00-002749 Cimerron Properties, Inc., And Robert W. Hagan vs. Agency For Health Care Administration Status: Closed Recommended Order on Wednesday, February 7, 2001.

Summary: After a nursing home voluntarily discontinues operation, its license is canceled and cannot be transferred or renewed by an entity or person who subsequently purchases the real property which housed the facility.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CIMERRON PROPERTIES, INC. and )

ROBERT W. HAGAN, )

)

Petitioners, )

)

vs. ) Case No. 00-2749

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this

case on December 7, 2000, in Tallahassee, Florida, before

Carolyn S. Holifield, Administrative Law Judge, Division of

Administrative Hearings.

APPEARANCES

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

R. Bruce McKibben, P.A.

Post Office Box 1798

Tallahassee, Florida 32302-1798

For Respondent: Michael R. Hope, Esquire

Agency for Health Care Administration

Post Office Box 14229

Tallahassee, Florida 32317-4229

STATEMENT OF THE ISSUE

Whether Petitioners' application for nursing home license

renewal and for change of ownership was properly denied.

PRELIMINARY STATEMENT

By letter dated April 3, 2000, Respondent, the Agency for

Health Care Administration, advised Petitioner, Robert W. Hagan,

President of Cimerron Properties, Inc., that his application for

renewal of the nursing home license for Victoria Martin Nursing

Home and for change of ownership was denied. The Agency for

Health Care Administration indicated that Victoria Martin

Nursing Home discontinued operation in June 1999, and as a

result thereof and in accordance with Section 400.18, Florida

Statutes, its license had been canceled.

Petitioners challenged the denial and on June 21, 2000,

filed a Petition for Formal Hearing. On or about July 3, 2000,

the Agency referred the matter to the Division of Administrative

Hearings for assignment of an Administrative Law Judge to

conduct the formal hearing. The hearing was scheduled to be

held on September 6 and 7, 2000, but was continued until

December 7, 2000, upon the undersigned's granting of

Petitioner's Agreed Motion for Continuance.

At the final hearing, Petitioners presented the testimony

of one witness and had seven exhibits received into evidence.

Respondent, the Agency for Health Care Administration, presented

the testimony of two witnesses and had two exhibits received

into evidence.

A Transcript of the proceeding was filed on January 2,

2001. Both parties timely filed Proposed Recommended Orders.

FINDINGS OF FACT

1. Respondent, the Agency for Health Care Administration

(Agency), is responsible for licensing and regulating nursing

homes in the State of Florida pursuant to Chapter 400, Part II,

Florida Statutes.

2. Victoria Martin Nursing Home (Victoria Martin or

Facility) was a 38-bed skilled nursing facility located in

St. Petersburg, Florida. The Facility had served that community

for approximately 35 to 40 years.

3. While a nursing home operating in the State of Florida,

Victoria Martin was licensed by and subject to regulation by the

Agency in accordance with Chapter 400, Florida Statutes.

4. At all times relevant hereto and until the time it

voluntarily discontinued its operation, Victoria Martin was

licensed to NewCare, Inc. (NewCare), through its subsidiary

corporation, Suncoast Nursing Home, Limited (Suncoast), and was

managed by Lenox Healthcare ( Lenox).

5. By letter dated and received by the Agency on June 10,

1999, the then-owner of Victoria Martin, NewCare, notified the

Agency that the Facility intended to voluntarily discontinue

operation as a nursing home. The letter stated that the

notification was being provided pursuant to the requirement of

Section 400.18, Florida Statutes. That section is titled

"Closing of Nursing Homes." In accordance with that provision,

NewCare also stated that the Facility's residents or their

families or other appropriate representatives would be given

notice, and that the residents would be transferred to suitable

facilities "before the discontinuance of the operation."

Finally, NewCare indicated that Lenox, which had taken over

management of Victoria Martin on June 1, 1999, would propose to

the Agency that Lenox be allowed to retain the Facility's

license for a period of 120 days after discontinuing operation

in order to "evaluate the needs of the property and assess the

financial commitment needed to restore the property to their

standard of operation."

6. NewCare's June 10, 1999, letter referenced in paragraph

5 above stated the following:

Pursuant to the requirement in FS 400.18

please accept this letter as official

notification that it is the providers [sic]

intention to voluntarily discontinue

operation of the Victoria Martin Nursing

Home provider number 10A433, located at 555

31st Street South, St. Petersburg, FL 33712.

As you are aware the provider agreement is

due to terminate July 8, 1999. As required,

a 90-day notification will be made, but I am

not sure how practical that is considering

the termination date of July 8, 1999. As I

understand, payments will still continue to

be made on behalf of residents for a period

of 30-days after the July termination date.

If that is the case then we will begin the

notification process immediately and

cooperate with the wishes of the resident,

family member or guardian as to suitable

transfer of the resident before

discontinuation of the operation.

In light of the substantial improvements

that have been made at Victoria Martin

Nursing Home it has become difficult to

justify funding the ongoing capital

intensive needs of the building in its

current condition. Lenox Healthcare, which

took over management of the Victoria Martin

Nursing Home on June 1, 1999 will propose to

the Agency for Health Care Administration in

Tallahassee that they be allowed to retain

the facility operating license for a period

of 120 days after the discontinuance of the

operation so that they can evaluate the need

of the property and assess the financial

commitment needed to restore the property to

their standard of operation.

7. By letter dated June 24, 1999, Petitioner,

Robert W. Hagan, writing as president of Prime Health Services,

advised the Agency that he intended to purchase the assets of

Victoria Martin. According to the letter, Hagan had already

signed a letter of intent and planned to sign a contract to

purchase the assets of Victoria Martin. Hagan noted, however,

that the "major requirement in our contract with NewCare is that

the nursing home stays open."

8. In the letter, Hagan acknowledged that he was aware of

the deficiency problems at Victoria Martin and understood that

the Facility's Medicaid license was being suspended July 7,

1999. In light of this imminent license suspension, Hagan

requested a 60-day extension of the Medicaid license and

promised that if the extension were granted, his company would

immediately begin correcting the deficiencies. In closing,

Hagan stated that he understood that the Agency would have to

review this request but asked that the Agency give immediate

attention to the matter.

9. In a July 2, 1999, letter to the Agency, Lenox, acting

as agent for NewCare and manager of Victoria Martin, requested

that upon closure of the Facility, the Agency preserve the

licensed beds at Victoria Martin and place them into "reserve

status" for at least six months.

10. The letter from Lenox to the Agency stated in relevant

part the following:

Per our conversation this letter is to serve

as the formal request of Lenox Healthcare,

Inc. ("Lenox") acting as agent for NewCare

Health Corporation ("NewCare") and manager

of [Victoria Martin] to preserve the

licensed beds upon closure of the Facility

for a period of at least six months in an

effort to review capital expenditure

initiatives and the condition of the

Facility.

We believe that it is in the best interests

of Lenox and the Agency to place the

Facility's beds into reserve status. This

would offer Lenox the opportunity to review

the Facility from the perspective of capital

expenditure initiatives to better suit the

needs of the residents in this service area.

Lenox respectively [sic] requests a reserve

approval status of at least six months, to

December 31, 1999 in order to review plans

to either refurbish or replace the Facility.

As you know, Lenox initiated a relocation

plan that transitioned the residents to the

facilities of their choice. Lenox has kept

the Agency informed of the progress in this

area, and will continue to do so as we

review the future plans for the Facility.

* * *

Please let us know at your earliest

convenience of the steps that you will

require in order for Lenox to preserve the

licensed beds for this period of time.

11. The Agency did not respond to the June 10, 1 999,

letter from NewCare advising the Agency that it intended to

voluntarily discontinue operation of Victoria Martin; the

June 24, 1999, letter from Robert Hagan asking for a 60-day

extension of the Facility's Medicaid license; or the July 2,

1999, letter from Lenox asking that the licensed beds at the

Facility be placed in a "reserve status" for at least 6 months.

12. By early or mid July 1999, all the residents of

Victoria Martin had been transferred to other facilities. With

the transfer of the residents and in accordance with the June

10, 1999, notification letter from NewCare, Victoria Martin

voluntarily discontinued its operation. Accordingly, the Agency

considered the Facility closed and the license canceled.

13. Section 400.18(4), Florida Statutes, provides that

immediately upon discontinuance of operation of a facility, the

licensee shall surrender the license to the Agency and the

license shall be canceled.

14. The Agency construes Section 400.18(4), Florida

Statutes, to require the licensee to surrender the license

immediately after a facility voluntarily discontinues operation.

Furthermore, the Agency's interpretation is that once the

facility voluntarily discontinues its operation, the license

under which it operated is automatically canceled and such

cancellation is not contingent on the facility's surrendering

its license.

15. Based on its interpretation of Section 400.18(4),

Florida Statutes, after the residents of the Facility were

transferred to other facilities and the Facility voluntarily

discontinued operation, the Agency considered the Facility's

license canceled. However, the Agency did not notify any of the

interested parties that it canceled or deemed the license

canceled by operation of law.

16. The license for Victoria Martin was never surrendered

and until June 2000, about a year after the Facility

discontinued operation, the Agency did not request that the

Facility, NewCare, Lenox, or Petitioner surrender the nursing

home license.

17. At or near the time residents of Victori a Martin were

transferred to other facilities, NewCare sought the protection

of the bankruptcy court. In September 1999, the bankruptcy

court appointed Hagan as receiver of Victoria Martin.

18. Hagan asserts that during the time that he served as

the court-appointed receiver, he operated the Facility until it

could be purchased by Cimmeron Properties, Inc., the company

owned by Hagan's wife and of which he is president.

19. When Hagan assumed the role of receiver of Victoria

Martin, he knew that the Facility was not operating as a nursing

home. He also knew that the Facility was only a vacant building

and that there were no residents in the Facility or nursing home

employees working on the premises. Accordingly, notwithstanding

Hagan's statements to the contrary, he did not operate Victoria

Martin as a nursing home and could not have done so.

20. Even though Hagan had requested that Victoria Martin's

Medicaid license be extended and Lenox had requested that the

facility's beds be placed in "reserve status" for six months,

the Agency never acted on either of these requests.

21. In the past, where there have been "unusual

circumstances," the Agency has placed a facility in an "inactive

status." In those situations, an agreement between the Agency

and the licensed facility memorializes the terms and conditions

of such action.

22. However, here the Agency never issued or entered into

an agreement with Hagan, Cimmeron Properties, Inc., New Care,

Suncoast, or Lenox that purported to place Victoria Martin's

license in an inactive or reserve status or to extend the

license after the facility closed or voluntarily discontinued

operation.

23. On December 6, 1999, a computer-generated letter was

mailed in error to Victoria Martin from the Agency's Bureau of

Managed Care and Health Quality. The letter mistakenly informed

the facility that its nursing home license was due to expire on

April 30, 2000, and gave instructions on renewing the license.

24. In response to the Agency's letter, Hagan contacted

the Agency to discuss exactly how the renewal application should

be completed inasmuch as there were no residents at the

facility. An Agency employee told Hagan that he should submit

an application to reflect that the Facility was in an "inactive"

status.

25. Hagan prepa red a license renewal application form

indicating that Victoria Martin's license was in an inactive

status and, on January 7, 2000, filed the renewal application.

In the cover letter for the application, Hagan stated that the

application had been completed pursuant to the instructions

given to him on the telephone by an Agency staff person.

Consistent with his understanding of those instructions, Hagan

completed only the basic portion of the application and

generally responded to questions "N/A" or "not applicable."

26. In addition to the renewal application, Hagan also

filed a change of ownership application seeking to have the

ownership of the Victoria Martin license changed or transferred

to Cimerron Properties, Inc., as of February 1, 2000.

27. By let ter dated April 3, 2000, the Agency denied

Hagan's license renewal application on the grounds that the

license had been canceled after Victoria Martin discontinued

operation in June 1999. In the letter, the Agency directed

Hagan to immediately surrender the Victoria Martin nursing home

license under which the Facility operated and advised him that

if he wanted to pursue initial licensure, he must apply for and

obtain a Certificate of Need.

28. In the April 3, 2000, letter, the Agency did not

expressly deny Petitioner's application for change of ownership.

However, the Agency's determination that Victoria Martin's

license had been canceled, implicitly and effectively denied

Petitioner's application for change of ownership. It was the

Agency's position that there was nothing to transfer.

CONCLUSIONS OF LAW

29. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this cause,

pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

30. The Agency is authorized to license nursing home

facilities in the State of Florida, pursuant to Chapter 400,

Part II, Florida Statutes, and subject to the conditions

prescribed therein.

31. This proceeding involves a challenge to the Agency's

denial of Petitioner's applications for license renewal and

change of ownership. Therefore, the burden is on Petitioners to

show by the preponderance of the evidence that they are eligible

for the licenses they seek. Petitioners have not met their

burden.

32. Section 400.071, Florida Statutes , delineates the

information that must be included in an initial and renewal

application for a nursing home license, and the Agency has

promulgated rules implementing the statute's directive relating

to licensure.

33. Rule 59A-4.103, Florida Administrativ e Code, provides

that licensees or prospective licensees shall make application

for an initial, renewal, or change of ownership to operate a

nursing home facility and shall provide all information required

by Section 400.071, Florida Statutes. The Agency is required to

approve an application if the applicant or licensee meets the

statutorily prescribed criteria.

34. Section 400.18, Florida Statutes, provides in

pertinent part the following:

Closing of nursing facility.–

(1) Whenever a licensee voluntarily

discontinues operation, and during the

period when it is preparing for such

discontinuance, it shall inform the agency

not less than 90 days prior to the

discontinuance of operation. The licensee

also shall inform the resident or the next

of kin, legal representative, or agency

acting on behalf of the resident of the

fact, and the proposed time, of such

discontinuance and give at least 90 days'

notice so that suitable arrangements may be

made for the transfer and care of the

resident.

* * *

(4) Immediately upon discontinuance of

operation of a facility, the licensee shall

surrender the license therefor to the

agency, and the license shall be canceled.

(emphasis supplied)

35. Pursuant to Section 400.18(1), Florida Statutes, when

a licensed nursing home voluntarily discontinues operation, it

must notify the Agency 90 days prior to the discontinuance of

operation. Immediately upon discontinuance of operation of the

licensed facility, the licensee is required to surrender the

license to the Agency and the license is canceled.

36. In this case, the uncontroverted evidence established

that NewCare substantially complied with the provisions of

Section 400.18(1), Florida Statutes. NewCare's compliance was

evidenced by its notifying the Agency that NewCare was

voluntarily discontinuing operation and by indicating to the

Agency that it would give notice to the residents or their

family members or representatives that the Facility was

discontinuing operation and would be transferring the residents

to a suitable facility. In the letter, NewCare noted that it

was giving notice and taking the steps in accordance with

Section 400.18, Florida Statutes.

37. Victoria Martin's nursing home license was canceled,

pursuant to Section 400.18(4), Florida Statutes, upon the

Facility's voluntary discontinuance of operations in July 1999.

38. The evidence established that the Victoria Martin

license which Petitioners sought to renew had been canceled in

July 1999, about six months prior to Petitioners' filing the

application for renewal. Accordingly, the Agency was required

by law to deny Petitioner's application for license renewal,

since at the time the application was filed, there was no longer

any license to renew.

39. Section 400.18(4), Florida Statutes, is clear and

unambiguous. This provision places the burden of surrendering

the license on the licensee and gives the Agency no discretion

in canceling the license. Moreover, the cancellation of the

license is not contingent on the Facility's surrendering the

license.

40. In this case, the evidence is undisputed that Lenox

requested that Victoria Martin's nursing home license be

extended or that its licensed beds be put in a "reserve status."

However, the evidence established that the Agency never granted

the request.

41. Sections 400.062 and 400.179, Florida Statutes, are

relevant to Petitioners' application for change of ownership.

42. Section 400.062(6), Florida Statutes, states the

following:

A license shall be valid only in the hands

of the individual, firm, partnership,

association, or corporation to whom it is

issued and shall not be subject to sale,

assignment, or other transfer, voluntary or

involuntary, nor shall a license be valid

for any premises other than those for which

originally issued.

43. Section 40 0.l79, Florida Statutes, provides in

pertinent part the following:

Sale or transfer of ownership of a nursing

facility; liability for Medicaid

underpayments and overpayments.

* * *

(2) Whenever a nursing facility is sold or

the ownership is transferred, including

leasing, the transferee shall make

application to the agency for a new license

at least 90 days prior to the date of

transfer of ownership.

(3) The transferor shall notify the agency

in writing at least 90 days prior to the

date of transfer of ownership. The

transferor shall be responsible and liable

for the lawful operation of the nursing

facility and the welfare of the residents

domiciled in the facility until the date the

transferee is licensed by the agency . . . .

44. According to S ection 400.062, Florida Statutes, a

nursing home license is not automatically transferable because

the premises in which the facility operated have been sold or

otherwise transferred. A transfer to a receiver in bankruptcy

proceedings comes within the purview of this provision.

Therefore, the Victoria Martin license could not be transferred

to Petitioner, Hagan, by virtue of his being appointed receiver

for Victoria Martin.

45. Pursuant to Section 400.179, Florida Statutes, when a

nursing facility is sold or transferred, certain action must be

taken by both parties. The transferee is required to apply to

the Agency for a new license at least 90 days prior to the date

of transfer of ownership. Section 400.179(2), Florida Statutes.

The transferor is required to notify the Agency in writing 90

days prior to the date of transfer of ownership. Section

400.179(3), Florida Statutes. Additionally, that subsection

provides that the transferor is "responsible and liable for the

lawful operation of the nursing facility and the welfare of the

residents domiciled in the facility until the date the

transferee is licensed by the agency."

46. By assigning to the transferor the responsibility and

liability for the "operation of the nursing facility" and "the

welfare of the residents," Section 400.179, Florida Statutes,

requires that a condition precedent to transferring ownership of

a nursing facility is that the facility is operating as a

nursing facility.

47. As noted in the preceding paragraph, a change of

ownership is limited to transfers of actively licensed

facilities. In this case, the evidence established that in

January 2000, when Petitioners applied for a change of ownership

of the Victoria Martin Facility, the Facility had voluntarily

discontinued operation and that the license had been canceled.

Because Victoria Martin had closed, there was no license

attached to the Facility, and, therefore, the Agency was without

authority to grant a change of ownership to Petitioners.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of

law, it is

RECOMMENDED that Respondent, the Agency for Health Care

Administration, deny Petitioners', Cimerron Properties, Inc.'s,

and Robert Hagan's, license renewal application for the property

known as Victoria Martin Nursing Home and Petitioners'

application for change of ownership.

DONE AND ENTERED this 7th day of February, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

CAROLYN S. HOLIFIELD

Administrative Law Judge

Divisio n of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearin gs

this 7th day of February, 2001.

COPIES FURNISHED :

Michael R. Hope, Esquire

Agency for Health Care Administration

Post Office Box 14229

Tallahassee, Florida 32317-4229

R. Bruce McKibben, Jr., Esquire

R. Bruce McKibben, P.A.

Post Office Box 1798

Tallahassee, Florida 32302-1798

Sam Power, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32306

Julie Gallagher, General Counsel

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32306

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.