs of members of the Venice Diocese who reside in Sarasota County, where there is currently no Catholic nursing home. The Venice Diocese is now served by the Sisters' nursing home in Charlotte County, and will also be served by the facility to be located in Collier County, for which a CON has already been issued. However, treatment at these nursing homes, including the proposed Villa Maria of Sarasota County, is not limited to Catholics; the Sisters accept, treat and care for persons in need from all religions backgrounds and denominational affiliations. Total project costs are estimated at $6.64 million, including $3.86 million for construction, approximately $592,000 for equipment, $762,000 to acquire a seven acre site, $237,000 for professional services, $888,000 for financing costs and approximately $300,000 in other related costs. The project would encompass almost 60,000 gross square feet, and would cost approximately $55,300 per bed and $64.50 per square foot. Almost 500 gross square feet would be available per bed, which represents the most square footage per bed of any application under consideration. The proposed facility would have 8 private and 56 semiprivate rooms, with in-room tubs and showers, 3 patient lounges, and a 100 seat dining room. Due to the large size of the proposal, some patient rooms exceed 120 feet from nurse's stations. However, this licensure requirement can easily be met with minor design modifications during the licensure process. Sisters project a 33.3 percent Medicaid, 17.6 - 19.7 percent Medicare, 4 percent indigent and 43 percent - 45 percent private pay utilization for the 120 bed nursing home in its first two years of operation. While Medicaid utilization in Dade County during 1987 rose to 68 percent as a county-wide average, Sisters' Dade County nursing home experienced a drop in Medicaid to 14.6 percent. The high Medicare utilization level which has been projected is consistent with, and based on, the experience of the Sisters at their Dade County nursing home which currently has 21 percent Medicare utilization. However, due to the greater number of hospital referral sources, as well as the larger population and fewer competing nursing homes in Dade County compared with Sarasota County, Medicare utilization projections may be overstated, and actually fall between the 3-4 percent historical utilization in the Sarasota area and Sisters' projection. It will be somewhat above 3-4 percent due to the fact that this will be a teaching nursing home which will attract more Medicare patients. The project will be funded with an equity contribution of 10.6 percent ($635,455) and the remaining 89.4 percent ($6 million) will be funded through the issuance of tax exempt bonds. This financing proposal is realistic and reasonable. The proposed nursing home is intended to offer services to AIDS patients, adult day care, and a meals-on-wheels program. However, it was not established at hearing that such patients would definitely be served, or that space would be available at this facility for these services until the Sisters can determine the actual level of need for these services in Sarasota County, if this CON is approved. Department of HRS On or before January 15, 1987, the Department received the CON applications at issue in this case for additional community nursing home beds in Sarasota County. As it relates to this case, the Department issued its SAAR on June 15, 1987, in which the application of HCR (CON 5049) for a 60 community nursing home bed addition to Kensington Manor was approved, and all other applications in this case were denied. In addition to the HCR application, the Department also supported at hearing the applications of Manor Care (CON 5050) for a 60 bed addition to Manor-Sarasota and Sisters of Bon Secours (CON 5039) for a new 120 bed community bed nursing home to be known as Villa Maria of Sarasota County. The Department opposed the issuance of a CON to the remaining applicants. It is the position of the Department that changes or updates to CON applications made after an application has been deemed complete and reviewed in a SAAR, cannot be considered at hearing if such changes or updates are the result of matters or events within the control of the applicant, and which therefore could have been foreseen and considered at the time the application or responses to omissions were filed. However, matters involving payor mix, salaries and charges could result from changes in demographics and economic factors outside of the applicants' control. In such instances, updates or changes to an application based upon current demographics or economics can, and should be, considered at hearing. The updated pro forma submitted by Sarasota Healthcare at hearing resulted from the applicant's desire to reflect current salaries in the Sarasota County labor market, which have increased dramatically since the original application was submitted. As a result of updating salary expense projections, Medicaid and Medicare rates also had to be updated. Associated projections throughout the pro forma which are dependent upon these reimbursement rates, as well as salary expense projections, also had to be updated. The updated pro forma presented by Sarasota Healthcare results from a factor outside of the control of the applicant, inflation, which could not have been foreseen or predicated with certainty in January, 1987. To ignore actual, current inflation data in Sarasota County is to ignore reality. This update is permissible and has been considered. Manor-Sarasota's application presented at hearing includes changes in its proposed payor mix, charges and salaries, as well as its pro forma. These updates are permissible since they result from changes in demographics and inflation outside of the applicant's control which could not have been foreseen in January 1987. However, a 21 percent increase in square footage and elimination of three-bed wards, with associated changes in proposed staffing, capital costs and equipment, while certainly having a positive effect on quality of care, is nevertheless a matter totally within the control of the applicant. The desireability of these changes could have been foreseen at the time the application was filed, and therefore these substantial changes in design represent impermissible amendments to Manor-Sarasota's application. Stipulations The appropriate planning area for these applications is Sarasota County, and the appropriate planning horizon is January, 1990. Sarasota County is in subdistrict 6 of the Department's service district 8. The parties have stipulated that there is a need for 240 additional community nursing home beds in the January, 1990, planning horizon in Sarasota County, in accordance with the bed need formula in Rule 10-5.011(1)(k), Florida Administrative Code. The parties have agreed that Section 381.705(1)(d) and (j), Florida Statutes (1987), have been met, or are not applicable to this case. This statutory criteria deals with the adequacy and availability of alternative health care facilities and the special needs and circumstances of health maintenance organizations. All remaining criteria found at Section 381.705(1) and (2), Florida Statutes (1987), are at issue in this case. Further, the parties stipulate that 1987 amendments to Chapter 381, Florida Statutes, relating to the content of applications, are inapplicable in this proceeding since these applications were filed prior to the effective date of said law. Therefore, application content provisions of Section 381.494(4), Florida Statutes, govern. State and Local Health Plans The 1985 Florida State Health Plan, Volume II, Chapter 8, identifies areas of concern relating to the provision of long-term care services in Florida, which traditionally has been synonymous with nursing home care. These concerns include resource supply, cost containment and resource access. The State Health Plan seeks a reduction in the fragmentation of services and encourages development of a continuum of care. These proposals are consistent with, or do not conflict with, the State Health Plan. The 1984 District Eight Local Health Plan for Nursing Home Care is applicable to these applications for community nursing home beds in Sarasota County. The Local Health Plan contains the following pertinent criteria and standards for review of these applications: Community nursing home services should be available to the residents of each county within District Eight. At a minimum community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy h. occupational therapy laboratory i. physical therapy x-ray j. speech therapy dental care k. mental health visual care counseling hearing care l. social services diet therapy m. medical services New and existing community nursing home bed developments should dedicate 33 1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. New community nursing home facilities may be considered for approval when existing facilities servicing comparable service areas cannot reasonably, economically, or geographically provide adequate service to these service areas. No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. The proposed project should have a formal discharge planning program as well as some type of patient follow-up services with discharge/transfer made available seven days a week. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. The specifically stated goal of the Local Health Plan is to develop new community nursing home facilities in which at least 33 1/3 percent of the total beds should be Medicaid. The impact of this long range recommended action is stated as follows: The provision of Medicaid care beds in existing nursing homes would assure continuity of care for nursing home patients, and should improve placement in appropriate levels of care by hospitals, physicians, social services, health departments, and other referral groups. The provision for Medicaid beds would reduce cost to patients, utilizing skilled care beds, who could adequately be served by Medicaid. With the exception of Health Quest's application, all other applicants meet the above stated standards and criteria contained in the Local Health Plan. Health Quest's application does not conform to the Local Health Plan. All applicants in this proceeding have indicated that they will provide therapies and services recommended in the Local Health Plan. All applicants, except Health Quest, indicate a commitment to dedicate at least 33 1/3 percent of their beds for Medicaid patients. The new nursing home facilities proposed by Sisters and Sarasota Healthcare would each be for 120 beds, consistent with the Local Health Plan standard that new facilities have at least 60 beds. Health Quest has proposed a 60 bed community nursing home through conversion of 53 sheltered nursing home beds and the addition of 7 new community beds. As existing providers, Manor-Sarasota, HCR band Health Quest have patient transfer agreements with one or more hospitals, as well as formal discharge planning programs and patient follow-up services, as recommended in the Local Health Plan. The applications for new facilities of Sarasota Healthcare and Sisters indicate they will also comply with these priorities if approval is granted and their facilities are opened. By virtue of its existing service and transfer agreements through the CSI facility in Sarasota County, Pinebrook Place, Sarasota Healthcare will be able to obtain these necessary agreements. Based upon Sisters' experience in Dade County at Villa Maria, as well as the fact that this will be a teaching nursing home, Sisters will also be able to obtain such agreements. Data has been provided by the existing nursing homes (Manor-Sarasota, HCR and Health Quest) which documents the history of their participation in the Medicaid and Medicare programs. The other applicants (Sarasota Healthcare and Sisters) have provided Medicaid/Medicare data for other existing facilities with which they are affiliated or upon which their application at issue in this case is based. Based upon this data, Pinebrook Place in Sarasota County, which is owned and operated by Sarasota Healthcare's general partners has not met the Medicaid condition on its CON, and the existing Manor-Sarasota facility has had only 24.8 percent Medicaid utilization in fiscal year 1988: Availability, Accessibility and Adequacy of Like and Existing Services HCR and Manor-Sarasota would increase the availability and adequacy of existing services they are now offering with the 60 bed additions each is seeking. The separate 30-bed specialized unit proposed by Manor-Sarasota and the 29-bed wing proposed by HCR for Alzheimer's patients will clearly increase the availability of specialized services for persons with Alzheimer's and related disorders, as well as their families. HCR will also dedicate 10 beds for sub-acute care, while Manor-Sarasota will offer community outreach, as well as respite care. Sarasota Healthcare, Sisters and Health Quest do not propose special units for Alzheimer's patients, but would offer special programs and services for them and their families. It was established that there is a need for additional services and programs to serve nursing home patients with Alzheimer's and related disorders in Sarasota County, as well as a special need for sub-acute, restorative, hospice, respite, and adult day care in the County. It was not established that there is a need for additional Medicare beds in Sarasota County. Sisters have indicated an interest in offering services to patients with AIDS and patients in need of adult day care, for which there is also a need in Sarasota County. In addition, their application will enhance the availability of sub-acute nursing home services, restorative and rehabilitative care, and respite care in Sarasota County. While it would serve patients of all denominations and religious affiliations, it would be the only Catholic nursing home in Sarasota County. The teaching component of the Sisters' application would provide access for students and other health professionals seeking to further their professional training. The Sarasota Healthcare proposal also places special emphasis on increasing the availability of sub-acute services in Sarasota County. Quality of Care The Sisters will seek JCAH accreditation of the proposed facility if their CON is approved, just as their nursing home in North Miami is currently accredited. The proposed affiliation with a college of medicine and nursing school, and the intent to operate this facility as a teaching nursing home will insure quality of care at this nursing home by utilizing state-of-the-art treatment and therapy programs. Florida nursing homes currently owned or operated by each of the applicants or their affiliated corporations have standard or superior licenses which means they meet or exceed State Standards. Licensure status of facilities owned or operated in other states by the applicants, or their affiliated companies, has not been considered since it was not established that licensure standards in other states are similar, or even comparable, to those in Florida. Each applicant has significant experience rendering quality nursing home care, and each has proposed a reasonable and comprehensive quality assurance program which will insure that quality nursing home services will be provided to their residents. The architectural design proposed by each applicant is reasonable and sufficient to allow quality care to be provided at each facility. All instances where an applicant's design fails to meet final construction standards are relatively minor, and can easily be met during the licensure process with slight modifications and adaptations in design. Staffing proposals by each, while different, will all insure that adequate medical, nursing, counseling and therapeutic staff will be trained and available either on-staff or through contract, to implement quality care programs at each facility. Manor-Sarasota's past reliance on temporary nursing services is decreasing and this will have a positive effect on quality of care. HCR has just completed extensive repairs and renovations costing $350,000 at Kensington Manor which will improve the atmosphere, living conditions and overall quality of care at the facility. Sisters' educational affiliations will aid in recruiting and retaining well-trained staff for its facility. Each facility will be equipped to provide quality care. There was extensive testimony about the advantages and disadvantages of central bathing facilities compared with private baths or showers in patient rooms. Sisters and Health Quest would provide private bathing facilities in patient rooms, while the others would have central facilities. Obviously, individual bathing facilities in patient rooms offer more privacy than central facilities, but privacy can also be achieved in a central bathing area by taking only a single, or limited number of patients to a partitioned central facility at any one time. The central facility is less costly than bathing facilities in each room, and also requires less staff time and involvement to assist with, and insure safety in, the patients' bathing. It has not been shown that one type of bathing facility provided in a nursing home, to the exclusion of all others, affects the quality of care in a positive or adverse manner. Quality care can be, and is, provided under both designs. The elimination of 3-bed wards from Manor-Sarasota's application would have a positive impact on quality of care, and be consistent with the Department's position of discouraging the creation of additional 3-bed wards in nursing homes. However, such elimination was proposed after this application was deemed complete by the Department. Patients suffering from Alzheimer's and related disorders can benefit from programs and treatment conducted in separate units, or while comingled with other patients, particularly in the early and middle phases of the disease. In the later phase of the disease it may be less disruptive to other patients if Alzheimer patients reside in a separate wing or unit of the nursing home. Quality care can be rendered through separate or integrated programming, and all applicants in this case that propose to offer specialized services to these patients have proposed programs and facility designs which will provide quality care to persons with Alzheimer's and related disorders. While there are differences in facility design, such as the two-story construction of Manor-Sarasota compared with the single level construction of all other applicants, and the central heating and cooling proposed by Sisters compared with individual wall units to be used by Sarasota Healthcare, the proposed designs of all applicants allow for the rendering of quality care to patients. Access for Chronically Underserved The Health Quest proposal is inconsistent with the Local Health Plan policy that 33 1/3 percent of all nursing home beds should be dedicated for Medicaid patients since it proposes that only 5 of its 60 beds (8 percent) will be certified for Medicaid patients if CON 5046 is approved. Although Medicaid utilization at Manor-Sarasota has not been consistent with the Local Health Plan, it is projected that if CON 5050 is approved Medicaid utilization will rise to 40 percent. Sarasota Healthcare, HCR and Sisters propose to meet or exceed this Local Health Plan policy. HCR has experienced a 75-80 percent Medicaid utilization at Kensington Manor, and proposes a 45 percent Medicaid level in the new addition if CON 5049 is approved. Financial Feasibility The proposals of Manor-Sarasota, HCR and Sisters are financially feasible. Health Quest did not file a pro forma and has not shown a profit in its year and a half of operation at Regents Park. Based upon its actual per patient operating expense at Pinebrook Place, Sarasota Healthcare has underestimated expenses in its second year of operation by approximately $8 per patient day. Its projection of a profit in the second year of operation is questionable due to this underestimation. Manor-Sarasota, HCR and Sisters have established their ability to finance, through equity and debt, the construction, equipment, supplies, and start-up costs associated with their proposals. Health Quest will have no construction costs, and only very minor costs to equip and supply seven new beds it is requesting. The entire financial structure of CSI and Sarasota Healthcare is dependent upon the financial strength of their general partners, the Kelletts, who currently have $76 million in long term debt and $12 million in equity. This is a relatively high debt to equity ratio of 6 to 1 which makes them susceptible to adverse impacts from any downturn in the economy, especially since they have 15 additional CON applications pending in Florida, totaling $60 million in construction costs. In contrast to the Kelletts' high debt to equity ratio, Sisters have $159 million in long term debt and $160 million in equity for a very secure 1 to 1 debt to equity ratio. Projections of revenue and expense, as well as assumptions concerning projected utilization, Medicaid and Medicare rates, private pay rates, and patient mix used by Manor-Sarasota, HCR and Sisters in their pro forma are reasonable, based upon that applicant's experience and the services proposed in their applications at issue. Adequacy of Staffing All proposals have adequate and reasonable staffing patterns, as well as staff training programs, to insure that quality care is provided. Proposed salaries are reasonable and will allow qualified staff to be hired, based upon the recruiting experience and salaries currently offered by Sarasota nursing homes. Adequate staff resources exist in the area. I. Most Effective and Less Costly Alternative Since it is generally not necessary to construct support areas for storage, laundry, kitchen and administration, adding additional beds to existing facilities is a less costly alternative to an entirely new facility. Health Quest, HCR and Manor-Sarasota are, therefore, less costly per bed than Sarasota Healthcare and Sisters' proposals to construct new 120 bed nursing homes. Specifically, there are only minor costs associated with Health Quest's proposal, while the cost per bed of the Manor-Sarasota and HCR proposals are $30,872 and $30,030, respectively, compared with $32,500 per bed for Sarasota Healthcare and $55,295 for Sisters. Health Quest's application is the least costly alternative since it involves no construction costs to add seven beds to the existing 53 sheltered beds which would be converted to community nursing home beds, although minor costs for equipping seven new beds would be incurred. Effect on Costs and Charges Sisters and Health Quest have proposed, or actually experienced, the highest costs and charges of all applicants. Health Quest has not shown any basis upon which it can be reasonably expected that room rates will decrease, as it asserts, if this CON is approved. Due to the large size of its proposed building, higher food costs and number of staff, Sisters projects the highest operating expense per patient day in the second year of operation. Sisters will provide almost 500 gross square feet per bed, while Manor-Sarasota, HCR, and Sarasota Healthcare will provide 278, 267 and 314 gross square feet per bed, respectively. Enhanced Competition Since the other applicants are already represented in the service area, the approval of Sisters' application would enhance competition by adding another provider to Sarasota County. This will provide more choices to nursing home residents, and should increase the quality of long term care in the community with the added emphasis this proposal will place on rehabilitative programming. Costs and Methods of Construction The costs and methods of construction proposed by the applicants are reasonable, as well as energy efficient.
Recommendation Based upon the foregoing, it is recommended that the Respondent enter a Final Order, as follows: Approving HCR's application for CON 5049; Approving Sisters' application for CON 5039; Denying the application of Manor-Sarasota, Sarasota Healthcare and Health Quest for CONs 5050, 5025 and 5046, respectively. DONE AND ENTERED this 9th day of August, 1988, in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of August, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-3471, 87-3473, 87-3475, 87-3478 and 87-3491 Rulings on the Department's Proposed Findings of Fact Adopted in Findings of Fact 3, 12, 17, 19, 24, 30, 37. Adopted in Finding of Fact 37. 3-4. Adopted in Finding of Fact 43. 5. Adopted in Finding of Fact 42. 6-10. Rejected as irrelevant and unnecessary since the parties have stipulated to need. Adopted in Findings of Fact 37, 38. Adopted in Findings of Fact 26, 27, 55, 69, 70. Adopted in Findings of Fact 30, 56, 58, 60. Adopted in Findings of Fact 3, 55. Rejected as irrelevant since the parties have stipulated to need. Rejected in Findings of Fact 48, 57. Rulings on Manor-Sarasota's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Adopted in Findings of Fact 37, 38, 43. Adopted in Findings of Fact 15, 30, 32. Rejected in Finding of Fact 17 and Adopted in Finding of Fact 19. Adopted in Findings of Fact 3, 5, 24. Adopted in Finding of Fact 38. Adopted in Findings of Fact 13, 14 but Rejected in Findings of Fact 71, 73. Adopted in Findings of Fact 29, 31. Adopted in Finding of Fact 34. Adopted in part in Finding of Fact 35, but otherwise Rejected as unnecessary. Adopted in Finding or Fact 2. Rejected as unsupported and unnecessary. Adopted in Findings of Fact 29, 60, 61 but also Rejected in part in Finding of Fact 60. Adopted in Finding of Fact 31. Adopted and. Rejected in Finding of Fact 60, and otherwise Rejected as irrelevant and unsupported in the record. Adopted in Finding of Fact 29 but otherwise Rejected as unsupported argument on the evidence, without any citation to the record, rather than a proposed finding of fact. Rejected in Findings of Fact 63, 76. Adopted in Findings of Fact 32, 33, 82 but Rejected in part in Finding of Fact 33. Rejected as unsupported by the record. Adopted in Findings of Fact 33, 64 in part, but otherwise. Rejected in Finding of Fact 64 and as not supported by the record. Rejected as unnecessary and without citation to the record. Adopted and. Rejected in Findings of Fact 33, 63. Rejected as cumulative and unnecessary. Rejected in Findings of Fact 33, 63. Rejected in Findings of Fact 17. Adopted in Finding of Fact 17, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 17, 18. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 20, 71. Rejected as cumulative and unnecessary. 33-34. Rejected as irrelevant and unnecessary. 35-36. Adopted in Finding of Fact 81. Adopted in Finding of Fact 21. Rejected as speculative. Adopted in Finding of Fact 18 but otherwise Rejected as irrelevant and unnecessary. Rejected as unnecessary and irrelevant. 41-43. Rejected as not supported by the record and speculative. Adopted in Findings of Fact 19, 80. Adopted in Findings of Fact 48, 51, but Rejected in Finding of Fact 21. Rejected in Findings of Fact 63, 76 and otherwise as unnecessary and irrelevant. Adopted in Findings of Fact 24-26. Adopted in Finding of Fact 23. Adopted in Finding of Fact 79. Adopted in Finding of Fact 27. Adopted in Finding of Fact 1. Adopted in Findings of Fact 61, 63 and otherwise Rejected as unnecessary. Rejected as unnecessary. Adopted in Findings of Fact 5, 81. Adopted in Findings of Fact 71, 75. 56-57. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. 58. Adopted in Findings of Fact 3, 55, 56. 59-61. Rejected as irrelevant, unnecessary and cumulative. Rejected in Finding of Fact 66. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 63, 76. Adopted in Findings of Fact 4, 6. Adopted in Finding of Fact l. Adopted in Finding of Fact 81 but otherwise Rejected as unnecessary. Rulings on HCR's Proposed Findings of Fact: 1-2. Adopted in Findings of Fact 42, 43. 3-4. Rejected as unnecessary and irrelevant. 5. Adopted in Finding of Fact 57. 6-7. Rejected as unnecessary. 8-9. Adopted in Finding of Fact 57. 10-15. Rejected in Finding of Fact 66 and otherwise as unnecessary and cumulative. Adopted in Finding of Fact 57. Adopted in Findings of Fact 27, 55. Rejected as unnecessary. Adopted in Finding of Fact 57. Adopted in Findings of Fact 23, 28, 63. Adopted in Finding of Fact 23. Adopted in Findings of Fact 25, 26, 28. Adopted in Findings of Fact 24, 27, 28. 24-25. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. 26-27. Adopted in Finding of Fact 27, but otherwise Rejected as unnecessary. 28-29. Adopted in Finding of Fact 66, but otherwise Rejected as unnecessary. 30. Adopted in Findings of Fact 46-49. 31-37. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary. Rejected as unnecessary and irrelevant. Adopted in Finding of Fact 24. 40-42. Adopted in Findings of Fact 25, 26, 71, 75. Adopted in Finding of Fact 71. Rejected as unnecessary. 45-46. Rejected as cumulative and unnecessary. Adopted in Findings of Fact 63, 81. Adopted in Finding of Fact 24. Adopted in Finding of Fact 28, but otherwise Rejected as cumulative and unnecessary. Adopted in Finding of Fact 79. 51-54. Adopted in part in Finding of Fact 24, but otherwise Rejected as unnecessary. 55. Adopted in Finding of Fact 37, but otherwise Rejected as unnecessary and cumulative. 56-57. Rejected as unnecessary. Adopted in part in Finding of Fact 17, but otherwise Rejected as unnecessary. Adopted in Finding of Fact 19. Adopted in part in Findings of Fact 18, 42. Adopted in Finding of Fact 18. 62-63. Adopted in Finding of Fact 20. Adopted in Findings of Fact 22, 55. Adopted in Findings of Fact 21, 49, 51. Adopted in Findings of Fact 32, 33. Adopted and. Rejected in Finding of Fact 33. Adopted in Finding of Fact 82. 69-70. Adopted in Finding of Fact 63. Adopted in Finding of Fact 56. Adopted and Rejected in part in Finding of Fact 34. Rulings on Sisters' Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 43. Rejected as unnecessary as a Finding of Fact. Adopted in Finding of Fact 30. Adopted in Findings of Fact 12, 14, but otherwise Rejected as irrelevant. Adopted in Finding of Fact 3. Adopted in Findings of Fact 24, 29. Adopted in Finding of Fact 19, but otherwise Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38. 11-12. Adopted in Finding of Fact 46. 13-15. Adopted in Findings of Fact 47-54. Rejected as unnecessary and not supported by the record. Adopted in Finding of Fact 30. 18-22. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. 23. Adopted in Finding of Fact 34. 24-26. Adopted in Finding of Fact 57, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57, but Rejected in Finding of Fact 34. Adopted in part in Finding of Fact 30, but otherwise Rejected as argument unsupported by any citation to the record. 30-38. Adopted in part in Finding of Fact 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. Adopted in Finding of Fact 40. Rejected in Finding of Fact 40. 41-51. Adopted in Findings of fact 60, 63, but otherwise Rejected as unnecessary, irrelevant and as argument on the evidence rather than a Finding of Fact. 52-58. Adopted in Findings of Fact 29, 60, 61, but otherwise Rejected as unnecessary and irrelevant. 59. Adopted in Finding of Fact 11, but otherwise Rejected as irrelevant. 60-75. Rejected as unnecessary irrelevant, and cumulative. Rejected as unnecessary. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Findings of Fact 33, 82. Adopted in Findings of Fact 33, 82. Adopted in Finding of Fact 33, but Rejected in Finding of Fact 64. 82-83. Rejected as unnecessary. 84. Adopted in Finding of Fact 9. 85-86. Rejected as unnecessary. 87-88. Adopted in Findings of Fact 9, 41. 89. Adopted in Finding of Fact 4, but otherwise Rejected as not supported by the record. 90-91. Rejected in Finding of Fact 63 and otherwise not supported by the record. 92-105. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary, cumulative and irrelevant. Rejected as unsupported in the record and otherwise unnecessary. Adopted in Finding of Fact 29. Adopted in Finding of Fact 11. Rejected as irrelevant, unnecessary and speculative. Rejected as unnecessary. 111-112. Adopted in Finding of Fact 30. 113. Adopted in Finding of Fact 63. 114-115. Rejected as unnecessary and cumulative. 116-120. Adopted in Findings of Fact 60, 63, but otherwise Rejected as unnecessary and cumulative. 121. Adopted in Finding of Fact 30. 122-123. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative. 124. Adopted in Findings of Fact 31, 34, but otherwise Rejected as unsupported in the record. 125-126. Adopted in Finding of Fact 35. 127-129. Rejected as unnecessary and irrelevant since no applicant has locked in interest rates, and therefore these rates will vary and are speculative. Rejected as speculative and irrelevant. Rejected as irrelevant. 132-135. Adopted in Finding of Fact 73. 136. Adopted in Finding of Fact 74. 137-139. Adopted in Finding of Fact 71, but otherwise Rejected as unnecessary and cumulative. 140. Rejected as unnecessary and irrelevant. 141-145. Adopted in Finding of Fact 71. 146-147. Adopted in Finding of Fact 83. Adopted in part in Finding of Fact 71, 84, but Rejected in Findings of Fact 81, 82. Adopted in Finding of Fact 63. Rejected in Finding of Fact 67. Rejected as irrelevant and unnecessary. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 34. Rejected as cumulative and unsupported by the record. 155-158. Adopted in Finding of Fact 54. 159. Rejected as irrelevant and unnecessary. Rulings on Sarasota Healthcare's Proposed Findings of Fact: Adopted in Findings of Fact 3, 12, 17, 19, 24, 30. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 37, 38, 43. 4-6. Adopted in Finding of Fact 11, but otherwise Rejected as unnecessary and irrelevant. 7-13. Adopted in Findings of Fact 12-16, but otherwise Rejected as unnecessary and irrelevant. 14-17. Adopted in Finding of Fact 46. Adopted in Finding of Fact 47. Adopted in Finding of Fact 49. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in Findings of Fact 11, 61. 22-23. Rejected as cumulative and unnecessary. 24-41. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. Adopted in part in Findings of Fact 14, 57, but otherwise. Rejected in Finding of Fact 83 and as unsupported in the record. Rejected in Finding of Fact 54, and otherwise as irrelevant. Adopted in Findings of Fact 13, 51, but Rejected in Finding of Fact 54. Adopted in Finding of Fact 13. Adopted in Findings of Fact 14, 57. 47-49. Adopted in Findings of Fact 56, 66. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. 53-58. Adopted in Finding of Fact 63, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 14. Adopted in Finding of Fact 57. Adopted in Finding of Fact 14. Adopted in Finding of Fact 53. Adopted in Finding of Fact 81. Adopted in Finding of Fact 63, but otherwise Rejected as cumulative and unnecessary. 65-78. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 79-85. Adopted in Findings of Fact 76, 77, but otherwise Rejected as unnecessary and irrelevant. 86-97. Adopted in Findings of Fact 15, 63, 84, but otherwise Rejected as cumulative and unnecessary. Adopted and. Rejected in Finding of Fact 64. Rejected as unsupported in the record. Rejected as cumulative and unnecessary. 101-103. Adopted in Findings of Fact 15, 84. 104. Rejected as unnecessary and cumulative. 105-109. Adopted in Findings of Fact 63, 84, but otherwise Rejected as irrelevant and unnecessary. Rejected as unsupported in the record. Adopted in part in Finding of Fact 16, but Rejected in Finding of Fact 73. 112-116. Adopted and Rejected in part in Findings of Fact 71, 73, 75, but otherwise. Rejected as irrelevant and unnecessary. 117. Adopted in Finding of Fact 16. 118-119. Adopted in Finding of Fact 75. 120-121. Rejected in Finding of Fact 71. 122-126. Adopted in Finding of Fact 40. 127-128. Adopted in Findings of Fact 30, 32. Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 31. Adopted in Finding of Fact 33. Adopted and Rejected in Finding of Fact 67. 133-135. Adopted and Rejected in part in Findings of Fact 33, 63, and otherwise. Rejected as irrelevant since all licensure requirements can easily be met with minor modifications. Adopted in Finding of Fact 36. Rejected as unsupported in the record. Adopted in Findings of Fact 15, 30, 32, 33. Adopted in Finding of Fact 31, but otherwise Rejected as simply a summation of testimony. 140-142. Adopted in Finding of Fact 36. Rejected as irrelevant. Adopted in Finding of Fact 34, but Rejected in Finding of Fact 51. 145-146. Adopted in Finding of Fact 34, but otherwise Rejected as unnecessary. 147-148. Adopted in Finding of Fact 30, but Rejected in Finding of Fact 57 and as unsupported in the record. 149-150. Adopted in Finding of Fact 34. Adopted in Finding of Fact 57. Rejected as unnecessary and cumulative 153-156. Rejected in Findings of Fact 63, 76, 77 and otherwise not supported in the record. Rejected as unnecessary. Adopted in Finding of Fact 36. Adopted in Finding of Fact 82. Rejected as unnecessary. Adopted in Finding of Fact s. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 71, but otherwise Rejected as cumulative and unnecessary. Rejected as cumulative and unnecessary. Adopted in Finding of Fact 18, but otherwise Rejected as irrelevant and unsupported in the record. Adopted in Findings of Fact 17, 18, but otherwise Rejected as cumulative and as argument on the evidence. Adopted in Findings of Fact 48, 49, 51. Rulings on Health Quest's Proposed Findings of Fact: Adopted in Finding of Fact 24. Adopted in Finding of Fact 3. Adopted in Findings of Fact 17, 19. Adopted in Finding of Fact 12. Adopted in Finding of Fact 30. 6-10. Adopted in Finding of Fact 37. Rejected as irrelevant and unnecessary. Adopted in Findings of Fact 42, 43. Adopted in Finding of Fact 20. Adopted in Findings of Fact 19, 20, 39. Adopted in Finding of Fact 18. Adopted in Findings of Fact 61, 63. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant and unnecessary. Adopted in Finding of Fact 17. Adopted in Finding of Fact 18. Rejected as argument on the evidence rather than a proposed finding of fact. Rejected as speculative and unsupported in the record. Adopted in Findings of Fact 19, 80. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 80. Rejected in Finding of Fact 71. Rejected as irrelevant. 27-34. Adopted in Findings of Fact 22, 63, 76, but otherwise Rejected as unnecessary and cumulative. 35-39. Adopted in Finding of Fact 22. 40. Adopted in Finding of Fact 66. 41-58. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding of Fact 61, but otherwise Rejected as irrelevant. Rejected as simply a statement on the evidence rather than a proposed finding of fact and otherwise irrelevant. Adopted in Finding of Fact 17, but otherwise Rejected as unnecessary. 62-63. Adopted in Finding of Fact 18. Rejected as unnecessary and cumulative. Adopted in Finding of Fact 80. Adopted in Finding of Fact 63. Adopted in Findings of Fact 19, 80. 68-70. Adopted in Finding of Fact 63, but otherwise Rejected as unnecessary and cumulative. 71. Adopted in Finding of Fact 21. 72-74. Rejected in Findings of Fact 48, 49, 51 and otherwise as irrelevant. 75-76. Rejected as unnecessary, although it is agreed that these matters are irrelevant and speculative. Adopted in Findings of Fact 63, 80. Adopted in Finding of Fact 9. Rejected as argument on the evidence rather than a proposed finding of fact. Adopted in Finding of Fact 9. 81-82. Adopted in Finding of Fact 39. 83. Rejected in Finding of Fact 39. 84-88. Adopted in Finding of Fact 41. Adopted in Finding of Fact 9. Rejected as argument on the evidence and as legal argument rather than a proposed finding of fact. Rejected as unnecessary. 92-94. Adopted in Finding of Fact 41. 95. Adopted and. Rejected in part in Finding of Fact 41. 96-101. Rejected in Findings of Fact 63, 76 and otherwise as irrelevant. 102. Rejected as cumulative. 103-104. Adopted in Finding of Fact 1. Rejected in Findings of Fact 61, 63. Rejected as simply a summation of testimony. 107-109. Rejected in Finding of Fact 63. 110-111. Rejected as unsupported in the record and irrelevant. 112-114. Adopted in Finding of Fact 9, but otherwise Rejected as unsupported by the record. 115. Adopted in Finding of Fact 41. 116-117. Rejected as unnecessary. 118-120. Rejected in Finding of Fact 66 and otherwise simply as a summation of testimony. 121-122. Rejected as irrelevant and as argument on the evidence. Adopted in Finding of Fact 38. Rejected as a conclusion of law rather than a proposed finding of fact. 125-127. Rejected as argument on the evidence and as a summation of testimony. 128. Rejected as cumulative. 129-131. Rejected as simply a summation of testimony rather than a proposed finding of fact. 132-134. Rejected in Findings of Fact 61, 63 and otherwise as irrelevant. 135. Rejected in Findings of Fact 43, 48, 57 and otherwise as irrelevant. 136-142. Rejected as irrelevant. The issue in this case is not the accuracy of the SAAR, but rather whether applicants have sustained their burden of establishing entitlement to a CON based on the record established at hearing. COPIES FURNISHED: Richard A. Patterson, Esquire Department of HRS 2727 Mahan Drive, 3rd Floor Tallahassee, Florida 32308 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House - Suite 100 118 North Gadsden Street Tallahassee, Florida 32301 David Watkins, Esquire Harry F. X. Purnell, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Byron B. Matthews, Jr., Esquire Vicki Gordon Kaufman, Esquire 700 Brickell Avenue Miami, Florida 33131-2802 Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 =================================================================
The Issue The ultimate issue to be resolved in this proceeding is whether the Petitioner should be granted a Certificate of Need to construct a 120-bed nursing home in Pinellas County, Florida. Petitioner contends that there is a need for such a facility; that the Department's rules do not apply in determining need; and that to the extent the Department's rules do apply, they are not a reasonable measure of the need for a nursing home facility. The Department contends that its rules are reasonable and applicable to this proceeding, and that there is no need for the proposed facility.
Findings Of Fact Petitioner is seeking a Certificate of Need authorizing the construction of a 120-bed nursing home in northern Pinellas County, Florida. At the time that the Application for Certificate of Need was filed, the total project cost was estimated at $3,829,000. Cost estimates have, been revised since that time, and at the time of the hearing, it was estimated that the total capital expenditure required would be $5.3 million. Petitioner proposes to provide intermediate and skilled care facilities and to secure Medicare and Medicaid approval. Petitioner has built and operated numerous nursing home facilities in states other than Florida. Petitioner has the necessary resources, competence and experience to build and operate the proposed nursing home facility. Prior to the adoption of Rule 10-5.11(21), Florida Administrative Code, the Department was utilizing a Health Services Plan adopted by the Florida Gulf Health Services Agency to determine the need for nursing home facilities in Pinellas County. Under the plan, the need for nursing home facilities was basically determined by estimating the population of persons 65 years old and older in the services area three years in the future and using a ratio of 27 nursing home beds per 1,000 persons in that population category. A reasonable estimate of the total population of persons 65 years of age and older in Pinellas County for 1986 is 217,232. Using the 27 beds per 1,000 ratio, total nursing home beds needed in the area by 1986 would be 5,865. There are at present 6,982 nursing home beds that are licensed or that have been approved for licensure in Pinellas County. Therefore, under the Health Services Plan, there will be 1,117 more nursing home beds than needed by 1986. In determining the need and demand for nursing home facilities, the Department now utilizes a formula set out in its Rule 10-5.11(21), Florida Administrative Code. Under the rule, the Department will not normally approve applications for additional nursing home beds in any service district unless a need for the beds is demonstrated by application of a formula set out in the rule. Under the formula, a ratio of 27 nursing home beds per 1,000 persons age 65 or older in the population is utilized. This formula historically allows for construction of nursing home beds which exceeds need. Persons who live in poverty have a historic need for nursing home services that exceeds that for the remainder of the population. The Department's formula thus applies a poverty ratio to the 27 beds per 1,000 formula. The percentage of poverty in Pinellas County is less than the state average. The bed need ratio for Pinellas County under the Department's rule is therefore 17.7 beds per 1,000 of aged population. Under its rule, the Department utilizes the most recent mid-range population projections published by the Bureau of Economic and Business Research at the University of Florida to determine the population of the service district. In Pinellas County, the population age 65 and above was estimated by that bureau for 1986 to be 217,232. Applying the 17.7 beds per 1,000 ratio, the theoretical bed need for Pinellas County for 1986 is 3,847 beds. There are more beds than that presently licensed, and more have been approved for Certificates of Need. When theoretical need for nursing home beds is exceeded, as is the case in Pinellas County and in the district that includes Pinellas County, the Department, under its rule, will not allocate additional beds unless an occupancy rate of 95 percent is exceeded. The occupancy rate in Pinellas County is 92.9 percent. There is therefore no need nor actual demand for the nursing home proposed by Petitioner under the Department's rule. The Department's Rule 10-5.11(21), Florida Administrative Code, is a reasonable method of determining theoretical need and actual demand for nursing home beds. There are other reasonable methodologies that could be followed. The Department's methodology is not, however, unreasonable, arbitrary, or capricious. Even if application of the formula does not demonstrate any need or demand for nursing home services, the Department can grant a Certificate of Need if other circumstances exist that would justify the addition of new nursing home beds. The applicant has failed to establish that any such conditions exist in Pinellas County. It has not been established that persons who live in poverty, Medicaid or Medicare patients, or any segment of the population are unable to obtain nursing home services. It has not been established that existing facilities are providing inferior services. The Department's Rule 10-5.11(21), Florida Administrative Code, allows for the construction of more nursing home beds in districts with a high degree of poverty than would be allowed in districts where there is a lesser degree of poverty. This factor has been placed in the formula because it has been established that persons who live in poverty have a greater need for nursing home facilities than do other segments of the population. The formula does not operate to discriminate against persons who do not live in poverty. Rather, it serves to allow the placement of facilities where they are needed.
Findings Of Fact 1-2. Rejected as a statement of the issues and not a Finding of Fact. Accepted and incorporated in Finding of Facts 8 and 9. Incorporated in Finding of Fact 9. Accepted. Incorporated in Finding of Facts 6 - 9. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 16. Incorporated in Finding of Fact 17. Irrelevant. Incorporated in Finding of Fact 5. Incorporated in Finding of Fact 6. 13-14. Irrelevant. Cumulative. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 11. Irrelevant. Incorporated in Finding of Fact 22. Incorporated in Finding of Fact 14. Irrelevant. Incorporated in Finding of Facts 4 and 5. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman 2700 Blairstone Rd. Suite C Tallahassee, Florida 32301 R. Bruce McKibben, Jr. Assistant General Counsel Department of HRS 1323 Winewood Boulevard Jonathan S. Grout, Esquire 307 W. Tharpe Avenue Tallahassee, Florida 32302 Thomas Beason, Esquire Suite 100 118 N. Gadsden Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore RECOMMENDED that the applications for a CON to construct either a 60 or 120-bed nursing home in Brevard County, Florida, submitted by Wuesthoff Health Services, Inc. and Florida Convalescent Centers, Inc., be denied. RECOMMENDED this 8th day of October, 1986, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway The Oakland Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 84-1976; 85-1310; 85-1506 The following constitutes my specific findings pursuant to Section 120.59(2), Florida Statutes, on all Proposed Findings of Fact submitted by the parties to this case.
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
Findings Of Fact Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
