STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
HALIFAX HOSPITAL MEDICAL CENTER, )
)
Petitioner, )
)
vs. )
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
) CASE NO. 84-1141
Respondent, )
and )
) HUMANA OF FLORIDA, INC. d/b/a ) HUMANA HOSPITAL DAYTONA BEACH, )
)
Intervenor/Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on June 25 and 26 and July 15 and 16, 1985, in Ormond Beach and Tallahassee, Florida.
APPEARANCES
For Petitioner: Harold C. Hubka, Esquire
Marvin Samuels, Esquire Post Office Box 5488
Daytona Beach, Florida 32018
For Respondent: R. S. Power, Esquire
Building One, Room 407 1323 Winewood Boulevard
Tallahassee, Florida 32301
For Intervenor/ John H. French, Jr., Esquire Respondent: James C. Hauser, Esquire
Post Office Box 1876 Tallahassee, Florida 32302
BACKGROUND
By application filed on August 12, 1983, petitioner, Halifax Hospital Medical Center, sought the issuance of a certificate of need to construct and operate a 100-bed acute care facility in Port Orange, Florida. To do this, it proposes to transfer 100 beds from its existing 545-bed facility in Daytona Beach.
On January 30, 1984, respondent, Department of Health and Rehabilitative Services, issued its proposed agency action denying the application on the grounds there were 229 unused beds readily accessible to the Port Orange population, and that such an expenditure was accordingly unwarranted and unjustified. Thereafter, petitioner requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes, to contest the proposed action. The matter was forwarded to the Division of Administrative Hearings on March 29, 1984, with a request that a hearing officer be assigned to conduct a formal hearing.
By notice of hearing dated June 14, 1984, a final hearing was scheduled on October 8-10, 1984 in Daytona Beach, Florida. On September 26, 1984, intervenor-respondent, Humana of Florida, Inc. d/b/a Humana Hospital Daytona
Beach, was authorized to intervene as a full party. Thereafter, by agreement of the parties, the matter was rescheduled to March 20-22, 1985 at the same location. At the request of the parties the matter was again rescheduled to June 25 and 26, 1985 in Ormond Beach, Florida. Continued hearings were held in Tallahassee, Florida on July 15 and 16, 1985.
At final hearing petitioner presented the testimony of Ron R. Rees, Sarah Zeritkowski, Patrick Kennedy, Kenneth Parker, Jeri Stadler, Raymond Hill, William Meyers, Glen Stafford, William Satey, James Fisher, Louis Orban, Thad McNulty, James Fogle, Joseph Truex, Steven Smith and Dale Abbott. It also offered petitioner's exhibits 1-18. All were received except exhibit 7 and portions of exhibits 5 and 6. Respondent presented the deposition testimony of Reid Jaffe and offered respondent's exhibit 1 which was received in evidence.
Intervenor-respondent presented the testimony of Ernie Peters, William Ward, Richard Baehr and Larry McDonald. It also offered intervenor's exhibits 1-13. All were received in evidence.
The transcripts of hearing (five volumes) were filed on September 6, 1985. Proposed findings of fact and conclusions of law were originally due on October 6, 1985. By agreement of the parties, this time was extended to October 15 and then to November 1, 1985. Proposed findings of fact and conclusions of law were filed by intervenor-respondent and petitioner on November 1 and 4, 1985, respectively. None were filed by the agency. A ruling on each proposed finding of fact has been made in the Appendix attached to this Recommended Order. 1/
At issue is whether petitioner's application for a certificate of need to construct and operate a 100-bed acute care hospital in Port Orange, Florida should be granted.
Based upon all of the evidence, the following findings of fact are determined:
FINDINGS OF FACT
Introduction
Petitioner, Halifax Hospital Medical Center (Halifax or applicant), filed an application with respondent, Department of Health and Rehabilitative Services (HRS), on or about August 12, 1983, seeking a certificate of need authorizing the transfer of one hundred licensed beds from its existing 545-bed facility in Daytona Beach, Florida, to establish a new freestanding 100-bed acute care hospital in Port Orange, Florida. Both the existing and proposed facilities are in Volusia County, and will lie approximately eight miles apart. Once the one hundred beds are transferred, ninety will be allocated to a
medical/surgical classification while the other ten are to be classified in the critical care category. Applicant estimates the cost of the new facility to be approximately $25.4 million.
After being reviewed by HRS, proposed agency action was issued on January 30, 1984, denying the application on the following general grounds:
The applicant is proposing to move a signifi- cant number of beds from its existing loca- tion so as to establish freestanding hospital facility in the Port Orange are. The appli- cant argues that the population growth in this area is significant. However, such growth does not warrant the expenditure of either $21 million or $14 million for the development of new hospital facilities where more than 229 unused beds are readily acces- sible to the Port Orange population. The current facility is approximately 8 to 10 miles from the proposed site of the new hospital. Although the highway network in this area is less than ideal, it is easily possible to reach either facility from the proposed locations within 30 minutes travel time since this distance is only 8-10 miles. Further, Fish Memorial Hospital in New Smyrna Beach is approximately 13 miles south of the Port Orange area on the main highway with 19 unused beds on an average daily basis. This facility is easily accessible within 30 minutes travel time under normal driving conditions.
The letter of denial prompted the instant proceeding. Thereafter, intervenor/respondent Humana of Florida Inc. d/b/a Humana Hospital Daytona Beach (Humana) which owns and operates an acute care facility in Daytona Beach, Florida was allowed to intervene in opposition to the application. According to Humana's petition, the new facility would "cause unnecessary duplication and an underutilization of Humana's facility," force it "to lose patients it would otherwise receive. . . (and) to lose patient revenues. . . result(ing) in an increase of patient charges." Although a number of other hospitals are located in the Daytona area, none intervened as formal parties.
Applicant's Proposal
Applicant, a tax district hospital created by special act of the legislature, owns and operates a 545-bed acute care hospital facility in Daytona Beach, Florida. These beds are licensed in the following categories: 389 in medical-surgical, 21 in obstetrical, 26 in pediatrics, 50 in psychiatric, and 59 in intensive care.
Applicant proposes to establish a 100-bed acute care satellite hospital in Port Orange by transferring 100 licensed beds from the Daytona Beach facility. Halifax proposes to transfer 20 pediatric beds, 25 unused and non-
operational medical-surgical beds, and 55 medical-surgical beds which it claims are now used by patients from the Port Orange area. The 25 unused medical- surgical beds have not been used since at least 1981 due to a lack of patient demand.
The new facility will be comprised of 90 medical- surgical beds and 10 ICU-CCU beds. However, it will not offer obstetrics, pediatric or psychiatric services. The two Halifax facilities will use the same administrative and support staff to the extent possible to achieve cost savings. Evidence that the new facility will have no difficulty in obtaining a qualified staff was not contradicted. Halifax intends to assign one-half of its personnel from the Daytona Beach facility to the Port Orange facility. However, as discussed in greater detail hereinafter, its projected cost for staffing and equipment appear to be overly optimistic and too low.
The proposed facility is primarily designed to serve the Port Orange area. That area is now a part of the primary service area of Halifax. Indeed, at the present time, Port Orange residents obtain medical-surgical, pediatric, obstetrical, and psychiatric services from Halifax. Although the two facilities will be only eight miles apart, Halifax contends that due to substantial growth in Volusia County, and particularly in the Port Orange area, the new facility will not have an adverse effect on Halifax or nearby competing acute care facilities. Halifax points out that Port Orange is the only population center in the Daytona area without its own hospitals and that widespread support for a "local" facility emanates from that community. It also contends that growth has clogged the Daytona area transportation arteries making Halifax and other facilities inaccessible to Port Orange residents.
Competing Facilities
Both Halifax and the proposed facility are located in subdistrict 4 of HRS District IV. There are four acute care facilities besides Halifax in the greater Daytona area, and they include Humana, Daytona Beach General Hospital, Peninsula Medical Center and Memorial Hospital of Ormond Beach. In addition, Fish Memorial Hospital of New Smyrna Beach lies some fifteen miles south of Port Orange and offers a full array of hospital services. Finally, Fish Memorial Hospital of Deland and West Memorial Hospital are located in the Deland area, which is some twenty miles west of Daytona Beach. Both offer acute care services.
Consistency with State Health Plan and District Plan (Sub- section 381.494(6)(c)1., Florida Statutes)
The State Health Plan (Plan) is a blueprint for the planning of inpatient hospital and health care facilities. Subsection 381.494(6)(c)1., Florida Statutes (Supp. 1984), requires that it be considered in the certificate of need process. The Plan establishes certain goals and objectives for health planning. Although the text of the Plan was not introduced into evidence by any party, relevant excerpts were offered by Humama.
Objective 6.1 of the State Health Plan provides that "by 1989, the ratio of acute care hospital beds to Florida's population (in 1,000's) should be less than 4.11". To achieve this goal, the Plan recommends no new construction in overbedded areas and suggests that licensed beds be retired to mitigate against excess capacity. The 1984 bed-to-population ratio in subdistrict 4 is
5.9 beds and is projected to be 5.1 beds in 1989. This ratio is the highest of all subdistricts in District IV. To the extent Halifax proposes to transfer (rather than retire) presently unused acute care beds, its proposal is inconsistent with Objective 6.1 of the Plan.
Objective 8.1 of the State Health Plan provides the following goal:
By 1989, attain an average annual occupancy rate of at least 80 percent for all non- federal, short stay hospital beds considered together in each of Florida's 11 HRS districts.
In 1984, the average annual occupancy rate of acute care hospitals in District IV and subdistrict 4 were 56 percent and 47.7 percent, respectively. By transferring additional medical/surgical beds to the new facility, Halifax will cause a deterioration of utilization rates at both its existing facility and those of competitors. By doing so, it contravenes the foregoing Plan Objective.
Although not altogether clear, at the time of final hearing, the 1984 District Health Plan was effective while the 1985 District Plan contained unadopted recommendations. 2/ However, both Plans contain two recommendations concerning bed need. Specifically, they recommend against adding any new acute care beds within the District or subdistrict until utilization rates improve or until the existing surplus is used. But Halifax does not intend to add any new acute care beds within the District or subdistrict, but only to transfer 100 already licensed beds to a new facility. Therefore, these "policies" are irrelevant to a determination of the merits of the application. Since these two "policies" are the only portions of the District Plan placed in issue, there is no incompatibility between Halifax's proposal and the District IV Health Plan.
Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services. (Subsection 381.494(6) (c)2., Florida Statutes).
Only two witnesses who were qualified in this proceeding as experts in health care planning testified as to whether there is a need for the proposed facility. Those persons were Richard Baehr for Humana and Reid Jaffe for HRS. Both witnesses concluded that there was no need or other justification for the proposed Port Orange facility.
Hospital utilization is generally declining due to more outpatient services, new medical reimbursement rates, shorter average length of stays, and innovative alternatives to hospital care. This trend is exemplified in District IV and subdistrict 4. Patient days at District IV hospitals declined 15.9 percent between 1982 and 1984, while hospital occupancy rates declined 21.7 percent during the same period. At the same time, subdistrict 4 patient days declined approximately 11.3 percent while the occupancy rate fell some 17 percent.
In the case of Humana its occupancy rate fell from 50.6 percent to
43.2 percent between 1982 and 1984, and has leveled out at 45 percent during 1985. Fish Memorial Hospital of New Smyrna Beach experienced a like decrease in occupancy from 63.5 percent in 1982 to 47.4 percent in 1984. Even Halifax's
occupancy rate has dropped from 70.1 percent to 67.8 percent during the same time period and its patient days for the first half of 1985 are some 9,000 less than its 1984 experience. These rates are far below the state recommended standard.
Due to insurance mechanisms and hospital alternatives, these declining and low utilization rates are expected to continue in the immediate future. Given this trend, which flies in the face of Halifax's projections, it is found that the existing acute care facilities are underutilized, and therefore the "extent of utilization" criterion has not been satisfied.
Halifax maintains that due to growth and development, Port Orange residents now find area hospitals inaccessible. Port Orange lies just to the south of the corporate limits of Daytona Beach, and is basically separated from that city by the City of South Daytona and a small unincorporated area. However, Daytona and Port Orange are connected by a number of principal arteries. It is undisputed that the area is experiencing a relatively large growth in population and a like growth in residential and commercial development. As is true of most of Florida, these trends will likely continue in the Daytona area in the immediate future. Lay testimony from Port Orange residents painted a picture of clogged roads and streets, constant delays, and excessive travel times to reach Halifax and other area hospitals. But
accessibility is best measured by more sophisticated traffic studies determining the travel time from various origin points in the relevant area to certificated hospitals. In this proceeding, only one qualified witness prepared such a study as to travel time conditions in subdistrict 4 and the Port Orange area, and it is found to be the most persuasive and credible evidence. Humana witness Peters utilized the "average car technique," which is described in Humana Exhibit 5, and derived the average travel time to hospitals from various origin points in the area. These hospitals included Halifax, Humana, Peninsula Medical Center, Memorial Hospital of Ormond Beach, Daytona Beach General Hospital, West Volusia Memorial Hospital (Deland), Fish Memorial Hospital (Deland), and Fish Memorial Hospital (New Smyrna Beach). The reliability, reasonableness and accuracy of the study have not been seriously questioned or contradicted. The study demonstrates that there is no area in the proposed Port Orange hospital service area which is farther than thirty minutes average travel time to a hospital.
The study also confirms that virtually all of the proposed service area is within fifteen or twenty minutes of Halifax, Humana or New Smyrna Beach Fish Memorial Hospital. Even a Halifax lay witness agreed that it was only a "ten minute ride" from Port Orange to Fish Memorial Hospital in New Smyrna Beach. Therefore, it is found that the travel time from Port Orange to existing facilities is not unreasonable and that such facilities are reasonably accessible within the meaning of the statute. To find otherwise would sanction a $25.4 million expenditure for the benefit of one small area in order to minimize what is now a 15 minute drive to area hospitals.
Halifax is the only hospital in Volusia County with licensed pediatric beds. If 20 of its 26 licensed beds are converted to medical-surgical beds at the Port Orange facility, as Halifax proposed, this would leave Halifax with only 6 pediatric beds at its existing facility. To this extent, the availability of such services at Halifax will be adversely affected, and may require patients to seek pediatric services outside the county.
Halifax owns and operates an "urgent care center" situated in the City of Port Orange. Halifax proposes to locate its new facility adjacent to this center. The center already has diagnostic equipment, treatment/examination rooms, laboratory, x- ray equipment, EKG equipment, and cardiac monitoring
equipment. It offers primary care and is equipped to stabilize patients for eventual transfer to a hospital. Indeed, the center is staffed with doctors board-certified in emergency medicine and is capable of responding to any type of emergency that might come from the Port Orange area. Where time is of the essence, patients are transported by ambulance or helicopter to Halifax after stabilization at the urgent care center. Even though a great deal of prehospital admission testing is done at this urgent care center, the facility still has unused capacity at the present time. Even so, Halifax is considering expanding the hours of operation at the urgent care center up to 24 hours a day. In view of the existing services now offered by the center, and the accessibility to Halifax and other area hospitals by Port Orange residents, the "like and existing health care services" in subdistrict 4 are adequate within the meaning of Subsection 381.494(6)(c)2. Therefore, this part of the criterion has not been met.
The Port Orange facility will not offer obstetrics, pediatric or psychiatric services. It will not have certain diagnostic and therapeutic equipment that Halifax currently offers. In addition, acutely ill patients in need of sophisticated medical treatment or equipment will still have to travel to Halifax or another facility offering that service. Therefore, the services offered by existing facilities are more available appropriate and adequate for Port Orange residents, and indeed provide better quality of care.
There is no evidence that the existing health care facilities in subdistrict 4 are insufficient. Therefore, this portion of the criterion, if relevant has not been met.
Immediate and Long-Term Financial Feasibility of the Project (Subsection 381.494(6)(c)9., Florida Statutes)
The agency is required by law to consider the "immediate and long-term financial feasibility of the proposal." In this vein, Halifax has offered exhibit 15 to demonstrate the financial feasibility of the project. That exhibit reflects that in fiscal year 1989 the new project will generate $707,000 in excess revenues over expenses, and that excess revenues will increase to
$1,105,000 in fiscal year 1990. In making these estimates, Halifax has made certain assumptions as to utilization, projected staffing salaries and benefits, and deductions required from gross revenues.
Halifax projects a 69 percent and 70 percent occupancy level, respectively, in the new facility's first two years of operation. However, these projections are not consistent with the health care industry experience or with average occupancy levels prevailing at Halifax, or other Volusia County and District IV providers. For example, in 1984 the existing facilities in subdistrict 4 averaged 47.7 percent occupancy while the District IV facilities averaged 56 percent occupancy. Even in its own budget, Halifax has underestimated the decline in its hospital utilization for fiscal year 1985. This was evidenced by an actual utilization during the first half of 1985 that is 12.21 percent below budget. Given these hard statistics, it is unrealistic for Halifax to expect to achieve its forecasted goals, particularly since start- up facilities rarely achieve the same level of occupancy as do existing facilities. Even if Halifax were to achieve a 60 percent occupancy level in the first two years of operation, which is optimistic, it would still suffer significant overall operating losses during those years.
The importance of utilization estimates upon projected revenues and expenses is not insignificant. In Halifax's case, every 1 percent change in
average occupancy is the equivalent of approximately $194,000 in gross revenues in 1989 and $210,000 in gross revenues in 1990. This translates into roughly
$150,000-$160,000 in net revenues after contractual deductions are subtracted. If utilization is overstated by 10 percent, net revenues generated at the proposed facility are reduced by about $1.5 million. Therefore, the financial stability of the proposed facility is extremely sensitive to comparatively small fluctuations in volume.
The methodology applied by Halifax in forecasting utilization was also deficient since Halifax's forecast of patient days was based upon certain population projections for the Port Orange service area which were deemed to be inadmissible because of their hearsay nature and unreliability. 3/ If different (and more reliable) population numbers were used, the numbers on Halifax's pro formas would also change. Further, if subdistrict population projections were used in lieu of the service area numbers used by Halifax, this would generate a lower use rate and thus a lower forecast of patient days. Therefore, the unreliable population projections render the utilization rates unreasonable and accordingly invalid.
In making its forecasts, Halifax has assumed that the 1985 Medicare reimbursement rates, adjusted for inflation, will continue throughout the forecast period. Humana points out that the likelihood exists for a 1986 reimbursement freeze, a 1986 wage level adjustment for the Daytona Beach statistical area, and the elimination of the capital cost pass through reimbursement. If such changes are indeed enacted, it will reduce the amount of money that Halifax receives through the Medicare reimbursement process, and increase the amount of deductions from patient revenues. However, none of the three changes had occurred when the record was closed in this proceeding, and accordingly their precise impact, if any, cannot be measured. Therefore, it was not improper for Halifax to prepare its exhibits without estimating the impact of these potential changes.
Halifax assumes that 187 full-time equivalent (FTE) employees in 1989 and 191 FTE's in 1990 would be required to staff the proposed Port Orange facility. This translates into approximately 2.7 FTE's per occupied bed in both years. These estimates are significantly below the actual staffing level experienced in hospitals of similar size in Florida. On average, in 1984, hospitals with 150 beds or fewer employed 3.6 FTE employees per occupied bed. The median staffing level was 3.5 FTE's per occupied beds and the lower twenty- fifth percentile was 3.2 FTE's per occupied bed. Since there is insubstantial evidence to demonstrate why Halifax is able to deviate from the norm, it is found that Halifax's proposal of 2.7 FTE's per occupied bed is unreasonably low.
If a more reasonable 3.2 FTE per occupied bed ratio is used to calculate the salary/benefit expenses associated with the Port Orange project, the incremental increase in salary expenses that results from this recalculation is approximately $736,000 in 1989 and $744,000 in 1990. These amounts would be added to Halifax's projected salaries, wages and fringe benefits, and in turn increase its operating expenses by those amounts.
Because salary expenses are understated, and the projected utilization levels are overly optimistic, the Port Orange facility will experience substantial operating losses in 1989 and 1990. This does not take into account the proposed changes in Medicare reimbursement regulations which, if adopted, would further increase the deficit in a significant manner. Therefore, the proposed Port Orange facility is not financially feasible from either an immediate or long-term basis.
Will the New Facility Promote Positive Competition and Foster Cost Effectiveness in the Delivery of Health Care Services. (Subsection 381.494(6)(c)12., Florida Statutes)
By adding a second facility in Port Orange, Halifax will incur additional incremental capital costs such as depreciation, interest expense, staffing, inventory and transportation between the two facilities. Since the project will not be financially feasible, Halifax will be forced to either increase patient charges or increase property taxes to cover these increased costs. If patient charges are increased, Halifax's ability to deliver health care services in a cost-effective manner will be impaired.
Humana operates a 214-bed acute care general hospital just across the street from Halifax. It provides a full range of hospital services, including ICU/CCU, a progressive care unit, full ancillaries an emergency room, laboratory, and sophisticated medical equipment. Humana's primary service area includes Daytona Beach, Port Orange, Holly Hill, and South Daytona Beach. About 37-38 percent of all admissions at Humana are generated from Port Orange residents. Humana actively markets and advertises its services in the Port Orange area. It is noteworthy that the Port Orange zip code provides the greatest percentage of admissions at Humana than any other zip code.
Humana receives almost 38 percent of its outpatient surgical business from Port Orange residents. Humana recently received certificate of need approval to improve end expand its outpatient surgical program, and is in the process of implementing its authorization to do so with a $2 million expenditure.
Humana's occupancy for its fiscal year to date is 45 percent. Its optimal occupancy is at least 80 percent. If the new facility is built, Halifax's market share of Port Orange residents will increase since Port Orange residents view a "local" facility as being more convenient and accessible.
Since Humana receives a substantial part of its patient admissions from the Port Orange area, the impact of a new facility would not be positive, and would adversely affect its ability to deliver cost-effective health care services in the area. Therefore, this criterion has not been satisfied.
Are the Cost Methods the Least Costly Reasonable and Sufficient. (Subsection 381.494(6)(c)13. Florida Statutes.)
The cost of constructing the 100-bed Port Orange facility is estimated to be $25.4 million. Although the cost of satellite hospitals is normally less than for a freestanding hospital facility, the estimated project cost for Port Orange is much higher than the norm. No explanation for this deviation was given.
In preparing its cost estimates, Halifax has assumed that all movable equipment in the new facility can be purchased for $2.4 million. It has included this amount in the total project cost. To determine the reasonableness of this estimate, Humana compared Halifax's costs with its own equipment costs, which are 15 percent lower than market rates. The list was also checked to see if it would adequately equip a 100-bed hospital. This study, which was not rebutted revealed that Halifax had understated its equipment costs by $1.5 million even if it were able to obtain the 15 percent discount that Humana enjoys. If this amount is added to the project cost, the total would increase
to $27 million rather than the projected $25.4 million. Therefore, the estimated costs of construction are unreasonable and exceed those normally required to construct a 100-bed facility.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.
Initially, it is noted that petitioner has "the burden of proving it meets the statutory criteria and is entitled to a CON." Boca Raton Artificial Kidney Centers Inc. et al. v. Department of Health and Rehabilitative Services, et al., 475 So.2d 260, 262 (Fla. 1st DCA 1985). The applicable statutory criteria are found in Subsection 381.494(6)(c) Florida Statutes (Supp. 1984).
By evidence and pleadings the parties have narrowed their dispute to the following criteria; all others being irrelevant or satisfied:
The need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to public health.
The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant.
* * *
9. The immediate and long-term financial feasibility of the proposal.
* * *
The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost- effectiveness.
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.
Rule 10-5.11(23), Florida Administrative Code, would normally provide further criteria to be met by an applicant in proving need in an acute care case. But because petitioner is merely seeking to transfer one hundred beds from its existing facility to the proposed facility, and will add no new beds to the district count, the "rule has no applicability to this case." Central Florida Regional Hospital v. Daytona Beach General Hospital et al., 475 So.2d 974, 975
(Fla. 1st DCA 1985). Even so, under the foregoing decision an applicant must still satisfy all statutory criteria. Therefore, statutory considerations such as accessibility and utilization must still be satisfied even though more precise standards in Rule 10-5.11(23) dealing with the same subjects need not be considered.
Subsection 381.494(6)(c)1., Florida Statutes (Supp. 1984), requires consideration of whether a proposal is consistent with the State Health Plan and District Health Plan. Although the entire text of the Plans was not offered in evidence, relevant excerpts were introduced by Humana. The evidence establishes that the proposal to transfer 100 beds to the Port Orange area will be contrary to Objectives 6.1 and 8.1 of the State Plan in that the state goals of retiring unused beds and increasing utilization rates will not be met. On the other hand, the District Health Plan policies are irrelevant to the factual situation herein since they pertain only to applicants who intend to add new beds to the District count.
Subsection 381.494(6)(c)2., Florida Statutes (Supp. 1984), requires consideration of the availability, quality of care, accessibility, efficiency, extent of utilization, and adequacy of like and existing health care services in the service district in which an applicant proposes to establish a new facility. Normally, the successful applicant demonstrates that like and existing facilities in the service district are either inaccessible, too fully utilized to accommodate the growing patient demand for health care services, or do not provide the necessary array of services required by the public. When this is shown, it generally follows that the existing services are also inadequate, unavailable or inappropriate, and that a new facility is warranted. In this proceeding, the evidence clearly establishes that existing health care facilities in the Daytona Beach area are reasonably available and accessible to Port Orange residents. Moreover, they are now underutilized as evidenced by current utilization rates of 67 percent, 47 percent and 45 percent at Halifax, Fish of New Smyrna and Humana, respectively, which rates are far below the state recommended standard. Finally, the existing facilities now provide a full array of services in a quality manner as required by the public. Therefore, it is concluded that the statutory criteria in Subsection 381.494(6)(c)2. have not been met.
Subsection 381.494(6)(c)9., Florida Statutes (Supp. 1984), requires consideration of the "immediate and long-term financial feasibility of the proposal." Here the evidence reveals a number of infirmities in Halifax's projections regarding the feasibility of the project, including unrealistic occupancy levels during the first two years of operation, and an understatement of deductions from gross patient revenues. Had more realistic projections been used, the project would show substantial operating losses in 1989 and 1990. Given these losses, it is concluded that the project's immediate and long- term feasibility has not been established.
Subsection 381.494(6)(c)12., Florida Statutes (Supp. 1984), requires that the agency consider whether the project will promote positive competition and foster cost-effectiveness in the delivery of health care services. The evidence establishes that significant capital costs will be created by Halifax building a second facility less than eight miles from its existing facility. These costs will have a negative impact on its ability to delivery health care services in a cost-effective manner. Further, the evidence shows that the new facility will not have positive effects on competition. Indeed, a new
competitor will substantially and adversely affect Humana and other health care providers in the Daytona area, and impair their ability to promote cost- effectiveness and quality of care. Therefore, it is concluded that this criterion has not been met.
Finally, Subsection 381.494(6)(c)13., Florida Statutes (Supp. 1984), requires consideration of the "costs and methods of proposed construction" of the project, and the "availability of alternatives costly or more effective methods of construction." In the case at bar, the record reveals that the equipment costs are understated by at least $1.4 million and that the total project cost will be in the range of at least $27 million for a 100-bed satellite hospital. Because satellite hospitals are generally less-expensive than freestanding facilities, and Halifax's capital expenditure is considerably higher than the norm, it is concluded that a $27 million capital expenditure is unreasonable, and is not justified for the sole purpose of improving accessibility for Port Orange residents. Therefore, the requirements of this criterion have not been met.
The criteria set forth in Subsection 381.494(6)(d), Florida Statutes (Supp. 1984), are applicable only "[i]n cases of capital expenditure proposals for the provision of new health services to inpatients." Since Halifax does not intend to offer new impatient health services, but only to transfer existing services and beds to the Port Orange area through the construction of a new facility, these criteria do not apply. Therefore, they have not been addressed in this Recommended Order.
The appropriate weight to be given to each criterion in Subsection 381.494(6)(c) is not fixed, but rather must vary on a case-by-case basis, depending upon the facts of each case, Collier Medical Center v. Department of Health and Rehabilitative Services, 462 So.2d 83, 84 (Fla. 1st DCA 1985). In light of petitioner's failure to satisfy the criteria in Subsections 381.494(6)(c)1., 2., 9., 12., and 13., Florida Statutes (Supp. 1984), which bear upon the financial feasibility and cost-effectiveness of the project, its consistency with the State Health Plan the effect on competitors, and the adequacy, accessibility, availability and quality of care of like and existing facilities, it is concluded the application must be denied.
Based on the foregoing findings of fact and conclusions of lawn it is RECOMMENDED that the application of Halifax Hospital Medical Center for a
certificate of need to construct and operate a 100-bed satellite hospital in Port Orange, Florida be DENIED.
DONE and ORDERED this 4th day of December, 1985, in Tallahassee, Florida.
DONALD R. ALEXANDER
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 4th day of December, 1985.
ENDNOTES
1/ Petitioner filed a proposed order containing a single section of unnumbered paragraphs entitled "Conclusions of Law and Fact." To the extent that section contains proposed findings of fact, a ruling on each such finding has been made in the Appendix to this Order.
2/ The 1985 District Plan now appears to be effective, but that fact is not of record, and no party has so advised the undersigned.
3/ At final hearing, service area statistics were deemed to be unreliable by virtue of their hearsay nature, and because they were not BERB projections.
They were also deemed inadmissible because Rule 10-5.11(23) required subdistrict and district population figures rather than service area statistics. Since the rule has no application to this case, as explained in the Conclusions of Law portion of this Recommended Order, the prior ruling is receded from to this extent. However, the service area numbers are still deemed to be unreliable because of their hearsay nature.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 84-1141
Petitioner:
Under the portion of conclusions of Law and Fact entitled "Need," all proposed findings of fact relating to the District Health Plan were considered unnecessary to an appropriate disposition of this Recommended Order since the Plan has no application to petitioner's case. Proposed findings relative to population growth were rejected to the extent they were considered hearsay and unreliable in mature.
Proposed findings of fact in the Availability portion of the proposed order relating to travel time were accepted to the extent they did not conflict with the testimony and exhibits of witness Peters. Proposed findings relative to care of indigents were rejected as being irrelevant to this matter.
Proposed findings of fact in the Quality of Care, Efficiency and Inpatient Care and Services portions of the proposed order have been essentially covered in this Recommended Order.
Proposed findings of fact in the Accessibility and Extent of Utilization portions of the proposed order have been rejected as being contrary to the weight of the evidence.
Proposed findings of fact in paragraph 1 of the Ability of Applicant to Provide Quality Care portion of the proposed order have been essentially covered in this Recommended Order. Those findings in paragraph 2 have been rejected as being contrary to the weight of the evidence.
Proposed findings of fact in the Economies and Improvements in Service That Will be Derived From Operation of Shared Health Care Services portion of the proposed order have been covered in this Recommended Order except that part which relates to cost savings generated by equipment and shared staffing. Those have been rejected as being contrary to the weight of the evidence.
Proposed findings of fact in the Financial Feasibility portion of the proposed order relating to the immediate and long- term feasibility of the project have been rejected as being contrary to the weight of the evidence.
Proposed findings relating to the bond financing have been rejected as being either unnecessary for deciding this matter or as being irrelevant.
Proposed findings of fact in the Costs and Methods of Proposed Construction portion of the proposed order have been rejected as being contrary to the weight of the evidence in that such costs are unreasonable and deviate from the norm.
Intervenor/Respondent:
1. Proposed findings of fact 1-4, 6-11, 16-21, 26-42, 50-56, 58-67 and 70-
87 have been substantially covered in this Recommended Order.
Proposed findings of fact 5, 43-49, 57, 68 and 69 have been rejected as being unnecessary for an appropriate disposition of this case.
Proposed findings of fact 12-15 and 22-25 have been rejected as being irrelevant.
COPIES FURNISHED:
Harold C. Hubka, Esquire Marvin Samuels, Esquire
P. O. Box 5488
Daytona Beach, Florida 32018
R. S. Power, Esquire Bldg. One, Room 407 1323 Winewood Blvd.
Tallahassee, Florida 32301
John H. French, Jr., Esquire James C. Hauser, Esquire
P. O. Box 1876 Tallahassee, Florida 32302
| Issue Date | Proceedings |
|---|---|
| Dec. 04, 1985 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 19, 1986 | Agency Final Order | |
| Dec. 04, 1985 | Recommended Order | Certificate of Need (CON) application to move 100 beds from 545-bed facility to new facility 8 miles away denied for not meeting feasibility requirements in statute. |
