85-004250RX National Health Corp. vs. Department Of Health And Rehabilitative Services Status: Closed DOAH Final Order on Friday, March 28, 1986.

Summary: DHRS rule 10-17.015 found to be an invalid exercise of delegated legislative authority.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NATIONAL HEALTH CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 85- 4250RX

)

STATE OF FLORIDA, DEPARTMENT )

OF HEALTH AND REHABILITATIVE )

SERVICES, )

)

Respondent. )

___________________________________)

FINAL ORDER

This matter came on for final hearing in Tallahassee,

Florida, before Robert T. Benton, II, Hearing Officer of the

Division of Administrative Hearings on January 16, 1986. The

record closed on January 30, 1986, with the filing of the

transcript of the deposition of Sharon Gordon- Girvin. The parties

waived the time for entry of a final order. Petitioner filed his

recommended order on February 24, 1986, and respondent's

memorandum in lieu of closing argument and proposed findings of

fact, conclusions of law and final order were filed on February

21, 1986. The parties' proposed findings of fact are dealt with

by number in the attached appendix. The parties are represented

by counsel:

APPEARANCES

For Petitioner: Robert D. Newell, Jr., Esquire

Suite B, 200 South Monroe Street

Tallahassee, Florida 32301

For Respondent: R. Bruce McKibben, Jr., Esquire

1317 Winewood Boulevard

Tallahassee, Florida 32301

By petition for determination of invalidity of agency rule

filed December 2, 1985, in accordance with Section 120.56, Florida

Statutes (1985), petitioner calls into question the validity of

Rule 10-17.015, Florida Administrative Code.

ISSUE

Whether Rule 10-17.015, Florida Administrative Code, is an

invalid exercise of delegated legislative authority.

FINDINGS OF FACT

1. Petitioner, National Health Corporation ( NHC), a

Tennessee corporation doing business in Florida, applied in

January 1985 for certificates of need to construct nursing homes

in Alachua, Lake and Suwannee counties. When the Department of

Health and Rehabilitative Services (HRS) proposed to deny its

applications, NHC filed petitions for formal proceedings with HRS,

which transmitted the petitions to the Division of Administrative

Hearings, where they were docketed in cases Nos. 85-2855

( Alachua), 85-2900 (Lake), and 85-2883 ( Suwannee), which have now

been consolidated for hearing. Alachua, Lake and Suwannee

Counties all lie within HRS District III.

2. At a prehearing conference in the substantial interest

proceeding, HRS announced its reliance on Rule 10-17.105, Florida

Administrative Code, among other things, as a basis for proposing

to turn down NHC's applications. The parties stipulated that NHC

is now, and will continue to be,

substantially, immediately and adversely

impacted by the use of Rule 10-17.015 as

the basis for the Department's

allocation of beds to competing applicants

in District III, since each priority

assigned by the local health council is a

function of the number of beds awarded in all

other planning areas.

Petitioner has standing to challenge Rule 10-17.015, Florida

Administrative Code, and the parties so stipulated.

3. Prior to its most recent amendment, Rule 10-17.015,

Florida Administrative Code, provided:

10-17.015 Local Health Plan Elements Against

Which Applications for Nursing Homes Beds

Shall Be Evaluated in Local Health Council

District 3.

(1) Nursing Home Subdistrict Designation.

Local Health Council District 3 has been

divided into seven subdistricts for the

purpose of planning for community nursing

home bed need.

(a) Subdistrict 1 consists of Lafayette,

Suwannee, Hamilton, Columbia, Union, and

Bradford Counties.

(b) Subdistrict 2 consists of Dixie, Gilchrist,

Alachua, and Levy Counties.

(c) Subdistrict 3 consists of Putnam County.

(d) Subdistrict 4 consists of Marion County.

(e) Subdistrict 5 consists of Citrus County.

(f) Subdistrict 6 consists of Hernando County.

(g) Subdistrict 7 consists of Lake and Sumter

counties.

(2) Local Policies and Priorities. In

addition to the statewide criteria against

which community nursing home applications are

evaluated, applications from District 3 will

be evaluated against the following local criteria:

(a) Special consideration should be given to

proposals to establish a nursing home to serve

residents who are more than 25 miles from an

existing or approved nursing home.

The designated subdistricts were used for "purposes of allocating

nursing home beds in the district by applying uniform statewide

methodology," (T. 74) set out in Rule 10-5.11(21), Florida

Administrative Code. "When . . . [the uniform statewide]

methodology was revised, . . . (by an amendment to Rule 10-

5.11(21), Florida Administrative Code, effective December 25,

1984] it had the effect of allocating beds to areas of. [District

III] which already had the largest share of the nursing home bed

supply for the district . . . [even though] there existed a

pattern of maldistribution" (T. 74) to begin with.

4. Under the uniform state methodology, embodied in Rule 10-

5.11(21), Florida Administrative Code, the allocation of nursing

home beds to subdistricts is "simply supply-based," (T. 75) so

that once the need for the district as a whole is determined,

nursing home beds are distributed to subdistricts based only on

how many nursing home beds are already there. Before Rule 10-

17.015, Florida Administrative Code, was amended, a quarter of the

nursing home beds in District III were in Subdistrict 2, where

only 15 percent of District III's population 75 and older lived,

while Subdistrict 4, with 15 percent of the District III

population 75 and over, had only 13 percent of the nursing home

beds in District III. Since the amendment, District III, like HRS

District X, comprises a " subdistrict of the whole." Use of such

subdistricts of the whole rarely results in a difference in the

number of beds added to a district, and "it's not generally

greater than 2 percent if there is difference." (T. 103)

5. Betty Roberts, who works in HRS's Office of Community

Health Planning, drafted the current version of Rule 10-17.015,

Florida Administrative Code, in consultation with Carol Gormley,

Executive Director of the North Central Florida Health Planning

Council, and under the supervision of Sharon Gordon- Girvin. Those

involved had earlier considered and rejected the idea of simply

repealing Rule 10-17.015, Florida Administrative Code, without

replacing it. The amendment, in fact adopted and here challenged,

provides:

10.17.015. Local Health Plan Elements Against

which Applications for Nursing Home Beds Be

Evaluated In Local Health Council District 3.

(1) Nursing Home Subdistrict Designation.

Local Health Council District 3 has divided

into seven subdistricts for the purpose of

planning for community nursing home bed need.

a. Subdistrict 1 consists of Lafayette,

Suwannee, Hamilton, Columbia, Union and

Bradford Counties.

b. Subdistrict 2 consists of Dixie, Gilchrist,

Alachua, and Levy County.

c. Subdistrict 3 consists of Putnam County.

d. Subdistrict 4 consists of Marion County.

e. Subdistrict 5 consists Citrus County.

f. Subdistrict 6 consists of Hernando County.

g. Subdistrict 7 consists of Lake and Sumter

Counties. Decided not to designate any

nursing home subdistricts. The allocation of

new nursing home beds to locations within the

district shall proceed according to policies

established in the local health plan.

(2) Local Policies and Priorities. In

addition to the statewide criteria against

which community nursing home applications

are evaluated, applications from District 3

will be evaluated against the following local

criteria. Special consideration should be

given to proposals to establish who are more

25 miles from an existing or approved nursing

home local health plan policies and

priorities contained in the approved plan.

The effect of current Rule 10-17.015, Florida Administrative Code,

is to make allocation of nursing home beds within District III

wholly dependent on "policies and priorities established in the

local health plan." Rule 10-17.015(1), Florida Administrative

Code. Deposition of Sharon Gordon- Girvin, pages 8-10. (T. 62).

HRS "specifically advised that . . . [the Health Planning Council]

should develop policies as a component of the plan, which were not

for rule promulgation." (T. 80). See Gormley deposition, Exhibit

No. 38.

6. The local health plan in effect when the challenged rule

was promulgated and still in effect at the time of hearing, sets

out a method for assigning priorities for nursing home bed

allocation to each of seven planning areas within District III.

These planning areas correspond to the subdistricts enumerated in

prior Rule 10-17.015, Florida Administrative Code. In pertinent

part, District III's local health plan provides:

1. Priority for allocation of nursing home

beds in District III will be established by

applying the policies set forth below. These

policy statements are presented in an estab-

lished order of importance.

a. No nursing home beds should be added in

an area until the occupancy rate of existing

and approved beds has sustained an average of

80 percent or greater for six months or more.

b. Nursing home beds should be added in an

area with sufficiently high utilization of

existing beds when that area's share of the

District bed supply is less than the proportion

of the District's population age 75 who

reside in that area.

c. The first step in establishing relative

priority standing of planning areas in District

III compares the population characteristics

to the bed distribution. The percent of the

District's bed supply in the area is subtracted

from the percent of the District's 75 popu-

lation residing in the area.

(1) High need is defined as a difference

greater than or equal to 3.50;

(2) Moderate need is defined as a difference

greater than or equal to 2.00 but less than

3.50;

(3) Low need is defined as a difference less

than 2.00.

(d) The priority order of areas in need

established under statement C will be adjusted

by a consideration of occupancy levels of

existing and approved facilities in each

planning area during the last six months:

(1) High occupancy is defined as an average

of 90 percent or greater;

(2) Moderate occupancy is defined as an average

greater than or equal to 80 percent but less

than 90 percent;

(3) Low Occupancy is defined as an average

less than 80 percent.

e. Final priority status is determined

as follows:

(1) Areas with high need and high occupancy

receive first priority;

(2) Areas with high need and moderate

occupancy receive second priority;

(3) Areas with moderate need and high

occupancy receive third priority;

(4) Areas with low need and high

occupancy receive fourth priority;

(5) Areas with moderate or low need and

moderate or low occupancy receive no priority.

f. To the extent possible, all areas ranked

in one of the four categories of priority

established above should be approved to add

some new beds. Relative allocation of

available beds should be determined in the

following manner:

(1) First priority areas should be allowed

add at least 120 and no more than 240 beds;

(2) Second priority areas should be allowed

to add at least 120 and no more than 180

beds;

(3) Third priority areas should be allowed

to add at least 60 beds and no more than 120

beds;

(4) Fourth priority areas should be allowed

to add up to 60 beds;

(5) Areas with no priority should not be

allowed to add beds.

The local health plan was not filed with the Secretary of State at

the time present Rule 10-17.015, Florida Administrative Code, was

adopted.

7. The prioritization element of the local health plan above

quoted is the basis for semiannual calculations by the North

Central Florida Health Planning Council which are set out for the

benefit of HRS employees reviewing certificate of need

applications in tables like the following for the six-month period

ending in May of 1985:

PRIORITY PLANNING APPROVAL BEDS NET

RANK AREA BEDS APPROVED 1 NEED 2

1 IV 120-240 60 60-180

VII 149 91 3

2 -- 120-180 -- --

3 III 60-120 -- 60-120

4 I 60 111 --

Unranked II -- 120 --

V -- 9 --

VI -- -- --

District III 597 2 449 --

1 Approvals between December 1, 1984

and March 30, 1985.

2 Calculation of district-wide need

as of January, 1984, using DHRS bed

need rule (10.5.11(21).

3 The minimum number of approval beds (120)

for this priority rank has already been

awarded. Approval of an additional 91

beds would bring the bed allocation up

to the maximum number (240). Exhibit No.

37 to the Deposition of Carol Gormley.

The numbering of planning areas is the same as the numbering of

the subdistricts which they replaced. As between competing

applications for nursing home certificates of need for planning

areas with difference priorities, the local health plan might well

be dispositive; and would, in any event, be essential to review of

the applications in accordance with 1018 rules. Deposition of

Gordon- Girvin.

8. In explaining the putative difference between

subdistricts and planning areas, Ms. Gormley stated:

We understand a subdistrict to be a

geographic area specifically designated

for use in a mathematical formula in a

methodology, like the statewide

methodology or, for example, in the case

of acute care, perhaps in a methodology

promulgated as rule after being

developed by a local health council.

The difference in our looking at

planning areas is that we don't in fact

apply a methodology, a mathematical

calculation for need. We accept the

need as determined solely by the

statewide methodology, but we use those

smaller geographic areas as a tool for

determining whether or not any part of

the district should have priority over

any other part of the district when

applications for additional beds are

considered. (T-84).

The need methodology set out in Rule 10-5.11(21), Florida

Administrative Code, determines how many nursing home beds, if

any, may be added to District III as a whole. Only when the state

methodology indicates a need for additional beds in District III,

does the question of allocation within the district arise, and

only then do the local health plan policies and priorities come

into play.

CONCLUSIONS OF LAW

9. The Division of Administrative Hearings has jurisdiction

over challenges to existing administrative rules on grounds that

they amount to "an invalid exercise of delegated legislative

authority." Section 120.56, Florida Statutes (1985).

10. The present challenge to Rule 10-17.015, Florida

Administrative Code, proceeds on several fronts. Petitioner

contends that the rule is invalid because its purported

incorporation of the local health plan by reference was

ineffective; because it is inconsistent with another HRS rule,

Rule 10-5.11(21), Florida Administrative; and because it is

inconsistent with Section 20.19(3)(b)9, Florida Statutes (1985).

11. Whatever the precise relationship between federally

mandated state and local health plans and Florida's Administrative

Procedure Act may be in other contexts, the statute is clear in

requiring that the "elements of an approved district plan which

are necessary to the review of any certificate-of-need application

shall be adopted by the department as a part of its rules."

Section 381.494(7)(b)1, Florida Statutes (1985). Petitioner does

not assail the rationality of District III's local health plan or

otherwise question its merit in arguing that HRS failed to follow

the procedures required for adopting the plan "as a part of its

rules," Section 381.494(7)(b)1, Florida Statutes (1985), in

promulgating Rule 10-17.015, Florida Administrative Code.

12. Nothing in the statutes forbids resort to incorporation

by reference in adopting as rules pertinent elements of a local

plan (or the whole of the plan.) The governing statute states:

Pursuant to rule of the Department of State,

a rule may incorporate material by reference

but only as such material exists on the

date the rule is adopted for purposes of

such rule, changes in such material shall

have no effect with respect to the rule

unless the rule is amended to incorporate

such material as changed. Section 120.54(8),

Florida Statutes (1985).

The pertinent rule of the Department of State is Rule 15-1.005

Florida Administrative Code, which provides:

(1) Any ordinance, standard, specification

or similar material may be published by

reference in a rule subject to the following

conditions:

(a) The material shall be generally

available to affected persons.

(b) The material shall be published by a

governmental agency or a generally

recognized professional organization.

(2) The agency publishing material by

reference shall file with the Department of

State a correct and complete copy of the

referenced material with an attached

certification page which shall state a

description of the referenced material and

specify the rule to which the referenced

material relates.

(3) Any amendments to material published

by reference must be promulgated under the

rulemaking provisions of Section 120.54,

Florida Statutes, in order for the amended

portions to be validly incorporated.

By Rule 10-2.11, Florida Administrative Code, HRS has adopted as

its own the model rules on rulemaking, including Rule 28-3.35,

Florida Administrative Code, which also refers to the Department

of State's rule:

Any rule, standard, specification or similar

material which is generally available to

affected persons may be incorporated in a

rule, by reference, in the manner adopted

by rule by the Department of State.

The rule requirement that an agency "file with the Department of

State a correct and complete copy of the referenced material,"

Rule 15-1.005(2), Florida Administrative Code, has the salutary

effect of making it a matter of public record just what "material

exists on the date the rule is adopted." Section 120.54(8),

Florida Statutes (1985).

13. The importance of such a requirement is underscored by

respondent's argument in this case that "policies and priorities

in the local health plan are dynamic in nature." Respondent's

Proposed Findings of Fact, Conclusions of Law & Final Order, p. 7.

Because the filing requirement was not met in the present case,

the purported incorporation by reference fails. Balsam v.

Department of Health and Rehabilitative Services, No. 84-0173R

( DOAH; March 27, 1984), 6 FALR 2592 aff'd sub nom. Department of

Health and Rehabilitative Services v. Balsam, 4626 So.2d 1109

(Fla. 1st DCA 1984).

14. Because the local plan includes elements "necessary to

the review of any certificate-of-need application," Section

381.494(7), Florida Statutes (1985), which are not incorporated in

the rule, the rule is at variance with the statute it implements.

The present case is readily distinguishable from Humhosco, Inc. v.

Department of Health and Rehabilitative Services, 476 So.2d 258

(Fla. 1st DCA 1985), where another applicant for a certificate of

need challenged similar HRS rules on grounds that "the rules do

not include all elements of the approved district plan necessary

to review of a CON application." 476 So.2d at 261. Unlike

petitioner here, the challenger in the Humhosco case "ha[d] not

presented evidence to prove that the alleged `missing' elements of

the district's plan [we]re necessary or essential to review of CON

applications." 476 So.2d at 261. It was established in the

Humhosco case, moreover, that "HRS intended, at the time the rules

were adopted, to adopt additional elements of the district plans

as they were submitted and evaluated, apparently because it was

impractical to delay adoption until all elements of the plan were

developed." 476 So.2d at 261.

15. Here the prioritization clement of the local health plan

has already been submitted and evaluated by HRS, and has been

shown to be necessary in the comparative review of applications

for nursing home certificates of need relating to planning area

assigned different priorities. HRS concedes that it " allocat[ es]

the beds, using the priorities established within the local health

plan as guidance." Respondent's Proposed Finding of Fact No. 15.

HRS adopted the rule under challenge here precisely in order to

remove a perceived impediment to the use of the local plan's

priority policy.

16. HRS personnel advised the health planning council's

director that the council should adopt as part of the plan the

priority formula policies "which were not for rule promulgation."

(T. 80). The same HRS personnel who failed to adopt the local

health plan bed allocation element as part of its rules viewed the

element as inconsistent with Rule 10-5.11(21), Florida

Administrative Code, and feared its adoption (in the absence of an

amendment to Rule 10-5.11(21), Florida Administrative Code) would

have created inconsistent rule provisions, even though they did

not object to District III's approach in practice. HRS adopted

Rule 10-17.015, Florida Administrative Code, in its present form

in an effort to permit allocation of nursing home beds in District

III on the basis an element of the local health plan, an element

which the rule fails to incorporate.

17. Petitioner contends that Rule 10-17.015, Florida

Administrative Code, is invalid on account of inconsistency with

Rule 10-5.11(21), Florida Administrative Code. But where language

in one rule cannot be reconciled with coequal provisions of

another rule, deciding which language to disregard is a question

of interpretation; and is not, in legal contemplation, a question

of invalidating one or the other. It is, therefore, unnecessary

to decide in the present case whether, as petitioner contends,

Rules 10-5.11(21) and 10-17.015, Florida Administrative code, are

mutually repugnant or, as respondent contends, they meld into a

harmonious whole, when read in pari materia.

18. Finally, petitioner contends that Rule 10-17.015,

Florida Administrative Code, runs afoul of Section 20.19(3)(b)6.,

Florida Statutes (1985), which assigns comprehensive health

planning to HRS' Deputy Assistant Secretary for Health Planning

and Development and states:

The functions of this office relating to

Pub. L. No. 93-641 shall not be

decentralized to the districts.

Petitioner's theory is that the health planning council would be

free to alter the local health plan under Rule 10-17.015, Florida

Administrative Code, as it is currently written, without the

imprimatur of HRS' Deputy Secretary for Health Planning and

Development. Whether or not this argument is meritorious,

compliance with the clear statutory requirement that plan elements

"necessary to the review of any certificate of need application,"

Section 381.494(7)(b)1., Florida Statutes (1985), be promulgated

as administrative rules ensures control by the HRS hierarchy.

It is, accordingly,

ORDERED:

Rule 10-17.015, Florida Administrative Code, is an invalid

exercise of delegated legislative authority.

DONE and ENTERED this 28th day of March 1986, in Tallahassee,

Florida.

____________________________________

ROBERT T. BENTON II, Hearing Officer

Division of Administrative Hearings

The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

FILED with the Clerk of the

Division of Administrative Hearings

this 28th day of March 1986.

APPENDIX

Petitioners Proposed findings of fact 1 through 7 have been

adopted in substance.

Respondent's proposed findings of fact 1 through 4, the first

sentence of 5, the first four sentences of 6, 7, the first two

sentences of 8, the first sentence of 9, the first paragraph and

final sentence of 10, 12, the third sentence in the second

paragraph of 15, 16, and the first and final sentences of 17 have

been adopted in substance.

The witnesses Gormley and Rond testified in the manner

recited in the second and third sentences of respondents proposed

finding of fact 13, and the record did establish that need (but

not allocation within the district) was determined under Rule 10-

5.11(21), Florida Administrative Code.

The second sentence of respondent's proposed findings of fact

5, the final sentence of 6, the final sentence of 8, the final

sentence of 9, the first sentence of the second paragraph of 10,

the first sentence of 13, the second and third sentences of 17,

and 18 have been rejected as unsupported by the weight of the

evidence. The record developed in this case did not establish

that the rule under challenge was the "only feasible, logical,

rational" step to take, did show that the bed allocation element

of the plan played an essential part in nursing home certificate

of need application review, did show that use of the local health

plan element generated specific numbers, and did show that the

plan element was skeptical of adoption as a rule.

Respondent's Proposed findings of fact 14 and 15, except for

the third sentence of 15, are proposed conclusions of law.

COPIES FURNISHED:

William "Pete" Page, Jr., Secretary

Department of HRS

1323 Winewood Blvd.

Tallahassee, Florida 32301

Steve Huss, Esquire

General Counsel

Department of HRS

1323 Winewood Blvd.

Tallahassee, Florida 32301

Robert D. Newell, Jr., Esquire

Suite B, 200 South Monroe Street

Tallahassee, Florida 32301

R. Bruce McKibben, Jr., Esquire

1317 Winewood Blvd.

Tallahassee, Florida 32301

Liz Cloud, Chief

Bureau of Administrative Code

1802 The Capitol

Tallahassee, Florida 32301

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this final order is entitled

to judicial review pursuant to Section 120.68, Florida Statutes.

Review proceedings are governed by the Florida Rules Of Appellate

Procedure. Such proceedings are commenced by filing one copy of a

notice of appeal with the Agency Clerk Of The Division Of

Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court Of Appeal, First

District, or with the District Court Of Appeal in the appellate

district where the party resides. The notice of appeal must be

filed within 30 days of rendition of the order to be reviewed.