STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NORTH BROWARD HOSPITAL DISTRICT d/b/a ) NORTH BROWARD HOSPITAL and PLANTATION ) GENERAL HOSPITAL, )

)

Petitioners, )

) HUMANA, INC. d/b/a CYPRESS COMMUNITY )

HOSPITAL and NORTH SHORE MEDICAL CENTER, ) CASE NO. 83-3205RX

)

Intervenors, )

)

vs. )

) DEPARTMENT OF HEALTH and REHABILITATIVE ) SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Adrinistrative Hearings, on November 21, 1983, in Tallahassee, Florida. The issue for determination in this proceeding is whether respondent's Rule 10-5.11(15), Florida Administrative Code, pertaining to cardiac catheterization laboratories, constitutes an invalid exercise of delegated legislative authority.

APPEARANCES

For North Broward J. Marbury Rainer, Esquire

Hospital: Parker, HudSon, Rainer, Dobbs & Kelly

1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

Ellen Gibbs, Esquire Gibbs & Zei, P.A.

224 Southeast 9th Street

Ft. Lauderdale, Florida 33316

For Palantation Thomas A. Sheehan, III, Esquire General Hospital: Moyle, Jones & Flanigan, P.A.

707 North Flagler Drive Post Office Box 3889

W Palm Beach, Florida 33402

For Humana, Inc. John H. French, Jr. and

James C. Hauser, Esquires Messer, Rhodes & Vickers

Lewis State Bank Building, Suite 701 Tallahassee, Florida 32302

For Northshore Jean Laramore and

Medical Center: G. Steven Pfeiffer Esquires

Laramore & Clark, P.A.

325 North Calhoun Street Tallahassee, Florida 32301

For Department Jay Adams, Esquire

of Health & Office of General Counsel Rehabilitative 1323 Winewood Boulevard Services: Building One, Room 407

Tallahassee, Florida 32301 INTRODUCTION

In Support of their challenge to the validity of Rule 10-5.11(15), Florida Administrative Code, the petitioners and intervenors offered the testimony of Jeffrey Stuart Dennis, M.D., who was accepted as an expert witness in the fields of cardiology and cardiac catheterization; James McElreath and Elfie Stamm, both of whom are Planners and Evaluators in the respondent's Office of Health Planning and Development; Ronald Everett, Carol L. Reichbaum and Brad Sexauer, all of whom were accepted as an expert witnesses in the area of health planning; Robert G. Turner, accepted as an expert in the field of economics; and Gene Nelson, the current Administrator of res-pondent's Office of Community Medical Facilities. The petitioners and intervenors also tendered the deposition testimony of Thomas F. Porter and Mark Druash, Medical Facilities Consultants with the respondent. Ruling on the admissibility of these depositions was reserved pending the filing of memoranda of law. Having considered the memorandum submitted by the petitioners and intervenors, it is concluded that these depositions are admissible. The petitioners' and intervenors' Exhibits 1 through 7 were received into evidence.

The respondent HRS presented the testimony of Philip C. Rond, the respondent's Administrator of Comprehensive Health Planning, who was accepted as an expert witness in the area of health planning, and respondent's Exhibit 1 was received into evidence.

Subsequent to the hearing, the parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings of fact are not incorporated into this Order, they are rejected as being either not supported by competent substantial evidence adduced at the hearing, irrelevant or imiaterial to the issues in dispute or as con-stituting conclusions of law as opposed to findings of fact.

FINDINGS OF FACT

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

1. The petitioners and intervenors each own and operate hospitals in Broward or Dade Counties. Each facility has applied to the respondent for a Certificate of Need for approval to construct and operate a cardiac

   catheterization service at their respective bSopitals. Each application was denied on the ground that the challenged Rule 10-5.11(15), Florida Administrative Code, did not reveal a need for further cardiac catheterization laboratories in the respective service districts.

   
   

2. A cardiac catbeterization laboratory is a specialized x-ray room designed for taking pictures of the heart or doing procedures referrable to the heart. Cardiac catheterization encompasses both diagnostic and, more recently, therapeutic procedures or maneuvers. As a diagnostic procedure, cardiac catheterization is the most reliable test for determining the presence of coronary disease. Within the last 3 to 5 years, cardiac catheterization labs have been used to perform therapeutic procedures, such as the installation of an enzyme to dissolve a clot, the use of PTCA (percutaneous transluminal coronary angioplasty) to open up blockages and the placement of permanent and temporary pacemakers. With wider acceptance of bypass surgery and new advances in anpioplasty, the use of cardiac catheterization has increased in recent years. At this point in time, the effect of other emerging technologies, such as NMR (nuclear magnetic resonance), upon the use of the cardiac catheterization technique cannot be determined.

   
   

3. Prior to the adoption of the current challenged rule, HRS's predecessor rule reguired denial of an application for a Certificate of Need for a proposed new cardiac catheterization laboratory unless all existing labs in the service area were performing more than 500 catheterizations per year. The prior rule also reguired the existence of or approval for an open heart surgery service at the applicant's facility. In August or September of 1982, HRS started a review of this rule which ultimately led to the adoption of the oresent challenged rule.

   
   

4. As pertinent to the issues raised in this proceeding, the challenged Rule 10-5.11(15) contains a formula methodology for determining the need for new cardiac catheterization laboratories in a service area. The formula requires the utilization of a base year use rate (the number of procedures per hundred thousand population in the service area) to be multiplied by the projected population in the service area in the year in which the proposed lab would initiate service, said year not to be more than two vears into the future. Such multiplication results in the number of catheterization procedures projected to be delivered at the time of initiation of the proposed new service. The rule further provides that no additional cardiac catheterization laboratories may be established in a service area unless the average number of catheterizations performed per year by existing and approved labs performing adult procedures in the service area is greater than 600. The challenged rule specifically states that HRS will consider applications in context with applicable statutory and rule criteria, and will not normally approve new labs unless additional need is indicated by the above formula and unless the 600 average procedures per lab reguirement is met. Rule 10-5.11(15)(f). The current rule deletes the requirement for open heart surgical potential at the applicant's facility.

   
   

5. During the rule-making process which spanned from July or August of 1982 through January, 1983, the HRS Office of Health Planning and Development held informal meetings with representatives of the medical community and health planners, and considered the criteria and standards included in the national guidelines, in other states and in various health systems plans. Medical journals were consulted and numerous written comments were received from interested perSons. Several variations of the rule evolved, and a public hearing was held on December 10, 1982. Based on the manv public comments received, changes in the rule were made. These changes were published, the

   final rule was filed with the Secretary of State on January 24, 1983 and Rule 10-5.11(15) became effective on February 14, 1983.

   
   

6. Throughout the rule-making process, HRS weighed and considered different methodologies for predicting the future need for cardiac catheterization services. The use of an historical base year as opposed to the most current or recent year use rate was considered and was the subject of considerable public comment. It was finally determined that a 1981 base year use rate figure would be adopted, and a one time data collection effort was under taken by HRS for this purpose. This effort was not completed until after the challenged rule was adopted. Although recognizing that the use of a current or most recent year use rate would be preferable to and more accurate than the use of a static use rate, HRS was hampered by the fact that it no longer had the data gathering mechanism or manpower to obtain ongoing current information regarding cardiac catheterization utilization. Therefore, 1991 is the latest and most current year for which a complete data base of utilization is available.

   
   

7. There is some support for the proposition that the continued increase in the utilization of cardiac catheterization procedures may tend to level off or even decrease as a result of emerging technologies and a decline in the rate of coronary disease. Balanced against this are the factors of increasing population, increased aging of the population and a wider acceptance of catheterization procedures, both diagnostic and therapeutic, on the part of physicians and patients. It is therefore difficult to predict with any degree of certainty whether utilization in the future will increase or decrease. It was the intent of HRS to design a need determination methodology which would pace the approval of new cardiac catheterization labs while observing what is occurring in that area of medicine.

   
   

8. The actual experience in Broward and Dade Counties has been a steady increase in the use rate of catheterization procedures performed from 1977 through 1983. The rate of increase for the United States as a whole, while present in each year between 1977 and 1981, with the exception of 1978, has not been as great as that experienced in Broward County. The application of the rule's need determination formula to Broward County, while permitting one additional lab, appears to under-estimate the need for cardiac catheterization services in that area. By employing the 1981 use rate, the formula projects fewer procedures for Broward County in 1984 than actually occurred in the year 1982. The estimated number of procedures for 1983, based upon the actual procedures performed during the first eight or nine months of 1983, exceeds the 1982 number by almost 1,000. Broward County's rate of increase in the utilization of cardiac catheterization procedures is much greater than the rate of increase either for the United States or for the State of Florida. This may be at least partially explained by the fact that the neighboring Palm Beach area has only one cardiac catheterization lab and there is a need in that area, even under the rule's methodology, for as many as five labs. There was no evidence presented that the existing labs in Broward County are overcrowded or unavailable to area residents.

   
   

9. A cardiac catheterization procedure takes, on the average, one to one- and-a-half hours. Therefore, the actual capacity of any particular laboratory is well in excess of 1,000 procedures per year. In 1981, the statewide average for annual number of procedures performed per lab was 581. For quality of care reasons, a minimum of 300 procedures per year per lab is necessary. Studies regarding the cost effectiveness of labs at different levels of usage indicate that the main economies of scale accrue up to the number 400 and additional,

   less pronounced economies of scale continue to accrue to as high as about 700. Any consideration of costs must also include the costs of trans-porting a patient from a facility without a lab to an existing lab and the costs of increased lengths of hospital stay if delays occur because a lab is not available.

   
   

10. As long as the cost of instituting a new lab does not exceed the capital expenditure threshold of Section 381.494(1)(c) Florida Statutes, (presently $600,000.00), an existing facility which presently offers cardiac catheterization capabilities could open a second laboratory without going through the Certificate of Need process and thus be exempt from the challenged rule and its method for determining need. This, of course, would allow an existing facility to have an advantage over new competitors who seek to enter the market to fill a demonstrated need. As a practical matter, such a situation would only occur when an existing facility already has a special procedures room and is willing to forfeit that room for the purpose of performing cardiac catheterization. Such a "loophole" is not a result of the challenged rule. The Certificate of Need thresholds are set by statute and the rule comes into effect only when a Certificate of Need is required.

    
    

11. The Economic Impact Statement (EIS) prepared for the challenged rule, (as well as for Rule 10-5.11(16) pertaining to open heart surgery programs) does not attempt or purport to analyze the overall financial impact upon providers, prospective providers or consumers of regulating the number of cardiac catheterization labs in a service area. Instead, it attempts to give an estimate of the economic impact which the amended rule will have in comparison to the prior rule on the subject. Given the fact that the prior rule reguired a facility to have existing or approved open heart surgical capabilities and required every existing lab in the service area to perform at least 500 procedures per year before a new lab could be approved, it can be concluded that the new rule actually liberalizes the need demonstration requirements for a Certificate of Need. The EIS concludes that, other than the printing and distribution costs of the rule to the agency, no economic impact is anticipated as a result of this amendment. The EIS states that

    
    

    "Though the full extent of the economic impact is indeterminable, the rule is expected to contain health care costs by assuring optimal utilization of existing cardiac catheterization . . ., and by avoiding large capital outlay expendi- tures for unnecessary, duplicative services."

    The effect on competition and the open market is estimated as follows: "Consistent with the purpose of the

    Certificate of Need law, the proposed rules will restrain the development of costly excess cardiac catbeterization and open heart surgery capacity. The proposed rules permit the development of competitive new services among area cardiac catbeterization laboratories and open heart surgery programs

    when need for additional capacity is indicated by the need formula and the level of utilization of existing capacity."

    Absent from the EIS is a detailed statement of the data and method used in making the estimates of costs and benefits to persons directly affected and the estimate of impact on competition and the open market. However, the record of the rule-making proceeding clearly reveals that cost and benefit considerations were reviewed by those responsible for promulgating the challenged rule. It is clear from the testimony adduced in this hearing, as well as the documents received into evidence pertaining to the public comments and letters received by HRS in the rule-promulgation process, that factors involving cost efficiency, increased patient costs, optimal and actual utilization, lab capacity and guality of care were considered by HRS. Such considerations led to numerous changes in the language utilized in the rule. While the EIS perhaps could have been more explicit in specifying the possible economic impacts of these considerations, the fact that actual dollar amounts are not assigned to these considerations does not render the EIS inadeguate. The challengers to the rule offered no more specifics than that contained in the EIS as to the economic impact resulting from the rule. The impacts enumerated by the economic expert presented by the challengers in this proceeding result more from the fact of regulation itself than from the operation of the challenged rule.

    
    

    CONCLUSIONS OF LAW

    
    

12. As applicants for Certificates of Need to establish and operate cardiac catheterization laboratories at their respective facilities, each of the petitioners and the intervenors have adequately demonstrated their substantial interest in the challenged rule which sets forth the methodology and criteria for determining the need for such a service.

    
    

13. The challengers basically contend that Rule 10-5.11(15), Florida Administrative Code, is invalid in that it is inconsistent with statutory authority, it is arbitrary and capricious with no rational basis in fact and the Economic Impact Statement is inadequate. More specifically, it is alleged that the rule's formula methodology for determining need focuses undue attention on a single statutory criterion to the exclusion of the remaining criteria in Section 381.494(6)(c), Florida Statutes, which the Legislature has mandated HRS to consider in Certificate of Need determinations. It is also alleged that the selection of the year 1981 as a base vear for determining the use rate to be employed in projecting future need has no rational explanation and fails to adeguately estimate real need. It is urged that the 600 figure bears no relationship to need, capacity, cost efficiency or quality of care. The challengers complain that the rule does not prohibit the addition of a second lab by an existing provider, and thus results in an unfair competitive advantage to existing providers. And, finally, the challengers contend that the EIS totally fails to contain the three estimates and one statement required in Section 120.54(2)(a), Florida Statutes.

    
    

14. Contrary to the contention of the challengers, Rule 10-5.11(15) does not preclude a consideration of factors other than the numerical need for additional facilities in a service area. The rule specifically states that the Department will consider applications in context with applicable statutory and rule criteria and will not normally approve applications unless additional need is indicated by the formula. The purpose of the rule is simply to prescribe a method for determining the numerical need for additional labs and to prescribe other reguirements for a new lab. It does not prohibit a consideration of the remaining criteria or standards for reaohing Certificate of Need determinations, such as geographic or economic accessibility or availability, the quality of care provided by existing facilities, financial feasibility or other special

    circumstances. The possibility that one charged with implementing the Certificate of Need statutes and rules may place more weight upon one criterion than another does not render this rule invalid. The law, and the rule itself, requires a consideration of all statutory and rule criteria. If undue weight is placed upon one criterion to the exclusion of others, that situation may be remedied through other administrative proceedings.

    
    

15. Utilization of a 1981 base year use rate to predict future need may not be the most desirable or accurate method to determine the need for additional cardiac catbeterization labs in an area. However, HRS's selection of this method is not without explanation or rational basis in fact. Due to changes in the law regarding the former local health systems agencies, HRS no longer has a continuing mechanism for compelling the production of up-to-date cardiac catheterization utilization data, nor does it have the manpower to conduct ongoing data collection. The year 1981 is the latest and most recent year for which complete information regarding cardiac catbeterization utilization is available. It is an appropriate and accepted health planning technique to use the most current year for which data is available as a base line for predicting future need. There was also some evidence to support the proposition that the utilization rate of cardiac catheterization procedures may tend to decrease or level off due to emerging technologies and/or a decline in the rate of heart disease. If the result of using the 1981 use rate is a clear underestimation of the need for additional services in an area, the applicant has the opportunity to demonstrate that existing facilities are unavailable or inaccessible, that guality of care in the service area is suffering from overutilization or by providing other information to illustrate that the situation is not "normal" in the service area so as to justify an application of the rule's methodology.

    
    

16. Likewise, the reguirement that existing labs be performing an average of 600 procedures per year finds support in the record of this proceeding. The use of an average number of procedures, as opposed to an absolute number per lab, gives effect to real numbers of procedures being performed and does not penalize an applicant for the effects of start-up times for newly approved facilities or problems which a particular facility may have regarding guality of care, accessibility, efficiency, staffing, etc. The number 600 is somewhat of a low midpoint between quality of care considerations and lab capacity considerations. It is within the realm of the figures suggested for cost efficiency purposes. Many public comments were received during the rule promulgation process suggesting an even higher utilization standard. The challengers have failed to demonstrate that the 600 procedures per year requirement is irrational or unsound or even that another number would constitute a better indicator of the need for additional cardiac catheterization services in an area.

    
    

17. The possibility that an existing facility which alreadv has a cardiac catbeterization lab may have an advantage over new potential providers is neither a function nor a result of the challenged rule. The Legislature has set the monetary and substantive thresholds for Certificate of Need requirements and the Department would not be authorized to modify or deviate from those requirements by rule. The challenged rule only applies when a Certificate of Need is required by law. If loopholes exist in the law which have a detrimental or unfair effect upon competition, it is the duty of the Legislature, not HRS, to correct that situation.

    
    

18. Borrowing the terminology of one of the attorneys in this proceeding, the Economic Impact Statement prepared for the challenged rule "is not a

    sterling example of financial fore-casting." Yet, the record of this proceeding, as well as the record of the prior rule-making proceeding, clearly demonstrates that HRS officials charged with the responsibility of promulgating this rule fully considered the economic effects of the rule upon existing providers, potential providers, consumers, patients and the health care system as a whole. The petitioners and the intervenors failed to demonstrate that the economic impact of the rule would be different than that stated in the EIS or that the fairness of the rule-making proceedings were impaired as a result of the EIS.

    
    

19. As stated in Division of Workers' Commensation v. McKee, 413 So.2d 805 (Fla. 1st DCA, 1982), even the total absence of an EIS may be harmless error if there is no economic impact or if the agency has fully considered the asserted economic factors and impact. Further, a facially deficient or less than thorough statement of economic impact does not provide grounds for the rule's invalidity if the fairness of the proceedings was not thereby impaired. Plantation Residents' Association v. School Board of Broward County, 424 So.2d 879 (Fla. 1st DCA, 1983)

    
    

20. The Legislature has delegated to the respondent HRS the duty and authority to develop rules for the issuance of Certificates of Need in compliance with and in implementation of the statutory criteria. The respondent has adopted a rule which contains a uniform statewide methodology, to be applied on a district basis, for reaching determinations of whether additional or new cardiac catheterization laboratories are needed in a particular area. The rule purports to constrain the addition of labs while assuring a sufficient number of labs to meet the needs of the service area. The computations utilized in the formula methodology are not without reason or logic and find support in the record of this proceeding. The fact that the methodology chosen by the respondent may be imperfect or out of step with a particular school of thought is not grounds for invalidating the discretionary action of an agency which is otherwise acting within its authority. A procedure exists under the Administrative Procedure Act for a regulated person to petition an agency to adopt, amend or repeal an agency rule. Section 120.54(5), Florida Statutes.

    The burden upon a petitioner in such a proceeding is not nearly as stringent as the burden upon one challenging an existing rule pursuant to Section 120.56, Florida Statutes, on the ground that the rule is an invalid exercise of delegated legislative authority.

    
    

21. A challenger who attacks the substance of an agency rule on grounds of arbitrariness or capriciousness carries the stringent burden of demonstrating by a preponderance of the evidence that the rule is not supported by facts or logic, was adopted without thought or reason or is otherwise not based upon competent substantial evidence. Agrico Chemical Company v. State, etc., 365 So.2d 759 (.Fla. 1st DCA, 1978). The petitioners and intervenors have failed to carry this stringent burden in this proceeding.

FINAL ORDER

Based upon the findings of fact and conclusions of law recited herein, it is concluded that petitioners and intervenors have failed to demonstrate that Rule 10-5.11(15), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority. Accordingly, the petitions seeking to challenge that rule are hereby DISMISSED.

ENTERED AND ORDERED this 16th day of March, 1984, 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 16th day of March, 1984.

COPIES FURNISHED:

J. Marbury Rainer, Esquire Parker, Hudson, Rainer, Dobbs

& Kelly

1200 Carnegie Building

133 Carnegie Way Atlanta, Georgia 30303

Ellen Gibbs, Esquire

224 Southeast 9th Street

Ft. Lauderdale, Florida 33316 Case No. 83-320 SR

Thomas Sheehan, III, Esguire Post Office Box 3888

West Palm Beach, Florida 33402

John H. French, Jr. and James C. Hauser, ESouires Suite 701

Lewis State Bank Building Tallahassee, Florida 32302

Jean Laramore and

G. Steven Pfeiffer, Esguires

325 North Calhoun Street Tallahassee, Florida 32301

James Adams, Esquire 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32301

David Pingree Secretary

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

Carroll Webb Executive Director Joint Administrative

Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301

Liz Cloud Bureau Chief

Administrative Code Section Department of State

1802 Capitol

Tallahassee, Florida 32301

Docket for Case No: 83-003205RX

Orders for Case No: 83-003205RX