St. Francis Hosp., Inc. v. Department of Health and Rehabilitative Services

• Decision Date: 20 December 1989
• Docket Number: No. 89-572,89-572
• Citation: 553 So.2d 1351
• Parties: 15 Fla. L. Weekly D21 ST. FRANCIS HOSPITAL, INC., Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellee.
• Court: Florida District Court of Appeals

Page 1351

553 So.2d 1351

15 Fla. L. Weekly D21

ST. FRANCIS HOSPITAL, INC., Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, Appellee.

No. 89-572.

District Court of Appeal of Florida,

First District.

Dec. 20, 1989.

Robert A. Weiss of Parker, Hudson, Rainer & Dobbs, Tallahassee, Thomas D. Watry, Atlanta, for appellant.

Richard A. Patterson, Asst. General Counsel, Dept. of Health and Rehabilitative Services, Tallahassee, for appellee.

SMITH, Judge.

St. Francis Hospital appeals a final order of the Department of Health and Rehabilitative Services (HRS) rejecting its application for a certificate of need (CON) to convert medical surgical beds to neonatal intensive care beds. The sole issue on appeal focuses on HRS's non-rule policy that a CON application will be rejected without consideration when the project costs contained in the application exceeds the estimated project costs set forth in the letter of intent (LOI). We reverse.

St. Francis's LOI proposed a total project cost of $463,132.00, but later, in its CON application, after making a more detailed analysis of the project's costs, St. Francis stated $569,625.00 as the actual cost of the project. Although St. Francis received notice of HRS's policy before the CON application deadline, this occurred after the LOI was filed, and it was too late to change the LOI to conform with the more accurate project cost. When HRS rejected its application, St. Francis requested a formal administrative hearing pursuant to section 120.57, Florida Statutes (1987).

HRS's position in this case stems from changes to sections 381.707 and 381.709, effective October 1, 1987. Section 381.709(2)(c) provides in pertinent part:

381.709 Review Process.--The review process for certificates of need shall be as follows:

* * * * * *

(2) Letters of Intent.--

* * * * * *

(c) Letters of Intent shall describe the proposal with specificity, including proposed expenditures.... The letter of intent shall contain a certified copy of a resolution by the board of directors of the applicant ... authorizing the filing of the application described in the letter of intent; authorizing the applicant to incur the expenditures necessary to accomplish the proposed project; certifying that if issued a certificate, the applicant shall accomplish the proposed project ... at or below the costs contained in the application....

Section 381.709(2)(d) required for the first time that an applicant publish a legal advertisement concerning the proposed project within fourteen (14) days after filing a letter of intent. HRS requires this advertisement to reflect the amount of the proposed capital expenditure. Section 381.707 provides, in pertinent part:

381.707 Application Content.--An application for a certificate of need shall contain:

* * * * * *

(2) A statement of the financial resources needed by and available to the applicant to accomplish the proposed project. This statement shall include:

* * * * * *

(b) A detailed listing of the needed capital expenditures, including sources of funds.

* * * * * *

(4) A certified copy of a resolution by the board of directors of the applicant ... authorizing the filing of the application; authorizing the applicant to incur the expenditures necessary to accomplish the proposed project; certifying that if issued a certificate, the applicant shall accomplish the proposed project ... at or below the costs contained in the application....

HRS requires the same resolution that accompanied the letter of intent to be filed with the application.

Also pertinent to this appeal is section 381.709(3)(a), which provides in part:

Within fifteen (15) days after the applicable application filing deadline established by department rule, the staff of the department shall determine if the application is complete. If the application is incomplete, the staff shall request specific information from the applicant necessary for the application to be complete.... If the requested information is not filed with the department within (21) days of the receipt of the staff's request, the application shall be deemed incomplete and deemed withdrawn from consideration.

With respect to HRS's non-rule policy, the hearing officer found:

9. HRS's policy is to treat the letter of intent as "locking in" an applicant to the type of service, number of beds and proposed capital expenditure proposed in the letter. Therefore, no changes in these items are permitted after the letter of intent is filed. The prohibition against these changes is premised on HRS's interpretation of sections 381.707 and 381.709. The agency construes these provisions to require consistency between the letter of intent and application as to type of service, unit size and costs. As to the prohibition against increasing project costs, HRS cites to the fact that the board resolution must be prepared before the filing of the letter of intent. To accomplish this, an applicant could not increase the costs after the letter of intent had been filed. From this interpretation flows HRS's policy of consistently rejecting all applications that have a project cost larger than that reflected in the letter of intent. There are, however, two exceptions to the "no-change" policy--those being to allow an applicant to "downsize" the project in terms of number of beds and to reduce the originally projected costs. These changes are permitted on the theory that HRS has authority to grant a "partial" award and to encourage cost savings.

10. HRS concedes that no statute or rule specifically authorizes it to reject an application, as it did that of SFH [St. Francis Hospital], but that the policy is nonetheless justified because the legal advertisement, which is published after the letter of intent is filed but before the application is submitted, "puts potential competitors on notice," "provides notice to the (general) public," and "provides an opportunity for business." Further, once publication is effected, there is no opportunity for an applicant to publish a second...