Findings Of Fact The controversy Forum Group, Inc. (Forum Group), Hillsborough Healthcare, Ltd. (Hillsborough Healthcare), Health Quest Corporation (Health Quest), and Careage House Healthcare Center (Careage) filed applications for certificates of need for community nursing homes in Hillsborough County, which is a subdistrict of HRS district VI. The applications were filed in the July, 1986, batching cycle, for need in July, 1989, known as the planning horizon. As amended prior to being deemed complete by HRS, Hillsborough Healthcare and Careage sought 120 beds, Health Quest sought 88 beds, and Forum Group sought 60 beds. All of the applications satisfy and are consistent with state and local health plans. The Department's free form preliminary action Ordinarily, the Department's preliminary decision on these applications would have been issued in November or December of 1986. In these cases, the parties were orally advised of the Department's preliminary action in January, 1987, but the state agency action report containing that preliminary decision was not issued until August, 1987. The delay in decision making in this case occurred due to the altered process of free form decision making that was used in this case. Careage filed a number of applications in the July, 1986, batching cycle, in a number of subdistricts. The preliminary review conducted by HRS determined there to be bed need in four of the counties in which Careage had applications: Hillsborough, Polk, Pinellas, and Lee. During free form agency decision making on the applications in this batching cycle, Ms. Marta Hardy was the Deputy Assistant of Regulation and Health Facilities for the Department. T. 1024. Her duties included responsibility to oversee the issuance of certificates of need and develop health planning policies. Id. Ms. Hardy was the direct supervisor of Robert Maryanski, who was the head of the office of community medical facilities, and Robert Sharp, who was the head of the office of comprehensive health planning. T. 1024. Mr. Maryanski was the direct supervisor of Mr. Reid Jaffe who reviewed the applications in Hillsborough county. Preliminary decisions on the applications in this batch were normally due in November, 1986. It was the normal procedure at the Department to review applications for certificates of need in the following manner. First, an employee in the position entitled "medical facilities consultant" reviewed all applications in the batching cycle for a particular district or subdistrict and made recommendations on each application. These recommendations were then reviewed by his supervisor, the medical facilities consultant supervisor. The recommendations of the medical facilities consultant supervisor upon each application then went to Mr. Maryanski. In Hillsborough, Polk, Pinellas, and Lee Counties in the July, 1986, batching cycle, all reviewers found there to be a bed need. In the normal course of business, all reviewers forwarded through Mr. Maryanski and to Ms. Hardy recommendations that did not recommend the award of a certificate of need to Careage in any of these four counties. T. 1057, 1055, 1281-82. Mr. Maryanski told Mr. Jaffe to "find a way" to approve the Careage application in Pinellas County. T. 1283-84. The time of this communication is not in the record. At about the time that Careage applied for certificates of need (August or September, 1986), Ms. Hardy had dinner with the owner of Careage, Mr. Gene Lynn, Mr. Lynn's wife, and Mr. Ralph Haben. T. 1040. At that meeting, the representatives of Careage told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. Mr. Haben is an attorney, and was then representing Careage. T. 1059. Mr. Haben and Ms. Hardy had been friends since the late 1970's, and in August and September, 1986, they had had lunch or dinner together socially four or five times. T. 1041- 49. In December, 1986, after Departmental staff had preliminarily recommended that Careage's applications be disapproved in the four counties in which was there was need, Ms. Hardy determined to ask Robert Sharp to review applications in the four counties. The result of Mr. Sharp's review was to recommend approval of the Careage application in the four counties. That recommendation was approved by Ms. Hardy. Mr. Sharp was responsible for health planning. He normally had nothing to do with review of certificate of need applications, although he had reviewed some hospital applications in the past. T. 1054. Ms. Hardy had come to the conclusion that Careage provided care of good quality. T. 1063. At the time she formed that opinion, Careage did not operate any nursing homes, and had not done so since 1982. Mr. Sharp understood that Ms. Hardy was impressed with Careage, but did not know the basis for such favorable impression. T. 940. Ms. Hardy told Mr. Sharp that she did not believe that the current method of comparative review of applications was adequate, and used Careage as an example of a best qualified applicant that was overlooked by the current method. T. 940. Mr. Sharp developed a method for comparative review of the applications in the batch for Hillsborough County and the other counties. The method has been referred to in the record as a matrix. Mr. Sharp simply selected certain aspects of the applications for comparison. Two types of information were selected: numerically quantified information, and "program characteristics," which called for a determination whether the selected item existed or did not exist in the proposal. The "matrix" also had a narrative for some of the applicants. Mr. Sharp used Careage as the standard of comparison for all other applicants in the comments section. There was no evidence that the items selected by Mr. Sharp were unreasonable or unfair. The items selected appear to be reasonably related to the task of comparing the virtues of the applicants. The items, for the most part, simply are based on information required by the Department in the application form. The matrix was found in September, 1987, to contain numerous factual errors, and the Department issued a revision. H.Q. Ex. 27. Need pursuant to rule 10-5.011(1)(k) Licensed beds in the district (LB) The number of licensed beds in the district (LB) as of June 1, 1986, was at least 5,964. T. 1706. This figure is derived by adding the 5,557 licensed beds shown on the August 25, 1986, semi-annual nursing home census report, H.Q. Ex. 16, to the 407 additional community nursing home beds that has been erroneously classified as sheltered nursing home beds. None of the other testimony credibly establishes this base figure. There is a dispute as to whether 96 additional beds at the Home Association should be considered licensed community nursing home beds as of June 1, 1986. The Home Association was founded in 1899. It is officially recognized that there was no certificate of need requirement in 1899. The Home Association has never received a certificate of need. Thus, it is inferred that the Home Association was never "issued" beds for "nonrestrictive use." At the time that the Home Association was licensed, there was no license category of "sheltered bed. Prior to 1982, there was no statute defining a "sheltered bed." T 1721-22. Thus, prior to 1979, the Home Association was not 1,issued" beds as "sheltered beds" or "for restrictive use". The Home Association is in the district and in the subdistrict, Hillsborough County. The Home Association had 96 beds in 1972, and had the same number on June 1, 1986. On or about August 20, 1986, HRS sent a letter to the Home Association. HQ Ex. 9. The letter stated that HRS records currently identified the Home Association as a "sheltered nursing home/continuing care facility licensed under Chapter 651, F. S.," but that HRS records did not indicate the date of the initial CON. The letter stated that the specific number of beds allocated to community and sheltered nursing home beds were listed below. At the bottom of the letter, HRS listed 96 beds in the column and line identified as current number of sheltered nursing home beds. The Home Association was told to review the data and make changes and return the letter to HRS. It further stated that a failure to respond would be interpreted as approval of the HRS listed bed allocations. The letter then provided four blanks for the Home Association to respond. The first two provided places to show the "corrected number of beds" both on a line identifying such beds as "community nursing home beds," and a line identify such beds as "sheltered nursing home beds." The Home Association left these lines blank. The third blank asked for the certificate of need number and date. The Home Association typed in: "The Home was founded in 1899; no certificate of need was issued." The fourth blank stated: "Sign Here if Corrections Requested." Initials appear in handwriting in that blank. H.Q. Ex. 9. The response of the Home Association was ambiguous. Having signed the fourth blank, thus seemingly communicating a desire to "correct" the form, the Home Association failed to tell HRS whether it wanted to correct the number of beds or the classification of the beds, or some combination thereof. HRS's need expert admitted that the only way one could settle the question would be to call the Home Association. T. 1724. The problem is further compounded by the way in which the letter from HRS was drafted. The letter did not ask the Home Association to provide information concerning the "historical utilization" of the 96 beds at the Home Association, and thus did not collect any information as to "historical utilization." See the last sentence of section 651.118(8), Fla. Stat. (1987). Instead, it told the Home Association that HRS records identified the Home Association as a sheltered nursing home/continuing care facility licensed under chapter 651. It also told the Home Association that "any nursing home bed located in a continuing care facility and not approved specifically as a sheltered nursing home bed and any nursing home bed located in a life care facility prior to 1979 shall be classified as a community nursing home bed." And the letter appeared to allow the Home Association an opportunity to request a "change in status" only if it had been issued a certificate of need as a community nursing home bed after 1979 and before 1982. It may be that when the Home Association wrote back that it had no certificate of need issued, and that it had been in existence since 1899, the Home Association was simply telling HRS that its beds fell in the category of automatically being community nursing home beds because "located in a life care facility prior to 1979." If the Home Association beds are counted as community nursing home beds, then those 96 beds are added to 5,964, and LB is 6,060. Licensed beds in the subdistrict (LBD) On June 1, 1986, there were 2,612 licensed beds (LBD) in the subdistrict, Hillsborough County. If the 96 beds at the Home Association are counted as community nursing home beds, then LBD is 2,708. Current populations (POPC and POPD) Whether POPC and POPD are the populations on January 1, 1986, or July 1, 1986 HRS divides the regulatory function with respect to certificates of need into two program offices. The office of comprehensive health planning (OCMF) is ordinarily responsible for writing the rules and developing the methodologies for the certificate of need program. It is also responsible for writing the state health plan. The office of community medical facilities (OCMF), which is now called the office of community health services and facilities, is normally responsible for making decisions upon applications for certificates of need. T. 929 (The transcript is in error on line 11; it should read OCMF), 930, 936, 1748, 1251. There are exceptions. T. 937 From 1984 through 1986, the office of comprehensive health planning routinely issued semiannual reports in which it calculated the need for community nursing home beds. H.Q. Exs. 12-18. T. 970-971, 1251. In each of these reports, bed need was projected for an established date. In each of these reports, the "current populations" (the base populations from which the need projection was made) were 3.5 years earlier than the date upon which need was projected. H.Q. Exs. 12-18; T. 1253. From 1984 through 1986, notwithstanding the fact that the semiannual report was based upon a 3.5 year period of need projection, the office of community medical facilities sometimes used a 3.0 year period of projection to actually issue certificates of need. T. 1254. That practice was not uniform within the office of community medical facilities. A number of certificate of need applications were issued based upon the calculations of need in the semiannual nursing home report, which used a 3.5 year period of projection. T. 560-561. It is officially recognized that several formal administrative hearings were settled using a 3.5 year period of projection of need. Health Quest Realty d/b/a Regents Park of Sarasota v. Department of Health and Rehabilitative Services, Final Order issued October 25, 1985 (CON number 3278), DOAH case number 84-3389, which was an exhibit in DOAH case number 86-0050, both cases which were before this Hearing Officer; Health Quest Corporation d/b/a Regents Park of Broward v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 2485, DOAH case number 84- 3297. But even that deviation was not uniform. It is officially recognized that in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051, HRS proposed at the formal administrative hearing to use a 2 year period of projection, using 1986 populations as "current" populations, although the applications were filed in 1985, and need was being projected in 1988. See paragraph 18, findings of fact, of that recommended order, which was written by this Hearing Officer. See also T. 1290. It is also officially recognized that in Forum Group, Inc., et al. v. Department of Health and Rehabilitative Services, et al., 8 F.A.L.R. 5438, 5445, para. 15, the Department used January 1986, as the starting date for a projection to July, 1987, an 18 month period of projection. It would serve no useful purpose to review all the other orders in the files of the Division of Administrative Hearings. It may be concluded from the foregoing that the way in which HRS has interpreted the meaning of "current" populations in its nursing home rule in the period from 1984 to 1986 was inconsistent. In fact HRS did not uniformly use a 3.5 year period of projection as now urged by the Petitioners. Since it has been concluded as a matter of law that the values of POPC and POPD must be determined as of July 1, 1986, no findings of fact will be made as to the populations on January 1, 1986. Whether POPC and POPD are determined from the July 1, 1986, or the May 12, 1987 release of Governor's estimates and projections The Governor's estimates and projections of population are prepared by the Bureau of Economic and Business Research and the University of Florida. T. 240. The Governor's estimates are released twice a year. T. 241. A population estimate, such as POPC or POPD, is an educated guess as to current population size. T. 239. A population projection, such as POPA or POPB, is a mathematical prediction of what a future population size will be. T. 240. The Governor's population estimates are based primarily upon actual data collected with respect to residential electric hookups combined with local information about housing mixes and national data about household size, persons per household, and institutional or group populations. T. 240, 242. The information is gathered each year. T. 242. The Governor's population projections are based upon the most recent population estimate projected forward using assumptions about future migration, mortality, and fertility. T. 240, 242. The May 12, 1987, Governor's population estimates and projections were the official Governor's release on the date of the formal administrative hearing, and were then the most current release. T. 241. The May 12, 1987, Governor's population estimates and projections for July 1, 1986, and July 1, 1989, were more accurate than the release by the Governor on July 1, 1986 for the following reasons: The May 12, 1987, projection of populations on July 1, 1989, is more accurate because the projection only attempts to project two years into the future. The July 1, 1986, release tries to project three years into the future. Extrapolation is more accurate over a shorter period of time because the underlying assumptions upon which the extrapolation is based will be assumed to remain constant for a shorter period of time. Stated another way, fewer things typically go wrong with the assumption that assumptions will remain constant over a short period of time rather than a longer period of time. T. 243-244. The May 12, 1987, projection of populations on July 1, 1989, are based upon actual hard data (electric hookups) for July 1, 1986, projected forward. The July 1, 1986, projection of populations for July 1, 1989, was not based upon a population estimate, but was based upon a population projection as to the population on July 1, 1986, which itself was based upon electric hookup data from an earlier period. T. 244. (This is also the reason that the May 12, 1987, estimate of July 1, 1986, populations, is more accurate than the projection of that population released on July 1, 1986.) The May 12, 1987, projection of populations on July 1, 1989, are based more current (actual 1986) figures upon which the extrapolation is made: actual levels of fertility, mortality, and migration for 1986, as well as 1980 through 1985. The July 1, 1986, release did not have this better data available, and had to rely on figures for only 1980 through 1985. T. 244. The district has grown at about 2.9 percent a year from 1980 to 1986. The July 1, 1986, release projects a rate of growth in each year from July 1, 1986, to July 1, 1989 of only 1.6 percent, or only one-half of the actual observed rate. There is no basis to conclude that the district growth rate in the period 1986-1989 will be one-half the rate observed in the prior six years. T. 245. The July 1, 1986, release bases its projection of July 1, 1989, populations upon an extrapolation based in part upon mortality rates from 1980 mortality tables. However, the mortality rates for the age groups involved, ages 65-74 and 75+, have substantially declined since the 1980 tables were compiled. T. 247-248. Elfie Stamm is Supervisor of the HRS Health Care Facilities and Services office. That office is responsible for all HRS health planning activities, including development of regulations for the certificate of need program, issuance of health policies governing the certificate of need program, and development of the state health plan. Ms. Stamm thought that the May 12, 1987, release of Governor's estimates and projections of populations was more accurate than the July 1, 1986, release because it was based on more up-to-date data. F.G. Ex. 15. The effect of selecting the May 12, 1987, release of populations, rather than the July 1, 1986, release upon the net need projected for the subdistrict in July, 1989, by HRS's rule is exceptionally dramatic: if the July 1, 1986, release is used, the net bed need is 143, and if the May 12, 1987, release is used, the net bed need is 300, assuming other factors are held constant (the projection period and the Home Association beds). HQ Ex. 4. Thus, use of the May 12, 1987, release of populations reveals 100 percent more bed need in 1989 than use of the July 1, 1986, release. HRS presented only one justification or basis for its policy of using the July 1, 1986, release of population estimates and projections: those were the most current estimates and projections at the time the applicants filed their applications and subsequently when the agency conducted its review of the applications in the batching cycle and developed its proposed agency action. T. 1709. The July 1, 1986, release of population estimates and projections was not available, however, when the applicants in this batch had to file their letters of intent. T. 1286. Based upon the Governor's estimates of population released on May 12, 1987, the estimated population on July 1, 1986, for age 65-74 (POPC) was 134,968, and for age 75+ (POPD) was 94,402. H.H. Ex. 6. Projected populations on July 1, 1989, POPA and POPB Based upon the Governor's projections of population released on May l2, 1987, the projected population on July 1, 1989, for age 65-74 (POPA) was 149,771, and for age 75+ (POPB) was 108,400. H.H. Ex. 6. The occupancy rate The occupancy rate for the 2,612 licensed community nursing homes within the subdistrict for October, 1985, through March, 1986, was 94.18 percent. T. 1707. If the 96 nursing home beds at the Home Association are counted as licensed community nursing home beds within the subdistrict, the occupancy rate within the subdistrict for October, 1985, through March, 1986, was 94.29 percent for these 2,708 beds. This is derived by averaging the occupancy rate of the Home Association for the six month period, which is 97.225 percent, see T. 1725, and then factoring the two rates together as follows: (97.225 X 96/2708)) + (94.18 X 2612/2708)= 94.29. The date for determining licensed beds and approved beds for purposes of determining net need in the final calculation The number of approved beds was 368 whether one relies upon the date that the supervisor signed the state agency action report, T. 1708, or August 25, 1986, which is the date of the semiannual nursing home census report and bed need allocations, H.Q. Ex. 16. It appears that all parties agree to use of 368 for AB in the formula. See T. 1708, 437; F.G. Ex. 8. Since that is the case, the following findings of fact are made in the event that the Hearing Officer has overlooked evidence on this point in this voluminous record. HRS relies again on incipient policy for the date of determination of the number of approved beds. That policy is to determine the number of approved beds in the subdistrict on the date that the supervisor signs the state agency action report, a date different from the date that licensed beds are determined. T. 1708, 1716. Pursuant to this policy, the date for determining approved beds will vary, but will always be later than the date of determining licensed beds. T. 1291. The basis for this incipient policy was not explained in this record. T. 1698-1711, 1711-1728, 1291-1295, 1746-1764. Mr. Jaffe, the supervisor in this case, first signed the state agency action report in mid-November, 1986. T. 1295. Subsequently, however there were several superseding state agency action reports, and the report signed originally by Mr. Jaffe was never issued. As a result, the last state agency action report in this case was not issued until August 18, 1987, over one year after the initial applications were filed. This was an irregular procedure, and not the way state agency action reports normally are issued. T. 1714. Moreover, the state agency action report issued in August, 1987, did not have a line or signature for the supervisor, Mr. Jaffe, to sign. T. 1292; F.G. Ex. 5. Changes to the application of Forum Group Forum Group's original application for certificate of need in this case is F.G. Ex. 3. It should be noted that this exhibit contains some revisions to tables that were filed by Forum Group before HRS deemed application to be complete, and thus superseded earlier tables in the same exhibit. At the formal administrative hearing, Forum Group submitted an "update" of its application for certificate of need which was prepared about a year after the initial application, as amended, was filed. The update is F.G. Ex. 6. T. 43. Table 7 of both applications contains Forum Group's plan for utilization by class of pay. Table 7 in the original application was for the first year of operation. Table 7 of the update is for the second year of operation. Table 8 of the application is a list of projected patient charges by reimbursement or charge type. Table 8 of the update is significantly different from the original application. Table 8 of the original application, F.G. Ex. 3, listed charges that were consistent with then current charges at other Forum Group facilities. T. 185. The update is for an effective date two years later. Although Forum Group presented evidence that the charges in the updated table 8 were reasonable, T. 189, it claimed that the above increases were solely due to the two year difference in the tables. T. 195. There is also evidence that the revised charges in table 8 was based upon a telephone survey conducted of subdistrict nursing homes three months prior to the formal administrative hearing. Forum Group was unable to provide any evidence as to whether the charges in the updated table 8 were based upon data that was not available to Forum Group when the original table 8 was prepared; moreover, Forum Group did not prove that the data was such that Forum Group could not, and reasonably should not, have been expected to have gathered for its original application. T. 198. The revisions of table 8 were not based upon ordinary inflation. Forum Group assumed in both the original table 8 and the revised table 8 that the inflation rate impact on charges between the first and second year of operation would be only 3.5 percent, T. 199. Forum Group's expert on charges was of the opinion that the inflation rate for expenses would be about 3.5 percent. T. 200-201. The increases in charges shown on table 8 of the update are much greater than expected inflation. For example, the charge for Medicaid ICF semiprivate rooms increased from $50 to $63, an increase of 26 percent. The charge for private pay ICF private rooms increased from $75 to $115, an increase of 53 percent. Table 10 of the application is a projection of patient days and occupancy percentages for each month over the first two years of occupancy. The revision to table 10, F.G. Ex. 6, were prompted by the delay in the case, resulting in an initial opening date two years later. The revisions to table 10 in the update were also based upon the prior experience of Forum Group and a telephone survey of subdistrict nursing homes to obtain more current fillup and occupancy rates. T. 39, 79-80, 84-87. The telephone survey was conducted after the initial application was deemed to be complete. Table 11 of the application sets forth the "manpower" requirements, specifying full time equivalents and annual salaries. Revised table 11 in F.G. Ex. 6 contains changes both in annual salary levels and in FTE's. The dietary supervisor and maintenance supervisor are new positions in the revised table 11, and would be shared with the retirement living facility. These positions could have been reported in the original table 11. T. 164; F.G. Ex. 6. The revised table 11 reports positions for utility workers, positions not in the original application but which could have been reported in the original table 11. T. 166. The revised table 11 has fewer registered nurses and licensed practical nurses than the original application. This change was based upon Forum Group's decision that this new staffing pattern would be more efficient. While the testimony attributed this to a difference in projected occupancy in the first year (95 percent instead of 74.4 percent), this is not a plausible reason for changing the number of RN FTE's from 5.3 to 4.3, or the number of LPN FTE'S from 3.6 to 2.8, since one would expect a need for more nursing at higher occupancy. The revised staffing pattern could have been contained in the original application. T. 166, 170. The increases in salaries reported in the revised table 11 were caused in part by inflation (a later opening date). T. 161-62. The revision in salaries was based upon a survey of salaries conducted a year after the application was filed, T. 162. Considered in the new survey was new information concerning federal requirements for professionals that was estimated to make the professional hiring shortage even worse. Id. It is concluded that the basis for the revisions to the salaries was market data that could not have been available to Forum Group when it filed its original application. Table 25 of the application covers estimated project costs. Revised table 25, F.G. Ex. 6, contains changes of two types: shifts of costs from one accounting line to another, and new estimates of costs based upon a later date of construction. T. 66-67, 91-94. The new estimates of costs were based upon inflation and the current construction experience off Forum Group, both of which would not have been available to Forum Group when it filed its initial application. T. 66-67. The shifts in costs by accounting line (even though one shift was to operating costs), considered alone, did not substantially change the total project cost. T. 91-94. The construction costs contained in the revised table 25, F.G. Ex. 6, are projected to be $1,654,826, which is 12 percent greater than the $1,466,500 originally projected. This new estimate is based upon inflation, current construction experience, and a decision to reduce some less essential space to lower costs. T. 66-67, 1461-65. The inflation rate is estimated to be higher than 3.5 percent in 1990, and the date of commencement of construction is inferred to be two years later than the date assumed in the original application. The revised projection is also more conservative, based upon Forum Group's analysis of current market data. The revised construction cost is thus adequately based upon new data that was not available to Forum Group when it filed its original application. As a result of inflation, Forum Group decided to reduce some space that was less essential. The reduction of space is reflected in revised tables 17 through 20 of F.G. Ex. 6. Forum Group's initial application (F.G. Ex. 3) did not mention or discuss patient treatment plans, patient rights, patient councils, or Alzheimer's programs. It did, however, list 10 special areas of nursing that it would provide, many of which are in the subacute area. See, e.g., ventilator care and compare T. 150. The revised pro forma of operating expenses projects total operating expenses in the first year of $923,153 and $1,256,991 in the second year. F.G. Ex. 6. The original application, as revised before deemed complete, reported total operating expenses of $659,900 and $740,693, respectively, for these same projected years. The new information in the revised pro forma was explained as based upon a projection of higher use by private pay patients and faster fillup, as well as some inflation. T. 202. The change clearly is not explained as a simple matter of inflation, since the increases are about 50 percent in each of the years. T. 201-202. Changes to the application of Health Quest The original Health Quest application is H.Q. Ex. 1, as amended by H.Q. Ex. 2, and is for an 88 bed community nursing home facility. Health Quest submitted a revised application for 60 beds dated a year later, in September, 1987. H.Q. Ex. 3. Table 8 of the application is the list of projected charges by patient type. The revised application, H.Q. Ex. 3, increased charges from 25 to 34 percent. This new information was not based solely upon inflation assumptions, but was based upon increased assumptions about operating costs, and a decision to make a more conservative projection. T. 629, 690-91. Health Quest did not prove that these assumptions were based upon data not available when the original application was filed. Table 11 of the application lists manpower by position and projected annual salary. The revised table 11, H.Q. Ex. 3, increases the numbers of registered nurses and licensed practical nurses from the original application. The new data is based upon the experience of Health Quest in the year following the filing of the original application. T. 630. The testimony on pages 688-89 of the transcript is not inconsistent with the testimony on page 630. It is evident that a change in planning took place, and that the change in planning was based upon new experience. Table 17 of the revised Health Quest application, H.Q. Ex. 3, does not have six 3 bed rooms which had been planned for the facility in table 17 of the original application, as amended, H.Q. Ex. 2. This new information was not caused by the reduction of the application from 88 beds to 60 beds. Health Quest did not credibly prove that its decision to delete 3 bed rooms from its project was based upon data that it could not have had when it filed its original application. T. 630-31. Table 18 of the revised application, H.Q. Ex. 3, changes the square footage of 1 bed rooms from 150 to 216. Health Quest did not credibly prove that its decision to make this change was based upon data that it could not have obtained when it filed its original application. T. 632-33. Changes to the application of Careage Careage presented new information at the hearing which consisted of Careage Exhibits 18-22 and 24-25. The changes to these exhibits were based solely upon a small (3 percent) inflation rate or a different starting date. T. 1570-85. There was also a decrease in utility rates of an apparent few thousand dollars. Compare C. Ex 25 to C. Ex. 3, attachment 12. T. 1583-85. The new projection of utility rates was shown to be based upon new information from the utility company, and new heating and cooling technology. T. 1584. Changes to the application of Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. The merits of the Careage application Credibility of the Careage application Credibility of Mr. Gentle Russell Gentle is Careage's Vice President for nursing home operations, and is responsible for development of the nursing home at issue in this case, and operation of the facility after it opens, as well as development and operations of other Careage nursing homes. T. 1487. The application filed by Careage in this case was prepared by Mr. Gentle, with the exception of the section on need. T. 1491. Mr. Gentle was called as an expert witness for Careage to provide opinion testimony to substantiate the Careage application and to prove the nature of the facility that Careage states it would build and operate if granted a certificate of need. T. 1491-93. Mr. Gentle testified twice that he had a bachelor's degree with a major in accounting from the Alaska Methodist University. T. 1487, 1493. This testimony was presented in order to have Mr. Gentle qualified as an expert witness. Mr. Gentle was tendered as an expert in several areas, including nursing home finance. T. 1493. Upon voir dire examination, and after it became obvious that counsel conducting the examination had investigated Mr. Gentle's academic credentials, 1493, Mr. Gentle admitted that he did not have a degree in accounting, but that his degree had been in science. T. 1496. A motion was made to have Mr. Gentle precluded from testifying as a witness due to his untruthful testimony. T. 1497-98. The motion for the sanction of preclusion of testimony was denied, but the tender of expertise was denied for lack of credible evidence in the record as to expert credentials. T. 1499, 1504, 1512-13, 1514-16. Since the witness had intentionally lied about his college education, a matter of importance in determining expertise, the remainder of the witness's testimony as to his experience and expert credentials was tainted and not credible. There was no independent evidence of the training and experience of the witness, other than from his own testimony. The tender of expertise thus was denied for lack of credible evidence of expertise in the record. If Mr. Gentle's testimony concerning his experience in nursing home development had been credible, the evidence of such experience was not sufficient to qualify Mr. Gentle as an expert in nursing home development. Since 1985, he had been fully responsible for development of only two nursing homes, and assisted in the development of five others. T. 1509, 1489, 1514-15. If Mr. Gentle's testimony concerning his experience in nursing home operation and administration had been credible, the evidence of such experience was not sufficiently detailed to qualify him as an expert in nursing home operation and administration. T. 1513-15. Mr. Gentle had never served as a nursing home administrator. T. 1494. Mr. Gentle testified that in 1972 he went to work for the State of Alaska as an auditor in the Department of Health and Social Services. He further testified that he worked his way up through the sections and became chief Medicaid auditor for the state of Alaska. T. 1487. The employment record for Mr. Gentle, however, from the State of Alaska was admitted into evidence without objection. H.H. Ex. 33. That record shows a starting date of work in 1973, not 1972. More important, it does not show continuous employment consistent with the claim of having worked "up through the sections." The record shows no employment of Mr. Gentle by the State of Alaska for 2 and 1/2 years, from July, 1973, through March, 1976, and the only employment is in temporary positions, not in permanent positions expected to have been in the "sections" Mr. Gentle "worked up through." Finally, the employment record only shows Mr. Gentle in a position as an accountant IV (temporary) for a 9 month period in 1976. Mr. Gentle's testimony that he obtained the position of chief Medicaid auditor for the State of Alaska after working his way up through the sections is not credible. Mr. Gentle testified that C. Ex. 15 was an excerpt from the magazine "Contemporary Long-Term Care," and that this excerpt was the section of the magazine that included an award. T. 1541-42. He testified that all of the narrative in the exhibit was part of the magazine and the award. T. 1542. This is testimony was incorrect. The last page of the exhibit contains narrative that is advertisement prepared by Careage. The typeset is identical to that in the interior pages as well. Thus, pages 2-4 of the exhibit are not excerpts from the magazine. Mr. Gentle did not choose his words with care as he testified. Table 11 (projected salaries and FTE's) is a part she original application filed with HRS in July of 1986. Mr. Gentle testified that in part the projected salaries were based upon salaries that "Careage is paying to its existing staff." T. 1557. At that time, Careage did not operate any nursing home. Mr. Gentle could have meant that these were salaries in nursing homes leased out by Careage, but his choice of words was misleading. Whether Careage will operate the facility Careage was started in 1962, and since that time it has constructed more than 270 new hospitals, nursing homes, and related facilities. Generally, Careage has built facilities for others to operate. T. 1516-17. A few of these (seven were named, T. 1520) may have been operated by Careage, but the vast majority were not. T. 1591-1520. In 1982, Careage ceased all nursing home operations. T. 1592. From 1982 through 1985, Careage did nothing but hospital development. T. 1519. In 1985, Careage decided to build and operate nursing homes, and in March 1985, hired Mr. Gentle to set up the operating arm of the corporation with respect to nursing homes. T 1513, 1518. In July, 1986, when Careage filed its application for a certificate of need, Careage did not operate any nursing homes in the country. T. 1595. It appears that the first nursing home now operated by Careage was opened in December, 1986. T. 1610. At the time of the formal hearing, Careage operated and managed three nursing homes on its own, and jointly managed three others. (Another was said to be "jointly operated by others.") T. 1519-20. All of these facilities are in western states. In the letter of intent, Gene D. Lynn, the proposed owner of the proposed facility, and the sole owner of Careage, stated his intent to operate the proposed nursing home in Hillsborough County. C. Ex. 3, attachment 8. The application, C. Ex. 3, asserts on page 4-24: Each community and situation is unique. There are times in which we operate directly through Healthco Management (a wholly owned subsidiary). In all cases, we establish the operating procedures and pro forma and closely monitor each facility. This strategy has generated such a successful program that, in twenty-four years of business, we can boast at never having missed a debt service payment nor have we had a single incident of governmental intervention into our operations. (E.S.) The clearly intended implication of the foregoing portion of the application is that for 24 years, Careage has either operated its nursing homes (which in the majority of cases was untrue) or, if it did not operate its nursing homes, it "closely monitored each facility." The statement in the application that Careage closely monitors each facility is not true, at least with respect to currently leased facilities. Mr. Gentle, who is in charge of nursing home operations for Careage, does not routinely review state licensure survey reports for leased facilities. T. 1842. Leased facility reports may be reviewed by the Careage leasing section, which is separate from nursing home operations. T. 1842. The only monitoring that Careage does with respect to leased facilities is to step in if there is government intervention. T. 1843. Careage has retained the contractual right to intervene in the operations of a leased facility only "in cases of severe problems in a facility." (E.S.) T. 1518. The statement in the application, P. 4-24, concerning the history of Careage as to operation or supervision of nursing homes is misleading. As will be discussed ahead, Careage representatives were either confused about the operation of nursing homes by Careage (Dr. Etten) or used words in a manner that misrepresented the operational status of Careage (Mr. Gentle and representatives of Careage at a dinner meeting with Ms. Hardy). These misleading statements, coupled with the prior history generally of not operating nursing homes, lead to the conclusion that Careage has not proved that it will operate the proposed nursing home in Hillsborough County by a preponderance of the credible evidence. Substantive aspects of the application General provisions Careage's original application proposed to construct 120 beds, 10 of which would be a subacute unit, 21 of which would be an Alzheimer's unit, and the remaining 89 beds would be general SNC/ICF (skilled/intermediate) nursing care beds. C. Ex. 3, P. 2-1. Four of the ten subacute unit beds would be designated for neonates and technology dependent children. C. Ex. 3, P. 3-6; T. 1522. The 10 bed subacute unit is proposed to provide 24 hour nursing care patients who are recovering from strokes, craniotomy patients, comatose victims of accidents, and others suffering serious chronic maladies. T. 1212. Nursing services to be provided include tube feedings, ventilators, tracheostomies, continuous intravenous infusion, hyperalimentation, total parenteral nutritional care, and inhalation therapy. T. 1213. The program proposed by Careage conforms to professional standards for such a program. Id. The 21 bed Alzheimer's disease unit is designed and intended to provide an environment adapted for the special needs of those patients. The design and program emphasizes low stimulation, safe ambulation, and simplicity to minimize confusion. The design is considerably more therapeutic for such patients than commingling such patients among other patients in an ordinary nursing home setting. T. 1206-12, 1432, 1474-75. The precise number of skilled and intermediate care nursing beds is unclear. At least 39 beds will be skilled nursing, and 21 beds for the Alzheimer's patients. T. 1136. Careage intends to concentrate on skilled nursing care rather than intermediate care. T. 1523, 1678. Careage does not intend to serve the market for intermediate care. Id.; C. Ex. 3, attachment 8. Careage did not include adult day care in its application, T. 1142, 1592, because it takes the position that adult day care does not require a certificate of need. T. 1592. Careage in fact will not offer adult day care. T. 1192. Careage intends to provide respite care at the facility. T. 1531. Careage estimates that 37 percent of its patients will be Medicaid patients. T. 1361. Quality assurance The nursing quality assurance programs described in the application of Careage are adequate, and would be adequate if implemented by Careage. T. 1221. Dr. Etten testified for Careage concerning her visit to two nursing homes owned by Careage. She did not express an opinion that the Careage quality assurance program in fact would be implemented based upon these visits. She did not describe the current operation of any Careage quality assurance program. She simply stated that she was favorably impressed by the physical environment in those two nursing homes. T. 1221-26. One of the facilities was in Salt Lake City, Utah, and there is no evidence in the record that Careage operates that facility. See T. 1519-20. Indeed, Dr. Etten later admitted on cross examination that she knew the Utah facility was not operated by Careage. T. 1234. Throughout the application process, Careage tended to misrepresent its status as an existing operator of nursing homes providing care of good quality. As discussed above, in the meeting in August or September, 1986, attended by Mr. and Mrs. Lynn, Mr. Haben, and Ms. Hardy, Careage's representatives told Ms. Hardy that Careage operated nursing homes in other states in which care of good quality was provided. T. 1060. The application, at page 4-24, appeared to assert that Careage had 24 years of experience operating nursing homes. Mr. Gentle represented that proposed salaries were based upon salaries in nursing homes currently operated by Careage. These statements were not true. Careage leased facilities, but did not operate any facilities at that time of the application, and its history had been primarily in the development of health care facilities for operation by others. Careage did not exercise close operational control of the leased facilities. And Dr. Etten seemed unconcerned as to what entity was operating the Utah nursing home that she visited. Her failure to do so caused her testimony to appear to be representative of the quality of care actually provided at Careage operated nursing homes. For these reasons, Careage did not prove by a preponderance of the credible evidence that it has had a history of operation of nursing homes, that it has had a significant history of providing nursing care of good quality, that it has had substantial experience in management of quality assurance programs, or that it would in fact implement the quality assurance program reviewed by Dr. Etten. Staffing Staffing, particularly nursing staffing, is established based upon the assumption that most of the beds at the Careage facility will be at least skilled nursing care beds, and some will be Alzheimer's disease beds or subacute beds, including beds for technology dependent children. Attachment 14, Ex. 3. The nursing staffing proposed by Careage is adequate. T. 1216. Other staffing proposed by Careage is based upon staffing at other facilities owned by Careage and standards in HRS rules. T. 1557, 1559. It is concluded that other staffing is adequate. The projected annual salaries for staff are reasonable. T. 1648, 1656, 1680-81. The objection to this testimony, taken under advisement, was overruled. T. 1687. The witness amply demonstrated expertise with regard salary levels. Construction and facility design The building proposed by Careage would be one story and have 45,500 square feet for 120 residents, or a total of 379.17 gross square feet per bed. T. 1133. The application represents that the net square foot area for living space in 2 bed (semiprivate) rooms is 283 to 295 square feet. C. Ex. 3, table This was an exaggeration. The actual square footage was shown to be substantially less upon cross examination: 213.75 square feet of living space for semiprivate rooms. This figure is based upon the fact revealed upon cross examination that the length of the room for purposes of calculating gross square feet is 23.5 feet instead of 24 feet, 4 inches. This correction reduces gross living square footage for the living area to 305.5, and net to 213.75. The floor plan, site plan, and space programs in the proposed design are adequate and will meet or exceed all requirements of Florida law. T. 1137. The nursing home floor plan does not include a space for adult day care. T. 1142. Careage projects that construction costs will be $56.77 per square foot. This estimate is in line with estimates of other applicants and is reasonable. T. 1176-78. Construction costs equate to $21,526 per bed. Careage did not include an estimate of costs for equipment for technology dependent children, but plans to cover this with funds estimated for contingencies. T. 1195. The amount of such costs is not in evidence. Id. The estimate of overall project costs, table 25 of the application, Ex. 3, is reasonable. T. 1171-76. Total project costs are estimated to be $4,150,000, or $34,583 per bed. The project cost includes $515,000 for 3 to 5 acres of land. T. 1546. The adequacy and appropriateness of the proposed equipment for the facility was not established by expert testimony. See T. 1179. Availability of resources Gene D. Lynn has an extensive history in successfully financing and constructing health care facilities, including nursing homes. T. 1516-17. Gene D. Lynn has more than adequate lines of credit to obtain complete financing for this project. T. 157 6- /7 Existing lines of credit, including SeaFirst, are available up to at least $9 million. T. 1576. The objection as to hearsay, which was sustained, was sustained only as to what unnamed persons with Washington Mutual "indicated." The remainder is not hearsay. It is testimony of the existing state of facts within the personal knowledge of the witness. The foregoing findings of fact are based upon testimony of Mr. Gentle, whose credibility as a witness was partially impeached as discussed in findings of fact above. Mr. Gentle's credibility problems, however, are not sufficient to compel the disregard of his testimony as to the general financial condition of the Lynns and Careage. Mr. Gentle demonstrated that his testimony as to his own expert qualifications was unworthy of belief, and he demonstrated that some portions of his testimony concerning the features of the proposed facility were exaggerated or incorrect. But this is not sufficient evidence to conclude that his testimony as to general financial resources of Careage is an untruth. It is noted that there is no evidence in this record to suggest in any manner that Gene Lynn does not have the net worth set presented in his unaudited financial statement. That net worth is over $45 million. If this were a substantial untruth, surely one of these highly competitive applicants would have presented evidence on the point. Financial feasibility The proposed project is financially feasible in the short term. T. 1632-39, 1686. Careage's projections as to patient mix (by payor type) and expected fillup (utilization) are reasonable. T. 1640- 42 The charges proposed by Careage are reasonable. T. 1642-45. Careage's projections as to operating expenses are reasonable. T. 1648, 1656-57. The proposed project is financially feasible in the long term. T. 1647, 1649-50, 1686. The Forum Group application General provisions Forum Group is a national company which owns and operates 11 retirement living centers and 22 nursing homes in a number of states. The retirement living centers are independent rental apartments which do not require entry fees. T. 20; F.G. Ex. 3. The Forum Group proposal is to construct and operate a 60 bed community nursing home in conjunction with a retirement living facility of 120 apartments and an adult congregate living facility of 30 units. F.G. Ex. 3, attachment 1. The community nursing home section would offer all services required for provision of skilled nursing care, intermediate nursing care, respite care, and adult daycare. T. 27. Forum Group does not propose to provide a separate Alzheimer's disease unit. The estimated total cost of the nursing home portion of the project is $2,673,084. F.G. Ex. 6, table 25. This is $44,551 per nursing bed. Forum Group will accept Medicare and Medicaid patients. T. 27, 210. Quality assurance Forum Group has never had a license denied, revoked, or suspended, and it has never had one of its facilities placed into receivership. T. 158. The proposed facility would provide 24 hour supervision by either a registered nurse or a licensed practical nurse, or by both. T. 140. The staffing levels proposed in the original application are adequate. T. 153. Staffing levels would vary according to the needs of the residents. T. 134. Medications would be distributed by unit dose. T. 139. Forum Group would implement an adequate plan for quality assurance audits. T. 141-43. The plan is in writing, is in use in other Forum Group nursing homes, and covers all aspects of the operation of the nursing home that are relevant to the quality of care received by nursing home residents. Forum Group would check staff qualifications prior to employment and would provide ongoing staff training. T. 149. Forum Group would provide residents with written statements of patients' rights upon admission to the facility, and would have an independent patients' rights council. T. 147- 48 Forum Group provides reasonably adequate nursing care in its existing nursing homes, and would do so in the proposed nursing home. T. 31-32, 158. Staffing The staffing proposed for the facility, and projected salaries, are reasonable and adequate. T. 151-154. Forum Group reviews the qualifications of applicants to insure that applicants are qualified for the job. T. 149. Construction and facility design Forum Group's community nursing home facility will have about 24,500 square feet. This is reduced from the original 27,000 due to inflation in costs. Patient room areas were not changed. T. 1453. This is 408 total gross square feet per bed. The net living area square footage allocated to semiprivate 2 bed rooms is 228 square feet. F.G. Ex. 3. The square footage allocated in both versions is reasonable. T. 1445, 1453. The building would be wood frame with brick veneer. It would have heavy roof insulation, double glazed windows, and a heat pump to conserve energy and to operate with less utility expense. T. 1454. The construction costs, including equipment costs, estimated for the revised project, F.G. Ex. 6, table 25, paragraph d., are reasonable. T. 1453. The costs as originally projected were also reasonable. T. 1446. The proposed facility would comply with state and federal standards for construction. T. 1456. The 60 bed community nursing home would require two to three acres of land. T. 1455. The $400,000 estimated to be needed to acquire a suitable site is reasonable for location in the northwest portion of Hillsborough County. T. 54, 59. Availability of resources Forum Group will attract suitable health care professionals, despite the shortage in Hillsborough County, by offering attractive fringe benefits, including attractive work schedules and continuing education. T. 156-57. Forum Group has the financial resources to construct and begin the initial operation of the facility. T. 182-84. Financial feasibility The project is financially feasible in the short term. T. 182-84. Due to its corporate size and current operation of a number of nursing facilities, as well as the size of the combined planned facility in Hillsborough County, Forum Group will be able to purchase supplies and other operational necessities at a favorable low cost, thus saving on operational expenses. T. 156. The estimated fillup rate in the original application was about 75 percent occupancy after the first year and about 86 percent occupancy after the second year. T. 37. Given the recent experience in Hillsborough County of occupancy around 95 percent and very fast fillup rates for new nursing homes, T. 116-18, a projection of 86 percent occupancy in the second year is probably too low. For purposes of determining financial feasibility, it is reasonable but conservative. T. 37. The project is financially feasible in the long term based upon the pro forma contained in the original application. T. 186-88; F.G. Ex. 3. The merits of the Hillsborough Healthcare application General provisions Hillsborough Healthcare, Ltd., is a Georgia limited partnership owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. Hillsborough Healthcare, Ltd., would own the proposed facility. T. 419. The facility would be managed by Convalescent Services, Inc., (CSI) which is also owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. CSI was formed in 1978 to own and operate extended care facilities owned or controlled by the Kelletts. T. 420. CSI currently operates 21 nursing homes and 3 retirement homes in 7 states. Six of the nursing homes and 2 retirement centers are in Florida. Id. Centralized management is provided by regional offices in Sarasota, Houston, Texas, and Huntsville, Alabama. T. 420. The long range plan of CSI is to acquire and develop nursing facilities in locations where CSI already has a management structure nearby. T. 421. Hillsborough Healthcare proposes to construct and operate a single story combination nursing home, consisting of 120 beds, and an adult congregate living facility, consisting of 60 beds. H.H. Ex. 1; T. 423. The 120 nursing beds would consist of 60 skilled nursing beds and 60 intermediate care beds. The 60 skilled nursing beds includes a distinct 24 bed unit for Alzheimer's disease patients. Id. The application estimates the total project cost to be $5,032,475, with $3,367,668 of that cost attributed to the nursing facility portion of the project. H.H. Ex. 1. This is $28,063.90 per nursing bed for 120 beds. The facility would have a rehabilitation program, activities, and social services programs. T. 423. The Hillsborough Healthcare facility intends to make its facility available as a training facility for medical and nursing schools. T. 461. The facility would participate in both the Medicare and Medicaid programs, and estimates about 30 percent Medicaid utilization. T. 423. Hillsborough Healthcare would accept partial approval of only 60 nursing home beds. T. 490. In that event, the 60 bed nursing facility (combined with the 60 bed adult congregate living facility) would offer the same services, including the 24 bed Alzheimer's disease unit. T. 390, 473. Access as a patient to the facility will be on an equal basis, without distinction as to race, religion, or sex. The facility will be constructed to provide handicapped access. T. 462-63. At least 30 percent of the patients served by the Hillsborough Healthcare facility would be Medicaid patients, and the percentage may well be higher. Currently, 17 of the 21 CSI nursing homes participate in state Medicaid programs, and all of the Florida nursing homes have Medicaid patients. All new nursing homes developed by CSI participate in both Medicaid and Medicare. Many of the 17 nursing homes were not Medicaid certified prior to acquisition by Hillsborough Healthcare, but are now certified and participate. CSI has never decertified one of its nursing homes as a Medicaid provider. T. 424. Existing CSI managed facilities in Florida are currently experiencing a 40 percent Medicaid utilization, which includes at least one in Hillsborough County. T. 1798. B. Quality assurance Sixteen of the 21 CSI managed nursing homes are in states that use a licensure rating system, and of these, 14 are have achieved the highest rating. T. 422. No CSI facility has ever had its licensed revoked or has ever been fined. Id. One-half (three) of CSI managed Florida facilities are rated superior. T. 319. Centralized management and location of facilities so that management resources can be shared should enhance the quality of care at the proposed nursing facility. The quality assurance program will be guided by a lengthy policies and procedures manual that is in use in other Florida CSI managed nursing homes. H.H. Ex. 11; T. 313. CSI employs a full time Florida registered nurse to make visits at least once a month to CSI facilities in Florida as a part of the quality assurance program. T. 316. The nurse conducts quality of care inspections, using measuring instruments developed by the CSI quality assurance program, and teaches new methods to improve the quality of health care. T. 317. Hillsborough Healthcare will have an adequate quality assurance program. T. 310. C. Services and programs CSI would provide programs for care of Alzheimer's disease patients, respite care, and adult day care. Respite care is temporary nursing care, for 16 days or less, to give the family a temporary rest from home care, and to improve the condition of the patient. T. 300. Adult day care is care only during the day to enable a family member to work. T. 301. Both types of care provide an opportunity for the elderly patient to receive nursing services, including the programs and medical care available at the nursing home, while giving home care providers a rest or needed free time. The Alzheimer's disease unit of 24 intensive care nursing beds would have operational and design features to meet the special needs of those patient. The medical director is to be board certified with a specialty in geriatrics and training with respect to Alzheimer's disease. Activities will be altered to accommodate the limitations of those patients. Staffing will be at a higher level, and staff will be specially trained to meet the needs of those patients. The facility will be designed with a secure courtyard, special dining room, and wander guard, to allow movement without physical or chemical intervention or restraints. T. 299, 289. CSI varies the activities programs at its facilities to match the needs of patients. T. 270. Activities for Alzheimer's patients, adult day care and respite care residents are designed within the limitations of those patients. T. 289-90. CSI typically provides activities that provide small and large group interaction, socialization, mental and physical activity, recreation, and religious activities. T. 270. The activities that have been implemented or suggested for CSI facilities are innovative, varied, and appear to be the result of much thoughtful work. T. 273-74; H.H. Ex. 1, pp. 115-123 H.H. Ex. 8. Some of CSI staff involved in activities have received awards for their work. T. 288. The proposed facility would provide activities similar to the activities provided at other CSI facilities. T. 274. CSI has employed an expert in community relations and activities programming to coordinate community relations, activities, and the volunteer program at all CSI nursing homes, including the proposed facility. That expert is the author of pp. 114-121 of the application, H.H. Ex. 1. The expert would recruit and train activities and community relations directors at the proposed facility. T. 287. CSI publishes a newsletter containing an exchange of program information, and encourages each nursing home to publish its own newsletter. Some do. H.H. Ex. 10; T. 284-85. Volunteers are encouraged to participate in nursing home activities. 272. CSI has compiled a package of volunteer information for use in development of a volunteer program at each nursing home. H.H. Ex. 9. Volunteers increase resident participation in programs, bring fresh ideas, and causes there to be a greater variety of activities and programs for residents. T. 281. Association of the nursing facility with an adult congregate living facility is a useful way to provide continuity of care and lessens the trauma to the resident of the initial move into a nursing facility. In some cases, a spouse may live in the adult congregate living facility and thus be closer to the spouse who must be in a nursing facility. CSI currently manages Sun Terrace Nursing Center, a 120 bed nursing home, and Lake Towers Retirement Center, both in Hillsborough County. Consequently, CSI has already in existence a network of relationships that would benefit residents at the proposed facility. Existing relationships include a system for patient referrals from local hospitals, transfer agreements with local hospitals for acute and emergency care, and agreements with local providers for ancillary services, such as physical therapy, diet therapy, occupational therapy, speech therapy, opthalmology, dental care, podiatry, x- ray, and pharmacy services. T. 302-304. Similar agreements for the proposed facility could be established. Such agreements are cost effective because used only as needed. T. 304. CSI would provide all the ancillary services listed in figure 1, page 14, H.H. Ex. 1. T. 304. Staffing The proposed staffing of the facility, including the 24 bed Alzheimer's disease unit, is adequate. T. 308. The proposed salaries are reasonable and adequate. T. 309. Hillsborough Healthcare will be able to recruit adequate staff. T. 309. Hillsborough Healthcare will provide a reasonable staff development program. T. 309. This program will aid in the retention of staff. T. 310. Construction and facility design The 120 bed nursing section is designed to include 4 private rooms and 58 semiprivate (double occupancy) 4 rooms. T. 355. The design includes the services and departments listed on table 12 of H.H. Ex. 1. It is proposed that the total gross square feet will be 33,996, or 283 square feet per bed. H.H. Ex. 1 The square footage allocated by the design to net living space in patient bedrooms and gross area of the nursing unit, tables 18 and 19, H.H. Ex 1, are reasonable. T. 355. Semiprivate (2 bed) rooms would have 185 net square feet of living space. The Hillsborough Healthcare design has several cost saving features. Sharing ancillary services and spaces (kitchen, administrative areas, and laundry) with the adult congregate living facility of 60 beds reduces the overall construction and equipment cost and operational cost per bed. Use of a modular "T" configuration, with straight line walls and corridors for units, results in a savings in construction cost. T. 360-61. The compact design, accompanied by extensive roof over hangs and insulating materials, will reduce energy requirements. T. 357 The floor plan could easily be altered by alteration of the arrangement of the modular wings to fit on different sites. T. 358. Nurses' stations are located in the middle of wings, giving good visibility down corridors, but no visibility into rooms. The nurses' station is 7 rooms from the most distant room on any wing. H.H. Ex. 1, p. 103. The Alzheimer's disease unit is in a separate portion of one wing, and is contiguous to an interior space that will be fenced to make a secure courtyard. T. 357; H.H. Ex. 1, p. 103. The construction cost includes additional wheelchairs and walkers, and includes $4,500 for a wander guard system for the 24 bed Alzheimer's disease unit. T. 364. The projected construction cost includes fixed equipment. T. 356. The construction cost of $2,331,418 is reasonable. T. 356. All of the costs estimated in table 25, H.H. Ex. 1, p. 33 (estimated project costs) are reasonable. T. 345-466, 356, 455-56. Availability of resources Through available equity and long term debt, adequate resources exist for Hillsborough Healthcare to construct and initially operate the proposed facility. T. 396-402. Financial feasibility The proposed facility is financially feasible in the short term. T. 396-402; H.H. Exs. 15, 16, 1. The projected charge rates, table 8, H.H. Ex. 1, are reasonable. T. 379-80, 400, 452. The projected percentages of patient utilization by payor class, table 7, H.H. Ex. 1, are reasonable. T. 450, 393. The projected number of expected patient days in the first two years of operation, tables 10 and 7, H.H. Ex. 1, reasonable. T. 488-49. The projections of total revenue, table 7, H.H. Ex. 1, are reasonable. T. 400-01. The projections of expenses and net income for the first two years of operation are reasonable. H.H. Ex. 1, pp. 100-01; T. 401-02. The 120 community nursing home bed version of Hillsborough Healthcare's application is financially feasible in the long term. T. 402. If the Department partially approves the Hillsborough Healthcare application for 60 beds, to be operated in conjunction with the 60 bed adult congregate living facility, the projection will be financially feasible in both the short and long term. T. 402. The project would be financially feasible with a higher Medicaid participation. T. 424. The merits of the Health Quest application General provisions Since critical portions of the 60 bed application, H.Q. Ex. 3, were impermissible changes to the 88 bed application, and thus not admitted into evidence, only the 88 bed application will be discussed. Health Quest proposes to construct and operate 88 community nursing home beds in conjunction with an adult congregate living facility of 124 units. H.Q. Ex. 2. The total cost of the nursing portion of the facility is estimated to be $3,054,466, or $34,719 per bed. H.Q. Ex. 2. Health Quest has entered into an agreement with a group of 129 physicians, organized as the University Community Physicians Association of Tampa. That association comprises the bulk of the physicians who practice at University Community Hospital in northern Tampa. T. 585. The agreement is that Health Quest would build and manage the nursing home, and the physicians would provide medical oversight and referrals. T. 579. The physicians would contribute to equity and share in operating profits and losses. T. 624. The share is 25 percent. T. 694-95. Other details are not in evidence. The negotiations for the agreement with the University Community Physicians Association of Tampa took several months, and the agreement itself did not come into being until August, 1987. T. 581. The University Community Physicians Association of Tampa is not named as an applicant in the original application since the agreement came into being after the application was filed. Health Quest intends to construct the proposed nursing home and adult congregate living facility near the present location of the University Community Hospital. T. 583. Health Quest intends to serve approximately 30 percent Medicaid patients. T. 841, 1102. Quality Assurance Health Quest has nursing homes in Florida, Indiana, and Illinois. Health Quest has a reputation in Indiana and Illinois for providing good health care. T. 599-609. Health Quest has three nursing homes in Florida. Of those three, two had been open long enough at the time of the hearing to have received a Florida rating. Both were rated superior. T. 610. Health Quest has a nursing home in Jacksonville, Florida, and the quality assurance program and services at that facility are representative of the type of care and services at other Health Quest facilities, as well as what is intended for the proposed Health Quest facility in Hillsborough County. T. 1077, 1102. All findings of fact which follow that reference the quality of care or scope and nature of services at the Jacksonville facility are thus also findings of fact that these quality assurance programs and services are intended to exist at the Hillsborough facility. The Jacksonville facility maintains a resident care plan on each resident. Health Quest would provide health care of good quality at its proposed facility. Services and programs The Jacksonville facility provides a number of services that require skilled nursing or arguably fall within the category of "subacute" care. The term "subacute" care is not a formal definition, and there is no Florida licensure category for that phrase. The Jacksonville facility provides intravenous therapy, parenteral nutrition, and tracheostomy care. T. 848-51. It also provides care for comatose patients (accident or stroke victims) regardless of age, and care of post-craniotomy patients. T. 851-53, 855-56. Health Quest does not intend to care for neonates (sick infants less than two weeks old). Neonates require care that is distinct from the care required for the elderly, thus requiring staff with different training. Neonates also can be at substantial risk from respiratory and urinary infections commonly present among the elderly in a nursing home. T. 859-61. The Jacksonville facility provides physical therapy, speech therapy, and occupational therapy. The physical therapist is a full time position. T. 871. The Jacksonville facility provides counseling to residents and families with a full time social worker on staff. T. 864. The Jacksonville facility provides music therapy, outside trips, and other activities, such as family night, the artist in residence program, and use of the facility for community programs. T. 866, 888, 892. Some of these programs are conducted jointly with the adult congregate living facility. Volunteers are used in the activities programs as well. T. 869. The quality of the activities program is directly related to the numbers of staff persons involved in the program. T. 871. The Jacksonville facility provides respite care of about two weeks in duration, although it could be longer. T 872. The adult congregate living facility that would be a part of the Health Quest facility would have tee same beneficial consequences as the adult congregate living facility proposed by Hillsborough Healthcare. T. 902-04. The Jacksonville facility is often used as a place for continuing nursing education for high schools or the local nursing association. T. 906-07. Staffing Health Quest proposes a total of 59.75 FTE's or .679 FTE per bed. H.Q. Ex. 2, table 11. Health Quest acknowledged that the staffing proposed for the 88 bed facility was adequate in 1986 when prepared, but by 1987, it was experiencing the need for more licensed personnel, and that it would increase licensed personnel for the 88 bed facility now. T. 630. No evidence was presented as to the specific changes that would be made. T. 632. Construction and facility design Health Quest proposed in its application to construct 34 two bed rooms, 6 three bed rooms, and 2 one bed rooms. H.Q. Ex. 2, table 17. Health Quest wants to change its design, if built, to make the three bed rooms into two bed rooms. T. 631. Health Quest proposes to provide 240 square feet of net living space for semiprivate two bed rooms. H.Q. Ex. 2. Health Quest proposes to provide a total of 37,263 square feet for the 88 bed facility, or 423 square feet per bed. H.Q. Ex. 2. Health Quest estimates that the project will need 3 to 4 acres of land, and projects that it can acquire the land for about $320,000. H.Q. Ex. 2; 634. This estimate is reasonable in comparison to the estimates of all other applicants. Health Quest has constructed three nursing homes in Florida, and others in Indiana and Illinois, and thus has substantial experience in construction. Photographs of the nursing homes constructed and now operated by Health Quest show that those nursing homes are reasonably attractive and appear to be hospitable places in which to live. H.Q. Ex. 22. Availability of resources Health Quest has access to sufficient funds to construct the project and initially operate it. T. 586-87. Financial feasibility The Health Quest proposal is financially feasible in the short term and the long term. T. 593 Summary of comparative data The space and costs associated with the four proposals may be compared as follows: Appl. Cost/Bed NetFt/Bed TotFt/bed Cost/NetFtBed Cost/TotFtBed Careage $34,583 214 306 $162 $113 Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The proposed staffing of the four proposals may be compared as follows: Applicant Total FTE RN FTE LPN FTE RN Asst FTE No. Beds Careage 96.0 11.9 7.4 42.1 120 Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: TotalFTE Applicant Per Bed PN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Careage .80 .10 .16 .51 Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 Comparison of the Careage staffing to other applicants is difficult because Careage proposes primarily to serve patients needing skilled nursing care who thus require more nursing staff per bed. Forum Group, Hillsborough Healthcare, and Health Quest are relatively the same with respect to anticipated efficiencies and continuity of care due to the association of adult congregate living facility beds with the proposed nursing home. Forum Group plans only 30 ACLF beds, but also plans 120 independent living apartments. Hillsborough proposes to provide 60 ACLF beds, and Health Quest proposes to have 124 ACLF beds. There is no evidence in the record to determine the optimum mix of ACLF beds to nursing home beds. Conclusions of Law The Division of Administrative hearings has jurisdiction of the parties and subject matter of this proceeding. The Department's free form preliminary decision The free form decision of the agency is ordinarily not dispositive since a formal administrative hearing is intended to formulate agency action, and is not intended to review prior action. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). The reasoning of the agency in its free form decision, however, ordinarily is a significant matter to be considered in the formal hearing. Findings of fact with respect to the free form decision-making upon the applications in this batching cycle have been made for two reasons: the assertion that the free form decision was influenced by considerations other than objective merit of the applications, and therefore not entitled to any persuasive effect upon this formal hearing, and representations in the free form stage made by Careage relevant to evaluation of the application of Careage. The free form decision in this case had the appearance of having been influenced in part by considerations other than the objective merit of the applications. For this reason, the free form decision with respect to these applicants has been disregarded as having no persuasive weight. Need calculated pursuant to rule 10-5.001(1)(k)2 Need for community nursing home beds is calculated pursuant to the need methodology set forth in rule 10- 5.011(1)(k)2, Fla. Admin. Code. The text of the rule is not in evidence, but comparison of the text of the rule referenced in proposed recommended orders indicates that the parties appear to agree that the rule promulgated on November 24, 1986, should govern this case. It is that rule that will be used in this recommended order. All parties agree that July 1, 1989, is the date upon which subdistrict need for community nursing home beds is to be determined. The first step in the need calculation pursuant to the rule is to determine BA. BA is defined by subparagraph 2a of the rule as the estimated bed rate for the population age 65-74 years in the relevant district. Subparagraph 2b of the rule provides: BA= LB/(POPC + (6 X POPD)) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. LB is at least 5,964, and is 6,060 if the 96 beds at the Home Association are, on this record, classified as community nursing home beds. Section 651.118(8), Fla. Stat. (1987) provides in part: This section shall not preclude a continuing care provider form applying to the Department of Health and Rehabilitative Services for a certificate of need for community nursing home beds or a combination of community and sheltered nursing home beds. Any nursing home bed located in a continuing care facility that is or has been issued for nonrestrictive use shall retain its legal status as a community nursing home bed unless the provider requests a change in status. Any nursing home bed located in a continuing care facility and not issued as a sheltered nursing home bed prior to 1979 shall be classified as a community bed. The Department of Health and Rehabilitative Services may require continuing care facilities to submit bed utilization reports for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents. (E.S.) The first sentence of this statutory section does not apply to the Home Association because it has not applied for a certificate of need. The second sentence does not apply because there is no evidence in the record that the nursing home beds at the Home Association were "issued" by anyone. The third sentence applies because the 96 nursing home beds at the Home Association were "not issued as a sheltered nursing home bed prior to 1979." The Home Association has existed since 1899 with its 96 nursing home beds, and never had a certificate of need. There was no statutory authority or definition for the issuance of a "sheltered nursing home" prior to 1979. By operation of law (the third sentence quoted above), the 96 beds are community nursing home beds. The fourth sentence appears to be directly in conflict with the third sentence. The fourth sentence states that HRS can conduct a study of historical utilization "for the purpose of determining community and sheltered nursing home bed inventories based on historical utilization by residents and nonresidents." The third sentence automatically confers community nursing home bed status upon certain beds based solely upon three criteria (located in a continuing care facility, located there before 1979, and not "issued" as a sheltered nursing home bed). Community nursing home bed status is thus conferred solely upon the three criteria, and historical utilization is irrelevant to the third sentence. If that is so, the fourth sentence, which allows HRS to "determine" community nursing home status based only upon historical utilization, is in direct conflict with the third sentence. This seemingly irreconcilable dilemma is not at issue in this case, however, because there is insufficient credible evidence in the record as to the "historical utilization" of the 96 beds at the Home Association. As discussed in the findings of fact, there is no credible evidence in this record as to how the 96 beds at the Home Association have in fact been "utilized" since 1899. Indeed, the only logical inference on this ambiguous record is that the Home Association has not felt itself constrained by any definitional categories, given its longevity in the Tampa Bay area. It thus is concluded as a matter of law, pursuant to the third sentence of section 651.118(8), Fla. Stat. (1987), that the 96 beds at the Home Association are community nursing home beds, and thus should be counted in the licensed beds in the district and subdistrict, LB and LBD. Thus, the correct value for LB in this case as of June 1, 1986, is 6,060. Next, the values of POPC and POPD must be determined Two issues arise with respect to ascertainment of the values of POPC and POPD. The first is whether the values of POPC and POPD should be determined on January 1, 1986, or on July 1, 1986. The second is whether the values of POPC and POPD should be determined based upon the Governor's estimates and projections of populations released on July 1, 1986, or on May 12, 1987. The first issue is governed by the clear language of the existing rule. The second issue has no clear guidance in the existing rule, and thus depends upon analysis of the record basis of the agency's incipient policy. With respect to the first issue, the parties urge that POPC and POPD are the populations on January 1, 1986, rather than on July 1, 1986. The basis of this argument is the inconsistent behavior of HRS over the last three years and in the January, 1987, batching cycle, wherein the values of POPC and POPD were often effectively determined on a date six months prior to the commencement of the batching cycle, a date which was the midpoint in the occupancy rate months. Notwithstanding the inconsistent manner in which HRS has interpreted its rules, a fundamental principle of law is that if the rule is clear, the agency must follow it. Kearse v. Department of Health and Rehabilitative Services, 474 So.2d 819, 820 (Fla. 1st DCA 1985); Woodley v. Department of Health and Rehabilitative Services, 505 So.2d 676, 678 (Fla. 1st DCA 1987);. There is no deference to the agency's interpretation of law (in this case, the conflicting interpretation of the office of comprehensive health planning) where the construction is based upon common meanings. Schoettle v. State of Florida, Department of Administration, Division of Retirement, 513 So.2d 1299, 1301 (Fla. 1st DCA 1987); Roberts v. Department of Professional Regulation, Construction Industry Licensing Board, 509 So.2d 1227 (Fla. 1st DCA 1987). In this case the Department has elected to follow the clear mandate of its own rule. This is not an occasion where the inconsistency of the agency with respect to incipient policy implicates questions of fairness to those regulated. Here, despite the arguable unfairness to the applicants in this batching cycle, the agency should follow its own clear rules. The populations POPC and POPD are clearly intended by the rule to be determined as of the date of the applications for certificate of need and the date of commencement of the batching cycle. The rule unequivocally calls for a projection of need "three years" into the future. T. 1254, 1250. There is no disagreement that the end date of that projection is July 1, 1989. What ends must have had a beginning. A three year period that ends on June 1, 1989, begins on July 1, 1986. Moreover, the rule clearly establishes the value of LB, licensed beds, as of June 1, 1986. The bedrate, the driving force in determining need, is the ratio of licensed beds as of June 1, 1986, to POPC and POPD, populations of elderly persons assumed to be using the beds. If LB was determined on June 1, 1986, but POPC and POPD determined on January 1, 1986, the ratio would be incongruent. The Department undoubtedly intended there to be a correlation between beds and people in existence at the same time since the result is supposed to be a model of need. Selection of the numerator from one date and the denominator for another date results in a fractured reality having little bearing upon the issue of whether the elderly in Hillsborough County will have enough or too may nursing home beds in July, 1989. Finally, the definition "current" populations POPC and POPD was established by the final order in Manor Care of Hillsborough County v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1102, DOAH case number 86-0051. The final order in that case, entered on February 7, 1987, determined that POPC and POPD must be the populations current on the date of application for the certificate of need. For these reasons, POPC and POPD should be the populations on July 1, 1986. The next issue is the source of those population estimates. HRS argues that POPC and POPD must be derived from the July 1, 1986, release of the Governor's estimates and projections of populations. HRS has failed to establish guidance in this area by rule, and instead has chosen to rely upon evolving agency policy as the basis for selecting the source off POPC and POPD. An agency need not adopt all policy as a rule, but to the extent that it relies upon non-rule incipient policy as a basis for decision and that decision is challenged in a formal administrative hearing, the agency has the burden to establish in the record "adequate support for its decision." Florida Cities Water Company v. Florida Public Service Commission, 384 So.2d 1280, 1281 (Fla. 1980); Baxter's Asphalt and Concrete, Inc. v. Department of Transportation, et al., 475 So.2d 1284, 1286 (Fla. 1st DCA 1985); McDonald v. Department of Banking and Finance, 346 So.2d 569, 582-584 (Fla. 1st DCA 1977). The only support offered by HRS for its incipient policy to use population releases available at the time of certificate of need application was that those releases were the only ones available at such time, and thus necessarily the agency's preliminary decision had to be based upon the earlier release. This may be a permissible construction of the enabling statutes, and might pass muster as an agency rule, but HRS has in this case elected to defend its policy on a case by case basis. On this record, it is clear that the policy has not been adequately supported and is unreasonable. While reliance upon the population release available at this time of preliminary agency action is obviously reasonable at that time, since it is then the most current release, the mere fact that it is the only release-then available is an inadequate reason for continuing to use that release at the de novo formal administrative hearing that follows. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Moreover, the inadequacy of HRS's basis for its incipient policy has been demonstrated in this record. The May 12, 1987, release is substantially more accurate than the release a year earlier. The May 12, 1987, release is much closer to observed population growth in the subdistrict than the earlier release. These facts were not rebutted. To underscore the inadequacy of HRS's incipient policy, it bears repeating that use of the July 1, 1986, population release underestimates the net need for community nursing home beds in Hillsborough County in July, 1989, by 100 percent. This indicates that something is dramatically wrong with the incipient policy. For these reasons, the values of POPC and POPD should be taken from the May 12, 1987, release of population estimates. POPC is 134,968 and POPD is 94,402. The calculation of the bed rate, BA, thus is as follows: BA= LB/(POPC + (6 X POPD)) BA= 6,060/134,968 + (6 X 94,402)) BA= 0.0086401 The next step in the calculation is to calculate BB, which is defined as the estimated bed rate for the population age 75 years and over in the relevant district. The calculation is provided in subparagraph 2c of the rule: BB= 6 X BA BB= 6 X 0.0086401 BB= 0.0518406 Subparagraph 2a of the rule then requires calculation of A, which is gross need for the horizon year: A= (POPA X BA) + (POPB X BB) Where: A is the district's projected age-adjusted total number of community nursing home beds for the review cycle for which a projection is being made. POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. For the reasons discussed with respect to selection of the date of the proper release of Governor's population estimates and projections with respect to POPC and POPD, POPA and POPB should be obtained from the May 12, 1987, Governor's release. POPA is 149,771 and POPB is 108,400. Therefore, continuing the calculation: A= (POPA X BA) + (POPB X BB) A= (149,771 X 0.0086401) + (108,400 X 0.0518406) A= 1,294.0364 + 5,619.521 A= 6,913.5574 The next step is to calculate SA, which is the preliminary subdistrict allocation of community nursing home beds pursuant to paragraph 2d of the rule: SA A X (LBD/LB) x (OR/.90) Where: * * * LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average occupancy rate for all licensed community nursing home beds within the subdistrict of the relevant district. Review of the applications submitted for the July batching cycle shall be based upon occupancy rate data for the months October- March preceding that cycle . . . * * * LBD is 2,708 since the 96 beds at the Home Association were community nursing home beds in Hillsborough County on June 1, 1986. OR is 94.29 Therefore, SA is calculated: SA= A X (LBD/LB) x (OR/.90) SA= 6,913.5574 x (2,708/6,060) x (.9429/.90) SA= 6,913.5574 X 0.4468646 X 1.0476666 SA= 3,236.6863 SA= 3,237 In the last sentence of subparagraph 2 of the rule, the "poverty adjustment" is described as follows: "In districts with a high proportion of elderly residents living in poverty, the methodology specifies a minimum bed rate." In this case, all parties agree that when the numbers are assigned to the values in the formula contained in subparagraph 2e of the rule, the poverty adjustment operates to reduce rather than enlarge the net bed need. Thus, in this case, strict application of the A formula found in subparagraph 2e fails to produce the intended "minimum" bed rate. HRS construes the rule, in this instance, to mean that the poverty adjustment does not apply, T. 1280, and all parties agree. This will be treated as a stipulation by all parties that the poverty adjustment is not an issue in this case. For this reason, the poverty adjustment will not be used in the calculations in this recommended order. The final step in the need calculation is defined by subparagraph 2i of the rule, and that is to calculate the net bed allocation for the subdistrict. Subparagraph 2i provides: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs through I. unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. All parties agree that the number of licensed beds within the subdistrict is determined as of June 1, 1986, for this batching cycle. That number for purposes of determining net need is 2,708. The number of approved beds for purposes of determining net need is 368. Net need for community nursing home beds in the subdistrict for July 1, 1989, is thus determined: Net Need = SA - (LBD + (.9 X AB)) Net Need = 3,237 - (2,708 + (.9 X 368)) Net Need = 3,237 - 3,039.2 Net Need = 197.8 Net Need = 198 Thus, on July 1, 1989, the subdistrict, Hillsborough County, will need 198 community nursing home beds. Evidence of "not normal" need Rule 10-5.011(k)2.j. provides criteria for approval of community nursing home certificates of need "in the event that the net bed allocation [pursuant to the rule formula] is zero . . ." The net bed allocation pursuant to the rule method is not zero in this case. Subparagraph 2j thus does not apply. The Petitioners did not present any evidence of need pursuant to the special criteria of subparagraph 2j of the rule. Rule 10-5.011(k)1. Provides: 1. Department Goal. The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds in the subdistricts designated by local health councils. (E.S.) Many other HRS need rules have the same "not normal" loophole, and in all of these other cases, the applicants are thereby given the opportunity to show exceptional circumstances justifying the grant of additional beds by consideration of various aspects of the statutory criteria. Since subparagraph 2j does not apply, the provisions of subparagraph 1 do apply to grant a similar opportunity. The only other credible or competent evidence presented by the Petitioners as to a "not normal" condition of need was evidence concerning the numbers of elderly residents in the subdistrict and the occupancy rates of existing community nursing homes. These factors have already been accounted for in the rule formula, and cannot be counted again. Health Quest Realty, XII v. Department of Health and Rehabilitative Services, 477 So.2d 576, 578-79 (Fla. 1st DCA 1985) Amendment or update of applications Rule 10-5.008(3), Fla. Admin. Code, provides that "[s]ubsequent to an application being deemed complete by the Office of Health Planning and Development, no further information or amendment will be accepted by the Department." (E.S.) The rule states that the Department will accept no information after the application is deemed complete. The words used are not ambiguous or unclear. Thus, if normal rules of construction were to be followed, the conclusion would be drawn that the Department is bound by its own clear rule, and cannot, by interpretation, add exceptions. But an equally valid rule of construction is that absurd results must be avoided. Certificate of need cases, particular ones like the case at bar, are highly competitive and complicated. The review of these applications by HRS was delayed for months beyond the normal review period. Further delay has occurred in discovery and preparation for the lengthy formal administrative hearing. Time changes all, and over this period of time, new data has come to the attention of all parties. It would be absurd `to require the applicants to prove applications that have become erroneous due to the passage of time. It is highly probable that rule 10-5.008(3) was originally drafted with only the free form review of an application for a certificate of need in mind, and that the application (or non-application) of the rule to an administrative hearing a year or more later was not considered by those who drafted the rule. Indeed, prior to August, 1985, the Department and all litigants uniformly followed the McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977) principle of Florida administrative law that formal administrative hearings are de novo, and that new information pertaining to the application is admissible. In August, 1985, the case of Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, et al., 483 So.2d 700 (Fla. 1st DCA 1986) was decided. While the Gulf Court decision was concerned only with the competitive status of applicants with respect to bed need, in the aftermath of that decision, the Department elected to construe rule 10- 5.008(3) as forbidding practically all new information, even information that had nothing to do with bed need. This undoubtedly was an overreaction to the Gulf Court decision, but the Department, after all, has always had the authority to establish rules governing the processing of applications for certificates of need, including the number and timing of amendments to such applications. McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). Given the fact that the rule is so clear, the better route would have been to amend the rule. As discussed above, conventional rules of statutory construction could easily support the legal conclusion that the rule must be applied as it is written, without further interpretation. Nonetheless, the Department for this case has chosen the other route, to interpret rather than to amend its rule. While the question is a close one, the Hearing Officer has concluded that it would be better to ignore the clear words of the rule, and attempt to apply the evolving interpretative policy of the Department to avoid an absurd result. The following appear to be the existing final orders of the Department interpreting rule 10-5.008(3), and its predecessor, published in the Florida Administrative Law Reports. Health Care and Retirement Corporation of America, d/b/a Heartland of Palm Beach, 8 F.A.L.R. 4650 (September 24, 1986); Arbor Health Care Company, Inc., d/b/a Martin Health Center, Inc., v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 709 (October 13, 1986); Mease Hospital and Clinic v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 159 (October 13, 1986); Health Care and Retirement Corporation of America, d/b/a Heartland of Collier County v. Department of Health and Rehabilitative Services, 8 F.A.L.R. 5883 (December 8, 1986); Health Care and Retirement Corporation of America, d/b/a Nursing Center of Highlands County, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1081 (December 8, 1986); Manatee Mental Health Center, Inc. d/b/a Manatee Crisis Center v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1430 (February 2, 1987); Health Care and Retirement Corporation of America, d/b/a Heartland of Hillsborough, v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1630 (February 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, 9 F.A.L.R. 1628 (March 2, 1987); Psychiatric Institutes of America, Inc., d/b/a Psychiatric Institute of Orlando v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 1626a (March 5, 1987); Manor Care, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2139 (March 24, 1987); Wuesthoff Health Services, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2110 (April 17, 1987); Hialeah Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 9 F.A.L.R. 2363 (May 1, 1987); Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, et al., 10 F.A.L.R. 1425 (February 15, 1988) These final orders contain the following statements concerning the Department's interpretation of rule 10-5.008(3) and its evolving policy with respect to changes to applications for certificates of need during section proceedings and admissibility of new information not contained in the original applications: Health Care and Retirement, supra, 8 F.A.L.R. at 4651: During 120.57 proceedings, an application may be updated to address facts extrinsic to the application such as interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories. An applicant is not allowed to update by adding additional services, beds, construction, or other concepts not initially reviewed by HRS. Manatee Mental Health Center, supra, 9 F.A.L.R. at 1431: . . . HRS has authority by statute to issue a CON for an identifiable portion of project. Section 381.494(8)(c), Florida Statutes. MMHC's "amended" proposal reduced the number of beds sought, and was properly considered during the 120.57 proceedings. Manor Care. Inc., supra, 9 F.A.L.R. at 2141-42: The amended applications [amended to address needs of Alzheimer's disease patients] changed the scope and character of the proposed facilities and services and thus, must be reviewed initially at HRS . . . [Gulf Court] . . . limited the de novo concept by requiring that evidence of changed circumstances be considered only if relevant to the application. Hialeah Hospital, Inc., 9 F.A.L.R. at 2366: It is recognized that more than a year may pass between the free form decision by HRS and the final 120.57 hearing and this passage of time may require updating an application by evidence of changed circumstances such as the effect of inflation on interest and construction costs. For the sake of clarity HRS would avoid the use of the word "amendment" to describe such updating. Such evidence of changed circumstances beyond the control of the applicant is relevant to the original application and is admissible at the 120.57 hearing. Taking the easiest first, those items explicitly listed by the Department in the first Health Care and Retirement case, "interest rates, inflation of construction costs, current occupancies, compliance with new state or local health plans, and changes in bed or service inventories," which change after the application is initially filed, are permitted. Not permitted are "additional services, beds, construction, or other concepts not initially reviewed by HRS." The remainder of the Department's incipient policy, as presently articulated, is extremely obscure. The word "extrinsic" without the list of examples is of little guidance. The application is only an idea on paper. Anything new, other than the bare words on the paper as originally filed, is literally "extrinsic" thereto. The concept of whether the new information changes the "scope and character of the facilities and services" originally reviewed in free form action by the Department is similarly of little guidance because the phrase "scope and character" can mean practically anything. Of fundamental difficulty is whether this phrase is intended to select substantial changes to the original application, or all changes. For example, if the original application proposes separate shower stalls and tubs for double rooms, but the amended application proposes a combination shower and tub, has the "scope and character" of the "facilities and services" changed? The phrase "additional services, beds, construction, or other concepts not initially reviewed by HRS" is similarly vague. What is a service or construction or a concept not originally reviewed? Would this include the change in bathing equipment discussed above? The concept of "control" of the applicant over the information that goes into the original application is the only phrase that gives applicants any guidance. The word "control" probably is intended as a "knew or reasonably should have known" standard. If the applicant reasonably should have known about the information and should have provided the Department with the information as a part of its original application, then the new information cannot be considered during the formal administrative hearing. The Hearing Officer will be guided, thus, by the explicit list of items provided by the Department in the Health Care and Retirement case, and by the concept of "control" provided by the Hialeah case. New information submitted by Forum Group Table 7 of the Forum Group update is for the second year of operation. There was no projection of utilization by class of pay for the second year of operation in Forum Group's original application, and Forum Group presented no evidence to explain why its original application did not or could not forecast utilization by class of pay for the second year of operation. Table 7 of the update, F.G. Ex. 6, thus constitutes an attempt to add matters to the original application which could have been a part of the original application as filed. Pursuant to rule 10-5.008(3), Fla. Admin. Code, it is now excluded from evidence because it is irrelevant. Table 8 of the Forum Group update was not proven by Forum Group to be based upon ordinary inflation. It appears that the revised charges in table 8 were based in part upon a telephone survey of subdistrict nursing homes conducted after Forum Group filed its original application. Forum Group did not prove that it could not reasonably have conducted such a telephone survey before it filed its original application. Thus, table 8 of F.G. Ex. 6 contravenes rule 10-5.008(3) and now is excluded from evidence because it is irrelevant to the original application. Table 10 of the Forum Group update was precisely the kind of new information allowed by the incipient policy of the Department. The old table 10 had an opening date of January, 1988, a date that was obviously in error due to the delay in decision in these cases. The new information was simply the old information altered by current occupancy and fillup rates in the subdistrict, data that could not have been acquired when the original application was filed. "Current occupancies" is explicitly listed by HRS as permissible new data in the Health Care and Retirement case, supra. Table 10, F.G. Ex. 6, is admitted into evidence. The revised table 11 contains positions for a dietary supervisor, maintenance supervisor, and utility workers, all of which could have been reported in the original table 11. These portions of table 11 are excluded from evidence. The revised table 11 contains changes in the FTE's for registered nurses and licensed practical nurses. These changes could have been in the original table 11 and are excluded from evidence. The revised table 11 contains changes in salaries that were adequately shown to be the result of inflation and new market data not available at the time the application was deemed complete. These portions of revised table 11 are admitted into evidence. Table 25 of the revised application, F.G. Ex. 6, which summarizes estimated project costs, including construction costs, contains new information permitted by the Department's evolving policy. The new table contains no changes of substance except changes caused by inflation and current construction experience. The bottom line, except to that extent, has not changed in substance. Table 25 of F.G. Ex. 6 is admitted into evidence in its entirety. Revisions to tables 17-20, F.G. Ex. 6, were driven entirely by inflation in construction costs. Surely if the Department allows an applicant to respond to inflation by projections of new costs, the Department's policy would also allow the applicant to respond to inflation by projections of new methods to reduce new costs caused by inflation. These revisions are admitted into evidence. The revised pro forma statement of total operating expenses has not been proven by a preponderance of the evidence. First, the revision was explained as being based upon changes in utilization by class of pay, but that data, table 7 of the revision, was not admitted into evidence. Moreover, the changes in total operating expenses resulted from impermissible changes in the numbers of FTE's which have been excluded from evidence. It is not possible on this record to determine how much of the revised pro forma statement of total operating expenses has been shown to be a credible projection, given the lack of these fundamental sources of the projection. Moreover, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, has not been credibly shown to be based upon matters that Forum Group could not have known at the time it originally filed its application. This conclusion flows from the fact that the original application did not project utilization by class of pay in year 2. Absent this projection, the revision of total operating expenses must necessarily be based upon data that was absent from the original application. The same is true with respect to changes in FTE's in the revision. For these reasons, the revision to total operating expenses in the revised pro forma, F.G. Ex. 6, constitutes an impermissible offer of new data precluded by rule 10-5.008(3). New information submitted by Health Quest Table 8 of the revised application of Health Quest, H.Q. Ex. 3, was based upon information that Health Quest could have obtained when it filed its original application. Table 8 of H.Q. Ex. 3 is thus excluded from evidence. Table 11 of the revised application was based upon the actual experience acquired after the original application was filed. Table 11 of H.Q. Ex. 3 is admitted into evidence. Table 17 of the original application projected that the facility would have six three-bed rooms, but the revised application deleted all 3 bed rooms. Since Health Quest failed to show that this new information would have been unavailable to it when it filed its original application, the change as to 3 rooms is not admissible. The ineluctable result, therefore, is that all of revised table 17 is inadmissible since the proper mix of beds has not been proven. The change of square footage of 1 bed room to 216 in the revised table 18 is inadmissible because it contravenes rule 10-5.008(3). Evidence as to the agreement with the University Community Physicians Association of Tampa is admissible as matters which did not exist and could not have been a part of the original application. The objections to that testimony, T. 579- 80, are overruled. New information submitted by Careage The changes to the Careage application, C. Exs. 18-23 and 24-25, were shown to be based upon information not reasonably obtainable by Careage when it filed its original application, and thus are admitted into evidence over the objections made that these exhibits were barred by rule 10-5.008(3). New information submitted by Hillsborough Healthcare Hillsborough Healthcare did not submit any changes to its application. Comparative review of the applications Careage failed to prove two essential portions of its application. It did not prove by a preponderance of the credible evidence that it would in fact operate the proposed facility if the certificate of need were granted, and it did not prove by credible evidence that it would provide care of good quality. For these reasons, the Careage application should be denied. The other applicants proved by credible evidence all essential portions of their applications. The only remaining task, therefore, is to determine the proper allocation of the 198 beds needed in July, 1989, among these three applicants. The space and costs associated with the remaining proposals may be compared as follows: Appli Cost/Bed NetFt/Bed TotFt/Bed Cost/NetFtBed Cost/TotFtBed Forum $44,551 228 408 $195 $109 HealthQ $34,719 240 423 $147 $ 82 HillsH $28,063 185 283 $152 $ 99 The cost per net square foot per bed (Cost/NetFtBed) is derived by dividing the cost per bed by the net square feet of living space per bed. Likewise, the cost by total square feet (gross) per bed (Cost/TotFtBed) is derived by the same division. Health Quest is preferable to the other two applicants when these cost and space figures are considered. It provides more space at a lower cost per square foot. The differences between Hillsborough Healthcare and Forum Group are not sufficiently significant to give one preference over the other. Hillsborough Healthcare is the less expensive proposal, but suffers from being the least spacious proposal in comparison to Forum Group. Moreover, the record does not contain guiding policies to determine whether there is a need in Hillsborough County for cheaper, less spacious, nursing homes, or for more expensive, more spacious nursing homes. The proposed staffing of the remaining proposals may be compared as follows: Applicant TotalFTE RN FTE LPN FTE RN Asst FTE No. Bed Forum 37.6 5.3 3.6 14.00 60 HealthQ 60.75 4.8 2.2 25.00 88 HillsH 64.65 2.92 8.78 36.61 120 Staffing per proposed bed may further be compared as follows: Total FTE Applicant Per Bed RN FTE Per Bed RN & LPN FTE Per Bed Total Nursing FTE Per Bed Forum .63 .08 .15 .38 HealthQ .69 .05 .08 .36 HillsH .54 .02 .10 .40 The total nursing FTE per bed for each applicant is relatively equal, with Hillsborough Healthcare having the highest ratio and Health Quest the lowest. Forum Group has significantly more RN's and LPN's per bed than Health Quest, but the overall nursing staffing is comparable. Hillsborough Healthcare is the lowest when only RN's and LPN's are considered, and the lowest total FTE per bed. The differences noted in staffing do not appear to be sufficient to draw meaningful conclusions. Hillsborough Healthcare's facility may be staffed at a less costly level, but whether this is due to substitution of nursing assistants for RN's and LPN's, or a result of efficiencies due to the larger number of beds (120), or reflects less than optimum staffing cannot be determined on this record. Hillsborough did not present evidence as to staffing patterns for a 60 bed facility. Other features of the proposals of the three applicants provide little to distinguish or rank them in priority. All three propose to associate the nursing facility with an adult congregate living facility, resulting in cost efficiencies and better continuity of care. All three have a substantial track record in the operation of a nursing homes, and can be expected to provide care of good quality. All three have very substantial resources and prior experience in the development and initial operation of a nursing home. If any distinction were to be made, perhaps it would be to favor the Hillsborough Healthcare application over the Forum Group application. Hillsborough Healthcare plans to serve the needs of Alzheimer's patients, and Forum Group does not. Hillsborough Healthcare's application is, relative to the Forum Group proposal, less expensive. On the other hand, the Alzheimer's disease unit is only a marginal factor since there is no qualified evidence in this record of need for that type of unit in 1989 in Hillsborough County. One can only infer that the need is probably going to be there, and it might be better to prefer Hillsborough over Forum Group for that reason. The "luxury" vs. "austerity" comparison is similarly not of ultimate persuasive weight since, as discussed above, there is no credible evidence in the record as to what the proper mix should be. Of course, it is safe to conclude that the need for less expensive nursing care is greater than the need for care that only a few can afford, but that conclusion does not necessarily result in the total denial of the Forum Group application. In summary, with respect to the question as to which applicant should be favored with approval of the most number of beds from the projected bed need, there is no major issue to adequately distinguish between the three applicants. For this reason, each applicant should be treated as equally as possible consistent with the application it submitted and the evidence it presented in support of that application. The Department appears to have several relatively reasonable ways to allocate bed need among the three applicants. It might simply divide the beds equally among the three. This alternative is less reasonable because it would ignore the detailed proof that has been presented by both Forum Group and Health Quest in support of proposed facilities of 60 beds and 88 beds respectively, and would result in implementation of facilities having staffing and design configuration that would be altered from that proof. A second alternative would be to award partial approval to Health Quest for 78 beds, to award full approval to Hillsborough Healthcare for 120 beds, and to deny the application of Forum Group. A third alternative would be to award partial approval to Health Quest for 78 beds, to award partial approval to Hillsborough Healthcare for 60 beds, and to award full approval to Forum Group for 60 beds. This third alternative is more reasonable and will be recommended by this order. This alternative has the advantage of fostering the most future competition in Hillsborough County by approving three competitors rather than two. Of the three applicants, Health Quest proposed the most space, relatively speaking, for the least cost. The staffing proposed by Health Quest is reasonable in comparison to the other two applicants. Reduction of the Health Quest proposal to 78 beds from 88 beds is a relatively minor reduction; stated another way, the proof provided by Health Quest as to the specifics of an 88 bed facility is likely to be changed only slightly for a 78 bed facility. Forum Group proved all of the details of its 60 bed proposal, and thus approval of those beds would be entirely consistent with its application and proof in this record. Hillsborough Healthcare did not prove the specifics of a 60 bed partially approved facility except that such a facility would contain the full sized Alzheimer's patient unit proposed in its 120 bed facility. It would be fairer to approve Hillsborough for that 60 bed facility than to approve Hillsborough for 120 beds, leaving Forum Group with denial of its application, given the lack of a compelling clear choice between the two applicants. Recommendation It is therefore recommended that the Department of Health and Rehabilitative Services enter its final order partially granting the application of Health Quest for 78 community nursing home beds, partially granting the application of Hillsborough Healthcare for 60 community nursing home beds, fully granting the application of Forum Group for 60 community nursing home beds, and denying the application of Careage. DONE and ORDERED this 30th day of June, 1988, 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 30th day of June, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 87-0670, 87-0671, and 87-0774 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used by the parties. Statements of fact contained in this appendix are adopted as findings of fact. Findings of fact proposed by HRS: 1-2. These proposed findings of fact are' subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The classification of the Home Association beds has been thoroughly discussed in the findings of fact and conclusions of law. The correct population figures are discussed in the findings of fact. 9-13. These are matters of law, and thus not appropriate as proposed findings of fact. 15. The changes to table 7 were not the result of a telephone survey. T. 51. 17. Defining "extrinsic circumstances" as not inclusive of economic or market changes that occurred after the original application was deemed to have been complete, or otherwise not reasonably obtainable or knowable by the applicant when the original application was filed, is contrary to HRS policy embodied in final orders, sketchy as it may be. 18, 23-25. Rejected as explained in the findings of fact. 26, 28. Rejected with respect to table 11 as explained in the findings of fact. 30. This finding of fact, while true, is not made because Health Quest made no such change to its 88 bed application. Rule 10-5.008(1) simply states that the application for a certificate of need must be filed on form 1455. Table 12 of the form has no instructions for what must be contained therein. Since HRS has not demonstrated on this record that table 12 in the original application was supposed to have listed these items, it cannot be said that the listing of these items in the new table 12 is a change. It is noted that spaces to take showers, baths, store linen, and for nursing stations would be assumed for any nursing home, and ought not be presumed to have been excluded by the failure of an applicant to list them. Moreover, it is further noted that from a review of the original application H.Q. Ex. 1 that table 12 does include nursing administrative space, patient lounges, a central supply space, general storage, housekeeping, and laundry. Moreover, the amendment, H.Q. Ex. 2, shows the following spaces on the space diagram: laundry, shower, patient lounge, and medication room (med). Any bed room could be used for isolation. Table 20 does include a chapel. H.Q. Ex. 1. Not supported by the record cited. Findings of fact proposed by Forum Group: 1-4, 9, 13. These are matters of law, and thus not appropriate as proposed findings of fact. 5. LB of 5,964, as proposed by the Department, is most credible as the beginning figure, without considering the beds at the Home Association. 7-8, 10. Incorrect value for LB. 11. OR should be 94.29 with the Home Association beds. 18. Incorrect values for LB and OR. 21. The denial occurred orally in January, 1987. The update has been discussed in findings of fact and conclusions of law. These are matters of law, and thus not appropriate as proposed findings of fact. It is true that there is need and the need must be satisfied. 29-33. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 34. The phrase "homelike atmosphere" is too vague to be a finding of fact. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The record does not contain sufficient evidence to make a finding as to the history of Forum Group with respect to the quality of care provided at Forum Group facilities. 49-50. The update with respect to financial feasibility is not relevant since essential parts of the update with respect to financial feasibility were not admitted into evidence. 60, 65, 67, 68, 74, and 80. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 66. This is not relevant. Ms. Kennedy testified that she had authority from Hillsborough Healthcare to accept a certificate of need for a 60 bed nursing home. There is no credible evidence to contradict this statement under oath. The lack of a written partnership authorization in evidence does not negate this statement. 76. Had there been any credible evidence in theme cases that the amount of need in Hillsborough County was minimal and that, consequently, the pro formas for 60 bed nursing-homes must be closely scrutinized for long term financial feasibility, then it would be relevant that CSI did not explain in detail the pro forma for a 60 bed nursing home. CSI did, however, present expert opinion that a 60 bed nursing home would be financially feasible, and on this record, the opinion is very credible. Forum Group and Health Quest have shown the long term financial feasibility of a 60 bed nursing home, and there is a large amount of need. Moreover, existing nursing homes are experiencing very high occupancy rates and fill up rates. For these reasons, this proposed finding of fact, while true, is not relevant. Hillsborough did show that its design was modular. Scaling down the project simply means deletion of one wing. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The witness specifically addressed two portions of the state health plan. T. 777. The testimony was competent and substantial evidence. The inference that the certificate of need was "about to expire" is inappropriate since the witness's testimony leads to the inference that Health Quest intends to proceed with that project. T. 641. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 98-99. These proposed findings of fact are true, but insufficient to support a finding that Health Quest lacks the resources to construct and operate this project in the short term. 101, 105-07. These proposed findings of fact are true, but do not lead to the conclusion that the construction cost estimates are unreasonable. See T. 590. Mr. Krisher had sufficient expertise in health planning, nursing home development, and financial feasibility, to testify generally as to these matters. T. 501-516. No party presented any independent evidence to seriously question these estimates. 102. This proposed finding of fact is incorrect since the expected Medicaid rate in Boca Raton is different from the expected rate in Tampa. T. 785. 111. Not supported by the record cited. 114-116, 118-120. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. True, but insufficient to show lack of resources to make the project financially feasible in the short term. Irrelevant. The existence of lines of credit was proved by Mr. Gentle. Irrelevant. The staffing was shown to be reasonable by the testimony of other competent witnesses. 125-27. True, but insufficient to show back of financial feasibility. 129. True, but irrelevant. It would be unreasonable and a waste of health care resources for an applicant to have to buy five expensive acres of urban land to be qualified to apply for a certificate of need. 130-31. Irrelevant. The delay and inflation rates are negligible. Findings of fact proposed by Hillsborough Healthcare: 1. This is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 5. The phrasing of the first and second sentences is rejected for lack of evidence. 7. The evidence is not sufficient to show actual bias by a preponderance of the evidence. 8-9, 19-20, 22-23. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact are true, however, and are adopted by reference. 21. Irrelevant. 24. True, but not relevant. These matters are covered by the numeric need rule. 29. The evidence does not show that CSI managed facilities offer "superior" activities. 32, 33 (fifth and sixth sentences), 35 (last sentence), 38(a)-(i), 40,42 (first sentence), 39, 45 (second and third sentences), 46 (all but the first sentence), 49 (first two sentences), 53, 56 (all but the first two sentences), and 60-72. These proposed findings of fact are subordinate to findings of fact that have been adopted. These proposed findings of fact ace true, however, and are adopted by reference. 51. The preponderance of the evidence does not credibly show that the floor plan promotes patient safety and convenience, or that travel distances are minimal. 54. Not supported by the record cited. These proposed findings of fact are irrelevant. A finding of fact that the criminal offense of perjury was committed cannot be made since there is no evidence of a criminal conviction by a court of competent jurisdiction. The testimony of Ms. Etten was not limited to those programs. The documents used in cross examination were never properly authenticated, and are hearsay. Thus, a finding of fact that the documents are in fact surveys of Careage facilities by other agencies in other states cannot be made based upon the documents. For this reason, the remainder of the proposed finding is not relevant. Ms. Etten credibly testified that nursing staffing was generally adequate. Her opinion was not ultimately limited to special programs. T. 1216. The inability of other witnesses to testify on this point is not relevant. The ability of Careage to recruit staff was adequately proved by other parties. There is no credible evidence in this record to believe that any applicant fail to recruit adequate staff. The recruitment plans of Careage appear to be quite reasonable. T. 1562-64. On pages 1686-87 of the transcript, the Hearing Officer ruled that the expert opinion of Ms. Krueger would be allowed even though it was based on hearsay. This was a correct ruling. Section 90.704, Fla. Stat. (1987). The sentence immediately following that ruling is incorrect as stated, and directly contradicts the initial correct ruling. That is, an expert opinion is admissible and may be relied upon even though based upon evidence, such as hearsay, which in itself may not be admissible. Further, the opinion of an expert in an administrative proceeding is a proper basis for a finding of fact even though the opinion is based upon hearsay, and even though hearsay alone in an administrative hearing, absent nonhearsay evidence on the point, is not sufficient as a basis for a finding of fact. The second sentence in the transcript was intended to state that hearsay evidence alone will not be the basis of a finding of fact, setting aside for the moment the issue of expert opinion. For these reasons, these proposed findings of fact are rejected to the extent that they urge that short term financial feasibility was not established because the opinion was premised upon hearsay evidence. With respect to the unaudited financial statement question, Ms. Krueger was not asked whether experts in her field reasonably rely upon unaudited financial statements. She was only asked which type was more worthy of belief and whether her profession feels they can rely on audited statements. She was never asked whether her profession feels it cannot rely upon unaudited statements. Ms. Krueger stated that she was aware of the existence of fraudulent audited statements, implying that the question leads to answers that are not that useful. T. 1652. In fact, Ms. Krueger, who was a thoroughly credible witness, explaining her opinions in a lucid and reasonable manner, relied upon unaudited statements, as well as her conversations with several of the chief executive officers of Careage. Based on this record, a finding cannot be made that experts in this field do not reasonably rely from time to time upon unaudited financial statements. The authenticity of the letter from SeaFirst is irrelevant since that line of credit was established by the direct testimony of Mr. Gentle. T. 1576. Ms. Krueger's lack of personal knowledge as to the existence of a binding commitment for a loan for this project is irrelevant due to Mr. Gentle's direct testimony. The evidence in the record from all parties indicates that land is generally available in Hillsborough County in the 3 to 5 acre range, that 3 to 5 acres is about what is needed for any of the projects, and that the cost is from $300,000 to $600,000. The Careage facility will bring in over $3 million in gross revenue per year in all years beyond the first few. A few hundred thousand dollars can be amortized over the life of a nursing home, and will not be a significant factor in long range financial feasibility. All of the applicants have access to credit to buy land at market rates. There is essentially no reasonable dispute as to land acquisition and cost in this case. The testimony related to equipment , not floor space, for technology dependent children. Those children would be served in the subacute beds. Space for Alzheimer's patients was included in the floor plan and the 45,500 square feet. T. 1136-37. Mr. Cushing testified that the Means reference book might project a cost per square foot in the "60's." He did not adopt that as his opinion. T. 1185-86. Delay in construction for 8 months is not such delay as to necessarily result in substantial increases in construction cost. The last sentence is true but does not account for the fact that Mr. Cushing consulted the Means reference book for labor rates. That is sufficient. The remainder of the reasoning of this proposed finding of fact was rejected in paragraph 85 above. Rejected as described in the preceding paragraphs. Ms. Krueger's expertise with respect to salaries was established perhaps more completely than any other expert witness. She not only had first hand knowledge from her work reviewing salaries in nearby counties, but she consulted expert reference materials. Her inability to remember the name of the book referenced does not seriously undermine her expertise. The ruling at T. 1324 sustained an objection to a question. It was not a ruling upon the admissibility of portions of the document. Ms. Krueger prepared the long range plan section of C. Ex. 3, P. 3-7, and the under served groups section, p. 3-8, in conjunction with Mr. Gentle. T. 1322. This is sufficient predicate for her testimony as to these matters. 91-92. The telephone survey was not a needs survey. It only surveyed existing services. The survey has essentially been discounted because of lack of response and lack of statistical reliability. These proposed findings ace adopted by reference. Since none of this testimony has been relied upon in this recommended order, the proposed findings of fact are irrelevant. These proposed findings of fact are irrelevant. The testimony as to lines of credit and resources of the Lynns was enough to establish the availability of working capital. These proposed findings of fact are irrelevant. Rejected as explained in the findings of fact. These proposed findings of fact are irrelevant. 101. The continuing objection was allowed, not granted. T. 595-96. Otherwise, these proposed findings of fact are true and are adopted by reference. 102-103. These proposed findings of fact are true and are adopted by reference. 104. Essentially irrelevant as explained with respect to proposed findings of fact concerning the land acquisition and preparation costs of other applicants. 105-107. These proposed findings of fact are true and are adopted by reference, except the last clause of the last sentence of proposed finding of fact 105. Absent quantitative data and a study of salaries showing the estimates to be substantially in error, the foregoing proposed findings of fact are not sufficient to show an error affecting financial feasibility. 108-109. These proposed findings of fact are irrelevant since the 60 bed application was not a permissible amendment. These proposed findings of fact are true and are adopted by reference. These proposed findings of fact are irrelevant since these are different health districts having different patient payor mixes. Findings of fact proposed by Health Quest: 4, 5, 7-10. These are matters of law, and thus not appropriate as proposed findings of fact. 11-17. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. The rationality of the OCHP's policy is irrelevant since it conflicts with the rule and other policies are also rational. A finding of a consistent pattern with respect to base date populations in the award of certificates of need cannot be made as discussed in the findings of fact. Mr. Sharp understood his position, and Mr. Jaffe well understood the inconsistencies. 22-23. True but irrelevant. Disadvantage often occurs to some person when the law is correctly applied. 24-28. Rejected as discussed at length elsewhere in this order. 33. Not supported by the record cited. 36.a. Mr. Gentle did not work with Careage in these years and could not be expected to have detailed memory on these points. He named seven such facilities. 38. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 40.b. (ii). There is no evidence that CHP is the same as Careage. 40.c.(v). Health Quest has operated since 1969. 42. Both could be true. 43.a.(ii). Mr. Gentle was not sure because this was not within his area of responsibility. T. 1603. 44. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Dr. Etten's unfamiliarity with the fact that the Health Quest facility in Jacksonville provides IV therapy and total parenteral nutrition does not demonstrate exaggeration or lack of expertise. The record does not clearly demonstrate that other Health Quest nursing homes provide these specific services. The evidence is only that services are generally the same. T. 1077. The testimony concerning Medicaid patients in the subacute unit was elicited on cross examination, and was not presented by the witness as an intended representation by Careage on direct. Ms. Krueger's understanding simply was wrong, not misleading. T. 1367. The remainder of this proposed finding of fact is similarly a red herring. Careage did not project anything more than 37 percent Medicaid utilization. C. Ex. 3, table 7B. It is one thing to expect 37 percent utilization, and another thing to represent that the facility will not discriminate. A promise to not discriminate inherently contains the caveat that a facility will not pursue that noble goal to bankruptcy. The Hearing Officer would not find that to be the case with respect to Careage any more than with respect to Health Quest. Mr. Gentle did not testify that the number of nurses aides in the Alzheimer's unit would be higher in comparison to other sections of the facility. He testified that the number would be "higher" in comparison to professional licensed staff, which would be lesser. T. 1525. 54. Irrelevant. Mr. Gentle said that day care would probably be at a location nearby. T. 1593. 57. None of the parties addressed site size with the specificity proposed by these findings of fact. Lack of such specificity has no real bearing on credibility. The record cited, T. 1526, does not support the proposed finding that equipment for technology dependent children is "substantial and expensive." Thus, the remainder of these proposed findings are rejected. It is true, however, that the application fails to itemize such equipment, and that the contingency is relied upon. There is no evidence that Careage proposes to employ a gerontological nurse practitioner. C. Ex. 3, table 11. The testimony of Dr. Etten simply describe the skills of that form of nurse practitioner. She was never asked whether such professional would be employed by Careage. T. 1217-19. The failure to tie in the testimony is only a human error, and does not show a lack of credibility. Proposed finding of fact 62.a. is not supported by the record. Dr. Etten was not asked to describe the care given an Alzheimer's patient in an ACLF. She was asked to describe the care given a "resident" of an adult congregate living facility. Her comment about such residents not being "bed patients for any period of time" is not a dodge of a question about an Alzheimer's disease patient. Moreover, she credibly and directly testified that Alzheimer's disease manifests itself so many different ways she could not say whether it would be appropriate to have such patients living in an adult congregate living facility. Next, Mr. Gentle's testimony as to the medical characteristics and needs of Alzheimer's patients is insufficient as a basis for findings of fact because Mr. Gentle was not accepted as a medical expert. Health Quest presented no credible evidence to show that an Alzheimer's patient can be treated either in an adult congregate living facility or a conventional nursing home. Absent such evidence, the failure of other parties to rebut the nonexistent negative, given the clear affirmative evidence that Alzheimer's disease patients greatly benefit from special care, is unpersuasive. These proposed findings of fact are irrelevant. These children would be served as subacute care patients. Precise identification of the area set aside for these children would have been only of marginal relevance. To the extent not adopted elsewhere in this recommended order, these proposed findings are adopted by reference. Careage's expert was clearly aware of the need to review site specific conditions in the preparation of construction plans. T. 1177. He has built nursing homes in many states. His competence to prepare adequate construction plans for Hillsborough County conditions was clearly established in the record. It is true that he had not yet prepared the final construction plans. But no party has presented final construction plans, and thus the lack of such plans is irrelevant on this record. Irrelevant on this record. Irrelevant. The amount of working capital is well within the resources available to Careage. There is no evidence in the record that a variation one way or the other by $100,000 would make the project not financially feasible. Careage's credibility was not discredited by the fact that Ms. Krueger was not aware of the mix of skilled and intermediate beds. True, but irrelevant. There is no evidence that such expenses were not accounted for, or if missing, the amount and importance. The staffing was shown by expert opinion to be adequate. T. 1216. One presumes that adequacy refers to adequate health care since the witness was only qualified in that area of expertise. The Careage design was not unique. The Careage use of the word "unique" to describe its design has been disregarded in this order. 78.c.(i)-(iii). These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 78.c.(vi). Not supported by the record cited. 78.c.(vii). The testimony cited is not competent opinion. There was no predicate for testimony as to the knowledge of Mr. Haben, and the objection to a similar question just preceding was sustained on that basis. 87-96, 100-101, 103-128. These proposed findings of fact are irrelevant for the reasons stated in Health Quest's proposed finding of fact 76. 135. These are matters of law, and thus not appropriate as proposed findings of fact. 146. Not relevant since the 60 bed proposal is not in evidence. 149. Without evidence as to what is included in the definition of "subacute" care, a finding as to "virtually all" cannot be made. 151 and 158. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 166, 169, 170 and 172. Not relevant since the 60 bed proposal is not in evidence. 168. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Findings of fact proposed by Careage: The first sentence implies that Careage has operated nursing homes for 25 years. Careage has built nursing homes fob that length of time for operation by others, for the most part. The second sentence is true, but subordinate, and is adopted by reference. Mr. Griffin testified that the decision to adhere to the recommendations made by staff before he assumed his duties at HRS was not his decision. T. 705-06, 703. His testimony reflect very little personal participation in the evaluation of the competing applications. T. 697-705. 6. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 8. There was no credible evidence in this record as to how many Alzheimer's patients need specialized services. The evidence was simply that if such patients exist, such patients need specialized services. Thus, the first sentence is rejected. 8 (second sentence) -12. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. A comparison of staffing is not possible since Careage intends to serve primarily persons in need of skilled nursing care, and hence it cannot be determined if Careage in fact has proposed nursing staff that is more generous relative to patient need than Hillsborough. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. Since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility, this finding of fact is rejected. The proposed finding concerning intent to provide adult day care is not supported by the record cited. 19-20. Irrelevant since insufficient credible evidence has been presented to conclude that Careage will operate the proposed facility. 21. The first sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. 22-23, 25 (all but first sentence), 26, 17 (third, fourth, and seventh sentences), 29. These proposed findings of fact are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 24. It is concluded that associating a nursing home with an adult congregate living facility will in fact result in cost efficiencies. The remainder of this proposed finding of fact, noting the relatively higher costs of Health Quest compared to Careage, is true, but does not disprove the conclusion that cost efficiencies would exist. It is true that the Hillsborough Healthcare Medicare mix projection may be somewhat high, but the fiscal consequences of that conclusion was not demonstrated. The second sentence is rejected because Ms. Krueger was not accepted as an expert with respect to appropriate levels of staffing. T. 1686-88. 31. The second sentence is based upon hearsay. It is also based upon the opinion of Mr. Gentle which was inadmissible. T. 1577. The fourth and fifth sentences are subordinate to findings of fact that have been adopted. They are true, however, and are adopted by reference. 32-33. These portions of the Forum Group amended application, F.G. EX. 6, were not admitted into evidence, and thus these proposed findings of fact are not relevant. 36. Irrelevant since the Health Quest 60 bed application is an impermissible amended application. COPIES FURNISHED: Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 DEPARTMENT OF HRS Edgar Lee Elzie, Jr., Esquire Guyte P. McCord, III, Esquire McFarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 32302 CAREAGE HOUSE HEALTH Robert S. Cohen, Esquire Haben and Associates Post Office Box 10095 Tallahassee, Florida 32302 FORUM GROUP, INC. R. Terry Rigsby, Esquire Post Office Box 11188 Tallahassee, Florida 32302 HILLSBOROUGH HEALTHCARE LTD. W. David Watkins, Esquire Oertel & Hoffman, P. A. Post Office Box 6507 Tallahassee, Florida 32314-6507 HEALTH QUEST CORP. Charles N. Loeser, Esquire Assistant General Counsel 315 W. Jefferson Blvd. South Bend, IN 46601 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302
Findings Of Fact HCR initially applied for a CON to construct a 120-bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action 3854, which it denied. Manor Care also initially applied for a CON to construct a 120- bed nursing home facility in Lee County, DHRS District VIII. DHRS assigned this application CON Action No. 3850, which it denied. Manor Care and HCR timely filed petitions for formal administrative hearings which resulted in the DOAH Consolidated Case Nos. 85-2937 and 85-3240. During the hearing, Manor Care and HCR offered updated CON applications (respectively MCI and HCRS). While the Manor Care proposal is a "scale-down" to 60 beds (HCR still proposes 120 beds. both applications propose nursing home beds be set aside to offer a therapeutic environment for patients with Alaheimer's Disease and patients with related disorders. Manor Care's update also provides for an attached 60-bed adult congregate living facility (ACLF), which does not require a certificate of need. DHRS objected to the admission in evidence of the respective applications but did not move for relinquishment of jurisdiction to the agency for consideration by its experts of the updated material in lieu of formal hearing (Vol. III p. 54). Both applications had been submitted to the DHRS attorney prior to hearing. Upon the Hearing Officer's own motion, an evidentiary hearing was conducted prior to the taking of other evidence solely on the propriety of consideration of the updated applications without resubmittal to DHRS. The HCR update did not change the number of beds, nor the patient mix. The Manor Care update was downsized to 60 beds, and this is permitted as a matter of law. Neither update requires amendment of the District Health Plan or the same fixed pool; neither attempts to alter the January 1988 planning horizon contemplated by the original January 1985 applications. The other changes contained in the updated applications relate to a description of the Alzheimer's Disease (AD) program and design of the AD unit for each application, or other changes such as increase or decrease in costs due to inflation and the passage of time, including particularly, the fact that subsequent to the filing of the original application there was a recognition in the District Health Plan and the State Health Plan of the special needs of AD patients, which was contained in the 1985-87 State Health Plan, Vol. III, p. 109. (T-73-74, Vol. II - testimony of HCR expert, Milo Bishop; DHRS Exhibit 5), and the subsequent Local District VIII Health Plan also identified the concern of availability of beds for Medicaid patients. Specifically, the District VIII Health Plan recommends priority consideration for nursing home beds to be given to applicants that will propose to accept a proportion of Medicaid eligible patients that is at least equal to the most recent quarterly figure of Medicaid occupancy in the district. (T-75, Vol. III, DHRS Exhibit 5). The updated application of HCR was filed to reflect these recently identified needs of the AD patients, sub- acute patients and Medicaid patients. The update of each Petitioner also clarifies assurances of Medicaid availability. The updated applications of both Manor Care and HCR proposed special programs for AD patients and a separate wing which appears now to be a treatment of choice for these types of patients. Awareness of AD and its ramification has increased significantly in the recent past. Recognition of the special needs of these patients in the respective updated CON applications constitutes refined material describing the current state of knowledge in medical care. The proposals by Manor Care and HCR to designate separate units and programs for AD patients does not constitute a substantial change in the applications for all of the foregoing reasons but also because any nursing home may admit and treat AD, related disorders, and sub-acute care patients without obtaining a specialized CON and because these types of patients could have been treated in the nursing homes described in the original applications. As far as the identification of newly available information on AD and related disorder patients are concerned, the updates are clearly encouraged within the purview of Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). Over all, none of the amendments of the Petitioners are substantial and the updated applications of both Manor Care and HCR are proper amendments permitted in these de novo proceedings pursuant to McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977); and Gulf Court Nursing Center v. DHRS, 483 So. 2d 700 (Fla. 1st DCA 1985), Motion for Rehearing (Feb. 14, 1986). The ruling that both amended applications were not substantial amendments and therefore no remand to the agency was necessary was entered on the record (Vol. III, p. 103 and is accordingly reiterated and confirmed here, within the Recommended Order. During the hearing, all the parties stipulated to the reasonableness of construction (and equipment) cost, and financial feasibility of both projects. DHRS (but not the Petitioners) stipulated that both Petitioners projects satisfied all quality of care considerations. Upon all the evidence (oral, documentary, and demonstrative) including but not limited to the testimony of Loma Overmeyer, Charlotte Young, Tal Widdes, and John Lee, it is found that both Petitioners have affirmatively demonstrated their respective abilities to provide satisfactory quality of care to their patients through these respective proposed projects. Rule 10-5.11(21), Florida Administrative Code, contains DHRS' methodology for computing nursing home bed need. The need methodology provides that the need for proposed new community nursing home beds is to be determined 3 years into the future. Here, the applicable planning horizon is January, 1988, which is 3 years from the time the initial applications were filed. Applications for new community nursing home beds will not normally be approved if such approval would cause the number of community nursing home beds in an area to exceed the bed need calculated pursuant to Rule 10-5.11(21)(b) 1-10 Florida_ Administrative Code. Applications for community nursing home facilities are normally approved for a minimum of 60 beds. All need experts utilized current population figures provided July 1, 1986 by the Office of the Governor. However, DHRS has arrived at a 37 bed surplus. The DHRS expert, Joyce Farr, testified she used the date of hearing (July 1986) as a basis and current population figures, rendering a gross need of 1,089 beds. If current population figures are used and the January 1985 (initial application date) is used, there is a gross bed need of 1,204 beds. There are 996 licensed nursing home beds in Lee County as of June 1, 1986. Applying the rule to either gross bed need leaves 93 (1089 minus 996) net need or 208 (1204 minus 996) net need. Manor Care calculated both ways and would qualify by either method if it were the sole applicant, but the net bed need by either calculation greatly exceeds the beds proposed by Manor Care. The latter calculation, based on January 1985 instead of the 1986 population projections is urged by HCR as preserving the sanctity and logic of batching cycles and planning horizons. Such an application of the rule's methodology would clearly permit a CON for 60 nursing home beds to be issued to Manor Care and also permit a CON for 120 nursing home beds to be issued to HCR, with a surplus of 28 beds. This solution of awarding a total of 180 beds (60 plus 120) would not offend DHRS established policy that applications for community nursing home facilities are normally approved for a minimum of 60 beds. Nonetheless, HCR's reading of the rule mixes 1985 and current figures without adequate justification in the record and is neither literal nor in conformity with the agency policy and interpretation which witness Farr testified has been applied by her on behalf of DHRS in at least 100 contested CON formal hearings. Further, it is clearly logical and in the best interests of the public and the health planning professions, and in accord with the intent of Chapter 381 F.S. to apply those figures which will most accurately reflect the bed need at the projected (January 1988) planning horizon. In this instance, that set of figures renders the net general community nursing home bed need as 93. However, Joyce Farr also testified that she had been instructed by her supervisor not to apply the rule as promulgated but instead to reserve 143 beds for Lee County and to subtract these beds as if they were already approved. The "reserved" 143 beds represent DHRS' interpretation of Gulf Court v. DHRS. Pursuant to directions in the opinion of the First District Court of Appeal in that case, DHRS has received, for comparative review, CON applications from the three party applicants in that case. Those parties' applications were originally filed in 1981 and 1982, and are for nursing home beds in Lee County. As of date of formal hearing in the instant cause, none of the "Gulf Court" parties' applications had been approved. The Department's stated intention regarding the three "Gulf Court" applications is to award 143 beds to one or more of the party applicants in that case. This intention is based upon the Department's interpretation of the Gulf Court case, and not upon any calculation of need for a planning horizon. As of date of hearing, DHRS had not given any consideration to the effect of changed statutes, regulations, facts, or circumstances on the "fixed pool" of beds applied for by the "Gulf Court" applicants. In her calculation of net need for the sub-district of Lee County, the DHRS witness counted the 143 beds set aside for the "Gulf Court" applicants as "approved" beds. Other than those beds, there are no other approved beds, nor any applications pending from prior batches. The DHRS methodology used to subtract 143 beds is not consistent with the provisions of Rule 10-5.11(21), Florida Administrative Code. (See Conclusions of Law). If the DHRS bed need formula contained in Rule 10- 5.11(21), Florida Administrative Code, is used, the correct number of beds needed for the planning horizon of January 1985 through January 1988 is 93 general community nursing home beds. Each applicant has included, in the updated applications presented at hearing, a number of beds set aside in a unit for Alaheimer's Disease (AD) patients. Manor Care has indicated that 18 beds would be so designated. HCR proposes to establish a 30 bed unit for both "Alzheimer's and the related disorders"' including 15 beds "just for wanderers." AD "is a degenerative process of the brain, characterized by memory impairment and impairment in several mental and physical functions." The disease progresses at certain levels or stages. There are four progressively worsening stages of this disease. In the first stage, the patient starts to forget names and facts in the recent past, and also begins to be unable to perform some complex tasks that the patient was able to perform before the disease began. In stage two, the impairment in memory increases. The patient starts to forget common names of objects usually used in daily living, and the patient starts to wander. There are often behavioral problems, such as agitation or depression. In stage three, there is. physical impairment, including incontinency, speech disturbances, and problems with communication. In stage four, the patient most of the time is confined to a bed, and largely unaware of his_ environment. He is incontinent. Without adequate care, he has sores on his back. He is nearing death at that point. AD is irreversible and the cause is unknown. Diagnosis is very difficult. The only positive method of diagnosis is by brain biopsy. The most common method of diagnosis is by a process of elimination and this often fails in the early stages of AD. Incidence of AD increases in the over 65 population but there are cases of some patients as young as 30. A large percentage of any nursing home is suffering from some form of dementia. The estimated need of "irreversible dementia" patients in nursing homes in Lee County for the year 1988 is 2,189. Out of this number of patients, 60% would be specifically AD patients or 1,313. Dr. Baquero presently has 100 AD patients in existing area nursing homes. AD patients are cared for in almost all nursing homes, but usually there is no separate area or program. There are no specialized programs or units for AD patients currently established in Lee County. The existing facilities in Lee County do not provide adequate care to persons suffering from AD. Because of the lack of facilities, AD patients are often kept at home until families are to the pint of desperation. Care of the AD patient is an enormous, 24 hour-a-day burden on the care-givers. Additional stress is caused by personality changes that often accompany the disease. Most facilities in Lee County will not accept a difficult patient. Families of AD patients have placed patients in facilities out of country, out of state, and out of country, because of the lack of facilities in Lee County. Dr Baquero, practicing medical physician in Ft. Myers, who is experienced in treating AD patients and who has knowledge gained as Medical Director for two existing nursing homes, was qualified as an expert in the care and treatment of AD patients. Upon his evidence and upon evidence of the representatives of the Alzheimer's Disease and Related Disorders Association (ADRDA), it is found that AD patients frequently have to be placed outside Lee County, as far as 60 to 70 miles from home. Approximately 50% of AD patients consulting ADTDA return to northern home states or go to foreign countries rather than awaiting long- delayed Lee County placement. Placement of AD patients also on Medicaid or needing sub-acute care is even more difficult. The Petitioners further demonstrated that other patients in addition to AD patients are not adequately served by the existing facilities in Lee County. It is extremely difficult in Lee County to place a patient who is in need of high technology or "sub-acute" care. Such patients include those in need of intravenous antibiotic therapy, ventilators, oxygen, feeding tubes or pumps, decubitus ulcer care (bed sores), etc. Feeding pumps and bed sores may eventually become a way of life for AD patients. AD patients may also require other forms of sub acute care and can be on Medicaid. Many of the existing nursing homes are not capable of handling such patients who often must be placed out of county. These difficult patients are frequently placed out of county or at great distance from their homes within the county, creating added burdens on elderly spouses and family members. The burden of out of county placement has created or intensified "separation syndrome" accidents and death for such patients elderly spouses. Implementation of the Diagnostic Related Grouping (DRG) system of Medicare reimbursement has been an incentive for hospitals to release patients as soon as they are no longer in need of "acute care," but due to the inability to place these patients, they stay in hospitals longer than necessary, resulting in a much higher expense than would be the case if a nursing home placement could be achieved. Additionally "cost shifting' to private and third party insurance payments may be inferred from the DRG statistics admitted. Both Lee Memorial Hospital and Ft. Myers Community Hospital experience difficulty in placing sub-acute care patients, especially those on Medicaid. Fifty per cent or more of Ft. Myers Community Hospital referrals are of sub-acute care patients. Ft. Myers Community Hospital records reflect an increase in hold-overs due to unavailability of nursing home beds. Since October, 1984, Lee Memorial Hospital has had to place 75 out of 941 discharge patients out of county. Only one of these patients was private pay. The majority of Lee Memorial discharges to nursing homes are Medicaid and Medicare patients; 48.3% are Medicare and 22.6% are Medicaid patients for a total of 70.9% of the total discharges to nursing homes. Only 29% of Lee Memorial discharges-to nursing homes are private pay patients. Twenty per cent of all of Lee Memorial's Medicaid discharges to nursing homes are required to be placed out of county and 11.2% of their Medicare discharges are placed out of the County. Mary Shell, the DHRS District Human Services Coordinator confirmed the difficulty of placing Medicaid patients in the county as sub-district and testified to a serious but unquantified shortage of both Medicaid and sub-acute nursing home beds in Lee County. Mr. Dennis Eskew, Supervisor of the DHRS Adult Payments Unit, which determines the eligibility for Medicaid nursing home programs, presented a chart (HCR 15) showing 20% of 203 approved Medicaid patients (41) had to be placed out of county during the immediately preceding six months because of unavailability of such beds in Lee County. Existing nursing homes in Lee County are almost always full. Hospital discharge planners, families, and medical physicians seeking placement of patients uniformly testified that there is a shortage of beds and long waiting periods, even for non-problematic patients and that there is a need for additional nursing home beds for all types of patients including Medicare/Medicaid patients, sub-acute patients, AD patients and routine nursing home patients. However, these witnesses did not attempt to quantify the number of beds needed. There is strong evidence that recently opened nursing homes are not making available promised Medicaid beds and there have been no DHRS enforcement procedures. Although minimally demonstrated, it may be inferred from the foregoing type of testimony that the absence of competition has reduced the incentive of existing local nursing homes to accept those out of the "walkie talkie" category, those still cognitive, ambulatory patients who are able to feed and care for themselves to a large degree. Both Petitioners meet the guidelines in the local health plan that applicants should provide at least 33 1/3% of beds available to Medicaid patients. HCR agreed to provide 46% Medicaid beds (55 beds out of 120) which was the prevailing district rate. The plan gives priority to those applicant who meet this percentage. Manor agrees only to provide 35% Medicaid beds. Both Petitioners indicate a willingness to treat sub- acute patients, but neither seeks a specific number of beds for this purpose. Sub-acute care is considered within the designation of skilled care. Manor Care's emphasis on rehabilitation in its existing facilities has had significant results. Manor Care's historical Medicare percentage is above the industry average. Both Petitioners are in the forefront of developing programs for the diagnosis and treatment of AD disease. Manor Care is prepared to totally commit 18 beds exclusively to AD and related diseases and 21 beds to Medicaid. These may overlap. HCR is prepared to totally commit 32 beds exclusively to AD and related diseases and 55 beds to Medicaid. These may overlap. The special attributes of each proposed AD unit (30 beds by HCR and 18 beds by Manor Care) include a higher staff-to- patient ratio, which is needed to supervise and assist confused and wandering patients and a great deal of attention to the physical environment, from a home-like atmosphere and certain relaxing shades of pink, to special furnishing and fixtures. Particular care is necessary in preparation and serving of food, to allow patients with AD and related disorders to eat adequately and without assistance and to prevent considerable weight loss in the wandering stage which can result in further rapid debilitation. One of the goals of AD programs is to reduce the need for traditionally utilized physical restraints or heavy sedation, and to promote prolonged individual functioning. There is no competent expert testimony contrary to the theme that AD patients require special care and special programs designed to meet their unique medical and custodial needs. The experts with any personal background in the area also uniformly agreed that a separate wing or another isolated area of the nursing home facility is most desirable because of the wandering tendencies of these patients, their hostile, unpredictable, and bizarre behavior, and the other special needs specific to this type of brain degeneration. HCR's Wander Guard security system is viewed as superior by some witnesses.
Recommendation Based on the foregoing, it is RECOMMENDED: That DHRS enter a Final Order approving HCR's updated application for a 120 nursing home bed facility in Lee County limited and conditioned upon HCR's updated application's specific provision for 46% Medicaid beds and upon 30 beds being dedicated as set out in the application and evidence at formal hearing for the specific for treatment of AD patients, and denying the application of Manor Care for a 60 bed facility. DONE and Ordered this 23rd day of December, 1986 in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway Tallahassee, Florida 32309 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December 1986. COPIES FURNISHED: Jean Laramore, Esquire Kenneth A. Hoffman, Esquire 325 North Calhoun Street Tallahassee, Florida 32302 Donna H. Stinson, Esquire The Perkins House, Suite 100 118 North Gadaden Street Tallahassee, Florida 32301 John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 William Page, Jr., Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 APPENDIX_ The following paragraphs constitute specific rulings upon the parties' respective proposed findings of fact as required by Section 120.59(2) F.S. Petitioner Manor Care's Proposals: Covered in Findings of Fact 1, 3. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 3, 9-12. Sentence 1 is covered in Finding of Fact 4; remainder rejected as taken out of context and not clear from the record as a whole. Covered in Finding of Fact 9. Covered in Finding of Fact 12. Covered in Finding of Fact 9-12. Covered in Findings of Fact 9-12. Up to the comma covered in Findings of Fact 12; after the comma accepted but not adopted as unnecessary. Covered in part in Finding of Fact 12; remainder accepted but unnecessary. Covered in Findings of Fact 12. 16-19. Covered in Finding of Fact 6. 20. Covered in Findings of Fact 9-12. Proposals 9, 14, and 15 are accepted but not adopted because subordinate and unnecessary. Petitioner Health Care and Retirement Corporation of America's_ Proposals: Covered in Finding of Fact 1. Covered in Findings of Fact 2. sentence 1 is covered in Finding of Fact remainder rejected as subordinate and unnecessary. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3. Covered in Finding of Fact 3 Covered in Finding of Fact 3. 10-12. Covered in Findings of Fact 3 and 12. Covered in Finding of Fact 12.a. Covered in Findings of Fact 3 and 10. 16. Covered in Finding of Fact 3. 19. Covered in Finding of Fact 3. 20-22. Covered in Finding of Fact 4; rejected in part as not supported by the record. 23-24. Covered in Finding of Fact 4. Covered in Findings of Fact 8 and 9. Covered in Finding of Fact 12. 27-32. Covered in Finding of Fact 8. Covered in Findings of Fact 5 and 6. Covered in Finding of Fact 8. 38-39. Are accepted in principle but rejected in their specificity as subordinate, unnecessary and cumulative. To a large degree the same subject matter is covered in Findings of Fact 8-12. Covered in Findings of Fact 9 and 12. Covered in Finding of Fact 8. Covered in Findings of Fact 9 and 12. 43-49. Covered in Findings of Fact 9-12. What is not covered is rejected as subordinate, unnecessary, and cumulative. Covered in Findings of Fact 9-10. Covered in Findings of Fact 9-12, particularly lOe. Covered in Findings of Fact 10-11. Accepted in principle but as stated is too broad and applies to situations outside of nursing home beds. Rejected in part as taken out of context and with insufficient predicate and in part as subordinate and unnecessary. What is accepted is covered in Finding of Fact 11. 60. Covered in Findings of Fact 10-11, particularly 10. 64. Covered in Findings of Fact 10-11, particularly 10. 66. Covered in Findings of Fact 9-12, particularly lOd. 67-69. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinate and/or cumulative. 70. Covered in Finding of Fact 11. 71-73. Covered in Findings of Fact 10-11, what is rejected is rejected as unnecessary, subordinates and/or cumulative. Covered in Findings of Fact 10-11. Covered in Findings of Fact 9-12. Covered in Findings of Fact 6 and 11-12. 77-90. Covered in Finding of Fact 6. Matters rejected are rejected as not supported by the record or as contrary to the appropriate application of law and incipient policy. See Conclusions of Law. Represents the sum total of all the Findings of Fact made and is more in the nature of a conclusion of law. See Conclusions of Law. Rejected as covered in Finding of Fact 6, and the Conclusions of Law. 93-95. Accepted and incorporated in Finding of Fact 12. 96. Covered in Findings of Fact 6, 11, and 12. Proposals 3, 15, 17, 18, 35, 36, 37, 55, 56, 57, 58, 59, 61, 62, 63, 65, are accepted but not adopted because subordinate and unnecessary. Respondent Department of Health and Rehabilitative Services' Proposals: 1-2. Covered in Finding of Fact 1. 3. Covered in Finding of Fact 2. 4. Covered in Finding of Fact 4. 5. Covered in Findings of Fact 3 and 12. 6. Covered in Finding of Fact 3. 7-9. Covered in Findings of Fact 3, 5, and 6._ 10. Covered in Finding of Fact 6. 11. Accepted but not specifically set out in Findings of Fact. Sentences 1-2 are accepted and sentence 3 is rejected in Finding of Fact 6 and in the Conclusions of Law. Rejected for the reasons set out in Finding of Fact 6 and Conclusions of Law. Covered in Findings of Fact 5 and 6 and Conclusions of Law. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. Rejected as out of context and immaterial to the facts as found. Similar material is covered in Findings of Fact 6 and 9-12. Rejected as set out in Findings of Fact 6, and 9-12 and as a conclusion of law. ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES MANOR CARE, INC., Petitioner, CASE NO. 85-2937 vs. CON NO. 3850 DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, d/b/a HEARTLAND OF LEE, Petitioner, vs. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Respondent. / CASE NO. 85-3240 CON NO. 3854
The Issue The issue presented for determination herein is whether or not F.A.C. Health Care, Inc., d/b/a Spring Hill Health Facility (Petitioner) is entitled to a Certificate of Need to establish a 60-bed nursing home to serve Hernando County.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at hearing, including the pre-hearing stipulation, the following relevant facts are found. F.A.C. Health Care, Inc. is a wholly-owned subsidiary of First American Corporation. First American Corporation has owned, operated and developed approximately 75 long-term care and retirement facilities over the past 15 years. These operations are primarily located in the southeastern United States. At present, First American Corporation operates 20 facilities and has seven Certificates of Need in the developmental stages. (TR. 35, Fulmer) On January 14, 1984, Petitioner filed an application with the Respondent for a Certificate of Need to construct and operate a community nursing home in the City of Spring Hill in Hernando County, at a total cost of $3,180,000. (Petitioner's Exhibit 1) The letter of denial accompanying the state agency action report dated April 30, 1984, noted the basis for denial as follows: Existing and approved bed capacity in Citrus/Hernando Counties is sufficient to satisfy projected need for 1986. There are 60 nursing home beds that have been approved but have not been constructed at the present time, which, when added to the existing nursing home bed supply in Citrus/Hernando Counties, will serve to satisfy a portion of the projected need for skilled nursing home beds in the sub-district through 1986. The proposed 120 beds are in excess of the 37 beds needed to reduce the prospective base utilization rate to a reasonable level by 1986. (TR. 36, Fulmer; Petitioner's Exhibit 2) On September 26, 1984, Petitioner amended its original application to reflect a reduction from 120 to 60 nursing home beds. Documents reflecting the corresponding reduction in project costs from 53,180,000 to 51,780,000 were submitted with the amended proposal. (Petitioner's Exhibit 3) FINANCIAL FEASIBILITY OF THE PROPOSED SPRING HILL FACILITY The immediate and long-term financial feasibility of a project is one criteria considered during the Certificate of Need review process. Section 381.494(6)(c)9., Florida Statutes. The total cost of the project of 51,780,000 appears reasonable and in line with similar projects. Funds for full 100 per cent financing of the project are available through industrial revenue bonds at 14 per cent interest over 30 years. In order to acquire an industrial revenue bond application, Petitioner would maintain a $150.000 debt service reserve fund. (Petitioner's Exhibit 3) Other methods of financing available to finance the subject project include conventional financing, syndicated equity programs and insurance investment programs. (Testimony of Fulmer at TR. 39-40) Due to the largely rural setting, projected utilization for the first year would be 81 per cent Medicaid, 5 per cent Medicare and 14 per cent private pay. Occupancy is projected to reach 97 per cent by the fifth full month of operation and would be supported in part by the increased utilization of nursing home beds as a direct result of the implementation of diagnostic related groupings. Pro forma statements for the first and second years of operation show a net operating profit beginning in the ninth month and continuing through the second year. The equipment costs, staffing patterns and personnel budget also appear reasonable for this type of project. METHODS AND CONSTRUCTION COSTS Another issue in this proceeding was whether Spring Hill satisfied the criteria in Section 381.494(6)(c)13., Florida Statutes, regarding the cost and methods of construction. Spring Hill's proposed facility will provide 11,981 square feet devoted to patient care and 9,710 square feet for administrative and common service areas at a construction cost of $41.50 per square foot. (Petitioner's Exhibit 3) Proposed construction costs and methods of construction efficiently minimize square footage space requirements and related construction costs and will permit the most efficient operation of the facility at a low per diem cost. The construction cost appears reasonable and is also supportive of a primarily Medicaid based facility. Finally, Respondent offered no evidence to controvert the reasonableness of construction costs and methods proposed by Petitioner. IMPACT ON HEALTH CARE COSTS Section 381.494(6)(c)12., Florida Statutes provides that as part of the Certificate of Need review, probable impact of the proposed project on the cost of providing health care services be considered. Petitioner's expert, Fulmer, urges that there would either be no impact on the cost of care or due to the availability of additional Medicaid beds, costs would be reduced since the private pay demands of family and relatives having to pay for the care of an individual rather than participating in the Medicaid program would reduce the costs of health care to the community rather than increase the financial burden. In this regard, Petitioner offered no evidence to substantiate the claim that the demand for Medicaid beds exceeded the supply, or that Medicaid patients had been refused health services by the available Medicaid health care providers. AVAILABILITY AND ACCESSIBILITY OF EXISTING SERVICES Hernando County lies within HRS District III which is composed of 16 counties in north-central Florida, stretching from the Gulf of Mexico north of Tampa to the Georgia border. (Petitioner's Exhibit 6) The District is further divided into sub-districts. Hernando County represents a separate sub-district. Petitioner's facility is proposed to be located in the City of Spring Hill, located in the fastest growing area of Hernando County. (Petitioner's Exhibits 1 and 2) The latest bulletin (No. 69) from the University of Florida, Bureau of Economic and Business Research, shows a 90 per cent projected growth between 1980 and 1990. Much of the population in the Spring Hill area falls in the 65 and older age bracket. County age group projections released by HRS on September 24, 1984, reveal that the elderly population of 65 and over in Hernando County in 1985 is projected as 17,616, or approximately 27 per cent of total population. By 1990, those projections will grow to 24,887 or approximately 29 per cent of total population. (Respondent's Exhibit 2) The growth trend in Hernando County is an extension of the rapid coastline development occurring in the New Port Richey- Clearwater areas and the counties to the south of Hernando. Previously, the only major development in Hernando County was centered in Brooksville, the middle of the county. Consequently, the existing community nursing home services in Hernando County are concentrated in the Brooksville area. Although Petitioner, through its expert (Konrad) testified that there is a mal-distribution of existing beds and community nursing home services which renders them neither available nor accessible to the rapidly growing elderly population in the southwestern Hernando County corridor and that high occupancy rates in existing community nursing homes in the area and the existence of waiting lists corroborates the lack of availability and accessibility of community nursing home services in the area, the evidence introduced herein failed to establish either the existence of waiting lists or that the existing community nursing homes in the area were overcrowded. SHELTERED VERSUS COMMUNITY NURSING HOME BEDS Petitioner contends that certain nursing home beds associated with the adult congregate living facility at Evergreen Woods in the Spring Hill area are not actually available and accessible to the general public but instead are functioning as sheltered nursing home beds. Respondent, on the other hand, considers the 60 nursing home beds associated with Evergreen Woods to be available and accessible to the general public. A review of the entire record compiled herein failed to substantiate Petitioner's claim that those beds at Evergreen Woods are unavailable and/or inaccessible to the general public. DETERMINATION OF NEED, SECTION 381.494(6)(c)1., FLORIDA STATUTES. In determining need for nursing home beds, a Certificate of Need project is reviewed on a 3-year planning horizon. In this case, predicted need for nursing home beds in District III and the sub-district of Hernando County is calculated through 1987. Hernando County is a single county sub-district located within in HRS planning District III in north central Florida. HRS has determined the overall nursing home bed need for District III as well as sub-district allocations by applying the uniform nursing home bed need methodology for community nursing home services contained in Florida Administrative Code Rule 10- 5.11(21). (Petitioner's Exhibit 5) Respondent provided a step-by-step application of the community nursing home bed need rule and introduced their exhibits supporting the calculation period (Testimony of expert medical facilities consultant, R. Jaffe and Respondent's Exhibits 1 and 2). Briefly stated, application of the pertinent rules reveals an extrapolated need for 31 beds which are available for CON approval based on data available to Respondent on June 29, 1984 and that 36 beds are available based on later data released on September 24, 1984. (TR. 91, Conrad; TR. 130, Jaffe and Petitioner's Exhibit 6) The census report applicable herein reflects that there were 360 licensed beds in the Hernando sub-districts and no approved beds for a total of 360 beds. 2/ Application of the nursing home bed need methodology is not the sole factor used in determining whether a CON application should be granted. Other factors, such as access, high occupancy rates, chronically underserved population and high Medicaid utilization are definite factors in approval of additional beds in cases where the rule shows either no need or only slight need. Respondent has, on several occasions, granted 60-bed applications where accessibility issues justified the grant of a minimum-sized facility in spite of the lesser numerical need indicated under the rules. 3/ Petitioner referred to instances wherein Respondent had granted approval for CON's in other districts where there were unusual circumstances such as accessibility issues as referred to herein above. A review of those cases reveals that a departure from the usual bed-need methodology is warranted in cases of extremely high occupancy rates (95 per cent or higher) or the facilities with lower occupancy rates, e.g. 85.7 per cent for homes in Sarasota County, which were located in inaccessible distances away from the population concentration. Petitioner has not demonstrated sufficient basis herein to warrant a departure from the usual bed need rule methodology. The instances wherein a departure from the usual bed need rule methodology has occurred are distinguishable, inasmuch as in the instant case, there are three existing facilities presently in Hernando County offering 360 nursing home beds. Current occupancy rate has been shown to be reasonable and is standing at or below average for District III. Additionally, Respondent introduced a "Stipulation of Settlement" dated September 28, 1984 which was entered into by and between Evergreen Woods Health Care Center and Respondent. The substance of that stipulation reveals that during October of 1983, Evergreen Woods Health Care Center (EWHCC) as Petitioner, filed an application with Respondent for a Certificate of Need to add 60 beds to its existing 60-bed nursing home located in Spring Hill, Hernando County, Florida. The application sought 45 community beds and 15 sheltered beds. As a means of amicably resolving that proceeding and based on available need data based on applicable quarterly census reports and application of the need criteria, EWHCC, as Petitioner in that proceeding, amended its Certificate of Need application filed October, 1983, to add a total of 60 beds to its existing facility; 31 beds to be designated as community beds and 29 to be designated as sheltered beds. A review of the public records reveal that the Certificate of Need has been issued (amended CON No. 2959 issued early October, 1984) pursuant to that stipulation of settlement. 4/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: The application of First American Corporation d/b/a Spring Hill Health Facility for establishment of a 60-bed nursing home facility in Hernando County, Florida, be DENIED. RECOMMENDED this 14th day of February, 1985, in Tallahassee, Florida. JAMES E. BRADWELL 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 14th day of February, 1985.
The Issue Whether Petitioners' applications for Certificates of Need should be approved?
Findings Of Fact Ocala Ocala is a general partnership composed of three partners: Ocala Health Care Associates, Inc., Casterfield, Ltd., and Big Sun Healthcare Systems, the lessee and operator of Munroe Regional Medical Center. Ocala is the current holder of an approved CON for 35 community beds in Marion County. If the 21-bed transfer of sheltered beds to community beds is approved, Ocala intends to operate a 56-bed facility. A 56-bed facility is more viable than a 35-bed facility. At the time of the hearing, there were 642 approved and licensed beds and 215 approved not yet licensed beds in Marion County. The 215 beds include Ocala's 35-bed CON. A patient needing subacute care is one who has been released from acute care status by a physician and is ready to be released from a hospital (acute care) to a less costly facility, e.g. a skilled nursing home. Subacute care patients are those needing, e.g., intravenous tubes, respirators, IV medication, decubitus ulcer care, tracheotomy tubes, or antibiotic therapy. Patients needing subacute care should be placed in a nursing home, since this is less costly than hospital care and it allows for acute care beds in a hospital to be used for patients needing acute care. Skilled nursing homes are authorized to provide subacute care, but are not required to do so. In order to provide subacute care, a nursing home may need additional staff and equipment. There is a problem in Marion County with the placement of subacute care patients in nursing homes. This problem is caused by a variety of factors and usually results in a patient remaining in a hospital longer than is necessary. One factor is that some of the existing nursing homes will not accept patients needing certain types of subacute care, e.g., patients needing ventilators or feeding tubes. Another equally important factor is that the nursing homes want to make sure they will get paid and there is usually some delay in determining how the nursing home will be compensated. Other factors include the patients inability to pay and, on occasion, the unavailability of beds. Ocala intends to use its 35-bed approved CON to provide subacute care. Country Club While the application shows the applicant's name as "Country Club Retirement Center," that is the name of the project. The applicant is Mr. J. E. Holland. Mr. Holland's application is for a 60-bed nursing home which will be part of a 250-apartment continuing care community. The facility is to be located in Clermont, in Lake County. Lake County is in Planning Area VII of HRS District III. Planning Area VII also includes Sumter County. Mr. Keach, the only witness presented by Country Club, is Vice President of National Health Care. National Health Care operates a nursing home in Gainesville, Florida. In addition to operating the nursing home, National Health Care assists persons seeking a CON with preparation of the CON application. Mr. Keach and other National Health Care employees assisted Mr. Holland with the preparation of the CON application submitted in this case. National Health Care will not own or operate Mr. Holland's facility. Mr. Keach is of the opinion that there is need in Clermont for a 60- bed nursing home. He bases his opinion on letters of support for the construction of the facility, on petitions signed by persons attending a public hearing, and on four or five visits to the area. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home. At the time HRS issued its State Agency Action Report there were 958 beds approved and licensed in Planning Area VII. Of these, 838 are located in Lake County, with 142 located in a nursing home in Clermont. Also these are swing-beds providing long-term care at a hospital in Clermont. Finally, there were 236 beds approved not yet licensed in Planning Area VII, with 176 to be located in Lake County. The occupancy rate for the nursing home facility located in Clermont is approximately 89 percent. For the six months ending March, 1988, the occupancy rate for Planning Area VII was below 80 percent. There are at least two nursing homes in operation within a 20-mile radius of Clermont. These two nursing homes are located in Winter Garden and one of them has received a CON to add 89 beds. Twenty-Eight Corporation The applicant in this case is Twenty-Eight Corporation. "The owner of the nursing home will be the Levy Nursing Care Center, a limited partnership, which will be owned and secured by Twenty-Eight Corporation." (28 Corporation, Composite Exhibit 1.) Twenty-Eight corporation seeks approval of a CON for 60 nursing home beds to be operated as part of a continuing care project which will include a 50-unit apartment complex. The facility is to be located in Chiefland, Florida, in Levy County. Levy County is in Planning Area II of HRS District III. Planning Area II also includes Alachua, Gilchrist and Dixie counties. At the time HRS issued its State Agency Action Report, there were 1112 licensed nursing home beds in Planning Area II. Of these, 120 are located in Trenton, in Gilchrist County, 180 are located in Williston, in Levy County, and the rest are located in Alachua County. Also, there are 147 beds approved not yet licensed to be located in Alachua County. Chiefland is approximately 12 miles from Trenton. Williston is approximately 27 miles from Trenton. Mr. Keach was the only witness who testified on behalf of Twenty-Eight Corporation. Mr. Keach is vice-president of National Health Care. (See Finding of Fact 17, supra.) Mr. Keach is of the opinion that there is need in the Chiefland area for a 60-bed nursing home. His opinion is based on letters of support and petitions of support he received for the project. Also, his opinion is based on the fact that there is no nursing home located in Chiefland and the nearest nursing home is located in Trenton, 12 miles away. The 1986 District III Health Plan shows the Trenton facility having an occupancy rate of 99.93 percent. Mr. Keach never performed a study which would indicate the number of persons with a "documented need" for nursing home services who have been denied access to a nursing home.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order denying Petitioners' applications in these three cases. DONE and ENTERED this 3rd day of March, 1989, in Tallahassee, Leon County, Florida. JOSE A. DIEZ-ARGUELLES 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 3rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1862, 88-1863, 88-1864 Rulings on Proposed Findings of Fact Ocala's Proposed Findings of Fact: 1. Accepted. 2-4. Supported by competent, substantial evidence but unnecessary to the decision reached. 5-7. Accepted. Irrelevant. Accepted. Rejected as not supported by the weight of the evidence. There is not an absolute absence of facilities willing to accept all patients needing subacute care. Irrelevant. "Serious concerns" are not what is needed under the Rule. First sentence rejected as recitation of testimony. Second sentence irrelevant; issue is whether nursing homes will accept patients, not whether nursing homes will enter into agreement with MRMC. 13-16. True, but irrelevant. Accepted. (a) Rejected to the extent it implies that the approved facilities would not provide subacute care. Mr. Bailey's testimony is that the facilities refused to enter into a relationship with MRMC; this does not establish that the facilities would not provide subacute care. Rejected as a recitation of testimony. The weight of the evidence shows that some facilities would accept same subacute patients. True, but it is unclear if these are the physician's notations the HRS witness referred to. True that charts and logs were provided, but they did not establish the number of patients in need of subacute care in excess of licensed or approved beds. 19-26. Irrelevant. 27-29. Accepted-for what they are, but insufficient to establish need. Twenty-Eight Corporation's Proposed Findings of Fact: 1-4 Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Accepted. Rejected as hearsay. But see Finding of Fact 31. Mr. Keach testified that Chiefland is 40 miles from Williston. The road map published by the Department of Transportation shows the distance between the two cities at 27 miles. True, but irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. Rejected as hearsay. True, but irrelevant. Rejected as hearsay. Also, a determination by a family member does not establish medical "need". True that this is Mr. Keach's opinion. However, Mr. Keach's opinion is rejected. His opinion of need is not based on what the Rule requires or on what health planners rely on to establish need. Mr. Keach is not able to testify as to the financial feasibility of the facility because he has no first- hand knowledge of the finances. 21-22. Irrelevant. 23. Rejected. See ruling on 10., supra. 24-26. Irrelevant. Rejected as contrary to the weight of the evidence. Irrelevant. Irrelevant; this is not a rule challenge. Irrelevant. True, but irrelevant. Irrelevant. Accepted. Rejected as hearsay. Rejected as not supported by the weight of the evidence. Rejected as argument. Also, unable to determine what the "second portion" is. 37-38. Irrelevant. First phrase accepted. Second phrase rejected to extent implies that only need to show that no other facility exists within 20 miles. Irrelevant. Country Club's Proposed Findings of Fact: 1-4. Accepted. Irrelevant. This is a de novo proceeding. True, but irrelevant. Accepted. Irrelevant. True, but irrelevant. Accepted. Accepted. However, this special consideration should be given only where numeric need has been established in the District. True, but irrelevant. True, but irrelevant. 14-17. Irrelevant. Rejected as contrary to the weight of the evidence. Accepted. Rejected as not supported by competent evidence; hearsay. Accepted. Rejected as not supported by competent evidence; hearsay. Irrelevant. Rejected as not supported by competent evidence; hearsay. True, but irrelevant. See ruling on 11, supra. Irrelevant. Rejected as not supported by competent evidence; hearsay. Irrelevant. The Rule also recognizes this. Irrelevant. Rejected as not supported by the weight of the evidence and irrelevant. True, but irrelevant. True, but irrelevant. 33-34. True, but irrelevant. This is a de novo proceeding. 35-39. Irrelevant. 40. Rejected as argument. Also, unable to determine what the "second portion" is. 41-42. Accepted 43. Rejected as contrary to the weight of the evidence. 44. True, but irrelevant. Also, there are approved beds within 20 miles, but located in a different HRS District. Leesburg's Proposed Findings of Fact 1-7. Accepted. Rejected as not a finding of fact. Accepted. 10-15. See Conclusions of Law section of RO. Accepted. Rejected as argument. Accepted. Rejected. Fact that need does not exist under HRS rule doesn't necessarily mean that that facility will not be financially feasible. In any event, Country Club was not able to establish financial feasibility. 20-21. See Conclusions of Law. 22. Rejected as argument. 23-28. Supported by competent substantial evidence but unnecessary to the decision reached. Accepted. Rejected as a recitation of testimony. Accepted.- HRS's Proposed Findings of Fact 1-19. Accepted. Rejected. The HRS witness did not specifically state that HRS needs to see the actual physician referral. Accepted. See Conclusions of Law. 22-28. Accepted. See Conclusions of Law. 29. Not a finding of fact. 30-37. Accepted. 38. Irrelevant. 39-42. Unnecessary to the decision reached. Irrelevant. Accepted. 45-46. See Conclusions of Law. Accepted. Accepted. Not a finding of fact. 50-65. Accepted. See Conclusions of Law. 66. Not a finding of fact. 67-71. Accepted, but Ocala's Exhibits 6 & 7 are not amendments to the application but simply more of the same information that was provided with the application. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 First Florida Bank Building Suite 600 215 South Monroe Street Tallahassee, Florida 32301 Theodore Mack, Esquire Assistant General Counsel 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 R. Bruce McKibben, Jr., Esquire 307 West Park Avenue Post Office Box 10651 Tallahassee, Florida 32302 Grafton Wilson, II, Esquire 711 NW 23rd Avenue, Suite #4 Gainesville, Florida 32609 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Which, if any, of the proposals of the co-batched applicants meet the criteria for the issuance of certificate(s) of need in response to the projected need for 168 additional community nursing home beds in Palm Beach County, for the year 2000 planning horizon.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the state agency which administers the certificate of need (CON) program for health care services and facilities in Florida. In April 1997, AHCA published a need for an additional 168 nursing home beds in District 9, Subdistrict 4, for Palm Beach County, by the January 2000 planning horizon. AHCA reviewed the applications and preliminarily approved the issuance of two CONs: CON 8853 to Whitehall Boca, an Illinois Limited Partnership, d/b/a Whitehall Boca Raton (Whitehall Boca), to convert 48 assisted living beds to 48 skilled nursing beds; and CON 8862 to Regents Park, Inc. (Regents Park), to construct a new 120-bed community nursing home. Regents Park's Letter of Intent In advance of filing for CONs, applicants give notice of impending applications by filing letters of intent (LOI). The information required in the LOI is specified in the CON statute and rules. Failure to meet mandatory LOI requirements has resulted in the rejection of CON applications. See e.g., Humhosco, Inc. v. DHRS, 561 So. 2d 388 (Fla. 1st DCA 1990); and Vantage Healthcare Corporation v. AHCA, 687 So. 2d 306 (Fla. 1st DCA 1997). At the time these applications were filed, the statutory requirement was as follows: Letters of intent shall describe the proposal with specificity, including proposed capital expenditures, number of beds sought, if any, services, specific subdistrict location, identification of the applicant, including the names of those with controlling interest in the applicant, and such other information as the department may by rule prescribe . . . . (Emphasis added.) Subsection 408.039(2)(c), Florida Statutes (1995). In a Motion for Summary Recommended Order, filed on May 1, 1998, Life Care Health Resources, Inc. (Life Care), maintained that Regents Park's petition should be dismissed because its LOI failed to include the information required to identify the applicant. Life Care cites the omission of the names of those with controlling interest in the applicant, not only as required by the statute, but as further described by rule: For an applicant which is a corporation not publicly held, a listing of each person with 10% or more ownership interest will satisfy this requirement provided the applicant identifies itself as a non-publicly held corporation. A list of the person or persons will not be construed by the agency to be an identification of the controlling interest of the applicant unless so described. (Emphasis added.) Rule 59C-1.008(1)(f)2., Florida Administrative Code (1/95). The rule also included a more general statement that the agency will not assume facts not clearly stated in the LOI. The parties agree that Regents Park is and identified itself as a non-public for-profit corporation. Regents Park attached to its LOI a list naming as its directors: Bernard B. Hollander and Jack L. Rajchenbach, and a list of officers: President Bernard B. Hollander, Secretary Jack L. Rajchenbach, and Treasurer Aaron Hollander. At the hearing, Aaron Hollander testified that Bernard B. Hollander and Jack L. Rajchenbach each own 26 percent of the stock in the Regents Park corporation, and that three other persons own 16 percent interest each. The names of the other three people, each of whom has an ownership interest in Regents Park in excess of 10 percent were not provided with the LOI. The LOI included statements that "Regents Park, Inc., is a Florida for-profit corporation which is governed and controlled by its Board of Directors. . . A current listing of the applicant's board members and officers is also attached. " Beverly Enterprises - Florida, Inc., d/b/a Beverly Gulf Coast - Florida, Inc. (Beverly), supports Life Care's position that Regents Park's LOI is fatally flawed. In its August 7, 1998 Motion for Summary Recommended Order Dismissing Regents Park, Inc., Beverly noted that the rule distinguished between the requirements for public and non-public corporations. A listing of directors, which was provided by Regents Park, satisfied the requirements for public, but not for non-public corporations. Beverly also asserted that Regents Park failed to specify that the names it listed were those of persons with controlling interest and that AHCA cannot construe or assume facts not clearly stated. Regents Park, supported by AHCA, argued that the rule never mandated disclosure of persons with 10 percent or greater interest. Although such disclosure "will satisfy" the requirement, Regents Park claims to have satisfied the statutory requirement in a different permissible manner. In addition, the statutory reference to "controlling interest" was repealed effective July 1, 1997. Subsequently, the reference in the rule to the 10 percent or more controlling interest disclosure requirement was repealed in November 1997, prior to the time of the final hearing. Vol. 23, No. 43, Florida Administrative Weekly (October 24, 1997). Regents Park acknowledged its continuing need to comply with the statute which was in effect when the LOI was filed, but not the rule which was no longer in effect at the time of the hearing. The 1997 statute included a provision that the LOI amendment would not apply to applications filed prior to July 1, 1997, but it also provided that AHCA's CON rules would remain in effect until repealed or amended. See Section 14, Ch. 97-270, Laws of Florida, and Section 408.0455, Florida Statutes (1997). At the time of the final hearing, only the general rule that the agency shall not assume facts not clearly stated was the same as it was at the time the LOI was filed. At the hearing, Aaron Hollander identified the two members of the Board who were listed in the LOI as having the controlling interest in Regents Park. For the reasons given in the Conclusions of Law, the Regents Park application is not dismissed and is considered on its merits. Applicants For Fewer Than 90 Beds Marriott Senior Living Services, Inc. (Marriott), is a wholly-owned subsidiary of Marriott International, Inc. Marriott owns and operates 94 senior living communities throughout the United States, 32 of those are multi-level care facilities, known as Brighton Gardens. In Palm Beach County, Marriott owns Brighton Gardens of West Palm Beach and Brighton Gardens of Boynton Beach which are 2 of 7 Florida Brighton Gardens. Marriott operates a total of 10 senior living communities in Florida. Marriott proposes to develop another multi-level senior living community, Brighton Gardens of North Palm Beach (Brighton Gardens) on a 6-acre site in the area of the City of Jupiter. In addition to 45 CON-approved nursing home beds, it will include 119 assisted living beds, 25 of those divided into two separate sections within a special care center for residents with Alzheimer's disease and other related dementia (ARD). If issued CON 8861, Marriott will commit to providing 30 percent of total patient days in the nursing beds to Medicaid-reimbursed residents, and will offer respite and hospice care. The capital cost for the nursing home component is approximately $3.4 million of the total $14.7 million cost for the development of the entire Brighton Gardens community. Heritage Park of West Delray, Ltd. (Heritage Park), is the applicant for CON 8850P to convert 20 assisted living beds to 17 nursing home beds in an existing facility, Liberty Inn. Liberty Inn has a total of 63 beds, 34 assisted living beds and 29 recently licensed nursing beds, all for ARD residents. In addition to Liberty Inn, the Heritage Park West retirement community campus includes a 196-apartment building. A related company also owns and operates Heritage Park East, which has 145 assisted-living apartments, and Colonial Inn, a 60-bed licensed extended congregate care facility. Another Heritage Park company operates a home health agency, established to serve only its 500 residents. Heritage Park proposes to condition its CON on maintaining a minimum Medicaid occupancy of 54.8 percent in the 17 new beds, and a minimum ARD occupancy of 67.7 percent. If CON 8850P is approved, Heritage Park's construction cost will be approximately $150,000 of the $576,394 in total project cost. Whitehall Boca, an Illinois Limited Partnership, d/b/a Whitehall Boca Raton (Whitehall Boca) is an existing 155-bed superior licensed facility with 99 operational and 7 approved nursing beds, providing subacute and assisted living care in Boca Raton, in southern Palm Beach County. Whitehall Boca is seeking CON 8853 to convert existing private rooms and assisted living space into 48 additional skilled nursing beds, including a 27-bed subacute unit. Although Whitehall Boca estimated a total of $1.6 million in project costs, approximately $1.3 million is attributable to prior expenditures, including the original land purchase and the construction costs for the 82,000 square foot building proportionately allocated to this project. Having originally been built to skilled nursing standards, the proposed conversion of beds at Whitehall Boca will, in fact, require approximately $350,000. Beverly Enterprises Florida, Inc., d/b/a Beverly Gulf Coast-Florida, Inc. (Beverly) which owns and operates approximately 45 facilities in Florida, is a wholly-owned subsidiary of Beverly Health and Rehabilitation Services, Inc., a wholly-owned subsidiary of Beverly Enterprises, Inc. The Beverly companies operate 61 facilities in Florida and in excess of 600 nursing homes and related businesses in the United States. Beverly Health and Rehabilitation Center - Royal Palm (Royal Palm) is an existing 120-bed nursing home, with 31 short-term, Medicare-certified rehabilitation beds. As the applicant for CON 8851, Beverly proposed to add approximately 18,500 gross square feet to Royal Palm for 48 additional beds, 28 of those for long- term care and 20 for a secure ARD unit. Located in western Palm Beach County, the City of Royal Palm is a developing community, which is 12 to 13 miles west of the City of West Palm Beach. If CON 8851 is approved, Beverly will commit to provide 53.8 percent of total patient days in the 48 new beds to Medicaid and .2 percent of annual gross revenues to indigent resident care, to provide respite care, and to award a $10,000 grant to a state university genotological research/scholarship fund. Beverly also agreed to accept residents who have mental health disorders, and those with AIDS. The total project cost is approximately $2.7 million. Health Care and Retirement Corporation of America, d/b/a Heartland Health Care and Rehabilitation Center - Boca Raton (HCR) is an existing 110-bed facility in Boca Raton in southern Palm Beach County. If issued CON 8860, HCR proposes to increase its capacity by 10 beds by converting 10 private rooms to semi-private rooms. Currently, 31 of the 110 beds are used for long-term care, with the remainder divided into the following services: 20 beds for an ARD unit, 40 beds for subacute care and 19 beds for progressive or step-down care. An additional 10 beds will increase the capacity for short stay, specialty rehabilitation, which is a proposed condition for the issuance of the CON. HCR will also commit to providing 5 percent of total patient days to post-acute care for persons recovering for coronary artery bypasses grafts (CABG), chronic obstructive pulmonary disease (COPD), total joint replacements, and other orthopedic conditions. HCR will commit to providing blood transfusions at the nursing home. The total project cost for HCR's proposal is $279,050. The 90- or 120-Bed Applicants Regents Park, which currently operates Regents Park of Boca Raton, is the applicant for CON 8862 to construct a new 120-bed nursing home for geriatric psychiatric residents, those who physically need nursing home care, but who also have secondary psychiatric diagnoses. Regents Park intends to have its staff trained in geriatric psychiatry and proposed, as other conditions for CON 8862, to accept transfers of geriatric psychiatric residents from other nursing homes, to provide at least 30 percent of its resident days to Medicaid residents, and to locate in southern Palm Beach County. In addition, Regents Park will commit to providing specialized diets, such as Kosher food. One-half of the beds, intended for short rehabilitative stays of approximately 60 days or less, will be built in an Extended Care Unit (ECU). Residents with longer expected lengths of stays, from 90 days to one year, will be housed in the half of the facility designated as an Aging Adult Services Unit (AASU). Regents Park proposes to construct the 64,000 gross square foot, 120-bed nursing home for the total projected cost of $8.5 million. Manor Care of Boynton Beach, Inc. (Manor Care), is the applicant for CON 8856 to construct a 120-bed nursing home or, alternatively, for CON 8856P to construct a 90-bed nursing home. Manor Care is a wholly-owned subsidiary of a subsidiary of a public corporation traded on the New York Stock Exchange. The Manor Care companies own and operate over 200 nursing homes in 29 states, including 13 nursing homes in Florida. In Palm Beach County, Manor Care owns and operates 180-bed facilities in Boca Raton and Boynton Beach, a new 120-bed facility in West Palm Beach, and a 120-bed facility which is under construction in West Delray. Manor Care proposes to condition its CON on locating the facility in the Jupiter area of northern Palm Beach County, and on providing 40 percent of total resident days to Medicaid, 5 percent of total resident days to hospice patients, 1,100 annual resident days for respite care and adult day care for 2 participants a day. Manor Care will also commit to establish a 20-bed Medicare unit and a 30-bed ARD unit in a 120-bed facility or a 34-bed ARD unit in a 90-bed facility. Manor Care will donate $15,000 to a Palm Beach County ARD association. The total project cost is approximately $8.5 million for the 120-bed 52,328 gross square foot facility, or $7.3 million for the 90-bed project of 41,452 gross square feet. Life Care Centers of America, Inc., a Tennessee Subchapter S corporation operates approximately 220 nursing facilities and other retirement centers in 28 states. In this case, the CON applicant is Life Care Health Resources, Inc. (Life Care), which is owned by the same sole shareholder as the other related Life Care entities. In Florida, Life Care affiliates have nine existing and one approved nursing home. Two of the Florida facilities, Darcy Hall Nursing Center and Lakeside Health Center, are located in West Palm Beach. As the applicant for CON No. 8859, Life Care proposes to construct a 120-bed nursing home of 57,500 gross square feet on approximately 6 acres in north central Palm Beach County. Life Care will condition the CON on the provision of 54 percent of total patient days to Medicaid residents, and the establishment of a 20-bed secure ARD unit and an adult day care center for 10 clients. Life Care will also provide respite and hospice care. The plans also include a 20-bed subacute unit with an adjacent therapy wing and an interior physical therapy courtyard. The projected total cost is $8.9 million. 408.035(1)(a) - need in relation to district and state health plans The state health plan directs AHCA to give preferences for applicants proposing the following: to locate in areas with nursing home occupancy rates exceeding 90 percent; to serve Medicaid residents in proportion to the subdistrict average with exceptions for special cultural, ethnic or multi-level care systems; to offer specialized care, as for residents with AIDS, ARD or mental illnesses; to provide a continuum of services, such as respite or adult day care; to maximize residential features within long-term care facilities; to provide innovative therapeutic and restorative care; to propose charges not exceeding the highest subdistrict Medicaid per diem rate except to serve an upper income population; to offer historically superior resident care; to staff, particularly nurses, at levels above minimum requirements; to use multi-disciplinary professional staff; to document protections for residents rights and privacy, and established protocols for quality assurance and discharge planning; and to implement lower administrative, but higher residential care costs than the district average. The district health plan is the 1996 Certificate of Need Allocation Factors Report of the Treasure Coast Health Council. It includes recommendations for approval of applicants who: agree to serve a minimum of 30 percent of total patient days for Medicaid; have a history of good care, higher staffing ratios, mental health and subacute rehabilitative care; and propose to serve a distinct, needy population in the subdistrict, such a those requiring special diets or bilingual staff. The state (SHP) and district (DHP) health plans are discussed in detail, as indicated below, with related statutory criteria. In general, Marriott qualifies for the district health plan allocation factors, with emphasis on the continuum of multi- level care to allow residents to "age in place." Marriott has also demonstrated compliance with the state health plan, except that Marriott's per diem charges exceed the highest Medicaid per diem, and it has lower than average resident care costs. Based on the geographical description in its CON, Marriott could locate in areas in which nursing homes do not meet the 90 percent occupancy level set in state health plan preference one, but its expressed intention to locate in the Jupiter area complies with the preference. Heritage Park complies with the factors and preferences in both the state and district health plans, except it has no history of operating nursing beds. Heritage Park emphasizes the needs of Medicaid residents who require a Kosher diet as a distinct population group. Whitehall Boca meets all of the local health allocation factors except the Medicaid minimum of 30 percent. Whitehall Boca also meets all of the state health plan preferences except that it does not propose to provide Medicaid in proportion to the subdistrict average and will exceed certain Medicaid charges. Whitehall Boca, however, qualifies for the exceptions for offering multi-level care to upper income residents. Whitehall Boca also partially meets the preference for higher residential care costs, but not for lower administrative costs. Beverly meets the local allocation factors, with emphasis on a broad range of services needed in its area of the County. Approximately half of its Florida facilities were rated superior at the time of hearing and Beverly's resident care costs are lower than the district average. In general, HCR meets the preferences of the state health plan, including the Medicaid exceptions for multi-level providers to upper income residents. With the exception of the priority for applicants providing a minimum of 30 percent Medicaid, HCR also meets the allocation factors in the local health plan, particularly to serve residents needing high technology post-acute skilled nursing care. Regents Park meets all of the local health plan factors, with emphasis on the needs of geriatric psychiatric residents. It also meets all of the state health plan preferences, except for the provision of Medicaid in proportion to the subdistrict average (proposing 30 percent as compared to 53.7 percent). Life Care qualifies for all of the local health plan factors, having identified Medicaid residents as a distinctly needy population group. Of the 120-bed applicants, only Life Care will equal the existing subdistrict Medicaid utilization. Life Care meets the state health plan preferences, except for its lack of specificity needed to determine that its location will be one in which nursing homes exceed 90 percent occupancy, its unimpressive history of care with only one of four clearly eligible Florida nursing homes licensed superior, and its lower resident care costs than the district average ($70.87 as compared to $77.40 to $88.33). Manor Care meets the local and state health plan preferences, except the Medicaid subdistrict average (proposing 40 percent as compared to 53.7 percent). Manor Care proposed to offer a full range of services with an ARD unit, and AIDS, Medicare, respite, hospice and adult day care in the Jupiter area. 408.035(1)(b) - availability, quality of care, efficiency appropriateness, accessibility, extent of utilization, adequacy of like and existing facilities, and services in the district; 408.035(2)(b) and (d) - efficient and appropriate use of existing facilities and patients' problems; and SHP 1 - over 90 percent occupancy All of the applicants propose to add beds or to construct facilities in the subdistrict for Palm Beach County, which had an average subdistrict occupancy of 88.8 percent from July to December 1996. The parties agree that 168 additional nursing home beds are needed. Each described the need for its proposal in terms of increasing the availability and appropriateness of the services currently provided in the existing 51 nursing homes in Palm Beach County. To enhance availability and accessibility geographically, Marriott, Life Care and Manor Care maintain that additional beds are needed in northern Palm Beach County. Beverly argued that the beds are needed at its location in the west central Palm Beach County community of Royal Palm. Heritage Park, Whitehall Boca, HCR and Regents Park presented evidence of need in southern Palm Beach County. Northern Palm Beach County is generally the area from Palm Beach Gardens north to Jupiter. At the time the CON applications were filed, 7 of the 51 nursing homes in the County were located in the Jupiter area. The occupancy levels of those nursing homes ranged from 91 to 94 percent. Life Care proposes generally to locate in north central Palm Beach County, using Lake Worth as the dividing line. That would include areas ranging in occupancy rates from 79.03 percent (Palm Beach Gardens/Lake Park) to 91.6 percent (Jupiter). Only Manor Care proposed to condition approval of its CON on locating the facility in the north, specifically north of North Lake Boulevard. Marriott argued the need for its project because the north also appears under-served by combined assisted living and skilled nursing retirement communities. Marriott would locate, in general, north of the West Palm Beach airport. Of the 51 existing nursing facilities in the County, 13 also have assisted living beds. Only 3 of the 13 multi-level communities with 300 nursing and 200 assisted living beds, are located in the northern areas of the County, all in the City of West Palm Beach. By comparison, the remaining 10 retirement communities, in southern areas, have 900 nursing and 800 assisted living beds. In support of Beverly's proposed expansion, the relative isolation of the facility west of the Turnpike, and its 96 to 97 percent occupancy rates were considered. Beverly's Royal Palm is the only facility located within a five mile radius of the Royal Palm community. Subacute care services at Royal Palm are provided to patients discharged from two area acute care providers, Wellington Regional Hospital and Columbia Palms Hospital. The proposal does not, however, include expansion of Beverly's 31-bed short-term rehabilitation unit so that cannot be a primary factor supporting its need. Dividing Palm Beach County at Southern Boulevard, which is also known as U.S. 441 or State Road 80, other expert health planners testified that the need for additional beds was greater in the southern areas of the County. The dividing line reasonably coincides with that used by the Treasure Coast Health Council for acute care hospitals. Using only the population 65 and over, the bed-to-population ratios are 36.4 in the north and 20.8 in the south for every 1,000 people. That analysis suggests an under-supply of nursing home beds in the south. Assuming that all 168 beds are approved in southern Palm Beach County, Regents Park's health planning expert determined that the imbalance in the bed-to-population ratios will continue with 35.58 beds per thousand in the north and 19.38 beds per thousand in the south in the year 2000. The need in the south is also reflected in occupancy rates for southern areas. Nursing homes in Boca Raton, for example, have a higher occupancy rate than those in other areas of the County, except the remote area of Pahokee located between the Everglades and Lake Okeechobee. Occupancy rates were 85 percent in the north, with some new startup facilities, and 91.99 percent in the south, from July to November 1996. By calendar year 1997, the occupancy levels were 88.07 percent in the north and 91.32 percent in the south. HCR in Boca Raton, at the time of hearing, had a census of 103 in 110 beds or 93 percent occupancy, despite a disproportionately large turnover for short stay rehabilitative, up from 86.23 percent occupancy in 1997. Within an 8-mile radius of Heritage Park, occupancy rates exceeded 91 percent in 19 nursing homes. That area corresponds to the southern one-third of Palm Beach County, in which Whitehall Boca is also located. Whitehall Boca had an occupancy rate of about 92.45 percent at the time the applications were filed. At the time of hearing, Whitehall Boca was fully occupied, at approximately 96 or 97 percent. In addition, Whitehall Boca usually has approximately 20 people on its waiting list at any time, and typically rejects 40 or 50 referrals a month. Arguing that the existing nursing beds are well distributed geographically, one expert proposed approvals of new beds that would also be well dispersed. Testifying on behalf of Beverly, that expert suggested a need for the combination of Beverly's 48-bed addition, Heritage Park's 17-bed conversion, Marriott's 45-bed new construction, Whitehall Boca's 48-bed conversion, and HCR's conversion of 10 private to semi-private rooms. In general, geographically, the demonstrated need for additional nursing beds is greatest in the area of Pahokee, followed by Boca Raton in the south, then by the northern community of Jupiter, and the central area of Royal Palm, in that order. In each of these areas, nursing home occupancy rates exceed the 90 percent threshold favored in state health plan preference one. If the Town of Royal Palm is considered a part of the West Palm Beach service area, however, with an average overall occupancy rate of 88.6 percent, then it does not meet the location needs test in state health plan preference. In general, the location of Royal Palm, separate and distinct from West Palm Beach, as indicated in part by the differences in nursing home utilization, justifies some separate consideration of the need for additional beds at Royal Palm. SHP 3 - specialized ARD, AIDS or mental illness care; DHP 2 (c) mental health and subacute care; SHP 6 - innovative therapies; and DHP 3 - distinct needy population group The parties distinguished the need for their proposals on the basis of programmatical and cultural considerations, as well as geographical differences. In fact, as noted in Beverly's description of its geographical location, a related consideration is its availability for residents discharged from area acute care hospitals. Manor Care also presented evidence of the need for more ARD units in the northern areas of the county. The experts agree that at least 50 percent of nursing home residents have some ARD. Based on the information gathered by Manor Care's expert planner, there was only one 20-bed ARD unit in the Jupiter area at the time Manor Care prepared its CON application. In addition to its location in southern Palm Beach County, Heritage Park asserted a need for its service based on cultural considerations. Heritage Park, which is 90 percent Jewish, offers Kosher food and celebrates Jewish holidays. Two other facilities within the district also provide the same special services for Jewish residents, Menorah House in Boca Raton and Joseph Morris Geriatrics in West Palm Beach. The high occupancy rates and difficulty in getting Medicaid beds in facilities catering to Jewish residents are, in part, the basis for the asserted need for additional nursing beds at Heritage Park. While some other facilities may not provide the same cultural environment as those which are considered "Jewish" nursing homes, it is important to note that Kosher food is widely available and provided at other facilities, if necessary, through contractual arrangements. The most unique proposal is that of Regents Park to serve exclusively a population described as geriatric psychiatric residents. There is no facility in existence anywhere which treats exclusively the conceptually targeted population. Geriatric psychiatric residents are defined as those who are nursing home eligible medically, but who also have a secondary diagnosis of a mental illness, such as acute depression, schizophrenia, bipolar disorders and some forms of reversible dementias. Targeted residents do not include those with Alzheimer's or other non-reversible dementias, but only those with treatable chronic mental illnesses. Regents Park suggests that these residents are currently in nursing homes, inappropriately placed in ARD units and/or inadequately treated for their mental illnesses. Using acute care hospital discharge data for Palm Beach County for the twelve months ending September 30, 1996, Regents Park identified a total of 8,848 patients aged 65 and over with primary medical and secondary psychiatric diagnoses. Of these, 2,364 with an average age of 69 years, were discharged to nursing homes. Regents Park intends to train its multi-disciplinary staff, including nurses aides, to manage and treat mentally ill residents. The care proposed is intended to respond to the failure of nursing home residents to thrive as well as to managing disruptive, behavioral consequences of mental illnesses. To some extent, all of applicants already do or expect to care for mentally ill residents. It is typical for the physical conditions of nursing home residents to coincide with depression or anxiety. Behavior modification and appropriate medications are used to treat mental illnesses in all nursing homes. Employees are trained, in general, to handle behavioral problems. When the problem is recognized as psychiatric or the resident becomes too difficult to handle, the resident is generally transferred to an acute care or psychiatric hospital. Within the nursing homes, mental health services are usually provided through contractual agreements with psychologists or psychiatrists. Some facilities, such as Heritage Park, also use the services of psychiatric nurses provided through its home health agency. Limitations and uncertainties exist, however, concerning Regents Park's ability to attract and treat targeted residents differently from any other nursing home. Only a person with a medical need for help with certain activities of daily living may lawfully be admitted to a nursing home. Regents Park is also excluding residents with ARDs which are not reversible, and those who are violent or dangerous. Assuming all of the 2,364 medical/psychiatric discharges to nursing homes in 1995-1996 met the other criteria for admissions and treatment at Regents Park, it is impossible to determine whether those residents and their families would have chosen or been directed to Regents Park as compared to any other nursing homes. Regents Park intends to rely on linkages with mental health professionals, but expert testimony about nursing home placements included various other considerations, including proximity to an acute care provider and proximity to families, as well as the nature of the services provided. A combination of small projects was suggested because of the range of services offered at different locations throughout the County. Marriott's continuum of care, with assisted living and skilled nursing beds, would be introduced in the north, for example. Beverly, in the west central, would add general care and dementia unit beds. In the south, Heritage Park would give special care for ARD residents. HCR would do the same for post-acute rehabilitative services, including apparently introducing blood transfusions to skilled nursing services. Whitehall Boca would expand an existing facility which already has a broad range of services. In general, that combination increases existing beds by 45 in the north, 48 in the west central area, and 75 in the south. Another combination intended to distribute beds geographically and programmatically was Manor Care's 90 beds in the north with a 34-ARD unit, Beverly's 48 beds in the west central area with a new ARD unit, HCR's 10 and Heritage Park's 17 beds in the south with more subacute and ARD care, for a total of 165 beds. This combination has the disadvantage of new construction of the largest number of beds in the areas of lesser relative need, which is also the disadvantage of combining Manor Care's and Life Care's 120-bed proposals with either of the 48-bed proposals. More beds can be shifted to the south by substituting Whitehall Boca for Beverly as the 48-bed provider. The combination of Manor Care's 90-bed project with the three smaller southern projects has the disadvantage of creating three beds fewer than needed, but introduces another ARD unit and a broader range of services to the Jupiter area. That combination increases ARD beds by 51 and Medicare by 57 beds. 408.035(1)(c) - ability and record on quality of care, SHP 8 - historically superior care, and DHP 2(a) history of good care Marriott held 6 superior, 2 standard and 1 conditional Florida nursing home license at the time it filed this application. Heritage Park has had deficiency-free or relatively minor, Class 3 deficiencies cited during state inspections. Heritage Park has never had a moratorium on a facility. Although it has never operated licensed nursing beds, Heritage Park's experience, since 1986, operating licensed assisted living facilities with extended congregate care, has been sufficiently similar to establish its ability to provide good care. Whitehall Boca and HCR hold superior state licenses and are accredited by the Joint Commission on Accreditation of Health Care Organizations (JCAHO). Whitehall Boca's accreditation includes its subacute care program. The parties stipulated that Whitehall Boca meets the criteria related to quality of care. With an average of 20 surveys a year, HCR has had one survey in the last three years in which the state noted a condition of immediate jeopardy to residents. Regents Park operates Regents Park of Boca Raton, a superior licensed facility which has had deficiency-free resident care surveys for five years. That facility has JCAHO accreditation. In general, Whitehall Boca and Regents Park have had the most successful records on quality of care, followed by impressive survey results at HCR and Heritage Park. Two-thirds of the Marriott facilities in Florida are licensed superior. For nine consecutive years, Beverly's Royal Palm has held superior licenses. It has been JCAHO-accredited since 1995. As of May 1997, twenty-two of Beverly's forty-five Florida facilities or approximately one-half were licensed superior. At the time of the final hearing, Life Care affiliates operated 9 nursing homes in Florida with 3 more under-development and another CON-approved. Of the 9 operational facilities, one is licensed superior, 2 are standard but eligible for superior licenses, 2 are standard because they have not been operational long enough to qualify for superior licenses, and four are standard. One of the standard operations is being relocated to a replacement building. Life Care has never had a license denied, revoked or suspended due to issues related to quality of care. In Florida, Manor Care had 11 superior nursing homes, 1 standard but not yet eligible to be superior, and 1 standard at the time of hearing. In 1997 and 1998, two of the three Manor Care facilities in Palm Beach County had conditional ratings, each for approximately six weeks, because one resident in each developed pressure ulcers. In general, Manor Care, then Marriott have better licensure ratings than Beverly, followed by Life Care. SHP 11 - to ensure residents rights and privacy, quality assurance and discharge planning The applicants have documented procedures to ensure residents rights and privacy protections, as required by law. All allow for some input by resident councils, ombudsman oversight and/or family council representation for residents, as noted by Heritage Park especially for those in more advanced stages of dementia. Each applicant has appropriate, established quality assurance and discharge planning procedures. 408.035(1)(d) - availability and adequacy of alternatives to nursing beds The parties agree that 168 additional nursing beds are needed in Palm Beach County. There was no evidence of available alternatives. Heritage Park is the only applicant participating in a pilot project to determine the feasibility of diverting Medicaid residents from nursing homes to assisted living facilities. There was no evidence of results or any new policy directives based on the pilot project. 408.035(1)(e) - economies and improvements from operation of joint or shared health care resources All of the applicants have existing health care operations in the County. Regents Park, Life Care and Manor Care can benefit from locating a new 120-bed facility, or 90-bed for Manor Care, near their existing operations, drawing on established relationships in the health care network. Marriott, although proposing new construction, will also have some economies in nursing costs as a result of shared operations with the assisted living portion of its retirement community. Beverly's new construction of 48 additional beds on adjacent vacant land, using the existing kitchen and recently enlarged therapy spaces enhances efficiencies at Royal Palm. The economies and efficiencies of operations at HCR, Whitehall Boca and Heritage Park will be improved by their planned conversions of existing spaces to more intensive uses. Strictly construed, however, none of the applicants proposes to operate jointly with or to share facilities with a different health care provider. 408.035(1)(f) - need for special equipment and services not accessible in adjoining areas None of the proposals addresses a need beyond the service area. To the extent that its services are unique, Regents Park expects but is not relying on drawing residents from Broward County. 408.035(1)(g) - need for research and educational facilities The needs of research and educational facilities are inapplicable to this proceeding. 408.035(1)(h) - personnel and staffing; SHP 9 - higher RN and LPN ratios; SHP 10 - interdisciplinary professional staff, SHP 12 - lower administrative, higher residential care costs than district average; and DHP 2(b) - higher staffing ratios All of the applicants propose staffing ratios that are higher than minimum state requirements. They all use or will use various therapists, social workers, and mental health care professionals in addition to medical doctors and nurses. Because their services differ, the staffing patterns also differ appropriately. In general, of the 120-bed applicants, Regents Park proposes the largest number of employees devoted to patient care, including twice the number of certified nurse assistants (CNAs) as required. Regents Park will retain the services of a psychiatrist as one of its two medical directors. Life Care believes that its continuity of care is enhanced by using in-house rather than contract therapists. At its existing Palm Beach County facilities, Life Care provides 2.8 to 3.05 nursing hours per resident day, as compared to the state requirement of a minimum of 2.2 hours per resident day. Manor Care proposed to provide 3.4 nursing hours per resident day, including an average of 4.7 hours in the Medicare unit, 2.8 to 3 hours in the ARD unit, and 3.28 in the rest of the nursing home. Beverly will have 3.6 hours of nursing care per resident day, including a registered nurse 24 hours a day, seven days a week, and employs in-house therapists. HCR proposes the highest ratio of licensed nurses to residents. With a physiatrist and a pulmonologist as medical directors, HCR offers extensive rehabilitation and complex clinical services. Because Marriott plans less intense subacute care in only 8 Medicare beds, it will not have 24-hour RN coverage, but will offer 3.11 hours of nursing care per resident day. Although it subcontracts for occupational and speech therapists, Whitehall Boca has three full-time in-house physical therapists in a 10-person department. Whitehall Boca also has a pulmonologist on staff to provide intense respiratory and ventilator therapy to higher acuity residents, as recognized, in part, by Whitehall Boca's Health Care Finance Administration (HCFA) rate exception. In response to the needs of residents with ARD, Heritage Park employs fewer nurses, but more people for longer hours for its activities' staff which has 5 full-time equivalent employees (FTEs), including a clinical social worker. Using different base years and inflation rates ranging from 3.5 percent to 6.29 percent, the parties estimated resident care costs and administrative costs per resident day for the year 2000. The result is a range in the estimated year 2000 district averages which compares to the applicants' projected costs as shown below: Resident Care Cost Administrative Costs District Average ($) 77.40-88.33 36.48-41.95 Beverly 67.34 20.00 Life Care 70.87 26.76 Marriott 77.39 32.47 Manor Care (120 beds) 77.75 33.93 Manor Care (90 beds) 81.46 37.57 Heritage Park 89.63 31.76 HCR 108.28 28.50 Whitehall Boca 115.29 58.72 Regents Park 117.97 37.95 Whitehall Boca attributes its non-compliance with the portion of the preference related to administrative costs to higher salaries and fringe benefits, but not owners' profit. The higher, preferable resident care costs at Regents Park, Whitehall Boca and HCR reflect not just higher quality, but is consistent with higher resident acuity levels requiring more intense therapies, including mental health therapy at Regents Park. In general, the projected lower administrative costs indicate more operational efficiencies and lower profit-making than average at Beverly, Life Care and HCR. HCR is the preferable applicant in both categories, followed by Heritage Park. 408.035(1)(h) and (i) - immediate and long-term financial feasibility Heritage Park, Whitehall Boca, Beverly and HCR established the ability to fund, and the short and long-term financial feasibility of their proposals. Marriott The parties stipulated to the ability to fund and the short-term but not the long-term financial feasibility of Marriott's proposal. At issue are Marriott's projected occupancy level and experiences at other facilities. Marriott projected 93 percent utilization in year 2. By comparison, the weighted average occupancy was 86.7 percent in 1997 in Marriott's three Palm Beach County facilities, with overall district occupancy just over 90 percent. For example, Marriott's Brighton Gardens of Boynton Beach reported 89.14 percent occupancy and $167,000 in losses in 1997. Another Marriott facility in Palm Beach, Stratford Court Health Care Center averaged 86.15 percent occupancy in 1997. Using the rate of qualified people, those needing help with instrumental activities of daily living, multiplied by the number of single households of persons aged 75 and over, Marriott assessed the need for its assisted living beds. If it attracts 6 percent of those in need in northern Palm Beach County, then Marriott's occupancy will be 111 in 119 assisted living beds or 93 percent. Based on its projected occupancy, Marriott's pro forma shows profits in the nursing beds of $353,000 and $491,000 for the entire operation. The most comparable facilities to that proposed by Marriott are the existing Brighton Gardens in Palm Beach County. In the published data supporting the need for 168 additional beds, the utilization is 87.91 percent for Boynton Beach and 93.46 percent for the West Palm Beach Brighton Gardens. Marriott considers those facilities to be an earlier generation model which is smaller, with 29 and 30 nursing beds and 102 assisted living beds, than the current model. Marriott reasonably expects better economies in the larger facility it has more recently designed to accommodate 45 nursing beds and 119 assisted living beds. Marriott's financial feasibility is demonstrated based on that distinction and expectation. Manor Care Manor Care expects to generate a profit of 7 percent for 120 beds, or 3 percent for 90 beds. Nationally, Manor Care's profit margin from all its operations is 13 percent. Manor Care could seek to increase the profits from this proposal by applying for a reduction in the Medicaid condition on its CON. Manor Care has had Medicaid conditions reduced from 43.3 to 28.3 percent at a Palm Harbor nursing home, and from 34.3 to 20.61 percent in Sarasota. There is, however, no evidence to support the assumption that Manor Care requires each entity within its huge system to achieve a 13 percent profit margin within two years, nor that demographic conditions will justify reductions in its Medicaid commitment. Manor Care has included revenues but not expenses for an outpatient clinic in its pro forma. There is also evidence that Manor Care should have included more interest expense, but there is no testimony that Manor Care's proposal is rendered infeasible if outpatient clinic revenues of $116,900 for 90 beds or $241,000 for 120 beds are deleted and interest increased, but only that its profit margin could be further reduced. Life Care Based on lending commitments, funds are available to complete Life Care's project. The six Life Care nursing homes in Florida showed expenses exceeding revenue, or net losses, in 1996. In 1997, six of seven Life Care facilities showed losses, raising doubts about the long-term financial feasibility of this proposal. Life Care explained that losses have resulted from refinancing facilities to withdraw cash for reinvestment or further development. As a private company, Life Care relies on debt to raise capital. Life Care also noted that it has had a positive cash flow from operations at its facilities. The losses are shown on revenue and expense statements taking into account non-cash items, such as depreciation and amortization. In determining long-term financial feasibility, it is appropriate to consider non-cash items included in revenue and expense statements prepared according to generally accepted accounting principles. Otherwise, there is no measure of the financial ability to generate sufficient revenue to cover expenses over time, including necessary replacements of assets. Using these pro forma financial statements, Life Care has not shown that its proposal is financially feasible in the long-term. Regents Park The immediate financial feasibility of Regents Park's proposal was criticized because of discrepancies in available funds for all projects, and underestimated land and movable equipment costs. Since the other project listed on Schedule 2 has, in fact, been completed, the mathematic discrepancy in total projects and available funds does not affect financial feasibility. Regents Park's projected purchase price for land was $400,000, as compared to $975,000 by Manor Care, and $1,050,000 by Life Care. In general, land values are higher and fewer sites are available in the southern area, where Regents Park expects to locate. Although there was testimony that a Regents Park officer has found some parcels for $60,000 an acre, the size of the tracts was not established. Considering the substantial, credible undisputed expert testimony that zoning or county commission requirements will have to be met on any parcel developed, Regents Park's estimate is unrealistically low. In addition, of the applicants in this case, Regents Park plans to build the largest 120-bed facility with 64,000 square feet, which exceeds that designed for Life Care by over 6,500 square feet and the Manor Care 120-bed building by over 10,000 square feet. Expert estimates that the land cost is underestimated by approximately $500,000 are reasonable. There was also expert testimony that Regents Park underestimated the cost of equipment, at $2,000 per bed, by at least $2,500 to $5,000 per bed. That conclusion was based on an estimate of the need for equipment valued at approximately $140,000 for the kitchen, $75,000 for therapy equipment and office furnishings, $100,000 for 10 lounges, $60,000 for dining areas, $50,000 for other offices, $50,000 for nurse stations, $20,000 for laundry equipment, plus $60,000 for freight and taxes. The experts differ, to some extent, over the classification of various items, whether appropriately included in construction costs, furnishings or equipment. Regents Park failed to establish that all the necessary items are included in any of the categories. Regents Park's total equipment cost of $440,000 is unreasonably low, when compared to Life Care's estimate of $750,000 (all of which it included in building costs, but also listed separately) or Manor Care's estimated $1.3 million. Regents Park concedes that its movable equipment estimate is too low when, by comparison, its existing facility has an inventory of $852,000 in equipment and furnishings, or $7,100 per bed. Regents Park will finance its project with a Department of Housing and Urban Development (HUD) insured loan. HUD loans require owners to make a 20 percent contribution to equity. Regent Park's owners intend to borrow that 20 percent which is apparently permitted under HUD rules as long as there are no other mortgages or liens on the property. Regents Park, therefore, established the short-term financial feasibility of its proposal only in terms of the availability of funds, but not considering the reasonableness of estimated project costs. Regents Park's projection of 95 percent occupancy in year two, higher than the current district average, is reasonable for two years from now. That does not, however, reflect more selective screening for geriatric psychiatric patients who are estimated to be approximately 60 percent of the current census at the existing Regents Park. Of greater concern with respect to long-term financial feasibility is Regents Park's projected payer mix, which is not supported by its experience. For example, managed care averages 2 to 5 percent in nursing homes and 1.9 percent at the existing Regents Park facility, but is estimated to increase to 17 percent at the new facility. Regents Park failed to establish that its project can attract the payer mix it proposed, particularly from the relative high reimbursement sources, such as Medicare and managed care. Therefore, Regents Park failed to demonstrate the long-term financial feasibility of its proposal. EFFECT OF PPS In 1997, Congress enacted the Balanced Budget Act which included revisions to the Medicare system. During the final hearing, on May 12, 1998, some of the regulations implementing the new Medicare payment system were adopted. The new prospective payment system (PPS) will provide a flat per diem rate of reimbursement for services provided to residents based on their diagnoses, as classified into resource utilization groups (RUGs). Nursing homes will be responsible for containing costs within that per diem rate. All of the applications were submitted with revenues calculated under the cost-based system, which allows nursing homes to contract with therapists who bill Medicare directly for actual costs. With PPS limiting reimbursement, it is reasonable to expect all providers to respond by limiting costs accordingly. At the time of the hearing, however, it was impossible to determine exactly what their rates will be or how each provider will respond. Therefore, it is impossible to determine the impact of PPS on the financial feasibility of any of the applicants' proposals. The experts seemed to agree only that the three-year phase in period for facilities with established, 1995 rates, will benefit existing providers. 408.035(1)(j) - special needs of HMOs As stipulated by the parties, the criterion is inapplicable. The applicants are not health maintenance organizations. 408.035(1)(k) - needs of entities serving non-residents The parties agree that the criterion is inapplicable to these proposals. 408.035(1)(l) - impact on costs; effect of competition 408.035(1)(m) - cost and methods of construction; 408.035(2)(a) and (c) - less costly, more efficient or appropriate arrangements and alternatives to new services and new construction; SHP 7 - charges not exceeding highest Medicaid Manor Care operates 480 licensed and 120 approved beds in Palm Beach County, which is approximately 10 percent of the total in the County. Life Care currently operates 327 beds in Palm Beach County, 107 at Lakeside Health Center and 220 at Darcy Hall. HCR operates 350 nursing beds in the County, while Marriott operates 119 nursing beds and 204 assisted living beds. Beverly, the testimony established, operates at least 240 beds in the County, at Royal Palm and Haverhill. Regents Park has one 120-bed facility with 60 additional approved beds, and Whitehall Boca has 99 operational and 7 approved nursing beds. Competition is, therefore, theoretically enhanced by bringing Heritage Park into the nursing home arena with more approved nursing beds and by increasing the number of beds at Whitehall Boca. As evaluated using state health plan preference 7, proposed charges should not exceed highest subdistrict Medicaid per diem rate, except to serve upper income residents. Whitehall Boca and HCR will serve upper income residents. The highest projected Medicaid rate for the year 2000 is approximately $136.97, which is exceeded only marginally by Marriott at $137.61. In terms of Medicare, the projected rate of $325.40 in year 2 is exceeded in all of the proposals except Manor Care, and by relatively small increments by Heritage Park, Life Care and HCR, in that order. There is no evidence that existing nursing beds are not used efficiently and appropriately, or any doubt that additional beds are needed. Construction costs are summarized as follows: Number of beds Square Feet $(000s) Total $(millions) Marriott 45 18,436/81,800* 51 1.9 Heritage Park 17 (existing beds) 22 .150 Whitehall Boca 48 (existing beds) 27 .178 Beverly 48 18,500 42 1.7 HCR 10 (existing space) 21 .200 Regents Park 120 64,000 55 5.8 Manor Care 120 52,328 41 3.9 Manor Care 90 41,452 44 3.1 Life Care 120 57,500 47 5.2 * combined skilled nursing and assisted living beds. In terms of lowest total construction costs and the more efficient utilization of existing beds and spaces, the proposals of HCR, Heritage Park, and Whitehall Boca are preferable to add 75 beds for an approximate total building cost of $600,000. With 10 additional beds, HCR can also, for example, reduce operating costs by $22 per patient day. Once the three are combined for a total of 75 beds, all new beds are in the southern area, the area of greatest need in Palm Beach County. With only 93 remaining beds, it is mathematically impossible to recommend approval of Regents Park, Life Care or Manor Care's 120-bed application. Manor Care's 90-bed proposal in the north or Marriott's 45 in the north combined with Beverly's 48 in west central Palm Beach County are the remaining competing applicants which can be approved, if they otherwise meet the CON criteria. Separately and independently considering the least costly means for the addition of 168 beds, assuming all other factors were equal, the result is the combination of Marriott, Heritage Park, Whitehall Boca, HCR and Beverly for a total of approximately $4 million. Leaving out 48 beds to make a more direct comparison to the 120-bed proposals, the 120-bed combination of smaller projects with Whitehall Boca costs $2.43 million, or with Beverly $3.95 million in building costs. Except Manor Care's 120-bed cost of $3.9 million, either combination of smaller projects is preferable, in terms of cost alone, to over $5 million for the construction of new 120-bed nursing homes by Life Care or Regents Park. Similarly, comparing only building costs, the combination of Marriott and Beverly adds 93 beds for approximately $3.6 million, while the cost of Manor Care's 90-bed proposal is approximately $3.1 million. The need for 168 additional beds can also be met by a combination of a 120-bed applicant with either of the two 48-bed applicants. Construction costs range from approximately $7.5 million for Regents Park and Beverly, to $4.1 million for Manor Care and Whitehall Boca. In terms of cost, quality of care, and need, including the single geographical area of greatest need, the combination of Regents Park and Whitehall Boca is the most desirable, if any new 120-bed facility is constructed. The reasonableness of Life Care's estimates of construction costs using the same cost plus system as proposed in this case, has been significantly undermined based on the past need to file for cost overruns. The following Life Care projects have received CONs for cost overruns: No. of beds (Location) Initial Final Estimate* Cost* 111 (Citrus County) 4.7 5.6 120 (Orange Park) 5.4 7.8 60 addition (Orange Park) 2.2 3.9 77 (Wells Crossing) 4.5 5.4 34 addition .8 2.4 *All amounts are in millions of dollars SHP 5 - residential design features, including landscaping Marriott features five landscaped courtyards around a "T" shaped building. Resident rooms have a toe-to-toe furniture arrangements with an oversized window for each resident. Bathroom and residents room doors are aligned to ensure privacy and safety if a resident falls. Marriott plans to use wallpaper and carpeting to enhance the residential character of the building. Heritage Park uses Queen Anne furniture because it is sturdy and upright, and also recognizable as having been fashionable during the lifetime of the elderly residents. Heritage Park features crown molding in hallways and carpeted, oversized resident rooms, each with a bathroom large enough to accommodate a 3 foot by 6 1/2 foot shower. Whitehall Boca also has oversized rooms and features wide, carpeted hallways and 9 foot high ceilings. The award- winning design of the center core of the building resembles a street market. Beverly's resident rooms exceed minimum size requirements and have room temperature controls, telephone and cable television connections. The proposed addition will increase the number of enclosed courtyards from two to four, with one for ARD residents adjacent to their separate dining and activity areas. HCR will convert an existing 50-bed nursing care unit to a 60-bed unit. The ten private rooms which will become semiprivate have a minimum of 182.5 square feet, as compared to the state minimum requirement of 160 square feet. HCR uses lighting and different color schemes to create a residential atmosphere. Life Care's design was criticized as an "institutional" rectangular building with long corridors, but that also provides good visual monitoring from nurses stations in the center of the corridors. Windows from 32 rooms look out on other portions of the building. Life Care has attempted to minimize the institutional effect with a vaulted ceiling entrance and courtyards on two sides of the dining room. Life Care has separate entrances for physical therapy and adult day care. Manor Care has developed a prototype nursing home, which evolves from staff feedback each time a new facility is built. Manor Care uses "jogged" corridors, skylights, recessed areas to minimize the institutional effect of relatively long corridors. Regents Park plans to create a central core of offices, therapy spaces, and laundry and kitchen areas. Adjacent to and on each side of the central core are the two main dining rooms. The 60 beds on each side of the facility are divided into "X" shaped corridors, with 15 beds in 3 private and 6 semiprivate rooms on each wing, and nurses' stations in the center of each "X." Regents Park's plan is the most residential of the 120-bed designs. The corridors are short with skylights, and every resident room window has an unobstructed view beyond the building. To accommodate psychiatric residents, lighting is hardwired to avoid exposed cords, and electrical outlets are recessed into boxes. For safety, beds are hand-cranked, not electric, and window shade cords are breakaway plastic. 408.035(1)(n) - past and proposed Medicaid, SHP 2 - Medicaid proportionate to subdistrict average except multi-level systems, and DHP 1 - minimum of 30 percent Medicaid With the exception of Whitehall Boca and HCR, the applicants propose to participate in the Medicaid program and agree to provide at least 30 percent of total patient days to Medicaid, as suggested in district health plan allocation factor one. The proposed Medicaid commitments are as follows: Whitehall Boca 0 percent HCR 0 percent Marriott 30 percent Regents Park 30 percent Manor Care 40 percent Beverly 53.8 percent Life Care 54 percent Heritage Park 54.8 percent The nursing homes in the Palm Beach County subdistrict had an average of 53.7 percent of total resident days for Medicaid in the last 6 months of 1996, and 53.9 percent for the same period in 1997. Therefore, Beverly, Life Care and Heritage Park also meet the Medicaid standard established in state health plan preference two. HCR, Marriott and Whitehall Boca are entitled to an exception from the state health plan preference as multi-level health care systems. Marriott combines nursing and assisted living care. In addition to long-term nursing care, Whitehall Boca offers adult day care. HCR will provide nursing and home health care, and owns a physician group practice in Palm Beach County. Heritage Park is also a multi-level provider, offering nursing, assisted living and home health care but, nevertheless, complies with state health plan preference two. Regents Park and Manor Care do not meet the state health plan preference for providing Medicaid in proportion to the district average. In terms of total number of Medicaid beds, the combination of HCR, Marriott, Beverly, and Heritage Park was suggested by Beverly's expert as a means for providing 120 beds with more Medicaid days than any of the 120-bed applicants except Life Care. All of the proposals are generally consistent with the applicants past Medicaid performances. Heritage Park has 29 nursing beds with a 65 percent Medicaid commitment which, when combined with 17 additional beds at 54.8 percent, gives a blended rate of 61.5 percent in 46 beds. Heritage Park has served over 90 percent of the Medicaid waiver program participants in the district. With the proposed addition, Beverly will have a blended Medicaid commitment of 43.9 percent in 168 beds. Beverly currently provides an average of 67 percent of total care to Medicaid at Royal Palm, and 65 to 70 percent Medicaid in all Beverly nursing homes. Manor Care's proposed Medicaid commitment of 40 percent is slightly above the applicant's 1994-1997 experiences of 33.28 percent Medicaid at Boynton Beach and 39.88 percent in Collier County. Manor Care projected a decline in the Medicaid subdistrict average due to the nursing home diversion pilot project. Life Care serves from 65 to 70 percent Medicaid in its facilities, including the existing ones in Palm Beach County. The approvals of Beverly and Life Care would result in the largest total Medicaid commitment in 168 beds, but would not increase capacity in southern Palm Beach County. 408.035(l)(o) - continuum of care; SHP 4 - including respite and adult day care In the continuum of care ranging from skilled nursing, including a special ARD unit, subacute, respite, hospice to adult day care, Manor Care proposes all of the services with minimum conditions. Life Care will provide the same services with more adult day care then Manor Care, for 10 rather the 2 persons a day, but fewer ARD beds, 20 as compared to 30 or 34 in the two Manor Care proposals. Life Care does not offer any conditions on proposed levels of respite or hospice care. Regents Park will offer respite and subacute care in addition to the traditional long-term care. Marriott, Beverly and HCR offer long-term, specialized ARD, subacute, respite and hospice care, although Marriott's ARD unit is only in assisted living beds. HCR also owns a physicians' practice and operates a home health agency. The owners of Heritage Park and Whitehall Boca also own home health agencies, and provide a range of services which includes ARD, subacute, respite and adult day care. 408.035(2)(a) - additions of beds consistent with plans of other state agencies responsible for providing and financing long-term care Heritage Park participates in a Medicaid waiver program to divert residents from nursing homes to assisted living at substantial savings of $750 a month as compared to over $3,000 a month for nursing home residents. The pilot projects, including the expanded use of home health services, are promoted by the State Department of Elder Affairs. Other applicants argued that the trend should encourage applicants, such as Heritage Park, not to convert from assisted living to skilled nursing beds. Review of Applications on Balance Both Life Care and Regents Park failed to demonstrate the financial feasibility of their projects. In addition to not demonstrating long-term financial feasibility, Life Care was not sufficiently specific about its proposed location and has a less than superior architectural design and history of quality of care, as determined by licensure rating. Regents Park underestimated land and equipment costs, adversely affecting short-term financial feasibility, and lacked sufficient data to support its admittedly unique conceptual plan selectively to attract and serve geriatric psychiatric patients in a manner different from other nursing homes, particularly considering its proposed payer mix. On balance, the most efficient, least costly increase in the number beds in the geographical area of greatest need, in existing, high quality providers will result from the issuance of CONS to Whitehall Boca, HCR and Heritage Park. That results in a total of 75 beds in southern Palm Beach County. Whitehall Boca is the preferable 48-bed applicant over Beverly based on quality of care and location. Combining Manor Care's 120-bed proposal with Whitehall Boca's 48-bed proposal adds the largest number of beds to the northern area at greater cost than the smaller bed combinations, and excludes the efficient space conversions proposed by HCR and Heritage Park. The remaining choices are Marriott and Beverly, or Manor Care's 90-bed proposal. Of these choices, Manor Care is the more expensive total project at $7.3 million as compared to $6.1 million, but Manor Care is approximately $300,000 lower in construction costs. In addition, Manor Care offers to condition its proposal on providing the broadest range of services. Manor Care also has the higher resident care cost at $81.46, as compared to $67.34 for Beverly, and $77.39 for Marriott. In direct one-on-one comparisons, Manor Care better meets the state and local health plans preferences and related statutory criteria than Marriott, with distinctions based on location, charges, costs and proportion of total facilities licensed superior. In a similar comparison with Beverly, Manor Care's better record of superior care, creation of more ARD unit beds, and higher resident care costs outweigh Beverly's higher Medicaid commitment. Manor Care has demonstrated that no anti- competitive effects on costs or charges can reasonably be expected as a result of the establishment of another Manor Care facility in Palm Beach County. The three bed numeric need shortage is outweighed by the experts' unanimous agreement that ARD unit beds are needed and by Manor Care's history of providing superior care.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That the application of Whitehall Boca for certificate of need 8853, the application of Heritage Park for certificate of need 8850P, the application of Health Care and Retirement Corporation for certificate of need 8860, and the application of Manor Care for certificate of need 8856P be approved; and that all other comparatively reviewed co-batched applications for certificates of need be denied. DONE AND ENTERED this 9th day of November, 1998, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 9th day of November, 1998. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Paul J. Martin, General Counsel Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308 Richard Ellis, Attorney Agency for Health Care Administration Fort Knox Building 3 2727 Mahan Drive, Suite 3431 Tallahassee, Florida 32308-5403 Douglas L. Mannheimer, Attorney Jay Adams, Attorney Broad & Cassel Post Office Drawer 11300 Tallahassee, Florida 32302 Alfred W. Clark, Attorney Post Office Box 623 Tallahassee, Florida 32302 Robert G. Schemel, General Partner Heritage Park of West Delray, Ltd. 5858 Heritage Park Way Delray Beach, Florida 33484 R. Bruce McKibben, Jr., Attorney Post Office Box 1798 Tallahassee, Florida 32302-1798 Robert Newell, Jr., Attorney Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Theodore Mack, Attorney Powell & Mack 803 North Calhoun Street Tallahassee, Florida 32303 R. Terry Rigsby, Attorney Geoffrey D. Smith, Attorney Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 James C. Hauser, Attorney Skelding, Labasky, Corry, Eastman, Hauser, Jolly & Metz, P.A. Post Office Box 669 Tallahassee, Florida 32302 W. David Watkins, Attorney Watkins, Tomasello & Caleen, P.A. Post Office Box 15828 Tallahassee, Florida 32317-5828
The Issue In their Prehearing Stipulation the original parties described the background and general nature of the controversy as follows: In January, 1985, HCR filed an application for certificate of need to develop a new 120 bed nursing home in Collier County, Florida. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceeding, and the proceeding was forwarded to the Division of Administrative Hearings. By application supplement dated May 15, 1986, HCR has reduced this application to a 90-bed new nursing home. The nursing home will provide skilled nursing care to Alzheimer's patients and to patients discharged from hospitals in need of additional intensive nursing care, in addition to the typical nursing home patient. HRS has denied HCR's application because, pursuant to Rule 10-5.11(21), Florida Administrative Code there is insufficient need for the additional nursing home beds proposed by HCR. In the Prehearing Statement the Petitioner described its position as follows: HCR contends that there is an identifiable need for a nursing home in Collier County, Florida, to serve the needs of patients who suffer from Alzheimer's disease and similar disorders and patients who are discharged from hospitals with a continuing need for a high level of intensive care, often provided through sophisticated technical or mechanical means. Existing nursing homes in Collier County do not offer adequate facilities for such patients and refuse admission to such patients. These patients have experienced an inability to obtain such care in Collier County. HCR's proposed nursing home will provide needed care which is otherwise unavailable and inaccessible in Collier County. The application meets all criteria relevant to approval of a certificate of need. HCR further contends that the nursing home formula shows a need for additional nursing home beds in Collier County. Previously, in circumstances where a need for additional nursing home services has been identified, HRS has approved certificates of need even though the nursing home formula showed a need for zero additional beds or a small number of additional beds. In the Prehearing Statement the Respondent described its position as follows: HRS contends, pursuant to the formula contained in Rule 10-5.11(21), Florida Administrative Code, that there is insufficient need in the January, 1988 planning horizon demonstrated for additional nursing home beds in Collier County to warrant approval of a-new nursing home. Therefore, HRS contends that the HCR application should be denied. Further in its original application, HCR did not identify services proposed specially for Alzheimer's disease patients or "sub-acute" patients. HCR did not and has not complied with provision of Chapter 10-5.11(21)(b 10., Florida Administrative Code, regarding mitigated circumstances. The Respondent also identified the following as an issue of fact to be litigated. "HRS contends that it should be determined whether HCR's supplement dated May 15, 1986, is a significant change in scope for which the application was originally submitted." Because of its late intervention into this case, the Intervenor's position is not described in the Prehearing Statement. In general, the Intervenor urges denial of the application on the same grounds as those advanced by the Respondent. The Intervenor did not attempt to become a party to this case until the morning of the second day of the formal hearing. Respondent had no objection to the Petition To Intervene. The original Petitioner objected on the grounds that the effort at intervention was untimely and that the Intervenor was without standing. The objection to intervention was overruled and the Intervenor was granted party status subject to taking the case as it found it. Accordingly, intervention having been granted at the conclusion of the evidentiary presentation of the other parties, the Intervenor was not permitted to call any witnesses or offer any exhibits. Intervenor's participation before the Division of Administrative Hearings was limited to an opportunity to file proposed findings of fact and conclusions of law. Following the hearing a transcript of proceedings was filed on July 8, 1986. Thereafter, all parties filed Proposed Recommended Orders containing proposed findings of fact. Careful consideration has been given to all of the Proposed Recommended Orders in the formulation of this Recommended Order. A specific ruling on all proposed findings of fact proposed by all parties is contained in the Appendix which is attached to and incorporated into this Recommended Order. The Petitioner also filed an unopposed post-hearing motion requesting that its name be corrected in the style of this case. The motion is granted.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Findings based on admitted facts The parties agree that HCR properly filed a letter of intent and application for certificate of need for a new nursing home to be located in Collier County. The application was reviewed by HRS in the ordinary course of its activities, and HRS initially denied the application. HRS continues to oppose issuance of a CON because (a) there is an insufficient need, pursuant to Rule 10-5.11(21), Florida Administrative Code, for additional nursing home beds to warrant approval of a new nursing home [Section 381.494(6)(c)1., Florida Statutes]; (b) the long term financial feasibility and economic impact of the proposal is questionable because of low occupancy being experienced by existing nursing homes "Section 381.494(6)(c)9., Florida Statutes]. HRS proposes no other basis for denial of the application. The parties agree that HCR meets all criteria for a certificate of need, with the exception of those two criteria listed in the immediately foregoing paragraph relating to need and financial feasibility/economic impact (relevant to low occupancy), which HRS contends have not been met. The parties agree that HCR would provide good quality care to patients, that the project would be financially feasible if the occupancy projections asserted by HCR were obtained, that the costs and methods of proposed construction are appropriate and reasonable, and that the proposed facility would be adequately available to underserved population groups. The rest of the findings In January 1985, HCR filed an application for a certificate of need to develop a new 120-bed nursing home facility in Collier County, Florida. The original application described a traditional approach to nursing home care. By notice dated June 28, 1985, HRS stated its intention to deny HCR's application. HCR timely filed a request for formal administrative proceedings and this proceeding ensued. By application supplement dated May 15, 1986, HCR made certain changes to its original application. These changes included reducing the size of the proposed nursing home from 120 to go beds and changing the-concept of the nursing home from a traditional nursing home to one specifically designed to address the treatment of Alzheimer's disease patients and sub-acute care patients. The supplement specifically provided that 30 of the 90 proposed beds would be "set aside to offer a therapeutic environment for patients with Alzheimer's or similar disorders." The project description in the original application contained no such provision. HCR's proposed facility would consist of 90 nursing home beds, 30 assisted living beds, and an adult day care facility located adjacent to the nursing home portion of the facility. Those portions of the facility relating to assisted living and adult day care do not require certificate of need review. The estimated cost of the portion of the project which requires certificate of need review is $3.5 million. HCR estimates that approximately 33 1/3 per cent of the patients in the facility will be Medicaid reimbursed. It is proposed that 30 of the 90 nursing home beds be designed and staffed specifically to provide care and treatment necessary to meet the special needs of certain patients who suffer from Alzheimer's disease and dementia and exhibit need for care different from that found in the typical nursing home. It is proposed that another 30-bed wing be staffed and equipped to provide sub-acute, high-tech services such as ventilator, I.V. therapy, pulmonary aids, tube feeding, hyperalimentation and other forms of care more intensive than those commonly found in a nursing home and necessary for the care of patients discharged from hospitals and patients in the last stages of Alzheimer's disease. The remaining 30-bed wing would be devoted to traditional nursing home care. HRS has adopted a rule which establishes a methodology for estimating the numeric need for additional nursing home beds within the Department's districts or subdistricts. This methodology is set out in Rule 10-5.11(21), Florida Administrative Code. This rule determines historic bed rates and projects those bed rates to a three-year planning horizon. Allocation to a subdistrict such as Collier County is adjusted by existing occupancy in the subdistrict and the subdistrict's percentage of beds in relationship to the total number of beds in the district. Additional beds normally are not authorized if there is no need for beds as calculated under the rule. HRS calculated need utilizing current population estimates for January 1986 and projected need for the population estimated for January 1988, arriving at a need of approximately 16 additional nursing home beds for the January 1988 planning horizon. HCR projected need to the January 1989 planning horizon and projected a numeric need of approximately 38 additional nursing home beds. There are no applicants for additional nursing home beds in the January 1989 planning horizon (batching cycle). Alzheimer's disease is a primary degenerative disease of the central nervous system which results in a breakdown of the nerve cells in the brain. The disease is progressive, in that it begins subtly, often with forgetfulness or simple personality changes, and ultimately results in death following a phase in which the patient is bedridden and totally dependent upon others for survival. The cause of the disease is not known. The disease is much more common in the older age groups and is very common in the southwest Florida area. (However, nothing in the evidence in this case suggests that Alzheimer's disease is more common in southwest Florida than in other parts of the state.) There is no known cure for Alzheimer's disease. Alzheimer's disease patients are characterized by such symptoms as memory loss, communication problems, difficulty understanding, confusion, disorientation, inability to recognize care givers, waking at night, wandering, inability to socialize appropriately, and incontinence. The progress of the disease can be divided into stages. During the initial stage, the patients will display forgetfulness and subtle personality changes. As the disease progresses, the patients encounter increasing difficulty performing more than simple tasks, tend to be more emotional, become more confused, encounter difficulty with concentration and retaining thoughts, and often display poor judgment and a denial of the significance of their actions. In the next stage, the patients begin to require assistance to survive. Forgetfulness and disorientation increase and wandering patients are often unable to find their way. The patients become incontinent, experience sleep disturbances, become restless at night, and wander during the day, leading to considerable family distraction and difficulties for the care givers. The patients encounter difficulty recognizing family members and often become paranoid and fearful of those family members within the house. violence and aggressive outbursts may occur. Finally, the patients progress to a stage in which they are totally inattentive to their features physical needs, requiring total care. These Patients are totally incontinent, experience frequent falls, develop seizures, and eventually become bedridden, going into a fetal position and becoming totally unable to provide any care for themselves. Traditionally, most nursing homes offer no special programs for patients who suffer from Alzheimer's disease and mix these patients with other patients in the nursing home. There is no nursing home in Collier County which provides program specifically designed for the treatment of Alzheimer's disease patients. The nearest nursing home where such care can be found is in Venice, some 92 miles from Naples. The total facility proposed by HCR is designed to provide a continum of care for Alzheimer's disease patients and their family care givers. The adult day care portion of the facility would enable family members to place Alzheimer's disease patients in day care for a portion of the day in order for the family care givers to maintain employment, perform normal household chores, and find relief from the extremely demanding task of constantly supervising and caring for an Alzheimer's disease victim. The adult day care portion of the facility would be designed and staffed to provide a therapeutic program for the Alzheimer's disease patient and the patient's family. The assisted living portion of the facility would allow an Alzheimer's disease patient in the early stages of the disease to live in an environment, with his or her spouse if desired, where immediate care and routine supervision at a level lower than that required by a nursing home patient would be provided. Thirty nursing home patient and who do not display those characteristics which are disruptive to non-Alzheimer's patients, such as wandering, combativeness, and incontinence. For those Alzheimer's patients who should not be mixed with other nursing home patients because of their disruptive routines and who require unique programs and facility design features to meet their specific needs, a 30-bed wing would be set aside. Finally, for Alzheimer's patients in the final stages of the disease who require total care and are bedridden, and for patients discharged from local hospitals who require high-tech services, a 30-bed wing designed, staffed and equipped to provide such services would be set aside. The facility would provide a high level of staffing to meet the demanding, personal care needs of Alzheimer's patients and would provide 24-hour nursing supervision in that portion of the facility dedicated to intensive services for the bedridden and high-tech patient. The design and equipment of the proposed facility are particularly addressed to the needs of Alzheimer's disease patients. Physically, the facility would allow patients freedom of movement both inside the facility and in an outside courtyard with porches, but the facility would be sufficiently secure to prevent the patient from wandering away from the facility. There would be amenities such as therapeutic kitchens which would allow patients still able to cook to do so. Fixtures in the facility would be designed so that the Alzheimer's disease patients could easily identify the functions of fixtures such as wastebaskets, toilets, and sinks. Features such as low frequency sound systems, lever door knobs, square instead of round tables, barrier-free doorways, special floor coverings, appropriate labeling, automatic bathroom lighting, and provisions for seating small groups of patients together would all provide the special care required by the Alzheimer's patient. The concept of a separate unit for Alzheimer's disease patients is a new one, growing out of increased medical awareness of the disease. The proposed unit would be a prototype for the Petitioner. There are four nursing homes in Collier County and 413 licensed nursing home beds. There are no approved but unlicensed nursing home beds in Collier County. At the time that HRS initially reviewed the HCR application, Collier County nursing homes were reporting an average occupancy of approximately 70 percent. At the time of the hearing, average occupancy of existing nursing home beds in Collier County was 83.5 per cent. Existing nursing home beds in Collier County are underutilized and there are a number of nursing home beds available to the public. Also there are available alternatives to nursing homes in Collier County. HCR has projected reaching 95 per cent occupancy within one year of opening. This projection seems overly optimistic and unwarranted by prior history, as only one existing facility has an occupancy rate that high. HCR's occupancy projections are based on assumptions that the future growth will be similar to that experienced between 7/1/85 and 12/1/85. But more recent data shows that growth has been decreasing and that there was no growth for the most recent period prior to the hearing. If projected occupancy is not met, projected revenues will not be realized, and projections of financial feasibility will not materialize. The record in this case does not contain evidence of patients' need for nursing home care documented by the attending physicians' plans of care or orders, assessments performed by the staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. The local health plan (Policy 1, priority 4) requires an occupancy level of at least 90 per cent before new nursing homes can be approved. The local health plan (Policy 1, priority 6) also provides, "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."
Recommendation For all of the foregoing reasons, it is recommended that the Department of Health and Rehabilitative Services issue a Final Order in this case denying the Petitioner's application for a certificate of need to construct either its original proposal or its supplemented proposal. DONE AND ENTERED this 14th day of October, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 1986.
The Issue Which of the applications for certificates of need for community nursing home beds for the Palm Beach County July, 1991, planning horizon filed by Whitehall Boca, an Illinois limited partnership; Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton; Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center; and Maple Leaf of Palm Beach County Health Care, Inc., should be granted, if any?
Findings Of Fact In November, 1988, the applicants in this proceeding filed applications for certificates of need for nursing home beds in District IX, subdistrict 4 (Palm Beach County) for the July, 1991, planning horizon. The Department of Health and Rehabilitative Services (hereinafter "HRS") published a fixed need pool applicable to this batching cycle of 62 additional nursing home beds for Palm Beach County. Maple Leaf of Palm Beach County Health Care, Inc., a wholly-owned subsidiary of Health Care and Retirement Corporation of America (hereinafter "HCR") proposes to add 30 nursing home beds to its approved 90-bed nursing home to be located in the Jupiter area of northern Palm Beach County. HCR's 30-bed addition would be accomplished by construction of a new 20-bed wing and the conversion of 10 private rooms to semi-private rooms. HCR will license and operate its nursing home through Maple Leaf of Palm Beach County Health Care, Inc., a corporation wholly-owned by HCR and established expressly for the development of this project. There is no operational difference between Maple Leaf of Palm Beach County Health Care, Inc., and HCR. HCR has been in the business of developing and operating nursing homes for over 25 years and operates 130 facilities with 16,000 nursing home beds in 19 states. In Florida, HCR operates 10 nursing homes and has several additional facilities under development. The 90-bed approved nursing home to which HCR seeks to add 30 beds will offer extensive rehabilitation, subacute care, high tech services and a 20-bed special care unit for Alzheimer's Disease and dementia victims. HCR's application for the 30-bed addition does not propose any additional special programs, but the rehabilitative and restorative care capability of the nursing home will be available to the patients admitted to the 30 additional beds. The new construction proposed by HCR consists of a sixth 20-bed wing (pod) added to the nursing home. Upon completion, the 120-bed nursing home will consist of 46,000 square feet with six individual resident pods and a central core area for administrative and support services. Each pod consists of 20 beds, and three pods comprise one nursing unit. One nursing unit is located on each end of the nursing home. Each three-pod unit has its own dining and activities areas. It will not be necessary to construct any additional support services for the proposed 30-bed addition. The pod design proposed by HCR provides unique and innovative benefits to the residents of the nursing home. The pod design breaks down the traditional institutional corridor design into smaller, residential-like increments. Instead of long corridors with rooms on each side, living areas are constructed in 20-bed increments (pods) clustered around a home-like living area or atrium located in the center of the pod. Each atrium is intended to have an identity of its own, such as a sitting area, activity area, library, living room, or game room. The pod design is much more residential in character than the traditional nursing home. HCR nursing homes, including this 30-bed addition, incorporate design elements necessary for both skilled nursing care and subacute care. The 30-bed addition proposed by HCR will meet subacute care standards. Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center (hereinafter "Vari-Care or Boulevard") suggests than its design is superior because it proposes to provide piped-in oxygen to rooms designated for subacute care. However, there is no requirement for oxygen supplies to be built into a room in order to provide subacute care. In today's technology, equipment for oxygen is brought into the room. HCR's allocation of equipment costs for this addition include equipment for the provision of subacute care. The project cost for the 30-bed addition proposed by HCR is $706,000 or $23,533 per bed. The total project cost for the approved 90 beds would be $3,865,000, or $42,944 per bed. Combining the 90- and 30-bed projects results in a total project cost of $4,571,000, or $38,092 per bed. Economies of scale make HCR's 120-bed nursing home more cost effective than construction of only the 90-bed nursing home. Purchase of additional land is not required for the HCR addition. HCR's total project costs for its 30-bed addition and for its resulting 120-bed facility are lower than those of any competing applicant. HCR enjoys economies of scale in its purchase of equipment for nursing homes because of the number of projects that it has under development at any given time and because of the national contracts which it has with material and equipment suppliers. HCR's volume purchasing allows HCR to obtain substantial discounts which, in turn, allows HCR to provide higher quality furnishings and equipment at competitive prices. HCR projects a second year utilization of 93.1% for the 30 additional beds, comprised of 42% Medicaid patients, 10% Medicare patients and 48% private pay and insurance patients. The 90-bed approval has a Certificate of Need (hereinafter "CON") condition which requires a minimum 33% Medicaid payor mix. The overall Medicaid payor mix at the 120-bed nursing home is projected to be 35%. All of the beds including the added beds at the HCR nursing home will be certified to serve Medicaid patients. HCR's most recent history of service to Medicaid patients is 59.4% companywide, which includes a range of 26.7% to 90.4% in Florida facilities. HCR will be able to fulfill its commitment to Medicaid patients in the addition. HCR intends to meet any conditions which include a requirement of 42% Medicaid utilization in the 30 added beds. HCR's utilization projections are reasonable. The HCR nursing home will be accessible to all residents of the service district. HCR proposes the following patient charges for 1992: private room, $101.66; semi-private room, $87.17; Medicaid, $83; and Medicare, $86. HCR's patient charges for 1992, the only year for which each applicant submitted charges, are lower than any competing applicant's charges. In determining the financial feasibility of this 30-bed project, HCR took into consideration financial feasibility of the approved 90-bed nursing home as well as the financial feasibility of the total 120-bed project. The 30- bed addition proposed by HCR as well as the resulting 120-bed nursing home are financially feasible. HCR has never had a nursing home license denied, revoked, or suspended and has never had a nursing home placed into receivership. HCR has never experienced a condition in one of its nursing homes which threatened or resulted in direct significant harm to any of its residents. At the time of hearing, HCR operated four nursing homes in Florida which had superior ratings, including one nursing home which, though continuing to be operated by HCR, underwent a technical change of ownership and thus became ineligible for a superior rating. HCR also operates nursing homes in West Virginia, which has a licensure rating system similar to that of Florida's. In West Virginia, all of HCR's nursing homes have licensure ratings comparable to Florida's superior rating. HCR adheres to extensive quality assurance (hereinafter "QA") standards which are based upon, and in some instances more stringent than, state and federal regulations. The purpose of the QA standards is to ensure the highest possible quality care for the residents of the nursing home. HCR utilizes a multi-tiered system to monitor compliance with the QA standards. Each nursing home performs quarterly a quality assurance audit to determine its compliance with the quality assurance standards. From the regional level, HCR provides professional services consultants, typically registered nurses or registered dieticians, who serve as problem solvers and trouble shooters for facilities within their region and typically visit each facility at least once a month. These professional consultants, who are employees of HCR, act as support for the nursing homes within their region, working with directors of nursing, administrators, registered dieticians, and the department heads in the individual nursing homes to ensure compliance with QA standards and monitor the quality of care provided in the nursing homes. Each HCR nursing home is subjected to an annual QA audit performed pursuant to a contract by an independent, outside organization. After the annual survey, the nursing home is provided with a written report and is required to submit a written plan of correction for any identified deficiencies. Implementation of the plans of correction and ongoing compliance with the QA program are monitored by the professional services consultants and management. HCR utilizes a formalized acuity program which provides for a total assessment and evaluation of each resident to determine the level of care needed for each resident. After admission, the required level of care may change. It is common for the condition of a nursing home resident to change during the nursing home stay. HCR's formalized acuity program takes into account these changes in condition and allows the nursing home to provide the level of staffing appropriate to the level of care required by each resident. The staffing proposed by HCR exceeds state requirements. There will be 13.6 total FTE RN, LPN, and nurse aide staff for the 30-bed addition, organized with 6.126 FTE staff on the first shift, 4.374 on the second shift, and 3.1 on the third shift. This is equivalent to a total staff per resident ratio for the 30 additional beds of .493, and a shift staff per bed ratio for the three shifts of .20, .15, and .10, respectively. HCR's 120-bed nursing home will have 78.4 total FTE RN, LPN, and nurse aide staff, or .653 total nursing staff per resident. The shift staffing in the 120-bed HCR nursing home will consist of 35 FTE for the first shift, 25.2 for the second, and 18.2 for the third, which is equivalent to a shift staff per bed ratio of .29, .21, and .15, respectively. The level of staffing proposed by HCR will enable HCR to provide high quality patient care. The staffing proposed by HCR in its 30-bed addition is higher than any competing applicant except Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton (hereinafter "Manor Care") and the staffing for HCR's 120-bed facility is the highest of any of the applicants. Vari-Care sought to demonstrate that its design of providing showers in each resident's room was superior. There are safety concerns relating to providing showers in each patient room. Residents receiving skilled and subacute care usually have to be assisted in and out of tubs or showers. Most residents in the HCR nursing home will not be able to enter or bathe unassisted in a shower or tub. Although it is possible for some patients to be rolled into showers in wheel chairs, baths are superior to showers for increasing circulation and preventing decubitus (skin breakdown). Each HCR nursing unit provides a central bathing unit each for males and for females. Central tubs and showers are easier for disabled residents because of the availability of hydraulic lifting devices to assist the residents in and out of the tubs and showers. There are no hydraulic lifting devices in individual rooms. HCR's QA standards establish procedures for protecting patient privacy and patient dignity during times of bathing, and HCR always uses privacy curtains and individual showers for men and women. HCR and each other applicant provided a description of their plans for various operational details of their proposed nursing homes, including plans for recruitment, career ladders, preadmission screening, appropriateness review, discharge planning, utilization review, QA programs and procedures, specialized programs, resident surveys, residents' councils, security and protection of residents' property, dietary services, linkage with local providers, activity coordination, spiritual development, mental health services, restorative and normalizing activities, quality of life enhancements, training-related plans for staff development and improvement of staff skills, and the availability of the facility for training programs. Compliance with these plans and procedures is important in providing high quality of care to nursing home residents. The plans and procedures described in the HCR application are appropriate. Nursing home beds in Palm Beach County are clustered into three distinct areas: the northern area near Jupiter, the middle area near West Palm Beach and Boynton Beach, and the southern area near Boca Raton and Delray Beach. The social and economic environments of these areas and the highway support system suggest the reasonableness of these divisions, although the Local Health Council has not subdivided Palm Beach County into these three areas for formal health planning purposes. At the time of hearing, there were eight approved nursing home projects with 584 new nursing home beds under development in Palm Beach County: 210 of these approved beds were to be located in southern Palm Beach County; 284 beds were to be located in the mid-Palm Beach County area; and 90 beds were to be located in the northern Palm Beach County area. The only new nursing home in the northern Palm Beach County area is the HCR nursing home. HCR will be located in one of the least affluent sections of Palm Beach County. The HCR nursing home will enhance competition in the service area, because it is the only new nursing home to be located in the northern Palm Beach County area and the quality of services to be offered by HCR will challenge existing facilities to enhance their quality of care. Whitehall Boca, an Illinois limited partnership (hereinafter "Whitehall") is an existing, combined ACLF and nursing home located in Boca Raton in southern Palm Beach County. Whitehall is licensed for 73 skilled nursing beds and 115 ACLF beds. However, because Whitehall has converted some semi-private ACLF rooms to private rooms, its effective ACLF capacity is 62. Whitehall proposes to convert 27 ACLF beds to nursing home beds. Whitehall's expressed purpose for the conversion is to meet the demand for nursing home beds from some of their existing ACLF residents. Structurally, the facility is two-stories and consists of two "V"- shaped wings on each floor. Three of the four wings have identical floor plans. The other wing consists of laundry, kitchen, and mechanical facilities, and nine semi-private ACLF resident rooms. The three identical wings each contain 28 resident rooms, two community tubs, and two showers. One of these wings is currently used for ACLF residents only, another is exclusively designated for skilled nursing, and the third wing is divided between 14 ACLF rooms and 14 skilled nursing rooms. Whitehall proposes to convert the 25 ACLF beds located in these 14 rooms of this third wing to 24 skilled nursing beds. Additionally, three existing skilled nursing rooms located on the first floor will be converted from private to semi-private rooms. In total, the conversion will result in Whitehall's nursing home beds increasing from 73 to 100, configured in 12 private and 44 semi-private bed, rooms. This conversion can be accomplished without construction or additional equipment and would involve only $70,000 in new expenditures (representing attorneys' and consultants fees). During the three years prior to filing its CON application, and as long as it has been eligible, Whitehall has received superior licensure ratings. Whitehall directs its marketing so as to attract residents from outside Palm Beach County and from outside the State of Florida. The visibility that this marketing provides Whitehall makes it better able than its competitors to fill the new beds to be awarded in this proceeding, but makes it less likely that any approved additional nursing home beds would be available to residents of Palm Beach County. Therefore, granting Whitehall's CON application could result in the need for new beds in Palm Beach County remaining unsatisfied. To foster career advancement, Whitehall pays 100% tuition for courses of study that relate directly to its employees' jobs. Whitehall also pays 50% tuition for any course of study an employee pursues that does not pertain to their position at Whitehall. Whitehall Boca contracts with Professional Medical Review, a quality assurance review organization. Whitehall Boca's procedure for quality assurance is that Whitehall's Director of Nursing provides to Professional Medical Review data which quantifies the quality of care that is provided at Whitehall. Professional Medical Review then assembles the data and, with guidelines established by that organization, provides Whitehall with its analysis of that data. With that data, Whitehall plans a method of correction. In addition, Whitehall performs its own in-house, day-to-day quality assurance. This level of quality assurance involves documentation of the quality of patient care, infection control, and safety. Because incoming residents may have difficulty adapting to the nursing home setting, Whitehall has created the "newcomers" Sunshine Group to assist in this transition. If further assistance in the transition process is necessary, Whitehall refers the resident to specialized counseling. Whitehall staffs more dietary personnel than other facilities its size because it offers individual catering throughout the entire facility through its contract for food services provided by the Marriott Corporation. It also makes room service available to all residents. Whitehall has in place a restorative dining program. This program is designed for residents who are not eating independently, but are capable of being restored to this level. The restorative dining program at Whitehall stresses the use of special utensils, modifications of diet, and independent eating training. Whitehall provides hospice services on two levels. The first is Whitehall's in-house social worker who is available to the facility's terminally ill residents on a day-to-day basis. The second consists of Whitehall's association with Hospice by the Sea, a private organization that provides counseling to terminally ill patients. Whitehall arranges with amateur entertainers, school children groups, The Humane Society, the YMCA, and the Girl Scouts to provide its residents with entertainment and linkages to the outside world. Whitehall's architectural design provides extraordinary amenities that improve the residents' quality of life. Whitehall's facility features original artwork and elaborate moldings in the corridors, hallways and patient rooms, making it residential in nature. Whitehall's patient rooms are home-like in design and are all equipped with brand name residential furniture. Each room has a quilted bed spread and a designer headboard. The ceilings in the rooms are nine feet high rather than the standard eight feet required by code. Additionally, each room is centrally heated and cooled and has an individual thermostat and fan speed control. The Whitehall facility features a "market square" which provides an outdoor street setting for a dental office, podiatry office, saloon where beer and wine are served, gift shop and a designated chapel for religious services. Whitehall's dining room is large and elegant. The tables are covered with linens, and fresh flowers are placed on each table. Whitehall has an outdoor patio with an awning to provide shade. Entrance to the patio is facilitated by automatic sliding glass doors which allow residents in wheelchairs to move about conveniently. The corridors in the Whitehall facility are ten feet wide rather than eight feet as required by code. Wall coverings and fixtures are used in the corridors. At Whitehall, breakfast is served by special order at any time during the morning. For lunch, Whitehall serves hot and cold foods, i.e., sliced meats and salads (egg and tuna). For dinner, Whitehall serves a variety of meals which are posted on a daily menu. Whitehall offers an Alzheimer support group for families of Alzheimer patients - these groups are open to residents' families as well as to the public generally. Whitehall coordinates a diabetes support group that meets regularly at the facility. Whitehall also conducts an annual health fair, seminars on a variety of subjects and brings in speakers on health related issues all of which are open to the general public. In terms of geographic accessibility to necessary medical services, Whitehall is strategically located. It is conveniently situated between I-95 and the Florida Turnpike in southern Palm Beach County. It is further west than any of the competing applicants which is the area where the majority of growth in the county is taking place. In terms of offering new techniques and quality of care for patients through relationships with research entities, Whitehall is currently the site of a clinical research project of the F.A.U. School of Nursing into the "life cycle of humans." The purpose of the project is to acquaint nursing students with an understanding of the role of the elderly in American society, to develop in them a more thorough understanding of the many functions of a long-term care facility. The Florida Board of Nursing requires nurses to undergo continuing education and obtain a certain number of continuing education units (CEU) in order to maintain their licensure. The nurse training seminars conducted by Whitehall are recognized by the Board of Nursing for CEU credit. These seminars are also open to the public. The costs and methods of conversion proposed by Whitehall are not in question. The beds Whitehall seeks to convert were originally constructed to nursing home code. As a result, the only modification necessary to implement its conversion is the installation of curtain tracks in rooms being converted from private to semi-private. Whitehall maintains referral agreements and other contacts to link it to the surrounding community. Whitehall maintains links with the following hospitals in the area: Boca Community Hospital; Delray Community Hospital and West Boca Hospital. Whitehall estimates that the total project cost for the 27-bed conversion will be $1,368,188 or $50,674 per bed. Whitehall's estimates include $209,090 for land costs or $7,744 per bed. The original costs for the Whitehall building was over $8,000,000. Financially, the Whitehall operation is a highly-leveraged investment, which results in Whitehall paying a high rate of interest. Interest costs on the Whitehall construction mortgage are approximately $1,100,000 per year. Whitehall has never admitted Medicaid-eligible residents to its facility and does not offer to serve any Medicaid-eligible residents in its proposed 27-bed conversion. Although Whitehall's refusal to accept Medicaid- eligible residents is based upon Whitehall's belief that the level of reimbursement for those patients is insufficient for Whitehall to continue to maintain its existing levels of amenities and service, Whitehall has performed no calculations to determine what its Medicaid reimbursement would be or whether it would have to decrease its level of care or amenities in order to accept Medicaid-eligible residents. Whitehall has accepted a small percentage of Medicare-eligible patients in the past, but Whitehall does not propose to certify any portion of the 27-bed conversion to provide care to Medicare- eligible patients. Whitehall has distributed $909,000 to its partners since Spring, 1988. Whitehall's projection of revenues and expenses after the 27-bed conversion assumes a yearly disbursement to partners of $500,000. Thus, high charges are necessary to cover the substantial mortgage interest and partnership dividends. Whitehall projects patient room charges in 1992 of $181 for a standard private room, $115 for a semi-private room, and $96 for Medicare reimbursement. This room rate applies to both nursing home and ACLF residents at Whitehall. The private pay charges projected by Whitehall are higher than those of any other applicant. Whitehall's semi-private room charge is the highest in Palm Beach County. Whitehall projects that it will have 79 total FTE direct care staff in the combined nursing home/ACLF in the second year of operation after conversion of the 27 beds. However, Whitehall's staffing projections are based upon a patient census of 130, which includes ACLF residents. Upon conversion of the 27 ACLF beds, Whitehall will have only 100 nursing home beds, not 130. Whitehall did not fully describe its staffing per shift. It is not possible to determine how Whitehall's nursing home beds will be staffed. Whitehall does not propose to change its staffing levels as a result of the conversion of 27 ACLF beds to nursing beds. An ACLF resident does not require as high a level of staffing as a nursing home resident. Because 27 ACLF beds are being converted to 27 nursing home beds, Whitehall's level of staffing for nursing home patients will be reduced if Whitehall does not add staff. Approximately 10% of Whitehall's nursing home residents come from outside Florida. Approximately 15% to 20% of Whitehall's nursing home residents come from outside Palm Beach County. Whitehall has been operating 62 ACLF beds rather than its full licensed complement of ACLF beds for approximately six years. Whitehall's 62 ACLF beds are occupied at approximately 80% to 85% occupancy. Most of the beds which Whitehall proposed to convert to nursing home beds are occupied by ACLF residents, who tend to be long-term residents. Whitehall's occupancy projections require its 27 converted beds to be filled to 95% occupancy within the first quarter of their operation. However, Whitehall does not assume that it is going to fill the 27 additional nursing home beds with its ACLF patients (in spite of Whitehall's stated purpose to convert the beds for use by ACLF residents) and Whitehall does not intend to atop admitting ACLF residents to its facility. Whitehall was unable to explain how it could continue to accommodate its ACLF patients while at the same time meeting its nursing home occupancy projections. The financial projections and schedules prepared in support of the Whitehall application are based upon facility-wide revenues and expenses for nursing home and ACLF residents. Whitehall prepared no financial feasibility projections for the 100-bed nursing home which will result from the 27-bed conversion or for the 27-bed conversion. It is not possible to determine from the evidence submitted by Whitehall whether this 27-bed conversion or the resulting 100 nursing home bed operation will be financially feasible in the long term. Boulevard is an existing nursing home located in Boynton Beach in the mid-Palm Beach County area. Boulevard currently operates 110 nursing home beds. Boulevard has a license to operate 44 additional beds acquired from Mason's Nursing Home. Boulevard is constructing a new wing to house the 44 beds. During construction, those 44 beds are inactive. Twenty-five (22.7%) of Boulevard's existing 110 beds are certified for Medicaid and 56 are certified for Medicare. When the 44 additional beds become operational, Boulevard's Medicaid certified beds will increase to 43 (27.9%). Vari-Care, Inc., a Delaware public corporation established in 1968, operates 25 nursing care facilities throughout the country, 20 of which are nursing homes. Since its inception, Vari-Care has operated its nursing facilities consistent with its corporate credo, "health care hospitality," that is, providing a health care environment with many of the hospitality characteristics commonly offered by the hotel and restaurant industries. Vari-Care operates three superior-rated nursing homes in Florida including Boulevard Manor Nursing Center, located on Seacrest Boulevard in Boynton Beach, Palm Beach County, Florida, which it has operated since 1976 and purchased in 1988. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, have received superior ratings since the rating system has been in effect in Florida. Vari-Care's nursing homes outside Florida have always received the highest or next-to-highest rating in states having a nursing home rating system. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, comply with or exceed staffing ratio requirements established by applicable laws, rules, and regulations. Boulevard Manor is currently medicare certified, does not have any outstanding deficiencies with the Health Care Financing Administration, has satisfied the Health Care Financing Administration's conditions of participation during its past three surveys, and has never been the subject of any certification or licensure revocation proceeding or moratorium. Vari-Care has never owned or operated a nursing home which has had its license revoked, been decertified from Medicare, or had its Medicare participation status revoked. Vari-Care provides managerial, programmatic, and operational resources to nursing homes it owns and operates, including the provision of a full-time Operations Director, who performs an operational review in each facility on a quarterly basis. Vari-Care's quality assurance program at Boulevard Manor incorporates the use of a regional nurse to perform approximately 25 to 30 quality assurance audits in a nursing home for each visit. After conducting the audit, the nurse confers with the nursing home's Director of Nursing and Administrator to review the scoring results and analyze any problems discovered. The Director of Nursing then turns the audits over to an established quality assurance committee within the nursing home to review the audits and determine what corrective actions need to be taken. The quality assurance committee makes recommendations to the Administrator and Director of Nursing, who formulate and institute an action plan. Vari-Care's quality assurance program meets or exceeds legal requirements. Boulevard Manor's utilization review plan evaluates the effectiveness and appropriateness of care rendered to Medicaid and Medicare patients. Reviews are performed by a committee comprised of two physicians having no financial interest in Boulevard Manor, the Administrator, the Director of Nursing, the Assistant Director of Nursing, and other professional personnel. The utilization review committee meets at a minimum on a monthly basis and on an on- call basis if there is a need. Boulevard Manor's activity program offers 4 to 5 activities on a daily basis, including educational programs, entertainment, and religious activities. Residents of Boulevard Manor are apprised of daily activities through rounds made by Boulevard Manor's staff, daily announcements posted on the facility's bulletin board, and a monthly newsletter designed to inform the residents, staff, community, and families of activities and events at the nursing home. Quality of life enhancements available to Boulevard Manor residents include: an ice cream and gift shop; non-institutional, residential-style furniture throughout the facility; a private dining room for residents and their family members; a chapel and library; a special foster grandparents program; color televisions and private baths within each room; an on-site laundry facility; and a barber and beauty shop. Community programs at Boulevard Manor include: participation in a Meals-on-Wheels program in conjunction with a neighboring church; a "speakers bureau" where nursing home residents go out into the community; visits with students from area schools, including Atlantic High School; a volunteer program for community activities; a voter registration program for residents that are not currently registered voters; and a respite care program for residents requiring care for a short period of time to relieve their usual caretaker. Boulevard Manor has extensive links within the community through informal and formal agreements with acute care hospitals, HMOs, physicians, rehabilitation facilities, the area's Veteran's Administration hospital and clinics, mental health and substance abuse programs, other nursing homes, ACLFs, adult day care programs, adult foster homes, hospice and home health agencies, social service agencies, and other related health care and human services programs. Intensive rehabilitative services available to residents at Boulevard Manor include speech, occupational, physical, and musical therapies, extra- nutritional therapy and dietary training, reality therapy for dementia and other patients, chemical therapy for sufferers of terminal illnesses and severe pain, bladder/bowel retraining and managing of incontinence, active and passive range of motion exercises, and ambulation programs to learn or relearn how to use walking aids and prostheses. Boulevard Manor's provisions for treatment of residents with mental health problems include a contract with a local psychiatrist, Dr. Tom O'Leary, a contract with Hospice-by-the-Sea, in-house programs offered by specially trained staff for treatment of Alzheimer's patients, and relationships with other community mental health resources. The majority of Vari-Care's facilities, including Boulevard Manor, are "clustered" in a particular geographic region with at least two other facilities operated by Vari-Care. Economies of scale resulting from this "clustering" concept include the use of one Regional Director and QA Nurse for all facilities in a particular area, and the ability to enter into regional food vendor contracts which contemplate a similar menu at all area facilities for better quality food at significant savings. Boulevard Manor's educational program includes ongoing affiliations with training programs and schools in the immediate area including Palm Beach Junior College, in which professors from the college teach training courses on such subjects as sexuality, motivation, and controlling personal stress. The addition of a subacute care unit would expand the availability of training programs for professional staff. Career advancement opportunities and other incentives and employee benefits such as tuition reimbursement and recruitment bonuses enable Boulevard Manor to recruit and maintain highly qualified staff at all levels. Boulevard Manor is geographically accessible to its community. It is located 1/2 mile east of 1-95, is directly accessible by public transportation, and is adjacent to Bethesda Memorial Hospital. Boulevard Manor makes use of the out-patient services provided at Bethesda Memorial Hospital including patient therapy, chemotherapy, radiation therapy, X-rays, and blood transfusions. Vari-Care integrates its "health care hospitality" philosophy into the design of its proposed bed addition at Boulevard Manor by offering non- institutional, residential-style furniture throughout the facility, corridors that are not straight but are avenues with room offsets, ceilings that are not flat but vary in height, and a mall concept around a courtyard with landscaping. Unique design features at Boulevard Manor include a drive-up entrance with a covered canopy, a large lobby with hotel-like furniture, a reception area, accent lighting, a beauty shop, a chapel and a study off the lobby, an ice cream and gift shop, a private dining room, a staff lounge and dining area, and a child day-care center for staff. Vari-Care's proposed 26 beds will be housed in semi-private accommodations wherein a partition wall enables each resident to have his or her own window, air conditioning unit, television, full bath, "roll-in" shower to accommodate wheelchairs, and walk-in closet. A partition in the room creates, in effect, a private room within a semi-private accommodation. There will be 120 square feet per resident in the semi-private rooms, which exceeds the State of Florida requirement for semi-private space in nursing homes. Vari-Care proposes to add 26 beds to its facility. Ten of the beds will be added by new construction in each wing of the existing 110-bed structure, bringing that structure up to 120 beds with two nurses stations. The remaining 16 beds will be added by converting 16 private rooms in the new 44-bed addition to semi-private rooms. There are no design changes required in the new wing, other than the conversion of 16 private rooms to semi-private rooms. Vari-Care proposes to certify 15 (58%) of the 26 additional beds to serve Medicaid-eligible residents. Vari-Care does not propose to certify any additional Medicare beds. Vari-Care projects a 32% Medicaid payor mix after addition of the 26 beds. This projection is based solely upon Vari-Care's intent to certify 58 (32% of 180) beds for Medicaid. Vari-Care's application describes a "high demand" for Medicaid beds and Vari-Care testified to a need for additional Medicaid beds. Nevertheless, only 25 of Boulevard's existing beds and 58 of Boulevard's proposed 180 beds will be Medicaid certified. Vari- Care's ability to serve Medicaid patients will be limited by the fact that it will certify only a portion of its beds. Vari-Care's projections of a 32% Medicaid payor mix are inconsistent with its historical payor mix of approximately 20%. Vari-Care's testimony that it will achieve 32% Medicaid simple because it will certify 32% of its beds is inconsistent with Vari-Care's testimony that it has never reached its maximum capacity for Medicaid patients in its existing facility. Vari-Care owns two other nursing homes in Palm Beach County, Medicana located in Lake Worth and The Fountains located in Boca Raton. Boulevard provided 18% of its patient days to Medicaid-eligible residents in calendar year 1988, and provided approximately 20% for the year to date at the time of hearing. In 1988, Medicana provided 15.5% of its patient days to Medicaid- eligible residents, and The Fountains provided 19.6%. Vari-Care's total project cost for the 26-bed addition will be $1,095,353 or $42,129 per bed. This cost includes the cost overrun anticipated by Vari-Care in its new wing but not included in the application estimates. The portion of that cost overrun allocable to the 16-bed conversion in the new wing is $106,408, or $6,650 per bed. Vari-Care's project cost estimates include land purchase costs of $107,620, or $4,139 per bed. Vari-Care projects patient charges in 1992 of $117 for a private room, $107 for a semi-private room, $87 as its Medicaid reimbursement, and $161 as its Medicare reimbursement. The long-term financial feasibility of Vari-Care's proposal is demonstrated by a positive net income for the first two years of operation, the ability of Vari-Care to service its debt adequately, its low debt-to-equity ratio, and its strong projected current ratio. Vari-Care testified that it does not intend to provide subacute care in its new 44-bed wing but that it would provide subacute care in the additional 16 beds in that wing. Boulevard's new wing incorporates design elements intended by Vari-Care to facilitate subacute care, such as piped-in oxygen. However, neither the design nor the construction of this new wing are contingent upon the approval of the 16-bed conversion. From a design standpoint, nothing proposed by Vari-Care in its application will enhance Boulevard's ability to provide subacute care. Boulevard's physical plant will be constructed to provide subacute care in the new wing, regardless of whether this application is approved. Vari-Care presented a schematic with its application which designated those private rooms to be converted to semi-private rooms. At final hearing, Vari-Care identified those rooms to be designated as the distinct subacute care unit. However, the rooms which Vari-Care designated for subacute care are not the same rooms to be converted from private to semi-private. Four of the rooms in the subacute care area are already semi-private rooms. Only four of the beds to be converted to semi-private use are located within the designated subacute care area. Therefore, except for four beds, Boulevard's designated subacute care unit will be in place upon completion of the 44-bed addition. Vari-Care described subacute care as care between acute hospital therapy and nursing home therapy or services not normally provided in a nursing home because of expense, specialized equipment and additional staffing that is necessary. Vari-Care cited examples of subacute care which it would provide to be respirator and ventilator care, tracheotomy care, IV services and decubitus care. However, Boulevard already provides subacute care, including tracheotomies, IV therapy, antibiotic therapy, pain management, dehydration and nutritional services, and decubitus care. Currently, subacute care at Boulevard is provided in the dedicated Medicare wing. The only type of subacute care which Boulevard will add is respirator and ventilator care. However, Vari-Care has not attempted to quantify the number of ventilator or respirator patients that it would treat. In any event, a CON is not required to provide ventilator or respirator care. The subacute care patients which Boulevard currently treats in the existing 110 beds are predominantly Medicare patients. Vari-Care expects 50% of the patients in the new 16 subacute beds and 10% of the patients in the 44 new beds to be Medicare patients. However, Boulevard does not propose to certify any additional Medicare beds, and only 1% of its Medicare patients will be treated in the existing 110 beds after construction of the new wing. Although Boulevard mist recently experienced a 14% Medicare utilization, or about 15 Medicare patients, Vari-Care's application assumes a 7.22% Medicare utilization, or about 12 patients (.0722 x 170), after the addition of a subacute care unit. The new subacute care beds will not increase the number of Medicare patients which Boulevard treats. Virtually all of the Medicare patient load which Boulevard now treats in its existing 110 beds will be treated in the new wing, and about half of Boulevard's current Medicare patient load will move to the new 16 subacute care beds. Subacute care requires a much higher level of staffing. The administrator of the Boulevard nursing home testified that the staffing ratios for the new addition, "as one of the conditions of the CON", are "much higher than" the current staffing levels, because of the planned subacute care. The CON condition referred to by the administrator was the condition imposed by HRS in its intent to approve the Vari-Care application. This condition would require a direct care staff to bed ratio (RNs, LPNs, and nurse aides) of .18 for the first shift, .12 for the second shift, and .08 for the third shift. Actually, these staff ratios reflect the current staffing levels at Boulevard's 110-bed facility. The testimony of the Boulevard administrator was contradicted by Vari-Care's Vice President of Operations, who testified that Boulevard's current staffing ratios will be maintained by Boulevard in the 26 new beds. There is no evidence that Boulevard will provide a much higher level of staffing in the addition. Boulevard's staffing is lower than that of any other applicant. Boulevard's proposed total nurse staffing for the second year of operation of the 180-bed nursing home is 73.5 total FTE, which is equivalent to a staff per resident ratio of .432. The shift staffing proposed by Boulevard is 33 FTE for the first shift, 24 FTE for the second, and 17 FTE for the third, which is equivalent to a shift staff per bed ratio of .18, .13, and .09 respectively. These staff ratios are roughly equivalent to those required by HRS in its condition for the 26-bed addition. Boulevard's proposed 16-bed subacute unit is closely related to its new 44-bed wing. However, the staffing proposed by Vari-Care for the new 44-bed wing is inconsistent with the staffing proposed by Vari-Care for the 16-bed subacute unit. When Vari-Care submitted its CON application for the new 44-bed wing, it proposed a direct care nursing staff of 88.02 total FTE for the resulting 154-bed facility. The staffing described by Vari-Care for the 154-bed facility is higher than the staffing which Vari-Care now proposes for the 180- bed facility. The staffing proposed by Vari-Care is inconsistent with its testimony that it did not intend to provide subacute care in the 44-bed addition and that higher staffing is required to provide subacute care. Vari-Care has not submitted an application consistent with its proposal for subacute care. Vari-Care has not quantified any need for the only two forms of subacute care, ventilator care and respirator care, which it does not currently provide. Although subacute care is acknowledged to require a higher level of staffing, the level of staffing proposed by Vari-Care is essentially the same as that in its existing 110-bed facility and is lower than that proposed for its 154-bed home. Boulevard's facility design is not dependent upon its proposal to provide subacute care. The rooms designated for subacute care are not the same as the rooms containing the beds to be converted from private to semi-private beds. The level of staffing proposed by Vari-Care is actually lower than that proposed by any other applicant, none of whom proposes to add subacute care through these pending applications. Manor Care is a 120-bed skilled nursing home facility in Boca Raton, south Palm Beach County. It holds final CON approval for a 30-bed dedicated Alzheimer unit. The Alzheimer unit will open in June, 1990. Manor Care currently holds a superior license and has held a superior license for as long as the facility has been eligible for one. Currently, 30% of its total patient days are for Medicaid residents. Of Manor Care's existing 120 beds, 36 beds (30%) are licensed for Medicaid. That is consistent with the CON condition on the original facility that 30% of the beds be licensed for Medicaid. Manor Care offers full physical therapy, occupational therapy, and speech therapy services. Manor Care offers a full complement of skilled nursing care, including tracheotomy, IV therapy and decubitus care. Manor Care classifies these specific services as skilled nursing care," not "subacute care." Manor Care characterizes "subacute care" as those services which would normally be delivered in a rehabilitation hospital. Subacute care requires 3 times the staffing normally provided in a nursing home. Manor Care believes that examples of subacute care are spinal cord injury and head trauma. On the other hand, Vari-Care chooses to characterize the services of tracheotomy, IV therapy and decubitus care as "subacute" care, and that is what it proposed to provide in its dedicated subacute unit. Manor Care offers these skilled services throughout its facility; it does not utilize a dedicated unit to provide them. Medicare patients in nursing homes normally require skilled nursing care. In this regard, 11.6% of total patient days at Manor Care in 1988 were for Medicare residents. That represents the highest Medicare percentage in Palm Beach County. Manor Care employs the state-of-the-cart approach for providing nursing home services. For example, Manor Care holds CON-approval to establish a 30-bed dedicated Alzheimer unit with specialized staff and programming. Manor Care is the only existing provider in this proceeding which treats Alzheimer disease in a segregated modality. (HCR's approved facility will also house a dedicated Alzheimer unit.) Manor Care has neither transferred nor voided any CON. Manor Care has had no Medicare conditions of non-compliance. Its license has never been revoked, suspended or denied. Manor Care has had no beds decertified by Medicare or Medicaid. Manor Care has no intention of selling its facility. Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton is a wholly-owned subsidiary of Manor Healthcare Corp. Manor Healthcare Corp. owns 155 nursing homed in 28 states. It has 9 nursing homes and 3 ACLFs in the State of Florida. Manor Healthcare has established six regional-based offices with a full complement of staff to assist its individual nursing homes in all areas of operations. It has a regional office in Orlando to service Florida. Through its corporate and regional offices, Manor Healthcare employs a team of professionals who are responsible for providing support functions to the nursing centers, such as: quality assurance, nursing training, administration, purchasing, facility planning, assisted living, Alzheimer care, managed care, accounting, dietary, marketing, staff recruitment, and chaplaincy. This centralized support system enhances operational capabilities and efficiencies. Manor Healthcare's primary goals are quality assurance and quality of care. It seeks to return nursing home residents to the community as soon as possible. In this regard, Manor Healthcare, on the average, returns 45% of its residents to the community. Manor Care proposes to add 30 skilled beds to its facility by locating them on the 2nd Floor above the 30-bed Alzheimer unit. This addition will include 15 semi-private rooms, lounge space, office space, conference space, an elevator, and a nursing station. Manor Care will offer the same quality, level and scope of skilled nursing services in the 30-bed addition as currently offered at its facility. The proposed addition will be integrated into the existing facility. The addition will be adjacent to existing therapy areas and near several dining room and lounge areas. Due to substantial existing ancillary areas, these 30 beds can be added without adding much ancillary spaces. Manor Care expressly agrees to the following CON conditions: 30 skilled nursing beds; 2.8 nursing hours per patient day; 37% Medicaid patient days in the addition; and 9400 square feet on the 2nd Floor. The total project cost (before CON application fee) for the 30-bed addition is $1,270,700. Manor Care projects that the 30-bed addition will be in use by June 1, 1991. The project cost will be 51% debt-financed; the rest will be financed with equity funds. The nursing and other staff at Manor Care are well qualified; its staffing ratios exceed licensure requirements by at least 25%. The proposed staffing levels, including the 30-bed addition, also exceed licensure requirements by at least 25%. Manor Care maintains an educational program plan to improve the ability of staff to meet the demands of its nursing home residents. These programs will continue to be employed at the Manor Care facility. All employees are required to attend educational programs pertinent to the improvement of skills within their respective disciplines. All employees are required to attend annual programs on fire prevention, accident prevention, infection control, effective communication, and the psychosocial/psychophysical aspects of aging. Health care seminars are sponsored by Manor Care on a quarterly basis. Topics cover a wide range of subjects related to enhancing quality of care in nursing homes. These seminars are available to facility staff and community health care professionals. Manor Care maintains a restorative program intended to enable each resident to achieve maximum function with the ultimate goal of returning patients back to the community whenever possible. For those unable to return home, the program seeks to ensure that all residents continue to function at their maximum potential. Examples of specific restorative programs include: progressive ambulation; bowel management; bladder management; self-feeding training; activities of daily living training; pain management for chronic and post operative pain; muscle control training and others. In this regard, Manor Care utilizes its "Excel Care" computerized system intended to document and evaluate the success of its restorative and rehabilitative programs. This program allows for the efficient monitoring of residents' responses to therapy and nursing care. Per this system, every unit of care is measured by outcome standards. The outcome standards describe the expected results in the patient's condition if treatment and therapy is successfully carried out. Manor Care maintains a utilization review committee comprised of three physicians, the administrator, the social services director, and the Director of Nursing. Its purpose is to meet every 30 days to assess patients and to ensure that appropriate and effective utilization of services is being provided. The purpose of Manor Care's QA program is to promote and support optimum quality standards in all disciplines. This objective is accomplished through: continuing in-service education programs; on-going consultation among corporate quality standards staff and QA regional specialists; unannounced annual surveys conducted by a Manor Healthcare QA team of health care professionals; and on-going surveying of guarantor/resident satisfaction with nursing home services. The Manor Care nursing home is reviewed annually on an unannounced basis by the QA interdisciplinary team of Manor Healthcare Corp. specialists. The QA review criteria meet all the minimum standards set by Medicare and exceed the most stringent state regulations throughout the country, including Florida. The unannounced annual review covers the following areas: resident care, dietary, activities, housekeeping, laundry, physician services, maintenance, medical records, pharmacy services, social services, administrative records and safety. Manor Care of Boca Raton was internally surveyed in January, 1989. It rated within the top 10% of all 150 Manor Healthcare facilities in the country. Within 30 days of an admission, the patient's guarantor is mailed a "satisfaction survey" form. The guarantor is asked to evaluate Manor Care's performance as to nursing, dietary, activities, therapies, etc. The form is self-addressed and is to be mailed to the Manor Healthcare corporate offices. Manor Care maintains an 800 toll-free health care hotline that is a direct line to the QA department of Manor Healthcare. This is available to all persons who want to ask questions, obtain information, make suggestions, or who require follow-up on unresolved concerns at the individual nursing home level. In effect, this serves as a consumer hotline. Manor Care designs and maintains activity programs that are responsive and appropriate to meet the physical, mental, and social needs of its residents. They include at least the following: various therapy activities; large group activities weekly; at least two religious activities per week; facility-wide general visits from the public; special events; birthday parties; activities after the evening meal; therapeutic programs for residents with special needs (such as stroke victims or blind persons); outings away from the nursing home; music activities; and special holiday events. Manor Care maintains a formalized program for involving families and community volunteers to promote the quality of life for its residents. Community volunteers participate on a routine basis in providing services to the residents, such as: reading to residents, distributing newspapers and magazines, assisting on community outings, and assisting with correspondence. These services bring the community closer to the nursing home residents. Manor Care establishes and maintains linkages with state and local health care providers to ensure that a continuum of care is available to residents and to facilitate community involvement by the nursing center. These community linkages and referral agreements include: local hospitals, physician specialists, therapists, home health agencies, adult day-care centers, area agencies on aging, homemaker services, private insurance companies, ACLFs, and other community agencies. Manor Care currently holds transfer agreements with four local hospitals. Manor Care works very closely with local agencies to ensure that residents are located in the most appropriate setting for their needs. Manor Care maintains linkages and agreements with less intensive institutions to meet the needs of those persons or residents who do not require or no longer require nursing home care, such as: adult day-care, meals-on-wheels, and senior centers. Due to existing ancillary space, Manor Care can add its proposed 30- bed unit at a relatively small cost. Manor Care already has ample dining room space, activity areas, therapy areas, and social areas which can accommodate an additional 30 beds without difficulty. In addition, Manor Care already retains the core nursing, administrative, therapy, and other staff required to operate a nursing home. As such, additional staff for the 30-bed addition is not substantial. The Manor Care application therefore provides a cost-effective approach to add nursing home beds to the community. Manor Care currently offers and will continue to offer clinical and training opportunities to students currently enrolled in nursing educational programs at local technical schools and universities. Manor Care also provides services to persons seeking to become certified nursing assistants. Manor Care serves as a clinical site for gerontological rotations for nursing students at Palm Beach Community College. Manor Care is developing a similar internship program with Atlantic Vocational Technical School and seeks to develop clinical affiliations with South Technical Vocational School and Florida Atlantic University. This working relationship not only trains students and health care professionals, but also provides Manor Care valuable resources in staff recruitment and development. Manor Care sponsors and will continue to sponsor nurse "refresher" courses which are taught by local area nursing school instructors. Persons wishing to renew their nursing licenses and certification can do so through this course work. Manor Care finances these nurse refresher programs. Manor Care sponsors and finances various health care seminars on a quarterly basis. These seminars are advertised in local hospitals, adult day- care centers, and other agencies. These seminars are available to both Manor Care staff and community health care professionals. Manor Care maintains a "career ladder" program which enables Manor Care employees (both at the facility and within the Manor Healthcare Corp. system) to reach their career goals through promotion, career advancement programs, and tuition support for additional schooling. Both the financial statements of Manor Care of Boca Raton and Manor Healthcare Corp. (which will provide the debt financing) demonstrate the financial strength and financial resource availability to accomplish and operate the proposed 30-bed addition. Manor Care has historically been very accessible to Medicare and Medicaid residents. In 1988, 11.9% total patient days were for Medicare patients. This represented the highest percentage in Palm Beach County. In calendar year 1989 to date, Manor Care has provided 30% of total patient days to Medicaid patients. For its proposed 30-bed addition, Manor Care commits to a minimum of 37% Medicaid If the 30 beds are approved, Manor Care's total facility after one year of operation would provide 34% Medicaid. Manor Care's historical and projected Medicare/Medicaid commitment is substantial, particularly when considered with the other existing providers/applicants in this case: Actual Actual Projected 1988 Medicare 1988 Medicaid Total Facility Medicaid After First Year of Operation Whitehall 1.3% 0 0 Vari-Care 5% 18.0% 26.65% Manor Care 11.9% 26.8% 34% The pro formas in the Manor Care application are reasonable. These pro formas demonstrate that the Manor Care proposal is financially feasible in the long-term. The pro formas are based on reasonable assumptions. The projected utilization underlying the pro formas is reasonable. The projected charges are reasonable. The projected staffing levels, staff salaries, and the other expenses were based on existing data and expense levels, and then reasonably inflated forward. Manor Care's proposed 30-bed addition will be integrated into the existing facility. The addition will benefit from existing, innovative quality of life features designed to enhance privacy and personal choice options for residents and family members. These features include: beauty/barber shop, formal private dining room, lobby areas, therapy areas, activity/recreational areas, specially-equipped rehabilitation dining room, distinct lounge area for families, self-contained Alzheimer's unit, carpeted conference room, several private room accommodations, outdoor patio areas, each patient room with its own bathroom, and reading rooms. In addition, the patient rooms are larger than the state requires and are very proximate to the nursing stations. The Manor Care facility incorporates many residential design and home-like features. Color schemes are emphasized for a home-like atmosphere, such as: muted vinyl wall covering; color-coordinated draperies, bedspreads and curtains (residents can choose their color scheme at admission); and lounges which are theme-decorated around particular purposes, such as a game room. Patients are permitted to exercise choice in furnishings and decorations. Patient room size is a major factor in controlling construction costs. At Manor Care, the rooms are rectangular with the shorter walls on the outside. This design minimizes exterior wall space, which is more expensive to construct than interior wall space. Minimized exterior walls also improve energy efficiency. The proximity of nursing stations to the patient rooms at Manor Care is cost-effective. The rectangular room shape reduces the cost of construction by reducing corridor length and square footage. Shorter corridors are less costly and also are more operationally efficient. The central core area at the facility concentrates the ancillary and support areas. Administrative areas are centrally located for easy access by residents and families. Resident lounges are located near the nursing station, thereby facilitating supervision by nursing staff. The State Health Plan consists of three broadly-stated goals. Goal 1 is to develop an adequate supply of long-term care services throughout Florida. Each of the four proposals for additional beds is consistent with this goal in that each proposal contributes to the supply of beds determined to be needed in Palm Beach County. Goal 2 of the State Health Plan is to develop a supply of appropriate long-term care services that are accessible to all residents. The HCR, Manor Care, and Vari-Care proposals are consistent with this goal in that each would supply nursing home services to those in need of such services, and their nursing homes will be accessible to all residents of the planning district, including Medicaid patients. Further, HCR will be the only new facility in northern Palm Beach County, and Manor Care is located in southern Palm Beach County, which experiences the highest demand for nursing home beds in Palm Beach County. Lastly, all three of those applicants will accept a significant number of Medicaid and Medicare patients. On the other hand, the Whitehall application is not consistent with this goal. First, Whitehall has never served Medicaid residents and does not propose to do so. Second, Whitehall does not provide substantial Medicare: .7% in 1987, and 1.3% in 1988. Third, Whitehall may not be affordable for many Palm Beach County residents. Its charges are the highest in Palm Beach County. Fourth, Whitehall markets itself to non-Florida residents. About 20% of its nursing home and ACLF patients reside outside Florida. Hence, approval of Whitehall's 27-beds does not promote access for Palm Beach County or Florida residents. Goal 3 is to insure that long-term care services are appropriately utilized throughout Florida. All four applicants have in place utilization and pre-admission screening programs for appropriate utilization of nursing home services. Accordingly, the proposals of HCR, Vari-Care, and Manor Care are consistent with the State Health Plan; however, the proposal of Whitehall is not. The District IX Local Health Council has adopted five long-term care CON allocation factors which are applicable to proposals for additional nursing home beds in Palm Beach County. The first factor is that freestanding nursing homes should have a minimum of 120 beds in urban subdistricts. Palm Beach County is an urban subdistrict in District IX. HCR's proposal is consistent with this recommendation in that the HCR proposal will bring HCR's nursing home up to the minimum 120-bed size unit. Manor Care is consistent with this recommendation in that it is an existing 120-bed facility with a 30-bed Alzheimer unit approval. Likewise, Vari-Care meets this recommendation since it is a 154-bed facility. Whitehall, however, fails to meet this recommendation since it only has 73 nursing home beds and only seeks approval for 27 more, for a total of 100 beds. Within this first recommendation is a recommendation that priority be given to additions to nursing homes so that the total capacity would reach, but not be greater than, 120 beds. The HCR proposal is consistent with this recommendation in that its proposal, if granted, would increase the number of beds in that facility to only 120. Accordingly, HCR should be given priority in this proceeding in order to meet the first recommendation in the Local Health Council. To the contrary, Whitehall should be given no priority since it does not propose to meet the first recommendation of the Local Health Council. The second recommendation of the Local Health Council is that all new nursing homes and expansions should agree that a minimum of 30% of its patient days will be provided to Medicaid-eligible patients, if such patients are available within the subdistrict. Medicaid-eligible are available within the subdistrict and accounted for more than 700,060 patient days in Palm Beach County in calendar year 1988. HCR's proposal for 42% of its additional patient days to be devoted to Medicaid-eligible patients exceeds the recommendation of the Local Health Council, and the facility-wide commitment to 35% of its patient days to Medicaid-eligible patients likewise exceeds the recommendation. Similarly, Manor Care agrees to a 37% Medicaid condition to its CON approval and, therefore, this factor is satisfied. Likewise, Vari-Care projects a 32% Medicaid payor mix. Whitehall will serve no Medicaid patients, and, accordingly, fails to comply with this recommendation of the Local Health Council. The third recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a range of long-term care services. HCR's 120-bed facility would offer a range of services to all of its patients including those in the proposed addition. Similarly, Manor Care Vari- Care, and Whitehall propose and provide a range of services to their patients and will do so in their proposed additions. The fourth recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a documented history of providing good residential care, staff ratios that exceed minimum requirement, provisions for the treatment of residents with mental health problems, and the inclusion of intensive rehabilitation services The HCR, Manor Care and Vari-Care proposals are consistent with this recommendation in that their staffing ratios exceed minimum requirements, they provide treatment for residents -with mental health problems, they have documented their ability to provide good quality care by operating facilities with superior licenses, and intensive rehabilitation services will be available to their residents. Medicare participation often indicates the level of intensity of skilled services offered at a facility. In this regard, Whitehall's Medicare participation of .7% in 1987 and 1.3% in 1988 does not demonstrate a substantial commitment to intensive skilled or rehabilitation services. The fifth recommendation of the Local Health Council is that priority should be given to applicants who propose service to a distinct patient population that currently is not being served within the Subdistrict. No applicant identified a distinct patient population that is not currently being served within the Subdistrict. Whitehall suggests that its application promotes this factor since it has Jewish patients. It does not suggest that the other applicants do not have Jewish patients. However, there are already three dedicated Jewish nursing homes in Palm Beach County. The presence of three dedicated Jewish nursing homes clearly indicates that the Jewish population is currently being served within the Subdistrict. Whitehall further concedes that its services (frozen Kosher dinners) is not the equivalent of those services of offered at a dedicated Jewish nursing home. Accordingly, no applicant should receive priority pursuant to this final recommendation of the Local Health Council since no applicant has identified a distinct population not currently being served, and no applicant has proposed to serve such a population. Accordingly, the HCR, Vari-Care, and Manor Care proposals comply with the District IX Local Health Council plan, but the Whitehall application does not. HCR's proposed facility will be located in northern Palm Beach County, Vari-Care's facility is located in central Palm Beach County, and Manor Care and Whitehall are located in very close proximity to each other in southern Palm Beach County. The two facilities in southern Palm Beach County both have licensure ratings of superior. It is clear that Whitehall's facility is more luxurious than that of Manor Care (and the other applicants for that matter), and its patient charges are high enough to offer many quality of life enhancements which other facilities are unable to offer. For example, Whitehall offers its patients room service, complimentary beer and wine, and a chauffeur- driven Cadillac for excursions outside the nursing home. However, Manor Care offers services more indicative of a high quality of care than Whitehall. Per its application, Whitehall will not staff its 3-11 or its 11-7 shift with nursing administrators, therapists, nurse-aides, activity directors, or social services. In comparison, Manor Care will provide such staff in its 3- 11 shift, and nurse-aides in the 11-7 shift. Whitehall does not provide in- house physical therapists. Manor Care employs physical therapists. Whitehall provides minimal skilled nursing services based on its small levels of Medicare participation. Whitehall proposes no additional Medicare-certified beds. Manor Care maintained the highest level of Medicare participation in Palm Beach County in 1988. At Whitehall, Alzheimer's patients are mingled in with other nursing home patients. Manor Care has final CON approval to establish a 30-bed dedicated Alzheimer unit so as to treat Alzheimer disease in the most appropriate modality. Whitehall mixes its ACLF and nursing home residents. They share dining rooms, activities, staff, and occupy the same floor. That is very uncommon. Regents Park of Boca Raton (hereinafter "Regents Park"), operated by Petitioner Health Quest Management Corporation III, is a 120-bed nursing center located in Boca Raton. Whitehall is located only about one mile from Regents Park, and Manor Care is located three to five miles from Regents Park. Approximately 90% of Regents Park's patients come from the Boca Raton area. Most are referred to the facility by Boca Hospital and West Boca Hospital. Like Regents Park, Manor Care and Whitehall also receive referrals from Boca Hospital and West Boca Hospital. Regents Park's general nursing program is the bedrock of the facility's service program. Additionally, Regents Park offers an established rehabilitation program. The facility maintains a fully equipped rehabilitation department housed in a specialized module that was built onto the facility some years ago. All of Regents Park's Medicare patients, as well as a substantial proportion of its skilled care patients, participate in the rehabilitation program. Boca Raton's local hospitals refer patients to Regents Park for rehabilitation. Most nursing homes experience less than half the Medicare utilization of Regents Park and Manor Care. These two facilities have historically ranked among the largest providers of Medicare services in Palm Beach County, despite their close proximity. Regents Park also offers an established program for low-functioning patients, which includes Alzheimer's patients and patients suffering from other dementias. Approximately thirty residents participate in the low-functioning program, and the program has four specialized staff. Health Quest claims that it would lose staff and patient days if Whitehall or Manor Care were approved. At the same time, Health Quest admits: it would not release staff; it would not limit current services; Health Quest is an excellent provider and can compete in the future for new residents; and Health Quest staffs well above minimum licensure requirements. Hence, by its own admission, Health Quest failed to show any credible or meaningful adverse impact if Manor Care or Whitehall were approved. Health Quest estimates it might suffer only a $12,000 or a $26,000 net loss if either application were approved. That amount does not constitute substantial, adverse impact.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that HRS enter a Final Order Approving the application of HCR for a CON for 30 additional nursing home beds; Approving the application of Manor Care for a CON for 30 additional nursing home beds; Denying the application of Vari-Care for a CON for 26 additional nursing home beds; and Denying the application of Whitehall for a CON for 27 additional nursing home beds. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd of January, 1990. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NUMBERS 89-2502, 89-2504, 89-2505, 89-2506, and 89-2507 Health Quest's proposed findings of fact numbered 1, 2, 5, 6, 8, 10, 26, 28, and 31 have been adopted either verbatim or in substance in this Recommended Order. Health Quest's proposed findings of fact numbered 3, 7, 27, and 32 have been rejected as unnecessary for determination of the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 4, 11-15, 21, 23-25, 29, 30, and 33-35 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Health Quest's proposed findings of fact numbered 9, 16-20, 22, and 36 have been rejected as being subordinate to the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 37 and 38 have been rejected as being immaterial to the issues involved herein. Health Quest's proposed findings of fact numbered 39-48 have been rejected as not constituting' findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Health Quest's proposed findings of fact numbered 49-79 have been rejected as being irrelevant to the issues involved in this proceeding. HRS' proposed findings of fact numbered 1, 4, and 5 have been adopted either verbatim or in substance in this Recommended Order. HRS' proposed findings of fact numbered 2 and 6 have been rejected as being unnecessary for determination of the issues involved in this proceeding. HRS' proposed findings of fact numbered 3 and 7 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. HRS' proposed finding of fact numbered 8 has been rejected as being subordinate to the issues involved in this proceeding. HRS' proposed finding of fact numbered 9 has been rejected as not being supported by the weight of the credible evidence in this proceeding. HRS" proposed finding of fact numbered 10 has been rejected as being contrary to the weight of the credible evidence in this proceeding. HCR's proposed findings of fact numbered 1-29 and 31-54 have been adopted either verbatim or in substance in this Recommended Order. HCR's proposed finding of fact numbered 30 has been rejected as being irrelevant to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 1-3, 5-8, 13, 15, 18- 23, 31, 33, 34, 37, 38, 41 42, 48, 50-54, 58, 61, 64, 70, 75, 76, 78, 79, and 82 have been adopted either verbatim or in substance in this Recommended Order. Vari-Care's proposed findings of fact numbered 4, 12, 24-27, 66, 69, 74, and 91 have been rejected as not being supported by the weight of the credible evidence in his proceeding. Vari-Care's proposed findings of fact numbered 9-11, 28, 30, 40, 43, 44, 63, 77, 80, 84, 85, and 90 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Vari-Care's proposed findings of fact numbered 14, 16, 32, 35, 36, 39, 45-47, 49, 59, and 73 have been rejected as being subordinate to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 17, 29, 55, 65, 67, 68, and 72 have rejected as being unnecessary for determination of the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 56 and 81 have been rejected as being immaterial to the issues involved herein. Vari-Care's proposed findings of fact numbered 57, 60, 62, 71, 83, and 86-89 have been rejected as being irrelevant to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 39, 47, 75-77, 82, 84, 85, 93, 118, 119, 146, and 151 have been rejected as being immaterial to the issues involved herein. Whitehall's proposed findings of fact numbered 1, 6, 11, 16, 21, 30, 34, 41, 48, 51, 54-56, 58, 59, 61, 65, 66, 74, 78, 88-90, 92, 96, 97, 99, 106, 121, 124, 126, 137, 139, 141, 142, 147, 148, and 150 have been adopted either verbatim or in substance in this Recommended Order. Whitehall's proposed findings of fact numbered 2, 7-9, 12, 13, 17-19, 29, 31, 40, 43-46, 63, 64, 83, 86, 91, 107, 128, 131, 136, 140, and 152 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Whitehall's proposed findings of fact numbered 3, 50, 101, 111-117, 125, 129, 155, and 156 have been rejected as being irrelevant to the issues involved in this proceeding Whitehall's proposed findings of fact numbered 20, 23-25, 27, 38, 42, 49, 52, 57, 60, 67, 69, 70, 72, 73, 79-81, 87, 94, 95, 98, 100, 102-105, 108- 110, 120, 122, 123, 127, 130, 134, 135, 143-145, and 149 have been rejected as being subordinate to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Whitehall's proposed findings of fact numbered 10, 22, 26, 28, 36, 37, 53, 62, 68, 71, 132, 133, 138, 153, and 154 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 14, 15, 32, 33, and 35 have been rejected as being contrary to the weight of the credible evidence in this proceeding. Manor Care's proposed findings of fact numbered 1, 2, 4, 5, 7-9, 11, 13-24, 27-37, 39, 40, 42, 43, 45, 47, 48, 50, 51, 53, 54, 57, 58, 60, 63, 64, 66, 69, 71-73, 75-78, 80, 81, 83, 89, 93-99, 102, 103, 107, 108, 110-113, 121, 130-141, 143-145, 147, and 149 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 3, 101, 104, 106, 117, and 148 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Manor Care's proposed findings of fact numbered 6, 12, 38, 49, 55, 56, 59, 65, 67, 68, 74, 82, 90, 92, 100, 114, 116, and 118-120 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 10, 26, 41, 44, 46, 52, 61, 62, 70, 79, 86-8, 105, 109, 115, 122, 142, 146, 150, and 151 have been rejected as being subordinate to the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 25, 84, 91, and 123- 129 have been rejected as being irrelevant to the issues involved in this proceeding. Manor Care's proposed finding of fact numbered 85 has been rejected as being immaterial to the issues involved herein. COPIES FURNISHED: Samuel J. Dubbin, Esquire Gerald M.Cohen, Esquire STEEL HECTOR & DAVIS 4000 Southeast Financial Center Miami, Florida 33131-2398 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601 Byron B. Mathews, Jr., Esquire 700 Brickell Avenue Miami, Florida 33131 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 James C. Hauser, Esquire Messer, Vickers, Caparello, French & Madsen, P.A. Post Office Box 1876 Tallahassee, Florida 32302 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact By Stipulation it was agreed and it is found that Petitioner's Petition for Administrative Hearing to contest Respondent's initial decision to deny its application was timely filed. On July 15, 1986, Petitioner submitted a Certificate of Need application to construct a 60 bed community nursing home in Collier County, Florida. In December, 1986, this application was denied by the Respondent because of its determination that there was insufficient numeric need according to the rule bed need methodology and because of the low utilization rate of existing facilities in Collier County. The initial intent to deny was appealed by Petitioner which filed a request for formal administrative hearing. Before the matter could be heard, however, Intervenor, Lakeside, filed a Petition for Intervention which was granted by the former Hearing Officer. After the case was set for hearing, Respondent, DHRS, and Petitioner, Surrey, entered into a stipulation and agreement in which DHRS agreed to reverse its position and support Surrey's application at the final hearing and, pursuant to that agreement, on May 14, 1987, DHRS filed a Notice of Change of Agency Position. Health Care Associates was formed in May, 1977, by Dr. John A. McCoy, PhD, in conjunction with an associate, Stanford L. Hoye, each of whom owns 50 percent of the business. This company which, upon approval, will develop and manage the Surrey project, has been involved in the development of several nursing homes in Florida, all but two of which have been managed by the corporation upon development. At the present time, in addition to the instant project, Petitioner is developing three other nursing home projects in Florida at Live Oak, Bradenton, and Crystal River. Dr. McCoy was instrumental in obtaining Certificates of Need for nine of the nursing homes developed by his company. Two of those have not yet been licensed and of the seven remaining facilities, five have been sold by the corporation to other unrelated organizations. In each case, Dr. McCoy personally realized a profit on the sale. Petitioner proposes to build a 60 bed skilled nursing facility in Collier County at a projected project cost of $1,600,000.00. Approximately $250,000.00 of that figure will be utilized for land acquisition and site costs; $150,000.00 for furniture, fixtures, and equipment; $100,000.00 for architectural fees; and $1,100,000.00 for construction costs, insurance, non- movable equipment, and other items. The initial state agency action report on the application, rendered in late November, 1986, recommended the project be denied on the basis there was insufficient bed need shown and because of the low utilization of currently licensed and operating facilities. Nonetheless, on May 6, 1987, the Department changed its position and entered into a stipulation and agreement with the Petitioner, in which it agreed that no CON approved nursing home beds exist in Collier County; the District Health Plan indicates a need for an additional 143 beds in that county in the applicable planning horizon; the bed to population ratio in Collier County for the 65 and older population is the lowest in the Health Care District; and the age 75 and over population is expected to increase by 24 percent within the next three years. On the basis of these factors and others outlined in the stipulation, the Department concluded, inter alia, that Petitioner proposed the lowest total project cost and the highest Medicare and Medicaid commitment, and determined that Petitioner's application should be approved. Petitioner has identified two potential sites for construction of the facility, both located in North Naples. Both sites carry an asking price substantially in excess of the land acquisition estimates outlined in the application, and neither is currently zoned for the operation of a nursing home. Zoning changes or variances are available, but the cost of securing them may be high and time consuming. Albeit each site would be utilized for construction of not only the proposed nursing home facility but also its related personal care unit, Petitioner estimates that 60 percent of the cost of land acquisition would be apportioned to the nursing home component and 40 percent to the personal care unit. That being the case, one of the parcels would fall within the proposed land acquisition figure cited. DHRS District VIII has been divided into subdistricts for the purposes of planning for community nursing home beds. Subdistrict 2 of District VIII consists of Collier County, Florida. The methodology used by DHRS to determine the need for community nursing home beds in Florida is found in Rule-10-5.011, F.A.C. and it provides, among other things, that the need for proposed new community nursing home beds is to be determined based on a planning horizon three years in the future from date of application. In this case, the appropriate planning horizon is July, 1989, three years after Petitioner's application was filed. The population figures relied upon by DHRS for ages 65 through 74 and ages 75 and above for the period July, 1986 and July, 1989 as of the date of the filing of the application were: 131,642 and 79,661 as well as 148, 229 and 96,142, respectively. The need formula contained in the F.A.C. also requires that the application submitted for July batching cycles be based upon the number of licensed beds in the District as of the preceding June 1. On June 1, 1986, District VIII showed 4,600 licensed community nursing home beds of which there were 473 licensed community nursing home beds in Subdistrict 2. As of November 26, 1986, however, there were no approved community nursing home beds in Collier County, a portion of Subdistrict 2. Another factor to be considered in the methodology is the occupancy rate within the district. As of the application period, the occupancy rate in Collier County was 84.44 percent including the occupancy data for Moorings Park. Petitioner and DHRS urge that it is DHRS policy to utilize at the de novo hearing the latest population figures available at the time of the initial application. These figures, cited above, reflect a 55 bed need in Collier county for the period July, 1989. There is, in addition, a factor which Petitioner urges relating to the licensure report submitted by Americana Nursing Home, located in Collier County, which indicates that a number of that facility's semiprivate rooms were converted to private rooms, thereby reducing the number of beds available for use in District VIII during the relevant time period. When this factor is incorporated into the calculations, a higher occupancy rate is indicated which results in a bed need of 66 rather than 55. Intervenor contests any adjustment made on the basis of Americana's conversion of some of its rooms from semiprivate to private rooms and a resultant decrease in the bed inventory thereby. It points out, and properly so, that former semiprivate rooms can be reconstituted as such in a very short period of time if needed and though the beds may not be set up when the room is a single room, the facility is capable of providing those additional beds without further approval when necessary. The removal of those beds, therefore, from the inventory, as a result of a temporary conversion is not an appropriate methodology. It has not been followed by DHRS in the past nor is it provided for in the rule and it should not be done here. Turning to the question of the population estimates and projections appropriate to make the proper calculation of numeric need for the area at the proper time, Intervenor objects to Petitioner's and DHRS' use of the pertinent population projections existing at the time of application on the basis that at a de novo hearing, the proper and most appropriate approach to bed need analysis and calculation would require the use of the most current available statistics. Utilizing the most current population projections for the July, 1989 planning horizon results in a net numeric need for July, 1989 of 21 beds with an error possible to 22 beds. In addition, the occupancy rate would be reduced and in that regard, evidence indicates that occupancy rates in Collier County have been low since 1982. However, there has been a steady and continuous rise in that figure since that time and as of July, 1987, it was 91.1 percent. The date upon which licensed beds are to be counted is provided for specifically in the rule defining need methodology, but the date upon which approved beds are to be counted is not stated in the rule. Similarly, the times for which population data are to be considered is contained in the rule methodology, but the release date of official estimates and projections to be utilized is not specified. Likewise, though the time period for which occupancy rates of existing facilities are to be considered is specifically set out, the input to be utilized when calculating "average occupancy rate" within that time period is not specifically established. In any case, the average occupancy rate as stipulated in the rule methodology for the area has been, until recently, consistently lower than 90 percent which is the figure identified in the rule methodology. Based on all the above, then, it must be found that the more accurate and pragmatic calculation of need utilizing the most current projections and discounting the agency policy for which the agency has not established any firm rationale or justifiable basis, indicates no numeric need for additional beds in the District during the period set forth in the planning horizon. Even if use of the rule methodology does not result in a mathematical showing of bed need sufficient to justify award of a certificate of need, nonetheless such a certificate can be awarded if other conditions and other circumstances establish a need that requires satisfaction within the area and the planning horizon. There was some dispute regarding poverty rates within Collier County and evidence presented at the hearing tends to indicate that the poverty rate in Collier County for the 65 and older population group is generally the lowest in the state. Low poverty rates among the elderly generally coincide with low nursing home utilization since wealthier patients generally have available to them alternatives to inpatient nursing home care. Intervenor urges, and there is no evidence to contradict it, that there are currently available alternatives to nursing home care for wealthy patients not only in Collier County but within District VIII as a whole. The Health Services and Facilities consultant for DHRS who initially reviewed Petitioner's application felt approval was not appropriate at the time he did his analysis. However, since that time additional information has caused him to conclude the application should be granted. He has subsequently learned that two of the four nursing homes in Collier County, which account for more than 50 percent of the beds licensed, have "conditional" quality ratings and there are currently no beds approved for construction in the county even though the county is one of the fastest growing counties in Florida. On the basis of this information, he now agrees with the agency's determination to approve a certificate of need for 60 beds for Petitioner. Based on what Mr. May knows of the three applicants, in his opinion Petitioner is the most appropriate applicant to receive the award. In the Stipulation entered into between Petitioner and the agency, the parties adopted the District VIII Health Council projection of 143 beds needed for Collier County for the 1986 planning horizon. The quarterly nursing home report for the period April through June, 1987, reflects the status of previously issued certificate of needs and includes all reported approved beds up to the date of issuance. This report shows that as of June 30, 1987, two applicants from prior batches received a total of 81 beds which, when subtracted from the 143 identified bed need, still leaves a 62 bed net need. Turning from the question of numeric need to other considerations regarding the applicant in issue, there can be little doubt that the estimates for the design of the proposed facility and construction are appropriate. The figures in Tables 18 and 19 of the application are also appropriate and reasonable. The costs for the project appear to be accurate and appropriate and the completion forecast timetable appears to be more than ample. Mr. Philips, the Vice President in charge of construction lending for the mortgage company which proposes to finance construction of the facility, is familiar with not only the applicant's corporate financial statement, but also those of the two principals, Dr. McCoy and Mr. Hoye. In his opinion, both are capable of providing the initial financing and their operations statements show a history of successful business operation. The 11 percent proposed as an interest rate for the loan supporting the construction is reasonable if not liberal, and the 25 year duration of the loan is also reasonable as is the loan origination fee of two points. If the certificate of need is approved, the lender is ready, willing, and able to lend the applicant sufficient funds to complete construction. Intervenor's expert in nursing home budgeting and financial feasibility analysis, testifying in contravention of Petitioner's experts, believes that approval of Petitioner's operation would have a severe financial impact on the Intervenor's operation as a current provider resulting in a first year bottom line loss of approximately $235,000 and a second year bottom line loss of almost $300,000. It should be noted here, however, that these are not actual operating losses but a projected reduction in profit. These estimates are based on August, 1987 figures adjusted forward for inflation. In short, while the opening of Petitioner's facility may have a negative impact on existing facilities, it would not necessarily result in a deficit operation for any existing provider. This expert also has some difficulty with Petitioner's projections of financial feasibility in its own facility. For example, he questions the 15 percent census of Medicare patients based on the fact that currently Intervenor does not have any Medicare patients though it does accept them. He also considers the estimate of a 96 percent occupancy by the end of six months to be unreasonable, especially in Collier County. He believes Petitioner's proposed expenses are understated and there are inconsistencies between the staffing table and labor costs in that the nursing expense is understated and the hourly rates projected to be paid are much too low. He believes that the projected cash flow is overstated since there is no provision for a reduction of principal. There are, also, other possible negative aspects to approval of Petitioner's application. Intervenor's regional director, who is an expert in nursing home administration, believes that approval of Petitioner's application will have a direct adverse reaction on Intervenor's Lakeside operation in regard to services provided, staffing, and its own financial feasibility. With regard to staffing, there is currently a critical shortage of nurses in Collier County and this factor was confirmed by a representative of another facility in the area. Approval of Petitioner's facility might well worsen the problem. Other service personnel are also in short supply and approval of Petitioner's application will worsen this as well. If these personnel shortages materialize, it may result in a reduction of quality of care, but this is speculative and there is no direct evidence that this would happen. Lakeside's current license is rated as "standard" as opposed to "superior" and this is claimed to be directly related to the nursing shortage which resulted in the facility's inability to attract sufficient nursing personnel to merit a "superior" rating. The witness identified other apparent deficiencies in applicant's submission, but these are either of a minor nature or the subject of opinion or conjecture. In short, the only substantive objection sustainable is the prospective adverse effect on the cost of attracting qualified nursing personnel. Certain other projections by the applicant are considered to be unreasonable by Americana's Director of Operations, such as the 15 percent projection for Medicare patients. Currently Americana, which generally has between 13 and 23 beds open at any time, has 2 Medicare patients and this witness also feels that a 96 per cent fill up rate in 6 months is unreasonable. Based on his experience, Collier County had even a slower than normal fill up rate when compared to other areas of the state. Notwithstanding the negative testimony, there can be little question, and it is so found, that Petitioner would be able to provide quality care if its application were approved. Turning to the question of the relationship of this application to State and Local health plans, the bed need calculation has already been discussed above. That calculation is based on the state methodology. However, the state methodology may be substantially different than a need developed by reference to the local health plan. The local plan looks at need from the county/subdistrict basis whereas the state looks at the district as a whole for establishment of need and then distributes beds on the basis of current bed census. When the smaller counties with fewer existing beds grow faster than the larger counties with a greater number of existing beds, they tend to be caught in a squeeze in that they get fewer beds because they are smaller, while their actual need may be greater than that of the larger county which, by virtue of its size, gets the larger number of beds. This state need rule, which calls for a 90 percent occupancy rate is felt by some to be less valid and less accurate a basis for evaluating the need in reality. As to the question of alternatives, there appear to be none for the vast majority of people in the county. Hospices or internal acute care bed or ambulatory facilities are not truly alternatives to nursing homes. In summary, Petitioner's expert believes that the Department's projected need for 43 beds could justifiably result in an approval of an application for 60 beds because: There were no approved beds at review time, Population trends, growth, and utilization trends indicate a need for new beds, The bed to population ratio in the county is one of the lowest in the district and in the state, (16 or 17/1,000 vs 27/1,000 normal for 65 plus) and the situation has not changed, Although the 65 plus population is used to determine need, the greatest use of nursing home facilities comes from the 75 plus population which is expected to increase in Collier County by July, 1989 by 32 percent, double the statewide average, At the time of application review, no existing facility was rated "superior" (there are now), showing a need for options. The applicant has a record of "superior" ratings statewide, The district health plan shows a bed need exceeding 60 beds for Collier County, The granting of a 60 bed nursing home is not inconsistent with previous actions by the Department when a mathematical need less a bed showed than 60 number. The project also is consistent with the rule criteria as well as statutory criteria, and Given DHRS's methodology and considering the adjustments due to Americana's change, there can be shown a mathematical need greater than the 43 shown by DHRS. Whether the need is 43 or 66 is really not important. The need is there. There is much to be said for these conclusions and they are adopted as findings herein.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Respondent, Department of Health and Rehabilitative Services, approving Petitioner, Health Care Associates, Inc., d/b/a Surrey Place of Collier County' application for a certificate of Need to establish and operated a 60 bed skilled nursing facility in Collier County, Florida. RECOMMENDED this 8th day of January, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0691 The following constitutes my specifics rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER AND RESPONDENT JOINT SUBMISSION 1 - 5. Accepted and incorporated herein. 6 - 8. Accepted and incorporated herein. 9. Accepted and incorporated herein. 10 - 15. Accepted and incorporated herein. 16. Accepted as a statement of DHRS policy and the resultant figures determined thereunder but rejected as the appropriate source of information. 17 - 19. Accepted and incorporated herein. Accepted as Petitioner's and Respondent's calculation but rejected as bearing in the Issue of bed need. Rejected as not reducing the number of available beds. Rejected. Accepted and incorporated herein. 24 - 29. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. 32 - 34. Accepted. 35 - 50. Accepted. Accepted. Accepted. 53 - 54. Accepted and incorporated herein. 55 - 56. Accepted. 57. Accepted. 58 - 59. Accepted. 60. Accepted. 61 - 65. Accepted and incorporated herein. 66 - 69. Accepted and incorporated herein. 70. Accepted. FOR INTERVENOR 1 - 6. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Irrelevant. Accepted and incorporated herein. Accepted and incorporated herein. Irrelevant. Accepted. Accepted and incorporated herein in substance. First sentence is rejected. Occupancy rates of other local facilities are not necessarily determinative of the expected occupancy rates of Petitioner in the absence of a showing of similarity of other factors. 16 - 19. Rejected as based on other than the best evidence. No original source was presented. 20. Accepted. 21 - 25. Accepted and incorporated herein. 26 - 27. Accepted. 28 - 29(b). Accepted. 30 - 31. Accepted and incorporated herein. 32. Accepted and incorporated herein. 33 - 34. Accepted and incorporated herein - except for that portion of paragraph 34 indicating the approval of Petitioner's application would be inconsistent with local health plan. Accepted but not determinative. Accepted but not determinative. First sentence rejected as argumentative. Remainder accepted. Rejected as contrary to the weight of the evidence. Rejected. 40-42. Accepted except for the last sentence of paragraph 40 which is rejected. Rejected as not proven. Rejected as not proven. Mr. May was unaware of possible charges during lag time. Accepted. Accepted. Accepted and incorporated herein. Accepted. Accepted and incorporated herein. Accepted. Rejected as argument rather than fact. 52 - 53. Irrelevant in light of 53. which is accepted. 54 - 55. Irrelevant in light of Intervenors' paragraph 55 which is accepted. 56 - 58. Accepted and incorporated herein. 59. Accepted. 60 - 64. Accepted. Accepted. Rejected as biased. Accepted. Accepted as to the fact that a reduction in Lakeside's income might occur, but rejected as to its severity. Intervenor presents a "worst case" picture based on speculation and conjecture. Accepted that Petitioner's projected site is near that of Intervenor. Remainder rejected as conjecture. 70 - 71. Accepted. COPIES FURNISHED: Philip F. Blank, Esquire Reynold Meyer, Esquire 204-B South Monroe Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Asst. General Counsel 1323 Winewood Blvd. Building One, Room 407 Tallahassee, Florida 32399-0700 W. David Watkins, Esquire Oertel & Hoffman, P.A. 2700 Blair Stone Road Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact On or about July 15, 1986, Petitioner filed an application with Respondent to construct a 60 bed community nursing home with a 45 bed adult congregate living facility (ACLF) in Highlands County, Florida. This application was identified as CON 4700. After preliminary review, Respondent denied this application on or about December 23, 1986, and Petitioner timely filed its petition for formal administrative hearing. Highlands County is in Respondent's Service District VI, Subdistrict IV. The parties stipulated that there was a net bed need in the July, 1989 planning horizon for Highlands County of an additional 28 community nursing home beds, based upon the bed need calculation set forth in Rule 10-5.011(1)(k), Florida Administrative Code. It was further stipulated by the parties that Petitioner's original application met all statutory and rule criteria for the issuance of a CON, but for the issue of need. Since the parties did stipulate to a need for 28 community nursing home beds, Petitioner sought, at hearing, to offer evidence in support of only an "identifiable portion" of its original application. Thus, Petitioner offered no evidence in support of the application it filed with Respondent, and which was preliminarily denied on December 23, 1986. Rather, Petitioner sought consideration and approval of either 28 nursing home beds with 32 ACLF beds, or 30 nursing home beds with 30 ACLF beds. Since the stipulation of the parties could not cover the financial feasibility of either alternative because they were presented for the first time at hearing, Petitioner offered evidence to establish the financial feasibility of these alternatives. Based upon the testimony of Herbert E. Straughn, it is found that Respondent does not normally approve nursing home CON applications for less than 60 nursing home beds. However, Respondent has approved a CON application for 30 nursing home beds in association with 30 ACLF beds or some other similar service when the need for 30 nursing home beds was shown to exist. Respondent has also approved a CON for less than 30 nursing home beds in connection with an existing 60 bed facility when the stipulated need did not reach 30. In this case, Petitioner's original application was for 60 community nursing home and 45 ACLF beds, and it was at hearing that Petitioner sought to down-size its application to meet the stipulated need of 28 nursing home beds. There are no accessibility problems with regard to special programs or services, or any other problems of accessibility, in District VI, Subdistrict IV. Petitioner's request for partial consideration and approval of its application, which was presented at hearing, would not introduce any new services or construction not originally contemplated in its application, although the size of the project and number of beds sought would be reduced. In its original application, Petitioner proposed a nursing home with two 30-bed units, and now seeks approval for only one 28 or 30-bed unit. From a health planning standpoint, nursing home bed units usually occur in multiples of 60 due to staffing and equipment considerations. No evidence was offered to show why the Respondent should deviate from its usual practice in this case, other than the fact that a need for only 28 beds exists. At hearing, Petitioner introduced revised pro formas for 28 and 30 nursing home beds, associated with 32 and 30 ACLF beds, respectively. These revised pro formas were based on the same ratios of patients by payor class as in the original pro forma. The equity to loan ratios in the revised pro formas to finance the project remained the same as in the original application. The revised pro formas combine revenue and expenses for nursing home and ACLF beds. However, if revenue and expenses for nursing home beds is segregated from ACLF beds, it is found that a 30 bed nursing home facility would not be financially feasible in either 1989 or 1990, and a 28 bed nursing home facility would be even less financially feasible than a 30 bed facility. When revenues and expenses for the ACLF component of the project are considered along with nursing home bed income and expenses, the project shows only a marginal profit in the second year of operation with the 30 nursing home bed-30 ACLF bed alternative. It is barely break-even in the second year under the 28 nursing home bed-32 ACLF bed alternative. Thus, under either alternative, the project is not financially feasible in 1989, and the nursing home component of this project, standing alone under either alternative presented at hearing, is not financially feasible in either 1989 or 1990. The 30 nursing home bed-30 ACLF bed alternative is more financially feasible than the 28-32 alternative since the 28-32 alternative is barely break even in the second year of operation. Specifically, under the 28-32 alternative, pretax income of less than $9000 is projected in the second year of operation with total revenues of approximately $1.321 million and total expenses of approximately $1.312 million.
Recommendation Based upon the foregoing, it is recommended that Respondent enter a Final Order denying Petitioner's application for CON 4700. DONE AND ENTERED this 7th day of January, 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 7th day of January, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0667 Rulings on Petitioner's Proposed Findings of Fact: Adopted in Findings of Fact 1, 2. Adopted in Finding of Fact 2. Rejected as unnecessary. Adopted in Finding of Fact 4. Adopted in Findings of Fact 5, 6. Adopted in Finding of Fact 8. Adopted in Findings of Fact 5, 6, 9. 8-10 Adopted in Finding of Fact 10. Rejected as simply a statement of position and not a proposed finding of fact. Adopted in Finding of Fact 6. 13-16 Rejected as conclusions of law and not proposed findings of fact; this legal argument has been considered in the preparation of conclusions of law contained in this Recommended Order. Adopted in part in Findings of Fact 8, 9, 10. However the last sentence in the proposed finding of fact is rejected as unclear. Rejected as unnecessary. Rejected as not based on competent substantial evidence, although from a health planning viewpoint a 30 nursing home bed unit is more functional and cost effective than a 28; it is also more financially feasible in this case. Adopted in Finding of Fact 11. Adopted and Rejected in part in Findings of Fact 9, 11, and otherwise rejected as unnecessary and cumulative. Rejected as not based on competent substantial evidence, although adopted in part in Findings of Fact 9, 11. Rulings on Respondent's Proposed Findings of Fact: 1 Adopted in Findings of Fact 1, 2. 2 Adopted in Finding of Fact 2. 3 Adopted in Finding of Fact 3. 4 Adopted in Finding of Fact 4. 5 Adopted in Finding of Fact 6. 6 Adopted in Findings of Fact 5, 6. 7 Adopted in Finding of Fact 11. 8-9 Adopted in Finding of Fact 7. COPIES FURNISHED: Jay Adams, Esquire 215 East Virginia Street Tallahassee, Florida 32301 Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 John Miller, Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background On November 23, 1988 petitioner, Lee County Board of County Commissioners d/b/a Shady Rest Nursing Home (applicant, Shady Rest or County), filed its application with respondent, Department of Health and Rehabilitative Services (HRS), for a certificate of need (CON) seeking authorization to replace one hundred and five existing beds and to add seventy-five nursing home beds so as to create a one hundreds eighty bed community nursing home facility at 3922 Michigan Avenue, Fort Myers, Florida. In the alternative, the County requested a partial award of replacing its existing facility add adding fifteen beds so as to create a one hundred twenty bed facility. Under the alternative plan, the County projected an anticipated capital expenditure of $5,490,500. The County has agreed that, if the application is approved, the additional beds would be dedicated exclusively to Medicaid patients. After reviewing the application and certain additional information filed by the County through the omissions process, HRS deemed the application to be complete on January 9, 1989. Thereafter, on March 10, 1989 HRS issued proposed agency action advising the County that its application had been denied. As grounds, the agency generally stated that its evaluation of the application revealed the applicant had not satisfied certain statutory and rule criteria. In addition, HRS concluded that the County had failed to provide adequate documentation prior to the January 9, 1989 "completeness" date to support its request. This action prompted the County to request a formal hearing to contest the agency's preliminary decision. However, the appeal is limited to the partial award request to add fifteen beds and establish a one hundred twenty bed facility. It is noted that there were no other applicants in the November 1988 batching cycle and no existing providers have intervened in this proceeding. The Applicant The County's facility is located in subdistrict 5 (Lee County) of HRS District 8. The County has owned and operated Shady Rest Nursing Home for approximately twenty-eight years. Now licensed for one hundred five beds, the facility is categorized by HRS as a community nursing home. This means that it serves the population at large and has not received a certificate of need designating the beds as sheltered beds in accordance with Chapter 656, Florida Statutes (1987). As a publicly owned facility, the nursing home provides service to the public regardless of profit. Although the facility received annual subsidies from the County until as recent as four years ago, the facility now operates on a fiscally sound basis. The most typical patient at Shady Rest is Medicaid eligible. Because the plant is around thirty-one years old, the County desires to construct a new, more efficient and less costly to operate facility. In this regard, it is noted that HRS supports the construction of a new facilites for the existing one hundred five beds but opposes the authorization for any new beds. Since by law a facility can have no more than sixty beds for each nursing station, it was more logical and efficient for the applicant to design a facility having one hundred twenty beds, or one that required two nursing stations. Thus, besides need, the additional fifteen beds are predicated on economic and planning considerations. Motion in Limini There is no specific methodology that is prescribed by HRS to inform applicants of what is needed to meet the burden of proof regarding not normal circumstances. Rather, applicants must rely on the language in Rule 10- 5.11(1)(k)2.j., Florida Administrative Code (1987). As noted in finding of fact 8, HRS has just begun using a new CON application form for nursing homes. The County's application was submitted in the first batching cycle in which the new CON application form was used. In its application, the County stated it was applying for more beds than were contained in the published fixed need pool pursuant to the special circumstances contained in subsections (1)(b) and (1)(k)2.j. of Rule 10-5.011, Florida Administrative Code (1987). Also attached to the application was what the County describes as "detailed evidence" of need for Medicaid-eligible nursing home beds in Lee County and the then current number of Lee County residents were located in out-of-county nursing homes. The detailed evidence is found on page one of two of Appendix 1 (1B2 - Optional) of the application and consists of the statement that "approximately 750-775 Lee County residents are reported in this (Medicaid) program as being in nursing care facilities. Approximately 130-150 of these residents are located in nursing homes outside of Lee County. Shady Rest Nursing Home experiences a waiting list of approximately 8 to 15 Lee County residents per month." Aside from this, no other information or documentation concerning special circumstances was included with the application. Although the County had at least three corroborating patient lists in its possession at the time the application was filed, it chose not to include them with the initial application or through the omissions process. At hearing, the County proffered into evidence the waiting lists and a more recently prepared letter of support and quality assurance manual on the theory they merely supplemented the statement set forth in Appendix 1 of the application. However, HRS did not consider these to be matters within the general scope of the application, deemed them to be impermissible amendments and objected to their admission by a motion in limini. The Review Process As an aid in evaluating applications for nursing home facilities, HRS recently instituted a somewhat complicated scoring system which involves an analysis of the responses provided by the applicant in its application. The scoring system is not codified in rule or statute form but is utilized on an ad hoc, case by case basis. The evaluation process rates an applicant's compliance with eight objectives which are designed to track the CON review criteria. The objectives are described in detail in HRS exhibits 3 and 4 received in evidence. Each objective has been assigned a certain number of points in the scoring process ranging from thirty to five hundred, or a total possible score of 1,398 points. The responses are measured by two HRS in-house consultants against this established point system, and numerical scores are assigned by them to each of eight categories of objectives. The two scores are averaged, and the overall score is then evaluated as a percentage of total points attained. Since a maximum of 1,398 points may be attained by an applicant, the overall average score is applied to that number to attain the applicable percentage. According to HRS, if a sufficient proportion of the total available points is achieved, the achievement indicates that the proposal is in conformance with the statutory and rule review criteria. The agency points out, however, that there is no passing score per se but rather the goal is to attain the highest score possible. In addition, the successful applicant will achieve a consistently high number in each of the eight rated objectives. This is because HRS equates consistency with capability to implement a successful project. In this case, HRS's review of the County's application resulted in the County achieving an overall average score of 710.81 points on its partial award request. This equated to a "score" of 50.84 percent of the 1,398 maximum assignable points. The agency then concluded that the applicant had "not demonstrated sufficient compliance with all relevant certificate of need review criteria for the approval of nursing home beds." The state agency action report received in evidence as petitioner's exhibit 2 indicated that the County's overall strengths were determined to be objectives 6 and 7 while its major weakness was noted in objective 1. The latter objective related to the identification of the nursing home fixed need bed pool and conformance with the local and state health plans. Compliance with Rule Criteria For purposes of determining the need for additional community nursing home beds in Lee County, HRS used a planning horizon of July 1991. In other words, through the use of a formula embodied in a rule, the agency calculated the number of new community nursing home beds projected to be needed in Lee County (the applicable subdistrict) at a relevant future period of time. The parties have agreed that under this formula no new beds are projected to be needed in Lee County during the planning horizon. As a general rule, additional beds would not normally be approved under these circumstances. However, the County contends that "not normal" circumstances are present that justify the need for an additional fifteen beds. Under this approach, an award of additional beds can be made even if no formula need exists if the applicant can show "special circumstances". One such special circumstance recognized by HRS is the inability of residents to obtain access to licensed and unoccupied beds in the area. The County has relied upon this exception and contends there is a demonstrated shortage of community nursing home beds in the subdistrict for Medicaid eligible patients. Underpinning the applicant's use of the exception are three waiting lists maintained by the facility over the past year and a half. They were proffered to show that persons with a need for nursing home care have been denied access to currently licensed but unfilled beds. One list (petitioner's exhibit 5) begun in 1987 contains the names of a large number of individuals who have filed applications with Shady Rest, of whom the County identifies twenty- one as being Medicaid-eligible and appropriate for immediate placement. A second list (petitioner's exhibit 6) contains the names of persons who made a phone inquiry with the home. Although there was no supporting documentation to show those individuals' demonstrated need for nursing home care as required by the rule, the facility's social service coordinator testified without contradiction that the above twenty-one persons were all determined to be Medicaid eligible and appropriate for placement in a nursing home. Even so, there was no independent or corroborative evidence that those twenty-one individuals had been denied placement in other Lee County nursing homes. This infirmity supports the claim of HRS that the list, in its present form, is not probative of the issue of need because clients often sign up on multiple lists or have a preference for a particular facility. This assertion was not contradicted by credible evidence. A third list (petitioner's exhibit 7) reflected that each month from August 1988 until July 1989 there were between one hundred fourteen and one hundred thirty-four Medicaid eligible Lee County residents in nursing homes outside of Lee County. This information was derived from monthly Medicaid billing summaries compiled by HRS. While it is probably true, as HRS suggests, that some of these patients by choice are residents of out-of-county facilities, it is just as likely that some patients did not voluntarily choose to be placed outside the county. This is because placement in an out-of-county home is inconvenient for a patient's family, particularly one at the poverty level. To the extent involuntary out-of-county placements have occurred, it is because some nursing homes may not always accept a Medicaid patient. For example, a nursing home may not be equipped to handle a particular client's medical condition. However, this type of client will always have a more difficult time being placed than others. Therefore, there are occasions when vacancies at nursing homes do not correspond with the ability to place a Medicaid-eligible patient in Lee County. To corroborate the contention that it has been unable to accept all applicants, the County established that its September 30, 1988 utilization rate was 98% with the percentage of Medicaid patients at 88% of the 98%. It was also established that the rate has not decreased since that time. According to the County, this high utilization factor has contributed to the County's inability to provide service to all applicants. Even so, a high utilization rate alone is not dispositive of the accessibility issue. While County representatives contended they have had difficulty in placing Medicaid eligible patients not only in their facility but also in other Lee County nursing homes, the HRS District 8 administrator, who is responsible for assisting those individuals in securing placement, had no "hard data" to confirm this. Indeed, her subordinates, who also testified, indicated that the alleged difficulty in placement arose only "at times". Given these considerations, it is found that persons with a need for Medicaid services are reasonably able to access existing services in the subdistrict and that the required not normal circumstances within the meaning of the rule are absent. Compliance with Statutory Criteria Prior to hearing the parties stipulated that various statutory and rule criteria were not applicable in this proceeding. After the evidentiary hearing was held, the agency acknowledged in its post-hearing proposed order that only five statutory criteria in Subsection 381.705(1), Florida Statutes (1987) are still in issue and that only two paragraphs in rule 10-5.011(1) apply. The first three statutory criteria pertain generally to need and accessibility and require that HRS consider the need for the project in relation to the applicable district and state health plans, the adequacy of existing providers and whether the proposed services will be accessible to all residents. In addition to the findings in paragraph 12, it is noted that for purposes of planning and review of nursing home care in District 8, the local health plan, which has been received in evidence as petitioner's exhibit 6, recommends that "preference . . . be given to new and existing community home bed developments that dedicate a substantial percentage of their beds for Medicaid patients." In addition, it recommends that "expansion of existing facilities to 120 beds should be given prefernce over construction of new facilities in the same health service area." Applicant's proposal is in agreement with those objectives, and it is found that the proposal is consistent with the local health plan. As required by law, the application also mandates that the applicant demonstrate compliance with relevant portions of the state health plan, including justification for an award of beds in excess of the zero fixed need pool. Those portions of the plan have been received in evidence as petitioner's exhibit 7. In its application response, the County simply stated that it did not have a copy of the state plan and therefore could not furnish an answer to this inquiry. At hearing, the County relied upon the special circumstances proof to show compliance with the state health plan. Since special circumstances were not shown to be present, the applicant also failed to show that the project is in conformity with the state health plan. Finally, it was established that the project will be accessible to all residents in the district. In its proposed order, HRS appears to have conceded that the County will provide adequate quality of care to to its patients. Nonetheless, and in an abundance of caution, the following findings of fact are made on this issue. The issues of whether the County can provide quality of care as well as the applicant's past record of quality of care are relevant. In this regard, the parties offered into evidence the records of past inspections by HRS personnel to show the historical record of care on the part of the facility. These records reflect that HRS gave the facility a standard rating in 1986 and 1987. In 1988, an initial inspection resulted in the facility receiving a conditional rating. However, the facility appealed that decision and was successful in getting the conditional rating removed. Since May 16, 1988 the County has maintained a superior rating which is indicative of the high quality of care rendered to its patients. These findings were corroborated by local HRS employees who characterized Shady Rest's' quality of care as "high". Therefore, it is found that this criterion has been satisfied. The next criterion in issue relates to the long-term financial feasibility of the project. As noted earlier, the facility was subsidized by the County until four years ago. Since then, it has operated in the black. According to the County's consultant, if the project is approved, the County will provide subsidies of $900,000 and $250,000, respectively, during the first two years of operation and any other required funding thereafter. It should be recognized, however, that the first year is the start-up of operations, with relatively high costs due to inventories, working capital and the like. The witness further opined that he expected the facility to be financially sound in the future. This is true even though the facility projects a payor mix of decreasing Medicaid days in the future. Therefore, it is found that this criterion has been satisfied. The only remaining criterion in issue concerns the costs and methods of the proposed construction and whether there are less costly alternatives. The agency's principal objection concerns the failure of the County's architect to document on the plans whether the project would be in compliance with local, state and federal building codes. More specifically, HRS's objection is based upon contentions that the County (a) did not document local, state and federal code references on the schematics, (b) did not address the relationship of the replacement facility with the bed addition, and (c) did not sufficiently document the support functions on the schematics. In response to the first objection, the registered architect who drafted the plans established that there are some forty-five codes that the structure must meet in order to pass muster with HRS. He did not identify each of the codes on the drawings because (a) the pertinent rules do not call for such a representation at this phase of the project, (b) "it is obvious what codes it would be built under", and (c) the plans would be subject to three more reviews by HRS, and a more detailed analysis would be given during that part of the process. It is noted that the architect has constructed more than twenty nursing home projects in Florida and used the same plans here as are being currently used on four other facilities now under construction in the state. As to the agency's objection to the failure to show where the additional fifteen beds will be placed in the facility in relation to the other one hundred and five, the architect pointed out that the new facility will have one hundred twenty beds, all of which are "new" in a sense, and it is irrelevant where the fifteen "new" beds will be located from an architectural standpoint. Finally, the architect responded to the last criticism by explaining that the drawings are self-explanatory and show designated support areas with the associated square footage devoted to a particular function. The witness added that the drawings submitted by the app1icant are "a very basic schematic" and in an early preliminary stage. This testimony is accepted and it is found that this statutory criterion has been met.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered denying the application of the Lee County Board of County Commissioners d/b/a Shady Rest Nursing Home for a certificate of need to add fifteen beds and construct a new one hundred twenty bed community nursing home facility in Fort Myers, Florida. DONE AND ENTERED this 8th day of November, 1989, in Tallahassee, Leon County, Florida. Donald R. Alexander, 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 8th day of November, 1989.
