The Issue Whether Petitioner, the Agency for Health Care Administration (AHCA or Agency), proved that Respondents, Life Care Centers of America, Inc., d/b/a Life Care Center of Port St. Lucie, and other Life Care facilities in Winter Haven, Ocala, Orlando, and Citrus County, were not in compliance with the Medicaid-patient-days condition stated on the face of the Certificates of Need (CON) for each facility for calendar year 2006, and, if not in compliance, whether the Agency may impose administrative fines in the amount sought in the first amended administrative complaints.
Findings Of Fact The Parties The Agency for Health Care Administration is the state agency responsible for licensing and regulating nursing home facilities such as Respondents under Chapter 400, Part II, Florida Statutes, and issuing CONs under Chapter 408, Florida Statutes. Respondents are community/skilled nursing home facilities that have CONs issued pursuant to Chapter 408, Florida Statutes. Each facility is located in the geographical area indicated by its name, e.g., Life Care Center of Port St. Lucie is located in Port St. Lucie, Florida, and in an AHCA health service planning district (District) and subdistrict. Life Care Center of Port St. Lucie, a 123-bed facility, is located in District 9, Subdistrict 5; Life Care Centers of America, Inc., d/b/a Life Care Center of Winter Haven, a 177-bed facility, is located in District 6, Subdistrict 5; Life Care Centers of America, Inc., d/b/a Life Care Center of Ocala, a 120-bed facility, is located in District 3, Subdistrict 4; Life Care Centers of America, Inc., d/b/a Life Care Center of Orlando, a 120-bed facility, is located in District 7, Subdistrict 2; and Life Care Centers of America, Inc., d/b/a Life Care Center of Citrus County, a 120-bed facility, is located in District 3, Subdistrict 5. § 408.032(5), Fla. Stat.; Fla. Admin. Code R. 59C-2.200. The CONs; Medicaid Conditions; Dual Eligibility The starting point of this story begins with the CONs that are effective for calendar year 2006 for each Respondent and the Medicaid-patient-days condition stated on each CON.2 The Agency conditioned the issuance of the CONs based upon statements of intent expressed by Respondents in the CON applications. § 408.040(1)(a), Fla. Stat. The primary purpose of requiring the CON Medicaid- patient-days condition is to ensure access for Medicaid-eligible or funded residents. T 499-500.3 When the CONs were issued, either through a transfer or as an initial CON, Respondents committed to provide a certain level of Medicaid patient days. The required Medicaid percentage of patient days for each Respondent is set forth in the table under Finding of Fact 36. Agency Exhibits 1 through 11 and 13 show how Life Care Centers of America, Inc., characterized the agreed to number/percentage of Medicaid patient days in various CON application documents; verbalization of same; and the manner in which its facilities would account on Schedule 7 or 10, e.g., of the CON application, for projected revenue by payor source, including, but not limited to, Medicaid. See Fla. Admin. Code R. 59C-1.008(1)(f) (adoption of Agency forms); T 161. (Payor and payer are used throughout this record and in context have the same meaning.) Agency Exhibit 4 contains excerpts from a 120-bed new freestanding nursing home in Marion County, Florida, submitted in 1995 on behalf of Life Care Centers of America, Inc. T 49. The conditions page states that the applicant agreed to provide "66% of patient days to Medicaid clients." The following page states in part: "Condition C2: A minimum percentage of proposed project for Medicaid eligible patients at stabilized occupancy." Under "Measurement and Conformance," it is stated: "Actual payor mix experience following project licensure and fill-up; annual reporting requirements." Id. at 3; T 49-50. (Another excerpt states: "Condition C2: Percentage of patient days for Medicaid beneficiaries." PE 13 at 4.) Schedule 10 provides projected operating revenue for year two ending December 31, 1996. Medicaid patient days are stated (26,981) as well as a percentage (66.0%) of patient days. Id. at 5. (In other excerpts, similar material appears in Schedule 7.) The Schedule 10 Notes and Assumptions pages devote a paragraph to Medicaid. Id. at 7. See T 165-67. None of the excerpts from Agency Exhibits 1 through 11 and 13 expressly refer to providing services to "dual eligible" patients. The schedules do not have a specific line item for entry of this information, although Schedule 7 has a category "Other Revenue," PE 1 at 4, which the Agency suggests could have been used to identify that revenue source. T 163. The Agency considers Agency Exhibits 1 through 11 and 13 as proof that Respondents understood and agreed to provide a minimum percentage of patient days to residents whose care was paid for by Medicaid, a payor source. Thus, according to the Agency, only patient days that are provided to patients when Medicaid is the sole source of reimbursement are counted when determining compliance with the Medicaid condition. (According to the Agency, the statement "'Medicaid patient days' is defined, for purposes of CON condition compliance, as the 'patient days reimbursed by Medicaid,'" see PE 41 at paragraph 15.b., and is derived from Respondents' Schedule 7 indicating what the Respondents "expect their payers to be, and that is in rule." T 931.) Agency Exhibits 21, 22, and 24 through 26 are the CONs at issue in this proceeding and, with some minor variations, state: A minimum of [ ] percent of the [ ] bed facility's total annual patient days shall be provided to Medicaid patients. Medicare is a program of health insurance and benefits authorized and administered under Title XX of the Social Security Act. Medicaid is a program of health insurance and benefits authorized and administered under Title XIX of the Social Security Act. "Nursing facilities may obtain reimbursement for services provided to recipients privately or through long term care insurance. There are also specific situations when Medicare will be the payer. Medicaid is always the payer of last resort." RE 46 at 2-2. A person who is eligible for care under Medicare is not necessarily Medicaid-eligible. The person must meet eligibility factors to qualify. However, a person may be qualified as Medicare and Medicaid-eligible. A Medicaid-eligible patient may stay at a nursing home one day or more. Not infrequently, such a patient is more or less permanent resident. Generally, if a nursing home patient achieves the status of a Medicaid patient on day one of the stay, the patient's status as a Medicaid patient continues throughout the stay at the nursing home, unless the patient loses that status either through an ineligibility determination or for some other reason. See T 393.4 Stated otherwise, Medicaid-eligible nursing home patients do not lose their status as Medicaid-eligible patients when the nursing home is reimbursed in whole or in part by Medicare. According to the Florida Medicaid Nursing Facility Services Coverage and Limitations Handbook (Handbook), published by the Agency, a "recipient" "is used to describe an individual who is eligible for Medicaid." RE 46 at ii. "If Medicare Part A covers the recipient, Medicare will reimburse the facility for the entire cost of the care provided for the first twenty (20) days the resident is in the facility following an acute care hospitalization. During the period of time between the twenty-first and one-hundredth days, the resident will incur a charge for coinsurance." RE 46 at 2-2. "Medicaid will cover the amount of the coinsurance if the recipient is eligible for Medicaid" under certain circumstances. Id. "When a recipient is Medicare and Medicaid-eligible and is in the Medicare coinsurance period (21 through 100 days of Medicare coverage), Medicaid pays the Medicare coinsurance amount for the recipient. The amount paid by Medicaid is the lesser of the Medicare rate or the Medicaid per diem rate minus the patient responsibility. Medicaid does not pay for a Medicare HMO recipient during the coinsurance period." RE 46 at 3-2. See also id. at "Qualified Medicare Beneficiary." If the Medicaid patient either enters the nursing home after a three-day or longer hospitalization stay or is a resident of the nursing home and then is hospitalized for this length of time, the resident's care will be reimbursed by Medicare (assuming he or she is enrolled in the program) for up to 20 days upon returning to the nursing home. Medicare may continue to reimburse, typically 80%, (subject to Medicaid's payment of any coinsurance, typically 20%) the nursing home for the patient's care thereafter up to a maximum of 80 additional days, depending on the patient's continuing qualification to receive services paid by Medicare. See generally T 549-54, 663-65, 835-36. In 2006, Medicare was the primary payer and Medicaid covered co-pays and deductibles only. Medicaid could have potentially paid for co-insurance or cross-over. Cross-over means if the patient has Medicare, then Medicaid would be potentially the secondary payer of the cross-over or co-insurance. Generally days 21 through 100 are the cross-over days. See generally T 387-93, 551, 663-65. Subsection 408.040(1)(b), Florida Statutes, states: (b) The agency may consider, in addition to the other criteria specified in s. 408.035, a statement of intent by the applicant that a specified percentage of the annual patient days at the facility will be utilized by patients eligible for care under Title XIX of the Social Security Act. Any certificate of need issued to a nursing home in reliance upon an applicant's statements that a specified percentage of annual patient days will be utilized by residents eligible for care under Title XIX of the Social Security Act must include a statement that such certification is a condition of issuance of the certificate of need. The certificate- of-need program shall notify the Medicaid program office and the Department of Elderly Affairs when it imposes conditions as authorized in this paragraph in an area in which a community diversion pilot project is implemented. (emphasis added). Subsection 408.040(1)(d), Florida Statutes, states: (d) If a nursing home is located in a county in which a long-term care community diversion pilot project has been implemented under s. 403.705 or in a county in which an integrated, fixed-payment delivery system [program] for Medicaid recipients who are 60 years of age or older [or dually eligible for Medicare and Medicaid] has been implemented under s. 409.912(5), the nursing home may request a reduction in the percentage of annual patient days used by residents who are eligible for care under Title XIX of the Social Security Act, which is a condition of the nursing home's certificate of need. The agency shall automatically grant the nursing home's request if the reduction is not more than 15 percent of the nursing home's annual Medicaid-patient-days condition. A nursing home may submit only one request every 2 years for an automatic reduction. A requesting nursing home must notify the agency in writing at least 60 days in advance of its intent to reduce its annual Medicaid-patient-days condition by not more than 15 percent. The agency must acknowledge the request in writing and must change its records to reflect the revised certificate-of-need condition. This paragraph expires June 30, 2011. (emphasis added). The language in brackets was inserted in 2007. "[P]rogram" was inserted for "system" and the remaining language in brackets was new. Ch. 2007-82, § 2 at 1051, Laws of Fla. The amendments to Subsection 408.040(1)(d) were made at the same time that amendments were made to Section 408.912, adding, in part, "program" and deleting "system," and adding "or dually eligible for Medicare and Medicaid" to Subsection 408.912(5). Id., § 1 at 1048. The Agency interprets "utilized by patients eligible for care under Title XIX of the Social Security Act" to mean residents whose care is paid for solely by Medicaid. If the nursing home is reimbursed in whole or in part by Medicare for services to a resident Medicaid patient, e.g., during the one to 100-day period referred to above, the Agency does not count any days of treatment as a Medicaid patient day for the purpose of satisfying the Medicaid-patient-days condition. Conversely, Respondents count all residents who are eligible for Medicaid, regardless of who pays for the resident's care.5 The Agency conditions the approval of a CON based on the applicant's commitment to provide services to the medically indigent, here Medicaid patients. There is no indication that the patients referred to as "dual eligible" by Respondents were not, in fact, Medicaid patients during calendar year 2006, notwithstanding the nature of the facilities reimbursement. Respondents supplied the Agency with data counting traditional Medicaid days, hospice Medicaid days, and the days for "dual eligible" residents, separately stated. The Agency does not take issue with Respondents' reported number of "dual eligible," Medicaid-eligible patient days, only that they should not be counted toward meeting the CON condition. Based upon the persuasive evidence, it is determined that the Agency's interpretation to exclude the reported "dual eligible" Medicaid patient days from consideration for meeting the CON condition is not reasonable. The Annual Compliance Reports; Reporting of Patient Data to the Agency Respondents are required to provide annual compliance reports to the Agency that contain required information, including but not limited to "[i]f applicable, the reason or reasons, with supporting data, why the [CON] holder was unable to meet the conditions set forth on the face of the [CON]." Fla. Admin. Code R. 59C-1.013(4)(a)7. All nursing homes report occupancy data to the local health councils (LHC), with some data reported to the Agency. See PE 14. The LHCs supply the Agency with data concerning the total occupancy of each facility in patient days as well as the number of days reimbursed by Medicaid. Id. This data is compiled into the Florida Nursing Home Utilization by District and Subdistrict Guide (NH Guide). PE 14 (calendar year 2006). If data received from the LHC indicates that a facility is not in compliance with the CON Medicaid-patient-days condition, the Agency will send a letter to the facility requesting additional information. The Agency sent each Respondent a letter requesting additional information for calendar year 2006. See, e.g., RE 1. Consistent with this reporting requirement, on February 25, 2008, counsel filed a formal report for each Respondent. Four of the Respondents, except Life Care Center of Ocala, submitted a detailed booklet setting forth the reason why it was unable to meet the CON Medicaid-patient-days condition. In each formal report except one (Ocala), Respondents' counsel concluded that each facility appeared to strictly not meet the CON Medicaid-patient-days condition, but additional documentation and discussion was provided to the Agency to support a finding by the Agency that the facility was in substantial compliance with these conditions. (With respect to Life Care Center of Ocala, it was suggested that this facility was in full compliance with the Medicaid-patient-days condition.) Except as otherwise stated herein,6 the parties agree (see, e.g., T 155, PHS at 20) with the following data: A B B A C B + C A Life Care Total Patient Days Medicaid Patient Days % "Dual Eligible" % CON Minimum Cond. Port St. Lucie 42,162 16,978 40.27% 1,429 43.66% 47.00% Winter Haven 60,817 29,580 48.64% 5,914 58.36% 60.60% Ocala 40,888 10,725 26.23% 5,387 39.41% 33.00% Orlando 40,468 9,093 22.47% 2,781 29.34% 31.19% Citrus Cty 40,846 14,559 35.64% 3,064 43.14% 45.64% Without consideration of "dual eligible" patient days, five facilities are allegedly non-compliant as follows: Port St. Lucie -- 6.73 %; Winter Haven -- 11.96%; Ocala -- 6.77%; Orlando -- 8.72%; and Citrus County -- 10.00%. RE 41; JPHS at 5-6; Agency's Pre-Hearing Statement at 7. If "dual eligible" patient days are considered, four out of five facilities remain allegedly non-compliant, but to a lesser degree: Port St. Lucie -- 3.34%; Winter Haven -- 2.24%; Orlando -- 1.85%; and Citrus County -- 2.50%. Ocala is compliant by 6.41%. See RE 3, 41; T 817; Agency's Pre-Hearing Statement at 8. The Administrative Complaints This proceeding initially involved consideration of six (now five) separate administrative complaints alleging that each Respondent did not comply with the Medicaid-patient-days condition set forth in each CON for calendar year 2006. Each administrative complaint is based on the information contained in and the Agency's analysis of the formal reports submitted on behalf of each Respondent.7 The Agency does not dispute the facts and figures set forth in the formal reports, although it disagrees with Respondents' contention of compliance with the Medicaid-patient- days condition and whether "dual-eligible" patients may be considered for compliance purposes. Each administrative complaint states, in part, that "[t]his is an action to impose administrative fines in the amount of . . . against Respondent, pursuant to Section 408.040, Florida Statutes, and Florida Administrative Code Rules 59C- 1.013 and 59C-1.021." The Agency has the statutory authority to impose fines up to $1,000 per day for noncompliance, taking into account as mitigation the degree of noncompliance.8 Prior to filing its first amended administrative complaints on October 28, 2009, when a CON holder was determined to be in noncompliance, the Agency made an individualized determination as to whether and how much to fine the CON holder. RE 44 at 3; T 115-16. The Agency created a chart that is completed as an analytical tool. Next, the Agency considered the individual situation of the CON holder, "including but not limited to" a number of factors, such as the "degree of noncompliance, absolutely and in comparison to others within the sub-district"; whether the "[f]acility is not at 85% occupancy"; whether the "[f]acility has not been operational for at least 18 months or first reached 85% occupancy during the reporting year"; whether the "[f]acility can demonstrate operational losses through financial statements and or audit"; whether the "[f]acility has a sister facility (facility owned by the same entity) in the same sub-district that either has no Medicaid condition or has met its Medicaid condition and has additional Medicaid Total Annual Patient-Days to donate to its sister facility"; "[p]rovision of patient care to Hospice Medicaid patients"; "[p]rovision of care to Charity/Indigent patients (days or cash)"; whether the "[f]acility is within 1% or less of its condition"; whether "[p]rovision of Medicaid for facility exceeds that of the sub-district"; and "[a]ny other factors that a CON holder may present that could impact against fines are considered." RE 44. These are a common list of factors that have been considered (not in isolation) by Agency management, if brought to their attention by the facility in assessing whether a fine should be imposed. RE 44; T 206-213, 215-216, 221, 279-80, 352- 56, 373, 483, 927-30, 947-49. See also Fla. Admin. Code R. 59C- 1.013(4)(a)7; Findings of Fact 73 through 83. "All things [were] considered prior to determining the fine, including [the Agency] gave [nursing homes] the 75 percent [for diversion programs] off." T 365. On a rare occasion, the Agency did not fine a noncompliant nursing home because the nursing home was closed during a portion of the year. T 267-68.9 With the filing of the third amended administrative complaints, none of these factors is considered in determining the fine. T 931, 949. The Agency proposed to fine each Respondent as follows: Port St. Lucie -- $13,085; Winter Haven -- $18,022; Ocala -- $18,724; Orlando -- $25,540; and Citrus County -- $19,992. The Agency explained how these fines were calculated, including the mitigation factors considered regarding the degree of noncompliance. RE 26; T 225-30. Respondents' Exhibit 26 consists of the forms (Excel spreadsheets) used by the Agency to determine noncompliance matters in calendar year 2006. The Agency started applying the Excel spreadsheets in approximately 2004 or 2005 in condition compliance cases. T 223, 250-51. For example, for Port St. Lucie, the maximum fine under the statutory framework is $365,000 ($1,000 per day times 365 days). The "applicable fine" was calculated to be $52,341, which is the maximum fine times the percent difference or $365,000 times 14.34%. Then the applicable fine was reduced by 75% to $13,085 ($52,341 times 25%), which is the fine sought in the administrative complaint. RE 26 at 5; see also T 252, 292-97. The 25% factor was applied in each case to reflect consideration of pilot diversion programs in each county where the Respondents are located. T 268, 295. Each Respondent was treated the same. See RE 26.10 Since approximately 2006 and 2007 and prior to the filing of the Agency's third amended administrative complaints in October of 2009, the Agency routinely applied the 25% diversion factor (a 75% deduction). T 294, 338-39. With the filing of the third amended administrative complaints, prior to calculating the fine, the Agency still considers the circumstances of each nursing home and the reasons why they were unable to meet the Medicaid-patient-days condition. "But in terms of the degree [the nursing home is] out of compliance, [the Agency is] using the statute based on the days that [the nursing home is] out of compliance and" the penalty is based on that calculation. T 366-68, 374. See also T 349-50, 357, 363-65. The Third Amended Petitions for Formal Administrative Hearing and the First Amended Administrative Complaints On October 2, 2009, Respondents filed a motion and revised motion to amend their second amended petitions and also filed their third amended petitions challenging the administrative complaints filed by the Agency. (The revised motion was granted over the Agency's objection.) Respondents dispute that they failed to meet the respective Medicaid-patient-days conditions; dispute that the Agency appropriately considered the degree of alleged noncompliance; dispute how the Agency determined the number of residents eligible pursuant to Title XIX of the Social Security Act and Section 408.040, Florida Statutes, claiming that "dual eligible" residents should be counted for purposes of compliance; and further claim that the Agency is improperly relying on six alleged statements as unadopted rules. See PE 41. On October 14, 2009, the Agency filed a motion requesting leave to amend its administrative complaints. (The motion was granted over Respondents' objection.) In its motion, the Agency voiced its disagreement with Respondents' challenge to the alleged statements as unadopted rules and stated: "While the Agency disagrees that the alleged statements are rules, the Agency has determined that in the present proceeding, it will explicitly not rely on the alleged statements, but will explicitly only rely on the Agency's statutory authority conferred by" Subsection 408.040(1)(e), Florida Statutes, and that "the Agency has amended the administrative complaints as to each respondent based on the admissions by each respondent and based upon the authority and language of" Subsection 408.040(1)(e). The Agency incorporated by reference the exhibits (including, but not limited to, the formal reports submitted by Respondents) attached to the original administrative complaints.11 On October 28, 2009, the Agency filed first amended administrative complaints against each Respondent. Most notably, the Agency deleted reference to Florida Administrative Code Rules 59C-1.013 and 59C-1.021, cited in the administrative complaints, and proceeded, consistent with the Agency motion requesting leave to amend, to rely solely on Subsection 408.040(1)(e), as authority to impose the fines requested. The proposed fines are based solely on the Agency's determination that each Respondent is not in compliance with the applicable Medicaid-patient-days condition and based on its view that the degree of noncompliance means the result of the mathematical calculation of the difference between the conditioned level of compliance and the reported level of compliance. No consideration was given to any other factors such as the prior proposed reduction in fines (in the original administrative complaints) in light of the pilot diversion programs (the 25% factor). Stated otherwise, the Agency applied the new proposed rule, see Finding of Fact 63, as the sole criterion for determining as mitigation the degree of noncompliance. T 219, 492. The Agency will no longer consider the mitigating factors considered by the Agency in the past. This led the Agency to proceed to rule development. T 494-95. The Agency explained how it calculated the amended fines. Agency Exhibits 27 and 28 and 30 through 32 are the calculation sheets used by the Agency to determine the fines for the first amended administrative complaints. T 151, 274-79. Based on each Respondents' formal report of compliance (without regard to "dual eligible" Medicaid patient days), except for "dual eligible" Medicaid patient days reported by a Respondent, the Agency considered all traditional Medicaid patient days, including Medicaid hospice days12 and charity days. T 152, 201-03. The Agency imposed a fine of $1,000 per day for each day in which Respondents were not in compliance. T 150-57, 272-79. The degree of noncompliance per month in calendar year 2006 was taken into consideration by calculating the percentage of noncompliance. For January 2006, Port St. Lucie was required to provide 1,688 Medicaid patient days (47% times 3,592) and actually provided 1,506 traditional Medicaid patient days, which was then divided by the required number of Medicaid patient days (1,506/1,688) to equal 89.22% of the 31 days in January that were met or 27.66 days or 3.34 unmet days. The resulting fine for January was $3,342 or $1,000 per day times 3.34. These calculations were performed for each month with the actual fine requested in the first amended administrative complaint at $52,024, T 152-153, PE 27, which is the fine for the number of days out of compliance. T 279, 494. (Mr. McLemore thought the Agency would not fine a nursing home out of compliance for two days. T 278.) The new formula is based on statutory-based days out of compliance, resulting in higher fines rather than taking 75% off the top reflected in the administrative complaints. T 274, 297. The Agency performed the same calculations for each Respondent. PE 27-28 and 30-32. T 156-57. The Agency has attempted to codify its decision to change the manner in which the fines are calculated in the first amended administrative complaints by publishing a Notice of Development of Rulemaking and proposing to amend Rule 56C- 1.021(3)(a), Certificate of Need Penalties, as follows: "Facilities failing to comply with any conditions . . . will be assessed a fine, not to exceed $1,000 per failure day. In assessing the penalty the agency shall take into account the degree of noncompliance. The degree of noncompliance means the result of the mathematical calculation of the difference between the conditioned level of compliance and the reported level of compliance." (emphasis in original). Aside from this notice, there is no evidence that the Agency has proceeded further to adopt the proposed rule. According to the Agency, it would be "completely impractical" to promulgate a rule listing all the conditions that would mitigate noncompliance. T 924-26, 940. The proposed fines were increased above the fines requested in the administrative complaints as follows: Port St. Lucie -- $13,085 to $52,024; Winter Haven -- $18,022 to $71,642; Ocala -- $18,724 to $74,830; Orlando -- $25,540 to $103,132; and Citrus County -- $19,992 to $79,409. The Amount of the Fine Using the Agency's Methodology It is determined that the fines should be calculated for each Respondent by including the stipulated number of "dual eligible" Medicaid patient days, arriving at a dollar figure and then subtracting 75%.13 The Agency used a methodology to calculate the fines in the original administrative complaints. That methodology is applied herein. See RE 26. Port St. Lucie The difference between the minimum CON condition percentage (47%) and the actual Medicaid percentage (43.66%) is 3.34%, which is then divided by 47% and yields 0.0710638 times $365,000, which yields $25,938. Twenty-five percent of $25,938 yields a total fine of $6,485 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 5. Winter Haven The difference between the minimum CON condition percentage (60.60%) and the actual Medicaid percentage (58.36%) is 2.24%, which is then divided by 60.60% and yields 0.0369636 times $365,000, which yields $13,492. Twenty-five percent of $13,492 yields a total fine of $3,373 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 11. Orlando The difference between the minimum CON condition percentage (31.19%) and the actual Medicaid percentage (29.34%) is 1.85%, which is then divided by 31.19% and yields 0.0593 times $365,000, which yields $21,645. Twenty-five percent of $21,645 yields a total fine of $5,411 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 9. Citrus County The difference between the minimum CON condition percentage (45.64%) and the actual Medicaid percentage (43.14%) is 2.50%, which is then divided by 45.64% and yields 0.0547765 times $365,000, which yields $19,993. Twenty-five percent of $19,993 yields a total fine of $4,998 (25% fine for pilot diversion program or 75% fine reduction), without consideration of any other factors discussed below. Compare with RE 26 at 3. Ocala No fines should be imposed on the Ocala facility as it exceeded the Medicaid condition for calendar year 2006. Consideration of Reasons Why Respondent Nursing Homes Were Unable to Meet CON Medicaid-Patient-Days Conditions and the Amount of the Fine Considering Other Factors Prior to filing its first amended administrative complaints and its Notice of Development of Rulemaking, the Agency considered several factors when deciding whether a nursing home complied or was unable to comply with a Medicaid condition, and whether a fine was appropriate under the circumstances for noncompliance. See generally Finding of Fact 44 for some of the compliance factors. Respondents offered testimony that they used their best efforts to meet the Medicaid-patient-days conditions, including the relative demand levels for Medicaid services in the areas served of Respondents, income levels of seniors, and other reasons. See generally T 547-48, 557, 826, 829, 852, and 876; RE 4-7. Respondents suggested that the existence of various State diversion and transition programs in the counties where they are located should also be considered in mitigation. See generally T 694-95. The nursing home diversion program operated in 26 counties in Florida in 2006, and Respondents are located in five of those counties. (Potential nursing home patients are diverted to other health care settings under this and other similar programs.) Generally, these diversion programs have been successful in diverting Medicaid-eligible residents from nursing homes. To some extent, these diversion programs have impacted Respondent nursing homes. T 534. Respondents also provided other factors in support of noncompliance with the Medicaid-patient-days conditions such as Medicaid utilization, which may be affected by the moratorium (with some exceptions) on new CONs for nursing homes, the existence of other community-based facilities, the effects of various diversion programs, the income level of various population centers where some of the Respondents are located, high Medicare admissions, declining Medicaid demand, and the relative age of Respondent facilities. Respondents also provided evidence of their marketing efforts. See PE 15-16, 18- 20; RE 4-7; T 535-36, 540-44, 556-57, 560-61, 570-71, 627-30, 638, 671-72, 711-23, 728-32, 846-47, 849, 858-60, 875-77. See also PE 39 at 3-4, regarding reported impacts of the moratorium. But see endnote 7. The Agency considered a nursing home's occupancy when it considered mitigation. T 266-67, 484-85.14 Respondents also suggest that the Agency has applied other factors either to forgo action against a nursing home facility by waiving a fine or by reducing a fine contrary to the Agency's treatment of Respondents. See, e g., Respondents' Proposed Recommended Order at 36-44. For example, in the past, the Agency has reduced or eliminated a calculated fine for a nursing home if it was less than one percent out of compliance. See RE 44 and 45; T 206. There have been instances when the Agency has not taken action against a nursing home that had missed the Medicaid condition by five percent or less. RE 24 at 19-28; RE 45 at 61-66. (Here, after calculating the fines using the Agency's pre-first amended administrative complaint methodology and including consideration of "dual eligible" patients, see Findings of Fact 68 through 72, none of the Respondents missed their Medicaid-patient-days conditions by more than four percent.) Conversely, the Agency provided evidence that each Respondent provided Medicaid patient days on a percentage basis below the average for other nursing homes in their respective subdistricts. However, the Agency has not used the comparison to impose a fine on a nursing home. T 259-65; see also RE 26 at 2, middle calculations. None of the Respondents is located in the same subdistrict with another Life Care facility which exceeds its Medicaid-patient-days condition. None of the Respondents (except Ocala that exceeded its Medicaid-patient- days condition) was within one percent of the Medicaid-patient- days conditions, even considering the "dual eligible" patient days. None of the Respondents reported experiencing an operational loss. (According to the Agency, these factors were not always applied in every noncompliance case. T 927-39.) The Agency also offered evidence that nursing home facilities within a five-mile radius of, e.g., the Respondent Ocala facility in Marion County, had a higher percentage of their days provided to Medicaid patients than the Ocala facility, T 910-11. See also T 908-15. The Agency also offered evidence that the percentage of Medicaid patient days/census provided by Respondents has reduced between 2000 and 2006. T 891-908. Based in part on the foregoing, Respondents suggest that no fines should be imposed, whereas the Agency suggests that fines should be imposed. No party has cited to any Medicaid condition fine case that was resolved after an evidentiary hearing and the entry of a recommended order and a final order. Rather, the examples of alleged inconsistent Agency action appear to have been resolved by settlements. It is difficult to apply the factors considered in this subsection of the Recommended Order in an objective fashion so as to determine, with any reliability and predictability, whether and to what extent Respondents should be further relieved of meeting the Medicaid-patient-days conditions.15 On a final note, the Agency abruptly (toward the end of the discovery portion of this proceeding) changed its policy regarding, in part, the method of determining the fines for noncompliance. The Agency did not adopt a rule codifying the change in policy despite opportunities to do so in the past and did not persuasively explain the reasons for departing from its policy, which pre-dated the filing of the first amended administrative complaints.
Recommendation Based upon the foregoing, it is recommended that the Agency enter a final order imposing the following fines: Port St. Lucie -- $6,485; Winter Haven -- $3,373; Orlando -- $5,411; and Citrus County -- $4,998. No fines should be imposed on the Ocala facility as it exceeded the Medicaid-patient-days condition. DONE AND ENTERED this 15th day of March, 2010, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of March, 2010.
The Issue The issue for resolution is which of two competing certificate of need applications should be approved for nursing home beds in District 6, Subdistrict 2, Manatee County, Florida. Other ancillary issues are whether Mediplex timely filed a letter of intent to apply for a certificate of need, whether Mediplex impermissibly amended its application at hearing and whether Beverly impermissibly is proposing two projects (delicensure and creation of beds in addition to those in the fixed need pool).
Findings Of Fact The Agency for Health Care Administration (AHCA) is responsible for the administration of the certificate of need (CON) program pursuant to section 408.034, Florida Statutes. Vantage Healthcare Corporation is a wholly-owned subsidiary of Beverly Health and Rehabilitation Services, Inc., which is itself a wholly-owned subsidiary of Beverly Enterprises, Inc. Beverly Enterprises, Inc. is the largest provider of nursing home services in the nation. Vantage operates four nursing homes in the State of Florida, and has no facilities outside of Florida. The Beverly family of nursing homes comprises 67 nursing homes in Florida, with just under 8,000 nursing home beds. Mediplex is a wholly-owned subsidiary of the Mediplex Group which, in turn, is a wholly-owned subsidiary of Sun Healthcare Group. The Sun Healthcare Group operates primarily in the northeast U.S. (Connecticut, Massachusetts, and Rhode Island) and the west (Denver and Seattle). Mediplex operates two facilities in Florida, one in Bradenton and another in West Palm Beach. Mediplex's Bradenton facility, the applicant in this proceeding, is an existing 120-bed nursing home located at 5627 Ninth Street East, Bradenton, Florida. Stipulations of the Parties Through their joint prehearing stipulation the parties stipulated to the following matters: Applications and Omission Responses may be placed into evidence without first having been proven, but the contents of those documents shall be hearsay, except as otherwise provided herein, until properly corroborated. Audited financial statements contained in the Application and/or Omissions Responses shall be admissible into evidence without a foundation witness and the information contained therein shall not be considered hearsay. Each of the applicants has access to sufficient financial resources to be able to construct and implement its proposed project; i.e. the proposals are financially feasible in the short term. Each of the applicants' dietary plans is adequate, meets regulatory requirements and does not afford the basis for comparative review between the parties. Each applicants' Letter of Intent, Corporate Resolution, newspaper publication and Schedule 2 are adequate and correct in form and content and comply with applicable statutes and rules except to the extent disputed by Mediplex in its Motion for Summary Recommended Order Against Vantage Healthcare Corporation. Newspaper publications were timely made by all applicants. Applications and Omissions Responses of all parties were timely filed. It remains at issue whether all Letters of Intent were timely filed. The fixed bed need pool available to applicants in this application cycle was 63 beds. Like and existing health care facilities in District 6 generally provide quality care, are efficient, and are adequate. However, up to 63 additional nursing home beds are required because the high utilization of the like and existing services renders them, or will render them, unavailable and inaccessible. By entering into this stipulation, the parties are not stating that the particular facilities owned or operated by Beverly Enterprises, Inc., or any of its subsidiaries, or Mediplex, necessarily provide quality care, are efficient or are adequate and reserve the right to present evidence on these issues related to these facilities. There are no appropriate alternatives to nursing care for those persons who, because of physical and/or social conditions require nursing care. No applicant is proposing joint, shared or cooperative health care resources. Section 408.035(1)(e), Florida Statutes, is not applicable to this proceeding. No applicant is proposing special equipment or services not accessible in adjoining areas. Mediplex, however, currently provides special equipment and/or services which may not be available in adjoining service areas. Section 408.035(1)(f) is not applicable to this proceeding. No applicant is proposing to provide a substantial portion of their proposed services to persons who do not reside in the service area. Mediplex, however, currently serves a number of patients from outside the service area in its existing facility. Section 408.035(1)(k) is not applicable to this proceeding. Existing inpatient facilities generally are being used in an appropriate and efficient manner. By so stipulating, the parties are not stating that existing facilities, particularly those operated by Beverly Enterprises, Inc., or its subsidiaries, and the Mediplex cannot be used in a more appropriate or efficient manner or are currently being used appropriately or efficiently. Patients in Manatee County will experience serious problems in accessing nursing care without the addition of additional nursing care beds. Each of the parties can hire the staff listed on Schedule 6 of their applications at the salary listed therein. The parties are not stipulating that the levels of staffing proposed on Schedule 6 are adequate. Additionally, at hearing, the parties stipulated to the following matters: Neither party has ever turned in a certificate of need for failure to complete a project. Neither Mediplex nor any Beverly entity has ever failed to obtain financing for an approved project. The proposed projects are consistent with the strategic development plans of the respective applications. Both applicants have true and accurate certification pages and corporate resolutions in their applications. Both applicants will go forth with the conditions which are stated in their applications. The applicants' cover pages are true and accurate. Each applicant paid an appropriate application fee to AHCA. Each applicant has operated in Florida for the years reflected in its application. Each applicant's project development and financing costs as reflected in its application is reasonable and accurate. Each applicant's proposed project completion forecast is reasonable. Beverly's Proposal Beverly is proposing to construct a 105-bed freestanding nursing home in Manatee County to be comprised of 63 beds from the fixed need pool and 42 beds to be delicensed from a related facility, the Manatee Health Care and Rehabilitation Center. The proposed facility will consist of 53,310 gross square feet and have a total project cost of $7,363,760. Beverly's facility will be conditioned upon providing 50.2 percent of its patient days to Medicaid patients, having a 20-bed Medicare-certified skilled nursing and subacute care unit with the capacity to treat ventilator patients, having an adult day care program, providing respite care, and treating persons with associated mental health disorders, Alzheimer's disease, and persons who are HIV positive. Beverly will also contribute $10,000 to a gerontological research fund at Florida A & M University upon approval of this project. Manatee Health Care and Rehabilitation Center is a three-story, 147-bed nursing home in Bradenton, Florida. It was constructed approximately thirty years ago and contains 3-bed wards on the second and third floors. Because of its age, the Manatee Health Care and Rehabilitation Center has very limited space for the provision of therapy. Three-bed wards are not considered state of the art and are difficult to manage. Residents prefer private and semiprivate rooms to three-bed wards. Gender separation and smoking preferences are much harder to accommodate with larger wards. Infection control problems are increased with larger residential units. In spite of these drawbacks, the facility has a superior license and enjoys continuous occupancy of over 90 percent. Beverly has filed a certificate of need application to delicense 42 beds at Manatee Health Care and Rehabilitation Center. Those 42 beds would be used in conjunction with 63 beds from the available fixed need pool to allow for the construction of a new Beverly facility at an undetermined site in Manatee County. If both applications are approved (the one at issue and the delicensure application), Beverly will remove all patient rooms from the first floor of Manatee Health Care and convert that space to therapy treatment rooms and office space. The additional therapy space will allow Beverly to purchase and install additional therapy equipment. All of the three-bed wards on the second floor of Manatee Health Care will be converted to semiprivate rooms. Beverly's proposal is intended to benefit residents at the proposed facility and the residents at the existing Manatee Health Care and Rehabilitation Center. Beverly's proposed new facility is designed in a "reverse T" configuration to minimize the distance from the resident rooms to the nursing stations, with each nursing station having direct visual control over all patient rooms on that station. It will have 36 semiprivate rooms and 33 private rooms. Designed to minimize an institutional effect and provide for a home-like setting, the proposal includes two large day rooms, four activity rooms, and five enclosed courtyards. The central courtyard has a solarium/greenhouse and a screened gazebo. Separate areas are designated for the adult day care program and the Alzheimer's treatment unit. There are a large occupational and physical therapy gym and dedicated treatment areas for speech therapy and activities of daily living therapy. There is also a central ambulation court for use in physical rehabilitation. In a prehearing motion for summary recommended order and throughout the proceeding, Mediplex has contended that Beverly's application for delicensure and approval of new beds is technically defective as the proposal described in its letter of intent is really two projects, rather than the required single project. The letter of intent describes the new facility to be comprised of 63 beds from the fixed need pool and 42 beds to be delicensed from the existing facility. The new facility is the subject of CON application number 7938, at issue in this proceeding. On January 20, 1995, subsequent to the application omissions filing deadline for CON number 7938, Beverly filed its application for CON number 7998 for delicensure of 42 beds at the existing facility. This latter application was denied and the proceeding to challenge that proposed agency action is in abeyance pending the outcome here. (Vantage Healthcare Corporation v. Agency for Health Care Administration; DOAH case number 95-3891) Beverly will not delicense its beds at the existing facility unless its application for CON for the new facility is approved. The two applications are essential elements in a single expansion scheme. Beverly made full disclosure of its intent to AHCA and confirmed with AHCA the process it should follow to present its proposal within the formal regulatory framework. The process of creating a new facility with beds from the fixed need pool combined with delicensed beds from a separate facility has been approved by AHCA in the recent past in Clearwater Land Company v. Agency for Health Care Administration, 17 FALR 3817 (AHCA 1995, DOAH Case No. 94-2404/94-2972). In the Clearwater case, however, the project involved delicensure of the entire old facility, a distinction that is significant with regard to financial projections as discussed below, but a distinction that is not fatal to the single project issue. Mediplex's Proposal Mediplex proposes a 60-bed addition to its existing 120-bed facility, for an additional 14,984 gross square feet at the cost of $2,019,972. Mediplex's Manatee Springs Nursing Center is located in the southeastern corner of Manatee County, in close proximity to hospitals in Manatee County and Sarasota. Eighty beds are active rehabilitation, sometimes called "subacute" beds, which are Medicare certified. Forty beds are long term, less intensive care beds. Mediplex has a superior license and is accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF) and the Joint Commission on Accreditation of Healthcare Facilities (JCAHO). These accreditations are evidence of extraordinary commitment to quality of care. The 60 beds sought by Mediplex are intended to be long term care beds, as the census in the facility's existing long term beds remains stable, with a 98 to 100 percent occupancy on a day to day basis. Occupancy of the subacute care beds fluctuates, but generally more of these beds are empty. Mediplex provides amenities that contribute to a home-like non- institutional environment, with design features to promote the privacy, individual choice and comfort of its residents. Design and location of the proposed addition will facilitate access to all services and amenities offered at the existing facility. Mediplex residents, existing and future, will benefit from staffing levels and ancillary services that are unique in a nursing home setting. The facility has three full-time physicians, including the medical director, a full- time psychologist, case managers and numerous contract therapists. Mediplex's Letter of Intent On October 31, 1994, Beverly filed its letter of intent for its proposed 105-bed facility. Consequently, pursuant to Rule 59C-1.008, Florida Administrative Code, a grace period was triggered for the filing of additional letters of intent. The deadline for the filing of grace period letters of intent was November 16, 1994. On November 15, 1994, Mediplex delivered its letter of intent to an overnight carrier, Airborne Express, for guaranteed delivery the following day to AHCA in Tallahassee and to the Local Health Council, the Health Council of West Florida, Inc. On November 17, 1994, AHCA advised Mediplex that AHCA and the local health council did not receive Mediplex's letter of intent until that same day. AHCA also advised that it would accept the letter of intent if Mediplex could obtain correspondence from the overnight carrier explaining that the late delivery was the fault of the overnight carrier and not the fault of Mediplex. Despite the fact that Mediplex's letter of intent was delivered to AHCA and the local health council one day following the grace period letter of intent deadline, AHCA determined that the letter of intent should be accepted because the late delivery was the fault of the overnight carrier and Mediplex had delivered the letter of intent in a timely manner to the overnight carrier. AHCA has previously accepted items from certificate of need applicants which were delivered one day late when late delivery was the result of an overnight carrier failing to follow through on its guarantee. This policy has developed in the eleven years that Liz Dudek, Bureau Chief for Certificate of Need and Budget Review, has been involved in the program. It is common and reasonable for applicants to rely on next-day delivery services and it is reasonable for AHCA to accept filings in the unusual event that the carrier fails to timely deliver through no fault of the applicant. Relevant Preferences in the Local Health Plan The August 1994 CON Allocation Factors Report for District VI identifies three allocation factors that are relevant to these nursing home applicants. Both Beverly's and Mediplex's proposals include agreed conditions for Medicaid utilization that meet or exceed the percentage of persons below 125 percent of the federal poverty level (15 percent in Manatee County) and the average number of Medicaid residents in existing nursing homes in the county (50.09 percent). Beverly commits to 50.2 percent for its new facility and is already achieving 72.4 percent at the facility from whence 42 beds will be derived. Although its commitment meets the criteria, it arguably represents a decline from Beverly's current outstanding Medicaid service. Uncertainty regarding the siting of the new facility affects Beverly's assurance that 50.2 percent is merely a minimum and that it expects to achieve a higher percentage. Depending upon the geographical location of the new facility in Manatee County, it may or may not attract the same level of Medicaid residents as now benefit from the existing facility. Mediplex commits to serve 51 percent Medicaid residents in 100 long- term beds. The second allocation factor in the District VI Plan relates to proposals of specialized services (for example, adult day care) to meet identified unmet needs. Both applicants propose an array of services. Beverly's application includes specific plans for adult day care; Mediplex's application does not. Both applicants are entitled to the preference in the third allocation factor, regarding demonstrated intent to serve HIV infected persons. Beverly has identified 3,400 patient days of nursing home care to patients with HIV/AIDS in all of its Florida facilities in 1994 and projected a substantial increase in 1995. Mediplex has served, and will continue to serve these patients, but does not maintain statistics on patient days. Mediplex's unique staffing, specifically including its full-time physicians, makes it ideally prepared to care for terminally ill patients. The State Health Plan The first allocation factor under the State Health Plan provides a preference to applicants proposing to locate nursing homes in subdistricts with occupancy rates exceeding 90 percent. The occupancy rate in Manatee County for the applicable planning horizon is 94.63 percent, and both Beverly and Mediplex qualify for this preference. The second State Health Plan factor, regarding service to Medicaid residents, is the same as the local health plan factor discussed in paragraphs 23 - 25, above, and both applicants qualify. Preference under the third factor is given to applicants proposing to provide specialized services to special needs residents, including AIDS and Alzheimer's residents and the mentally ill. Beverly has agreed to condition approval of its application on services to these special needs persons. Mediplex does not include such agreement in its application, but provides the services and plainly has the will and the means to continue to do so. State Health Plan allocation factor four is similar to the local plan allocation factor discussed in paragraph 26, above. Beverly describes and intends to implement a specific program for adult day care and includes a dedicated unit in its architectural plans; it also conditions award of its CON on the provision of respite care. Mediplex's application does not address day care, but states that the addition of 60 long term care beds will make it possible to implement a respite care program. Its existing 40 long term beds have been fully utilized, with no space to accommodate respite care which by its nature is short term. Allocation factor five gives preference to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. Both applicants are entitled to this preference with outstanding designs and programs. Beverly's new facility will provide more space per patient overall than Mediplex's addition, but the room sizes are approximately equal. During the hearing, issues were raised with regard to whether portions of both Mediplex's and Beverly's designs met the requirements of the Americans with Disabilities Act (ADA). Credible conclusions by experts for both parties established that the apparent deficiencies were in the rough designs and that ADA requirements could be met by both facilities within their proposed spaces and costs. Allocation factor six provides a preference for proposals of innovative therapeutic programs which have been proven to be effective in enhancing residents' physical and mental functioning level. Beverly proposes, and Mediplex already provides, a full range of high quality therapy services. While these services may be more extensive or intensive than those offered in other older nursing homes, the services are not novel or "innovative." Further, Mediplex's application for 60 new long term care beds does not contemplate intensive therapeutic services to the residents of those new beds, which services are already being provided in its existing program. Beverly's proposal more effectively advances the goal reflected in this factor since its new facility would substantially improve the rehabilitation services it now offers. Preference in allocation factor seven is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are considered for facilities proposing to serve upper income residents. Mediplex has now, and will have in the projected future, the highest Medicaid per diem rate in the subdistrict. It failed to prove at hearing its statement in its CON application that approval of the 60-bed addition would result in a lower Medicaid per diem rate for the facility. Beverly's current and projected rates are substantially lower than Mediplex's. Beverly argues that Mediplex impermissibly amended its application at hearing when its expert testified that the projected Medicaid rate is $126 per day. While the financial data, as well as other parts of the application, included careless errors, the testimony explained the data provided and did not change the revenue and expense projections on Mediplex's Schedule Eleven. Allocation factor eight provides a preference to applicants with a history of superior resident care in existing facilities, considering, among other circumstances, the current licensure ratings of facilities located in Florida. Both applicants have a history of providing superior resident care. Approximately 75 percent of Beverly's many facilities in Florida enjoy a superior license rating. Of the four facilities owned by wholly-owned subsidiary, Vantage, two are superior, including the facility from which beds will be delicensed. Deficiencies have been quickly corrected when identified. Mediplex has consistently maintained a superior rating at the facility it seeks to expand. Its ability to withstand rigorous accreditation scrutiny by the Joint Commission on the Accreditation of Health Care Organizations and by the Commission on Accreditation of Rehabilitation Facilities, and its designation as a Head Injury Rehabilitation Care Center by the Florida Division of Vocational Rehabilitation further attest to its unique quality. State Health Plan allocation factor nine gives preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Preference is also given in allocation factor ten to applicants who will use professionals from a variety of disciplines to meet residents' needs including social services, recreation, nutrition, physical and specialized therapy, mental health and spiritual guidance. Beverly and Mediplex both clearly are entitled to these preferences as they both propose staffing levels which exceed the minimum standards of the agency's administrative rules. Both describe a multidisciplinary approach in serving residents; both employ or will contract with a full array of health care and geriatric care professionals. Entitlement by both applicants to the preference in allocation factor eleven is similarly uncontested. This preference relates to a respect for residents' rights and privacy and well-designed quality assurance and discharge plans. State Health Plan allocation factor twelve gives preference to applicants proposing lower administrative costs and higher resident care costs than the average costs in nursing homes in the district. Only Beverly achieves this. The average administrative cost per patient day in District VI in 1993 was $24.74, and the average patient care cost per day was $47.48. To arrive at a reasonable comparison, the agency applies a five percent per year inflation factor through the applicants' second year of operation (here, 1998). This results in mid-year 1998 average patient care costs of $60.60 per day and administrative costs of $31.56 per day. For the target year Beverly proposes $22.27 administrative costs and $67.72 patient care costs. Mediplex's projected resident care cost of $118.43 and administrative cost of $59.73, per day, are both almost twice the district averages. As described by Mediplex's consultant, these costs are reflective of the high level of patient care provided in its facility. Approval of the additional 60 long term care beds, which beds will ordinarily generate less costs, will spread the subacute beds' costs over a wider base, thereby benefiting those patients. The high level of care will also be available to the long term care patients. Balancing Criteria: Need and Financial Feasibility As reflected above, there is little to recommend one application over the other when the criteria in the local and state health plans are considered. Beverly's new physical plant is preferable and its projected Medicaid rate and administrative costs (but patient costs, as well) are lower. Mediplex, however, enjoys an impeccable reputation for quality of care and provides the unique staffing to insure that its high level and quality of care are maintained. Both applicants reasonably propose to meet the identified for additional community nursing home beds in Manatee County, Florida. There is a difference in how each proposes to meet that need. Beverly suggests there is a need for subacute care beds and proposes to provide twenty such beds in its new facility. It is undisputed that patients are being discharged from acute care hospitals "quicker and sicker" and they sometimes require "step-down" or subacute level of care before returning to their homes or long term living arrangements. There is a trend in nursing homes to staff and equip facilities to meet this need. Beverly projected the need for additional subacute beds in Manatee County based on a flawed analysis of existing inventory. It considered only fifteen of Mediplex's eighty subacute beds and failed to include subacute beds recently approved in two hospitals in Manatee County, Blake and Manatee Memorial. These hospitals, without their own subacute beds, would be actively referring patients to community nursing homes with subacute care capability. There is no established definition of "subacute" and consequently no clear basis to establish an inventory of those beds in existing facilities. The facilities themselves define and identify them based on the acuity of services provided. A basic precursory step to establishing a subacute care bed is obtaining Medicare certification for that bed. There are approximately 400 Medicare-certified beds in Manatee County. Although subacute care services may not be currently provided in each of those 400 beds, their Medicare certification provides the potential for such services. There is an intuitive presumption of need for adult day care services, respite care services, services to Alzheimer's and HIV/AIDS patients, all services firmly committed to by Beverly. The state and local health plans address that need generally with the preferences described above. In this proceeding, however, no empirical data was presented to justify this basis for favoring Beverly's application over Mediplex's. It is not known, for example, whether the services are already being provided in other facilities or through alternative programs less costly than nursing homes. Mediplex established that its proposal for long term care beds more effectively meets existing need in Manatee County. Mediplex's proposal is also substantially less costly: approximately $2 million versus Beverly's $7 million, for the net addition of approximately the same number of beds. It is reasonable to expect that the $5 million difference will impact the system at some point in time when the investment is recouped either from government reimbursement systems or from the total charge structure. In reality, Beverly's project is more than $7 million when $442,000 is added for the delicensure application. And that delicensure process appears to cast a cloud on the validity of Beverly's financial feasibility projections. The projections contemplate a net loss ($42,184) for the first year's operation of the new 105-bed facility, and net income of $211,779 for the second year of operations. Standing alone, these are reasonable and suggest the long term financial feasibility of the new facility. The projections do not reflect the effect of delicensure of the beds in the existing facility, however. The projections related to the existing facility are found in the delicensure application, reviewed and analyzed in CON application number 7998. After delicensure, the existing facility will still generate a smaller, but positive net income. Both facilities will make money, but not as much as the existing facility without delicensure. This underscores the concern that somewhere in the system the $7.5 million investment will be recouped. That is, it is not reasonable to expect that $7.5 million is being spent to make less profit than would have been made without the investment. It is easier to establish the long term financial feasibility of Mediplex's project. It is an existing facility with robust financial performance and reasonable projections in the future. On balance, the Mediplex proposal better fulfills the statutory and regulatory criteria for a certificate of need.
Recommendation Based on the foregoing, it is hereby recommended that the agency enter its final order awarding CON number 7939 to Mediplex (Manatee Springs Nursing Center, Incorporated). RECOMMENDED this 22nd day of January, 1996, in Tallahassee, Florida. MARY W. CLARK, 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 22nd day of January, 1996. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Beverly's Proposed Findings of Fact 1-3. Adopted in paragraphs 1 - 3, respectively. 4. Adopted in paragraph 6. 5&6. Adopted in paragraph 9. Addressed generally in Paragraphs 33 and 34. Adopted in paragraph 7. Adopted in paragraph 8. Adopted in paragraphs 10 - 12. Adopted in paragraphs 13 and 25. Adopted in substance in paragraph 16. Adopted in paragraph 4. Adopted in paragraphs 23 - 25. Adopted in substance in paragraph 26. 16&17. Rejected as unnecessary. 18&19. Adopted in paragraph 27, except for finding of "greater commitment", which is unsubstantiated or unsupported argument. 20&21. Rejected as unnecessary. Adopted in paragraph 28. Adopted in paragraph 29. 24-25. Adopted in paragraph 30, except that Mediplex did present evidence of services to patients suffering from dementia. 26. Rejected as unsupported argument. 27-28. Adopted in substance in paragraphs 31 and 32. 29. Addressed, but rejected, in paragraphs 53 and 54. 30-34. Adopted in summary in paragraph 33. 35&36. Adopted in summary in paragraph 35. 37-39. Adopted in summary in paragraph 36. 40&41. Adopted in paragraphs 38 - 40. 42&43. Adopted in paragraphs 41 and 42. 44-46. Adopted in substance in paragraphs 44 - 46, except that the high acuity services will be available to all Mediplex residents. 47. Adopted in paragraph 4. 48-54. Rejected as unnecessary. Adopted in paragraph 4. Adopted in summary in paragraph 58. Rejected as unnecessary. Adopted in paragraph 46, in summary but Beverly's own projections are suspect since construction costs will be recouped through the health care system somehow. Rejected as unnecessary. See paragraph 58, above. The "no free lunch" argument has been credited. 61-70. Rejected as cumulative or unnecessary. 71. Rejected as argument that is unsupported by the weight of evidence. 72&73. Addressed in paragraphs 19 - 22. Addressed in paragraphs 10 - 12. Addressed in paragraphs 37 and 69, with the argument rejected. Mediplex's and AHCA's Proposed Findings of Fact Adopted in paragraph 3. Addressed in preliminary statement. 3-5. Adopted in paragraph 11. 6. Adopted in paragraph 2. 7&8. Adopted in paragraph 12. 9-11. Addressed in preliminary statement. 12&13. Adopted in paragraphs 4 and 5, respectively. 14&15. Adopted in paragraph 19. 16&17. Adopted in paragraph 20. 18. Adopted in paragraph 21. 19&20. Adopted in paragraph 22. 21-42. Adopted in summary in paragraphs 49 - 52 and 55. 43-49. Adopted in summary in paragraphs 56 - 58. 50-108. The findings of unusually high quality of care and level of services at Mediplex's existing facility are accepted generally and are adopted in summary in paragraphs 15 - 18, 35, 40, 42, 43 and 46. 109-115. Adopted generally in paragraph 7 (final sentence). 116-122. Rejected as unnecessary. 123-128. Rejected as argument that is unsubstantiated or unsupported (that Beverly's Medicaid utilization will drop), although the undetermined site may affect the utilization as found in paragraph 24. 129-136. Rejected as unnecessary. Adopted in paragraph 24. Adopted in paragraph 13. Rejected as unnecessary. Adopted in substance in paragraph 17. Rejected as contrary to the weight of evidence (as to larger rooms); adopted in substance in paragraph 34 (as to ADA compliance). Adopted in paragraph 27. 143&144. Rejected as unnecessary or cumulative. Adopted in paragraph 27. Adopted in paragraph 4. 147-186. Adopted in summary in paragraphs 37, 56 and 59. 187-194. Rejected as unnecessary. COPIES FURNISHED: Douglas L. Mannheimer, Esquire Jay Adams, Esquire BROAD & CASSEL Post Office Drawer 11300 Tallahassee, Florida 32302 David C. Ashburn, Esquire Michael Cherniga, Esquire GREENBERG, TRAURIG, HOFFMAN, LIPOFF, ROSEN AND QUENTEL Post Office Box 1838 Tallahassee, Florida 32302 James H. Peterson Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Sam Power, Agency Clerk Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
