STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EDGEWOOD KIDNEY TREATMENT )

CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 84-1130

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

and )

) COMMUNITY DIALYSIS CENTER, INC., ) d/b/a COMMUNITY DIALYSIS SERVICE ) OF VENICE, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case at Tampa, Florida, on October 10 and 11, 1984.

APPEARANCES

For Petitioner: E. G. Boone, Esquire and

Robert T. Klingbeil, Esquire Post Office Box 1596 Venice, Florida 33595

For Respondent: Louise Jeroslow, Legal Intern

Post Office Drawer 11300 Tallahassee, Florida 32302-3300

For Intervenor: Mary Ann Presswood, Esquire

Assistant General Counsel Community Psychiatric Centers 2204 East Fourth Street

Santa Ana, California 92705

By Revised Application dated October 5, 1984, Englewood Kidney Treatment Center, Inc.(EKTC), Petitioner, seeks a certificate of need to operate a five- station kidney dialysis treatment center at Englewood, Florida. An earlier application by EKTC for a six-station treatment facility in Englewood was approved by the Department of Health and Rehabilitative Services (DHRS) for five stations. Community Dialysis Center, Inc., d/b/a Community Dialysis Service of Venice (CDC), Intervenor, operates a ten-station renal dialysis center in Venice, Florida, and opposes the grant of a certificate of need to EKTC.

At the hearing Petitioner submitted the evidence submitted to DHRS and the DHRS Agency Action Report approving the application for five stations and rested. Thereafter, DHRS called two witnesses, CDC called two witnesses, Petitioner called three witnesses, and eighteen exhibits were admitted into evidence. Ruling on the admissibility of Exhibit 7 was reserved at the hearing. That exhibit is now admitted into evidence. Objections to Exhibits 11, 17, 19, 20, 22, and 24 were sustained.

The parties have submitted posthearing proposed findings of fact pursuant to Section 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly, or indirectly, in this Recommended Order except where such proposed findings of fact have been rejected as subordinate, cumulative, immaterial, or unnecessary to the results reached. The 37-page Proposed Recommended Order submitted by EKTC was adopted by DHRS as its own and no separate recommended order was submitted. Proposed Finding 19 therein is specifically rejected since no evidence whatsoever relating to that finding was presented at this hearing. No credible evidence was presented that it is customary in this industry to hire an outside professional management team to operate a renal dialysis center ,and most of the adjectives used to describe EKTC's witnesses and proposed services are also specifically rejected, e.g., "impressive qualifications," "very highest quality dialysis care." Further, EKTC's Response to the Proposed Findings submitted by CDC is neither authorized by Chapter 120, Florida Statutes, nor given consideration by the Hearing Officer. In the proposed findings submitted by CDC the first six pages of the ten-page Proposed Recommended Order are devoted to quoting extracts from the State Agency Action Report and to staff assessments of End-Stage Renal Dialysis Network 19. The balance of these proposed findings merely recites testimony of witnesses and technical errors in procedure.

FINDINGS OF FACT

1. EKTC was formed to apply for and operate a renal dialysis treatment center in Englewood, Florida, by Michael J. Kenny, M.D., the sole shareholder of this corporation. Dr. Kenny has entered into a preliminary agreement with Renal Care Centers, Inc. (RCC) to organize and manage the facility. The catchment area from which EKTC proposes to take patients includes the communities of Englewood, Grove City, Cape Haze, Boca Grande, El Jobean, Gulf Cove, North Port, Warm Mineral Springs, Placida, and Rotunda.

   
   

2. Funds for start-up costs, including the purchase of the five dialysis machines required, will be provided by RCC as part of its management fee. These start-up costs are estimated at $60,000 which will be capitalized and amoritized over a five-year period. The equipment purchased will be owned by RCC.

   
   

3. Florida End-Stage Renal Disease (ESRD) Network 19 maintains census records of renal disease patients in Florida by zip code location and treatment needed. DHRS relies on the data supplied by Network 19 to determine need for additional dialysis stations. In reviewing applications and making recommendations Network 19 gives more emphasis to access than to the effect additional kidney treatment centers will have on existing facilities.

   
   

4. Englewood, 12 miles south of Venice, is in one of the fastest growing areas in Florida and has a high percentage of its population over 50 years of

   age. This is the age group having the greatest need for in-center dialysis treatment. There are presently dialysis treatment centers at Venice and at Port Charlotte, 21 road miles east of Englewood. There are five patients currently treated at CBC, Venice, who live in the Englewood area and nine patients currently treated at Port Charlotte AKC live in the proposed catchment area.

   Approval of this application will have an initial serious adverse impact on these facilities.

   
   

5. CDC operates a ten-unit dialysis center in Venice and initially will be adversely affected by the grant of the certificate of need to EKTC. Renal dialysis patients usually require dialysis three times per week, with each dialysis taking from four to five hours. Full utilization would occur if two patients are dialyzed per machine per day. If the dialysis center is open six days per week and each patient requires three dialyses per week, then one machine at full utilization could dialyze four patients per week. However, experience has shown that such utilization is impractical and 80 percent of this figure, or 3.2 patients per station, has been accepted as "full" utilization so as to authorize additional dialysis centers when this percentage utilization is reached. This degree of utilization provides time at dialysis centers for transients and emergency cases which are not counted in determining the percentage utilization of the equipment.

   
   

6. Numerous witnesses testified that the driving time between Englewood and CDC's facility at Venice varies from 20 to 90 minutes depending upon the traffic. No time distance study was presented to confirm these driving times. No credible evidence was submitted regarding the driving time between the homes of those patients living in Englewood who are currently treated in Venice and the Venice facility; nor was similar evidence presented regarding driving time to the Port Charlotte dialysis center from the homes of those Englewood residents currently receiving dialysis treatment at Port Charlotte.

   
   

7. Between October 1983 and September 1984 CDC treated an average of just over 26 patients per month which, when divided by 40, gives a utilization rate of 65 percent. The maximum average number of patients in any one month during this period was 31, which gives a utilization rate of 77.5 percent. These utilization rates are below the 80 percent utilization recognized as the threshold to meet before additional dialysis centers are needed. Exhibit 4 shows that the Port Charlotte center, with eight stations, had an average of 31 patients per month during the first six months of 1983, for a utilization rate of 97 percent, but in the three following months the utilization rate dropped to

   68 percent.

   
   

8. A new hospital is under construction in Englewood and, when operational, could result in additional doctors, including nephrologists, coming to this area. More nephrologists coincide with additional renal disease patients and increase the potential for more renal dialysis stations.

   
   

9. EKTC proposes to offer renal dialysis, training for home dialysis, and peritoneal dialysis. CDC provides no peritoneal dialysis and, although certified for home dialysis training, has provided no such training to date.

   
   

10. EKTC is wholly owned by Michael J. Kenny, M.D., who is one of two nephrologists practicing in the Venice area, and, if this certificate of need is approved, Dr. Kenny has entered into a management agreement with RCC, a wholly- owned subsidiary of United Medical Corp. to set up and manage the facility.

11. RCC has the experience, personnel, and resources to equip and operate the proposed facility and they are ready and willing to commence the operation once approval is granted.

    
    

12. CDC questioned the validity of the CON granted to EKTC. Among the errors noted are:

    
    

    1. The State Agency Action Report (Exhibit 2) although signed and dated, does not indicate final state agency action taken.

       
       

    2. Dr. Kenny signed the application but failed to show himself as an officer of the corporation (EKTC) or authorized by the Board of Directors to apply for a certificate of need.

       
       

    3. No address in Englewood was shown for the proposed facility. The office address of EKTC's attorneys is the only address shown on the application.

       
       

    4. Dr. Joseph is not the proposed medical director as shown on the application.

       
       

    5. The projected cost of the project was changed from $37,167 on the initial application to $60,000 on the amended application without a new agency review and evaluation.

       
       

    6. EKTC has not paid the correct fee for the amended application.

    
    

    All of these objections are technical. By letter dated February 3, 1984 (Exhibit 3), DHRS forwarded CON No. 2934 to EKTC. Subsequent to filing the original application, Dr. Kenny completed the negotiations with RCC and the decision was made to buy the dialysis machines rather than rent them and this contributes most of the increase in initial costs. Not a major change.

    Likewise, Dr. Joseph backed out as medical director and Dr. Kenny assumed that role until he can obtain someone else to take over. Dr. Kenny is the sole stockholder in EKTC and to make an issue of the fact that he did not put a corporate title under his signature or present a Board of Directors' resolution authorizing him to sign the application elevates form over substance. At the time the application was submitted, no site had been selected for the proposed facility so the address shown was for mail purposes only.

    
    

13. DHRS, following the recommendations of ESRD Network 19, historically has given favorable consideration to requests which improve access to care for area patients. This is true even when a need is not clearly shown. In recommending granting the five station renal dialysis center certificate of need to EKTC, ESRD Network 19 took the trend analysis of 116 ESRD patients per one million population, to arrive at a patient census for the catchment area of 18. From this it deducted patients dialysing at home, projected new home-trained patients, projected transplants and projected mortality; and added projected new patient acquisition, projected unsuccessful transplants, and projected home- trained patients returned to center, and ended up with 14 patients in the catchment area requiring in-center dialysis (Exhibit 5). To this it applied 3.2 patients per station, to arrive at a need for four to five stations.

    
    

14. The addition of the proposed five dialysis stations in Englewood will greatly improve access for those patients in the catchment area and will have an immediate after it is adverse impact on CDC and Port Charlotte AKC. Experience has shown that approximately one-half of the patients in the Englewood catchment area will go to EKTC immediately opened and the others will follow during the

    next 12 to 18 months. The continued growth of Florida's population and, in particular, the faster growth of older people in this state, also historically has mitigated the long-term effect on existing renal dialysis centers losing patients to new centers.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

16. The parties stipulated that of those 13 criteria listed under Section 381.494(6)(c), Florida Statutes, only 7 and 10 were not applicable to these proceedings. Of those remaining criteria, the ones on which the decision in this case depends relate to the reasonableness of access to the existing providers by patients in the catchment area and the impact EKTC will have on CDC and Port Charlotte AKC. Those criteria relating to the financial ability of the applicant to provide the proposed service and the capability of the applicant to provide quality health care are clearly resolved in favor of the applicant.

    
    

17. By presenting the evidence on which DHRS relied in issuing CON No. 3934, EKTC established a prima facie case. Florida Department of Transportation

    v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

    
    

18. In the presentation of its evidence CDC primarily relied on technical errors in the application and State Agency Action Report. Whether or not this rebutted EKTC's prima facie case, upon the conclusion of CDC's case EKTC presented competent evidence to establish that the proposed project is in compliance with the criteria contained in Section 381.494(6)(c) Florida Statutes, with the possible exception of the extent of utilization of like health care providers in the same service district. That is an issue that is to be weighed against the accessibility of the existing providers to those patients in the catchment area. Since most of these patients are elderly and less capable of enduring longer travel periods than are younger patients with similar disabilities, the definite improvement in access outweighs the lesser utilization rates that will follow.

    
    

19. From the foregoing it is concluded that a need exists in the catchment area to be served by EKTC for a five-station renal dialysis center. It is

RECOMMENDED that a Final Order be entered granting Englewood Kidney Treatment Center, Inc., a certificate of need to operate a five-station renal dialysis center in Englewood, Florida.

ENTERED this 14th day of December, 1984, at Tallahassee, Florida.

K. N. AYERS, 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 14th day of December, 1984.

COPIES FURNISHED:

E. G. Boone, Esquire and Robert T. Klingbeil, Esquire Post Office Box 1596

Venice, Florida 33595

Louise Jeroslow, Legal Intern CULPEPPER, TURNER & MANNHEIMER

Post Office Drawer 11300 Tallahassee, Florida 32302-3300

Mary Ann Presswood, Esquire Assistant General Counsel Community Psychiatric Centers 2204 East Fourth Street

Santa Ann, California 92705

David H. Pingree, Secretary Department of Health and

Rehabilitative Services 1321 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 84-001130

Orders for Case No: 84-001130