16-001696CON Pruitthealth-Alachua County, Llc And Alachua County Hrc, Llc vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, September 16, 2016.

Summary: On balance, Alachua HRC, LLC, best met the statutory review criteria, and its application for a certificate of need should be approved.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PRUITTHEALTH - ALACHUA COUNTY,

LLC ,

Petitioner ,

vs. Case No. 16 - 1696CON

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent ,

and

ALACHUA COUNTY HRC, LLC,

Intervenor .

_______________________________/

RECOMMENDED ORDER

Pursuant to notice to both parties, a final hearing in this

matter was held in Tallahassee, Florida , on June 8 through 10

and 13 through 15, 2016, before the Honorable R. Bruce McKibben,

Administrative Law Judge with the Division of Administrative

Hearings (ÐDOAHÑ) .

APPEARANCES

For Petitioner , PruittHealth - Alachua County, LLC :

Jay Adams, Esquire

Broad and Cassel

Post Office Box 11300

Tallahassee, Florida 32302

For Respondent , Agency f or Health Care Administration :

Kevin Michael Marker, Esquire

Richard Joseph Saliba, Esquire

Agency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

For Intervenor , Alachua County HRC, LLC :

Seann M. Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

Suite 750

215 South Monroe Street

Tallahassee, Florida 32301

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

Suite 3600

303 P eachtree Street Northeast

Atlanta, Georgia 30308

STATEMENT OF THE ISSUE

This proceeding involves Certificate of Need (ÐCONÑ)

Application No. 10400 filed by Petitioner, PruittHealth - Alachua

County, LLC (Ð PruittHealth Ñ) , and C ON Application No.

10397 filed by A lachua County HRC, LLC ( ÐAlachua HRC Ñ). The

applica nt s each seek to establish a new community nursing home

in District 3/ s ubdistrict 3 - 2, Alachua County, Florida.

PruittHealth is seeking a 94 - bed nursing home, consistent with

the projected bed need for that subdistrict; Alachua HRC see ks

to ag gregate nine additional beds from s ubdistrict 3 - 3 for a

total of 103 beds. The nature of the controversy is whether, on

balance, PruittHealth Ós or Alachua HRC Ós application best

satisfies the applicable cr iteria for approval.

PRELIMINARY STATEMENT

On October 2, 2015, Respondent, Agency for Health Care

Administration (the ÐAgencyÑ or ÐAHCAÑ), published a need

for 94 community nursing home beds in subdistrict 3 - 2 and a need

for nine community nursing home bed s in subdistrict 3 - 3.

PruittHealth and Alachua HRC filed their CON applications, which

were co - batched for review by the Agency. On February 22, 2016,

the Agency announced its preliminary approval of Alachua HRC Ós

application and the denial of PruittHeal th Ós application.

PruittHealth timely filed a Petition for Formal Administrative

Hearing to challenge the AgencyÓs decision. Alachua HRC timely

filed a c ross - p etition in support of the AgencyÓs decision. The

p etitions we re consolidated into the instant proceeding.

The final hearing in this matter was held on the dates set

forth above. Each party was represented by counsel as noted.

At the final hearing, PruittHealth called eight witnesses:

Patti Greenber g , accepted as an expert in health care research

and resources, health planning, and health care finance ; Aneel

Gill, director of health and financial planning, accepted as an

expert in health planning; Jodi Barrows Felix, community

relations and market survey distribution; Dr. Dan Wyman, chief

medical officer, accepted as an expert in medicine and quality

of care; Steven Ward, director of external reporting, accepted

as an expert in health care finance and financial reporting; Ali

Momin, director of acquisition analytics, accepted as an expert

in health care finance and pro forma and operating financials;

Steven Jones, chief executive officer, accepted as an expert in

nursing home operations and administration; and Tracy Adams,

vice president of therapy services, accepted as an expert in

geriatric specia l and rehabilitative therapy services in skilled

nursing facilities. PruittHealth Ós E xhibits 1 , 2, 4 through 12,

14 through 19, 22 through 26, 28, 32 through 35, 37 through 41,

45 , 46, 48, 54 through 56, 58 , and Rebuttal Exhibit 1 were

admitted into evide nce. The Agency called one witness, Maricel

Fitch, accepted as an expert in certificate of need and health

care planning. Alachua HRC called eleven witnesses: Mark

Richardson, accepted as an expert in health p lanning; William

Tsukalas, senior vice presi dent of regional corporate banking

for BB&T, accepted as an expert in banking; Jeff Cleveland,

president of Clear Choice Health Care, LLC (ÐClear ChoiceÑ) ;

Jason Canlas, regional vice president, accepted as an expert in

nursing home administration; Dr. Jo se Medina - Sanchez, accepted

as an expert in psychiatry ; Debbie Kennedy, executive vice

president and co - owner of Clear Choice, accepted as an expert in

health administration with emphasis in risk management, project

development, and finance; Orrin Whitten, accepted as an expert

in physical therapy; Taylor Huston, regional rehabilitation

director, accepted as an expert in rehabilitation management,

speech and language pathology, and audiolo g y; Dennis Robinson,

executive vice president of the Douglas Company, accepted as an

expert in construction management; Geoff Fraser, senior vice

president and co - owner of Clear Choice, accepted as an expert in

nursing home administration; and Thomas Davidson, president of

Davidson Consulting Company, accepted as an expert in health

care finance. Alachua HRC Ós exhibits 1 through 17, 20 through

24, 28 through 35, 45, 48, 49, and 55 through 62 were admitted

into evidence.

By rule, the parties are given 10 days from the date the

final hearing transcript is filed at DOAH to su bmit proposed

recommended orders (PROs). However, the parties requested and

were granted 20 days from the transcript filing to submit their

PROs. The T ranscript was filed on July 25, 2016 ; each party

tim ely submitted a PRO and each were considered in the

preparation of this Recommended Order. Just prior to filing

their PROs, the parties jointly requested that the page limit be

extended from 40 pages to 50 pages. Although the undersigned

was not able to rule on the motion prior to the PRO filing date,

th e request was granted after the fact. The partiesÓ PROs were

accepted as filed.

FINDINGS OF FACT

(Facts 1 through 6 are as stipulated by the parties .)

1 . O n October 2, 201 5 , the Agency published a need for

94 additional community nursing home beds in N ursing Home

Subdistrict 3 - 2, which consists of Alachua County. In that same

publication, the Agency published a need for nine additional

community nursing home beds in s ubdistrict 3 - 3, which consists

of Putnam County. See Florida Administrative Register , Vol. 41,

No. 192 (Oct. 2, 2015); Fla. Admin. Code R . 59C - 2.200(3)( f)5.

Putnam County is adjacent to Alachua County.

2 . In response to the October 2, 2015 , fixed need pool

announcement, Alachua HRC filed CON Application N o . 10397 and

PruittHealth filed C ON Application No. 10400.

3 . Alachua HRC Ós and PruittHealth Ós applications were co -

batched and comparatively reviewed.

4 . On February 19, 2016, the Agency preliminarily approved

Alachua HRC Ós CON Application No. 10397 and preliminarily denied

PruittHea lth Ós CON Application No. 10400. The Agency published

official notice of its decision on February 22, 2016, in the

Florida Administrative Register , Vol. 42, No. 35.

5 . On March 7, 2016, PruittHealth timely filed a petition

for formal administrative heari ng to contest the AgencyÓs

preliminary approval of Alachua HRC Ós CON a pplication.

6 . On March 18, 2016, Alachua HRC timely filed a cross -

petition supporting the AgencyÓs preliminary decision to approve

its CON a pplication and to preliminarily deny PruittH ealth Ós CON

a pplication.

(The following findings of fact are based o n the

evidence presented at final hearing , both oral

testimony and documentary in nature.)

The Parties

Alachua County HRC, LLC

7 . Alachua HRC was established to apply for a CON in

Ala chua County . Alachua HRC will be supported by its management

company and operator, Clear Choice . Alachua HRC was formed by

experienced nursing home administrators and health planning

professionals with significant experience in the establishment,

constru ction, and operation of nursing homes .

8 . Alachua HRC is primarily owned by Samuel B. Kellett, an

owner of several nursing homes in Florida which contract with

Clear Choice for management. Through his companies, including

SBK Capital, Mr. Kellett has a long track record of successful

nursing home ownership and operation. Mr. Kellett, through

predecessor and subsidiary companies, originally obtained

certificates of need for most of the nursing homes now operated

by Clear Choice, primarily in c entral Fl orida. Mr. Kellet t has

never failed to build and operate a nursing home after receiving

a CON.

9 . Mr. Kellett has continuously invested in renovations

and maintenance of his nursing homes. Since 2013, Mr. Kellett

has invested millions of dollars in ren ovations and expansion

construction at his Florida nursing homes. Several more

facilities are planned for similar renovations in the near

future.

10 . The expansions typically include the addition of

upscale amenity space, an increase in the number of pr ivate

rooms, outdoor living spaces, and significantly enhanced gym and

rehabilitation areas. These renovations have attracted higher

numbers of short - term rehabilitation patients, while continuing

to allow Clear Choice to offer long - term care, primarily t o

Medicaid nursing home residents , in Mr. Kellett's facilities.

PruittHealth - Alachua County, LLC

11. PruittHealth is likewise a single purpose entity

formed for the purpose of pursuing a CON to operate a skilled

community nursing facility in Alachua Count y. PruittHealth is

affiliated with PruittHealth , Inc . That company was founded in

1969 as t he Toccoa Nursing Center in Toc coa, Georgia.

PruittHealth , Inc. provides administrative related services to

all of its affiliated healthcare providers in Florida, Georgia,

North Carolina, and South Carolina. PruittHealth (the

applicant) would benefit from those same services. The parent

company of PruittHealth , Inc. is United Health Services, Inc.,

which includes in its structure 94 skilled nursing and

rehabilita tion centers, four assisted living facilities, one

independent living facility, 29 hospice agencies, 19 home health

agencies, one adult day care center, six pharmacies, and several

other health care related businesses.

12 . PruittHealth , Inc. is a family - owned health care

provider. It is the 11 th largest provider of skilled nursing

services in the United States. It car es for about

24,000 nursing home residents and has about 16,000 employees,

referred to as Ðpartners . Ñ Because PruittHealth , Inc. is

fami ly - owned, it does not have the pressures (or, conversely,

the oversight) associated with reporting to shareholders or

meeting outside expectations. Among the skilled nursing

facilities operated by PruittHealth , Inc. are five facilities

dedicated to caring for war veterans, a facility dedicated to

caring for the medically underserved, and a facility that serves

the developmentally - disabled ch ildren population.

13 . PruittHealth , Inc. 's corporate philosophy centers

around its continuum of care by which one provider that i s

really good at providing services across a multitude of service

lines can do a better job than a lot of different providers that

have to transition the same pati ent across the service line(s).

PruittHealth , Inc. currently owns and operate s one nursing home

in Florida, PruittHealth Î Santa Rosa , and has received

certificates of need to construct three more.

Agency for Health Care Administration

14. AHCA is the state agency responsible for, inter alia,

regulating the CON program and monit oring CON approvals. As

recognized by AHCA, both the applicants are more than able to

successfully and appropriately operate their project if

approved.

The Proposals

Alachua HRC / Clear Choice

15 . Alachua HRC proposes to build a 103 - bed nursing

facility to be located in Alachua County on the eastern side of

Gainesville. The facility would meet the need of subdistrict

3 - 2 (94 beds in Alachua county) and the need of subdistrict

3 - 3 (9 beds in Putnam county). Subdistricts 3 - 2 and 3 - 3 are

contiguous, and Alachua HRC proposes to build the proje ct in

s ubdistrict 3 - 2 , as close to subdistrict 3 - 3 as practicable .

16 . Alachua HRC's proposed site is reasonably located to

provide services to both Alachua County and Putnam County. The

proposed site is on Highway 20, which is the main road between

Gainesville and Palatka , the major city in eastern Putnam

County. The site was chosen to promote ease of access to both

Alachua County and Putnam County residents by auto and via bus

route.

17 . In Alachua and Putnam c ounties , existing nursing homes

are clustered in w estern Alachua County around Gainesville, and

in e astern Putnam County around Palatka, a significant distance

apart . There are currently no nursing homes located between

downtown Gainesville and Palatka.

18 . A lachua HRC's skilled nursing facility will be located

in this geographic gap and will meet the needs of nearby

populations. A large over - age - sixty - five population resides on

the western side of Putnam County adjacent to Alachua County.

Some therapy patients from Putnam County are already receiving

care at hospitals in Gainesville. Alachua HRC's facility will

provide care to patients in Alachua County , as well as patients

on the western side of Putnam County.

19 . R egardless of the ease of access to the proposed site,

Alachua HRC proposes to provide transportation for residents and

families who are not able to reach the facili ty on their own.

20 . Alachua HRC is proposing to construct a facility

consisting of 75,641 square feet of new construction with a

construction cost of $12,586,662 and a total project cost of

$19,675,000. The proposal envisions over 55 percent of the

patient days being provided to Medicare residents and 41 percent

of the patient days being provided to Medicaid residents.

Seve nty - four percent of the beds (i.e., 77) will be private,

i.e., single - bed rooms. Alachua HRC proposes to condition its

CON on having a left ventricular assist device program;

providing the Lee Silverman Voice Treatment Loud and Big

programs; having two hy drotherapy pools; providing infusion

therapy services; having an anti - gravity treadmill; obtaining

HUR therapy equipment; having a wellness check program;

performing home assessments, medication reconciliations, and

rehabilitation team assessments, as nece ssary; and

transportation as needed from home to therapy treatment.

21 . Alachua HRC's architectural design focuses on

providing a variety of destinations under one roof so that

patients are encouraged to get out and about, rather than

spending time solely in their rooms. Destinations include a

se cond - floor gym, a number of bistro optio ns, a theater, a

chapel , and attractive outdoor living spaces. Though most of

the rooms are private rooms, even the semi - private rooms have

walls separating the beds. Alac hua HRC also designed its

facility to be a more appropriate setting for hospice care.

PruittHealth

22 . PruittHealth applied for a CON to construct a 94 - bed

nursing home in Alachua County, Florida. The facility would

involve 66,077 square feet at a const ruction cost of

$9,449,739 and a tota l project cost of $15,873,409. Sixty - two

percent of its beds (58 beds) would be in private, single - bed

rooms. PruittHealth proposes to provide 66 percent of its

patient days to Medicaid patients. The proposed Medicai d

projection is slightly above the current Alachua County average.

Twenty - nine percent of its patient days would be for Medicare

patients.

23 . PruittHealth proposes to condition its CON on seeking

Joint Commission accreditation of its facility; implemen ting a

program to reduce hospital readmissions; having a minimum of

62 percent of its beds located in private rooms; participation

in a corporate - wide quality assurance and performance

improvement initiative; implementing a medical records system

with poin t right technology and clinical kiosks throughout the

facility; installation of resident safety features such as

Wanderguard and Call Guard; and implementation of the top five

special amenities and the top five clinical initiatives

identified as needed in the Alachua County market.

Statutory and Rule Review Criteria

Section 408.035(1)(a): The need for the

health care facilities and health services

being proposed.

Rule 59C - 1.030(2)(a) : The need that the

population to be served . . . a nd the extent

to whi ch all residents of the district, and

in particular . . . the elderly, are likely

to have access to those services.

24 . There is no argument that the fixed need pool

established a need for additiona l nursing home beds in

District 3, subdistricts 3 - 2 and 3 - 3. PruittHealth seeks to

satisfy the need in subdistrict 3 - 2, i.e., 94 beds; Alachua HRC

seeks to address the need in both subdistricts (103 beds).

25 . Alachua HRC relied on its management companyÓs

experience and on letters from the proposed locality to identify

specific needs in the area.

26 . Alachua HRC's application suggests the existence of a

gap in the availability of high intensity rehabilitative

services and equipment in Alachua County. Because hospitals are

now ince ntivized to discharge patie nts Ðquicker and sicker,Ñ a

majority of nursing home patients discharged from hospitals are

patients that require robust rehabilitative care. As a result,

nursing homes are now required to provide a stronger and broader

portfolio of services to maximize t heir patients' potential.

27 . PruittHealth conducted a survey and met with local

citizens to identify what it considered the most needed design

features, special operational initiatives, clinical services ,

and special amenities that formed the basis of w hat would be

offered at its proposed Alachua County nursing home. The top

bed and program mix factors it identified were offering a high

percentage of private room s, providing Medicare and short - term

rehab ilitation services, and providing Medicaid service s. The

top five special operational initiatives that were identified

were offering a h igh percentage of private rooms; implementing

programs to reduce hospital readmissions; provi ding electronic

medical records; possessi ng resident safety technologies; an d

maintaining a high ratio of total nursing hours per patient day.

The top clinical programs identified as needed were providing

me ntal health/behavioral services; diabetes care ; medication

management; hospice care; and HIV/AIDs care . Finally, the top

sp ecial amenities that were identified as needed were providing

specialized car e staff; possessing state - of - the - art

rehab ilitation suites and a therapy pool ; and offering custom

meal planning and multip le dining options. The survey also had

a specific quest ion in regard to access issues by pay o r source ;

it was observed that that 60 percent of the R espondent s believed

that s ubdistrict 3 Î 2 residents currently have access issues for

Medicaid services. No other competent or persuasive evidence

was presented to substantiate that survey finding.

28 . Neither of the methods utilized by the parties w as

particularly helpful in determining whether there was a specific

need for one proposal over the other. Alachua HRC supplied

support letters from past users or perso ns knowledgeable about

its provision of services. Not surprisingly, the letters

included glowing reports about Clear Choice. PruittHealth , on

the other hand, did some informal surveys of the public in

general, including some persons generally associated with the

provision of health care services. It also conducted a Ðmeet

and greetÑ session where informal conversations about long - term

care in general were conducted. Again, it is not surprising

that the people who attended the free food and drink session s

were supportive of PruittHealth . Neither of the Ðneed

determinationsÑ had a high degree of sophistication or

statistical validity. Nonetheless, the findings by both parties

were considered in the decision rendered herein.

29 . The conclusion that can b e drawn from the information

provided by the parties is that there is a desire for certain

services or amenities in the service area, including: 1) A high

percentage of private rooms withi n the facility; 2) Short - term,

robust rehabilitative services; 3) A high ratio of nurse hours

per patient day; 4) State of the art rehabilitation suites,

including therapy pools; and 5) Provision of service to persons

whose care is paid by Medicaid.

30 . Each of the applicants, to some extent, proposed to

meet those desir es expressed within the community. Both propose

a high percentage of private rooms, although Alachua HRC has

more private rooms than PruittHealth (77 to 62, respectively) .

Both project t he provision of intensive short - term

rehabilitation care. Again, Al achua HRC has a larger focus in

this area than does PruittHealth . Each of the applicants

proposes a ratio of nurse hours per patient day that is

admirable. Both applicants include rehabilitation suites,

though the equipment proposed by Alachua HRC seems more state of

the art than does PruittHealth Ós equipment. And while both

propose therapy pools, Alachua HRC will have two pools (in

recognition of the fact that pools can often be soiled by human

accident or be out of service due to maintenance. Having t wo

pools provides assurance that there will not be a loss of that

service when something such as that occurs ) .

31 . Both applicants propose to serve Medicaid res idents.

PruittHealth projects that 66 percent of its patients will be

Medicaid eligible, clos e ly matching the existing Medicaid

percentage in the service area (64 percent ). Alachua HRC

proposes to serve a lower percentage of Medicaid residents du e

to its primary focus on short - term rehabilitative care, i.e.,

those with a payor source of Medicare. The Agency no longer

accepts C onditions in a CON application relating to Medicaid, so

the proposals are not as strictly monitored as they once were.

Section 408.035(1)(b): The availability,

quality of care, accessibility, and extent

of utilization of exi sting health care

facilities and health services in the

service district of the applicant.

Rule 59C - 1.030(2)(d): When determining

accessibility, consideration of service to

the medically underserved, Medicare,

Medicaid and the indigent, and Ð the extent

t o which the applicant offers a range of

means by which a patient will have access to

its services Ñ .

32 . There is no real dispute that either of the applicants

can provide exception al care in the facilities they propose.

Though they each raised questions of whose facilities had the

most awards or recognitions, which had experienced bad surveys,

and that kind of thing, the difference s were insignificant.

Both can provide a high quality of care to residents.

33 . The range of services proposed by each appl icant is

similar, as they are in most skilled nursing facilities. Some

facilities concentrate more on one area, some on another, but

all the services generally exist. The applicants here are no

exception.

34 . Other providers in the area will compete for residents

in all payor classes and all levels of care. Each of the

applicants will likely realize its projected payor mix as it

directs its marketing efforts accordingly.

Section 408.035(1)(c): The ability of the

applicant to provide quality of care and the

applicant's record of providing quality of

care.

3 5 . As noted in the previous section, both applicants are

capable of and expected to provide quality care to their

residents. Some of the support for this was set forth in the

CON applications and vi a testimony at final hearing. Some

examples follow.

36 . One measure of the ability to provide quality of care

is the staffing being proposed. It is generally recognized that

the more nursing hours of care that are provided per patient

day, the better th e care is likely to be. PruittHealth proposes

to provide 1.72 hours of nursing care and Alachua HRC is

proposing 1.70 hours per patient , so the difference is

negligible . The fact that Alachua HRC proposes a higher level

of services and should be expected to have higher levels of

nursing care gives PruittHealth the advantage in this one area.

There are some differences in other areas of staffing as well :

Alachua HRC has considerably more therapy staff, 30.5 to

9.3 full - time equivalent employees ( Ð FTEs Ñ ) , which is to be

expected based on the applicantsÓ different payor mix

projections. Alachua HRC also ha s more administrative staff,

19 to 6.4, but some of that may be attributable to the fact that

some of the FTEs in PruittHealthÓs nursing staff could also be

deemed administrative. The total nursing staff, including RNs,

LPNs, and aides, i s 82.5 for Alachua HRC and 72.2 for

PruittHealth. The total FTEs for the applicants is 165 for

Alachua HRC and 113 for PruittHealth.

3 7 . PruittHealth , Inc. 's lone Flo rida facility,

PruittHealth - Santa Rosa, is rated 5 stars by both the Center

for Medicaid and Medicare Services (Ð CMS Ñ) and AHCA. It has

been recommended for the Gold Seal award by AHCA. It has been

awarded the Silver Star by the American Health Care As sociation.

PruittHealth - Santa Rosa's most recent survey, and three of its

past five surv eys, have been deficiency free. Its administrator

was named Administrator of the Year for Florida in 2013. Its

hospital readmission rate is consistently lower that the state

and national average. Finally, it wa s recently named as one of

the Ð Best Nursing Homes in the U.S. Ñ by U.S. News & World

Report. This facility will be the template for the PruittHealth

project in Alachua County.

3 8 . The PruittHealth , Inc. co nsolidated group of companies

have a well - developed corporate headquarter s infrastructure that

provides regional oversight and consulting and management

systems to monitor, correct and improve quality of care

throughout the chain. The company has been gro wing steadily

over the years and has developed effective programs and human

resourc es to ensure quality of care.

3 9 . PruittHealth , Inc. 's efforts in other facilities have

resulted in it delivering a high quality of care. This is

demonstrated by PruittH ealth , Inc. 's pursuit and receipt of

industry - quality awards, its licensure record , and its survey

history .

40 . As part of its management practices for facilities,

PruittHealth , Inc. has several well - defined and effective

programs to promote quality; sign ificant evidence and te stimony

was provided as to its Ð Go for the Gold ,Ñ ÐCommitted to Caring

Campaign , Ñ and ÐQuality First PledgeÑ initiatives and company -

wide goals.

41 . The PruittHealth , Inc. chain does regularly pursue

quality designatio ns through r ecognized industry q uality a ward

programs or designations , such as :

(1) The American Health Care Association's n ational

q uality award program is one such program to which PruittHealth ,

Inc. has made a firm com mitment. PruittHealth , Inc. has been

able t o achieve the Silver Award for its facility in Santa Rosa

County, Florida. For its other facilities, it has obtained nine

silver awards and 65 bronze awards.

(2) The PruittHealth , Inc. companies have ach ieved

Joint Commission a ccreditat ion at 12 of thei r facilities.

PruittHealth has offered as a C ondition on its CON a requirement

that the proposed facility shall achieve such designation.

(3) Lastly, the PruittHealth , Inc. facilities have

obtained the distinction by the U.S. News & World Report by

hav ing 2 2 of its facilities designated ÐBest Nursing Homes in

the U.S.Ñ

42 . PruittHealth , Inc. has an excellent regulatory survey

history. It has a significant number of its facilities which

have been deficiency free in the last four years. While

PruittH ealth , Inc. has had some facilities in the p ast which

have received I and J - tags , i.e., those which indicate immediate

jeopardy, it was demonstrated that (1) for several of the

facilities, those tags were incurred before PruittHealth , Inc.

owned the facili ties, and (2) in all instances, it responded

promptly and corrected the matters or events which generated

such tags.

4 3 . Clear Choice operates three facilities that have

received the Governor's Gold Seal designation. Only five

percent of all nursing hom es obtain a Gold Seal designation.

A fourth Clear Choice facility was eligible for Gold Seal status

and was making its application complete at the time of final

hearing.

44 . Clear Choice pro vides higher quality care than

PruittHealth , Inc. according to CMS's star rating system,

especially in the area of staffing. On a scale of 1 to 5, Clear

Choice offers better ratings than PruittHealth , Inc. for health

inspection rating (3.2 to 3.1), staffing rating (4.4 to 2.6) and

RN staffing rating (4.3 to 2.9). O n average Clear Choice rates

at 3.8 stars and PruittHealth , Inc. at 3.4. Clear Choice has a

higher percentage of five - star facilities than PruittHealth ,

Inc. Conversely, PruittHealth , Inc. has a higher percentage of

one - star and two - star facilities than Clear Choice .

4 5 . Clear Choice has a track record of providing state - of -

the - art rehabilitation equipment, gyms , and pools that are not

provided by other nursing homes. As noted above, the

application contains strong documentation of the rehabilitative

s ervices and equipm ent Alachua HRC will provide.

4 6 . Specifically, Alachua HRC conditioned its application

on the provision of an array of rehabil itative services and

equipment. It also conditioned its application on provision of

clinical staff to support such services and on providing at

least $150 ,000 of charity care annually , as in common in its

facilities .

47 . Clear Choice offers therapy programs in pulmonary

rehabilitation, physical therapy and respiratory therapy. It

offers a stroke program with ni ne certified specialists and

pla ns to certify more specialists. Clear Choice offers LVAD for

cardiac care; mist therapy for wound care ; Lee Silverman Voice

treatment focused on the Parkinson's population ; a program with

certified specialists in lymphedema treatment ; VitalStim to

st rengthen muscles for swallowing; aquatic therapy; and FEES

therapy to assess swallowing capability. Clear Choice expends

substantial funds providing continuing education and training to

its therapy staff and certified specialist s for facilities it

manages . That will include the project at issue here for

Alachua HRC .

48 . Alachua HRC proposes an array of state - of - the - art

rehabilitati on equipment such as wheelchair - accessible HUR

equipment for building s trength; two therapy pool s by Hydroworx;

an AlterG Anti - Gravity Treadmill which allows patients to

exercise while only bearing a portion of their body weight

in stead of their full body weight; a portab le BioSway for

balance training; a wheelchair accessible Kin esis pulley system

f or exercise; NuStep and SCIFIT systems and an Omnicycle for

cardiac rehabilitation; and E - Stim and VitalStim for swallowing

treatment.

49 . Alachua HRC plans to offer all of its therapy services

and its equipm ent to both long - term and short - t erm patients.

50 . Because it offers several options and a fresh Bistro -

style dining approach, Clear Choice facilities spend more per

patient on food than the average nu rsing home.

51 . Clear Choice facilities implement robust quality

assurance programs such as welcome meetings to go o ver

medications and therapies, Care P lan meetings, AdvaCast program,

Team TSI , and medication reconciliation. During Care Plan

meetings, specialist physicians, such as Dr. Medina - Sanchez,

collaborate with facility staff regarding the resul ts of their

patient visits. They also discuss outcomes, prognoses, goals ,

and other medical issues, to assure that patients, families and

physicians all understand the same expectations after discharge.

These Care Plan meetings occur for both short - term and long - term

care patients.

52 . Clear Choice has also been selected as a nursing home

partner to hospitals paid under a bundled system. Clear Choice

was selected for the bundled programs based on its quality

measures and readm ission rates.

5 3 . During quality surveys, PruittHealth , Inc. has

received 50 J and K - tags and 36 G - tags across 19 facilities,

or roughly 20 percent of PruittHealth , Inc. facilities. O f

20 PruittHealth , Inc. facilities , 17 have received I - tags and

J - tags under PruittHealth , Inc. ' s watch.

5 4 . Since its inception nine years ago, only one Clear

Choice facility has ever received an immediate jeopardy tag, and

it was from a single incident and survey.

5 5 . There was considerable testimony at final hearing

concerning readmission rates, i.e., the external benchmark

utilized by CMS to measure the number of hospital - discharged

patients admi tted to a skilled nursing facility who return to a

hospital within 30 days. CMS has developed sophisticated

statistical techniques to adjust raw data ( observed rates) for

the acuity of the patients seen at different facilities and

management styles (adjusted rates). Unfortunately, CMS has not

disclosed exactly how it makes the adjustments, so it is

virtually impossible to make comparisons between differ ent

providers.

5 6 . In the present case, PruittHealth provided credible

evidence that its readmission rates are measurably better than

Clear ChoiceÓs re admission rates for existing facilities . This

could be, in part, due to Clear ChoiceÓs patient mix wh ich

i ncludes considerably more short - term intensive rehabilitation

residents.

5 7 . Clear Choice conducts a number of activities to avoid

readmissions. Clear Choice's interdisciplinary team reviews all

admissions and discharges within the 30 - day readmiss ion time

slot. Clear Choice partners with the Medicare - contracted group

advising on readmissions, Health Service Advisory Group , and the

Nursing Home Collaborative to track data used to track

readmissions.

58 . Clear Choice has achieved relatively low rea dmission

rates for the medically complex patients it serves. Clear

Choice has concerns about PruittHealthÓs policies on

readmissions to the extent they appear to incentivize holding

patients longer in skilled nursing facilities rather than

releasing them to a hospital for care. Specifically, the

statement by PruittHealthÓs medical expert that Ðp art of our

bonus structure . . . is based on readmission rates,Ñ could lead

to conclusions that patientsÓ needs are being manipulated.

5 9 . However, in general, b oth applicants had reasonable

and seemingly effective plans for keeping their admission rates

at or near the S tate average.

Section 408.035(1)(d); The availability of

resources, including health personnel,

management personnel, and funds for capital

and op erating expenditures, for project

accomplishment and operation.

60 . AHCA determined that both applicants fulfilled this

criterion equally. However, PruittHealth points out that it

provided the audited financial statements of its parent company

even thou gh it was not required. PruittHealth questioned the

commitment of Mr. Kellett to the Alachua HRC project because his

personal or business financial statements were not included with

the application. The totality of the evidence and testimony by

Ms. Kenne dy proves otherwise.

Section 408.035(1)(e): The extent to

which the proposed services will

enhance access to health care for

residents of the service district.

61 . Both applicants will provide services to persons

within the service area who require sk illed nursing care,

whether it is traditional long - term care, subacute care and

rehabilitation, or other kinds of care.

6 2 . Alachua HRC Ós proposed location, east of the existing

cluster of nursing homes in Alachua County, will be in closer

proximity to residents of Putnam County.

Section 408.035(1)(f): The immediate

and long - term financial feasibility of

the proposal.

6 3 . Both of the applicants (through parent companies or

affiliates) are experienced in the business of owning and

operating skilled nu rsing facilities. While the single purpose

entities which filed the CON applications have not independently

financed construction of a facility, they are each related to

companies with vast experience and financial wherewithal.

Notwithstanding, each appl icant raised concerns about the other,

some of which will be discussed herein.

6 4 . PruittHealth , on the Source of Funds form in

Schedule 3 of the CON application, chose section 2 Î Operating

Cash Flows, and Section 4 Î Non Related Party Financing , as its

source of funding for the project . As documentation in support

of its source of funds, PruittHealth provided : (1) a letter

from an institutional lender, Synovus Bank indicating an

interest in financing the project ; (2) a letter from

PruittHealth , Inc. Ós senior v ice p resident of Treasury

Management and Treasurer addressing a $36 m illion working

capital line of credit which, as of the date of the CON

application , had an unused balance of $26,100,000 and had

$19.8 m illion at the time of the hearing ; and (3) a nother letter

of its s enior vice p resident formally committing the funds of

PruittHealth under the c apital line of credit to finance the

equity portion (25 percent ) of the Synovus Bank financing, and

also the internal cash flow and cash on hand of PruittH ealth ,

Inc. as shown on its audited financial statement.

65 . There is some evidence that PruittHealth Ós estimated

land costs and construction costs, and therefore its

amortization and depreciation expenses, are understated.

Further, PruittHealth is in t he midst of a large nursing home

bed expansion, includ ing three CONs approved in the S tate of

Florida : a 77 - bed facility in Bay County; a 97 - bed CON in Clay

County ; and an 86 - bed facility in Leon County. The Bay and Clay

County projects have a commence - c onstruction deadline of

September 2016, but neither project is currently financed. The

Leon County project is scheduled to commence construction within

nine months , but financing, land purchase, permitting , and such

have not yet been accomplished.

6 6 . Th e three facilities wi ll require a total of about

$33 million, with two thirds of that required almost

immediately. Obtaining those loans may be impaired by

PruittHealth Ós need to refinance approximately $150 million in

debt during the next three years. F urther, its debt ratios seem

to exceed the benchmarks set forth in the Dodd - Frank Act,

creating a potential impediment to acquiring additional loans.

6 7 . Although the size and strength of PruittHealth, Inc.

seem sufficient to handle the financial concerns set forth

above, the existence of three pending CONs in Florida create s

some doubt. That those projects are on such short timelines for

construction also indicate s a need for PruittHealth , Inc. to

focus on them without incurring additional obligations.

Long Term Financial Feasibility

6 8. Both applicants, with support from their respective

mentor organizations, will likely realize long - term financial

feasibility in their proposed projects. However, neither of the

applicant sÓ proposals w as without fault.

6 9 . PruittHealth used reasonable methodologies and

assumptions for its project cost, utilization and fill - up rates,

staffing , and pro forma financial statements, i.e. , Schedules 1,

4, 5, 6, 7 , and 8 of the application. Using its actual

operating results at other related facilities is reasonable and

demonstrates a legitimate basis for legitimacy of the

projections.

70 . However, many of the financial projections relied upon

by PruittHealth were derived from unverified information. While

the projections a ppear reasonable from an overview perspective,

there were many items that appeared to be gue s stimates or

plucked from other, perhaps dissimilar types of projects. There

appears to be insufficient nursing staff to cover both the

skilled and long - term patie nts , but the numbers could be

increased as needed (but would require additional cost s). And,

because the salaries for nurses were pulled from a public

website, they may be suspect.

71 . Alachua HRC 's financial schedules were based on Clear

Choice's actual experience at another Clear Choice facility, Sun

Terrace, which is very similar to the Alachua HRC proposal. The

pro forma presumably captured every expense Alachua HRC is

expected to incur and appears reasonable. On the revenue side,

the pro forma is a lso based on actual experience of Clear Choice

facilities.

72 . A projection of 97 - percent occupancy is unusual. But,

d ue to Alachua HRC's high percentage of private rooms, the

projected occupancy of 97 - percent is reasonable and achievable.

Two Clear Ch oice facilities, Melbourne Terrace and Spring Lake,

currently e xperience over 97 - percent occupancy. Both facilities

recently underwent renovations to add the private rooms and

large gyms like the ones planned for the Alachua project.

Additionally, severa l othe r Clear Choice facilities achieved

greater than 95 - percent occupancy, even in faci l ities that do

not yet boast a compliment of private rooms. Clear Choice's

projected occupancy rate is only three percent higher than

PruittHealth 's and is reasonable.

7 3 . Clear Choice projects a total of 165 FTEs to staff the

Alachua HRC project versus only 113.1 FTEs that PruittHealth

projects for its project. Clear Choice Ós staffing projection is

also based on the Sun Terrace facility, which is similar to the

Alac hua HRC proposal. The projected staffing is based on actual

Florida experience and is reasonable.

7 4 . There is little difference between the applicants for

the per diem projection s for the larger pay o r g roups of Medicare

and Medicaid. T he difference in the overall revenue between the

two applicants is primarily a function of Clear Choice 's higher

proportio n of Medicare patients. Its higher expenses than

PruittHealth are due to the higher level of care being offered

to the Medicare/short - term rehabilita tion patients.

7 5 . However, on aggregate, both of the applicants would

like ly achieve positive long - term financial results.

Section 408.035(1)(g): The extent to which

the proposal will foster competition that

promotes quality and cost - effectiveness.

7 6 . Neither applicant currently has a nursing home in

Alachua County. Therefore the approval of either applicant

will, to some extent, increase competition. Both applicants

propose high - quality nursing home programs at competitive costs.

Section 408.035(1 )(i): The applicant's past

and proposed provision of health care

services to Medicaid patients and the

medically indigent.

Rule 59C - 1.030(2)(a) . . . The need that

the population to be served . . . a nd the

extent to which all residents of the

district, and i n particular low income

persons . . . a nd the elderly, are likely to

have access to those services.

7 7 . This criterion no longer holds the weight it once held

in nursing home CON cases. The advent of Medicaid managed care

for nursing home residents changed the dynamic of traditional

Medicaid care, and AHCA no longer views this criterion as vastly

important.

7 8 . Clearly, PruittHealth proposes a higher Medicaid

census (64 percent ) that does Alachua HRC ( 41 percent ) .

However, when including dual eli gible residents (i.e., those

patients who are admitted into the facility as Medicare patients

but would qualify for Medicaid at the end of their qualifying

stay), Alachua HRC Ós percentage of Medicaid residents increases

to about 58 percent . Presumably, em ploying the same stratagem

for PruittHealth would increase its Medicaid census as well.

7 9 . AHCA no longer accepts c onditions on the CON for

provision of a specified percentage of Medicaid care . Unlike

days of yore, applicants are not granted any speci al

consideration on the basis of their Medicaid projections.

80 . PruittHealth points out that it is attempting to be

consistent with the percentage of Medicaid care currently extant

in the service area. It did not provide persuasive evidence

that meeting that percentage was especially significant.

CONCLUSIONS OF LAW

81 . The Division of Administrative Hearings has

jurisdiction over this matter pursuant to sections 120.569,

120.57, and 408.039(5), Florida Statutes (2016) .

8 2 . Each of the applicants has standing to participate in

the proceeding. § 408.039(5)(c) , Fla. Stat.

8 3 . The petitions in this case commenced a de novo

proceeding intended to formulate final agency action.

Fla. Dep't of Transp. v. J.W.C. Co. , 396 So. 2d 778, 786 -

87 (Fla. 1st DCA 1981); § 120.57(1), Fla. Stat. Each applicant

for a CON has the burden of demonstrating that its application

should be approved. Bo ca Raton Artificial Kidney Ctr. v. Dep't

of HRS , 475 So. 2d 250 (Fla. 1st DCA 1985).

8 4 . The award of a CON must be based on a balanced

consideration of all applicable statutory and rule criteria.

Dep't of HRS v. Johnson and Johnson Home Healthcare, Inc. ,

447 So. 2d 361 (Fla. 1st DCA 1984); Balsam v. Dep't of HRS ,

486 So. 2d 1341 (Fla. 1st DCA 1986). The appropriate weight to

be given to each criterion is not fixed, but varies upon the

facts of each case. Collier Med. Ctr., Inc. v. Dep't of HRS ,

462 So. 2d 83, 83 (Fla. 1st DCA 1985).

8 5 . Where, as here, mutually exclusive applications seek a

limited number of beds, the app lications are reviewed on a

comparative and competitive basis to determine which application

is superior to the other(s) based on a balanced consideration of

applicable statutory and rule criteria . Humana, Inc., d/b/a

Cypress C m t y . Hosp . v. Dep Ó t of HRS , et al. , 492 So. 2d

388 (Fla. 4th DCA 1986).

8 6 . Both applicants filed applications that met all of the

criteria for issuance of a CON. Both are good providers that

would be able to develop and operate a high quality nursing home

in Alachua County. Any d eficiency in either application is not

cause to dismiss that application. See 408.039(5)(d), Fla .

Sta t . However, this is a case of comparative review.

8 7 . Considering all the evidence, and upon consideration

of the AgencyÓs review and findings concernin g the applicants

(which have no presumptions of correctness but are based on

considerable knowledge of the subject matter), it is clear that

the application of Alachua HRC best complies with the statutory

and rule requirements.

8 8 . Neither applicantsÓ abi lity to provide quality care is

in question, and neither has negative survey findings which

raise significant concerns about their operations.

89 . Alachua HRC proposes a facility that is more attuned

to the changing world of skilled nursing facilities.

PruittHealthÓs proposal is more of a traditional long - term care

facility, focused on the current level of payor mix in the area.

90 . As for funding required for the projects, either

applicant could likely obtain the funds needed for their

project, but Pru ittHealth, Inc. is stretched a bit thin with its

three pending and rapidly approaching projects. And, there is

some legitimate concern that PruittHealth, Inc.Ós current

financial ratios may impede further loans.

91 . On balance, the application of Alachua HRC should be

approved.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be entered by Respondent ,

Agency for Health Care Administration, approving CON Application

No. 10397 filed by Alach ua County HRC, LLC, for a 103 - bed

skilled nursing facility in Alachua County, AHCA District 3,

s ubdistrict 3 - 2.

D ONE AND ENT ERED this 16 th day of September , 2016, in

Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative H earings

this 16th day of September , 20 16 .

COPIES FURNISHED:

Jay Adams, Esquire

Broad and Cassel

Post Office Box 11300

Tallahassee, Florida 32302

(eServed)

Seann M. Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

Suite 750

215 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

Suite 3600

303 Peachtree Street Northeast

Atlanta, Georgia 30308

(eServed)

Richard Joseph Saliba, Esquire

Agency for Health Care Administration

M ail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32303

(eServed)

Kevin Michael Marker, Esquire

Agency for Health Care Administration

Mail Stop 3

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Frank P. Rainer, Esquire

Broad and Cassel

Suite 400

2 15 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Stuart Williams, Gen eral Co unsel

Agency for Health C are Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPT IONS

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.