STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
MORTON F. PLANT HOSPITAL )
ASSOCIATION, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 83-1275
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
) PSYCHIATRIC HOSPITALS OF FLORIDA, ) INC., d/b/a HORIZON HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 84-0296
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
) PIA MEDFIELD, INC., d/b/a )
MEDFIELD CENTER, )
)
Petitioner, )
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES ) CASE NO. 84-0699
)
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on July 24-27, 1984, in Clearwater, Florida, and on July 30 and August 6, 1984, in Tallahassee, Florida. These issue for determination in these three consolidated proceedings is whether Morton F. Plant Hospital is entitled to a Certificate of Need to construct and operate a freestanding psychiatric facility in Pinellas County, Florida. These cases were consolidated for hearing purposes with the case of Psychiatric Hospitals of Florida, Inc., d/b/a Horizon Hospital v.
Department of Health and Rehabilitative Services, DOAH Case No. 84-1864, which is the subject of a separate Recommended Order entered this same date.
APPEARANCES
For Morton Alan C. Sundberg and Plant Hospital: Cynthia S. Tunnicliff
Carlton, Fields, Ward, Emmanuel and Cutler, P.A.
Post Office Drawer 190 Tallahassee, Florida 32302
For HRS: Amy M. Jones
Building One, Room 407 1323 Winewood Boulevard
Tallahassee, Florida 32301
For Horizon: William B. Wiley
McFarlain, Bobo, Sternstein, Wiley and Cassedy, P.A.
Post Office Box 2174 Tallahassee, Florida 32301
For Medfield: C. Gary Williams and
Michael J. Glazer
Ausley, McMullen, McGehee, Carothers and Proctor
Post Office Box 391 Tallahassee, Florida 32302
INTRODUCTION
Morton F. Plant Hospital (Morton Plant) contends in these consolidated proceedings that it is entitled to a Certificate of Need to construct and operate a freestanding sixty-four bed short-term psychiatric hospital to include
42 replacement beds, 22 new beds, 10 residential treatment beds and a day hospital or outpatient treatment center. In support of this contention, Morton
Plant presented the testimony of Wayne Sibole and Alan Zuckerman, both of whom were accepted as expert witnesses in the area of health care planning; James Edward Hosking, accepted as an expert in health care facilities planning and health care planning; Donald J. Forino, accepted as an expert witness in construction costs estimations; Kendall P. Mitchell, accepted as an expert in the area of the determination and assessment of financial feasibility of hospital M.D., accepted as an expert in psychiatry with special emphasis in residential treatment programs and day outpatient programs; and Duane Houtz, accepted as an expert in the area of hospital administration. Received into evidence were Morton Plant's Exhibits 1 through 18 and 21 and 22, which included the deposition testimony of psychiatrists Dr. Vijaya Rivindran and Dr. John Wayne Pierson.
Testifying on behalf of the Department of Health and Rehabilitative Services (HRS) was Thomas Porter, accepted as an expert in health care planning and the Certificate of Need process.
In opposition to the granting of a Certificate of Need, Psychiatric Hospitals of Florida, Inc., d/b/a Horizon Hospital (Horizon) presented the testimony of F. Dee Goldberg, accepted as an expert in the area of mental health administration; Edward Hoefle, accepted as an expert in healthy care planning and Wayne Sibole. Received into evidence on behalf of Horizon Hospital were Exhibits 1 through 23, 25, 27 through 29, 32, 34, 37 through 40, 42, 47, 48, 50,
67, 69 and 70. These exhibits included the deposition testimony of HRS personnel Marjorie Turnbull, the former Deputy Assistant Secretary for Health Planning and Development; Robert Maryanski, the Director of the Office of Licensure and Certification; Philip Rond, the Administrator of the Office of Comprehensive Health Planning; Elfie Stamm, a Medical Health Care Planner; and Eugene Nelson, the Administrator of the Office of Community Medical Facilities.
Also opposing the issuance of a Certificate of Need, PIA Medfield, Inc., d/b/a Medfield Center (Medfield) presented the testimony of Donna Reynolds; Anthony Cusati, III accepted as an expert witness in the area of health care finance for psychiatric health care facilities; Carol Moore, accepted as an expert in health care planning; and Thomas Ebejer, accepted as an expert in the areas of health care facilities design and construction, including costs.
Medfield's Exhibits 1 through 14 were received into evidence, including the deposition of Paul Reilly, accepted as an expert in the area of health care facilities design and construction costs.
Hearing Officer's Exhibits 1 through 4 were also received into evidence.
Subsequent to the hearing, each of the parties submitted proposed findings of fact and proposed conclusions of law, which have been carefully considered. To the extent that the parties' proposed findings of fact are not included within this Recommended Order, they are rejected as not being supported by competent substantial evidence adduced at the hearing, irrelevant or immaterial to the issues in dispute or as constituting legal conclusions as opposed to factual findings.
FINDINGS OF FACT
Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:
In November of 1982, Morton Plant filed with HRS an application for a Certificate of Need to construct and operate a mental health facility containing
110 psychiatric beds. The project proposed included the construction of a multistory, freestanding facility containing 84,646 square feet at a total project cost of $15,985,000.
On or about February 28, 1983, HRS gave notice of its intent to deny the project in its entirety.
Morton Plant thereafter petitioned for a formal administrative hearing regarding the denial of its application (DOAH Case No. 83-1275). Horizon Hospital petitioned to intervene in opposition to the application on May 19, 1983, and this petition was granted by Order dated June 1, 1983. A motion for reconsideration of the Order allowing intervention was denied by Order dated June 23, 1983. On July 6, 1983, Medfield filed a petition to intervene in opposition to the Morton Plant application. Morton Plant opposed the petition to intervene, and a motion hearing was scheduled for 10:00 a.m. on September 6, 1983. After hearing oral argument from the parties, the Medfield petition to intervene was granted by Order dated September 6, 1983.
At 3:52 p.m. on September 6, 1983, a "Stipulation for Voluntary Dismissal" dated September 6, 1983, was filed with the Division of Administrative Hearings. While the caption of the Stipulation includes Horizon as an intervenor, the Stipulation bears the signatures of representatives from only HRS and Morton Plant. The Stipulation notes that subsequent to the
original denial of Morton Plant's application, HRS adopted a new psychiatric bed need rule and that the application of that rule justifies the partial granting of Morton Plant's application. HRS therefore agreed to grant Morton Plant a Certificate of Need for the construction and equipping of:
"(a) psychiatric inpatient nursing facilities containing a maximum of sixty-four (64) beds including twenty-two (22) additional beds and forty-two (42) replacement beds;
psychiatric outpatient treatment facilities; and
psychiatric residential treatment facilities. Units (a), (b), and (c) above shall be contained within a total area of 66,246 GFT 2/ at a total project cost not to exceed $12,756,526."
Morton Plant agreed to voluntarily dismiss Case No. 83-1275, and further agreed to
"provide DHRS, within thirty (30) days of the effective date of these stipulations, the following information: (a) schematic drawings (minimum scale 1/16" = 1' - 0"), delineating and identifying all spaces related to the psychiatric inpatient, outpatient, and resi- dential treatment units proposed under this application, and (b) an "existing bed relo- cation schedule" identifying: the building/ wing or unit floor location, room number, present bed capacity of each room, the number of beds to be relocated, and a description of proposed use of vacated bed spaces."
By Order to Show Cause dated September 8, 1983, the intervenors were informed of the Stipulation and were ordered to show cause why Case No. 83-1275 should not be dismissed. An extension of time to respond to the Order was granted and a hearing was ultimately scheduled for November 4, 1983. As a result of that hearing, the undersigned Hearing Officer ruled that Case No. 83- 1275 would not be dismissed pursuant to the Stipulation and the parties were ordered to file amended petitions with regard to the issues in dispute so that this cause could proceed to hearing.
In the meantime and subsequent thereto, two further occurred. On or about September 21, 1983, HRS and Morton Plant entered into an "Amended Stipulation for Voluntary Dismissal," amending the total square footage of the facility to 84,646 and amending the total project cost to "not to exceed
$15,985,000." Attached to the Amended Stipulation were schematic diagrams showing the proposed bed use plan of the Roebling Building's second and third floors, and the site plan and floor plans for the proposed new mental health facility. The proposed facility plans attached to the Amended Stipulation are identical to those contained in the original 110-bed application with respect to the number of floors, the configuration of the building and the total square footage. The ground floor remains the same. The first floor is changed from the original application's provision for "alcohol - 20 beds" and "geriatric - 20 beds" to a "day hospital." The second floor plan is changed from "adult - 30 beds" and "intake - 10 beds" to a "30 bed adult unit" and a "14 bed geriatric
psychiatric unit." The third floor plans were changed from "adolescents - 20 beds" and "pediatrics - 10 beds" to "adolescent/pediatric beds (20)" and a "communicative and learning disorders department." The floor designated "Penthouse/Mechanical" contained no changes.
The last procedural event occurring prior to the hearing was the issuance on December 21, 1983, of Certificate of Need Number 2438 to Morton Plant for a short-term sixty-four bed (to include 42 beds currently licensed) psychiatric hospital at a project cost of $15,985,000. The project description attached to the Certificate of Need is as follows:
"construct a sixty-four bed short-term specialty psychiatric hospital to include forty-two replacement beds licensed and located in Morton F. Plant Hospital. Total construction involves 84,646 GFT 2/
also to include psychiatric outpatient treatment facilities and psychiatric residential treatment facilities.
Psychiatric care will be provided to indigents."
In light of the issuance of Certificate of Need Number 2438 to Morton Plant, and in order to insure that their rights to an administrative hearing were protected, both Horizon (Case No. 84 0296) and Medfield (Case No.84-0699) filed separate petitions for a formal administrative hearing, and moved to consolidate the three cases. The motions to consolidate were granted.
Morton Plant, chartered in 1914, is a 745-bed not-for profit general acute care hospital composed of an 11-building campus located in Clearwater, Florida. The hospital is governed by a 16-member Board of Trustees, which is appointed by the Morton Plant Association. The Association consists of 9,000 members from the community who have donated $10 or more. The book value of its net assets are approximately $52 million, and it has in excess of $12 million in either cash or fund depreciation and less than $4 million in long-term indebtedness. Morton Plant is committed to providing a wide range of medical services to all patients of Pinellas County regardless of ability to pay. It carries the largest Medicaid and charity load of any hospital in Northern Pinellas County. According to recent Hospital Cost Containment Board reports, Morton Plant charges less per day and less per stay than any other acute medical surgical hospital in Pinellas County.
There are presently 42 licensed short-term psychiatric beds at Morton Plant. These beds are currently located on two floors of the Roebling Building, and consist of a 30-bed adult unit and a 12-bed pediatric/adolescent unit.
While utilization of the adult psychiatric unit has declined, the 42-bed psychiatric unit as a whole experienced an average daily census of 57 in the eight-month period preceding the hearing.
Two additional beds are designated and utilized by Morton Plant in its pediatric/adolescent unit. These beds are licensed as psychiatric beds. There is often a waiting list at Morton Plant for psychiatric beds for adolescents and children, and these patients must sometimes be placed in the adult unit.
In December of 1983, Morton Plant began operating a 28 bed "liaison unit" on the same floor as the pediatric/adolescent psychiatric unit. This unit shares some of its services and personnel with the psychiatric units. The "liaison unit" is a mixed medical/surgical and psychiatric unit and was
established to group medical patients with psychiatric problems for treatment. Most of the patients assigned to the "liaison unit" have a primary psychiatric diagnosis. Prior to the establishment of this unit, patients with psychiatric diagnoses were placed throughout the hospital, thus creating problems of patient safety and more expensive treatment. Any medical doctor with staff privileges may admit patients to the "liaison unit" and placement there does not require a psychiatric consult, as do the adult and children's psychiatric units.
The Roebling Building contains five floors and was built in 1959. It has been recommended that this building be phased out in the future. In addition to the psychiatric units and the "liaison unit" located on the top two floors, the Roebling Building presently contains rehab services in the basement, a clinical laboratory on the ground floor and obstetrical services, including labor, delivery, nursery and post partum, on the first floor.
Morton Plant does not currently offer services or facilities for adolescent residential treatment or a day hospitalization program for psychiatric patients. Such programs are designed primarily to provide a transition from or an alternative to inpatient hospitalization. It is currently not the practice of HRS to require a Certificate of Need for psychiatric day hospitalization or residential treatment programs.
Morton Plant currently seeks the issuance of a Certificate of Need to construct and operate a freestanding mental health facility containing 64 short- term psychiatric beds to be comprised of its existing 42 licensed beds and 22 new additional beds. The 64 beds are to be divided into units of 20 adolescent/pediatric, 30 adult and 14 geriatric. The plans for constructing this facility which were submitted in support of the issuance of a Certificate of Need indicate a four-story building (with a fifth story penthouse) consisting of 84,646 square feet. The building is to contain a kitchen, cafeteria, recreational rooms, a gymnasium and administrative offices on the ground floor, the first floor is to be utilized primarily for a day hospital, the second floor will be devoted primarily to the adult and geriatric units (44 beds), and the third floor will be utilized for the 20 adolescent and pediatric beds, as well as a 10-bed residential treatment center. Morton Plant believes that the provision of inpatient hospital beds, residential treatment center beds and a day hospital for psychiatric patients in one facility would allow for the development of a step-down program in a continuum of care. While these combined psychiatric services are to be located in a separate building on the Morton Plant campus, the facility is to be operated as an integral service component under Morton Plant's general hospital license. A patient from the psychiatric hospital requiring medical care will not be required to go through readmission procedures to the hospital.
The bed need methodology for short-term psychiatric beds is contained in Rule 10-5.11(25), Florida Administrative Code. Need is calculated by subtracting the number of existing and approved short-term psychiatric beds from the number of beds calculated by applying a ratio of .35 beds per 1,000 population projected for a given year. Applying the Rule's bed-to population ratio results in a total need for 392 psychiatric beds in District 5 for the year 1988 and 400 beds for the year 1989. In order to arrive at the number of additional beds needed for those years, it is necessary to subtract the number of psychiatric beds currently in existence or approved. The inventories utilized by both HRS 1/ and the Health Council of Pasco-Pinellas, Inc. indicate that there are 372 licensed and/or approved short-term psychiatric beds in District 5. Utilizing the methodology contained in Rule 10-5.11(.25), there is
a need in District 5 for 20 additional psychiatric beds in 1988 and a need for
28 such beds in 1989.
Based upon historical utilization of Morton Plant's existing psychiatric service, the granting of staff privileges to three new psychiatrists and the fact that at least some of the patients currently occupying beds in the "liaison unit" will occupy psychiatric beds at the new facility, Morton Plant projects that its new 64-bed facility will achieve occupancy levels of 95.8 percent for each month in its first year of operation and 97.9 percent for each month in its second year of operation. With these utilization projections, Morton Plant predicts that it will operate at a deficit of revenues over expenses of $320,000 in its first year of operation and a profit of $59,000 in its second year. These figures include revenues derived from at least an 80 percent occupancy of its 10-bed adolescent residential treatment unit and a patient census of approximately 50 in its day hospitalization program, with a 40 day average length of stay.
While the expansion of an existing facility will generally have a higher rate of utilization than a new facility, projected occupancy levels of
95.8 percent and 97.9 percent for every month of the year are unreasonably high. Such projections do not account for start-up requirements from both a clinical and support services perspective, considerations of patient mix and seasonal fluctuations in occupancy levels. At a more realistic occupancy level of 90 percent, Morton Plant's proposed mental health facility would operate at deficits of $482,000, $261,000 and $182,000, respectively, during the first three years of operation. However, if Morton Plant were to increase its projected charges by 6.4 percent for the first year, the deficit could be eliminated. The Blue Cross/Blue Shield voluntary rate increase limit for the year 1985 is 8.4 percent.
When HRS examines the financial feasibility of a project proposed by an existing facility, it looks at the financial viability of the institution as a whole. Morton Plant is dedicated to the concept of providing services needed by the community and does not limit its services in terms of their individual financial feasibility. Morton Plant desires to expand its provision of psychiatric services whether or not it is profitable, and has the ability to finance the project either from cash on hand or long-term indebtedness.
Though the original Morton Plant application listed and this was the figure contained in the Amended Stipulation as well as Certificate of Need No. 2438 issued on December 21, 1983, Morton Plant presented evidence at the hearing that its total project cost was $11,066,279.00, with $8,924,339.00 of that amount attributable to construction costs for the proposed 84,646 square foot building. The average cost per bed in Florida for a psychiatric hospital is between $75,000.00 and $85,000.00. Even after removing 25 percent of the total project cost as that portion being attributable to a day hospital, the average cost per bed for this facility would be over $112,000.00 if 74 beds are counted and $129,000.00 if 64 beds are counted. The average gross size of a complete psychiatric hospital is approximately 700 square feet per bed. At 64 beds, this proposal has 1,322 square feet per bed and, at 74 beds, 1,143 square feet per bed results. Even if 17,500 square feet were to be removed from the total as being that portion of the facility attributable to the day hospital, this proposal would have 1,049 square feet per bed based on 64 beds and 907 square feet per bed based on 74 beds.
Morton Plant considered several alternatives to the construction of a new facility. The alternatives involved the conversion and use of existing
space in the Roebling Building and several other buildings. Each of the options considered started with the assumption that a similar amount of space -- 84,646 square feet -- would be required. In other words, each option considered started with the question: what would it involve and cost to put the planned freestanding facility, including space for the day hospital and the residential treatment center, into Morton Plant's existing buildings? The options involved the renovation on five levels of four different buildings. The alternatives included both the relocation and the displacement of 100 medical/surgical beds now located in the existing buildings. The costs of the various options ranged between $9,921,963 and $13,716,187, with the low figures accounting for the displacement of the 100 medical/surgical beds. If Morton Plant were to lose 100 of its 603 medical/surgical beds, it could experience occupancy rates of 98 percent or 99 percent, at least during its peak demand seasons. This is true only if one assumes that Morton Plant's new ambulatory surgery center and the effect of DRG(s) will have no impact upon current utilization of medical/surgical beds. Many of the 100 beds located in the buildings selected for renovation are not currently being utilized by Morton Plant as medical/surgical beds. As previously found, 30 such beds are presently utilized in connection with the existing psychiatric service -- 2 in the pediatric/adolescent unit and 28 in the "liaison unit."
Facilities for a day hospital and a residential treatment center can be built less expensively per square foot if not housed within a psychiatric hospital, primarily due to the more stringent building code requirements for a hospital. Neither a day hospital nor a residential treatment facility require as many square feet per patient as an inpatient bed requires per psychiatric patient.
The estimated costs of construction for this proposed project, as well as the estimated costs of the alternatives considered by Morton Plant, are entirely dependent upon the plans submitted, to wit: a requirement of 84,646 square feet to house 64 psychiatric beds, a residential treatment unit containing 10 beds and a day hospital. If any part of these plans change, the construction cost estimates will change, as they were prepared based upon the number of square feet in each department or unit as depicted on the schematic plans submitted into evidence. Yet, the evidence is undisputed that the freestanding facility plans submitted into evidence in support of the issuance of a Certificate of Need will be changed by Morton Plant if a Certificate of Need is granted. The person now responsible for designing and recommending space allocations for the proposed mental health facility predicts that the shape and configuration of the building, and even the number of buildings and total square footage, will be different than the plans submitted into evidence in this proceeding. While the new plans will contain the same basic elements with respect to the number of rooms and types of rooms, a change in the actual layout of the facility will be recommended. The changed design will not have more than 84,646 square feet and the total project costs will not exceed
$15,985,000.00.
Morton Plant does have contingency plans to convert the space designated for the day hospital and the residential treatment program to space for additional inpatient psychiatric beds should there be a greater need for inpatient psychiatric services. In fact, Morton Plant presently has pending an application for a Certificate of Need to add 46 short-term psychiatric and substance abuse beds and to convert its approved (pending) psychiatric outpatient services to psychiatric inpatient services.
Medfield Center is a 32-bed short-term specialty psychiatric hospital located about five miles from Morton Plant. It provides many of the same psychiatric services offered and proposed to be offered by Morton Plant, and the two service areas overlap. As a specialty hospital, it does not receive Medicaid reimbursement. Medfield Center does not have, within its facility, either a day hospital or a residential treatment center. Its 32-bed facility operates at utilization rates exceeding 80 percent.
Horizon Hospital is a licensed 200-bed specialty psychiatric hospital 2/ located in Largo, Florida. It is the designated Baker Act receiving facility in Pinellas County, but it, too, is not eligible to receive Medicaid reimbursement payments. While its service area is predominantly southern and central Pinellas County, it does receive some patients from Morton Plant's primary service area. Horizon has experienced a decrease in occupancy rates and, for the three months prior to the hearing, its average daily census fluctuated between 110 and 130. Horizon does not provide either a day hospital or a residential treatment center within its facility.
The average of the overall 1983 utilization of short term psychiatric beds in District 5 exceeds 75 percent.
CONCLUSIONS OF LAW
In order to be entitled to a Certificate of Need, an applicant bears the burden of proving that it complies with all the applicable statutory and regulatory criteria for review. For the purposes of this proceeding, the applicable review criteria are set forth in Section 381.494(6), Florida Statutes, and Rule 10-5.11(1)-(12) and (.25), Florida Administrative Code. The prime statutory and regulatory criteria in dispute in this proceeding are those relating to the questions of the need for additional short-term psychiatric beds in District 5; the financial feasibility of the proposed project; and the cost effectiveness of the proposed project, both with respect to the costs and methods of the proposed construction and the potential conversion of under- utilized beds in other hospital services. In addition to these specific statutory and regulatory criteria, the intervenors also contend that the Certificate of Need should be denied due to (1) the ex parte nature of the stipulation and the amended stipulation between Morton Plant and HRS; (2) the fact that Morton Plant never filed a Letter of Intent or submitted a Certificate of Need application for either a day hospital or a residential treatment facility; and (3) the fact that Morton Plant is currently operating psychiatric beds in its adolescent unit and its "liaison unit" without a Certificate of Need.
As existing short-term psychiatric facilities within District 5, Horizon and Medfield have sufficiently demonstrated their standing to intervene in opposition to the issuance of a Certificate of Need to Morton Plant.
Utilizing the bed need methodology set forth in Rule 10-5.11 (25), Florida Administrative Code, Morton Plant has adequately demonstrated a need for additional short-term psychiatric beds in District 5. There being a total need of 392 and 400 beds in the District for the years 1988 and 1989, and there existing only 372 such beds, there is a present need of between 20 and 28 additional beds. Also to be considered is the provision of services to indigent and Medicaid patients (Rule 10 5.11(25)(e)3) and the average annual occupancy rate experienced by existing short-term inpatient psychiatric facilities (Rule
10 5.11(25)(d)5). Morton Plant has demonstrated that it is willing to and does now provide services to indigent and Medicaid patients and that the occupancy
rate at psychiatric facilities exceeds 75 percent. 3/ In addition, Morton Plant has amply demonstrated that its own designated psychiatric beds have had an occupancy rate of 75 percent or greater for the preceding year. Rule 10- 5.11(25)(d)6).
It is further concluded that Morton Plant has adequately demonstrated that it has the resources to finance the construction of the proposed project and that the project can be operated in a financially feasible manner without unreasonable charges for services rendered. While predicting unreasonable utilization levels for the first two years of operation, it was demonstrated that a lower utilization with a slight increase in charges (which would still be comparable to charges for the provision of like services in the District) would allow the project's revenues to exceed expenses at the end of the second year of operation. This can be accomplished, however, only if the projected revenues from the operation of the day hospital and the residential treatment center are included.
This leads then to an additional issue raised by the intervenors. The Certificate of Need application process requires, as a first step, the filing of a Letter of Intent prior to the filing of the application. Section 381.494(5), Florida Statutes; Rule 10-5.08, Florida Administrative Code. One purpose for this requirement is to put other providers or potential providers on notice in the event that they wish to compete for the same provision of service. Rule 10-
5.09 sets forth the required contents of a Certificate of Need application, and Section 381.494(8)(c), Florida Statutes, provides that HRS shall issue or deny the Certificate of Need "in its entirety or for identifiable portions of the total project." Here, evidence was lacking as to whether or not Morton Plant filed a Letter of Intent. However, even assuming that it did, it must be presumed that the application filed was in accordance with its Letter of Intent. The application filed by Morton Plant was for the construction and operation of a mental health facility containing 110 short-term psychiatric beds. It now seeks, and HRS intends to approve, a Certificate of Need for 64 such beds, a day hospital and a residential treatment center.
There was evidence presented in this proceeding that HRS has never before required a Certificate of Need for the establishment of a psychiatric day hospital or a psychiatric residential treatment center. Whether or not that interpretation of the statutes is correct in light of the inclusion of capital expenditures exceeding $714,000.00 as projects subject to review (Section 381.494(1)(c), Florida Statutes) need not be determined in this proceeding for two reasons. First, regardless of HRS's past practice, it does in this proceeding intend to include the day hospital and the residential treatment center in the Certificate of Need issued. And second, if the purpose of the requirements regarding Letters of Intent and Certificate of Need applications is to provide both information and notice to HRS and other interested persons, it cannot be legitimately argued that any of the parties in these cases lacked such information or notice long in advance of the de novo administrative hearing. Neither the intervenors nor any other entity has ever alleged that they were prejudiced in the competitive batching review process by Morton Plant's amended "application" to reduce the number of requested inpatient psychiatric beds and add the day hospital and residential treatment center programs. The scope of the proposed project was the result of settlement negotiations, and the rights of these intervenors have been protected by allowing them to proceed with the administrative hearing on the project as defined by the "settlement" and the evidence presented.
A related issue raised by Horizon is the ex parte nature of the settlement negotiations which occurred between Morton Plant and HRS after Horizon and Medfield had attained intervenor status. Again, whether or not a violation of Rule 10 5.02(30), Florida Administrative Code, occurred is not an appropriate issue for determination in this proceeding. The fact remains that these intervenors were permitted to fully litigate the issues in these proceedings and the only weight of the "settlement" was to frame the issues for determination and realign the parties as to their position on those issues.
The evidence establishes that Morton Plant currently holds a Certificate of Need for 42 short-term psychiatric beds but is, in fact, operating and utilizing more beds as a part of its provision of inpatient psychiatric care. A facility's addition of psychiatric beds requires Certificate of Need review. The intervenors contend that Morton Plant's violation of the Certificate of Need law in this regard provides sufficient grounds for the denial of Morton Plant's request for approval of additional beds. The criteria for approval and the sanctions for violations of the Certificate of Need law are fully set forth in Sections 381.494 and 381.495, Florida Statutes. Neither include the remedy sought by the intervenors. While a persuasive argument can be made that a provider should not be permitted to profit from a violation of the law, the undersigned concludes that, with the possible exception of its projected utilization of the proposed new facility such projections having previously been rejected as unreasonable, Morton Plant has gained no advantage in the Certificate of Need process by operating non- Certificate of Need-approved psychiatric beds. Indeed, its use of such beds as a part of its existing service and facilities plays a major role in the undersigned's conclusion to recommend denial of the current "application" for a Certificate of Need to construct a new, freestanding mental health facility.
If one accepts the position adopted by both Morton Plant and HRS that neither the day hospital nor the residential treatment center are subject to Certificate of Need review, the issue to be determined is whether Morton Plant is entitled to a Certificate of Need authorizing it to construct an 84,646 square foot facility at a cost in excess of $11 million to house its 42 existing psychiatric beds and the proposed additional 22 psychiatric beds. A statement of the issue in this form dictates the answer. It is obvious that a facility devoting 1,322 square feet per bed, at a cost per bed of almost $140,099 is excessive and not cost-effective. On the other hand, if one considers the inclusion of the day hospital and the residential treatment program, both in terms of the space allocated and the projected revenue, as justification for the proposed facility, then the reasonableness of such inclusions must be examined.
One of the general statutory and regulatory criterion for review of all projects is
"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." Section 381.494(6)(c)13, Florida Statutes.
Also see Rule 10-5.11(12)(a), Florida Administrative Code. With specific reference to the addition of new short-term hospital inpatient psychiatric beds,
Rule 10-5.11 (25)(e)6 further requires that development of such services
"shall be through conversion of underutilized beds in other hospital services, unless conversion costs are prohibitive when compared with development of new facilities, or other factors to be specified by the applicant prohibit such conversion."
With these criteria in mind, it is concluded that Morton Plant has failed to demonstrate that its proposed project is cost effective or that the conversion of existing beds would not be a reasonable alternative.
The Rule specifically requires that the addition of new psychiatric beds shall be by conversion of existing underutilized beds unless conversion costs are prohibitive. Morton Plant did not even attempt to carry its burden with respect to this portion of the rule. The evidence establishes that Morton Plant is currently utilizing a number of medical/surgical beds in connection with its psychiatric units. Morton Plant did not present any evidence as to whether the cost of legitimately converting 22 medical/surgical beds to psychiatric beds would be cost-prohibitive. Its only evidence with regard to conversion pertained to the conversion of 84,646 square feet of space to accommodate 64 beds, a day hospital and a residential treatment center. The conversion of beds was not addressed. While Morton Plant did adduce evidence that the loss of 100 medical/surgical beds could result in overcrowded conditions during its peak seasonal period, there is no evidence to that the conversion of only 22 beds would have such a result. In short, there was simply insufficient evidence to demonstrate that Morton Plant's existing facility could not accommodate either the existing psychiatric unit or the addition of 22 additional Certificate of Need approved psychiatric beds. While Morton Plant may have plans to phase out the Roebling Building, its plan to construct the proposed facility was not shown to be a cost-effective method of construction to accomplish either that purpose or its proposed project. Health care planning is not to be considered on an institution-specific basis.
HRS is required by statute to examine and review the costs and methods of the proposed construction and the availability of alternative, less costly, or more effective methods of construction. Section 381.494(6)(c)13, Florida Statutes. The purpose of the Certificate of Need law is not only to eliminate unnecessary duplication of health services, but also to rationally examine alternative methods of achieving health goals,
"and to aid in their achievement through the most effective means possible within
the limits of available resources." Section 381.493(2), Florida Statutes.
Morton Plant did consider alternatives to the construction of a new facility. However, all the options considered started with the proposition that 84,646 square feet were required. Nowhere in the record of this proceeding is that amount of space justified. The evidence is clear that both in terms of required square footage and in terms of costs per patient, it is considerably less expensive to provide day hospitalization and residential treatment services in a non hospital setting. Thus, the conversion and renovation of existing
hospital space for these purposes does not appear to be a reasonable, cost- effective alternative. Without these services, it is obvious that the costs of the options considered by Morton Plant would be greatly reduced.
Morton Plant simply failed to prove that a new 84,646 square foot facility is reasonably necessary or cost-effective to accomplish the services it desires to perform. Indeed, even at the time of the hearing, Morton Plant itself was still conducting its own analysis of the amount of space it would actually require and the allocation of that space to the various units of the proposed project. Construction costs and total project costs are entirely dependent upon the facility proposed -- its total size, its configuration and the services or functions to be performed. It is incumbent upon an applicant to propose a specific project for review and then demonstrate that its proposed construction is cost-effective and that there are no alternative, less costly or more effective methods of construction. This, Morton Plant has not done.
It has been the policy of HRS not to grant Certificate of Need approval for "shelled in" or "banking" space. This is due to the potential competitive advantage such would afford by allowing a future increase of beds or services without significant cost. Here, the prospect of "shelled in" space is certainly suspect when one considers that Morton Plant originally applied for a 110-bed psychiatric facility, changed that to 64 beds without changing the size or configuration of the proposed facility, presently has a 46-psychiatric bed application pending and will convert its outpatient services to inpatient services should it be granted additional beds.
Inasmuch as HRS may issue or deny an application in its entirety "or for identifiable portions of the total project," the undersigned has carefully considered whether or not that portion of Morton Plant's "application" which seeks an additional 22 psychiatric beds should be granted. A need for additional psychiatric beds has been demonstrated, and Morton Plant has demonstrated its ability to meet that need in terms of quality of care, accessibility and financial capability. However, there simply is no "identifiable portion" of the "application" or the evidence presented in this proceeding which would justify granting a Certificate of Need for additional psychiatric beds to Morton Plant. Given the determination that an 84,646 square foot facility is excessive and not cost-effective, there is no other evidence in the record of this proceeding to identify how Morton Plant would proceed to add the 22 beds or scale down its proposed project to be more cost-effective.
Morton Plant has applied for a Certificate of Need to construct a freestanding facility to house its 42 existing beds and its proposed 22 new beds. There is nothing in the record to demonstrate that Morton Plant can accomplish such a project in a cost-effective manner.
Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of Morton F. Plant Hospital for a Certificate of Need to construct a freestanding mental health facility and to add additional short term inpatient psychiatric beds be DENIED in its entirety.
Respectfully submitted and entered this 27th day of March, 1985, in Tallahassee, Florida.
DIANE D. TREMOR, 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 28th day of March, 1985.
ENDNOTES
1/ The inventory utilized by HRS, and subsequently adopted by the local health council, was challenged by Horizon Hospital in Division of Administrative Hearings' Case No. 84-1864, which was consolidated for hearing purposes with these cases. That case is the subject of a separate Recommended Order entered this same day, which concludes that the inventory, at least as it applies to Horizon Hospital, correctly categorizes the number of short term psychiatric and substance abuse beds at that facility as 178 and 22, respectively.
2/ See footnote 1 on page 8.
3/ It is recognized that the Rule requires a 75 percent occupancy rate for adult beds and a 70 percent occupancy rate for beds for adolescents and children under 18. However, at the time of the hearing, there was no reporting mechanism available to distinguish between adult and minor utilization of psychiatric beds. Given the fact that overall utilization exceeded 75 percent, it is concluded that Morton Plant has demonstrated compliance with this criterion for review.
COPIES FURNISHED:
Alan C. Sundberg and Cynthia S. Tunnicliff Carlton, Fields, Ward, Emmanuel & Cutler, P.A. Post Office Drawer 190 Tallahassee, Florida 32302
Amy M. Jones Secretary Building 1 - Room 407
1323 Winewood Blvd.
Tallahassee, Florida 32301
William Wiley
McFarlain, Bobo, Sternstein, Wiley & Cassedy, P.A.
P.O. Box 2174
Tallahassee, Florida 32301
C. Gary Williams and Michael J. Glazer Ausley, McMullen, McGehee, Carothers and Proctor
Post Office Box 391 Tallahassee, Florida 32302
David Pingree Secretary
Department of Health and Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Oct. 06, 1985 | Final Order filed. |
| Mar. 28, 1985 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 04, 1985 | Agency Final Order | |
| Mar. 28, 1985 | Recommended Order | Certificate of Need (CON) to construct free-standing mental health facility denied. CON failed to demonstrate project could be accomplished in cost effective manner. |
