18-001275CON Nhi Spb Operations, Llc vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, July 27, 2018.

Summary: Pet. proved good faith delay in commencing construction continued due to same two governmental action/inaction impediments with respect to regulations/permitting that AHCA agreed warranted 1st 60-day CON extension. AHCA should grant another 60-day ext.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NHI SPB OPERATIONS, LLC,

Petitioner,

vs. Case No. 18 - 1275CON

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

_______________________________/

RECOMMENDED ORDER

On May 9, 2018 , Administrative Law Judge Elizabeth W.

McArthur of the Division of Administrative Hearings (DOAH)

conducted a disputed - fact hearing in Tallahassee, Florida .

APPEARANCES

For Petitioner: John F. Gilroy, III, Esquire

John F. Gilroy, III, P. A.

Post Office Box 14227

Tallahassee, Florida 32317

For Respondent: Richard Joseph Saliba, Esquire

Nicole M. Barrera, Esquire

Agency for Health Care Administration

Fo rt Knox Building III, Mail Stop 7

2727 Mahan Drive

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue for determination is whether PetitionerÓs second

request for a 60 - day extension t o the validity period of

cer tificate of need (CON) No. 10412 should be granted or denied.

PRELIMINARY STATEMENT

By letter filed with the Agency for Health Care

Administration (AHCA or Respondent) on January 2 9 , 2018, NHI SPB

Operations, LLC (NHI or Petitioner) , requested a second 60 - day

extension (having previously received one 60 - day extension) to

the validity period of CON No. 10412 , authorizing a 111 - bed

community nursing home in Palm Beach County .

AHCA responded by letter dated February 6, 2018, setting

forth its proposed agen cy action to deny the extension request,

and informing NHI of its right to request a hearing pursuant to

chapter 120, Florida Statutes (2017) , 1/ the Administrative

Procedure Act (APA).

NHI timely requested a disputed - fact administrative hearing .

AHCA tran smitted the case to DOAH and requested the assignment of

an Administrative Law Judge to conduct the proceeding and submit

a recommended order to AHCA.

The final hearing was scheduled for May 9, 2018. At AHCAÓs

request, a video teleconference connection w as made available in

Fort Lauderdale for the convenience of one or more local

witnesses who might be called to testify.

AHCA filed a Motion to Relinquish [Jurisdiction] on

April 12, 2018, to which NHI responded on April 19, 2018 . The

motion was denied b y Order issued April 27, 2018. AHCA filed a

Motion in Limine on April 30, 2018, to which NHI responded on

May 4, 2018 . The motion was denied on the record at the outset

of the hearing. (Tr. at 10 - 12).

At the hearing, Petitioner presented the testimony of three

witnesses: Christopher Peters, an a sset management consultant

who represented the seller s of the sub - lease hold interests in the

property intended for t h e nursing home site ; Gary Dunay, Esqu ire,

real estate counsel to NHI, its parent company, and a related

company for the project at issue; and Paul Wa lczak, PetitionerÓs

corporate representative , who is the managing member of the

parent company that wholly owns both NHI and the related company .

PetitionerÓs Exhibits 1 through 8 , 11, and 12 were adm itted in

evidence . PetitionerÓs Exhibit 9 was admitted in evidence, but

not for the truth of the matters asserted therein. PetitionerÓs

Exhib it 10 was officially recognized.

AHCA offered the testimony of Marisol Fitch, supervisor of

AHCAÓs CON unit, who was accepted as an expert in certificate of

need and health care planning. AHCAÓ s Exhibits 1 through 17

and 21 were admitted in evidence by stipulation, subject to any

hearsay issues. 2/

At the conclusion of the hearing, the undersigned informed

the part ies of the uniform ruleÓs standard ten - day deadline after

the filing of the transcript for the parties to file proposed

recommended orders (PROs) . The two - volume Transcript was filed

June 1, 2018. On June 6, 2018, Petitioner filed an agreed motion

for a seven - day extension to the PRO filing deadline, which was

granted. 3/ The parties timely filed their PROs by the extended

deadline, and their filings have been considered in preparing

this Recommended Order.

FINDING S OF FACT

1. Petitioner NHI holds CON No . 10412, which authorizes the

establishment of a 111 - bed community nursing home by new

construction in Palm Beach County. CON 1041 2 was issued June 16,

2016, and had an initial termination date of December 17, 2017.

2. The nursing home was not approved p ursuant to a

determination that additional beds were needed under a Ðfixed

need poolÑ calculation . See Fla. Admin . Code R. 59C - 1.008(2)

(fixed need pool rule) ; Fla. Admin. Code R. 59C - 1 . 036 (nursing

facility bed need rule). Instead, as set forth in the C ONÓs

conditions , the 111 - bed nursing home will replace a 51 - bed

nursing home, which will delicense its beds, and 60 beds of a

120 - bed nursing home , which will delicense half of its beds.

3 . NHI is a wholly - owned subsidiary of NuVista Health Ca re

Investors (ÐNuVistaÑ) ; NuVista is NHIÓs sole member . The parent,

NuVista , has structured this project in a manner common for this

type of project , with one wholly - owned entity created to serve as

the asset holder or Ðprop - coÑ (i.e., property company) a nd

a nother wholly - owned entity created to serve as the license

holder or Ðop - coÑ (i.e., operating company) . NHI is the Ð op - co Ñ

that obtained the CON and that will license and operate the

facility . A different entity, SPB HRE Investments, LLC (SPB

HRE) , w hose sole member is also NuVista , was created to serve as

the Ð prop - co Ñ for asset ownership. The two entities , which have

the same principal address and same mailing address, were formed

on the same day , about six weeks before a letter of intent was

filed with AHCA as the first step to be eligible for filing a CON

application in the review cycle in which NHI applied.

4. The parent, NuVista , is coordinating this nursing home

project. NuVista is experienced in the health care industry, and

has successful ly completed projects in multiple states, including

Florida, that involved funding, designing, constructing,

licensing , and o perating health care facilities. At its peak,

NuVista ha d 27 facilities in Florida that it owned, operated,

constructed, and/or re novated. It has developed four Florida

CON - approved facilities from the ground up , including two in Palm

Beach County : a nursing home in Wellington that has been in

operation since 2011, and another nursing home in Jupiter that is

under construction. No evidence was offered to question

NuVistaÓs experience or successful track record in this regard.

5 . CON 10412 authorize s th e nursing home project at issue

to be located anywhere in Palm Beach County. 4/ NuVista chose to

pursue establishing this proje ct in a research park adjacent to

the Florida Atlantic University (FAU) Boca Raton campus , known as

the Research Park at FAU . The location was chosen because of its

unique potential for a collaborative, research - driven endeavor ,

integrating the activities of FAUÓs colleges of nursing ,

medicine, business, and engineering by providing trainin g ,

ed ucational , and research opportunities .

6. The Research Park at FAU is the trademarked name for the

property under the leasehold control of the Florida Atlantic

Research and Development Authority (FARDA). FARDA is a research

and development authority established pursuant to sections

159.701 through 159.7095, Florida Statutes. FARDA was c reated in

1985 as a public instrumentality through the combined resolutions

of Palm Beach County and Broward County for the purposes of

development, operation, management, and financing of a research

and d evelopment park . See § 159.703(1), Fla. Stat. As a

research and development authority, FARDAÓs statutory purpose is

to promot e scientific research and development affiliated with

and related to the research and development activities of one or

more institutions of higher e du cation , and to foster the economic

development and broaden the economic base of the two counties .

See § 1 59.701, Fla. Stat.

7 . FARDA is a collegial body with seven members : three

members are appointed by Palm Beach County ; three members are

appointed by Broward County ; and the seventh member is FAUÓs

president or the presidentÓs designee . As a collegial

go vernmental body, FARDA meet s at noticed public meetings to take

official action . Regular meetings are held every other month ,

six times per year . In addition, when needed, special meetings

can be noticed and held .

8 . The Research Park at FAU (Research Park) includes 55

acres of land on the north side of FAUÓs Boca Raton campus , in

the city of Boca Raton, near the southern border of Palm Beach

County . This was FARDAÓs first property , and remains the main

property under FARDAÓs jurisdiction to carry out its statutory

functions and purposes . The land is owned by the state Board of

Trustees of the Internal Improvement Trust Fund and was leased t o

FARDA in 1986 . In 2003, FARDA added to the property under its

jurisdiction, by leasing 16 acres from t he City of Deerfield

Beach in Broward County.

9 . FARDA members do not devote full time to the

development , administration, and management of the property in

their charge. The members all have day jobs and professions

apart from their FARDA service. FARDA Ós byl aws authorize FARDA

to create Ðnon - member administratorsÑ to assist FARDA members to

carry out their responsibilities . The two administrative offices

authorized are the position of President/C hief Executive Officer ,

who is responsible for carrying out FAR DAÓs plans , purposes, and

objectives, and the position of legal counsel to address the

legal sufficiency of FARDA actions and to represent FARDA.

Andrew Duffel l is the administrative officer in the position of

President/CEO. George Pincus is FARDAÓs lega l counsel.

10 . In 1995 , FARDA took action to develop the R esearch P ark

indirectly, by selecting a t hird party Ðdeveloper , Ñ Boca/Research

Park Ltd. , to whom most or all of the parcels in the Research

Park would be sublease d. In preparation for that subl ease, FARDA

adopted a Declaration o f Covenants and Restrictions to bind and

run with the Research Park property . The Declaration provided

that t he day - to - day administration and management of the Research

Park w ould be turned over to a not - for - profit corpo ration to be

formed and known as the Florida Atlantic University Research and

Development Park Maintenance Association (Maintenance

Association).

11 . While not itself a governmental entity, the Maintenance

Association was created pursuant to FARDAÓs Decl aration to

function similarly to a homeownerÓs association by, among other

things, maintain ing the Research ParkÓs common areas and utility

easements, identify ing and approv ing needed capital improvements,

imposing regular assessments on parcel sub - lessee s to cover

maintenance costs and special assessments to fund capital

improvements , and administering the ARB functions to review and

approve planned improvements to be constructed on Research Park

parcels, and make recommendations to FARDA to approve (or no t

approve) the planned improvements. Creating this type of

property ownersÓ association was necessary to spread the

maintenance and capital improvement costs among the Research Park

sub - lease hold owners, because FARDA does not have th e power to

impose tax es or assessments.

12 . FARDA more directly controls the uses and users of

property in the Research Park , pursuant to a section of the

Declarations called Regulation of Uses/Users. According to the

Declarations, a proposed sublease transaction is sub ject to a

FARDA approval process , which requires one of the following: an

ÐAuthority p ermitted u se Ñ consistent wi th FARDAÓs public

purposes ; an Ðapproved user relationshipÑ with FAU; or a

provision in the sublease for the sub - lessee to pay a user

surcharg e.

13 . The procedure by which a prospective sub - lessee is to

seek and obtain FARDAÓs approval for the proposed sublease and

the intended use of the parcel(s) is not formally defin ed or

described in any document. Historically , FARDA has followed a

practic e of requiring the prospective tenant to prepare a Ðwhite

paperÑ describing the intended use and collaborative

relationships with FAU . FARDA provides the white paper to a

ÐTechnology Review, Advisory and Innovation CommitteeÑ (TRAC) for

its review and rec ommendation , and then FARDA makes the final

decision whether to approve the pro posed tenant and intended use

as set forth in the white paper .

14 . Before CON 10412 was issued, representatives of NuVista

began negotiations with representatives of the sub - l essee s of two

adjacent parcels in the Research Park (parcels five and eight) ,

for the sale and purchase of the sub - lease hold interests . The

NuVista plan from the beginning was to combine the two adjacent

parcels for use as the nursing home site.

15 . Re presentatives of the s eller s and NuVista met with

FARDAÓs administrator, Mr. Duffell, to determine the process

necessary to obtain FARDA approval for the proposed transaction

and the intended use . Mr. Duffell explained the process FARDA

had followed in th e past, and rep orted that the process would

take roughly four months based on past experience . That

information helped guide the terms of the Agreement for Sale and

Purchase of the sub - lease hold interests in parcels five and eight

in the Research Park.

1 6 . The Agreement for Sale and Purchase was executed on

June 15, 2016, the day before CON 10412 was issued. For the

seller, the contract was executed b y two subsidiary - entities of

Boca R & D Finance, which was the assignee of the original

developer , Boc a/Research Park, Ltd. 5/ For the buyer, the contract

was executed by SBP HRE, the NuVista Ðprop - coÑ for th e project

that had become known as NuVista Living at Boca Raton .

17 . The contract terms provided for a fairly short window

of time for the buyer to obtain a survey of the property and to

submit plans and specifications for the improvements to be

constructed on the combined parcels to the sellers and to FARDA

for review and approval. A longer (and extendable) period of 210

days after the contract was executed was provided for obtaining

specified approvals necessary to allow the parcels to be combined

and used as the site for construction of the nursing home. The se

included obtaining FARDA approval of the intended use and user ,

and s ecuring the abando nment or vacation of the portion of a

roadway Ï Northwest Seventh Avenue Ï that ran between the two

adjacent parcels so the nursing home could be built across the

combine d parcels . The contract gave the NuVista Ðprop - coÑ the

right to pursue these necessary ap provals, and NuVista

immediately took steps to accomplish them .

18 . With regard to obtaining FARDA approval, NuVista

followed the procedures outlined by Mr. Duffell. A NuVista team

of professionals participat ed in a series of meetings with FAU

representa tives from the colleges of nursing, medicine,

engineering, and business to discuss collaborative activities.

The NuVista team then worked together to develop the white paper,

which was completed in the first month after the CON was issued.

The white pape r was submitted to Mr. Duffell for presentation to

FARDA and to the TRAC for review and recommendation. FARDA

considered the white paper at its July 27, 2016, public meeting,

as reflected in the following excerpt of the FARDA official

minutes:

NuVista Whi te Paper

President Duffell informed the Authority that

NuVista had presented a White Paper and held

multiple meetings with FAU faculty and staff

to establish collaborative relationships.

The concept is for the construction of a 120 -

bed [6/] post - acute car e facility that would

provide multiple learning and research

opportunities for FAU while improving patient

outcomes. The meetings and ensuing

discussions had led to a positive

recommendation from TRAC. He then invited

NuVista to discuss their project wit h the

Authority.

Ms. Fago outlined the concept of the project

and later Mr. Walczak added comments; both

discussed the possibility of improving

outcomes and cutting waste in healthcare.

NuVista is already innovating in this

industry and has a facility in Wellington, FL

with another under construction in Jupiter

next to the FAU campus.

Authority members asked how the company would

interact with the University and discussed

the direction the Research Park was taking:

a critical mass of healthcare and he althcare

IT companies that complemented the direction

of FAUÓs Boca Raton campus.

RESOLUTION 16 - 7 OF THE FLORIDA ATLANTIC

RESEARCH AND DEVELOPMENT AUTHORITY APPROVING

SPB HRE INVESTMENTS, LLC D/B/A NUVISTA LIVING

AT BOCA RATONÓS TENANCY IN THE RESEARCH PA RK

AT BOCA RATON; PROVIDING FOR SEVERABILITY;

AND PROVIDING FOR AN EFFECTIVE DATE.

A motion to approve the Resolution 16 - 7 was

made . . . and seconded . . . . The motion

passed 5 - 0, with 2 members absent.

19. NuVista also proceeded immediately after entering into

the contract for the sublease to put together the plans and

specifications on the improvements to be constructed , as required

for submission to FARDA . The required submissions were prepared

by two different architectural firms. In addition, at the

recommendation of the asset manager for the sellers, NuVista

retained Mark Smiley as project engineer. Mr. Smiley had been

working as an engineer consultant for the Maintenance Association

for many years, and was very familiar with the Research Pa rk.

20 . One of the NuVista architectural firms submitted the

following package t o Mr. Duffell on July 15, 2016 :

• White Paper

• Certificate of need

• Preliminary Site Plan

• Preliminary Landscape Plan

• Schematic Building Elevations

• Schematic Building Floor Plans

• Survey

• Schematic Engineering Plans

21 . The plans and specifications were provided to the ARB

for its review, approval, and recommendation to FARDA.

22 . An ARB meeting was held on August 17, 2016, at which

detailed comments were made with regard to the s ubmissions, in

the following categories: site plan; elevation; landscape;

civil; deviation and variance table; and interlocal agreement

issues. NuVistaÓs architects prepared responses, point by point,

in an August 29, 2016, submission.

23 . One ARB com ment was to ask for a traffic analysis to

gauge the impact on existing streets. Accordingly, NuVista

retained the Wantman Group, Inc., which prepared a traffic

analysis and evaluation, dated August 23, 2016. The traffic

analysis was submitted with the ar chitectsÓ August 29, 2016,

response to the ARB.

24 . In the ÐcivilÑ area, one ARB question was: ÐWhen will

confirmation of the sanitation plan be available?Ñ The response

was as follows: ÐThe proposed route is reflected on the revised

plan. Due to elev ations, re - route of [wastewater lines from]

existing building to the north to go to the existing R&D Lift

Station. This will assist with future decisions by the Park as

discussed with John Wargo and the Park. Capacity to the lift

station is not an issue. Ñ (AHCA Ex. 2, 8/29/16 response letter

at 4).

25 . Follow - up ARB meetings were held on September 12

and 15, 2016, generating a second round of comments. A

significant comment in the ÐcivilÑ section was as follows:

The [ARB] Committee has been advised that the

UniversityÓs Hubbard Lift Station, which is

the current downstream receiver for the

ParkÓs wastewater, is at full capacity and

cannot receive additional flows without an

upgrade/replacement. The Applicant is

strongly advised to consult with its

engineer, the Developer and FARDA to explore

alternatives for addressing the issue .

(emphasis added).

26 . Shortly after these follow - up ARB meetings, at the

September 28, 2016, FARDA meeting, Mr. Duffell reported in his

ÐPresidentÓs ReportÑ that he was Ð[w]orking with NuVista on its

plans in the Research Park, which has involved liaison with the

City [of Boca Raton], Maintenance Association, and others.Ñ

27 . NuVistaÓs architects responded similarly to the ARBÓs

wastewater comment, reporting as follows i n the November 7, 2016,

point - by - point response to the ARBÓs second round of comments:

ÐMark Smiley, the Project Engineer, is coordinating this with

FARDA.Ñ

28. Despite the unresolved wastewater capacity issue, which

remained looming, the ARB gave its ap proval of the site plan

submission, and recommended it for approval by FARDA. FARDA

reviewed and approved the site plan submission at its regular

meeting on January 25, 2017. 7 /

I mpediment One: Res olving t he Wastewater Capacity Problem

2 9 . In fact, Mr. Smiley had been attempting to coordinate

with FARDA and the Maintenance Association regarding the

wastewater disposal system for the Research Park for many years

preceding NuVistaÓs involvement. The additional development

represented by the NuVista projec t , as well as FARDAÓs desire to

make the Research Park viable for future development, spurred

movement in the direction of resolving the problem.

30 . Wastewater disposal in flat terrains such as the

Research Park and FAU campus depends on lift stations, w hich

operate as pumps to lift up sewage flowing in sewage lines so that

the flow will continue down to the next lift station.

Historically, wastewater disposal lines ran from the Research Park

to the Hubbard lift station, which is owned and operated by FA U on

FAUÓs campus. From the Hubbard lift station, the sewage is pumped

through lines running to the east and connecting to the City of

Boca RatonÓs sewage system. There is one lift station within the

Research Park , and it has been used to move wastewater from more

remote Research Park parcels to the Hubbard lift station. Thus,

as historically configured, all wastewater from the Research Park

flowed through FAUÓs Hubbard lift station.

3 1 . Wastewater disposal is a utility service, and a

perpetual easemen t is recognized for the establishment,

maintenance, and improvement of the sewage disposal lines

throughout the Research Park. The cost of establishing,

maintaining, and improving the lines and any other necessary

capital improvements for the sewage dispo sal system is raised

through the Maintenance Association Ós regular and special

assessment authority , as set forth in FARDAÓs Declaration of

Covenants. Ultimately, though, FARDA must ensure that the

Research Park at FAU is serviced by appropriate utilities .

Otherwise, FARDA will be unable to meet its responsibilities to

promote development and economic growth within the Research Park.

3 2 . As early as 2009, M r. Smiley, the M aintenance

AssociationÓs engineer , determined that there could be problems

with w astewater disposal in t he future without improving/upgrading

the FAU Hubbard lift station or coming up with alternative system

improvements to re - route the Research Park wastewater to flow

directly to and connect with the City of Boca RatonÓs sewage

dispos al system.

3 3 . T he FAU Hubbard l ift s tation was apparently adequate to

receive the capacity generated by the Research Park with no

additional development, but with the addition of NuVistaÓs nursing

home and more future development in the Research Park, th e Hubbard

l ift s tation would require upgrades if the Researc h Park continued

to route its wastewater through FAUÓs lift station for disposal.

FAU apparently was pushing the Maintenance Association to help pay

for upgrades to the H ubbard l ift s tation. How ever, Mr. Smiley

conducted an analysis of the options , which led to the decision to

re - route the Research ParkÓs wastewater discharge to go through

the existing Research Park lift station and connect directly to

the City of Boca Raton sewage system. This w as seen as the more

economical and appropriate way , in the long run, to address the

future wastewater disposal needs of the Research Park , rather than

to upgrade the Hubbard l ift s tation.

3 4 . Mr. Smiley met with City of Boca Raton staff in December

2016 to plan for the re - routing of wastewater discharge directly

into the CityÓs system.

3 5 . T he FARDA Economic Development Plan for 2017 - 2022 ,

prepared during the months leading up to FARDAÓs March 22, 2017 ,

meeting where it was approved by FARDA, included the following:

The Authority has the opportunity to enhance

the Research ParkÓs Boca Raton property

through a number of initiatives.

* * *

Partner with stakeholders to enhance the

sense of place:

* * *

• Maintenance Association, City of Boca

Rato n Î waste water capacity

3 6 . While it is unclear what actions FARDA has taken

pursuant to this initiative, at le ast FARDA has acknowledged its

responsibility for ensuring that appropriate infrastructure is in

place to allow development.

3 7 . The contract to purchase the sub - leasehold interests in

parcels five and eight has been amended three times to keep the

contract viable and extend the closing. The third amendment,

executed on September 19, 2017 , added as a condition precedent to

the closing that the Maintenance Association must have

substantially completed the new sewer line installation up to the

property being acquired. It would then be the buyerÓs

responsibility to install lines from the property to connect to

the new sewer line that will carry t he wastewater to the City of

Boca RatonÓs system.

Impediment Two: A Roadway Runs Through It

3 8 . Meanwhile, NuVista has been working on one other

impediment to proceeding with its project. Unlike the wastewater

capacity issue, which was not revealed to NuVista until the ARB

site plan review meetings in the months after the contract was

signed , this other impediment was known as an obvious hurdle from

the outset, albeit the solution was viewed to be a relatively

easy, standard one. As explained by Mr. P eters, the then - asset

manager for the sellers, road abandonment issues are not uncommon

in developments like this one, where the proposed project

necessitates combining separate parcels . Combining separate

parcels into one parcel renders the bisecting roa dway

unnecessary. Usually, such roadway abandonment issues are easy

to solve because the roadway is owned by a municipality or county

and the solution is as simple as providing some compensation for

the property.

3 9 . As is obvious from a quick glance o f any schematic

showing parcels five and eight in the Research Park, there is a

roadway between the adjacent parcels, identified as N orthwest

Seventh Avenue. From the outset, NuVista has been working on a

solution that would have FARDA, as the lessee of t he Research Park

property pursuant to the Senior Lease with the Board of Trustees

of the Internal Improvement Trust Fund , abandon the roadway so as

to allow the two parcels to be joined as one for construction of

the nursing facility building . As shown by repeated references in

FARDA meetings, FARDA appeared to be amenable to solving this

problem. This would stand to reason, as FARDA approved the site

plan showing a building built across both parcels, and, thus,

across the roadway.

40 . After a long searc h to identify the right lease

instruments covering the roadway, a lease produced by Mr. Pincus

was believed to be the right one, and FARDA adopted a resolution

in March 2017, that purported to abandon the roadway. However, it

was later determined that the lease used for the resolution was

not the right one, so the resolution was not effective to abandon

the road.

4 1 . NuVistaÓs attorneys attempted more records searches, and

then went to work to craft language to effectively abandon the

roadway, despite not having t he correct lease. The document

believed to accomplish this w as completed in August 2017, and

provided to Mr. Duffell with a request to present the matter at a

FARDA meeting. That had not happened by November 15, 2017.

4 2 . The document to accomp lish the abandonment of the

roadway segment between parcels five and eight is an exhibit to

the third amendment to the contract to acquire the sub - leasehold

interests in those parcels. The buyerÓs receipt of executed

signature pages from all parties to th e instrument was made the

second condition precedent to closing on the contract.

C ON E xtension R equest s

4 3 . With the delays caused by the wastewater capacity

problem and the roadway abandonment problem , on November 15, 2017,

NHI had its Tallahassee health planning consultant and authorized

representative before AHCA submit a request to AHCA for a 60 - day

extension to CON 10412, pursuant to section 408.040(2)(c), Florida

Statutes, and Florida Administrative Code Rule 5 9 C - 1.018(3).

4 4 . As an overall point, t he request noted that there have

been Ðunanticipated delays related to planning and zoning

requirements [,] Ñ and that the location of the project within the

FAU Research and Development Park, which is governed by FARDA,

Ðdelays the approval process for deve lopment but offers

advancements in senior care through research and training

opportunities once the project materializes.Ñ

4 5 . The request summarize d the sewer capacity problem within

the Research Park that has stymied additional development , but

that Ð [u]nder authority of FARDA, Smiley & Associates, Inc. , is

developing plans to add capacity to the park by tying into the

cityÓs sewer system.Ñ Documentation attached to the letter

included the ARB site plan review comments that identified the

problem and urged NuVista to coordinate with Mr. Smiley and FARDA

to come up with alternative solutions that did not involve the

Hubbard lift station, as well as M r. SmileyÓs October 30, 2017,

lette r summarizing his numerous meetings to identify and develop

solutions, including meetings with the City of Boca Raton. Based

on the information available at that time, the sewer tie - in was

not expected to be complete until the first quarter of 2018 at the

earliest.

4 6 . The extension request also raised the problems

encou ntered in securing an effective abandonment of Northwest

Seventh Avenue, which remained pending.

4 7 . The extension request concluded by noting: ÐUntil the

road abandonment and s e wer tie in issues are resolved,

[construction] plan submission to the ARB and to AHCA, Office of

Plans and Construction (OPC) are delayed .Ñ

4 8 . An updated Project Completion Forecast was provided with

the request, estimating that pursuant to the revised forecast,

construction was expected to commence by January 1, 2019. As

suc h, the request noted: ÐTherefore, in addition to the current

request for a 60 - day extension, additional extensions will be

necessary to allow sufficient time to resolve the road abandonment

and sewer tie in issues and to meet the regulatory requirements

f rom both [AHCA] and FARDA. Ñ

4 9 . AHCA a pproved the documented request and updated project

completion forecast, and issued the requested 60 - day extension .

The new CON termination date was set at February 14, 2018, but

AHCA also noted that another request for a 60 - day extension could

be submitted by January 30, 2018.

50 . A second request for extension was timely filed on

January 29, 2018 , by the same health planning consultant . Th is

request reported that the same two impediments detailed in the

first requ est continued to delay commencement of construction.

The evidence at hearing supported this assertion. Completion of

the sewer tie - in project and abandonment of the roadway must first

occur for the contract to close. Once these impediments are

removed a nd the contract is closed, then the pathway to

construction will return to the more typical path of finalizing

construction documents in conjunction with AHCAÓs Office of Plans

and Construction , the City of Boca Raton, and FARDA, finalizing

construction fi nancing, securing approval s for construction, and

finally, commencing construction.

The Sideshow : FARDA Limited - Life Approval and Do - over

5 1 . In addition to the two impediments of the wastewater

capacity and road abandonment, a nother point had developed before

FARDA that had to be resolved. As of the submission of the

second extension request , resolution of the matter was pending .

5 2 . In short, FARDA staff took the position that the

resolution approving NuVista as a tenant and approving the

intended us e expired when NuVista had not commenced construction

within one year. That is, indeed, what the resolution says ,

although it is unclear why the duration of user and use approval

would expire in one year or why the approval is cast in terms of

commencing construction .

5 3 . NuVista made two arguments against the position of

FARDAÓs staff : one, that the approval could be extended because

construction was delayed due to the sewer capacity problem in

FARDAÓs R esearch P ark and the problems identifying the ri ght

documentation to effect the necessary road abandonment; or two,

that the FARDA approval was a development order that was tolled by

a series of executive orders declaring states of emergency for one

reason after another , each of which extended the effec tive date.

5 4 . At the time of NHIÓs first 60 - day extension request,

FARDA had recently met and addressed NuVistaÓs request to extend

the approval . FARDAÓs attorney questioned FARDAÓs authority to

extend or reissue its approval of NuVista as tenant and th e

intended use for a nursing facility, even though there were no

changes. Rather than extend or reissue its approval , FARDA

instead invited NHI to ÐresubmitÑ a new white paper , while

assuring NuVista that the process would be expedited .

5 5 . This hitc h was not mentioned in the first extension

request . AHCA may have assumed the omission was for nefarious

purposes , but the credible evidence at hearing does not support

that inference. Instead, it was not unreasonable for NuVista to

assume at that time t hat the resubmittal of what had already been

reviewed and approved was a mere formality, since nothing had

changed in terms of the tenant or the intended use. The delay

caused by having to go back through FARDAÓs use approval process

was not viewed as its elf an impediment to c ommencing construction,

because the wastewater discharge project was still slowly making

its way through multiple levels .

5 6 . By the time of the second extension request, there were

signs that FARDAÓs re - approval would not be easil y secured as a

formality . Included with the second extension request was

documentation of the December 2018 meeting at which several FARDA

members wanted more details fleshed out with FAU colleges , and

NuVista agreed to try to provide what was requested . Also

included was documentation of the January 23, 2018, FARDA meeting

at which FARDA wanted more concrete relationships with FAU, in the

form of memorandums of understanding from four colleges. FARDA

voted to conditionally approve the resubmitted white paper,

conditioned on obtaining the memorandums of understanding in 60

days, and returning before FARDA for final approval.

5 7 . A s recently observed by several FARDA members, NuVista

was made to go through more steps than any other applicant seeking

use a pproval in FARDAÓs history.

5 8 . AHCA denied the second extension request . Although AHCA

was satisfied with the CON holderÓs showing in the first extension

request that good faith commencement of construction was delayed

due to governmental action/inact ion in providing adequate

wastewater disposal capacity and accomplishing the road

abandonment , AHCA questioned the sufficiency of the same grounds

for the second extension, because of the ancillary issue that

NuVista was in the process of seeking re - approv al from FARDA for

the intended use , and had only attained conditional approval as of

the second request .

5 9 . At hearing, Ms. Fitch explained that in her view, if the

CON holder did not have use approval from the governmental entity,

FARDA, its good faith commencement of construction could not be

delayed by the wastewater capacity problem or the road abandonment

problem . Yet the evidence is clear that FARDA had given

conditional approval of the resubmitted white paper by the time of

the second extension re quest. FARDA had certainly not denied use

approval. Instead, FARDA had asserted its position that NuVistaÓs

use approval lapsed , and while NuVista had a valid contrary

argument, NuVista also chose to acquiesce in the process that

FARDA had ÐinvitedÑ NuVi sta to follow, by resubmitting the white

paper and jumping through whatever hoops FARDA was asking of it.

60 . At hearing, NHI was permitted (over AHCAÓs objection) to

present evidence proving that on April 25 , 2018, FARDA met again

and approved the resubm itted white paper . Thus, NuVista has once

again secured FARDA approval and has an ÐAuthority permitted useÑ

of the property if it commences construction within on e year from

April 25, 2018 .

6 1 . At the April 25, 2018, FARDA meeting, FARDA members

asked ma ny questions about the delay in resolving the wastewater

capacity problem . The questions reflected the impression that the

City of Boca Raton was taking too long. Mr. Maclaren, attorney

for both the developer and the Maintenance Association responded:

Ð By any measure, efforts have been ongoing to address that issue,

but it is not a simple issue , because . . . [e]very time you get

one peg itÓs like whack - a - mole, another one pops up.Ñ

6 2 . FARDA member Whelchel, who is one of two FARDA members

on the Mai ntenance Association board , made the following

observations about the sewage disposal capacity:

Ms. Whelchel: I have a question. . . .

Maybe more of a statement. I attended as a

new member, everyone has a position on the

board, you know, the president, the chairman,

the secretary . . . and in my case I was

appointed to that [Maintenance Assoc i ation]

board , and we met, I met one time,

[Mr. Maclarin was] in the room, John Wargo

was in the room, et cetera. I havenÓt met

with that board since so itÓs been quite some

number of months ago. So I guess I am just,

I guess, since, until we [solve] a water

sewer problem, then nothing is ever going to

change, because you got to have it. I mean,

you just canÓt build bui l dings and not , not

have a system , you know, thatÓs working.

Mr. Maclarin: I think no one understands

that issue, better than you.

Ms. Whelchel: So what, whatÓs the delay

again? I know, I am asking rhetorical

questions here, but

Mr. Maclarin: It would appear, b ased on

experience , that th ere is no delay. . . .

[F]rom my experience, it would be

inappropriate and perhaps mischaracterized as

a delay we think is moving forward with a

pace that can be achieved, certainly it could

go quicker, but anytime youÓre dealing with

multiple parties, par ticularly a

circumstances like this Î

Ms. Whelchel: -- Well, I guess my concern, I

am not sure why, I donÓt know that we have to

do it, but someoneÓs got to do it, and if we

have to do it, then we should do it. I mean

somebodyÓs got to, have to move fo rward.

Mr. Daskal: Well, I think the issue is that,

that, that they need, they need approval on

the white paper, they need to get the water

and sewer, they need to get the [road]

abandonment, they need all of these things to

go forward, but you know, rig ht now weÓre

only dealing with the approval, weÓre not

dealing with the maintenance association

today, thatÓs just a point theyÓre making.

(Pet. Ex. 12 at 25 - 27).

6 3 . At the request of FARDA members, the asset manager for

the sellers/developer provided a n update to FARDA on the

wastewater disposal project. As stated in the first extension

request, neither the Research ParkÓs ARB nor AHCA are going to

approve final construction documents for the nursing facility

until the City of Boca Raton has completed the upgrades needed to

its system to allow the tie - in for the whole Research Park,

followed by completion of sewer line installation by the

Maintenance Association from the CityÓs sewer system to parcels

f ive and e ight . The updated report was as follows:

The preliminary phases of the sewer project

are, for the most part, completed. The

construction drawings are completed. They

were submitted to the city, we received

comments back from the city, the comments

were woven into the documents, resubmitted to

t he city, and weÓve obtained approvals.

Permits have been processed, and we have what

are known as Ðbid documents,Ñ we have

construction documents that are ready to be

submitted to a group of general contractors,

so that they can bid on the project. We ha ve

an estimated cost to complete the project, to

put things in perspective for the board. We

have roughly between five - and $700,000.00,

um 76% of that is funded by the developer .

So, yes there are other stake holders in the

process, but the developers f or the most

part, a majority funds in that process. The

developer has funded these funds, weÓre fully

funded on that. WeÓre holding them in

escrow, subject to the documents being

((INAUDIBLE)). We expect the bid documents

to be submitted to the general contractor the

week of May 7th, we expect to award a

contract the week of May 21, and we expect

that project to be completed roughly , August

15th. So while this has been a need and Meir

Whelchel, you had asked a question earlier,

why this ha d nÓt been addr essed earlier? It

was - I believe the board, I believe the

maintenance association was aware of the need

for increased capacity should the park

continue to expand in its development and its

need. So, as a result of the continued

expansion and d evelopment within the park,

itÓs now come to the boardÓs attention that

this is required. So itÓs sort of a shifting

here between the University and the city, as

it relates to the sewer capacity, because

there are a number of stake holders and users

that these, for the sewer facilities, but to

be perfectly clear, weÓre, weÓre 80% there.

The construction drawings are done, the

permits have been issued, weÓre going to let

the contracts to the general contractors, and

expected completion date on this is mid -

August. (P et. Ex. 12 at 31 - 33).

6 4 . The bottom line is that for FARDA to carry out its

responsibility to promote development of the Research Park, it

must see to it th at the sewage capacity problem is solved to

allow future development, starting with PetitionerÓs project.

While technically correct to say to that it is the function of

the Maintenance Association to carry out the task s of planning

the capital improvement, levying the special assessment,

collecting the funds, and working with the City of Boca Raton t o

accomplish the extension of sewage lines from the CityÓs system,

all of these tasks are for the purpose of allowing new

development in FARDAÓs Research Park , apparently the first new

development in over a decade , according to FARDA member

Mr. Rose tto (ÐThis park hasnÓt done much of, of anything over the

last ten yearsÑ) (Pet. Exh. 12, second segment, at 4) , and

Mr. Maclarin, attorney for the Maintenance Association and the

developer (Ð [ W ] e have not had any development occur in the park

in 12 ye ars. This is our opportunity to have it.Ñ) (Pet. Exh. 12

at 19). Indeed, FARDA has adopted an initiative to partner with

the Maintenance Association and the City to address the

wastewater capacity problem so as to attract new development.

6 5 . As AHCA pr eviously determined, the impediments to

commencing construction are due to governmental action or

inaction with respect to regulations or permitting. Having made

that determination on the first extension request, it wo uld be

arbitrary for AHCA to find oth erwise now.

6 6 . In terms of the timeline for the sewage system project,

it is unclear whether the process has been unduly delayed, but it

has taken time for the governmental action necessary to allow the

project to go forward to completion . Once the pro blem was

brought home as one that had to be resolved to allow NuVistaÓs

project to go forward, steps were taken to identify options,

determine the costs of those options (including the City of Boca

Raton identifying the upgrades needed to its system to acc ept the

connection of new Research Park lines, and then pricing those

upgrades), and have the capital improvement approved by the

Maintenance Association Board. Then the Maintenance Association

had to make and collect special assessments. Then the

Mainte nance Association had to obtain permits to lay the sewage

lines from the City of Boca RatonÓs system to the Research Park

lots. Meanwhile, the City of Boca Raton had to carry out the

improvements to its system that it had determined were necessary

to acco mmodate the Research Park connection.

6 7 . As to the roadway abandonment, consideration of the new

document was placed on the FARDA agenda for its January 23, 2018 ,

meeting. However, Mr. Duffell asked FARDA to defer the item so

the document language cou ld be studied further, and FARDA agreed.

6 8 . Now that FARDA has reissued its user / use approval, it is

anticipated that the road impediment will be resolved soon.

69. AHCAÓs CON supervisor, Marisol Fitch, testified that the

Ðgood faithÑ part of the CON ex tension statute is an inquiry into

whether there is evidence of stalling to buy time , instead of

moving the project forward to commencement. She was unable to

of fer a reasonable explanation of what record evidence would cause

her to question PetitionerÓs good faith. Instead, she said that

there might be some discrepancies as to timelines, and she pointed

to the fact that NuVista had not closed on the contract to acquire

the sublease or arranged construction financing. However, under

the circumstances, it is reasonable for NuVista to defer these

steps unt il the sewage capacity and road abandonment impediments

are removed . The sellers who are parties to the executory

contract acknowledged the reasonableness of awaiting those steps,

by agreeing to the third contract amendment t o add those

conditions precedent.

Ultimate Finding s of Fact

70 . Based on the greater weight of the credible testimony

and documentary evidence, Petitioner has demonstrated that good

faith commencement of construction for the proje ct continues to

be delayed by government act ion and inaction with respect to

regulations and permitting precluding commencement of the

project.

71 . The CON holder here has proven Ðgood faithÑ in

connection with the project . There is no evidence of any

s talling on this project to buy more time. Instead, the parent

company NuVista, and the prop - co and op - co created by the parent

for this project, have all carried out their assigned roles to

move this project forward , attempting to resolve the impediments

to the extent they could. NuVista h a s taken on a very ambitious

project because of the complicated structure of the Research Park

and the added layers necessary before the project can commence.

But th at is not a reason to deny a second 60 - day extension. T he

Ðgood faithÑ found here is a reason to gr ant the 60 - day

extension, where, as here, AHCA previously granted an extension

based on the same governmental action/inaction that continues.

CONCLUSIONS OF LAW

72 . The Division of Administrative Hearings ha s

jurisdiction over the subject matter and the parties, pursuant to

sections 120.569 and 120.57(1), Florida Statutes.

7 3 . Petitioner is seeking its second 60 - day extension to

the validity period of CON 10412, pursuant to section

408.040(2) (c) and rule 59C - 1.018(3). As the one requesting an

extension, Petitioner is asserting the affirmative of the issue,

and, as such, bears the burden of proving by a preponderance of

the evidence that its extension request should be granted. See

Young v. DepÓt of Cmty. Af f . , 625 So. 3d 831, 833 (Fla. 1993);

Balino v. DepÓt of Health & Rehab. Servs. , 348 So. 2d 349, 350

(Fla. 1st DCA 1977 ) (the burden of proof, apart from statute, is

on the party asserting the affirmative of an issue before an

administrative tribunal) ; § 12 0.57(1)(j), Fla. Stat.

7 4 . Section 408.040(2) provides in pertinent part:

( a) Unless the applicant has commenced

construction, if the project provides for

construction, [or] unless the applicant has

incurred an enforceable capital expenditure

commitment for a project, if the project does

not provide for construction, . . . a

certificate of need shall terminate 18 months

after the date of issuance . . . . The agency

shall monitor the progress of the holder of

the certificate of need in meeting the

timetab le for project development specified

in the application, and may revoke the

certificate of need, if the holder of the

certificate is not meeting such timetable and

is not making a good - faith effort, as defined

by rule, to meet it.

* * *

(c) The certificate - of - need validity period

for a project shall be extended by the

agency, to the extent that the applicant

demonstrates to the satisfaction of the

agency that good - faith commencement of the

project is being delayed by litigation or by

govern mental action or inaction with respect

to regulations or permitting precluding

commencement of the project.

7 5 . Elaborating on the CON extension process, rule 59C -

1.018(3) provides:

(3) Extension of Validity Period.

(a) Extensions of up to 60 calenda r days per

each request may be requested by a

certificate of need holder who is approaching

the end of the 18 - month validity period. The

holder must submit a written request to the

agency for approval at least 15 calendar days

before the certificate of ne ed terminates.

The filing of a request does not extend the

validity period of a certificate of need.

Failure to timely file is a waiver of the

right to request an extension. This request

for an extension must demonstrate that good

faith commencement of the project is being

delayed by litigation or by governmental

action or inaction with respect to

regulations or permitting which precludes

commencement on the project. The request

must provide the agency a detailed

explanation of the problem and a plan of

action to be undertaken by the holder to

resolve the problem within the time frame

requested.

1. Land zoning issues will be considered for

extension of the certificate of need validity

period beyond the 18 months, if the

certificate of need holder can d emonstrate

that action has been initiated to obtain

proper zoning for the proposed site for the

facility, and that such action was timely

with respect to the requirements for

obtaining proper zoning.

2. Untimely filing of submission of plans

and requests for local and state permits,

based on the processing time required by the

state and local governments for such plans

and permits, will not be considered as

justification for an extension beyond the 18 -

month period.

(b) Where the holder of a valid certif icate

of need is precluded from commencement of the

project due to litigation, including appeal,

or if the holderÓs certificate of need is the

subject of an appeal of a final order

approving the issuance of the certificate of

need, an extension of the vali dity period

shall be granted for the actual amount of

time of the validity period which is

equivalent to the period of litigation,

including appeal. The holder of a

certificate of need shall submit a request

for an extension to the agency, in writing,

not later than 15 calendar days prior to the

termination date.

7 6 . It is undisputed that the project at issue involves

construction, and it is likewise undisputed that Petitioner did

not commence construction by the CON termination date, as

extended by the first 60 - day extension. That is why Petitioner

requested a second 60 - day extension.

7 7 . Petitioner met the requirements of AHCAÓs rule by

timely submitting its second request for extension, as Petitioner

had forewarned AHCA that it would need to do in l ight of the

revised project timetable submitted with the first extension

request.

7 8 . Based on the findings above, Petitioner met its burden

of proving that good faith commencement of construction continues

to be delayed by governmental action or inacti on with respect to

regulations or permitting . Sewage disposal is plain ly a

regulatory matter . The need for increased wastewater capacity to

allow additional development, starting with the NuVista project ,

a s well as future projects in the Research Park , was raised

during the site plan review process shortly after the CON was

issued . Resolution of that problem was complicated, involving

three different governmental bodies : FARDA (as the ultimate

stakeholder to pave the way for development of the Research Park ,

as is its charge) ; FAU ( as the current owner/operator of the

Hubbard lift station, improvement of which was one of the options

considered) ; and the City of Boca Raton, which became the focal

point of the best option ultimately approved by t he Mainte nance

Association Board .

7 9 . AHCAÓs argument that expanding wastewater capacity to

the entire Research Park should not be considered ÐgovernmentalÑ

for the reason that the Maintenance Association is organized as a

private non - profit corporation is reject ed for several reasons.

First, AHCA ruled otherwise in granting the second extension

request. Second, AH CA has not considered the FARDA - specific

initiative to partner with the Maintenance Association and the

City of Boca Raton to solve the Research ParkÓ s wastewater

capacity problem , or the comments in the April 25, 2018, FARDA

meeting, at which FARDA expressed its concern with completing

this project with one member stating emphatically that FARDA

should just take it over and get it done. FARDA has the power to

itself construct the improvements for utilities and other

necessities to allow the development of Research Park parcels ,

and financing could be accomplished under the Florida Industrial

Development Financing Act . See § 159.705(8), Fla. Stat. Tha t

FARDA chose the alternative structure of accompli shing these

needs through the conduit of the Maintenance Association created

pursuant to FARDAÓs Declaration of Covenants , and financing them

through assessments, does not make the actions any less

governm ental. Indeed, the Maintenance AssociationÓs ARB itself

directed NuVista to coordinate with the engineer and FARDA in

coming up with a solution to the Research ParkÓs wastewater

capacity problem. Finally, AHCAÓs argument ignores the central

role of the o ther governmental body involved, the Cit y of Boca

Raton , which had to make improvements to its own system to

accommodate the tie - in of sewer lines directly from the Research

Park, as well as permit the Maintenance Association to install

the sewer lines to re - route all of the Research Park Ós wastewater

flow from the Hubbard lift station to instead flow thro ugh the

Research ParkÓs lift station and directly connect to the cityÓs

system .

80 . Standing alone, the wastewater ca pacity impediment is

sufficient t o warrant issuance of 60 - day extensions to CON 10412

until that project is completed and NuVista can proceed to

finalize its construction plans and get its own permits that will

include installation of sewer line(s) to tie into the new

Research Park lines once they are extended to the property.

81 . In addition, t he roadway abandonment impediment also

requires resolution by governmental action to allow commencement

of construction . While in one sense this problem is a ÐtitleÑ

matter, for this project it i s more akin to a land use/zoning

matter in that two adjacent parcels must be c ombined and the

current land use for the roadway must be changed from road usage

to allow construction of a nursing home. Again, AHCA granted the

first extension request based o n the wastewater capacity and

roadway abandonment problems , and these continue to be the two

impediments to commencing construction.

82 . AHCA took the position in a prehearing motion to

relinquish jurisdiction, and maintained at hearing, that there

a re no disputed issues of material fact for the reason that all

of the actions to move this project forward we re taken by the

related entity SPB HRE instead of by the CON holder, NHI.

8 3 . This argum ent was rejected before hearing and remains

unpersuasive. N either the CON laws nor AHCAÓs rules can be read

so restrictively to require that CON projects be developed solely

by the CON holder instead of a related entity. The CON extension

statute and rule only require that the CON holder be the one to

submit t he request for an extension and make the required

showing: that good faith commencement of the project has been

delayed by governmental action or inaction with respect to

regulations or permitting preclud ing commencement of the project.

AHCAÓs interpreta tion would require the injection of qual ifying

words , shown in brackets : that good faith commencement of the

project [by the CON holder] has been delayed by governmental

action or inaction with respect to regulations or permitting

[ being applied to the CO N holder or for which the CON holder has

applied ] precluding commencement of the project [by the CON

holder]. Those qualifying words are not set forth in the CON

extension rule , so if this were AHCA's interpretation of the CON

extension statute , not codif ied in an adopted rule, the

interpretation would be a rule by definition. § 120.52( 16 ), Fla.

Stat. Neither the undersigned nor AHCA may take action in this

proceeding based on a rule that has not been adopted pursuant to

the APA. § 120.57(1)(e), Fla. St at.

8 4 . AHCAÓs interpretation is also contrary to one o f the

very few appellate decisions addressing the CON extension

statute , Health Quest Corporation IV v. Department of Health and

Rehabilitative Services , 593 So. 2d 533 (Fla. 1st DCA 1992 )

(Health Que st). In Health Quest , the court reversed the denial

of a CON extension request b y AHCAÓs predecessor, the Department

of Health and Rehabilitative Services (HRS) . The court held that

a CON holder was entitled to an extension, even though the CON

holder it self had done nothing to move forward on the project to

construct a new nursing home . Near the end of the CON validity

period, the parent corporation of the CON holder negotiated a

sale - leaseback with an unrelated corpora tion , which allowed a

subsidiary t o take over the project (without notifying HRS) . 8 /

Shortly before the end of the CON validity period, t he design of

the facility was completely redone by the new entity taking over

the project . The new entity also brought a lawsuit against the

county to contest a requirement that a new sewer line had to be

built instead of tapping into an existing line . The litigation

was unsuccessful, and the new entity submitted construction plan s

for the redesigned facility t o HRS for approval the next week,

too late to be reviewed and approved quickly enough to allow

commencement of construction before the termination date.

8 5 . The court rejected the conclusions of the DOAH hearing

officer in the Recommended Order, adopted by HRS in its Final

Order , that the statut ory standard for an extension was not met.

Then, as now, the CON extension statute provided:

The certificate - of - need validity period for a

project shall be extended by the department,

to the extent the applicant demonstrates to

the satisfaction of the dep artment that good -

faith commencement of the project is being

delayed by litigation or by governmental

action or inaction with respect to

regulations or permitting precluding

commencement of the project.

§ 381.710(2)(c), Fla. Stat. (19 87 ).

8 6 . HRS mainta ined on appeal in Health Quest that the delay

in comm enc ing construction by the termination date was not caused

by governmental action or inaction, but rather, was due to the

choice s of the new entity taking over the project to initiate

litigation in an at tempt to save money on sewage disposal and to

completely redesign the facility. However, the court focused on

the good - faith requirement, concluding as follows:

The record reflects no evi dence that FPMC

redesigned the facility for construction with

noncom bustible materials for any purpose

other than improving the facilityÓs safety.

The record also reflects no evidence that

FPMC chose to litigate Dade CountyÓs sewer -

line requirement for any reason other than

its honest busin e ss judgment that it had a

reaso nable chance of saving $150,000 in

construction costs. . . . Because the s e wer

litigation affected even foundation - only

plans, FPMC could not have obtained local

approval of its plans prior to the end of the

litigation .

Health Quest , 593 So. 2d at 535.

8 7 . Even more clearly in this case, a coordinated effort by

related entities to carry out a project was established, without

contradiction. Unlike in Health Quest , there was no inaction

until the CON validity period was nearing an end. But just like

in Health Quest , it should be irrelevant that entities other than

the CON holder took the action to move the project forward.

8 8 . AHCA has also argued before, during, and after the

hearing that Petitioner should not have been allowed to present

evidenc e that FARDAÓs conditional approval of the res ubmitted

white paper, as of the second extension request, had become full

approval without condition as of the hearing. According to AHCA,

since the statute requires Petitioner to make the required

showing Ðto the agencyÓs satisfaction , Ñ then Petitioner should be

restricted to presenting evidence of its extension request , and

not allowed to present any evidence of events subsequent to its

submission. AHCA argues that t his proceeding should be

transformed in to a restricted review proceeding, in which

deference should be given to the agencyÓs decision that extension

request did not make the showing to the agencyÓs satisfaction.

8 9 . As stated on the record at the outset of the hearing

(Tr. 10 - 12 ), AHCAÓs argumen t is rejected as contrary to the APA,

which requires a de novo hearing . See § 120.57(1)(k), Fla. Stat.

(Ð All proceedings conducted under this subsection shall be de

novo. Ñ); J.D. v. Ag. for Pers . with Disab . , 114 So. 3d 1127 (Fla.

1st DCA 20 13 ) . While th ere is a temporal element to the

determination to be made in this case, in that Petitioner must

meet its burden of making the good - faith showing that c ommencing

construction was precluded by the extended termination date, the

door cannot be shut to evidenc e of subsequent events to the

extent they evolve from and put in perspective the circumstances

existing when the second extension request was submitted. That

was precisely the situation here, where the recent events proven

at hearing were the continuation and culmination of process es

that w ere ongoing and pending as of the second extension request.

90 . The statutory language Ðto the agencyÓs satisfactionÑ

that is AHCAÓs focus does not change the APAÓs requirement that

an agency cannot make a final decisio n determining a partyÓs

substantial interests until after affording the party a de novo

hearing. The de no vo hearing is an opportunity to formulate

agency action based on evidence presented at hearing .

91. Finally, AHCA proposed in its PRO a brigh t - line rule

that would deem Petitioner in eligible to request a CON extension

because it did not own the land or a leasehold interest in the

land on which the nursing home would be constructed. Once again,

there is no such requirement in the CON extension statute or

rule. To impose such a requirement here would be impermissibly

basing agency action on an unadopted rule.

9 2 . AHCAÓs argument is also inappropriately predicated on

the statutory requirements for commencing construction. AHCA

offers its inter pretation of th e definition of Ðcommenced

constructionÑ as requiring that the CON holder must own the land

or a leasehold interest in the land on which the facility is

being constructed . O nce again, the statute does not say that;

the part of the definitio n of Ðcommenc ed constructionÑ that AHCA

relies on requires Ð proof of an executed owner/contractor

agreement or an irrevocable or binding forced account . Ñ

§ 408.032 (4), Fla. Stat. Even if AHCAÓ s argument had merit, it

would not be germane to this case, b ecause this issue is not

subject to determination here. The question is not whether

Petitioner has met the requirements for commencing construction.

9 3 . AHCA canno t borrow requirements for commencing

construction a nd import them into the CON extension statute . The

C ON extension statute only applies when the requirements to

commence construction are not met. Just as AHCA could not

contend that a building permit must have been obtained applying

AHCA - approved construction documents (one component of com mencing

construction) , or that foundation - forming must have begun

(another component of commencing construction), AHCA could not

reasonably contend that a CON holder must prove there is an

executed owner/contractor agreement or an irrevocable or binding

fo rced account to be eligible for an extension to the CON

validity period .

94. Both parties offer as relevant authority Baker County

Medical Services, Inc. v. Agency for Health Care Administration ,

178 So. 3d 71 (Fla. 1st DCA 2015). AHCA argues that the c ase

stands for the notion that it must strictly follow the extension

statute . Petitioner argues that the case stands for the

proposition that if the standard for granting an extension is

met, AHCA is required to grant the extension. Really, though,

Baker County has little to do with the issues presented here for

determination. In that case, AHCA, an existing provider, and a

CON applicant agreed to settle litigation over whether a CON

should be issued. The agreement provided that the CON would be

issued, but not until after an extended perio d of time. The

court simply determined that AHCA does not have any statutory

authority to defer issuance of a CON, in effect frontloading an

extension to the CONÓ s validity period. The court referred to

the CON exten sion statute for the purpose of making it clear that

that statute did not apply :

Under ordinary circumstances, the certificate

of need at issue would have expired after 18

months, on June 7, 2012, but . . . the

validity period did not commence until a year

later on June 1, 2013. Even then, AHCA

agreed not to license the hospital prior to

December 1, 2016. Whatever authority AHCA

has, colorable or apparent, is not so elastic

as to allow an effective quadrupling of the

statutorily set validity period.

Id. at 77 - 78. In Baker County , then, AHCA could not transform

the CON extension statute to broaden its reach to apply to

ÐextensionsÑ before a CON is even issued (by delaying issuance of

the CON) and after construction has commenced (by delaying

licensure of the constructed facility). This case involves the

opposite: here, AHCA wants to add restrictions to the statutory

standard for a CON extension by injecting requirements not found

in the statute. Insofar as Baker County holds that AHCA may not

expand its authority by rewriting the statute and rule, the case

supports t he conclusions herein that AHCA also cannot narrow the

statute and rule by adding restrictions not found in either

statute or rule.

95. AHCA relies on State Board of Optometry v. Florida

So ciety of Opthalmology , 538 So. 2d 878, 884 (Fla. 1st DCA 1998) ,

as authority for the proposition that it s interpretation s of its

statutes and rules are entitled to deference , even though the

interpretation s might not be the only one s possible or the best

o ne s possible . AHCAÓs argument is an admission that AHCAÓs

interpretations offered in this case add meaning to the CON

extension statute and rule and , as such, constitute impermissible

unadopted rules. The cited case does not legitimize AHCAÓs

interpretat ions that add requirements to the statute and rule.

The cited case was an appeal of a final order in a challenge to

the validity of an agencyÓs adopted rule. The court applied the

principle that reviewing courts accord wide discretion to a n

a genc y in the lawful exercise of its rulemaking authority to set

forth an interpretation of its statute (which need not be the

only or best interpretation) in a promulgated rule .

9 6 . I n all respects , Petitioner has met its burden of

proving that it is entitled to a second 60 - day extension to the

validity period o f CON 10412. AHCAÓs strained arguments in

opposition to the request were neither supported nor reasonable.

Instead, they were puzzling; it remains unclear why AHCA has so

vigorously oppose d th is extensio n request .

97. In accordance with its precedent , AHCA should grant a

60 - day extension from the date of rendition of its final order.

See Miami Jewish Home and Hosp. for the Aged, Inc. v. Ag. for

Health Care Admi n. , Case No. 09 - 0695 (Fla. DOAH May 11 , 20 09 ),

adopted, in part, and modified , ( AHCA July 2, 2009).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Agency for Health Care

Administration issue a final order granting a n extension of an

additional 60 days to the validity period of CON No. 10412, to go

into effect upon rendition of a final order.

DONE AND ENTERED this 27th day of July , 2018 , in

Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHU R

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 Hearings

this 27th day of July , 2018 .

ENDNOTE S

1/ References herein to Florida Statutes are to the 2017

codif ication, unless otherwise noted, as the law in effect at the

time of hearing. T he substantive statute and rule governing CON

extension reques ts have not changed subsequent to the hearing.

2/ AHCA initially requested official recognition of the documents

by a Motion for Judicial Notice filed on April 12, 2018. At the

outset of the hearing, the undersigned ruled that for the most

part , the d ocuments were not appropriate for official

recognition, but that since Petitioner did not oppose allowing

the documents to become part of the record, the documents could

be admitted in evidence as exhibits. The undersigned noted that

regardless of whether documents were officially recognized or

admitted in evidence, to the extent the documents were, or

contained, hearsay, the parties should be prepare d to address the

hearsay issues because of the limitation on using hearsay in

administrative proceedings, e ven without an objection. See

§ 120.57(1 )(c) , Fla. Stat. ; and Fl a. Admin. Code R. 28 -

106.213(3). AHCAÓs argument to the contrary in its PRO , t hat

admission of evidence with a stipulation as to authenticity

should be viewed to waive or cure any hearsay p roblems, is

rejected as contrary to the APA and uniform rules and also

contrary to the undersignedÓs admonitions in admitting the

evidence .

3/ B y agreeing to an extended deadline for post - hearing

submissions beyond 10 days after the filing of the transc ript,

the 30 - day time period for filing the recommended o rder was

waived. See Fla. Admin. Code R. 28 - 106.216.

4/ In its PRO, AHCA proposed a finding to the effect that NHI had

identified a specific location for the nursing home in its CON

application. N o part of t he CON application was offered in

evidence . The record citation offered a s support for the

proposed finding was AHCA Exhibit 16, which is the CON itself,

not the application. Th e CON does not identify a location for

the project other than Pal m Beach County. No evidence in the

record supports this proposed finding.

5/ T he sellersÓ organizational structure is more complicated than

the NuVista structure that uses a wholly - owned prop - co and op - co

in tandem. The seller of the parcel five subl ease is Boca R & D

Finance 16 Parcel 5, LLC. The seller of the parcel eight

sublease is Boca R & D Finance 7 Parcel 8, LLC . The original

third - party developer identified in FARDAÓs Declaration of

Covenants was B oca/Research Park, Ltd. In approximately 2 011,

that entity assigned its interest in the Research Park to Boca

R & D Finance 16 , a sovereign investment fund of the Kuwaiti

government , which assumed the role of developer . That entity

parsed out ownership of the sub - lease hold interests to separate

wholly - owned entities for each parcel . Mr. Peters was the

investment management consultant charged with oversight of this

investment for a two - year period that started in the midst of

negotiations with NuVista for the sale and purchase of parcels

five an d eight , and ended in March 2018. Mr. Peters was a n

active participant on behalf of the seller s in the activities

relevant to this case, and his testimony offered a credible

perspective of one with personal knowledge of the relevant

events .

6/ It is not ed that th e nursing facility was described in FARDA Ós

minutes as a 120 - bed facility, not a 111 - bed facility as approved

by the CON. AHCA has no t raised this discrepancy as relevant to

consideration of NHIÓs extension request , nor would the

undersigned fin d it relevant . Ultimately, the CON would serve as

a limitation to the number of beds that could be licensed after

the facility is constructed . It might be possible for the

building to be constructed with sufficient physical capacity to

house 120 licensed beds, but no more than 111 beds w ould be

licensed under the authority of CON 10412.

7/ In attempting to discount the significance of FARDAÓs approval

of the NuVista site plan submission , AHCA relied solely on

hearsay evidence despite being warned at th e outset of the

hearing that hearsay issues in AHCAÓs exhibits would have to be

addressed, particularly in reference to correspondence authored

by persons who were not identified as prospective witnesses.

AHCAÓs PRO repeatedly relied on and quoted at leng th from a

letter written by FARDAÓs non - member administrative officer,

Mr. Pincus (legal counsel), on which FARDAÓs other non - member

administrative officer, Mr. Duffell , was copied . AHCA went so

far as to inaccurately characterize the letter as the ÐFARD A

position summary.Ñ Instead, a more accurate characterization of

the letter is that it was one of a series of back - and - forth

accusatory, finger - pointing letters, bristling and defensive in

tone, and not reliable on top of being hearsay that cannot be the

sole basis for a finding of fact. § 120.57(1)(c), Fla. Stat.;

Fla. Admin. Code R. 28 - 106.213 (3). Suffice it to say that

communications issues apparently developed, and unfortunately,

the views of FARDAÓs administrative officers appear to have been

colo red by those issues . At the recent FARDA meeting,

Mr. Duffell expressed his resentment over being threatened with

lawsuit s and dragged in to testify in deposition in this

administrative hearing, which w as scheduled for later that same

day. Mr. Duffell w as admonished by the FARDA chair for not being

objective, and he responded by saying, in effect, that it was not

his job to be objective. Hopefully, NuVista can restore

relations with Mr. Duffell and Mr. Pincus , as the y should be

working together to accom plish what the FARDA members believe is

a project that will be good for the Research Park.

8 / As mentioned at the hearing, t he courtÓs opinion does not

focus on the multiple entities involved , although three of them

were appellants: the CON holder (He alth Quest Corporation IV);

its parent (Health Quest Corporation), and the unrelated parent

(Federal Property Management Corporation) that turned the project

over to a wholly - owned subsidiary. T he entity details are laid

out in the underlying Recommended and Final Orders. See Health

Quest Corp. IV, Health Quest Corp. and Fed. Prop . Mgmt. Corp. v.

DepÓt of Health & Rehab. Servs. , Case No. 88 - 3019 (Fla. DOAH

Dec. 9, 1988; HRS Jan. 20, 1989).

COPIES FURNISHED:

John F. Gilroy, III, Esquire

John F. Gilro y, III, P.A.

Post Office Box 14227

Tallahassee, Florida 32317

(eServed)

Richard Joseph Saliba, Esquire

Agency for Health Care Administration

Fort Knox Building III, Mail Stop 7

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Nicole M. Barrera, Es quire

Agency for Health Care Administration

Mail Stop 7

2727 Mahan Drive

Tallahassee, Florida 32308

(eServed)

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

J ustin Senior, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

(eServed)

Stefan Grow, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Shena Grantham, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

Thomas M. Hoeler, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

(eServed)

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.