Findings Of Fact Procedural. 1. Meridian, National, HBA and ten other applicants filed certificate of need applications with the Department in the October, 1987, nursing home bed certificate of need review cycle of the Department for Subdistrict 4 of District This area includes Flagler and Volusia Counties, Florida. Each of the applicants involved in these cases filed a letter of intent with the Department and the District 4 Local Health Council within the time required for the filing of letters of intent for the October, 1987, nursing home bed certificate of need review cycle. Each of the applicants involved in these cases filed their certificate of need applications within the time required for the filing of certificate of need applications for the October, 1987, nursing home bed certificate of need review cycle. The applications were deemed complete by the Department. The Department comparatively reviewed the applications of the applicants involved in these cases and those of ten other applicants. Based upon this review the Department issued a State Agency Action Report for the October, 1987, nursing home bed review cycle (hereinafter referred to as the "SAAR") on February 18, 1988. The SAAR was published by the Department in the Florida Administrative Weekly on March 4, 1988. In the SAAR the Department proposed to approve the certificate of need application filed by HBA and to deny all other applications. Ten of the applicants whose certificate of need applications were denied by the Department filed Petitions pursuant to Section 120.57(1), Florida Statutes, challenging the Department's proposed action. All of the Petitioners except the two Petitioners in these cases and HCR withdrew their Petitions prior to the formal hearing of these cases. HCR participated in the formal hearing of these cases but withdrew its Petition prior to the issuance of this Recommended Order. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for nursing home beds to be located in Flagler and Volusia Counties. Meridian. Meridian, Inc., is a corporation headquartered in Towson, Maryland. The stock of Meridian, Inc., is owned by five individuals. Volusia Meridian Limited Partnership (hereinafter referred to as the "Partnership") is a Maryland limited partnership authorized to conduct business in Florida. Meridian, Inc., is the Partnership's general partner. The Partnership owns a nursing home in Ormond Beach, Florida. The Ormond Beach nursing home is leased to Meridian Nursing Centers, Inc. For the past twenty years, Meridian has owned, operated, developed and managed long-term health care facilities, retirement communities and other health care services for the elderly. Meridian owns and operates thirty-three facilities, in five States. These facilities have approximately 4,800 beds. In Florida, Meridian owns nursing homes in Lakeland, Plantation and Ormond Beach. As of the date of the formal hearing, Meridian had two other facilities under construction in Florida: one located in Longwood, Florida; and the other located in Melbourne, Florida. National. National is a publicly traded Delaware limited partnership, authorized to conduct business in Florida. National's principal offices are located in Murfreesboro, Tennessee. National was created in 1971 with the purchase of fourteen existing nursing homes located in Tennessee, Kentucky, and Georgia. National now operates seventy nursing homes and health care centers in ten different States. Twenty-two of these homes and health care centers are managed, but not owned, by National. National also operates four retirement complexes, eighteen home health agencies and seven to ten specialized Alzheimer's units. In Florida, National owns two health care centers and manages eighteen centers owned by other companies. None of these facilities are located in Flagler or Volusia Counties. HBA. HBA is a Florida corporation engaged in the business of developing, constructing and operating nursing homes. The principals of HBA have owned and operated nursing homes for approximately twenty years and in Florida for approximately fifteen years. HBA's corporate headquarters are located in Ft. Lauderdale, Florida. HBA owns or operates twenty-four nursing homes located in Florida, New Jersey, Pennsylvania and Washington D.C. In Florida, HBA owns or operates six nursing homes. They are located in New Smyrna Beach, Ft. Lauderdale, Plantation, Tamarac and Miami. The New Smyrna Beach nursing home, Ocean View Nursing Home (hereinafter referred to as "Ocean View"), is located in southern Volusia County. The Proposals. Meridian's Proposal. Meridian's Ormond Beach nursing home is located in northeast Volusia County. This facility consist of 60 nursing home beds. It began operation in November, 1987. In this proceeding, Meridian is seeking approval of the addition to its Ormond Beach nursing home of an additional 60 nursing home beds. Meridian is proposing the construction of a 14,531 square foot (329 square feet per bed) addition to its existing Ormond Beach nursing home. The total size of the Ormond Beach facility will be 39,000 gross square feet if Meridian's proposal is approved. The total proposed cost of Meridian's project is $1,247,800.00. The total project cost of the resulting 120-bed Ormond Beach facility will be $4,262,361.00. National's Proposal. In this proceeding, National is seeking approval of a certificate of need authorizing the construction and operation of an 80-bed nursing home to be located in the Palm Coast area of Flagler County, Florida. The exact location of the facility has not been identified by National. National is proposing the construction of a facility consisting of approximately 44,183 gross square feet (552 square feet per bed). The total proposed cost of National's project is $3,786,846.00. HBA'S Proposal. HBA currently owns and operates Ocean View. Ocean View is located in southeast Volusia County. Ocean View currently is licensed to operate 179 nursing home beds. In this proceeding, HBA is seeking approval of the addition to Ocean View of 60 nursing home beds. HBA is proposing the construction of an 18,000 gross square foot (263 square feet per bed) addition to Ocean View. The total size of Ocean View will be 63,000 gross square feet if HBA's proposal is approved. The total proposed cost of HBA's project is Section 381.705(1)(a), Florida Statutes. Numeric Need. Numeric need for additional nursing home beds is determined pursuant to the need methodology provided in Rule 10-5.011(1)(k), Florida Administrative Code (hereinafter referred to as the "Need Methodology"). The Department determines the need for additional nursing home beds by applying the Need Methodology for "planning horizons" three years into the future from the certificate of need batching cycles. For the batching cycle involved in these cases, the Department published pursuant to Rule 10-5.008(2), Florida Administrative Code, the net number of additional nursing home beds, the "fixed need pool," in the Florida Administrative Weekly, for the first time. In these cases, the Need Methodology must be applied to determine the fixed need pool for the July, 1990, planning horizon for Flagler and Volusia Counties. These Counties make up Subdistrict 4 of the Department's District 4. Initially the Department determined that the fixed need pool involved in these cases was zero. Pursuant to Department policy, the Department published a corrected fixed need pool during the grace period of Rule 10- 5.008(1)(b), Florida Administrative Code, on September 18, 1987. Based upon the corrected fixed need pool, the Department determined that there was a need for 80 additional nursing home beds for Subdistrict 4 of District 4. No point of entry was provided by the Department for challenging this fixed need pool. The Department's calculation of a fixed need pool of 80 nursing home beds was based upon a misapplication of the Need Methodology by the Department. Based upon a proper application of the Need Methodology there is a need for 68 additional nursing home beds for the planning horizon at issue in these cases. The applicants involved in these cases filed their applications in reliance upon the Department's published fixed-need pool of 80 additional nursing home beds. The proper components of the Need Methodology for determining the gross number of nursing home beds needed for District 4 in July, 1990, are as follows: The projected population age 65-74 in District 4 for July, 1990, is 125,990 (POPA); The projected population age 75 and older in District 4 for July, 1990, is 91,109 (POPB); The population age 65-74 in District 4 in July, 1987, was 113,083 (POPC); The population age 75 and older in District 4 in July, 1987, was 77,867 (POPD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 (LB); The estimated bed rate for the population aged 65-74 of District 4 is 0.01034836 (BA); The estimated bed rate for the population aged 75 and older of District 4 is 0.06209018 (BB); and The total number of nursing home beds needed for District 4 in July, 1990, is 6,961 beds (A). The proper components of the Need Methodology for allocating the gross number of nursing home beds needed for District 4 in July, 1990, to Subdistrict 4 are as follows: The number of licensed beds in Subdistrict 4 as of July 1, 1987, was 2,290 beds (LBD); The number of licensed beds in District 4 as of July 1, 1987, was 6,005 beds (LB); The occupancy rate of Subdistrict 4 was 85.83% (OR); and The gross number of nursing home beds allocated to Subdistrict 4 is 2,532 beds (SA). Rule 10-5.011(1)(k)2.g., Florida Administrative Code, provides the following with regard to determining the number of licensed nursing home beds to be taken into account in calculating gross bed need for the batching cycle involved in these cases: [B]ed rates established prior to the second batching cycle letter of intent deadline shall be calculated on the number of licensed community nursing ads and the population projections as of July 1... Once the gross number of nursing home beds needed in Subdistrict 4 for July, 1990, is determined, the net number of beds needed is determined by subtracting the total number of licensed beds and 90 percent of approved beds in the Subdistrict from the gross number of beds needed. Rule 10-5.011(1)(k)2.i., Florida Administrative Code, provides the manner in which net bed need is to be determined. In particular, this Rule provides the following: The number of approved and licensed nursing home beds for the second batching cycle in 1987 shall be based on the number of approved and licensed beds as of August 1, 1987; ... The number of licensed beds in Subdistrict 4 as of August 1, 1987, was 2,410 beds. The number of approved licensed beds in Subdistrict 4 as of August 1, 1987, was 60 beds. The increase in licensed beds in Subdistrict 4 from 2,290 beds as of July 1, 1987, to 2,410 beds as of August 1, 1987, was caused by the licensing of the approved 120-bed Indigo Manor nursing home owned by Health Care and Retirement Corporation of America on July 21, 1987. It is not inconsistent for the Department to use the number of licensed nursing home beds as of July 1 for purposes of determining gross bed need and August 1 for calculating net bed need. The use of these dates by the Department is consistent with good health planning and the requirements of the Need Methodology. The State Health Plan. The Florida State Health Plan contains the general goals of fostering cost containment and developing an adequate supply of accessible and appropriately utilized long-term care health services. Each of the applicants will increase the accessibility of nursing home beds and are proposing appropriate utilization of health services. HBA's proposal will enhance the accessibility of nursing home beds in southeast Volusia County. The District Health Plan. The 1987 update to the 1986 district health plan for Subdistrict 4 of the Department's District 4, contains recommendations to be considered in determining community nursing home care bed need. These recommendations, and their application, are as follows: If the state determines that Subdistrict 4 is eligible for additional beds, these beds should be awarded to the Flagler Beach/Palm Coast area of Flagler County if the occupancy rate of Meadowbrook Manor meets or exceeds 85 percent occupancy at the time of CON decision and if it could be shown that the level of occupancy is likely to continue. The average occupancy rate for Meadowbrook Manor for the period of January 1, 1987, through June 30, 1987, was 58 percent. Meadowbrook has never achieved an 85 percent occupancy rate as of the date of the formal hearing of these cases. At the time of the "CON decision" in these cases, Meadowbrook had not achieved an 85 percent occupancy. This recommendation, therefore, does not apply. If a high rate of occupancy at Meadowbrook Manor in Flagler County does not materialize and if the occupancy rate at Ocean View Nursing Home in southeast Volusia County continues at 85 percent or higher and it could be verified that it will remain at a high rate, then 60 nursing home beds should be awarded in the New Smyrna Beach/Edgewater area of southeast Volusia County. The CON applicant must be willing to accept 50 percent Medicaid patients. The remaining portion should be awarded in West Volusia County. The average monthly occupancy of Ocean View for the period of January 1, 1987, through June 30, 1987, was 86 percent. Since September, 1987, the occupancy rate at Ocean View has been 94 percent or higher. This high rate of occupancy should continue. HBA proposes to accept 50 percent Medicaid patients and proposes to add its sought after nursing home beds to the New Smyrna Beach/Edgewater area of southeast Volusia County. HBA is the only applicant that meets this recommendation. If the conditions in Nos. 1[a] and 2[b] are not met, the state should award all beds to West Volusia. The conditions of 2[b] have been met. Therefore, this recommendation does not apply. No nursing home beds should be awarded to East Volusia County out of the New Smyrna Beach/Edgewater area. Refer to recommendation 2[b] above. The Meridian proposal seeks to add beds to its facility located in East Volusia County outside of the New Smyrna/Edgewater area. Meridian's proposal is, therefore, inconsistent with this recommendation. HBA's proposal is consistent with the recommendations of the updated 1986 district health plan. Meridian's and National's proposals are not consistent with these recommendations. The 1988 district health plan does not contain the specific recommendations concerning the allocation of nursing home beds within Subdistrict 4 of District 4, quoted above. The specific recommendations concerning where beds should be located within Subdistrict 4 of District 4 were eliminated in response to a suggestion by the Department that the recommendations were too specific and did not allow more flexibility. Need for Services. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. The evidence did not prove that any of the applicants are proposing services not being provided in Subdistrict 4 of District 4. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Subdistrict 4 (consisting of Flagler and Volusia Counties) of District 4 are not available, efficient, appropriate, accessible, adequate or providing quality of care, except to the extent that existing services cannot meet the need for additional nursing home beds in the subdistrict. The accessibility of nursing home beds in southeast Volusia County has been restricted since September, 1987. Ocean View's occupancy during this period of time has been at or above 95 percent. Nursing home beds in eastern Volusia County have been at 75 percent occupancy. Meadowbrook Manor, located in Bunnell, Flagler County, has not achieved an occupancy rate of 75 percent since it opened in November, 1985. Meadowbrook Manor is a 100-bed nursing home. It has been experiencing one of the lowest, if not the lowest, occupancy rates of all nursing homes in Subdistrict 4. Although the evidence proved that Meadowbrook Manor has experienced difficulties in attracting residents, the evidence failed to prove that Meadowbrook Manor is not an appropriate, available and accessible nursing home or that the difficulties experienced by Meadowbrook Manor will continue in the future. Section 381.705(1)(c), Florida Statutes. Meridian. Meridian's licensed nursing home facility in Plantation, Florida, is currently rated superior. Meridian has been informed by the Department that its nursing home facility in Ormond Beach will be rated superior. Meridian's facility in Lakeland has not been in operation long enough to be eligible for a superior rating. Therefore, the Lakeland nursing home has been rated standard. Meridian will provide extensive training for its staff at its Ormond Beach nursing home. Meridian will provide staff for the Ormond Beach facility in excess of the staffing levels required by the Department. Meridian has an extensive quality assurance program, including its Quality of Life Program. Meridian's findings of fact numbers 5-12 and 14-22 are hereby adopted and incorporated herein by reference. Meridian proposes to provide sufficient services, safeguards and staff. Meridian should be able to provide adequate quality of care in its facility. National. Four of National's fourteen existing nursing home facilities in Florida have been rated superior. The other ten facilities have be rated standard. National has a policy of seeking accreditation by the Joint Commission for Accreditation of Health Care Organizations. National will provide staff for its proposed facility in excess of the staffing levels required by the Department. National has an extensive quality assurance program. National's finding of fact number 24a-g and k is hereby adopted and incorporated herein by reference. National proposes to provide sufficient services, safeguards and staff. National should be able to provide adequate-quality of care in its proposed nursing home facility. HBA. Four of HBA's seven nursing home facilities in Florida have been rated superior. The other three facilities have been rated standard. Ocean View has been rated a superior facility by the Department for the past five years. HBA will provide extensive training and development for its staff at Ocean View. HBA proposes to provide sufficient services, safeguards and staff. HBA should be able to provide adequate quality of care at Ocean View. Section 381.705(1)(e), Florida Statutes. All three of the applicants in these cases operate a number of nursing homes and other health care facilities in Florida and other areas. Each will enjoy the benefits, including joint purchasing power, which inure to multi- facility organizations. None of the applicants, however, proved that they will provide joint, cooperative or shared health care resources more effectively than the other applicants. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all of the residents of Flagler and Volusia Counties. Meridian has proposed to provide 53% and 51% of its patient days during its first year and its second year of operation, respectively, to the care of Medicaid patients. Meridian has proposed to provide 4% of its patient days during its first two years of operation to the care of Medicare patients. National has proposed to provide 57% of its patient days during its first two years of operation to the care of Medicaid patients. National has proposed to provide 10% of its patient days during its first two years of operation to the care of Medicare patients. National has not determined, however, how many nursing home beds it will dedicate to the care of Medicare patients. National has indicated that it will dedicate fourteen to twenty-four beds as a Medicare certified distinct-part unit. Nationally, 8% of National's total patient days for the fiscal year ending September 30, 1986, were Medicare patient days. HBA has proposed to provide 60% of its patient days during its first two years of operation to the care of Medicaid patients. HBA has proposed to provide 5% of its patient days during its first two years of operation to the care of Medicare patients. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. The parties have stipulated to the following with regard to immediate financial feasibility of the proposals in these cases: All applicants are ready, willing and capable of raising all the required capital and obtaining all financing at the rates, conditions and amortizations shown in the applicants' certificate of need applications submitted in this cause. Long-term Financial Feasibility. (1). Meridian. Meridian has projected a profit of $67,976.00 on revenue of $2,536,518.00 for the first year of operation of its proposed 120-bed Ormond- Beach facility and a profit of $136,712.00 on revenue of $2,881,804.00 for the second year of operation of its proposed 120-bed Ormond Beach facility. Meridian has also projected a profit from the operation of its proposed 60-bed addition for the first two years of operation. Meridian has projected a payor mix of 49% Medicaid, 4% Medicare, 44% private pay and 3% other during the first year of operation and 46% Medicaid, 4% Medicare, 46% private pay and 4% other during the second year of operation. These projections are reasonable. Meridian's Ormond Beach facility opened in November, 1987. Although it was projected to fill up in twelve months, it only took five months. The facility had a waiting list of twenty people when it opened. Meridian's projected fill up rate for the additional 60 beds is reasonable. Meridian's projected patient charges are reasonable. Meridian's proposed Medicare charges are the lowest of the three applicants. Meridian's projected revenue and expenses are reasonable. Meridian's project is financially feasible in the long term. (2). National. National has projected a loss of $96,990.00 on revenue of $986,598.00 for the first year of operation of its proposed facility and a profit of $269,603.00 on revenue of $1,847,865.00 for the second year of operation of its proposed facility. National has projected a payor mix of 52% Medicaid, 12% Medicare, 31% private pay and 4% other during the first year of operation and 48% Medicaid, 13% Medicare, 33% private pay and 5% other during the second year of operation. These projections are reasonable. National's projected fill up rate is reasonable. National's projected patient charges are reasonable. National's projected revenue and expenses are reasonable. National's project would be financially feasible in the long term if there was a need for 80 nursing home beds. (3). HBA. HBA has projected a profit of $127,542.00 on revenue of $5,658,984.00 for the first year of operation of its proposed 239-bed facility and a profit of $188,614.00 on revenue of $6,213,164.00 for the second year of operation of its proposed 239-bed facility. HBA has projected a payor mix of 53% Medicaid, 6% Medicare, 34% private pay and 7% other during the first two years of operation. These projections are reasonable. HBA's projected fill up rate for the additional 60 beds is reasonable. HBA's projected patient charges are reasonable. HBA's projected revenue and expenses are reasonable. HBA's project is financially feasible in the long term. Section 381.705(1)(k), Florida Statutes. The evidence failed to prove that this criterion applies in this proceeding. Section 381.705(1)(l), Florida Statutes. Generally, all of the applicants will improve competition if their projects are approved. Based upon projected Medicaid and Medicare rates, Meridian will have the least adverse impact on patient charges. HBA will have the least adverse impact on private-pay patient charges. Section 381.705(1)(m), Florida Statutes. The cost of constructing Meridian's proposed addition is $932,100.00. This amounts to a per square foot cost of $64.14. Meridian's existing Ormond Beach nursing home is located on a 5.5 acre wooded site. The existing building was constructed with sufficient ancillaries for a 120-bed nursing home. Site plans, road work, sewer, utility connections and zoning have been designed and approved for a 120-bed facility. The cost per bed for Meridian's proposed 60-bed addition is $20,797.00, based upon the total projected project cost. The cost per bed for the existing 60-bed facility was $51,242.00. The cost per bed for the proposed 120-bed facility will be $35,519.00. Meridian's projected costs of construction are reasonable. Meridian's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing National's proposed facility is $2,789,346.00. This amounts to a per square foot cost of $63.13. The cost per bed for National's proposed 80-bed nursing home is $47,355.00. National's projected costs of construction are reasonable. National's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The cost of constructing HBA's proposed addition is $1,145,000.00. This amounts to a per square foot cost of $63.61. The cost per bed for HBA's proposed facility is $25,000.00, based upon the total projected project cost. HBA's projected costs of construction are reasonable. HBA has proposed construction of its 60-bed addition as a second floor addition to an existing first floor 60-bed wing at Ocean View. The second floor will be constructed by a method of construction which uses twin T concrete planks. These planks support the second floor. When the planks are placed over the existing wing patients in the existing wing will have to be displaced for a portion of one day. The existing dining room will not be used for approximately 4 to 6 weeks. The construction of HBA's addition will not endanger patients at Ocean View. HBA has successfully constructed second floor additions over existing facilities in the past. Although there will be some inconvenience, quality of care should still be provided during construction. The other applicants have raised a number of questions concerning the appropriateness of HBA's proposed addition. Those questions do not, however, prove that HBA will not provide an adequately designed and constructed addition or cannot provide quality of care. HBA's proposed methods of construction, including the costs and methods of energy provision, are reasonable. The facility will comply with code and regulatory requirements. The evidence failed to prove that there are alternative, less costly or more effective methods of construction to the construction methods proposed by Meridian, National or HBA available. Section 381.705(1)(n), Florida Statutes. None of the applicants presented evidence concerning past or proposed care of the medically indigent, other than their care of Medicaid patients. Meridian has committed to provide 55% of its patient days in its Ormond Beach nursing home for the care of Medicaid patients. Meridian has not yet reached this level of care of Medicaid patients, however. At the time of the formal hearing Meridian was providing 46% Medicaid care. Meridian has not declined to serve Medicaid patients if a bed was available. During its fiscal year ending September 30, 1986, National provided 20.6% of its company-wide patient days to skilled Medicaid patients and 38.5% to intermediate Medicaid patients. HBA has been providing approximately 65% of its patient days at Ocean View to the care of Medicaid patients. All of the applicants propose to provide adequate care to Medicaid patients. The projected percentages of Medicaid patient days and revenue have been listed in previous findings of fact. Section 381.705(2), Florida Statutes. To the extent applicable, all of the applicants comply with the requirements of Section 381.705(2), Florida Statutes.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting HBA's application for a certificate of need authorizing the addition of 60 nursing home beds to Ocean View and denying Meridian's and National's applications for certificates of need. DONE and ENTERED this 1st day of June, 1989, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1989. APPENDIX CASE NUMBERS 88-1836 88-1839 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. All of the parties have filed proposed findings of fact which pertain to HCR. HCR also filed a proposed recommended order. In light of the fact that HCR has voluntarily dismissed its case, those proposed findings of fact have not been considered in this Appendix. Meridian's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 9, 11-12 and 46. 2 19-20. 3 90. The last two sentences are hereby accepted. 4 70. 5-12 See 49. 13 The parties stipulated that the criterion to which this proposed finding of fact relates has been met by all the parties. 14-22 See 49. 23 67-73. 24-27 These proposed findings of fact fail to take into account the fact that some of the costs attributable to the additional 60 nursing home beds sought by Meridian in this proceeding have been included in the cost of the existing facility. 28 107. 29 The proposed construction cost per square foot is $64.14. See finding of fact 89. 30-33 90. Hereby accepted. 34-41 Proposed findings of fact pertaining to HCR. 42 16-17. 43 23-25. 44 101 and hereby accepted. 45-49 See 103. Although there was evidence that supported these proposed findings of fact generally, the proposed findings of fact overlook the fact that HBA's drawings are preliminary and will be revised as needed to comply with the Department's requirements. The weight of the evidence supports a conclusion that HBA's proposed methods of construction and costs are reasonable despite the necessary corrections in its preliminary plans. The proposed finding of fact concerning parking spaces is not relevant to this proceeding because the weight of the evidence failed to prove that any costs associated with additional parking spaces which may be needed have been left out of HBA's projected costs. The availability of parking spaces is not a consideration under the criteria of Section 381.705, Florida Statutes, except to the extent that costs associated with parking spaces should be taken into account. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. The first two sentences are not relevant to these proceedings. The rest of this proposed finding of fact is not supported by the weight of the evidence. 52-53 Not supported by the weight of the evidence. The evidence did prove that, as of the date of the hearing of these cases, HBA should have filed a different pro forma which takes into account changes in its projected Medicaid revenue and its salary projections if this proceeding was a completely de novo proceeding. The Department has, however, taken the position that applicants cannot "amend" their applications between the date that an application is reviewed and a formal administrative hearing concerning the application. Therefore, HBA did not change its pro forma to reflect the most current information concerning Medicaid and salaries. HBA's financial expert was aware of the changes in Medicaid and salary expenses. Despite this knowledge, he testified that HBA's proposed facility is financial feasible. This testimony was accepted. 54 14-15. 55 21-22 and 95. Not relevant to this proceeding. 64. The last sentence is not supported by the weight of the evidence. 58 51. 59 Not supported by the weight of the evidence. National presented evidence that it would designate a portion of its proposed facility as a dedicated Medicare unit. 60 18, 21, 24 and 27. 61 26-29. 29. The last sentence is not relevant to this de novo proceeding. Not relevant to this de novo proceeding. 64-65 Contrary to the stipulation of the parties. 66 Contrary to the stipulation of the parties and not relevant. National's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 2 and 21. 2 1 and 3. 3-4 Hereby accepted. 5 4-6. 6 13-14. 15 and hereby accepted. Hereby accepted. 21 and 64 and hereby accepted. 10 21-22. 11 26. 12 27. See 28. Not supported by the weight of the evidence. 31-32 and hereby accepted. Not supported by the weight of the evidence and erroneous conclusion of law. See 34-35. 17 35. Not supported by the weight of the evidence and erroneous conclusion of law. The first sentence is accepted in finding of fact 34. The rest of the proposed finding of fact is not supported by the weight of the evidence or is an erroneous conclusion of law. 20 28. See 37-38 and 45. National's proposal is not consistent with the 1987 district health plan. Subparagraph A. is not relevant to this de novo proceeding. Subparagraph B. is not relevant or not supported by the weight of the evidence. The last sentence of subparagraph C. is not relevant to this de novo proceeding. The last sentence of subparagraph D. and subparagraphs e-h are not supported by the weight of the evidence. Although subparagraph I. is generally correct, it is not sufficient to justify locating the nursing home beds to be awarded in this case in Flagler County. Subparagraph j. is not supported by the weight of the evidence. The first and last sentences are hereby accepted. The second sentence is not supported by the weight of the evidence. Hereby accepted. 49 and 51-55. Subparagraph h. is not supported by the weight of the evidence. See 59. Stipulated by the parties as true of all of the applicants. 27 60 and 63. 28 67 and see 75-79. 29 86. Section 381.705(1)(l), Florida Statutes, is to be applied to all of Subdistrict 4 of District 4 and not just Flagler County. 22, 94, 97 and hereby accepted. 32 64 and 108. 33 See 111. Not supported by the weight of the evidence. Hereby accepted. HBA's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1 2 2-3. 3 4. 4 5. 5 6. 6 7. 7 8. 8 9-12. 9 14-15. National does not have a corporate headquarters since it is not a corporation. 10, 14, 21, 25, 32 and 35 Proposed findings of fact pertaining to HCR. 11 16-17. The evidence proved that HBA owns 6, not 7, nursing homes in Florida. 12 18-20. 13 21-22. 15 23-24. 28, 30 and 34-35. Subparagraph b) is a statement of arguments advanced by Meridian and National. 27, 38 and hereby accepted. Subparagraph's c)1)-4) and 7) pertain to HCR. 18 See 42-45. 19 See 46-47 and 50. Subparagraph b) is not supported by the weight of the evidence. 20 20, 51 and 54. 22 56-58 and hereby accepted. 23 59. 24 60. 26 Stipulated. 27 67. 28 85. See, however, 79. 29-30 Hereby accepted. 31 See 89. 33 18-20, 89 and 93. 34 22 and 96-97. 36 24-25, 101-104 and hereby accepted. 37 111. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 28. 3 30. 4 2-3 and 7. 4 and 6. Not relevant to this proceeding. 7 26 and 28. 8-15 Although there is evidence to support these proposed findings, they are not relevant to this proceeding. As a matter of law, the Department cannot through agency policy circumvent the requirements of the Need Methodology of Rule 10-5.011(1)(k), Florida Administrative Code, by publishing a "fixed need pool" for which no point of entry to challenge has been provided. Not relevant to this de novo proceeding. Hereby accepted. Not relevant because the parties have stipulated that Section 381.705(1)(a), Florida Statutes, applies to these cases. Not supported by the weight of the evidence. 20 32 and 36. 21 Hereby accepted. 22 32. 23 34. 24 33. 25 36. 26 29. 27 28. 28 Hereby accepted. COPIES FURNISHED: Gerald B. Sternstein, Esquire Darrell White, Esquire Post Office Box 2174 Tallahassee, Florida 32316-2174 Charles D. Hood, Jr., Esquire Post Office Box 15200 Daytona Beach, Florida 32015 Lee Elzie, Esquire Post Office Box 82 Tallahassee, Florida 32302 Thomas W. Stahl, Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretarey Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact The parties' stipulation The parties have stipulated to the following facts: Forum and Amedex timely filed their respective letters of intent and applications with the Department and the District Local Health Council for the July 1986 batching cycle. The Department ultimately deemed the applications complete and, following review, published its notice of intent to deny the applications. Forum and Amedex each timely filed a petition requesting a formal hearing on the denial of their application. With regard to the Forum application, the Department contends that there is no need for the proposed facility, that such lack of need will render Forum's project financially unfeasible, that the project is not the best use of Forum's resources, and that Forum fails to meet the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. All other statutory and rule criteria are satisfied, at least minimally, based on Forum's 60-bed proposal. With regard to the Amedex application, the Department contends that there is no need for the proposed facility, that such lack of need will render Amedex's project financially unfeasible, and that the project is not the best use of Amedex's resources. The Department further contends that Amedex has not demonstrated that it can provide quality of care, that it has not demonstrated that its project is financially feasible in the short or long term, that it has not provided long range plans and that, even assuming minimal need, the size of Amedex' proposed project will cause difficulty in meeting projected utilization needs based on Broward County's past utilization rates. All other statutory and rule criteria are satisfied, at least minimally, based on Amedex' 240-bed proposal. As between the applicants, they agree that a comparative review is appropriate to determine the best applicant. Further, they agree for purposes of this proceeding that the other meets all statutory and rule criteria, at least minimally, except the following: need beyond 60 beds, ability to provide quality of care, and availability of funds for project accomplishment and operation. The parties have further agreed that there are no special circumstances existent in this case upon which a certificate of need is being sought. The Amedex Proposal In July 1986 Amedex filed an application with the Department for a certificate of need to construct a 240-bed skilled and intermediate care nursing home in Broward County, Florida. The total project cost is projected to be $9,040,228. At hearing, Amedex failed to offer any competent proof to demonstrate the immediate and long-term financial feasibility of its proposed project, that it could provide quality care, or that it had available the necessary funds for project accomplishment and operation. 1/ While the Department contended that the proposed project was not the best use of Amedex's resources, it offered no proof to demonstrate what other health services would be a more appropriate use of the resources. The Forum Proposal In July 1986, Forum also filed an application with the Department for a certificate of need to construct a skilled and intermediate care nursing home in Broward County, Florida. Forum's application sought leave to construct a 60-bed facility. The estimated cost for construction of Forum's proposed nursing home is $2,39,800. Forum has the necessary resources for project accomplishment and operation. While the Department contended that the proposed project was not the best use of Forum's resources, it offered no proof to demonstrate what other health service would be a more appropriate use of such resources. Forum is a publicly held health services company which owns, develops, and operates retirement living centers and nursing homes on a national basis. Pertinent to this case, Forum proposes to develop a retirement living center in Broward County that would consist of 120 apartments for independent living, a 30-bed adult congregate living facility, and the proposed 60-bed skilled and intermediate care nursing home. Forum has packaged its centers to provide these three levels of service to meet the desires of retired persons they hope to attract to their retirement community. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen and heating plant. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. The nursing facility proposed by Forum would offer a wide range of services for its residents including: 24-hour skilled and intermediate nursing care, physical therapy services, and other restorative services. Additionally, Forum proposes to offer, as needed, subacute services such as: intravenous care, continuous bladder irrigation, oxygen therapy, nastrogastric tube feeding, ventilator care, insulin treatment, sterile dressing changes, and sterile care of tracheotomies. Forum also proposes to offer in the future, if need is identified and if any necessary agreements can be reached, respite care, adult day care, meals on wheels and hospice care. Forum proposes to seek medicare and medicaid certification, and will dedicate 25 of its beds to medicaid patients. Forum has a history of providing quality care at its existing facilities, and will provide quality care at the proposed facility. Forum has demonstrated the immediate and long term financial feasibility of its proposed project. Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. Due to the excellent growth potential in Broward County for retirement living centers, Forum should be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible. However, in view of the lack of numeric need for such facility as discussed infra, Forum's success will be to the detriment of existing and approved facilities. Numeric need The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)2, Florida Administrative Code. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides: Need Methodology ... the Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i... The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case, establishes a "planning horizon" of July 1989. Pertinent to this case, subparagraphs 2 a-d provide the methodology for calculating gross bed need for the district/subdistrict (in this case the district and subdistrict are the same--Broward County) in the horizon year. The first step in the calculation of gross need for the horizon year is to derive "BA," the estimated bed rate for the population age-group 65-74. This rate is defined by subparagraph 2b as follows: 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. The parties concur that the district licensed bed figure (LB) is calculated based on the number of licensed community nursing home beds as of June 1, 1986, and that there were 3,226 licensed beds in the district on that date. 2/ The parties do not, however, agree as to the date on which POPC and POPD should be derived. The formula mandated by the rule methodology for calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived. Forum contends that the appropriate date to establish the "current population" for POPC and POPD is January 1, 1986. The Department contends that the appropriate date is the date of application. In the opinion of David Warner, which opinion is credited, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. January 1, 1986, as the midpoint of that date, is the appropriate date to derive POPC and POPD. Supportive of Dr. Warner's opinion are the past practices of the Department. Between December 1984 and December 1986, the Department routinely used a three and one half year spread between the base population period and the horizon date for "current population" in its semiannual nursing home census report and bed need allocation. That three and one half year spread was adopted by the Department for the same reasons expressed by Dr. Warner. In the batching cycle of January 1987, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one half year spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to use a three year spread between the base population period and the horizon date for "current population" in calculating POPC and POPD. Application of the methodology prescribed by subparagraph 2b to the facts of this case produces the following calculation: BA = 3,226 / (158,878 + (6 x 110,217) BA = 3,226 / (158,878 + 661,302) BA = 3,226 / 820,180 BA = .0039332 The second step in the calculation of gross need for the horizon year is to derive "BB," the estimated bed rate for the population age group 75 and over. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB = 6 x BA BB = 6 x .0039332 BB = .0235992 The third step in the calculation of gross need for the horizon year is to derive "A," the district's "age-adjusted number of community nursing home beds" at the horizon year. This methodology is defined by subparagraph 2a as follows: A = (POPA x BA) + (POPB x BB) Where: 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. The parties concur that POPA and POPB are, respectively, 165,533 and 128,250 for the horizon year. Accordingly, application of the methodology prescribed by subparagraph 2a produces the following calculation: A = (165,533 x .0039332) + (128,250 x .0235992) A = 651.07439 + 3,026.5974 A = 3,677.67 The final step in the calculation of gross need in the horizon year is to derive "SA," the "preliminary subdistrict allocation of community nursing home beds" (gross bed need in this case. 3/ This calculation is defined by subparagraph 2d as follows: 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 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through June 30. The batching cycle in which these applications were filed occurred before the Department amended its rule to include the fixed need pool concept. Accordingly, the parties agree that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d, but, rather is defined by former rule 10-5.11(21)(b)4 as follows: OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of applications submitted for the July batching cycle shall be based upon occupancy data for the months of October through March preceding that cycle... In Broward County (District X) LB and LBD are the same since the county has not been divided into subdistricts. Application of the foregoing methodology to the facts of this case produces a gross need in July 1989 of 3,453 beds, computed as follows: 4/ SA = 3,677.67 x (3226/3226) x (.845/.9) SA = 3,677.67 x 1 x .938888 SA = 3452.92 The net need calculation The final step in the numeric need methodology is to derive net reed from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed need 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 sub- district from the bed allocation determined under subparagraphs 2.a. through f. Notably, former rule 10-5.11(21)(b)9 comports with the new rule in all material respects. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need previously calculated, it is silent as to the date that inventory should be calculated. The Department asserts, through application of "policy," that the number of licensed beds should be calculated as of June 1, 1986 (the date established by former rule 10-5.11(21)(b)7 for calculating LB and LBD), and the number of approved beds as of December 1, 1986 (the date the Department's supervisory consultant signed the state agency action report). Forum would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no proof to expose and elucidate its policy choice. As discussed below, the dates used by the Department and Forum for purposes of calculating net need were facially unreasonable. 5/ The inventory of licensed and approved beds under subparagraph 2i, as well as former rule 10-5.11(21)(b)9, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's policy choice concerning the dates at which licensed and approved beds are to be counted is neither logical nor rational since it could result in some nursing home beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed in June 1, 1986, but licensed before the supervisory consultant signed the state agency action report (SAAR), they would not be counted in either inventory. Since the purpose of subparagraph 2i is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures, to the greatest extent possible, that the horizon population will not be over or underserved. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated by reducing the gross need calculation by the inventory of licensed and approved beds, from previous batching cycles, existent on that date. As of the date of administrative hearing, there were 3,226 licensed beds and 695 approved beds in the district/subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a surplus of 399 community nursing home beds in the district for the June 1989 planning horizon. Consistency with State and local health plans The parties have stipulated that both proposals are consistent with the State and local health plans except for Forum's facial failure to comply with the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. Pertinent to this issue, the local health plan provides: In addition to controlling capacity in order to discourage the construction of unneeded beds, the certificate of need program addresses cost containment by encouraging efficiencies in operation as a criteria to certificate of need approval. A number of operational models have historically proven to be positive influences on efficiency. Licensure laws, for instance, require nursing home staffing patterns to be structured in minimum modules of 30 bed configurations. As a result, the construction of nursing homes with beds totalling numbers not divisible by 30, has the capability of encouraging over staffing. Similarly, experience has shown that freestanding nursing homes constructed at less than 120 beds also are less cost efficient compared to larger facilities. Likewise, since construction and corresponding debt service retirement is greater for freestanding facilities than for new construction on existing facilities, expansion and conversion as an alternative to new construction frequently acts to reduce costs. The basis for the 120-bed minimum size for a "freestanding" facility in the local health plan is to insure efficiency and economy of scale. The 60- bed project proposed by Forum is not "freestanding" but is an integral part of a retirement center which also includes 120 independent living units and a 30-bed adult congregate living facility. Under the circumstances, the economies and efficiencies contemplated by the local health plan will be achieved, and Forum's proposal is consistent with such plan. The local health plan also provides, as a recommendation, that: ... applications for certificates of need to construct additional nursing home beds should be approved so as to support the State policy of 27 beds/1000 population over age 65 in Broward County. Considering the population over age 65 at the applicants' planning horizon, as well as the number of licensed and approved beds in the district, calculates a 14.36 beds/1000 population over age 65 for July 1989. Accordingly, the applicants' proposal is consistent with state and local health plans regarding bed to population ratio. Comparative Review As between the competing applicants, the proof demonstrates that Forum is the superior applicant, and that were the award of a certificate of need appropriate in this case that its application would be the one of choice. Under no circumstance does the proof support an award to Amedex, since it failed to demonstrate the immediate and long-term financial feasibility of its project, failed to demonstrate that it would provide quality care, and failed to demonstrate that it had sufficient resources for project accomplishment and operation. The criteria on balance In evaluating the applications of Amedex and Forum, none of the criteria established by Section 381.705, Florida Statutes (1987), or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. In the case of Amedex, the lack of need in the district, as well as its failure to demonstrate compliance with relevant criteria as discussed in paragraph 46, demonstrates that, on balance, its application should be denied. In the case of Forum, its application meets all relevant statutory and rule criteria except need. Need is the key criteria in the instant case. Forum's failure to satisfy that criterion by proof of numeric need or special circumstances is dispositive of its application for licensure, and such failure is not outweighed by any other, or combination of any other, criteria.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications for certificate of need filed by Amedex and Forum be DENIED. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of February, 1988. WILLIAM J. KENDRICK 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 25th day of February, 1988.
Findings Of Fact FMCC's application is to provide a 102-bed long-term care nursing facility in Fort Myers, Florida, while AHC's and HSI's applications are to provide 120-bed long-term nursing care facilities. When each of these applications was presented to the south Central Florida Health Systems Council, Inc. (HSA), the application of FMCC was approved and forwarded to Respondent recommending approval and the other two applications were disapproved and so forwarded. The primary reason given by HSA for disapproving HSI's application was lack of firm financing and for disapproving AHC's application was cost of construction. Trained personnel to man the proposed facilities are in short supply in Lee County. Applicants' plans to import personnel, if necessary, from other parts of the country were supported by no evidence to indicate such personnel would be amenable to move to Lee County. All applications were disapproved by Respondent and each applicant requested a hearing which resulted in this consolidated hearing. At present there are 741 existing or approved long-term care nursing home beds in Lee County, Florida. A 120-bed facility at Cape Coral became operative in February, 1979 and a 60-bed addition to Beacon-Donegan Manor nursing home has also been approved. Prior to the opening of the newest 120-bed facility at Cape Coral, the occupancy rate for the other long-term care nursing homes was greater than 90 percent. Due to its recent opening, no evidence was presented as to the occupancy rate in Lee County following the opening of the Cape Coral facility. The population of Lee County in 1978 was 184,841 with 41,984 more than 65 years old, which is less than 23 percent of the population. This is in line with the population forecasts by the University of Florida and validates the estimated 1980 population figures which were used by all parties in submitting their applications. In 1978 Respondent proposed a State Health Plan which included a determination that the long-term care nursing home bed needs were 27 per 1,000 population greater than 65 years old. This determination was unacceptable to the Department of Health, Education and Welfare (HEW) whose decision is binding on Respondent. In refusing to accept this standard, HEW reaffirmed the requirement that the formula contained in the Hill-Burton Act be utilized in determining certificates of need. Following the Hill-Burton formula results in no additional long-term care nursing home beds needed in Lee County. Modification of the results produced by use of the Hill-Burton formula when extenuating and mitigating circumstances exist is authorized by the Florida Medical Facilities Plan. Accordingly, when use of Hill-Burton formula produces results contrary to obvious facts, such as a showing of no need for additional facilities when occupancy rates are high and long waiting lists for admission exists, these extenuating circumstances are considered and a finding of need is made. The parties stipulated that extenuating circumstances, notably the greater than 90 percent occupancy rate in nursing homes in 1977 and most of 1978 and the existing waiting lists created need for 100 to 120 additional beds. No evidence was presented establishing a need for more than 100-120 additional long-term care nursing home beds in Lee County. In fact, no evidence was presented showing the current occupancy rate, current waiting lists, or any other information not previously submitted to the Health Systems Agency was here presented other than the latest Census Report, which merely confirmed the accuracy of the forecasts. Even if the 27 beds per 1,000 population greater than 65 which was proposed by the South Central Florida Health Systems Agency were used to establish the number of beds needed, their limitation, that no more than 50 percent be added in the two-year planning period, would preclude approving more than one additional nursing home at this time. Absent evidence showing a need for more than one additional nursing home, the only issue remaining is which of the applicants is best qualified to provide the best service at the lowest cost for the stipulated need. HSI submitted proposed construction costs and patient charges in line with those submitted by FMCC. However, although their application states, and the Health Systems Agency apparently accepted, their allegation that an option to lease had been obtained on the property on which the proposed facility was to be erected, testimony at the hearing disclosed that only an oral agreement to lease the property had been obtained by HSI. An oral agreement affecting a long-term lease of real property comes within the Statute of Frauds and is unenforceable. This fact alone renders all cost estimates submitted by HSI suspect. Further, the financing proposed by HSI to construct the facility shows less than $200,000 equity capital available and a requirement to borrow $1,300,000. One ground noted by the Health Systems Agency for disapproving this application was the inadequacy of their financing. No evidence presented at this hearing contradicted this Health System Agency's finding. AHC operates some 50 nursing homes in 14 states with two nursing homes in the Orlando area. A certificate of need has been obtained for a third nursing home in Jacksonville. Florida Living Care, Inc., the parent corporation of FMCC, manages some 44 nursing homes and owns 25. It has certificates of need for 6 nursing homes in Florida, one of which is completed and in operation, while 3 are under construction. AHC proposes to finance 87 percent of the cost of the 120-bed project, or $2,160,000, in a 40-year loan at 8.5 percent interest. FMCC proposes to finance 80 percent of the cost of a 102-bed project, or $1,000,000, in a 25-year loan at 9.5 percent interest. Although no testimony regarding the current status of mortgage money was presented, it is recognized that interest rates are at historically high levels and that FMCC is more likely to get financing on the terms it proposed than is AHC on the terms the latter proposed. HSI proposed costs and charges result in average costs of $30.16 per patient per day. FMCC proposed costs and charges result in average costs of $30.96 per patient per day. AHC proposed costs and charges result in average costs of $34.40 per patient per day. No significant difference exists in the services proposed by each of the applicants. Savings from combined purchasing can result when numerous facilities are operated. Both AHC and FMCC are in a better position in this regard than is HSI. Additional savings in group food purchasing can result when facilities are within 200 miles of each other. The facilities FMCC's parent corporation is opening in Sebring and Port Charlotte are close enough to Fort Myers to allow group food purchasing for these facilities. AHC's construction costs are approximately 50 percent higher per bed than are the costs submitted by FMCC and HSI. This factor must result in higher charges to amortize these higher construction costs.
Findings Of Fact Each applicant in this proceeding submitted its application in the January, 1986 batching cycle for the January, 1989 planning horizon, each requesting a certificate of need to build a 120-bed nursing home in Brevard County, Florida. The parties have stipulated that each applicant's letter of intent and application was timely filed, that there is a need in the January, 1989 planning horizon for additional community nursing home beds, and that 120 of those beds should be awarded to one of these applicants. They further stipulated that there are sufficient professional staff available in the Brevard County area to completely staff a new nursing home facility and that each of the applicants is able to obtain the funds necessary to construct its project. Maple Leaf of Brevard County Health Care, Inc., a new corporation to be formed as a wholly-owned subsidiary of HCR proposes a 120-bed community nursing home to be located in central Brevard County in the area of Rockledge and Cocoa. In addition to traditional skilled and intermediate care, the nursing home will provide services for sub-acute patients, and a separate wing of the nursing home will be set aside for Alzheimers and related dementia disease patients (hereinafter "Alzheimers patients"). The HCR proposal includes an adult day- care unit for Alzheimers patients and respite care on a bed- availability basis. At final hearing, HCR submitted an application supplement which provided updated calculations, projections and program descriptions to account for changes occurring as a result of the elapse of time between submission of the original application and the final hearing. The application supplement does not include any programmatic changes from the original application and does not add any new concepts or elements to the original HCR proposal. The adult day-care unit will provide care to Alzheimers patients for four to eight hours a day and from one to five days a week, depending upon the needs of the patient and caregiver. The program will be staffed by a nurse director and an assistant. Patients will be provided with various activities of daily living in an environment developed for Alzheimers disease victims. This program provides placement for the patient who does not need inpatient care but whose caregiver needs rest or an opportunity to attend to matters outside of the home, such as employment. Respite care at the HCR facility is intended to provide placement for patients on a 24-hour basis while the family or caregiver attends to needs such as vacation or hospitalization incompatible with overnight care of the patient at home. Respite care provides inpatient nursing home care for short periods of time, typically a week or two. Sub-acute care is a more intensive form of skilled nursing care than typically has been provided in nursing homes. Historically, this care was provided in hospitals, but adoption of the DRG (diagnostically related group) system of acute care reimbursement has resulted in an earlier discharge from hospitals of elderly patients who continue to need an intense level of nursing care. Sub-acute care includes the provision of high-tech services such as ventilator care IV therapy, pulmonary aids, tube feeding, hyperalimentation and short- and long-term rehabilitation. HCR provides a wide variety of these sub- acute care services in its existing facilities. Hospitals in Brevard County report difficulty in placing patients who require sub-acute care and high-tech services. Particularly difficult to place are these patients whose care is reimbursed by Medicaid. The availability of sub-acute care also provides continuity of care for bedridden Alzheimers patients in the later stages of the disease when they require life support systems. HCR proposes to devote a 29-bed wing of the facility to the care of Alzheimers patients. Special design features, patient activities and programs and modified staffing will be provided to meet the special needs of Alzheimers patients. Alzheimers disease, a form of dementia, is a degenerative condition of the brain which results in a progressive dementia and loss of Previously- acquired intellectual functions and memory. Generally, the disease has three or four stages. In the earliest stages, the victims experience some mild memory loss, behavioral changes, loss of interest in previous hobbies, depression, anxiety and increased difficulty handling some routine day-to-day affairs. In the early stages, victims often are in reasonably good physical condition and symptoms tend to be fairly subtle. In stage two memory loss is much more apparent, and victims begin to have problems with the use of language. They may have increased difficulty with spatial relationships and become lost in familiar surroundings. These victims experience more noticeable problems with their memory in terms with dealing with their family and friends; as the disease progresses to stage three, those problems tend to worsen and become apparent even to people who are not otherwise familiar with the patient. The victims may have additional behavioral or psychiatric difficulties associated with depression or severe anxiety. A delusional stage is frequent. These victims experience disruption of their sleeping cycles and sleep during the day and wander during the night. Seizures may become a problem. In stage three, the victims usually require supervision. As the disease progresses through stage three, the victims have difficulty with personal hygiene, difficulty getting dressed and difficulty performing the simplest human task. As the disease progresses into stage four the victim becomes bedridden and requires total nursing care. There is no cure for the disease. It is terminal. Nursing home care is probably appropriate for everyone in stage four of Alzheimers disease. Most patients in stage three require nursing home care. Some patients in stage two may require nursing home care, depending upon the type of care that is available at home. According to some estimations, approximately 2.5 million American adults suffer from Alzheimers disease and approximately one-half of existing nursing home patients, and 15 percent of the population age 75 and over suffer from Alzheimers disease (4 - 5 percent 65 and over, 20 - 30 percent 85 and older). There are eleven nursing homes in Brevard County, but there is only one nursing home in Brevard County which provides a separate unit for Alzheimers patients. This facility is located in West Melbourne in south Brevard County. There is no nursing home which provides a separate Alzheimers program in central or north Brevard County. Historically, Alzheimers patients in nursing homes have been mixed with other patients. The Alzheimers patient in the nursing home has often created management problems because of wandering, incontinence, confusion, loss of cognitive and communicative capabilities, unusual sensitivity to normal environmental stress, and socially, unacceptable behavior. Because of these characteristics, nursing homes have sometimes avoided admitting Alzheimers patients. Often, when such patients were admitted, their behavior was controlled by sedation and physical restraints. Nursing home patients who do not suffer from Alzheimers disease are often agitated and disrupted by the Alzheimers patient. The Alzheimers patient exhibits such unacceptable social behavior as going through other patients' belongings, sleeping in other patients' beds, violent behavior, being unresponsive to attempted communications and continually wandering. A separate unit for the Alzheimers disease victim also accommodates the needs of the non- Alzheimers patient. It is medically appropriate to separate Alzheimers patients from other nursing home patients. Frequently, the Alzheimers patient is suffering from mental problems resulting in confusion and disorientation but is otherwise physically healthy and ambulatory. Other patients in the nursing home often have a variety of medical problems which require more intensive nursing care. Placing Alzheimers patients in the same area with those patients with medical problems requiring more nursing care can be disruptive to the nursing care being provided to the non- Alzheimers patient, The design of the HCR facility is intended to reduce the environmental stress on Alzheimers disease victims and allow them to maintain their cognitive capabilities for as long as possible. Special wall coverings, floor coverings, labeling and color coding features are provided. Separate dining and activities areas are provided. Wandering is permitted. A fenced courtyard is provided. A monitoring system will alert the facility staff when a patient begins to wander out of the facility. Bathrooms are designed to avoid fright and confusion by automatic lighting systems, coloring and distinctly shaped fixtures and waste baskets. Safe dinnerware and tables which enhance the Alzheimers victim's ability to continue to feed himself or herself are provided. Additional staffing in the Alzheimers unit and staff training in Alzheimers care will be provided. The goal of the Alzheimers design and program is to maintain the patient's activities of daily living and assist in the retention of the patient's cognitive capabilities for as long as possible. Separate, specialized Alzheimers care units are beneficial for several reasons. They are safer for the Alzheimers patient. They reduce the agitation and disruption of the Alzheimer's and non-Alzheimer's patient. They provide programs for Alzheimers patients which are within the patient's cognitive abilities. The units are smaller, and each patient receives more individual attention. Sedation and physical restraint is eliminated or reduced. Individual dignity is enhanced. HCR confirmed the need for an Alzheimers program in Brevard County by calculations based upon nationally-accepted statistics and contact in Brevard County with individuals knowledgeable of the availability of care being provided to Alzheimers disease patients. Special units for Alzheimers patients are a fairly new phenomenon. HCR proposes to develop Alzheimers units in other nursing homes in Florida and has submitted applications to add Alzheimers wings to existing nursing homes in Florida. HCR also proposes to convert a wing in an existing facility in Dade County to provide care for Alzheimers patients. HCR will locate its nursing home in the Rockledge- Cocoa area, about thirty miles north of Melbourne and thirty miles south of Titusville, in central Brevard County. All 120 nursing home beds in the HCR nursing home will be certified for Medicaid reimbursement. New equipment for the HCR nursing home is projected to cost $412,079. This represents an increase in cost over the original estimate of $370,000 because of a general increase in equipment cost since the original application and an allocation of approximately $13,800 for equipment for the daycare unit, a cost which was not included in the original estimate. HCR's estimate for purchase of new equipment is reasonable. Projections of payor-mix, facility utilization and revenue and expenses of a nursing home are useful to evaluate the financial feasibility of the project. All projections utilized by HCR to evaluate financial feasibility are conservative projections. The updated projections presented by HCR at final hearing are more conservative than the projections presented in HCR's original application. If the projections found in HCR's original application were realized, the facility simply would be more profitable. HCR's estimate of an 11 percent interest rate for the funds to be borrowed for this project is a reasonable and conservative estimate. HCR's estimate of 50 percent intermediate care patients and 50 percent skilled care patients is a reasonable estimate for the patients expected to be found in this facility and is a conservative estimate. No other applicant provided such an estimate. In computing revenues and expenses, HCR assumed an inflation factor of 3 percent for Medicare and Medicaid revenues, 5 percent for other revenues and 5 percent for expenses. These inflation factors are reasonable. HCR's projections of 22 percent in year one and 25 percent in year two for payroll taxes and fringe benefits are reasonable and consistent with HCR's actual experience. HCR utilized reasonable and appropriate depreciation periods of 40 years for the building and 10 years for equipment. These are the depreciation periods used by HCR in its regular course of business. The patient charges projected by HCR, including Medicaid, Medicare and private room rates and ancillary charges, are reasonable projections. HCR projected that private pay room charges at the nursing home would be $75 for a semi-private room and $85 for a private room in July, 1989. These updated projections are consistent with existing (1987) private pay rates in Brevard County, which range from $59 for a semi-private room to $90 for a private room. The HCR rates, inflated forward to 1989, are reasonable and consistent with the existing private pay charges in Brevard County. Private pay room rates charged at nursing homes tend to reflect the market for private pay rates in the vicinity of the nursing home. HCR's updated projection of payor-mix is consistent with the actual experience in central Brevard County and an open admissions policy for Medicaid patients. HCR projects that the facility will reach 95 percent occupancy within 12 months of operation. This projection is based upon HCR's experience subsequent to filing the original application. This projection is reasonable and more conservative than those of the other applicants. HCR anticipates a loss in the first year of operation of $293,885, but a profit in the second year of Operation of $241,084. These projections reveal that the project proposed by HCR is financially feasible, and these projections are reasonable. Staffing of the HCR nursing home is comprised of an administrator, a director of nursing, an assistant director of nursing, an Alzheimers program director, 8.4 FTE (full time equivalent) registered nurses, 6.3 FTE licensed practical nurses, 39.9 FTE nurse-aides, 1 full time occupational therapy aide, 1 full time recreational therapy aide, a social worker, an activities director, 10 FTE dietary personnel, 3 FTE laundry personnel, 8 FTE housekeeping personnel, a maintenance person, 2 clerical workers, and 1 medical records worker. Physical therapy, occupational therapy, recreational therapy, and speech therapy will be provided by licensed therapists on a contract basis. The updated staffing pattern represents minor changes from the staffing pattern in the original application. These changes are a direct result of HCR's experience in operating an Alzheimers wing within a nursing home. HCR's staffing level for staff who provide direct patient care (RNs, LPNs and Aides) exceeds that of Wuesthoff and Unicare. Staff levels in the HCR nursing home are designed to meet the special needs of the Alzheimers patients. An Alzheimers program director will be responsible for the Alzheimers wing and will be an advisor for the day-care facility. HCR's staffing pattern assumes 15 wandering Alzheimers patients in the Alzheimers wing. Care for Alzheimers patients requires increased staffing. Higher nurse-aides staffing is required in the Alzheimers wing during the evening and night hours than in the remainder of the nursing home because Alzheimers patients tend to wander without regard to the time of day. HCR estimates construction costs to be $2,200,000, not including site preparation, which is estimated to cost $275,000. Construction costs per square foot are estimated at $55 and $61.87 when site preparation is included. The estimates of construction cost and construction cost per square foot include an allocation of 2,000 square feet and $110,000 for the day-care unit. The cost per square foot projected in the updated application differs from that projected in the original application because the original application included site preparation, assumed a facility size of 36,000 square feet and was not changed when the original design was changed to add day- care in the original application supplement. The actual size is approximately 40,000 gross square feet. The original HCR application submitted a blueprint which is somewhat different in shape from that which HCR currently intends to build. When HCR added day-care in its Original application supplement, a change in the shape of the building was required and a new design was submitted, but cost estimates were not changed. The design which HCR will use for this facility is similar to the design being used in four ongoing HCR projects in Florida, and which, therefore, meets HRS' requirements. The design relied upon by HCR at final hearing is not substantially different from the design presented to HRS in the original application supplement. HCR's estimates of construction cost, construction cost per square foot, construction cost per bed, equipment cost per bed and total project costs are reasonable and adequate to accomplish the construction of the proposed facility. HCR's updated construction cost estimates are based upon its construction experience in Florida, its experience in having built the design proposed and its discussions with contractors and subcontractors on the east coast of Florida. HCR is currently building two facilities on the east coast of Florida. HCR does not anticipate any cost overruns on any of the facilities currently under construction. All HCR facilities under construction are being constructed within the certificate of need budgets for those facilities. HCR estimates project development costs, including feasibility studies, surveys, legal and accounting fees, planning and HRS's plan review, to be $55,000, which represents an increase over the estimate in the original application due to the passage of time. HCR estimates professional services required for the construction of the facility to cost $90,000. These services include architectural and engineering fees and a site survey and soil investigation report. These costs are approximate1y $5,000 less than the original estimate. This reduction in cost is a direct result of HCR's new staff of civil engineers. Previously, HCR had contracted for site survey work with outside engineers. Thus, while architectural and engineering fees increase, the costs for site surveys and soil investigation reports decrease. The HCR nursing home will be located on approximately 5 acres. HCR estimates land cost for the facility to be approximately $500,000. This - represents an increase over the original land cost estimate because HCR intends to acquire a site which requires less site preparation, located near a hospital. The HCR estimates for land cost are reasonable and consistent with other applicants' estimates. Site preparation costs are estimated at $275,000, a reduction from the original site preparation cost estimate of $315,000. This change is accounted for by HCR's intention to acquire a more costly site which will require less site preparation. HCR intends to build and operate the nursing home proposed for Brevard County and is willing to accept a condition to that effect on any certificate of need issued. HCR estimates a project completion schedule which will result in its nursing home being occupied and in use in July, 1989, and this project completion forecast is a reasonable forecast. HCR has taken steps to ensure that failure to initiate construction within statutory requirements will not occur. HCR has undertaken numerous nursing home projects since 1983 and has successfully constructed or initiated construction on all of those projects. At this time HCR has approximately six projects under construction, four projects have been completed, and one project is under construction for a third party. The design of the HCR facility incorporates numerous energy conservation measures and efficiencies. The HCR facility will comply with all energy code requirements. HCR owns and operates seven nursing homes in Florida. Three of these facilities have superior licenses, and the remaining facilities have standard licenses. HCR nursing homes adhere to extensive quality assurance standards and guidelines. These standards and guidelines regulate such areas as patients' rights, staff development and orientation, physician and nurses services, pharmacy services and medication administration, social services, patient activities, infection control, patient care planning, safety and the physical environmental, menus, diets, nutritional care and scheduling and staffing of dietary personnel, personal appearance and hygiene for dietary personnel, and food storage, preparation and sanitation. These standards and guidelines will be applicable to this proposed project. The standards and guidelines cover all areas of operations and patient care and incorporate survey tools used by the state of Florida and the Health Care and Finance Administration of the federal government for their annual licensure surveys. Additionally, administrators of HCR facilities have a financial incentive to optimize the performance and the quality of care of their facilities. HCR estimates that approximately 60 percent of the patient days in the facility (53 percent of the revenue) will result from Medicaid patients. This estimate is consistent with the experience in the Rockledge-Cocoa area, where one facility has a very low percentage of Medicaid patients and the remaining facilities have very high Medicaid populations (over 60 percent). HCR's estimate also takes into account HCR's recent experience in staffing a facility which includes an Alzheimers wing. HCR will not restrict the number of Medicaid patients in the Alzheimers wing or the remainder of the home. HCR's original application assumed approximately 45 percent of the patient days (42 percent of the revenues) would be accounted for by Medicaid patients. This assumption was based upon HCR's assumption at that time that, in order to cover the assumed high cost of additional staffing in the Alzheimers wing, a greater percentage of private patients (at a higher daily charge) would be required. Subsequent to submission of the original application, HCR has gained actual experience which has demonstrated that the level of staffing proposed by the original application is not necessary and that the cost of staffing can be reduced. The result is that HCR can reduce its reliance on the additional revenue generated by the private paying patient. HCR's design for its Brevard County Alzheimers unit is based upon a state-of-the-art Alzheimers wing at its facility in Perrysburg, Ohio, and HCR's experience gained there. In addition, HCR operates two other facilities which have separate units for Alzheimers patients. The HCR application is consistent with both state and local health plans. HCR projects a charge for Medicaid patients to be $60.93 and, for Medicare patients to be $76 in July, 1989. The increase in charges between the updated projections and the original projections is due to increases in costs during the passage of time since the original estimates were made. The cost of care for patients who are unable to pay is subsidized by the general revenue of the nursing home. Although HCR and Unicare have not projected a percentage of "charity" patients who will not be paying for their services, there will always be some patients who do not pay for all of their care. Patients who do not qualify for Medicaid but who cannot afford standard private pay rates are charged at lower contract rates. The loan fees projected by HCR of $57,000 for the amount of the project financed by debt are reasonable projections based upon current discussions with lenders. HCR estimates that interest during construction will cost $225,000. This amount represents the interest expense paid during the period of construction. This estimate is reasonable. HCR estimates $50,000 will be required for preopening expenses - those incurred in preparing the facility for the opening day. These expenses include marketing and the hiring of an administrator, a director of nursing, and other employees prior to opening. $50,000 is an adequate amount to cover the pre- opening expenses for the proposed facility. HCR's pro forma assumptions, proposed patient charges, projections of revenue and expense, staffing and projections of salaries are reasonable. Each HCR nursing home provides individual patient care plans for each patient, a statement of patients' rights and a resident council (which is a unit of individuals selected by the patients to afford an opportunity to have a formalized, direct method to state preferences, grievances and other opinions related to the operation of the nursing home), and each HCR nursing home has transfer agreements with local-hospitals. The planning director of the Local Health Council responsible for Brevard County performed an analysis of the need for nursing home beds in Brevard County. The results of the study demonstrate that the central part of Brevard County has a lower number of nursing home beds per thousand population over 65 than the remainder of Brevard County. If additional nursing home beds are to be approved for Brevard County, the beds should be located in the central part of the county because the need for nursing home beds in Brevard County is greatest in central Brevard. The HCR architectural design best accommodates the needs of the nursing home patient. Wuesthoff Health Services, Inc., is a non-profit corporation affiliated with Wuesthoff Hospital, Inc., a 305-bed non-profit hospital serving Brevard County, through a common parent Wuesthoff Health Systems, Inc. Wuesthoff Hospital provides some indigent medical care in central Brevard County, and the Wuesthoff nursing home certificate of need application commits to providing some indigent care at the proposed nursing home facility. Wuesthoff, through its affiliated non-profit companies, operates within Brevard County a home health agency, a hospice, four family practice clinics, Life Line for the elderly or disabled who live alone, and Brevard Medical Transport, a no- cost transportation service for the elderly. It also operates a retail pharmacy through a for-profit affiliated corporation. The hospital has for several years maintained a senior citizens' advisory council which concerns itself with the needs of the elderly in Brevard County. It also intends to compete with other businesses in operating Brevard County's Meals On Wheels due to a recent expansion of the size of the Hospital's kitchen. The proposed nursing home will be located on a tract of land owned by Wuesthoff Hospital which will make the property available to Wuesthoff Health Services, Inc., at either the nominal rental of $1 per year for the useful life of the nursing home or by outright contribution if required by HRS. The land has been owned for several years by Wuesthoff Hospital, but Wuesthoff included $48,000 for land costs in its original certificate of need application. The site for the Wuesthoff nursing home is part of a large tract of land which already has located thereon a 20,000 square feet ambulatory care center, diagnostic testing center, family practice physician, dental facility, and retail pharmacy, all of which are owned by one of the Wuesthoff corporations. The ambulatory care center includes laboratory services, physical therapy services, radiology services, two out-patient surgery suites, and 24- hour physician coverage. The nursing home will be connected to the ambulatory care center by an air conditioned, enclosed corridor through which the nursing home patients will be transported to receive any therapies or services which they require. The farthest distance from any patient room in the nursing home to the ambulatory care center, including physical therapy rooms, is approximately 400 feet. Wuesthoff's nursing home would be located in the area which the Local Health Council recognizes as having the greatest need for nursing home beds, i.e., central Brevard County in the Cocoa/Rockledge area. According to Wuesthoff's updated application the total project cost for its 120-bed nursing home would be $2,901,213, and the facility will consist of 37,500 square feet. The project size actually includes 1,000 square feet for the corridor which connects the nursing home to the ambulatory care center. Therefore, the facility itself consists of only 36,500 square feet. It is unclear whether that figure should be further reduced since Wuesthoff decreased the size of its kitchen in its amended application so that the nursing home would no longer have a full-service kitchen. Similarly, the total project cost was substantially higher in Wuesthoff's original application wherein the total project cost was given as $4,417,884. Wuesthoff made changes from its original to its updated application either because the applications were prepared by different persons or because decisions were made to change Wuesthoff's application, as follows: The original application included a full-service kitchen, while the updated application contemplates meals will be prepared at Wuesthoff Hospital and transported seven miles to the nursing home. The removal of the kitchen affects the square footage of the facility along with equipment costs, staffing costs and other costs associated with the operation of the proposed nursing home, such as the increased costs associated with transporting the food to the nursing home. In its original application, one individual was listed as both the nursing home administrator and director of nursing. In its updated application, Wuesthoff treated these as separate positions. Wuesthoff proposed $376,000 for equipment costs in its original application and projected $187,400 for equipment costs in its updated application. Wuesthoff projected 45 percent Medicaid and 15 percent Medicare in its original application and 50 percent Medicaid and 2 percent Medicare in its updated application without any evidence that the needs in the community had changed. Wuesthoff removed the debt service, in its updated application, thus reducing the financing costs. The underwriter's fees between the original and updated application were reduced based upon a dimunition of the bond size as a result of reduction of square footage in the facility and the elimination of the debt service. Wuesthoff reduced land cost from $48,000 in its original application to no cost in its updated application despite the fact that the land was owned by Wuesthoff at the time the original application was filed. Wuesthoff changed the equity contribution between its original and updated applications without any testimony of extrinsic factors while evidence showed that the funds were available to make the equity contribution at the time of the submittal of the Original certificate of need application. Although Wuesthoff's application' represents that approximately 3 percent of the revenues from private pay patients would be devoted to indigent or charity patients, the 3 percent actually applies to both charity and bad debt. Wuesthoff failed to demonstrate how much of its revenues, if any, would be allocated to charity care alone. Wuesthoff projected charges of $65 for a semi- private room for a private paying patient and $73 for a private room for a private paying patient. These charges, projected for mid-1989, are below existing (1987) charges at nursing homes in Brevard County. The projections of financial feasibility and the pro formas for the Wuesthoff facility are based upon the assumption that the Wuesthoff nursing home will be owned and operated by Wuesthoff Health Services, Inc. The only financial statements provided by Wuesthoff in support of its application are those relating to Wuesthoff Memorial Hospital. Wuesthoff Memorial Hospital is a corporation separate and distinct from Wuesthoff Health Services, Inc. Further, the financial statements of Wuesthoff Memorial Hospital provided by Wuesthoff do not include the "notes" normally appended to those statements. The "notes" to the audited financial statements are typically included in any complete financial statements and are required for a full understanding of the financial statements. The pro formas of Wuesthoff assume that 15 percent of salaries would be allocated to fringe benefits. This assumption is based upon the assumption that the employees of the nursing home will not be unionized and, therefore, their fringe benefits will not be as high as those for unionized employees. The nurses at Wuesthoff Memorial Hospital are unionized and have higher benefits than proposed for the nursing home. Unionization is a decision made by employees and not by management. Wuesthoff's assumptions for fringe benefits do not assume any increase in the fringe benefits from year to year. Wuesthoff agrees that there are required increases in fringe benefits, such as increases in required contributions to social security programs over the next few years. Thus, the amount for fringe benefits assumed by Wuesthoff understates the amount likely to be paid. A participant in the Medicaid reimbursement system is entitled to reimbursement on the basis of fair rental value of the nursing home. Although the fair rental value aspect of the reimbursement plan includes consideration of the value of land upon which a nursing home is situated, and although Wuesthoff assumes that it would receive reimbursement under this element of the plan, Wuesthoff does not include in that reimbursement any value for land value. Wuesthoff would be entitled to that form of reimbursement, but Wuesthoff was unable to specify "how that's going to be done." The Medicaid reimbursement system incorporates certain caps on reimbursement, including caps for patient care costs, operating costs and property costs. Wuesthoff is unable to specify which Medicaid reimbursement caps it utilized when calculating its Medicaid charges. It is not possible to calculate Wuesthoff's Medicaid reimbursement and Medicaid charges based upon the exhibits presented by Wuesthoff, including its applications. The Wuesthoff application does not contain any description of patient care costs or costs of operation of the Wuesthoff facility upon which Medicaid charges can be determined. Wuesthoff represented that certain services would be provided to the Wuesthoff nursing home by Wuesthoff Health Services or Wuesthoff Memorial Hospital at no charge to the nursing home. The exact nature of the services and their value are unspecified. Although Wuesthoff contends fewer staff will be needed at the nursing home, Wuesthoff has not determined how many additional staff would be required at the hospital and has not calculated the cost of transporting food to the nursing home. Ordinarily, a related entity providing services to a nursing home is entitled to reimbursement for the cost of those services under the Medicaid reimbursement system. Wuesthoff has not determined whether the Medicaid statutes and regulations will allow a related entity to waive its entitlement to such reimbursement. Wuesthoff's parent company, Wuesthoff Health Systems, and Wuesthoff Memorial Hospital will incur costs for providing those services to Wuesthoff which Wuesthoff represents will not be reimbursed. These entities' budgets and Medicaid reimbursement are regulated and audited by HRS and the Hospital Cost Containment Board. By providing services to the nursing home and no longer allocating 100 percent of costs to operation of the hospital, the hospital's reimbursement and budget will have to be adjusted. These required adjustments have not been taken into consideration by Wuesthoff. In preparing its budget to be submitted to the Hospital Cost Containment Board, the hospital will be required to allocate a certain amount of time for those persons providing services to the nursing home. The hospital will not be reimbursed for those services by Medicaid or Medicare. The total cost of providing care to nursing home residents must be reported by the nursing home in its Medicaid cost report. If a nursing home does not include allowable Medicaid costs in its cost report, HRS will include those costs when HRS audits the cost report. When those additional costs are included, the nursing home's reimbursement (Medicaid charge) will increase. It is not a generally accepted accounting principle to exclude allowable costs in a Medicaid cost report. By not including certain costs, expenses are understated and profit is overstated. Wuesthoff attempted to present evidence that a hospital-based nursing home facility maintains lower costs which can be passed on to its patients, because of an absence of taxation and the presence of group purchasing. However, this evidence also revealed that the hospital-based nursing home to which Wuesthoff sought comparison had patient care and operating costs which exceed the caps for Medicaid reimbursement. Additionally, Wuesthoff's Medicaid costs are higher than those of HCR. Wuesthoff proposes an architectural plan for its nursing home which has never been built in Florida. Wuesthoff is the only applicant which proposes three nurses' stations for 120 beds. The 120-bed nursing home with two nurses' stations is more efficient to operate than a 120-bed nursing home with three nurses' stations. Three nurses' stations result in a higher cost per patient day than two nurses' stations. Wuesthoff's architect was unable to estimate the cost of site preparation and was unable to specify the exact nature of site preparation required. However, site preparation will be required. There is confusion concerning the cost of equipment for the Wuesthoff project, particularly with regard to food service equipment. Although the Wuesthoff architect testified that Wuesthoff originally had consulted with him concerning the cost of equipment, the witness was unable to identify the equipment costs listed in the application. The equipment list relied upon by Wuesthoff and the list of used equipment and food service equipment was not prepared until the first week of the final hearing. Wuesthoff's projection of construction cost ($57 per square foot) was not prepared by Wuesthoff's architect and the source of the projection is unspecified. The project is not based upon any actual experience of nursing home construction in Florida. The original estimate was provided by the architect to Wuesthoff several years earlier and was lower than $57 per square foot. Wuesthoff proposes to connect its nursing home to a nearby ambulatory surgical center by a corridor. There are no physical therapy or Occupational therapy rooms provided at the nursing home. Although recreational therapy and speech therapy must be provided at the nursing home, only small meeting rooms are available for these purposes. A nursing home patient transported from a nursing home to a location outside the nursing home for therapies must remain in the care of nursing home staff. This mode of operation requires more staff than one in which all therapies are provided within the physical confines of the nursing home. Wuesthoff did not include in its estimate of project development cost any estimate for attorney's fees or consulting fees of the planners and financial consultants retained for the purpose of obtaining a certificate of need. The shared services referred to by Wuesthoff are not free services, and no evidence was offered to show that the sharing of those services would be cost efficient. The corridor between the ambulatory surgical center and the nursing home is estimated by Wuesthoff to be 1,000 square feet. The cost for the corridor is -included in the costs projected for the nursing home, and the corridor is included in the total size (37,500 square feet) of the nursing home. Wuesthoff proposes to equip the nursing home with used equipment and furniture. The used hospital beds which Wuesthoff proposes to use at the nursing home are eight to twelve years old. Although Wuesthoff proposes to provide therapy through professional staff from Wuesthoff Memorial Hospital, Wuesthoff could not estimate how many additional therapists must be hired by the hospital in order to provide therapy for the nursing home patients. Wuesthoff contends that it will provide a high level of charity care in its nursing home at the same level that is provided at the hospital. However, when calculating the percentage of charity care at the hospital, Wuesthoff included care provided within programs where some form of governmental funding was available to pay for care. For instance, Brevard County contributes funding toward the care of patients who are not eligible for Medicaid or Medicare reimbursement. There is also a state fund for indigent care and Wuesthoff expects to receive revenues from that fund. The total allowance for bad debt and charity care proposed by Wuesthoff is 1.1 percent of gross patient revenues. Wuesthoff will require financial screening of patients prior to admission. Unicare proposes as total project cost in both its original and updated applications the amount of $3,360,000. The project cost cannot be relied upon, however, since it will be necessary for Unicare to modify its design. As further set forth below, Unicare's projected revenues and expenses are suspect. Unicare has never constructed a new nursing home in Florida or built the design proposed. When filing a cost report and determining Medicaid reimbursement for a new nursing home, all costs incurred throughout the process of developing and constructing the project, including feasibility studies, attorney's fees, accounting fees, consulting fees and certificate of need fees must be included. Unicare failed to include all project development costs in its application. The pro formas and projections of revenues and expenses for Unicare were prepared solely by Unicare's certificate of need consultants, based upon the consultants' experience in their own nursing homes and not upon any information (other than home office costs) concerning the operation of Unicare nursing homes. Unicare's in-house financial expert agreed that it is difficult to project revenues and expenses for operation of the proposed Unicare nursing home without having knowledge of what Unicare's general costs and expenses are. Two Unicare homes have failed to comply with the isolation room requirements of Rule 10D-29, Florida Administrative Code, which governs the licensure of nursing homes. The Unicare design does not provide any single, licensed isolation room as required by HRS licensure regulations. The Unicare architectural design provides only one toilet room between two patient rooms to meet the needs of four nursing home patients. The company which designed and expects to construct the Unicare facility has not performed any nursing home construction work in Florida since 1983 or 1984 when the company remodeled a nursing home. The last nursing home which this company completed for Unicare was prior to 1985. This company did not prepare the construction cost estimates relied upon by Unicare. Calculation of the size of the Unicare facility did not include a reduction of 9 square feet for each indented, V-shaped window in the facility. There are 23 such windows proposed for the Unicare facility. Accordingly, the Unicare facility is 207 square feet smaller than represented in the application. Licensure regulations require an unobstructed view (vista) of 20 feet from the window of a nursing home resident's room. At least four Unicare patient rooms have an unobstructed view of less than 20 feet. Therefore, the design presented by Unicare at final hearing does not comply with the rules for licensure of a new nursing home, pursuant to Chapter 10D-29, Florida Administrative Code. The Unicare design has never been built, although it was prepared more than five years ago. The design was intended for patient programs not now proposed by Unicare. The original facility design accommodated residents who require a degree of care below and can participate in activities above typical nursing home residents, such as residents found in adult congregate living facilities. The design and location of the sinks in the Unicare patient rooms do not allow sufficient space for a patient in a wheelchair to have access to the sink at the same time that the door to the toilet room is open. Unicare proposes to locate its facility in the Titusville area in north Brevard County. The local health plan shows the greatest need for additional nursing home beds to be in central, not north, Brevard County. Unicare's selection of Titusville as the area for location of its nursing home was not based upon any demographic analysis or determination of need for additional nursing home beds in the Titusville area. Rather, the selection of Titusville would avoid competition with another of Unicare's facilities located in the Rockledge/Cocoa area. In determining equipment needs, Unicare's certificate of need consultants did not refer to the design of the Unicare nursing home. Unicare projects that its facility will reach 97 percent occupancy in the first nine months of operation. However, the last nursing home to open in the Titusville area, Vista Manor, did not reach 97 percent occupancy until after the first year of operation. Unicare will staff at skilled levels. Its proposed staff salaries are reasonable. Unicare has not yet settled on any site in the Titusville area although it has narrowed its search down to four sites which vary between four and seven acres with prices ranging from $25,000 to $90,000 per acre. Its current total project cost of $3,360,000 computes to a project cost per bed of exactly $28,000. Unicare's parent, United Health, Inc., is the entity that must fund this project and has, by resolution, committed to such funding "provided that said expenditure shall not exceed $28,000 per bed." Consequently, it is highly likely that the proposed design, which has never been built anywhere, which must be redone to comply with HRS codes, and which will be built on land that is yet to be acquired but which will likely require a zoning variance, will cost more than $28,000 per bed. The HCR nursing home is larger and provides more area for patient care than the facilities proposed by Wuesthoff and Unicare. The HCR facility will provide more gross square feet per bed and a larger nursing unit area (which includes patient rooms, the nursing support unit and corridor areas). The entire facility proposed by HCR will be 40,000 square feet, 2,000 of which is allocated to day-care; the day-care area will be available to nursing home residents during those hours in which the day-care area is not in use by day- care residents. The Wuesthoff facility is said to be 37,500 square feet, but 1,000 square feet consists of an outside corridor; thus, the net usable space at the Wuesthoff nursing home is only 36,5' 00 square feet. The smallest proposed facility is the Unicare facility, said to be 34,121.5 square feet, but actually less than 34,000 feet when accurately measured. The nursing homes proposed by Wuesthoff and Unicare are at or below the low gross square foot average determined by HRS. Larger patient care areas are desirable. It is not desirable to place only one toilet room between two patient rooms to accommodate four patients, as proposed by Unicare. It is a generally accepted standard for nursing home skilled nursing units to be organized in groups of 60 beds. Units of this size offer the best efficiencies of operation in terms of economics and quality of care. Each nursing unit must include, in addition to patient bedrooms, toilet rooms and bathing facilities, one nurses' station, a clean utility room, a soiled utility room, a medication preparation room, a nourishment room, a janitors closet, an equipment storage room, a stretcher and wheel chair alcove, a clean linen closet and a nurses' toilet and lavatory. By providing three nursing units, Wuesthoff must devote more space to meet these requirements than would be required for two nursing units.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that HRS enter a Final Order: Granting HCR's application for a certificate of need; Denying Unicare's application for a certificate of need; Denying Wuesthoff's application for a certificate of need; and Dismissing the Petition to Intervene of Brevard Medical Investors, Inc. DONE and RECOMMENDED this 30th day of July, 1987, in Tallahassee, Florida. LINDA M. RIGOT 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 July, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2686, 86-2687, 86-2688 and 86-2690 Unicare's proposed findings of fact numbered 14, 22, and 25 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Unicare's proposed findings of fact have been rejected as follows: 1, 3, 8, 10, 11, and 13 as being contrary to the evidence in this cause; 2, 4-7, 12, 15-17, 19-21, 23, 24, and 26 as not being supported by the weight of the evidence in this cause; 9 and 18 as being subordinate to the issues in this cause; and 27 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. Wuesthoff's proposed findings of fact numbered 2-6, 36, 39, and 40 have been adopted either verbatim or in substance in this Recommended Order. The remainder of Wuesthoff's proposed findings of fact have been rejected as follows: 31 as being contrary to the evidence in this cause; 1, 7-18, 22-30, 32, 34, and 41 as not being supported by the weight of the evidence in this cause; 19-21, 33, 35, 37 and 38 as being subordinate to the issues in this cause; and 42 - 43 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law. HCR's and HRS' proposed findings of fact numbered 1-66, 68, 70-81, 83, 85- 92, 94, 96-104, and 106-123 have been adopted either verbatim or in substance in this Recommended Order. The remainder of HCR's and HRS' proposed findings of fact have been rejected as follows: 67 as being subordinate to the issues in this cause; 69 as being cumulative; 82 and 95 as being irrelevant; 84 as being unnecessary; 93 as not constituting a finding of fact but rather as constituting argument of counsel or a conclusion of law; and 105 as being not supported by the weight of the evidence in this cause. COPIES FURNISHED: Harold F. X. Purnell, Esquire Kenneth Hoffman, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507 Richard Patterson, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Frank J. Santry, Esquire Post Office Box 14129 Tallahassee, Florida 3231 Jonathan S. Grout, Esquire Karen L. Goldsmith, Esquire Dempsey & Goldsmith, P.A. Post Office Box 1980 Orlando, Florida 32802 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
The Issue Whether Petitioner's application for a Certificate of Need ("CON") authorizing establishment of a 60-bed sheltered nursing home adjacent to a 75-unit life care residential facility in HRS Health District IX, Palm Beach County, Florida, should be granted (in whole or in part), or denied.
Findings Of Fact I. The Proposal Petitioner is a not-for-profit Florida corporation organized to provide retirement and nursing home services to aged Episcopalians in the three Episcopal Dioceses in Florida: Central, Southwest and Southeast. Since 1951, Petitioner has operated a life care facility or community, with adjacent nursing home, in Davenport, Florida. It has 71 residential (well-care) units and 60 nursing home beds, operates at nearly full capacity, and has a 3-to-5 year waiting list. There are 128 residents at the facility, 57 of whom live in the nursing home. Petitioner now seeks to replicate the (Davenport) Crane Gray Inn in Lake Worth, Palm Beach County, Florida, in order to better serve the needs of older Episcopalians. The life care community, consisting of a 60-bed skilled nursing home and a 75- unit retirement facility, would be convenient to the residents of the Southeast Florida diocese, but is expected to draw residents throughout Florida. The 60-bed skilled nursing home, for which a CON is required, would be a one-story building measuring 19,100 square feet. Initially estimated to cost $1,705,515, or $68.06 per square foot to construct and equip, actual bids subsequently received have reduced the expected cost to $60.00 per square foot. The total cost of the entire project, including the well- care and nursing-care facilities, is estimated to be $3,600,000. Petitioner intends to obtain certification of the entire project as a continuing care facility in accordance with Chapter 651, Florida Statutes. In March, 1985, the State of Florida Department of Insurance and Treasurer issued Petitioner a provisional license to operate the proposed facility as a continuing care facility.2 Petitioner intends to comply with the reporting and escrow requirements which Chapter 651, Florida Statutes, imposes on life-care facilities. The admission requirements for the proposed life care facility are the same as those which have applied to the Davenport Crane Gray Inn ("Inn"). Before admission, a resident must execute a continuing care or "Resident's Agreement" with the Inn. Under that agreement, in exchange for the future maintenance and support of the resident at the Inn for the remainder of the applicant's life, the applicant transfers all of his or her real and personal property to the Inn. The resident also agrees to execute a will to the Inn to effectuate the transfer of property then owned or later acquired. No entrance fee is charged. The Inn promises to provide the resident with a personal living unit (including all utilities); three meals a day; health care (including medicine, physician fees, dental care, and hospitalization); recreational, educational, social and religious programs; funeral and burial costs; a monthly allowance for personal expenses; weekly maid service and laundry facilities; and transportation for shopping trips and other activities. Either party may terminate the agreement under specified conditions. On termination, the Inn will transfer back to the resident the property previously conveyed, or a sum equal to the value thereof, without interest and deducting therefrom an amount sufficient to compensate the Inn for the resident's care and support while at the Inn. If the resident becomes eligible for social security or government assistance, such assistance is paid to the Inn for the support of the resident. If the resident dies while at the Inn, all property transferred to the Inn on admission is considered to have been earned and becomes the property of the Inn. (Joint Exhibit I) There is no requirement that a prospective resident have any assets and applicants are ostensibly admitted without regard to their financial condition. (However, in the past ten years, only two Medicaid patients or indigent residents have been admitted to the Davenport Inn.) An account for each resident is maintained, to which earnings are transferred and costs of care deducted. Residents without assets are treated the same as those with assets and the account information is treated confidentially. Over time, the accounts of residents are depleted. Currently, 68% of the patients at the Davenport nursing home are Medicaid patients. The per diem rate reimbursed by Medicaid is $51.25. No resident has ever been transferred for lack of funds. However, the average resident, when admitted, transfers assets worth approximately $24,000 to the Inn. Prospective residents of the proposed nursing home will ordinarily come from the adjacent well-care retirement units. The purpose of the nursing home is to serve the individuals residing in the life care community who, as their needs intensify, require skilled nursing care. Only on rare occasions will an individual be admitted directly to the nursing home without first residing in the well-care portion of the life care community. At the Davenport Inn, this has happened only once. Petitioner acknowledges that prospective nursing home patients may come from eligible Episcopalians who reside in nursing homes in the local community. Actual residence in the well-care units will not be a prerequisite to admission to the nursing home. However, no person has been, or will be, admitted to the nursing home without first executing a continuing care agreement. Direct admission of nursing home patients from outside the life care center is permissible under "sheltered nursing home" rules, as construed by HRS officials. Robert E. Maryanski, Administrator of HRS' Community Medical Facilities Office of Health Planning and Development (which implements the CON licensing process) advised Petitioner's counsel on September 20, 1985, that under HRS rules, patients may--if necessary--be admitted directly to the proposed nursing home without first residing in the well-care units. Individuals who have paid for membership with the particular life care center, finding themselves in immediate need of nursing home care, may be directly admitted into the nursing home. (Petitioner's Ex. No. 11) If HRS rules were interpreted otherwise, perfunctory stops in well-care units "on the way to the nursing home" would be encouraged, a practice which would burden patients and serve no useful purpose. Although Petitioner's CON application does not specify a minimum age for admission to the life care community, Petitioner's life care centers are oriented toward members of the Episcopal Protestant Churches who are at an advanced age and "need a place to go for their last days... [In] a lot of cases they have outlived their own children." (TR-34) The average age of the patients in the Davenport nursing home is 89; in the well-care retirement units, 82. The average overall age of members of the Davenport life care community is 84 or 85. Approximately one-half of the residents eventually need nursing care. At Davenport, the minimal age for admission is 71. (TR- 12) According to a member of the Board of Directors of Petitioner, only patients 70 or over will be admitted to the life care community proposed for Palm Beach County. (TR-35) There is already a waiting list of ninety (90) qualified persons for the proposed life care community in Palm Beach County. Out of that figure, only five people currently require nursing home services. After executing the standard continuing care agreement, these five people would be admitted directly to the nursing home facility, without first residing in a well-care unit. Waiting lists are compiled six times a year, with the most recent completed only a week prior to hearing. Petitioner does not intend to utilize all the nursing home beds, since it must keep some beds open to meet the needs of well-care residents. Nursing home beds at the Palm Beach facility would be filled gradually, approximately two per week, so it would take six months to reach optimum capacity. The parties stipulate that all criteria for evaluating CON applications under Section 381.494(6)(c) and Rule 10-5.11, Florida Administrative Code, have been met or are inapplicable except for the following: The long-term financial feasibility of the project, the availability of operating capital, and the economic impact on other providers (Section 381.494(6) (c)8, 9, Fla. Stat.); The cost of construction (Section 381.494(6) (c)13, Fla. Stat.); The ratio of beds to residential units (Rule 10-5.11(22)(a), Fla. Admin. Code). II. Financial Feasibility The historical track record of the Davenport facility over the last 13 years and projections for the proposed facility demonstrate that the proposed nursing home is financially feasible and that Petitioner has, or can obtain sufficient funds to meet its operating costs. Moreover, as a licensed Chapter 651 life care facility, the financial viability of the entire operation will be monitored by the Department of Insurance. Assets available to support the costs of operating the life care community include income and assets derived from incoming residents; estates and bequests; and a fund of 1,300,000.00, functioning as an endowment, to be placed in escrow. The cost for a resident in the well-care units is approximately $27 per day; the cost in the nursing home is approximately $54 per day. Although there is a deficit of approximately $300 per month in the well-care section of the Davenport facility, there is no deficiency in the nursing home. Medicaid payments are sufficient to cover the costs of providing nursing care. Philanthropy should not be required to sustain the operation of the proposed nursing home. Petitioner has never had difficulty in obtaining financial support for its Davenport well-care units. More than one-half of the operating deficit for the well-care units was met by funds at work and did not depend on philanthropy. There are over 200 Episcopal Churches in the three Florida dioceses with 90-100,000 parishioners, who have been responsive to fund- raising efforts in the past. Last year, Petitioner raised $693,000 from fund raising drives. It is reasonably expected that this source of financial support will also be available to support the proposed life care facility, including the nursing home. An endowment fund of $1,300,000 is also available. These funds will be made available to support the proposed life care community. In addition, each new resident contributes an average of $24,000, which is used to defray operating costs. Barnett Bank will finance construction of the project at one-half percent over prime. Petitioner intends to pay off the capital debt in two or three years. The land has already been acquired and some land preparation costs have been paid. Petitioner has expended over $800,000, to date, on the proposed life care community. Petitioner has $120, 000 on hand for the project, in addition to escrowed reserves. An HRS health care planner has misgivings about the financial viability of the project since Petitioner has relied on philanthropy to support its Davenport facility, and would rely on it to some extent to support the proposed facility. However, Petitioner projects that 77% of the nursing home patients at the proposed facility will be Medicaid eligible. Due to efficiencies in operation, Medicaid payments should be sufficient to cover the costs of nursing home patients at the proposed facility, just as they have been at the Davenport nursing home. The various sources of funds available to Petitioner--proven wholly adequate in the past--should be sufficient to cover the other costs of operation and ensure the continued financial viability of the nursing home, as well as the associated well-care units. III. Cost of Construction HRS contends that the initial estimate of construction costs for the proposed nursing home ($68.00 per square foot) is excessive when compared to other 60-bed nursing facilities, where the cost is approximately $10.00 less per square foot. But, through various cost-cutting measures, the cost of the project has now been reduced to approximately $60.00 per square foot, which is reasonable and in line with the other nursing home projects. IV. Ratio of Nursing Rome Beds to Residential Units Rule 10-5.11(22)(a), Florida Administrative Code, provides that HRS "will not normally approve an application for new or additional sheltered nursing home beds if approved would result in the number of sheltered nursing home beds that exceed one for every four residential units in the life care facility." The parties stipulate that, absent unusual or exceptional circumstances, this rule would preclude approval of more than 19 of Petitioner's 60 proposed nursing home beds. The proposed nursing home, like the Davenport facility it duplicates, will be unique, unusual or extraordinary, when compared with other nursing homes in Florida, due to the advanced age of its patients. No one under 70 will be admitted. The average age of its patients is expected to approach 89 with the average age of well-care residents approaching 82. Approximately one-half of the well-care residents will eventually require transfer into the nursing home. People of advanced age are more likely to require nursing home care. Based on Petitioner's historical experience at its Davenport facility, it is likely that 60 nursing home beds will be required to meet the needs of residents of the proposed well- care units. It has been shown that the proposed 60 nursing beds will be needed to serve the needs of well-care residents as they age and their health care needs intensify. That has been the case at the Davenport facility, where rarely has a patient been admitted to the nursing home who did not first reside in the well-care units. The proposed nursing home and life care center will draw patients and residents similar to those drawn by the Davenport facility--the state-wide applicant "pool" of both is expected to be the same. For this reason, the proposed nursing home should have no significant impact on the census of, or need for, community nursing homes in Palm Beach County. It appears that the rationale behind the four-to-one (residential units to nursing home beds) ratio of the HRS rule is that, under normal or ordinary conditions, only one nursing home bed will be required to serve the residents of four well- care units. In the instant case, actual experience has shown this assumption to be patently erroneous. If only 19 nursing home beds were allowed Petitioner--because of the ratio cast in HRS rules--it is likely that many well-care residents at the proposed life care center would be forced to find nursing care outside of the center. Displaced, placed in nursing homes distant from the life care community, such patients would lose close contact with spouses and friends. The HRS rule, embracing a numerical ratio for the norm, allows flexibility in particular situations which are shown to be abnormal. The circumstances of the instant case show it to be an abnormal situation, fully justifying approval of 60-beds sought, rather than the 19 otherwise permitted by the HRS rule.
Recommendation Accordingly, based on the foregoing, it is RECOMMENDED: That Petitioner's application for a CON authorizing establishment of a 60-bed nursing home in Palm Beach County be GRANTED; and that the CON, on its face, state that issuance is predicated on Petitioner's statement of intent (during Section 120.57(1) licensing proceedings) that (i.) no one under 70 years of age will be admitted to the life care community (including both well-care and nursing-care sections) and (ii.) that, only in relatively rare and unusual cases, will patients be directly admitted to the nursing home without first residing in the well- care residential units of the life care communities.3 See, Section 381.494(8)(g), Florida Statutes (1985). DONE and ORDERED this 14th day of March, 1986, in Tallahassee, Florida. R. L. CALEEN, 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 March, 1986.
The Issue The parties have stipulated that Petitioner is a "prevailing small business party" as defined in Section 57.111, F.S., and that the attorney fees requested are reasonable, up to the $15,000.00 statutory limit. The issue remaining for resolution is whether the expungement proceeding had a "reasonable basis in law and fact at the time it was initiated by [the] state agency", as provided in Section 57.111, F.S.
Findings Of Fact The following findings are adduced from the record, consisting of the transcript and exhibits in cases number 89-4151C/89-6087C, from the stipulations of the parties, and from the final order of the agency adopting the recommended order of Hearing Officer, K.N. Ayers, dated March 20, 1990. Petitioners are sole proprietors of Forest Haven, an unincorporated adult congregate living facility (ACLF) licensed by the State of Florida pursuant to Chapter 400, Part II, F.S., and located at 8207 Forest City Road, Orlando, Florida. Petitioners and Forest Haven have their principal office in Orlando, Florida and are domiciled in Orlando, Florida. They have less than 25 full-time employees and a net worth of less than $2 million. On March 17, 1989, a Department of Health and Rehabilitative Services (HRS) survey team visited Forest Haven to conduct an annual survey of the facility. The survey team was comprised of 10 persons, enlarged due to a training exercise. Several of the team members were registered nurses; several members were Office of Licensure and Certification supervisors. During the course of the visit and observations of the residents, members of the team determined that eight residents required a higher level of care than could be provided at the ACLF. As found in the recommended order adopted by the agency, the basis for this determination was, As to T.M., age 81, the need for a restraining vest, and the existence of bruises and gashes on the face and head; As to H.L., age 89, the presence of a foley catheter, total disorientation, low weight and poor skin turgor (brittle skin); As to F.W., age 72, the presence of a foley catheter, observation of fresh blood in the catheter bag, and low body weight; As to M.B., age 81, incontinence and nonambulatory status; As to R.T., age 84, a foley catheter and contraction of both legs; As to L.O., age 94, edema of lower extremities, contracture of both knees, low body weight, skin tear on left buttocks, and possible bed sore on right buttocks; As to P.B., age 88, incontinence, low body weight, and inability to transfer from wheelchair to bed without assistance; and As to F.H., age 89, one-half inch bed sore on coccyx, pitting edema of legs, incontinence and somewhat confused state. An adult protective services investigator was summoned, as well as law enforcement personnel, and the above residents were removed from the facility on an emergency basis and were placed in a nursing home. They were evaluated at the nursing home the following day by Carolyn Lyons, a Registered Nurse Specialist with HRS, who found that intermediate or skilled nursing home services were required. A ninth resident, C.K., was evaluated by a medical review team nurse and an adult protective services worker at the ACLF on March 20, 1989, and was removed from the facility and placed in a nursing home the same day. C.K., age 89, was found to be confused, incontinent, with bruises, a swollen foot, non- ambulatory, and with a red rash on the trunk of her body. HRS obtained orders from the Circuit Court to provide protective services for seven of the above-mentioned residents. Of the remaining two, one was competent to consent to the nursing home placement and another was returned to his own home by relatives. On March 22, 1989, HRS Protective Services worker, Annette Hair, classified the report in her investigation as "confirmed" medical neglect by S.G. and J.G. of the eight residents who had been removed from the ACLF. She relied on her own observations of the individuals, on the medical assessments performed by the survey team nurses at the ACLF, and the subsequent assessment of Carolyn Lyons, the HRS staff person responsible for making an evaluation of the level of care required for medicaid nursing home placement. The narrative "investigative conclusion" of Ms. Hair's report provides, in pertinent part: * * * Based on the facts obtained during the course of this investigation this case is being classified as CONFIRMED. In accordance with F.S. Section 415.102(4) it is clearly estab- lished that [S. and J.G.] were the caregivers of the eight alleged victims of this report as they had been entrusted with the care of said individuals. The allegation of neglect is verified for each of the eight alleged victims in that [S. and J.G.] failed to provide the care and service necessary to maintain the physical and mental health of an aged person that a prudent person would deem essential for the well-being of an aged person (F.S. Section 415.102(13)). Specifically each of the eight alleged victims has a medical condition which required twenty-four hour skilled nursing care and supervision which the caregivers, [S. and J.G.] failed to provide for said individuals. Five of the eight alleged victims, [H.L., L.O., T.M., F.H. and P.B.] had Scabies (a highly contagious disease caused by parasitic mites that burrow under the skin. This disease is associated with unsanitary conditions and causes a painful itch). [S. and J.G.] failed to provide the supervision necessary to detect this disease and in so doing jeopardized the health and well-being of the other residents in the facility. [H.L.] in addition to having Scabies, was semi-comatose, had bed sores on her buttocks and pelvic area and had a foley catheter. [T.M.] had open lacerations on her face, was extremely mentally confused and was known to wander and fall which required her to be physically restrained. [L.O.] had two open skin areas and Edema. [M.B.] has an excoriated area on her buttocks, Edema of the feet, and her right knee was swollen. [R.T.] had a cough of unknown origin, contraction of both legs, and an in-dwelling catheter. [F.W.] had an in-dwelling catheter which was draining bloody urine and appeared malnourished. [P.B.] appeared malnourished and was incontinent of both bowels and bladder, was extremely confused, and had an open draining wound. [F.H.] had bed sores, and Pitting Edema in addition to Scabies. [S. and J.G.], in addition to being negligent for failing to provide the care and services necessary to maintain the physical and mental health of the alleged victims, were in direct violation of F.S. Section 400.426(1) as they did not perform their responsibility of determining the appropriateness of residence of said individuals in their facility. (Petitioner's exhibit 2, in cases number 89-4151C/89-6087C) On April 4, 1989, HRS Protective Services worker, Kathleen C. Schirhman, classified the report in her investigation as "confirmed" medical neglect by S.G. and J.G. She relied on her own assessment of the resident, and on the medical assessments by Nurse Lyons, and by medical staff at the receiving nursing home, including a physician, Dr. Parsons. The narrative "investigative conclusion" of Ms. Schirhman's report provides: Based upon the facts obtained during the course of this investigation, both alle- gations of medical neglect and other neglect were determined to be verified, and the case is being classified as CONFIRMED. [J.G. and S.G.] assumed the responsibility of care for [C.K.] and, therefore, became her caregivers. They did not provide the care and services necessary to maintain the physical and mental health of [C.K.] that a prudent person would deem essential for her well-being. She required medical services and nursing supervision in a skilled nursing facility. Pursuant to F.S. 400.426 "the owner or Admini- strator of a facility is responsible for determining the appropriateness of admission of an individual to the facility and for deter- mining the continued appropriateness of resi- dence of an individual in the facility." The assessment by the CARES nurse determined that [C.K.] was being medically neglected, because she required 24 hour nursing care, which she was not receiving. She had Scabies, for which she was not being treated. The CARES nurse believed that the alleged victim was at risk and requiring immediate nursing home placement. Allegation of "other neglect" was added to the original report. [C.K.] was being neglected, because she was a total transfer patient, who required restraints, which were not used and cannot be used in an ACLF. Furthermore, the potential for harm to her was great: She was blind, confused, and unable to self-preserve. (Petitioner's exhibit number 1 in cases number 89-4151C/89-6087C) S.G. and J.G. requested expungement of the reports but the request was denied on July 10, 1989. Thereafter, through counsel, they made a timely request for a formal evidentiary hearing. The hearing was conducted on February 14 and 15, 1990, by DOAH Hearing Officer, K.N. Ayers. Depositions of David J. Parsons, M.D. and Gideon Lewis, M.D. were filed after the hearing, by leave of the Hearing Officer. In his recommended order issued on March 20, 1990, Hearing Officer Ayers found that the HRS investigators did not contact the physicians who had signed the admissions forms when each of the residents at issue had been admitted to the ACLF. Nor did the HRS staff obtain records from the home health agency which, at the treating physicians' direction, was providing, or had provided, home health care to most of the residents at Forest Haven. Skin lesions (decubitus) and scabies were found to be frequently present in nursing home and ACLF residents. Edema and underweight conditions are also common in these residents. Dr. Lewis, the treating physician for most of the residents at Forest Haven, had ordered the vest restraint for T.M.'s protection. He had also written to HRS about a year prior to the survey, recommending that efforts be made to relocate H.L. to a skilled nursing facility. The recommended order found that no evidence of exploitation or neglect, other than medical neglect, was presented at the hearing. The order also found that evidence of medical neglect by S.G. and J.G. was not presented, but rather, "[t]o the contrary, the evidence was unrebutted that Respondents [Petitioners in this proceeding] promptly reported to the resident's physician all changes in the resident's physical condition." The agency's final order was filed on May 29, 1990, adopting the findings of fact and conclusions of law recommended by Hearing Officer Ayers, and granting J.G. and S.G.'s requests for expungement. The Final Order addressed the department's exceptions to the recommended order, as follows: RULING ON EXCEPTIONS FILED BY THE DEPARTMENT The dispositive issue is whether retention of a resident (or residents) in an ACLF whose medical condition is more serious than the established criteria for residence in an ACLF (see Section 10A-5.0181, Florida Administra- tive Code for the criteria) constitutes per se neglect under Chapter 415. Inappropriate retention of a resident may constitute grounds for disciplinary sanctions under the licensure rules, but it does not automatically consti- tute abuse under Chapter 415. See State vs. E. N. G., Case Number 89-3306C (HRS 2/13/90). The evidence of medical neglect was based on the inappropriate retention of certain resi- dents. The Hearing Officer's finding that these residents were not medically neglected is based on competent, substantial evidence; therefore, the department is obligated to accept this finding. Johnson vs. Department of Professional Regulation, 456 So2d 939 (Fla. 1st DCA 1981), B. B. vs. Department of Health and Rehabilitative Services, 542 So2d 1362 (Fla. 3rd DCA 1989). In pursuing expungement, Petitioners incurred fees, costs and interest in the total amount of $22,772.49. The amount of interest included in that total is $1,000.91. As stipulated, the fees, up to the $15,000.00 statutory maximum, are reasonable.
Findings Of Fact Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
The Issue The issue in this proceeding is whether DHRS should approve the application for certificate of need of any one or more of the January, 1987, applicants for community nursing home beds in Hillsborough County. STIPULATIONS The parties stipulated to the following facts: All applicants timely filed their respective letters of intent, applications and omission responses with DHRS and the appropriate local health council for the January, 1987, batching cycle. The petitioners each timely filed a petition requesting a Section 120.57(1) hearing and have standing in this proceeding. The parties agree the Division of Administrative Hearings has jurisdiction over this matter and the parties. The CON application content requirements of Section 381.494, Florida Statutes (1985), apply as that was the statute in effect at the time the applications were filed. The review criteria in Section 381.705(1) and (2), Florida Statutes (1987), apply to this proceeding. The following statutory criteria have been met orare not applicable in this proceeding: Section 381.705(1)(d), (f), (g), (j) and (k) and all of Section 381.705(2), Florida Statutes (1987). Except for the effects the project will have on clinical needs of health professional training programs, the extent to which services will be accessible to schools for health professionals and the availability of alternative uses of such resources for the provision of other health services, Section 381.705(1)(h) is in dispute and remains to be litigated.
Findings Of Fact SUMMARY DESCRIPTION OF THE PARTIES. HCR's application (CON Action No. 5000) is to construct a 120-bed nursing home consisting of 40,000 square feet at a cost of $3,964,000.00, or $33,033 per bed (including adult day care; $32,1127 when the cost for day care is excluded.) The HCR application describes special programs and services for Alzheimer's Disease and related disorder patients in a distinct special care unit and an Alzheimer's day care center, both Identified in the plans submitted by HCR showing special design elements. HCR also proposes to offer sub-acute care and respite care. The HCR nursing home will have 2.08 (120/57.6) patients per staff, which includes the assistant director of nursing and occupational therapy and recreational therapy aides listed by HCR in its application. FCP submitted an application for 30 nursing home beds to be constructed as a part of a retirement facility (CON Action NO. 4993). The 30 beds will comprise approximately 17,558 square feet at a cost of $1,549,599.00, or $51,653 per bed. The Florida Country Place application proposes a patient staff ratio of approximately 2.3 (30/13). Palm Court submitted an application for a 60-bed addition to its existing 120-bed facility (CON Action No. 4987). The 60-bed addition would consist of 15,260 square feet at a cost of $1,472,435.00, or $24,571 per bed. The Palm Court facility is located in Plant City in the far eastern portion of Hillsborough County, near the Polk County line. Palm Court proposed a ratio of 2.31 (60/26) patients per nursing staff. Manor Care submitted an application (CON Action No. 5006) to add 60 beds to an approved certificate of need for 60-beds for which construction has not yet begun. The area to be added would consist of 19,000 square feet at a cost of $2,187,045.00, or $36,451 per bed. The Manor Care addition would include a distinct special care unit for Alzheimer's Disease and related disorder victims and the 60-bed addition would provide a patient staff ratio of 1.98 (60/30.3), which includes a half-time physical therapy aide, a half-time recreational therapy assistant and an assistant director of nursing. Forum submitted an application (CON Action No. 4999) to construct a 120-bed nursing home as a part of a retirement complex. The nursing home element will consist of 49,283 square feet at a cost of $5,053,301.00, or $42,111 per bed. Forum proposes a staffing ratio of 3.0 patients per staff FTE. Forum proposed to provide respite care and hospice care, and adult day care and meals on wheels during or after the second year of operation. HHL submitted an application (CON Action No. 4978) for 120-bed nursing home consisting of 37,700 square feet at a cost of $3,900,000.00, or $32,500 per bed. The HHL facility proposes 2.27 (120/52.8) patients per staff, which includes the rehabilitation assistants and the assistant director of nursing listed by HHL. HHL proposes sub-acute care, respite care, programs for Alzheimer's Disease victims (but not a distinct special care unit) and an Alzheimer's adult day care program of from four to six patients. Cypress submitted an application (CON Action No. 5004) to construct a 60-bed nursing home in Sun City Center in southeastern Hillsborough County. The nursing home described in the application would contain 24,069 square feet at a cost of $2,125,000.00, or $35,419 per bed. But Cypress' estimated construction cost per square foot of $49.81 does not account for inflation and is unreasonably low. Median cost of nursing home construction in Florida is $55 per square foot. It is estimated that Cypress' construction cost estimate is 10-15 percent too low. Assuming that the cost estimate is 12.5 percent too low, the cost of construction would increase to approximately $2,274.485 or $37,914 per bed. Cypress did not detail any special programs in its application and proposed 2.45 (60/24.5) patients per staff. However, this ratio is questionable in view of the confusion surrounding Cypress' evidence regarding staffing and the apparent inaccuracy of the staffing presented by the application. DHRS is the state agency that preliminarily reviewed and passed on the applications and is responsible for final agency action on them. DHRS PRELIMINARY REVIEW AND ACTION. HCR, FCP, Palm Court, Manor Care, Forum, HHL, Cypress, and others filed their applications for community nursing home bed certificates of need for Hillsborough County in the January, 1987, batching cycle. On June 18, 1987, DHRS issued its State Agency Action Report (SAAR), in which it denied all of the applications except HCR's, FCP's and VHA/Oxford's (for 120 beds). Review of the SAAR in light of the evidence introduced at the final hearing indicates that DHRS erred in reviewing the applications in at least the following respects: Manor Care. -- The SAAR indicates that DHRS was not cognizant that Manor Care had a final approval for a 60-bed nursing home CON (No. 4155) to which to add the 60 beds applied for in this case, CON Action No. 5006. The SAAR was somewhat critical of the Manor Care proposal for being a two-story structure. It appears that DHRS confused the proposal to add 60-beds (CON Action No. 5006) with a parallel contingent proposal to build a new 120-bed facility (CON Action No. 5005), which Manor Care eventually withdrew during the final hearing. Actually, CON Action No. 5006, added to the approved CON No. 4155 for a new 60-bed nursing home, would result in a one-story 120-bed nursing home. On page 7 of the SAAR, DHRS indicated its understanding that Manor Care had not specified a location for its proposal. Later, on page 11, the SAAR acknowledges the true fact that Manor Care's proposed nursIng home would be located in the Northwest Hillsborough County subdistrict, which is the Local Health Plan's first priority for location of additional nursing home beds in DHRS District 6. HHL. The SAAR (p. 13) states that Convalescent Services, Inc. (CSI), the management corporation HHL and other limited partnerships for which the Kellett Brothers are the general partners, has no other nursing homes in Florida. While technically correct, Kellett limited partnerships do have other nursing homes in Florida. Staffing tables on page 17 of the SAAR are incorrect, attributing no LPNs to the HHL proposal instead of 6 and only 36 aides instead of 38. On page 18 of the SAAR, the table of patient privileges incorrectly states that the HHL applications had no patients' bill of rights. Also on page 18 of the SAAR, DHRS incorrectly omitted adult day care and community outreach from the table of programs provided by HHL. On page 26 of the SAkR, it gives HHL's private pay private room rate ($101) as its semi-private room rate (actually $69.92) The SAAR Review Matrix incorrectly omits adult day care, community outreach and sub-acute care from HHL's proposed programs and omits HHL's patients' bill of rights. Forum. -- The SAAR starts out on page 3 by misidentifying Forum as being affiliated with Hospital Corporation of America. On pages 4, 6 and 15, the SAAR incorrectly fails to recognize that a retirement living center (apartments) is part of the overall development Forum proposes. The semi-private room rate of $110 attributed to Forum's application on page 26 of the SAAR is wrong; it should have been $85. Cypress. -- The Review Matrix in the SAAR failed to identify several services and programs Cypress stated in its application that it would offer. The matrix did not recognize that Cypress would offer social activity functions within the community, would offer rehabilitation, would provide some Alzheimer's type services, (which Cypress called supportive care and mentally frail services) and physically frail services. Cypress also spoke of hospice care and respite care in its application, as well as specialized rehabilitation, physical therapy, and speech therapy. Cypress also spoke of community outreach programs, psychiatric services, home health agencies, and numerous other areas that were not recognized by DHRS in its matrix. However, there are valid reasons for some of these omissions. On May 9, 1988, the first day of the final hearing, VHA/Oxford withdrew its application. On the afternoon of May 17, 1988, DHRS announced it was supporting the grant of Palm Court's application since VHA/Oxford had withdrawn. But the only evidence to support the new DHRS position was through the testimony of Reid Jaffe, DHRS Health Services and Facilities Consultants Supervisor, who did not express a personal opinion but acted as a messsenger to relay the positions taken by others at DHRS who did not testify. NUMERIC NEED. Rule 10.5.011(1)(k), Florida Administrative Code, is a methodology for calculating net numeric need for nursing home beds. Under the methodology, gross numeric need is calculated essentially by multiplying the population of two age cohorts projected on the planning horizon by a use rate. The use rate is calculated by divIding current population by the current number of licensed beds. To obtain net need in a health planning sub-district, the methodology first prorates the gross need in the entire district, using the proportion of current licensed beds in the subdistrict to the current licensed beds in the district, and adjusts the resultant by a current occupancy rate factor (occupancy rate /0.90); then, the number of licensed beds, plus 90 percent of the number of approved beds in the subdistrict, are subtracted from the adjusted gross need in the subdistrict. With three exceptions, the parties agree on how net numeric need is calculated under the rule methodology. The parties disagree only on the current licensed bed count, the current approved bed count, and the occupancy rate at one facility that has both community nursing home beds and sheltered nursing home beds. (Sheltered nursing home beds generally are not factored into the formula.) As for the licensed bed count, the issue is whether The Home Association, a 96-bed facility in Hillsborough County, should be included as a licensed community nursing home facility or excluded as a sheltered facility. At hearing, all of the parties presenting evidence on the issue except Forum counted The Home Association's 96 beds as licensed community beds. Forum excluded The Home Association from the licensed bed count because it was not listed on the Department's Community Nursing Home Report for January 1, 1988. This same report reflects three other facilities in Hillsborough County in which the beds were formerly sheltered but as of August 1, 1987, began to be counted by the Department as community beds. Forum conceded, however, that if the Department recognizes The Home Association as a community facility, then it would be appropriate to include those beds in the licensed bed count under the rule formula. In its proposed recommended order, even Forum agrees that The Home Association beds are included in the licensed bed count. Two issues are presented relating to the inventory of approved beds under the rule formula: the date at which approved beds are to be counted; and whether the 120 beds under Careage CON #4714 and Manor Care's 60 beds under CON #4155 were approved at the pertinent time. On the first question, Forum again stands alone. In the face of a rule which is silent as to the date on which approved beds are to be counted, Forum suggests that they be counted cn the same day licensed beds are counted, December 1, 1986, for this batch. All other interested parties follow the Department's general practice of counting approved beds as of the date the State Agency Action Report for this batch was executed, June 18, 1987. Forum supports its position on the ground that use of the same date for both licensed and approved beds avoids the prospect that beds may be "lost" from the calculation if they are not licensed as of December 1, 1986, but become licensed before June 18, 1987, and therefore are no longer approved beds on that latter date. The argument is meritless. There is no evidence of any "lost" beds under this policy for this batch. Indeed, the evidence is that such beds are not lost: 120 beds at Carrollwood were licensed on December 15, 1986, after the December 1 licensed bed cut-off and before the June 18, 1987, SAAR date. These beds were included in the approved bed inventory on June 18, 1987. The Department's policy under its numeric need rule is to count approved beds as of the execution date of the SAAR. Under this policy, the need for beds in the future is predicated on the number of beds currently or soon to be available to meet the need. When more than seven months can elapse after licensed beds are counted but before the agency decision is formulated, it makes sense to count beds approved during this intervening period. A 120-bed award to Careage in the prior batch was published by DHRS in the Florida Administrative Weekly of January 23, 1987, reflecting approval on January 7, 1987. However, DHRS then received criticism.of the approval, and a new supervisor in charge initiated a second review of the circumstances and of the Careage approval. The second review did not conclude until after June 18, 1987. When it did, DHRS re- affirmed its decision to approve Careage and issued a CON for 120 beds on August 18, 1987. Although the Careage CON was issued after June 18, 1987, DHRS proved that there is a rational basis for including it in the approved bed count under these unusual circumstances. The Careage CON represents 120 beds approved in the batching cycle preceding the one at issue in this case. Counting the 120 beds as approved promotes sound health planning. The projection of net need on the planning horizon is predicated on the most accurate count of approved beds from prior batching cycles that can be anticipated to come on line in the near future. As of June 18, 1987, there were 308 other beds approved but not yet licensed in Hillsborough County. Included among these 308 approved beds are 60 beds awarded to Manor Care under CON 4155 by Stipulation dated March 30, 1987. By mistake, DHRS did not count Manor Care's 60-bed CON in the SAAR. This mistake was not discovered, and DHRS served discovery responses and took a final position on need, as required by prehearing orders, that did not count the Manor Care CON. But this mistake f fact should now be corrected, even if it could have been discovered earlier through the use of due diligence, so that the health planning decision resulting from these de novo proceedings will be predicated on the correct facts. See Gulf Court Nursing Center v. HRS, 483 So.2d 700, 712 (Fla. 1st DCA 1986). It is appropriate to include Manor Care's finally approved 60 beds in the rule formula. Adding Careage's 120 beds, the total approved bed count is 428. The final variation accounting for the differences in the parties' calculations under the formula is the manner in which the occupancy rate should be computed at John Knox Village, a facility containing both community and sheltered beds. The issue is whether the patient days in this mixed facility should be prorated between the two types of beds or whether the full patient days for both types of beds should be used in calculating the occupancy rate in the facility. There is no separate report of occupancy by bed type for this mixed facility. The number of patient days delivered in the community beds at John Knox is not known. If the patient days for the entire facility are prorated according to the percentage the community beds bear to the total number of beds, there is a necessary but wholly unsupported and speculative assumption that the proportion of patient days delivered in community beds is identical to the proportion of community beds. DHRS historically has been unwilling to make this assumption and has always included the total number of beds and patient days in mixed facilities to determine the occupancy rate under the community bed rule. The rationale supporting this policy has been appropriately explicated on the record. The use of prorated patient days to determine occupancy in mixed facilities, as suggested by DHRS for the first time at final hearing, also is a change from the position the Department took when exhibits were exchanged and the prehearing stipulation was executed and then relied on by the parties. Because the Department, as a party litigant, did not prorate in its prehearing submissions, it cannot do so at hearing in the absence of fraud, mistake of fact, or newly discovered evidence. No evidence of any such extenuating circumstances was presented. The only explanation DHRS gave for changing its treatment of the John Knox occupancy data was that more accurate recent data (using daily census data instead of first day of the month census data) furnished by the Local Health Council was prorated. But DHRS just as easily could have prorated the older, less accurate data if it had chosen to take that position at the time the parties were required to take final positions in prehearing procedures. The Department, therefore, is precluded from adopting a posture at hearing relating to the treatment of patient days in mixed facilities which is different from that reflected in the Department's prehearing stipulation and exchanged exhibits. In summary, the appropriate numeric need calculation must include The Home Association in licensed beds, count both Careage's 120-bed CON and Manor Care's 60-bed CON in the approved bed count, and use the full John Knox bed complement and patient days in determining the Hillsborough County occupancy rate. Using these factors in the rule methodology, the net need for community nursing home beds in Hillsborough County for the January, 1990, planning horizon is 231, as reflected in the calculation included in the attached Appendix To Recommended Order, Case Nos. 87-3409, etc. Rule 10-5.011(1)(k), Florida Administrative Code, provides that DHRS normally may not approve more beds than the numeric net need calculated under rule methodology. In this case, none of the circumstances specified in the rule that would justify exceeding the numeric net need were proven by the evidence. At the same time, the rule does not require DHRS to fill all, or as much as possible, of the numeric net need by attempting to "mix and match" applications to come as close as possible to the calculated number. LOCAL GEOGRAPHIC NEED PRIORITIES. The current, 1985 District VI Local Health Plan provides that, after consideration of numeric bed need under the rule need methodology, its "priority need rankings" should be considered in the competitive review for new nursing homes. Hil1sborough County, Northwest, is priority rank number one. HCR, FCP, Manor Care, Forum and HHL all propose to locate their nursing homes there. Cypress proposes to locate in Sun City Center and Palm Court is in Plant City, both in Hillsborough County, Southeast, an area ranked fifth in priority in District VI. Plant City is close to Polk County, which the Local Health Plan designates as the fourth ranked area in priority. Cypress proposes its 60-bed nursing home approximately 1/4 mile down the road from an existing nursing home called Sun Terrace, operated by CSI. Quality of care concerns have arisen due to rapid fill-up of 60 additional beds recently licensed at Sun Terrace and opened in September, 1987. See Findings of Fact 83-87, below. As a result, Sun Terrace has imposed on itself a moratorium on new admissions until quality of care concerns can be addressed. In part as a result of the moratorium, Sun Terrace's occupancy rate at the time of the final hearing was only approximately 65 percent, leaving 42 empty beds. MEDICAID NEED. One of the three major considerations for competitive review of nursing home CON applications in the Longterm Care section of the 1985-1987 State Health Plan is "resource access." Except as reflected in the priority rankings, geographic access is not an issue in this proceeding. (Priority/Policy 7 of the Local Health Plan, setting a goal of providing for nursing home services within 30 minutes travel time of 90 percent of urban residents and within 45 minutes travel time of 90 percent of rural residents, already has been achieved in District VI.) But, to address concern for financial access, Priority/Policy 2 of the Local Health Plan provides that applicants "should commit, at a minimum, to serve Medicaid eligible patients in proportion to the representation of elderly poor in the subdistrict." In Hillsborough County, Northwest, where all but two of the applicants propose to locate, the elderly poverty rate is 18.6; in Hillsborough County, Southeast, where Cypress and Pal:n Court would be located, the elderly poverty rate is 15.6 percent. The applicants propose to commit the following percentages of their nursing home beds to the care of Medicaid- 4 eligible patients: HCR, 70 percent; FCP, 70 percent; Manor Care, 30 percent; HHL, 45 percent; Palm Court, 70 percent; and Cypress, approximately 10 percent. Cypress proposed in its application to commit 10 percent of its beds for Medicaid use. It attempted to update its application to provide for a 15 percent Medicaid commitment. The update was said to have been the result of a decrease in the average age of the residents of Sun City Center, Cypress' proposed primary service area, from 73 to 70. But the percentage was calculated by first estimating 60 percent private pay and "backing down" to a Medicare percentage of 25 percent, leaving 15 percent Medicaid. The evidence was persuasive that this attempted update was not due to extrinsic factors. See Conclusions of Law 20 to 25, below. Forum has committed only to have 50 percent of its beds Medicaid- certified and to meet the requirements of Priority/Policy 2. Although Priority/Policy 2 is written as a minimum Medicaid percentage, no evidence was presented from which to determine how high a percentage of Medicaid commitment is desirable. There was, e.g., no evidence on which to find that a Medicaid percentage as high as four times the elderly poverty rate is more desirable than a percentage approximately equal to or perhaps just a bit higher than the elderly poverty rate. To the contrary, the only evidence on the subject was that DHRS does not now consider the Medicaid percentage to be as important as it was considered to be in the past and that DHRS now just checks to see that the percentage approximates the elderly poor rate in the County. NEED FOR ALZHEIMER'S DISEASE PROGRAMS. Description Of The Disease And The Need. There is a need in Hillsborough County for additional nursing home beds and services for Alzheimer's Disease and related disorder victims. There is no known nursing home in Hillsborough County which provides a distinct care unit for Alzheimer's Disease and related disorder victims. There is an estimated unmet need by Alzheimer's patients for nursing home care in Hillsborough County of approximately 1,271 by July, 1989. DHRS has recommended that "preference should be given to applicants for new nursing home beds which propose the development of special Alzheimer's units" and "greater preference should be given to units that will also provide adult day care and/or respite care." Alzheimer's Disease is a brain disorder that was discovered at the turn of the century. It primarily affects persons over the age of 60. The term "related disorders" is used because some non-Alzheimer's disorders mimic Alzheimer's Disease symptoms and create many of the same needs for specialized care. Typically, Alzheimer's Disease results in gradual memory loss and, as memory loss progresses, results in the need for ever- increasing personal care. In the earlier stages, the victim is often in reasonably good physical condition and simply exhibits signs of recent memory loss. However, as memory loss increases, various activities of daily living are disrupted. Victims encounter more serious physical problems and exhibit symptoms such as wandering, significant weight loss, clumsiness, incontinence and antisocial behavior. In the last stages of the disease, the victim requires increasingly intense medical attention, becomes totally dependent on others, and may eventually require total skilled nursing care. The intensity of care required for the Alzheimer's Disease and related disorder victim increases as the disease progresses. In early stages, the victims are typically cared for at home by a family member. The nature of care required for an Alzheimer's Disease or related disorders victim is very exhausting for the care giver. Toward the end of the first stage of the disease when the victim requires increasing supervision, the victim can be maintained longer in the home if there is available to the care giver some form of occasional rest, such as adult day care or respite care. Adult day care and respite care provide opportunities for the primary care giver to "take a break". See Findings of Fact 133 to 135, below. An Alzheimer's Disease patient usually requires inpatient nursing home care late in the second stage of the disease. If the patient is ambulatory, he often exhibits a wandering behavior. Approximately 50 percent of the Alzheimer's victims admitted to a nursing home have the potential to wander. Ultimately, Alzheimer's victims become bed-ridden and require skilled or sub- acute nursing home care, including tube feedings, cathethers, and artificial life support. Historically, ambulatory Alzheimer's patients in nursing homes have been mixed with other patients. The Alzheimer's victim has often disrupted life in the nursing home because of the victim's wandering, incontinence, confusion, and socially unacceptable behavior. Because of these characteristics, some nursing homes avoid admitting Alzheimer's patients and others control problem behavior with sedation and physical restraint. A separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the Alzheimer's disease victim and allows the victim to maintain his cognitive capabilities for as long as possible, without restraint and sedation. Nursing home patients who do not suffer from Alzheimer's and related diseases are often agitated and disrupted by the Alzheimer's patients' unacceptable social behavior. A separate unit for Alzheimer's Disease victims accommodates the needs of the non-Alzheimer's patient by eliminating unpleasant, often violent encounters between dementia victims and other patients. Distinct Alzheimer's special care units provide better care for Alzheimer's disease and related disorder victims for several reasons. A separate unit eliminates the tendency of the Alzheimer's disease patient to disrupt the remainder of the nursing home. A separate unit provides a smaller, safer, specially designed area with specially trained staff to address the unique needs of the Alzheimer's disease victim. A separate unit is preferable to mixing Alzheimer's patients with non- Alzheimer's patients. Traditional nursing home programs and activities are often inappropriate and counterproductive for the Alzheimer's patient. HCR's Proposal. The 120-bed nursing home proposed by HCR will help meet the needs in Hillsborough County for adult day care, respite care, sub-acute care and a special care unit for Alzheimer's Disease and related disorder victims. The programs and services will enable the HCR nursing home to provide at one location a complete continuum of care from the least intense level of care in adult day care to total (sub-acute) care. HCR's Alzheimer's special care unit will incorporate special design features, special patient activities and programs and higher staffing levels to meet the unique needs cf Alzheimer's disease victims. These features are intended to compensate for memory loss and provide a safe environment where cognitive capabilities can be maintained for as long as possible while patients enjoy personal freedom without the use of restraints and sedation which have typified the treatment of unmanageable Alzheimer's and dementia patients. The architectural design of the HCR nursing home will accommodate the tendency of Alzheimer's victims to wander by allowing the victims to ambulate in circular patterns through the facility and the adjacent court yard and by providing an electronic warning system to prevent inadvertent exit from the nursing home. Patient bathrooms are specially designed to avoid fright and confusion through the use of automatic lighting fixtures, appropriate coloring and distinctly shaped fixtures and waste baskets. Calming colors, color coding, carefully selected art work, special floor coverings and labeling are provided. Separate dining and activities areas enable the nursing home to provide programs and activities for Alzheimer's disease victims in a more effective and efficient manner than would be possible if the same areas also had to be used for non- Alzheimer's Disease victims. The proposed HCR nursing home includes a discreet area designed for an adult day care center, which will share some resources with the nursing home. The program will accommodate 12 persons and be operated in accordance with adult day care regulations. The physical spaces include an entry separate from the main nursing home entry, a lobby, an office, a therapeutic kitchen for use by the patients, toilet facilities, an activities center, and a lounge with an adjacent covered porch. The adult day care program will be staffed by a nurse director, an assistant and volunteers. The participants in this program will be provided with various activities of daily living in an environment developed for Alzheimer's Disease victiMs. This program is intended to provide placement for persons not yet in need of in-patient care and will provide an alternative to premature nursing home admission. Manor Care's Proposal. Manor Care proposes a dedicated 30-bed specialized unit for persons suffering from Alzheimer's disease and related disorders. In 1985, Manor Care perceived the need to treat Alzheimer's patients in a manner different than patients in the general nursing home population. Manor Care's task force of nurses, administrators, architects, and designers developed an Alzheimer's program which recognizes the special needs of the patient. Manor Care now operates 21 special dedicated Alzheimer's units throughout the country and is planning 16 additional Alzheimer's units. Manor Care's comprehensive Alzheimer's program encompasses five components: (1) environment, (2) staffing and training, (3) programming, (4) specialized medical services, and (5) family support. Environment. The proposed 30-bed Alzheimer's unit will be separate from the rest of the facility and self-contained, with its own dining room, activities room, lounge, quiet/privacy room, nurses sub-station, director's office, and outdoor courtyard. A separate dining room for Alzheimer's residents enables staff to provide individualized attention and special assistance. By providing a simple and separate dining environment, residents are no longer embarrassed by confusion and agitation displayed in the presence of non-Alzheimer's residents during mealtime. A separate lounge area is provided for families to visit with residents. In a typical nursing center, the family must visit a confused resident in the presence of other families; families of Alzheimer's residents can find this embarrassing. A separate lounge makes visitation more desirable for Alzheimer's residents and families. The quiet/privacy room can be used by families as a quiet area to visit with a family member, by residents who want to spend time alone, or by staff persons and residents for individualized programming away from the activity on the unit. The outdoor courtyard, which is enclosed and accessible to the unit through the activities room and hallway door, allows Alzheimer's residents to walk outside freely without wandering off. The Manor Care Alzheimer's unit is specially designed with features which reduce environmental stress by minimizing glare (using parabolic lenses), noise and bold patterns which increase agitation in Alzheimer's residents. Throughout the unit, a residential, uncluttered atmosphere is emphasized, using soft, contrasting colors and textures. The unit also contains visual cues to increase orientation. Furnishings are functional, durable and easy to maintain. Staffing and Training. The Alzheimer's unit has its own specialized staff including a Unit Director, Activities Director, and nursing staff. The unit is staffed at a higher "nurse to resident" ratio than the rest of the facility. Staffing patterns emphasizu continuity to ensure that residents receive individualized care. The nurses become f;i1iar with the behavior and abilities of each resident and are able to render care appropriately. Programming. The goal of programming and activities in the Alzheimer's unit is to improve the quality of life of the Alzheimer's resident. This specialized programming results in reducing the use of medications and restraints necessary to manage the Alzheimer's resident. The Manor Care Alzheimer's activity program is success-oriented; staff provide activities designed to allow Alzheimer's residents to succeed more frequently. (They usually fail when mixed in with the general nursing home population.) specialized Medical Services. The use of consultant medical specialists is an integral part of Manor Care's Alzheimer's Program. Specialists provide diagnostic and treatment services for Alzheimer's residents upon admission to the unit, and thereafter when deemed medically appropriate. Family support. Family support is another important aspect of the Manor Care Alzheimer's program. Families are very supportive of the unit's programming and have benef itted from the understanding and support available to them. The Others' Proposals. None of the other applicants propose specialized units for the care of patients with Alzheimer's disease and related disorders. Alzheimer's sufferers will be treated in an "open unit" at the HHL facility and will be placed as compatibly as possible with other residents. Although these residents will be able to intermingle with other residents, their movements will be monitored by the "wander guard" system and all doors will be equipped with buzzers connected to the nurse's stations. The HHL facility will be designed to incorporate secure courtyards and other areas where residents will be free to wander safely throughout the living areas. The facility's nursing personnel will be specially trained to provide services to Alzheimer's sufferers. The proposed HHL facility will also offer an adult Alzheimer's day care program. Although the program will be small (accommodating between four to six individuals) it will interface with the Alzheimer's program offered to the in-house residents. As with the respite program, the Alzheimer's adult day care program will give the families of Alzheimer's disease sufferers an opportunity to take a breather during the day, and the participants will benefit from the special Alzheimer's programs and activities offered. With its proposed 60-bed addition, Palm Court plans to add a program directed specifically at persons suffering from Alzheimers and related brain disorders. Currently, it does not have one. Neither FCP nor Forum make any particular provision for the care of Alzheimer's patients. FCP points out that its facilities in other states historically have cared for this special category of patient, primarily through use of high quality, thereapy-oriented programs, especially at the earlier stages of the disease. Cypress proposes to locate off of a central core: a 60-bed nursing home, offering both intermediate and skilled care, with its own recreation area and dining, serviced from the central kitchen; (2) a 20-bed assisted living unit (which Cypress also calls "supportive care") for mentally frail and physically strong individuals which has its own outdoor recreation area and dining area; and (3) another 40 assisted living beds broken into two 20-unit wings for mentally strong and physically frail individuals, with their own dining and recreation area, including outdoor recreation. The various levels of care are separate since each of the levels have different needs and methods of treatment. However, Cypress will only accept in the mentally frail, physically strong wing, Alzheimer's-type patients who are in the earlier stages of the disease. QUALITY OF CARE. Priority/Policy 9 of the 1985 Local Health Plan states: "Applicants should be evaluated as to their achievement of superior quality ratings by DHRS and other indications of quality as available." Track Record. At the time of application, three of the nursing homes operated by HCR in Florida had superior licenses and the remaining homes had standard licenses. FCP has one nursing home in Florida. It is rated standard by DHRS. None of the facilities operated by FCP's principals, the Phillipses, has ever been in receivership or had a Medicaid or Medicare certification revoked. The Phillipses have an excellent reputation in Ohio for their operation and management of nursing homes and have remained in positive standing with federal and state certification agencies. Manor Care's proposed 60-bed addition will be owned by Manor Care of Florida, Inc., a wholly-owned subsidiary of Manor HealthCare Corporation. Manor HealthCare Corporation is a publicly-held corporation which owns and operates about 130 nursing homes in various states. Manor Care owns and operates nine nursing homes and three adult congregate living facilities (ACLFs) in Florida. All nine Florida nursing homes exceed DHRS licensure standards; the majority of Manor Care's Florida facilities hold a superior license rating. Manor Care has never had a license denied, revoked, or suspended in Florida. Manor Care has opened three nursing homes in Florida in recent years. All three are superior rated. Palm Court Nursing Home has a superior license, with zero deficiencies, from DHRS' Office of Licensure and Certification with the most recent inspection having occurred between May 2 and May 4 immediately preceding the beginning of the final hearing. It is managed by National Health Corp., Murpheesboro, Tennessee. National Health Corp is an owner-operator of other facilities and either owns or operates some 19 facilities in Florida. It has managed Palm Court Nursing Home since its inception and, if the 60 bed addition is approved, will manage the addition. Forum has never had a license denied, revoked or suspended, nor had a facility placed in receivership. Forum has never had any nursing home placed in receivership at any time during its ownership, management or leasing. Forum has a history of providing quality of care and owns and operates facilities in other states which hold superior ratings. Forum has a corporate policy of seeking to attain a superior rating in those states which have such a system. Forum presently owns and operates one facility in Florida. That facility is rated standard and was acquired by Forum within the past two years. That facility, which only has 35 nursing beds, is not a prototype of what Forum proposes in this case. Seventeen (17) of the twenty-one (21) nursing homes currently managed by CSI are located in states which utilize a superior rating system. Of the facilities that are eligible to receive superior licenses, CSI maintains superior ratings in over 80 percent of its beds. CSI's Sun Terrace in Sun City Center was the subject of an extensive survey issued by the Office of Licensure and Certification, an arm of DHRS, in April, 1988, that cited numerous deficiencies in the areas of quality of care, staffing, and programs at the Sun Terrace facility. The licensure survey also cited violations of state and federal laws in the handling of controlled substances and problems with resident care plans at the facility. The findings of DHRS in its licensure survey of Sun Terrace appear to be serious matters, the resolution of which is clearly within the control of CSI. Following the opening of the second 60 beds at Sun Terrace in September, 1987, the facility experienced a shortage of nursing personnel which necessitated a greater use of agency personnel to staff the facility. The problems cited by DHRS at Sun Terrace were largely the result of the increased use of agency personnel, lack of documentation, a newly licensed administrator, and the unexpected resignation of the director of nursing. Even before the DHRS licensure survey, CSI had taken affirmative action to address the problems at Sun Terrace, including a voluntary moratorium on new admissions. In response to the recent problems at Sun Terrac, CSI has moved toward more centralized management of its facilities. CSI now requires administrators to adhere very closely to the corporate policies and procedures. Further, the addition of a second full-time nurse/consultant will double the frequency of quality of care monitoring visits at CSI facilities. The problems experienced at Sun Terrace are atypical of CSI-managed facilities. When CSI's policies and procedures are properly followed, the result is excellent nursing care and services. But the problems at Sun Terrace are examples of what can happen when an organization attempts to expand operations more rapidly than it should. In this connection, CSI has received seven CONs since July 1984. Two of the seven are preliminary approvals that have been challenged and have not yet gone to hearing. One was the 60-bed addition to Sun Terrace which is now licensed. Another is a 73-bed nursing home in Brevard County which is expected to open within the next several months, and another is a 21-bed addition project in Collier County. Cypress has never operated a nursing home and has no track record. Staffing. Staffing arrangments are important considerations in assessing the quality of care to be expected from a proposal, but there is not necessarily a proportional correlation between staffing and quality. How staffing affects quality also depends on the breadth and types of programs to be offered. For example, Alzheimer's programs and sub-acute care will require higher staffing ratios. HCR, FCP, Manor Care, Palm Court and Forum all propose staffing arrangments that meet or exceed state requirements. See Findings Of Fact 1-5, above. Cypress' application, on the other hand, leaves much to be desired in its proposed staffing. The staffing plan presented by Cypress on its Updated Table 11 fails to meet the requirements of Rule 10D-29, F.A.C. Specifically, no provision has been made for an activity director (10D-29.116), a medical director (10D-29.107), a pharmacy consultant (10D-29.112), or a medical records consultant (10D-29.118), all of which are required by rule. (Cypress attempted to explain that it would have a pharmacy consultant on contract who would bill patients separately.) Further, no provision has been made for utilization review to monitor the appropriateness of the placement of residents, as required by Rule 10D-29. Cypress' Updated Table 11 provides for LPNs of 1.5 FTEs on the first shift and night shift and 6.0 FTEs on the second shift. The second shift LPN coverage is over-staffed by 4 1/2 FTEs which will result in inefficiency. Rule 10D-29.108, F.A.C., requires staffing of nursing assistants on all shifts. The Cypress staffing plan makes no provision for nursing assistants on the second shift. In testimony, Cypress attempted to explain that Table 11 was wrong and that the second shift LPNs should have been aides. The proposes Cypress nursing home will not offer 24-hour RN coverage. The third shift has no RN coverage. Based upon the proposed staffing pattern appearing in Cypress' Updated Table 11, its proposed facililty would not qualify for licensure under Florida regulations, much less qualify for a superior rating. Cypress has not secured or identified the day-to-day management of the proposed nursing home. No medical director has been secured or identified. Quality Assurance programs. All of the applicants except Cypress have existing quality assurance (QA) programs that are adequate to assL're quality of care. From the evidence HCR's, Manor Care's, HHL's and Forum's QA programs are comparable and are the best among the applicants. Palm Court has had results comparable to or better than the others , which is itself evidence of an adequate QA program. Meanwhile, CSI, despite an evidently superior QA program, has experienced quality programs due to rapid fill-up of its 60 additiional beds at Sun Terrace. Cypress has no experience operating a nursing home. Not surprisingly, it professes to desire quality and to plan to implement stringent QA programs. But its plans at this stage are not as developed and detailed as the existing QA programs being used by the other applicants at other facilities. Other Factors. Whether Therapies Are In-House or Contracted. Assuming a need for it, and reasonable cost of providing it, provision of therapies--e.g., physical therapy, occupational therapy and speech therapy-- in-house generally is preferable to providing them by contracts with third parties. From an operational and administrative perspective, there are advantages to providing physical therapy services (PT) on an in- house basis. Contracted physical therapy staff tend to be available only for scheduled treatments; in-house staff are always available to assist staff and perform unscheduled maintenance therapy. In-house physical therapy staff work regularly with the nursing home staff. They are present within the facility anc learn the operation of the nursing home facility better than outside agencies. Manor Care proposes to provide in-house physical therapy staff, as opposed to employing outside physical therapy staff on a contract basis. The evidence was that the other applicants plan to provide all of these therapies through third- party contracts. Palm Court has one full-time PT assistant who works under the direction of a licensed physical therapist who now divides time among three 120- bed nursing homes managed by National Health Corp. The service of this licensed physical therapist is provided as part of National Health Corp's management services. Having to cover another 60 beds at Palm Court will spread the service even thinner. In addition, Palm Court's administrator conceded that the single PT assistant in Palm Court's application will not be enough once 60-beds are added to the facility; two will be required. Of course, the trade-off (implied in Finding of Fact 102, above) for providing in-house therapy is that it is less efficient if full use of the services is not required. De-institutionalization. FCP, Forum and Cypress have made special efforts to "de- institutionalize" nursing home care at their proposed facilities. All three proposals emphasize the provision of nursing care within aresidential development--a combination of retirement apartments, assisted living accommodations and nursing home. (See also this concept's impact on Continuum of Care concerns, Findings of Fact 114-127, below.) FCP's proposed facility is designed with a residential appearance to facilitate and implement the philosophy of de-institutionalization co:tained in its application. It reflects FCP's modular approach to care with residential units in wings tied to a common area of support services. The support services are extensive. There are activities areas, craft areas, exercise rooms, therapy areas, a beauty salon and barber shop, men's and women's recreational areas, private dining rooms, a community dining room, screened patios and porches, a newsstand, a bank, a post office, a library, a chapel, a screened-in gazebo, and a swimming pool. The exterior amenities of the design include a pond, an exercise course, a sitting deck, and a putting green. The center core and its recreation and therapy programs are designed to encourage interact ion among the residents in all the different levels of care. Although the third floor, where the nursing home is located, also has a secondary lounge and supplemental dining area, the primary dining area, as well as all of the other amenities, are on the first floor to enhance the interaction. The 30-bed size of FCP's proposed nursing home unit is a part of the original Phillips concept of a de- institutionalized setting, enabling the provision of more personalized care. Where there are fewer residents to care for, a better rapport between the residents and the care givers and a more family-type, personal atmosphere are achieved. This 30-bed concept previously has been approved by the Department in Lee and Polk Counties. Those projects are operationally, structurally, and physically identical to this proposed project. The symmetrical, 3-story design minimizes the amount of travel distance for the resident at the farthest unit to the amenities of the center core and its services. The nursing unit is on the third and smallest floor so that the distance by elevator to the central core for the nursing home iesidents is at a minimum'while still providing those residents with the greatest opportunity for quiet time. Privacy is an essential element in achieving high quality of care. The semi-private room plan utilized in this proposal is a unique approach to maximizing privacy for each resident. A permanent partial partition separating the two beds in each room effectively creates two private rooms. This provides a private space for each resident with his or her own thermostat, window, storage space, television, and telephone accommodation, and heightened auditory privacy. There will be equal access to and control of the vestibule and bathroom for each resident. The 585 gross square feet per bed in the FCP proposal is approximately one-third greater than standard nursing home room configuration. Forum's proposal's chief effort in furtherance of the goal of deinstitutiona1izationother than the continuum of care concept and overall residential appearance--is in the relatively large and "up-scale" living areas. The Cypress facility will include a central core dividing the two 60- bed portions of the project. The central core will include an administrative area, a chapel, a beauty and barber shop, enclosed courtyard, physical and occupational therapy, dining, a central kitchen, and a laundry area. One trade-off for de-institutionalization is cost. Both FCP and Forum generally cost more than the others. Cypress claims not to, but its projected construction cost of $49 per square foot is unrealistically low. See Findings of Fact 147 and 149, below. PROGRAMS (OTHER THAN ALZHEIMER'S). Continnum of Care. As just alluded to, several of the proposals emphasize the placement of their nursing home within a larger community of persons needing different levels of care. FCP. FCP proposes the construction of a 30-bed nursing unit as part of a family owned and operated, 120-unit, full continuum of care facility for the elderly. The facility also contains 60 independent living apartments and 30 adult congregate living units. The full continuum of care is proposed in a uniquely designed, de-institutionalized, home-like atmosphere. FCP offers a therapeutic community offering individualized, personalIzed care in small self- contained units, each specializing in various levels of care ranging from day care and respite care, through apartments for the elderly and assisted living, to skilled, post-hospital rehabilitation. The continuum of care will provide a homogeneous environment through which residents can move as their medical and personal needs change. Forum. Forum Group, Inc., is a national company which owns, develops and operates retirement living centers in a number of states. Forum's proposed nursing home will be part of a total retirement living center containing two other levels of care, assisted living (or ACLF units) and independent apartment units. Forum's proposal calls for provision of a continuum of care, from independent living to assisted living to nursing care, all on the same campus. Cypress. Cypress Total Care would be part of an overall medical project known as Cypress Park. The corporation was formed and a master plan was created, to be developed in two phases. Phase I is a 120-bed nursing facility consisting of 60 skilled and intermediate nursing beds, the subject of these proceedings, and 60 personal care units. Phase II would consist of a 290-unit adult congregate living facility (ACLF) and 143 units of independent villa housing on a golf course with nature trails and other amenities. Also proposed in Phase II would be units of medical offices and commercial health-related facilities to support the community. The area selected by Cypress is adjacent to the Sun Hill Medical Arts Building and the Community Arts Building, as well as a hospital owned by Hospital Corporation of America known as Sun City Hospital. These components would be worked into the overall master plan proposed by Cypress. Cypress proposes a multi-level assessment program. The 120-bed Cypress Park Community facility will have an independent level one facility in Sun City Center which will admit healthy elderly residents. These elderly may have canes, but no walkers or wheelchairs, and they will function normally in their activities of daily living. These individuals may prepare two meals a day in their apartments, or have them in the dining room. The main meal will be in the dining room. Social services and activities will be provided and recommended to the independent living residents to enhance their lifestyles. A home health agency is planned as a part of the center so that house calls can be made to insure that any necessary medications are taken and that residents receive the services they might need from time to time. (Cypress has not yet applied for a CON for its home health agency.) The next level of living is for patients who need more assistance. These are residents who require 24-hour companion service. These patients do not require skilled nursing care and do not require the institutional environment of a nursing home. Some of these paients may be in the first stage of Alzheimer's, or they may be physically frail, but not enough to require skilled nursing care. This level is primarily for those individuals who are physically frail and mentally strong or mentally frail and physically strong. The physically frail and mentally strong may have limited ambulatory capabilities, need assistance in activities of daily living, need medication, or need all their meals prepared. As noted above, this level of services also will be provided to individuals who are physically strong but mentally frail. The majority of these people will be Alzheimer's residents, they must be carefully monitored 24 hours a day and receive strong psychological support. The next level of care offered is for individuals who require some nursing care and no longer qualify for the level two care described above. This will be intermediate nursing care and will consist of care from certified nursing aides and licensed practical nurses. These individuals do not require skilled nursing care. Rehabilitation is the key to this portion of the plan, and the rehabilitative center will be involved to constantly push these individuals to the point of rehabilitation where they can reenter an independent lifestyle. If individuals progress further, they can move into the skilled nursing care center in which they will receive care not only from nursing aides and licensed practical nurses, but also from registered nurses. The final level would be acute hospital care which would be provided by the existing Sun City Hospital. The medical staff who are involved in the Cypress project also are on the medical staff of the Sun City Hospital and will be working and consulting with individuals both in the acute hospital care and the nursing home setting to provide appropriate levels of care to the individuals who need it. The nursing home will share IV teams, work with tracheotomy patients, A.D.A. dieticians, accounting services, and other services with the existing hospital in Sun City Center. Palm Court. Palm Court, while currently a free-standing 120- bed nursing home, is located on property where construction of a 360-bed adult congregate living facility (ACLF) is now starting. In addition, Palm Court has transfer agreements with area hospitals including Plant City Hospital, South Florida Baptist Hospital, Brandon Humana Hospital and Lakeland Regional Medical Center. It also has formal working relationships with home health agencies and with elderly programs in the area. The Others. The other applicants--HCR, Manor Care and HHL-- propose free-standing nursing homes. But all can be expected to make efforts to achieve transfer and other agreements with local hospitals, home health agencies and providers of care for the elderly where reasonable and appropriate. Sub-Acute Care. The HCR nursing home will be staffed and equipped to provide sub- acute care. The sub-acute care services provided by HCR will include high tech services such as ventilator care, IV therapy, pulmonary aids, tube feeding, hyperalimentation, and short and long term rehabilitation. HCR currently provides a wide variety of these sub-acute services in its existing nursing homes. CSI currently provides sub-acute nursing services at its existing Florida facilities. Those services include ventilators, hyperalimentation, intravenous therapy, Clinitron beds, heparin pumps, nosogastric and Jejunoscopy tube feedings, subclavian lines, and Hickman catheters. These service will be provided at HHL's proposed facility. Forum will provide skilled and intermediate care, and the following services will be offered at the proposed facility: Sterile dressing changes for decubitus care. Brittle diabetics on sliding scale insulin. Continuous administration of oxygen. Sterile case of tracheotomies. Ventilators. Continuous bladder irrigation. Hyper-alimentation or N-G feeding. IV treatment. Special medication monitoring (e.g. heparin, comadin). New post-operative cases facing hospital discharge as a result of D.R.G. reimbursement. The skilled nursing services to be provided by FCP include parenteral nutrition, internal nutrition, tracheostomy care, respirator care, skin wound decubitus care, ostomy care, and head trauma care. Palm Court also will provide sub-acute care. Adult Day Care Adult day care is a part of the specialized Azfleimer's program HCR proposes. In addition, HHL, FCP and Forum offer adult day care. Respite Care. HCR and Manor Care offer respite care as part of their Alzheimer's programs. Both will have no minimum length of stay and no extra charge over the regular daily rate for nursing home care. All the others except Palm Court also offer respite care, but Cypress' proposal for respite care is sketchy. HHL says it will offer respite care at no extra charge. D. Hospice. Only HCR, Forum and HHL offer hospice care as part of their nursing home programs. F. Rehabilitation and Community Outreach. All of the applicants propose rehabilitative (or restorative) care and some kind of community outreach programs. The distinctions among the ideas expressed by the applicants are not particularly competitively significant. However, the manner in which the therapies are delivered can be significant. See Finding of Facts 102 to 105, above. HOW SOON THE PROJECT BECOMES OPERATIONAL. Because there is a shortage of nursing home beds in Hillsborough County, there is a valid concern how long it would take for the holder of a CON to get its facility operational. Priority/Policy 3 of the 1985 Local Health Plan gives expression to this concern as follows: In competitive reviews, preference should be given to applicants with a documented history of implementing certificates of need within the statutory time frames. Of the applicants who have developed nursing homes in the past (i.e., excluding Cypress), all but Palm Court have a history of timely implementing their CONs. Palm Court had to request an extension of time in implementing its existing 120-bed facility. But Palm Court bought the CON for that project from the original owners in 1982 or 1983. Palm Court then had to secure another, more suitable location, re-design the facility, get construction financing and enter into a construction contract before construction could begin. This delayed the project and resulted in administrative litigation to decide whether Palm Court should lose the CON for failure to timely implement it or be given an extension of time. Palm Court prevailed, and the facility opened in September, 1985. HHL, through CSI, also has a history of timely implementing CONs but recent expansion in Florida raises some question whether it can continue to be as timely in implementing this CON, along with the others. See Findings of Fact 82-87,98, and 100, above. Generally, an addition of beds to an existing nursing home can be constructed more quickly than a new facility, giving Palm Court an advantage in potential speed of implementation. similarly, Manor Care, which is prepared to begin construction on its finally approved 60-bed CON, has an advantage over the others, as well as a potential construction cost savings over Palm Court. See Findings of Fact 146, below. COST OF CARE. Cost of Construction And Development. Advantage of Additions. Within limits placed on recovery of capital costs under the Medicaid and Medicare reimbursement programs now in place (which, to some extent, are emulated by private health care insurers and employers' health benefit plans), construction and development costs generally are reflected in the charges patients pay for nursing home care. Additions, such as Palm Court's and Manor Care's proposals, have a cost advantage over the other proposals. Construction sites already have been prepared, and it is not ncessary to duplicate some features already incorporated in the original structure, such as the kitchen, laundry and building plant. Due to delays in finalization of its approved CON for 60 beds, Manor Care has the fortuitous additional potential cost advantage of being able to construct both the "original facility" and the 60-bed "addition" at the same time. Quality vs. Cost Trade-Off. Other than the cost advantage of adding on, and of saving the contractor's fee by using an in-house construction team (as HCR does), reduced cost of construction generally will reflect reduced quality. For example, some of the quality features incorporated in the proposals of Forum, FCP and Cypress will cost more. See Finding of Fact 113, above. Put another way, lower costs may result in lower patient charges but also may result in lower quality, everything else being equal. The costs of construction of the various proposals may be found in Findings of Fact 1 to 7, above. It should also be noted at this point that Cypress' facility design has features--primarily unusual wall and roof angles and one water heater requiring larger pipe sizing-- which make its construction costs appear lower than they should be. Cost Overruns. The applicants' respective records for cost overruns in implementing CONs mirror their records for timeliness. See Findings of Fact 138-143, above. Cypress has no track record; all the others except Palm Court have experienced no cost overruns; Palm Court's $1.3 million cost overrun was precipitated by the need to secure another site and re-design the facility after it acquired the CON for 120 beds; and CSI, which would be responsible for implementing HHL's proposal, is involved in recent expansion which could affect its ability to bring all of its' CONs on line within budget. Cost of Operations. Economies of Scale--Size of Facility. In addition to construction and development costs, cost of operations are reflected in patient charges. It generally is accepted that a 120-bed nursing home is the optimal size for operational efficiencies. In this respect, the proposals by HCR, Forum and HHL have an advantage over the others. Manor Care has the advantage of proposing to expand a less efficient 60-bed nursing home to an optimally efficient 120-bed facility. To some extent, the generally accepted principle that 120-bed nursing homes are more desirable may have become dated. Two of the proposals--FCP's and Cypress'--combine some of the operating efficiencies of a 120-bed nursing home with the continuum of care and quality of care that can be achieved in a 120-bed living complex that incorporates a smaller nursing unit with other living units of different levels of care. By c(Jmparison, these type facilities are less institutionalized than a 120-bed nursing home, whether free-standing or incorporated within a larger complex with other living units. See Findings of Fact 106 to 113, above. Economies of Scale--Size of Organization. Economies of scale also can be realized from the size of the organization that owns or manages a nursing home. The proposals of all of the applicants except Cypress benefit from this principle, Palm Court to a lesser extent than the others, including in the area of quality assurance, nurse training and nurse recruiting. At the time of hearing, HCR operated nine nursing homes in Florida. HCR has approximately twelve nursing homes scheduled to begin construction in Florida within the next year. Nationwide, HCR operates more than 125 facilities containing approximately 16,000 beds. HCR has designed and built over 200 nursing homes and related health care facilities. HCR realizes substantial savings by using national contracts for the purchase of furniture, equipment, hardware and other operating supplies. Forum, as a national company, has the experience and purchasing power to cut operational costs through national purchase contracts and through economies and improvements experienced at the local level with a total retirement facility all on one campus. The Manor Care Florida Regional Office offers the services of a Regional Director, a Regional Nurse, a Nurse Recruiter, and a Comptroller to work with the corresponding departments of the Manor Care Florida nursing homes. FCP's long term plans are to develop homes in clusters, currently concentrating on the central west coast area of Florida. FCP has previously been granted certificates of need in Lee County and Polk County and has been recommended by the Department for a certificate of need in Hillsborough County. This cluster will operate under a unified local administration and share rehabilitative, medical, social, dietary and transportation personnel, enhancing economies of operation. CSI was formed in 1978 for the purpose of operating extended care facilities, including nursing homes and retirement centers. Since that time, the company has grown to its current operations of twenty-one (21) nursing homes, two (2) retirement centers and one (1) home for the aged located in seven states. Historically, much of this growth has occurred through the acquisition of existing facilities, although more recently the focus has shifted to the development of new facilities. Because CSI has established "national accounts" for the acquisition of movable equipment CSI can purchase nursing home equipment and furnishings and other operating supplies for HHL at reduced prices. (3) Patient Charges. The applicants propose the following room charges for semi-private rooms. Applicant Medicaid Medicare Private Pay HCR 60.94 76.00 75.00 FCP 60.00 65.00 80.00 Manor Care 1/ 69.37 ---- 72.57 HHL 66.30 109.33 2/ 72.76 Forum 67.18 80.67 79.50 Palm Court 77.00 100.00 77.00 Cypress 58.00 65.00 69.00 However, Cypress' charges are suspect; they probably are unrealistically low. Palm Court's charges also are suspect. It is difficult to understand from the evidence whether they are charges or Medicaid reimbursements. It also is difficult to tell if they are current or projected. In any event, they do not relate to the information in Palm Court's pro forma. As previously alluded to, patient charges do not necessarily proportionately reflect construction and development and operating efficiencies. They also are affected by programs and quality. BUILDING DESIGN AND ENERGY FEATURES. Patient Care and Safety. Overall, HCR's design is excellent. Functional elements are effectively inter-related, the building is designed to be open to landscaping, sunlight and court yards, and there is a wide range of amenities. Cypress' patient rooms are smaller than allowed under state requirments. The state minimum in Chapter 10D-29, Florida Administrative Code, is 80 net square feet per bed for multi-bed and 100 net square feet in a single room. Cypress' proposal only has approximately 65.58 gross square feet per bed. Cypress' building design also has rooms that are approximately 130 feet from the nurses' stations and clean utility and soiled utility rooms, 10 feet over the state maximum under Rule 10D-29.121(24), Florida Administrative Code. Forum's :4 floor plan also violates this standard. Rule 10D-29.121(6), Florida Administrative Code, requires a 20 foot clear view out room windows. Cypress' design also violates this standard. Manor Care's floorplan is the most compact one- story design. It has four compact wings off a central core. Forum proposes a two-story structure, creating a potential increased hazard for patients with reduced mobility. But DHRS rules provide for nursing homes of more than one floor, and required safety features, which Forum will provide, keep the potential to an insignificant minimum. FCP proposes a three-story facility with the nursing home on the third floor adjacent to the elevators connecting it to the first floor central core and amenities. FCP, too, adequately addresses DHRS safety concerns and actually could be more convenient to more nursing home patients than a one-story structure. Energy Conservation Features. All of the applicants propose to insulate their facilities for energy efficiency, some, e.q., HHL, somewhat better than others. Building design itself also affects energy consumption. Cypress' high exterior building surface area makes it a less energy-efficient design; Manor Care's compact design aces it a more energy-efficient design. FCP's three-story design also is a more energy-efficient design. Cypress' design incorporates only one water heater. This will produce line loss and lower energy efficiency, as well as potential total loss of hot water. (Cypress also has only one electrical plant.) Other Unique Design Features. Several unique features in FCP's room design helps "de- institutionalize" the facility and contributes to overall quality of care. Similarly, residents at FCP will be able to offer their guests refreshments from the kitchen at any time of the day or nights and children, spouses, and entire families will be encouraged to join residents for meals as often as they wish, assisting in the maintenance of ties with the community. Dining may be either communal or in the several lounge areas and private dining rooms. One of Cypress' unique design features is of the bizarre and morbid variety--a room designed to store deceased residents. FINANCIAL FEASIBILITY. The short-term and long-term feasibility of the proposals of HCR, FCP, Manor Care, Forum and HHL was never seriously questioned and was easily proven. Not so with Palm Court and Cypress. Palm Court. The duty to defend the immediate and long term financial feasibility of Palm Court's project rested with Steve Jones. Mr. Jones, who was not involved in the preparation of the application, offered his opinion that the Palm Court 60-bed addition would be feasible in the immediate and long terms. In giving his opinion of the project's financial feasibility, Mr. Jones stated he believed the pro forma in years 1 and 2 relate back to the corresponding tables in the application; but acknowledged he performed no analysis of his own, but rather he took the information provided him at face value. The pro forma is one of the key components of an application, as literally the heart of the application ties directly or indirectly into developing the pro forma, including Tables 1, 2, 3, 7, 8, 10, 11 and 25, as well as the amortization schedule. It is a required component of the application. Section 381.494(4)(e), F.S. (1985). Mr. Jones was asked to render an opinion on the reasonableness of Tables 8, 10, 11 and 25, which he did. On cross examination, however, Mr. Jones acknowledged he did not evaluate existing staff at Palm Court to determine the reasonableness of the pro forma. He did not verify the projected management fee and, in fact, stated he didn't know if it was included as a line item under "administration and general" on the pro forma nor how the management fee was computed. Mr. Jones, who has never prepared all the financial information in a CON application, also admitted he didn't know what current nursing salaries were in Hillsborough County, or any other salaries for that matter. He further acknowledged that he could not testify that the application's hourly wage times the number of working hours in a year would give you the stated nursing salaries. In sum, Mr. Jones admitted his opinion of the project's feasibility was based solely on his review of Tables 8, 11, 20 and 25 and his firm's involvement in the preparation of Palm Court's two most recent cost reports and not on the pro forma filed with Palm Court's application. Mr. Jones' accounting firm, in preparing Palm Court's cost reports, does not conduct an audit or express any opinion relating to the reasonableness of the statement of revenues and expenses. Joseph Lennartz, an expert in financial feasibility analysis, gave persuasive testimony outlining the inconsistencies in Palm Court's application. Palm Court's total revenue projections appearing in Table 7 for years 1 and 2 do correspond to the daily room and board revenues appearing in the pro forma, yet none of the Table 7 revenue projections correspond to the projected charges on Table 8. Assuming the salaries on Table 11 do not include fringe benefits, all FTE's and salaries on Table 11 are not accounted for in the pro forma. The pro forma salaries are significantly lower than on Table 11: RNs ,- understated by $12,426 LPNs - understated by $30,518 CNAS -understated by $239,541 Social Worker - understated by $2,983 Dietary - understated by $3,009 Maintenance - understated by $10,165 Activities - understated by $4,486 Housekeeping - understated by $6,365 Laundry & Linen - understated by $6,498 Admin & General - understated by $2,560 Palm Court's salary information on Table 11 is in 1987 dollars and needs to be inflated forward at least two to three years. Palm Court's current average salaries exceeded the proposed salaries on Table 11--including the administrator's salary, proposed at an annual salary of just over $31,000 when it actually was over $50,000 in 1987. Based on Palm Court's answers to interrogatories, Palm Court's management fee is not accurately reflected in the pro forma and is $44,559 too low in year 2; the projected dietary expense is understated by $112,386 in year 2; the projected housekeeping expense is understated by $46,609 in year 2; the projected laundry expense is understated by $35,308 in year 2; and plant expenses are understated by $100,116 in year 2. The terms of debt financing appearing on Table 2 of Palm Court's application do not conform to the amortization table, causing the interest expense line item on the pro forma to be understated. Cypress. As previously alluded to, the reasonableness of Cypress' projected Medicaid and Medicare rates appearing on its Updated Table 8 has not been established by competent substantial evidence. The Cypress pro forma fails to make provision for interest expense, depreciation, and property tax expense. These omissions represent an understatement of expenses as follows: YEAR ONE YEAR TWO INTEREST $177,818 $176,186 DEPRECIATION $110,000 $100,000 PROPERTY TAXES 2,200 25,000 (at assessed value 75 percent of market) TOTAL $290,018 $301,186 When interest, depreciation, and property taxes are included in the Cypress pro forma, the result is a loss of $90,000 in year one and $80,000 in year two. Furthermore, from a cash flow perspective, Cypress will incur a cash loss of $2,037 in year one and a cash gain of just $6,342 in year two. If property taxes are based on an assessed value at 100 percent of fair market value, there would be a $2,000 cash loss even in year two. It is not unusual for a nursing home to experience a negative cash flow in its first year of operation due to its low occupancy. However, it is unusual for a nursing home to experience a negative cash flow, as the Cypress facility will, while operating at optimal occupancy (95 percent). Cypress' owner/investors are willing to proceed with the project because they expect to be able to use some of the approximately $90,000 per year tax loss in years one and two to offset personal income, resulting in a cash on cash return of approximately $23,000 or 5.4 percent. Cypress' Table 1, "source of funds" states that the applicant has $425,000 "in hand". In fact, Cypress does not have those funds in hand. They are in the hands of the Cypress owner/investors. So far they have contributed $90,000 to the venture and will have to contribute not only an additional $425,000 to fund the nursing home but also an unspecified larger sum to fund Cypress planned ACLF and other projects. The evidence suggests that at least $425,000 more of equity contribution would be required for the rest of the project. Cypress did not prove that its proposed facility is financially feasible, either in the immediate or long term. BALANCED CONSIDERATION. Giving a balanced consideration to all of the statutory and rule factors addressed in the preceding findings, it is found that there is a net need for 231 community nursing home beds in Hillsborough County, that the applications of HCR, FCP and Manor Care should be granted and that the other applications should be denied.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Department of Health and Rehabilitative Services enter a final order granting the applications of HCR (CON Action No. 5000), FCP (CON Action No. 4993) and Manor Care (CON Action No. 5006) and denying the applications of Forum (CON Action No. 4999), HHL (CON Action No. 4978) Palm Court (CON Action No. 4987) and Cypress (CON Action No. 5004). RECOMMENDED this 14th day of November, 1988, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 14th day of November, 1988.
Findings Of Fact Respondent, Department of Health and Rehabilitative Services (HRS, Department,) is the state agency empowered to review, grant, or deny certificate of need applications. Careage Aire filed a certificate of need application with the Department proposing a new 60 bed nursing home for Escambia County, Florida. The application was assigned certificate of need #4660 by HRS and was reviewed in the July, 1986 batching cycle. The Department recommended denial of the certificate of need application on January 27, 1987, in a "State Agency Action Report." The parties to this cause submitted a joint prehearing stipulation which narrowed the issues to be presented at final hearing. The factual issues remaining for determination are thus as follows: Whether there is a need for the nursing home facility proposed; The appropriate inventory of licensed or approved beds in the relevant planning district; The appropriate occupancy rate for nursing home beds in the relevant planning district; The relevant population projection figures to be utilized in accessing the need for Careage Aire's proposed facility; Whether there is a need for the special services to be provided by Careage Aire; Whether the proposed patient charges for sub-acute care and private VA care are reasonable. The stipulated legal issues requiring determination include: Whether there is a need for the nursing home facility proposed; Whether there is a need for the proposed special services; Which time period should be used to fix the relevant population, occupancy rate, and bed inventory for review of the application. Additionally, it was stipulated that a timely petition for formal hearing was filed, and that the letter of intent was timely filed. It was also stipulated that the applicant is financially capable of proceeding to construct and operate the proposed project, that the applicant is capable of providing quality of care sufficient to meet pertinent regulatory requirements, and that the construction costs projected by the applicant, Petitioner, are reasonable. The Proposed Project Careage is a group of corporations owned by Gene E. Lynn, who has been involved in the nursing home industry for a long period of years. In the past, Careage has built more than 250 hospitals, nursing homes, and health-related facilities. It has built such facilities in approximately 30 states, centering its activities on the west coast of the United States. Careage does not currently operate any nursing home facilities in Florida, but has a number of applications pending. Careage is proposing to provide what might be termed an "upscale" nursing home in the sense of its providing certain special services and programs not commonly offered at nursing homes in Florida. This package of special services and programs is similar to those Careage operates at nursing homes in other states. Careage Aire, in proposing to construct a new 60 bed nursing home, has designated 21 beds for a discreet unit for the care of Alzheimer's disease patients. It will be a self- contained unit separate from the rest of the nursing home. Additionally, 5 beds will be provided for sub-acute services which, generally, are services involving more intense medical care or therapy than is the case in the normal skilled nursing home. Sub-acute services are analogous to those provided at extended care centers operated by hospitals for patients who are no longer required by their medical conditions to be actual inpatients in the hospital. Two of the beds proposed are identified as being dedicated to the treatment of technology dependent children, that is, children who are dependent upon machines or other devices for treatment or life support, such as ventilator patients. Additionally, Careage will provide other special services such as adult day care and respite care services at its proposed facility, those generally being described as part time residence in the nursing home by the patients involved. The facility proposed will be similar in design to the Careage facility in Coupeville, Washington. This design allows for various amenities and interior design features designed to enhance the quality of care rendered. Careage will thus provide an innovative semiprivate room bed configuration, which places the patients and beds "foot to foot" rather than beside each other. This configuration has been used in other nursing homes and it has been determined that this allows patients to more readily communicate with each other and enables them both to have a window view. The proposed facility will have a television receptacle across from every bed with speakers on the pillows so that residents can watch or listen to television without disturbing their roommates in a semiprivate room. Additionally, Careage Aire will provide three separate patient areas for residents. These areas will be the lobby, passive activity room and an active activity room. The "active room" will have crafts, paints, or other activities available to engage in, with the "passive" room being devoted to such activity as reading, card playing and other more sedate pursuits. As part of the normal family activity, Careage will open its dining room to the general public on Sundays. It has been found at other facilities that such a practice encourages the quality of care within its facility, by being regularly exposed to the public view. Additionally, the Petitioner will have such amenities as a popcorn machine and aquariums in the walls of the entrance lobby, which although not directly related to quality of nursing care, do represent amenities very popular with residents and contribute significantly to the residents and their families sense of well-being and confidence in the quality of service rendered. Appropriateness of Specialized Services in Nursing Home Setting The application proposes to provide several specialized services. Among those services are an Alzheimer's unit, sub-acute care unit and the provision of specialized care to technology dependent children. Alzheimer's disease is a degenerative neurological condition occurring most often after age 55. It is apparently an irreversible deterioration of brain cells and is characterized by short term memory loss, behaviorial changes and changes in personality accompanied by mood swings, and often manic depressive symptoms. In its final stages, patients usually become incontinent and are often not aware of their surroundings nor recognize family members. Such patients often become disoriented, restless, and combative and lose their ability to recognize places, people and other sensory stimuli. They also seem to lose their sense of time, and go through stages of wandering. Careage Aire proposes to provide a distinct 21 bed Alzeheimer's unit at the proposed facility. The provision of care for Alzeheimer's patients in a separate unit from other nursing home patients was shown to be the most appropriate way to care for them. This is because they can be offered specialized services, designed to fit their particular needs with less external stimuli and a more predictable environment. This tends to diminish the effects of many of the Alzheimer's symptoms which become more apparent when Alzheimer's patients are placed with other patients in a regular nursing home unit setting. The combative behavior of Alzheimer's patients can be alleviated by providing for their separate care in a specialized unit. They can tend to maintain their mental levels at the highest degree in a unit of the type proposed by the applicant. The rooms for instance will be identified not only by a room number, but also by distinct physical identifiers, which are color coded. This will allow the individual patient four different means of recognition of which room is his. Additionally, Careage Aire will provide a specially trained staff within the unit to assist in the proper diagnosis of Alzheimer's patients. In certain cases, Alzeheimer's patients are being misdiagnosed when they are merely experiencing drug interactions or other medical conditions which result in similar symptoms. The proposed design for the Alzheimer's unit includes a doorway separating it from the rest of the nursing home facility. The unit contains a control station for nursing supervision, activities and dining room, and a quiet room. At the back of the unit is a door opening onto a walkway within an attractively walled area where patients can walk and receive exercise and yet not wander into unsafe areas. In the walled area is a covered area for a picnic table and a resting bench. The area for walking enables the Alzheimer's patients who are subject to wander, to do so in a safe environment. The planning, physical layout and the training of the staff proposed by the applicant for the Alzheimer's unit constitutes appropriate quality care for Alzheimer's residents. None of the existing nursing homes in the County provide a true distinct Alzheimer's unit. Although existing nursing homes accept such patients and care for them in a nursing home floor setting, the treatment of Alzheimer's patients in a specialized and distinct unit is more effective, economical and appropriate. The types of services proposed to be provided by the applicant in this unit would result in the treatment of such patients in the least restrictive, most humane and economically feasible manner. Existing nursing homes in Escambia County often do not choose to deal with "heavy" care patients, which may result in their being discharged when their best interests would dictate otherwise. The applicant established that physicians treating patients with Alzheimer's disease in the area would refer them to Careage Aire for placement in an Alzheimers unit if it were built. Sub-Acute Care Services The applicant has allocated five of the proposed beds for sub-acute care patients. Sub-acute care has not been provided in nursing homes traditionally, since it is a more intensive type of care, normally associated with the extended care facilities operated by hospitals. Careage, however, has experience in other states in providing such services in a nursing home setting. The definition of this type service proposed by the applicant (and adopted in the State of California) includes numerous services such as hyper-alimentation, IV therapy, IV antibiotic therapy, morphine drip therapy, ventilators, IPPB treatments, heparin flush, infusion pumps for the administration of fluid, kangaroo pumps for tube feeders, specialized inhalation therapy treatments, and concentrated rehabilitative therapies. These services are similar to care provided in extended care beds operated by acute care hospitals. The provision of sub-acute care services is appropriate in a nursing home setting such as this. The existing nursing homes are not accepting ventilator dependent patients, for instance, and the early patient discharge from hospitals, mandated by the federal "DRG" system of reimbursement, has served to increase the need for "heavy care" of the type proposed for patients in non-hospital settings. Careage Aire also proposes to provide services for "technology- dependent" children, allocating two beds for that purpose. Providing such care for children is a new concept, but is increasing as medical technology becomes more advanced, which results in the survival of a large number of children who are ill or severally injured who would have died in former years. Such children with birth defects, brain damage, injuries from accidents, or neuromuscular disease often require specialized care which could be provided in a nursing home setting. Such care is less restrictive and more appropriate than housing such pediatric patients in an acute hospital setting. Additionally, the intermingling of younger patients with elderly patients can sometimes have a beneficial psychological impact on both patient groups. The local hospitals in the Pensacola area are experiencing difficulty in placing pediatric patients who require skilled care after hospital discharge. There are two such patients in the children's hospital associated with Sacred Heart Hospital in Pensacola at the time of this hearing and an additional two such patients in the neonatal unit of Sacred Heart Hospital. Placement of these ventilator dependent children has been an ongoing problem for the director of social work at Sacred Heart Hospital. In one instance, the director was required to look for placement for such a child for over seven months. The director of social work at Sacred Heart Hospital would use a nursing home such as this one proposed by Careage Aire which would accept Medicaid "ventilator- dependent" children and would consider the availability of that service in discharge planning for such patients. Existing Escambia County nursing homes are not accepting ventilator patients. Baptist Hospital in Pensacola does offer ECF services, but does not accept Medicaid patients into its ECF beds. Careage Aire also proposes to provide both adult daycare and respite care services at its nursing home facility. The provision of such services, involving elderly residents staying only a portion of the day or for a limited number of days at the nursing home facility before changing their residency back to their family homes, is certainly an appropriate and patient benefiting nursing home service. Need for Proposed Beds The proposed project is located in HRS service District 1. Sub- district 1-A of District 1 is composed of Escambia and Santa Rosa Counties. In determining need for a particular project, health planners utilize the inventory of licensed and approved beds for a district or sub-district, as the case may be. Additionally, need is projected within a given "planning horizon" for a service district or sub-district. For the July, 1986 nursing home batching cycle, in which this application was filed and reviewed, the relevant planning horizon is July, 1989. In Escambia County, there are 1,024 licensed community nursing home beds, with 30 sheltered beds and 140 "approved" community beds. Santa Rosa County has 180 licensed beds and 120 "approved" beds. In Sub- district 1-A there are 1,204 licensed community beds, 30 sheltered beds, and 260 approved community beds for the July, 1989 planning horizon. In determining the numerical need for nursing home facilities, the Department utilizes the "nursing home bed need rule" appearing at Rule 10.5.011(1)(k), Florida Administrative Code. That rule methodology for numerical need is referenced in the State Agency Action Reports regarding this application. Utilizing the bed inventory as of the application's filing date and utilizing a 90.94 percent occupancy rate for Sub-district 1-A, there results an 18 bed surplus, over actual need, for Sub- district 1-A as a whole. The same assumptions and methodology, however, result in a 45 bed, specific need for Escambia County itself. The Department's bed need rule states that "current" population figures are to be used in determining the population projection for purposes of the need calculation. The term "current", referencing population projections, is not defined in the rule itself, however it is generally taken to mean that which is most recent or "prevalent at the moment." 1/ It is reasonable from a health planning standpoint to utilize the most recent available population estimates for the relevant planning horizon, which is July, 1989. The use of the most current population data increases the accuracy with which the 1989 population forecast can be made. The most recently available population estimates are contained in the January, 1987 population report contained in Exhibit 11. That data, being available, should be employed in calculating need for the proposed beds. The underlying support documents prepared and compiled by the Department for nursing home occupancy and licensed bed inventory, indicate some confusion concerning the number of licensed beds and the occupancy levels at the Azalea Trace nursing home. The occupancy level data for that nursing home, as well as the reported number of licensed beds, show an unexplained fluctuation during relevant time periods involved in this application. The last three months of reported data by Azalea Trace shows that it was running at 96 percent occupancy. For the first quarter of 1987, however Azalea Trace merely indicated greater than 90 percent occupancy based upon 90 licensed beds. The number of licensed beds, however, have been reported as varying between 90 and 60 licensed beds and some reporting periods no data concerning numbers of licensed beds was reported at all. In light of the inconclusive data noted in the underlying source documents and in the absence of data being reported in certain months, it has not been demonstrated that the occupancy data and number of licensed beds contained in data relied upon by the Department (referenced in Exhibits 13 and 14 and transcript pages 89-97) is reliable. It is thus reasonable, from a health planning standpoint, to infer that Azalea Trace enjoyed the same average occupancy rate as other Escambia County nursing homes during the pertinent 6 month period used for determining sub-district occupancy, and such an inference is made at this juncture. No contradictory evidence was adduced. Accordingly, if it be assumed that Azalea Trace operated at the same occupancy rate as other Escambia County nursing homes for the pertinent 6 month period from October, 1985 to March, 1986, the resulting occupancy rate for the sub- district as a whole would be 92.4 percent. This is at variance with the 94.9 percent occupancy rate relied upon by the Department in arriving at the information in the State Agency Action Report. See Exhibit 11. If the occupancy rate of 92.4 percent is used for the sub-district, along with the employment of the most recent available population estimates based upon the January, 1987 reported estimates, discussed above; and if all other factors are static, a net need is shown for Escambia County of 81 nursing home beds for the July, 1989 planning horizon, and a net need of 25 beds in Sub- district 1-A as a whole. Local Health Plan Considerations The Northwest Florida Health Council, Inc. has prepared a local health plan which addresses the need for long-term care in District I. The local health plan dated March 26, 1986, was in force at the time the application was submitted for review and is the most recent version of the local health plan. The local plan lists several priorities for the review of CON applications for nursing homes in that district. Careage Aire's application for 60 beds has been shown to be consistent with the pertinent priorities identified by that plan. Priority number 1 of the local health plan states that counties within sub-districts which indicate a greater need, applying the state rule methodology, will receive priority over proposals for counties within such sub- districts which indicate less need. Application of the state rules methodology to Sub- district 1-A indicates there is a greater need in Escambia County, where the applicant proposes to construct its nursing home, than prevails in Santa Rosa County. Local health plan priority number 2 provides that the county with the greatest percentage of population aged 65 and over, living in poverty conditions, should receive priority over proposals from other counties with less of a corresponding percentage. The percentage of population 65 and older living in poverty in Escambia County was 22.4 percent. This is a greater percentage of persons in such category than were living in Santa Rosa County. Priorities 3 through 7 of that health plan are not applicable to this proceeding or have been satisfied by the application and are not at issue. The local health plan also includes a methodology for determining nursing home bed need. The local health plan methodology is based on a comparison of the percentage of local persons living in poverty between District 1 and the entire State of Florida. The District 1 poverty level is 22 percent, compared to a state average of 12.7 percent. The medicaid occupancy rate for Escambia County, in Sub-district 1- A, is 70 percent, compared to 57 percent for the State of Florida as a whole. If as a "reality check," one applies the local health council methodology (albeit different from the HRS rule methodology) to the data used in calculating need there results a bed need for the July, 1989 planning horizon of 120 beds for Sub-district 1-A as a whole. Need for Specialized Services Aside from the determination of whether a numeric need for a given certificate of need nursing home project exists, it is pertinent to consider specialized services which the applicant proposes. There is no existing Alzheimer's care unit in any nursing home in Escambia County at the present time. The applicant proposes such a unit for Sub-district 1-A. A reasonable estimate of the number of Alzheimer's patients presently in nursing homes in Sub-district 1-A is 367. None of these are in specialized care units. The estimates in the Department's "Alzheimer's Disease Initiative" published in May of 1986, indicate there may be as many as 3,957 Alzheimer's patients in Sub- district 1-A by July, 1989. See Exhibit 17 in evidence. There is a need in Sub-district 1-A, for the sub-acute care services proposed by the applicant. Careage Aire will admit Medicaid patients to its facility, including ventilator dependent patients. These services are not currently available in either nursing home or extended care facilities in the sub-district for Medicaid patients, who have a problem with "financial accessibility" to such services. There is a need for the services proposed to be provided to technology dependent children. There is an existing problem for the hospitals in the Pensacola area in successfully placing "technology dependent children" once they have progressed sufficiently to no longer require acute hospital care. The number of such children requiring ventilators or other speciality equipment is likely to increase with the improvement of medical technology which allows brain damaged or other severely handicapped children to survive, but be dependent upon speciality equipment. Additionally, Careage Aire proposes other speciality services, involving adult daycare and respite care services, which are currently needed in Sub-district 1-A and which would help alleviate some of the problems attendant to financial inaccessibility of nursing home care to some families. It would allow families to place elderly family members in nursing home care during the day while the family members work and allow them to be taken home each night. Such care would often be a feasible alternative for families who can not afford full time nursing home care and for patients whose condition does not necessarily require full-time nursing care, but who are unable to care for themselves if left entirely to their own devices for a full day. Patient Charges The applicant's patient charges or estimated patient charges are enumerated in Exhibit 1, Table 8. The $70 charge for Veteran's Administration patients is reasonable based on the level of care to be afforded and is lower than Careage's experience with such charges in other states in which it operates. The Medicaid charge of $59.50 and the $105 charge for Medicare patients was shown by the applicant's expert to be reasonable and that testimony was unrefuted. The rather unique sub-acute care service was shown to have an estimated charge of $135, which is less than that prevailing at the Baptist Hospital's existing extended care facility. The expert testimony in support of these charges establishes that they are reasonable. In summary, existing nursing home facilities in Sub- district 1-A are experiencing an increase in occupancy which is at high levels at the present time. The Department's bed need rule methodology allows flexibility to grant certificate of need applications even where there is no actual showing of a numeric need under that rule. In the instance situation, when the most current population projections for the static July, 1989 planning horizon are employed, in conjunction with the above found average occupancy levels for the sub- district, there is demonstrated an actual numeric need, albeit not for 60 beds or more for the entire sub-district. There was shown to be an 81 bed need for Escambia County itself. It is also true, however, that in view of the needed special services to be provided by the applicant and the fact that the relevant priorities of the local health plan have all been satisfied by the applicant, a need exists for the proposed 60 bed nursing home facility. In fact, although the rule-mandated methodology must be used in determining the question of numeric need, the rule allows for granting an application even when no numeric need exists by consideration of other factors, including the priorities and goals of the local health plan. It is noteworthy, in a corroborative sense, that the local health plan methodology reveals a need for 120 beds in Sub- district 1-A for the July, 1989 planning horizon. Although this methodology is not mandated to be considered by the Department's numeric need calculation rule, since "other circumstances" can be considered in favor of granting an application, even when numeric need is not shown to exist, such a factor, along with the special services offered by the applicant, corroborates the existence of a need for the proposed project, especially since some need for beds is shown by the "rule calculation" itself.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that the application of Gene E. Lynn, Careage Aire Health Care Center for a certificate of need authorizing construction and operation of a 60 bed nursing home in Escambia County, Florida, be approved. DONE and ENTERED this 31st of December, 1987, in Tallahassee, Florida. P. MICHAEL RUFF 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 31st day of December, 1987.
The Issue Whether Respondent nursing home violated Florida statutes and Department rules (and should be subject to a civil penalty) as alleged by the Department for (1) failing to provide adequate health care to an injured patient, and (2) failing to meet nursing staffing requirements.
Findings Of Fact Upon consideration of the evidence presented at the hearing, including the demeanor and credibility of the witnesses, and posthearing filings by counsel, the following findings of fact are determined: Respondent Nursing Home, the Apalachicola Valley Nursing Center, is a nursing care facility located immediately west of Blountstown, Florida. It is licensed by the Department, and has been in operation since June, 1975. (Testimony of Margaret Brock) Injury to and Standard of Care Provided Myrtle White On July 4, 1979, Dora M. Keifer was the licensed practical nurse on duty during the Nursing Home's night shift. At approximately 1:30 a.m., nurse Keifer heard a noise coming from the nearby room of an elderly patient, Myrtle White. The nurse immediately investigated, and found Myrtle White lying on the floor, and against the wall. Nurse Keifer then visually examined Mrs. White's head and extremities for bruises, discolorations, swelling, lacerations, and other signs of possible fractures. Finding only a slight abrasion on her elbow, nurse Keifer then manually examined the patient's leg and hip for signs of a bone fracture or associated pain. The patient responded by complaining of pain on her right side from her knee to her hip. However, no swelling of that area could be detected; nor were there any other physical symptoms of a bone fracture which were detectable by visual or manual examination. (Testimony of Dora Keifer) After completing the examination, nurse Keifer, with the assistance of four aides, placed Mrs. White on a blanket and carefully lifted her directly onto her bed, placing her on her back. This is a lifting procedure which minimizes sudden movement and is recommended for use with patients who are suspected of suffering from bone fractures. Nurse Keifer then raised the bed side rails to prevent the patient from falling off the bed, and checked the patient's vital signs. Except for slightly elevated blood pressure, the patient's vital signs were within normal limits. Nurse Keifer, then pushed the bed to within 10 feet of her nursing station to ensure that the patient would-be constantly observed during the remainder of her shift. (Testimony of Dora Keifer, Dr. E. B. White) Except on the two occasions when she made her routine rounds, nurse Keifer kept Mrs. White under constant personal observation until her shift ended at 7:00 a.m. on July 4, 1979. When she made her rounds, nurse Keifer advised her aides to keep Mrs. White under constant observation. During the remainder of her shift, nurse Keifer periodically reexamined Mrs. White. Physical symptoms of a fracture, or other injury resulting from the patient's fall, continued to be absent. At 4:30 a.m., nurse Keifer checked the patient's urine sample and detected no blood or other unusual signs. (Testimony of Dora Keifer) At the time of her accident on July 4, 1979, Mrs. White, an 88-year-old woman, was suffering from deafness, senility, disorientation, poor eyesight and arthritis. She had previously fractured her right hip, and a prosthetic device had been inserted. Her ailments caused her to frequently suffer, and complain of pain in the area of her right hip, for which her doctor (Dr. Manuel E. Lopez) had prescribed, by standing (continuing) order, a pain medication known as Phenophen No. 4. The standing order authorized the nursing staff to administer this pain medication to the patient, without further authorization from a physician, four times daily, and on an "as needed" basis to relieve Mrs. White's pain. (Testimony of Dora Keifer, Mr. Manuel Lopez, Margaret Brock) Previous to and at the time of Mrs. White's accident, nurse Keifer was aware of Mrs. White's ailments, and frequent complaints of discomfort, as well as the standing order of Dr. Lopez which authorized the administering of Phenophen No. 4 to Mrs. White on an "as needed" basis to relieve pain. In addition, nurse Keifer, by background and training was qualified to examine, make judgments concerning, and render care to patients requiring emergency medical treatment. For several years, she had served as a part-time nurse on the night shift at the Nursing Home, and had served for 6 years in the emergency room and obstetric ward at Calhoun County Hospital. At the hospital, she had engaged in the detection and treatment of traumatic injuries and broken bones on a daily basis, and was familiar with the proper nursing and medical techniques used in caring for such injuries. (Testimony of Dora Keifer, Dr. E. B. White) Nurse Keifer had been instructed by local physicians (including Dr. Lopez) practicing at the Nursing Home that they should not be telephoned during the late evening and early morning hours unless, in the nurse's judgment, the patient required emergency care. Because Blountstown suffers a severe shortage of physicians, the judgment of licensed nurses necessarily assumes on increasingly important role in providing adequate medical care. (Testimony of Dora Keifer, Dr. E. B. White, Margaret Brook, Dr. Manuel Lopez) Between 1:30 a.m. (the time of Mrs. Trite's accident) and 7:00 a.m., on July 4, 1979, nurse Keifer administered Phenophen No. 4 two times to Mrs. White for the purpose of relieving pain. The initial dose was given Mrs. White shortly after she had complained of pain and been moved near nurse Keifer's duty station for observation. The drug appeared to alleviate Mrs. White's discomfort. Three or four hours later, after Mrs. White again complained of pain, a second dose was administered. (Testimony of Dora Keifer) Nurse Keifer administered the two doses of Phenophen No. 4 to Mrs. White during the early morning hours of July 4, 1979, without contacting, or seeking the further authorization of a physician. Having detected no symptoms of a bone fracture, or other injury to Mrs. White resulting from her fall, nurse Keifer concluded that administration of the medication to relieve pain was authorized by Dr. Lopez's standing order, and justified under the circumstances. She further made a judgment that Mrs. White was not suffering from an injury which justified emergency treatment, and the immediate contacting of a physician. (Testimony of Dora Keifer, Dr. Manuel Lopez, Dr. E. B. White) At 5:30 a.m. on July 4, 1979, nurse Keifer telephoned Calhoun County Hospital and left a message requesting Dr. Lopez to come to the Nursing Home and examine Mrs. White as soon as he completed his rounds at the hospital. Nurse Keifer was aware, at the time, that Dr. Lopez began his daily hospital rounds at 6:00 a.m. Later that morning, at the direction of Dr. Lopez, Mrs. White was taken to the hospital for x-rays which revealed that Mrs. White had fractured her right hip. She was returned to the Nursing Home that day, and transferred to Tallahassee Memorial Hospital for several days. No surgical repairs were ever made to the hip fracture, however, and Mrs. White was subsequently returned to the Nursing Home, for bed-side care. (Testimony of Dora Keifer, Dr. Lopez, Dr. E. B. White) It was nurse Keifer's professional judgment, based upon the facts known to her at that time, that Mrs. White's fall, and physical condition neither required emergency medical treatment nor justified the immediate contacting of a physician. Nurse Keifer further concluded that the administration of Phenophen No. 4 to relieve Mrs. White's pain, without further authorization of a physician, was necessary and authorized by the standing order of Dr. Lopez. These professional nursing judgments and actions were reasonable, justified by the facts, consistent with established health care standards applied in the Blountstown area, and did not endanger the life, or create a substantial probability of harm to Mrs. White. Although the Department's Medical Facilities Program Supervisor, Howard Chastain, testified that nurse Keifer's failure to immediately notify a physician concerning Mrs. White's fall presented an imminent danger to the patient, it is concluded that the contrary testimony of two experienced medical doctors constitutes the weight of the evidence on this issue. As to the meaning of Dr. Lopez's standing order con cerning administration of Phenophen No. 4 to Mrs. White, the Department's witnesses on this matter, James L. Myrah and Christine Denson, conceded that they would net disagree with Dr. Lopez if the doctor testified that nurse Keifer's action was consistent with the standing order. Dr. Lopez, subsequently, so testified. (Testimony of Dr. M. Lopez, Dr. E. B. White, James L. Myrah) Shortage of One Nurse on Night Shift During the period of June 1 through June 30, 1979, and July 1, through July 21, 1979, for a total of fifty-one (51) nights, the Nursing Home employed only one licensed nurse on the 11:00 p.m. - 7:00 a.m. night shift. (Testimony of Margaret Brook, J. L. Myrah) During this same 51-day time period, the number of patients at the Nursing Home fluctuated between 70 and 80 patients. (Testimony of Margaret Brook, J. L. Myrah, Petitioner's Exhibit No. 2) The Nursing Home is managed by a licensed nursing home administrator, and provides a full range of health and related services to patients requiring skilled or extensive nursing home care. Most of the patients require nursing services on a 24-hour basis and are seriously incapacitated, mentally or physically. (Testimony of Margaret Brook) The Administrator of the Nursing Home was aware that Department rules required the employment of two licensed nurses on the night shift during June and July, 1979. She made numerous unsuccessful efforts to recruit, locate, and employ an additional nurse for the night shift. Her failure to hire the additional nurse required by Department rules was not a willful act of misfeasance or nonfeasance on her part--but was due to a statewide nursing shortage which is particularly severe in rural northwest Florida. Other nursing homes have experienced similar difficulty in recruiting and hiring the requisite number of licensed nurses. The Nursing Home received no economic benefit from its failure to employ the additional night nurse during the time in question because the cost of such an employee is fully reimbursed by the State. On approximately March 1, 1980, the Nursing Home located, and has since employed, the additional licensed nurse required by Department rules for the night shift. (Testimony of Dora Keifer, Margaret Brook) Due to the widespread shortage of qualified nursing personnel, the Department ordinarily brings enforcement actions against nursing homes for noncompliance with the minimum nursing staff requirements only if the noncompliance is adversely affecting patient care. (Testimony of James L. Myrah, Margaret Brock) The shortage of one licensed nurse on the night shift during the time in question did not adversely affect the level of patient care provided by the Nursing Home. (Testimony of Dora Keifer, Margaret Brock) The parties have submitted proposed Findings of Fact and Conclusions of Law. To the extent that those findings and conclusions are not adopted in this Recommended Order, they are specifically rejected as being irrelevant to the issues in this cause, unsupported by the evidence, or law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department's Administrative Complaint, and the charges against Respondent contained therein, be DISMISSED. DONE and ENTERED this 2nd day of May, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: John L. Pearce, Esquire District II Legal Counsel Department of Health and Rehabilitative Services 2639 North Monroe Street Suite 200-A Tallahassee, Florida 32303 Stephen D. Milbrath, Esquire Dempsey & Slaughter, P.A. Suite 610 - Eola Office Center 605 East Robinson Street Orlando, Florida 32801
