96-005369CON Elysium Rehabilitation Center, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Monday, June 2, 1997.

Summary: Absent showing of need or unique circumstances, applications for Certificate of Needs (CONs) should be dismissed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ELYSIUM REHABILITATION CENTER, )

INC., )

)

Petitioner, )

vs. ) CASE NO. 96-5369

) CASE NO. 96-5370

AGENCY FOR HEALTH CARE )

ADMINISTRATION )

)

Respondent, )

and )

)

MANOR HEALTH CARE CORP. d/b/a )

MANOR CARE NURSING CENTER, )

)

Intervenor. )

___________________________________)

GOOD SAMARITAN HOSPITAL, INC. )

)

Petitioner, )

vs. ) CASE NO. 96-5372

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings,

by its duly designated Administrative Law Judge, Don W. Davis,

held a formal hearing in the above-styled case on March 19

through 26, 1997, in Tallahassee, Florida.

APPEARANCES

For Petitioner Good Samaritan Hospital:

Thomas A. Sheehan, III, Esquire

Moyle, Flanigan, Katz, et al.

Barnett Centre, Ninth Floor

625 North Flagler Drive

West Palm Beach, Florida 33402

For Petitioner Elysium Rehabilitation Center Inc.:

David K. Friedman, Esquire

Weiss and Handler, P.A.

2255 Glades Road, Suite 218A

Boca Raton, Florida 33431

For Intervenor Manor Health Care Corp. d/b/a

Manor Care Nursing Center:

James C. Hauser, Esquire

Skelding, Labasky, Corry, et al.

3l8 North Monroe Street

Tallahassee, Florida 32301

For Respondent Agency For Health Care Administration:

John Gilroy, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Suite 3426

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

Whether the application of Elysium Rehabilitation Center

Inc., (“Elysium”) for a certificate of need (CON) to construct

and operate a 120-bed nursing home along with a CON application

for an included 20-bed subacute unit in Palm Beach County,

Florida, and the application of Good Samaritan Hospital (“Good

Samaritan”) for a CON to convert 27 acute care beds to a 27-bed

hospital-based skilled nursing unit (SNU), also known as a

“subacute unit”, should be approved or denied.

PRELIMINARY STATEMENT

On April 19, 1996, the Agency for Health Care Administration

(AHCA or Agency) published a Fixed Need pool for community

nursing home beds for the January, 1999 planning horizon. In

that batching cycle were applicants Good Samaritan and Elysium.

The published fixed need, acknowledged by all parties, was zero.

On April 4, 1996, the First District Court of Appeal upheld

a decision by Administrative Law Judge James York invalidating

Rule 59C-1.036(1), Florida Administrative Code. Health Care and

Retirement Corp. v. Tarpon Springs , 671 So.2d 217 (Fla. App. 1 st

DCA 1996). Under the invalidated provision, applications for

subacute beds or SNUs in hospitals were reviewed by AHCA in

relation to applications for all community nursing home beds.

While comparative review of such applications is clearly

precluded by Tarpon Springs , the April 19, 1996 fixed need pool

was derived by AHCA using existing need methodology in Rule 59C-

1.036(2), Florida Administrative Code, to separately determine

need for “short term” skilled nursing or subacute beds. That

fixed need is, as acknowledged by the parties, zero.

By stipulation of the parties, Good Samaritan’s application

is unopposed by Manor Care. Good Samaritan and Elysium do not

oppose each other’s application.

On September 23, 1996, AHCA issued its decision denying,

among others, the following applications: CON Numbers 8540 and

8540S to Elysium to construct a 120 bed facility (including a 20-

bed subacute unit) and CON Number 8539S to Good Samaritan to

convert 27 acute care beds to a 27 bed hospital-based SNU.

Petitioners timely asserted their entitlement to

administrative review of the pending agency decision.

Subsequently the cases were forwarded to the Division of

Administrative Hearings for formal proceedings, and by order of

Administrative Law Judge Eleanor M. Hunter entered on November

22, 1996, were consolidated for final hearing. On February 5,

1997, Manor Care Healthcare Corporation (“Manor Care”), filed a

Petition to Intervene which was granted by Judge Hunter on

February 13, 1997.

Thereafter the matter was assigned to the undersigned for

conduct of the final hearing where Good Samaritan presented the

testimony of Joan Horvath (expert in rehabilitation services),

Jeffrey S. Farber, M.D. (expert in subacute care and physical and

rehabilitation medicine), and Jay Cushman (expert in the field of

health planning). Good Samaritan exhibits 1 through 8 were

admitted into evidence.

Elysium presented the testimony of Sharon Gordon-Girvin

(expert in health care planning), Rabbi Joseph Pollack (Jewish

customs and practice), Ira M. Sheskin, Ph.D. (expert in Jewish

demography), Rabbi Bruce Warshall, John L. Fiorella, Jr., Joseph

Legan (expert in architectural design including nursing home

design and cost estimation), Thomas Davidson (expert in health

care finance), and Suzanne Richardson, (expert in the field of

skilled nursing and subacute care). Elysium’s exhibits 1 through

2 and 4 through 11 were received into evidence.

Manor Care presented the testimony of Marta Meers, R.N.

(expert in nursing home administration and operations and

clinical services), Linda Ward (expert in the field and operation

of special Alzheimer’s and dementia care units in nursing homes),

George L. Siefert (expert in nursing home architecture and

design), Linda Gilchrist , Diane Karolkowski, Doug Wanke and

Thomas J. Sullivan (expert in health care planning and health

care finance). Manor Care exhibits 1 through 12 were received

into evidence.

AHCA presented the testimony of Elfie Stamm (expert in the

area of health planning) and Karen Rivera. AHCA’s exhibits 1

through 3 were received into evidence.

The transcript of the proceeding was filed on April 11,

1997. By stipulation of the parties, the time to file proposed

recommended orders was extended to May 8, 1997. Manor Care

subsequently filed a timely motion for extension of time

requesting that the time for filing proposed recommended orders

be extended to May 15, 1997. The motion for extension of time

was granted on May 5, 1997. Proposed findings of fact submitted

by the parties have been duly considered in the preparation of

this recommended order.

FINDINGS OF FACT

1. AHCA published a “Notice of Community Nursing Home Fixed

Need Pool” on April 19, 1996, in the Florida Administrative

Weekly , Volume 22, No. 16. In District 9, Subdistrict 4, the

published numerical need, as acknowledged by the parties, was

zero for the January 1999 planning horizon. The published need

resulted from calculation of projected need for additional

community nursing beds in accordance with need methodology

contained in Rule 59C-1.036(2), Florida Administrative Code.

2. On May 24, 1996, AHCA published a “Notice To Potential

Applicants” for CONs. The notice stated the following:

In the review of applicants seeking beds from

the January, 1999 Nursing Home Fixed Need

Pool, as published in the April 19, 1996

F.A.W., which includes the same need for long

and short term beds, the agency will consider

the need for short and long term beds

separately. Those applicants seeking both

short and long term [beds] must file

applications for each type of bed.

3. As acknowledged by the parties, the notice specifically

set out a “Need For Short Term Beds” in AHCA’s Subdistrict 9-4 of

zero. Neither the April 19 published fixed need pool or the May

24 notice was challenged by any of the parties.

4. Although the term “subacute” is not defined in federal

or Florida law, the weight of expert testimony in this case

establishes that for health planning purposes in the current

environment, measurement of Medicare certified skilled nursing

days or services (“Short Term Beds”) is a fair and reasonable

surrogate for “subacute” care.

Good Samaritan’s Application

5. By letter of intent and application for CON filed in the

batching cycle applicable to the January, 1999 planning horizon,

Good Samaritan seeks to convert 27 acute beds at its Palm Beach

County facility in AHCA District 9, Subdistrict 4, to a 27-bed

subacute unit or SNU.

6. Good Samaritan has attempted to demonstrate a need for

the proposed beds through the presentation of an “internal

survey,” in addition to calculations under three different

methodologies.

7. The internal survey results relied upon by Good

Samaritan to show the existence of need is a product of the

social work staff of Good Samaritan and its affiliate, St. Mary’s

Hospital. The purpose of the survey was to identify patients who

could, on the day of the survey, have received subacute as

opposed to acute care.

8. The survey results were compiled from 36 patients who,

at that time, were in acute care beds and, according to

Rehabilitation Services Expert Joan Horvath, needed to be in a

subacute program. Survey documentation includes descriptive

columns documenting “Reason for SNU Potential” and “Reason for

Occupying Acute Bed.” Short, non-specific statements of the

“reasons” for a patient’s occupation of an acute bed are listed

for most of those surveyed. Reasons are varied with some having

little to do with availability of an appropriate subacute bed.

Of all survey results, only one patient case arguably reports

unavailability of subacute care. There is no contention that

attempts were made to provide placement to the patients in the

survey.

9. Karen Rivera, AHCA’s CON review consultant testified

that the survey “raised more questions than it answered.” Good

Samaritan’s application confirms that most patients included in

the survey were subsequently placed in free standing SNU

facilities without any substantiation by Good Samaritan of

unnecessary delays. Good Samaritan has failed to demonstrate or

document any lack of patient access to needed services.

10. Dr. Jeffrey Farber, slated to be the medical director

of Good Samaritan’s proposed subacute unit, testified “from an

anecdotal level” that certain physicians may retain patients

longer than necessary in acute care because of a lack of

physician comfort with available facilities. Farber is unaware

of any quantification of patient need related to systematic or

chronic lack of availability of subacute care services. Evidence

related to physician convenience or patient preference is not

responsive to the rule-based criteria which requires a finding of

a lack of reasonable access to appropriate medical care. Reasons

advanced by Dr. Farber to support a finding of need for

additional access to subacute services are, as he conceded,

“those same issues [that] would exist as to any acute care

patient at any acute care facility which did not have a subacute

care unit.”

11. Several methodologies presented in Good Samaritan’s

application seek to support the conclusion that the proposed

project is needed. Reliance is primarily on a health planning

product called the Subacute Care Market Analysis Model, developed

and marketed by Dr. Harold Ting as a means to estimate demand for

subacute care in a given market. A “normative” demand model, the

Ting methodology attempts to project potential demand for

subacute services based on a subjective ideal, the number of

patients that should or could have been provided subacute care—as

opposed to actual experience with patients.

12. Without regard to any specific infirmities in the Ting

theory, the Ting methodology cannot be credited as a means of

determining need in this case. It is a proprietary collection of

calculations which, as a result, cannot be expressly described or

tested. It can be discerned, however, that the theory may be

flawed in its application inasmuch as it uses an inflated average

length of stay for patients in subacute facilities of 36 days for

purpose of need calculation, as opposed to the median length of

stay for patients in subacute units in hospitals in Florida of

approximately 24 days. An adjustment to calculations for this

inflation factor which were then run at the final hearing by Jay

Cushman, Good Samaritan’s expert in the field of health planning,

did not demonstrate any need for additional hospital-based

subacute capacity.

13. Neither of the other two numeric methodologies

presented by Good Samaritan at the final hearing demonstrated

need for the proposed project sufficient to warrant its approval.

14. Hospital-based SNUs or subacute units, beyond

convenience and preference issues, in relation to free standing

skilled nursing facilities, offer more immediate availability of

emergency and acute services and the possibility that laboratory

tests are completed in a shorter time.

15. Good Samaritan maintains that the need pool for

community nursing homes published by AHCA on April 19, 1996, is

inapplicable to its application, although Good Samaritan filed no

challenge to that bed need pool.

16. Since affirmation by the First District Court of Appeal

in Health Care and Retirement Corp. v. Tarpon Springs , 671 So.2d

217 (Fla. App. 1 st DCA 1996)of Administrative Law Judge James

York’s decision invalidating Rule 59C-1.036(1), Florida

Administrative Code, no comparative review of SNU beds in

hospitals in relation to all community nursing home beds has been

conducted and AHCA no longer conducts such reviews.

17. Subsequent to publication of the court’s opinion in

Tarpon Springs , AHCA published the fixed need pool for the

planning horizon at issue in this case based upon a calculation

of need using the same numeric methodology contained in Rule 59C-

1.036(2), Florida Administrative Code. The calculation includes

consideration of the entire Subdistrict population, and the need

for all of the various categories of services included under the

heading of skilled nursing care, including subacute and

Alzheimer’s care. AHCA’s calculation also accounts fully for the

number and occupancy rates of skilled nursing beds within the

Subdistrict’s hospitals and free standing nursing homes.

18. The published fixed need of zero represents “overall”

need for skilled nursing beds, including Medicare certified and

non-Medicare certified (also referred to as “short term” and

“long term”). AHCA’s expert health planner, responsible for CON

rule development, testified at final hearing that the need number

calculated under the methodology contained in Rule 59C-1.036(2),

Florida Administrative Code, represents the “overall” need for

all nursing beds except for private contract “sheltered beds”

requiring entry fees which are a specific category regulated by

another government agency and not available to the public at

large. This need number also includes all skilled nursing

facility beds, whether located in freestanding nursing homes or

hospitals.

19. After determination of overall need, AHCA determined

the need for Medicare certified beds in each subdistrict, based

upon existing utilization of such beds. In response to the

decision in Tarpon Springs , AHCA explored options and proceeded

to determine, as reflected in the April 19 and May 24, 1996

notices published in this case, the need for Medicare certified

nursing home beds separately from non-Medicare certified or “long

term” beds, without regard to the location of those beds in

hospitals or nursing homes.

20. AHCA segregated nursing home beds into two groups,

Medicare certified and non-medicare certified, for need

determinations and comparative review purposes. Under this

approach, comparison of applicants is made on the character of

the services being provided.

21. Good Samaritan’s position is that AHCA’s need

determination is inconsistent with the court’s holding in Tarpon

Springs . As established by proof at the final hearing, there has

been no showing that subdividing the applications into short-term

and long-term services is flawed or irrational. Additionally,

Good Samaritan has not shown any rational alternative means of

creating subgroups of skilled nursing applications or determining

need for short-term beds on anything broader than an institution-

specific basis.

22. AHCA’s position is that the actual need methodology in

Rule 59C-1.036(2), Florida Administrative Code was not

invalidated by Tarpon Springs . The court’s decision in that case

is limited to a prohibition of comparative review between

hospital-based SNUs or subacute care beds and all community

nursing home beds.

Elysium’s Application

23. Elysium, like Good Samaritan, did not challenge the

April 19, 1996, published notice of the fixed need pool for the

January 1999 planning horizon. As noted above, the notice,

published in the Florida Administrative Weekly, established a

projected bed need of zero (0) for community nursing homes in

AHCA’s planning district 9, Subdistrict 4, Palm Beach County.

24. Elysium’s timely filed application for a CON to

construct a 120 bed skilled nursing facility containing a 20 bed

subacute care unit (medicare certified) and a 16 bed Alzheimer’s

Disease and Related Dementia Unit, however, seeks approval

pursuant to provisions of Rule 59C-1.036(2)(h) and Rule 59C-

1.030(2), Florida Administrate Code for CON issuance to meet

“special circumstances” despite the lack of numeric need.

25. It is Elysium’s contention that elderly Jews who keep

kosher are an identifiable ethnic minority in Palm Beach County

with unique ethnic, religious, cultural and dietary needs who

will be effectively denied access to long term care absent CON

issuance.

26. However, the applicant, Elysium Rehabilitation Center,

Inc., owns no nursing homes and operates no nursing homes. The

applicant has virtually no operating assets and no businesses.

27. Sole shareholder of Elysium is John Fiorella, Jr. He

is not a licensed nursing home administrator. He has never

worked full time in a nursing home. He has not operated or

opened a nursing home.

28. The board of directors of Elysium include Fiorella and

his mother and father. Both of the parents are experienced in

the nursing home industry, but stopped working in 1986.

29. A related corporation is Elysium of Boca Raton, Inc.,

which owns an assisted living facility (ALF) in Boca Raton,

Florida, but no nursing homes. The ALF has a kosher kitchen.

30. Elysium proposes to locate its nursing home facility on

the ALF campus. The proposed facility is a freestanding building

to be connected by an enclosed walkway to the ALF operated by

Elysium of Boca Raton, Inc.

31. The proposed facility’s connection to the existing ALF

is intended to allow residents of the facility to be visited by

spouses who are residing in the adjacent ALF, to allow use of

common staff elements, and to allow for sharing of the common

space of the existing facility.

32. The projected cost of the proposed facility

approximates 7.9 million dollars and includes proposals for a 20

bed subacute care unit and a 16 bed Alizheimer’s disease/related

dementia unit.

33. Elysium projects 65 percent occupancy in year one and

90 percent occupancy in year two. The proposed payor mix is: 7.1

percent private, 16.6 percent semiprivate, 55.5 percent Medicaid,

16.7 percent Medicare, 0 percent HMO or insurance and 4.2 percent

“other”. The facility will admit Jewish and non-Jewish

residents.

34. While proposing to “provide a predominantly Jewish

environment and meet the dietary laws of glatt kosher for the

large number of elderly Jewish citizens residing in the area”,

Elysium’s application also documents that the proposed facility

will have a “predominately non-Jewish staff.” The proposed

nursing home will not have an in-house kosher kitchen since the

kosher kitchen at the adjoining ALF has been designated as glatt

kosher by the Va’ad Hakashrut section of the Rabbinical

Association. Elysium also proposes to offer its residents Hebrew

classes, Yiddish discussion groups, religious studies, programs

at the local Jewish Community Center and holiday celebrations.

Need Per Section 408.035(1)(b) and (2), Florida Statutes

And Rule 59C-1036(2), Florida Administrative Code

35. Section 408.035(1)(b) and (2) requires that

consideration be given to the availability, need, accessibility,

extent of utilization, and adequacy of like and existing health

care services in a District. By Rule 59C-1.036(2), Florida

Administrative Code, AHCA projects bed need on a county-wide

basis. The need formula considers elderly population in a

county, projected growth in the elderly population, the occupancy

of existing nursing homes, number of licensed and CON-approved

beds in a county, and other health variables. The formula

projects need for all nursing home services, inclusive of

custodial care, Alzheimer/related dementia disease, and subacute

care.

36. AHCA has published a zero need for additional nursing

home beds in Palm Beach County. Elysium does not dispute AHCA’s

finding. Additionally, there are 630 CON-approved, but not yet

opened, nursing home beds in Palm Beach County. As established

by the testimony at the final hearing of Dan Sullivan, an expert

in health care planning and health care finance, the zero fixed

need for Palm Beach County is attributable to these already

approved beds.

37. Many of the CON-approved beds will serve the same

geographic area as that proposed by Elysium. Further, all

nursing homes in Palm Beach County provide custodial care,

Alzheimer’s care, subacute care, and Medicaid services. As

conceded at final hearing by Elysium’s expert in health planning,

Sharon Gordon-Girvin, custodial care, Alzheimer’s care, subacute

care, and Medicaid services are provided at all nursing homes in

Palm Beach County and are not unique or “not normal” services.

Jewish residents in Palm Beach County currently receive

Alzheimer’s services and subacute services with no problem in

regard to clinical outcomes or quality of care issues.

38. Subacute bed need is subsumed within AHCA’s need

methodology. The specific subacute disorders proposed to be

dealt with by Elysium are commonly provided in any subacute unit

and, clinically, subacute care is the same regardless of

religion.

39. Per Rule 59C-1.036(2)(h), Florida Administrative Code,

proof of need in the absence of fixed need requires proof of an

access problem. Documented need means persons must be denied

access or demonstrate that actual need exceeds the number of

available beds. The testimony of Dan Sullivan at hearing

establishes that Elysium’s allegation of unique need is not

proven in that there has not been identification of “a single

patient who had been denied services or refused services in

nursing home” due to a lack of glatt kosher services.

40. The lack of documentation of an “access” problem for

glatt kosher food is illustrated by the lack of demand for same.

Diane Karolkowski was the admissions director at Menorah House, a

Jewish facility, in 1996. An in-house survey conducted by her

documented that of 115 patients, only 2 preferred kosher foods.

41. Jewish residents are adequately served at existing

nursing homes in Palm Beach County. As established by testimony

of Dr. Ira Sheskin, Elysium’s expert in Jewish demography, the

majority of Jewish residents in south Palm Beach County nursing

homes are in nursing homes other than Jewish nursing homes.

42. About 60 percent of patients at Intervenor Manor Care’s

facility are Jewish, including orthodox and conservative Jews.

Kosher foods are made available to residents requesting same, but

such foods are rarely requested by even the orthodox Jewish

residents. Manor Care’s Boynton, Florida facility has conducted

studies of residents’ food preferences with the result that

residents simply do not prefer the kosher foods.

43. The ALF owned by Elysium of Boca Raton, Inc. has a

kosher kitchen. With 144 beds, the ALF averages only 55

residents—a very low occupancy demonstrative of the little demand

for kosher kitchen services. Elysium’s submittal that 20 percent

of elderly Jews in south Palm Beach County keep kosher does not

establish a demand or need for kosher kitchen services in a

nursing home.

44. Occupancy rates are expressly incorporated in the

calculation of fixed need. The occupancy rates of the two Jewish

nursing homes in the area accordingly do not justify deviation

from the zero fixed need.

45. Waiting lists at nursing homes do not demonstrate need.

As indicators of bed need, such list are not meaningful. Nursing

homes with empty beds have waiting lists. Waiting lists can

reflect patient preference for a particular accommodation such as

a private room or need for a Medicaid bed, a subacute bed, an

Alzheimer’s bed, or simply a desire to be with a friend.

Additionally, such lists become outdated when people change their

minds or develop other placement options without removing

themselves from other waiting lists. Waiting for a Medicaid bed,

not kosher foods, is the primary reason given by those on waiting

lists.

Elysium And Quality Of Care

Section 408.035(1)(c), Florida Statutes.

46. Elysium is without any record of providing quality of

care. Neither owner nor operator of any nursing home, this

applicant has no experience or record of nursing home operations.

A premium is placed on nursing home provider experience and

competence since people are discharged earlier from hospitals

than in the past and are consequently sicker than in previous

years. Elysium’s ability to provide quality of care is not

demonstrated.

47. Schedule 6 in Elysium’s application presents projected

staffing patterns. The projected staffing is not proposed by

specific unit. Staffing will vary between the proposed

facility’s 20-bed subacute unit, the 16-bed Alzheimer’s unit, and

the custodial care units but this variance is not indicated in

the application. Also, Elysium’s sole shareholder could not

testify concerning the different staffing ratios for different

units.

48. There is no indication in Elysium’s application

regarding whether a dedicated staff is contemplated for the

subacute or Alzheimer’s units. Lack of a dedicated staff for

these units is not reasonable. A minimum of 2.7 nursing hours

per day for the subacute patient is reflected by on page 1b-5 of

Elysium’s application, an unreasonable number since subacute

units usually require at least 4.7 nursing hours per day to

properly service the complexity and acuity of subacute disorders.

49. Special Alzheimer’s units require 2.8 nursing hours per

patient day. Elysium’s application fails to state what the ratio

will be for such units in its facility.

50. Assuming a standard of 4.7 nursing hours per day for

subacute, 2.8 nursing hours per day for an Alzheimer’s unit and

1.9 nursing hours per day for custodial patients, measures

established at final hearing by testimony of Marta Meers, Manor

Care’s expert on Nursing, Nursing Administration and Clinical

Services, the nursing full time equivalency (FTEs)required per

Elysium’s utilization projections in year two for Registered

Nurses (RNs), Licensed Practical Nurses (LPNs), and Certified

Nursing Assistants (CNAs) is as follows:

UNIT RN/LPN CNA TOTAL

Alzheimer’s 4.2 10 14.2

Subacute 8.2 8.2 16.4

Long-Term 6.3 24 30.3

(Custodial)

TOTAL ____

FTEs 60.9

The 30.3 FTEs for custodial beds presumes that all 72 custodial,

non-specialty beds are in one contiguous unit. Under Elysium’s

proposal these units are to be located on separate floors of the

proposed facility and would require more FTEs.

51. Elysium’s projections in year two show requirements for

5.6 RNs, 8.5 LPNs, and 34.1 CNAs for a total of 48.2 positions.

This is at least 12.7 FTEs low, as established by testimony of

expert Meers.

52. Elysium’s professed intent, as documented on Schedule

6, to contract for therapists (physical, speech, occupational,

and audiological) instead of hiring these professionals as

employees does not promote quality of care or quality assurance

since contract staff provides less continuity. Many companies

send different therapists to nursing homes at different times.

53. Elysium’s application fails to state the volume of

therapy that will be provided to subacute patients. Normal

practice is to provide three hours of physical, occupational and

speech therapy to patients requiring same.

54. While stating that subacute programmatic policies and

procedures will be developed, Elysium’s application is absent any

such formulated policies—evidence of an inexperienced provider.

55. The Elysium application also projects zero HMO or

insurance days for its subacute program. In Palm Beach County,

30 to 40 percent of subacute patients are managed care with the

likelihood that this percentage will increase in the future.

56. Deficiencies of the proposed facility include mixing

custodial and subacute patients; location of the physical therapy

room on the second floor while subacute patients are located on

the first floor; and a nurses’ station layout that complicates

the possibility of a dedicated staff by locating the one station

to service the subacute unit, the Alzheimer’s Unit, and custodial

beds. Successful subacute programs require a dedicated, trained

staff who normally exhibit a higher level of skill and

professionalism than the custodial bed staff.

57. Elysium’s application lacks established protocols of

care and has not identified any employee who will serve in the

capacity of therapist, unit director, or nurses for the subacute

program.

58. Elysium’s proposed 16-b ed Alzheimer’s unit provides no

nursing station within the unit, no separate dining room, no

activity space, therapy space, family visitation area or quiet

time room. These spaces are necessary for a quality, operational

unit.

59. Elysium’s proposal to mainstream Alzheimer’s residents

for various services and activities is at variance with the

fundamental reason for a special unit, particularly in view of

the special needs of latter stage Alzheimer patients which make

separate services appropriate. Mainstreaming these patients does

not promote quality of care or quality assurance, and the

application fails to indicate what mainstreaming for what stage

of disease is contemplated.

60. Elysium’s application promotes a less than ideal

bracelet security system for the Alzheimer’s unit. Patients will

be fitted with bracelets that will trigger and lock doors as the

patients approach them. Safer measures would include the locked

ward concept where doors are locked and alarms sound when the

door is opened.

Adequate And Available Alternatives

Section 408.035(1)(d), Florida Statutes.

61. Consideration of adequate alternatives to the proposed

project is required by Section 408.035(1)(d), Florida Statutes.

The many available and accessible nursing homes already existent

in the area illustrate such alternatives to Elysium’s proposal.

Most of the existing nursing homes provide the same services

proposed by Elysium. Additionally, many of the CON-approved beds

that are still to come on line will provide further alternatives.

62. Most of the nursing homes in the southern part of Palm

Beach County admit Jewish residents, observe Jewish holidays, and

allow other cultural practices and customs for the Jewish

population, inclusive of religious services.

63. Kosher foods can and are provided without kosher

kitchens in many of the area nursing homes, but, as noted

earlier, demand for such foods is rare. Catering kosher food, if

necessary, from the under-utilized ALF which would supply

Elysium’s proposed facility is a cheaper, better alternative to

meeting the occasional need for kosher food than building an

unneeded nursing home.

Improvements In Services Through Joint Resources

Section 408.035(1)(e), Florida Statutes.

64. Section 408.035(1)(e), Florida Statutes, addresses

whether improvements in services may be derived from operation of

joint, cooperative, or shared health care resources. With

exception of limited discussion regarding joint use of the ALF’s

kosher kitchen, the Elysium application does not meet this

criterion. Additionally, financial projections in the

application fail to indicate any economies, reduction in staff,

reduction in non-salary expense, or other expense relief

resulting from locating the nursing home next to the ALF. There

is no discussion in the application of shared services with other

health care providers. The ALF administrator, Claire Bojanoski,

even professes no knowledge of the application or involvement in

discussions about coordination between the existing ALF and the

proposed facility.

Applicant Resources For Project Accomplishment

Section 408.035(1)(h), Florida Statutes.

65. Section 408.035(1)(h), Florida Statutes, considers

whether the applicant has available resources in personnel,

management, and funds for project accomplishment and operation.

Elysium’s application does not meet this criterion.

66. As noted above, Elysium neither owns or operates

nursing homes. The sole shareholder has no ownership or

operational experience in the field. The applicant has no

employees or specific individuals employed in any key operational

or management positions.

67. With regard to funding, the applicant proposes to

borrow 5.8 million in long-term debt for project development.

The only evidence in the application with regard to availability

of such funding are two “letters of interest” from banks. The

letters are casual, in no way binding, and cannot be viewed as

firm commitments to provide debt funding. The applicant does

have 250,000 dollars in capital for the nearly 8 million dollar

project. Such a small percentage of the initial requirement for

funding, plus the need for working capital when the facility

opens, necessitates a finding that Elysium has not demonstrated

in its application that it can firmly secure funds for project

accomplishment and operation.

Project Financial Feasibility

Section 408.035(1)(i), Florida Statutes.

68. Immediate financial feasibility is the ability to

finance construction and initial operations. It is similar to

the criterion of funds availability for capital and operating

expenditures and, based on findings set forth above in that

regard, it is found that the project lacks immediate financial

feasibility.

69. Long term feasibility addresses whether a project is

financially viable after two years of operation. Elysium’s

position that the large and growing Jewish population in the

southern part of Palm Beach County will be adequate to assure

long term feasibility is not sufficient to meet this criterion,

particularly in view of the present usage of the ALF (less than

40 percent occupancy) and the lack of documented need for a

facility that will target primarily a Jewish population.

70. Utilization projections advanced by Elysium in Schedule

5 of its application are not reasonable. There is inadequate

demand for glatt kosher in Palm Beach County to justify the high

occupancy and rapid fill up of occupancy projected by Elysium.

Physical needs of patients primarily direct nursing home

placement as opposed to cultural or dietary preferences, and the

zero fixed need also illustrates the lack of need on that basis

for the Alzheimer’s services, subacute care, Medicaid services,

and custodial services associated with the typical nursing home.

71. Elysium projects, in Schedule 10 of the application,

that it will capture 6,588 Medicare days. Equated to subacute

days, such a figure amounts to 337 subacute admissions for which

no specific referral sources are identified.

72. Subacute services are increasingly funded by managed

care, yet Elysium projects zero days from managed care for the

entire facility.

73. With regard to projected Medicare revenues, a

significant portion of total revenues, Elysium did not calculate

Medicare costs on the basis of actual cost of delivering subacute

services, but chose instead to assume that Medicare reimbursement

would equal the average Medicare reimbursement for all Palm Beach

County nursing homes. Such an assumption for an alleged unique

facility is not reasonable. Additionally, projected Medicare

revenues do not indicate staffing patterns or amount of therapy

to be provided subacute patients.

74. With respect to projected expenses, Elysium projected

these expenses merely as a percentage of projected revenues. No

consideration was given to the purported unique aspects of the

proposed facility.

75. Salary expenses, the largest expense item for a nursing

home, are very understated in view of the dramatic understated

number of nursing home employees required to operate the

specialized units and the total facility.

76. As established at the final hearing by testimony of the

expert on health care planning and health care finance, Dan

Sullivan, Elysium’s projection on Schedule 11 of $61.58 patient

care costs per day in year 2000, the second year of operation, is

unrealistic. Palm Beach County nursing homes averaged $61.27 in

1994. If the 1994 figure is inflated 4 percent per year, that

would increase Elysium’s patient care costs by $15 per day.

Multiplication of $15 per day times 39,528 patient days

(utilization projections in year two) generates an additional

expense of almost $600,000. Elysium projected a profit of

$300,000, which, as Sullivan opined, becomes a $300,000 loss with

the additional $600,000 cost.

Promotion Of Competition, Quality Assurance,

Or Cost-Effectiveness

Section 408.035(1)(l), Florida Statutes.

77. There are no competitive benefits associated with

Elysium’s application in view of the lack of Fixed Need and the

existence of many nursing homes that presently provide the same

services proposed by this applicant. Additionally, Jewish

residents now receive adequate, available, and accessible

cultural and religious services at existing facilities.

78. For the same facts set forth earlier, finding that

Elysium’s application fails to meet the “quality of care”

criterion, the criterion of quality assurance is not met.

79. With regard to cost effectiveness, there is no specific

cost savings or cost effectiveness for health care delivery

systems identified by Elysium’s application. Elysium has

substantially understated its expenses and has expended no effort

to share costs with the ALF or to provide any meaningful economic

linkage with the ALF.

Reasonableness Of Project Cost And Design

Section 408.035(1)(m), Florida Statutes.

80. The layout of Elysium’s Alzheimer’s unit and subacute

unit, as previously noted, are not reasonable. Additionally,

Elysium’s projected “start-up” costs of $25,000 shown on Schedule

1 manifests a misapprehension of what is involved in developing

and operating a nursing home. Testimony of Marta Meers

establishes that start-up involves hiring an administrator and

other key staff six to eight months before opening; hiring and

training other staff prior to opening; marketing and promotion.

A projection of $25,000 for these costs is unrealistic and fails

to meet this criterion.

81. Elysium is inconsistent with regard to whether there

will be a separate kosher kitchen for the proposed facility.

Page 3-16 of the application states there will not be a separate

kitchen, contrary to the project architect’s testimony that the

proposed facility could accommodate preparation of kosher and

non-kosher foods. The architect’s testimony is not credited on

this point.

Applicant’s Past And Proposed Provision

Of Medicaid And Indigent Services

Section 408.035(1)(n), Florida Statutes.

82. Elysium has no history and therefore has no history of

providing service to Medicaid or indigent persons. Elysium

projects 55 percent Medicaid which is the Palm Beach County

nursing home average. Elysium makes no attempt to quantify

Medicaid need for nursing home residents demanding glatt kosher

foods and puts further in question whether the applicant seeks to

offer a unique service. Elysium does not satisfy this criterion.

Continuum Of Care In A Multi-Level Health Care System

Section 408.035(1)(o), Florida Statutes.

83. This proposed facility is not linked to any other

element in the health care system of Palm Beach County with the

exception of the ALF which is not particularly viable. There are

no letters of support from hospitals or other nursing homes. The

applicant has failed to establish that the proposed facility is

an integrated part of a continuum of services.

Local And State Health Plan Satisfaction

Section 408.035(1)(a), Florida Statutes.

Local Health Plan

84. The District 9 Local Health Plan includes preferences

for consideration in the review of applications for nursing home

beds.

85. The first preference gives priority to applicants for

new nursing homes who agree to provide a minimum of 30 percent

Medicaid patient days. Elysium has proposed a minimum of 55

percent Medicaid patient days and, therefore, meets this

preference.

86. The second preference contains four subparts that

establish priorities for applicants: documented history of

providing good residential care; staffing ratios, particularly

for registered nurses and aids, that exceed staffing

requirements; provision for the treatment of residents with

mental health problems; and the inclusion of intensive

rehabilitation services for those short stay patients requiring

rehabilitation below the level of an acute care hospital.

87. Elysium has not operated a skilled nursing facility to

date and therefore does not have a rating history to report.

88. With regard to staffing ratios, provision of treatment

of residents with mental health problems, the inclusion of

intensive rehabilitation services for those short stay patients

requiring rehabilitation such as a subacute unit, these

preferences are not met by Elysium in view of the facts found

above documenting the applicant’s failure to demonstrate an

ability to provide high quality of care and quality assurance for

its specialized services.

89. The third priority under the local/district health plan

establishes a priority for applicants who propose to serve a

distinct population that is not currently being served within the

Subdistrict. As noted above, the distinct population in this

instance is already well served by other nursing homes in Palm

Beach County which meet the ethnic, religious, cultural and

dietary needs of the elderly Jewish population who keep kosher.

Florida State Health Plan

90. The Florida State Health Plan contains twelve

allocation factors for reviewing CON applications for community

nursing home beds.

91. Factor 1 provides a preference for applicants proposing

to locate in subdistricts with occupancy rates exceeding 90

percent. Elysium conforms to this preference since occupancy

rates in Palm Beach County have exceeded 90 percent throughout

1995.

92. Factor 2 provides a preference to those proposing to

serve Medicaid residents in proportion to the subdistrict

average. At risk to its claim that it proposes a truly unique

facility, Elysium conforms to this preference.

93. Factor 3 provides a preference to applicants proposing

specialized services to special care residents, including AIDS,

Alzheimer’s and mentally ill residents. As previously noted

above, the applicant’s failure to demonstrate an ability to

provide high quality of care and quality assurance for its

specialized services prevents conformance with this preference.

94. Factor 4 provides a preference to applicants proposing

a continuum of services, including but not limited to, respite

care and adult day care. As previously noted, Elysium’s failure

to demonstrate an ability to provide quality of care or quality

assurance precludes consideration of this preference.

95. Factor 5 of the State Health Plan is for applicants

proposing reasonable facility design. As found above, Elysium’s

proposal is unreasonable in design, particularly with regard to

the specialized units for Alzheimer’s and subacute patients.

96. Factor 6 provides a preference to applicants providing

innovative and therapeutic programs that enhance residents’

physical and mental functional level and emphasize restorative

care. Elysium’s proposed subacute program does not offer

services not provided at other nursing homes in the area.

Additionally, Elysium does not demonstrate an ability to provide

quality of care in its programs.

97. Factor 7 provides a preference to applicants proposing

charges that do not exceed the highest Medicaid per diem rate in

the Subdistrict. Elysium conforms with this preference.

98. Factor 8 provides a preference to applicants with a

history of providing superior residential care in existing

facilities in Florida and other states. Elysium has not operated

a skilled nursing facility to date and therefore does not have a

rating history to report.

99. Factor 9 provides a preference to applicants proposing

staffing levels that exceed the minimum staffing standards

contained in licensure administrative rules. The staffing ratios

proposed by Elysium’s application do not meet minimum staffing

ratios under the licensure rules due to understatement by the

applicant of the number of nursing employees needed to operate

its proposed facility.

100. Factor 10 provides preference to applicants who will

use professionals from a variety of disciplines to meet the

residents’ needs for social services, specialized therapies,

nutrition, recreation and spiritual guidance. Elysium minimally

complies, with proposed contractual services, with requirements

for this preference.

101. Factor 11 provides a preference to applicants who

document how they will ensure residents’ rights and privacy, if

they use residents’ councils, and if they plan to implement a

well-designed quality assurance and discharge planning program.

Absent quality assurance concerns, Elysium qualifies for priority

under this factor.

102. Factor 12 provides preference to applicants proposing

lower administrative costs and higher resident care costs

compared to the average nursing home in the district. Elysium

does not meet this preference in that proposed patient care costs

are lower than average.

Adverse Impact To Other Facilities

103. Manor Care is a 180 bed nursing home. Superior-rated,

it has a 32-bed Alzheimer’s unit and provides subacute services.

Service is provided to the Medicaid population and 60 percent of

its residents are Jewish. It is located 1.5 miles from Elysium’s

proposed site.

104. Presuming that Elysium reached projected utilization,

20 percent of that business would come at the expense of Manor

Care in an amount equal to the loss of 8,000 patient days.

Currently generating a contribution margin of $60 per resident

day, the loss to Manor Care would approximate $480,000 should

Elysium’s application be approved. This is a substantial and

adverse financial loss.

CONCLUSIONS OF LAW

105. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings pursuant to Section 120.57(1) and 408.039,

Florida Statutes.

106. Each applicant bears the burden of proving its

entitlement to the particular CON sought, based on a balanced

consideration of the criteria. Department of HRS v. Johnson &

Johnson Home Health Care, Inc. , 447 So.2d 361 (Fla. 1st DCA

1994). Weight to be accorded each criterion is not fixed, but

varies dependent upon facts of the case. Collier Medical Center,

Inc. v. Department of HRS , 462 So.2d 83 (Fla. 1 st DCA 1985).

107. With regard to both applicants, the fixed need

determination made by AHCA pursuant to provisions of Rule 59C-

1.036(2), Florida Administrative Code of zero need, went

unchallenged and must be applied in this case. St. Joseph’s

Hospital, Inc. v. AHCA , AHCA Final Order dated March 17, 1997,

Appeal Pending , Fla. 1 st DCA Case No. 97-01440 (adopting DOAH

Recommended Order in Case No.96-6236).

108. In response to concerns of Good Samaritan regarding

the court’s decision in Tarpon Springs , it is simply noted that

the opinion does not expressly address the calculation of bed

need.

109. Good Samaritan acknowledged the unchallenged fixed

need pool of zero, protested application of that finding, and

sought to demonstrate a need for its project in order to provide

access to residents to subacute care, pursuant to Rule 59C-

1.030(2), Florida Administrative Code.

110. In addition to the la0ck of proof establishing any

general unavailability of appropriate care or quantification of

any class of patients unable to reasonably access needed subacute

care, the methodologies presented by Good Samaritan failed to

establish a need for the proposed project. “Normative” in

approach to determining need (in that an estimate of projected

need is arrived at on the basis of what is subjectively

determined should be available), the methodologies are

fundamentally flawed and fail to establish unmet subacute care

need in Subdistrict 9-4 for the planning horizon in question.

111. Similarly, Elysium acknowledged that the bed need

methodology employed by AHCA to calculate need for beds in Palm

Beach County did not result in a projected need for beds for the

current nursing home batching cycle. However, since numerical

need is but one of several factors to be considered in

determining whether beds are needed, Elysium sought to show

special circumstances justifying approval of its application

despite a lack of bed need.

112. Elysium’s application expressly addresses the alleged

special needs of the distinct elderly Jews who keep kosher and

who are alleged to be an identifiable ethnic minority in Palm

Beach County with unique ethnic, religious, cultural and dietary

needs.

113. While elderly Jews falling into the category of

individuals sought to be addressed by Elysium’s application may

well be an identifiable ethnic minority, Elysium has not shown an

unmet demand for glatt kosher foods in existing nursing homes.

114. An access problem has not been demonstrated by Elysium

nor has the applicant established a need for its project in Palm

Beach County. Further, as noted in the factual findings set

forth above, Elysium’s application fails to meet other

requirements, inclusive of quality of care and financial

feasibility considerations.

RECOMMENDATION

Based on the foregoing, it is, hereby,

RECOMMENDED:

That a final order be entered denying the applications of

Elysium and Good Samaritan which are at issue in this proceeding.

DONE AND ENTERED th is 2 nd day of June, 1997, in Tallahassee,

Leon County, Florida.

___________________________________

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings nd

this 2 day of June, 1997.

COPIES FURNISHED:

Thomas A. Sheehan, III, Esquire

Moyle, Flanigan, Katz, et al.

625 North Flagler Drive

West Palm Beach, FL 33402

David K. Friedman, Esquire

Weiss and Handler, P.A.

2255 Glades Road, Suite 218A

Boca Raton, FL 33431

James C. Hauser, Esquire

Skelding, Labasky, Corry et al.

318 North Monroe Street

Tallahassee, FL 32301

John Gilroy, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Suite 3426

Tallahassee, FL 32308

R. Sam Power, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Tallahassee, FL 32308-5403

Jerome W. Hoffman, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Tallahassee, FL 32308-5403

Douglas M. Cook, Director

Agency for Health Care Administration

2727 Mahan Drive

Tallahassee, FL 32308-5403

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.