STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION 1. Applicant/CON Action Number SF Palm Beach, LLC/CON #10176 2 North Palafox Street Pensacola, Florida 32502 Authorized Representative: Craig Robinson, President Gulf Coast Health Care, LLC (800) 861-9907 2. Service District/Subdistrict District 9/Subdistrict 9-4 (Palm Beach County) B. PUBLIC HEARING No public hearing was held or requested on the proposed project to construct a new 60-bed community nursing home through delicensure of 60 beds at Edward J. Healey Rehabilitation and Nursing Center. Ronald J. Wiewora, M.D., MPH, Chief Executive Officer, Health Care District of Palm Beach County, provided a letter which states that The Health Care District of Palm Beach County ( District ) is the licensee of the Edward J. Healey Rehabilitation and Nursing Center, a 198-bed community nursing home in Health Planning District 9, Nursing Home Subdistrict 9-4, Palm Beach County. The District hereby agrees to voluntarily de-license 60 of its licensed beds at Edward J. Healey should the CON be approved. He also states that The District hereby further agrees that it will submit a licensure application to reduce the number of licensed community nursing home beds at Edward J. Healey Rehabilitation and Nursing Center by 60 beds, no later than the date that SF Palm Beach, LLC submits its initial licensure application for the new 60-bed facility. Dr. Wiewora adds that since both facilities are located within Nursing Home Subdistrict 9-4, Palm Beach County, no net increase in the number of nursing home beds in Palm Beach County will occur if the CON is approved.
Letters of Support The applicant submitted two support letters that were signed and dated on November 14 and 30, 2012. Below is a brief summary of the letters. Dr. David Ijac, M.D., Medical Director of Boynton Health Care Center, an affiliate of Gulf Coast Health Care wrote There are many times that it is difficult getting patients admitted to skilled nursing facilities from the hospital or other setting due to the limited available space. It would be extremely important that approval for this expansion be given to a highly rated company like Gulf Coast Health Care which oversees Five Star facilities like Boynton Health Care Center. Dr. Ijac also expressed concern that in the future, limited bed space will force patients to seek nursing home care far from home, resulting in a disruption of care and patient isolation if additional nursing home beds are not available. Sharon Reuben, a resident of Boynton Beach, wrote to support Gulf Coast Health Care opening a second facility in Palm Beach County, noting the exploding population, particularly seniors in need of skilled nursing care. Ms. Reuben also noted Boynton Health Care Center s reputation for quality service to the community. C. PROJECT SUMMARY SF Palm Beach, LLC (CON #10176) proposes to construct a new 60-bed community nursing home in District 9, Subdistrict 9-4, Palm Beach County, through the voluntary delicensure of 60 community nursing home beds from the Health Care District of Palm Beach County d/b/a Edward J. Healey Rehabilitation and Nursing Center. The location of the new facility is still to be determined. The project is forecasted to open January 1, 2016. If approved, the project will add no new beds to the subdistrict. SF Palm Beach, LLC is an affiliate of the parent company, Gulf Coast Health Care, LLC. The parent and subsidiaries own 44 skilled nursing facilities and assisted living facilities in the Southeastern United States. The applicant s parent operates two existing facilities in Palm Beach County. If approved, the project will provide resident centered care with all private rooms, private handicap accessible bathrooms, two exterior courtyards, therapy suite, dining options, social gathering spaces, and Wi-Fi access. 2
The project involves single story new construction of 45,776 total gross square feet (GSF). Total construction cost is $7,857,500. Total project cost is $15,050,900. Project cost includes land, building, equipment, project development, financing and start-up costs. SF Palm Beach, LLC indicates that it does not wish to accept any conditions. However, the applicant s attachment to Schedule C indicates that should the Agency select from among the content within the document elements to propose as conditions, SF Palm Beach, LLC will honor them. D. REVIEW PROCEDURE The evaluation process is structured by the certificate of need review criteria found in Section 408.035, Florida Statutes. These criteria form the basis for the goals of the review process. The goals represent desirable outcomes to be attained by successful applicants who demonstrate an overall compliance with the criteria. Analysis of an applicant's capability to undertake the proposed project successfully is conducted by assessing the responses provided in the application, and independent information gathered by the reviewer. Applications are analyzed to identify strengths and weaknesses in each proposal. If more than one application is submitted for the same type of project in the same district (subdistrict), applications are comparatively reviewed to determine which applicant best meets the review criteria. Section 59C-1.010(3)(b), Florida Administrative Code, allows no application amendment information subsequent to the application being deemed complete. The burden of proof to entitlement of a certificate rests with the applicant. As such, the applicant is responsible for the representations in the application. This is attested to as part of the application in the Certification of the applicant. As part of the fact-finding, the consultant, Jessica Hand, analyzed the application with consultation from Financial Analyst Eric West, who evaluated the financial data, and Said Baniahmad of the Office of Plans and Construction, who reviewed the application for conformance with the architectural criteria. 3
E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA The following indicate the level of conformity of the proposed project with the criteria and application content requirements found in Florida Statutes, Sections 408.035, and 408.037; applicable rules of the State of Florida, Chapter 59C-1 and 59C-2 and Florida Administrative Code. 1. Fixed Need Pool a. Does the project proposed respond to need as published by a fixed need pool? Or does the project proposed seek beds or services in excess of the fixed need pool? Rule 59C-1.008(2), Florida Administrative Code. Pursuant to Florida Statutes 408.0435 (1), the Florida Legislature extended a moratorium, until Medicaid managed care is implemented statewide pursuant to Sections 409.961-409.985, Florida Statutes, or October 1, 2016, whichever is earlier, on the issuance of any certificate of need (CON) for increases in the number of community nursing home beds around the state. Due to the moratorium, a fixed need pool was not published by the Agency. This project, if approved, will not change the bed count in the planning area. b. If no Agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology, which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Population demographics and dynamics SF Palm Beach, LLC cites the Agency s Population Estimates 2010 to 2015, published February 2012, which indicate that as of July 1, 2012, District 9 had a proportionately larger senior population, age 65 and over, than the state as a whole. The 65 and over population comprised 23 percent of the district s total population compared to 18 percent of the total population statewide. Seniors aged 65 and over comprised 22 percent of the population in Palm Beach County during the same time. 4
As of July 1, 2012 the total population of District 9 was 1,954,453, of which 438,168 were aged 65 and over and 225,463 were 75 and over. By comparison, the total population of the state of Florida was 19,128,190, of which 3,426,139 were aged 65 and over, and 1,582,212 aged 75 and over. Furthermore, the total population of Palm Beach County was 1,339,070, of which 294,307 were aged 65 and over and 155,364 were 75 and over. Net Increase by Year in Population for Palm Beach County District 9 and the State July 2011-2016 Mid-Point: Population Estimates, 02/2012 2016 2015 2014 2013 2012 July 1, 2011 Population Palm Beach County Total Pop 19,307 20,764 20,845 18,708 11,761 1,327,309 65+ 9,125 7,574 6,933 6,391 4,815 289,492 75+ 2,959 2,020 1,683 1,456 667 154,697 District 9 Total Pop 34,189 37,448 37,868 33,663 21,056 1,933,397 65+ 15,239 12,423 11,313 10,294 7,443 430,725 75+ 4,818 3,789 3,408 2,974 1,585 223,878 State Total Pop 293,818 315,494 318,155 289,965 193,903 18,934,287 65+ 131,354 114,959 107,697 100,039 83,616 3,342,523 75+ 45,428 39,881 37,462 34,777 26,563 1,555,649 Source: CON application #10176 from Agency for Health Care Administration Population Estimates 2010 to 2015 published February 2012. Note: The reviewer modified the applicant s table to include the estimated July 2011 population data. SF Palm Beach, LLC notes that seniors (aged 65 and over) are projected to comprise an additional one percent of the population in District 9 by 2015. The table above shows a projected increase in population in Palm Beach County of almost 21,000 per year from 2013-2015, of which approximately 7,000 are over age 65. The population is estimated to increase by 19,000 from 2015-2016, of which 9,000 are seniors aged 65 and over. The applicant contends the number of seniors in this area presents an increasing need for health services. Availability, Utilization, and quality of like services Concerning availability, there are 53 licensed community nursing homes with a total of 6,098 community nursing home beds in District 9, Subdistrict 9-4 (Palm Beach County). Subdistrict 9-4 averaged 83.08 percent occupancy for the 12-month period ending June 30, 2012. 1 1 Source: Florida Nursing Home Utilization by District and Subdistrict July 2011 June 2012 published September 28, 2012. 5
The table below uses data from the publication Florida Nursing Home Utilization by District and Subdistrict to compare nursing home utilization at the two Palm Beach County facilities operated by the applicant s parent, Edward J. Healey Rehabilitation Nursing Center, Palm Beach County (Subdistrict 9-4) and the district during the 12-month period ending June 30, 2012. Royal Manor, Boynton Health Care Center, Edward J. Healey Rehabilitation and Nursing Center, Subdistrict 9-4 (Palm Beach County) & District 9 Utilization July 1, 2011-June 30, 2012 Facility Bed Days Patient Days Total Occup. Medicaid Days Medicaid Occup. Royal Manor 43,920 41,288 94.01% 30,412 73.66% Boynton Health Care Center 29,646 25,922 87.64% 14,113 54.54% Edward J. Healey Rehab & Nursing Center 72,468 37,351 51.54% 27,142 72.67% Subdistrict 9-4 (Palm Beach County) 2,230,548 1,853,069 83.08% 1,094,239 59.05% District 9 3,171,168 2,679,976 84.51% 1,631,108 60.86 % Source: Agency for Health Care Administration Florida Nursing Home Utilization by District and Subdistrict September 28, 2012. Concerning utilization, the applicant seeks to utilize 60 licensed beds from Edward J. Healey Rehabilitation and Nursing Center to construct the project. The applicant states that low occupancy rates (51.54 percent shown above) at Edward J. Healey Rehabilitation and Nursing Center reflect the building s age, and the transfer of 60 beds from this facility to the new 60-bed project will improve utilization of these beds. Gulf Coast Health Care, the parent company of the applicant, operates two facilities in District 9, Subdistrict 9-4: Boynton Health Care Center and Royal Manor. SF Palm Beach, LLC submitted the table above to demonstrate that the higher occupancy rates of these facilities support the ability of Gulf Coast Health Care to utilize beds in the new facility sought by the applicant. A five-year comparison of community nursing home utilization showed an occupancy average at Edward J. Healey of 52.59 percent, 92.50 percent at Royal Manor, 88.52 percent at Boynton, and 83.79 percent for the subdistrict. 6
Palm Beach County (Subdistrict 9-4) Boynton Health Care Center & Edward J. Healey Rehabilitation and Nursing Center Community Nursing Home Bed Utilization 12-Month Periods ending June-2008 through June-2012 7/11-6/12 7/10-6/11 7/09-6/10 7/08-6/09 7/07-6/08 Palm Beach County Total Beds 6098 5978 6046 6046 6197 Bed Days 2,230,548 2,203,458 2,206,790 2,206,790 2,242,734 Patient Days 1,853,069 1,867,249 1,858,414 1,840,173 1,873,369 Percent Total Occupancy 83.08% 84.74% 84.21% 83.39% 83.53% Percent Medicaid Occupancy 59.05% 58.14% 58.45% 56.97% 56.45% Boynton Health Care Total Beds 81 81 81 81 81 Bed Days 29,646 29,565 29,565 29,565 29,646 Patient Days 25,922 26,481 27,092 26,326 25,170 Percent Total Occupancy 87.64% 89.57% 91.64% 89.04% 84.90% Percent Medicaid Occupancy 54.74% 50.82% 53.66% 53.04% 57.52% Edward J. Healey Total Beds 198 198 198 198 198 Bed Days 72,468 72,270 72,270 72,270 72,468 Patient Days 37,351 34,946 37,339 38,711 41,535 Percent Total Occupancy 51.54% 48.35% 51.67% 53.56% 57.31% Percent Medicaid Occupancy 72.67% 68.96% 72.60% 60.91% 57.78% Royal Manor Total Beds 120 120 120 120 120 Bed Days 43,920 43,800 43,800 43,800 43,920 Patient Days 41,288 40,656 41,564 38,398 40,706 Percent Total Occupancy 94.01% 92.82% 94.89% 87.67% 92.68% Percent Medicaid Occupancy 73.66% 68.50% 71.18% 69.03% 65.32% Source: Agency for Health Care Administration Florida Nursing Home Utilization by District and Subdistrict for the appropriate periods. Concerning quality of like services, the applicant reports the proposed project is not competitive, with no other applicants under consideration for transfer of the 60 beds in this project. The applicant states the reputation of their parent company, Gulf Coast Health Care, demonstrates the quality of nursing home care that can be expected from the applicant. SF Palm Beach, LLC states that: 39 of 44 Gulf Coast facilities received American Health Care Association Bronze or Silver Quality Awards 2 during 2010 2012 89 percent of all Gulf Coast facilities received national awards 65 percent (22 of the 34) Gulf Coast facilities in Florida received a score of four or five out of five possible stars during the Agency s most recent inspection; and Having staff from nearby facilities to assist in a successful start-up will benefit the new facility. 2 The American Health Care Association s silver award is for achievement in quality, the second highest level next to Gold, with Bronze (the beginning level of three steps) being a demonstrated commitment to quality. 7
Medical Treatment Trends SF Palm Beach, LLC indicates that several factors, including an increasing number of assisted living facilities, Medicaid waiver programs and managed care options channel persons to alternatives to traditional nursing home care. This resulted in declining nursing home occupancy rates, with a statewide average of 88 percent during the past seven years. The applicant indicates that one result of expanding options to community nursing home placement was nursing home admissions declined, while increased demand occurred for short stay, sub-acute care and rehabilitation services. SF Palm Beach, LLC states that today permanent residents in nursing home facilities expect features such as spacious private rooms with windows, and privacy to a greater degree than in the past. Also, more emphasis is placed on amenities such as lounges, activities, outdoor spaces, and dining options. The applicant states the new facility will provide these services, as well as all private rooms that include a European Style bathroom, Wi-fi and a flat screen television. SF Palm Beach, LLC cites the paper Do Nursing Homes Have a Place in Long-term Care Reform?, as support for the trend toward rehabilitation services, open home-like floor plans, and specialized residency units for Alzheimer s disease, end of life, and palliative care. The applicant indicates that nursing homes have responded to increased care of fragile and chronic patient conditions by increasing the skill of staff through training programs and offering tuition reimbursement for certified nursing assistants who seek to become nurses. SF Palm Beach, LLC states these programs encourage staff retention and directly benefit facility residents. Market Trends The applicant cites a report by The Centers for Medicare and Medicaid (CMS) which demonstrates Medicare could save $2.1 billion by reducing hospitalizations among long-term care residents by 25 percent. When patients are transitioned into their highest degree of achievable independence and functionality, costs from therapy-intensive to maintenance care will tend to go down. SF Palm Beach, LLC further indicates the transition to a maximum level of independence (from higher intensity therapy modalities to maintenance therapy) typically occurs over a six-month period. Costs are stated to be greater in this first sixmonth period, when higher acuity therapy regimens would be applied. The intended outcome is for the patient to reach a highest attainable quality of life with greatest independent functionality. 8
The applicant states that as facilities meet the increasing demand for nursing support and therapies, financial loss due to limited Medicaid reimbursements becomes a challenge. In the words of the applicant While Medicare is the payer for short-term rehabilitation, Medicaid becomes the payment mechanism for the long-stay or permanent resident, with the nursing facility becoming his or her home. SF Palm Beach, LLC contends that nursing homes that provide skilled care will continue to face challenges regarding cost of care. 2. Agency Rule Preferences Does the project respond to preferences stated in Agency rules? Please indicate how each applicable preference for the type of service proposed is met. Chapter 59C-1.036, Florida Administrative Code. Chapter 59C-1.036 of the Florida Administrative Code does not contain preferences relative to community nursing home beds nor does the Agency for Health Care Administration publish specific preferences for these facilities. However, the rule does contain standards the Agency utilizes in assessing the applicant s ability to provide quality care to the residents. a. Geographically Underserved Areas. In a competitive certificate of need review within the nursing home subdistrict as defined in 59C-2.200, Florida Administrative Code, the Agency shall award a certificate of need if the applicant meets all applicable criteria for a geographically undeserved area as specified in subsection 408.032(15), Florida Statutes (Florida Statutes), and if the applicant meets the applicable statutory certificate of need review criteria specified in section 408.035, Florida Statutes, including bed need according to the relevant bed need formula contained in this rule. If the applicant is awarded a certificate of need based on the provisions of this paragraph, the applicant shall agree that the nursing facility will be located in a county without a nursing facility, or in the center of an area within the subdistrict of a radius of at least 20 miles which meets the definition of a geographically undeserved area. The center of the geographically undeserved area shall be the proposed nursing home location in the application. The application is not submitted in order to remedy a geographically underserved area. 9
b. Proposed Services. Applicants proposing the establishment of Medicare-certified nursing facility beds to be licensed under Chapter 400, Florida Statutes, shall provide a detailed description of the services to be provided, staffing pattern, patient characteristics, expected average length of stay, ancillary services, patient assessment tools, admission policies, and discharged policies. SF Palm Beach, LLC does not operate licensed nursing homes but indicates that Gulf Coast Health Care (its parent) participates in Medicare and Medicaid Programs, and the new facility will be constructed and staffed to accommodate both short-term rehabilitation and long-term skilled nursing care needs. The applicant cites the experience of Gulf Coast Health Care, which operates 44 facilities in the southeast, as evidence that the new project will be compliant with applicable statutes and rules, and will have policies and procedures that meet or exceed industry standards of care. As stated previously, the facility will have all private rooms, equipped with individual bathrooms. Trained staff will provide care in a therapy suite designed to accommodate physical, occupational and speech therapy. The facility will provide access to outdoor courtyards. Other services include: Outpatient rehab Cardiac and stroke rehab monitoring Pain management Lymphedema therapy Restorative nursing program Wound care program IV therapy Customized pressure support systems Infectious disease treatment Oncology/cancer care Psychological services Registered dietician services Individual meal planning Comfort and security measures: pet therapy, security system, multi-lingual staff, daily transportation, snack bars, televisions, phones, beauty/barber shop, whirlpool spa. 10
Care planning will begin immediately upon admission. Within seven days an interdisciplinary team collaborates to complete a comprehensive care plan. This plan will include measurable objectives and timetables for the medical, nursing, and psychological needs of each patient. The patient record will reflect ongoing updates from the interdisciplinary team, with quarterly reviews of each patient care plan. SF Palm Beach, LLC states that admissions must be under the recommendation of a physician, and patients must remain under physician care during their stay. New patients and family will be familiarized with the facility and policies by a Nursing Services Department representative. The Social Services Director (or representative) will provide additional information on patient rights in accordance with state law. A physician s order is required for discharge, and a post-discharge plan developed by a care team will be provided to the resident and family, which they will review with a representative from Social Services, to ensure necessary follow up care will be provided. The applicant states that staffing patterns reflect the short-term rehabilitation focus of the new 60-bed project. Medicare is the usual payer for short-term rehabilitation, and the average length of patient stay projected to be 21-40 days. The table below contains SF Palm Beach, LLC s projected staffing during year one and year two of the proposed project. The applicant indicates it will add 56.81 FTEs in year one and an additional 15.59 FTEs in year two, for a total of 72.40 FTEs by December 31, 2017, the end of year two of the project. 11
SF Palm Beach, LLC Staffing Patterns for Year One and Year Two of Operations Year One Ending 12/31/2016 Years Two Ending 12/31/2017 Administration Administrator 1.0 1.0 Director of Nursing 1.0 1.0 Admissions 2.0 2.0 Finance 3.0 3.0 Risk Manager 1.0 1.0 MDS/Care Plan 2.0 2.0 TOTAL 10.0 10.0 Nursing RN 4.0 3.0 LPN 6.83 10.17 Nurses Aides 16.76 26.24 Assistant DON 2.0 2.0 TOTAL 29.59 41.41 Ancillary Physical Therapist 0.0 0.0 Speech Therapist 0.0 0.0 Occupational Therapist 0.0 0.0 Medical Supply Clerk 1.0 1.0 TOTAL 1.0 1.0 Dietary Dietary Supervisor 2.0 2.0 Dietary Staff 3.72 6.0 TOTAL 5.72 8.0 Social Services Social Services Director 1.0 1.0 Activities Director 1.0 1.0 Activities Assistant 1.0 1.0 TOTAL 3.0 3.0 Housekeeping Housekeeping Supervisor 1.0 1.0 Housekeepers 2.48 4.0 TOTAL 3.48 5.0 Laundry Laundry Supervisor 0.0 0.0 Laundry Aides 2.0 2.0 TOTAL 2.0 2.0 Plant Maintenance Maintenance Supervisor 1.0 1.0 Maintenance Assistance 1.0 1.0 TOTAL 2.0 2.0 GRAND TOTAL 56.79* 72.41* Source: CON application #10176, Schedule 6. Note: * Reviewer calculations applicant indicates year one FTEs total 56.81 and year two total 72.40. 12
c. Quality of Care. In assessing the applicant s ability to provide quality of care pursuant to s. 408.035(1), Florida Statutes, the Agency shall evaluate the following facts and circumstances: 1. Whether the applicant has had a Chapter 400, Florida Statutes, nursing facility license denied, revoked, or suspended within the 36 months prior to the application. The applicant, SF Palm Beach, LLC has not had a nursing home license denied, revoked, or suspended. 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. The applicant has not had a nursing home placed into receivership at any time. 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. This provision is not applicable. 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. This provision is not applicable. 5. Rule 59C-1.036 (4) (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 subparagraph (e) 1 and (e) 2 result in the 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 with the Agency. 13
Since there have been no violations, this provision is not applicable. Refer to quality of care discussion below in section E. 3. b. of this report. d. Rule 59C-1.036 (5) Utilization Reports. Within 45 days after the end of each calendar quarter, facilities with nursing facility beds licensed under Chapter 400, Florida Statutes shall report to the Agency, or its designee, the total number of patient days, which occurred in each month of the quarter, and the number of such days that were Medicaid patient days. The applicant states it will provide the required data to the Health Council of Southeast Florida and to the Agency. 3. Statutory Review Criteria a. Is need for the project evidenced by the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the applicant's service area? ss. 408.035 (1)(b) and (e), Florida Statutes. As stated previously, there are 53 community nursing homes in District 9, Subdistrict 9-4 (Palm Beach County) with a total of 6,098 licensed community nursing home beds. Subdistrict 9-4 averaged 83.08 percent occupancy for the 12-month period ending June 30, 2012. District 9 averaged 84.51 percent occupancy during the same 12-month period. The applicant notes that the subdistrict has fewer beds per 1,000 elderly persons age 65+ than in the past, dropping from 22 beds per 1,000 persons during CY 2007-2010 to 21 beds per 1,000 in CY 2011. At the same time, the number of beds per 1,000 elderly persons aged 75+ went from 39 to 38 and back to 39 beds per 1,000 in CY 2011 reflecting a dip in the older age group in the county. SF Palm Beach, LLC indicates that 14
since the Governor s Office lowered population forecasts the (subdistrict s) bed to population ratio as an indication of supply should be considered static. The applicant concludes that the project assures that the 60 beds will be available for a needed service. As stated previously, the site of this project is to be determined. The applicant cites hospital discharge rates as an indication of need for short-term rehabilitation services the project will provide to the community. SF Palm Beach, LLC states that the Agency s hospital discharge data for April 1, 2011 March 31, 2012, indicates that there were 18,190 Palm Beach County residents discharged from Palm Beach County hospitals to skilled nursing facilities, with Boca Raton, Delray Beach, Lake Worth, and West Palm Beach absorbing the majority of these cases. 3 SF Palm Beach, LLC contends that the project would likely enhance utilization of relatively poorly occupied beds in the subdistrict. The applicant states quality of care is correlated to high occupancy rates, and refers to two existing Gulf Coast facilities previous discussed (Boynton Health Care Center and Royal Manor) within the subdistrict as an indication of quality of care for the new project. b. Does the applicant have a history of providing quality of care? Has the applicant demonstrated the ability to provide quality care? Is the applicant a Gold Seal Program nursing facility that is proposing to add beds to an existing nursing home? ss. 408.035 (1)(c) and (j), Florida Statutes. SF Palm Beach, LLC is a new entity applying to operate a new community nursing home in Palm Beach County. The parent company, Gulf Coast Health Care, LLC and subsidiaries own 44 skilled nursing and assisted living facilities in Florida, Mississippi, and Alabama. The applicant states all 44 Gulf Coast Health Care, LLC facilities have received nationally recognized honors, including both Gulf Coast affiliated facilities in Palm Beach County. During 2011 and 2012 Boynton Health Care Center earned the Silver Quality Award from the American Health Care Association, and both Royal Manor and Boynton Health Care Center received the Bronze Quality Award in 2010. 3 Per CON application #10176, page 3-10, Table 3-3. 15
In addition to its formal quality improvement program, Gulf Coast Health Care uses two initiatives for improving resident care PointClickCare for electronic health records, and the Interact System 4 to reduce the number of re-hospitalizations. The applicant presents a brief description of Gulf Coast Health Care s quality improvement program, identifying key program components. Employees are trained in policies and procedures, the objectives of which are reviewed by a committee, with goals and benchmarks set according to current industry protocols. SF Palm Beach indicates that Gulf Coast Health Care facilities have regularly scheduled Resident Council and Family Council meetings in which minutes are taken. These minutes are shared with administrative staff. Council feedback in the form of comments, suggestions, and independent evaluations are encouraged. The applicant includes Boynton Health Care Center s November 2012 Activity Calendar and discusses Gulf Coast s whole person approach to establish a lifestyle routine for residents. Examples of daily activities include the following: Sittercise Spiritual Hour Trivia Painting/crafts Happy Hour Travelogue video Coffee social Aromatherapy Musical entertainment Musical movie Music Sensory Stimulation Resident Council Meeting Jewish Services. SF Palm Beach, LLC indicates that a program of care is determined for each patient through a comprehensive assessment upon admission. Gulf Coast Health Care facilities provide short-term rehabilitation services including occupational, physical and speech therapy are available, as well as specialized rehabilitation programs for: Arthritis Rheumatoid arthritis 4 The applicant states this system was developed by Dr. Ouslander of Florida Atlantic University. 16
Brain injury Cardiac care Diabetes Joint replacement Neurological disorders Orthopedics Pain management Post-surgical care Pulmonary disease Spinal cord injury Stroke. The applicant indicates that a detailed post-discharge plan will be created for each resident to ensure successful transition at the end of a resident s stay. Royal Manor, one of the Gulf Coast Health Care, LLC facilities in Palm Beach County, had one substantiated complaint in the residents rights category during the 36 months ending January 24, 2013. Gulf Coast Health Care, LLC has 34 affiliated community nursing homes in Florida with a total of 4,362 beds. Agency data indicates that Gulf Coast Heath Care affiliated facilities had 51 substantiated complaints during the three-year period ending January 24, 2013. A single complaint can encompass multiple complaint categories. The table below has these listed by complaint categories. Gulf Coast Health Care, LLC Substantiated Complaint Categories 36-month period ending January 24, 2013 Complaint Category Number Substantiated Quality of Care/Treatment 19 Nursing Services 3 Resident/Patient/Client Rights 7 Physical Environment 5 Resident/Patient/Client Assessment 6 Admission, Transfer & Discharge Rights 7 Administration/Personnel 4 Infection Control 2 Dietary Services 2 Physician Services 1 Quality of Life 1 Misappropriation of Property 1 Life Safety Code 1 Resident/Patient/Client Neglect 1 State Licensure-Failure to follow Baker Act Regulations 2 Source: Agency for Health Care Administration complaint records. 17
c. What resources, including health manpower, management personnel and funds for capital and operating expenditures, are available for project accomplishment and operation? ss. 408.035(1)(d), Florida Statutes. The financial impact of the project will include the project cost of $15,050,900 and year two operating costs of $7, 403,209. The audited financial statements of Gulf Coast Health Care, LLC (Parent) for the period ending December 31, 2011 were analyzed for the purpose of evaluating the applicant s ability to provide operational funding necessary to implement the project. The applicant indicated that Regions Bank will finance the construction of the nursing home. Short-Term Position: The parent s current ratio of 1.0 is below average and indicates current assets are approximately the same as current liabilities, a weak position. The ratio of cash flows to current liabilities of 0.2 is below average, a weak position. The working capital (current assets less current liabilities) of $977,320 is a measure of excess liquidity that could be used to fund capital projects. Overall, Gulf Coast Health Care, LLC has a weak short-term position (see Table 1). Long-Term Position: The ratio of long-term debt to net assets of 1.3 is well above average and indicates the applicant may have difficulty acquiring future debt financing if necessary. The ratio of cash flow to assets of 9.4 percent is slightly below average, an adequate position. The most recent year had $22.5 million of revenue in excess of expenses, which resulted in a total margin of 4.7 percent. Overall, the applicant has an adequate long-term position (see Table 1). Capital Requirements: The applicant indicates on Schedule 2 capital projects totaling $15 million which includes this project and routine capital expenditures. Available Capital: The applicant indicates on Schedule 3 of its application that funding for the project will be provided by Regions Bank. Regions Bank provided a letter indicating an interest in financing the project. However, no guarantee of financing was provided. Management Resources: SF Palm Beach, LLC submitted resumes of six top administrators with the parent company Gulf Coast Health Care. The applicant states that its affiliation with Gulf Coast will benefit the facility s recruitment and 18
retention programs, and provided a brief description of these programs and other benefits for staff at the new facility. Staffing: Schedule 6A indicates for CY 2016 (the first year of the proposed project), the applicant forecasts 56.81 FTEs facility-wide. For year two of the project ending December 31, 2017, the applicant forecasts an incremental addition of 15.59 FTEs. Therefore, by the end of year two, the applicant forecasts a total of 72.40 FTE s facility-wide. Conclusion: Funding for this project is not assured. TABLE 1 CON 10176- SF Palm Beach Gulf Coast Health Care, LLC (Parent) 12/31/11 12/31/10 Current Assets $64,137,299 $69,319,972 Cash and Current Investment $868,027 $8,857,355 Restricted & Board Designated Investments $3,750,007 $2,786,029 Total Assets $153,099,863 $148,130,273 Current Liabilities $63,159,979 $60,762,194 Total Liabilities $114,470,941 $109,259,888 Net Assets $38,628,922 $38,870,385 Total Revenues $474,659,572 $456,127,171 Interest Expense $4,796,591 $4,573,948 Excess of Revenues Over Expenses $22,517,293 $16,422,473 Cash Flow from Operations $14,380,108 $13,396,616 Working Capital $977,320 $8,557,778 FINANCIAL RATIOS 12/31/11 12/31/10 Current Ratio (CA/CL) 1.0 1.1 Cash Flow to Current Liabilities (CFO/CL) 0.2 0.2 Long-Term Debt to Net Assets (TL-CL/NA) 1.3 1.2 Times Interest Earned (NPO+Int/Int) 5.7 4.6 Net Assets to Total Assets (NA/TA) 25.2% 26.2% Total Margin (ER/TR) 4.7% 3.6% Return on Assets (ER/TA) 14.7% 11.1% Operating Cash Flow to Assets (CFO/TA) 9.4% 9.0% d. What is the immediate and long-term financial feasibility of the proposal? ss. 408.035(1)(f), Florida Statutes. A comparison of the applicant s estimates to the control group values provides for an objective evaluation of financial feasibility, (the likelihood that the services can be provided under the parameters and conditions contained in Schedules 7 and 8), and efficiency, (the degree of economies achievable through the skill and management of the applicant). In general, projections that approximate the median are the most desirable, and balance the opposing forces of feasibility and efficiency. In other 19
words, as estimates approach the highest in the group, it is more likely that the project is feasible, because fewer economies must be realized to achieve the desired outcome. Conversely, as estimates approach the lowest in the group, it is less likely that the project is feasible, because a much higher level of economies must be realized to achieve the desired outcome. These relationships hold true for a constant intensity of service through the relevant range of outcomes. As these relationships go beyond the relevant range of outcomes, revenues and expenses may, either go beyond what the market will tolerate, or may decrease to levels where activities are no longer sustainable. Comparative data was derived from skilled nursing facilities that submitted Medicaid cost reports in fiscal year 2010 and 2011. We selected 25 skilled nursing facilities with similar Medicaid utilization. Per Diem rates are projected to increase by an average of 2.8 percent per year. The price adjustment factor used was based on the new CMS Market Basket Price Index as published in the 3rd Quarter 2012 Health Care Cost Review. Projected net revenue per patient day (NRPD) of $381 in year one and $386 in year two is between the control group highest and median values of $823 and $376 in year one and $863 and $395 in year two. With net revenues between the highest and median values in the control group, the facility is expected to consume health care resources in proportion to the services provided (see Table 2). Projected revenues appear to be reasonable. Anticipated costs per patient day (CPD) of $452 in year one and $376 in year two is between the control group highest and median values of $851 and $342 in year one and $893 and $358 in year two. (See Table 2). The applicant is projecting a decrease in CPD between year one and year two of approximately 16.84 percent. Overall, costs appear to be reasonable. Section 400.23(3)(a)1., Florida Statutes, specifies a minimum certified nursing assistant staffing of 2.5 hours of direct care per resident per day and a minimum licensed nursing staffing of 1.0 hour of direct resident care per resident per day. Based on the information provided in Schedule 6, the applicant s projected licensed nursing staffing and direct care exceeds the minimum level required in years one and two. The year two operating profit for the skilled nursing facility of $213,991 computes to an operating margin per patient day of $11 which is between the control group median and lowest values of $20 and -$25. Overall profitability appears achievable. 20
Conclusion: This project appears to be financially feasible based on the prior profitable operations of the parent. TABLE 2 CON #10176 Dec-17 YEAR 2 VALUES ADJUSTED SELECT FY 2010/2011 YEAR 2 ACTIVITY FOR INFLATION COST REPORT DATA ACTIVITY PER PAT. DAY Highest Median Lowest ROUTINE SERVICES 7,614,800 386 714 271 217 ANCILLARY SERVICES 4,202,100 213 221 149 53 OTHER OPERATING REVENUE 0 0 47 1-7 GROSS REVENUE 11,816,900 600 910 445 329 DEDUCTIONS FROM REVENUE 4,199,700 213 0 0 0 NET REVENUES 7,617,200 386 863 395 293 EXPENSES ADMINISTRATIVE 1,506,100 76 205 93 74 PATIENT CARE 4,394,600 223 224 145 124 PROPERTY 1,442,209 73 184 28 5 OTHER 60,300 3 0 0 0 TOTAL EXPENSES 7,403,209 376 893 358 294 OPERATING INCOME 213,991 11 49 20-25 2.8% PATIENT DAYS 19,711 VALUES NOT ADJUSTED TOTAL BED DAYS AVAILABLE 21,900 FOR INFLATION TOTAL NUMBER OF BEDS 60 Highest Median Lowest PERCENT OCCUPANCY 90.00% 96.5% 93.0% 73.9% PAYER TYPE PATIENT DAYS % TOTAL SELF PAY 986 5.0% MEDICAID 8,870 45.0% 50.6% 47.0% 40.1% MEDICARE 7,884 40.0% 50.9% 34.1% 10.3% INSURANCE 0 0.0% HMO/PPO 0 0.0% OTHER 1,971 10.0% TOTAL 19,711 100.0% 21
e. Will the proposed project foster competition to promote quality and cost-effectiveness? ss. 408.035(1)(e) and (g), Florida Statutes. Competition to promote quality and cost-effectiveness is driven primarily by the best combination of high quality and fair price. Competition forces health care facilities to increase quality and reduce charges/costs in order to remain viable in the market. In this case the applicant is transferring existing beds from one location to another. Therefore, this project will not result in new beds to the service area and will not have a material impact on competition. f. Are the proposed costs and methods of construction reasonable? Do they comply with statutory and rule requirements? ss. 408.035(1)(h), Florida Statutes; Ch. 59A-4, Florida Administrative Code. The plans and project narrative indicate the proposed 60-bed facility will be a one story building and fully sprinklered. The construction type is not listed but building materials are described as non-combustible and comply with the requirements of the applicable codes. A site for the proposed facility is yet to be determined but the narrative indicates that the occupied residents areas will be minimum two feet above the category 3 storm surge and 100-year flood elevations, as required by the Florida Building Code. The facility would be organized into two wings with a nurse station and required support areas. Each wing would have a courtyard, a dining room and living room. This arrangement reduces the travel distance from the resident rooms to the most frequently used areas. The plan shows that the dining rooms and living rooms would be open to the corridor and have direct access to the courtyards. Public space and administrative areas are provided near the entrance of the facility. This central location eliminates unnecessary travel through resident areas. The therapy department is located on the center of the facility between the two residents wings. The therapy department will have facilities for physical therapy and occupational therapy. All resident rooms are private with attached private shower/toilet rooms. All rooms appear to be designed to meet accessibility standards. The proposed resident rooms exceed the minimum area requirements of the Florida Building Code. The layout is efficient and functional. The design as presented does not indicate any major impediments. The narrative indicates that the facility would be designed and constructed to meet all current code requirements for a skilled nursing home. 22
Based on the analysis of actual cost data of a similar project, the estimated construction costs appears to be high. The information provided in the project completion forecast appears to be reasonable. The plans submitted with this application were schematic in detail with the expectation that they will necessarily be revised and refined during the Design Development (Preliminary) and Contract Document Stages. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner. g. Does the applicant have a history of and propose the provision of health services to Medicaid patients and the medically indigent? Does the applicant propose to provide health services to Medicaid patients and the medically indigent? ss. 408.035(1)(i), Florida Statutes SF Palm Beach, LLC is a start-up entity and does not operate licensed nursing homes. As stated previously, the parent company Gulf Coast Health Care, LLC operates two facilities in District 9, Subdistrict 9-4, Palm Beach County, and has a consistent pattern of providing skilled nursing services to Medicaid patients. The table below demonstrates the percentage of Medicaid patients provided care at each facility during the 12 months ending June 30, 2012. Boynton Health Care Center and Royal Manor Total & Medicaid Patient Days for the 12 Months Ending June 30, 2012 Facility Boynton Health Care Center Royal Manor Total Patient Days 25,922 41,288 Medicaid Days 14,113 30,412 Percent Medicaid 54.44% 73.66% SF Palm Beach, LLC does not propose to condition project approval to service to Medicaid patients. The applicant states that the facility s projected Medicaid patient days is based on the historical utilization of Gulf Coast Health Care, LLC s Subdistrict 9-4 affiliates and other similar sized facilities within Palm Beach County. SF Palm Beach, LLC notes that Subdistrict 9-4 s Medicaid occupancy rate was 59.05 percent for the 12-month period ending June 30, 2012. The applicant s assumptions to Schedule 7 indicate its projections (see table below) are based on Gulf Coast Health Care LLC s historical experience and anticipated market demand. 23
Forecasted Medicaid Patient Days For SF Palm Beach, LLC First Two Years of Operations Year One: 2016 Year Two: 2017 Medicaid Patient Days Percent of Total Patient Days Medicaid Patient Days Percent of Total Patient Days 5,511 45.1% 8,870 45.0% F. SUMMARY SF Palm Beach, LLC (CON #10176) proposes to construct a new 60-bed community nursing home through the delicensure of 60 beds at the 178- bed Edward J. Healey Rehabilitation and Nursing Center in District 9, Subdistrict 9-4, Palm Beach County, Florida. The location of this nursing home has yet to be determined. The project adds no new beds to the subdistrict. The project involves 45,776 GSF of new construction. The construction cost is $7,857,500. Total project cost is $15,050,900. Project cost includes land, building, equipment, project development, financing and start-up costs. The applicant proposes no conditions to project approval. Need/Access: The applicant cites Palm Beach County s projected elderly population (age 65+ and age 75+) growth from CY 2013 to CY 2015 in support of need for the project. Two facilities within Palm Beach County affiliated with the parent of the applicant, Gulf Coast Health Care, have a relatively high total occupancy rate (greater than 88 percent over the past five years) compared to the facility voluntarily delicensing 60 community nursing home beds. The applicant emphasizes that the project will enhance availability in the subdistrict by utilizing beds from the lesser occupied Edward J. Healey Rehabilitation Nursing Facility. Therefore, the project better accommodates access, availability and utilization. Quality of Care: All 44 facilities affiliated with the applicant s parent company, Gulf Coast Health Care, LLC have received nationally recognized honors, including both Gulf Coast affiliated facilities in Palm Beach County. 24
The applicant provided a good description of its ability to provide quality care. Agency data shows that Gulf Coast Health Care, LLC s 34 affiliated nursing homes (4,362 beds) had a total of 51 substantiated complaints during the three-year period ending January 24, 2013. Financial Feasibility/Availability of Funds: Overall, the applicant s parent has a weak short-term position and an adequate long-term position This project appears to be feasible based on the prior profitable operations of similar facilities. This project is not likely to have a material impact on competition. Medicaid/Indigent/Charity Care: The applicant s parent has a history of providing care to Medicaid recipients. In the 12 months ending June 30, 2012 the two District 9 Gulf Coast Health Care affiliates had Medicaid occupancy rates of 54.44 percent and 73.66 percent. The applicant forecasts an average Medicaid occupancy rate of 45 percent for year one and two (2016 and 2017) of the new proposed project. Architectural: All resident rooms are private with attached private shower/toilet rooms and appear to be designed to meet accessibility standards. The proposed resident rooms exceed the minimum area requirements of the Florida Building Code. The estimated construction costs appear to be higher than the actual cost of a similar project. The information provided in the project completion forecast appears to be reasonable. 25
G. RECOMMENDATION Approve CON #10176 to establish a new 60-bed community nursing home in Palm Beach County, District 9, Subdistrict 4, through the delicensure of 60 community nursing home beds from Edward J. Healey Rehabilitation and Nursing Center. The total project cost is $15,050,900. The project involves 45,776 GSF of new construction and a total construction cost of $7,857,600. 26
AUTHORIZATION FOR AGENCY ACTION Authorized representatives of the Agency for Health Care Administration adopted the recommendation contained herein and released the State Agency Action Report. DATE: James B. McLemore Health Services and Facilities Consultant Supervisor Certificate of Need Jeffrey N. Gregg Director, Florida Center for Health Information and Policy Analysis 27