STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

KIDNEYCARE OF FLORIDA, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 77-2203

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, ) OFFICE OF COMMUNITY MEDICAL ) FACILITIES, STATE OF FLORIDA, )

)

Respondent, )

and )

) BIO-MEDICAL APPLICATIONS OF ) CLEARWATER, INC. )

)

Intervenor. )

)

RECOMMENDED ORDER

A hearing was held in the above captioned matter, after due notice, at Tallahassee, Florida, on January 12, 1978, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: John H. French, Jr., Esquire

630 Lewis State Bank Building Tallahassee, Florida

For Respondent: Eric Haugdahl, Esquire

Staff Attorney Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida

For Intervenor: Mark B. Cohn, Esquire

Post Office Box 1102 Tampa, Florida 33601

ISSUE PRESENTED

Whether Petitioner's application for a Certificate of Need and approval of a capital expenditure proposal pursuant to Chapter 381, Florida Statutes, and Section 1122 of the Social Security Act (42 U.S.C. 1320a-1), to establish a ten station chronic renal dialysis facility at Clearwater, Florida, should be granted.

At a prehearing conference held on January 9, 1978, Bio-Medical Applications of Clearwater, Inc. was granted intervention as a party to these proceedings based on its current application for a Certificate of Need and for Section 1122 review of its capital expenditure proposal to establish a twenty station chronic renal dialysis facility in Clearwater, Florida, which is also the subject of state administrative proceedings at this time. The intervenor's Motion for Consolidation of its case with the instant case for the purposes of hearing was denied, after objection thereto by Petitioner. The Intervenor's Motion for a Continuance to enable it to conduct discovery procedures was denied in the absence of consent thereto by Petitioner, but the right was reserved to renew the motion after the final hearing had commenced. Intervenor did renew such motion at the time of final hearing. The motion was denied, it not having been shown that any discovery requests were then pending.

FINDINGS OF FACT

1. On September 21, 1977, Petitioner filed its application for a Certificate of Need and Section 1122 project review with Respondent. The application is for a ten station chronic dialysis unit to serve the needs of instate renal disease patients at Clearwater, Florida. The proposed facility would provide limited care hemodialysis for outpatients drawn primarily from north Pinellas and Pasco counties. Petitioner plans to lease space in a building providing easy access to Morton Plant Hospital, Clearwater, Florida. That hospital has agreed to provide the inpatient support services required by a freestanding hemodialysis unit. The hospital has approval for facilities to treat acute patients and is desirous of acting as a "backup unit" for petitioner's chronic patients who develop complications or otherwise require hospitalization. In addition, petitioner and Tampa General Hospital have an affiliation agreement whereby the hospital also will act as a "backup" facility to provide inpatient care for petitioner's dialysis patients. The Morton Plant Hospital has employed three nephrologists to staff its acute dialysis unit and these physicians intend to work also in Petitioner's chronic unit. The Morton Plant Hospital is the largest in Pinellas County and its assistant director testified that if petitioner is unable to establish its dialysis unit, there would be a serious adverse impact on the long-range plans of the hospital because it needs a nearby "feeder" for its acute unit. (Exhibit 4, Testimony of Pickering, Graves, McKinney)

   
   

2. Petitioner is a nonprofit Florida corporation that is owned and directed by five nephrologists who currently practice medicine in the Tampa area. Four of the five physicians are full-time members of the instructional staff at the University of South Florida and also engage in private practice. The other physician is in full-time private practice. All five directors provide supervisory care of patients at Petitioner's Lakeland and Tampa, Florida, dialysis facilities, at the Tampa General Hospital and Tampa Veterans Administration Hospital. It is contemplated that the director of the proposed Clearwater dialysis unit will be Dr. Harry J. Free, a nephrologist and staff member of Morton Plant Hospital. Additional personnel that will be required in the proposed unit are a nursing supervisor, nurses, dietitian, social worker, technician, and clerical personnel. Petitioner plans to lease some 3500 square feet of space in an existing building with any necessary renovation costs built into the cost of the lease, which is estimated at eight to nine dollars per square foot. Suitable sites have been identified and are available in the Clearwater area. Petitioner plans either to lease or purchase necessary dialysis machines, water treatment equipment, and office and medical equipment at a total cost of approximately $77,000, depending on current resources. The cost of additional dialysis machines for home training will be paid out of a

   federal Department of Health, Education and Welfare grant to establish a home dialysis program, effective March, 1978, for a period of nine years. Based on the evidence presented, it is found that Petitioner's project is financially feasible and that the facility will be adequately staffed to provide effective health care. (Exhibit 4, Testimony of Pickering, McKinney)

   
   

3. End-stage renal disease (ESRD) is the stage of kidney impairment when the human kidney has ceased to function and a machine must take over the function. Without dialysis, the ESRD patient will die. There are basically two kinds of ESRD life-sustaining services - dialysis and transplantation. Dialysis is a process which separates substances in the blood by taking advantage of their different diffusibility through a porous membrane by means of the artificial kidney (Dialysis station) . Transplantation is the process whereby a patient's nonfunctioning kidney is replaced surgically with a functioning kidney donated by a relative or a suitable cadaver. Hemodialysis is employed on an acute basis for hospital inpatients and on a chronic basis for those persons suffering from ESRD who must have this maintenance procedure performed usually three times per week, five hours per treatment, in order to live. Chronic hemodialysis is performed on an outpatient basis and may be rendered by home self-care or in-center treatment. In-center care is carried out in a facility where dialysis is either accomplished by the individual or with the assistance of nurses. (Exhibit 3, Testimony of Pickering)

   
   

4. There are five chronic dialysis units in facilities located within the four-county area of the Florida Gulf Health Systems Agency, Inc. The counties are Pasco, Pinellas, Hillsborough and Manatee. Four of these facilities are located in Hillsborough County and one in Pinellas County at St. Petersburg. There is no unit in the northern part of Pinellas County to service that area and Pasco County. The total number of chronic dialysis stations at the five facilities total 91, including 18 stations at the VA Hospital in Tampa. The VA Hospital had 39 dialysis patients as of January 1, 1978, and has established a

   41 patient maximum for the facility. (Exhibits 3, 4, 8, Testimony of Pickering, McKinney, Riedsiel)

   
   

5. Thee fees for outpatient chronic dialysis for Medicare patients are established by the federal government and have been fixed at $150.00 per treatment since 1973. The sum of $12.00 of that amount is for the physician's fee. For eligible Medicare patients, the government reimburses 80 percent of the allowable charge. Ninety percent of dialysis patients are eligible for Medicare. If Petitioner's proposed unit is approved, there will be a savings to the government in travel costs and there will be greater convenience to the patients in that those in the northern Pinellas and Pasco County area are now obliged to travel either to Tampa or St. Petersburg for treatment. (Exhibit 3, Testimony of Pickering, supplemented by Composite Exhibit 5)

   
   

6. In its application, petitioner used a standard formula to arrive at the projected need for additional dialysis stations by August 1, 1978. This was based on the actual number of patients (217) in the four-county area, excluding Veterans Administration patients, as of August 1, 1977. The estimated number of new patients in the ensuing year, based on anticipated population growth to 1.6 million, was added to this figure to arrive at a total number of patients. Different computations were made based on either 80 or 100 new patients per million population. The actual number of successful kidney transplants performed in the area during the previous year was deducted from the projected patient population, as was an estimated 20 percent mortality rate for all patients. It was further assumed that patients would use each station two shifts a day for six days a week. Based on the existing number of dialysis

   stations, Petitioner estimated that between 4 and 11 new stations would be required within a year, depending upon either a 90 percent or 80 percent utilization rate of stations. These figures did not include transient patients or winter visitors. (Exhibit 4)

   
   

7. Petitioner's proposal was first considered by the Florida Gulf Health Systems Agency, Inc., a federally funded agency charged with initial review of such applications, on November 28, 1977. It found that the proposal was in conformity with standards, criteria, and plans employed by the agency under the Section 1122 review program and recommended approval of the application. This agency utilized a formula similar to that of the Petitioner and determined that there would be a net need for five additional dialysis stations in 1978 and seventeen additional stations in 1979. However, it based this estimate on a figure of 3.2 patients per station, with each station operating only at 80 percent utilization. It also used an increased projected mortality rate of 21.8 percent per year, and estimated there would be 96 new patients per million population. The agency's rationale for recommending approval of Petitioner's application for ten additional stations even though the data indicated a need for only five in 1978, was based on the exclusion of transient population from the data, the life and death nature of the service, and the time period required for phasing in of the project. (Exhibit 3, Testimony of Silver)

   
   

8. After receipt of the recommendation of the Florida Gulf Health Systems Agency, Inc., Respondent's medical facilities consultant reviewed the application, taking into consideration the recommendations and report of that agency, together with the report of a health program specialist of the Kidney Disease Program in the Department of Health and Rehabilitative Services. The latter report used erroneous figures in its computations to arrive at a zero need for additional dialysis stations by August, 1978. In a subsequent report, using more accurate figures as to patient load for each machine and a 15 percent instead of a 20 percent projected mortality rate, a new recommendation still found no need for additional stations within the coming year. However, unrealistic population figures were used in arriving at the probable number of new patients. (Exhibits 10, 11, Testimony of McDaniel)

   
   

9. Respondent's consultant found that Petitioner's application met all the statutory and regulatory criteria for approval except as to need for additional facilities. Using an admittedly erroneous figure as to the average number of patients per dialysis station, he determined that an excess of 11 stations would exist in 1978 and an excess of two stations in 1979. Based on the recommendation of the consultant, respondent's Administrator of the Office of Community Medical Facilities advised Petitioner by letter of December 13, 1977, that its proposal was not favorably considered for the following reasons:

   
   

   1. The finding by the Florida Gulf Health Systems Agency that only five additional ESRD stations will be needed in 1978.

   2. The determination by the Office of Community Medical Facilities that a surplus of eleven stations will exist in the Health Service area in 1978.

      
      

      On December 16, 1977, Petitioner filed its petition for a formal hearing to contest the denial of its application. (Exhibits 1, 2, Testimony of Sjoberg)

      
      

10. At the hearing, both Petitioner and Respondent presented updated figures as to actual patient population on January 1, 1978, based on informal

    surveys of local dialysis facilities. They stipulated that 242 patients were utilizing dialysis stations in the four-county area as of that date. Both parties also basically agreed that 3.6 patients per station is realistic, as is a 20 percent mortality rate, that the projected area population by the end of 1978 will be about 1.6 million, and that an average of 96 new patients per million population could be anticipated. The number of successful kidney transplants in 1977 (12) was undisputed. It was shown that the limitations on veterans gaining access to the Tampa VA Hospital would be modified by deaths in the hospital in the amount of some eight patients. The evidence also showed that Petitioner's planned home dialysis program would take care of the needs of about 23 patients per year.

    
    

11. In applying the above figures to the basic formula, it is found that at least 78 stations will be needed by the end of 1978. Since 73 stations are in existence at the present time, five new stations would be required in 1978 based on a projected net patient population of 282. This figure does not include occasional utilization of dialysis stations by an unknown number of transients and winter residents of the area. However, since the number of such patients is unknown, this factor cannot be used in calculating the need for facilities. Applying the standard formula, it also conservatively can be found that at least five additional dialysis stations will be required in the first half of 1979. Respondent, as a matter of unwritten policy, restricts its consideration of need to the one-year period subsequent to the filing of an application. It will take petitioner approximately three to four months to have its facility operational for the treatment of patients. In consideration of the necessary administrative approvals required prior to commencing the purchase of equipment and rental and renovation of building space, it is found that Petitioner will not be in a position to operate its proposed facility until the latter half of 1978. (Exhibits 3, 6, 7, 12, 13, Testimony of McKinney, Sjoberg, Riedsiel, Shires)

    
    

    CONCLUSIONS OF LAW

    
    

12. An applicant for a Certificate of Need/ capital expenditure proposal has the burden of establishing conformance to federal and state plans, standards and criteria developed pursuant to Section 1122 of the Social Security Act, 42 USC 1320a-1, 42 CFR Section 100.101 et seq; Sections 381.493-497, Florida Statutes; Florida Administrative Code Chapter 10-5.

    
    

13. Title 42 of the federal regulations sets forth the criteria for evaluation of capital expenditure proposals pertinently as follow:

    
    

    100.107 Agreement; criteria for agency review.

    * * *

    1. Whether the proposed project is needed or projected as necessary to meet the needs in the community in terms of health services required . . .

    2. Whether the proposed project can be adequately staffed and operated when com- pleted;

    3. Whether the proposed capital expenditure is economically feasible and can be accommo- dated in the patient charge structure of the health care facility or health maintenance

       organization without unreasonable increases; and

    4. Whether the 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 in- creased competition between different health services delivery systems. (Emphasis added)

    
    

14. Although the Intervenor raised questions as to the economic feasibility of the proposed expenditure and as to such matters as site selection, adequate staffing and efficiency of operation, Petitioner presented adequate evidence to establish that it would meet such criteria in the event of approval. Therefore, in view of the fact that Respondent denied Petitioner's application solely on the basis of need, it is considered that only that aspect need be considered hereinafter.

    
    

15. Section 381.494(5)(c)1, Florida Statutes (Chapter 77-400, Laws of Fla.), provides that health systems agencies in certificate of need determinations, must consider, Inter alia, "The need for health-care facilities and services being proposed in relation to the applicable health systems plan, annual implementation plan, and state medical facilities plan adopted pursuant to Titles XV and XVI of the Public Health Service Act." Here, the Florida Gulf Health Systems Agency, Inc. determined that there was a need for the facilities and services proposed by the Petitioner under its proposed health systems plan and annual implementation plan. No state medical facilities plan has been established for renal dialysis.

    
    

16. Section 381.494(6)(c) provides that respondent shall review the application, the recommendation of the health system agency, and the relationship between the application and the state medical facilities plan, and thereafter issue or deny certificate of need for proposed capital expenditures in their entirety or for identifiable portions of the total project. Respondent has established further criteria for consideration of an application/ proposal in Rule 10-5.11, Florida Administrative Code. Rule 10-5.11(3) refers to "The need that the population served or to be served has for such proposed health services." (Emphasis added)

    
    

17. It thus can be seen that the question of need for the proposed facilities or services is not restricted to a present need. The federal rule quoted above speaks of whether the project is "projected as necessary to meet the needs of the community" and the state rule specifies the need of the population "to be served," but no definite time period for such projected needs for the health services or population growth is specified. Respondent's policy of considering only needs for the year following the date of an application is not necessarily unreasonable, but should be applied in the light of the status of the application at the present time, the "lead time" necessary for the facility to become operational, and a consideration of the importance of the particular facility to the health of the community. In view of the fact that the health systems agency is in the best position to know the status of the needs of the community and taking into consideration Its crucial role in the evaluation process, its recommendations as to the general area requirements, and the critical nature of the proposed facility are entitled to great weight. It is true that all parties concerned in these proceedings originally applied

    inadequate or incorrect data or standards to arrive at the number of dialysis stations required in the community. However, as heretofore found, corrected figures show a need for at least five additional dialysis stations in 1978 and another five by mid-1979. Since Petitioner's facility cannot become fully operational until mid-1978, it is considered that the need he established for the twelve-month period thereafter. Accordingly, Petitioner's request for ten stations is found to be warranted.

    
    

18. It is therefore concluded that the application/proposal is in conformance with applicable federal and state standards, criteria, and plans, and that the Certificate of Need and any necessary approvals of Petitioner's capital expenditure proposal should be issued.

RECOMMENDATION

It is recommended that the petitioner's application for Certificate of Need/Capital Expenditure Proposal be approved.

Done and Entered this 14th day of February, 1978, in Tallahassee, Florida.

THOMAS C. OLDHAM

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

COPIES FURNISHED:

Mr. Art Forehand Administrator

Office of Community Medical Facilities

1323 Winewood Boulevard

Tallahassee, Florida 32301

Eric Haugdahl, Esquire

Staff Attorney, Department of HRS 1323 Winewood Boulevard

Tallahassee, Florida 32301

John H. French, Jr., Esquire 630 Lewis State Bank Building Tallahassee, Florida 32301

Gary Silvers

Director of Project Review Florida Gulf Health Systems Agency, Inc.

10051 Fifth Street North Suite 253

St. Petersburg, Florida

Mark B. Cohn, Esquire Post Office Box 1102 Tampa, Florida 33601

Docket for Case No: 77-002203

Orders for Case No: 77-002203