STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

In re: The Application of North )

Miami General Hospital for a ) CASE NO. 77-301 Certificate of Need to procure a ) HRS NO. 77-12-E Total Body Computerized Axial )

Tomograph Scanner. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on April 20, 1977 in Tallahassee, Florida.

APPEARANCES

For Petitioner: Barry White, Esquire

Foley, White, Hoag & Elliott

10 Post Office Square Boston, Massachusetts

and

Sheldon M. Simons, Esquire 3661 South Miami Avenue Miami, Florida 33133

For Respondent: Eric Haugdahl, Esquire

Staff Attorney Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida

By this petition, North Miami General Hospital, Miami Florida, Petitioner, seeks reversal of the Department of Health and Rehabilitative Services (HRS), Respondent, determination that petitioner's proposed capital expenditure, for the purpose of procuring and installing a Total Body CAT-Scanner, was not favorably to be recommended to the Department of Health, Education and Welfare. Pursuant to the provisions of 42 USCA 1320 a-1 and 42 CFR Part 100, petitioner has requested a fair hearing on this determination.

At the commencement of the hearing respondent, HRS, stipulated and agreed that the Recommended Order here submitted would be adopted as the Final Order of HRS. The parties stipulated and agreed for the purpose of limiting the issues the sole issue to be resolved was whether existing CAT-Scan facilities were being sufficiently used to justify the need for an additional scanner in the Miami area. Thereafter 17 exhibits were offered into evidence, 4 witnesses were called by petitioner and 2 witnesses were called by respondent. All exhibits were admitted when offered except Exhibit 16 and ruling on the objection to its admissibility on grounds of hearsay was reserved. Exhibit 16 is now admitted into evidence.

FINDINGS OF FACT

1. At the time of the denial of petitioner's request for a certificate of need, on January 18, 1977, nine CAT-Scanners were operational in Dade County. Two additional CAT-Scanners had been granted certificates of need approval and were on order. Three additional physician owned scanners for which certificate of need is not relevant were also on order. Of the nine CAT-Scanners currently operational in Dade County six were granted certificates of need and the remaining three are physician owned.

   
   

2. During the calendar year 1976 three of the CAT-Scanners in operation in Dade County performed less than 2,000 scans. The lowest performed 1256. On the other hand the most active CAT-Scanner, which is owned by a physician, operated

   14 hours per day and performed 3,269 scans. The next highest number of scans was performed by the CAT-Scanner at Jackson Memorial Hospital which numbered 3,059.

   
   

3. Guidelines established by HRS for granting certificate of need approval for CAT-Scanners is 2,400 scans per year. This number is based on an average of

   10 scans per day, 240 days per year. This excludes week-ends and holidays.

   
   

4. The national average of scans per day per machine is 13 which indicates the average machine does at least 2,750 scans per year.

   
   

5. The cost per scan is the total yearly cost for running the scanner divided by the number of scans done in a year. Although the cost of operating the scanner varies with the number of procedures done these variable costs are relatively small as compared to indirect costs and total costs. A doubling of the number of patients from 40 to 80 per week leads to only a 14 percent increase in total costs (Exhibit 16).

   
   

6. In the United States in 1976 Florida was second only to California in the total number of CAT-Scanners with 27 compared to California's 60. However, Florida has one machine per 310,000 population and California one machine per 353,000 population. Of the 27 machines in Florida at the time of that determination seven were located in Dade County. Dade County then provided one machine per 228,000 population.

   
   

7. North Miami General Hospital is a general hospital with 334 beds with the full range of facilities normally provided by general hospitals. It is preferred to locate CAT-Scanners in general hospitals where 24 hours per day service can be provided should the need arise.

   
   

8. Petitioner's projected use of the machine was 1,500 procedures the first year of operation and 2,000 procedures the second year (Exhibit 1).

   
   

9. The South Florida Health Systems Agency (HSA) initially projected scanner demand on institutional usage showing the sum of nuclear brain scans, cerebral angiograms and pneumoencephalograms performed is at least 1,000. This requirement was based on the rationale that an institution performing 1,000 of these three head procedures can expect to generate some 1,900 total head and body scans each year (Exhibit 8).

   
   

10. A survey of the Mt. Sinai procedures conducted before and after the installation of a CAT-Scanner cast serious doubts on the validity of these assumptions (Exhibit 8) and HSA increased the institutional procedures required for justification of need to 1,500.

11. However community need and not institutional need is the criteria required to support an application for a certificate of need.

    
    

12. In support of its position that the decision of HSA and HRS to recommend denial of petitioner's application for a certificate of need was arbitrary and unreasonable, petitioner called four witnesses.

    
    

13. The first witness, a diagnostic radiologist, lives and works in Leon County. The scanner at Tallahassee Memorial Hospital is in operation 14 hours per day and in 1976 some 2,850 procedures were performed. He has never used a body scanner and is not familiar with the need for additional machines in Dade County.

    
    

14. Petitioner's second witness was a diagnostic radiologist attached to the staff at North Miami General Hospital. He believes that CAT-Scanners should be readily available 24 hours per day in all hospitals of a size at least comparable to North Miami General. The nearest machine to North Miami General is located at Miami International Hospital and is owned by a group of physicians. He does not consider the quality of scanning procedures done at this hospital is up to the highest standards and is reluctant to send patients there. No reports of unsatisfactory procedures have been made by him. In 1976 North Miami General referred only 250 to 300 patients to other hospitals for scanning procedures.

    
    

15. Referrals are usually made to Mt. Sinai Hospital, Palmetto General Hospital, and Miami International Hospital. One objection voiced respecting the latter is the requirement that patients pay in advance for the procedure.

    
    

16. At North Shore Hospital a physician-owned scanner is in service.

    North Shore Hospital, Miami International Hospital and Parkway General Hospitals are in reasonably close proximity to North Miami General. Parkway General is across the street from Miami International and commenced operating its body scanner in January, 1977.

    
    

17. The Executive Vice president and Executive Director of petitioner also feels his hospital needs a CAT-Scanner so one will be readily available for use by patients needing the procedure. Petitioner has entered into negotiations with St. Francis Hospital to participate in the use of their scanner, but to date have not reached a participation agreement. The scanner at St. Francis Hospital, if present, is not included with the nine machines reported to be in use or the five on order. The estimates of projected use submitted with petitioner's application he considers to be conservative.

    
    

18. The fourth witness called by petitioner was the official of HRS who prepared the letter denying the application for certificate of need. His function is to evaluate the need for capital expenditure for projects such as CAT scanners. In evaluating the need for the requested machine here involved the number of scanners presently in use was ascertained with the usage to which they are put. To this is added the scanners for which approval has been granted and ordered as well as those on order for which certificate of need has not been requested. In reaching the decision to deny approval of this application HRS relied heavily on the evaluation made by HSA and the review council both of which recommended the application not be approved. Numerous criteria, including the number of additional machines approved and on order for installation in Dade County, were considered by HRS, literature on the subject was reviewed, usage data of existing machines was obtained, discussions were held with doctors

    utilizing the procedure and a minimum reasonable usage of 200 scans per month, or 2,400 scans per year, per machine was established as the crucible upon which applications for additional certificates of need would be tested. Using these criteria HRS followed the recommendation of HSA.

    
    

19. Determination of need was predicated upon the criteria contained in 42 CFR 51.4.

    
    

20. In relating those criteria to this application HRS considered the service area appurtenant to applicant and on the date denial letter (Exhibit 6) was forwarded to petitioner three facilities in this service area, viz Mt. Sinai, Miami International, and North Shore General Hospital were equipped with CAT-Scanners and Parkway General had an application approved with installation pending.

    
    

21. Community need, rather than the institutional need criteria developed by HSA was utilized.

    
    

22. The primary basis for HRS' denial of the application was two CAT- Scanners in the vicinity of North Miami General were not being utilized at or reasonably near the minimum determined usage of 2,400 procedures per year and an additional scanner had been approved for installation at Parkway General.

    
    

23. Respondent presented two witnesses, the senior health planner for HSA and the official in charge of issuing state certificates of need for HRS.

    
    

24. In making the recommendation to disapprove the application here involved HSA considered the number of scanners installed and approved in Dade County plus those on order and the current utilization of the scanners in Dade County. Also considered was the nationwide usage data and number of scanners contained in the office of Technical Assessment draft report prepared at the request of the U. S. Senate (Exhibit 16).

    
    

25. The procedure used to ascertain the minimum usage requirement of 2,400 procedures per year was to discuss with the doctors operating "CAT" Scanner the operation of the scanner at the hospitals using them to determine the average number of scans performed, then review the literature extant on the subject to obtain cost/usage figures throughout the U.S.

    
    

    CONCLUSIONS OF LAW

    
    

26. 42 CFR 51.4 establishes the criteria to be followed in issuing certificates of need and states the determinations will be based on the following considerations:

    
    

    "(i) Whether a proposed project is needed or projected as necessary to meet the needs in the community in terms of health services required: Provided, That projects for highly specialized services which will draw from patient population outside the community will receive appropriate consideration;

    1. Whether a proposed project can be adequately staffed and operated when completed;

    2. Whether a proposed capital expenditure is economically feasible and can be accommodated in the patient charge structure

       of the health care facility or health maintenance organization without unreasonable increases;

    3. Whether a project will foster cost containment or improved quality of care through improved efficiency and productivity, including promotion of cost-effective factors such as ambulatory care, preventive health care services, home health care, and design and construction economies; or through increased competition between different health services delivery systems."

       
       

27. The above requirements contemplate cost considerations will be taken into account in determining certificates of need for capital cost intensive equipment. The CAT-Scanner is a capital cost intensive piece of equipment capable of performing valuable diagnostic procedures. To be cost effective it is necessary that this equipment be operated to the maximum extent practicable.

    
    

28. The minimum of 2,400 procedures per year per scanner is a reasonable requirement to be met before additional scanners are approved and no evidence was submitted to rebut this determination.

    
    

29. Petitioner contends that the need for the proposed body scanner should be determined as of the date of its application, October 7, 1976, rather than the date of HRS denial of January 18, 1977. However subsection (i) above quoted states "needed or projected as necessary". In order to determine the projected requirement most accurately the status of installed, approved and ordered scanners should be ascertained as of the time agency action is taken on the application.

    
    

30. No specific criteria upon which the determination of need is to be predicated is provided by the regulations. Implicit in these regulations is the concept to provide the maximum health care possible with the resources available. The HSA obviously is called upon to determine the most cost effective use of these resources for the community for which they are responsible. No evidence was presented that the cost of additional CAT-Scanners was weighed against the cost of other desirable medical equipment or facilities before the determination to recommend disapproval of this application was made, however, such a determination appears implicit in the recommendation.

    
    

31. From the foregoing it is concluded that petitioner failed to show that an additional CAT-Scanner in the area serviced by North Miami General Hospital is needed by the community or that the existing, approved, and ordered machines are not adequate to supply this need. It is therefore,

RECOMMENDED that the appeal be denied. In view of the stipulation of HRS at the commencement of the hearing that this Recommended Order would be adopted by the HRS as its final order it is also

RECOMMENDED that HRS enter an order adopting this Recommended Order as its final order.

DONE and ENTERED this 11th day of July, 1977, in Tallahassee, Florida.

K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Barry White, Esquire

Foley, White, Hoag & Elliott

10 Post Office Square Boston, Mass.

Sheldon M. Simons, Esquire 3661 South Miami Avenue Miami, Florida 33133

Eric Haughdahl, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Mr. William J. Page, Jr. Secretary

Department of Health and Rehabilitative Services

1323 Winewood Blvd.

Tallahassee, Florida 32301

Docket for Case No: 77-000301

Orders for Case No: 77-000301