STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
MEMORIAL HOSPITAL OF )
JACKSONVILLE, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 82-472
) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE )
SERVICES, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, an administrative hearing was held before Charles C. Adams, Hearing Officer with the Division of Administrative Hearings, on April 8 and 9, 1982, in Jacksonville and Tallahassee, Florida, respectively. 1/
APPEARANCES
For Petitioner: Kenneth Hoffman, Esquire
OERTEL & LARAMORE
646 Lewis State Bank Building Tallahassee, Florida 32301
For Respondent: James M. Barclay, Esquire
Office of Community Medical Facilities Department of Health and
Rehabilitative Services 1317 Winewood Boulevard
Building 2, Suite 220
Tallahassee, Florida 32301 ISSUES
The issues presented here concern the question of whether Petitioner is entitled to a Certificate of Need which would allow it to "shell-in" a fifth floor at its facility in Jacksonville, Duval County, Florida. The stated purpose of the fifth floor is for the future potential use of meeting a need for hospital beds. In addition, in response to the request for further information concerning the initial application for a Certificate of Need, Petitioner has indicated the intention to use the space created on the fifth floor for temporary storage and for permanent storage and expansion of wellness and physical fitness programs, if no additional beds are granted in the future.
FINDINGS OF FACT
On July 30, 1981, Petitioner filed an application with the Health Systems Agency of Northeast Florida, Area III, Inc. for a Certificate of Need to
construct an enclosure on the fifth floor of the south wing of Petitioner's hospital. The purpose of that enclosure was in contemplation of future available bed space at a time when need for those beds had been documented and approved by the local health system's agency. (Petitioner's Composite Exhibit No. 2)
In response to a request for further information which was made by the Executive Director of the local health system's agency, Rudolph Nudo, Director of Engineering for the Petitioner, answered that inquiry in writing by correspondence dated September 24, 1981. (Petitioner's Exhibit No. 3) Through the course of that correspondence Nudo indicated that the temporary use of the fifth floor would be for storage, and the fifth floor would be used in a permanent way for storage and expansion of the hospital's wellness and physical fitness programs should a determination be made in the future that additional beds are not needed in the review area of the local HSA.
On November 23, 1981 the local HSA wrote to advise Herbert E. Straughn, Medical Facilities Consultant, Community Medical Facilities for Respondent, that the Northeast Florida Area III Health Systems Agency was recommending the denial of the proposed Certificate of Need. That correspondence had as an attachment the legal notices publicizing the public hearing related to the project, staff briefing memoranda and papers involved in the review process. (Respondent's Exhibits 4 through 4d)
On January 27, 1982, Thomas J. Conrad, Administrator, Community Medical Facilities of the Office of Health Planning and Development, Department of Health and Rehabilitative Services, wrote to Charles Vadakin, President-General Manager of Petitioner, to advise Petitioner that the request for a Certificate of Need was being denied. (Petitioner's Exhibit 4) This indication of denial had as an attachment the State agency action report. (Petitioner's Exhibit No. 5)
On February 5, 1982, in keeping with Subsection 120.57(1), Florida Statutes, Petitioner requested a formal hearing to consider its entitlement to be granted a Certificate of Need to "shell-in" the fifth floor at its facility. On February 17, 1982, the Division of Administrative Hearings received Respondent's request that the Division conduct the formal hearing. That hearing de novo was held on April 8 and 9, 1982.
The evidence presented in the course of the hearing addressed the question of whether the proposal for construction by the applicant meets the criteria established in Section 381.494(6)(c), Florida Statutes and Rule 10- 5.11, Florida Administrative Code, in particular Rule 10-5.11(1),(3),(4),(6) and (12), Florida Administrative Code. (Those other criteria set forth in Rule 10- 5.11, Florida Administrative Code, have satisfactorily been addressed by the application process or are inapplicable in terms of the subject matter of the given criteria.)
Evidence presented also dealt with the subject of whether this Certificate of Need could be granted due to extenuating and mitigating circumstances which exist, notwithstanding the applicant's failure to successfully meet the criteria discussed above.
Memorial Hospital of Jacksonville is an acute general care hospital with a 309 bed capacity. The hospital is located in Jacksonville, Duval County, Florida. Petitioner has been granted Certificates of Need allowing the construction of an educational floor, perinatal center on a second floor and the
third and fourth floors above those. The third and fourth floors would house an additional thirty-four beds, bringing the total bed count in the hospital to 343 beds. The construction is referred to as the south wing and is depicted at a certain point in the construction through Petitioner's Exhibit 1, a photograph of the area of construction. Memorial's present request for a Certificate of Need would allow the construction of an additional floor, or fifth floor, above the, four floors that have been granted.
Memorial Hospital provides critical care, to include trauma cases treated in its emergency room and open heart surgery. In addition, there is a cardiac catheterization laboratory and other general cardiac care, an intensive care unit, a perinatal (birthing) center and other hospital services.
The fifth floor, if constructed, would not immediately contain additional beds and would be left with interior partition walls and would be used for storage space in the interim period prior to the grant of any further beds to the Petitioner.
The construction on the south wing which had been approved has its origins in Certificates of Need which were the topic of separate applications filed in 1979 and 1980. Specifically, in November, 1979, Memorial filed separate applications for its educational floor, first floor, in the amount of
$2,991,000.00 and at the same time, an application for a perinatal unit, second floor, in the amount of $4,352,000.00. The applications were granted in 1980 in the amounts requested.
At a later date in 1980, Petitioner filed a separate application for three additional stories; floors three, four and five, and for 106 additional beds, all in the cost amount of $10,656,000.00. This request came about at approximately the same time as a request by St. Luke's Hospital in Jacksonville, Florida, to move its hospital operations to an area in the vicinity of Memorial Hospital.
Memorial and St. Luke's, together with the local HSA, resolved the problem of the competing certificate requests by entering into a stipulation and agreement in 1981. By the terms of that agreement, Memorial limited its expansion to two floors instead of three, leaving floors three and four intact. It reduced its bed request from 106 to 34 additional new beds to be installed on one of the two additional floors, with the second additional floor receiving 34 beds from another part of the hospital which was not subject to the Certificate of Need. The second set of beds would be gained by the process of converting existing semi-private rooms to private rooms. Petitioner also agreed not to apply for additional beds until at least six months after the perinatal unit and
34 new medical/surgical beds had been opened. St. Luke's reduced its number of obstetric beds by 20 and it agreed that it would not "shell-in" space for additional beds in its proposed facility.
The results of the agreement caused the abandonment by Memorial of its fifth floor request and the reduction of bed requests by 72 beds. The new terms are set out in Certificate of Need No. 1488 pertaining to floors three and four. The project costs were left as originally requested, and that monetary amount was granted.
The agreement reached between the local HSA, Petitioner and St. Luke's was premised upon extenuating and mitigating circumstances, especially the possibility of the cost of protracted litigation had the parties not come to an agreement.
Following the stipulation and agreement with the local HSA and St. Luke's Hospital, the Petitioner filed the present request for Certificate. The general purpose of that project has been discussed before. The rationalization on the subject of consistency of the project with the local Health Systems' plan and the local annual implementation plan was as follows:
The proposed enclosure project is consistent with Health Systems' plan and annual implementation plan for 1980, in that it provides a mechanism for assuring available health care resources at the lowest possible cost consistent with quality service delivery. The proposal guarantees no additional beds will be added until approved by the Health Systems Agency and yet safeguards the most effective option of maximizing current capital investment dollars.
This project will allow Memorial Hospital to continue to meet the area's acute health care needs for the next ten years. The project contemplates the expenditure of $1,200,000.00 for cost of construction of "shell-in" space.
Need for the subject project was discussed in terms of a reference to "Certificate of Need #1488" which is that Certificate relating to floors three and four of the south wing. The Certificate of Need No. 1488 was based upon an application which included a study concluded in August, 1980, which set forth primary and secondary service areas, census tracts and preliminary 1980 Federal census figures for Duval County gathered by the "Research Department, Florida Publishing Company" and a document to the effect that Memorial had a firm market position, and that health care consumerism was emerging and that there was a strong consumer loyalty-to Memorial.
The present application was reviewed by the local Health Agency and the Health Needs and Priorities Committee voted to recommend denial of the proposed project; its Executive Committee also recommended denial of the project. During this review cycle, concerns were expressed about the application in view of the 1981 agreement with St. Luke's and the local HSA in which Memorial agreed not to apply for additional beds for at least six months after the 34 beds which had been approved were in operation.
While the present application does not violate the terms of that agreement, it does allow for a large portion of the capital expenditure, i.e., that part devoted to the construction of the "shell-in" of the floor to be achieved and thereby allows for a portion of the capital expenditure related to future beds to be approved.
With St. Luke's relocation to south Jacksonville, some time in late 1984 or early 1985, and with the addition of Memorial's construction program that has been approved, 323 beds will be added to the south side area of Duval County in the next few years.
In the local HSA staff's opinion, which opinion is accurate, from a community planning basis, there will not be a demonstrated community need for
additional beds in the south side any sooner than 1985 and it is more likely that there would be no further bed need before 1990.
The local HSA is also concerned that the project would set a precedent for future "shell-in" applications. This concern is borne out by interviews conducted through staff members of that HSA which revealed that seven hospital administrators planned major construction projects in the HSA area, and six administrators indicated that they would ask for "shell-in" space if they thought it would be approved.
In specific terms, the local HSA recommended disapproval of the project and did so by written findings alluded to before. In summary, those findings indicated:
The Health System's Plan did not address expansion projects which do not directly result in an increase in licensed beds or service but the primary purpose of the fifth floor would be for bed spaces.
The Health System's Plan called for a regional rate of 4.3 beds per 1,000 population. Excluding Nemour's Children and St. Johns
River Hospital, there were approximately 4.1 beds on the south side and beaches area of Jacksonville. When St. Luke's Hospital (289 beds) relocates to the south side and Memorial opens its 34 new beds, the rate will be approximately 5.2 beds per 1,000 population in 1985. In 1990 the estimated rate would be 5.0 beds per 1,000 population.
It was HSA's staff's opinion that there will not be a need on a community planning basis to approve more beds for the south side until the 1990s.
The local HSA also indicated that Memorial could be more effective in its specialization. Its recommendation in that regard was that after the current construction of four stories had been completed, Memorial could still have the capability to add additional licensed beds within its presently approved structures, even though it would mean reducing the ratio of private beds to semi-private beds.
Specifically, it was recommended by the HSA that:
Petitioner reconvert the 34 rooms previously used for semi-private back to semi-private
--34 beds
Modify the 34 private rooms on the third floor of the new building to semi-private, and
--34 beds
Modify the 34 private rooms on the fourth floor of the new building to semi-private.
--34 beds
TOTAL 102 beds
These observations and findings are correct, except as they relate to modification of rooms on the third and fourth floors of the new construction. The above-stated suggestion by the local HSA related to the modification to semi-private rooms on the third and fourth floors of the south wing would not comport with the design specifications of those beds as now contemplated by
Memorial, in that the private rooms contemplated on those floors did not provide sufficient space to be modified into semi-private rooms.
Analysis by HRS adopted and confirmed the majority of the analysis by the local Health Planning Agency. HRS also pointed out in its analysis, and the HRS analysis is accurate, that in view of the fact of excess bed capacity in the planning area through 1985, the adding of potential beds would give Petitioner an undue advantage over facilities should the fifth floor be constructed as "shell-in" space. Furthermore, according to Respondent, construction economies to be realized by Memorial Hospital can only be recognized as legitimate, if there is a community need for the project. Based upon the analysis conducted by Respondent, the project from a community-wide standpoint, under the terms of Section 381.493, Florida Statutes, there is an excess of 238 hospital beds in Duval County through 1985, and possibly into early 1990. Respondent having in mind the bed need situation, concluded that the proposed project was not consistent with bed need standards at the time of review or in the planning future and that the community need to add "shell-in" bed space did not exist absent a recognized bed need, which would not occur before 1985. All of these comments by HRS are correct accounts.
It was also concluded by Respondent that there were alternatives for converting private bedrooms to semi-private rooms, increasing capacity without major construction. This is a true understanding of the circumstances except as it relates to the third and fourth floors in the new construction.
Based upon the overall analysis, the project application was denied.
The conditions at Memorial Hospital are such that it would benefit from an expansion to add a fifth floor at the south wing. Those benefits pertain to the availability of storage and administrative space.
The occupancy rate for patients in the hospital during the last year have averaged approximately 90 percent (Petitioner's Exhibit 16), causing both emergency and planned health care services to be delayed due to overcrowding. Federal, State and HSA guidelines call for 80 percent occupancy of nonfederal, short-term care beds, such as provided by Petitioner.
There is a need for administrative office space. At the present time some administrative offices are placed in lobbies and hallways and the files for those offices are located in hallways.
Intravenous solutions are stored in hallways at present.
Testimony by the hospital engineer established a need of 15,000 square feet of space to accommodate storage problems more comfortably. The application seeks 17,500 square feet of space.
The alternatives to the construction of the fifth floor related to future bed need and short and long-term storage space would be to forego the expansion, construct the project at a future date, or construct a new building.
Construction at a later date could cost as much as an additional
$7,000,000.00, constituted of approximately $813,000.00 in construction cost and
$6,000,000.00 in loss of gross revenue. These costs are related to completion of the "shell-in" structure after the initial four floors had been completed and assumes loss of revenue related to beds in the third and fourth floors of the hospital, which floors would have to be closed during the construction of the fifth floor at a subsequent time.
Construction costs at the present, as set forth in Petitioner's Exhibit No. 3, at the last sentence of the first page, is estimated to be $.31 per-patient day.
There is precedent for granting the "shell-in" space as may be found in Petitioner's Exhibits Nos. 8, 9, and 10, related to projects in the Florida Gulf Health Systems Agency, Inc. area of responsibility. Respectively, those projects refer to Women's Hospital in Tampa, Florida; St. Joseph's Hospital in Tampa, Florida; and L. W. Blake Memorial Hospital in Bradenton, Florida.
In the situation of Women's Hospital, Respondent allowed the construction by installation of necessary structural equipment and fixtures needed to establish 34 single occupancy rooms as double occupancy rooms as a hedge against construction costs for any additional beds approved at a future date.
St. Joseph's Hospital was allowed to construct two floors in which 45 beds had been requested, but only 36 beds were granted per floor, leaving additional "shell-in" space which would accommodate nine additional beds per floor, for a total of 18 beds.
In the situation at Blake Memorial Hospital in Bradenton, Florida, that hospital was allowed to "shell-in" a fifth floor on condition that the structural framework would be completed and that the floor would be left in an unfinished state, that is to say, that the improvements necessary for the utilization of that fifth floor for patient rooms were not allowed to be added.
In each instance in which some form of "shell-in" space was granted, the HSA area was overbeded at the time of the grant of certificate.
The project is not consistent with the local health systems plan, annual implementation plan, and Florida State Health Systems Plan. (Petitioner's Exhibits 11 through 14 respectively)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this proceeding. See Subsection 120.57(1), Florida Statutes; Subsection 381.494(6)(c), Florida Statutes, and Rules 10-5.11 and 10-5.12, Florida Administrative Code.
The decision to be reached concerns the Petitioner's entitlement to be granted a Certificate of Need as requested. Decision on this issue shall be made in keeping with applicable criteria for issuance as set forth in Subsections 381.494(6)(c), Florida Statutes and Rule 10-5.11, Florida Administrative Code.
Subsection 381.494(6)(c), Florida Statutes, on the question of criteria related to this case, states:
The need for the health care facilities and services and hospicies being proposed in relation to the applicable health systems plan, annual implementation plan, and state health plan adopted pursuant to Title XV of the
Public Health Service Act, except in emergency circumstances which pose a threat to the public health.
The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospicies in the applicant's health services area.
Rule 10-5.11, Florida Administrative Code, in its subparts at (1),(3),(4),(6), and (12), states the following on the question of criteria related to this review process:
(1) The relationship of health and hospice services being proposed to the applicable Health Systems Plan, and Annual Implementation Plan and State Health Plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health.
The need that the population served or to be served has for such proposed health or hospice services.
The availability of alternative, less costly or more effective methods of providing such proposed health services upon the consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost effectiveness.
(6) The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospicies in the applicant's health service area.
(12.a) The costs and methods of the proposed construction including the costs and methods of energy provision; and the availability of alternative, less costly, or more effective methods of construction.
(b) The probable impact of the proposed construction project on the cost of providing health services proposed by the applicant upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and
improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost effectiveness.
To effect the ends associated with this inquiry the hearing de novo was held as a part of the process of the formulation of agency policy. See Florida Department of Transportation v. J.W.C. Company,, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).
The essential purpose of the Certificate of Need review process is to eliminate unnecessary duplication of existing health services in a defined area, and to insure this outcome, keeping in mind acceptable levels of quality, accessibility and efficiency of that health care. This review process is conducted on a community-wide basis as opposed to an institution-specific basis. See Lake City Medical Center v. HRS, DOAH Case No. 81-022.
Although the criteria discussed in the statute and rule do not speak in terms of "shell-in" space or storage by specific reference, the construction of such space is sufficiently related to the question of delivery of health care as set forth in the criteria to require a grant of Certificate of Need before constructing the fifth floor. Indeed, this has been the course perceived by the Department in reviewing past projects in Tampa and Bradenton, related to "sell- in" destruction, as alluded to in the Findings of Fact section of this Recommended Order.
In considering the initial criterion set forth in Section 381.494(6)(c)1., Florida Statutes, there is no present need for the services to be gained by the construction of the fifth floor, as it relates to gain on a community-wide basis. The health system's plan calls for a regional hospital bed rate of 4.3 per 1,000 population and with the completion of Memorial's construction in the first four floors in the south wing, and with the move of St. Luke's Hospital into the general area of the Petitioner's facility, there would be 5.2 beds per 1,000 and in 1990 the estimated rate would be 5.0 beds per 1,000. Consequently, on a community-area basis, there would not be the need for further beds until as late as 1990. There would be a benefit to the patients in Memorial Hospital by construction of the fifth floor, allowing more room for storage which would have a positive benefit for patients in the hospital. Nonetheless, taking into account a community-wide basis of examination and review, the project is not consistent with the local health systems plan in Duval County, Florida.
The analysis of criterion set forth in Subsection 381.494(6)(c)2., Florida Statutes, dealing with availability, quality of care, efficiency, appropriateness, accessibility and extent of utilization and adequacy of like and existing health care services area, leads to the conclusion that Memorial has not satisfied this criterion in terms of its entitlement. There are excess beds in the service area and notwithstanding Memorial's high occupancy rate, decision for expansion as addressed under this criterion must be based upon a community viewpoint, as opposed to an institutional viewpoint. Utilizing that concept, there is no need for the construction as measured against the criterion.
Rule 10-5.11(1), Florida Administrative Code, through criteria set forth in that provision, leads to the conclusion that the project is not in keeping with the health system's annual implementation and state health plans, which items have been recognized for the purpose of this hearing through the
process of admission into evidence as Petitioner's exhibits. Again, while the project affords benefits to the Petitioner, it does not afford benefits to the overall community in which it is located.
There is no need for this expansion in order to accommodate health care needs of the population served or to be served by this expansion, within the meaning of Rule 10-5.11(3), Florida Administrative Code, and therefore, that criterion is not satisfactorily addressed by the Petitioner.
While, from a specific institution's point of view, the construction of the fifth floor for purposes of storage and possible future beds, as envisioned by this Certificate application, would be the least costly and most effective method of providing the storage space and future beds, when measured against community needs related to cost and methods of providing the health service, it is not found to meet that criterion. Consequently the criterion in Rule 10-5.11(4), Florida Administrative Code is not met.
Rule 10-5.11(6), Florida Administrative Code, deals with the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing health care services in the applicant's service area. For reasons as set forth in the discussion of Subsection 381.494(6)(c)2., Florida Statutes, this rule criteria has not been met by the Respondent.
Those provisions of Rule 10-5.11(12)(a) and (b), Florida Administrative Code, which deal with cost and methods of construction and the impact of that construction on providing health care services, while found to be a cost savings to the institution, will not benefit the overall community in which this facility delivers its health services. Therefore, the criteria as set forth in those rules provisions have not been met. The grant of the Certificate will increase cost per patient day in the facility, which does not foster cost containment and would grant to Memorial an undue advantage over its competitor at a time when additional beds would be needed in the future, conclusions which pertain to various criteria discussed before.
There are no extenuating and mitigating circumstances which cause the Certificate to be granted.
This decision is reached notwithstanding the past practices of the Respondent in granting "shell-in" space to other applicants. The formulation of agency policy in the absence of a specific rule is an ad hoc process which not only allows, but requires refinements and even change in the formulation of final agency action, where there is an identifiable reason for such change. The record created in this instance supports the deviation from decisions which have been reached in the past in granting "shell-in" space.
Based upon a full consideration of the facts and conclusions of law, it is RECOMMENDED:
That a final order be entered which denies the petitioner's application for Certificate of Need to "shell-in" a fifth floor at Memorial Hospital.
DONE and ENTERED this 5th day of May, 1982, in Tallahassee, Florida.
CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 5th day of May, 1982.
ENDNOTE
1/ This Recommended Order is being entered after receipt and review of proposed recommended orders as submitted by the parties. To the extent that those proposals are consistent with this Recommended Order, they have been utilized.
To the extent that the proposals are inconsistent with the Recommended Order, they are rejected.
COPIES FURNISHED:
Kenneth Hoffman, Esquire
646 Lewis State Bank Building Tallahassee, Florida 32301
James M. Barclay, Esquire
Office of Community Medical Facilities Department of HRS
1317 Winewood Boulevard
Building 2, Suite 220
Tallahassee, Florida 32301
David Pingree, Secretary Department of HRS
1323 Winewood Boulevard
Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Jun. 14, 1982 | Final Order filed. |
| May 05, 1982 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 11, 1982 | Agency Final Order | |
| May 05, 1982 | Recommended Order | Granting Certificate of Need (CON) not in keeping with statutory need to reduce costs and meet community needs. Deny application for CON to shell in top floor of hospital. |
