Category Archives: CON Law

Nursing Home CON Batching Cycle Rapidly Approaching

Now that the moratorium on Certificates of Need for Nursing Homes has been lifted, nursing homes seeking to add beds must participate in AHCA’s CON batching cycles. The first of these batching cycles since the lifting of the moratorium is rapidly approaching. On October 3, 2014, less than a month from now, AHCA will publish its Summary Need Projections in the F.A.W. Once this is published, nursing homes seeking to add beds to their facilities need to comply with a series of rules and deadlines in order to compete for the fixed number of beds available in their district. To learn more about the rules and deadlines read our article here.

A nursing home wishing to compete in this batching cycle needs to begin preparing now. If you need help competing in this upcoming batching cycle, contact the experienced counsel at Smith & Associates.

PREPARING FOR THE RETURN OF NURSING HOME CON PROCEEDINGS

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It’s now old news that the Florida Legislature has lifted the 13-year moratorium on the Certificate of Need program for new nursing homes in Florida. In addition to allowing new skilled nursing facility development projects to be authorized by CON, the legislation includes a variety of provisions that create new CON exemptions and expedited reviews for certain bed additions and facility replacement projects, as well as relaxing some of the standards for assessing need for new skilled nursing facilities and beds. For a full review of the specific provisions adopted in the CON law, see my newsletter article posted on-line at www.smithlawtlh.com. Below I address what skilled nursing facility owners and operators, and potential applicants, should be doing to prepare for the return of nursing home CON proceedings in Florida.

The Batching Cycle Deadlines

Under existing Rules, AHCA has a schedule that governs the procedures and a detailed time-line for applying for a Certificate of Need. Applications for new skilled nursing facilities and bed additions may be submitted two times per year in the “batching cycle” for “other beds and programs.” A “batching cycle” review is required for any party that wishes to obtain a CON for a new facility or bed addition that is not authorized under an exemption or expedited review. The key dates for the next available batching cycle are as follows:

Event	Deadline
Fixed Need Pool Projections	10/03/14
10 days to File Notice of Errors in a Fixed Need Pool	10/13/14
21 Days to File Formal Challenge to Fixed Need Pool	10/24/14
Letter of Intent Filing Deadline	10/20/14
16-day Grace Period Letter of Intent Filing Deadline	11/05/14
CON Initial Application Filing Deadline	11/19/14
Request Public Hearing	14 Days After Publication Of Application Filing in Florida Administrative Register
CON Application Omissions Response Deadline	12/24/14
State Agency Action Reports (SAARs) Issued	2/20/15
Deadline to File Petition for Formal Administrative Hearing to Challenge a SAAR	21 Days After Publication of the SAAR Results in the Florida Administrative Register

Based on the schedule for the next batching cycle, any party wishing to submit a CON Application should immediately begin the process of putting together a “CON Application Team” consisting of at least the following members:

Key management for owner/operators;
Experienced CON counsel;
Experienced health planner;
Experienced financial planner; and
A health care architect.

FIXED NEED POOL PUBLICATION AND CHALLENGES

The process for CON Applications will commence with the publication of fixed need pools on October 3, 2014. The fixed need pool is a projection of the number of new skilled nursing facility beds that will be needed in each nursing home sub-district for a planning horizon that is three years in the future. The Need formula included in AHCA’s existing Rule (which should be adjusted by the changes required in the recent legislation lifting the moratorium) takes into account a variety of factors including: a) current and future population in two age groups (65-74 and 75 and older); b) the most recent bed rates for skilled nursing facilities in the District; c) occupancy rates in the district; d) a target occupancy rate; and e) allocation of beds among sub-districts. The “Net Need” number will be published in the Florida Administrative Register providing any interested parties with notice of AHCA’s projections of the number of needed beds that will be applied to review of any CON Applications submitted in the batching cycle. Unless a party successfully challenges a Fixed Need Pool publication, then the Need is “fixed” and will be applied to all applications in the batch.

The CON statute and applicable rules allow for a party to file a challenge to the publication of a Fixed Need Pool to correct any errors identified in the calculation. A party wishing to challenge a Fixed Need Pool must notify AHCA in writing within 10 days of publication of the Fixed Need Pool detailing any errors in the calculation. If AHCA agrees that an error was made, then it will file and publish a Notice of Corrected Fixed Need Pool. If AHCA disagrees that any error was made, a party may file a Petition for Formal Administrative Hearing within 21 days of the original Fixed Need Pool publication, and the matter will be referred to an Administrative Law Judge at the Division of Administrative Hearings for a formal hearing on the evidence.

LETTERS OF INTENT AND GRACE PERIOD LETTERS OF INTENT

In the upcoming batching cycle, any party interested in filing a Certificate of Need application for skilled nursing facilities or bed additions (non-exempt) must file a Letter of Intent by the deadline of October 20, 2014. If any party files a Letter of Intent in a sub-district, a “grace period” is triggered which allows any other party to submit competing a Letter of Intent to file a competing CON Application in the same sub-district where an applicant has already filed a Letter of Intent. The grace period deadline is November 5, 2014.

THE INITIAL CON APPLICATION

The initial CON Application deadline in the upcoming batching cycle is November 19, 2014. It is not uncommon for parties and their CON team to meet with representatives of AHCA prior to filing the initial CON Application to discuss any potential concerns or issues, and simply to obtain some insight to any issues that AHCA staff may feel are particularly important to address in the CON Application.

Typically a party will file only what is called a “shell application” by the initial application deadline—that is simply signing a blank application form and noting that the remainder of any information will be submitted with the Omissions Response.

Upon receipt of the Initial CON Applications, AHCA notifies each party of any Omissions in the initial Application. These Omissions letters have become boilerplate over the years, and AHCA typically sends a form letter indicating that all responses to all sections of the Application form are required to be submitted by the Omissions deadline.

PUBLIC HEARINGS AND WRITTEN OPPOSITION STATEMENTS

A Public Hearing may be requested after initial CON Applications are filed. A public hearing is an opportunity for interested members of the public, or any party, to provide AHCA with comments in support of or in opposition to any Application. The date and time of the Public Hearing will be published by AHCA. The hearings are typically held in the local Health Council offices in the area where the proposed project will be located shortly after the Omissions deadline. A party may use the Public Records Law to obtain a copy of the CON Application prior to the public hearing.

In lieu of a Public Hearing, parties may submit written statements to AHCA. It is not unusual for AHCA to receive detailed opposition statements from existing providers in the same District in response to a CON Application. Opposition statements must be submitted prior to the Omissions deadline, unless a Public Hearing is requested and held in which case written opposition materials can also be submitted at a public hearing.

OMISSIONS RESPONSES AND REVIEW CRITERIA

The deadline in the next batching cycle to file the Omissions Response to a CON Application is December 24, 2014. The Omissions Response is typically the real meat of the Application, and will usually be a document of 150 pages or more of narrative responses addressing the various CON review criteria, along with required financial schedules, audited financial statements, a financial feasibility analysis, and architectural schematic drawings of the proposed facility or bed addition.

CON Review Criteria set forth in Section 408.035(1), Florida Statutes, include the following:

(a) The need for the health care facilities and health services being proposed.

(b) The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant.

(c) The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care.

(d) The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation.

(e) The extent to which the proposed services will enhance access to health care for residents of the service district.

(f) The immediate and long-term financial feasibility of the proposal.

(g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness.

(h) The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

(i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

(j) The applicant’s designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility.

There are a number of required schedules that pertain to the CON Application financial analysis, including the following:
     Schedule 1: Estimated Project Costs
     Schedule 2: Capital Projects List
     Schedule 3: Source of Funds Documentation
     Schedule 4: Historic Utilization
     Schedule 5: Projected Utilization
     Schedule 6: Staffing and Salaries
     Schedule 7: Projected Revenues
     Schedule 8: Projected Expenses and Net Income
     Schedule 9: Architectural Criteria
     Schedule 10: Project Completion Forecast
     Schedule 11: Fines, Levies and Overpayments.

Additionally, the CON Application includes a required Form setting forth Conditions Predicated on Award of CON. This form allows an Applicant to accept specific Conditions on the CON which may include “enticements” or “sweeteners” offered by an Applicant to make its CON Application more appealing than other applicants. Common conditions include a specific site location; implementation of a specific program or service that may be lacking in the community; enhanced staff or staff qualifications; and a specific minimum percentage of charity, indigent or unfunded patients to be served. Virtually anything may be offered as a Condition, and in some instances CON Conditions may make the difference between approval and denial of an application.

The Nursing Facility CON Rule (59C-1.036(3), Florida Administrative Code) also includes the following Review Criteria pertaining to an Applicant’s Quality of Care:

(e) Quality of Care. In assessing the applicant’s ability to provide quality of care pursuant to Section 408.035(1)(c), F.S., the agency shall evaluate the following facts and circumstances:

1. Whether the applicant has had a Chapter 400, F.S., nursing facility license denied, revoked, or suspended within the 36 months prior to the application.

2. Whether the applicant has had a nursing facility placed into receivership at any time during the period of ownership, management, or leasing of a nursing facility in the 36 months prior to the current application.

3. The extent to which the conditions identified within subparagraphs 1. and 2. threatened or resulted in direct, significant harm to the health, safety or welfare of the nursing facility residents.

4. The extent to which the conditions identified within subparagraph 3. were corrected within the time frames allowed by the appropriate state agency in each respective state and in a manner satisfactory to the agency.

(f) Harmful Conditions. The agency shall question the ability of the applicant to provide quality of care within any nursing facility when the conditions identified in subparagraphs (e)1. and (e)2. resulted in direct, significant harm to the health, safety or welfare of a nursing facility resident, and were not corrected within the time frames allowed by the appropriate state agency in each respective state and in a manner satisfactory to the agency.

There are also additional Review Criteria set forth in Rule 59C-1.030, Florida Administrative Code, which address specific needs of various underserved population groups, and how the applicant proposes to enhance access to services for such groups.

Finally, Applicants typically will include an “adverse impact” analysis to demonstrate that approval of the CON Application will not imperil or jeopardize the continued operation of other existing skilled nursing facilities.

COMPARATIVE REVIEW AND THE STATE AGENCY ACTION REPORT

Once all CON Omissions Responses are filed, AHCA then conducts a comparative review of CON Applications that are submitted for beds or facilities located in the same sub-district. The review includes an assessment of each Applicant’s proposal, and a determination ultimately of which applicant or applicants best meet the statutory and rule review criteria. There is no fixed weight applied to any criteria, and the analysis by AHCA involves a weighing and balancing of all the review criteria.

AHCA’s initial decision for all CON Applications submitted in each sub-district is announced in a State Agency Action Report (SAAR). The SAAR sets forth the comparative review of the CON Applications, and the key points that resulted in AHCA’s recommendation to approve or deny an Application. Because so many applications are similar, it is often difficult for AHCA to articulate the precise reasons why one applicant may have been selected for approval over other applicants.

In a bygone era of CON review, decisions to outright deny or disqualify a CON Applicant from consideration were often made based upon perceived technical defects in an Application. Today, such disqualification of a defective CON Application is less common. Decisions typically address AHCA’s perception of the relative merits of each applicant’s proposal; although technical defects can still hurt the overall review of the merits of an application.

FORMAL ADMINISTRATIVE HEARINGS

After issuance of a SAAR, any co-batched applicant, as well as any existing provider of skilled nursing facility services in the same health planning District, may file a Petition for Formal Administrative Hearing to challenge AHCA’s initial decision. Thus, a co-batched applicant can request a formal hearing to demonstrate through evidence that its application is superior to other applicants that were approved, or conversely that other applicants had defects or problems with the application that should have resulted in denial. Similarly, an existing provider in the same District may challenge the approval of an applicant for a new facility based upon a demonstration that its existing facility will suffer an adverse impact, and that a preliminarily approved application does not on balance meet the CON review criteria set forth in statute and rule.

If Petitions are filed, the cases are referred to the Division of Administrative Hearings (DOAH) for assignment of an Administrative Law Judge to review the decisions being challenged. This hearing is considered a “de novo” proceeding, which means that the ALJ should not be influenced by AHCA’s preliminary decision set forth in the SAAR—and the SAAR is “not clothed with a presumption of correctness.”

An administrative hearing is similar to a civil court trial, with slightly relaxed rules of evidence. Parties conduct written discovery, and conduct pre-trial depositions of witnesses. The parties then present their case through expert testimony, lay witness testimony, and submission of documentary evidence. There is an opening statement, direct examination and cross examination of witnesses by attorneys, and legal arguments over admissibility of evidence. One of the most common arguments in CON cases concerns whether the evidence being presented amounts to an “impermissible amendment” of a CON Application. By Rule and established case law, a CON Applicant cannot amend its application to include new concepts or theories for approval that were not set forth in the CON Application. However, an Applicant may introduce new evidence, new or updated data, and testimony that elaborates and explains concepts or theories that were included in the CON Application. These issues are often hotly debated during the course of a CON hearing.

By statute, a party requesting a hearing has a right to demand that the hearing be commenced within 60 days of assignment of an ALJ at DOAH. Most hearings are not done on this expedited schedule, however, and it is not unusual for the hearing process to take 4-6 months or longer. Hearings typically last about 2-3 days for each party involved. In multi-party proceedings involving several applicants, existing providers, and AHCA, a final hearing may last 3-4 weeks. All final hearings are held at DOAH headquarters in Tallahassee.

Upon conclusion of a formal hearing, the parties are required to submit a Proposed Recommended Order (PRO) for the ALJ’s review and consideration. This is typically filed 30 days or so after the final hearing. The PRO includes proposed Findings of Fact as well as proposed Conclusions of Law. By Rule a PRO is supposed to be no longer than 40 pages; but is not unusual for an ALJ to expand the number of pages to 60 or 80 pages depending on the number of parties involved. The ALJ reviews all PROs submitted by the parties and then issues a decision in a Recommended Order.

EXCEPTIONS AND THE FINAL ORDER

Once the ALJ issues a Recommended Order, the case is remanded back to AHCA for issuance of a Final Order. Parties may file “Exceptions” to the Recommended Order to explain why the ALJ’s decision is in error. In issuing a Final Order, AHCA may not reject an ALJ’s findings of fact, unless the Agency reviews the entire record, and finds that there is no “competent, substantial evidence” to support a specific finding. It is not the role of AHCA to reweigh the evidence, or judge the credibility of witnesses, or to substitute its balancing of the evidence for that of the ALJ. As to Conclusions of Law, AHCA cannot disturb a conclusion unless it is on a legal matter that is within AHCA’s expertise and jurisdiction (e.g., its governing statute and rules) and AHCA must state with particularity its reasons for rejecting or modifying the conclusion of the ALJ, and must make a finding that its substituted or modified conclusion of law is as or more reasonable than the ALJ’s conclusion.

The issuance of a Final Order by AHCA is the end of the formal hearing process, and unless a judicial appeal is taken, the CONs will be issued or denied as set forth in the Final Order.

FURTHER APPEALS

A party may appeal the Final Order to a District Court of Appeal. This appeal is limited only to a review of the record by a three judge panel based upon legal arguments submitted by the parties’ attorneys in legal briefs.

CONCLUSION

Anyone who operates or wishes to operate a Skilled Nursing Facility in Florida should pay careful attention to the CON process that will begin in October of this year. There will be ample opportunities for parties that are seeking to expand skilled nursing operations in Florida. The CON process also includes protections for those with existing operations that could be adversely impacted by a CON being issued to another facility. Thus, whether you are seeking approval for new nursing home development or are simply seeking to protect your existing operation, the return of nursing home CON in Florida is likely to be of interest.

Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

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Early Effects of the New CON Laws

We posted before about how the lifting of the moratorium CON Regulations for Nursing Homes would alter the nursing home regulation landscape. Now that the law has been passed and the moratorium actually lifted, the effects are beginning to be felt. Recently, AHCA posted its list of applicants for the “1st Other Beds & Programs Batching Cycle of 2014.” The list can be found here.

What is readily apparent is that the existing providers are getting in early to raise the bar before competitors have a chance to enter the market now that the CON moratorium has been lifted. If you are a nursing home provider and you need help navigating these new laws, we can help. Contact us here for a free consultation.

Nursing Home Certificate Of Need Returning In Florida: Ready, Set, Go!

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After a moratorium that has lasted 13 years, Florida is preparing to reactivate its Certificate of Need (CON) program for new community nursing homes or skilled nursing facilities. Originally enacted in 2001 as a response to concern over an ever-growing state Medicaid budget, Section 408.0435, Florida Statutes, prohibited the Agency for Health Care Administration (AHCA) from issuing any CON for a new nursing home. Under the original legislative bill imposing this moratorium, it was to last only five years. However, it was extended by the Legislature for five more years in 2006 and then extended again in 2011. Now, under a pair of bills winding through the House and Senate, the Florida Legislature appears poised to repeal the moratorium and allow for new nursing home CONs to again be issued in the State. Those in the nursing home or skilled nursing industry who have seen their development plans thwarted over the past decade can prepare now to take advantage of the re-opening of the CON program.

Under committee substitutes for House Bill 287 (now CS/HB 287) and Senate Bill (now CS/SB 268) the moratorium enacted in Section 408.0435, Florida Statutes, would be repealed effective July 1, 2014, and the CON program for nursing homes would be reactivated with some new twists allowing for additional or expanded exemptions and “expedited review” for certain projects, including:

Exemptions: No CON Approval Needed

The existing CON exemption for replacement of a nursing home on the same site, or within 3 miles of the same site, would be expanded to allow for replacements within 5 miles of the existing site; and limits this exemption to only those replacements in the same nursing home “sub-district” under AHCA rules.

Creates a new exemption for facilities to add either 30 beds or 25% bed addition (whichever is less) to a facility that is being replaced.

Continues the existing “high occupancy” CON exemption to add 10 beds or 10% of the facility’s existing number of beds, but lowers the threshold to qualify from 96% annual occupancy to 94% annual occupancy.

Authorizes a new exemption for facilities with a common ownership interest to combine beds or transfer beds between facilities in the same district if there is no increase in the total number of beds in the district and the site to which beds are transferred is within 30 miles from the original location.

Expedited Reviews: Fast-Track Approval

Expands existing law allowing for expedited review to replace a nursing home within the same district under certain conditions, and now allows for replacement anywhere within a 30-mile radius, even outside of the existing District.

Allows for expedited review of replacement facilities that will be located outside of 30 miles from the existing site provided that the replacement location is within the same sub-district or an adjoining sub-district. However, if the move will be to an adjoining sub-district, the existing nursing homes in the adjoining sub-district must have had at least 85% occupancy in the last six month.

Amends existing provisions for allowing for expedited review of relocation of beds to a facility in the same district, by allowing beds to be relocated to another facility or a new facility in the same district or in an adjoining district, so long as there is no increase in the overall number of beds in the state.

Standing to Challenge Exemptions and Expedited Review Applications

There are clear benefits to a CON exemption or expedited review application, chief among which is the ability to apply at any time without having to wait for the twice-per-year competitive review batching cycles and publication of a “fixed need pool” by AHCA. Instead, an applicant for an exemption or expedited review can apply at any time, and the review and approval process is much shorter.

But does approval under an exemption or an expedited review process protect an applicant from potential legal challenges by existing providers in the same geographic area? It is often erroneously believed by applicants for an exemption or an expedited project that AHCA’s decision to approve the project cannot be challenged. However, Section 408.039(5)(c), Florida Statutes, specifically allows that existing providers in the same service district can challenge a proposed AHCA CON approval of a project whether that preliminary approval is the result of a batched comparative review or under an expedited review process. While it is uncommon, there is legal standing for existing providers to challenge the issuance of an expedited CON approval through the normal process under the Florida Administrative Procedure Act (Chapter 120, Florida Statutes) which includes the right to seek a full formal administrative hearing to resolve any factual disputes before an independent Administrative Law Judge assigned by the Division of Administrative Hearings (DOAH). Similarly, the granting of a CON exemption can be challenged and subject to a formal administrative hearing if there are factual disputes as to whether or not an applicant actually meets the legislative criteria for the CON exemption. University Community Hospital v. Department of Health and Rehabilitative Services, 555 So. 2d 922 (Fla. 1st DCA 1990).

Comparative Review Process

In addition to the changes to CON exemptions and CON expedited review applications described above, the lifting of the moratorium on CON approvals for new nursing homes will revive the existing process for comparative review of competing CON Applications for new facilities or bed additions to existing facilities that are not exempt or subject to expedited review. This process includes the following procedural steps with the changes being proposed in the pending House and Senate Bills noted:

Publication of a Fixed Need Pool: Under the established CON process, AHCA will publish a “fixed need pool” for nursing home beds in the Florida Administrative Register two times per year under the formula set forth in Rule 59C-1.036, Florida Administrative Code. The current rule formula projects the need for new nursing home beds in a future three year planning horizon, taking into account: the projected population in the District for population ages 65 to 74 and ages 74 and above; the use rates for usage of nursing homes by these age groups in the District; and the current bed inventory and occupancy. Any party may challenge the accuracy of AHCA’s published fixed need pool by filing a notice of any errors within 10 days of the publication, and filing a Petition for Formal Administrative Hearing to challenge any uncorrected errors within 21 days of the published Fixed Need Pool.

Filing of Letters of Intent: Once the need is established, any person or entity that wishes to apply for a new nursing home, or addition of beds, must first submit a “Letter of Intent” identifying the number of beds being sought and the location by District, sub-district and county. The filing of a Letter of Intent triggers a “grace period” during which any other parties may submit a competing Letter of Intent for a project that will be located in the same District. A party is free to apply for any number of beds that are within AHCA’s published projection of fixed need. A party may also apply for beds under “special circumstances” or “not normal circumstances” for a new facility or bed addition regardless of the number of beds projected in the published fixed need pool.

The CON Application and Omissions Response: Once AHCA receives all initial and grace period Letters of Intent, the CON Applications are submitted by the applicants setting forth in detail the basis of the application and presenting data and analysis to demonstrate compliance with the statutory and Rule review criteria. See Section 408.035, Florida Statutes, and Rule 59C-1.030 and 59C-1.036, Florida Administrative Code. The Application is typically submitted in two filings: an initial or “Shell” application that includes the required forms, and an Omissions response with detailed information and analysis. Typically, an application will include a Need Analysis, Utilization Forecast, Financial Pro Formas, a short-term and long-term financial feasibility analysis, and an architectural narrative and detailed schematic drawings for the proposed project.

If the application is alleging “not normal circumstances,” the applicant must demonstrate need by showing that existing facilities are unavailable or inaccessible, the quality of care in the service area is suffering from overutilization, or by providing other information to illustrate that the situation is not “normal” in the service area. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So. 2d 889 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services v. Johnson & Johnson Home Health Care, Inc., 447 So. 2d 361, 363 (Fla. 1st DCA 1984); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986). It has been held that there is no limitation to circumstances that may be shown to constitute a “not normal” situation warranting approval of an application in the absence of published need, but it is common for applicants to discuss “barriers to access” including geographic, financial, cultural or programmatic barriers.

AHCA Review of Competing Proposals in the Same District: Once all applications and responses are submitted, AHCA is required to conduct a comparative review of applications for new facilities or beds located in the same District. In conducting its review, AHCA approves the application or applications it finds best meet the projected need and the statutory and rule review criteria.

The proposed legislation to lift the moratorium on nursing home CON approval includes some important changes to AHCA’s review of applications under existing statutes and rules, including the following:

Aggregating Need in Sub-Districts: Allows an Applicant to aggregate the need in contiguous sub-districts for purposes of demonstrating need for a new facility or new beds. The current statute and rule require the applicant to only consider need in the sub-district where the facility will be located. If using an aggregated “need” from two or more sub-districts under the new bill requirements, the facility must be located in the sub-district where the highest annual occupancy of two sub-districts are aggregated. If more than two sub-districts are aggregated to support an argument for need, then the facility must be located so as to provide reasonable geographic access to residents of all the sub-districts. Interestingly, the bills provide that need will continue to be shown under the Rule formula in contiguous sub-districts where the facility is not built, even though the facility is being located to address the projected need in that sub-district.

Lower Occupancy Target in Rule: Requires that AHCA lower the desired occupancy rate that the agency uses in its rule for determining need from 94% to 92% occupancy in the sub-district.

Positive Treatment for De-licensing Beds in Areas with No Need: The bills require that AHCA establish a positive CON application factor for an applicant in a sub-district where need has been published, if the applicant agrees to voluntarily relinquish licensed nursing home beds in one or more sub-districts where no need is projected. The applicant must show that it operates, controls, or otherwise has an agreement with the owner to ensure that such relinquishment of beds will occur if the new application is approved.

Challenges to State Agency Action Reports: AHCA’s decision is announced in a State Agency Action Report (SAAR). Any competing applicant in the same District, as well as existing providers in the same District, have legal standing to initiate or intervene in a formal administrative proceeding to challenge the Agency’s preliminary decision that is announced in the SAAR. Thus, an applicant who believes it has a superior CON application, or who otherwise believes that AHCA improperly denied its application has the right to a formal hearing before an Administrative Law Judge (ALJ) at DOAH to present evidence to support its application, or to demonstrate that another applicant should not be approved or has an inferior application, or to demonstrate that more than one applicant should have been approved under the circumstances that exist. Similarly, existing providers have the right to initiate or intervene in formal proceedings to demonstrate that a new applicant or applicants should not be approved under the statutory or rule review criteria. The review by the ALJ is “de novo,” meaning that the agency’s SAAR is not entitled to any presumption of correctness; but, rather, the ALJ reviews the evidence anew to make a determination.

Parties in an administrative hearing have the right to present witnesses, documentary evidence, and to submit Proposed Recommended Orders that include Findings of Fact and Conclusions of Law. An ALJ reviews the evidence, and the Proposed Recommended Orders and then issues a “Recommended Order.”

A party may file “Exceptions” to the Recommended Order within 15 days after the ALJ’s issuance of the order. AHCA then reviews all Exceptions to the Recommended Order and issues a Final Order. However, AHCA, as a state agency, is limited by the Administrative Procedure Act in its authority to overturn the findings by an ALJ. Factual issues susceptible of ordinary methods of proof that are not infused with policy considerations are the prerogative of the ALJ as the finder of fact.” Heifetz v. Dep’t of Bus. Regulation, Div. of Alcoholic Beverages & Tobacco, 475 So. 2d 1277, 1281 (Fla. 1st DCA 1985) (citing McDonald v. Dep’t of Banking & Fin., 346 So. 2d 569 (Fla. 1st DCA 1977)). This includes consideration of the evidence presented, resolution of conflicts in the evidence, judging credibility of the witnesses, drawing permissible inferences from the evidence, and reaching “ultimate finding[s] of fact based on competent, substantial evidence.” Id. (citing State Beverage Dep’t v. Ernal, Inc., 115 So. 2d 566 (Fla. 3d DCA 1959)). An “agency may not reject the [ALJ’s] findings unless there is no competent, substantial evidence from which the finding could reasonably be inferred. The agency is not authorized to weigh the evidence presented, judge credibility of witnesses, or otherwise interpret the evidence to fit its desired ultimate conclusion.” Id. (emphasis added) “If there is competent[,] substantial evidence in the record to support the ALJ’s findings of fact, the agency may not reject them, modify them, substitute its findings, or make new findings.” Rogers v. Dep’t of Health, 920 So. 2d 27, 30 (Fla. 1st DCA 2005). Only in the narrow area where a Conclusion of Law or recommendation is within the substantive jurisdiction of the agency under its governing statutes and rules, may the agency overturn such conclusions and recommendations. Even in these narrow circumstances, the agency, in rejecting or modifying a conclusion of law by the ALJ, must state with particularity its reasons for rejecting or modifying the conclusion, and must make an affirmative finding that its conclusion is as, or more reasonable than, the ALJ’s conclusion that is being rejected.

A party may appeal the issuance of a Final Order to the District Court of Appeal where the project would be located, or to the First District Court of Appeal in Tallahassee.

Limitation on New Nursing Home CONs

Although the lifting of the moratorium on CONs for nursing homes will present some new opportunities, there are limitations. First and foremost, the bills currently under consideration would each place a statewide cap on the number of new nursing home beds that could be approved from July 1, 2014 to July 1, 2019. Under both the House and Senate Bills the cap would be 3,750 beds statewide. Once the cap is reached, both bills provide that no further CONs may be granted by AHCA.

Based upon a preliminary analysis conducted by National Healthcare Associates (NHA), a national consulting firm with headquarters in Coral Gables, it is likely that positive fixed need for additional nursing home beds will occur under the rule need formula, including the new statutory changes. Bed need using currently available data, would be shown for the following sub-districts:

Sub-district	Counties	Net Need
1-1	Escambia, Santa Rosa	185
1-2	Okaloosa	14
2-1	Gadsden, Holmes, Jackson, Washington	71
2-2	Bay	82
2-3	Calhoun, Franklin, Gulf, Liberty, Wakulla	33
2-4	Leon	106
2-5	Jefferson, Madison, Taylor	23
3-1	Columbia, Hamilton, Suwannee	121
3-2	Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, Union	275
3-3	Putnam	57
3-4	Marion	167
3-5	Citrus	100
3-6	Hernando	82
3-7	Lake, Sumter	159
4-1	Nassau, Duval	144
4-2	Baker, Clay, Duval	214
4-3	St. Johns, Duval	178
4-4	Flagler, Volusia	160
5-1	Pasco	62
5-2	Pinellas	82
6-1	Hillsborough	219
6-2	Manatee	1
6-4	Highlands	30
6-5	Polk	244
7-1	Brevard	133
7-2	Orange	353
7-3	Osceola	151
7-4	Seminole	129
8-1	Charlotte	10
8-2	Collier	32
8-5	Lee	279
9-1	Indian River	12
9-2	Martin	2
9-3	Okeechobee	25
11-1	Miami-Dade	269

Under the new Bill changes, an applicant could have the option of aggregating the need in multiple contiguous sub-districts to demonstrate sufficient need for a new facility. Importantly, the current need rule contains a “default to zero” provision based on occupancy rate in a sub-district – i.e., if the sub-district average occupancy is less than 85% for the most recent six month any calculated need defaults to zero. There is presently no proposed legislative change to this required average occupancy. According to NHA the average occupancy in the following sub-districts was below the required 85% based upon the most recent six month reporting period (July 1, 2013 through December 31, 2013), and therefore there would be no need for any additional beds under the “default to zero” provisions of the Rule:

1-3 (Walton)
6-2 (Manatee)
6-3 (Hardee)
8-1 (Charlotte)
8-3 (DeSoto)
8-4 (Glades and Hendry)
8-6 (Sarasota)
9-4 (Palm Beach)
9-5 (St. Lucie)
10 (Broward)
11-2 (Monroe)

Thus for large portions of the State, it is expected that there will be published numeric need and applicants will have the ability to compete for the published bed need.

Looking at factors other than published need, according to NHA, there are barriers that exist in some parts of the State. These barriers must be identified and analyzed by an applicant to determine whether there is sound health planning justification for approval of a new facility, or of additional beds, even where there is zero published need. Every area or sub-district must be analyzed based upon the unique facts and circumstances applicable to that area.

Conclusion

The lifting of the 13-year moratorium will bring dramatic changes to the CON landscape for nursing homes in Florida. It will undoubtedly present new opportunities for nursing home and skilled nursing facility providers that have been unable to proceed with business expansion plans over the past 13 years. For existing providers who are operating efficiently at high occupancy, the lifting of the moratorium may present challenges by prospective CON applicants and market entrants taking advantage of the new and expanded exemption and expedited review process.

Although the legislative session is not yet over, and it is possible that the bills to lift the moratorium will not pass, current progress of the bills indicates likely passage. All nursing home and skilled nursing operators and prospective applicants should take note and should be ready to respond to this dramatic change.

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Geoffrey D. Smith is a shareholder in the law firm of Smith & Associates, and has practiced in the area of health care law and CON regulation for over 20 years.

New Certificate of Need Law

During the 2008 General Legislative Session, a major overhaul of Certificate of Need review for new general hospital projects was adopted. Senate Bill 2326 was signed into law by the Governor effective May 19, 2008 (Ch. 2008-29, Laws of Florida). These legislative changes do not apply to any CON Application filed prior to the effective date of the Act. Therefore, under AHCA’s batching schedule, the new law will be applied for the first time to CON Applications for new hospitals filed in the next batching cycle, which has a Letter of Intent filing deadline of August 11, 2008.

The substantial changes to CON review for new hospitals were the result of the Governor’s initiative to completely eliminate CON review for new hospitals. However, as a result of widespread opposition to CON repeal in the hospital industry, including opposition from the Florida Hospital Association, and virtually every hospital provider in the State, the compromise bill that was ultimately adopted by the Legislature significantly streamlines, but does not eliminate, the CON review process for new hospitals. The following is an overview of the substantive and procedural changes to CON review requirements.

Reduction in CON Review Criteria for New General Hospitals

A major component of SB 2326 is the reduction of the statutory review criteria that will apply to review of new general hospital CON projects. It is important to note that these legislative changes apply only to new general hospital projects, and will not effect CON Applications for the dwindling list of other beds or services that are still subject to CON review. Thus, these revisions will not apply to hospice services, specialty hospitals, non-exempt NICU proposals, comprehensive medical rehabilitation proposals, and open heart surgery (until such time as CON for open heart surgery is replaced by AHCA’s pending proposed licensure rules for adult cardiovascular services). It is somewhat unclear whether the proposed rules will apply to Long Term Acute Care Hospitals, although it seems likely that AHCA will apply the new law to new LTACH CON proposals.

The current statutory review criteria are contained in Section 408.035, Florida Statutes. The following review criteria are completely eliminated for review of new general hospital CON Applications, and therefore will not be used in reviewing future CON Applications for new hospitals:

(c) The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care.

(d) The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation.

(f) The immediate and long-term financial feasibility of the proposal.

(h) The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

(j) The applicant’s designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility.

The rationale for the elimination of these criteria is that a decision on a new hospital should be based on true issues of need and access to hospital care services, and not upon technical application issues. Thus, issues related to “Schedule 6 – Proposed Staffing” and a proposed hospital’s ability to recruit qualified medical, clinical, and technical staff in the face of labor shortages, will no longer be relevant to review of new hospital CON proposals. Likewise, issues pertaining to “Schedules 7 and 8 – Projections of Revenues and Expenses” are likewise eliminated as relevant to a new hospital proposal. Finally, any matters that pertain to the proposed architectural plans are eliminated from review.

It will be a difficult task for AHCA to apply the reduced criteria, as many of the eliminated review criteria were issues that have been commonly used as “distinguishers” among competing CON applicants. With the elimination of these criteria, there are fewer issues for AHCA to draw meaningful comparisons and contrasts between applicants proposing to serve the same area.

The criteria remaining that will be reviewed for new general hospital proposals include only the following:

(a) The need for the health care facilities and health services being proposed.

(b) The availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district of the applicant. (Note: “quality of care” is eliminated from consideration under this criteria for new hospitals.)

(e) The extent to which the proposed services will enhance access to health care for residents of the service district.

(g) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness.

(i) The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent.

Thus, the focus of CON review and administrative hearings will be limited to these criteria focusing primarily upon issues of need, access to services, competition, and provision of indigent care.

New CON Application Content Requirements

The wording of the new statute for CON Application Content is awkward, but appears to eliminate all of the currently existing content requirements for new hospital CON projects. Thus, it appears a CON Application for a new hospital project will no longer be required to include:

A listing of all capital projects planned, approved or underway
Sources of funds for planned capital projects
Two years of financial pro forma projections
An audited financial statement of the applicant for most recent two years

In replace of these familiar Application Content items, SB 2326 establishes new content items for general hospital projects, including:

a detailed description of the proposed project and a statement of its purpose and the needs it will meet
the proposed project’s location
the primary and secondary service area, defined by zip code (primary service area is first 75% of patients, and secondary is all remainder)
a statement of intent, that if approved, the applicant will supply proof of financial ability to operate within 120 days. (AHCA will establish the financial documentation requirements, such as revenues and expenditures; basis for financing; and anticipated cash flows; and access to contingency financing.)

It is likely that AHCA will propose new rules and develop a new CON Application form to address these new requirements for hospital projects.

Limits on Ability to Challenge a CON Award

In addition to limiting the specific statutory review criteria at issue for new hospitals, the new law also imposes specific procedural limits on the ability of an existing hospital to file a challenge to approval of a new hospital.

Within 21 days of a CON Application for a new general hospital being filed and deemed complete, any existing hospital seeking to ultimately challenge the award of a CON must provide a detailed written statement of opposition to AHCA and to the CON applicant. Although not specified in the new law, these opposition statements should include both health planning information and data, as well as legal arguments, evaluation of case precedent, and overall application of statutory and rule criteria to the specific facts of the case. In many ways, such opposition statements should be similar in scope and depth to a Proposed Recommended Order – summarizing and detailing all of the facts and law that support the denial of a proposed CON Application. The applicant will then have 10 days from the receipt of the detailed statement of opposition to file a written response.

Only competing applicants, and existing hospitals that filed the required detailed written statement of opposition have the right to petition for a formal administrative hearing to challenge the Agency’s preliminary approval of a CON for a new hospital. Such challenges are limited in scope to only those issues raised in the detailed written statement of opposition.

However, an administrative law judge may, upon showing of good cause, expand the scope of the hearing. In seeking to expand the issues, the moving party must provide substantial and detailed facts and reasons for the failure to include the issues in the written statement of opposition. In all likelihood, administrative law judges will be reluctant to allow any significant expansion of the issues beyond the matters addressed in the detailed written statement of opposition, absent a showing that the matters could not have been raised at that time. But exceptions are allowed. For example, an administrative law judge could allow new issues to be litigated based upon information produced during the discovery process only after the submittal of the statement of opposition, and could not have been otherwise available to the opponent of the project.

New Time Frame for Hearing

The legislative amendments mandate that administrative hearings for new hospital CON Applications must be commenced within six months after an administrative law judge has been assigned. The law specifically provides that a continuance may not be granted absent a finding of extraordinary circumstances by the administrative law judge. This will likely eliminate the current practice where it is common for new hospital cases to take up to a year or longer to proceed to final hearing.

New Post Final Order Procedures

The legislative amendments include several new post Final Order procedures for new hospital CONs.

First, the new law provides that AHCA shall revoke the CON if the proposed location of the new hospital changes from what is specified in the CON Application, or if the primary service area of the proposed hospital changes from what is identified in the CON Application. Parties that participated in the administrative hearing, have standing to participate in any subsequent CON revocation proceedings based upon changed hospital location or service area. AHCA may allow such changes to location or service area if it is determined that such changes will enhance access to hospital services. It is not clear in the law whether this provision on CON revocation will apply to a hospital that is constructed, licensed, and becomes operational and then has a significant deviation in Primary Service Area from what was projected in the CON Application.

Second, the new law provides that a CON Applicant must submit proof of financial ability to operate and fund the project within 120 days of issuance of the Final Order. AHCA is to determine (presumably through rulemaking) the type and form of financial documentation to be submitted. Any party who participated in an administrative hearing on the CON may submit written comments concerning the adequacy of the financial documentation submitted; however, such party does not have standing to initiate or participate in any formal administrative hearing that may occur on the issue of financial ability to operate.

Additionally under the new law, AHCA may require a hospital licensee to provide proof of financial ability to operate at any time there is evidence of financial stability, including but not limited to unpaid expenses necessary for basic operations of the provider. This provision is interesting as it applies to “hospital licensees” (as opposed to CON applicants), and thus could be applied at any time after the hospital is operational. This appears to provide AHCA with new authority to “revoke a CON” for an operational hospital based upon financial instability.

Judicial Appeals

The new law includes some very substantial changes concerning attorney fees and costs for parties that undertake an appeal of a Final Order to the District Court of Appeal. Under these changes, an Appellant is liable for up to $1 million in attorney fees and costs, including fees and costs from the beginning of the original administrative hearing. Additionally, the party appealing must post a $1 million appeal bond. This will provide a strong disincentive for any party to pursue a judicial appeal of a Final Order in a CON proceeding. This provision may be subject to legal challenge as an unconstitutional impediment to access to the courts.

Conclusion

Legislative changes to CON regulation for proposed new hospitals will have significant impact on future CON Application review and challenges by existing hospital providers. Whether this streamlining of the CON process will satisfy critics of CON review remains to be seen.