STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

vs. ) CASE NO. 78-102

) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, ) OFFICE OF COMMUNITY MEDICAL ) FACILITIES, )

)

Respondent, )

and )

) KIDNEYCARE OF FLORIDA, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on February 17, 1978, in Room 103 of the Collins Building, Tallahassee, Florida. The parties stipulated that the hearing would be officially closed on the date of receipt of the transcript of the hearing. This date was later extended by agreement of the parties.

APPEARANCES

For Petitioner: Harold W. Mullis, Jr.

Tream, Simmons, Kemker,

Scharf, Barkin, Frye and O'Neill Post Office Box 1102

Tampa, Florida 33601

For Respondent: Eric J. Haugdahl

Assistant General Counsel 1323 Winewood Boulevard

Building 1, Room 406

Tallahassee, Florida 32301

For Intervenor: John H. French, Jr.

630 Lewis State Bank Building Tallahassee, Florida 32301

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. On September 14, 1977, respondent received petitioner's (BMA) application for approval of a capital expenditure proposal to establish a new twenty-station chronic renal dialysis facility in Clearwater, Florida. Petitioner is a subsidiary of National Medical Care, Inc., which is the largest provider of chronic dialysis services, operating some sixty facilities nationwide. BMA currently operates two facilities in the Florida Gulf Health Systems Agency (FGHSA) region -- a twenty-five station facility in Tampa and a twenty station facility in St. Petersburg. BMA also operates facilities in Sarasota, Gainesville and Orlando, Florida. The present application proposes to spend $470,000.00 for leasehold improvements and $140,000.00 for equipment for a total capital expenditure of $610,000.00. The proposed facility is designed to provide outpatient hemodialysis treatments to medically stable, ambulatory patients suffering from end state renal disease (ESRD). Such patients suffer negligible kidney functions and require either regular chronic dialysis treatment or transplantation. Those patients who undergo hemodialysis generally have three treatments per week, each treatment lasting from four to six hours.

   
   

2. By letter dated December 12, 1977, the respondent's administrator notified petitioner that its capital expenditure proposal was not favorably considered for two reasons, both relating to the need for such services within the applicable service area. The first reason cited by the respondent was the finding by the FGHSA that only five additional stations would be needed in the year 1978. Due to the fact that the FGHSA failed to provide respondent with its recommendation within sixty days, respondent was required, pursuant to F.S. Section 381.494(5)(e), to deem that the proposal was recommended for approval by the FGHSA. The second reason for disapproval listed by the respondent was its own determination that a surplus of eleven stations would exist in the service area of 1978. This figure of eleven was amended at the hearing to four.

   
   

3. Subsequent to the time that petitioner's application was considered at the local and state levels, respondent approved the application of Kidneycare of Florida, Inc. for the establishment of a ten station chronic renal dialysis facility in Clearwater, Florida. This action occurred on February 15, 1978, after an administrative hearing was held in which petitioner BMA was an intervenor. That case (Case No. 77-2203) is presently on appeal in the District Court of Appeal, Second District. Apparently, the BMA and the Kidneycare applications were submitted to and considered by the local and state reviewing authorities during the same period of time.

   
   

4. The generally accepted formula for arriving at a projected need for additional dialysis stations is not in dispute. The starting point is the actual number of persons who are ESRD patients within the service area. To this number is added the number of patients expected to develop ESRD during the planning period. This sum is then reduced by the number of successful kidney transplants expected to occur and by the number of patients expected to die within the planning period. For planning purposes, veteran administration patients and dialysis machines are not to be included in the projections. In order to arrive at a valid project patient population figure for the planning period, it should be appropriate to add the number of transient patients or winter visitors to the area and subtract the number of patients trained for home dialysis. To arrive at the number of stations (machines) required to serve the project patient population at the end of the planning period, the projected patient pool is divided by the station utilization factor (a ratio of number of patients per station). The number of existing stations in the area is then subtracted from this figure, thus yielding the number of additional stations needed. Thus the ideal formula reads as follows:

   current patient pool

   + new patients

   • successful transplants

   • mortality factor

   • home trainees

     + winter visitors

   • V.A. patients

     = projected patient pool divided by station utilization factor

   • number of existing non V.A. stations

     + additional stations needed

     
     

     This formula necessarily employs certain conjectural components and the dispute in this proceeding concerns the derivation and propriety of the statistics used to supply these conjectural components.

     
     

5. It appears from the testimony and documentary evidence that the respondent relied exclusively on the data supplied by the FGHSA, with the exception of the station utilization factor. Therefore, it is presumed that the figures utilized by the FGHSA in its analysis were also utilized by respondent.

   
   

6. In arriving at the projected patient pool, the petitioner and the HSA were in agreement with the number of new patients and the number of successful transplants. They were not in agreement with the projected morality figure or with the projected number of veterans administration patients. The HSA utilized the actual morality figure (21.8 percent) for the 1975-76 year. The petitioner utilized the figure of 15 percent. The actual morality rate for the 1976-77 year was 14.1 percent. Had the HSA had this more recent statistic available to it at the time, it would have utilized it. A more appropriate method would have been to average the two figures. This would have increased the number of deaths projected by the petitioner and decreased the number projected by the HSA. The evidence with respect to the patient cap at the V.A. hospital was based upon hearsay and thus is not sufficient to refute the HSA's projections in that area.

   
   

7. Neither the HSA nor the petitioner took into account the number of transient patients or the number of existing patients who would undergo home dialysis training within the planning period. Each of these factors was deemed too speculative or conjectural for a meaningful computation of projected needs. Testimony was adduced to the effect that the intervenor Kidneycare had received a nine-year grant to establish home dialysis training in the subject service area, and that once this program was underway, it was expected that from 30 to

   50 patients would be trained in home dialysis.

   
   

8. The utilization factor per station or machine was also in dispute. In making their projections, both the petitioner and the HSA used a factor of 3.2. This result is obtained by assuming that each machine has a capacity for dialyzing two patients per day, and that each patient must be dialyzed three times per week. Assuming a capacity rate of 80 percent, the utilization factor is 3.2 patients per station. Using a capacity rate of 90 percent, the utilization factor is 3.6 patients per station. The respondent utilized the 3.6 factor in projecting future need. This 3.6 utilization standard has consistently been used by respondent in its review of other free-standing chronic renal dialysis facilities, and petitioner has failed to demonstrate that such a standard is unreasonable.

   
   

9. The remaining area of the formula in dispute is the number of existing non-V.A. stations in the area to be served. The parties agreed that as of the

   end of 1977, there were 73 chronic renal dialysis stations in existence or authorized in the four county are covered by the FGHSA. The dispute arose over the actual utilization by Tampa General Hospital of its existing 14 stations.

   The assistant hospital administrator at Tampa General Hospital testified that it is the future intent of said hospital to reduce the number of stations available for stable chronic patients in order to make room for more unstable chronic and acute patients. This "future intent" is still in the recommendation stage and the testimony regarding this intent was not specific as to the actual number of stations to be withdrawn.

   
   

10. The testimony established that a reasonable planning period for chronic renal dialysis equipment is one year. If one considers the one year period to commence at the time that the proposed facility can be operational, the testimony indicates that the one year period would run from the end of 1978 through the end of 1979.

    
    

11. In applying the facts discussed above to the acceptable formula, it is found that the patient pool projected by the HSA must be increased by utilizing a lower mortality rate (18 percent in lieu of 21.8 percent) and that the petitioner's projected patient pool must be decreased by utilizing a higher number of deaths and a higher number of V.A. patients. The resulting figures must also be offset by applying a station utilization factor of 3.6 in lieu of

    3.2 and by adding to the number of existing stations the ten stations for which the intervenor Kidneycare recently received approval from respondent. Applying these adjustments to the figures projected by the respondent, the projected patient pool for non-V.A. patients for the end of 1978 approximates 294, and the figure for the end of 1979 is somewhere close to 326. A utilization factor of

    3.6 patients per station indicates an approximate need for 82 stations by the end of 1978 and 90 stations by the end of 1979.

    
    

    CONCLUSIONS OF LAW

    
    

12. The petitioner's application was denied by the respondent solely on the ground of a perceived lack of need for the proposed facility within the service area. For this reason, as well as the fact that no further reason for denial was addressed by the parties at the hearing, only the question of projected need is addressed in this order.

    
    

13. Petitioner has clearly illustrated that it would be more accurate to utilize a lower mortality rate than that figure used by respondent and the HSA. The respondent's estimated caseload of non-veteran patients should thus be increased by three percent, as set forth in the last paragraph of the findings of fact. Applying the station utilization rate (3.6) to the figure of 294 (285 plus .03 percent) yields a need at the end of 1978 for 82 machines and a need at the end of 1979 (with 326 patients) for 90 machines. There are currently 83 stations approved for operation in the planning area. The one-year planning period should begin to run from the date of expected operation of the proposed project which is, in this instance, the end of 1978. There will thus be a need for seven additional machines by the end of the planning period.

    
    

14. This conclusion does not take into account the effect of home dialysis training expected to be implemented in the near future. None of the reviewing agencies took this into account in their projections and the testimony adduced at the hearing was too conjectural to allow its use in projecting future need. The evidence further indicated that the service area in question has a strong tourist or transient population which has an effect upon the patient pool.

    Inasmuch as the number of such patients is unknown, this factor cannot be used in calculating the future need for facilities.

    
    

15. The evidence adduced at the hearing clearly illustrates that projections as to the need for hemodialysis facilities should be liberal. This service is a vital one to those suffering from end stage renal disease.

    
    

16. The Health Facilities and Health Services Planning Act, F.S. Sections 381-493-381.497, permits the respondent to issue or deny certificates of need for proposed capital expenditures "in their entirety or for identifiable portions of the total project." F.S. Section 381.494(6)(c); F.A.C. Ch. 10- 5.10(5)(a). The present application seeks approval for twenty chronic renal dialysis stations. The evidence adduced at the hearing illustrates a need for seven stations within the planning period. Were the approval sought in this case based only upon the provisions of F.S. Sections 381.493-381.497, it would be concluded that respondent should issue a certificate of need to petitioner for the construction and operation of seven stations. However, petitioner is also seeking approval for its proposal under the provisions of Section 1122, PL 92-603. Under the latter review process, respondent is required to recommend to the Secretary of the United States Department of Health, Education and Welfare approval or disapproval of the proposed capital expenditure in its entirety.

F.A.C. Ch. 10-5.10(5)(b). Therefore, it is concluded that the petitioner, if it so desires, be permitted to submit a revised or amended application for approval of a seven station chronic renal dialysis facility. Said application should satisfy the requirements for Section 1122 purposes and should be submitted to respondent within twenty days of the date of respondent's final order rendered in this proceeding. Inasmuch as a full hearing has previously been afforded on the issue of need for the service area, respondent should immediately, and not later than fifteen days from the respondent's receipt of the revised application, approve said application if all other criteria for review are satisfied.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent's denial based upon the ground of lack of demonstrated need for additional dialysis stations in the service area be reversed. It is further recommended that, a need having been shown for an additional seven stations in the planning period, petitioner be permitted to submit a revised or amended application within twenty days for approval of a seven station facility. Respondent should then act upon said revised application within fifteen days from receipt of the same.

Respectfully submitted and entered this 9th day of May, 1978, in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 904/488-9675

COPIES FURNISHED:

Art Forehand, Administrator

Office of Community Medical Facilities 1323 Winewood Boulevard

Tallahassee, Florida 32301

Harold W. Mullis, Jr.

Trenam, Simmons, Kemker, Scharf, Barkin, Frye and O'Neill

Post Office Box 1102 Tampa, Florida 33601

Eric J. Haugdahl Assistant General Counsel 1323 Winewood Boulevard

Building 1, Room 406

Tallahassee, Florida 32304

John H. French, Jr.

630 Lewis State Bank Building Tallahassee, Florida 32304

Docket for Case No: 78-000102

Orders for Case No: 78-000102