01-001991 Life Care Center Of Sarasota vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, September 28, 2001.

Summary: Agency denial of license based on failure to submit bond is reasonable.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LIFE CARE CENTER OF SARASOTA, )

)

Petitioner, )

)

vs. ) Case No. 01-1991

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

On August 1, 2001, a formal administrative hearing in this

case was held in Tallahassee, Florida, before William F.

Quattlebaum, Administrative Law Judge, Division of

Administrative Hearings.

APPEARANCES

For Petitioner : R. Bruce McKibben, Jr. Esquire

R. Bruce McKibben , P.A.

1301 Miccosukee Road

Post Office Box 1798

Tallahassee, FL 32308

For Respondent : Richard Patterson, Esquire

Michael Mathis, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Suite 3431

Tallahassee, FL 32308-5403

STATEMENT OF THE ISSUE

The issue in the case is whether the Petitioner’s

application for renewal of nursing home licensure should be

approved.

PRELIMINARY STATEMENT

By Notice of Intent dated April 6, 2001, the Agency for

Health Care Administration (AHCA) informed Life Care Center of

Sarasota (Petitioner) that its request for renewal of nursing

home licensure would be denied. As grounds for the proposed

denial, AHCA cited the Petitioner’s failure to provide a “Leased

Nursing Home Surety Bond” pursuant to Section 400.179(5)(d),

Florida Statutes.

By Petition for Formal Administrative Hearing dated

April 18, 2001, the Petitioner challenged the denial. AHCA

forwarded the Petition to the Division of Administrative

Hearings, which scheduled the proceeding.

At the hearing, the Petitioner presented the testimony of

three witnesses and had Exhibits Numbered 1-18 admitted into

evidence. AHCA presented the testimony of three witnesses and

had Exhibits Numbered 1-6 admitted into evidence.

A Transcript of the hearing was filed on August 13, 2001.

Both parties filed Proposed Recommended Orders that were

considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner is a licensed nursing home facility

located at 8104 North Tuttle Avenue, Sarasota, Florida.

2. AHCA is the state agency charged with responsibility

for licensure and regulation of nursing home facilities in

Florida.

3. By application dated January 30, 2001, the Petitioner

applied for renewal of the license for Life Care Center of

Sarasota. According to the application, Life Care Center of

Sarasota is a leased facility.

4. Although the cover letter accompanying the application

indicates that a surety bond was enclosed, the Petitioner did

not include a surety bond.

5. Florida law requires that an applicant for licensure of

a nursing home operating in a leased facility must meet a

bonding requirement. The law provides that the requirement may

be met through other arrangements acceptable to AHCA.

6. Currently, AHCA is requiring that operators of leased

facilities must comply with the bond requirement.

7. In an attempt to comply with the bond requirement, the

Petitioner submitted an “Unconditional Guarantee of Payment”

executed by the owner of the Petitioner’s parent company, Life

Care Centers of America, Inc.

8. By Notice of Intent dated April 6, 2001, AHCA informed

the Petitioner that the licensure application would be denied.

As grounds for the denial, the notice states that the denial is

based on the failure to provide a “Leased Nursing Home Surety

Bond for 30 months of coverage” pursuant to Section

400.179(5)(d) 3., Florida Statutes.

9. The evidence supports the cited grounds for denial of

the application.

10. There is no evidence that the Petitioner is unable to

obtain the surety bond.

11. The Petitioner asserts that AHCA accepts Unconditional

Guarantees of Payment from operators of nursing home facilities

that are owned by the guarantor, and that such guarantees should

be accepted from operators of nursing home facilities that are

leased by the guarantor. The evidence fails to support the

assertion.

12. There is no credible evidence that AHCA has accepted

Unconditional Guarantees of Payment from operators or nursing

home facilities that are leased from a third party by the

operator.

13. The Petitioner asserts that some leases are actually

financing mechanisms and that such leaseholders should be

permitted to supply Unconditional Guarantees of Payment in lieu

of complying with the bond requirement. The evidence in this

case fails to establish that an Unconditional Guarantee of

Payment should be accepted in lieu of complying with the bond

requirement.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. Section 120.57(1), Florida Statutes.

15. The Petitioner has the burden of establishing

entitlement to the licensure sought. Florida Department of

Transportation v. J.W.C. Co., Inc. , 396 So. 2d 778 (Fla. 1st DCA

1981).

16. Section 400.179, Florida Statutes, governs the sale

and transfer of ownership of a nursing facility, and the

liability of the owner for overpayments and underpayments by the

Medicaid program. The intent of the Legislature in enacting the

statute is “to protect the rights of nursing home residents and

the security of public funds when a nursing home is sold or the

ownership is transferred.” Section 400.179(1), Florida

Statutes.

17. Section 400.179(5), Florida Statutes, governs the

determination of liability for Medicaid program overpayments and

underpayments that are revealed during a change of ownership.

Section 400.179(5)(d), Florida Statutes, addresses the issue of

ownership transfer involving a facility leased by the

transferor, and provides as follows:

Where the transfer involves a facility

that has been leased by the transferor:

1. The transferee shall, as a condition

to being issued a license by the agency,

acquire, maintain, and provide proof to the

agency of a bond with a term of 30 months,

renewable annually, in an amount not less

than the total of 3 months Medicaid payments

to the facility computed on the basis of the

preceding 12-month average Medicaid payments

to the facility.

2. The leasehold operator may meet the

bond requirement through other arrangements

acceptable to the department.

3. All existing nursing facility

licensees, operating the facility as a

leasehold, shall acquire, maintain, and

provide proof to the agency of the 30-month

bond required in subparagraph 1., above, on

and after July 1, 1993, for each license

renewal.

4. It shall be the responsibility of all

nursing facility operators, operating the

facility as a leasehold, to renew the 30-

month bond and to provide proof of such

renewal to the agency annually at the time

of application for license renewal.

5. Any failure of the nursing facility

operator to acquire, maintain, renew

annually, or provide proof to the agency

shall be grounds for the agency to deny,

cancel, revoke, or suspend the facility

license to operate such facility and to take

any further action, including, but not

limited to, enjoining the facility,

asserting a moratorium, or applying for a

receiver, deemed necessary to ensure

compliance with this section and to

safeguard and protect the health, safety,

and welfare of the facility's residents.

18. In this case, the Petitioner has failed to meet the

requirement set forth in Section 400.179(5)(d) 3., Florida

Statutes.

19. The Petitioner asserts that the agency should accept

an Unconditional Guarantee of Payment under the provisions of

Section 400.179(5)(d) 2., Florida Statutes (“[t ]he leasehold

operator may meet the bond requirement through other

arrangements acceptable to the department”).

20. The cited subsection does not require AHCA to accept

an Unconditional Guarantee of Payment in lieu of the required

bond. There is no evidence that AHCA has permitted use of an

Unconditional Guarantee of Payment in lieu of the required bond

for leased facilities.

21. The Petitioner is attempting to extend the apparent

use of Unconditional Guarantees of Payment from facilities owned

by the operators to facilities leased by the operators. The

Respondent asserts that owned facilities provide more security

than leased facilities, because the owner has equity in the

property and is less likely to abandon a nursing home than would

the operator of a leased facility. The Petitioner responds by

suggesting that in cases where an owned facility is subject to a

mortgage for 100 percent of the property’s cost, the owner has

no equity and an Unconditional Guarantee of Payment provides

little actual security to the residents of the facility or to

the State. Assuming the Petitioner’s position is correct, it

suggests that AHCA should perhaps reconsider the use of

Unconditional Guarantees of Payment for owned facilities. It

does not, given the intent of the statute at issue in this

proceeding, lead to the conclusion that the less secure

guarantee should be available to all nursing home operators

regardless of ownership.

22. The Petitioner asserts that in this specific case, the

Unconditional Guarantee of Payment provides the same level of

security to the facility’s residents and to the State of Florida

as would a lease bond. There was no evidence produced at

hearing to permit a factual determination in this case that the

guarantor would be capable of complying with the guarantee

should such action be required.

23. In order to obtain a bond from a surety company, the

surety would review the financial status of the entity for which

the bond is issued and require some form of collateral or

security for the bond amount. In order for an Unconditional

Guarantee of Payment to provide the same level of security to

the state and a facility’s residents as would a surety bond, an

independent evaluation of the financial condition of the

guarantor similar to that which would be performed by a surety

should be performed. There was no evidence presented in this

case to permit such an evaluation. Absent such supporting

documentation, it is not possible to conclude based on the

evidence presented at the hearing, that the guarantor is

financially capable of meeting the obligation should such be

necessary.

24. Further, although the Petitioner asserts that due to

litigation related to nursing home care the cost of lease bonds

has become onerous , the cost of a lease bond is a reimbursable

cost for purposes of the Medicaid program. In other words, the

cost of the bond is eventually borne by the State of Florida.

While permitting use of a different mechanism than a surety bond

might result in reduced costs to the State, the statute clearly

indicates that a surety bond is preferred and provides AHCA with

discretion as to whether an alternate mechanism is acceptable.

The evidence fails to establish that AHCA’s decision in this

case to reject substitution of the Unconditional Guarantee of

Payment for the required surety bond is an unreasonable

application of the agency’s discretion.

25. The Petitioner asserts that a nursing home operator

seeking licensure or re-licensure could obtain a lease bond for

purposes of meeting the applicable requirement, and then cancel

the bond after completing the licensure process. There is no

evidence to suggest that the State’s nursing home operators,

including the Petitioner, would act in such bad faith,

especially where, through reimbursement, the cost of the bond is

ultimately assumed by the State .

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is recommended that the Agency for Health Care

Administration enter a Final Order denying the application for

licensure of Life Care Center of Sarasota based on the

Petitioner’s failure to provide a lease bond as required by

statute.

DONE AND ENTERED this 28th day of September, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488- 9675 SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of September, 2001.

COPIES FURNISHED :

R. Bruce McKibben, Jr., Esquire

R. Bruce McKibben , P.A.

1301 Miccosukee Road

Post Office Box 1798

Tallahassee, Florida 32308

Richard A. Patterson, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Building Three, Suite 3431

Tallahassee, Florida 32308-5403

William Roberts, Acting General Counsel

Agency for Health Care Administration

2727 Mahan Drive

Building Three, Suite 3431

Tallahassee, Florida 32308-5403

Diane Grubbs, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive

Building Three, Suite 3431

Tallahassee, Florida 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.