Findings Of Fact Originally, each Petitioner filed an application for a Certificate Of Need for the construction and operation of nursing home facilities in Broward County as follows: HCR - 120 beds, Richmond - 240 beds, Health Quest - 180 beds, and FPM - 240 beds. The applications were reviewed by Respondent comparatively and competitively, and they were denied in a State Agency Action Report on August 12, 1982 solely on the basis that there was no need for additional nursing home beds in Broward County. The formal hearing thereafter requested by all Petitioners was continued several times due to scheduling conflicts and due to the expected promulgation of a new methodology by which the need for nursing home beds is computed. As a result of Respondent's Quarterly Census Report dated November 30, 1983, Respondent determined that in fact there was a need for an additional 101 nursing home beds in Broward County. Accordingly, just prior to the formal hearing and by letter dated January 4, 1984, Respondent's attorney invited each Petitioner to amend its application for the purpose of being eligible to receive a Certificate Of Need for those 101 beds. Each Petitioner so complied. At the final hearing, each Petitioner proceeded on both its original application and its amended application. In spite of the singular ground for denial of each application contained in the State Agency Action Report, Respondent's attorney contended from the inception of this proceeding and into the final hearing that whether any of the applications met all statutory and rule criteria for approval was disputed by Respondent, including the financial feasibility of each proposed project. According to Respondent's only witness, Thomas F. Porter, however, all four applications meet all statutory and rule criteria for approval including financial feasibility. Accordingly, the only facts to be determined herein will relate to the issue of the number of beds needed. Since Respondent stipulated that 101 beds were available to be awarded to one of the applicants in this proceeding (Tr. 17, 36-40, 952), the threshold issue is how many beds in excess of 101, if any, are needed in Broward County. Respondent uses the most recently available information in analyzing applications for nursing home beds, including the Quarterly Census Report which it publishes, and a mathematical methodology contained in Section 10-5.11(21), Florida Administrative Code, the purpose of which methodology is to project the need for nursing home beds on a three year basis to determine the availability of those beds for award to Certificate Of Need applicants in relation to a projected need. The methodology contains several steps. The first part of the methodology projects the number of beds that will be needed based upon an adjustment of a standard of 27 beds per thousand for the population aged 65 and over to reflect the percentage of those in poverty in the HRS district in relation to those living in poverty in the state. The second part of the methodology contains the present and prospective occupancy rates. Before any of the new beds which are determined to be needed can be added, the average occupancy rate for existing homes must exceed eighty five Percent (85), as the rule is applied to Broward County, the only county in Florida constituting its own HRS district and having no sub-districts. Furthermore, the second part of the formula provides that no additional beds which have been determined to be needed can actually be added if, theoretically, the prospective occupancy rate after the beds are added will be reduced below eighty percent (80 percent). Respondent's determination as to the number of beds needed and the number of beds available for Certificate of Need applicants according to "part two" of the formula is based on its Quarterly Census Reports. The November 30, 1983 Quarterly Census Report revealed that 1,419 community nursing home beds (4,058 needed beds, less 2,789 existing and 300 previously approved but not constructed beds) will be needed in Broward county in 1986, the horizon year for these applicants. The occupancy rate of existing nursing home beds for the six months preceding that report was 91.5 percent. According to that report, since the prospective occupancy rate is 80 percent for Broward County, then the addition of more than 101 beds at the present time will theoretically reduce the prospective occupancy rate below 80 percent. Under normal circumstances Respondent will issue Certificates of Need in accordance with the need methodology set forth above. However, Respondent has discretion to approve applications for nursing home beds which do not conform to the need methodology if the existence of special circumstances can be proven. Special circumstances do exist in Broward County which warrant a determination that more nursing home beds are needed than is demonstrated by a strict application of Respondent's need methodology. One of those special circumstances is the existence in the district comprised of Broward County of an older population than in the other districts in Florida. Broward County's 65 and over population is fairly typical of Florida at the present time, but there is a significant difference in the proportion of the population which is 75 and over and which will be 75 and over in the near future. In 1980 Florida as a whole had 6.5 percent of its 65 and over population in the 75 and over category which was projected to increase to 9 percent by the year 2000. By contrast, according to studies performed by Dr. Robert Weller, in Broward County 35.4 percent of the 65 and over population was 75 and over, and by 1986 this number was projected to increase to 53.6 percent. This difference was classified by Dr. Weller as "very meaningful" to the point where he would be very "uncomfortable" with any attempt to plan for Broward County using statewide averages. This large difference in the composition of the elderly population of the state as a whole and Broward County is a significant special circumstance because the older the population the greater the demand for nursing home beds. In fact, the big predictors of need for nursing home beds are illness and age. The average age of entry into a nursing home is 81. While the population group of 85 and older utilize nursing home beds at a rate 15 times greater than the 65 and older group, the over 75 age category constitutes 70 percent of all nursing home users. Respondent's need methodology does not make an adjustment for differences in the 65 and over category between the various districts. This failure to adjust for an older population may not significantly affect districts with more normal population composition, but since Broward County's population departs substantially from the norm, it is an essential consideration. The failure to consider this situation results in a gross understatement of need in Broward County. Diagnostically Related Groups (hereinafter "DRG") regulations are amendments to the Social Security Act effective in 1983 which alter the method by which hospitals will receive reimbursement for Medicare patients. Under the DRG regulations, which hospitals are required to adhere to by the end of 1984, reimbursement for Medicare patients will be based upon an established length of stay for each type of illness. For example a hospital might be reimbursed for an eight day hospital stay for a coronary by-pass operation whether the patient actually stays in the hospital for seven or for 12 days. The effect of the DRG regulations is the earlier discharge of many patients in need of intensive nursing care. Every expert witness and professional administrator opined at the hearing in this cause that DRG regulations will result in an increased demand for nursing home beds. In addition to the effect the DRG regulations will have in a normal situation, the characteristics of the Broward County will accentuate this effect. The nationwide average for percent of Medicare funding in acute care hospitals is approximately 50 percent while the average for Broward County in last 12 months ranges from 53 percent to about 64 percent. The characteristics of Broward's elderly population also increases the effect of the DRG regulations because the population in Broward County is older than that in the remainder of the state. A study of the effects of the DRG regulations on the need for additional nursing home beds was recently conducted for Palm Beach County. That county has a high percentage of elderly (although not as high as Broward) and a high percentage of Medicaid funding. That study indicated that the DRG regulations would increase demand there by about 225 to 300 beds. Theodore J. Foti, an expert in health planning, utilized the Palm Beach study to estimate that from 325 to 400 additional beds are needed in Broward County to compensate for the DRG regulations alone. In Broward County there are three facilities which Respondent counts as nursing home facilities but which do not provide nursing home services. The Daystar Nursing Home, which contains 44 beds, is a Christian Science facility which does not provide the level of care associated with nursing homes. The Manor Oaks facility, which contains 116 beds, has a hospital license as an extended care facility and is a licensed specialty hospital, not a nursing home. St. Johns Nursing and Rehabilitation Center, which contains 100 beds, is a specialty hospital. Respondent includes the 340 beds in these facilities in computing the total of existing nursing home beds. Since these facilities are not truly nursing homes, they are displacing beds which normally provide nursing home services. The need methodology, therefore, does not include the true number of existing nursing home beds in Broward County, and, therefore, even if all other data used in the methodology be accurate, the bed need as determined by the methodology is understated by 340 beds. Barbara Palmer is employed by Respondent in its Office of Aging and Adult Services. Her job duties include writing proposed rules, manual material and legislative budget requests for Respondent's program known as Community Care for the Elderly (hereinafter "CCE"). CCE services include case management as well as CORE services, adult day care, chore, emergency alert response systems, home delivered meals, home health aid, medical transportation and personal care. Each of these programs is generally designed to provide services to the clients in the client's home. None of these services are provided to persons who are already in nursing homes. In order to compute need for CCE services, Palmer and Respondent rely on research by Dr. Carter Osterbind which identifies the incidence of "homebound" and "bedfast" individuals in the population aged 65 and over. Respondent defines bedfast as a person who, because of physical or other infirmities, remains in bed and is incapable of being in any other place. Similarly homebound individuals are those who cannot leave their homes without assistance. Respondent routinely uses Osterbind's 8 percent incidence factor to calculate the percentage of the population in the State of Florida 65 and over that can be characterized as homebound and bedfast. Subject to revisions, Palmer prepares the budget proposal for Aging and Adult Services which is then approved by the Secretary of the Department of Health and Rehabilitative Services for submission to the Governor and which then becomes Services for part of the Governor's budget request which is ultimately submitted to the Legislature. Palmer uses two documents to prepare her budget request: Dr. Osterbind's paper "Older People in Florida" and "Florida Decade of the 80's", a technical appendix provided by the Office of the Governor as a reference for population statistics for use in developing legislative budget requests. Using these two documents, a projected need is compared with the historical data of how many people have been served with the money which was received in a previous budget year. By subtracting the historically met need from the projected need, Palmer arrives at the projected unmet need, which is presented in a table depicting the total number of homebound and bedfast clients who will not receive services. Palmer also uses a factor, developed by Respondent's Community Care for the Elderly Program, to determine how many individuals, but for the fact that their need is going to be met, are at risk of institutionalization. Respondent's Office of Evaluation has developed and published a 42 percent factor and utilizes it as a basis to determine how many of those persons in a category whose needs will be unmet because of lack of budget dollars in the future will actually end up in nursing homes if more dollars are not appropriated. In other words, Respondent utilizes a document promulgated in 1981 by its Office of Evaluation which indicates that a 42 percent factor should be applied to an 8 percent statewide percent of the population 65 and older to determine how many are at risk of institutionalization in a nursing home, and this methodology has been used routinely by Respondent to prepare Respondent's budget requests through 1985. Palmer's approach in preparing the budget request has a purpose of persuading the Legislature that unless money is provided, 42 of all homebound and bedfast individuals will have to be institutionalized but for provision for home health care services. Palmer's last budget request shows that in the decade of the 80's Respondent expects a 69.8 percent increase in the population group 65 and over. The 10 year plan for CCE and CORE services gives the estimated percentage of need which Respondent intends to meet with CCE and CORE services for various budget years through 1990. Respondent will only provide those services to 23.84 percent of those persons needing them in 1985-86 and only 26.48 percent in 1986-87. Estimated unduplicated clients that will be served in those same years are 41,448 and 47,869 respectively. Expert witness, Michael Schwartz, used Respondent's population figures for Broward County and Respondent's methodology according to Palmer to determine how many of those individuals aged 65 and over in Broward County will be homebound and bedfast in the planning horizon year of 1986. Multiplying the number of homebound and bedfast by the percentile of persons that are at risk of institutionalization yields the figure of 9,760 persons for the horizon year. The number of persons projected by Respondent's Office of Aging and Adult Services to actually receive the CCE-CORE services in that horizon year is 3,956. Thus, the number of individuals unable to obtain those services and needing a nursing home bed in that year will be 5,802. These people will need nursing home beds for an average length of stay of two and one-half years (national average). The current inventory of nursing home beds in Broward County, including approved but not built beds, is 3,089. When the existing inventory is subtracted from the number of needed beds, as computed by the Aging and Adult Services methodology, the net need is an additional 2,715. Thus, when Respondent's methodology for determining the need for nursing home beds in the absence of alternatives of CCE and CORE services is applied to Broward County for the year 1986, it yields a need for 2,715 beds in addition to existing and approved beds to accommodate the homebound and bedfast who will not receive those services. However, when Respondent's methodology in Section 10-5.11(21), Florida Administrative Code, is applied to Broward County for the year 1986 it yields a need for 1,419 beds in addition to existing and approved beds. Yet, when the theoretical prospective occupancy feature contained in that rule is applied to Broward County, only 101 beds are needed to be built in time for service in 1986. It is noteworthy that the formula used by Respondent to induce the Legislature to fund programs for the diversion of the elderly from nursing homes yields double the need for nursing home beds in Broward County in 1986 than use of the formula established by Respondent to evaluate applications for new nursing home beds. Schwartz identified the reason for the difference: The CCE funding formula takes into account those below the poverty level as well as those above the poverty level in determining the number of people who are at risk of institutionalization unless CCE services are provided. However, Respondent's bed need methodology uses a poverty ratio (number of impoverished in the county relative to number of impoverished in the state) to adjust the statewide standard of 27 beds per thousand downward to 15.5 beds per thousand in Broward County. Since the first part of the bed need methodology only measures nursing home bed need for the impoverished (by adjusting 27 beds per one thousand by a poverty ratio) while the formula used by Aging and Adult Services contemplates all persons at risk of institutionalization, whether impoverished or not, and since the Aging and Adult Services methodology yields a higher need figure, tie difference between the two figures must represent the extent to which private pay patients (not impoverished) are using, and will continue to use, nursing home beds in Broward County to the exclusion of Medicaid patients. Utilizing the first part of the bed need methodology, Respondent has determined that Broward County will need a total of 4,508 beds in 1986 and that, when licensed and approved beds are subtracted, 1,419 additional beds will be needed. However, the second part of the methodology which purports to determine the prospective utilization of nursing home beds limits the number of beds which can be added to 101. The premise behind the prospective utilization test is that the addition of more than 101 beds will result in the occupancy rate for nursing homes in Broward County being reduced below 80 percent. Because of the particular situation existing in Broward County this premise is not valid. In November 1983, Richmond's newly-constructed Sunrise facility had 120 beds in service, but Respondent counted all 240 approved beds as being in service for determining its occupancy rate. These 240 beds were, therefore, occupied at a rate of 24.4 percent. In November 1982, the occupancy rate for nursing homes in Broward County was 89.8 percent, while a year later after including all 240 licensed beds in Richmond's Sunrise facility, the occupancy rate had only fallen 3 points to 86.7 percent. Expert witness Schwartz concludes that if 240 beds can be added In Broward County and only drop the occupancy rate from 89.8 percent to 86.7 percent, then certainly more than 101 beds can be added before the occupancy rate will drop below 80 percent. He further concludes that when One examines what actually happened in Broward County rather than what could theoretically happen, the prospective utilization test may well be a valid predictor of future occupancy rates under normal circumstances, but it fails to be in Broward County. Rather, Schwartz concluded that approximately 1,000 nursing home beds can be added in Broward County without lowering the occupancy rate below 80. Expert witness Theodore Foti explained the effect of Respondent's bed need methodology when applied to Broward County. The methodology is based on the premise that the only people who need nursing homes in Florida are the impoverished since the standard 27 beds per one thousand is adjusted only by the poverty ratio. However, nursing home providers prefer private patients because they pay more. In Broward County there are facilities that only accept private pay patients. The provider receives about 25 percent more profit than he would if he had two individuals to care for in the same room when the difference between private and semi-private rates and the decrease in staffing that is possible with the lesser number of patients are taken into consideration. Because of the shortage of supply and the ever-growing demand in Broward County, it is economically beneficial to a 60 bed nursing home for example to take 20 beds out of service and operate with 40 beds because the owner can increase the rates and lower the costs simultaneously. According to Foti, a review of the occupancy rates in Broward County shows that beds in certain facilities have been taken out of use over a period of time by those facilities. Those providers have chosen to serve primarily the private paying individual since it is to their financial benefit to do so. The corresponding result is that the demand for nursing home beds by the medicaid recipient cannot be satisfied because the private pay patient has "squeezed out" the Medicaid patient. The existence of this phenomena in Broward County rises to the level of an exceptional circumstance since Respondent uses a formula to prescribe prospective occupancy rates which are directly controlled by the number of beds that the existing owners place in service or take out of service. Considering the "private pay phenomena" in Broward County, and considering that the number of beds per 1,000 in Broward County is the lowest in the state, and considering that the number of beds per 1,000 in the state is the lowest in the country, Foti calculates a need currently in Broward County to be an additional 800 beds as a minimum figure even without considering the DRG regulations which clearly will accentuate that need. Respondent's witness Porter acknowledged that Respondent would look favorably upon applications for Certificates of Need for additional beds in an area where indications are that Medicaid patients are being denied access to beds although Respondent's bed need methodology simultaneously shows that no new beds are needed. He explained that as an extenuating circumstance if there is evidence that a particular population group is being denied access and that Respondent would look favorably upon applications proposing substantial Medicaid beds (such as those under consideration herein) if accessibility for Medicaid clients is limited. He further acknowledged that the Medicaid program office of the division of Adult and Aging Services would be an appropriate authority upon which he would rely in making such a determination. He further acknowledged that the accessibility to Medicaid beds would be increased in Broward County by issuing Certificates of Need with a Medicaid bed condition attached to them since the Medicaid utilization rate has been increasing in Broward County even though the total number of beds has remained constant. Lynn Raichelson as the supervisor of Respondent's Adult Payments Unit for Broward County is responsible for gathering data reflecting the number of people placed in Medicaid beds during the month in Broward County for Medicaid payment purposes. Both her reports admitted in evidence and her testimony at the final hearing noted an overall difficulty in finding placements in Broward County for Medicaid patients. Her reports indicate a number of entries where all Broward County and Dade County nursing homes were contacted but there were no nursing home beds available. The number of days for placement ranged from 23 to in excess of 83 days. Most of the patients were in acute care hospital beds while awaiting nursing home beds. Several health care professionals testified as to the actual need in Broward County as opposed to the projected need based upon Respondent's mathematical formula. One hospital administrator had no problem placing private pay patients but found that Medicaid placements are extremely difficult to make in Broward County. His hospital alone holds 8 to 12 patients on any given day who should have been discharged into a nursing home. The executive director of the North Broward Hospital District which encompasses three hospitals encounters difficulty in placing Medicaid and Medicare patients in nursing homes in Broward County since the nursing homes are at full operational occupancy. Approximately 25 percent of the patients discharged from hospitals in the District are referred to and placed in nursing homes. Of this 25 percent, the District encounters difficulty in placing 10 to 15 percent of the patients. The problems persist year round but are especially difficult during the winter "peak" season. Alan Mahar is the administrator of the Primary Health Care Division of the Health and Public Safety Department for Broward County. He was the supervisor of nursing home placement from 1975 to 1981 when Broward County was making nursing home placements. Between June 1981 and September 1983 he participated in a Medicaid demonstration project called Pentastar which was sponsored by Respondent's District 10 Aging and Adult Program Office. The purpose of the project was to determine if an alternative existed to keep persons out of nursing homes. An important part of the program was the identification of persons aged 60 and over who were potentially at risk of being placed into a nursing home within one year. Those enrolled in the program had to qualify for Medicaid payments. Although he expected he would need to interview approximately 300 to find 150 persons for the program, everyone he interviewed qualified. At the conclusion of the program, none of the persons who received services through pentastar were any less at risk than they were before those services commenced. Services under that program terminated in September 1983. Since Broward County does not have a publicly operated nursing home, Mahar experienced extreme difficulty in placing Medicaid patients and found that it frequently took weeks and sometimes months to find an available nursing home bed for a Medicaid patient. Mahar's opinion that there is not a sufficient number of beds available to Medicaid patients in Broward County is also based on his identification of the trend over the last three years he has been involved in auditing Medicaid matching funds. The money which Broward County has been paying for hospital care for Medicaid persons has almost doubled in the last three years, while the Medicaid match money for nursing home care has gone up only 15 or 20 percent during that same period. The poverty ratio included in Respondent's bed need formula results in an underestimation of bed need for wealthy counties such as Broward County where the majority of nursing home patients are private pay patients. Broward County is the wealthiest county in the state and has the lowest Medicaid usage in the state. The poverty ratio results in a calculated bed-need ratio in Broward County of 15.5 beds per thousand whereas the statewide need ratio is 27 beds per thousand. There is overwhelming competent substantial evidence to show an actual need for community nursing home beds in Broward County currently and in 1986 for in excess of the 780 beds Petitioners collectively seek herein. Substantial competent evidence was presented to show several special circumstances, and respondent's sole witness acknowledged that one of those was sufficient for the grant of all applications filed by the four Petitioners in this cause. The overwhelming need proven herein was uncontroverted by Respondent, and the special circumstances prohibit Respondent from applying the bed need methodology in Broward County at this time. In view of the overwhelming and uncontroverted evidence, there is no need to determine which of the applicants herein is best qualified for the award of the 101 beds in issue in this cause. Additionally, the evidence in this record is insufficient to proclaim any of the applicants to be best qualified. At the final hearing there were a few attempts at a comparative analysis, and none was credible. The attempts at comparative analysis simply resulted in a further substantiation of the fact that all of the applicants are equally qualified. Respondent's witness gave his personal opinion that one of the applicants was preferable but was unable to assign any weight to any of the factors utilized in reaching that individual opinion. Rather, the one factor that he did testify to at length in the hearing as the most important - accessibility by Medicaid patients - was the one item that that applicant would not guarantee. HCR's application for the 101 beds indicated that it would not commit to the number of Medicaid patients that it would serve. In short, the testimony at the hearing and the evidence presented provide very little basis, if any, for choosing one applicant over another. Rather, all applicants meet all criteria, and the need for the number of beds originally requested clearly exists.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is recommended that a Final Order be entered: Granting to Richmond Healthcare, Inc. a Certificate of Need for 240 beds in Broward County in accordance with its original application; Granting to Health Care and Retirement Corporation of America a Certificate of Need 120 beds in Broward County in accordance with its original application; Granting to Health Quest Corporation a Certificate of Need for 180 beds in Broward County in accordance with its original application; and Granting to Federal Property Management a Certificate of Need for 240 beds in Broward County in accordance with its original application. DONE and RECOMMENDED this 15th day of October, 1984 in Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1984. COPIES FURNISHED: Richard G. Coker, Jr., Esquire 1107 South East Fourth Avenue Fort Lauderdale, Florida 33316 Jean Laramore, Esquire and Alfred W. Clark, Esquire 325 North Calhoun Street Tallahassee, Florida 32301 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601-1568 Robert D. Newell, Jr., Esquire Lewis State Bank Building, Suite 464 Tallahassee, Florida 32301 Claire D. Dryfuss, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard, Suite 406 Tallahassee, Florida 32301 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Which of the applications for certificates of need for community nursing home beds for the Palm Beach County July, 1991, planning horizon filed by Whitehall Boca, an Illinois limited partnership; Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton; Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center; and Maple Leaf of Palm Beach County Health Care, Inc., should be granted, if any?
Findings Of Fact In November, 1988, the applicants in this proceeding filed applications for certificates of need for nursing home beds in District IX, subdistrict 4 (Palm Beach County) for the July, 1991, planning horizon. The Department of Health and Rehabilitative Services (hereinafter "HRS") published a fixed need pool applicable to this batching cycle of 62 additional nursing home beds for Palm Beach County. Maple Leaf of Palm Beach County Health Care, Inc., a wholly-owned subsidiary of Health Care and Retirement Corporation of America (hereinafter "HCR") proposes to add 30 nursing home beds to its approved 90-bed nursing home to be located in the Jupiter area of northern Palm Beach County. HCR's 30-bed addition would be accomplished by construction of a new 20-bed wing and the conversion of 10 private rooms to semi-private rooms. HCR will license and operate its nursing home through Maple Leaf of Palm Beach County Health Care, Inc., a corporation wholly-owned by HCR and established expressly for the development of this project. There is no operational difference between Maple Leaf of Palm Beach County Health Care, Inc., and HCR. HCR has been in the business of developing and operating nursing homes for over 25 years and operates 130 facilities with 16,000 nursing home beds in 19 states. In Florida, HCR operates 10 nursing homes and has several additional facilities under development. The 90-bed approved nursing home to which HCR seeks to add 30 beds will offer extensive rehabilitation, subacute care, high tech services and a 20-bed special care unit for Alzheimer's Disease and dementia victims. HCR's application for the 30-bed addition does not propose any additional special programs, but the rehabilitative and restorative care capability of the nursing home will be available to the patients admitted to the 30 additional beds. The new construction proposed by HCR consists of a sixth 20-bed wing (pod) added to the nursing home. Upon completion, the 120-bed nursing home will consist of 46,000 square feet with six individual resident pods and a central core area for administrative and support services. Each pod consists of 20 beds, and three pods comprise one nursing unit. One nursing unit is located on each end of the nursing home. Each three-pod unit has its own dining and activities areas. It will not be necessary to construct any additional support services for the proposed 30-bed addition. The pod design proposed by HCR provides unique and innovative benefits to the residents of the nursing home. The pod design breaks down the traditional institutional corridor design into smaller, residential-like increments. Instead of long corridors with rooms on each side, living areas are constructed in 20-bed increments (pods) clustered around a home-like living area or atrium located in the center of the pod. Each atrium is intended to have an identity of its own, such as a sitting area, activity area, library, living room, or game room. The pod design is much more residential in character than the traditional nursing home. HCR nursing homes, including this 30-bed addition, incorporate design elements necessary for both skilled nursing care and subacute care. The 30-bed addition proposed by HCR will meet subacute care standards. Vari-Care, Inc. d/b/a Boulevard Manor Nursing Center (hereinafter "Vari-Care or Boulevard") suggests than its design is superior because it proposes to provide piped-in oxygen to rooms designated for subacute care. However, there is no requirement for oxygen supplies to be built into a room in order to provide subacute care. In today's technology, equipment for oxygen is brought into the room. HCR's allocation of equipment costs for this addition include equipment for the provision of subacute care. The project cost for the 30-bed addition proposed by HCR is $706,000 or $23,533 per bed. The total project cost for the approved 90 beds would be $3,865,000, or $42,944 per bed. Combining the 90- and 30-bed projects results in a total project cost of $4,571,000, or $38,092 per bed. Economies of scale make HCR's 120-bed nursing home more cost effective than construction of only the 90-bed nursing home. Purchase of additional land is not required for the HCR addition. HCR's total project costs for its 30-bed addition and for its resulting 120-bed facility are lower than those of any competing applicant. HCR enjoys economies of scale in its purchase of equipment for nursing homes because of the number of projects that it has under development at any given time and because of the national contracts which it has with material and equipment suppliers. HCR's volume purchasing allows HCR to obtain substantial discounts which, in turn, allows HCR to provide higher quality furnishings and equipment at competitive prices. HCR projects a second year utilization of 93.1% for the 30 additional beds, comprised of 42% Medicaid patients, 10% Medicare patients and 48% private pay and insurance patients. The 90-bed approval has a Certificate of Need (hereinafter "CON") condition which requires a minimum 33% Medicaid payor mix. The overall Medicaid payor mix at the 120-bed nursing home is projected to be 35%. All of the beds including the added beds at the HCR nursing home will be certified to serve Medicaid patients. HCR's most recent history of service to Medicaid patients is 59.4% companywide, which includes a range of 26.7% to 90.4% in Florida facilities. HCR will be able to fulfill its commitment to Medicaid patients in the addition. HCR intends to meet any conditions which include a requirement of 42% Medicaid utilization in the 30 added beds. HCR's utilization projections are reasonable. The HCR nursing home will be accessible to all residents of the service district. HCR proposes the following patient charges for 1992: private room, $101.66; semi-private room, $87.17; Medicaid, $83; and Medicare, $86. HCR's patient charges for 1992, the only year for which each applicant submitted charges, are lower than any competing applicant's charges. In determining the financial feasibility of this 30-bed project, HCR took into consideration financial feasibility of the approved 90-bed nursing home as well as the financial feasibility of the total 120-bed project. The 30- bed addition proposed by HCR as well as the resulting 120-bed nursing home are financially feasible. HCR has never had a nursing home license denied, revoked, or suspended and has never had a nursing home placed into receivership. HCR has never experienced a condition in one of its nursing homes which threatened or resulted in direct significant harm to any of its residents. At the time of hearing, HCR operated four nursing homes in Florida which had superior ratings, including one nursing home which, though continuing to be operated by HCR, underwent a technical change of ownership and thus became ineligible for a superior rating. HCR also operates nursing homes in West Virginia, which has a licensure rating system similar to that of Florida's. In West Virginia, all of HCR's nursing homes have licensure ratings comparable to Florida's superior rating. HCR adheres to extensive quality assurance (hereinafter "QA") standards which are based upon, and in some instances more stringent than, state and federal regulations. The purpose of the QA standards is to ensure the highest possible quality care for the residents of the nursing home. HCR utilizes a multi-tiered system to monitor compliance with the QA standards. Each nursing home performs quarterly a quality assurance audit to determine its compliance with the quality assurance standards. From the regional level, HCR provides professional services consultants, typically registered nurses or registered dieticians, who serve as problem solvers and trouble shooters for facilities within their region and typically visit each facility at least once a month. These professional consultants, who are employees of HCR, act as support for the nursing homes within their region, working with directors of nursing, administrators, registered dieticians, and the department heads in the individual nursing homes to ensure compliance with QA standards and monitor the quality of care provided in the nursing homes. Each HCR nursing home is subjected to an annual QA audit performed pursuant to a contract by an independent, outside organization. After the annual survey, the nursing home is provided with a written report and is required to submit a written plan of correction for any identified deficiencies. Implementation of the plans of correction and ongoing compliance with the QA program are monitored by the professional services consultants and management. HCR utilizes a formalized acuity program which provides for a total assessment and evaluation of each resident to determine the level of care needed for each resident. After admission, the required level of care may change. It is common for the condition of a nursing home resident to change during the nursing home stay. HCR's formalized acuity program takes into account these changes in condition and allows the nursing home to provide the level of staffing appropriate to the level of care required by each resident. The staffing proposed by HCR exceeds state requirements. There will be 13.6 total FTE RN, LPN, and nurse aide staff for the 30-bed addition, organized with 6.126 FTE staff on the first shift, 4.374 on the second shift, and 3.1 on the third shift. This is equivalent to a total staff per resident ratio for the 30 additional beds of .493, and a shift staff per bed ratio for the three shifts of .20, .15, and .10, respectively. HCR's 120-bed nursing home will have 78.4 total FTE RN, LPN, and nurse aide staff, or .653 total nursing staff per resident. The shift staffing in the 120-bed HCR nursing home will consist of 35 FTE for the first shift, 25.2 for the second, and 18.2 for the third, which is equivalent to a shift staff per bed ratio of .29, .21, and .15, respectively. The level of staffing proposed by HCR will enable HCR to provide high quality patient care. The staffing proposed by HCR in its 30-bed addition is higher than any competing applicant except Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton (hereinafter "Manor Care") and the staffing for HCR's 120-bed facility is the highest of any of the applicants. Vari-Care sought to demonstrate that its design of providing showers in each resident's room was superior. There are safety concerns relating to providing showers in each patient room. Residents receiving skilled and subacute care usually have to be assisted in and out of tubs or showers. Most residents in the HCR nursing home will not be able to enter or bathe unassisted in a shower or tub. Although it is possible for some patients to be rolled into showers in wheel chairs, baths are superior to showers for increasing circulation and preventing decubitus (skin breakdown). Each HCR nursing unit provides a central bathing unit each for males and for females. Central tubs and showers are easier for disabled residents because of the availability of hydraulic lifting devices to assist the residents in and out of the tubs and showers. There are no hydraulic lifting devices in individual rooms. HCR's QA standards establish procedures for protecting patient privacy and patient dignity during times of bathing, and HCR always uses privacy curtains and individual showers for men and women. HCR and each other applicant provided a description of their plans for various operational details of their proposed nursing homes, including plans for recruitment, career ladders, preadmission screening, appropriateness review, discharge planning, utilization review, QA programs and procedures, specialized programs, resident surveys, residents' councils, security and protection of residents' property, dietary services, linkage with local providers, activity coordination, spiritual development, mental health services, restorative and normalizing activities, quality of life enhancements, training-related plans for staff development and improvement of staff skills, and the availability of the facility for training programs. Compliance with these plans and procedures is important in providing high quality of care to nursing home residents. The plans and procedures described in the HCR application are appropriate. Nursing home beds in Palm Beach County are clustered into three distinct areas: the northern area near Jupiter, the middle area near West Palm Beach and Boynton Beach, and the southern area near Boca Raton and Delray Beach. The social and economic environments of these areas and the highway support system suggest the reasonableness of these divisions, although the Local Health Council has not subdivided Palm Beach County into these three areas for formal health planning purposes. At the time of hearing, there were eight approved nursing home projects with 584 new nursing home beds under development in Palm Beach County: 210 of these approved beds were to be located in southern Palm Beach County; 284 beds were to be located in the mid-Palm Beach County area; and 90 beds were to be located in the northern Palm Beach County area. The only new nursing home in the northern Palm Beach County area is the HCR nursing home. HCR will be located in one of the least affluent sections of Palm Beach County. The HCR nursing home will enhance competition in the service area, because it is the only new nursing home to be located in the northern Palm Beach County area and the quality of services to be offered by HCR will challenge existing facilities to enhance their quality of care. Whitehall Boca, an Illinois limited partnership (hereinafter "Whitehall") is an existing, combined ACLF and nursing home located in Boca Raton in southern Palm Beach County. Whitehall is licensed for 73 skilled nursing beds and 115 ACLF beds. However, because Whitehall has converted some semi-private ACLF rooms to private rooms, its effective ACLF capacity is 62. Whitehall proposes to convert 27 ACLF beds to nursing home beds. Whitehall's expressed purpose for the conversion is to meet the demand for nursing home beds from some of their existing ACLF residents. Structurally, the facility is two-stories and consists of two "V"- shaped wings on each floor. Three of the four wings have identical floor plans. The other wing consists of laundry, kitchen, and mechanical facilities, and nine semi-private ACLF resident rooms. The three identical wings each contain 28 resident rooms, two community tubs, and two showers. One of these wings is currently used for ACLF residents only, another is exclusively designated for skilled nursing, and the third wing is divided between 14 ACLF rooms and 14 skilled nursing rooms. Whitehall proposes to convert the 25 ACLF beds located in these 14 rooms of this third wing to 24 skilled nursing beds. Additionally, three existing skilled nursing rooms located on the first floor will be converted from private to semi-private rooms. In total, the conversion will result in Whitehall's nursing home beds increasing from 73 to 100, configured in 12 private and 44 semi-private bed, rooms. This conversion can be accomplished without construction or additional equipment and would involve only $70,000 in new expenditures (representing attorneys' and consultants fees). During the three years prior to filing its CON application, and as long as it has been eligible, Whitehall has received superior licensure ratings. Whitehall directs its marketing so as to attract residents from outside Palm Beach County and from outside the State of Florida. The visibility that this marketing provides Whitehall makes it better able than its competitors to fill the new beds to be awarded in this proceeding, but makes it less likely that any approved additional nursing home beds would be available to residents of Palm Beach County. Therefore, granting Whitehall's CON application could result in the need for new beds in Palm Beach County remaining unsatisfied. To foster career advancement, Whitehall pays 100% tuition for courses of study that relate directly to its employees' jobs. Whitehall also pays 50% tuition for any course of study an employee pursues that does not pertain to their position at Whitehall. Whitehall Boca contracts with Professional Medical Review, a quality assurance review organization. Whitehall Boca's procedure for quality assurance is that Whitehall's Director of Nursing provides to Professional Medical Review data which quantifies the quality of care that is provided at Whitehall. Professional Medical Review then assembles the data and, with guidelines established by that organization, provides Whitehall with its analysis of that data. With that data, Whitehall plans a method of correction. In addition, Whitehall performs its own in-house, day-to-day quality assurance. This level of quality assurance involves documentation of the quality of patient care, infection control, and safety. Because incoming residents may have difficulty adapting to the nursing home setting, Whitehall has created the "newcomers" Sunshine Group to assist in this transition. If further assistance in the transition process is necessary, Whitehall refers the resident to specialized counseling. Whitehall staffs more dietary personnel than other facilities its size because it offers individual catering throughout the entire facility through its contract for food services provided by the Marriott Corporation. It also makes room service available to all residents. Whitehall has in place a restorative dining program. This program is designed for residents who are not eating independently, but are capable of being restored to this level. The restorative dining program at Whitehall stresses the use of special utensils, modifications of diet, and independent eating training. Whitehall provides hospice services on two levels. The first is Whitehall's in-house social worker who is available to the facility's terminally ill residents on a day-to-day basis. The second consists of Whitehall's association with Hospice by the Sea, a private organization that provides counseling to terminally ill patients. Whitehall arranges with amateur entertainers, school children groups, The Humane Society, the YMCA, and the Girl Scouts to provide its residents with entertainment and linkages to the outside world. Whitehall's architectural design provides extraordinary amenities that improve the residents' quality of life. Whitehall's facility features original artwork and elaborate moldings in the corridors, hallways and patient rooms, making it residential in nature. Whitehall's patient rooms are home-like in design and are all equipped with brand name residential furniture. Each room has a quilted bed spread and a designer headboard. The ceilings in the rooms are nine feet high rather than the standard eight feet required by code. Additionally, each room is centrally heated and cooled and has an individual thermostat and fan speed control. The Whitehall facility features a "market square" which provides an outdoor street setting for a dental office, podiatry office, saloon where beer and wine are served, gift shop and a designated chapel for religious services. Whitehall's dining room is large and elegant. The tables are covered with linens, and fresh flowers are placed on each table. Whitehall has an outdoor patio with an awning to provide shade. Entrance to the patio is facilitated by automatic sliding glass doors which allow residents in wheelchairs to move about conveniently. The corridors in the Whitehall facility are ten feet wide rather than eight feet as required by code. Wall coverings and fixtures are used in the corridors. At Whitehall, breakfast is served by special order at any time during the morning. For lunch, Whitehall serves hot and cold foods, i.e., sliced meats and salads (egg and tuna). For dinner, Whitehall serves a variety of meals which are posted on a daily menu. Whitehall offers an Alzheimer support group for families of Alzheimer patients - these groups are open to residents' families as well as to the public generally. Whitehall coordinates a diabetes support group that meets regularly at the facility. Whitehall also conducts an annual health fair, seminars on a variety of subjects and brings in speakers on health related issues all of which are open to the general public. In terms of geographic accessibility to necessary medical services, Whitehall is strategically located. It is conveniently situated between I-95 and the Florida Turnpike in southern Palm Beach County. It is further west than any of the competing applicants which is the area where the majority of growth in the county is taking place. In terms of offering new techniques and quality of care for patients through relationships with research entities, Whitehall is currently the site of a clinical research project of the F.A.U. School of Nursing into the "life cycle of humans." The purpose of the project is to acquaint nursing students with an understanding of the role of the elderly in American society, to develop in them a more thorough understanding of the many functions of a long-term care facility. The Florida Board of Nursing requires nurses to undergo continuing education and obtain a certain number of continuing education units (CEU) in order to maintain their licensure. The nurse training seminars conducted by Whitehall are recognized by the Board of Nursing for CEU credit. These seminars are also open to the public. The costs and methods of conversion proposed by Whitehall are not in question. The beds Whitehall seeks to convert were originally constructed to nursing home code. As a result, the only modification necessary to implement its conversion is the installation of curtain tracks in rooms being converted from private to semi-private. Whitehall maintains referral agreements and other contacts to link it to the surrounding community. Whitehall maintains links with the following hospitals in the area: Boca Community Hospital; Delray Community Hospital and West Boca Hospital. Whitehall estimates that the total project cost for the 27-bed conversion will be $1,368,188 or $50,674 per bed. Whitehall's estimates include $209,090 for land costs or $7,744 per bed. The original costs for the Whitehall building was over $8,000,000. Financially, the Whitehall operation is a highly-leveraged investment, which results in Whitehall paying a high rate of interest. Interest costs on the Whitehall construction mortgage are approximately $1,100,000 per year. Whitehall has never admitted Medicaid-eligible residents to its facility and does not offer to serve any Medicaid-eligible residents in its proposed 27-bed conversion. Although Whitehall's refusal to accept Medicaid- eligible residents is based upon Whitehall's belief that the level of reimbursement for those patients is insufficient for Whitehall to continue to maintain its existing levels of amenities and service, Whitehall has performed no calculations to determine what its Medicaid reimbursement would be or whether it would have to decrease its level of care or amenities in order to accept Medicaid-eligible residents. Whitehall has accepted a small percentage of Medicare-eligible patients in the past, but Whitehall does not propose to certify any portion of the 27-bed conversion to provide care to Medicare- eligible patients. Whitehall has distributed $909,000 to its partners since Spring, 1988. Whitehall's projection of revenues and expenses after the 27-bed conversion assumes a yearly disbursement to partners of $500,000. Thus, high charges are necessary to cover the substantial mortgage interest and partnership dividends. Whitehall projects patient room charges in 1992 of $181 for a standard private room, $115 for a semi-private room, and $96 for Medicare reimbursement. This room rate applies to both nursing home and ACLF residents at Whitehall. The private pay charges projected by Whitehall are higher than those of any other applicant. Whitehall's semi-private room charge is the highest in Palm Beach County. Whitehall projects that it will have 79 total FTE direct care staff in the combined nursing home/ACLF in the second year of operation after conversion of the 27 beds. However, Whitehall's staffing projections are based upon a patient census of 130, which includes ACLF residents. Upon conversion of the 27 ACLF beds, Whitehall will have only 100 nursing home beds, not 130. Whitehall did not fully describe its staffing per shift. It is not possible to determine how Whitehall's nursing home beds will be staffed. Whitehall does not propose to change its staffing levels as a result of the conversion of 27 ACLF beds to nursing beds. An ACLF resident does not require as high a level of staffing as a nursing home resident. Because 27 ACLF beds are being converted to 27 nursing home beds, Whitehall's level of staffing for nursing home patients will be reduced if Whitehall does not add staff. Approximately 10% of Whitehall's nursing home residents come from outside Florida. Approximately 15% to 20% of Whitehall's nursing home residents come from outside Palm Beach County. Whitehall has been operating 62 ACLF beds rather than its full licensed complement of ACLF beds for approximately six years. Whitehall's 62 ACLF beds are occupied at approximately 80% to 85% occupancy. Most of the beds which Whitehall proposed to convert to nursing home beds are occupied by ACLF residents, who tend to be long-term residents. Whitehall's occupancy projections require its 27 converted beds to be filled to 95% occupancy within the first quarter of their operation. However, Whitehall does not assume that it is going to fill the 27 additional nursing home beds with its ACLF patients (in spite of Whitehall's stated purpose to convert the beds for use by ACLF residents) and Whitehall does not intend to atop admitting ACLF residents to its facility. Whitehall was unable to explain how it could continue to accommodate its ACLF patients while at the same time meeting its nursing home occupancy projections. The financial projections and schedules prepared in support of the Whitehall application are based upon facility-wide revenues and expenses for nursing home and ACLF residents. Whitehall prepared no financial feasibility projections for the 100-bed nursing home which will result from the 27-bed conversion or for the 27-bed conversion. It is not possible to determine from the evidence submitted by Whitehall whether this 27-bed conversion or the resulting 100 nursing home bed operation will be financially feasible in the long term. Boulevard is an existing nursing home located in Boynton Beach in the mid-Palm Beach County area. Boulevard currently operates 110 nursing home beds. Boulevard has a license to operate 44 additional beds acquired from Mason's Nursing Home. Boulevard is constructing a new wing to house the 44 beds. During construction, those 44 beds are inactive. Twenty-five (22.7%) of Boulevard's existing 110 beds are certified for Medicaid and 56 are certified for Medicare. When the 44 additional beds become operational, Boulevard's Medicaid certified beds will increase to 43 (27.9%). Vari-Care, Inc., a Delaware public corporation established in 1968, operates 25 nursing care facilities throughout the country, 20 of which are nursing homes. Since its inception, Vari-Care has operated its nursing facilities consistent with its corporate credo, "health care hospitality," that is, providing a health care environment with many of the hospitality characteristics commonly offered by the hotel and restaurant industries. Vari-Care operates three superior-rated nursing homes in Florida including Boulevard Manor Nursing Center, located on Seacrest Boulevard in Boynton Beach, Palm Beach County, Florida, which it has operated since 1976 and purchased in 1988. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, have received superior ratings since the rating system has been in effect in Florida. Vari-Care's nursing homes outside Florida have always received the highest or next-to-highest rating in states having a nursing home rating system. All nursing homes owned or operated by Vari-Care in Florida, including Boulevard Manor, comply with or exceed staffing ratio requirements established by applicable laws, rules, and regulations. Boulevard Manor is currently medicare certified, does not have any outstanding deficiencies with the Health Care Financing Administration, has satisfied the Health Care Financing Administration's conditions of participation during its past three surveys, and has never been the subject of any certification or licensure revocation proceeding or moratorium. Vari-Care has never owned or operated a nursing home which has had its license revoked, been decertified from Medicare, or had its Medicare participation status revoked. Vari-Care provides managerial, programmatic, and operational resources to nursing homes it owns and operates, including the provision of a full-time Operations Director, who performs an operational review in each facility on a quarterly basis. Vari-Care's quality assurance program at Boulevard Manor incorporates the use of a regional nurse to perform approximately 25 to 30 quality assurance audits in a nursing home for each visit. After conducting the audit, the nurse confers with the nursing home's Director of Nursing and Administrator to review the scoring results and analyze any problems discovered. The Director of Nursing then turns the audits over to an established quality assurance committee within the nursing home to review the audits and determine what corrective actions need to be taken. The quality assurance committee makes recommendations to the Administrator and Director of Nursing, who formulate and institute an action plan. Vari-Care's quality assurance program meets or exceeds legal requirements. Boulevard Manor's utilization review plan evaluates the effectiveness and appropriateness of care rendered to Medicaid and Medicare patients. Reviews are performed by a committee comprised of two physicians having no financial interest in Boulevard Manor, the Administrator, the Director of Nursing, the Assistant Director of Nursing, and other professional personnel. The utilization review committee meets at a minimum on a monthly basis and on an on- call basis if there is a need. Boulevard Manor's activity program offers 4 to 5 activities on a daily basis, including educational programs, entertainment, and religious activities. Residents of Boulevard Manor are apprised of daily activities through rounds made by Boulevard Manor's staff, daily announcements posted on the facility's bulletin board, and a monthly newsletter designed to inform the residents, staff, community, and families of activities and events at the nursing home. Quality of life enhancements available to Boulevard Manor residents include: an ice cream and gift shop; non-institutional, residential-style furniture throughout the facility; a private dining room for residents and their family members; a chapel and library; a special foster grandparents program; color televisions and private baths within each room; an on-site laundry facility; and a barber and beauty shop. Community programs at Boulevard Manor include: participation in a Meals-on-Wheels program in conjunction with a neighboring church; a "speakers bureau" where nursing home residents go out into the community; visits with students from area schools, including Atlantic High School; a volunteer program for community activities; a voter registration program for residents that are not currently registered voters; and a respite care program for residents requiring care for a short period of time to relieve their usual caretaker. Boulevard Manor has extensive links within the community through informal and formal agreements with acute care hospitals, HMOs, physicians, rehabilitation facilities, the area's Veteran's Administration hospital and clinics, mental health and substance abuse programs, other nursing homes, ACLFs, adult day care programs, adult foster homes, hospice and home health agencies, social service agencies, and other related health care and human services programs. Intensive rehabilitative services available to residents at Boulevard Manor include speech, occupational, physical, and musical therapies, extra- nutritional therapy and dietary training, reality therapy for dementia and other patients, chemical therapy for sufferers of terminal illnesses and severe pain, bladder/bowel retraining and managing of incontinence, active and passive range of motion exercises, and ambulation programs to learn or relearn how to use walking aids and prostheses. Boulevard Manor's provisions for treatment of residents with mental health problems include a contract with a local psychiatrist, Dr. Tom O'Leary, a contract with Hospice-by-the-Sea, in-house programs offered by specially trained staff for treatment of Alzheimer's patients, and relationships with other community mental health resources. The majority of Vari-Care's facilities, including Boulevard Manor, are "clustered" in a particular geographic region with at least two other facilities operated by Vari-Care. Economies of scale resulting from this "clustering" concept include the use of one Regional Director and QA Nurse for all facilities in a particular area, and the ability to enter into regional food vendor contracts which contemplate a similar menu at all area facilities for better quality food at significant savings. Boulevard Manor's educational program includes ongoing affiliations with training programs and schools in the immediate area including Palm Beach Junior College, in which professors from the college teach training courses on such subjects as sexuality, motivation, and controlling personal stress. The addition of a subacute care unit would expand the availability of training programs for professional staff. Career advancement opportunities and other incentives and employee benefits such as tuition reimbursement and recruitment bonuses enable Boulevard Manor to recruit and maintain highly qualified staff at all levels. Boulevard Manor is geographically accessible to its community. It is located 1/2 mile east of 1-95, is directly accessible by public transportation, and is adjacent to Bethesda Memorial Hospital. Boulevard Manor makes use of the out-patient services provided at Bethesda Memorial Hospital including patient therapy, chemotherapy, radiation therapy, X-rays, and blood transfusions. Vari-Care integrates its "health care hospitality" philosophy into the design of its proposed bed addition at Boulevard Manor by offering non- institutional, residential-style furniture throughout the facility, corridors that are not straight but are avenues with room offsets, ceilings that are not flat but vary in height, and a mall concept around a courtyard with landscaping. Unique design features at Boulevard Manor include a drive-up entrance with a covered canopy, a large lobby with hotel-like furniture, a reception area, accent lighting, a beauty shop, a chapel and a study off the lobby, an ice cream and gift shop, a private dining room, a staff lounge and dining area, and a child day-care center for staff. Vari-Care's proposed 26 beds will be housed in semi-private accommodations wherein a partition wall enables each resident to have his or her own window, air conditioning unit, television, full bath, "roll-in" shower to accommodate wheelchairs, and walk-in closet. A partition in the room creates, in effect, a private room within a semi-private accommodation. There will be 120 square feet per resident in the semi-private rooms, which exceeds the State of Florida requirement for semi-private space in nursing homes. Vari-Care proposes to add 26 beds to its facility. Ten of the beds will be added by new construction in each wing of the existing 110-bed structure, bringing that structure up to 120 beds with two nurses stations. The remaining 16 beds will be added by converting 16 private rooms in the new 44-bed addition to semi-private rooms. There are no design changes required in the new wing, other than the conversion of 16 private rooms to semi-private rooms. Vari-Care proposes to certify 15 (58%) of the 26 additional beds to serve Medicaid-eligible residents. Vari-Care does not propose to certify any additional Medicare beds. Vari-Care projects a 32% Medicaid payor mix after addition of the 26 beds. This projection is based solely upon Vari-Care's intent to certify 58 (32% of 180) beds for Medicaid. Vari-Care's application describes a "high demand" for Medicaid beds and Vari-Care testified to a need for additional Medicaid beds. Nevertheless, only 25 of Boulevard's existing beds and 58 of Boulevard's proposed 180 beds will be Medicaid certified. Vari- Care's ability to serve Medicaid patients will be limited by the fact that it will certify only a portion of its beds. Vari-Care's projections of a 32% Medicaid payor mix are inconsistent with its historical payor mix of approximately 20%. Vari-Care's testimony that it will achieve 32% Medicaid simple because it will certify 32% of its beds is inconsistent with Vari-Care's testimony that it has never reached its maximum capacity for Medicaid patients in its existing facility. Vari-Care owns two other nursing homes in Palm Beach County, Medicana located in Lake Worth and The Fountains located in Boca Raton. Boulevard provided 18% of its patient days to Medicaid-eligible residents in calendar year 1988, and provided approximately 20% for the year to date at the time of hearing. In 1988, Medicana provided 15.5% of its patient days to Medicaid- eligible residents, and The Fountains provided 19.6%. Vari-Care's total project cost for the 26-bed addition will be $1,095,353 or $42,129 per bed. This cost includes the cost overrun anticipated by Vari-Care in its new wing but not included in the application estimates. The portion of that cost overrun allocable to the 16-bed conversion in the new wing is $106,408, or $6,650 per bed. Vari-Care's project cost estimates include land purchase costs of $107,620, or $4,139 per bed. Vari-Care projects patient charges in 1992 of $117 for a private room, $107 for a semi-private room, $87 as its Medicaid reimbursement, and $161 as its Medicare reimbursement. The long-term financial feasibility of Vari-Care's proposal is demonstrated by a positive net income for the first two years of operation, the ability of Vari-Care to service its debt adequately, its low debt-to-equity ratio, and its strong projected current ratio. Vari-Care testified that it does not intend to provide subacute care in its new 44-bed wing but that it would provide subacute care in the additional 16 beds in that wing. Boulevard's new wing incorporates design elements intended by Vari-Care to facilitate subacute care, such as piped-in oxygen. However, neither the design nor the construction of this new wing are contingent upon the approval of the 16-bed conversion. From a design standpoint, nothing proposed by Vari-Care in its application will enhance Boulevard's ability to provide subacute care. Boulevard's physical plant will be constructed to provide subacute care in the new wing, regardless of whether this application is approved. Vari-Care presented a schematic with its application which designated those private rooms to be converted to semi-private rooms. At final hearing, Vari-Care identified those rooms to be designated as the distinct subacute care unit. However, the rooms which Vari-Care designated for subacute care are not the same rooms to be converted from private to semi-private. Four of the rooms in the subacute care area are already semi-private rooms. Only four of the beds to be converted to semi-private use are located within the designated subacute care area. Therefore, except for four beds, Boulevard's designated subacute care unit will be in place upon completion of the 44-bed addition. Vari-Care described subacute care as care between acute hospital therapy and nursing home therapy or services not normally provided in a nursing home because of expense, specialized equipment and additional staffing that is necessary. Vari-Care cited examples of subacute care which it would provide to be respirator and ventilator care, tracheotomy care, IV services and decubitus care. However, Boulevard already provides subacute care, including tracheotomies, IV therapy, antibiotic therapy, pain management, dehydration and nutritional services, and decubitus care. Currently, subacute care at Boulevard is provided in the dedicated Medicare wing. The only type of subacute care which Boulevard will add is respirator and ventilator care. However, Vari-Care has not attempted to quantify the number of ventilator or respirator patients that it would treat. In any event, a CON is not required to provide ventilator or respirator care. The subacute care patients which Boulevard currently treats in the existing 110 beds are predominantly Medicare patients. Vari-Care expects 50% of the patients in the new 16 subacute beds and 10% of the patients in the 44 new beds to be Medicare patients. However, Boulevard does not propose to certify any additional Medicare beds, and only 1% of its Medicare patients will be treated in the existing 110 beds after construction of the new wing. Although Boulevard mist recently experienced a 14% Medicare utilization, or about 15 Medicare patients, Vari-Care's application assumes a 7.22% Medicare utilization, or about 12 patients (.0722 x 170), after the addition of a subacute care unit. The new subacute care beds will not increase the number of Medicare patients which Boulevard treats. Virtually all of the Medicare patient load which Boulevard now treats in its existing 110 beds will be treated in the new wing, and about half of Boulevard's current Medicare patient load will move to the new 16 subacute care beds. Subacute care requires a much higher level of staffing. The administrator of the Boulevard nursing home testified that the staffing ratios for the new addition, "as one of the conditions of the CON", are "much higher than" the current staffing levels, because of the planned subacute care. The CON condition referred to by the administrator was the condition imposed by HRS in its intent to approve the Vari-Care application. This condition would require a direct care staff to bed ratio (RNs, LPNs, and nurse aides) of .18 for the first shift, .12 for the second shift, and .08 for the third shift. Actually, these staff ratios reflect the current staffing levels at Boulevard's 110-bed facility. The testimony of the Boulevard administrator was contradicted by Vari-Care's Vice President of Operations, who testified that Boulevard's current staffing ratios will be maintained by Boulevard in the 26 new beds. There is no evidence that Boulevard will provide a much higher level of staffing in the addition. Boulevard's staffing is lower than that of any other applicant. Boulevard's proposed total nurse staffing for the second year of operation of the 180-bed nursing home is 73.5 total FTE, which is equivalent to a staff per resident ratio of .432. The shift staffing proposed by Boulevard is 33 FTE for the first shift, 24 FTE for the second, and 17 FTE for the third, which is equivalent to a shift staff per bed ratio of .18, .13, and .09 respectively. These staff ratios are roughly equivalent to those required by HRS in its condition for the 26-bed addition. Boulevard's proposed 16-bed subacute unit is closely related to its new 44-bed wing. However, the staffing proposed by Vari-Care for the new 44-bed wing is inconsistent with the staffing proposed by Vari-Care for the 16-bed subacute unit. When Vari-Care submitted its CON application for the new 44-bed wing, it proposed a direct care nursing staff of 88.02 total FTE for the resulting 154-bed facility. The staffing described by Vari-Care for the 154-bed facility is higher than the staffing which Vari-Care now proposes for the 180- bed facility. The staffing proposed by Vari-Care is inconsistent with its testimony that it did not intend to provide subacute care in the 44-bed addition and that higher staffing is required to provide subacute care. Vari-Care has not submitted an application consistent with its proposal for subacute care. Vari-Care has not quantified any need for the only two forms of subacute care, ventilator care and respirator care, which it does not currently provide. Although subacute care is acknowledged to require a higher level of staffing, the level of staffing proposed by Vari-Care is essentially the same as that in its existing 110-bed facility and is lower than that proposed for its 154-bed home. Boulevard's facility design is not dependent upon its proposal to provide subacute care. The rooms designated for subacute care are not the same as the rooms containing the beds to be converted from private to semi-private beds. The level of staffing proposed by Vari-Care is actually lower than that proposed by any other applicant, none of whom proposes to add subacute care through these pending applications. Manor Care is a 120-bed skilled nursing home facility in Boca Raton, south Palm Beach County. It holds final CON approval for a 30-bed dedicated Alzheimer unit. The Alzheimer unit will open in June, 1990. Manor Care currently holds a superior license and has held a superior license for as long as the facility has been eligible for one. Currently, 30% of its total patient days are for Medicaid residents. Of Manor Care's existing 120 beds, 36 beds (30%) are licensed for Medicaid. That is consistent with the CON condition on the original facility that 30% of the beds be licensed for Medicaid. Manor Care offers full physical therapy, occupational therapy, and speech therapy services. Manor Care offers a full complement of skilled nursing care, including tracheotomy, IV therapy and decubitus care. Manor Care classifies these specific services as skilled nursing care," not "subacute care." Manor Care characterizes "subacute care" as those services which would normally be delivered in a rehabilitation hospital. Subacute care requires 3 times the staffing normally provided in a nursing home. Manor Care believes that examples of subacute care are spinal cord injury and head trauma. On the other hand, Vari-Care chooses to characterize the services of tracheotomy, IV therapy and decubitus care as "subacute" care, and that is what it proposed to provide in its dedicated subacute unit. Manor Care offers these skilled services throughout its facility; it does not utilize a dedicated unit to provide them. Medicare patients in nursing homes normally require skilled nursing care. In this regard, 11.6% of total patient days at Manor Care in 1988 were for Medicare residents. That represents the highest Medicare percentage in Palm Beach County. Manor Care employs the state-of-the-cart approach for providing nursing home services. For example, Manor Care holds CON-approval to establish a 30-bed dedicated Alzheimer unit with specialized staff and programming. Manor Care is the only existing provider in this proceeding which treats Alzheimer disease in a segregated modality. (HCR's approved facility will also house a dedicated Alzheimer unit.) Manor Care has neither transferred nor voided any CON. Manor Care has had no Medicare conditions of non-compliance. Its license has never been revoked, suspended or denied. Manor Care has had no beds decertified by Medicare or Medicaid. Manor Care has no intention of selling its facility. Manor Care of Boca Raton, Inc. d/b/a Manor Care of Boca Raton is a wholly-owned subsidiary of Manor Healthcare Corp. Manor Healthcare Corp. owns 155 nursing homed in 28 states. It has 9 nursing homes and 3 ACLFs in the State of Florida. Manor Healthcare has established six regional-based offices with a full complement of staff to assist its individual nursing homes in all areas of operations. It has a regional office in Orlando to service Florida. Through its corporate and regional offices, Manor Healthcare employs a team of professionals who are responsible for providing support functions to the nursing centers, such as: quality assurance, nursing training, administration, purchasing, facility planning, assisted living, Alzheimer care, managed care, accounting, dietary, marketing, staff recruitment, and chaplaincy. This centralized support system enhances operational capabilities and efficiencies. Manor Healthcare's primary goals are quality assurance and quality of care. It seeks to return nursing home residents to the community as soon as possible. In this regard, Manor Healthcare, on the average, returns 45% of its residents to the community. Manor Care proposes to add 30 skilled beds to its facility by locating them on the 2nd Floor above the 30-bed Alzheimer unit. This addition will include 15 semi-private rooms, lounge space, office space, conference space, an elevator, and a nursing station. Manor Care will offer the same quality, level and scope of skilled nursing services in the 30-bed addition as currently offered at its facility. The proposed addition will be integrated into the existing facility. The addition will be adjacent to existing therapy areas and near several dining room and lounge areas. Due to substantial existing ancillary areas, these 30 beds can be added without adding much ancillary spaces. Manor Care expressly agrees to the following CON conditions: 30 skilled nursing beds; 2.8 nursing hours per patient day; 37% Medicaid patient days in the addition; and 9400 square feet on the 2nd Floor. The total project cost (before CON application fee) for the 30-bed addition is $1,270,700. Manor Care projects that the 30-bed addition will be in use by June 1, 1991. The project cost will be 51% debt-financed; the rest will be financed with equity funds. The nursing and other staff at Manor Care are well qualified; its staffing ratios exceed licensure requirements by at least 25%. The proposed staffing levels, including the 30-bed addition, also exceed licensure requirements by at least 25%. Manor Care maintains an educational program plan to improve the ability of staff to meet the demands of its nursing home residents. These programs will continue to be employed at the Manor Care facility. All employees are required to attend educational programs pertinent to the improvement of skills within their respective disciplines. All employees are required to attend annual programs on fire prevention, accident prevention, infection control, effective communication, and the psychosocial/psychophysical aspects of aging. Health care seminars are sponsored by Manor Care on a quarterly basis. Topics cover a wide range of subjects related to enhancing quality of care in nursing homes. These seminars are available to facility staff and community health care professionals. Manor Care maintains a restorative program intended to enable each resident to achieve maximum function with the ultimate goal of returning patients back to the community whenever possible. For those unable to return home, the program seeks to ensure that all residents continue to function at their maximum potential. Examples of specific restorative programs include: progressive ambulation; bowel management; bladder management; self-feeding training; activities of daily living training; pain management for chronic and post operative pain; muscle control training and others. In this regard, Manor Care utilizes its "Excel Care" computerized system intended to document and evaluate the success of its restorative and rehabilitative programs. This program allows for the efficient monitoring of residents' responses to therapy and nursing care. Per this system, every unit of care is measured by outcome standards. The outcome standards describe the expected results in the patient's condition if treatment and therapy is successfully carried out. Manor Care maintains a utilization review committee comprised of three physicians, the administrator, the social services director, and the Director of Nursing. Its purpose is to meet every 30 days to assess patients and to ensure that appropriate and effective utilization of services is being provided. The purpose of Manor Care's QA program is to promote and support optimum quality standards in all disciplines. This objective is accomplished through: continuing in-service education programs; on-going consultation among corporate quality standards staff and QA regional specialists; unannounced annual surveys conducted by a Manor Healthcare QA team of health care professionals; and on-going surveying of guarantor/resident satisfaction with nursing home services. The Manor Care nursing home is reviewed annually on an unannounced basis by the QA interdisciplinary team of Manor Healthcare Corp. specialists. The QA review criteria meet all the minimum standards set by Medicare and exceed the most stringent state regulations throughout the country, including Florida. The unannounced annual review covers the following areas: resident care, dietary, activities, housekeeping, laundry, physician services, maintenance, medical records, pharmacy services, social services, administrative records and safety. Manor Care of Boca Raton was internally surveyed in January, 1989. It rated within the top 10% of all 150 Manor Healthcare facilities in the country. Within 30 days of an admission, the patient's guarantor is mailed a "satisfaction survey" form. The guarantor is asked to evaluate Manor Care's performance as to nursing, dietary, activities, therapies, etc. The form is self-addressed and is to be mailed to the Manor Healthcare corporate offices. Manor Care maintains an 800 toll-free health care hotline that is a direct line to the QA department of Manor Healthcare. This is available to all persons who want to ask questions, obtain information, make suggestions, or who require follow-up on unresolved concerns at the individual nursing home level. In effect, this serves as a consumer hotline. Manor Care designs and maintains activity programs that are responsive and appropriate to meet the physical, mental, and social needs of its residents. They include at least the following: various therapy activities; large group activities weekly; at least two religious activities per week; facility-wide general visits from the public; special events; birthday parties; activities after the evening meal; therapeutic programs for residents with special needs (such as stroke victims or blind persons); outings away from the nursing home; music activities; and special holiday events. Manor Care maintains a formalized program for involving families and community volunteers to promote the quality of life for its residents. Community volunteers participate on a routine basis in providing services to the residents, such as: reading to residents, distributing newspapers and magazines, assisting on community outings, and assisting with correspondence. These services bring the community closer to the nursing home residents. Manor Care establishes and maintains linkages with state and local health care providers to ensure that a continuum of care is available to residents and to facilitate community involvement by the nursing center. These community linkages and referral agreements include: local hospitals, physician specialists, therapists, home health agencies, adult day-care centers, area agencies on aging, homemaker services, private insurance companies, ACLFs, and other community agencies. Manor Care currently holds transfer agreements with four local hospitals. Manor Care works very closely with local agencies to ensure that residents are located in the most appropriate setting for their needs. Manor Care maintains linkages and agreements with less intensive institutions to meet the needs of those persons or residents who do not require or no longer require nursing home care, such as: adult day-care, meals-on-wheels, and senior centers. Due to existing ancillary space, Manor Care can add its proposed 30- bed unit at a relatively small cost. Manor Care already has ample dining room space, activity areas, therapy areas, and social areas which can accommodate an additional 30 beds without difficulty. In addition, Manor Care already retains the core nursing, administrative, therapy, and other staff required to operate a nursing home. As such, additional staff for the 30-bed addition is not substantial. The Manor Care application therefore provides a cost-effective approach to add nursing home beds to the community. Manor Care currently offers and will continue to offer clinical and training opportunities to students currently enrolled in nursing educational programs at local technical schools and universities. Manor Care also provides services to persons seeking to become certified nursing assistants. Manor Care serves as a clinical site for gerontological rotations for nursing students at Palm Beach Community College. Manor Care is developing a similar internship program with Atlantic Vocational Technical School and seeks to develop clinical affiliations with South Technical Vocational School and Florida Atlantic University. This working relationship not only trains students and health care professionals, but also provides Manor Care valuable resources in staff recruitment and development. Manor Care sponsors and will continue to sponsor nurse "refresher" courses which are taught by local area nursing school instructors. Persons wishing to renew their nursing licenses and certification can do so through this course work. Manor Care finances these nurse refresher programs. Manor Care sponsors and finances various health care seminars on a quarterly basis. These seminars are advertised in local hospitals, adult day- care centers, and other agencies. These seminars are available to both Manor Care staff and community health care professionals. Manor Care maintains a "career ladder" program which enables Manor Care employees (both at the facility and within the Manor Healthcare Corp. system) to reach their career goals through promotion, career advancement programs, and tuition support for additional schooling. Both the financial statements of Manor Care of Boca Raton and Manor Healthcare Corp. (which will provide the debt financing) demonstrate the financial strength and financial resource availability to accomplish and operate the proposed 30-bed addition. Manor Care has historically been very accessible to Medicare and Medicaid residents. In 1988, 11.9% total patient days were for Medicare patients. This represented the highest percentage in Palm Beach County. In calendar year 1989 to date, Manor Care has provided 30% of total patient days to Medicaid patients. For its proposed 30-bed addition, Manor Care commits to a minimum of 37% Medicaid If the 30 beds are approved, Manor Care's total facility after one year of operation would provide 34% Medicaid. Manor Care's historical and projected Medicare/Medicaid commitment is substantial, particularly when considered with the other existing providers/applicants in this case: Actual Actual Projected 1988 Medicare 1988 Medicaid Total Facility Medicaid After First Year of Operation Whitehall 1.3% 0 0 Vari-Care 5% 18.0% 26.65% Manor Care 11.9% 26.8% 34% The pro formas in the Manor Care application are reasonable. These pro formas demonstrate that the Manor Care proposal is financially feasible in the long-term. The pro formas are based on reasonable assumptions. The projected utilization underlying the pro formas is reasonable. The projected charges are reasonable. The projected staffing levels, staff salaries, and the other expenses were based on existing data and expense levels, and then reasonably inflated forward. Manor Care's proposed 30-bed addition will be integrated into the existing facility. The addition will benefit from existing, innovative quality of life features designed to enhance privacy and personal choice options for residents and family members. These features include: beauty/barber shop, formal private dining room, lobby areas, therapy areas, activity/recreational areas, specially-equipped rehabilitation dining room, distinct lounge area for families, self-contained Alzheimer's unit, carpeted conference room, several private room accommodations, outdoor patio areas, each patient room with its own bathroom, and reading rooms. In addition, the patient rooms are larger than the state requires and are very proximate to the nursing stations. The Manor Care facility incorporates many residential design and home-like features. Color schemes are emphasized for a home-like atmosphere, such as: muted vinyl wall covering; color-coordinated draperies, bedspreads and curtains (residents can choose their color scheme at admission); and lounges which are theme-decorated around particular purposes, such as a game room. Patients are permitted to exercise choice in furnishings and decorations. Patient room size is a major factor in controlling construction costs. At Manor Care, the rooms are rectangular with the shorter walls on the outside. This design minimizes exterior wall space, which is more expensive to construct than interior wall space. Minimized exterior walls also improve energy efficiency. The proximity of nursing stations to the patient rooms at Manor Care is cost-effective. The rectangular room shape reduces the cost of construction by reducing corridor length and square footage. Shorter corridors are less costly and also are more operationally efficient. The central core area at the facility concentrates the ancillary and support areas. Administrative areas are centrally located for easy access by residents and families. Resident lounges are located near the nursing station, thereby facilitating supervision by nursing staff. The State Health Plan consists of three broadly-stated goals. Goal 1 is to develop an adequate supply of long-term care services throughout Florida. Each of the four proposals for additional beds is consistent with this goal in that each proposal contributes to the supply of beds determined to be needed in Palm Beach County. Goal 2 of the State Health Plan is to develop a supply of appropriate long-term care services that are accessible to all residents. The HCR, Manor Care, and Vari-Care proposals are consistent with this goal in that each would supply nursing home services to those in need of such services, and their nursing homes will be accessible to all residents of the planning district, including Medicaid patients. Further, HCR will be the only new facility in northern Palm Beach County, and Manor Care is located in southern Palm Beach County, which experiences the highest demand for nursing home beds in Palm Beach County. Lastly, all three of those applicants will accept a significant number of Medicaid and Medicare patients. On the other hand, the Whitehall application is not consistent with this goal. First, Whitehall has never served Medicaid residents and does not propose to do so. Second, Whitehall does not provide substantial Medicare: .7% in 1987, and 1.3% in 1988. Third, Whitehall may not be affordable for many Palm Beach County residents. Its charges are the highest in Palm Beach County. Fourth, Whitehall markets itself to non-Florida residents. About 20% of its nursing home and ACLF patients reside outside Florida. Hence, approval of Whitehall's 27-beds does not promote access for Palm Beach County or Florida residents. Goal 3 is to insure that long-term care services are appropriately utilized throughout Florida. All four applicants have in place utilization and pre-admission screening programs for appropriate utilization of nursing home services. Accordingly, the proposals of HCR, Vari-Care, and Manor Care are consistent with the State Health Plan; however, the proposal of Whitehall is not. The District IX Local Health Council has adopted five long-term care CON allocation factors which are applicable to proposals for additional nursing home beds in Palm Beach County. The first factor is that freestanding nursing homes should have a minimum of 120 beds in urban subdistricts. Palm Beach County is an urban subdistrict in District IX. HCR's proposal is consistent with this recommendation in that the HCR proposal will bring HCR's nursing home up to the minimum 120-bed size unit. Manor Care is consistent with this recommendation in that it is an existing 120-bed facility with a 30-bed Alzheimer unit approval. Likewise, Vari-Care meets this recommendation since it is a 154-bed facility. Whitehall, however, fails to meet this recommendation since it only has 73 nursing home beds and only seeks approval for 27 more, for a total of 100 beds. Within this first recommendation is a recommendation that priority be given to additions to nursing homes so that the total capacity would reach, but not be greater than, 120 beds. The HCR proposal is consistent with this recommendation in that its proposal, if granted, would increase the number of beds in that facility to only 120. Accordingly, HCR should be given priority in this proceeding in order to meet the first recommendation in the Local Health Council. To the contrary, Whitehall should be given no priority since it does not propose to meet the first recommendation of the Local Health Council. The second recommendation of the Local Health Council is that all new nursing homes and expansions should agree that a minimum of 30% of its patient days will be provided to Medicaid-eligible patients, if such patients are available within the subdistrict. Medicaid-eligible are available within the subdistrict and accounted for more than 700,060 patient days in Palm Beach County in calendar year 1988. HCR's proposal for 42% of its additional patient days to be devoted to Medicaid-eligible patients exceeds the recommendation of the Local Health Council, and the facility-wide commitment to 35% of its patient days to Medicaid-eligible patients likewise exceeds the recommendation. Similarly, Manor Care agrees to a 37% Medicaid condition to its CON approval and, therefore, this factor is satisfied. Likewise, Vari-Care projects a 32% Medicaid payor mix. Whitehall will serve no Medicaid patients, and, accordingly, fails to comply with this recommendation of the Local Health Council. The third recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a range of long-term care services. HCR's 120-bed facility would offer a range of services to all of its patients including those in the proposed addition. Similarly, Manor Care Vari- Care, and Whitehall propose and provide a range of services to their patients and will do so in their proposed additions. The fourth recommendation of the Local Health Council is that priority should be given to applicants who demonstrate a documented history of providing good residential care, staff ratios that exceed minimum requirement, provisions for the treatment of residents with mental health problems, and the inclusion of intensive rehabilitation services The HCR, Manor Care and Vari-Care proposals are consistent with this recommendation in that their staffing ratios exceed minimum requirements, they provide treatment for residents -with mental health problems, they have documented their ability to provide good quality care by operating facilities with superior licenses, and intensive rehabilitation services will be available to their residents. Medicare participation often indicates the level of intensity of skilled services offered at a facility. In this regard, Whitehall's Medicare participation of .7% in 1987 and 1.3% in 1988 does not demonstrate a substantial commitment to intensive skilled or rehabilitation services. The fifth recommendation of the Local Health Council is that priority should be given to applicants who propose service to a distinct patient population that currently is not being served within the Subdistrict. No applicant identified a distinct patient population that is not currently being served within the Subdistrict. Whitehall suggests that its application promotes this factor since it has Jewish patients. It does not suggest that the other applicants do not have Jewish patients. However, there are already three dedicated Jewish nursing homes in Palm Beach County. The presence of three dedicated Jewish nursing homes clearly indicates that the Jewish population is currently being served within the Subdistrict. Whitehall further concedes that its services (frozen Kosher dinners) is not the equivalent of those services of offered at a dedicated Jewish nursing home. Accordingly, no applicant should receive priority pursuant to this final recommendation of the Local Health Council since no applicant has identified a distinct population not currently being served, and no applicant has proposed to serve such a population. Accordingly, the HCR, Vari-Care, and Manor Care proposals comply with the District IX Local Health Council plan, but the Whitehall application does not. HCR's proposed facility will be located in northern Palm Beach County, Vari-Care's facility is located in central Palm Beach County, and Manor Care and Whitehall are located in very close proximity to each other in southern Palm Beach County. The two facilities in southern Palm Beach County both have licensure ratings of superior. It is clear that Whitehall's facility is more luxurious than that of Manor Care (and the other applicants for that matter), and its patient charges are high enough to offer many quality of life enhancements which other facilities are unable to offer. For example, Whitehall offers its patients room service, complimentary beer and wine, and a chauffeur- driven Cadillac for excursions outside the nursing home. However, Manor Care offers services more indicative of a high quality of care than Whitehall. Per its application, Whitehall will not staff its 3-11 or its 11-7 shift with nursing administrators, therapists, nurse-aides, activity directors, or social services. In comparison, Manor Care will provide such staff in its 3- 11 shift, and nurse-aides in the 11-7 shift. Whitehall does not provide in- house physical therapists. Manor Care employs physical therapists. Whitehall provides minimal skilled nursing services based on its small levels of Medicare participation. Whitehall proposes no additional Medicare-certified beds. Manor Care maintained the highest level of Medicare participation in Palm Beach County in 1988. At Whitehall, Alzheimer's patients are mingled in with other nursing home patients. Manor Care has final CON approval to establish a 30-bed dedicated Alzheimer unit so as to treat Alzheimer disease in the most appropriate modality. Whitehall mixes its ACLF and nursing home residents. They share dining rooms, activities, staff, and occupy the same floor. That is very uncommon. Regents Park of Boca Raton (hereinafter "Regents Park"), operated by Petitioner Health Quest Management Corporation III, is a 120-bed nursing center located in Boca Raton. Whitehall is located only about one mile from Regents Park, and Manor Care is located three to five miles from Regents Park. Approximately 90% of Regents Park's patients come from the Boca Raton area. Most are referred to the facility by Boca Hospital and West Boca Hospital. Like Regents Park, Manor Care and Whitehall also receive referrals from Boca Hospital and West Boca Hospital. Regents Park's general nursing program is the bedrock of the facility's service program. Additionally, Regents Park offers an established rehabilitation program. The facility maintains a fully equipped rehabilitation department housed in a specialized module that was built onto the facility some years ago. All of Regents Park's Medicare patients, as well as a substantial proportion of its skilled care patients, participate in the rehabilitation program. Boca Raton's local hospitals refer patients to Regents Park for rehabilitation. Most nursing homes experience less than half the Medicare utilization of Regents Park and Manor Care. These two facilities have historically ranked among the largest providers of Medicare services in Palm Beach County, despite their close proximity. Regents Park also offers an established program for low-functioning patients, which includes Alzheimer's patients and patients suffering from other dementias. Approximately thirty residents participate in the low-functioning program, and the program has four specialized staff. Health Quest claims that it would lose staff and patient days if Whitehall or Manor Care were approved. At the same time, Health Quest admits: it would not release staff; it would not limit current services; Health Quest is an excellent provider and can compete in the future for new residents; and Health Quest staffs well above minimum licensure requirements. Hence, by its own admission, Health Quest failed to show any credible or meaningful adverse impact if Manor Care or Whitehall were approved. Health Quest estimates it might suffer only a $12,000 or a $26,000 net loss if either application were approved. That amount does not constitute substantial, adverse impact.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that HRS enter a Final Order Approving the application of HCR for a CON for 30 additional nursing home beds; Approving the application of Manor Care for a CON for 30 additional nursing home beds; Denying the application of Vari-Care for a CON for 26 additional nursing home beds; and Denying the application of Whitehall for a CON for 27 additional nursing home beds. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd of January, 1990. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1990. APPENDIX TO RECOMMENDED ORDER DOAH CASE NUMBERS 89-2502, 89-2504, 89-2505, 89-2506, and 89-2507 Health Quest's proposed findings of fact numbered 1, 2, 5, 6, 8, 10, 26, 28, and 31 have been adopted either verbatim or in substance in this Recommended Order. Health Quest's proposed findings of fact numbered 3, 7, 27, and 32 have been rejected as unnecessary for determination of the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 4, 11-15, 21, 23-25, 29, 30, and 33-35 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Health Quest's proposed findings of fact numbered 9, 16-20, 22, and 36 have been rejected as being subordinate to the issues involved in this proceeding. Health Quest's proposed findings of fact numbered 37 and 38 have been rejected as being immaterial to the issues involved herein. Health Quest's proposed findings of fact numbered 39-48 have been rejected as not constituting' findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Health Quest's proposed findings of fact numbered 49-79 have been rejected as being irrelevant to the issues involved in this proceeding. HRS' proposed findings of fact numbered 1, 4, and 5 have been adopted either verbatim or in substance in this Recommended Order. HRS' proposed findings of fact numbered 2 and 6 have been rejected as being unnecessary for determination of the issues involved in this proceeding. HRS' proposed findings of fact numbered 3 and 7 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. HRS' proposed finding of fact numbered 8 has been rejected as being subordinate to the issues involved in this proceeding. HRS' proposed finding of fact numbered 9 has been rejected as not being supported by the weight of the credible evidence in this proceeding. HRS" proposed finding of fact numbered 10 has been rejected as being contrary to the weight of the credible evidence in this proceeding. HCR's proposed findings of fact numbered 1-29 and 31-54 have been adopted either verbatim or in substance in this Recommended Order. HCR's proposed finding of fact numbered 30 has been rejected as being irrelevant to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 1-3, 5-8, 13, 15, 18- 23, 31, 33, 34, 37, 38, 41 42, 48, 50-54, 58, 61, 64, 70, 75, 76, 78, 79, and 82 have been adopted either verbatim or in substance in this Recommended Order. Vari-Care's proposed findings of fact numbered 4, 12, 24-27, 66, 69, 74, and 91 have been rejected as not being supported by the weight of the credible evidence in his proceeding. Vari-Care's proposed findings of fact numbered 9-11, 28, 30, 40, 43, 44, 63, 77, 80, 84, 85, and 90 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Vari-Care's proposed findings of fact numbered 14, 16, 32, 35, 36, 39, 45-47, 49, 59, and 73 have been rejected as being subordinate to the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 17, 29, 55, 65, 67, 68, and 72 have rejected as being unnecessary for determination of the issues involved in this proceeding. Vari-Care's proposed findings of fact numbered 56 and 81 have been rejected as being immaterial to the issues involved herein. Vari-Care's proposed findings of fact numbered 57, 60, 62, 71, 83, and 86-89 have been rejected as being irrelevant to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 39, 47, 75-77, 82, 84, 85, 93, 118, 119, 146, and 151 have been rejected as being immaterial to the issues involved herein. Whitehall's proposed findings of fact numbered 1, 6, 11, 16, 21, 30, 34, 41, 48, 51, 54-56, 58, 59, 61, 65, 66, 74, 78, 88-90, 92, 96, 97, 99, 106, 121, 124, 126, 137, 139, 141, 142, 147, 148, and 150 have been adopted either verbatim or in substance in this Recommended Order. Whitehall's proposed findings of fact numbered 2, 7-9, 12, 13, 17-19, 29, 31, 40, 43-46, 63, 64, 83, 86, 91, 107, 128, 131, 136, 140, and 152 have been rejected as not being supported by the weight of the credible evidence in this proceeding. Whitehall's proposed findings of fact numbered 3, 50, 101, 111-117, 125, 129, 155, and 156 have been rejected as being irrelevant to the issues involved in this proceeding Whitehall's proposed findings of fact numbered 20, 23-25, 27, 38, 42, 49, 52, 57, 60, 67, 69, 70, 72, 73, 79-81, 87, 94, 95, 98, 100, 102-105, 108- 110, 120, 122, 123, 127, 130, 134, 135, 143-145, and 149 have been rejected as being subordinate to the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 4 and 5 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Whitehall's proposed findings of fact numbered 10, 22, 26, 28, 36, 37, 53, 62, 68, 71, 132, 133, 138, 153, and 154 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Whitehall's proposed findings of fact numbered 14, 15, 32, 33, and 35 have been rejected as being contrary to the weight of the credible evidence in this proceeding. Manor Care's proposed findings of fact numbered 1, 2, 4, 5, 7-9, 11, 13-24, 27-37, 39, 40, 42, 43, 45, 47, 48, 50, 51, 53, 54, 57, 58, 60, 63, 64, 66, 69, 71-73, 75-78, 80, 81, 83, 89, 93-99, 102, 103, 107, 108, 110-113, 121, 130-141, 143-145, 147, and 149 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 3, 101, 104, 106, 117, and 148 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, recitation of the testimony, or conclusions of law. Manor Care's proposed findings of fact numbered 6, 12, 38, 49, 55, 56, 59, 65, 67, 68, 74, 82, 90, 92, 100, 114, 116, and 118-120 have been rejected as being unnecessary for determination of the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 10, 26, 41, 44, 46, 52, 61, 62, 70, 79, 86-8, 105, 109, 115, 122, 142, 146, 150, and 151 have been rejected as being subordinate to the issues involved in this proceeding. Manor Care's proposed findings of fact numbered 25, 84, 91, and 123- 129 have been rejected as being irrelevant to the issues involved in this proceeding. Manor Care's proposed finding of fact numbered 85 has been rejected as being immaterial to the issues involved herein. COPIES FURNISHED: Samuel J. Dubbin, Esquire Gerald M.Cohen, Esquire STEEL HECTOR & DAVIS 4000 Southeast Financial Center Miami, Florida 33131-2398 Steven W. Huss, Esquire 1017 Thomasville Road Suite C Tallahassee, Florida 32303 Charles M. Loeser, Esquire 315 West Jefferson Boulevard South Bend, Indiana 46601 Byron B. Mathews, Jr., Esquire 700 Brickell Avenue Miami, Florida 33131 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 James C. Hauser, Esquire Messer, Vickers, Caparello, French & Madsen, P.A. Post Office Box 1876 Tallahassee, Florida 32302 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
The Issue Whether a certificate of need for an additional 60 nursing home beds to be located in Sarasota County, Florida, in July, 1990, should be granted to any of the four competing certificate of need applicants in these proceedings?
Findings Of Fact Procedural. Arbor, Health Quest, HCR, Trecor and fourteen other applicants filed certificate of need applications with the Department in the October, 1987, nursing home bed certificate of need review cycle of the Department for Sarasota County. Each of the applicants involved in these cases filed a letter of intent with the Department within the time required for the filing of letters of intent for the October, 1987, nursing home bed certificate of need review cycle. Each of the applicants involved in these cases filed their certificate of need application within the time required for the filing of certificate of need applications for the October, 1987, nursing home bed certificate of need review cycle. The applications were deemed complete by the Department. The Department completed its State Agency Action Report for the October, 1987, nursing home bed review cycle on February 19, 1988. The State Agency Action Report relevant to these cases was published by the Department in the Florida Administrative Weekly on March 4, 1988. The Department proposed to approve the certificate of need application filed by Trecor and to deny all other applications. Eleven of the applicants whose certificate of need applications were denied by the Department filed Petitions pursuant to Section 120.57(1), Florida Statutes, challenging the Department's proposed action. All of the Petitioner's except the three Petitioners in these cases withdrew their Petitions. The Parties. The Department. The Department is the agency responsible for reviewing certificate of need applications for or nursing home beds to be located in Sarasota County, Florida. Arbor. Arbor is a nursing home company that designs, develops, constructs and operates nursing homes. Arbor's corporate headquarters are located in Lima, Ohio. Arbor owns and operates eighteen nursing home and adult congregate living facilities comprising approximately 2,218 beds. In Florida, Arbor owns Lake Highlands Nursing and Retirement Center in Clermont, The Village at Brandon, and The Village at Countryside. In Florida, Arbor is currently developing certificate of need approved facilities in Clay, Orange, Polk, Pinellas and Sarasota Counties. Arbor formed Sarasota Health Center, Inc., to hold the certificate of need it is seeking in this proceeding. Although this corporation is in form the applicant, Arbor is in substance the applicant in these proceedings. Health Quest. Health Quest is an Indiana corporation which has been in the business of constructing and operating nursing homes and retirement housing facilities for approximately twenty years. Health Quest currently operates eleven nursing centers and three retirement housing developments. In Florida, Health Quest operates three nursing centers and two retirement housing developments. The nursing centers are located in Sarasota, Jacksonville and Boca Raton, Florida. The Jacksonville center is located adjacent to, and is operated in conjunction with, a retirement facility. The facility located in Sarasota is Regents Park of Sarasota (hereinafter referred to as "Regents Park"), a 53-bed sheltered nursing center. Regents Park is located at Lake Pointe Woods, a Health Quest retirement community, which includes 212 independent living apartments and 110 assisted living apartments. The assisted living apartments qualify as an adult congregate living facility. The 53 sheltered nursing home beds are authorized as part of a living care complex pursuant to Chapter 651, Florida Statutes. Health Quest has received approval from the Department to locate 60 nursing home beds, which Health Quest has received as part of a certificate of need for 180 nursing home beds, at Regents Park. The other 120 approved nursing home beds will be located at another facility to be constructed in Sarasota County by Health Quest. Health Quest also has two other projects under construction in Florida: a new facility in Winter Park, Florida, and a new facility in Sunrise, Florida. HCR. HCR is a corporation engaging in the business of designing, developing, constructing and operating nursing homes and related facilities. HCR is a wholly-owned subsidiary of Owens Illinois Corporation. HCR operates approximately 125 facilities with approximately 16,000 beds. HCR has designed and built over 200 nursing homes and related health care facilities. 24 HCR owns and operates ten nursing homes in Florida, including Kensington Manor, a 147-bed nursing center located in Sarasota County, Florida. HCR also has ten other projects being developed in Florida. Trecor. Trecor is a Florida corporation formed to engage in the business of developing and operating facilities within the full spectrum of the health care industry. Trecor was founded in 1985 when it acquired Burzenski Nursing Home (hereinafter referred to as "Burzenski"). Trecor does not own or operate any other health care facility. Burzenski is an existing nursing home with 60 dually certified beds located in the City of Sarasota. The facility was built in 1955 as a private residence. An addition to the facility was constructed in 1962. The Proposals. Arbor's Proposal. Pursuant to a stipulation with the Department dated September 9, 1987, Arbor received certificate of need 4182. Certificate of need 4182 authorizes Arbor to construct a 60-bed nursing home in Sarasota County. 20. Arbor's approved 60-bed nursing home facility will consist of 18,000 gross square feet. Costs of $2,200,000.00 have been approved by the Department in the certificate of need issued for the facility. Arbor intends to develop certificate of need 4182 by building a facility large enough for 120 beds. This facility will house the approved 60 nursing home beds and, if Arbor's application in this case is not approved, an additional 60 beds, licensed as adult congregate living facility beds. In this proceeding Arbor is requesting approval of a proposed conversion of the 60 adult congregate living facility beds to 60 nursing home beds. Arbor has proposed the construction of an additional 18,000 gross square feet to house the additional 60 nursing home beds sought in this proceeding. The proposed cost of the proposal is $2,380,000.00. The total cost of 120 bed facility will be $4,580,000.00. Health Quest's Proposal. Health Quest is seeking approval to convert its 53 sheltered nursing center beds at Regents Park to nursing home beds and to add 7 nursing home beds. The 60 nursing home beds are to be housed in the new community nursing home facility at Regents Park. The beds will be housed in 30,945 square foot of the Regents Park facility. Health Quest also intends to add 60 nursing home beds, which have already been approved by the Department, to Regents Park. The certificate of need application filed by Health Quest indicates that its proposal involves no capital costs. This is incorrect. There will be minimal costs associated with the addition of the 7 additional nursing home beds being sought by Health Quest which it has failed to include in its proposal. Health Quest did not present evidence concerning the total cost of the facility it plans to use to house the proposed 60 beds or the cost of the 60 beds already approved by the Department which it plans to add to Regents Park. HCR's Proposal. HCR is seeking approval to construct a new, freestanding 60-bed nursing home in Sarasota County. HCR's proposal also includes a 31-bed adult congregate living facility. The nursing home component will consist of 25,600 gross square feet (including 2,300 square feet to be used for adult day care). The total facility will consist of 43,000 gross square feet. Total capital cost for the nursing home component is estimated to be $2,519,000.00. The total cost, including the costs attributable to proposed adult day care services, is $2,657,000.00. The cost of the 31-bed adult congregate living portion of the project will be $1,800,000.00. The total cost of HCR's planned facility is $4,457,000.00. Trecor's Proposal. Trecor is seeking approval to construct a 60-bed addition to the Burzenski 60-bed nursing home. Burzenski is located at 4450 Eighth Street, Sarasota, Florida. The building in which the existing 60 nursing home beds are housed will be replaced by Trecor with a new building. The existing Burzenski building has out-lived its useful life and contains several structural deficiencies. Operations are severely restricted and inefficient. Existing three and four bed wards limit the placement of residents. The existing building does not comply with all current licensure requirements. The noncompliance, however, was "grandfathered" in. In order to replace its existing building with a modern building which meets all current licensure requirements, Trecor applied for a certificate of need in 1985 to build a replacement facility on an adjoining parcel of real estate for which Trecor held an option to purchase at the time. This application was approved on December 4, 1985. After an error by Trecor caused the time established for exercising the certificate of need to pass and a requested six-month extension of the certificate of need was denied by the Department, the certificate of need to construct the replacement facility lapsed. Another application for a replacement facility was filed in January, 1987. This application was approved by the Department in May, 1987. The replacement facility was not, however, constructed. Subsequently, in April and May, 1988, the Department determined that replacement of the existing building was exempt from certificate of need review. Trecor now proposes to add 60 nursing home beds at the same time that it builds its replacement facility for its existing 60 nursing home beds. The new nursing home beds will be housed on a second floor to be built on the replacement facility. In Trecor's application for (30 additional nursing home beds, Trecor has proposed the addition of 12,061 gross square feet to its replacement facility and a project cost of $885,210.00. The cost of Trecor's replacement facility will be $1,303,424.00 plus a $1,400,000.00 debt on the existing building. The total cost of Trecor's 120 bed facility will be $3,588,634.00. Section 381.705(1)(a), Florida Statutes. Numeric Need. Pursuant to the need methodology of Rule 10- 5.011(1)(k)(2), Florida Administrative Code, there is a need for an additional 75 community nursing home beds for Sarasota County for July, 1990, the planning horizon applicable in these cases. All of the applicants have agreed with the Department's determination of the need for additional nursing home beds for Sarasota County. All of the applicants are seeking to provide 60 of the needed nursing home beds. The District Health Plan. The district health plan for the Department's District 8, which includes Sarasota County, provides certain standards and criteria to be considered in determining community nursing home care need. The policy guidelines and their application, if applicable to the applicants in this proceeding, are as follows: Community nursing home services should be available to the residents of each county within District Eight. Sarasota County is a separate planning subdistrict for community nursing home beds. Therefore, this guideline should be applied to Sarasota County. All of the applicants will increase the availability of nursing home services to the residents of Sarasota County. Community nursing home beds should be geographically distributed throughout the counties of District Eight to promote optimal availability and accessibility. The 2,264 existing licensed and 283 approved community nursing home beds located, or to be located in Sarasota County, are already geographically distributed throughout Sarasota County. All of the applicants will increase geographic distribution of beds throughout Sarasota County, regardless of where they may be located. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: pharmacy g. occupational therapy laboratory h. physical therapy x-ray i. speech therapy dental care j. mental health counseling visual care k. social services diet therapy l. medical services All of the applicants will meet thin guideline. New and existing community nursing home bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. The applicants have proposed to provide the following percentage of care to Medicaid patients: Arbor: 45% Health Quest: 16.7% HCR: 42% Burzenski: 59% 1st Year; 60% 2d Year. All of the applicants except Health Quest comply with this guideline. Community nursing home facilities in District Eight should expand their financial base to include as many reimbursement mechanisms as are available to them including Medicare, Medicaid, Champus, VA, and other third-party payers, and private pay. This guideline applies to existing facilities. None of the applicants are proposing to "expand their financial bases" in the manner suggested in this guideline. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. This guideline has been filled. New community nursing home facilities may be considered for approval when existing facilities servicing comparable services areas cannot reasonably, economically, or geographically provide adequate service to these service areas. Existing facilities cannot reasonably meet the need for the 75 additional nursing home beds in Sarasota County for July, 1990. No new community nursing home facility should be constructed having less than 60 beds. However, less than 60 beds may be approved as part of an established acute care hospital facility. All of the applicants meets this guideline. Expansion of existing facilities to 120 beds should be given priority over construction of new facilities in the health service area. The proposals of Arbor, Health Quest and Trecor meet this guideline. The proposal of HCR does not meet this guideline. Each nursing home facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same community. All of the applicants meet, or will meet, this guideline. The proposed project should have a formal discharge planning program as well as some type of patient follow-up service with discharge/transfer made available seven days a week. All of the applicants meet this guideline. Nursing home services should be within at least one hour typical travel time by automobile for at least 95 percent of all residents of District Eight. This guideline is not applicable. Community nursing homes should be accessible to residents throughout District Eight regardless of their ability to pay. All of the applicants meet this guideline. Health Quest meets this guideline less than the other applicants because of its minimal Medicaid commitment. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and medicare programs, and provide data on an ongoing basis to the District Eight Local Health Council as requested. All of the applicants meet this guideline. Health Quest has not, however, provided Medicaid care at Regents Park. Health Quest does provide Medicaid at all its other nursing centers and will obtain Medicaid certification at Regents Park if its application for a certificate of need in this case is approved. Medicare is not provided at Burzenski at this time. Burzenski will, however, provide Medicare at its proposed facility. Failure of a holder of a certificate of need to substantially comply with statements of intent made in the application and relied upon the Department of Health and Rehabilitative Services as set forth in the Certificate shall be cause for the Department to initiate an action for specific performance, fines as specified in s. 381.495(3), or injunctive relief. This guideline is not applicable. Need for Services. HCR conducted a "non-numeric community need survey" in Sarasota County. Based upon this survey, HCR has suggested that there is an unmet need for 1,600 nursing home beds for Sarasota County for Alzheimer patients and other dementia patients. HCR's conclusions concerning unmet need for services for Sarasota County are unrealistic. HCR failed to prove that any need in Sarasota County for services for Alzheimer patients and others is not being met adequately. Services for Alzheimer patients are currently being provided by Trecor and Health Quest. HCR and Trecor have proposed to dedicate 30 of their proposed nursing home beds to the care of Alzheimer patients and patients with other forms of dementia. All of the applicants propose to provide a full range of services to their residents, including sub-acute care. Other Considerations. Health Quest's avowed purpose for the proposed conversion of its 53 sheltered beds is to insure that Regents Park remains available for use by the general public. Florida law allows sheltered nursing home beds to be used by persons other than residents of an adult congregate living facility for five years from the issuance of a license for the sheltered nursing home beds. Regents Park received its license in November, 1986. Therefore, its sheltered nursing home beds can remain available for use by the general public until November, 1991. Health Quest has received a certificate of need for 180 nursing home beds for Sarasota. Health Quest intends on placing 60 of those beds at Regents Park. The other 120 beds will be placed at another facility to be constructed in Sarasota County. Health Quest may be able to use some of its 180 approved nursing home beds to avoid the closing of Regents Park to the general public. Health Quest has not, however, explored this alternative. Health Quest's decision not to pursue this course of action is based in part on its decision that the 43% Medicaid care required for its certificate of need for 180 nursing home beds is not acceptable at Regents Park. Health Quest has failed to prove that its proposal is needed because of its desire to convert its sheltered beds to community nursing home beds. Section 381.705(1)(b), Florida Statutes. The evidence in this case failed to prove that like and existing health care services in Sarasota County are not available, efficient, appropriate, accessible, adequate or providing quality of care except to the extent that existing services cannot meet the need for 75 additional nursing home beds in Sarasota County. Section 381.705(1)(c), Florida Statutes. Arbor. Two of Arbor's three licensed facilities in Florida are currently rated superior. The other facility is rated standard. Arbor's proposal may qualify it for a superior rating at its proposed facility. Arbor proposes to provide sufficient services, safeguards and staff. Arbor should be able to provide adequate quality of care in its proposed facility. Health Quest. Health Quest has a corporate policy of emphasizing quality of care. It attempts to obtain the highest quality rating in every community it serves. Health Quest's facilities in Jacksonville and Boca Raton have been rated superior. Health Quest's Sarasota facility has not been in operation long enough to qualify for a superior rating. Health Quest's Sarasota facility offers a high level of staffing, including a Human Resources Director, who is responsible for personnel administration and training, a full time social activities director and an activities coordinator. It also has a high nursing ratio. Health Quest is proposing the highest level of staffing of the applicants in this proceeding. Extensive training and development of staff at Health Quest's Sarasota facility is provided. Orientation training and in-service training on an on- going basis will be provided. Health Quest proposes to provide sufficient services, safeguards and staff. Health Quest should be able to provide adequate quality of care in its proposed facility. HCR. HCR's existing Sarasota nursing home has received a license with a standard rating. Other HCR facilities have received standard ratings, including some facilities which were acquired by HCR with superior ratings. HCR also has facilities which have been rated superior. HCR will enhance the quality of care available by providing a full range of services, from the least intensive level (adult day care) to the most intensive levels (i.e., sub- acute care). HCR's proposal to provide adult day care, a dedicated Alzheimer's unit, sub-acute care and respite care, and its adult congregate living facility will enhance quality of care in Sarasota County. HCR adheres to extensive quality assurance standards and guidelines. HCR provides adequate training, exceeding state minimum requirements, for its staff. HCR proposes to provide sufficient services, safeguards and staff. HCR should be able to provide adequate quality of care in its proposed facility. Trecor. Trecor has contracted with Central Care, Inc., a Florida corporation providing a full spectrum of health care and retirement living services, to manage its facility. Trecor provides education and training for its staff on an ongoing basis. Even though Trecor is operating in an inadequate building, Trecor received a superior rating in 1986-1987 and 1987-1988. Trecor proposes to provide sufficient services, safeguards and staff. Trecor should be able to provide adequate quality of care in its proposed facility. Section 381.705(1)(e), Florida Statutes. None of the applicants provided sufficient proof to conclude that they will provide joint, cooperative or shared health care resources sufficient to provide them with an advantage over the other applicants. Section 381.705(1)(f), Florida Statutes. None of the applicants proved that there is any need in the service district for special equipment or services which are not reasonably and economically accessible in adjoining areas. Section 381.705(1)(g), Florida Statutes. None of the applicants proved that this criterion applies in this proceeding. Section 381.705(1)(h), Florida Statutes. All of the applicants' proposals will be accessible to all residents of the service district. Health Quest will, however, provide less access to Medicaid residents than the other applicants. Trecor will attempt to initiate internship and training programs for area nursing and allied health programs, and provide clinical placements. Health Quest participates in training programs for nurses from Sarasota Vocational/Technical school. A certified nursing aide program is also offered by Health Quest through Sarasota Vocational/Technical School. All of the applicants will be able to attract and maintain the staff necessary to operate their proposed facilities. HCR is proposing to provide the highest salaries and benefits for staff. Health Quest already has staff for its existing 53 beds. Health Quest is adding, however, 60 nursing home beds to Regents Park. HCR failed to prove that all of the existing staff will be used to staff the proposed 60 nursing home beds and not the already approved 60 nursing home beds. Section 381.705(1)(i), Florida Statutes. Immediate Financial Feasibility. Short-term financial feasibility is the ability of an applicant to finance a project. Arbor. The total projected cost of Arbor's proposed 60-bed addition is $2,380,000.00. The total cost for its 120-bed facility is $4,580,000.00. Arbor's projected costs are reasonable. Arbor is proposing to contribute 10% of the cost of its proposal and finance the remaining 90%. Arbor has $39,000,000.00 in bank lines of credit, of which $34,000,000.00 remain available for development of Arbor's proposed project. Arbor also has sufficient money market funds to meet its projected equity contribution of 10%. Arbor has demonstrated immediate financial feasibility of its proposed project. Health Quest. Health Quest indicated in its application that there were no capital costs associated with its proposal. This is not correct. It will have some minor costs for the addition of the seven new nursing home beds it is seeking. Health Quest's proposal is the lowest in terms of additional capital costs which must be incurred. Most of the capital costs associated with the 53 nursing home beds it is seeking were already incurred when it built Regents Park. Health Quest did not provide proof of the cost of Regents Park. The unaudited financial statements of Health Quest indicate that it experienced a loss of $3,200,000.00 in 1986 and a loss of $5,000,000.00 in 1987. Health Quest has net worth and equity of $300,000.00 on over $200,000,000.00 in assets. The losses Health Quest has been experiencing have been the result of Health Quest's development activities. Health Quest can finance its project with internal funds. The evidence failed to prove that Health Quest must liquidate assets to generate operating funds. Health Quest demonstrated immediate financial feasibility of its proposed project. HCR. HCR's total estimated project costs for its 60-bed facility is $2,657,000.00. This amount includes the cost of the portion of the project to be used for adult day care ($138,000.00). The costs to be incurred for the adult congregate living facility is $1,800,000.00. HCR's projected costs are reasonable. HCR intends to contribute 25% of the total project costs and finance the remaining 75%. HCR has sufficient funds on hand to fund 25% of its project costs. In fact, HCR has the ability to contribute 100% of the total project costs. HCR has lines of credit with banks and other sources of obtaining financing for the project, including a loan from its parent corporation. HCR has demonstrated immediate financial feasibility of its proposed project. Trecor. The total cost of Trecor's proposed 60-bed nursing home addition is $885,210.00. The total cost of replacing the existing Burzenski building is projected as $3,588,634.00 ($885,210.00 for the proposed addition; $1,400,000.00 debt on the existing building; and $1,303,424.00 for the replacement of the existing building). Trecor is proposing to contribute 10% of the proposed project costs, or $88,521.00, and to finance the remaining 90%. To finance the entire project will require an equity contribution of over $300,000.00. Trecor has experienced operating losses in 1986 and 1987 and has a negative net worth of $259,000.00. Trecor has a positive cash flow, however. Trecor does not have sufficient equity to contribute 10% of the proposed project costs. The Board of Directors of Trecor has, however, adopted a resolution indicating Trecor's intent to provide the necessary contribution. Trecor can obtain the necessary funds from its owners if necessary. NCNB has expressed an interest in financing the rest of the project. Although NCNB has not legally committed to such an arrangement, it is reasonable to conclude that a satisfactory loan agreement can be reached with NCNB or Barnett Bank. Trecor has demonstrated immediate financial feasibility of its proposed project. Long-Term Financial Feasibility. Long-term financial feasibility is the ability of an applicant to operate a project at a profit, generally measured at the end of the second year of operation. Arbor. At the formal hearing Arbor presented an updated pro forma. Arbor suggested that the purpose of the updated pro forma was to reflect increased personnel costs and reduced utilization from 97% to 95%. According to Arbor, the changes reflect changes caused by inflation and "actual experience." The updated pro forma submitted by Arbor includes substantial increases in salary expense ranging from 10% to 30% (and one increase of 50%). The updated pro forma also includes at least one position not included in the original pro forma filed with Arbor's application. Arbor's original pro forma understated salary expenses. The updated salary expenses were foreseeable, and should have been foreseen, when Arbor filed its application. The updated pro forma was accepted into evidence over objection. In the updated pro forma, Arbor has projected a loss of $347,043.00 from revenue of $2,034,837.00 for the first year of operation and a profit of $41,833.00 from revenue of $3,016,512.00 for the second year of operation. Arbor has projected a payor mix of 45% Medicaid, 5% Medicare and 50% private pay. These projections are reasonable. Arbor's projected fill-up rate is reasonable. Arbor's projected charges are reasonable. The evidence failed to prove that Arbor's projected revenue and expenses as contained in its original application are reasonable. The evidence also failed to prove that Arbor's projected expenses as contained in its updated pro forma are reasonable either. Arbor has failed to prove that its project is feasible in the long term. Health Quest. Health Quest is operating at close to capacity at Regents Park and is already charging close to its projected patient charges. The facility has been operating at a loss. The facility experienced a profit only during its latest month of operation. The addition of Medicaid beds will erode Health Quest's revenues to some extent. Health Quest has projected a profit of $16,663.00 from revenue of $1,771,303.00 for the first year of operation and a profit of $40,698.00 from revenue of $1,850,156.00 for the second year of operation. Health Quest is projecting a payor mix of 16.7% Medicaid, 4.2% medicare and 79.2% private pay. These projections are reasonable. Regents Park opened in November, 1986, and filled up rapidly. It has been operating at full occupancy and with a waiting list. Health Quest's estimated fill up rate is reasonable in light of this fact. Health Quest has failed to prove that its project is feasible in the long term. HCR. HCR has projected a loss of $267,436.00 on $1,068,427.00 of revenue for its first year of operation and a profit of $62,729.00 on $1,772,399.00 of revenue for its second year of operation. HCR has projected a payor mix of 42% Medicaid, 4% medicare and 54% private pay. These projections are reasonable. HCR's projected fill-up rate to 95% occupancy is reasonable. HCR's projected patient charges are reasonable. HCR's projected revenue and expenses are reasonable. HCR's project is feasible in the long term. (4). Trecor. Trecor has projected a profit of $77,458.00 on revenue of $2,481,229.00 for the first year of operation and a profit of $367,896.00 on revenue of $3,106,152.00 for the second year of operation. The pro forma submitted by Trecor is for the 120-bed nursing home facility and not just the proposed 60-bed project. Trecor has a negative net worth and Trecor has been operating at a loss. Trecor has projected a payor mix of 59% Medicaid, 3.5% medicare, 34% private pay and 3.5% V.A. These projections are reasonable. Trecor has estimated it will achieve 50% occupancy in the first month of operation and an occupancy of 96% by the seventh month. This is a fill up rate of 2 residents a week. Arbor and HCR have projected fill up rates of 2 residents a month. Trecor does not expect to lose any patients during construction of its facility. Trecor is currently at full occupancy and has a waiting list. Trecor's projected fill up rate is achievable. Trecor's projected patient charges are reasonable. They are the lowest of the competing applicants. Trecor has failed to include some expenses in its projections. Trecor left $50,000.00 of administrative salaries out of its projections and FICA is underestimated because Trecor used the old rate. When these expenses are taken into account, Trecor's project is still financially feasible. Trecor's projected revenue and expenses, except as noted above, are reasonable. Trecor's project is feasible in the long term. Section 381.705(1)(1), Florida Statutes. Based upon the projected rates for nursing home services to be charged by the applicants, Arbor and Trecor will have the least adverse impact on patient charges, followed by HCR. Health Quest will have the greatest adverse impact on patient charges. Generally, all of the applicants will enhance competition if their projects are approved. Section 381.705(1)(m), Florida Statutes. Arbor. Arbor's building will contain 36,000 gross square feet, with 18,000 gross square feet attributable to the 60 nursing home beds it is seeking in this proceeding. The cost of Arbor's proposed 60-bed addition is $2,380,000.00 ($132.22 per square foot) and the cost of its entire project is $4,580,000.00. The projected cost of construction is $1,228,000.00, a cost of $68.22 per square foot. Arbor's projected costs are reasonable. Arbor's proposed building will provide 300 square feet per bed. Arbor plans to build its prototype 120-bed nursing home facility. It has used its 120-bed nursing home plans for other Florida projects. These plans have been approved by the Department's Office of Licensure and Certification. Arbors' building will comply with all code and regulatory requirements. The building will be constructed on a 6.5 acre site which is appropriately zoned and of sufficient size. The design of Arbor's proposed building and the proposed methods of construction are reasonable. Health Quest. Health Quest has already constructed the building in which its proposed 60 nursing home beds dire to be located. The building is already licensed. The building complies witch all code and regulatory requirements. A total of 30,945 square feat will be devoted to the nursing home portion of Regents Park. This is the largest of the proposed facilities. The proposed building will have 515 square feet per bed. There are no construction costs to be incurred for Health Quest's proposal. Construction costs have already been incurred to construct the facility in which Health Quest's proposed beds will be housed. Health Quest's building design is of the highest quality. HCR. HCR is proposing to construct a 60-bed nursing home. Additional space for 31 adult congregate living beds and for an additional 60 nursing home beds will also be built. The facility will include a dedicated 30-bed Alzheimer's unit. The inclusion of this unit requires more space. The proposed HCR building will consist of 25,600 square feet for the 60-bed nursing home. This includes the $138,240.00 cost and the 2,300 square feet of the adult day care unit. The projected cost of HCR's project is $2,657,000.00 or $103.79 per square foot. The projected cost of constructing HCR's proposed building is $1,536,000.00 or $60.00 a square foot. HCR's projected costs are reasonable. 166. HCR's facility will consist of 426 square feet per bed. 167. HCR's facility will comply with code and regulatory requirements. 168. HCR's design and methods of construction are reasonable. 169. HCR's facility will incorporate energy conservation measures. Trecor. The Trecor proposal entails the addition of a 60-bed patient wing on the second floor of a two-story building. The first floor of the building will be constructed by Trecor to replace its existing building. Approval of the replacement facility is not part Trecor's proposal at issue in this proceeding. The plans for the replacement building and the addition thereto have been developed together. The plans can be modified to insure that all of the proposed services can be accommodated in the building. The proposed Trecor building will be constructed in phases. First, the portion of the new building which will house the 120 nursing home beds will be constructed. Patients will then be transferred to the newly constructed facility. All of the existing building except the kitchen and administration facilities will then be demolished. Patients will be fed out of the existing kitchen and the administrative functions will be handled form the old administrative facilities. The new kitchen, dining and administrative offices will then be constructed. When this portion of the building is completed, the old kitchen and administrative offices will be demolished. Although inconvenient, Trecor should be able to continue to provide quality of care during the construction period. The other applicants have raised a number of issues concerning the Trecor building. The issues do not, however, involve violations of code or regulatory requirements for nursing home facilities. Trecor's building will contain a total of 31,398 square feet. This total includes 19,337 square feet attributable to the existing 60 nursing home beds and 12,061 square feet attributable to the 60 nursing home beds at issue in this proceeding. The proposed building is relatively small. Trecor's architect did a very good job of properly using the relatively small parcel of real estate he had to work with. The small size of the building, however, accounts for the lower cost of the Trecor proposal. The evidence failed to prove that Trecor cannot provide adequate care, despite the building's size. The cost of Trecor's proposed 60-bed addition is $885,210.00 ($73.39 per square foot) and the cost of its replacement facility is $1,303,424.00. The projected cost of construction for Trecor's proposed 60-bed addition is $592,500.00, a cost of $49.13 per square foot. Questions have been raised concerning the project development costs and the estimated architecture/engineer fees for Trecor's project. Trecor did not include all of the expenses for these items in the projected costs of its proposed 60-bed addition because the costs were included as part of building the replacement facility. Some of those costs could have been included as part of the cost of the proposal being reviewed in this proceeding. If those costs had been included, their inclusion would not affect the conclusions reached in this proceeding concerning the reasonableness of Trecor's project. Trecor's projected costs are reasonable. Trecor's proposed building will provide 201 square feet for the proposed 60 nursing home beds, 322 square feet for the existing 60 nursing home beds and 261 square feet for the total 120 nursing home beds. Trecor's building will comply with all code and regulatory requirements. The Trecor facility will be located on 1.97 acres. The design of the Trecor building and the proposed methods of construction are reasonable. Trecor's facility will incorporate energy conservation measures. Section 381.705(1)(n), Florida Statutes. All of the applicants have a history of providing care to Medicaid patients. Health Quest, however, does not provide care to Medicaid patients at Regents Park. If Health Quest's application is approved, Regents Park will become Medicaid certified. The projected Medicaid of the applicants is as follows: Arbor: 45% Health Quest 16.7% HCR 42% Burzenski 59% first year; 60% second year All of the applicants except Health Quest are proposing to provide at least 42% Medicaid, which is the average Medicaid provided in Sarasota County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue a Final Order granting Trecor's application for certificate of need number 5443 and denying Arbor's application for certificate of need number 5841, Health Quest's application for certificate of need number 5442 and HCR's application for certificate of need number 5437. DONE and ENTERED this 14th day of March, 1989, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-1945; 88-1949; 88-1950 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Arbor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 10-13. 2 1 and 29-33. 3 15-21 and hereby accepted. 4 19-20, 34 and 36. 5 22-25. 6 37-40. 7 26-27. 28, 41 and 44-47. Trecor applied for a certificate of need in January, 1987, not May, 1987. Hereby accepted. Not all of the applicants in this proceeding, however, have met the minimum criteria for the issuance of a certificate of need. Not supported by the weight of the evidence and a statement concerning the proceedings. 51. The last two sentences are argument. 51. The fifth through ninth sentences are argument. The evidence proved that Health Quest is adding 60 nursing home beds to its existing facility. Therefore, if its application in this case is approved it will have a 120-bed nursing home facility. 51. The last five sentences are statements of law and argument. Statement of law or not supported by the weight of the evidence. 15 64-66. 16 67-69 and 73. 74 and hereby accepted. The last two sentences are not supported by the weight of the evidence. 43 and 81. The fifth, sixth and eighth sentences are not supported by the weight of the evidence. The third, fourth and seventh sentences are hereby accepted. Although this proposed finding of fact, except the last sentence, is generally correct, this is not the only factor to consider in determining whether an applicant can provide quality of care. Argument, not relevant to this proceeding or not supported by the weight of the evidence. 52-55 and hereby accepted. The last sentence, except the reference to the state health plan, is hereby accepted. The second, sixth, ninth, tenth and eleventh sentences are not supported by the weight of the evidence or are argument. See 52-56. Argument. 56 and hereby accepted. 85, 87-88 and hereby accepted. The last sentence is not supported by the weight of the evidence. 51, 60-61 and 86. The second, third, sixth, eighth, ninth and tenth sentences are not relevant to this proceeding, not supported by the weight of the evidence or argument. 26 92 and 114. 27 95-97 and 106-107. 28 98 and 100. 109-111. The last five sentences are argument and not supported by the weight of the evidence. See 111-113. 97 and 107. Short-term financial feasibility of Health Quest is not moot and Trecor can finance its project with the assistance of its shareholders. Hereby accepted. The last sentence is not supported by the weight of the evidence. 115 and 118. The last four sentences are not supported by the weight of the evidence or are argument. 119-120. The last two sentences are not relevant to this proceeding or are not supported by the weight of the evidence. See 123. 34 130 and 134. 125, 127 and 132. The fifth sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. The last sentence is hereby accepted. 136-137 and 143. The first and last sentences are not supported by the weight of the evidence. 38-39 Not supported by the weight of the evidence, argument, not relevant to these proceedings or taken into account in determining the weight to be accorded to testimony. 40 Hereby accepted. The first and last sentences are not supported by the weight of the evidence. 41 139-141. 42 See 97, 103, 107, 113, 124, 129, 135 and 145. Arbor has not proven that it is financially feasible in the long term. The last three sentences are not supported by the weight of the evidence. 43, 46 and 56 Statements of law. 146 and hereby accepted. Hereby accepted. 47 148 and 153-155. 48 157-158, 160 and 175. 49 161-163 and 175. 171, 175, 180 and hereby accepted. The sixth, ninth and tenth sentences are not supported by the weight of the evidence. 171. The last sentence is not supported by the weight of the evidence. 52-54 Not supported by the weight of the evidence, argument or not relevant to this proceeding. 55 185 and 187-188. The last sentence is argument. 57-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. Health Quest's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 32, 34, 37 and 41. 3 2. 4 3. 4 and 6. 7. Not all of the applicants filed petitions. 7 48. 8 15-16. 9 67-68. 10 17-19. 11 21. 12 19. 13 58-59. See 57. The weight of the evidence did not prove that Regents Park will be closed to the public "unless Health Quest's application for conversion to community status is approved." 14-15 Not supported by the weight of the evidence and not relevant to this proceeding. 16 See 36. Not supported by the weight of the evidence. 17-19 Not supported by the weight of the evidence or not relevant to this proceeding. 20 70 and hereby accepted. 21, 24, 27, 30-48, 52, 54-57, 61, 64, 70, 77, 88-89, 93, 95, 97, 107-108, 110-111, 113, 118, 124, 126, 128-129, 132, 135-136 and 138-139. Hereby accepted. 22 Hereby accepted and summary of testimony. The last two sentences are not supported by the weight of the evidence. See 91. 23 72. 25-26 88 and hereby accepted. 56 and hereby accepted. Not relevant to this proceeding. 49 Hereby accepted. The last two sentences are not relevant to this proceeding, are based upon hearsay and constitute opinion testimony from a nonexpert witness. 50 69. 51 Not relevant to this proceeding or based upon hearsay. 53 126 and 128. 58 Hereby accepted. The last sentence is not supported by the weight of the evidence. 59 157. 60, 65-67, 71, 91, 112, 114-116, 121-122 and 125 Not supported by the weight of the evidence. 62 Not relevant to this proceeding. 63 51 and 185-186. 68 100-101. 69 102. 72 51. The last sentence is rejected. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. The parties did not indicate that Section 381.703(1)(b)1, Florida Statutes, was at issue in this proceeding or that Section 381.705(1)(a), Florida Statutes, does not apply. 73-76 Not relevant to this proceeding. The issue is not just whether nursing home services are available to all residents of the service area. Also at issue is whether each applicant is proposing to serve all of the residents of the service area. Health Quest's proposal does indicate Health Quest intends on serving a significant portion of Sarasota County's Medicaid population. 78 60-61. The portion of this proposed finding of fact prior to subparagraph a, the portion of subparagraph a appearing on page 19 of the proposed recommended order and subparagraphs b-d are rejected as argument, statements of law or as not being supported by the weight of the evidence. 79-82 Although generally correct, these proposed findings of fact are argument. 83 Not relevant to this proceeding. 84-86 Summary of testimony and argument. 87 Hereby accepted. The last sentence is not relevant to this proceeding or supported by the weight of the evidence. 90, 92 Not relevant to this proceeding. 94 Summary of testimony and argument. 96 Hereby accepted. The last sentence and the last half of the second sentence are rejected as not being relevant to this proceeding. 98-106 These proposed findings of fact were taken into account in determining the weight to be given testimony and other evidence. 109 Although the first sentence is correct, the rest of the proposed finding of fact is not relevant to this proceeding or not supported by the weight of the evidence. 117, 119-120 Not relevant to this proceeding. 123 108. The portion of this proposed finding of fact contained on page 30 of the proposed recommended order is primarily argument and not supported by the weight of the evidence. 127 143. 130-131 and 133-134 Not supported by the weight of the evidence, cumulative or not relevant to this proceeding. 137 The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence, argument or not relevant to this proceeding. Summary of testimony. Not supported by the weight of the evidence. The first two sentences are hereby accepted. The rest of the proposed finding of fact is argument and not supported by the weight of the evidence. HCR's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2, 4-9, 13-14, 16, 19-20, 22-23, 27, 30-32, 35, 41-42, 45, 47, 49-51, 53, 63-67, 71 and 75 Hereby accepted. 3, 15 and 33 Not supported by the weight of the evidence. Hereby accepted. The last sentence, as it applies to Sarasota County, is not supported by the weight of the evidence. Although generally true, this proposed finding of fact, as it applies to Sarasota County, is not supported by the weight of the evidence. 12 55. 17 37-4 and 55. 18 Hereby accepted, except that the first sentence is not supported by the weight of the evidence. 21 51 and 86. 24 51. The parties stipulated that the state health plan has been met by all of the applicants. 25 22-25. 26 76-78 and hereby accepted. 77 and hereby accepted. 78 and hereby accepted. 34 106-107. 36 Although generally true, the evidence failed to prove that HCR would provide these benefits without cost to its proposed Sarasota facility. 37 131-132. 38 133. 39 134-135. 40 89-90. 43 39-40, 163-164 and 166. 44 152, 167-170, and 180. 46 169-170. 48 165-166. 52 Hereby accepted. The weight of the evidence failed to prove that appropriate services for "AD patients" are not adequately available. 54 The parties stipulated that the state health plan has been met by all of the applicants. 55 2-3. 56-58 These proposed findings of fact are contrary to the stipulation of the parties. The parties stipulated prior to commencement of the formal hearing in this case that the criteria to be considered in determining which applicant was entitled to a certificate of need were contained in Section 381.705, Florida Statutes. Additionally, the Department accepted all of the applicants' certificate of need applications as being complete. It would not be proper for the Department to now disqualify an applicant on the grounds that its application is not complete. 59 148-149. 60 Taken into account in determining the weight to be given to testimony. Not supported by the weight of the evidence. 61 123. 62 Hereby accepted except the last two sentences which are not supported by the weight of the evidence. 68-69 115-117. 70 Not relevant to this proceeding. 72 41, 45-47, 175-176, 180 and hereby accepted. Hereby accepted except the third through fifth sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence and not relevant to this proceeding. Hereby accepted except the last sentence is not supported by the weight of the evidence. The first sentence is hereby accepted. The rest of the proposed finding of fact is not supported by the weight of the evidence. Taken into account in determining the weight to be given testimony and other evidence. Not relevant to this proceeding. 80-81 Not supported by the weight of the evidence. 109-110. The last three sentences are not relevant to this proceeding. Hereby accepted, except for the first two sentences, which are not supported by the weight of the evidence. Hereby accepted except the third and last sentences are not supported by the weight of the evidence. Not supported by the weight of the evidence. See 136. Not relevant to this proceeding. Trecor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-6, 20-24, 27, 29-32, 35, 37-39 and 56. Hereby accepted. 7 28 and 41-42. 8 41, 43 and 81. 9 26-27. 10 41, 44 and 81. 11 44-45. 12 46 and 171. 13 173. 14 46, 171-172 and 174. 15-16 173. The last sentence of proposed finding of fact 16 is not supported by the weight of the evidence. 17 181. 18 54-55 and hereby accepted. 19 79. 25 40, 47, 109, 111-112 and hereby accepted. 26 175 and 177. 28 178 and hereby accepted. 33 184 and hereby accepted. 34 138 and 142. 36 139-141. 40 50. 41 51. 42 51. The last three sentences are not supported by the weight of the evidence. Although the Arbor site was not disclosed, the weight of the evidence supports a conclusion that Arbor's proposal meets this portion of the district plan. 43-47 51. 48 51. The last sentence is not supported by the weight of the evidence. 49-50 51 and hereby accepted. 51 51 and hereby accepted. The last sentence is not supported by the weight of the evidence. 52-53 51. Argument. 51 and hereby accepted. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 48. 2-3 49. 4 Not relevant to this proceeding. 5-6 Conclusions of law. Not supported by the weight of the evidence. Contrary to a stipulation of the parties that all of the parties meet the state health plan to the extent that it is applicable. See 63. 10, 13, 15 and 17 Hereby accepted. 11 See 64-84 concerning Section 381.705(1)(c), Florida Statutes. The parties stipulated that Section 381.705(1)(d), Florida Statutes, had been met or did not apply. 12 86 and 129. 14 Not relevant in this de novo proceeding and not supported by the weight of the evidence. 16 See 60-62. COPIES FURNISHED: Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Charles M. Loeser Assistant General Counsel Health Quest Corporation 315 West Jefferson Boulevard South Bend, Indiana 46601 James M. Barclay, Esquire 231 A East Virginia Street Tallahassee, Florida 32301 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32308 Jay Adams, Esquire Jay Adams, P.A. 1519 Big Sky Way Tallahassee, Florida 32301 Theodore E. Mack Assistant General Counsel Department of Health and Rehabilitative Services 2727 Mahan Drive Fort Knox Executive Center Tallahassee, Florida 32308 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the stipulations of the parties and the entire record complied herein, I hereby make the following findings of fact: THE STIPULATIONS OF THE PARTIES The parties stipulated to the following facts: Forum timely filed its letter of intent and application with DHRS and the District IX Local Health Council for the July 1986 batching cycle. DHRS ultimately deemed the application complete and, following review, published its notice of intent to deny the application. Forum timely filed a petition requesting a formal administrative hearing pursuant to Section 120.57(1), Florida Statutes. The sole issue is whether there is a need for Forum's proposed services; additionally, it is DHRS's position that a lack of need for the project results in the project not being financially feasible in the short or long term. All other statutory and rule criteria were satisfied, at least minimally, except proof of need pursuant to Rule 10-5.011(1)(k) [formerly 10-5.11(21)(b)], Florida Administrative Code, and financial feasibility as it relates to need. FORUM'S PROPOSAL Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Forum proposes to develop a retirement living center in Palm Beach County that would consist of 120 to 150 apartment units for independent living, a separate personal care unit (known in Florida as an adult congregate living facility), and a 60-bed nursing home component certified for skilled and intermediate care. Palm Beach County is in HRS Service District IX, Subdistrict 4. All three components of Forum's retirement living center would be physically connected and share some operational functions, such as dietary facilities and the heating plant. Such a design provides for an efficient operation as well as an economic distribution of costs facility wide. No specific site has been selected , although Forum has narrowed its focus to the eastern half of Palm Beach County. It is not economically feasible to acquire property or pay for an option on property until after receiving CON approval. The projected total cost of Forum's proposed 60-bed nursing home is $2,329,800. Forum has the necessary resources for project accomplishment and operation. Forum proposes to seek Medicare certification and will provide up to 25 of its beds for Medicaid patients. FINANCIAL FEASIBILITY Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. If need for the facility is shown, Forum would be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible while at the same time having no material negative impact on existing providers in the district. NUMERIC NEED Need for new or additional community nursing home beds in Florida is determined, preliminarily, by use of the methodology found in Rule 10- 5.011(1)(k), Florida Administrative Code. Additional beds normally are not approved if there is no need for beds as calculated under the rule. Pursuant to the rule, need for a defined nursing home subdivision is projected to a three- year planning horizon, in this case July 1989. The need methodology prescribed in the rule is as follows: A (POPA x BA) + (POPB x BB) or: The District's age-adjusted number of community nursing home beds for the review cycle for which a projection is being made [A] (The population age 65-74 years in the relevant departmental districts projected three years into the future [POPA] x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]) + (The population age 75 years and older in the relevant departmental district projected three years into the future [POPB] x the estimated current bed rate for the population age 75 years and over in the relevant district [BB].) BA LB/(POPC) + (6 x POPD) or: The estimated current bed rate for the population age 65-74 years in the relevant district [BA] (The number of licensed community nursing home beds in the relevant district [LB]/the current population age 65-74 years [POPC] + (6 x the current population age 75 years and over [POPD]) BB 6 x BA or: The estimated current bed rate for the population age 75 years and over in the relevant district [BB] 6 x the estimated current bed rate for the population age 65-74 years in the relevant district [BA]. SA A x (LBD/LB) x (OR/.90) or: The preliminary subdivision allocation of community nursing home beds [SA] The district's age-adjusted number of community nursing home bids for the review cycle for which a projection is being made [A] x (The number of licensed community nursing home beds in the relevant subdistrict [LBD]/the number of licensed community nursing home beds in the relevant district [LB]) x (The average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district [OR]/.90) Rule 10-5.011(1)(k)(2)(i), Florida Administrative Code, provides that: The new bed allocation for a subdistrict, which is the number of beds available for CON approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subparagraphs a. through i., unless the subdistrict's average estimated occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. The appropriate planning horizon for the instant case is July 1989, corresponding to the review cycle which began July 15, 1986, and the subdistrict is Palm Beach County. THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT DISTRICT (LB)/THE NUMBER OF LICENSED COMMUNITY NURSING HOME BEDS IN THE RELEVANT SUBDISTRICT (LBD) Rule 10-5.011(1)(k) requires that "review of applications submitted for the July batching cycle shall be based upon the number of licensed beds (LB and LBD) as of June 1 preceding this cycle..." On June 1, 1986, there were 5,459 licensed community nursing home beds in District XI (LB) and 4,084 licensed community nursing home beds in subdistrict 4 (Palm Beach County LBD). These figures include 220 licensed beds that were previously categorized as sheltered. In the instant case, the appropriate figure for LB is 5,459, and the appropriate figure for LBD is 4,084. APPROVED BEDS WITHIN THE RELEVANT DEPARTMENTAL SUBDISTRICT DHRS's interpretation of the rule is to include in the count of approved beds, those approved up to the date of the supervisor's signature on the State Agency Action Report (SAAR). In this case, there were 640 approved beds in Palm Beach County at that time. As of June 1, 1986, the same date as the licensed bed cutoff, there were 640 approved beds in the subdistrict. In Dr. Warner's opinion, approved beds should be determined as of the same time period as licensed beds in order to have consistency and avoid anomalies in the formula. This opinion is reasonable and appropriate. In the instant case, the figure to be applied in the formula for approved beds in the subdistrict is 640 approved beds. THE POPULATION AGE 65-79 YEARS IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPA). THE POPULATION AGE 75 YEARS AND OVER IN THE RELEVANT DEPARTMENTAL DISTRICT PROJECTED THREE YEARS INTO THE FUTURE (POPB). The rule provides that the three year projections of population shall be based upon the official estimates and projections adopted by the Office of the Governor. For the purposes of calculating need, DHRS utilizes at the final hearing the figures for estimated population obtained from data available at the time of initial application and review. The set of population projections which were available when Petitioner's application was filed and reviewed were those published on July 1, 1986. Based on this data, which is reasonable to use, POPA 170,639; and, POPB 122,577. THE CURRENT POPULATION AGE 65-74 YEARS (POPC)/THE CURRENT POPULATION AGE 75 YEARS AND OVER (POPD). In calculating POPC and POPD, DHRS also utilizes at final hearing the most current data available at the time of initial application and review, in this case the July 1, 1986, release. Based on that data, POPC 153,005 and POPD 112,894. In the opinion of Dr. Warner, Forum's expert, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. According to Warner, January 1, 1986, as the midpoint of this time period, is the appropriate date to derive POPC and POPD in this case. The formula mandated by the rule methodology for calculating the estimated current bed rate requires that the "current population" for the two age groups be utilized. It is reasonable and appropriate for the base for POPC and POPD to correspond to the period for which the average occupancy rate is calculated. Supportive of Dr. Warner's opinion are the past practices of DHRS. Between December 1984 and December 1986, DHRS routinely used a three and one half year spread between the base population period and the horizon date in determining "current population" in its semiannual nursing home census report and bed need allocation. In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, DHRS utilized a three and one half year spread between the base population period and the horizon data for "current population" when it awarded beds. DHRS offered In this case, it proposed to use a three year spread between the base population period and the horizon dated for "current population" in calculating POPC and POPD. Using the July 1986 population release, POPC for January 1986 is 149,821 and POPD for January 1986 is 98,933. THE AVERAGE OCCUPANCY RATE FOR ALL LICENSED COMMUNITY NURSING HOMES WITHIN THE SUBDIVISION OF THE RELEVANT DISTRICT (OR). The rule requires the use of occupancy data from the HRS Office of Health Planning and Development for the months of the previous October through March when calculating a July batch of nursing home applicants. However, the rule is not instructive as to how one calculates this number. In this case, DHRS computed average occupancy rates based on the existing occupancy rates at applicable facilities on the first day of each month. Based on this occupancy data, which includes the data for the 220 previously sheltered beds in the subdistrict, occupancy rates for the July 1986 batch of Palm Beach County nursing home applicants is 83.75 percent. Forum's witness, Dr. Warner, determined that the correct occupancy rate was 85.46 percent for Palm Beach County for the period October 1985 to March 1986. Dr. Warner arrived at this figure by including paid reservation days. A paid reservation day is a day which is paid for by the patient or the patient's intermediary during which the patient is not physically in the bed. Typically, the patient will either be in the hospital, visiting relatives or otherwise away from the facility and will continue to pay for the nursing home bed, so that they will be able to return and not have someone occupy the bed. One of the goals and objectives of the District IX Local Health Plan is that paid reservation days be considered when bed need calculations are made. Calculating prepaid reservation days is consistent with the Rule because such beds are no longer available to the public and are therefore in use. Dr. Warner determined that during the applicable period, 1.25 percent of the licensed beds in the subdistrict were paid reservation days. Although taking paid reservation days into account would not be inconsistent with the rule, Forum failed to demonstrate that the 1.25 percent figure arrived at is valid for the applicable period, i.e., October 1985 to March 1986. Dr. Warner merely calculated a two-year average number of paid reservation days, broke this figure down to a six-month average and applied this average to the six-month period specified in the Rule. Gene Nelson, an expert called on behalf of Forum, calculated the occupancy rate as 88.72 percent in Palm Beach County for the appropriate period called for in the Rule. Nelson used the average monthly occupancy data obtained from medicaid cost reports for some facilities rather than first-day of the month data as used by DHRS. In addition, Nelson did not factor in the occupancy date of licensed beds in the extreme western portion of the County based on his belief that the District IX Local Health Plan mandates that the western area not be considered in any way with the eastern coast section of Palm Beach County for purposes of determining competitiveness. While the use of average full-month occupancy data is generally more reliable than using first-day of the month data, it is best, from a health planning prospective, to be able to use either all full-month data or all first- day of the month data. In making his calculations, Mr. Nelson mixed the two types of data, using full-month data when available and in other cases using first-day of the month data when full-month data was not available. It is inappropriate to fail to consider licensed beds in the extreme western portion of the County based solely on the local health plan. Among other reasons, the rule does not provide for exclusions for any of the subdistricts licensed facilities from the methodology. The appropriate and most reasonable occupancy rate (OR) in the instant case for the applicable time period is 83.75 percent. NET NEED Applying the above-referenced variables to the Rule formula produces the following results. July, 1986. District Allocation BA LB (POPC + (6 x POPD) - 5459 [149,821 + (6 x 98,833)] - .007349 BB - 6 x BA .044094 (.007349) July, 1989 Allocation (POPA x BA) + (POPB x BB) - (170,639 x .007349) + (122,577 x .044094) - 6659 Subdivision Allocation and Need SA A x (LBD / LB) x (OR 1.9) - 6659 x (4084 / 5459) x (.8375/.9) - 6659 x .74812236673 x .93055555555 4636 Subdistrict Allocation for Palm Beach County 4084 (Licensed Beds) 576 (90 percent of 640 Approved Beds) -24 (Bed Surplus)
Recommendation Based on the foregoing Findings of Fact, and Conclusions of Law, it is, RECOMMENDED that the application for certificate of need filed by Forum be Denied. DONE AND ORDERED, this 4th day of April, 1988, in Tallahassee, Florida. W. MATTHEW STEVENSON 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 4th day of April, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-0704 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner Adopted in substance in Finding of Fact 2. Adopted in substance in Finding of Fact 3. Adopted in substance in Finding of Fact 4. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 5. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 9. Sentence 1 is rejected as contrary to the weight of the evidence. Rejected as subordinate and/or unnecessary. 11. Adopted in substance in Finding of Fact 9. 12. Adopted in substance in Finding of Fact 9. 13. Adopted in substance in Finding of Fact 10. 14. Adopted in substance in Finding of Fact 12. 15. Adopted in substance in Finding of Fact 1. 16. Adopted in substance in Finding of Fact 14. 17. Adopted in substance in Finding of Fact 21. 18. Adopted in substance in Finding of Fact 20. 19. Adopted in substance in Finding of Fact 22. 20. Adopted in substance in Finding of Fact 22. 21. Adopted in substance in Finding of Fact 18. Adopted in substance in Finding of Fact 15. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 17. Adopted in substance in Finding of Fact 23. Rejected as a recitation of testimony and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 24. Rejected as a recitation of testimony and/or unnecessary. Adopted in substance in Finding of Fact 25. Rejected as a recitation of testimony and/or subordinate. Adopted in substance in Finding of Fact 25. Adopted in substance in Finding of Fact 21. Rejected as contrary to the weight of the evidence. Rejected as not supported by the weight of the evidence and/or unnecessary. Rejected as subordinate and/or unnecessary. Rejected as subordinate and/or unnecessary. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Adopted in substance in Finding of Fact 27. Adopted in substance in Finding of Fact 28. Rejected as a recitation of testimony and/or subordinate. Rejected as misleading and/or subordinate. Rejected as subordinate and/or unnecessary. Rejected as contrary to the weight of the evidence. Rejected as contrary to the weight of the evidence. Rulings on Proposed Findings of Fact Submitted by the Respondent Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 1. Adopted in substance in Finding of Fact 9. Adopted in substance in Finding of Fact 3. Rejected as contrary to the weight of evidence. Adopted in substance in Finding of Fact 13. Adopted in substance in Finding of Fact 18 and 19. Adopted in substance in Finding of Fact 16. Adopted in substance in Finding of Fact 23. Addressed in Conclusions of Law. Addressed in Conclusions of Law. Rejected as subordinate and/or unnecessary. COPIES FURNISHED: Thomas W. Stahl, Esquire 102 South Monroe Street Tallahassee, Florida 32301 R. Terry Rigsby, Esquire 325 John Knox Road Building C, Suite 135 Tallahassee, Florida 32303 Richard Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive Tallahassee, Florida 32308 Gregory L. Coler Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 John Miller, Esquire Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power HRS Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 =================================================================
The Issue Whether Rule 59C-1.036 constitutes an invalid exercise of delegated legislative authority, and; Whether the Agency's application form and scoring system utilized in the review of nursing home batch certificate of need applications constitute rules of the Agency as the term "rule" is defined in Section 120.52(16), employed in violation of Section 120.535, Florida Statutes (1993) and; Whether the disputed form and scoring system constitute an invalid exercise of delegated legislative authority.
Findings Of Fact The disputed rule in this case is Rule 59C-1.036(1), Florida Administrative Code, which provides in pertinent part: The community nursing home beds subject to the provisions of this rule include beds licensed by the agency in accordance with Chapter 400, Part I, Florida Statutes, and beds licensed under Chapter 395, Florida Statutes, which are located in a distinct part of a hospital that is Medicare certified as a skilled nursing unit. All proposals for community nursing home beds will be comparatively reviewed consistent with the requirements of Subsection 408.39(1), Florida Statutes, and consistent with the batching cycles for nursing home projects described in paragraph 59C-1.008(1)(l), Florida Administrative Code. The challenged rule is entitled "Community Nursing Home Beds," and also includes the "need methodology" for determining the need for community nursing home beds and specifically: regulates the construction of new community nursing home beds, the addition of new community nursing home beds, and the conversion of other health care facility bed types to community nursing home beds... Also pertinent to this case, the challenged rule provides: The Agency will not normally approve applications for new or additional community nursing home beds in any agency service subdistrict if approval of an application would cause the number of community nursing home beds in that agency subdistrict to exceed the numeric need for community nursing home beds, as determined consistent with the methodology described in paragraphs (2)(a), (b), (c), (d), (e), and (f) of this rule. The challenged rule has the effect of, among other things, requiring nursing homes and hospitals who seek to operate skilled nursing facility beds to file applications for community nursing home beds in the same batching cycle, compete against each other for those beds in nursing home subdistricts and be subject to the need methodology applicable to nursing home beds. The Agency has not developed a need methodology specifically for Medicare certified distinct part skilled nursing units. In 1980, the Agency's predecessor, the Department of Health and Rehabilitative Services, attempted to promulgate rules with the same effect of the rules challenged in this case. In Venice Hospital, Inc. v. State of Florida, Department of Health and Rehabilitative Services, 14 FALR 1220 (DOAH 1990) 1/ the Hearing Officer found the challenged rule in that case to be invalid and concluded, as a matter of law, that, with respect to the previous proposed rule: The competent, substantial evidence shows that these proposed rules are not reasonable or practical and will lead to an illogical result. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing beds into the community nursing bed inventory. In the 1990 challenge to the previously proposed rule, the Hearing Officer concluded that the proposed rule in question was an invalid exercise of delegated legislative authority, but also found that, from a health planning standpoint, reasons existed for and against the inclusion of hospital-based skilled nursing units within the nursing home bed inventory. In the instant proceedings, the Agency concedes that the challenged rule and the previous proposed rule are substantially identical. In this case, the parties defending the challenged rule presented several facts, many of which seek to establish changed circumstances since 1990, as evidence of a rational basis for the inclusion of hospital-based skilled nursing units within the nursing home bed inventory. Facts Established Which Arguably Support the Validity of the Challenged Rule Although the term "subacute care" does not have a generally accepted definition, this term is often applied to that care provided patients in skilled nursing units. Subacute care is an emerging and developing area of care which covers patients whose medical and clinical needs are higher than would be found in a traditional nursing home setting, but not so intense as to require an acute medical/surgical hospital bed. Subacute care is a level of care that is being developed to bridge a gap between hospital and traditional nursing home care and to lower the cost of care to the health delivery system. Both hospitals and nursing homes operate Medicare-certified distinct part skilled nursing facility units. The same criteria, including admissions criteria, staffing requirements and reimbursement methodologies, apply to such skilled nursing units, in hospitals and freestanding nursing homes. The patient population served in such units is primarily a population which comes to either a hospital or nursing home-based unit from an acute care hospital stay. This population group has a short length of stay in the Medicare distinct part unit and can be rehabilitated within a certain period of time. Skilled nursing units in hospitals and those in freestanding nursing homes are competing for the same patient population. Both hospitals and nursing homes are aggressively entering the subacute care market. There are some nursing homes which provide a level of subacute care equal to that provided by hospitals. As a general rule, the staffing, clinical programs, patient acuity and costs of care for patients do not substantially vary between skilled nursing units in hospitals and such units in freestanding nursing homes. In the past two or three years, the number of Florida nursing homes which compete for skilled unit patients has increased. In applications for skilled nursing unit beds, the services proposed by hospitals and those proposed by nursing homes are generally similar. Medicare-certified distinct part units in both freestanding nursing homes and hospitals are certified to provide the same nursing services. The types of services and equipment provided by hospital skilled nursing units and nursing home skilled nursing units are similar. There has been an increase in subacute care in the past five years. The average length of stay for patients treated in Medicare-certified distinct part nursing units in hospitals and in such units located in freestanding nursing homes is similar. The federal eligibility requirement for Medicare patients in hospital- based and in freestanding nursing home distinct part skilled nursing units are the same. Some skilled nursing units which are located in nursing homes have historically received patient referrals from hospitals. When these referring hospitals develop distinct part Medicare certified skilled nursing units, the nursing home skilled nursing units tend to experience a decline in occupancy. Uniform need methodology is developed in part based upon demographic characteristics of potential patient population. Nursing home bed need methodology utilizes changes in population by age groups over age 65 to project need for beds. Both hospital-based skilled nursing units and nursing home-based units serve substantial numbers of Medicare-eligible patients who are 65 years of age and older. Population health status is also utilized in developing uniform need methodologies. The health status of service population for Medicare units in freestanding nursing homes is, as a general rule, the same as the health status of population served in such units located in hospitals. The intent behind the process of reviewing CON applications from hospitals seeking skilled nursing unit beds and nursing homes seeking such beds is to reduce the risk of overbedding and duplication of services. Overbedding and duplication of services have the tendency to result in excessive costs and can result in deterioration of quality of care. Medicare admissions to nursing homes and Medicare revenue to nursing homes have increased in the past several years. Data also indicates that nursing homes are beginning to provide more intensive care for patients in skilled nursing units. The prevalence of freestanding nursing home Medicare-certified skilled nursing units has substantially increased in the past three years and this growth trend is expected to continue. Facts Established Which Demonstrate That the Challenged Rule Should be Declared Invalid The challenged rule requires a hospital seeking Medicare-certified skilled nursing unit beds to be comparatively reviewed with nursing home applications seeking all types of nursing home beds. There is no separate nursing home licensure bed category for skilled nursing unit beds. The Agency's inventories of freestanding nursing home beds do not identify Medicare-certified skilled nursing beds. Once an applicant to construct a nursing home opens the nursing home, the applicant does not need a separate CON to designate beds as a Medicare- certified skilled nursing unit. According to the AHCA's own witness, a freestanding nursing home can internally change its categories at any time without CON review. Pursuant to statute and agency rule, however, hospitals must obtain a CON to change the category of even one bed. 2/ Although a hospital seeking hospital licensed Medicare-certified skilled nursing beds is compelled by Rule 59C-1.036(1), Florida Administrative Code, to compete against all nursing home applicants and all nursing home beds in a batched review, it faces totally different standards of construction, operation and staffing after approval. Rule 59C-1.036(2), Florida Administrative Code, is the nursing home bed need formula. This formula does not result in an estimate of need for skilled nursing unit beds and projects need for total community nursing home beds only. There is currently no bed need methodology (hospital or nursing home) to ascertain the need for Medicare certified skilled nursing unit beds. The Agency's inventories of freestanding nursing home beds do not separately identify Medicare-certified skilled nursing home beds in nursing homes. All that is shown is whether the beds are "community nursing home beds" or "sheltered nursing home beds." The Agency has not established how, under this inventory and regulatory scheme, it controls overbedding in Medicare- certified skilled nursing units within a specific district or subdistrict since the only such beds shown on the inventories are those in hospitals. It is unreasonable and illogical to compare the need for hospital- based Medicare-certified skilled nursing unit beds with the need for all community nursing home beds. Under the present circumstances a reasonable comparison might be drawn between need for hospital-based skilled nursing unit beds and freestanding nursing home skilled nursing unit beds, but the AHCA rules do not currently provide for such a comparison. Determining the need for hospital-based skilled nursing unit beds by comparing such beds to all nursing unit beds constitutes poor health planning. Such hospital-based skilled nursing units do not provide similar services to similar patients when compared to all community nursing home beds and it is neither logical or reasonable to comparatively review the need for such services. The challenged rule also requires hospital applicants for skilled nursing unit beds to compete with nursing homes within the nursing home subdistrict. The Agency by rule divides districts differently for nursing homes than for hospitals. Thus, some hospitals' skilled nursing unit beds are comparatively reviewed against nursing home beds of all kinds and against hospital skilled nursing beds which are not within the same hospital subdistrict. As a general statement, the treatment profiles for patients in Medicare-certified skilled nursing units in hospitals and those for patients in nursing homes skilled nursing units are similar. There is, however, a distinct part of such patient population which must be treated in a setting which provides immediate access to emergency care. The provision of immediate emergency care is not typically available in nursing homes and nursing home patients in need of such care usually have to be readmitted to hospitals. Care available in hospitals (physicians and registered nurses on duty at all times, laboratory and radiation services available on premises) is sufficiently different to demonstrate that Medicare-certified skilled nursing units are not comparable to such units in freestanding nursing homes in all aspects. This distinction is clearly significant to patients who need emergency services because of age, multiple illnesses, and other conditions. Chapter 395, Florida Statutes, is the hospital licensure statute. Section 395.003(4), Florida Statutes, provides: The Agency shall issue a license which specifies the service categories and the number of hospital beds in each category for which a license is received. Such information shall be listed on the face of the license. All which are not covered by any specialty-bed-need methodology shall be specified as general beds. The Agency equates "acute care" beds with general beds. By rule, the Agency has excluded from the definition of "acute care bed": neonatal intensive care beds comprehensive medical rehabilitation beds hospital inpatient psychiatric beds hospital inpatient substance abuse beds beds in distinct part skilled nursing units, and beds in long term care hospitals licensed pursuant to Part I, Chapter 395, Florida Statutes. By Agency rule, a hospital specialty need methodology exists for all categories of hospital beds excluded from the acute care bed definition except category (e) beds in distinct part skilled nursing units and (f) long term care beds. The Agency is currently drafting a specialty hospital bed need methodology for long term care beds. The only licensed bed category for which the Agency has developed no specialty bed need methodology (existing or in process) is hospital beds in distinct part skilled nursing units. At hearing, the Agency presented the testimony of Elfie Stamm who was accepted as an expert in health planning and certificate of need policy analysis. Through Ms. Stamm's testimony, the Agency attempted to establish that the numeric need methodology established by the challenged rule includes a calculation of the need for both nursing home and hospital-based distinct part skilled nursing units. This testimony was not persuasive on this point. Indeed, Ms. Stamm acknowledged that the disputed rule does not result in an estimate of need for skilled nursing units or beds. The parties to this proceeding have attempted to establish that Medicare admission statistics in Florida support either the validity or invalidity of the challenged rule. Based upon the Medicare-related statistical data placed in the record in this case, it is more likely than not that, as of 1992, in excess of 90 percent of utilization of hospital-based skilled nursing units is Medicare covered and that the percentage of Medicare (as opposed to Medicaid) patient days in all freestanding nursing home beds was only seven percent. In this respect, it is not logical or reasonable to comparatively review the need for hospital-based Medicare-certified skilled nursing unit beds with all community nursing home beds. 47. The Agency lists Sections 408.15(8), 408.34(3)(5), 408.39(4)(a) and 400.71(7), Florida Statutes, as specific statutory authority for the challenged rule. None of the cited statutory provisions provides specific authority for the Agency to require hospitals seeking hospital licensed beds in Medicare- certified skilled nursing units to be reviewed against all community nursing home beds. There is no evidence of record in this case of any federal law requiring such review and no evidence to suggest that Medicare reimbursement is affected by such a review one way or the other. In this case, the competent, substantial evidence shows that the disputed rule is not reasonable or rational. The Agency has not developed a specific numerical need methodology providing for a reasonable and rational basis to comparatively review the need for Medicare-certified skilled nursing unit beds in hospitals or in nursing homes. There exists an inadequate factual or legal basis to support the forced inclusion of hospital-based skilled nursing units into the inventory of all community nursing home beds. Form 1455A Agency Form 1455A and the scoring methodology are used by the Agency in the review of applications for community nursing home beds and for skilled nursing facilities within distinct parts of a hospital. Various parties in this proceeding assert the Form 1455A and the scoring methodology constitute unpromulgated rules which are invalid pursuant to Section 120.535, Florida Statutes. Any party filing a letter of intent concerning community nursing home beds receives from the Agency an application package including Form 1455A and instructions. The instructions are an integral part of the application. Also included as part of the application are 34 pages of instructions on how the Agency scores the application. Form 1455A has general applicability to all applicants for community nursing home beds and for skilled nursing home facilities within distinct parts of a hospital. Form 1455A contains numerous provisions of mandatory language which facially provides that it must be submitted with applications for CON. The Agency acknowledges that such mandatory language predated the passage of Section 120.535, Florida Statutes, and considers the language obsolete. The Agency intends, in the future, to edit the form to strike "misleading language". Form 1455A is not incorporated in any rule of the Agency and has not been promulgated as a rule. Applications are reviewed based upon questions in Form 1455A. Applications are also reviewed against a numerical scoring system developed with the form. The form requires that the applicant certify that it will obtain a license to operate a nursing home. The form also requires certification that the applicant participate in Medicaid services which are not applicable to hospitals. These and other portions of the form are not rationally or reasonably related to the operation of a hospital-based distinct part skilled nursing unit. In the review and analysis of the applications at issue, a "scoring methodology" is used by the Agency. The scoring matrix is utilized to put numerous applications filed in the same agency district in perspective in terms of numerical ranking and how the applications compare to each other. The State Agency Action Report is the end product of the Agency review of the applications. The scoring system is used in the review proceedings and is utilized and included in at least some of the State Agency Action Reports. Form 1455A and the scoring methodology are utilized by the Agency in a manner that has general application and which forms significant components of a process which creates rights, and which implements, interprets, and prescribes law and Agency policy. At the final hearing, the Agency presented the testimony of Ms. Elizabeth Dudek, the Agency Chief of the Certificate of Need and budget review offices. Ms. Dudek was accepted as an expert in CON policy and procedure. Ms. Dudek provided an overview of the process whereby the challenged form and scoring system are used by the Agency in analyzing CON applications. Ms. Dudek testified that the Agency does not believe the form and scoring system meet the requirements of a rule. Ms. Dudek considers the form and system to be tools used to elicit responses in a standardized format. The fact that an application receives a high score based on the scoring matrix does not mean that the application will be approved. Ms. Dudek is of the opinion that the form and scoring system do not competitively disadvantage hospitals competing with nursing homes. Ms. Dudek cited the most recent batch cycle in which twelve hospitals were awarded distinct part nursing units, although these hospitals' applications did not receive the highest scores. Ms. Dudek's testimony was not persuasive in the above-referenced areas. As currently structured and utilized by the Agency, the form and the scoring system at issue are not reasonable or rational. There is not an adequate factual or legal basis to support the use of the form or the scoring system in analyzing applications for CON files by hospitals for distinct part Medicare-certified skilled nursing units.
Findings Of Fact Petitioner proposes to construct a 90 bed long term skilled facility near a hospital complex on University Boulevard in Jacksonville, and to offer beds to medicare patients immediately upon opening the facility Only one of the four existing nursing homes on the east side of the St. Johns River in Jacksonville has medicare certification. The existing nursing home in Jacksonville with the greatest number of vacant beds does not yet have medicare certification. Petitioner submitted its application for certificate of need on July 1, 1977. Between July 1, 1970, and July 1, 1977, overall occupancy of available nursing home beds in Jacksonville was between 95 and 97 percent. In April of 1977, Riverside Nursing Home had made 58 new beds available, 95 percent of which were occupied within two and a half months, in August of 1977, Riverside Nursing Home made an additional 58 now beds available. The following month 94.4 percent of the beds at Riverside Nursing Home were occupied. On September 19, 1977, a new 180-bed nursing home, Turtle Creek, opened its doors. At the time of the hearing, 82 of Turtle Creek's beds were occupied, although Turtle Creek, which is located on the northern periphery of Jacksonville, had not received medicare certification. Notwithstanding the filling of these new beds, the number of patients in other Jacksonville nursing homes did not decline appreciably. At the time of the hearing, 90.3 percent of all nursing home beds in Jacksonville were occupied, and all authorized beds were available for occupancy. It takes approximately 22 months after the start of construction to make a nursing home like petitioner proposes to build ready for occupancy. Stays in hospital beds are three or four times more expensive than stays in nursing home beds. At the time of the hearing, some medicare patients were staying in hospitals up to a week and a half after their physicians had authorized their discharge to a nursing home, because beds in medicare certified nursing homes were unavailable. This situation should be ameliorated, at least temporarily, if Turtle Creek obtains medicare certification before its beds are filled by non-medicare patients. On the other hand, social workers employed by Memorial Hospital and Riverside Hospital testified to recently increased numbers of persons requiring placement in nursing homes, upon discharge from their respective hospitals. In the four to six months next preceding the hearing, the number of persons requiring nursing home care when discharged by Memorial Hospital doubled. At the time of the hearing, persons otherwise ready to be discharged from hospitals remained hospitalized for lack of available beds in medicare certified nursing homes. Proximity of nursing homes to their residents' families and friends facilitates visiting, which has a beneficial effect on the health of persons confined to nursing homes. The southeast section of Jacksonville, in which petitioner proposes to construct a nursing home, has a large and growing population. Turtle Creek, which has the biggest block of vacant nursing home beds in Jacksonville, is 15 miles north of petitioner's proposed site. Relevant portions of the 1977 State Medical Facilities Plan (the Plan) were received in evidence as petitioner's exhibit No. 6. The Plan utilizes projected population increases in Duval County in projecting how many nursing home beds will be necessary in order to accommodate everybody who will need one, at a 90 percent occupancy rate. On this basis, a projected need by 1982, of 1,845 nursing home beds for Duval County was incorporated into the Plan. After adoption of the Plan, but before August 10, 1977, the 1,845 figure was changed to 1,921 at the instance of Lloyd Bulme end Ronald Fehr Floyd, employees 01 the Health Systems Agency of Northeast Florida Area 3, Inc. (HSA). At the time of the hearing, 1,912 or 1,914 nursing home beds, all that had been authorized, were available for occupancy in Duval County. While embodying projections as to how many nursing home beds would be needed in the future so as to assure a 90 percent occupancy rate, the Plan provides for the possibility of error in these projections. Specifically, the Plan allows for the consideration of "extenuating and mitigating circumstances," including "availability": Availability In those instances whereby a capital expenditure/certificate of need proposal is made for a new or expanded facility and whereby it can be demonstrated and documented by the applicant and verified by the HSA and/or OCMF that: similar facilities in the documented service area have been utilized at an optimum rate (85 percent occupancy for acute general hospitals and 90 percent occupancy for nursing homes) for the previous 12 month period; and, there exists a current, unduplicated waiting list within the documented service area for the services to be offered by the new or expanded facility; these factors will be considered in making a determination on the capital expenditure/ certificate of need proposal. Petitioner's exhibit No. 6. In applying the Plan's 90 percent optimum rate formula, the Office of Community Medical Facilities "would certainly consider the open beds, the occupancy during the preceding twelve months of the open, available for use beds, tempered certainly by beds which have been approved but are not yet available." (T1231) Fifty-nine of the nursing home beds in Jacksonville require "[m]odernization," according to the Plan. Petitioner's application for a certificate of need was initially reviewed by a committee" of the HSA. On August 25, 1977, the Health Needs and Priorities Committee voted to recommend approval of petitioner's application, on condition that Jacksonville's nursing homes' occupancy rate not fall below 90 percent for four months once all the authorized nursing home beds became available for occupancy. This consideration was consistent with the local Health Systems Plan's requirement of 90 percent or better occupancy, calculated the basis of all authorized beds, for four months preceding the grant of a certificate of need for additional nursing home beds. Before the Executive Committee of the HSA acted on the Recommendation of the HSA's Health Needs and Priorities Committee, HSA staff were advised by the Office of Community Medical Facilities in Tallahassee that "December 19, 1977 . . . . [was] the latest possible time for a decision Petitioner's exhibit No. 17. Inasmuch as Turtle Creek began operation on September 19, 1977, only three months before "the latest possible time for a decision," there was not to be a four months' trial with all authorized beds available, before HSA's Executive Committee passed on petitioner's application. Instead, HSA staff calculated the occupancy rate by adding all existing nursing home beds in Jacksonville, and all other authorized nursing home beds expected to become available in Jacksonville, and dividing the sum into the number of occupied nursing home beds in Jacksonville less the number of occupied beds in Regency House Center (because the HSA staff did not have Regency House Center "patient data." Petitioner's exhibit No. 6.) This calculation yielded an occupancy rate of 84.4 percent for the four months preceding the date on which petitioner filed its application. Because 84.4 percent was less than 90 percent called for by the Health Systems Plan, the HSA's Executive Committee disapproved petitioner's application. Subsequently, the Office of Community Medical Facilities also acted unfavorably on petitioner's application, for reasons which the evidence adduced at the hearing did not make entirely clear. The foregoing findings of fact should be road in conjunction with the statement required by Stuckey's of Eastmam, Georgia v. Department of Transportation, 340 So.2d 119 (Fla 1st DCA 1976) , which is attached as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent grant petitioner's application for certificate of need. DONE AND ENTERED this 23rd day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 77-2243 Paragraphs one, two, five, six, seven, nine, ten, eleven, thirteen, fourteen, sixteen, seventeen and eighteen of petitioner's proposed findings of fact accurately report the evidence adduced at the hearing and have been adopted, in substance, insofar as relevant. Paragraphs three and four and most of paragraph nineteen of petitioner's proposed findings of fact are actually proposed conclusions of law. Paragraph eight of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville. The discrepancy between the Health Systems Plan and the State Medical Facilities Plan was 146 beds for the entire area. Paragraph twelve of petitioner's proposed findings or fact has been largely rejected. The evidence did not establish that all 35 beds at Regency House Center were probably full. The charges to the state plan were apparently called to the attention of federal bureaucrats in Atlanta. (T254) Paragraph fifteen of petitioner's proposed findings of fact overstates slightly the number of existing nursing home beds in Jacksonville; end is otherwise supported only by the speculative testimony of one witness. COPIES FURNISHED: Kenneth F. Hoffman, Esq. Rogers, Towers, Dailey, Jones & Gay Post Office Box 1872 Tallahassee, Florida 32302 Robert M. Eisenberg, Esquire 5920 Arlington Expressway Post Office Box 2417 F Jacksonville, Florida 32231
The Issue Whether the Department of Health and Rehabilitative Services should approve the application for certificate of need (CON) of any one or more of five applicants for community nursing home beds in Lee County for the July 1989 planning horizon.
Findings Of Fact The Applicants Applications for certificates of need (CON) for nursing homes are accepted by the Department of Health and Rehabilitative Services (Department) in batching cycles and are subject to competitive review. The Department comparatively reviewed and analyzed 13 individual applications for proposed nursing services for District VIII, Lee County, in the July, 1986 nursing home batching cycle. Five of those applications are at issue for purposes of this proceeding. Pertinent to this proceeding, petitioner, Maple Leaf of Lee County Health Care, Inc., a wholly owned subsidiary of Health Care and Retirement Corporation of America (HCR filed an application for a 120-bed nursing home (CON 4746), petitioner Forum Group, Inc. (Forum), filed an application for a 60-bed nursing home (CON 4755), petitioner, Health Quest Corporation (Health Quest), filed an application for a 60-bed nursing home (CON 4747), petitioner, Hillhaven, Inc., d/b/a Hillhaven Health Care Center Lee County (Hillhaven) filed an application for a 120-bed nursing home (CON 4756), and respondent, Gene Lynn d/b/a Careage Southwest Healthcare Center (Careage) filed an application for a 120-bed nursing home (CON 4748). Each of these applications was timely filed. The Department's "preliminary" action The Department is the state agency charged with implementing and regulating the CON program for medical facilities and services in Florida. Within the Department, the Office of Community Medical Facilities is responsible for the review of CON applications and provides a recommendation for approval or disapproval after its analysis is concluded. The Department assigned the subject District VIII applications for the July, 1986 hatching cycle to Medical Facilities Consultant Robert May for review. Mr. May was supervised in his work by Elizabeth Dudek, an experienced Medical Facilities Consultant Supervisor, who has reviewed or supervised the review of approximately 1200 CON applications. Robert Nay and Elizabeth Dudek concurred in their evaluations of the applications and recommended that Hillhaven's application be approved for 60 beds in Lee County. This recommendation was forwarded to the Administrator of the Office of Community Medical Facilities, Robert E. Naryanski, who also occurred with the recommendation on or about December 20, 1986, and forwarded the recommendation to Marta Hardy, Deputy Assistant Secretary for Health Planning and Development, for final approval. An unusual set of circumstances evolved from that approximate point in time with respect to the applications at issue. Sometime in late November 1986 Marta Hardy talked to Robert Sharpe, Administrator of the Office of Comprehensive Health Planning, concerning the applications in this batching cycle and stated that she intended to involve him in the review procedure. In late December, she asked Mr. Sharpe to review the applications for four of the counties in the cycle, including Lee County. Mr. Sharpe is in a separate and distinct part of the Department, which reports to the Deputy Assistant Secretary but does not, in the ordinary course of operations, review certificate of need applications. Mr. Sharpe's involvement with reviewing nursing home applications had never occurred before and has not occurred since. However, Mr. Sharpe has been involved on limited occasions with reviewing hospital CON applications in preparation for administrative hearings. Careage had a CON application in each of the four districts that Mr. Sharpe was asked to review. Mr. Sharpe was not asked to review any other districts other than the four districts in which Careage had applications pending. In Mr. Sharpe's conversation with Ms. Hardy, Ms. Hardy specifically mentioned Careage while expressing her concern about the Department's ability to discriminate the best applicants on the basis of quality of care. Ms. Hardy mentioned no other applicant by name. Mr. Sharpe, in all circumstances, recommended Careage for approval. Mr. Sharpe did not attempt to do a complete re-review the applications, and did not redo any part of the review that had been performed by the Office of Community Medical Facilities specifically the need calculations and comparing the applications to the statutory review criteria. Mr. Sharpe did not apply statutory review criteria in his review of the applications because it had been determined that all the applicants were minimally qualified and met the statutory review criteria. Mr. Sharpe felt that the responsibility of his office was simply to do a comparative review to determine the best applicant. Mr. Sharpe placed information in the applications into what has been termed a "matrix." The purpose of the matrix was to present the information in the applications in a format which would facilitate a comparative analysis based on a greater number of factors than had previously been considered. Traditionally, the predominant factors utilized by the Department in reviewing applications were construction costs, Medicaid participation percentages, proposed sites, and charges. The matrix developed by Mr. Sharpe included additional factors which he felt would better address the quality of care to be provided, such as the size of facility, the size of the patient rooms, the amenities available to the patients and their families, the type and level of staffing, availability of special programs, and operating costs. By including a greater number of factors in the matrix, more information was considered in selecting the best applicant. As a result, the factors that traditionally had been considered by the Department were given relatively less weight. There was no notice to the applicants of this change in practice. Further, although all the information considered by Mr. Sharpe was taken from the applications and generally required to be in the application, the applicants reported the information differently, making a direct "apples-to-apples" comparison difficult. Mr. Sharpe's review of the applications spanned approximately five to eight days. Mr. Sharpe's staff in the information on the matrix from the applications, and, although Mr. Sharpe had personally reviewed all the applications, Mr. Sharpe did not personally check the information placed on matrix for accuracy. The Office of Community Medical Facilities' initial review covered a period of approximately six months. There was no evidence that the duties and responsibilities of the Office of Community Medical Facilities were not carried out in a thorough and appropriate manner. Ms. Dudek has more experience in reviewing CON applications than Mr. Sharpe, and she took into account, among other review criteria requirements, the type programs offered by the applicant and the quality of care the applicant had demonstrated and was capable of providing. Mr. Sharpe never talked to Ms. Dudek to find out the basis for her recommendation because he felt his responsibility was to do an independent review. Robert Sharpe reported his findings with regard to Lee County to Marta Hardy who apparently accepted Mr. Sharpe's recommendation on or about January 7, 1987, approving Careage's application for 60 beds and denying all others. On or about January 23, 1987, in the Florida Administrative Weekly, it was published that Careage was approved fob a 120-bed facility in Lee County. Actually HRS approved Careage for a 60-bed facility; the 120-bed figure in the Florida Administrative Weekly was erroneous. As a result of a new administration and Bob Griffin succeeding Ms. Hardy as Deputy Secretary in the Office of Health Planning, and due to his concerns about the unique manner in which these applications were reviewed and a decision made, another review of the applications for Lee County was conducted. The Office of Community Medical Facilities, the office originally responsible for reviewing the applications, was asked to do this review. This third review was conducted during the summer of 1987 by Bob May while this case was pending before the Division of Administrative Hearings. In this third review, a matrix was also used, but not the identical matrix previously used by Mr. Sharpe. Indeed, the Office of Community Medical Facilities was instructed not to look at what Mr. Sharpe's office had done. The review resulted in a decision that HRS would maintain its position of supporting partial approval of the Careage application for 60 beds. By letter dated September 4, 1987, the parties were formally notified of the HRS decision and a Correction Notice was published in the Florida Administrative Weekly indicating that the notice published in January, 1987, stating that Careage had received a CON for 120 beds, should have shown a partial approval of 60 beds, and a denial of 60 beds. HCR, Forum, Health Quest and Hillhaven timely contested initial approval of the Careage application and their own respective denials. Careage and HRS are the respondents. Hillhaven, prior to final hearing, dismissed its case contesting the Careage approval for 60 beds, and in this proceeding contends that Hillhaven should be awarded a certificate of need because there is a bed need in excess of 60 beds in Lee County. Careage did not timely contest the denial of the 120 beds requested in its original application. Health Care and Retirement Corporation of America HCR, through its wholly owned subsidiary, Maple Leaf of Lee County Health Care, Inc., proposes to construct a 120-bed community nursing home in Lee County, Florida. At the time its application was submitted, HCR had not selected a site on the proposed facility, but at hearing proposed to locate it in the Ft. Myers area. Currently, HCR owns and operates 92 nursing homes in 19 different states, including seven within the State of Florida. Its existing Florida facilities are Pasadena Manor Nursing Home (South Pasadena, Florida), Community Convalescent Center (Plant City Florida), Kensington Manor (Sarasota, Florida), Jacaranda Manor (St. Petersburg, Florida) Wakulla Manor (Crawfordville, Florida, Heartland of St. Petersburg (St. Petersburg, Florida, and Rosedale Manor (St. Petersburg, Florida). Each of these facilities received superior ratings on their latest licensure and certification survey with the exception of Heartland and Rosedale, which received a standard and conditional rating respectively. Significantly, the conditional rating assigned to the Rosedale facility occurred less than six months after that facility was acquired by HCR, and all deficiencies were corrected within 19 days of the survey. HCR's current proposal for a 120-bed facility will be a one-story structure containing 40,000 gross square feet, including 2,000 square feet for an ancillary adult day care center. It will have 58 semi-private rooms with half-bath (toilet and sink) and four private rooms with full bath (toilet, sink and shower) located within four patient wings, two nursing stations, two dining rooms, central bathing facilities, beauty- barber shop, quite lounge, physical therapy room, occupational therapy room, multi-purpose rooms, outdoor patio areas and the other standard functional elements required to meet licensure standards. In all, the proposed facility meets or exceeds state requirements for the construction of nursing homes. HCR proposes to dedicate one wing (14 semi-private and 1 private room) of its facility to the care of patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as such loss progresses, a need for increased personal care. Historically, Alzheimer's patients have been mixed with other patients in nursing homes, often disrupting other patients and presenting problems of control for staff separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient without restraint or sedation, and provides the patient with a smaller, safer and specially designed area with specially trained staff to address the needs of such patients. However, absent fill-up, HCR does not propose to limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders. HCR's Alzheimer's unit is reasonably designed, equipped and minimally staffed for its intended purpose. HCR also proposes to provide, as needed, subacute care at its facility. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there has been an increased demand for subacute services in nursing homes. Included within the subacute services HCR proposes to offer are ventilator care, IV therapy, pulmonary aids, tube feeding, hyperalimentation, and percentage and long term rehabilitation. HCR currently provides a wide variety of such subacute services at its existing facilities, and it may reasonably be expected to continue such practice at the proposed facility. As an adjunct to the proposed nursing home, HCR proposes to operate an adult day care unit for 12 Alzheimer's Disease patients. Additionally, HCR will offer respite care within the nursing home when beds available. Adult care and respite care provide alternatives to institutional long-term care in nursing homes, aid in preventing premature rising home admissions, and promote cost containment. As initially reviewed by the Department, HCR's activity would be a single story building containing 40,000 gross square feet, including the day care area, with an estimated total project cost of $3,894,000. As proposed, the total project cost equates to $32,450 per bed, and as designed provides 127 net square feet of living space for private rooms and 166 square feet for semi- private rooms. Construction equipment costs were as follows: Construction costs $2,200,000; costs per square foot $55.00; construct cost per bed 17,417; equipment costs $420,000; and equipment cost per bed $3,500. HCR's estimate of project costs is reasonable. At hearing HCR updated its project costs to account for changes that arose during the delay between initial review and de novo hearing. As updated, the total project cost was $4,375,500, or $36,462 per bed. Construction equipment costs, as updated were as follows: construction costs $2,400,000; cost per square foot $60.00; construction cost per bed $19,000, equipment costs $420,000; and equipment cost per bed $3,500. HCR's updated estimate of cost is reasonable. Staffing at the proposed 120-bed facility is designed to accommodate the needs of the skilled and intermediate care patients, as well as the special needs of the Alzheimer's and subacute patients. HCR will provide 24-hour registered nurse coverage for subacute patients and a higher staffing level in the Alzheimer's unit. The nursing home will provide 3.59 hours per patient in the Alzheimer's unit and 2.73 nursing hours overall, based on the assumption that 50 percent of the Alzheimer's patients will wanderers and that 50 percent of all patients will require skilled care. Precise staffing for subacute patients will be determined by the nature of the subacute services needed. HCR's staffing levels, as originally proposed and as updated, meet or exceed state standards. The salary and benefit estimates provided by HCR in its original application reflect salary and benefit levels current at the time of application, and the salary and benefit projections provided by HCR at bearing reflect current (1987) salaries and benefits inflated to the date of opening. Both estimates are reasonable. HCR's projection of utilization by class of pay as initially proposed was as follows: Private pay 51 percent, Medicaid 46 percent, and Medicare 3 percent. Due to its experience over the intervening 17 months since submittal of its application, HCR updated its assessment of utilization as follows: Private pay 50 percent, Medicaid 46 percent, and Medicare 4 percent. The current Lee County Medicaid experience level is 46 percent, and HCR provides an average 71 percent Medicaid occupancy in its Florida facilities. HCR's projections for payor mix are reasonable. HCR's initial application contained estimates of expenses and revenues current as of the date of application (July 1986) but failed to include an inflation factor to accommodate anticipated increases in expenses and revenues. Initially, T. projected its per diem room charges to be $60 to $85. At hearing, HCR projected its per diem room charges in the year opening (1990) to be $90 for a private room, $75 for a semiprivate room, $76.00 for Medicare patients, and $72 for Medicaid patients. The private, semi-private and Medicare charges were determined by inflating current (1987) Lee County charges forward to the year of opening. The Medicaid charges were based on a calculation of the Medicaid reimbursement formula. These charges, when multiplied by patient days, are a reasonable estimate of the projected revenues of the facility. HCR's estimate of expenses in its initial application was based on its current experience. Intervening events have lent new insight to its evaluation of expenses, as have intervening inflationary factors. While HCR's estimate of expenses and revenues was reasonable in its initial application, its current estimates comport with the reality of a 1990 opening and are reasonable. HCR has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other personnel necessary to staff its facility. Since HCR does not propose to initially limit admission to its Alzheimer's unit solely to patients suffering from Alzheimer's disease and related disorders, its pro formas are premised on reasonable assumptions, and it has demonstrated the financial feasibility project in both the short term and long term. The proof demonstrates that HCR provides and Bill continue to provide quality care. HCR's corporate standards and guidelines regulate such areas as patient rights, staff development and orientation, physician and nurse services, pharmacy services and medication administration, social services, and infection control. HCR's manager of quality assurance, house professional services consultants, and quality assurance consultants regularly visit each HCR nursing home to implement the quality assurance standards and guidelines. Each HRC nursing home provides a staff development director who is responsible for the orientation of new employees, training new employees, and continuing training for all employees. Forum Group Inc. Forum is a publicly held health services company which owns, develops and operates retirement living centers and nursing homes on a national basis. Currently Forum operates 22 Lang facilities and an additional 11 retirement living centers with attached nursing facilities, including one nursing facility in Florida. Its Florida facility holds a standard rating. Other facilities owned by Forum in Texas, Kentucky and Illinois do, however, hold superior ratings. Pertinent to this case, Forum proposes to develop a retirement living center in Lee County that would consist of its proposed 60-bed skilled and intermediate care nursing home, an adult congregate living facility, and apartments or Independent living. 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, laundry, administrative area and heating plant. Such design provides for an efficient operation, as well as an economical distribution costs facility wide. The nursing facility proposed by Forum will be a single story building of wood frame and brick veneer construction containing 27,000 gross square feet. It will include 20 semi- private rooms with half bath, 16 private rooms with half bath, 3 private rooms with full bath, and one isolation room with full bath. Also included are a beauty-barber shop, quite lounge, physical therapy room, occupational therapy room, and exam-treatment room. But for the length of the corridors in the patient wings, discussed infra, the proposed facility meets or exceeds state requirements for the construction of nursing homes. Forum's proposal, as initially reviewed by the Department, would have a total project cost of $2,314,800. This equates to $38,580 per bed, and as designed provides 150 net square feet of living space for private rooms and 228 net square feet for semi-private rooms. Construction equipment costs were as follows: Construction costs $1,377,000; cost per square foot $51.00; construction cost per bed $22,950; equipment costs $200,000; and equipment costs per bed $3,333. Forum's estimate of project cost is reasonable. Forum provided a single-line drawing indicating the general arrangement of spaces for its proposed facility. As proposed, the facility would consist of two patient wings, and a central nurse's station. The corridor lengths in the patient wings exceed state standards by 40 feet. They could, however, be modified to conform to State standards without significantly affecting the cost of construction. The project would have energy conservation features such as heavy duty roof and side insulation, double-glazed windows, and high efficiency heating and air conditioning equipment. The forum facility will offer skilled and intermediate care, and subacute care, including IV therapy, ventilator care, hyperalimentation, pulmonary aids, and short and long term rehabilitation. Forum would contract out for physical therapy, speech therapy, pharmacy consultation and a registered dietician. If needed, Forum would offer respite care when beds are available. The proposed staffing levels and salaries proposed by Forum in its application are reasonable and meet or exceed state standards. Forum has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent staff. Twenty-four hour coverage by registered nurses will be provided, and a staffing ratio of 2.9 will be maintained. The staffing level at the proposed facility is consistent with that experienced at Forum's existing Florida Facility. Forum provides, and will continue to provide, quality care. Forum's application projected its utilization by class of pay as follows: private pay 58.47 percent, Medicaid 37.16 percent, and Medicare 4.37 percent. Currently, Forum experiences a 48 percent Medicaid occupancy rate system-wide, although it only has 2 of 35 beds dedicated to Medicaid care in its present Florida facility. Forum estimated its revenues based on patient charges ranging from $50.64 per day for Medicaid/semi-private room to $75.00 per day for SNF/private pay/private room. Based on such revenues, its pro forma, utilizing a conservative 86.25 percent occupancy rate at the end of the second year of operation, demonstrated the short term and long term financial feasibility of the project as initially reviewed by the Department notwithstanding the fact that it had underestimated its Medicaid and Medicare reimbursement rates. At hearing, Forum sought to demonstrate that its project was currently feasible by offering proof that intervening events had not significantly impacted the financial feasibility of its project. To this end, Forum offered proof that the contingencies and inflation factors it had built into the construction of its initial proposal would substantially offset any increased costs or expenses of construction. Additionally, Forum sought to update its proposal at hearing by offering testimony that included an increase in the administrator's salary from $27,000 to $39,000, a decrease in interest in year one to $187,803, an increase in interest in year two to $250,790, and an increase in revenues based on patient charges ranging from $69.19 per day for Medicaid/semi private room to $90.00 per day for SNF/private pay/private room. Some of the applicants objected to Forum's proof directed at the current financial feasibility of its project because it had not previously provided them with a written update of its application as ordered by the Hearing Officer. The applicants' objection was well founded. Further, the proof was not persuasive that any contingencies and inflation factors it had built into its initial proposal would substantially offset any increased costs or expenses of construction, nor that salaries, benefits and other expenses that would be currently experienced were appropriately considered in addressing the present financial feasibility of Forum's project. While Forum has the available resources, including management personnel and funds for initial capital and operating expenditures, for project accomplishments and operation, and will be able to recruit any other personnel necessary to staff its facility, it has failed to demonstrate that its proposal, as updated, is financially feasible in the long term. Health Quest Corporation Health Quest is a privately held corporation which owns, develops and operates health care facilities and retirement centers on a national basis. Health Quest has been in business for approximately 20 years, and currently operates 11 long-term care facilities and three retirement centers in Indiana, Illinois, and Florida. Its existing Florida facilities are located in Jacksonville, Boca Raton, and Sarasota. It also has facilities under construction in Winter Park and Sunrise, Florida. Health Quest also held a number of other certificates of need to construct nursing facilities in Florida. Recently, however, it decided to transfer or sell 3-4 of those certificates because its initial decision to develop nine new projects simultaneously would have, in its opinion, strained its management staff and commitment to high quality standards. HCR is, however, currently proceeding with several projects in Florida, and anticipates that the proposed Lee County facility will be brought on line thereafter. Pertinent to this case, Health Quest proposes to develop a retirement center in Lee County that would consist of a 60-bed skilled and intermediate care nursing home, and 124 assisted living studio apartments (an ACLF). 4/ The two components which comprise Health Quest's retirement center are physically connected and share some operational functions such as a common kitchen, laundry, therapy areas, maintenance areas, and administrative areas. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. In addition to providing an economical distribution of costs, the two components of the retirement center are mutually supportive. The nursing care unit supports the ACLF by making sure that health care services are available to the assisted living people. The ACLF supports the nursing unit as a source of referral and as an alternative to nursing home placement. The nursing facility proposed by Health Quest will be a single story building of masonry and concrete construction. It will include 6 private rooms and 27 semi-private rooms with half-bath attached, central nurse's station, central bathing facilities, beauty-barber shop, quite lounge, central dining area, physical and occupational therapy room and outdoor patio The center, itself, will provide patios, walkways and other outdoor features to render the facility pleasant and attractive, and will provide multi-purpose areas to be used for religious services and other activities, an ice cream parlor and gift shop. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Health Quest's proposed facility contained 25,269 gross square feet, with an estimated total project cost of $2,244,505. As proposed, the total project cost equates to $37,408 per bed, and as designed provides 240 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows: Construction costs $1,470,333; cost per square foot $58.19; construction cost per bed $24,506; equipment costs $298,200; and equipment cost per bed $4,970. While the majority of Health Quest's costs are reasonable, its equipment costs are not. These costs are substantially the same as those projected in its original application for a 120-bed facility, which at an equipment cost of $300,000 derived an equipment cost per bed of $2,500. Why the same cost should prevail at this 60-bed facility was not explained by Health Quest, and its equipment cost per bed of $4,970 was not shown to be reasonable. As with most applicants, Health Quest updated its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing. As updated, the estimated project cost is $2,290.331, $38,172 per bed. Construction equipment costs were as follows: Construction costs $1,507,043; cost per square foot $59.64; construction cost per bed $25,117; equipment costs $302,700; and equipment costs per bed $5,045. Again, while the majority of Health Quest's costs are reasonable its equipment costs are, for the reasons heretofore expressed, not shown to be reasonable. The Health Quest facility will offer skilled and intermediate nursing care, and subacute care, including IV therapy, chemotherapy, TPN therapy and tracheostomy care. Also to be offered are respite care as beds are available and, within the complex, adult day care. Health Quest will maintain a nursing staffing ratio of approximately 3.25 hours per patient day for skilled care and 2.5 for intermediate care. As originally reviewed by the Department, Health Quest's staffing levels and expenses were reasonable. At hearing, Health Quest increased its staffing levels to account for an increased demand in labor intensive care, and increased its staffing expenses to account for the intervening changes in the market place. As updated, Health Quest's staffing levels and expenses are reasonable. Health Quest's projection of utilization by class of pay in the application reviewed by the Department was as follows: private pay 51.6 percent, Medicaid 45 percent, and Medicare 3.4 percent. Health Quest's utilization projection, as updated at hearing, was as follows: private pay 50.9 percent, Medicaid 45 percent, and Medicare 4.1 percent. TAB Health Quest currently serves 30 percent Medicaid patients at its Jacksonville facility, 10 percent Medicaid patients at its Boca Raton facility, and no Medicaid patients at its Sarasota facility. It has, however, committed to serve 40 percent and 48 percent Medicaid patients at its Sunrise and Winter Park facilities, respectively. Health Quest's projections of payor are reasonable. Initially, Health Quest projected its per diem room charges to range from $52 for skilled and intermediate care Medicare patients to $57.25 for skilled care-private and Medicare patients. It did not, however, draw any distinction between private and semi-private rooms. At hearing, Health Quest projected its per diem room charges as follows: $90 for SNF/single/private pay; $73 for SNF/double/private pay; $73 for SNF/double/Medicare; $68 for SF/double Medicaid; $68 for ICF/single/private pay; $70.75 for ICF/double/private pay; and $68 for ICF/double/Medicaid. Health Quest's fill-up and occupancy projections, as well as its projections of revenue and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and as updated. During the course of these proceedings, a serious question was raised as to whether Health Quest had demonstrated that it had the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, or that it was committed to the subject project. Within the past three years, Health Quest has sold three of its approved CONS and is considering the sale a fourth due to its inability to handle that number of projects, and the adverse impact it would have on its ability to deliver quality care. Notwithstanding its inability to proceed with approved projects, Health Quest proceeded to hearing in October 1987 and December 1987 for nursing home CONs in Hillsborough County and Lee County (the subject application), and also had nine such applications pending in the January 1987 batching cycle and eight such applications in the October 1987 batching cycle. Health Quest's actions are not logical, nor supportive of the conclusion that it is committed to this project or that it possesses available resources for project accomplishment. Under the circumstances, Health Quest has failed to demonstrate that it has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. Health Quest's facilities in Jacksonville and Boca Raton currently hold superior ratings from the Department. A superior rating includes consideration of staffing ratios, staff training, the physical environment, physical and restorative therapies, social services, and other professional services. Those facilities are monitored, as would the subject facility, by Health Quest for quality care through a system of quarterly peer review, and provide extensive staff education programs that include orientation training for new staff and on-going education for regular staff. Health Quest has demonstrated that it has provided quality care. However, in light of the strain its current activities have placed on its resources, it is found that Health Quest has failed to demonstrate that it could provide quality care at the proposed facility were its application approved. Hillhaven, Inc. Hillhaven is a wholly owned subsidiary of the Hillhaven Corporation, which is a subsidiary of National Medical Enterprises. The Hillhaven Corporation has been business for almost 30 years, and is currently responsible for the operation of approximately 437 nursing homes and retirement centers nationally, including 15 nursing homes which it owns or operates in the State of Florida. Hillhaven proposes to develop a new 120-bed skilled and intermediate care community nursing home in Fort Myers, Lee County, consisting of 38,323 square feet. It will include 14 private rooms and 53 semi-private rooms, a full bath attached to each room (shower, toilet and sink), central tub rooms, beauty- barber shop, quite lounge, chapel, physical therapy room, occupational therapy room, and outdoor patio areas. In all, Hillhaven's proposed facility meets or exceeds state requirements for the construction of nursing homes. As initially reviewed by the Department, Health Quest's proposed facility would be a single-story building containing 38,323 gross square feet, with an estimated total project cost of $3,544,444. As proposed, the total project cost equates to $29,537 per bed, and as designed provides 217 net square feet of living space for both private and semi-private rooms. Construction equipment costs were as follows; construction costs $2,146,000; cost per square foot $56.00; construction cost per bed $17,884; equipment costs $442,005; and equipment cost per bed $3,683.38. Hillhaven's project costs are reasonable. As with the other applicants, Hillhaven update its project costs at hearing to account for the changes which were occasioned by the delay between initial review and de novo hearing, certain oversights in its initial submission, and its decision to proceed with type 4 construction as opposed to type 5 construction as originally proposed. As updated, the estimated project cost is $4,089,639, or $34,155.33 per bed. Construction equipment costs, as updated, were as follows: construction costs $2,446,088; cost per square foot $63.82; construction cost per bed $20,384; equipment costs $521,200; and equipment costs per bed $4,343.33. By far, the biggest factor in the increased construction costs was Hillhaven's decision to proceed with type 4 construction as opposed to type 5 construction. Either type of construction would, however, meet or exceed state standards, and Hillhaven's estimates of construction and equipment costs are reasonable. The Hillhaven facility will offer skilled and intermediate care, occupational therapy, speech therapy, physical therapy, recreational services, restorative nursing services, and social services. Hillhaven does not discriminate on admission, and would admit Alzheimer's and subacute patients as presented. Were sufficient demand experienced, Hillhaven has the ability to provide and would develop a full Alzheimer's unit, and provide day care and respite care. Currently, Hillhaven operates 36 Alzheimer's units at its facilities nation wide, but has experienced no demand for such a special unit or other special care at its existent Lee County facility. As originally reviewed by the Department, Hillhaven's staffing levels an expenses were reasonable. At hearing, Hillhaven increased its staffing levels to account for staff inadvertently omitted from its initial application, and increased its staffing expenses to account or intervening changes in the market place. As updated, Hillhaven's staffing level is 2.5, and its staffing levels and expenses are reasonable. Hillhaven's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 30 percent, Medicaid 60 percent, and Medicare 10 percent. As updated at hearing, Hillhaven's utilization projection was as follows: private pay 44 percent, Medicaid 53 percent, and Medicare 3 percent. Currently, Hillhaven provides, on average, 53 percent Medicaid care at its facilities in Florida. Hillhaven's estimate of payor mix was reasonable and, in light of intervening changes in circumstance, was reasonable as updated. Hillhaven's patient charges for its second year of operation as originally reviewed by the Department ranged from $58.60 to $62.00 per day. As updated, Hillhaven's patient charges ranged from $52.13 to $73.50 per day. Hillhaven's estimated charges were achievable when initially proposed and as updated, and are reasonable. Hillhaven's fill-up and occupancy projections, as well as its projections of revenues and expenses, are reasonable. They were reasonable when initially reviewed by the Department, and comport, as updated, with the current experience in Lee County. Hillhaven has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates are premised on reasonable assumptions, and Hillhaven has demonstrated the short term and long term financial feasibility of its project. Currently, Hillhaven owns or operates 15 facilities in the State of Florida. Of these 15 facilities, two have opened within the past year and are not eligible for ratings. Nine of the 13 eligible facilities are operating with superior licenses. Of the remaining four facilities, two have a standard license and two have a conditional license. The two facilities with conditional ratings have both resolved their deficiencies. Hillhaven has provided and will continue to provide quality care. It ensures that quality care will be maintained within its facilities by drawing upon the professional resources four regional offices comprised of registered nurses, quality assurance monitors, regional dietitians, maintenance supervisors, employee relations specialists, and other administrative support personnel. Regional consultants visit company facilities monthly to plan, organize and monitor operations, and to conduct in-service training workshops. Overall, Hillhaven provides each facility with an in-depth quality assurance program. Gene Lynn d/b/a Careage Southwest Healthcare Center Gene Lynn (Careage) is the president and 100 percent owner of Careage Corporation. Since 1962, Careage has developed approximately 150 nursing homes and retirement centers, as well as 100 medically related facilities, in 22 states and the Virgin Islands. Until December 1986 it did not, however, own or operate any facilities. Currently, Careage operates four nursing homes in the United States (one in the State of Washington, two in the State of California, and one in the State of Arizona) , but none in Florida. The home office of Careage is located in Bellevue, Washington. Careage proposed to develop a new 120-bed skilled and intermediate care nursing home in Lee County with specialty units for subacute and Alzheimer's care, consisting of 45,500 square feet. It would include a patient care unit consisting of 2 isolation rooms and 7 private rooms with full bath and 45 semiprivate rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semiprivate rooms with half bath, central dining area, beauty-barber shop, quiet lounge, chapel, physical therapy room, occupational therapy room, outdoor patio areas, and exam-treatment room. As proposed, the nursing home meets or exceeds state standards. As initially reviewed by the Department, Careage's proposed facility was a single-story building containing 45,500 gross square feet, with an estimated total project cost of $4,150,000. As proposed, the total project cost equates to 34,583 per bed, and as designed provides 184-227 net square feet of living space for isolation/private rooms, and 227-273 net square feet of living space or semi-private rooms. Construction equipment costs were as follows: construction costs $2,583,125; cost per square foot $56.77; construction cost per bed $21,526; equipment costs $420,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipment costs, are reasonable. The Careage facility would offer skilled and intermediate care, occupational therapy, physical therapy, recreational services and social services. Additionally, the proposal includes a special 21-bed unit dedicated solely to the treatment of Alzheimer's disease patients, and a dedicated 10-bed unit for subacute care which will accommodate technology dependent children care. Among the subacute services to be offered are hyperalimentation, IV therapy, ventilators, heparin flush, and infusion pumps for administration of fluids. Careage will offer respite care as beds are available, and will offer day care in a separate facility. Careage's projected utilization by class of pay as originally reviewed by the Department was as follows: private pay 49 percent, Medicaid 40 percent, Medicare 3 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patients charges for its facility were projected as follows: private and VA (room rate only) $63.86, Medicaid (all inclusive rate) $59.23, Medicaid (all inclusive rate) $108.15, and private (other) /subacute (room rate only) $128.75. Careage's fill-up and occupancy projections as well as its projections of revenues and expenses, for its 120-bed facility were not shown to be reasonable. First, in light of the fact that there was no quantifiable demand for a dedicated Alzheimer's unit and subacute care unit, as discussed infra at paragraphs 126-129, no reliable calculation of fill-up and occupancy rates or revenues and expenses could be derived that was, as the Careage application is, dependent on such revenue stream. Second, the Careage pro forma was predicated on average rates experienced in Lee County. Since Careage proposes heavier nursing care than that currently experienced in Lee County, its estimates of patient charges are not credible. At hearing, Careage updated its 120-bed application to account for inflationary factors that had affected the project since it was first reviewed, and to correct two staffing errors. These updates did not substantially change the project. Careage has the available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation, and will be able to recruit any other necessary personnel to staff its facility. Its pro forma estimates were not, however, premised on reasonable assumptions, and Careage has failed to demonstrate the short term and long term financial feasibility of its 120-bed project. Following the Department's initial review of the applications in this batching cycle, it proposed to award a certificate of need to Careage for a 60- bed facility, premised on its conclusion that there was insufficient numeric need to justify an award of beds exceeding that number, notwithstanding the fact that the application of Careage was for 120 beds and did not request or propose a 60-bed facility. Notably, all financial, staffing, construction, equipment and other projections described in the Careage application were based on a 120- bed facility, and no information was provided regarding a 60- bed facility. Also notable is the fact that the other applicants were not accorded equal consideration. Not surprisingly, the proposed award of a CON for 60-beds to Careage was timely challenged, but Careage did not protest the Department's denial of its application for 120 beds but appeared as a respondent to defend the Department's decision to award it 60 beds. At hearing, Careage offered proof of the reasonableness of its 120- bed proposal over the objection of the other applicants. /5 Careage contends that its proposed 60-bed facility is a scaled down version of its 120-bed proposal Careage proposes to offer the same services in its 60-bed facility as it proposed in its 120-bed facility, including the 21-bed Alzheimer's unit and 10-bed subacute care unit. Its proposed 60- bed facility is not, however, an identifiable portion of its initial project. As proposed, the 60-bed facility would contain 26,900 gross square feet, and meet or exceed state standards. It would include a patient care unit consisting of 1 isolation room and 4 private rooms with full bath, 17 semi- private rooms with half-bath, an Alzheimer's unit consisting of 1 private room with full bath and 10 semi-private rooms with half-bath, together with the same amenities offered by the 120-bed facility, but on a reduced scale. As proposed, the total project cost for the 60-bed facility is $2,475,000, which equates to $41,250 per bed. As designed, the facility would provide the same net square footage of living space for private and semi-private rooms as the 120-bed facility. Construction equipment costs would be as follows: construction costs $1,431,750; cost per square foot $53.22; construction cost per bed $23,863; equipment costs $210,000; and equipment cost per bed $3,500. Careage's methods of construction, as well as its construction and equipments costs, are reasonable. Careage's projected utilization by class of pay in its 60-bed facility was as follows: private pay 47 percent, Medicaid 40 percent, Medicare 5 percent, subacute (private) 6 percent, and VA 2 percent. Careage's patient charges for its 60-bed facility were projected as follows: private and VA (room rate only) $66.00, Medicaid (all Inclusive rate) $63.50, Medicare (all inclusive rate) $120.00, private (other)/subacute (room rate only) $130.00. Careage's fill-up and occupancy projections, its projections of revenue and expenses, and its pro forma estimates for its 60-bed facility suffer the same deficiencies as those for its proposed 120-bed facility. Under the circumstances, Careage has failed to demonstrate the short term and long term financial feasibility of its 60-bed facility. While Careage has only owned and operated nursing homes for a short time, the proof demonstrates that it has and will continue to provide quality care for its residents. The Alzheimer's unit and subacute care units are reasonably designed, equipped and staffed for their intended functions. Staffing ratios in the subacute unit will be 6.0, and in the other areas of the facility 3.0. Careage currently utilizes a quality assurance program at each facility which includes a utilization review committee, safety committee, infection control committee, and pharmaceutical committee. Each facility also has a resident advisory council, community advisory council, and employee advisory council. Presently, Careage is developing a company level quality assurance program, and has initiated announced and unannounced site visits by a quality assurance expert to evaluate resident care, operations, maintenance and physical environment. The Department of Health and Rehabilitative Services The opinions expressed by the witnesses offered by the Department were premised on information available to them while these applications underwent "preliminary" review. The information available to them at that time, and represented by the State Agency Action Report (SAAR), was incomplete and inaccurate in many respects, including the services to be provided by some of the applicants and the approved bed inventory and occupancy rates utilized in the need methodology. These witnesses were not made privy to, and expressed no opinions, regarding the relative merits of the applications in light of the facts developed at hearing. Throughout the hearing, counsel for the Department objected to evidence from any applicant regarding "updates" (changes) to their applications as they were deemed complete by the Department prior to its initial review. It was the position of the Department's counsel, but otherwise unexplicated, that the only appropriate evidence of changed conditions after the date the application was deemed complete were those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation and other current circumstances external to the application. The majority of the "updated" material offered by the applicants at hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of final hearing, changes in the market place regarding nursing salaries, changes in the Medicaid and Medicare reimbursement system and typographical errors in the application. Some changes in design were offered as a result of the applicant's experience with other construction projects and in order to comply with licensing regulations. There were also some changes which resulted from better information having been secured through more current market surveys. None of the applicants attempted to change their planning horizon, the number of beds proposed, the proposed location of the facility or the services to be offered except Careage. 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; formerly, Rule 10- 5.11(21)(b) 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 2a-d provide the methodology for calculating gross bed need for the district/subdistrict in the horizon year. In this case, the applicable district is District 8, and the applicable subdistrict is Lee County. 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 in the district. 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), as well as the subdistrict licensed bed figure (LBD) is calculated based on the number of community nursing home beds as of June 1, 1986. The Department's Semi-Annual Nursing Home Census Report and Bed Need Allocation prepared for the July 1986 review cycle (July 1989 planning horizon) listed 4,193 licensed community nursing home beds in District 8 and 996 in Lee County. However, that count taken on May 1, 1986, did not include 120 new beds which were licensed in Charlotte County on May 8, 1986. The count also excluded 287 beds at four other facilities in the district, including 60 beds at Calusa Harbor in Lee County, because they were listed as sheltered beds according to Department records at that time. After passage of Section 651.118(8), Florida Statutes, the Department surveyed the facilities and found that the beds at these four facilities were operated as community beds rather than sheltered beds. Under the circumstances, the proof demonstrates that as of June 1, 1986, there were 4,600 licensed community nursing home beds in district 8 (LB) and 1,056 in Lee County (LBD). The formula mandated by the rule methodology or 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. Some of the applicants contend that the current population" for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated or the July batching cycle, OR based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. Under this theory, January 1, 1986, as the midpoint of that period, is the appropriate date to calculate "current population" to derive PCPC and POPD. The Department contends that "current population" for POPC and POPD should be calculated as of July 1986, the filing deadline for applications in this review cycle. The Department's position is, however, contrary to its past and current practice. The need reports issued by the Department between December 1984 and December 1986, routinely used a three and one- half year spread between the base population period and the horizon date for "current population." In the January 1987 batching cycle, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one-half 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 deviate from its past and current practice. Under the circumstances, January 1, 1986, is the appropriate date on which the "current population" is to be calculated when deriving POPC and POPD. The parties are also in disagreement as to whether population estimates developed after the application deadline can used to establish the current population. Rule 10- 5.011(k)2h, Florida Administrative Code, mandates that population projections shall be based upon the official estimates and projections adopted by the Executive Office of the Governor, but does not limit such proof to any particular estimate. The Department advocates the use of population estimates existent at the application deadline. Accordingly, it would apply the official estimates and projections adopted by the Executive Office of the Governor as of July 1, 1986. Other parties would apply the more recent estimates adopted by the Office of the Governor as of July 1, 1987. In this case, the use of either estimate would have no significant effect on the result reached under the rule methodology; however, since all population estimates and projections are only approximations rather than actual counts, it would be more reasonable from a health planning perspective to use the latest estimates of the 1987 population than the estimates available at the time of application. In this case, this means using July 1, 1987, estimates of January 1986 populations. These estimates are still "current" as of January 1986, since It is still the January 1986 population that is to be measured, and more reliable from a health planning perspective than the prior projection. In the same manner, July 1, 1987, estimates of horizon year 1989 populations (PCPA and POP), infra, would also be used rather than July 1, 1986, estimates of that population. Accordingly, Forum's calculation POPC (128,871), POPD (77,194), POPA (149,645), and POPB (95,748) is appropriate. (Forum Exhibit 10, Appendix A) Application of the methodology prescribed by subparagraph 26 to the facts of this case produces the following calculation: BA 4,600/(128,871 + (6 x 77,194) BA 4,600/(128,871 + 463,164) BA 4,600/592,035 BA .0077698 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 in the district. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB 6 x BA BB 6 x .0077698 BB .0466188 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 homes 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 department district projected three years into the future. POPR is the population age 75 years and older in the relevant departmental district projected three years into the future. Application of the methodology prescribed by subparagraph 2a to the facts of this case produces the following calculation: A (149,645 x .0077698) + (95,748 x .0466188) A 1,162.7117 + 4,422.4086 A 5,585.12 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 need in the case. 7/ This calculation is defined by subparagraphs 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, however, occurred before the Department amended its rule to include the fixed need pool concept contemplated by subparagraph 2d. Accordingly, the parties concur that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d of the current rule, but, rather, defined by former rule 1C--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 calculating the occupancy rate (OR) for the licensed community nursing homes in the subdistrict (Lee County) the Department derived a figure of 91.91. The Department arrived at this figure based on the first day of the month patient census of each facility considered to have community beds (LBD=1,056), which included the 60 beds at Shell Point Nursing Pavilion; assumed that such census was maintained throughout the entire month; and then divided such patient days by the actual number of beds available. The Department's methodology is an accepted health planning technique, and comports with its previous practice. Some of the parties disagree with the technique utilized by the Department to calculate OR, and advocate the use of actual patient day occupancy to derive OR. This technique differs from the "first of the month" technique by utilizing the actual number of patient days experienced by the facility, as opposed to assuming a constant census based on first of the month data. This alternative methodology is, likewise, an accepted health planning technique, and if proper assumptions are utilized will yield a more meaningful result than the Department's methodology. In this case, the proponents of the "actual patient day occupancy" methodology, erroneously assumed that 160 beds at Shell Point Nursing Pavilion were community nursing homes beds, as opposed to 60 beds; and, based on an erroneous LBD of 1,156, derived a subdistrict occupancy rate of 92.97. Under such circumstances, these proponents calculations are not reliable, and the subdistrict occupancy rate derived by the Department is accepted. Applying the facts of this case to the methodology prescribed by subparagraph 2d produces the following gross need calculation for the subdistrict: 5A 5,585.12 x (1,056/4,600) x (.9191/.9) SA 5,585.12 x .2295652 x 1.0212222 SA 1309.36 The final step in the numeric need methodology is to derive net need from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed allocation for a subdistrict, which is the number of beds available for Certificate of Need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant department subdistrict from the bed allocation determined under subparagraphs 2.a. through f. unless the subdistrict's average occupancy rate for the most recent six months is less than 80 percent, in which case the net bed allocation is zero. 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, in subsequent nursing home batching cycles, the number of licensed and approved beds to be used in establishing net need for a particular batching cycle shall be determined as of the agency's initial decision for the immediately preceding nursing home batching cycle. 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 cross need previously calculated, it is silent as to the date that inventory should be calculated when, as here, the batching cycle at issue predates its enactment. In the face of this dilemma, the parties rely on the provisions of former rule 10-5.11(21)(b) , Florida Administrative Code, which was existent when their applications were filed to resolve their dispute. Under the circumstances, reference to former rule 10-5.11(21)(b), is appropriate. Former rule 10-5.11(21)(b)9 provides: The net bed allocation for a subdistrict, which is the number of beds available, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental subdistrict from the bed allocation determined under subaragraphs 1 through 9 (sic 8).... (Emphasis added) While the former 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 calculated under subparagraphs (b)1-8, it is silent as to the date that inventory should be calculated. The Department asserts that the number of licensed beds should be calculated as of June 1, 1986 (the date established by subparagraph (b)7 of the former rule as the data base for calculating LB and LBD, and the number of approved beds as of December 18, 1986 (the date the Department's supervisory consultant signed the state agency action report). The other parties would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no reasonable evidentiary basis for its interpretation of the date at which the total number of licensed and approved beds are to be calculated under subparagraph (b)9 of the former rule. As discussed below, the dates used by the Department and the other parties for purposes of calculating net need were facially unreasonable. The Inventory of licensed and approved beds under subparagraph (b)9 of the former rule, as well as subparagraph 2i of the current rule, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's interpretation of the dates at which licensed and approved beds are to be counted is neither logical nor rational, since it could result in some beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed on June 1, 1986, but licensed before the consultant supervisor signed the SAAR (state agency action report), they would not be counted in either inventory. On the other hand, the other parties' approach would ignore all beds licensed or approved from previous batching cycles after June 1, 1986 which beds were intended to serve at least a portion of the future population. The fundamental flaw in the parties' approach to establishing an inventory date under subparagraph (b)9, was the assumption that subparagraph (b)7 of the former rule defined licensed bed inventory for purposes of subparagraph (b)9. The Department's rule must be construed in its entirety, and all parts of the rule must be construed so as to work harmoniously with its other parts. So construed, the only logical conclusion to be drawn, as hereinafter demonstrated, is that subparagraph (b)7 defines LB and LBD ("current" licensed beds) for the cross need calculation under the methodology defined by subparagraphs (b)1-4, and does not presume to define licensed beds for the net need calculation under subparagraph (b)9. Subparagraphs (b)1-4 and 7 of the numeric need methodology prescribed by the former rule is designed to yield a gross bed need for the horizon year. The keys to this methodology are the calculation of a current bed rate (BA) and current occupancy rate (OR) for the current using population, and the projection of those rates on the population to be served in the horizon year. A meaningful calculation of the current bed rate cannot, however, be derived without a current inventory of licensed beds (LB and LBD). Accordingly, the relationship between subparagraph (b)7, which defines the data base (June 1, 1986 in this case) for defining LB and LBD (the "current" licensed bed inventory) to the gross bed need calculation is apparent. The parties' suggestion that subparagraph (b)7 defines licensed bed inventory under subparagraph (b)9 not only ignores the inextricable link between subparagraph (b)7 and the gross bed need methodology, but also the language and purpose of subparagraph (b)9. The purpose of that subparagraph is to derive a realistic estimate of actual (net) bed need in the horizon year. Since all licensed and approved beds from previous batching cycles were intended to serve at least a portion of the horizon population, it would be illogical to ignore any of those beds when calculating net need. Accordingly, it would be unreasonable in this case not to count any beds that were licensed or approved from previous batching cycles between June 1, 1986, and the date a decision is rendered on these applications. Indeed, subparagraph (b)9 speaks to "the total number" of licensed and approved beds, not beds existent on June 1, 1986. In sum, subparagraph (b)7 cannot be read to define licensed bed inventory under subparagraph (b)9, and the parties' suggestion that it can is rejected as contrary to the clear language of the rule methodology. See: Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 493 So.2d 1055 (Fla. 1st DCA 1986). Since the purpose of subparagraph (b)9 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 undeserved. 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 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 1,056 licensed beds and 120 approved beds in the subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a net need of 145 community nursing home beds for the July 1989 planning horizon. Special Circumstances. The Department will not normally approve an application for new or additional nursing home beds in any service district in excess of the number calculated by the aforesaid methodology. Rule 10-5.011(1)(k), Florida Administrative Code. Succinctly, the need for nursing home services, whether they be general or special, is a product of the rule methodology, and not relevant to a calculation of need absent a demonstration of special circumstances. The Department has adopted by rule the methodology to be utilized in demonstrating special circumstances that would warrant a consideration of factors other than the numeric need methodology in deciding the need for nursing home services. That rule, 10-5.011(1)(k)2; Florida Administrative Code, provides: In the event that the net bed allocation is zero the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained at Section 10-5.011. Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under the provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed unoccupied and currently approved nursing home beds. Existing and like services shall include the following as defined in statute or rule, adult congregate living facilities, adult foster homes, homes for special 505 home health services, adult day health care, adult day care, community care for the elderly, and home care for the elderly. Patients' need for nursing home care must be documented by the attending physicians' plans of care or orders, assessments performed by staff of the Department of Health and Rehabilitative Services, or equivalent assessments performed by attending physicians indicating need for nursing home care. In the instant case, some of the applicants have proposed special services, including an Alzheimer's unit, subacute care unit, and beds for technology dependent children. They offered, however, no proof that any person with a documented need for such services had been denied access to available beds that the number of persons with a documented need exceeded the number of available beds. Succinctly, there is no credible proof that the need for nursing home services in Lee County exceeds that calculated pursuant to the numeric need methodology. While there are no special circumstances existent in this case that would justify an award of beds in excess of that calculated by the rule methodology, that does not mean that consideration of the Alzheimer's, subacute and technology dependent children services offered by some of the applicants is not relevant to the comparative review of the subject applications. Rather, it means that the need for such services will presumptively be met within the need calculated by the rule methodology. How the applicants propose to address that need is, however, a matter for consideration in a comparative review of their applications. Each of the applicants propose to provide subacute care, with Careage proposing a special 10-bed subacute care unit which would accommodate technology dependent children. HCR and Careage propose special Alzheimer's care units; a 15-bed unit by HCR and a 21-bed unit by Careage. Hillhaven will admit Alzheimer's disease patients as presented, and will develop a dedicated Alzheimer's unit if demand should subsequently develop. The prevalence of Alzheimer's disease and the increased demand for subacute services brought about by DRGs, demonstrates that there will be a demand for such services within existing and proposed facilities. There was, however, no persuasive proof of any demand for technology dependent services in Lee County. While there is a demand for Alzheimer's disease care, and the preferred mode of care is in a separate unit specifically designed, staffed, and equipped to deal with this degenerative disease, there was no persuasive proof that the demand is such as to warrant the creation of a separate unit such as proposed by HCR and Careage. 10/ Absent such quantifiable demand, the application of Hillhaven more realistically addresses the need for Alzheimer's disease patients than does that of the other applicants. With regard to subacute care services, the proof likewise fails to quantify the demand for such services. Under such circumstances, Careage's proposed 10-bed subacute care unit is not objectively warranted, and does not serve to better its proposal to provide such services over the proposals of the other applicants. Consistency with district plan and state plan The District 8 health plan contains the following pertinent standards and criteria: Community nursing home services should be available to the residents of each county, 4 within District Eight. At a minimum, community nursing home facilities should make available, in addition to minimum statutory regulation, in the facility or under contractual arrangements, the following services: a. pharmacy h. occupational therapy b. laboratory i. physical therapy c. x-ray j. speech therapy c. dental care k. mental health counseling e. visual care l. social services f. hearing care m. medial services g. diet therapy New and existing community nursing bed developments should dedicate 33-1/3 percent of their beds to use for Medicaid patients. Community nursing home (skilled and intermediate care) facilities in each county should maintain an occupancy rate of at least 90 percent. No new community nursing home facility should be constructed having less than 60 beds... Each nursing facility should have a patient transfer agreement with one or more hospitals within an hour's travel time, or the nearest hospital within the same county. All community nursing homes and applicants for community nursing homes should document their history of participation in Medicaid and Medicare programs. ... The State Health Plan contains the following pertinent goals: GOAL 1: TO DEVELOP AN ADEQUATE SUPPLY OF LONG TERM CARE SERVICES THROUGHOUT FLORIDA. GOAL 2: TO ENSURE THAT APPROPRIATE LONG TERM, CARE SERVICES ARE ACCESSIBLE TO ALL RESIDENTS OF FLORIDA. Each of the applicants demonstrated that their proposal would conform, at least minimally, with the foregoing provisions of the state and local health plans. Of particular significance to Lee County is, however, an applicant's commitment to Medicaid service. The District 8 Council has reported that hospitals in Lee County are having difficulty placing Medicaid patients in nursing homes due to the unavailability of Medicaid beds. The current Medicaid experience is 46 percent. Therefore, the local council has directed that new and existing community nursing home developments should dedicate at least 33-1/3 percent of their beds for Medicaid patients. While all applicants propose to meet this standard, Hillhaven's proposal to dedicate 53 percent of its beds to Medicaid care is substantially greater than the commitment of the other applicants, and is consistent with its current experience in meeting a community's need for nursing home care. Availability, appropriateness, and extent of utilization of existing health care services Section 381.705(1)(b), Florida Statutes, requires Consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district. When the subject applications were filed, there were 1,056 licensed beds in Lee County with an occupancy rate of 91.91 percent. The nursing home bed supply in Lee County is obviously strained, and there exist no reasonable alternatives to the addition of new beds to the subdistrict. To coordinate with existing health facilities, each applicant proposes to establish appropriate transfer agreements and affiliations with local physicians, hospitals, and other health care providers. While some of the applicants have proposed an Alzheimer's unit and subacute care unit, the proof failed to demonstrate any quantitative need for such units in the subdistrict. Some applicants also proposed to provide day care in conjunction with their nursing home. Currently, there exists adequate day care in Lee County at little or no expense to the patient, and there was no persuasive proof of a need for additional day care services. Economies derived from joint health care resources HCR and Hillhaven each proposed 120-bed facilities which would provide for a more efficient and economical operation than a 60-bed facility. The 60-bed facilities proposed by Forum and Health Quest are, however, part of a larger complex which likewise lends itself to an efficient and economical operation. HCR, Hillhaven, Forum and Health Quest are major operators of nursing home facilities, and are thereby able to negotiate and obtain bulk prices for food, medical and nursing supplies. These savings are ultimately passed on to the residents. Additionally, by drawing upon a broad spectrum of expertise existent within their corporate networks, these applicants are best able to maintain and improve the services they offer. The criteria on balance In evaluating the applications at issue in this proceeding, none of the criteria established by Section 381.705, Florida Statutes, or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. As between the competing applicants, consideration of those criteria demonstrates that Hillhaven is the superior applicant whether it is evaluated on its application as initially reviewed by the Department or as updated at hearing. Among other things, the Hillhaven facility is spacious with large and well appointed patient rooms, its project costs are most reasonable (whether type 5 or type 4 construction), its programmatic proposal and staffing levels are most reasonable in light of existing demand, its provision for Medicaid services is the highest, and its patient charges are the lowest.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered granting Hillhaven's application for a certificate of need to construct a new 20-bed community nursing home in Lee County, and denying the applications of HCR, Forum, Health Quest and Careage. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of November, 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 22nd day of November, 1987.
Findings Of Fact 1-2. Rejected as a statement of the issues and not a Finding of Fact. Accepted and incorporated in Finding of Facts 8 and 9. Incorporated in Finding of Fact 9. Accepted. Incorporated in Finding of Facts 6 - 9. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 16. Incorporated in Finding of Fact 17. Irrelevant. Incorporated in Finding of Fact 5. Incorporated in Finding of Fact 6. 13-14. Irrelevant. Cumulative. Incorporated in Finding of Fact 7. Incorporated in Finding of Fact 11. Irrelevant. Incorporated in Finding of Fact 22. Incorporated in Finding of Fact 14. Irrelevant. Incorporated in Finding of Facts 4 and 5. COPIES FURNISHED: W. David Watkins, Esquire Oertel & Hoffman 2700 Blairstone Rd. Suite C Tallahassee, Florida 32301 R. Bruce McKibben, Jr. Assistant General Counsel Department of HRS 1323 Winewood Boulevard Jonathan S. Grout, Esquire 307 W. Tharpe Avenue Tallahassee, Florida 32302 Thomas Beason, Esquire Suite 100 118 N. Gadsden Street Tallahassee, Florida 32301 William Page, Jr. Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore RECOMMENDED that the applications for a CON to construct either a 60 or 120-bed nursing home in Brevard County, Florida, submitted by Wuesthoff Health Services, Inc. and Florida Convalescent Centers, Inc., be denied. RECOMMENDED this 8th day of October, 1986, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway The Oakland Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 1986. APPENDIX TO RECOMMENDED ORDER IN CASE NOS. 84-1976; 85-1310; 85-1506 The following constitutes my specific findings pursuant to Section 120.59(2), Florida Statutes, on all Proposed Findings of Fact submitted by the parties to this case.
The Issue The issues under consideration concern the request by Petitioner, Brookwood-Jackson County Convalescent Center (Brookwood) to be granted a certificate of need for dual certification of skilled and immediate care nursing home beds associated with the second review cycle in 1987. See Section 381.494, Florida Statutes (1985) and Rule 10-5.011(1)(k) , Florida Administrative Code.
Findings Of Fact On October 5, 1987 Brookwood filed an application with HRS seeking to expand its facility in Graceville, Jackson County, Florida, one with 120 licensed beds and 30 beds approved effective June 12, 1986, to one with 30 additional beds for a total of 180 beds. Beds being sought in this instance were upon dual certification as skilled and intermediate nursing home beds. The nursing home is located in Subdistrict A to District II which is constituted of Gadsden, Holmes, Jackson and Washington counties. This applicant is associated with Brookwood, Investments, a Georgia corporation qualified to do business and registered in the State of Florida and other states in the southeastern United States. That corporation has as its principal function the development and operation of nursing homes and other forms of residential placement of the elderly. The actual ownership of the applicant nursing home is through a general partnership. Kenneth Gummels is one of two partners who own the facility. The Brookwood group has a number of nursing home facilities which it operates in the southeastern United States. Florida facilities that it operates are found in DeFuniak Springs, Walton County, Florida; Panama City, Bay County, Florida; Chipley, Washington County, Florida; Homestead, Dade County, Florida; Hialeah Gardens, Dade County, Florida, as well as the present applicant's facility. The applicant as to the beds which it now operates, serves Medicare, Medicaid, Veteran Administration, private pay and other third party pay patients. The number of Medicaid patients in the 120 licensed beds is well in excess of 90 percent. The ratio of Medicaid patients with the advent of the 30 approved beds was diminished. As to those beds, 75 percent were attributed to Medicaid. If the 30 beds now sought were approved, the projection is for 87 percent private pay and 13 percent Medicaid for those new beds. The nursing home administration feels that the new beds must be vied for under those ratios in order for it to continue to be able to serve a high number of Medicaid patients, an observation which has not been refuted by the Respondent. Nonetheless, if these beds are approved the percentage of Medicaid patients would be reduced to the neighborhood of 80 percent within the facility which compares to the approximately 81 percent experience of Medicaid beds within the district at present and the approximately 88 percent of Medicaid beds within the subdistrict at present. The cost of the addition of the 30 beds in question would be $495,000. Financial feasibility of this project has been stipulated to by the parties assuming that need is found for the addition of those beds. The basic area within the Florida panhandle wherein the applicant facility may be found, together with other facilities in the Florida panhandle is depicted in a map found at page 101 of Petitioner's Exhibit 1 admitted into evidence. This map also shows that a second licensed nursing home facility is located in Jackson County in Marianna, Florida, known as Marianna Convalescent Center. The applicant facility is directly below the Alabama-Florida border, immediately south of Dothan, Alabama, a metropolitan community. The significance of the relative location of the applicant's facility to Dothan, Alabama concerns the fact that since 1984 roughly 50 percent of its nursing home patients have been from out-of-state, the majority of those out-of-state patients coming from Alabama. Alabama is a state which has had a moratorium on the approval of new nursing home beds for eight years. The proximity of one of that state's relatively high population areas, Dothan, Alabama, has caused its patients to seek nursing home care in other places such as the subject facility. The applicant has encouraged that arrangement by its business practices. Among the services provided by the nursing home facility are physical therapy, physical examination and treatment, dietary services, laundry, medical records, recreational activity programs and, by the use of third party consultants, occupational and social therapy and barber and beauty services, as well as sub-acute care. The facility is adjacent to the Campbellton-Graceville Hospital in Graceville, Florida. The nursing home was developed sometime in 1978 or 1979 with an original complement of 90 beds expanding to 120 beds around 1983 or 1984. The Chamber of Commerce of Marianna, Florida had held the certificate of need upon the expectation that grant funds might be available to conclude the project. When that did not materialize, the County Commissioners of Jackson County, Florida sought the assistance of Brookwood Investments and that organization took over the development of the 90 beds. The original certificate holder voluntarily terminated and the Brookwood partnership then took over after receiving a certificate of need for Brookwood-Jackson County Convalescent Center. The nursing home in Marianna, Florida which is located about 16 miles from Graceville has 180 beds having undergone a 60 bed expansion several years ago. Concerning the Brookwood organization's nursing home beds in Florida, the Walton County Convalescent Center was a 100 bed facility that expanded to 120 beds at a later date and has received permission to expand by another 32 beds approved in the same review cycle associated with the present applicant. Gulf Coast Convalescent Center in Panama City, is a 120 bed facility of Brookwood. Brookwood also has the Washington County Convalescent Center in Washington County, in particular in Chipley, Florida which has 180 beds. That facility was expanded by 60 beds as licensed in October, 1987 and those additional beds have been occupied by patients. Brookwood has a 120 bed facility in Homestead and a 180 bed facility in Hialeah Gardens. With the exception of its two South Florida facilities in Homestead and Hialeah Gardens, recent acquisitions under joint ownership, the Brookwood group has earned a superior performance rating in its Florida facilities. No attempt has been made by this applicant to utilize the 30 beds which were approved, effective June 12, 1986. Its management prefers to await the outcome in this dispute before determining its next action concerning the 30 approved beds. The applicant asserted that the 30 beds that had been approved would be quickly occupied based upon experience in nursing home facilities within Subdistrict A to District II following the advent of nursing home bed approval. That surmise is much less valuable than the real life experience and does not lend effective support for the grant of the certificate of need in this instance. The waiting list for the 120 licensed beds in the facility has been reduced to five names. This was done in recognition of the fact that there is very limited patient turnover within the facility. Therefore, to maintain a significant number of people on the waiting list would tend to frustrate the sponsors for those patients and social workers who assist in placement if too many names were carried on the waiting list. At the point in time when the hearing was conducted, the facility was not in a position to accept any patients into its 120 licensed facility. This condition of virtually 100 percent occupancy has been present since about 1984 or 1985. The applicant has transfer agreements with Campbellton-Graceville Hospital and with two hospitals in Dothan, Alabama, they are Flower's Hospital and Southeast Alabama Medical Center. The applicant also has a transfer agreement with the Marianna Community Hospital in Marianna, Florida. The referral arrangements with the Alabama hospitals were made by the applicant in recognition of the proximity of those hospitals to the nursing home facility and the belief in the need to conduct its business, which is the provision of nursing home care, without regard for the patient origin. Early on in its history with the nursing home, Brookwood promised and attempted in some fashion to primarily serve the needs of Jackson County, Florida residents, but the explanation of its more recent activities in this regard does not portray any meaningful distinction between service to the Jackson County residents and to those from other places, especially Alabama. This reflects the concern expressed by Kenneth Gummels, owner and principal with the applicant nursing home, who believes that under federal law the nursing home may not discriminate between citizens in Florida and Alabama when considering placement in the nursing home. In this connection, during 1987 the experience within the applicant nursing home was to the effect that for every patient admitted from Florida five Florida patients were turned away. By contrast, to deal with the idea of priority of placing patients some effort was made by Gummels to explain how priority is still given to Jackson County residents in the placement for nursing home care. Again, in the end analysis, there does not seem to be any meaningful difference in approach and this is evidenced by the fact that the level of out-of-state patients in the facility has remained relatively constant after 1984. If there was some meaningful differentiation in the placement of Florida patients and those from out-of-state, one would expect to see a change in the number of patients from out-of-state reflecting a downward trend. As described, historically the experience which Brookwood has had with the facility occupancy rates is one of high utilization except for brief periods of time when additional beds were added at the facility or in the Marianna Nursing Home. At time of the application the primary service area for the applicant was Jackson County with a secondary service area basically described as a 25 mile radius outside of Graceville extending into Alabama and portions of Washington and Holmes Counties. As stated, at present the occupancy rate is as high as it has ever been, essentially 100 percent, with that percentage only decreasing on those occasions where beds come empty based upon transfers between nursing homes or between the nursing home and a hospital or related to the death of a resident. Those vacancies are filled through the waiting list described or through recommendations of physicians who have a referral association with the facility. The patients who are in the facility at the place of consideration of this application were 50 percent from Florida and 50 percent from out-of-state, of which 56 of the 60 out-of-state patients were formerly from Alabama, with one patient being from Ohio and three others from Georgia. More specifically, related to the history of out-of-state patients coming to reside in the nursing home, in 1984 basically 25 percent patients were from Alabama, moving from there into 1985 at 47 percent of the patient population from Alabama, in 1986 50 percent from Alabama, in 1987 48 percent from Alabama and in 1988 the point of consideration of the case at hearing the figure was 47 percent of Alabama patients, of the 50 percent patients described in the preceding paragraph. Of the patients who are in the facility from Florida, the majority of those are believed to be from Jackson County. Those patients who come to Florida from Alabama, by history of placement, seem to be put in the applicant's facility in Graceville as a first choice because it is closest to the Dothan, Alabama area. The next preference appears to be Chipley and the Brookwood nursing home facility in Chipley, and thence to Bonifay and then to other places in the Florida panhandle, in particular Panama City. In the Brookwood-Washington County facility at Chipley, Florida 35 percent of the patients are from Alabama which tends to correspond to the observation that the Alabama placements as they come into Florida are highest in Graceville and decrease in other places. This is further borne out by the experience in the Brookwood-Walton County facility at DeFuniak Springs, Florida which has an Alabama patient percentage of approximately 10 to 12 percent. When the nursing home facilities in Chipley and Bonifay received 60 additional beds each in October, 1987, they began to experience rapid occupancy in those beds as depicted in the Petitioner's Exhibit 1 at pages 228 through 230. The other facility in Jackson County, namely Jackson County Convalescent Center, within the last six months has shown an occupancy rate in excess of 98 percent, thereby being unavailable to attend the needs of additional Jackson County patients who need placement and other patients within the subdistrict. This same basic circumstance has existed in other facilities within Subdistrict A to District II. When the applicant is unable to place patients in its facility it then attempts placement in Chipley, Bonifay, DeFuniak Springs, and Panama City, Florida, and from there to other places as nearby as possible. The proximity of the patient to family members and friends is important for therapeutic reasons in that the more remote the patient placement from family and friends, the more difficult it is for the family and friends to provide support which is a vital part of the therapy. Consequently, this is a significant issue. Notwithstanding problems in achieving a more desirable placement for some patients who must find space in outlying locales, there was no showing of the inability to place a patient who needed nursing home care. Most of the Alabama referrals are Medicaid referrals. Those patient referrals are treated like any other resident within the nursing home related to that payment class for services. Effectively, they are treated in the same way as patients who have come from locations within Florida to reside in the nursing home. Notwithstanding the management choice to delay its use of the 30 approved beds dating from June 12, 1986, which were challenged and which challenge was resolved in the fall, 1987, those beds may not be ignored in terms of their significance. They must be seen as available for patient placement. The fact that the experience in this service area has been such that beds fill up rapidly following construction does not change this reality. This circumstance becomes more significant when realizing that use of the needs formula for the project at issue reveals a surplus of 19 beds in Subdistrict A to District II for the planning horizon associated with July, 1990. See Rule 10-5.011(1)(k), Florida Administrative Code. The 19 bed surplus takes into account the 30 approved beds just described. Having recognized the inability to demonstrate need by resort to the formula which is found within the rule's provision referenced in the previous paragraph, the applicant sought to demonstrate its entitlement to a certificate through reference to what it calls "special circumstances." Those circumstances are variously described as: Patient wishing to be located in Jackson County. Lack of accessibility to currently approved CON beds. High rate of poverty, Medicaid utilization and occupancy. Jackson County Convalescent Center utilization by out-of- state patients. The applicant in asking for special relief relies upon the recommendation of the Big Bend Health Council, District II in its health plan and the Statewide Health Council remarks, whose suggestions would modify the basis for calculation of need found in the HRS rule with more emphasis being placed on the adjustment for poverty. Those suggestions for health planning are not controlling. The HRS rule takes precedence. Consequently, those suggestions not being available to substitute for the HRS rule, Petitioner is left to demonstrate the "special circumstances" or "exceptional circumstances" in the context of the HRS rule and Section 381.494(6), Florida Statutes (1985). Compliance per se with local and statewide planning ideas is required in the remaining instances where those precepts do not conflict with the HRS rule and statute concerning the need calculations by formula. Turning to the claim for an exception to the rule on need, the first argument is associated with the patient wishing to be located in Jackson County. This would be preferable but is not mandated. On the topic of this second reason for exceptions to the need formula, the matter is not so much a lack of accessibility to currently approved CON beds as it is an argument which is to the effect that there are no beds available be they licensed or approved. This theory is not convincing for reasons to be discussed, infra. Next, there is an extremely high rate of poverty in District II. It has the highest rate of poverty in the state. Moreover Subdistrict A to District II has an even greater degree of poverty and this equates to high Medicaid use and contributes to high occupancy. This coincides with the observation by the Big Bend Health Council when it takes issue with the HRS methodology rule concerning recognition of the significance of poverty within the HRS rule and the belief by the local health council that given the high poverty rates in District II some adjustments should be made to the need formula in the HRS rule. Under its theory, 161 additional beds would be needed at the planning horizon for July 1990 in Subdistrict A. Concerning the attempt by the applicant to make this rationalization its own, the record does not reflect reason to defer to the Big Bend Health Council theory as an exception to the normal poverty adjustment set forth in the HRS rule. When the applicant describes the effects of the out-of-state patients, in particularly those from Alabama in what some have described as in-migration, it argues that Rule 10-5.011(1)(k), Florida Administrative Code makes no allowance for those influences. The applicant chooses to describe these beds, the beds used by out-of-state residents, as unavailable or Inaccessible. This concept of inaccessibility is one which departs from the definition of inaccessibility set forth at Rule 10-5.011(1)(k)2.j., Florida Administrative Code. The specific exception to the requirement for compliance with the numeric need methodology in demonstration of a net need is set forth in that reference, and the proof presented did not show entitlement to the benefits of that exception. That leaves the applicant arguing in favor of recognition of its entitlement to a certificate of need premised upon a theory not specifically announced in that reference. This is the in-migration idea. It ties in the basic idea of poverty but does not depend on rigid adherence to the Big Bend Health Council idea of a substitute element in the HRS needs formula related to poverty. It also promotes the significance of problems which a number of physicians, who testified by deposition in this case, observed when attempting to place patients in the subject nursing home and other nursing homes in the surrounding area. They found high occupancy rates in the present facility and others within Subdistrict A to District II. These problems with placement as described by the physicians can have short term adverse effects on the patient and the family members, but they are not sufficient reason to grant the certification. In considering the formula for deriving need as promulgated by HRS, the proof does not seem to suggest that the nursing home residents themselves who came from out-of-state are excluded from the population census for Florida. On the other hand, unlike the situation in Florida in which the population at large is considered in trying to anticipate future nursing home bed needs, it make no assumptions concerning the Alabama population at large. Ultimately, it becomes a question of whether this unknown factor, given the history of migration of patients from Alabama into Florida and in particular into the subject nursing home, together with other relevant considerations, may properly form the basis for granting the certificate of need to the applicant. It is concluded that there is a fundamental difference in the situation found within this application compared to other planning areas within Florida which do not have to contend with the level of poverty, the proximity to Alabama and the advent of Alabama placements in this nursing home, the high occupancy rates in the subdistrict and the resulting difficulty in placement of patients near their homes. Posed against this troublesome circumstance is the fact that the applicant has failed to use its 30 approved beds or to make a decision for such use, that it had invited and continues to invite the placement of Alabama residents through the referral arrangements with the two Dothan, Alabama hospitals, realizing that such an arrangement tends to exclude opportunities for Florida residents to some extent, and the recognition that patients are being placed; that is patients are not going without nursing home care. The two Alabama hospitals with whom the applicant has referral agreements provide a substantial number of the patients who are admitted. This recount acknowledges what the ownership considers to be their obligation in law and morally to serve the interest of all patients without regard for their home of origin; however, the thrust of the certificate of need licensing process in Florida is to develop the apparatus necessary to service the needs of Florida residents, not Alabama residents. This does not include the necessity of trying to redress the circumstance which appears to exist in Alabama in which the government in that state is unable or unwilling to meet the needs of its citizens. On balance, the applicant has not demonstrated a sufficient reason to depart from the normal requirements of statute and rule, which departure would have as much benefit for Alabama residents as it would for Florida Residents. Contrary to the applicant's assertions it could legitimately de-emphasize its association with Alabama. It has chosen not to and should not be indulged In this choice in an enterprise which is not sufficiently related to the needs of Florida residents to condone the licensure of the beds sought, even when other factors described are taken into account. The applicant has also alluded to a certificate of need request made by Walton County Convalescent Center, a Brookwood facility in District I which sought a certificate of need in the same batch which pertains to the present applicant. The application and the review and comment by HRS may be found within Composite Exhibit 2 by the Petitioner admitted as evidence. Petitioner asserts that the Walton County experience in which 32 beds were granted is so similar to the present case that it would be inappropriate for the agency to act inconsistently in denying the present applicant after having granted a certificate of need to the Walton County applicant. Without making a line-by- line comparison, it suffices to say that in many respects these projects are similar. In other respects they are not. On the whole, it cannot be found that the agency is acting unfairly in denying the present applicant while granting a certificate to the applicant in the Walton County case. The differences are substantial enough to allow the agency to come to the conclusion that the present applicant should be denied and the applicant in Walton County should have its certificate granted. Likewise, no procedural impropriety on the part of HRS in its review function has been shown.
The Issue Whether or not Petitioner qualifies for grant of a certificate of need (CON) for construction of a 60 bed addition to its existing Stuart Convalescent Center nursing home facility in Stuart, Martin County by establishing a bed need of 60 beds. By stipulation, bed need is the only issue to be determined in these proceedings. POST HEARING SCHEDULE The parties joined in filing transcript of the proceedings on October 10, 1985, and by stipulation, proposed findings of facts and conclusions of law as well as supporting memoranda were timely filed by each party within 20 days thereof. Due to the extended period agreed upon, the 30 days for entry of this Recommended Order has been waived. All proposed findings of fact have been considered in preparation of this Recommended Order and each proposed finding of fact is ruled upon in the appendix hereto.
Findings Of Fact Petitioner Eden Park is a for-profit corporation which constructs and operates nursing homes in Florida and elsewhere. Its principal offices are located in the state of New York and its local office is located in Port St. Lucie, St. Lucie County, Florida. Eden Park demonstrated that all of its facilities in Florida are currently rated "superior" by the DHRS Office of Licensure and Certification. This indicates at least peripherally that current nursing home residents at existing Eden Park facilities, including Stuart Convalescent Center in Martin County, receive a high quality of care. Eden Park's amended application contemplates adding 60 nursing home beds to its Stuart Convalescent Center, in Stuart, Martin County. Stuart Convalescent Center is the only licensed nursing home within the City of Stuart. Martin County constitutes a sub-district within DHRS District IX. St. Lucie County, is in the same DHRS District as Martin County, but is a separate and distinct sub-district as mandated by Rule 10-17.021(1)(b) and (e) Florida Administrative Code. Eden Park currently operates a nursing home in the City of Port St. Lucie, St. Lucie County, which it maintains has an overflow of patients and a waiting list which needs to be absorbed by the proposed addition to its Stuart Convalescent Center in Martin County. The two counties are contiguous and it is possible for persons residing in St. Lucie County near the county line to be closer, physically, to Petitioner's existing Martin County facility than to Petitioner's existing St. Lucie County facility. The Cities of Stuart, Martin County and Port St. Lucie, St. Lucie County are also characterized as physically contiguous cities. Petitioner presented no evidence to show that any existing nursing homes in St. Lucie County other than its own St. Lucie County facility had waiting lists. Petitioner presented no evidence to clearly establish that the patients on the Petitioner's St. Lucie County facility's waiting list could not be placed at other nursing homes in St. Lucie County. (See discussion of waiting lists infra.) Respondent presented testimony that two recent certificates of need have been granted in St. Lucie County to two other nursing home applicants, Beverly Enterprises and Florida Convalescent Centers. These facilities are not yet licensed and in operation nor are they required by their certificates of need to locate in any designated physical location within St. Lucie County. However, it is anticipated by DHRS personnel that completion of these facilities will adequately accommodate any nursing home bed need currently existing in St. Lucie County. Exhibit P-6, the Stuart Convalescent Center Martin County May 29, 1985 Census, shows 131 beds occupied by Martin County residents, 12 by St. Lucie County residents, 31 by residents of other Florida counties and 6 by patients originating out of state. Out of state patients are not calculated, and Florida patients from outside Martin County are not considered in the present calculation of bed need employed by DHRS for Martin County but Florida patients from outside Martin County are considered in bed need determinations for the counties in which they reside. For instance, the bed need of St. Lucie County residents has been calculated and provided for by the two nursing home CONs as recently issued for that sub-district and discussed above in paragraph 6. A CON was issued to Beverly Enterprises in 1982 for 120 new nursing home beds in Martin County. As of the date of formal hearing, these beds had been licensed and the nursing home was in operation. Although Mr. Kane, operational director for Eden Park Management, testified that the Beverly facility was only about one-fourth full at the time of formal hearing, he conceded that the Beverly facility would have an impact on Petitioner's Stuart Convalescent Center facility's waiting list although it has not impacted yet. Mr. Kane represents that the Beverly home is not presently taking Medicaid or Medicare patients. The predicate for Mr. Kane's knowledge on this point is weak, but even if it could be accepted, it does not, in isolation, provide any gauge of unfulfilled bed need in Martin County. Mr. Jaffe testified that Beverly's CON carries the proviso that Beverly must maintain one-third Medicaid occupancy when filled. Mr. Kane's testimony is accepted that historically Petitioner's Martin County facility has maintained a 50 percent Medicaid and Medicare population. Testimony of Respondent's expert, Reid Jaffe, is accepted that poverty level in a sub-district such as Martin County in relationship to its district, District IX, does not impact on the current bed need methodology established by rule and that the relevant factor is poverty level in the district in relationship to the state poverty level. Petitioner's existing St. Lucie County and Martin County nursing homes currently have a combined waiting list of 80 persons. For the Martin County facility, it is more like 32 on the waiting list (P-5). However, this waiting list's accuracy is suspect in that it includes persons hospitalized since December, 1984 and Mr. Kane could not state that the lists were correct, or whether the people on them were still hospitalized, at home, or exactly where they were. More recent data appears on P-3 (Eden Park's St. Lucie County facility's waiting list) but it shares the same paucity of in formation on the status of the listees and what other nursing home options are or are not available to them. Petitioner was previously granted three separate 60 bed projects, an original and two additions to its St. Lucie County facility. It took three months to fill the first 60 beds, two months to fill the second 60 beds and three and one half months to fill the next 60 beds. Past fill rate in St. Lucie County appears largely irrelevant, even given Petitioner's argument on the contiguous nature of the sub-districts. Petitioner appears to argue in its proposals that these additions were to its Martin County facility (Stuart Convalescent Center) but that is not what the undersigned understands from the testimony in the record (TR 48-51). Moreover, this rate of fill occupancy in 1978 has no probative value for currently projected future bed need whether it applied in St. Lucie or Martin Counties. Contrariwise, Petitioner's amended application (P-1) indicates the Stuart Convalescent Center was built for 120 beds in 1973 with a 60 bed addition in 1976 and that the St. Lucie County facility was built for 180 beds in 1980. In conjunction with Mr. Kane's testimony, this latter date also has no probative value for currently projected future bed need in Martin County. Martin Memorial Hospital is located in Martin County in near proximity to Petitioner's existing nursing facility, Stuart Convalescent Center. DHRS has recently granted a certificate of need to Martin Memorial Hospital for 150 hospital beds. Petitioner desires that the inference be drawn from the foregoing fact regarding new hospital beds that a need for 60 additional nursing home beds is established, but the two cannot be related as a quid pro quo. Petitioner is in the process of constructing a 150 unit adult congregate living facility (ACLF) in Martin County, which it proposes will provide an alternative to existing services in Martin County. Mr. Jack Kane testified that the Eden Park ACLF will foster the most efficient use of services allowing people to be cared for in the most appropriate setting based upon their individual needs especially as these needs change in the continuum of care. This testimony is accepted but it does not, without some statistical evaluation or projection of potential nursing home candidates arising out of that ACLF environment, provide any useful information for determining current nursing home bed need or even for projecting, per the formula established by rule, the future nursing home bed need in Martin County. Jack Kane served seven years as the director of the Palm Beach Health Planning Council, was president of the Florida Health Care Association for a period of two years, served as senior vice-president for the Florida Health Care Association for two years and as regional vice-president for five years. Mr. Kane testified to a number of factors which, during his tenure on the Palm Beach Health Planning Council, would have been applicable to the bed need formula used then. A process or formula applicable on a local basis prior to adoption of the present statewide system and prior to the present rule's adoption is not applicable in this instant proceeding. Here, there is no evidence of current revised sub-district designations by a local health council within either sub- district or even within District IX which have not already been accounted for by the rules. (See discussion in Conclusion of Law Paragraphs 8a-d). Determination of nursing home bed need used to be on a beds-per- thousand basis but the new methodology now precludes that formula. The present formula application, as clarified by expert testimony from Mr. Reid Jaffe, medical facilities coordinator for DHRS's Office of Community Medical Facilities, only permits application of a 27 beds-per-thousand formula if two events exist: the district percentage of elderly in poverty is greater than that which the state has and there are fewer beds than 27 per thousand. A poverty ratio was not established sufficient to bring Martin County within this rule. Any further discussion of the bed need rule is more properly discussed under the following conclusions of law. Although a specific location of facility is requested on the CON application there is no statutory requirement that the facility, as constructed, be located there.
Recommendation That the Department of Health and Rehabilitative Services enter a final order affirming the denial of Petitioner's certificate of need application for 120 nursing home beds and further denying the amended application for 60 nursing home beds. DONE and ORDERED this 31st day of December, 1985, in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1985. APPENDIX TO RECOMMENDED ORDER, CASE 84-0260 Petitioner's Proposed Findings of Fact Rejected as background procedure only and therefore subordinate, unnecessary and not dispositive of any issue at bar due to the de novo nature of these proceedings. Rejected as background procedure only and therefore, subordinate, unnecessary and not dispositive of any issue at bar due to the de novo nature of these proceedings. Rejected as background procedure only and therefore subordinate, unnecessary, and not dispositive of any issue at bar due to the de novo nature of these proceedings. Rejected as background procedure only and therefore subordinated unnecessary, and not dispositive of any issue at bar due to the de novo nature of these proceedings. Rejected as background procedure only and therefore subordinate, unnecessary, and not dispositive of any issue at bar due to the de novo nature of these proceedings. Constitutes an evidentiary matter and not a finding of fact, and therefore requires no ruling. Accepted but modified and amplified to conform to the evidence. See Finding of Fact Paragraphs 2 and 13. Adopted. See Findings of Fact Paragraph 12. Rejected as setting forth a Conclusion of Law and to the extent it may constitute a proposed finding of fact is contrary to the competent substantial evidence in the record as a whole. Rejected as a proposed conclusion of law and as a proposed recommendation. It is not a proposed finding of fact requiring a ruling. Respondent's Proposed Findings of Fact. The proposals of fact herein are adopted. Other assertions which are essentially procedural are rejected as unnecessary, and not dispositive of any issue at bar due to the de novo nature of these proceedings. Accepted but not adopted as subordinate, unnecessary and not dispositive of any issue at bar due to the de novo nature of these proceedings. Adopted. Adopted. Adopted Adopted. Adopted. Up to the word "but" the proposal is accepted but not adopted as subordinate, unnecessary, and not dispositive of any issue at bar due to the de novo nature of these proceedings. The remainder of the sentence is accepted but not adopted as stating a conclusion of law. See Finding of Fact Paragraph 14. Conceded that the proposal constitutes a portion of the expert opinion testimony of DHRS' expert witness but as expressed is a proposed conclusion of law requiring no ruling. To the extent it may constitute a proposed finding of fact it has been accepted and modified to conform to the competent substantial evidence contained in the record as a whole. See Finding of Fact Paragraphs 9b and 14. If this constitutes a proposal of fact that DHRS previously considered certain circumstances or as a matter of custom considers certain circumstances, it is accepted but not adopted as subordinate, unnecessary and not dispositive of any issue at bar due to the de novo nature of these proceedings. If it constitutes legal argument or a conclusion of law, it requires no ruling. Similar subject matter is covered by Finding of Fact Paragraphs 9a and 14. Adopted. COPIES FURNISHED: David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301 Mark W. Hoffman, Esquire 87 Columbia Street Albany, New York 12210 R. Bruce McKibben, Jr., Esquire Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
