STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
HUMANA OF FLORIDA, INC., d/b/a ) WOMEN'S HOSPITAL OF BOCA RATON, )
)
Petitioner, )
)
vs. ) CASE NO. 83-0931
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
) and BETHESDA MEMORIAL HOSPITAL, ) ST. MARY'S HOSPITAL, and BOCA ) RATON COMMUNITY HOSPITAL, INC., )
)
Intervenors. )
) COMMUNITY HOSPITAL OF THE )
PALM BEACHES d/b/a HUMANA )
HOSPITAL PALM BEACHES, )
)
Petitioner, )
)
vs. ) CASE NO. 84-0702
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES )
and NATIONAL MEDICAL )
ENTERPRISES, INC., d/b/a ) WEST BOCA RATON MEDICAL CENTER, )
)
Respondents. )
) SOUTHEASTERN PALM BEACH )
COUNTY HOSPITAL DISTRICT ) d/b/a BETHESDA MEMORIAL HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 84-0728
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES and ) NATIONAL MEDICAL ENTERPRISES, ) INC., d/b/a WEST BOCA RATON )
MEDICAL CENTER, )
)
Respondents. )
)
RECOMMENDED ORDER APPEARANCES
For NME Hospitals, C. Gary Williams, Esquire Inc., d/b/a West Stephen C. Emmanuel, Esquire Boca Eaton Medical AUSLEY, MCMULLEN, MCGEHEE, Center: CAROTHERS & PROCTOR
227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302
For Department of Douglas L. Mannheimer, Esquire
Health and CULPEPPER, PELHAM, TURNER & MANNHEIMER
Rehabilitative 300 East Park Avenue Services: Post Office Drawer 11300
Tallahassee, Florida 32302-3300
For Humana of John H. French, Jr., Esquire Florida, Inc., James C. Hauser, Esquire d/b/a Women's MESSER, VICKERS, CAPARELLO,
Hospital of Boca FRENCH & MADSEN
Raton: 701 First Florida Bank Building Post Office Box 1876 Tallahassee, Florida 32302
For Bethesda Kenneth F. Hoffman, Esquire Memorial Hospital: Eleanor A. Joseph, Esquire
OERTEL & HOFFMAN, P.A.
2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507
BACKGROUND AND ISSUES
At issue in this administrative proceeding is whether the Department of Health and Rehabilitative Services (HRS) should grant the application for a certificate of need ("CON") filed by NME Hospitals, Inc., d/b/a West Boca Raton Medical Center ("West Boca") for the addition of a fifteen bed obstetrical unit to its hospital in South Palm Beach County.
Some explanation of the relatively complex procedural background of this case is an appropriate preface to this Recommended Order. West Boca was one of a dozen applicants for certificates of need for an assortment of acute care hospital services in HRS District IX. The applications were filed in the batching cycle for which applications were due in August 1983, and for which HRS preliminary agency action was scheduled to occur in November 1983. After HRS preliminary agency action, 18 separate petitions were filed for formal administrative proceedings on an assortment of issues. Five additional parties intervened in one or more of the proceedings. Eventually, all 18 cases were consolidated for further proceedings and final hearing since all arose out of applications in the same health planning district and the same batching cycle.
Because cases arising out of the previous batching cycle remained pending at the Division of Administrative Hearings, the final administrative hearing in the consolidated cases was continued several times. By the time the cases were able to go to final hearing in November 1985, one of the applications--an
application to add an obstetric wing to Everglades Memorial Hospital in Pahokee by transferring nine beds from Glades General in Belle Glade--had been granted by stipulation and all but two of the remaining applicants had withdrawn their applications. All of the cases directed to the withdrawn applications were severed and ultimately dismissed.
By agreement of the parties, DOAH Case No. 84-0743 on one of the two remaining application--the application of Osteopathic Medical Hospitals, Inc., d/b/a Martin County Medical Center, for a new 120-bed osteopathic hospital--was severed from the remaining cases and went to final hearing first. Eventually, HRS entered a Final Order adopting the Recommended Order that the application be denied.
The West Boca application, the subject of DOAH Case Nos. 84-0702 and 84- 0728, went to final hearing on December 11 and 12, 1985, in West Palm Beach and on January 2-3 and 6-9, 1986, in Tallahassee. Before proposed recommended orders were filed, the District Court of Appeal, First District of Florida, on March 13, 1986, handed down an opinion on motion for rehearing which reversed its decision of August 20, 1985, in NME Hospitals, Inc., etc., et al. v.
Department of Health and Rehabilitative Services and held that West Boca was entitled to comparative review with Humana of Florida, Inc., d/b/a Humana Women's Hospital ("Humana Women's"). Humana Women's filed another motion for rehearing but meanwhile, on May 1, 1986, another final hearing was scheduled for November 12 through 26, 1986, for purposes of comparing the Humana Women's and West Boca applications, if necessary.
On June 24, 1986, the First District handed down another opinion on motion for rehearing in the NME Hospitals, Inc., etc., et al. v. Department of Health and Rehabilitative Services case. This opinion substantially modified the court's rationale but not the holding. The court held: ". . . Humana should be given a reasonable opportunity to resubmit a completed application consistent with the criteria prescribed by Rule 10-5.11(23), and be afforded comparative review with the application of NME." NME Hospitals, Inc. v. Department of Health and Rehabilitative Services, 492 So.2d 379,388 (Fla. 1st DCA 1985), reversed on motion for rehearing, (Fla. 1st DCA 1986). The Humana Women's case (DOAH Case No. 83-931) was then remanded to DOAH. But, as this Recommended Order will explain, no comparative review was necessary, and, on or about November 4, 1986, the November 1986 hearing was cancelled. The parties requested and were given until November 24, 1986, in which to file proposed recommended orders.
STIPULATIONS
The parties stipulated that the criteria for CON review found in paragraphs 6, 7, 8 (except the last clause) and 11 of Section 381.494(6)(c) and in paragraph 5 of Section 381.494(6)(d), Florida Statutes (1985), are not applicable. The parties also stipulated that West Boca's application satisfies criterion 381.494(6)(c)13.
FINDINGS OF FACT
The Humana Women's Application.
Sometime in November 1982, Humana Women's filed an application for a CON to construct a 100-bed women's hospital to be located in South Palm Beach County, Florida. This application was preliminarily reviewed and denied by HRS based on a 1987 planning horizon. NME Hospitals, Inc. v. Department of Health
and Rehabilitative Services, 492 So.2d 379 (Fla. 1st DCA 1986). The Notice of Denial of said application appeared in Vol. IX, No. 10, Florida Administrative Weekly (March 11, 1983).
Humana Women's requested a formal administrative hearing to contest the denial of its application. After that administrative hearing, but before a recommended order was entered, HRS reversed its position on the Humana Women's application and entered into a Stipulation and Agreement with Humana Women's, purporting to "settle" DOAH Case No. 83-931 on August 16, 1984. The settlement awarded a certificate of need to Humana Women's for its proposed 100-bed hospital, to include 40 obstetrical beds.
HRS' settlement and award of a CON to Humana Women's was challenged by West Boca, Bethesda, St. Mary's Hospital and Boca Raton Community Hospital. By Final Order dated August 31, 1984, HRS ruled its award of a CON to Humana Women's was final agency action not subject to further administrative review. West Boca, Bethesda, St. Mary's Hospital and Boca Raton Community Hospital appealed this ruling to the First District Court of Appeal.
While this appeal was pending in the First District Court of Appeal, an administrative hearing was held on West Boca's application on the above- referenced dates. After this hearing was held but before proposed recommended orders were submitted, the First District in NME Hospitals, Inc. v. Department of Health and Rehabilitative Services, 492 So.2d 379 (Fla. 1st DCA 1986), reversed HRS' settlement with Humana Women's and ordered that the applications by Humana Women's and West Boca be comparatively reviewed.
Pursuant to this decision HRS remanded DOAH Case No. 83-931 back to DOAH and consolidated with this case for comparative review. A consolidated, comparative hearing was scheduled on these applications for November 12, 1986 through November 26, 1986. Pursuant to a prehearing order dated October 21, 1986, all parties were obligated to furnish opposing counsel with the names and addresses of all witnesses on October 24, 1986, and West Boca and Humana Women's were further obligated to furnish opposing counsel with a list of all exhibits and documents to be introduced into evidence by October 28, 1986. While West Boca timely filed its witness and exhibit lists and made its exhibits available for opposing counsel, Humana Women's failed to file or exchange either list.
In addition to failing to provide opposing counsel with required witness and exhibit lists, Humana Women's also failed to designate corporate representatives as requested under Rule 1.310(b)(6), Florida Rules of Civil Procedure, or otherwise appear at a scheduled Notice of Deposition Duces Tecum on November 3, 1986.
Bethesda filed a motion to dismiss Humana Women's on October 30, 1986, and a hearing was held on this motion on November 3, 1986, and continued at a prehearing conference held on November 4, 1986. At the November 4 hearing, counsel for Humana Women's stated that Humana Women's did not know whether it planned to go forward with its application and did not know when a decision on whether to go forward would be made.
Humana Women's has been given "a reasonable opportunity to resubmit a completed application consistent with the criteria prescribed by Rule 10- 5.11(23), and be afforded comparative review with the application of NME." NME Hospitals, Inc. v. Department of Health and Rehabilitative Services, 492 So.2d 379,388 (Fla. 1st DCA 1985), reversed on motion for rehearing, (Fla. 1st DCA 1986). The comparative hearing was scheduled for November 12 through 26, 1986,
by Notice of Hearing, dated May 1, 1986. The First District's decision giving Humana Women's the opportunity for comparative review was handed down on June 24, 1986; the Mandate was entered on July 23, 1986.
West Boca's Application.
West Boca is a 170-bed privately-owned hospital located approximately one mile south of Glades road on U.S. Highway 441, in the southwest corner of the South Palm Beach County Subdistrict. West Boca was approved by Final Order of HRS after challenge by Bethesda and an administrative hearing and was scheduled to open February 3, 1986. When open, West Boca will offer a full range of services including 24-hour emergency coverage, five operating rooms and sixteen intensive care beds.
On or about August 15, 1983, West Boca filed an application with HRS for a CON to add a 15-bed obstetrical unit to its hospital being built in South Palm Beach County, Florida. This application was based on a 1988 planning horizon. The OB unit proposed by West Boca is for a "basic level of service" which would take care of "well babies." Such a facility, with medically uncomplicated mothers and babies, is defined as a Level 1 facility.
West Boca is located in Palm Beach County, Florida. Palm Beach County is located in HRS Service District IX which is comprised of Indian River, Okeechobee, St. Lucie, Martin and Palm Beach Counties. Section 20.19(4)(a), Florida Statutes.
The District IX Local Health Council has divided HRS Service District IX into five Subdistricts. Subdistrict 1 consists of Indian River County, Subdistrict 2 consists of Martin and St. Lucie Counties, Subdistrict 3 consists of Okeechobee County, Subdistrict 4 consists of North Palm Beach County and Subdistrict 5 consists of South Palm Beach County. Rule 10-17.010, Florida Administrative Code.
West Boca is located in the South Palm Beach County Subdistrict. At the present time, Bethesda is the only provider of obstetrical services in the South Palm Beach County Subdistrict. Bethesda is a 350-bed, tax-supported hospital located at 2815 South Seacrest Boulevard, Boynton Beach, Florida.
Review Of West Boca Application In Context Of Criterion 387.494(6)(c)1. (Need For It In Relation To District
And State Health Plans.)
The District IX 1983 District Health Plan identified a need for 316 additional acute-care beds in District IX for 1988 (West Boca Ex. 1, page 8).
As part of this need, the District IX 1983 District Health Plan specifically identified a need for fifteen (15) additional obstetrical beds in the South Palm Beach County Subdistrict in 1988, the same number of beds proposed by West Boca.
The State Health Plan, Vol. II, page 83, calls for attainment of at least an 80 percent occupancy of all non-federal short stay hospital beds by 1989. The District IX Health Plan also calls for 80 percent overall general bed occupancy and 75 percent OB occupancy, and proscribes the grant of new OB beds until existing beds are 75 percent occupied. The 80 percent occupancy standard is adopted by reference In Rule 10-7.010, Florida Administrative Code.
Until September 9, 1985, the only OB beds in the subdistrict being reported to the Local Health Council were 18 OB beds at Bethesda. Using an
inventory of 18, subdistrict occupancy rates exceeded 100 percent during 1984 and 1985. (They were 119.4 percent for the first six months of 1985.) This occurred because Bethesda actually was operating 33 OB beds during this time. Based on a 33 OB bed inventory, occupancy rates actually are lower than 75 percent. (They were 64.7 percent during the first six months of 1985.)
The 1985-87 State Health Plan was the most current State Health Plan in effect at the time of the final hearing. 1/ Guideline 2 of Goal 4 of that Plan provides that "Level 1 intrapartum care services should be available to 90 percent of the population within 30 minutes drive time in urban areas and 45 minutes drive time in rural areas." The 30-minute average driving time accessibility standard for 90 percent of the population in an urban area was accepted by all parties, and is the standard adopted by HRS in Section 10- 5.11(23)(i), Florida Administrative Code. The traffic engineers for West Boca and Bethesda agreed that the average travel times would remain approximately constant for the next five years, given the balance of population increase and road improvements. If one considers only OB facilities in District IX, over 10 percent of the subdistrict is more than 30 minutes from obstetric service (11.1% in 1985, 11.7% in 1988, and 12.1% in 1990.) 90 percent of the population to be served in the subdistrict is within 30 minutes of new, nearby OB facilities in northern Broward County, including Coral Springs Medical Center and Northwest Regional Hospital. But the evidence was that the Broward facilities cannot be counted on to be available to the residents of South Palm Beach County because those beds were approved due to the high demand for them by residents of Broward County.
Recommended Action 2.2B of Objective 2.2 of Goal 2 of the 1985 State Health Plan requires local health councils and HRS to reallocate acute-care beds to subdistrict exhibiting need or inadequate access. Looking strictly at subdistrict lines, the North Palm Beach Subdistrict has too many obstetric beds while there are not enough beds in the South Palm Beach County Subdistrict. For example, in 1980 the South Palm Beach County Subdistrict has 40.5% of all the females in the age 15 to 44 cohort in District IX, but only 9.9 percent of the District's obstetric beds. The North Palm Beach County Subdistrict, on the other hand, while having only 30.9 percent of the District's females age 15 to 44, had 56.4% of the District's obstetric bed supply. The maldistribution of beds is further illustrated by a comparison of obstetrical utilization in the North and South Palm Beach County Subdistricts. For example, the South Palm Beach County Subdistrict obstetric occupancy rate increased from 66.6% in 1980 to 117.5% in the 1984 and 119.4 percent for the first six months of 1985. In contrast, the North Palm Beach County Subdistrict's obstetric bed occupancy rate was 48.3% in 1980 and only 66.6% in 1984 with a rate of 56.6 percent reported for the first six months of 1985. However, the maldistribution is not as serious as it seems. A significant percentage of the OB bed inventory in the North Palm Beach Subdistrict is not very far north of the boundary between the north and south subdistricts. If the two subdistricts were divided in thirds, no serious maldistribution would be apparent.
Objective 4.1 of Goal 4 of the 1985 State Health Plan is to establish a regionalized obstetric services network in each district. No evidence explained exactly what is meant by this objective. It is true that there are five OB providers in the North Palm Beach County Subdistrict (including two in the isolated extreme northwest corner of the county) and only one in the South Palm Beach County Subdistrict (Bethesda). But the evidence did not show that "a regionalized obstetric services network in each district" means an equal number of OB providers in each subdistrict.
Meanwhile, Level 1 facilities are now being phased out all over the country except in very rural areas where there are no other facilities within reasonable transport time. The American College of Obstetrics and Gynecology looks down upon the Level 1 facilities and, as population grows, expects that they will be eliminated entirely. Generally it is better not to add a Level 1 facility in an urban area.
The Bethesda OB facility is a Level 2 facility. A Level 2 nursery will take care of patients with complications, including all high risk patients who do not require extensive university-type treatment.
Bethesda now provides intensive educational programs for mothers, including family oriented childbirth programs; nutritional programs, exercise programs; genetic counseling; a family oriented delivery system with birthing rooms; on- board anesthesia, including continuous epidural blocks, and a unit to take care of the high risk neonates is being developed under a certificate of need. The nurses are cross-trained to handle not only the laboring patients but also the delivery situation and situations involving a caesarean section. In other words, they are trained as an operating room team as well as delivery room team. Bethesda has recently received permission from HRS to add a neonatal intensive care unit. It already has expensive equipment operational and available, such an infant ventilators, apnea monitors, cardiac monitors, infant transport incubators, among others. Having a neonatologist on staff does not in itself make a facility a Level 2 facility. You need specially trained personnel, including nurses, respiratory therapists, lab personnel, x-ray personnel, etc.
Based on the evidence it is more likely that the concept of "a regionalized obstetric services network" presumes Level 2 OB services in urban areas. That being the case, the West Boca application for a Level 1 facility would not meet the objective.
Guideline 5 of Objective 4.1 of the State Health Plan states: "Under normal service demand conditions, obstetrical services should be provided at the least intensive, least costly level or setting consistent with client risk status and care preferences." The vast majority of deliveries originating from the West Boca area were uncomplicated deliveries which could be adequately served by a Level 1 service. But, at the same time, the evidence was not clear that this guideline encouraged the construction of new facilities in urban areas only capable of Level 1 OB services. Even at West Boca's proposed facility, a certain percentage of anticipated low risk births will become high risk during labor and delivery. About 35 percent to 45 percent of mothers are potentially at risk in their pregnancies and about 10 percent of the babies born need some special care or intervention. A Level 2 facility could provide the least intensive, least costly service appropriate to the particular patient and still care for the higher risk patient.
Using HRS' rule bed need methodology (set out in Rule 10-5.11(23), Florida Administrative Code), there is a need for 36 additional acute care hospital beds in District IX on the 1988 planning horizon, enough to accommodate West Boca's application for 15 OB beds. The evidence did not prove how many of those 36 beds should be allocated to the South Palm Beach County Subdistrict.
Based on parts of the HRS rule bed needs methodology the evidence suggests that the district-wide bed need shown by the rule is not in the area of OB beds. Using the OB portion of the rule methodology (strictly speaking improperly) separate from the rest of the rule there will be a surplus of approximately 45 OB beds in District IX in 1988. However, using the same type
methodology, there would be a need for approximately 43 OB beds in the South Palm Beach County Subdistrict in 1988, another reflection of the disproportionately high number of OB beds in the North Palm Beach County Subdistrict. (These need estimates counted 33 OB beds at Bethesda.)
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)2. (Availability, Quality Of Care, Appropriateness, Accessibility, Extent Of Utilization And Adequacy Of Like And Existing Services In The District).
At least for the last 2 years, Bethesda Memorial Hospital has staffed and operated a 33-bed OB unit, with an average daily census of between 21 and 23 patients. The average daily census has remained stable as the number of births increased, but the length of stay of maternity patients declined.
The configuration of the floor at Bethesda would allow for the conversion of 10 additional beds for OB use. The labor and delivery suites at Bethesda have the physical capacity to handle the medical needs for up to 43 OB beds.
On any given day there were 1000 empty hospital beds in Palm Beach County in 1984. That trend (declining utilization) is continuing and getting worse.
Analysis of all general beds in District IX shows that the average utilization of existing hospitals dropped from 72.3% for the first 6 months in 1984 to 67.9% in the first 6 months of 1985. The South Palm Beach subdistrict utilization, in the same periods, dropped from 77.1% to 67.9%. Bethesda's utilization dropped from 66.6% to 56.4%.
Trends show decreases in patient days, occupancy, length of stay and number of admissions.
Through September of 1985, the 33 OB beds at Bethesda show a 64.7% average occupancy.
The horizon year for NME's application is 1988. The addition of OB beds "calculated" to be needed in the South Palm Beach County Subdistrict in 1990 would reduce overall use to 62%.
District-side utilization of OB beds in 1990 is projected to be between 56-57%.
Bethesda's Level 2 OB service affords quality health care. Its 33 OB beds (and the 10 it could add, if needed) are available, appropriate and adequate.
Notwithstanding the existence and capacity of Bethesda, accessibility has been and continues to be a problem for residents of the West Boca Raton area who need OB services. Large numbers of them are over 30 minutes away from OB services. The addition of OB services at two hospitals in north Broward County makes those services, although in HRS District X, less than 30 minutes from to West Boca Raton residents. Between the Broward facilities and Bethesda, all the residents of the South Palm Beach County Subdistrict are within 30 minutes of OB services. But the Broward County OB beds can be expected to be filled with Broward residents so that, while "accessible," they would not be "available" to West Boca Raton residents. In other words, based on the evidence, they cannot
be counted on to cure the access problem faced by residents of the West Boca Raton area. See Finding Of Fact 17, above.
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)3. (West Boca's Ability To Provide Quality Care).
West Boca proved that it can provide quality obstetrical care, if approved, despite not yet providing obstetrical care in its Florida hospitals or in many of its hospitals nationwide. Of course, the obstetrical service provided will be Level 1 service.
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)4. (Availability And Adequacy Of Alternatives).
Level 1 obstetrical care is for low risk mothers and healthy babies. Nonetheless, there was no evidence that there is any non-hospital-based alternative, such as outpatient care and ambulatory or home care services, to hospital-based obstetrical care, even for Level 1 obstetrical care.
Review Of West Boca's Application In Context Of Criterion 381.494(6)(c)5. (Probable Economies And Improvements From Joint, Cooperative Or Shared Resources.
As a subsidiary of NME, West Boca would have the benefit of numerous agreements NME has with a variety of major vendors which would entitle it to significant discounts in purchasing obstetrical supplies and equipment. Otherwise, no economies or improvements in service derived from operation of joint, cooperative or shared health services were shown.
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)8., To Extent Applicable (Extent To Which Proposed Services Will Be Accessible To All Residents Of the District).
Geographically, West Boca's proposed OB services will be accessible to residents within 30 minutes drive time--an area covering all of the southern part of, and almost all of the rest of, the South Palm Beach County Subdistrict.
But the proposed services will not be accessible to all residents of the service district. "At risk" mothers and babies will have to go elsewhere.
NME's Medicaid history and its acknowledgment that it has not had OB facilities in the past because they did not pay well raise questions as to the extent to which West Boca's OB service will be accessible to the poor. Of NME's seven acute care hospitals in Florida (including West Boca), none have OB services. The basic reason NME has not, in the past, implemented OB programs was because they were not money makers. NME hospitals' highest percent of gross charges for Medicaid in Florida hospitals was 0.9%, with the second highest 0.5%. Of course, the location of a hospital will impact the percentage of Medicaid. But NME's history of choosing to operate hospitals in areas not likely to have high Medicaid utilization indicates that the desire to make a profit in the health care business primarily motivates NME.
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)9. (Immediate And Long Term Feasibility).
West Boca's proposed service area is characterized by a large, rapidly growing female population in the child bearing age cohort. It is projected that
West Boca's service area will have 36,011 females age 15-44 by 1990 which represents a 64.8% increase over 1980 levels. In addition, by 1990 the West Boca service area target population is estimated to represent 39% of District IX's total female population between the ages 15-44. This represents a gain of 9.7% over the 10 year period 1980-1990. NME's updated financial projections for the project demonstrate that the project is financially feasible on both a short-term and lone-term basis.
Review Of West Boca Application In Context Of Criterion 381.494(6)(c)10. (Special Needs And Circumstances Of HMOs).
Health maintenance organizations (HMOs) are prepaid medical insurance entities which seek to limit the cost of medical coverage to their subscribers through negotiating with health care providers for lower costs. In addition to negotiating contracts or fee agreements with physicians, HMOs also negotiate contracts with hospitals which provide those services which will be needed by their subscribers. When there is only one hospital in an area providing a service, however, the ability of an HMO to negotiate a lower price from that hospital for that service is diminished.
Bethesda is currently the only hospital providing obstetrical services in the South Palm Beach County Subdistrict. Approval of West Boca's application would--like the initiation of OB services at nearby hospitals in Broward County-
-bring a new provider of obstetrical services to South Palm Beach County and increase the ability of HMOs in the area to negotiate more attractive terms for obstetrical services for their subscribers.
West Boca's ability to obtain an HMO contract would be increased if it were allowed to provide obstetric services. HMOs prefer to contract with one hospital that can provide a full range of services, including obstetrics. HMOs which have approached West Boca to date have been reluctant to enter into an agreement with West Boca because of its inability to provide obstetrics. However, it would be possible for West Boca to now offer an HMO a full range of services by subcontracting the OB portion of the services to Bethesda or one of the nearby hospitals in Broward County. In addition, NME owns an HMO called AV- MED, and it must be inferred that West Boca would have a competitive advantage when dealing with AV-MED. Increasing West Boca's ability to compete with other hospitals for HMO business therefore is not a significant consideration.
Review Of West Boca Application In Context Of Criterion 381.494(6)(0)12. (Probable Impact On Competition, Supply, Quality Assurance And Cost- Effectiveness).
On its face, the West Boca OB proposal would increase competition. Bethesda is now the only provider in the Subdistrict. To a point, the addition of competition can and often does lead to price and quality competition--the competitors reduce prices and improve services. There is some evidence that improvement of quality and variety of services at Bethesda recently can be attributed, at least in part, to the pending West Boca application. However, too much competition, or the wrong kind of competition, also can have the opposite effect. For example, if hospitals services are duplicated unnecessarily, charges per patient will have to go up to pay the cost of the capital improvements and/or quality of services will suffer.
Since NME does not provide OB services at any of its Florida facilities, it is impossible to compare its history with that of Bethesda. However, comparisons could be made using the charge structure at NME's nearest
hospital at Delray Beach. Hospital Cost Containment Board (HCCB) peer groups are a valid estimator for comparing hospitals, and it is reasonable to compare hospitals in the same county even if they are in a different HCCB peer group.
The adjusted gross inpatient revenue per admission was $3,940 for Bethesda and was $5,248 for Delray. Delray is approximately 33.2% more expensive for the same service than Bethesda on a gross impatient revenue per admission basis, as corrected for case mix and other factors. A case mix adjusted net revenue per adjusted admission for Bethesda shows revenue of
$3,148, whereas Delray's is $3,736. Delray is approximately 18.7% more expensive for the same service if the payor mix is washed out or neutralized. Bethesda's revenue per OB admission is $2,118 while Delray's projected revenue per OB admission, if it had OB, would be $3,060. $2,757 is a reasonable expectation of West Boca's OB revenue per admission of NME, taking into account that it is a Level 1 facility. This exceeds West Boca's proposed charges by approximately $1,500. It also exceeds Bethesda's OB charges.
Based on the HCCB date, Bethesda has less revenues per admission (money realized by a hospital on its adjusted admissions and revenues) than 84% of the hospitals in the HCCB group. In other words, 84% of the hospitals in Bethesda's group have higher average revenues, thereby costing insurance companies more money and costing private patients more money. Bethesda's gross revenue per admission is lower than the average of all the NME hospitals and lower than the average of all the hospitals in Florida. NME hospitals are obtaining more income per admission than the average hospital in Florida.
In comparing Bethesda to the NME hospitals, Bethesda generates fewer dollars per admission than most of the hospitals in its cluster compared to NME hospitals, which generate higher costs per admission than most of the hospitals in their cluster, with the exception of Hollywood Medical Center.
Bethesda has low revenues and therefore has not been scrutinized by the Hospital Cost Containment Board, whereas five out of six NME hospitals are coming under that kind of scrutiny by the Board.
The American Academy of Pediatrics recommends that an average of 2000 deliveries is necessary to support a Level 2 nursery. Quite often, the mother of the sick child is the least able to afford this kind of services. There is a need to have healthy patients in volume to help support such a unit.
In its updated application, West Boca projects it will have 2802 patient days in its first year and 2942 in its second year. Since West Boca also projects an average length of stay of 2.8 days or 2.5 days, it anticipates obtaining at least 1000 deliveries its first year.
There were about 2600 deliveries at Bethesda in the last fiscal year. If Bethesda were to lose 1000 deliveries, a significant adverse impact on Bethesda's nurse competence would result. At this point, doing 2600 deliveries a year, Bethesda's nurses have enough volume and opportunity for different clinical experiences to keep their expertise up. Bethesda has a qualified nursing staff. To maintain that qualification, though, Bethesda needs volume and continued varied clinical experience.
In the last fiscal year, Bethesda's operating expenses exceeded its operating revenues by $124,000. However, with tax revenues and unrestricted gifts and bequests, Bethesda had a positive operating margin of $5,439,000 in 1984.
If West Boca takes 1000 deliveries a year from Bethesda (and Bethesda cannot replace them from elsewhere), Bethesda would lose an additional $860,000 from its operations. But by better penetration of its secondary service area, Bethesda could offset some of the loss of patients to West Boca. Eight zip codes are within seven to eight miles north and west of Bethesda from which Bethesda has historically penetrated more successfully than it is accomplishing at present. If Bethesda captured only twenty-five percent of the projected obstetric need of these eight zip codes, Bethesda would experience an increased average daily census of 7.2 patients which would offset much of the loss of patients to West Boca from West Boca's primary service area which is approximately ten to fifteen miles from Bethesda. Bethesda's strategic planning consultants, Robert Douglass and Associates, have made a similar finding and recommendation to Bethesda.
Still, competition from West Boca can be expected to have a negative impact on Bethesda's operating loss, probably pulling it down from 1984 levels of $124,000 to the neighborhood of $400,000 to $500,000. This loss could be covered by Bethesda's tax revenue and gifts and bequests. Additional tax revenue and additional gifts and bequests also are a possibility. Bethesda might be required to increase patient charges to some extent. But it is not likely that Bethesda will have to reduce services, including the OB services which recently have been improved to Level 2. It also is possible, but not likely, that Bethesda would have to try to borrow money to pay some of its operating losses to have enough for necessary capital improvements.
Applicable Section 381.494(6)(d) Findings.
No less costly, more efficient alternatives to this proposal exist. Use of the Bethesda facility and St. Mary's OB facilities for those in the northern part of the subdistrict would be alternatives except that they do not address the access problem for residents of the West Boca Raton area. The evidence was that the OB services in northern Broward County cannot be counted on for use by West Boca Raton residents.
Existing impatient OB facilities are being used in an appropriate and efficient manner.
No alternatives to the proposed new construction exist.
Patients from the West Boca Raton area will experience serious problems in obtaining inpatient care of the type proposed in the absence of the West Boca proposal.
Balanced Consideration Of The Criteria.
Giving a balanced consideration to the applicable criteria, it is found that there is a need for West Boca's proposal sufficient to justify issuance of a certificate of need. West Boca's application is not without its faults. The application would be better if it proposed Level 2 OB services, if it could be expected to afford more services for the poor, and if it could be expected to result in lower patient charges. The proposal also is likely to have significant adverse impact on Bethesda, a provider that does better on all of those counts. But the immediate access problem in the West Boca Raton area is overriding, and it is addressed by the West Boca application. There is no other available solution to the access problem according to the evidence in this case.
CONCLUSIONS OF LAW
The criteria applicable to and determinative of West Boca's application for a CON are set forth in Section 381.494(6)(c) and (d), Florida Statutes, and the applicable rules adopted pursuant thereto. Decisions on CON applications must be based on a balanced consideration of all the applicable statutory criteria. Department of Health and Rehabilitative Services v. Johnson and Johnson, 447 So.2d 361, 373 (Fla. 1st DCA 1984). Moreover, the appropriate weight afforded to each criterion is not fixed but varies on a case by case basis. Cf. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83, 84 (Fla. 1st DCA 1985).
It is axiomatic that a party must establish its standing in an administrative proceeding. To prove standing, a party must prove (1) injury in fact of sufficient immediacy to entitle the party to a Section 120.57 hearing, and (2) substantial injury of the type or nature the proceeding is designed to protect. Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 2d DCA 1981). While Bethesda presented sufficient evidence of potential injury to give it standing in this proceeding, Humana Palm Beaches failed to enter an appearance or present any evidence at final hearing. In addition, Humana Palm Beaches is located in the North Palm Beach County Subdistrict, does not offer obstetrical services, and withdrew its competing application to add an obstetrics unit prior to hearing. For these reasons, it is concluded that Humana Palm Beaches does not have standing to challenge West Boca's application.
Humana Women's standing in this proceeding was predicated upon HRS' settlement and approval of its application for a 100-bed women's hospital. As noted above, the settlement and approval was reversed by the First District Court of Appeal which ordered that the Humana Women's and West Boca applications be comparatively reviewed. But Humana Women's was unable to make a decision within a reasonable time whether to pursue comparative review with West Boca's application. As late as eight days before the comparative hearing scheduled to begin November 12, 1986, Humana Women's still had not decided whether to proceed. Meanwhile, due to its indecision, Humana Women's failed to comply with discovery and prehearing order requirements. As a result, Humana Women's forfeited its opportunity to prove an application to be compared to the West Boca application. Without a viable application, Humana Women's no longer had standing as a party to this case and could not compel West Boca to prove up its application based on circumstances in November 1986. Therefore, an order was entered dismissing Humana Women's as an applicant and cancelling the November 1986, hearing. The West Boca application was reviewed on the basis of evidence presented at the hearing in December 1985, and January 1986.
The primary issue in dispute in this proceeding is the need for additional obstetrical beds in the south Palm Beach County Subdistrict and the availability, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing health care services in the area. On this issue, there was evidence of an immediate need for fifteen obstetrical beds in the West Boca Raton area of South Palm Beach County. This immediate need can be best met by approval of West Boca's application. Other health care facilities and services such as outpatient care or ambulatory emergency centers are not viable alternatives for meeting this need.
It is further concluded that West Boca has adequately demonstrated that is has the resources to finance the construction of the proposed project
and that the project can be operated in a financially feasible manner. In this regard, approval of West Boca's application would not affect Bethesda enough to require denial of this application. Bethesda, through better penetration of its secondary service are, could largely offset the loss of patients to West Boca.
Bethesda also has several other ways to address the adverse financial impact of the West Boca proposal short of significantly cutting back services or dropping its OB service back to Level 1.
The lack of access to OB services for residents of the West Boca Raton area was not cured by the new OB services in northern Broward County. In Charter Medical Southeast, Inc. v. Department of Health and Rehabilitative Services, 495 So.2d 759 (Fla. 1st DCA 1986), the court upheld HRS' consideration of short-term substance abuse beds in District VIII in deciding whether residents of Manatee County in District VI had access to short-term substance abuse beds. But in the Charter case, there was no need under the rule methodology, giving rise to consideration of the access provision under the rule. Also, the evidence proved excess capacity in the District VIII. Finally, the Charter decision was based on evidence of an HRS non-rule policy that the out-of-district beds should be considered under the circumstances of that case. None of those circumstances exist in this case. To the contrary, the acute care bed need rule showed a need, and the evidence was that there is enough demand for OB beds in Broward County for the northern Broward County beds to be filled by Broward residents. And there was no proof of an HRS non-rule policy that the District X Broward County beds should be considered under the facts of this case.
Giving balanced consideration to all of the applicable criteria, it has been found, and must be concluded, that there is sufficient need to justify issuance of a certificate of need to West Boca to add 15 OB beds to its existing hospital in West Boca Raton. Of primary concern, the addition of fifteen obstetrical beds to West Boca will promote accessibility of obstetric services in the South Palm Beach County Subdistrict and for residents of the West Boca Raton area in particular.
Based on the foregoing, it is recommended:
that Humana Women's application for a 100-bed women's hospital be DISMISSED with prejudice and DENIED; and
that West Boca's application for a fifteen bed obstetrical unit be GRANTED.
DONE and ORDERED this 29th day of December 1986, in Tallahassee, Florida.
J. LAWRENCE JOHNSTON Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
FILED with the Clerk of the Division of Administrative Hearings this 29th day of December 1986.
ENDNOTE
1/ The predecessor plan to the 1985-87 State Health Plan was the 1981-83 State Health Plan, a 1983-85 State Health Plan not having been adopted.
APPENDIX TO RECOMMENDED ORDER CASE NOS. 83-931, 84-0702 AND 84-0728
The following are rulings on proposed findings of fact as required by Section 120.59(2), Florida Statutes (1985):
West Boca and HRS.
West Boca and HRS submitted substantially identical proposed findings of fact. Rulings on them are therefore combined except as indicated.
West Boca & HRS
Accepted and incorporated. 2-3. Accepted but unnecessary.
4. Accepted and incorporated.
5-6. Accepted and incorporated except where unnecessary. 7-11. Accepted and incorporated.
12. Unnecessary.
13-14. Accepted but unnecessary. 15-18. Accepted and incorporated.
19-21. Accepted but largely unnecessary.
22-25. Accepted but unnecessary. No other party pursued this issue in a proposed recommended order.
Unnecessary.
Accepted and incorporated to the extent unnecessary.
Parts accepted and incorporated. Other parts rejected. West Boca's application was not consistent with all of the criteria.
Parts accepted and incorporated. Other parts unnecessary.
Subordinate to facts found.
31.-32. Accepted and incorporated with additional findings.
Rejected in large part because it implies there must be a proportionate number of beds in each subdistrict and implies a goal to establish Level 1 OB units in urban areas.
Accepted and incorporated in part. Rejected in part because it implies a goal to establish Level 1 OB units in urban areas.
35-37. Rejected as contrary to the greater weight of the evidence and facts found. Bethesda's 33 beds should be counted in determining occupancy rate. The occupancy rate standards were not met.
West Boca 38. See 35-37., above.
West Boca/HRS
39-45/38-44. Accepted but subordinate to facts found.
46-50/45-49. Accepted but (1) irrelevant to the extent it seeks to establish need in violation to only a portion of the subdistrict or (2) subordinate to facts found in relation to access, i.e., that more than 10 percent of the subdistrict has insufficient access to OB beds.
51/50. Not probative. Also, subordinate and unnecessary.
52/51. Rejected as contrary to the greater weight of the evidence and facts found, i.e., that Bethesda can provide quality OB care with or without West Boca.
West Boca 53. Rejected as contrary to the greater weight of the evidence and facts found, i.e., that Bethesda can provide quality OB care with or without West Boca.
West Boca/HRS
54/52. Subordinate to facts found, i.e., that West Boca can provide quality OB care, albeit on Level 1.
55-56/53/54. Accepted and incorporated, along with additional findings. 57-58/55-56. Accepted and incorporated to the extent necessary.
59-61/57-59. Accepted and incorporated, along with additional findings.
62./60. Accepted and incorporated.
63/61. Rejected as contrary to the greater weight of the evidence and facts found.
64/62. Accepted and incorporated.
65/63. Accepted and incorporated, along with additional findings. 66/64. Accepted and incorporated.
67/65. Subordinate and unnecessary. Since West Boca had the beds available and only has to build specialty rooms like labor and delivery rooms and a newborn nursery, little purpose would be served by delicensing medical/surgical beds, especially since the subdistrict is growing as fast as it is.
68/66. Unnecessary; stipulated. 69/67. Unnecessary.
70/68. Accepted and incorporated.
Bethesda.
1-3. Accepted but unnecessary. 4-5. Accepted and incorporated.
6-7. Subordinate and unnecessary. 8-15. Conclusions of law.
16. Subordinate to facts found. 17-25. Accepted and incorporated.
Accepted in part but rejected in part because the Broward County beds should not be considered on the "access" issue.
Rejected as contrary to the greater weight of the evidence and facts found. 28. Accepted and incorporated to the extent necessary but does not address need based on access problems.
Rejected as argument.
Accepted and incorporated.
Accepted and incorporated except where subordinate or unnecessary. 32.-33. Accepted as a generality but not as an ultimate finding in this
case due to the access problem.
Accepted and incorporated in part but rejected in part as contrary to the finding that West Boca can provide quality Level 1 OB care.
Accepted and incorporated except where argumentative. 36-38. Accepted and incorporated.
Accepted but unnecessary.
Subordinate in part to facts found; accepted and incorporated in part.
Accepted and incorporated.
Subordinate to facts found.
Accepted and incorporated.
44-46. Accepted and incorporated to the extent necessary.
Unnecessary.
Accepted and incorporated to the extent necessary.
Subordinate to facts found.
Accepted and incorporated to the extent necessary. 51-53. Subordinate to facts found.
54. Accepted and incorporated.
55-56. Rejected as contrary to the greater weight of the evidence and facts found.
57. Subordinate to facts found.
58-60. Accepted in large part and incorporated to the extent necessary. 61.-62. Cumulative.
Rejected as contrary to the greater weight of the evidence and facts found.
Accepted and incorporated to the extent necessary.
Subordinate to facts found.
Accepted as a generality but rejected as applied by the witness.
Accepted and incorporated. 68-69. Unnecessary.
70. Accepted and incorporated. 71-72. Accepted but unnecessary.
Accepted if referring to proposals 71 and 72 but unnecessary in any event.
Accepted but unnecessary.
Rejected; the witness omitted some alternatives. 76-77. Accepted but unnecessary.
Rejected as argument.
Accepted but unnecessary.
Subordinate and unnecessary.
81-82. Rejected as contrary to the greater weight of the evidence and facts found.
Accepted and incorporated to the extent necessary.
Rejected as to "access."
85-86. Rejected as contrary to the greater weight of the evidence and facts found.
Rejected. Some economies as a result of joint, co-operative or shared health services were found.
Unnecessary.
Accepted and incorporated.
Rejected as contrary to the greater weight of the evidence and facts found.
See Findings Of Fact 40-42.
Unnecessary.
Accepted that costs probably will increase. Rejected that Bethesda's OB service will be put in jeopardy.
Unnecessary.
(b) is accepted and incorporated; the rest is rejected as contrary to the greater weight of the evidence and facts found.
Conclusion of law. Facts accepted and incorporated, but access problems should be addressed regardless of overall utilization of existing facilities.
Unnecessary.
COPIES FURNISHED:
Douglas L. Mannheimer, Esquire Post Office Drawer 11300 Tallahassee, Florida 32302-3300
John H. French, Jr., Esquire James C. Hauser, Esquire Post Office Box 1876 Tallahassee, Florida 32302
Kenneth Hoffman, Esquire Eleanor A. Joseph, Esquire Oertel & Hoffman, P.A. Post Office Box 6507
Tallahassee, Florida 32314-6507
Stephen C. Emmanuel, Esquire
Gary Williams, Esquire Post Office Box 391 Tallahassee, Florida 32301
William Page, Jr. Secretary Department of HRS 1323 Winewood Blvd.
Tallahassee, Florida 32301
Steven W. Huss, Esquire General Counsel Department of HRS
1323 Winewood Blvd.
Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Dec. 29, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 28, 1987 | Agency Final Order | |
| Dec. 29, 1986 | Recommended Order | West Boca Raton Medical Center best meets need for obstetrics & should be granted CON for 15-bed unit (despite facility in nearby Broward County). |
DEPARTMENT OF HEALTH, BOARD OF MEDICINE vs DOUGLAS FRANK DEORCHIS, M.D., 83-000931 (1983)
WESTSIDE REGIONAL MEDICAL CENTER vs AGENCY FOR HEALTH CARE ADMINISTRATION, 83-000931 (1983)
CITY OF PENSACOLA vs AGENCY FOR HEALTH CARE ADMINISTRATION, 83-000931 (1983)
CRUM RESOURCES vs AGENCY FOR HEALTH CARE ADMINISTRATION, 83-000931 (1983)
