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
Findings Of Fact Venice Hospital, a general acute care hospital offering 342 medical/surgical beds and 30 bed's for general psychiatric care, services a population of approximately 110,000 people in Southern Sarasota and Northern Charlotte Counties. Approximately 80% of its patients are covered by Medicare. This figure being higher than average, puts it somewhere in the top 5% of Medicare providers in Florida. The hospital's services are concentrated on geriatric patients and it is developing several programs devoted to that type of patient. It has recently received approval for nursing home development and operates a home health agency. Missing from the geriatric spectrum of services is the hospital based skilled nursing facility, (SNF), which is the subject of this action. Sarasota County currently has four med/surg hospitals, including Petitioner which is the only hospital in the Venice area. Petitioner has a licensed psychiatric unit which operates under separate rules and which is licensed separately but within the hospital cycle. The patients which are treated in that unit are of a different demographic make up than those treated in the med/surg beds and the staff which treats them is different. Petitioner completed a study of the potential need for SNF beds in the hospital which led to the conclusion being drawn by it that this service should be established. Mr. Bebee's review of the applicable rules and statutes indicated to him that the hospital could elect to designate a special care unit within the hospital without even having to go through Certificate of Need, (CON), review. A letter was submitted by the hospital to the Department on February 8, 1990, asking for an exemption from CON review for that project. Because no response to that letter was forthcoming, and because the hospital review cycle was fast coming up, on February 22, 1990, Mr. Bebee submitted a LOI to the Department seeking to convert 42 med/surg beds to a hospital based SNF facility at a cost of $310,000.00. After the LOI was sent, on February 26, 1990, Ms. Gordon-Girvin, on behalf of the Department, responded by letter to Bebee's inquiry letter, indicating the CON review process was a necessary part of the process for Petitioner's facility, but that the LOI and application should be filed in the next nursing home batching cycle by April 30, 1990. Shortly thereafter, by letter dated March 13, 1990, Ms. Gordon-Girvin rejected the LOI which Petitioner had submitted in the hospital cycle since, according to the Department, it was properly "reviewable under the nursing home review cycle rather than the hospital review cycle." Notwithstanding that rejection, and understanding the Department's position as to which cycle was appropriate, on March 26, 1990, Petitioner submitted its CON application for this project, modified to seek only 36 beds. By undated letter, the envelope for which was postmarked April 16, 1990, Ms. Gordon-Girvin declined to accept that application for the same reason she had rejected the LOI. Petitioner has since filed a CON application for the same project in the current nursing home cycle, on a nursing home application form. It did this to keep its options open but considers that action as being without prejudice to the application at issue. Though numerical bed need is not in issue in this proceeding, a brief discussion of general need is pertinent to an understanding of why Petitioner has applied for approval of this project. Petitioner is of the opinion that SNF beds within the hospital setting will provide better care for the patients than could be provided in a nursing home. Many of the patients in issue are receiving intravenous applications of medicines; taking antibiotics; require orthopedic therapy; or are in respiratory distress calling for ventilator or other pulmonary procedures. These patients need a continuing level of nursing care on a 24 hour basis but no longer qualify for a hospital continued length of stay. Petitioner currently has and is taking care of such patients in the facility, but would like to do so in a more organized, systematic manner which could be accomplished in a hospital based SNF. In addition, reimbursement rules dictate that patients no longer needing full hospital care but who remain in the hospital, become, in part, a cost to the hospital because no meaningful reimbursement is received for thatlevel of care. They would qualify for Medicare reimbursement, however, if the unit were designated and certified as a SNF. Medicaid does not recognize these beds as reimbursable because they are in a hospital. Certification for the hospital based SNF would be through the Health Care Financing Administration, (HCFA), and the Medicare program. To secure this certification, the hospital based unit would have to be a distinct part of the facility and not merely consist of beds scattered throughout the facility. Once certified, the unit is not referred to as a nursing home by HCFA or Medicare, but is classified as a hospital based unit. Because Petitioner sees this as a hospital project - a service that the hospital would be providing under its license, it chose to file for the approval in the hospital cycle rather than in the nursing home cycle. Bebee is familiar with the certification process for both hospitals and nursing homes. The latter is a lengthier process and is substantially different from that used for hospitals. In his opinion, it does not give the hospital based applicant the opportunity to properly justify the approval of a hospital based SNF since it deals more with the requirements of a community based facility. The nursing home form is highly structured whereas the hospital form makes it easier to identify and supply the appropriate supporting information for the project applied for. Further, Bebee does not consider the hospital based SNF bed in the same context as a community nursing home bed. The type of patient is not the same nor are the resources required to treat that patient. Petitioner has purchased a CON to construct a 120 bed community nursing home within the Venice area which will have some SNF beds in it. Nonetheless, because of the basic difference between the services, it still plans to pursue the hospital based SNF. A Florida Hospital Association study concluded that SNF in hospitals are different and there is a lack of this type of service in the hospitals throughout the state. This study, dated May, 1989, at Page 5 reads: Conversion of hospital beds to nursing home beds could improve the financial viability of hospitals, reduce purchasers' and consumers' health costs, and improve access to care for patients requiring higher levels of nursing care, [if they are needed and meet quality care requirements]. Bebee also points out that if this project is considered in the nursing home cycle rather than in the hospital cycle, it would result in a hospital competing with nursing homes which are seeking a different type of bed - community versus SNF. Current community nursing home bed need is set at 0. Petitioner's nursing home cycle application was filed under the "not normal circumstances" provision, but there may still be substantial contest. This type of litigation, he believes, adds unreasonably and unnecessarily costs and is a resultant financial burden to the hospital. Mr. Balzano, a health care consultant and Petitioner's other expert, confirmed and amplified the substance of Mr. Bebee's thesis. He compared hospital based SNFs with those in community nursing homes and found notable differences aside from the statutes and rules governing each. Petitioner's current beds are controlled under Chapter 395, Florida Statutes, and Rule 10D- 28, F.A.C. If some were converted to SNF beds under the pending application, they would still fall under the purview of that statute and rule. On the other hand, community nursing home SNF beds would be controlled by the provisions of Chapter 400, Florida Statutes, and Rule 10D-29, F.A.C. There is a substantial difference between them. Other differences are: Patients in hospital based SNF beds generally have greater nursing requirements than those in SNF beds in community nursing homes. Staffing in hospital based SNF is generally higher than in free standing nursing homes. The average stay is shorter in a hospital based SNF. Patients are not there for continuing care but for restorative care. The size of a hospital based SNF unit is generally smaller than that in a free standing unit. Costs are usually greater in a hospital based SNF unit reflecting the greater needs of the patient. Therefore, reimbursement is generally higher. Health services in the different systems are different and a comparative review would be difficult. The questions in the different application forms reflect a different approach and in the nursing home application, relate to residential type care. This is not the case in the hospital form. Costs relating to the use of an existing facility would be cheaper for the hospital based unit when compared with building a new nursing home facility. However, the costs of hospital construction are usually higher than nursing home construction though the quality of construction is generally better. The operating costs for the more complex services provided in a hospital based unit are higher and Petitioner would have trouble competing if reimbursement were based on the classification as a nursing home. Higher staffing levels and higher staffing costs in a hospital based facility would act in disfavor of that facility. The state generally looks with greater favor on projects for Medicaid patients. Hospital based units are not oriented toward that group and would, therefore, not be given the same consideration, as would be a nursing home which catered to Medicaid patients. The type of patient, (residential vs. subacute) has an impact. The hospital based unit provides treatment to the more acutely ill patient. SNF patients who need that higher degree of care would get it better at a hospital based facility which has greater resources to meet patient needs. Mr. Balzano feels it is unfair to compare the two types of properties. The differences in the programs would have an impact on the issue of need when comparative review is done. A SNF in the hospital setting is different but would be compared, if the nursing home cycle were used, against the total pool of community nursing home beds even though the patients are different and their need for services are different. Need methodology looks at historical utilization. Hospital based SNF patients turn over more frequently than do community nursing home patients and the occupancy level is not as high in the hospital based setting. This would bring the average occupancy rate in an area down and could affect the need for community beds across the board. It is also noted that hospital based SNF beds would not be appropriate to house community nursing home patients who could not be accommodated in a nursing home, and vice-versa. SNF patients could normally not be appropriately treated in a community nursing home because of their greater needs. If compared in a batched review, however, they would be considered together without that distinction being made. Since all other hospital services are reviewed under the provisions of Chapter 395 parameters as hospitals, Balzano sees it as inconsistent to review hospital based SNF beds under the nursing home criteria. He can find no statutory or rule provision requiring this. The Department has drafted a proposed rule on the subject but that proposal is presently under challenge. Further, Medicare considers hospital based SNF beds and community nursing home based SNF beds as different entities with the hospital based beds earning a higher reimbursement ceiling due to the increased services and the different type of patient. According to Mr. Balzano, in Florida, hospital based SNF beds account for 1/2 of 1% of all hospital beds. Nationwide the figure is 4%. Balzano feels this is because in Florida there is no criteria to judge need against and therefore these beds are compared to all nursing home beds. He considers this wrong, especially in a state where there is such a high percentage of elderly patients. It is, in his opinion, poor health planning, and when compared against other nursing homes, the hospital based SNF unit will always be at a disadvantage. The testimony of Ms. Sharon Gordon-Girvin, Director of the Department's Office of Community Health Services and Facilities, reveals the Department's rationale in its rejection of the Petitioner's LOI for the instant project and the subsequent return of its application. The application was rejected because there was no underlying LOI for the project. The LOI was initially rejected as having been filed in an inappropriate cycle, (hospital). The Department's policy, calling for applications for all extended care or hospital based skilled nursing facility beds to be filed in a nursing home batching cycle has been in place for an extended period going back before 1984. The Department looks at extended care beds and SNF beds as somewhat equivalent but different. The designation of extended care facility beds initially used by HCFA, (Medicare), in hospital situations is no longer applicable. Now, Medicare recognizes SNF beds in hospitals, but does not distinguish them from other types of hospital based beds. The service is considered the same and the patients must meet identical admissions criteria. The reasons relied upon by the Department, from a health planning standpoint, for reviewing applications for hospital based SNF beds in the nursing home cycle are: Medicare conditions of service and admission criteria are the same, and The State nursing home formula rule projects a need for all nursing home beds, (SNF and ICF) , and does not differentiate between type. Providers compete for the beds, not where they will be used or under what conditions. The mere need for special treatment such as ventilators or intravenous antibiotics is not controlling. If the patient does not need the acute care provided to hospital acute care patients, since a "subacute" status is no longer recognized by the state, it is the Department's position that that patient should be in intermediate care status. This position is incorporated in the Departments proposed rule which is currently under challenge. It had been elucidated, however, in both the 1988 and 1990 editions of HRSM 235-1, relating to Certificates of Need, where at section 9-5 in both editions the text reads: 9-5 Skilled Nursing Unite in Hospitals. Beds in skilled nursing units located in hospitals will be counted in the nursing home bed inventory, even though they retain their licensure as general medical surgical beds. In addition, the Florida State Health Plan for 1989 and for each year since 1984, has counted hospital based SNF beds in the nursing home bed inventory. The parties stipulated to that point. Ms. Gordon-Girvin admits that it is sometimes difficult for an applicant to apply for hospital based SNF beds on a nursing home application for, but claims that is as it should be. She asserts that the patients are the same, (disputed), and since, she claims, a hospital cannot provide the same services that a full service nursing home could provide, the applicants should be differentiated on the basis of services rather than patient category to justify the additional cost inherent in the hospital based setting. In short, she believes the current situation is appropriate since it requires the applicant, a hospital, to look more carefully at the terms and conditions of the services to be provided. In so far as this results in health care cost savings, her position is accepted. She also contends that the Florida Hospital Association study relied upon by Petitioner to support its position that hospital based SNF bed applications for distinct units cannot compete fairly against nursing homes in a comparative CON review, is not pertinent here considering it was prepared to examine an excess of hospital bed inventory and possible alternative uses as income sources. Regardless of the purpose of the study, absent a showing that it is unreasonably slanted or biased, its conclusions have not been successfully rebutted. Ms. Gordon-Girvin also contends that the low percentage of hospital based SNF beds as compared to total hospital beds is a positive result of the state's efforts to reduce costly services in favor of less costly alternatives. The Department has the exclusive charter to determine which services are to be reviewed and how the review is to be conducted. Even if the proposed rule formalizing the procedure questioned here is stricken, the policy currently being utilized by the Department would still be valid and appropriate. Psychiatric, substance abuse, and rehabilitation beds in hospital inventories are considered distinct from acute care beds, but are still classified as hospital beds because there are no reasonable alternatives for treatment of those conditions. With regard to those patients using hospital based SNF beds, however, the Department claims there is an alternative, the community nursing home based SNF beds. In further support of the Department's position, Amy M. Jones, the Department's Assistant Secretary for Health Care Facilities and an expert in facility licensing and certification in Florida, pointed our that the Department treats hospital based SNF beds and community nursing home SNF beds the same because: conditions of participation are the same and the Department wants to look at and compare similar activities in the same cycle, and pertinent statutes and rules both provide for comparison of similar beds and similar services. Section 395.003(4), Florida Statutes, defines the various types of hospital beds as psychiatric, rehabilitative, and general medical/surgical acute care beds regardless of how they are used. The HCFA Conditions of Participation call for certification of SNF beds as either a distinct part of another facility or as a free standing facility. The agency regulations, as outlined in The Federal Register for February 2, 1989, outlines the requirement that SNF beds in a hospital be surveyed just as are community nursing home SNF beds. Taken as a whole, it would appear that both federal and state regulatory agencies look at SNF beds, regardless of where located, as an integral part of a nursing home operation as opposed to a hospital operation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be entered by the Department affirming its rejection of the Petitioner's Letter of Intent and CON application for the conversion of medical/surgical beds to SNF beds filed in the hospital batching cycle. RECOMMENDED this 30th day of August, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of August, 1990. APPENDIX TO RECOMMENDED ORDER IN CASES NOS. 90-2738 & 90-3575 The following constituted my specific rulings pursuant to S 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Not a proper Finding of Fact. Accepted and incorporated herein as it relates to Petitioner's filing of the LOI and the CON application. The balance is background information and is not a proper Finding of Fact. 3.-6. Accepted and incorporated herein. Not a proper Finding of Fact but a statement of party position. Accepted and incorporated herein except for first sentence. Accepted and incorporated herein. Accepted. Accepted. &13. Accepted and incorporated herein. 14.&15. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. 18.-21. Accepted. Not a Finding of Fact but merely a restatement of the testimony. Accepted and incorporated herein. Accepted and incorporated herein. &26. Accepted and incorporated herein. Accepted. &29. Not a Finding of Fact but argument and a restatement of testimony. Not a Finding of Fact but argument. Not a Finding of Fact but a comment on the evidence. Accepted. Recitation of the witnesses testimony is accurate, but the conclusion drawn does not necessarily follow. Frequency of use does not necesarily determine the finality of the policy. Not a Finding of Fact but a comment on the evidence. Accepted as a presentation of the contents of the document. Accepted. Accepted as represented. 38.-40. Accepted and incorporated herein. 41. Accepted as a restatement of testimony. 42.&43. Accepted. Accepted. &46. Accepted. Accepted. Accepted. FOR THE RESPONDENT: 1.&2. Accepted and incorporated herein. 3. Accepted. 4.-6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Richard A. Patterson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive - Suite 103 Tallahassee, Florida 32308 Jeffery A. Boone, Esquire Post Office Box 1596 Venice, Florida 34284 Linda K. HarSris General Counsel DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Sam Power Agency Clerk DHRS 1323 Winewood Blvd. Tallahassee, Florida 32399-0700
The Issue The 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 The central issue for disposition is whether Certificate of Need no. 7750, for 24 hospital-based skilled nursing unit beds should be awarded to Petitioner, St. Joseph’s Hospital, Inc. (St. Joseph’s). To resolve that issue it is necessary to resolve factual issues regarding the need for the proposed beds and a legal issue regarding the impact of Health Care and Retirement Corp. of America v. Tarpon Springs Hospital Foundation, Inc. 671 So.2d 217 (Fla 1st DCA 1996) (Tarpon Springs) on the fixed need pool published in the first nursing home batching cycle of 1994 in Hillsborough County, District 6, Subdistrict 1.
Findings Of Fact The Parties St. Joseph’s Hospital, Inc. (St. Joseph’s) is a not- for-profit hospital which has operated in the Tampa, Florida area for over fifty years. It is currently licensed for 883 acute- care beds; it owns John Knox Village, which includes an adult congregate living facility and medical center nursing home; and it offers other services in a continuum of health care. St. Joseph’s also has a 19-bed, in-hospital skilled nursing care unit which became operational in early 1995. The Agency for Health Care Administration (agency or AHCA) is the state agency responsible for administering and enforcing the certificate of need (CON) process described in sections 408.031 through 408.045, Florida Statutes (“the Health Facility and Services Development Act”). The Process The fixed need pool published by AHCA in vol. 20, number 15, April 15, 1994, Florida Administrative Weekly, projected a need for 94 additional nursing home beds in Hillsborough County, District 6, Subdistrict 1, for the January 1997 planning horizon. There is no evidence that this fixed need pool was challenged. Approximately eleven health care providers, including St. Joseph’s, responded to the fixed need pool notice with applications for CON’s ranging from 10 to 94 beds. Some of those applicants, like St. Joseph’s, were hospitals seeking hospital- based skilled nursing beds. After comparative review of the applications, AHCA issued its state agency action report (SAAR) on September 16, 1994, denying some and granting others, and explaining the basis for its intended actions. Some of the beds were awarded for a hospital-based skilled nursing unit; St. Joseph’s application for 24 in-hospital beds was denied in the comparative review that determined St. Joseph’s application was inferior to others in meeting statutory and rule criteria. The applicants’ petitions for formal hearing were forwarded to the Division of Administrative Hearings by AHCA and were consolidated in a single proceeding relating to the 94 beds in District 6, Subdistrict 1. On October 19, 1995, during the pendancy of appeal of the DOAH Final Order in Tarpon Springs, all of the parties in the consolidated cases executed and filed a stipulation which disposes of 93 out of the 94 available beds in the fixed need pool. The stipulation provides that all of the applicants, except St. Joseph’s, withdrew their petitions for formal hearing. As to St. Joseph’s, the stipulation provides: St. Joseph’s has previously withdrawn its opposition to the applications of all other parties to this proceeding by its Notice of Voluntary Dismissal of Petitions for Administrative Hearing and Notice of Lack of Opposition, dated September 13, 1995. St. Joseph’s and AHCA stipulate that Case No. 94-6236, wherein St. Joseph’s challenged the denial of its application for certificate of need 7750 to add 24 skilled nursing unit beds, should be held in abeyance pending the final judicial determination of Tarpon Springs Hospital Foundation, et al. v. Agency for Health Care Administration, et al. (Proceeding below DOAH Case Nos. 94-0958RU and 94-1165RU, reported at 16 FALR 3420, presently on appeal before the First District Court of Appeal). St. Joseph’s acknowledges that the terms of this settlement will deplete the fixed bed need pool determined to be available for this application cycle, assents to the same, and maintains its position that its application should be approved notwithstanding the lack of availability of community nursing home beds within the fixed bed need pool. All other parties to this agreement except for AHCA hereby withdraw their petitions filed in this proceeding in opposition to the application of St. Joseph’s for certificate of need 7750 and waive any challenge or protest that they may have to the issuance of certificate of need 7750. St. Joseph’s hereby agrees not to oppose the transfer of up to seven (7) beds from this application cycle to TGH. After remand of all of the consolidated cases except St. Joseph’s (DOAH no. 94-6236), AHCA entered its final order on December 13, 1995, awarding CON’s for 93 beds to various of the applicants. Some of those 93 beds were awarded for hospital- based skilled nursing units. This final order depleted the fixed need pool of all but one bed. In their prehearing stipulation filed on August 29, 1996, AHCA and St. Joseph’s admitted these relevant facts: The appropriate planning area is Hillsborough County; The appropriate planning horizon for the application is January 1997. Rule 59C-1.036, Florida Administrative Code was appropriately used in determining the bed need for Hillsborough County, District 6, Subdistrict 1, for the first nursing home batching cycle of 1994; and The numbers used to derive the project pool of 94 beds in Hillsborough County, District 6, Subdistrict 1 for the January 1997 planning horizon were accurate and appropriate. At the hearing and in its proposed recommended order, St. Joseph’s concedes that it did not apply for beds under “not normal” circumstances. The Project St. Joseph’s proposes to establish a 24 bed, hospital- based skilled nursing unit in an area of its main hospital building by converting 24 acute care beds to this use. The project involves 19,600 square feet of renovation at a total project cost of $684,731, including conversion costs of $331,940. Actual out-of-pocket costs for the project are $352.791. The skilled nursing beds within the hospital facility are intended to contribute to St. Joseph’s goal of providing a full continuum of care for its patients, with services provided at different levels for a medically-appropriate and cost- effective outcome. St. Joseph’s anticipates that the patient using the skilled nursing (also called “subacute care”) unit would be one coming from the acute care setting and requiring less-acute care, but a more intensive level of care and a shorter length of stay than generally offered in a typical nursing home. All ancillary services and therapies will be available at the hospital seven days a week. Rehabilitative services, which are critical to the patient likely to use the skilled nursing beds, include physical therapy, occupational therapy, speech and language therapy, and recreation therapy. Need Analysis/Impact on Existing Programs Virtually all of the referrals to the proposed new beds will come from within St. Joseph’s. This is the experience of the new 19 bed unit. The hospital’s doctors and their patients prefer to not transfer to an outside facility and they plan in advance, as part of their treatment goals, that the subacute rehabilitative phase of treatment will be in St. Joseph’s own skilled nursing unit. The multi-discipline health care team evaluates and identifies patients who will benefit from such treatment; patients are not automatically shifted down to the unit. The existing unit enjoys a near-100 percent occupancy rate and has a waiting list for patients. Sometimes patients are held in an acute care bed while awaiting transfer to a vacant bed in the skilled nursing unit. This is an inappropriate use of the acute care bed. Few, if any patients would come from other hospitals. Since many hospitals now have their own skilled nursing units, there is little exchange of patients. In the experience of St. Joseph’s staff, other hospitals generally fill their own units from within in their own “continuum of care” system. John Knox Village is not an alternative for patients who need to “step-down” from acute to subacute care. John Knox is eleven miles from St. Joseph’s and does not provide the intensity of care that is offered in the hospital-based skilled nursing unit. There are subacute care, or skilled nursing care, beds in Hillsborough County in free-standing, not hospital-based units. These alternative facilities are not all fully occupied and some offer similar services and treat patients comparable to those treated in the hospital-based units. Evidence that the free-standing skilled nursing facilities are not appropriate alternatives to St. Joseph’s new beds was largely anecdotal. Although Dr. Wasylik, St. Joseph’s chief of orthopedics, is generally familiar with facilities in which he has patients, his observation that transfer of patients from St. Joseph’s would not be appropriate is based on his concern that the “continuity of care” would be disrupted. In other words, even before surgery and admission to an acute care bed, a “critical pathway” in the patient’s rehabilitation is developed. Another facility might have a different pathway that would disrupt the rehabilitative process. Better continuity of care, in Wasylik’s view, translates into quicker, and thereby more cost-effective, recovery. Financial Considerations Although the agency found some inconsistencies in the financial data included in St. Joseph’s application, those inconsistencies affected only the scoring of the application in a competitive batching cycle. The agency witness who provided financial review of the application conceded there was no problem with funding the project, and due to the small size of the project in relation to the size of St. Joseph’s, the project would not have a significant impact on the cost of other services provided by St. Joseph’s. The proposed project would generate a positive financial return for St. Joseph’s. In the proforma financial statement included with the application, the hospital used an occupancy rate of 74%; the actual occupancy rate experienced in the new 19 bed unit is higher. Some of the problems the agency found when reviewing St. Joseph’s application were adequately explained at hearing. For example, the actual cost of the project is less than what the agency found in the financial projections in the application. Also, if, as the agency contends, St. Joseph’s has over-stated its projection of Medicaid patients, a lower Medicaid utilization rate will actually inure to the benefit of St. Joseph’s, since the Medicaid reimbursement rate is lower than for other payor sources. While not obvious on the face of the application, the financial assumptions provided by St. Joseph’s were sufficient to extrapolate valid projected salary expenses in the second year of operation. In summary, a CON application, by necessity, includes estimates and projections of expenses and revenue generated by the proposed project. St. Joseph’s now has the experience, which it did not have when the application was prepared, of the actual expenses and revenue from its 19 bed unit. That actual experience helps validate its prediction of financial feasibility for the proposed 24 beds. Architectural Issues At hearing, St. Joseph’s clarified its intent to not delicense nor relocate acute care beds to make room for the proposed 24 bed skilled nursing unit. Nor does it intend to “phase in” the skilled nursing beds, if approved. Neither of these intentions is clear from the face of the application and the architectural review by the agency raised questions on these issues. The questions affected St. Joseph’s overall standing in a competitive review process, but are not serious enough to foreclose approval if the application is considered on its own merit. The application states that the new beds would be co- located with the existing 19 beds. But if there is not sufficient room, as long as St. Joseph’s can accomplish the project at or below the approved project cost, and as long as St. Joseph’s obtains agency approval for placing the beds elsewhere (which approval is routinely granted), the precise location of the beds within St. Joseph’s facility is not a problem. The beds may not, nor are they intended to be, co-mingled with acute care beds in the hospital. Upon construction, the 24 beds will meet all of the licensure, building code and other regulations applicable to a skilled nursing unit within an acute care hospital. Balancing the Criteria and Summary of Findings There is little dispute that St. Joseph’s has the financial resources to complete the approved project and to operate it successfully. Nor is quality of care, either in the existing facility and projected in the future, an issue of dispute. The questions raised in the financial review and architectural review are not impediments to approval. There are two significant problems with St. Joseph’s proposal. St. Joseph’s serves the entire planning district, and the impact of new beds must be considered in that district-wide health-planning perspective. St. Joseph’s generates enough patients from within its own hospital to fill the beds close to capacity. Other facilities providing similar services in the district are not at full capacity. The possibility of those existing facilities serving as an alternative to new beds was not adequately explored by St. Joseph’s, but was rejected out of an abundance of pride in its own fine services, or physician and patient loyalty. Patient and physician preference does impact “real world” utilization of health care facilities but cannot drive the health planning decisions that are made in the CON process. The second, and most significant impediment to St. Joseph’s application is that only one bed remains in the fixed need pool established for the relevant planning horizon. As discussed below, Tarpon Springs did not invalidate that fixed need pool. St. Joseph’s application does not reflect a willingness to accept any fewer than the requested beds, much less an award of only one single bed. (See, Respondent’s Exhibit 12, CON application, p. 34)
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: that the Agency for Health Care Administration enter its final order denying CON number 7750 to St. Joseph’s Hospital, Inc. DONE and ENTERED in Tallahassee, Leon County, Florida, this 23rd day of January 1997. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 1997. COPIES FURNISHED: Ivan Wood, Esquire Baker & Hostetler Suite 2000 100 Louisiana Houston, Texas 77002 Steven A. Grigas, Esquire Agency for Health Care Administration Building 3 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman, Esquire General Counsel 2727 Mahan Drive Tallahassee, Florida 32308-5403
Findings Of Fact The semi-annual census report by DHRS for District. III dated December 1, 1984, (Exhibit 23) indicated a need for 615 additional nursing home beds for the January 1985 review cycle. Although this report cautioned that changes in reporting and pending litigation or appeals could change the count of approved beds, nevertheless, most of the applicants for beds in the January 1985 batching cycle relied on this report as the basis for their applications. At the time this report was submitted, District III was subdivided into seven sub districts, and the need for each sub district was separately listed. Prior to the completion of the review of the applications in the January 1985 batching cycle, some 500 nursing home beds in District III were allocated to applicants in earlier batching cycles whose applications had been denied for lack of need, and who were in the process of appealing those denials. Many of these applications had been updated and those beds were issued by DHRS pursuant to its then-current policy of issuing beds on a first come-first served basis. As a result, only some beds were allocated to those applicants in the January 1985 batching cycle before the pool of available beds was depleted. Furthermore, rule changes became effective before the January 1985 batching cycle applications were reviewed which eliminated sub districts in District III. Largely because of the allocation of beds to applicants in earlier batching cycles, but also due to population based changes in District III, the bed need methodology, using data current at the time of the hearing and computing need to January 1988, shows there will be an excess of 342 nursing home beds in District III in 1988. (Exhibit 33) Eustis Limited Partnership The initial application of Eustis was for 8 additional beds which involved construction costs. The amended application which was considered in this hearing is for three (3) beds with costs allocated only for the equipment and furniture needed to add a bed to three existing rooms. As amended, Eustis' application is very similar to the application of Oakwood Nursing Center who was granted a CON for the addition of three (3) beds without construction costs. At the time Oakwood's CON was granted, DHRS was in the process of granting CONs for 103 beds. At the time Eustis submitted its application, all of the 615 beds initially available had been dispensed and there was no need for additional beds. At this hearing, Eustis produced no evidence to show a need for the three (3) beds for which Eustis applied. The evidence submitted by Eustis primarily showed that by simply adding a bed to three existing rooms, the cost per bed added was far less than would be the cost of constructing new facilities. Inverness Convalescent Center (ICC) ICC proposes to construct and operate a 120-bed nursing home in Citrus County at a cost of $3,400,000. (Exhibit 15) Citrus County has four licensed nursing homes with a total of 430 beds and an average occupancy rate of less than 90% during the last reported six-month period. (Exhibit 17)- During the last quarter of 1985, the occupancy rate in Citrus County nursing homes was the lowest of the planning areas in District III, and in the first quarter of 1986, it was second lowest. ICC contends the need formula doesn't apply to their application because they propose to serve special needs of the elderly, such as institutionalized patients, head trauma patients, etc. However, the only testimony presented indicating a need in Citrus County for such special services came from ICC owners and employees who live in New Jersey. ICC further contends that since there are less than 27 nursing home beds in Citrus County per 1,000 residents over age 65, that an additional nursing home is needed in Citrus County. However, the 27-beds per 1,000 population is but one factor considered in determining need for nursing home beds. In short, ICC presented no evidence to show that need exists in Citrus County for the proposed facility. Beverly Enterprises Beverly's application is for a CON to add 60 beds to an existing 120-bed nursing home in Live Oak, Suwannee County, Florida, at Suwannee Health Care Center. This facility was opened in 1983 and reached full capacity in seven to nine months. There are two nursing homes in Suwannee County; Suwannee Health Care Center, (HCC) and Advent Christian Village, Dowling Park (ACV). The latter is a church owned retirementc ~B community of 550 residents which provides a continuum of care on five levels. Although Advent Christian is not licensed as a life care community, it gives priority of admission to its 107 licensed nursing home beds to residents of the life care community. As a result, there are few vacancies available for persons living outside the retirement community. Advent - Christian has a waiting list of 32 on the active waiting list and ~20 on an inactive waiting list. People on waiting lists are told the wait is from one to five years for admission. Suwannee HCC has an occupancy rate approaching 100% and a waiting list of approximately 50. As a result, the vast majority of Suwannee County residents needing nursing home care are sent to a nursing home outside Suwannee County, usually in Gainesville, some 65 miles from Live Oak. The planning area in which Suwannee County is located, formerly sub district 1 in District III, has five nursing homes with an average occupancy rate for the last three months of 1985 and the first three months of 1986, ranging from 96.91% to 99.75%. During the first three months of 1986, the occupancy rate of three of these nursing homes was greater than 99%' one as 98.7% and the lowest, Advent Christian, was 96.91% (Exhibit 17). The patient mix at Suwannee ACC is over 80% Medicaid and approximately one-third black. The black population is about 30% of the total population in Suwannee County. Suwannee HCC has had several superior ratings (Exhibits 9, 10), takes patients in order on the waiting list regardless of whether they are Medicaid or private pay, and has a very good reputation in the area for service. DHRS personnel who approve Medicaid placement of patients, hospital employees who have the duty of placing patients in nursing homes, nursing home personnel, and private citizens with relatives in nursing homes, all confirmed the critical access problems of Suwannee County residents for local nursing home placement. Live Oak residents, for example, who need placement in a nursing home are usually sent outside Suwannee County, have their names added to waiting lists at nursing homes in Live Oak, and nursing homes closer to Live Oak than the nursing home in which they are placed, and move to the closer nursing home when a vacancy occurs. As a result, most of the vacancies at Suwannee HCC are filled by patients who were, first transferred outside Suwannee County for nursing home placement, and got on the waiting list at Suwannee HCC. There are very few patients from Suwannee County who are initially placed in a Suwannee County nursing home. Southern Medical Associates (SMA) SMA proposes to construct and operate a free standing, 60-bed, skilled nursing home in Palatka, Putnam County, Florida, at a cost of $1,692,400. (Exhibit 19) When SMA's application was submitted the computation of bed need in Suwannee County under the sub district rule in effect when the application was submitted, showed 30 beds needed in Putnam County. This calculation included 36 beds earlier approved but not yet licensed. At the time of this hearing those approved 36 beds had been revoked by reason of not beginning construction in a timely fashion. The medical consultant who reviewed these applications and prepared most of the State Agency Action reports, (Exhibit 30) initially recommended that SMA'S application be granted. The two existing nursing homes in Putnam County have an occupancy rate in excess of 98 percent for the latest reported 3 month period. (Exhibit 17) 85 to 90 percent of these patients are Medicaid patients. The one nursing home in Palatka, Putnam Memorial Nursing Home, is a 65-bed nursing home with an occupancy rate in excess of 99 percent for the past year, and on the date of hearing had 18 people on the waiting list for a bed. The turnover in this nursing home is about 50 percent each year, with most vacancies resulting from the death of a patient. Two HRS employees whose job it is to determine eligibility of residents of Putnam County for Medicaid reimbursement for nursing home care, testified that they very, seldom see a patient go to Putnam Memorial Nursing Home, that over half of the patients they qualify for eligibility are sent out of the county, and of those placed in the county, almost all are placed at Lakewood Nursing Home which is located 18 miles from Palatka. The only hospital in Putnam County discharges 5 to 6 patients per month who need additional nursing care after discharge. Most of these patients are sent to nursing homes in St. Augustine, Florida, a few are sent to Lakewood, but for very few is a bed available in Palatka.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Health Quest Corporation Health Quest Corporation has been in operation for approximately 20 years and currently operates 11 nursing centers in the States of Indiana, Illinois and Florida. Its three existing Florida facilities are located in Jacksonville, Boca Raton and Sarasota. It also has nursing centers under construction in Winter Park, Kendall and Sunrise, Florida, as well as four more in Indiana. Health Quest has a Certificate of Need to build a new 180-bed nursing center in Sarasota County, and that project is currently under development. Health Quest also holds Certificates of Need for nursing centers in Pembroke Pines, Duval County and Safety Harbor. The Safety Harbor approved Certificate of Need for 120 beds is in Pinellas County. Due to a revision of its development plans for Florida, Health Quest now plans to transfer or sell its CONs and sites in Pembroke Pines, Duval County and Safety Harbor. Whereas the company had formerly planned to build seven new Florida facilities simultaneously, it has now decided to build only four facilities in each generation of Florida projects. The decision to trim its development schedule is based upon Health Quest's reluctance to temporarily expand its present staff of management personnel and its refusal to compromise its quality standards for the sake of developing a larger quantity of new facilities. It is contemplated that the proposed facility in Pinellas County would be built after the completion of its nursing and retirement centers in Winter Park and Sunrise. The Letter of Intent filed with HRS noticed Health Quest's intent to request a Certificate of Need for 120 community nursing home beds in Pinellas County. However, the actual application filed with HRS, and the project being pursued in this proceeding, is for a 180-bed nursing center. HRS accepted the 180-bed application, and no party has demonstrated prejudice from the discrepancy between Health Quest's Letter of Intent and its application. The nursing center is proposed for the northern area of Pinellas County and is to be integrated with a 124-apartment assisted living residence. The nursing center will contain a specialized 60-bed unit for the care of residents suffering from organic brain syndrome, which includes Alzheimer's disease and related dementias. Health Quest currently operates organic brain syndrome units at two of its Indiana nursing centers. In this unit, Health Quest proposes a nursing staff ratio of 3.5 hours per patient day. A non-supervisory nursing staff ratio of approximately 3.0 hours per patient day is proposed for the remaining 120 beds. Its proposed staffing is sufficient to provide 24-hour registered nursing coverage on each of the three proposed nursing units, and its staffing level is slightly higher than that proposed by the other applicants in this proceeding. Health Quest intends to offer sub-acute care, including hyperalimentation and intravenous treatment, respite care and vacation care and, possibly, adult day care. Therapy treatment, including physical, occupational, speech, audiology and psychosocial, will be provided through an affiliate of the Health Quest Corporation, known as Achievement Rehabilitation Corporation. Health Quest maintains a quality assurance program based on a system of peer review. Its Jacksonville and Boca Raton nursing centers hold superior licenses. Its Sarasota nursing center is not yet eligible for a superior license because it has only been open since November of 1986. It also offers orientation and staff training programs and participates in education programs in conjunction with local schools of nursing. As did many of the applicants in this proceeding, Health Quest updated its application at the hearing. The updates were based upon a survey of existing facilities in Pinellas County, which survey was not completed at the time its application was reviewed; additional beds having been approved in Pinellas County as a result of a Settlement Agreement executed subsequent to the review date of this batching cycle; the effects of inflation; and the passage of time. Also, Health Quest determined subsequent to the filing of its application to build all its resident rooms at 216 net square feet, rather than some at 216 and others at 200. Its architectural and engineering fees were increased to reflect the fact that it now contracts out more of its design tasks than it did at the time the original application was reviewed. Its equipment costs were updated because it was decided that the original estimate was unrealistically low. Health Quest estimates the total costs of the nursing home center to be $5,546,812. Health Quest did not include a set of floorplans with its application, nor did it offer any at the hearing. The one-story design of its proposed nursing center is described in narrative form in Section III.G. of its application and the tables in the application form requesting the square footage of certain areas were completed. HRS did not request floorplans or any kind of schematic drawings in its notification of omissions, and HRS deemed the Health Quest application complete. While the application form contains a space for the inclusion of "schematic/diagrammatic drawings," and it is common practice to include such drawings with a Certificate of Need application, neither the statutes governing application content nor HRS's rules specifically require the submission of floorplans or drawings. Health Quest plans a facility with 71,142 total square feet, at a cost of $30,816 per bed and a total of 395 square feet per bed. With the exception of VHA/Oxford, Health Quest projects the lowest cost per bed. The patient rooms will each encompass 216 square feet, thereby exceeding the minimum requirements for room sizes. The facility will have 18 single rooms and 81 semi-private rooms. The reasonableness of the Health Quest project completion schedule is questionable inasmuch as Table 26 calls for a one-month period from the time it contracts with an architect to HRS approval of final plans for licensure purposes. Health Quest projects that 30 percent of its patient days will be Medicaid, that 4.1 percent will be Medicare and that 65.9 percent will be private pay. The Medicaid projection is comparable to that experienced at its Jacksonville nursing home facility, but much higher than that experienced at its Boca Raton and Sarasota facilities. The total project cost of $5.5 million is comparable to other similar- sized nursing hones. While Health Quest's financial analysis and feasibility expert testified as to the reasonableness of Health Quest's pro formas, which show the project as breaking even at 54 percent occupancy at the beginning of the second year of operation, this witness had not conducted an independent analysis of the individual items upon which the pro formas were based. Instead, he relied upon the contents of the application and its updates, neither of which were prepared by him. The witness had not reviewed the 1987 or 1988 quarterly audited financial statements of Health Quest. The data reviewed was for the year ending March 31, 1986. The witness did not know whether Health Quest had money in hand to make the 10 percent equity contribution, nor whether it had $5 million assured but not in hand for conventional financing for this project. It is therefore difficult to assess the short and long-term financial feasibility of the project proposed by Health Quest. Florida Country Place Limited Partnership Florida Country Place Limited Partnership is a foreign limited partnership authorized to do business in Florida. The general partners are Scott Phillips and Kim Phillips and the limited partner is the Jack E. Phillips Trust. The managing entity will be Phillips Florida Healthcare, Inc., a foreign corporation authorized to do business in Florida. The principals of Country Place have been involved in designing, constructing and operating nursing homes, apartment complexes and other health related facilities for over 15 years. The family now owns and operates three multilevel delivery of care facilities such as the one proposed herein. These include a 170-bed facility in Cuyahoga Falls, Ohio, a 109-bed facility in Wickliffe, Ohio, and a 103-bed facility in Clearwater, Florida. The long range plans of Country Place are to develop homes in clusters, currently concentrating on the central west coast area of Florida, and eventually to develop a southern headquarters. It has previously been granted Certificates of Need in Lee County and Polk County and has been recommended by HRS for a Certificate of Need in Hillsborough County. The current proposal is for the construction of a 30-bed nursing unit, consisting of 14 new community nursing home beds and the transfer of 16 existing beds, as part of a 120-unit continuum of care facility for the elderly. The facility would also contain 60 independent living apartments and 30 adult congregate living units. The 16-bed transfer from Florida Country Place's existing facility in Pinellas County would allow the conversion of triple- occupancy rooms to double occupancy, thus enhancing the living environment for the residents of that facility. The site and design of the existing facility, known as Country Place of Clearwater (and formerly known as Druid Hills), renders it impossible to eliminate the 3-bed wards through new construction of replacement bed space. While the owner of the existing nursing home in Clearwater did not join in the application filed with HRS for the current proposal, one of the general partners of both the transferor facility and the applicant is authorized by the transferor to seek the proposed transfer. HRS never sought additional or clarifying information about the transfer proposal in its omissions request, and its authorized representative deemed the application complete. Florida Country Place made some revisions in its application at the time of the hearing. The changes included a reduction in the common area space in its facility design, changes resulting from an inflation adjustment and a change in the way the common costs and expenses among the three components of the project were allocated in order to conform to HRS's allocation methodology, which was first revealed in the State Agency Action Report. Florida Country Place proposes a three-story facility designed with a residential appearance to implement the philosophy of deinstitutionalization. There are many support services and activities areas, and the exterior amenities include a pond, an exercise course, a sitting deck and a putting green. The center core is designed to encourage interaction among the residents of all the different levels of care. The 30-bed size is designed to enable more personalized care and a more family- type personal concept. The 3-story design has as its purpose minimizing the amount of travel distance for the resident at the farthest unit to the amenities of the center core and its services. The first floor will consist of independent living apartments and the second floor will be adult congregate living units and the laundry. The 30-bed nursing unit is on the smallest floor, the third and top floor, so that travel distance to the central core is the shortest while still providing the nursing home residents with the greatest amount of privacy and quiet time. The plans for the nursing home include semi-private rooms with a permanent partial partition separating the two beds so as to effectively create two private rooms. Each resident will have his or her own thermostat, window, storage space, television and telephone accommodation. The total project cost allocated to the nursing home component of the project is $1,605,113, or $53,504 per bed. This cost per bed is far greater than the other applicants propose, as is the square feet per bed of 603. Even with the higher cost per bed, construction and development costs are reasonable. Some economies of scale will be realized through the sharing of administration, common areas, maintenance and the kitchen and laundry. The design of the entire facility will conform with state regulations for mixed use facilities and will utilize energy conservation measures. Services and programs, in addition to the continuum of care concept proposed for this facility, include adult day care, respite care, intensive rehabilitative services, community involvement, care for Alzheimer's patients and subacute care. Ease of movement through the facility from less to more intensive levels of care, and vice versa, is anticipated. Numerous physical and recreational activities will be offered. The proposed staffing levels exceed the minimum required. Florida Country Place encourages the hiring of elderly workers in every area of their nursing home facilities, and it has an active recruitment program to attract sufficient qualified staff. The projected salaries are reasonable. The proposed facility will be available for pharmacology and nurse training. Florida Country Place has not yet selected a site for its proposed facility, but desires to locate in north Pinellas County, wish Dunedin or Palm Harbor being the target area. It proposes to provide 45 percent of its patient days to Medicaid patients. The principals' Ohio nursing home facilities do not participate in Medicaid because they believe that the reimbursement mechanism is unfair and would require a reduction in services to avoid an economic burden on private pay patients. The per diem charges proposed are at the high end of the scale of reasonableness. Private pay patient charges will be individualized based upon need and level of care required, and the charges will be revised on an ongoing basis. The proposed nursing home project can be successfully financed, and the required equity contribution is available. While the total project will have a loss in it second year of operation, it will be profitable thereafter. The nursing home component will be viable in its first year and thereafter. During 1986 and 1987, the existing Clearwater facility (formerly Druid Hills) was experiencing low occupancy, in part because of the three-bed wards and in part because of the negative reputation of the previous ownership. A public relations marketing program was instituted, and the census increased from 70 percent to 90 percent in the early part of 1988. An in-house survey revealed that key personnel were not keeping staff recruitment and development in step with the rapid census growth. At about the same time, a new staff development coordinator and new nursing staff were hired. During the training of new personnel, the HRS audit team arrived for the annual survey. The facility did not have adequate trained staff to handle the increased census and, on May 20, 1988, HRS imposed a moratorium on new admissions. At the time of the hearing, Country Place had recruited new staff for that facility, believed it was now ready to accept new admissions and had requested a resurvey by HRS. There is a structural deficiency at the existing Clearwater facility, which was built in the early 1960s and purchased by the Phillips in the early 1980s. This deficiency is currently undergoing repair, and review for a superior rating will be requested after completion of the repairs. The Forum Group, Inc. The Forum Group, Inc. is a national, publicly held company which started in 1981 and currently owns, develops and operates sixteen retirement living centers and twenty freestanding nursing homes in a number of states. Forum has sold or transferred many of its acute care, psychiatric and smaller nursing home facilities so that it can concentrate on the retirement living center concept. It currently has only one other operating facility in Florida. This facility is Park Summit, which consists of 200 independent living apartments and 35 nursing home beds. Park Summit currently has a standard rating and has only two Medicaid-approved beds. The Park Summit facility is not typical of the facility proposed for Pinellas County in that it contains no adult congregate living facility units. Some of Forum's facilities in other states hold superior license ratings, and it has never had a license denied, revoked or suspended. The 120-bed nursing home facility proposed by Forum for Pinellas County will be part of a total retirement living center containing two other levels of care--assisted living (or adult congregate living facility units) and independent apartment units. There will be 30 assisted living units and 120 to 150 independent apartment units. While a specific site has not yet been selected for the project, Forum is focusing its attention on the eastern portion of Pinellas County. The total cost of the nursing home component of Forum's proposed retirement living center is estimated to be $5,053,301. This figure is the highest for those applicants proposing 120-bed nursing homes, but is consistent with similar projects recently developed by Forum. Forum is a solvent company and has the financial resources to finance the construction and initial operation of the proposed facility. While the price of Forum stock has declined in the past year, this does not affect the intrinsic value of the company, whose cash alone exceeds its liabilities and which has a 3 to 1 ratio of assets to liabilities. The revenues and expenses projected by Forum are reasonable and are based upon Forum's corporate experience. Forum projects a positive net income in its second year of operation and thereafter, and has demonstrated the financial feasibility of the project on both a short-term and long-term basis. Forum's nursing home project will encompass approximately 49,000 square feet, with a cost per bed of $42,111. Its proposed estimate of equipment and construction costs are reasonable and consistent with other Forum projects. By combining the nursing home project with the remainder of the proposed retirement living center, Forum will realize some operating efficiencies and economies through the use of common heating and cooling, kitchens, laundry and maintenance. Forum provided single-line drawings with its original application, indicating the general arrangement of spaces for the proposed nursing home facility. While the corridor length in the drawings did exceed state requirements, a slight modification to the configuration can be made to cure this problem without exceeding the estimated project cost by more than ten percent and without exceeding the proposed total square footage of the project. Forum's project will involve a two-story structure, will be finally designed to comply with all licensure requirements and will not create a safety hazard for patients. Forum may ultimately utilize an architectural plan different than the single-line drawings submitted with its application. The project would have energy conservation features such as heavy roof insulation, double glazed insulated windows and heat pumps. Forum projects a utilization of 28.5 percent Medicaid patient days, which is the lowest projection of all applicants. It projects a utilization of 66.7 percent private pay patient days, with private room rates being $110.00 per day and semi-private room rates being $85.00 per day. Its proposed design contemplates about 40 private rooms. Contrary to a statement in Forum's application, Forum no longer maintains a separate fund for indigent care. Its projected patient charges for Medicaid and Medicare are somewhat low, inasmuch as there have been increases since January of 1987. An update to account for this would create an increase in the total revenues projected by Forum. Forum's proposed staffing and salaries are consistent with Forum's other facilities, and are comparable to those proposed by the other applicants. Forum has a quality assurance program with written standards for monitoring resident care. It has a staff training program, with pre-service and in-service training, and utilizes a prescreening procedure to assure it hires competent, trained staff. Twenty-four hour coverage by registered nurses and licensed practical nurses will be provided. Forum's solution to the nursing shortage is to pay higher wages with greater benefits, to provide higher quality surroundings and to utilize re-entry nurses. In the event of a nursing deficit, Forum would utilize as a source of staffing the personnel available from the home health care that will be provided to the apartment residents of the retirement living facility. Forum will offer all services required under skilled and intermediate care, as well as respite care. Forum makes its facilities available to educational institutions for community training programs. Pinellas Healthcare, Ltd./Convalescent Services, Inc. Pinellas Healthcare, Ltd. (PHL) is a Georgia Limited partnership owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. Although PHL will own the proposed facility, it will be managed and operated by Convalescent Services, Inc. (CSI). CSI is also 100 percent owned by Stiles A. Kellett, Jr. and Samuel B. Kellett. CSI was formed in 1978 for the purpose of operating extended care facilities, including nursing homes and retirement centers. It currently operates 21 nursing homes and 3 retirement centers located in 7 states. Six of the nursing homes, including one 120-bed facility in Pinellas County, and two of the retirement centers (adult congregate living facilities) are located in Florida. It also has another Certificate of Need approval to establish 120 community nursing home beds in Pinellas County. It is the Company's plan to gear its growth toward those markets where CSI already operates facilities or has a management network in place, thus allowing CSI to provide high quality care both more effectively and more efficiently than if development took place in new markets without existing resources. After receipt of its initial Certificate of Need application, HRS notified CSI that certain elements had been omitted from the proposal, and requested CSI to provide the number of registered nurses per shift and the patient bill of rights. In response thereto, CSI submitted another entire application which varied, in some respects, from the initial application filed. The revisions involved a reduction in the square footage of the proposed facility and an increase in the project costs associated with financing. HRS accepted the revised application and deemed the application complete. There was no evidence adduced to demonstrate that the revisions resulted from a review of the applications submitted by the other parties in this proceeding. The project proposed herein is a free-standing 120-bed nursing facility in Pinellas County. A site has not yet been selected. A utilization of 45 percent Medicaid, 4 percent Medicare and 51 percent private pay is anticipated. These projections are based upon a review of historical occupancy data in Pinellas County as well as CSI's own experience in Pinellas County and at its other existing facilities. Medicaid utilization within its existing certified nursing home beds currently averages approximately 40 percent of all patient days. The nursing home would offer a comprehensive range of services, including subacute, skilled and intermediate care; respite care; hospice care; special services for patients with Alzheimer's and related disorders; physical, speech, occupational and recreational therapy; social services; case management services and counseling services. The charge for respite care will be the same as for regular admissions. CSI does not intend to segregate its Alzheimer's patients in a separate and distinct unit, and is of the philosophy that such patients do better in an integrated environment whereby the more alert patients tend to prevent the Alzheimer's sufferers from deteriorating as quickly. A "wander guard" system will be installed to monitor the Alzheimer's patients. CSI has developed a manual containing standards of nursing care for Alzheimer's patients, and its nursing personnel will be specially trained to provide services to such patients. Due to its management of an existing facility in Pinellas County, CSI has existing agreements with the providers of services and transfer agreements with area hospitals. CSI has existing affiliations with the Pinellas County School Board and St. Petersburg Junior College, and intends to enter into educational relationships with these and other institutions to ensure the continuing education of its own staff and to serve as a clinical training ground for faculty and students. CSI intends to implement numerous activity programs especially tailored to the needs of the individual residents, to encourage volunteer participation and to engage its nursing home residents in various community service projects. The proposed nursing home facility would be comprised of twelve single-bed rooms and 54 two-bed rooms. The nursing home would consist of 37,700 total gross square feet, and the total facility gross square feet per bed will be 314 feet. The one-bed rooms would consist of 159 net square feet and the double bed rooms would consist of 191 net square feet. The most energy efficient equipment available will b installed in the facility. The total project cost is estimated to be $3,900,000, or $32,500 per bed. The projected costs for construction, professional services, equipment and site preparation are consistent with its past experience. CSI's quality assurance program includes the employment of a nursing services coordinator responsible for ensuring the quality of care provided at its facilities, a quality assurance manual which contains standards covering all departments within each facility, a resident care plan, resident counsels and pre-service and in-service training for nursing personnel. Of the 21 nursing homes currently managed by CSI, 17 are located in states which utilize a superior rating system. Of those facilities eligible to receive superior licenses, CSI maintains superior ratings in over 80 percent of its beds. Only one of its 6 Florida nursing homes is eligible for a licensure rating, and that facility currently holds a standard rating. Several deficiencies have been cited against the Centerville Care Center in Tallahassee. In March 1988, HRS imposed a moratorium on admissions to that facility, partly because the minimum standards for nursing staff were not being met. That moratorium on admissions was administratively challenged by CSI and had not been finally resolved as of the time of the hearing. CSI's nursing staff proposal in the instant proceeding is on the low range of all the applicants, though the numbers and classifications of positions meet or exceed state licensing requirements. The tables in the application, as revised, were updated at the hearing to account for "skyrocketing" nursing salaries and recent salary changes in the marketplace (which also necessitated an adjustment in the Medicaid and Medicare rates), inflation, and a new Medicaid payment system adopted on January 1, 1988. The pro formas project a loss during the first year of operation and a profit during the second year of operation with a 95 percent occupancy rate. The project is to be financed through a 25 percent equity contribution provided by the general partners and a 75 percent commercial financing arrangement for a period of 30 years. This proposed method of financing is consistent with past CSI experience in Florida and elsewhere. The Kelletts have a $40 million renewable credit facility through a series of banks, with $13-$14 million currently available. The Mediplex Group, Inc. The Mediplex Group, Inc. was formed about 25 years ago, and is now, since April of 1986, a wholly-owned subsidiary of Avon Products, Inc. Avon is a multi-million dollar national corporation which had $73.8 million cash on hand as of December 31, 1987. The Board of Directors of Avon has approved the instant proposed project and Avon will provide the long-term financing for this project. The applicant, through Mediplex, has the funds available to make the 10 percent equity contribution for the proposed project. Mediplex currently has approximately 18 to 22 projects in various stages of development and construction, which represent approximately $125 million. It has never defaulted or become delinquent on payments due on any of the loans associated with these projects. The applicant, Florida Convalescent Associates of Pinellas County, is a partnership of Mediplex Management of Pinellas County, Inc., which is a wholly-owned subsidiary of The Mediplex Group, Inc. The Mediplex Group will develop and manage the facility on behalf of the partnership. Mediplex currently manages one other nursing home facility in Florida -- Manatee Springs in Bradenton. Mediplex now seeks a Certificate of Need for a 120-bed nursing home facility to be located in northern Pinellas county. It intends to offer a continuum of care, and will include respite care and adult day care among its services. It will accept Alzheimer's patients and integrate them into the system with other patients. A "wander guard" system will be utilized to protect such patients and other dementia patients from wandering. There will be no subacute care unit, per se. The facility proposed by Mediplex contains 44,722 total square feet and 369 square feet per bed. There will be 8 private rooms and 56 semi-private rooms, several multi-use rooms and two dining rooms. There will be two central bathing areas in each nursing unit. The design of the facility incorporates energy saving features. The schematic floorplans do not show toilet facilities in the kitchen, and do not indicate a quiet lounge, sunroom or chapel as represented in the Certificate of Need application. The total cost of the proposed project is estimated to be $4,550,879, or $37,924 per bed. The Mediplex philosophy of care is to bring each patient up to his or her maximum level of participation, and to accomplish this through a continuum of care policy. Each Mediplex facility must comply with policy standards which comport with the highest minimum standards of the states in which Mediplex facilities exist. Mediplex employs a national director of quality assurance who is responsible for overseeing the operations of the various facilities, as well as the quality of care offered. When new facilities are opened, key employees of other Mediplex facilities go to the new facility to assist in orientation. There will be an infection control program at the facility, and it will be Mediplex's policy to always have a registered nurse on duty in the building. Mediplex will attempt to involve residents in community activities. The hiring and training of appropriate employees will be emphasized. Recognizing that there is a shortage of nurses, Mediplex has, in the past, successfully recruited nurses from Ireland and England. An HRS survey of Mediplex's Manatee Springs nursing home facility in Bradenton, Florida, conducted in March, 1987, resulted in a finding that 6 licensing standards had not been met. This facility currently holds a standard rating. Several of its facilities in Massachusetts and Connecticut have been cited for deficiencies relating to patient care and proper infection control techniques. The proposed facility will provide 52 percent of its patient days for Medicaid residents, and has a policy of accepting any resident regardless of the source of payment. The total staff per patient day proposed by Mediplex is higher than that proposed by the other applicants. While the salaries listed in the application were consistent with Mediplex current policies, no witness called by Mediplex was familiar with salaries in Pinellas County, and thus their reasonableness was not established. A pro forma statement of revenues and expenses for the first year of operation of the proposed facility has never been submitted by Mediplex, though there was testimony that Mediplex would suffer a loss of approximately $300,000 after its first year of operation. Section 381.494(4)(e), Florida Statutes, in effect at the time the current applications were filed (as well as the current Section 381.707(2)(c)) requires a statement of the projected revenues and expenses for the first two years of operation after completion of the proposed project. The pro formas submitted by Mediplex encompass years two and three of operation, and appear to be stated in terms of current dollars. In preparing the pro formas, Mediplex relied on the average of all Mediplex Group facilities companywide, and not upon information relevant to either Pinellas County or Florida. Although Medicaid and Medicare per diems are computed by different reimbursement methodologies, Mediplex's second year per diem for Medicare and Medicaid are projected as identical. The inflation assumptions appearing on the updated pro formas were not established or substantiated. In summary, while Mediplex established that its financial projections were consistent with its experience in constructing and operating other nursing home facilities around the country, it did not establish that the projections were reasonable for a facility to be opened in Pinellas County in the year 1990. Manor Care of Florida, Inc. Manor Care of Florida, Inc., is a wholly-owned subsidiary of Manor HealthCare Corporation, a publicly held corporation which owns and operates about 150 nursing homes in 26 or 27 states. Manor HealthCare Corporation is the fifth largest nursing home provider in the country, and has been in business for approximately 30 years. Manor Care owns and operates nine nursing homes and three adult congregate living facilities in Florida. It currently has a 120-bed nursing home in Pinellas County, as well as approval for 60 more beds. Three of its Florida nursing homes opened within the last three years were built without a cost overrun, are operating profitably and are superior rated. Manor Care has never sold a Certificate of Need or a nursing home in Florida. Each of its five Certificates of Need received since 1981 has been timely implemented. In order to have greater control over operations, Manor Care owns and manages all its Florida nursing home facilities. Manor Care now proposes to establish a 120-bed nursing home in Northern Pinellas County at a total project cost of $4,821,150. A five acre parcel of band in Palm Harbour, just east of Highway 19, has been purchased for this purpose. The initial design of the facility was revised to reflect HRS's preliminary intention to grant a certificate of Need to Manor Care upon the condition that there be no 3-bed rooms and to comply with some of the comments contained in the HRS architectural report which accompanied the State Agency Action Report. The present facility design contains one story with four wings all connected to a common area. There will be two nurses stations, with 60-beds each. The central area of the facility contains the administrative area, the dining room, kitchen, laundry and facility support area. The facility will have 30 private rooms and 45 semi-private rooms, and will contain 46,850 gross square feet, and 390 square feet per bed. The total cost per bed is $46,850. One of the four wings will house a separate and distinct 30-bed area specially designed for Alzheimer's patients. That area will be divisioned off from the rest of the facility by double doors, and will have its own separate dining room, activity area and outdoor garden area. This design will allow patients to wander within a restricted area and reduce concern over patients leaving the facility. Manor Care has been developing dedicated Alzheimer's units within its nursing homes around the country for the past two and a half years, and currently operates 16 Alzheimer's units. Its program is geared toward treating middle stage Alzheimer's disease, which is characterized by combative behavior, incontinence, gait disturbances and eating problems. The goal of Manor Care's program is to provide a comforting environment in which residents and families can cope with the mental and physical deterioration associated with the disease. The Manor Care Alzheimer's program emphasizes five components of care: environment, specialized staffing and training (with a higher nurse to resident ratio than the rest of the facility), programming, specialized medical services through the use of consultants, and family support. The A.D.R.D.A. (Alzheimer's Disease and Related Disorders Association) has officially recognized that the most appropriate treatment and care of Alzheimer's patients is accomplished in a dedicated and separate unit. In addition to its Alzheimer's program, Manor Care intends to offer programs in the areas of respite care (a short-term nursing home stay designed to give the caregiver a rest), chaplaincy (whereby chaplains from all different faiths are recruited to serve as liaisons for the religious and spiritual needs of the residents), and an "In Touch Program" to help patients and families upon admission into the nursing home. It also provides a comprehensive corporate- wide quality assurance program which audits the services provided at all Manor Care nursing homes and provides follow-up and education for staff. The inter- disciplinary quality assurance team is comprised of professionals in nursing, rehabilitative therapy, activities, dietary and environmental services. Annual unannounced assessments are conducted in every Manor Care nursing home and action plans are developed and implemented. In addition, each facility conducts ongoing self-assessments. Manor Care uses a corporate quality assurance manual which contains standards based on federal regulations and the most stringent state regulations in the country. It provides mandatory in-service training for staff and emphasizes promotion within the company. Manor Care has a regional office in Orlando to serve its Florida nursing homes, and a regional nurse works with the Florida directors of nursing and nursing departments and acts as a quality assurance liaison to conduct mini-quality assurance reviews upon visits to the facilities. Manor Care will provide 46 percent of its patient days to Medicaid patients. Its proposed patient charges are reasonable, as is its projections for utilization. Its projected expenses are based upon actual experience at its existing Dunedin facility, and are reasonable. Discounts from retail purchasing are realized by Manor Care through volume purchasing. It is projected that the proposed facility would incur a first year loss of $305,500 and a second year profit of $89,000. The project will be funded by working capital and senior subordinated notes. The funds for the project are currently available. The project is financially feasible in both the short and long-term. Health Care and Retirement of America HCR currently owns and operates 127 nursing home facilities containing 16,000 beds in 19 different states. It has designed and built over 200 nursing homes and related health care facilities, along with 10 nursing home facilities in Florida, with 6 more in various stages of design and construction. HCR's current proposal consists of a 60-bed addition to its existing Pasadena Manor 126-bed nursing home located in southwestern Pinellas County, which is within the area designated by the local health council as the East Subdivision. Pasadena Manor, consisting of approximately 34,280 gross square feet, has been rated by HRS as a superior nursing home for several years and had no deficiencies on its most recent licensure survey. The 60-bed addition will be a two-story structure connected to the existing building by a corridor. It will have 30 beds on each floor, two nurses' stations, two dining rooms, two multi-purpose rooms, two physical therapy areas and the standard functional elements required to meet licensure standards. The first floor will have a 15-bed dedicated Alzheimer's Disease wing, as well as space for adult day care. The second floor will have 30 beds, including a dedicated 10 to 15-bed subacute unit. The subacute care provided will include high tech services and ventilator care, I-V therapy, pulmonary aids, tube feeding and hyperalimentation. Due to the impacts of the federal DRG (diagnostically related group) system which encourages hospitals to discharge patients earlier, there is a need for nursing home beds and services available to patients requiring subacute care. The 60-bed addition will contain 4 private rooms and 28 semi-private rooms. Respite care will also be offered when beds are available. Adult day care and respite care provide alternatives to institutional long-term care in a nursing home. Such services aid in preventing premature nursing home admissions and promote cost containment. There is no known nursing home in Pinellas County which provides a distinct and separate care unit for patients suffering from Alzheimer's Disease and related disorders. Alzheimer's Disease is a brain disorder that results in gradual memory loss and, as memory loss progresses, the need for ever-increasing personal care is required. Victims encounter more serious physical problems and exhibit symptoms such as wandering, significant weight loss, clumsiness, incontinence and antisocial behavior. Intense medical attention is required in the last stages of the disease. Historically, Alzheimer's patients have been mixed with other patients nursing homes, often disrupting other patients and presenting problems of control for the staff. Because of behavior problems, some nursing homes avoid admitting Alzheimer patients and others control problem behavior with sedation and physical restraint. A separate Alzheimer's care unit enables the nursing home to utilize special techniques to manage the patient and allows the patient to maintain his cognitive capabilities for as long as possible without restraint and sedation. A separate unit provides a smaller, safer, specially designed area with specially trained staff to address the unique needs of the Alzheimer's Disease and related disorders victim. The proposed Alzheimer's special care unit will incorporate special design features, patient activities and programs and higher staffing levels to meet the unique needs of the patients. The architectural design of the addition will accommodate the tendency of Alzheimer's victims to wander and will prevent inadvertent exit from the nursing home. HCR facilities, including Pasadena Manor, are subject to extensive quality assurance standards and guidelines utilized to cover all areas of operation and patient care. The level of staffing proposed for the 60-bed addition exceeds state licensure requirements, and the staffing 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. The projected salaries and benefits are reasonable. HCR's projections of a payor mix of 45 percent Medicaid, 51 percent private pay and 4 percent Medicare are reasonable. Its fill-up and occupancy projections and its projections of revenues and expenses are also reasonable. The total project cost for the 60-bed addition to Pasadena Manor is estimated to be $2,054,000. The components making up the total are reasonable and consistent with HCR's prior experience. The entire addition, including the 2,000 square feet adult day care center, consists of approximately 24,000 square feet, providing 367 square feet per bed. Construction of an addition is more efficient and cost effective than construction of a new, free-standing facility because it will not be necessary to duplicate ancillary spaces, such as laundry and administrative areas. The current operations of Pasadena Manor will benefit from improvements in services, special programs and the high level of staffing. HCR has available the financial resources necessary to accomplish the 60-bed addition to Pasadena Manor. If HCR does not finance the project internally, it has the ability to obtain financing from a commercial lender. Its pro formas for the proposed project are reasonable and are indicative of the financial feasibility of the project both immediately and in the long term. While the addition itself would show a loss the first year of operation, the total facility would show a profit the first year. The addition would show a second year profit, as would the entire Pasadena Manor facility. VHA/Oxford Senior Living Ventures The applicant is VHA/Oxford Senior Living Ventures, d/b/a Oxford- Pinellas Nursing Associates. The joint venture partners of VHA/Oxford are VHA Development Company and Oxford Development Enterprises, Inc. No copy of the joint venture agreement between these two entities was produced at the hearing, though it is apparently a 50-50 joint venture. Oxford's parent company is Oxford Development Corporation, a national real estate services company. Oxford Development Enterprises, Inc., with offices in Maitland, Florida, has developed about 2,000 apartment units and two senior living communities in Florida. VHA Development Company is one of the many subsidiaries of VHA Enterprises, Inc. VHA Enterprises also has a consulting company, a behavioral medical care company involved in substance abuse and psychiatric care, an ambulatory services company and a long term care company (VHA Long Term Care) that develops and manages nursing homes. The parent company, VHA, Inc. (Voluntary Hospitals of America) is a for-profit cooperative owned by the VHA shareholder hospitals. There are approximately 900 hospitals nationally affiliated with VHA. The applicant VHA/Oxford proposes a 120-bed nursing home in southeastern Pinellas County in affiliation with an acute care hospital, Bayfront Medical Center, which is a VHA affiliate. The proposal contemplates that the applicant VHA/Oxford will hold the real estate and lease the nursing home to Bayfront. The only revenues to be received by the joint venture would be the lease payments. Bayfront would, according to the application, engage VHA Long Term Care to manage the facility on the hospital's behalf. Although witnesses employed by VHA Long Term Care testified that the proposed facility would be managed by VHA Long Term Care on behalf of the hospital sponsor, witnesses testifying on behalf of the applicant, the joint venture, expressed some confusion as to whether the day-to-day operation of the nursing home would be the responsibility of the leasing hospital or VHA Long Term Care. VHA Long Term Care does have a quality assurance program and a staff training program that it implements at all nursing homes managed by it. At the time of the hearing, no formal relationship between Bayfront Medical Center and the applicant was established and no lease agreement with Bayfront had been prepared. Bayfront has, however, "expressed an interest in" having a relationship with a nursing home because they are having difficulty in placing patients. Some 600 to 800 patients a year discharged from Bayfront, a 518-bed acute care hospital, are discharged to nursing homes. Approximately 47 to 50 percent of the total Medicaid patients in southeast Pinellas County are treated at Bayfront Medical Center. The advantages of operating a nursing home in conjunction with a hospital include the quick and cost-effective availability of ancillary services, such as physical therapy, speech therapy, occupational therapy, respiratory therapy and other services, as well as the ability to care for patients who require a heavier degree of care. As recognized by other applicants, VHA Long Term Care recognizes that the acuity level of patients has increased as a result of DRGs. The applicant proposes to designate 30 of its 120 beds for skilled nursing care. The present proposal by VHA/Oxford contemplates, in its first phase, to establish 30 skilled beds and 90 intermediate-level care beds within the nursing home component of the project. The second phase of the project would add independent and assisted living units to the project. While VHA/Oxford states that its proposed nursing home facility would include 12 private rooms and 54 semi-private rooms, the drawings submitted in support of its application provide for only 12 private rooms and 50 semi-private rooms, thus accommodating only 112 patients. The drawings also fail to show a toilet facility in the kitchen and showers near the nurses' stations. Four of the patient rooms do not have the twenty-foot vista required by applicable regulations. The floor plan for the nursing home is square, with an enclosed courtyard, and includes two patient care units. It will have 41,380 gross square feet, or 345 square feet per bed. The total cost of the project is estimated to be $3,579,680 or $29,830 per bed. The proposed nursing home would include traditional nursing home care, physical therapy, occupational therapy and respite care. While it will accept Alzheimer's patients, its approach is to "mainstream" (or not segregate) such patients, so that the more alert patients in the facility will assume some responsibility for the confused patients and, hopefully, slow their deterioration. It is difficult to assess the financial feasibility of the proposed project. While many of its projected revenues and expenses are similar to those of the other applicants, the witnesses called upon to establish the reasonableness of the financial projections were not familiar with nursing staff salaries in Pinellas County or with current Florida Medicaid or Medicare reimbursement. The applicant proposes that over 54 percent of its patient days will be attributable to Medicaid patients. Updated Tables 7 and 8 suffer from internal inconsistencies with regard to Medicaid and Medicare charges and revenues. There was confusion as to which years the pro formas were based upon. There appears to be an inadequate number of registered nurses available to provide 24-hour nursing coverage. The opinions offered by the applicant were based upon many unsubstantiated assumptions, such as a leasing arrangement with Bayfront Medical Center, the validity of room rates, and staffing salaries. The total project costs are considerably less than the other applicants proposing 120-bed facilities. In addition, this joint venture has never financed any project. The VHA subsidiary responsible for financing its half of the project does not have any lines of credit and has never itself financed a project. Oxford Development Corporation is experiencing some financial problems, and is presently undergoing a restructuring. The President of the VHA joint venture is not familiar with Oxford's financial statements. The applicant projects no preopening expenses in its total project cost. In any event, if the assumptions made are valid, the applicant projects a first year loss of 142,714 and a second year profit of $241,967. At the time of the hearing in this proceeding, VHA/Oxford Senior Living Venture had a preliminary approval from HRS for a 120-bed nursing home facility in Hillsborough county. This proposed facility was almost identical to the facility proposed for Pinellas County. The Senior Development Manager for Oxford Development and a member of the executive committee of the joint venture testified that the Hillsborough County Certificate of Need had not been offered for sale. When confronted with a letter written by him to National Facilities Corporation stating that "VHA/Oxford has made the decision to seek a purchaser for the [Hillsborough County] CON," the witness attempted to explain the discrepancy by stating that he was offering to sell only a completed and licensed facility. This testimony is not credible. The letter, received into evidence as CSI's Exhibit 18, clearly proposes that VHA/Oxford would transfer the CON, if awarded, at the earliest possible date following final award and certification and would seek, as compensation therefore, $400,000. It defies logic to assume that a completed and licensed facility would be sold for $400,000. The letter also offered to allow the purchaser to be in control of the appeal process. Department of Health and Rehabilitative Services Other than its counsel, no representatives from HRS attended the three and a half week-long hearing except for the time during which the two HRS witnesses provided testimony. The opinions offered by HRS's one expert health care planner were based upon the information available to him on June 18, 1987, the date upon which the State Agency Action Report (SAAR) was signed. This report encompassed a comparative review of 12 applications submitted in January of 1987 for community nursing home beds in Pinellas County and announced HRS's intent to grant four of the applications. HRS admits that the report contains errors regarding the services to be provided by some of the applicants, the licensed beds counted and the occupancy rates utilized in the need methodology, and the number of new beds sought by one applicant. At the time of the initial agency review (the SAAR) and at the time of the hearing, HRS was of the opinion that all the applicants were in substantial compliance with the State Health Plan, the District Health Plan and the applicable statutory and regulatory criteria for review of Certificate of Need applications. It was determined that all the applicants in this proceeding would increase availability and access to the services being proposed, would improve the quality of care, efficiency, appropriateness and adequacy of nursing home services in the area, would promote access to underserved groups, would provide quality care, would have sufficient manpower and financial resources to accomplish and operate the project, proposed reasonable costs and methods of construction, and would be financially feasible in the short and long-term. However, since HRS calculated the need for new nursing home beds in Pinellas County to be substantially less than the total number of beds for which these applicants were seeking, HRS proposed to grant only the Certificate of Need applications submitted by HCR (for 58 of the 60 beds), Mediplex (120 beds), Manor Care (120 beds) and VHA/Oxford (120 beds). These applicants were chosen because they were deemed the best overall, offering the most services and programs for patients and their projects were within the parameters of size and cost that HRS felt would be most suitable. In addition, at the time of initial review HRS was sensitive to criticism that only existing Florida entities were receiving Certificates of Need from HRS. Consequently, additional consideration was given to those applicants who had not previously done business in Florida and whose proposals were worthy. Throughout the hearing, counsel for HRS objected to evidence from any of the applicants regarding updates to their applications as they were deemed complete by HRS prior to its initial review. It was the position of the HRS counsel that the only appropriate evidence of changed conditions after the date the application was deemed complete are those changes which relate to or result from extrinsic circumstances beyond the control of the applicant, such as inflation add other current circumstances external to the application. The majority of the "updated" material offered by the applicants at the hearing did result from the effects of inflation, the passage of time between the application preparation and the dates of the final hearing, changes in the marketplace 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 applicants' 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 market surveys conducted after the applications were deemed complete. 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. As noted above, HRS's position at the time of the hearing was the same as it was at the time of the initial review and does not take into account any information not available at the time of initial review. It was the opinion of HRS's expert in health planning as it relates to Certificate of Need review that if the initial agency review (SAAR) contained errors, at least with respect to a listing of the services or programs intended to be offered by the various applicants, this would be minimal and its initial decision would not be in error. HRS did not object to evidence concerning Manor Care's redesign of its facility because HRS had conditioned its initial approval upon two-bed rooms rather than three-bed rooms. The Need for Nursing Home Beds in Pinellas County No documentation of need other than that established by the numeric need methodology set forth in Rule 10-5.011(1)(k)(1), Florida Administrative Code, was offered by any applicant. HRS normally will not approve applications for new or additional community nursing home beds in a service district if approval would cause the number of beds in that district to exceed the number calculated by use of the rule methodology. It is the appropriate application of the formula, along with the issue of the applicability of Florida Statutes, Section 381.713(4), which produced a range of expert opinion regarding the number of beds needed in Pinellas County. The range was from a low of 440 beds to a high of 860 beds needed in Pinellas County for the planning horizon of January, 1990. In its application of the numeric need formula, HRS initially determined a need for 434 new beds. Shortly before the hearing, HRS changed its opinion and found a need for 391 beds. At the hearing, HRS found a need For 440 beds. The various changes resulted from an adjustment in the number of licensed beds to include sheltered beds which were converted to community beds by Chapter 651, Florida Statutes, and to exclude beds in a Christian Science facility, and a revision of the occupancy rate utilized in the formula. The evidence supports the HRS final revisions of these two components of the formula, and establishes that the overall number of beds needed in Pinellas County for January of 1990 is 8,292. From this figure, the number of licensed beds and 90 percent of the number of approved beds must be subtracted in order to determine the net bed need. The evidence establishes that, as of December 1, 1986, there were 7,394 licensed beds in Pinellas County. The dispute in this proceeding concerns the appropriate number of approved beds to be counted. Rule 10-5.011(1)(k), Florida Administrative Code, is silent as to the cutoff date for counting approved beds. HRS interprets the rule to use the date that the supervisor signs the State Agency Action Report as the cutoff date for counting the number of approved beds. In counting approved beds, HRS included an approved Certificate of Need for 60 beds granted to Careage (CON No. 4691). Based upon the testimony of HRS's expert health planner as to the definition of an "approved" bed, the 60 beds awarded to Careage should not have been counted as approved beds. The witness stated that in order for approved but unlicensed beds to be included in the bed need calculation, the Certificate of Need authorizing such beds must have been "received" at the time that the supervisor signed off on the State Agency Action Report. "Approved" beds to be counted were further described as those "which have been issued their Certificate of Need," those "which have received initial approval," those for which HRS "has entered into stipulated agreements," and those "which have final orders." The series of events regarding Careage's CON Number 4691 are as follows: In the January 23, 1987, edition of the Florida Administrative Weekly, HRS published notice that on January 7, 1987, it had made a decision to grant a Certificate of Need to Careage to construct a 60-bed nursing home in Pinellas County. The evidence demonstrates that the "decision to grant" was simply a tentative or proposed decision, and that such a decision was internally reviewed by HRS subsequent to January 7, 1987. Indeed, the CON to Careage was not "issued" until July 30, 1987. The State Agency Action Report stating the basis for the approval of CON 4691 was not issued until August of 1987, and the CON was not actually transmitted to Careage until September of 1987. It is the practice of HRS, as apparently required by Rule 10-5.010, Florida Administrative Code, to provide its notice of intent to issue or deny a Certificate of Need through the vehicle of the State Agency Action Report. Thus, Careage had not "received initial approval," and the Careage 60-bed Certificate of Need was not received, issued, the subject of a stipulated settlement or a final order as of the date the State Agency Action Report was prepared in this proceeding, which was June 18, 1987. The 60 beds awarded to Carriage should not have been included in the inventory of "approved" beds with respect to the January, 1987, batching cycle. Certificates of Need Numbers 2379, 2976 and 2978, each for 120-bed nursing home facilities in Pinellas County, were issued by HRS prior to February 14, 1986. Each of the three CON holders had expended at least $50,000 in reliance upon their CONs prior to June 16, 1987. A petition challenging the validity of CONs 2379, 2976 and 2978 was filed with HRS on June 16, 1987. None of the beds authorized by such CONs were licensed as of June 17, 1987. According to Section 381.713(4), Florida Statutes (1987), these 360 beds should not have been considered or utilized in the determination of need or included in the inventory of approved nursing home beds by HRS. HRS's rationale for including the 360 beds as "approved" beds was that the petition challenging their validity was not "effective" for purposes of Section 381.713(4) because it was dismissed by HRS as being untimely and was never referred to the Division of Administrative Hearings. This interpretation of the statute was not sufficiently explicated by HRS at the hearing. It is clear from a reading of the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA, 1986), and subsequent cases holding that later-batched applicants should have availed themselves of the proper remedy of challenging previously-issued CONS belatedly, as well as the language of Section 381.713(4), that the "initiation of proceedings" referred to in the new statute was intended to refer to petitions which HRS viewed as "untimely." Another reason for excluding the beds approved by CONS 2379, 2976 and 2978 from the inventory of approved beds for this batching cycle is the stipulation by HRS in Hillhaven, et al. v. DHRS, (DOAH Case No. 86-0132) that once Section 381.713(4) is applied in a given subdistrict, it must be similarly applied in every review cycle in that subdistrict up through and including the January, 1987, review cycle. This recognition has been applied by HRS in at least two other cases -- Forum Group , Inc. v. DHRS (DOAH Case No. 87-0722) and Manor Care, Inc., et al. v. DHRS (DOAH Case No. 87-3471). In order to accept the testimony presented by HRS that Section 381.713(4) has never been applied in Pinellas County, one would have to assume that HRS grants Certificates of Need in a vacuum and without reference to the bed need calculation rule. Without unduly lengthening this Recommended Order by a discussion of the events which led to a settlement in the case of Imperial Palms Apartments, et al. v. DHRS (DOAH Case No. 85-2639), it is found that HRS's settlement of that case was in fact based upon the recognition that Section 381.713(4) required exclusion of CONS 2379, 2976 and 2978 for purposes of need calculations under Rule 10- 5.011(1)(k), Florida Administrative Code. (For an accurate discussion of the facts involved in the Imperial Palms proceeding, see the Recommended Order entered on October 18, 1988, by Hearing Officer Linda M. Rigot in Health Quest Corporation, d/b/a Regents Park of Dade County v. DHRS, DOAH Case No. 86-1351.) Having once applied Section 381.713(4) to Pinellas County, HRS is bound to apply it in this January, 1987, review cycle. Accordingly, the 360 beds must be excluded from the inventory of approved beds. The number of additional community nursing home beds needed in Pinellas County for the planning horizon of January, 1990, is 818. This figure is derived by an acceptance of HRS's calculation of bed need under the formula up to the calculation of the appropriate number of "approved" beds. The Careage CON (60 beds) and CONs No. 2379, 2976 and 2978 (360 beds) should be excluded from the inventory of approved beds, leaving 78 beds to be counted as approved. After adding the number of licensed beds and 90 percent of the number of approved beds existing in Pinellas County, and subtracting that number from the total bed need in the County, there is a net need for 818 beds.
Recommendation Based upon the Findings of Fact and Conclusions of Law recited herein, it is RECOMMENDED that Certificates of Need for the establishment of community nursing home beds in Pinellas County be GRANTED to HCR for 60 beds, Manor Care for 120 beds, Forum for 120 beds, Florida Country Place for 14 new beds and 16 transfer beds, CSI for 120 beds, Mediplex for 120 beds, and Health Quest for 180 beds. It is further RECOMMENDED that the application of VHA/Oxford for 120 beds be DENIED. Respectfully submitted and entered this 3rd day of November, 1988, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3447, 87-3448, 87-3449, 87-3453, 87-3455, 87-3456, 87-3463, and 87-3465 The proposed findings of fact submitted by each of the parties have been carefully considered and are accepted, incorporated and/or summarized in this Recommended Order, with the following exceptions: Health Quest 63. Rejected insofar as the evidence demonstrates that Health Quest is selling or transfering 3 of its Florida nursing home CONs. Rejected as to individual line items. Rejected factually as unsupported by competent, substantial evidence (but see Conclusions of law regarding financial feasibility.) 140. Rejected as contrary to the greater weight of the evidence. 149. Second sentence rejected as unsupported by the evidence. All but first sentence rejected as improper factual findings. Last sentence rejected as unsupported by competent, substantial evidence. 162. Last sentence rejected as argumentative. 176. Second sentence rejected as unsupported by competent, substantial evidence. Figure $3(0,000 rejected as unsupported by the evidence. Rejected. See Conclusions of Law. Florida Country Place 51. Rejected as to range of need. See Finding of Fact 68. 58. Rejected as an improper factual finding. Forum 20. Rejected. See Finding of Fact 73. CSI 19(i) Accepted, with the exception of CSI's Tallahassee facility. 47. The words "do better" rejected as unsupported by the greater weight of the evidence. 120. As noted in Finding of Fact 57, there was some discrepancy in the testimony as to which entity would manage the day-to-day operations of the facility. Mediplex 7. Second sentence rejected as unsubstantiated by competent evidence. See Findings of Fact 41 and 42. 11. Rejected. See Finding of Fact 42. 13, 18, and 21 - 23. Rejected. See Findings of Fact 41 and 42. 43. Accepted, except with regard to toilet facilities in kitchen. 63. Rejected as unsupported by substantial competent evidence. 71. Last sentence rejected as unsupported by the evidence. Partially rejected. See discussion in Conclusions of Law regarding preliminary plans or drawings. Rejected as contrary to the evidence. 97. Rejected as contrary to the evidence. Manor Care 129 - 131. Rejected. See Findings of Fact 68 - 73. HCR 4 and 9. Rejected as to the number of beds awarded to Careage; contrary to the evidence. VHA/Oxford 12. Figure of 860 rejected. See Finding of Fact 73. 14 and 42. As noted in Finding of Fact 57, there was some discrepancy in the testimony as to which entity would manage the day-to-day operations of the facility. 30. The number of private rooms on the floor-plan is rejected as contrary to the evidence. 50. Rejected as not supported by competent substantial evidence. 56. Rejected. The testimony demonstrates 600 to 800 patients. 59. Rejected. The evidence demonstrates that the total project cost is $3,579,680. 63 - 66. Rejected as not sufficiently established by the evidence of record. 73. Rejected if the statements are intended to apply to salaries in Pinellas County. 76 and 78. Last sentences rejected as unsupported by competent substantial evidence 81. Accepted only if other assumptions in pro formas are reasonable. 87. Rejected as an improper factual finding. 90. The words "tremendous" and "terrible hindrance" are rejected as unsupported by competent substantial evidence. First sentence rejected as unsupported by the evidence. Rejected insofar as it is intended to imply that review of other applications did occur. HRS 6 - 9. Rejected. See Findings of Fact 68 - 73. Rejected insofar as it purports to state anything other than HRS's position in this proceeding. (the first 14) Factually accepted, but irrelevant to the application at issue. 15 - 38. The changes stated are factually accepted; however, see Finding of Fact 66 and discussion of "updates" in Conclusions of Law. COPIES FURNISHED: Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 R. S. Powers, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, Florida 32399-0700 Steven W. Huss, Esquire 1017 Thomasville Road, Suite C Tallahassee, Florida 32303 Douglas L. Mannheimer, Esquire Sandra P. Stockwell, Esquire 820 East Park Avenue, Bldg. F Tallahassee, Florida 32301 R. Terry Rigsby, Esquire J. David Holder, Esquire 325 John Knox Road Suite C-135 Tallahassee, Florida 32303 W. David Watkins, Esquire Harold F. X. Purnell, Esquire Post Office Box 6507 Tallahassee, Florida 32314 Karen L. Goldsmith, Esquire Jonathan S. Grout, Esquire Post Office Box 10651 Tallahassee, Florida 32302 James C. Hauser, Esquire Joy Heath Thomas, Esquire 215 South Monroe Street Suite 701 Tallahassee, Florida 32301 Alfred W. Clark, Esquire Post Office Box 623 Tallahassee, Florida 32302 Paul Amundsen, Esquire Guy Collier, Esquire Byron E. Mathews, Esquire Vicki Kaufman, Esquire 700 Brickell Avenue Miami, Florida 33131-2802 Edgar Lee Elzie, Esquire 215 South Monroe Street Suite 804 Tallahassee, Florida 32301
The Issue Which of two competing applications for nursing home beds better meets the statutory and rule criteria to satisfy the numeric need for 79 additional beds in Agency for Health Care Administration District 7, Subdistrict 1, Brevard County.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the single agency responsible for the administration of certificate of need ("CON") laws in Florida. AHCA published a numeric need for an additional 79 beds in District 7, Subdistrict 1, for Brevard County for the July 1996 planning horizon. There was no challenge to the numeric need determination. After reviewing the applications of Holmes/VHA Long Term Care Joint Venture ("Holmes/VHA") and National Health Corporation d/b/a NHC of Merritt Island ("NHC"), among others, AHCA published its intent to approve the application of NHC and to deny that of Holmes/VHA. The State Agency Action Report ("SAAR") issued on March 13, 1994, for the July 1996 Planning Horizon, summarizes AHCA's review of the applications and the reasons for its decision. Holmes/VHA timely challenged AHCA's preliminary approval of CON 7527 to NHC and denial of CON 7539 to Holmes/VHA. In a pre-hearing stipulation, the parties agreed that the specific statutory criteria at issue, related to the contents of the letter of intent and application are subsections 408.037(2)(a), (2)(c), (4) and 408.039(2)(c), Florida Statutes. The parties also agreed that the CON review criteria at issue are subsections 408.035(1)(a), (b), (d), (e), (h), (i), (l), (m), (n) and (0), and 408.035(2)(e), Florida Statutes. The parties stipulated to the need for 79 additional community nursing home beds in the subdistrict. At the formal hearing the parties also agreed that quality of care is not at issue and that staffing schedules and proposals to fund or finance both projects are reasonable, thereby removing from consideration subsections 408.035(1)(c) and portions of (1)(h). HOLMES/VHA Holmes/VHA, the applicant for CON 7539, is a Florida general partnership formed between Holmes Regional Enterprises, Inc. ("Holmes Enterprises"), a Florida not-for-profit corporation, in Brevard County, Florida, and Vantage Health Systems, Inc., d/b/a VHA Long Term Care ("VHA"). The partnership, Holmes/VHA, owns and operates an existing 120-bed nursing home, Holmes Regional Nursing Center ("Holmes Nursing Center") in Melbourne. VHA is a division of Service Master Diversified Health Services of Memphis, Tennessee, which manages 106 facilities in 30 states. Holmes Enterprises operates Holmes Regional Medical Center ("Holmes Regional"), a 528-bed acute care hospital, with open heart surgery and neonatal intensive care services and approval for 30 skilled nursing beds. Sixty of Holmes Regional's licensed beds are located at Palm Bay Community Hospital in Palm Bay, approximately 8 to 15 miles south of Holmes Regional. Although it is a separate municipality, Palm Bay was described as a suburb of and contiguous to Melbourne. The site for the Palm Bay Center, which is across the street from Palm Bay Community Hospital, is in another community known as Mallibar. VHA has entered into similar partnerships with acute care hospitals in Jacksonville, Florida, and Greensboro, North Carolina, to operate nursing homes in those areas. The Service Master organization provides management and support services, including data processing, legal, personnel, dietary, and architectural and design services for nursing homes. Holmes/VHA, the joint venture general partnership, has a management committee of four people, two from the hospital and two from the VHA company. The management committee, functioning like a board of directors, adopted a resolution authorizing Holmes/VHA to file the Con application. When formed, the joint venture obtained an older 60-bed facility, and then constructed a replacement facility. During the construction, it obtained a 60-bed CON from another company and combined beds to build its existing 120-bed nursing home, Holmes Nursing Center. Holmes Nursing Center is rated superior and offers inpatient and outpatient rehabilitative and restorative services, including a head and spinal cord injury program. The rehabilitative services are directed by Holmes Regional, which is located a block and a half from the nursing home. The original CON for Holmes Nursing Center required that 35 percent of total patient days be provided to Medicaid. The requirement was increased to 45 percent with the 60-bed addition, which Holmes Nursing Center has exceeded. The 120 beds are divided into 20 percent Medicare certified, 50 percent Medicaid certified and 30 percent non-certified or private pay. Holmes Nursing Center also operates a 24-bed subacute unit for persons qualifying under Medicare criteria for skilled nursing care. Patients in the unit receive intensive assessments on each nursing shift and services which include pain, respiratory, and wound management. Holmes Regional Hospice, Inc. ("the hospice") is an affiliate of Holmes Enterprises, for which Holmes Regional holds the CON to take care of hospitalized hospice patients The current hospice census of over 200 patients includes 70 percent cancer, 9 percent AIDS, and 21 percent other terminal illnesses, such as heart disease and Alzheimers. Holmes/VHA applied for a CON to construct the 79-bed Palm Bay Nursing and Rehabilitation Center ("Palm Bay Center") conditioned on the provision of 61 percent of total patient days to Medicaid and the establishment of a 12-bed sub- acute unit, one room for hospice patients, inpatient and outpatient rehabilitative therapy, and respite care. The total gross square footage is 42,691 square feet. The Holmes Enterprises affiliates propose to provide support services for the Palm Bay Center, as they do for Holmes Nursing Center. The estimated total project cost for the Palm Bay Center is $4,732,790, of which the construction cost is $82,720,000 or $63.71 a square foot. An equity contribution of land valued at $420,000, will be provided by the hospital. Service Master will provide the funds or obtain financing for the project. The assumptions in the pro forma, including the expectation that interest may be due for a commercial loan, are reasonable. AHCA's expert's conclusion that the project is financially feasible is accepted. The financing by Service Master can be structured to avoid being treated as a related party transaction, which would adversely affect Medicaid and Medicare reimbursements. Holmes/VHA listed as capital projects three other pending CON and an additional $25,000 in annual capitalized routine expenses for furniture, fixtures and equipment attributable to Holmes Regional Nursing Center. The total of the capital projects listed on Schedule 2 of the application is $13,256,701. NHC National HealthCorp, L.P. ("NHC"), the applicant for CON 7527, began operations in 1986, with 14 nursing homes. Currently, NHC owns or manages 96 nursing homes primarily in the southeast United States. It manages 36 nursing homes in Florida, 6 of which are also owned by NHC. NHC proposes to add 60 beds to National Healthcare Center of Merritt Island ("NHC-Merritt Island"), a superior rated, 120-bed community nursing home on a 7 acre site in Merritt Island, Brevard County. NHC-Merritt Island has a 22-bed Alzheimers' unit. NHC's regional office provides support services, including speech, occupational, and physical therapies, nursing, dietary, and administrative services to NHC-Merritt Island. With the addition of 60 beds, NHC intends to provide respite care, a dedicated 20-bed subacute unit, and an additional 16-bed Alzheimers' unit. Without a subacute unit, NHC already has an average census of 9 subacute patients. NHC will triple the size of the therapy space and more than double the size of the building. The projected total capital expenditure is $3,891,850, with construction costs of $2,955,000, or $85.00 a square foot. To accommodate the addition, NHC has entered into a contract to purchase an additional 1.3 acres, adjacent to the current 7 acres, for a cost of $175,000. For the past few years, NHC has experienced 94 to 100 percent occupancy. Fifty-four people are on NHC's waiting list and an additional 16 are on the waiting list for the Alzheimers' unit. The projected annual fill-up rates for NHC's additional beds are supported by the demand for its service and its historical experience, even though the monthly fill-up rates in the application are not adjusted to reflect the specific number of days in each month. Medicaid resident days are 55 percent to 57 percent of the total at present, below the 60.31 percent average in the subdistrict and the current 60 percent CON condition. If the expansion CON is approved, NHC will commit to providing 60.31 percent Medicaid patient days and will increase the number of Medicaid certified beds from 77 to 108. NHC was profitable in 1992 and 1993, by approximately $100,000 and $250,000, respectively, but currently is not profitable, with an approximate deficit of $8,000. The deficit is attributable to (1) a decline in the Medicaid reimbursement rate, which was initially higher due to start up costs, (2) the expiration of a new provider exemption from Medicare cost limits, and (3) the transfer of assets by NHC, in exchange for stock, to a newly formed subsidiary, from which NHC-Merritt Island is now leased. Lease payments are $517,000 a year whether the facility has 120 or 180 beds, and profits are returned to stockholders, including NHC. Using Medicaid rates, calculated by the state, as inflated forward, and Medicare rates in excess of routine cost limits, based on the current experience of NHC-Merritt Island, NHC reasonably projected its costs and profit margin. NHC-Merritt Island has a positive cash flow and its expenses and revenues are at the goal set by NHC. With a total of 180 beds, the projections are reasonable that NHC-Merritt Island will be profitable. As AHCA's expert opined, NHC's proposal is financially feasible. Subsection 408.035(1)(a) - need in relation to district and state health plans The 1991 District 7 health plan has three preferences related to nursing homes, one favoring a section of Orange County, is inapplicable to the Brevard County applications. A second, for applicants proposing pediatric services, is inapplicable because both proposals in this batch are to provide adult services. The third preference favors applicants proposing to establish units providing psychiatric or subacute services, with emphasis on treating medically complex patients and AIDS/HIV positive patients. Holmes/VHA's health planner considers the subacute care and AIDS/HIV services proposed by Holmes/VHA superior to those proposed by NHC. NHC, however, proposes to provide specialized care in designated units for both subacute and Alzheimers's patients. Although Holmes/VHA argues that Alzheimers' care is required in every nursing home and is, therefore, not a specialized program, the physical design of a separate unit for such patients was shown to enhance their comfort. No AIDS/HIV positive patient has been treated at either Holmes Nusing Center or at NHC-Merritt Island. NHC-Merritt Island has accepted AIDS/HIV positive patients who did not come to the facility. The state health plan has twelve allocation factors for use in comparing nursing home applications. Both applicants comply with the factors favoring locations in a subdistrict in which occupancy levels exceed 90 percent, proposals to meet or exceed that average subdistrict Medicaid occupancy of 60.31 percent, proposals with respite care and innovative therapies, multi- disciplinary staffing, for staffing in excess of minimum state requirements, and which document means to protect residents' rights and privacy. Both Holmes/VHA and NHC also meet the preference for proposing charges that do not exceed the highest Medicaid per diem in the subdistrict. NHC asserted, but failed to demonstrate that its therapy services with in-house staff are superior to those provided to Holmes/VHA by contract staff from Holmes Regional. The state health plan factor number 3, for specialized services, is largely duplicative of district health plan preferences. Neither applicant meets the part of one preference for providing adult day care, or the preference for proposing lower than average administrative costs and higher than average resident care costs. The fifth state allocation factor, for maximizing resident comfort and the criterion of subsection 408.035(1)(m), Florida Statutes, related to the cost and methods of construction, are at issue. NHC questions the adequacy of three acres for the building proposed by Holmes/VHA and the design of the building. Holmes Regional Nursing Center has 120 beds and approximately the same building area as that proposed for Palm Bay Center. The architects of the building have constructed a 163-bed facility on four acres in Jacksonville, and a 240-bed facility in Memphis, Tennessee on approximately six acres. Homes/VHA expects to construct the building in half the time required for completion of NHC's proposed addition. AHCA's architect noted, however, that Holmes/VHA has no Alzheimers unit and that its subacute area is not separated from the areas used by other patients and their families. Holmes/VHA has showers only in the 13 private rooms. By contrast, NHC has an Alzheimers unit with its own lounge and courtyard and a subacute unit at the end of a wing with a separate waiting room. NHC's rooms are larger, with larger windows. NHC's costs are higher than Holmes/VHA's, but not above the high average cost guidelines for construction used by AHCA. NHC has one nursing station for 60 beds, which meets the state requirement while Holmes/VHA is better equipped with two nurses stations for 79 beds. In general, Holmes/VHA established that its building could be built on 3 acres, and that its interior spaces exceed the requirements to be licensed. NHC established that its building and grounds will be larger, higher quality construction with more non-combustible materials, and better meet the preference for maximizing resident comfort. The preference for superior resident care is met by both Holmes/VHA and NHC-Merritt Island. An NHC facility in Stuart was rated conditional for 80 days of the 36 months, prior to the filing of the application. NHC had just purchased the Stuart facility at the time of the conditional rating, and had, in total, many more months of superior operations. In addition, the parties stipulated to quality of care issues at the hearing. Subsection 408.035(1)(b) and (1)(d) - availability, accessibility, efficiency, extent of utilization of like and existing services; alternatives to the applicants' proposals Brevard County is 80 miles long from north to south, 22 miles wide at its widest point, with 62 percent of its population in the southern area of the county. Holmes/VHA contends that its application should be approved based on the greater need for nursing home beds in southern Brevard County. Using ratios of beds in existing or approved nursing homes as compared to the population ages 65 and older, and 75 and older, a need is shown for more beds in the southern area, including Palm Bay. In the central area, there are 31.52 beds per 1000 people over 65, as compared to 26.53 in the southern area of Brevard County. For the population over 75, the ratios are 82.53 in the central and 68.47 in the southern area. The over 75 population is also projected to increase by a greater percentage in the southern as contrasted to the central areas of the county. AHCA claims to reject the use of any "sub-subdistrict" analysis of need, other than the test for geographically underserved areas, as defined by Rule 59C-1.036, Florida Administrative Code. That test which applies to proposed sites more than 20 miles from a nursing home, is not met by Holmes/VHA or NHC. However, AHCA has, in at least one other case, considered geographic accessibility within the planning area in determining which applicant should be approved, without the applicants having to demonstrate that the proposed sites are geographically underserved areas. NHC takes issue with Holmes/VHA's data on bed availability in the southern and central portions of the county. NHC maintains that its central location better serves the entire county. NHC's expert also criticized the methodology used by Holmes/VHA for demonstrating need in the southern area. The comparison of existing beds to population, shows a lack of county-wide parity, but not necessarily need. Other factors related to the need for nursing homes were not presented, such as poverty, migration, mortality and occupancy rates. In addition, NHC's expert questioned Holmes/VHA's experts calculations of bed- to-population ratios. The ratios arguably were skewed by using beds for Wuesthoff Hospital Progressive Care in the central area data, but including the population of the zip code in which Wuesthoff is located in the southern area. Holmes/VHA noted that the majority of the population in the zip code is in the southern area. Subsection 408.035(1)(n) - past and proposed Medicaid/indigent care Holmes/VHA's expert criticized NHC because two of its facilities, Merritt Island and Stuart, have been below the subdistrict average for Medicaid occupancy. For 3 six month periods during the last 4 years, they also were below their CON Medicaid commitments. One other NHC facility, in Hudson, has been below the subdistrict average, but significantly above its CON condition. NHC claims that it treats its Medicaid condition as a minimum, while Holmes/VHA uses its conditions as an artificial ceiling or maximum. Subsection 408.035(1)(e),(1)(o) - cooperative or shared health care resources; continuum of care Holmes/VHA has established linkages to its various related companies to provide cooperative care and shared resources. Palm Bay Nursing Center would enhance the multi-level care provided by the Holmes Enterprises group and provide another integral step in the continuum, particularly in rehabilitative therapies. NHC, however, as an existing provider, is part of a well-established network of health care providers in the community. NHC has also purchased land to build an adult congregate living facility near or adjacent to NHC-Merritt Island. Subsections 408.039(2)(a), (2)(c) and 408.037(4), and Rule 59C-1.008, Florida Administrative Code - capital projects list; board resolutions; and impacts on costs AHCA interprets the requirements for the submission of a board resolution to allow an original resolution accompanying the letter of intent to be treated as a part of the complete application. A board resolution with an application, which the statute requires "if applicable," applies to expedited applications for which a letter of intent would not have been received, according to AHCA. NHC submitted an original board resolution with its letter of intent, and a copy of that resolution with its application for CON 7527. The authority of Holmes/VHA's management committee to authorize the construction of a new nursing home, and the authority to operate a nursing home outside the city of Melbourne was questioned. The testimony that the joint venture agreement authorizes the management committee to adopt a resolution authorizing the filing of CON 7539 was not refuted. In addition, the testimony that operations are restricted to the "Melbourne area" as opposed to some more specifically defined geographic area was not refuted. Repeatedly, witnesses described Palm Bay, although a separate municipal corporation, as a suburb of Melbourne. Holmes/VHA claims that NHC failed to disclose certain capital equipment leases from its schedule 2 list of capital projects and failed to evaluate the impact on costs, as required by subsection 408.037, Florida Statutes. In NHC's annual reports, the costs of capital equipment leases were $204,000 in 1991, $43,000 in 1992, and $88,000 in 1993. In fact, the NHC witness who prepared schedule 2 included a total of $21,653,468 for the category "Renovations (Including Furnishings and Equipment) 1994", taken from the capital expenditure budget of each NHC facility. The listing is consistent with the footnote indicating the budget items "are subject to final approval and cash reserves availability." In addition, $100,000 is also listed under "Other Capitalization" for equipment, for which a footnote explains "[a]mount included in an abundance of caution to cover any items unknown at the time of filing." NHC, according to Holmes/VHA, also failed to provide a detailed evaluation of the impact of the proposed project on the cost of other services it provides, as required by subsection 408.037(2)(c), Florida Statutes. NHC merely states that the impact is "nominal" and "negligible." NHC satisfied the impact analysis requirement in the notes to schedule 2 and in schedules 11, 13 and 14 of the application. The incremental pro forma analysis of the effect on costs with or without the proposed project, and projected financial ratios and costs, give detail support for the statements in the application. Assuming, arguendo, that Holmes/VHA omitted $50,000 in capital costs from schedule 2, the omission is not material or fatal to consideration of the application on the merits. Holmes/VHA's financial expert testified that $50,000 is less than on-half of one percent of the total project expenditures listed on schedule 2 and is, therefore, immaterial. As AHCA concedes, Holmes/VHA and NHC have the resources to establish their projects and to provide the services described in their applications. On balance, the demand for additional beds, the enhancement of a superior, existing physical plant and the expansion of specialized services at NHC outweigh the community linkages demonstrated by Holmes/VHA and the desirability of county- wide parity in the distribution of nursing homes beds, at this time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration issue a Final Order approving CON No. 7527 for the construction of an additional 60 community nursing home beds by National Healthcorp, L.P., conditioned on the provision of 60.31 percent of total patient days to Medicaid patients. DONE AND ENTERED this 17th day of April, 1995, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER 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 17th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2393 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner NHC's Proposed Findings of Fact. Accepted in Findings of Fact 13. Accepted in Findings of Fact 3. Accepted in or subordinate to Findings of Fact 14-18. Accepted in or subordinate to Findings of Fact 14-18, except last phrase. Accepted in or subordinate to Findings of Fact 6 and 10. 6-17. Accepted in or subordinate to Findings of Fact 30 and conclusions of law. 18-21. Accepted in Findings of Fact 32. 22. Accepted in Findings of Fact 3. 23-30. Accepted in or subordinate to Findings of Fact 5 and 31. Rejected in Findings of Fact 6 and 31. Accepted in Findings of Fact 33. Rejected in Findings of Fact 33. Accepted in preliminary statement and Finding of Fact 1. 35-36. Accepted in part and rejected in part in Findings of Fact 21-25. 37-38. Accepted in Findings of Fact 21. 39. Rejected conclusion in Findings of Fact 20, 23 and 34. 40. Accepted in Findings of Fact 21 and 23. 41. Accepted in Findings of Fact 24. 42. Accepted in Findings of Fact 21. 43. Accepted in Findings of Fact 20. 44-45. Accepted in Findings of Fact 21. 46-48. Accepted in Findings of Fact 25. 49. Rejected in Findings of Fact 25. 50. Accepted in Findings of Fact 21. 51. Rejected in Findings of Fact 21. 52. Accepted in Findings of Fact 21. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 19. 56-57. Accepted in Findings of Fact 20. Accepted in Findings of Fact 34. Accepted in Findings of Fact 27 and 28. Accepted in Findings of Fact 26 and 27. Rejected in Findings of Fact 26 and 27. Accepted in or subordinate to Findings of Fact 26 and 27. Accepted in Findings of Fact 19. Accepted in Findings of Fact 19, 26 and 27. Rejected in Findings of Fact 26-27 and conclusions of law. Rejected in Findings of Fact 26-27 and conclusions of law. Accepted in Findings of Fact 2. 68-77. Accepted in part and rejected in part in Findings of Fact 27. Accepted in Findings of Fact 20. Rejected in or subordinate to Findings of Fact 26. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in or subordinate to Findings of Fact 9, 10 and 20. Accepted in or subordinate to Findings of Fact 20. 84-88. Accepted in or subordinate to Findings of Fact 10, and 20. 89-95. Accepted in or subordinate to Findings of Fact 15, and 20. 96-97. Accepted in Findings of Fact 10, 15, and 21. 98-100. Accepted in Findings of Fact 21-22. Accepted in or subordinate to Findings of Fact 15, 16 and 20. Accepted in or subordinate to Findings of Fact 16. Accepted in or subordinate to Findings of Fact 8 and 15. 104-108. Accepted in or subordinate to Findings of Fact 13 and 14. 109-110. Accepted in or subordinate to Findings of Fact 34. Subordinate to Finding of Fact 4. Accepted in or subordinate to Findings of Fact 34. 113-117. Accepted in Findings of Fact 21. Accepted in Findings of Fact 34. Accepted in Findings of Fact 11, 18 and 34. 120-123. Rejected conclusion in Findings of Fact 11. 124-130. Rejected in or subordinate to Findings of Fact 18. 131. Accepted in Findings of Fact 32. 132. Accepted in or subordinate to Findings of Fact 21. 133. Accepted in or subordinate to Findings of Fact 21. 134-136. Accepted in or subordinate to Findings of Fact 24. 137. Rejected first sentence in Findings of Fact 24. 138. Accepted in or subordinate to Findings of Fact 24. 139. Rejected as subordinate to Finding of Fact 24. 140. Accepted in or subordinate to Findings of Fact 15 and 24. 141-150. Accepted in or subordinate to Findings of Fact 24. 151. Rejected as not entirely supported by the record. 152-162. Accepted in or subordinate to Findings of Fact 24. 163-172. Accepted in or subordinate to Findings of Fact 21 and 28. 173-175. Accepted in or subordinate to Findings of Fact 29. 176. Rejected conclusion that "NHC better . . ." in or subordinate to Findings of Fact 29. 177. Accepted. Petitioner Holmes/VHA's Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 3.. 4. Accepted in or subordinate to Findings of Fact 3 and 4. 5. Accepted in Findings of Fact 26. 6-8. Accepted in or subordinate to Findings of Fact 10 and 31. 9. Accepted in Findings of Fact 10. 10. Accepted in Findings of Fact 2. 11. Accepted in Findings of Fact 30 and 31. 12. Rejected in Findings of Fact 30 and 32. 13. Conclusion rejected in Findings of Fact 30 and conclusions of law 37-40. 14. Accepted in Findings of Fact 2. 15. Accepted in Findings of Fact 3 and 31. 16. Accepted in Findings of Fact 26. 17-21. Accepted in or subordinate to Findings of Fact 26 and 27. 22. Accepted, except last sentence, in Findings of Fact 27. 23-24. Accepted in or subordinate to Findings of Fact 26 and 27. 25. Conclusions cannot be reached in Findings of Fact 26 and 27. 26-29. Accepted in or subordinate to Findings of Fact 11. 30-36. Accepted in Findings of Fact 11, 12, 33 and 34. Rejected in Findings of Fact 18 and 34. Rejected in or subordinate to Finding of Fact 32. Accepted in or subordinate to Findings of Fact 16. Accepted in Findings of Fact 40. Rejected in Findings of Fact 16. Rejected conclusion in Findings of Fact 18. 43-44. Rejected in Findings of Fact 18. 45-48. Rejected conclusion in Findings of Fact 18. 49-51. Accepted in or subordinate to Findings of Fact 3-10 and 29. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 7 and 8. Accepted in Findings of Fact 20. Accepted in or subordinate to Findings of Fact 3. Accepted in or subordinate to Findings of Fact 3 and 24. Accepted in Findings of Fact 29. 58-59. Accepted in or subordinate to Findings of Fact 9 and 10. Accepted in Findings of Fact 29. Accepted in Findings of Fact 19. Accepted in Findings of Fact 20. 63-65. Accepted in or subordinate to Findings of Fact 21. Accepted, except conclusion, in Findings of Fact 21 and 28. Rejected conclusions in Findings of Fact 20. Accepted in Findings of Fact 21 and 22. Accepted in Findings of Fact 24. 70-71. Accepted in Findings of Fact 21. 72. Accepted as corrected in Findings of Fact 25. 73-74. Accepted in Findings of Fact 21. Accepted in Findings of Fact 23. Accepted in Findings of Fact 10 and 21. 77-78. Accepted in or subordinate to Findings of Fact 28. Rejected conclusion in Findings of Fact 28. Accepted in Findings of Fact 28. 81-89. Accepted in or subordinate to Findings of Fact 10, 21 and 29. 90-96. Accepted in or subordinate to Findings of Fact 9 and 10. 97. Accepted in Findings of Fact 20. 98. Accepted in Findings of Fact 21. 99. Accepted in Findings of Fact 20. 100. Accepted in Findings of Fact 8. 101. Accepted in or subordinate to Findings of Fact 20. 102. Accepted in Findings of Fact 8. 103-105. Accepted in or subordinate to Findings of Fact 20. 106. Accepted in or subordinate to Findings of Fact 10 and 21. 107-108. Accepted in or subordinate to Findings of Fact 21. 109. Accepted in or subordinate to Findings of Fact 4. 110-112. Accepted in or subordinate to Findings of Fact 21 and 25. 113-115. Accepted in or subordinate to Findings of Fact 21. 116-118. Accepted in or subordinate to Findings of Fact 20. 119-136. Accepted in or subordinate to Findings of Fact 24. 137. Accepted in Findings of Fact 10. 138-143. Accepted in or subordinate to Findings of Fact 11 and 24. COPIES FURNISHED: P. Timothy Howard, Esquire John F. Gilroy, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Darrell White, Esquire Charles Stampelos, Esquire MCFARLAIN, WILEY, CASSEDY & JONES, P.A. 600 First Florida Bank Tower 215 South Monroe Street Tallahassee, Florida 32301 Robert M. Simmons, Esquire 5050 Poplar Avenue 18th Floor Memphis, Tennessee 38157 Gerald B. Sternstein, Esquire Frank P. Rainer, Esquire Ruden, Barnett, McClosky, et al. Monroe-Park Tower, Suite 815 215 South Monroe Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Jerome W. Hoffman General Counsel Agency For Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303
The Issue Whether there is a need for a 120 bed nursing home in Manatee County?
Findings Of Fact HCR is a health care corporation. Its sole business is designing and constructing nursing homes. During the twenty years it has been in the business, HCR has built approximately 180 nursing homes. HCR currently operates approximately 10,000 nursing home beds in twelve states including Florida. HCR filed an application for a certificate of need to construct a 120 bed nursing home in Manatee County. The Department denied this request. The only issue in this case is whether there is a need for a 120 bed nursing home facility in Manatee County. If such a need exists, the Department has agreed that HCR "meets all applicable statutory and rule criteria." The need for nursing home beds is determined under Rule 10-5.11(21), Florida Administrative Code. Rule 10-5.11(21)(a), Florida Administrative Code, contains the following Department goal: The Department will consider applications for community nursing home beds in context with applicable statutory and rule criteria. The Department will not normally approve applications for new or additional community nursing home beds in any departmental service district if approval of an application would cause the number of community nursing home beds in that departmental service district to exceed the number of community nursing home beds calculated by the methodology described in subsections (21)(b), (c), (d), (e), (f), (g), and (h) of this rule. Rule 10-5.11(21)(b), Florida Administrative Code, provides for a determination of bed need three years into the future "according to the methodology specified under subparagraphs 1 through 10." Under the methodology provided in subparagraphs 1 through 10, need is determined on a subdistrict basis if a departmental service district has been divided into subdistricts. Manatee County is located in District 6. District 6 has been divided into subdistricts for purposes of determining nursing home bed need. Manatee County has been designated as a subdistrict. Rule 10-17.018, Florida Administrative Code. Therefore, nursing home bed need is to be determined under the methodology of Rule 10-5.11(21), Florida Administrative Code, for Manatee County. The parties have agreed and the evidence proves that there is no need for nursing home beds in Manatee County based upon an application of the methodology of Rule 10-5.11(21), Florida Administrative Code (hereinafter referred to as the "Formula"). In fact, an application of the Formula indicates that there will be an excess of 105 nursing home beds in Manatee County three years into the future based upon the following: 876 nursing home beds needed - (765 existing beds + 90 percent of 240 approved beds) = (105). Based upon an application of the Formula, there is clearly no need for any additional nursing home beds in Manatee County. This determination, however, does not totally resolve the issue in this case. Rule 10-5.11(21)(b), Florida Administrative Code, provides that the Department is to determine bed need according to the Formula "[i] n addition to other statutory and rule criteria . . . " Also, Rule 10-5.11(21)(b)10, Florida Administrative Code, provides in relevant part, the following: 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 in the Department's Rule 10-5.11. Based upon these provisions of the Department's rules, it appears clear that if no nursing home bed need is shown to exist based upon an application of the Formula, other statutory and rule criteria should be considered, i.e., are there adequate like and existing services in the subdistrict? Rule 10-5.11(21)(b)10, Florida Administrative Code, however, goes on to provide: 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 this 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 services, 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. As discussed under the Conclusions of Law, infra, this portion of the Department's rule (hereinafter referred to as the "Specific Exception") is not the only alternative method of demonstrating a need for nursing home beds when there appears to be no need based upon an application of the Formula. A need for nursing home beds can be demonstrated even if there is no need indicated under the Formula and the Specific Exception is not complied with based upon a consideration of other statutory and rule criteria. The Specific Exception is, however, the only method by which an applicant can demonstrate the need for a new nursing home facility based upon an access problem in the relevant service district. HCR has attempted to prove there is a need for its proposed 120 bed facility based in part upon a consideration of Rule 10-5.11(3)(a)-(d), Florida Administrative Code. This rule provides generally for a consideration of the extent to which all residents of the service area and, in particular, low income persons, the elderly and others, can access existing nursing home beds. In particular, HCR has attempted to prove that there is a need for a 120 bed nursing home because of alleged access problems under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code, during the "peak season" in Manatee County and alleged access problems of Medicaid patients, Alzheimer patients and respite care patients. As discussed under Conclusions of Law, infra, HCR has failed to comply with the Specific Exception in attempting to demonstrate need for its proposal under Rule 10- 5.11(3)(a)-(d), Florida Administrative Code. Therefore, any evidence concerning access problems cannot be considered. HCR has also attempted to demonstrate need for its proposal based upon an application of Rules 10-5.11(4) and (6), Florida Administrative Code. These rules require a consideration of the availability of alternative, less costly, or more effective methods of providing the proposed health services and the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing services. In particular, HCR has attempted to prove that like and existing services in Manatee County are not meeting the needs of Alzheimer patients and respite care patients and that there are no alternative, less costly or more effective methods of providing HCR's proposed services. If HCR had succeeded in demonstrating need for its proposal under these rules, a certificate of need would have been recommended even though the Specific Exception was not complied with. HCR has agreed that its proposed facility will meet the alleged need for Medicaid patients, Alzheimer patients and respite care patients in Manatee County by dedicating a thirty- bed wing to the care of Alzheimer patients, a thirty-bed wing to respite care patients and guaranteeing access to fifty percent of its beds to Medicaid patients. The following findings of fact are made with regard to the specific categories of persons allegedly in need of nursing home care. Although HCR's proposed findings of fact concerning access problems of these groups are not relevant because of its failure to comply with the Specific Exception, findings are made in an abundance of caution in case the Department or a Court ultimately determines that need can be demonstrated based upon access problems even when the Specific Exception is not complied with. Medicaid Patients. Manatee County generally experiences a "peak season" from November to March during which time nursing home bed use increases. The peak season in 1984-1985, however, was only about seven weeks. During the peak season there is some difficulty in placing Medicaid patients in nursing home beds in Manatee County. Between January, 1985 and March, 1985, the Department's Manatee County office placed twenty-two Medicaid patients in nursing home beds located outside of Manatee County. Some Medicaid patients have also been placed in adult congregate living facilities even though such placements are contrary to the prohibition against placing patients in need of skilled nursing home services in such facilities. L. W. Blake Memorial Hospital has also had to place patients in nursing homes on a temporary basis outside of Manatee County. During the past year, only twenty-four patients were placed in nursing homes outside Manatee County. The evidence does not establish how many of those patients were Medicaid patients, however. Alzheimer Patients. Alzheimer's disease is a disease which primarily afflicts persons in their 50's and 60's. It can, however, afflict younger persons also. The disease progresses through three stages and has no cure. During the first stage, the afflicted person experiences forgetfulness, impairment of judgement and inability to perform routine tasks. During the second stage, the afflicted person begins to wander. During the third and final stage, the afflicted person becomes dependent and incontinent. Currently there are approximately 160 Alzheimer patients in the five existing nursing homes in Manatee County. None of these nursing homes has a special program designed for Alzheimer patients. The evidence does not, however, support a finding that Alzheimer patients are not being adequately cared for. The evidence also does not establish how many persons in Manatee County are afflicted by Alzheimer's disease or the number of persons so afflicted who are in need of nursing home care. Generally, it is not until the third stage of the disease that nursing home care becomes necessary. Even then some Alzheimer patients are cared for in the home, private boarding facilities, or mental hospitals. The evidence does establish that no person afflicted with Alzheimer's disease has been refused admittance to a nursing home bed in Manatee County. The evidence also establishes that there is a 303 bed nursing home located in neighboring Hillsborough County which treats only Alzheimer patients. Hillborough County is located in District 6. Finally, the evidence demonstrates that Alzheimer patients would benefit from a special wing dedicated to the care of Alzheimer's disease in its final stages. Respite Care Patients. Respite care is the placement of a person in need of care under the supervision of another person for a short period of time. One purpose of this care is to free-up the primary care giver for a short period of time. The patient needs supervision or may need skilled nursing care. The length of the care can vary from a few hours to several weeks. HCR has proposed to establish a thirty-bed wing in its proposed facility that will be dedicated solely to the care of respite care patients in need of skilled nursing care for a period of one to eight weeks. None of the existing nursing homes in Manatee County provides the type of specialized wing HCR in proposing. The evidence establishes that there is a need for such a service in Manatee County. The evidence does not establish, however, how many nursing home beds are needed. There was testimony that there was a need for fifty nursing home beds. This testimony was, however, purely a "guess". Additionally, this estimate was not limited to the type of respite care HCR proposes to provide; the respite care giving rise to this guess included respite care for as short a period as three to five days. Short-term respite care needs are currently being met by existing programs in Manatee County. DHRS Exhibit 4 does not corroborate the fifty bed estimate because it is not at all clear what the data on this Exhibit means. Based upon the foregoing, there is a need for nursing home beds for Medicaid patients during the "peak season" and for respite care patients in need of skilled nursing care for a period of one to eight weeks because of an access problem. The need of these patients, however, has not been properly demonstrated pursuant to the Specific Exception and therefore cannot be considered. If this need could be considered even though the Specific Exception has not been complied with, the evidence fails to demonstrate how many additional beds are needed. Additionally, two new nursing homes have been approved for construction which will add 240 nursing home beds in Manatee County. The addition of these beds will eliminate some, if not all, of the need of Medicaid patients. There is a need for nursing home beds for respite care patients in need of skilled nursing care for a period of one to eight weeks because of the lack of adequate like and existing services. HCR has, however, failed to prove that this need is sufficient to justify its proposal. The evidence fails to demonstrate a need for Alzheimer patients sufficient to justify HCR's proposal based upon the care presently being given to Alzheimer patients in Manatee County. Although the ability of Alzheimer patients to access beds is not relevant because of HCR's failure to comply with the Specific Exception, the evidence also fails to demonstrate any access problem of Alzheimer patients. Alzheimer patients would benefit from a dedicated nursing home wing. This finding, however, based upon the other findings of fact in this case, does not justify HCR's proposal. Even if it were concluded that HCR does not need to comply with the Specific Exception in this case, the evidence does not support a finding that a 120 bed facility should be approved. The only evidence as to the total number of nursing home beds allegedly needed in Manatee County was presented by Mr. Jay Cushman, an expert in the field of health planning. According to Mr. Cushman there is a need for a minimum of 193 additional nursing home beds in Manatee County. Mr. Cushman's opinion was based upon the criteria of Rules 10- 5.11(3)(a)-(d), (4) and (6), Florida Administrative Code. In particular, Mr. Cushman relied upon the effect on nursing home bed use of Manatee County's peak season and the needs of Alzheimer patients, respite care patients and Medicaid patients. Mr. Cushman's opinion was based upon his determination that there is a need for a total of 1,174 nursing home beds in Manatee County. This figure was arrived at by adding Mr. Cushman's projected need for Medicaid patients (40 beds), Alzheimer patients (121 beds), respite care patients (50 beds) and the current peak census of nursing homes in Manatee County (718 beds). The sum of these figures was multiplied by 1.137 (to account for population growth in Manatee County over the next three years) and the result was divided by ninety percent (to account for a maximum occupancy rate of ninety percent). Mr. Cushman's determination of need, to the extent his figures are based upon purported access problems associated with Medicaid patients, Alzheimer patients, respite care patients and persons in need of care during the peak season, should not and cannot be considered because of the lack of compliance with the Specific Exception. Since Mr. Cushman did take into account alleged access problems without complying with the Specific Exception in arriving at his conclusion that 193 nursing home beds are needed in Manatee County, Mr. Cushman's opinion of need is rejected. Even if it was proper for Mr. Cushman to consider access problems despite the failure to comply with the Specific Exception, the weight of the evidence does not support Mr. Cushman's opinion. In arriving at his estimate of the need for Medicaid patients, Mr. Cushman relied in part upon the fact that twenty-four patients (twenty-five according to Mr. Cushman) had been placed in nursing homes located out of Manatee County by L. W. Blake Memorial Hospital personnel. The evidence, however, does not prove that all of these patients were Medicaid patients. Mr. Cushman's determination that 50 beds are needed for respite care patients was based upon on the opinion of Mr. Russell Kitching. Mr. Kitching's estimate was rejected, supra. The most significant problem with Mr. Cushman's determination of bed need is his estimate of the need for Alzheimer's patients. The evidence does not support a conclusion that there is a need for additional nursing home beds for Alzheimer's patients. The evidence proved that no Alzheimer's patient in Manatee County has been denied access to a nursing home. Finally, Mr. Cushman's opinion is contrary to, and did not take into account, the fact that Manatee County is projected to have an excess of 105 nursing home beds under the Formula. Based upon the foregoing, it is concluded that HCR has failed to prove that there is a need for a 120 bed nursing home in Manatee County.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the certificate of need application filed by HCR for a 120-bed nursing home to be located in Manatee County be denied. DONE and ENTERED this 2nd day of August, 1985, in Tallahassee, Florida. LARRY J. SARTIN 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 2nd day of August, 1985. COPIES FURNISHED: Jean Laramore, Esquire G. Steven Pfeiffer, Esquire LARAMORE & CLARK, P.A. The Bowen House 325 N. Calhoun Street Tallahassee, Florida 32301 John F. Gilroy, Esquire CULPEPPER, TURNER & MANNHEIMER P. O. Drawer 11300 Tallahassee, Florida 32302 David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32301
The Issue Whether the applications for certificates of need filed by Petitioners Alachua General Hospital, Inc., Oakhurst Manor Nursing Corporation and Florida Convalescent Centers, Inc., meet the requirements of law and should be approved based on application of the statutory review criteria or upon other considerations.
Findings Of Fact Oakhurst Manor Nursing Center is a community-based skilled nursing facility of 120 beds located in Ocala, Florida. Oakhurst has a history of high occupancy and is a superior rated facility. At hearing, Oakhurst acknowledged a number of inaccuracies in its application. Some staffing ratios were misstated. The data utilized to calculate financial ratios is different from the data set forth in the combined statement. The physical location of the facility was incorrectly identified. The application misstated the existing number of beds in the facility. Section 408.035(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. As to the application of Oakhurst, utilization rates indicate that need exists for additional community nursing care services in Marion County. Oakhurst experiences full occupancy. Projected occupancy levels set forth in the Oakhurst application are reasonable. The evidence establishes that the need for additional beds exists and that the application of Oakhurst is consistent with the applicable district and state health plans. Section 408.035(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 and hospices in the service district of the applicant. Approval of the Oakhurst application will increase the availability of community nursing care at a superior rated facility and will meet the projected need determined by the AHCA's determination of the fixed pool. Section 408.035(1)(c), Florida Statutes, requires consideration of the applicant's ability to provide quality of care and the applicant's record of providing quality of care. Oakhurst is a superior rated facility with a history of providing high quality care. There is no indication that the 60 bed unit addition will result in a decline in quality of care. Section 408.035(1)(e), Florida Statutes, requires consideration of the probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. The evidence fails to establish that approval of the Oakhurst application will result in probable economies and improvements in service from joint, cooperative, or shared health care operations. Section 408.035(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal. Since purchase by the current owners, Oakhurst's financial performance has been satisfactory. Losses experienced during the two years following the purchase are attributed to accelerated depreciation. The facility is currently profitable. Although there was evidence that insufficient funds are being generated to maintain the facility's physical plant, the evidence is insufficient to establish that Oakhurst is unable to maintain the facility. Projected occupancy rates are reasonable. Funds for capital and operating expenditures are available to Oakhurst. Notwithstanding current operation of the facility and availability of funds, Oakhurst's proposal is not financially feasible. Oakhurst's revenue projections are not reasonable. This finding is based on the credible testimony of expert Charles Wysocki. Mr. Wysocki opined that the Oakhurst application is not financially feasible in the short and long term and that the financial projections in the Oakhurst application are not reliable. Mr. Wysocki's testimony was credible and persuasive. Oakhurst's current Medicaid rate is $71.68. Oakhurst application Schedule 10 projects Medicaid rates as follows: $77.41 during the construction year; $104.69 during operation year one; and $99.75 during operation year two. Oakhurst's projected Medicaid rates are unreasonable. Projected Medicaid rates are overstated and do not appear to account for Medicaid program rate ceilings. Medicaid program payment restrictions will not permit payment of such rates during years one and two. Oakhurst's current Medicare rate is $186.87. Oakhurst application Schedule 10 projects Medicare rates as follows: $340 during the construction year; $361 during operation year one; and $328 during operation year two. Oakhurst's projected Medicare rates are overstated and unreasonable. Medicare program payment restrictions will not permit payment of such rates. Oakhurst's application overstated revenue projections related to private pay patients. Further, according to Mr. Wysocki, Oakhurst has underestimated expenses related to depreciation, amortization and property taxes. Section 408.035(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. Approval of Oakhurst's application can be expected to have a positive competitive impact on the supply of services being proposed based on the fact that the addition of beds will increase the supply of appropriate placements. Section 408.035(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Although Oakhurst has historically participated in the Medicaid program, Oakhurst is currently not subject to Medicaid participation requirements. If the CON at issue in this proceeding is awarded, Oakhurst will be required to provide at least half of the expanded facility's 160 beds to Medicaid patients. Section 408.035(2)(b), Florida Statutes, requires consideration of whether existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. To the extent that such information is available, there is no evidence that these services are used inappropriately or inefficiently. Section 408.035(2)(d), Florida Statutes, requires consideration of whether patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. As to community nursing home beds, the AHCA has determined that a need exists for additional capacity in the planning area's nursing homes. It is likely that failure to meet projected need will result in difficulty in locating appropriate placements. The state health plan sets forth "preferences" which are considered in comparative evaluations of competing CON applications. Preference is given to applicants proposing to locate nursing homes in areas within subdistricts with occupancy rates exceeding 90 percent. The occupancy rate is higher in the Alachua planning area than in the Marion planning area. Oakhurst is in the Marion planning area and has the highest occupancy in the planning area. Oakhurst meets this preference. Preference is given to applicants who propose to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. Exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds or propose the development of multi-level care systems. The Marion County Medicaid participation average is 72.93 percent. Oakhurst's application subjects the facility to a 50 percent Medicaid average. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. Oakhurst intends to operate a separate 20 bed subunit specializing in skin and wound care. A distinct subacute care program targeted at a specific patient population is a specialized service. Oakhurst does not have specialized Alzheimer services. Oakhurst does not provide care to AIDS patients. Oakhurst does not meet this preference. Preference is given to applicants proposing to provide a continuum of services to community residents, including but not limited to, respite care and adult day care. The Oakhurst proposal does not address respite care or adult day care. Oakhurst does not meet this preference. Preference is given to applicants proposing to construct facilities which provide maximum resident comfort and quality of care. These special features may include, but are not limited to, larger rooms, individual room temperature controls, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. Oakhurst's application meets this preference. Preference is given to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. No party proposes to offer any therapeutic programs which may credibly be identified as "innovative." Preference is given to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions are be considered for facilities proposing to serve upper income residents. Oakhurst's projected rates exceed the highest Medicaid per diem rate in the subdistrict, therefore Oakhurst does not meets this preference. Preference is given to applicants with a history of providing superior resident care programs in existing facilities in Florida or other states. HRS' evaluation of existing facilities shall consider, but not be limited to, current ratings of licensure facilities located in Florida. AHCA is the successor agency to HRS. All applications meet this preference. Preference is given to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules. Applicants proposing higher ratios of RNs- and LPNs-to-residents than other applicants shall be given preference. Although FCC and Oakhurst propose reasonable staff levels, Alachua's hospital-based unit, by virtue of location, more closely meets this preference than FCC or Oakhurst. Preference is given to applicants who will use professionals from a variety of disciplines to meet the residents' needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. These professionals include physical therapists, mental health nurses, and social workers. All applications meet this preference. Preference is given to applicants who document plans to will ensure residents' rights and privacy, to use resident councils, and to implement a well-designed quality-assurance and discharge-planning program. All applications meet this preference. Preference is given to applicants proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. Oakhurst has higher administrative costs and lower resident care costs compared to the average nursing home in the district. Oakhurst does not meet this preference. The district health plan sets forth preferences which are to be considered in comparative evaluations of CON applications. The first applicable district preference is directed toward providing geographic access to nursing home beds. None of the applications meet this preference. The second applicable district preference requires consideration of existing bed utilization. Based on the percentage of elderly population and utilization of existing beds in each area, relative priorities are established. Oakhurst is in a "high need" planning area. Existing nursing homes in the Marion planning area are experiencing occupancy levels between 80 and 90 percent placing Oakhurst in a "moderate occupancy" planning area. According to the preference matrix set forth in the district plan, Oakhurst is in a priority two planning area (high need and moderate occupancy.) The evidence establishes that Oakhurst meets this preference. The third preference relates to the conversion of acute care beds to skilled nursing use. Oakhurst does not intend to convert underutilized hospital beds into skilled nursing beds for step-down or subacute care. The fourth and fifth preferences apply to new facilities of at least 60 beds. No application meets these preferences. The sixth preference states that priority consideration should be given to facilities which propose to offer specialized services to meet the needs of the identified population. Oakhurst proposes to offer a subunit specializing in skin and wound care. Oakhurst meets this preference.
Recommendation RECOMMENDED that a Final Order be entered determining the application of Oakhurst Manor Nursing Center for Certificate of Need #7326 to be incomplete and withdrawn, GRANTING the application of Florida Convalescent Centers, Inc., for Certificate of Need #7325 for the 60 remaining beds in the applicable fixed need pool and GRANTING the application of Alachua General Hospital for Certificate of Need #7320 to convert 30 existing acute care beds into a skilled nursing unit. DONE and RECOMMENDED this 5th day of October, 1994, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 5th day of October, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-6264 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Alachua General Hospital, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 15. Rejected, irrelevant as to the AHCA's review of the proposals prior to notice of intended award. 16, 20. Rejected, unnecessary. 21-26. Rejected, subordinate. 30. Rejected, recitation of testimony is not finding of fact. 32, 34. Rejected, subordinate. 42-50. Rejected, not supported by the evidence. The preferences set forth in the proposed finding are not those contained within Alachua's exhibit #1, which has been utilized in this Recommended Order. 52. Rejected, immaterial. Rejected, recitation of testimony is not finding of fact. Rejected, evidence fails to establish that therapy offered is "innovative." 62. Rejected, cumulative. 63-64. Rejected, subordinate. 72. Rejected as to SAAR, unnecessary. 73-76. Rejected, recitation of testimony is not finding of fact. Oakhurst Manor Nursing Corp.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 4,6, 8-51. Rejected, unnecessary, application rejected as incomplete and withdrawn from consideration. 52-54, 56-58. Rejected, irrelevant. Although it is true that the application contained the combined audited financial statements for the Harborside facilities, such statement fails to meet the requirement that the application contain an audited financial statement for the applicant. Harborside is not the applicant. 55. Rejected, irrelevant. The agency has cited no authority which would permit the waiver of the statutory requirement. 59. Rejected, immaterial. The document was admitted to demonstrate that the material required by law was not submitted with the CON application. Further consideration constitutes an impermissible amendment to the CON application and is rejected. Florida Convalescent Centers, Inc.'s proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, unnecessary. 5-91. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 93. Rejected, unnecessary. 102-143. References to Oakhurst application, rejected, unnecessary. Agency for Health Care Administration's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, irrelevant. 4-5. Rejected, unnecessary. 6. Rejected, subordinate. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Rejected, not supported by the greater weight of evidence. 13-16. Rejected. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. 19. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the greater weight of the evidence, wherein the CON application sets forth such information. Rejected, unnecessary. The Oakhurst application has been rejected as incomplete and treated herein as having been withdrawn. Comparison is inappropriate. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence. The CON application sets forth the information which the agency asserts was not provided. Rejected, contrary to the comparative review contained herein. Rejected, contrary to the evidence as related to applicable criteria for review set forth in the statute. 35. Rejected, not supported by credible evidence or the administrative rules cited in the proposed finding of fact. COPIES FURNISHED: Douglas M. Cook, Director Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Dean Bunton, Esquire Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 R. Terry Rigsby, Esquire Geoffrey D. Smith, Esquire BLANK, RIGSBY & MEENAN 204 South Monroe Street Tallahassee, Florida 32302 Gerald Sternstein, Esquire Frank Rainer, Esquire RUDEN, BARNETT, McCLOSKY, SMITH 215 South Monroe Street Barnett Bank Building, Suite 815 Tallahassee, Florida 32301 Alfred W. Clark, Esquire 117 South Gadsden Street, Suite 201 Tallahassee, FL 32301
Findings Of Fact The parties' stipulation The parties have stipulated to the following facts: Forum and Amedex timely filed their respective letters of intent and applications with the Department and the District Local Health Council for the July 1986 batching cycle. The Department ultimately deemed the applications complete and, following review, published its notice of intent to deny the applications. Forum and Amedex each timely filed a petition requesting a formal hearing on the denial of their application. With regard to the Forum application, the Department contends that there is no need for the proposed facility, that such lack of need will render Forum's project financially unfeasible, that the project is not the best use of Forum's resources, and that Forum fails to meet the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. All other statutory and rule criteria are satisfied, at least minimally, based on Forum's 60-bed proposal. With regard to the Amedex application, the Department contends that there is no need for the proposed facility, that such lack of need will render Amedex's project financially unfeasible, and that the project is not the best use of Amedex's resources. The Department further contends that Amedex has not demonstrated that it can provide quality of care, that it has not demonstrated that its project is financially feasible in the short or long term, that it has not provided long range plans and that, even assuming minimal need, the size of Amedex' proposed project will cause difficulty in meeting projected utilization needs based on Broward County's past utilization rates. All other statutory and rule criteria are satisfied, at least minimally, based on Amedex' 240-bed proposal. As between the applicants, they agree that a comparative review is appropriate to determine the best applicant. Further, they agree for purposes of this proceeding that the other meets all statutory and rule criteria, at least minimally, except the following: need beyond 60 beds, ability to provide quality of care, and availability of funds for project accomplishment and operation. The parties have further agreed that there are no special circumstances existent in this case upon which a certificate of need is being sought. The Amedex Proposal In July 1986 Amedex filed an application with the Department for a certificate of need to construct a 240-bed skilled and intermediate care nursing home in Broward County, Florida. The total project cost is projected to be $9,040,228. At hearing, Amedex failed to offer any competent proof to demonstrate the immediate and long-term financial feasibility of its proposed project, that it could provide quality care, or that it had available the necessary funds for project accomplishment and operation. 1/ While the Department contended that the proposed project was not the best use of Amedex's resources, it offered no proof to demonstrate what other health services would be a more appropriate use of the resources. The Forum Proposal In July 1986, Forum also filed an application with the Department for a certificate of need to construct a skilled and intermediate care nursing home in Broward County, Florida. Forum's application sought leave to construct a 60-bed facility. The estimated cost for construction of Forum's proposed nursing home is $2,39,800. Forum has the necessary resources for project accomplishment and operation. While the Department contended that the proposed project was not the best use of Forum's resources, it offered no proof to demonstrate what other health service would be a more appropriate use of such resources. Forum is a publicly held health services company which owns, develops, and operates retirement living centers and nursing homes on a national basis. Pertinent to this case, Forum proposes to develop a retirement living center in Broward County that would consist of 120 apartments for independent living, a 30-bed adult congregate living facility, and the proposed 60-bed skilled and intermediate care nursing home. Forum has packaged its centers to provide these three levels of service to meet the desires of retired persons they hope to attract to their retirement community. Each of the three components which comprise Forum's retirement living center are physically connected and share some operational functions, such as a central kitchen and heating plant. Such design provides for an efficient operation, as well as an economical distribution of costs facility wide. The nursing facility proposed by Forum would offer a wide range of services for its residents including: 24-hour skilled and intermediate nursing care, physical therapy services, and other restorative services. Additionally, Forum proposes to offer, as needed, subacute services such as: intravenous care, continuous bladder irrigation, oxygen therapy, nastrogastric tube feeding, ventilator care, insulin treatment, sterile dressing changes, and sterile care of tracheotomies. Forum also proposes to offer in the future, if need is identified and if any necessary agreements can be reached, respite care, adult day care, meals on wheels and hospice care. Forum proposes to seek medicare and medicaid certification, and will dedicate 25 of its beds to medicaid patients. Forum has a history of providing quality care at its existing facilities, and will provide quality care at the proposed facility. Forum has demonstrated the immediate and long term financial feasibility of its proposed project. Forum is a national company, with substantial experience in developing and operating nursing homes and retirement living centers. Due to the excellent growth potential in Broward County for retirement living centers, Forum should be able to capture a sufficient share of the nursing home market to render its proposed nursing home financially feasible. However, in view of the lack of numeric need for such facility as discussed infra, Forum's success will be to the detriment of existing and approved facilities. Numeric need The Department has established by rule the methodology whereby the need for community nursing home beds in a service district shall be determined. Rule 10-5.011(1)(k)2, Florida Administrative Code. The first step in calculating need pursuant to the rule methodology is to establish a "planning horizon." Subparagraph 2 of the rule provides: Need Methodology ... the Department will determine if there is a projected need for new or additional beds 3 years into the future according to the methodology specified under subparagraphs a. through i... The Department interprets subparagraph 2, and the applicants concur, as establishing a "planning horizon" in certificate of need proceedings calculated from the filing deadline for applications established by Department rule. This interpretation is consistent with the numeric methodology prescribed by subparagraph 2, and with the decision in Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986). Applying the Department's interpretation to the facts of this case, establishes a "planning horizon" of July 1989. Pertinent to this case, subparagraphs 2 a-d provide the methodology for calculating gross bed need for the district/subdistrict (in this case the district and subdistrict are the same--Broward County) in the horizon year. The first step in the calculation of gross need for the horizon year is to derive "BA," the estimated bed rate for the population age-group 65-74. This rate is defined by subparagraph 2b as follows: BA = LB/ (POPC + (6 x POPD) Where: LB is the number of licensed community nursing home beds in the relevant district. POPC is the current population age 65-74 years. POPD is the current population age 75 years and over. The parties concur that the district licensed bed figure (LB) is calculated based on the number of licensed community nursing home beds as of June 1, 1986, and that there were 3,226 licensed beds in the district on that date. 2/ The parties do not, however, agree as to the date on which POPC and POPD should be derived. The formula mandated by the rule methodology for calculating BA requires that the "current population" for the two age groups be utilized. The rule does not, however, prescribe the date on which the "current population" is to be derived. Forum contends that the appropriate date to establish the "current population" for POPC and POPD is January 1, 1986. The Department contends that the appropriate date is the date of application. In the opinion of David Warner, which opinion is credited, the base for POPC and POPD should correspond to the period for which the average occupancy rate (OR) is calculated. For the July batching cycle, OR is based upon the occupancy rates of licensed facilities for the months of October through March preceding that cycle. January 1, 1986, as the midpoint of that date, is the appropriate date to derive POPC and POPD. Supportive of Dr. Warner's opinion are the past practices of the Department. Between December 1984 and December 1986, the Department routinely used a three and one half year spread between the base population period and the horizon date for "current population" in its semiannual nursing home census report and bed need allocation. That three and one half year spread was adopted by the Department for the same reasons expressed by Dr. Warner. In the batching cycle of January 1987, which cycle immediately followed the cycle at issue in this case, the Department utilized a three and one half year spread between the base population period and the horizon date for "current population" when it awarded beds in that cycle. The Department offered no explanation of why, in this case, it proposed to use a three year spread between the base population period and the horizon date for "current population" in calculating POPC and POPD. Application of the methodology prescribed by subparagraph 2b to the facts of this case produces the following calculation: BA = 3,226 / (158,878 + (6 x 110,217) BA = 3,226 / (158,878 + 661,302) BA = 3,226 / 820,180 BA = .0039332 The second step in the calculation of gross need for the horizon year is to derive "BB," the estimated bed rate for the population age group 75 and over. This methodology is defined by subparagraph 2c, and calculated in this case as follows: BB = 6 x BA BB = 6 x .0039332 BB = .0235992 The third step in the calculation of gross need for the horizon year is to derive "A," the district's "age-adjusted number of community nursing home beds" at the horizon year. This methodology is defined by subparagraph 2a as follows: A = (POPA x BA) + (POPB x BB) Where: POPA is the population age 65-74 years in the relevant departmental district projected three years into the future. POPB is the population age 75 years and older in the relevant departmental district projected three years into the future. The parties concur that POPA and POPB are, respectively, 165,533 and 128,250 for the horizon year. Accordingly, application of the methodology prescribed by subparagraph 2a produces the following calculation: A = (165,533 x .0039332) + (128,250 x .0235992) A = 651.07439 + 3,026.5974 A = 3,677.67 The final step in the calculation of gross need in the horizon year is to derive "SA," the "preliminary subdistrict allocation of community nursing home beds" (gross bed need in this case. 3/ This calculation is defined by subparagraph 2d as follows: SA = A x (LBD/LB) x (OR/.90) Where: LBD is the number of licensed community nursing home beds in the relevant subdistrict. OR is the average 6 month occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Occupancy rates established prior to the first batching cycle shall be based upon nursing home patient days for the months of July 1 through December 31; occupancy rates established prior to the second batching cycle shall be based upon nursing home patient days for the months of January 1 through June 30. The batching cycle in which these applications were filed occurred before the Department amended its rule to include the fixed need pool concept. Accordingly, the parties agree that the six month period on which the average occupancy rate is calculated is not as set forth in subparagraph 2d, but, rather is defined by former rule 10-5.11(21)(b)4 as follows: OR is the average occupancy rate for all licensed community nursing homes within the subdistrict of the relevant district. Review of applications submitted for the July batching cycle shall be based upon occupancy data for the months of October through March preceding that cycle... In Broward County (District X) LB and LBD are the same since the county has not been divided into subdistricts. Application of the foregoing methodology to the facts of this case produces a gross need in July 1989 of 3,453 beds, computed as follows: 4/ SA = 3,677.67 x (3226/3226) x (.845/.9) SA = 3,677.67 x 1 x .938888 SA = 3452.92 The net need calculation The final step in the numeric need methodology is to derive net reed from gross need. According to subparagraph 2i, this need is calculated as follows: The net bed need allocation for a subdistrict, which is the number of beds available for certificate of need approval, is determined by subtracting the total number of licensed and 90 percent of the approved beds within the relevant departmental sub- district from the bed allocation determined under subparagraphs 2.a. through f. Notably, former rule 10-5.11(21)(b)9 comports with the new rule in all material respects. While the rule requires that net need be calculated by subtracting "the total number of licensed and 90 percent of the approved beds" in the subdistrict from the gross need previously calculated, it is silent as to the date that inventory should be calculated. The Department asserts, through application of "policy," that the number of licensed beds should be calculated as of June 1, 1986 (the date established by former rule 10-5.11(21)(b)7 for calculating LB and LBD), and the number of approved beds as of December 1, 1986 (the date the Department's supervisory consultant signed the state agency action report). Forum would likewise calculate licensed beds as of June 1, 1986, but would also calculate approved beds as of that date. The Department offered no proof to expose and elucidate its policy choice. As discussed below, the dates used by the Department and Forum for purposes of calculating net need were facially unreasonable. 5/ The inventory of licensed and approved beds under subparagraph 2i, as well as former rule 10-5.11(21)(b)9, are inextricably linked. As approved beds are licensed, the approved bed inventory decreases and the licensed bed inventory increases. The Department's policy choice concerning the dates at which licensed and approved beds are to be counted is neither logical nor rational since it could result in some nursing home beds not being counted as either licensed or approved. For example, if beds were approved and not yet licensed in June 1, 1986, but licensed before the supervisory consultant signed the state agency action report (SAAR), they would not be counted in either inventory. Since the purpose of subparagraph 2i is to calculate a realistic estimate of the net bed need for the horizon year, it is appropriate to use the most current inventory of licensed and approved beds at the point a decision is rendered on an application. This assures, to the greatest extent possible, that the horizon population will not be over or underserved. In those circumstances where the SAAR becomes final agency action, the Department's approach of calculating inventory on the date the supervisory consultant signs the SAAR, assuming that inventory includes licensed and approved beds on that date, might be reasonable. However, where, as here, the SAAR constitutes only preliminary agency action, and a de novo review of the application is undertaken, there is no rational basis for subsuming that inventory. The rule methodology considered, the only rational conclusion is that net need be derived on the date of de novo review, and that it be calculated by reducing the gross need calculation by the inventory of licensed and approved beds, from previous batching cycles, existent on that date. As of the date of administrative hearing, there were 3,226 licensed beds and 695 approved beds in the district/subdistrict. Applying the methodology prescribed by subparagraph 2i to the facts of this case calculates a surplus of 399 community nursing home beds in the district for the June 1989 planning horizon. Consistency with State and local health plans The parties have stipulated that both proposals are consistent with the State and local health plans except for Forum's facial failure to comply with the local health plan priority relating to the construction of freestanding facilities with a minimum capacity of 120 beds. Pertinent to this issue, the local health plan provides: In addition to controlling capacity in order to discourage the construction of unneeded beds, the certificate of need program addresses cost containment by encouraging efficiencies in operation as a criteria to certificate of need approval. A number of operational models have historically proven to be positive influences on efficiency. Licensure laws, for instance, require nursing home staffing patterns to be structured in minimum modules of 30 bed configurations. As a result, the construction of nursing homes with beds totalling numbers not divisible by 30, has the capability of encouraging over staffing. Similarly, experience has shown that freestanding nursing homes constructed at less than 120 beds also are less cost efficient compared to larger facilities. Likewise, since construction and corresponding debt service retirement is greater for freestanding facilities than for new construction on existing facilities, expansion and conversion as an alternative to new construction frequently acts to reduce costs. The basis for the 120-bed minimum size for a "freestanding" facility in the local health plan is to insure efficiency and economy of scale. The 60- bed project proposed by Forum is not "freestanding" but is an integral part of a retirement center which also includes 120 independent living units and a 30-bed adult congregate living facility. Under the circumstances, the economies and efficiencies contemplated by the local health plan will be achieved, and Forum's proposal is consistent with such plan. The local health plan also provides, as a recommendation, that: ... applications for certificates of need to construct additional nursing home beds should be approved so as to support the State policy of 27 beds/1000 population over age 65 in Broward County. Considering the population over age 65 at the applicants' planning horizon, as well as the number of licensed and approved beds in the district, calculates a 14.36 beds/1000 population over age 65 for July 1989. Accordingly, the applicants' proposal is consistent with state and local health plans regarding bed to population ratio. Comparative Review As between the competing applicants, the proof demonstrates that Forum is the superior applicant, and that were the award of a certificate of need appropriate in this case that its application would be the one of choice. Under no circumstance does the proof support an award to Amedex, since it failed to demonstrate the immediate and long-term financial feasibility of its project, failed to demonstrate that it would provide quality care, and failed to demonstrate that it had sufficient resources for project accomplishment and operation. The criteria on balance In evaluating the applications of Amedex and Forum, none of the criteria established by Section 381.705, Florida Statutes (1987), or Rule 10- 5.011(k), Florida Administrative Code, have been overlooked. In the case of Amedex, the lack of need in the district, as well as its failure to demonstrate compliance with relevant criteria as discussed in paragraph 46, demonstrates that, on balance, its application should be denied. In the case of Forum, its application meets all relevant statutory and rule criteria except need. Need is the key criteria in the instant case. Forum's failure to satisfy that criterion by proof of numeric need or special circumstances is dispositive of its application for licensure, and such failure is not outweighed by any other, or combination of any other, criteria.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications for certificate of need filed by Amedex and Forum be DENIED. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of February, 1988. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 1988.
