STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
VENICE HOSPITAL, INC., )
)
Petitioner, )
)
vs. ) Case No. 85-0045
)
DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, and ) MANASOTA OSTEOPATHIC GENERAL ) HOSPITAL, INC., )
)
Respondents. )
) HCA OF FLORIDA, INC., d/b/a ) DOCTORS HOSPITAL OF SARASOTA, )
)
Petitioner, )
)
vs. ) Case No. 85-0047
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
)
and )
) MANASOTA OSTEOPATHIC GENERAL ) GENERAL HOSPITAL, INC., and ) ENGLEWOOD COMMUNITY HOSPITAL, )
)
Intervenors. )
) DOCTORS' OSTEOPATHIC MEDICAL ) CENTER, INC. d/b/a GULF COAST ) HOSPITAL INC., )
)
Petitioner, )
)
vs. ) Case No. 85-0050
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
)
SARASOTA COUNTY PUBLIC HOSPITAL ) BOARD d/b/a MEMORIAL HOSPITAL, ) SARASOTA, )
)
Petitioner, )
)
vs. ) Case No 85-0051
)
DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) MANASOTA OSTEOPATHIC GENERAL ) HOSPITAL, INC., )
)
Respondents. )
)
RECOMMENDED ORDER
Pursuant to notice, this cause came on for formal hearing on September 4-13, September 30 through October 4, and October 23- 25, 1985, in Sarasota, Florida and Tallahassee, Florida, before
Michael Ruff, duly designated Hearing Officer.
APPEARANCES
For Petitioner, Kenneth F. Hoffman, Esquire Venice Hospital: W. David Watkins, Esquire
OERTEL & HOFFMAN, P.A.
Post Office Box 6507 Tallahassee, Florida 32314-6507
For Petitioner, A. Lamar Matthews, Esquire Memorial Hospital, Theodore C. Eastmore, Esquire Sarasota: 1550 Ringling Boulevard
Sarasota, Florida 33578
and
Robert A. Weiss, Esquire Suite 101
118 North Gadsden Street Tallahassee, Florida 32301
For Respondent, Ken W. Davis, Esquire Manasota Osteopathic 210 East College Avenue General Hospital, Inc: Tallahassee, Florida 32301
and
William E. Williams, Esquire FULLER & JOHNSON, P.A.
111 North Calhoun Street Tallahassee, Florida 32301
For Respondent, Jay Adams, Esquire Department of Health Department of Health and and Rehabilitative Rehabilitative Services Services: Building One, Suite 406
1323 Winewood Boulevard
Tallahassee, Florida 32301
For Intervenor, E. G. Boone, Esquire
Englewood Community Robert T. Klingbeil, Jr., Esquire Hospital: Post Office Box 1596
Venice, Florida 34284
This cause concerns an application for a Certificate of Need by Manasota Osteopathic General Hospital, Inc. (Manasota), by which it seeks to construct and operate a 100-bed osteopathic acute-care hospital in Sarasota County, Florida in keeping with the provisions of Section 381.494(c) and (d), Florida Statutes.
Venice Hospital, Inc. (Venice), and Sarasota County Public Hospital Board d/b/a Memorial Hospital, Sarasota (Memorial), timely filed petitions for formal administrative hearing to contest the grant of a CON to Manasota. On February 4, 1985, Englewood Community Hospital, Inc. (Englewood), (ECH) was allowed to intervene.
Venice, Memorial and Englewood allege that they are acute care hospitals, having osteopathic staff physicians and treating osteopathic patients. They contend generally that a grant of Manasota's application is improper because there is no need for the proposed osteopathic hospital in Sarasota County, that there are less costly methods of providing the proposed health care services and that Manasota fails to meet the criteria of the above section and Rule 10-5.11, Florida Administrative Code.
They contend that a grant of the application would result in unnecessary duplication of services provided at their facilities and would result in decreased utilization with concomitant increase in cost to the consumers for such health care services, with an adverse impact on the viability of their operations in the particulars envisioned by the above statutory provisions and as found below.
On the last day prior to final hearing, Manasota filed a Motion for Summary Recommended Order alleging that Memorial, Venice and Englewood lack standing to object to the grant of the certificate of need, contending that they do not offer the same or similar health care services and thus were unaffected by the issuance of the certificate of need to Manasota under the provisions of Section 381.494(2), Florida Statutes and Rule 10- 5.02(20), Florida Administrative Code. The motion was heard on the first day of the hearing but, since some of the parties did not receive the motion until that day, ruling thereon was
reserved until those parties had an opportunity to respond. The ruling on the motion is made in the Conclusions of Law below.
The cause came on for hearing in which Manasota presented the testimony of the following witnesses: W. Gerald White; James Henry; Linda Usher; Marcelino Oliva, D.O.; Ellen J.Snyder, D.O. Robert J. Lewis, D.O.; Robert K. Kudelko, D.O.: J.David Lowery, D.O.; E. Lisa Lowery, D.O.; Randy Sucher; Harold Christopher Ward, D.O.; J. Allen Swedloff, D.O.; James Erick Taylor, D.O.; Arnold Melnick, D.O.; Thomas J. Konrad; James F. Blem, D.O.; Donald F. Blem, D.O.; Joseph Chirillo, D.O.; Thaddeus Jaroszewicz; J. Fred Miller, III, M.D.; Elton Scott, Ph.D; William J. Serow, Ph.D; Raymond McDermott, M.D.; and Kathleen Zambelli. Manasota offered and had received into evidence exhibits numbered 1-5; 15-17; 21-22; 25; 28; 30; 36; 44; 46-48;
69; and 91-100.
The Department of Health and Rehabilitative Services (HRS) presented the testimony of Elizabeth Dudek and offered one composite exhibit.
Venice called witnesses Norman L. Ross; Brady R. Justice, Jr.; William Bush; Gregory Shanika; Michael Richmond; Michael Jernigan; Armando Navarro; Henry Zaretsky, Ph.D.; and Michael L. Schwartz. Venice's exhibits numbered 1, 1A, 1B, 2, 3, 4 and 5 were received into evidence.
Englewood called witnesses John R. Gass; Robert L. Anderson; Thomas F. Porter; Robert Priselac; Charles Wilke; Jerry Grace; and Marvin Williams. Englewood's exhibits numbered 1-11 were received into evidence.
Memorial called witnesses Albert A. Nestor, D.O.; Dale Beechey; Donald R. Furci, D.O.; Merwin R. Lipman, D.O. and Richard A. Yonker, D.O. Memorial offered one exhibit which was admitted into evidence. Additionally, public witnesses Marie Grace, William Grace, Carl Kruger, Violet Long, Daniel Marazon and Lois Marazon testified.
At the conclusion of the hearing the parties ordered a transcript of the proceedings which was duly filed with the Hearing Officer. The parties were allowed to file proposed findings of fact and conclusions of law, concomitantly waiving the time requirements of Rule 28-5.402, Florida Administrative Code. After two stipulated extensions of time for submission of those pleadings, the proposed findings of fact and conclusions of law of all parties were timely filed. In conjunction with requesting an extended post-hearing briefing schedule the parties elected to waive the necessity of specific, separately referenced rulings on each proposed finding of fact, with the issues and
subject matter raised by each proposed finding of fact being treated without specific reference in the Recommended Order itself. Counsel for Englewood left the hearing room prior to adjournment and thus did not participate in the waiver decision on the day of hearing. Therefore, the Hearing Officer directed all parties to confer with each other, including Englewood, and to advise the Hearing Officer within seven days should any party indeed desire Specific rulings on its proposed findings of fact in an appendix to the Recommended Order. No party responded to that direction.
The issue to be resolved in this proceeding ultimately concerns whether Manasota's application for a 100 bed osteopathic teaching hospital be located in HRS District VIII and specifically, in Sarasota County, should be granted and, embodied within that general issue, whether the application and the project as reflected therein is in compliance with the criteria of Section 381.494(2) and (6)(c) and (d), Florida Statutes (1983).
FINDINGS OF FACT
Background
Manasota applied for a Certificate of Need to construct a 100-bed osteopathic acute care hospital in Sarasota County, (District VIII). Manasota did not specifically designate a site in its application and indeed has not obtained a site for its proposed hospital as yet. It intends to locate its facility in the southern part of Sarasota County, near the interchange of I-
75 and Jacaranda Boulevard. There are three existing acute care hospitals serving south Sarasota County. Memorial, which is a 788-bed acute care hospital located in the southerly portion of the City of Sarasota; Venice, which is a 312-bed acute care hospital located in Venice; and Englewood Community Hospital (ECH) which is a brand new 100-bed acute care hospital located in Englewood, also in southern Sarasota County, immediately south of the City of Venice. ECH opened its facility in early November, 1985. The proposed location of the Applicant Manasota is in the vicinity of the southerly environs of Venice, and is within the primary service areas of these existing hospitals.
The Parties
Venice Hospital is a not-for-profit, general, acute care hospital. It has 312 licensed beds, of which 6 are OB beds and
32 are intensive care beds. In fiscal year 1983, it enjoyed an 89.5% average annual occupancy. That occupancy declined to 83.5% in 1984 and the next fiscal year (1985) it dropped to 71%. The hospital's occupancy rate in fiscal year 1986 will decline to
approximately 55.8%. That figure includes consideration of the impact of the November, 1985 opening of the Englewood Hospital but not the projected impact of Manasota. Venice's primary service area is the southerly portion of Sarasota County and northern Charlotte County, generally co-extensive with that proposed by Manasota.
Memorial is a 788-bed, publicly owned, acute care hospital. Its primary service area is Sarasota County. Its publicly elected board requires it to maintain at least a 2% operating margin (profit) in order to maintain sufficient working capital and a sufficiently favorable bond rating so that its debt financing can be obtained at optimum cost. In 1984, Memorial obtained a 6.5% operating margin, but in 1985, that margin declined to approximately 2%, due to reduced utilization.
Due to declines in utilization, only 590 of its licensed beds were in service in October, 1985. Memorial's total patient days for 1985 were the lowest it has experienced since 1973. Memorial is a full-service acute care hospital, offering services including obstetrics, psychiatric services, pediatrics, emergency care, cardiac catheterization and open heart surgery, neo-natal intensive care and ambulatory surgery.
ECH is a 100-bed, full-service, acute care hospital located in Englewood, immediately south of Venice, in Sarasota County. It will open in November, 1985, and thus has not yet had an opportunity to obtain patients, adequate utilization, and a favorable operating experience. Its primary service area is southern Sarasota County and northern Charlotte County, substantially the same as that of Venice and that proposed by the Applicant. ECH has osteopathic physicians on its staff and provides manipulative therapy to patients of osteopathic physicians, as do the other two existing hospitals. The chief of ECH's medical staff is an osteopath.
Manasota seeks approval for construction of a 100-bed osteopathic teaching hospital in southern Sarasota County in the immediate environs of Venice. The hospital would provide medical surgical services, ICU/CCU, a 24-hour physician staffed emergency room, outpatient surgery, a pharmacy, clinical laboratory, x-ray and other surgical and diagnostic services such as radiography, cardio-pulmonary and ultra-sonography. Manasota projects opening the facility in 1988 with 92 medical surgical beds and 8 intensive care beds.
The hospital would be owned by Manasota, but will be operated and managed as a subsidiary of AmeriHealth, Inc., a Florida corporation. Ninety-two per cent of Manasota's stock has been purchased by AmeriHealth Systems, Inc., which is a wholly
owned subsidiary of AmeriHealth Holdings, Inc., which in turn is a wholly-owned subsidiary of AmeriHealth, Inc. AmeriHealth Inc. is a publicly-held, Florida corporation.
Manasota proposes to treat patients in accordance with the principles of osteopathy, supported by osteopathic specialists. Manasota will have an open medical staff, meaning it will have allopathic and osteopathic physicians on its staff. It maintains that management and control of the facility will be by osteopaths or those "sympathetic" to the osteopathic school of medicine. Although two of the four present members of Manasota's Board of Directors are osteopathic physicians, the chief executive officer of AmeriHealth, Inc., Mr. White established that in the near future that parent entity will nominate a new board of directors.
Manasota proposes to affiliate with the Southeastern College of Osteopathic Medicine in Miami as an osteopathic teaching hospital and seek accreditation by the American Osteopathic Association. The facility would be located adjacent to or east of I-75 in southern Sarasota County, a minimum distance of five miles from existing hospitals. The primary service area would be southern Sarasota County (Census Tracts 20- 27). The secondary service area would include northern Sarasota County and northern Charlotte County, as well as the remainder of HRS District VIII, purportedly within a 30-60 minute driving time. In this connection, however, it is noted that osteopathic acute care hospitals have been held to be regional in nature and Manasota's health planning witness, Mr. Konrad, established that a two-hour driving time access standard is appropriate for osteopathic hospitals. District VIII is not, by rule, divided into subdistricts for health planning and CON review purposes. See, South Dade Osteopathic Medical Center v. Department of Health and Rehabilitative Services, DOAH Case No. 84-0750, Final Order at 7 FALR 5681 (November 14, 1985); Community Hospital of Collier, Inc. v. Department of Health and Rehabilitative Services, et al. and Naples Community Hospital v. Department of Health and Rehabilitative Services, et al., DOAH Case Nos. 84- 0744, 84-0907 and 84-0909 (consolidated), (Recommended Order August 16, 1985), p. 39. Although there are no operating osteopathic acute care hospitals in District VIII at the time of hearing, Gulf Coast Hospital has been approved by Final Order for a CON for 60 osteopathic beds and will be located approximately
68 miles and less than two hours driving time from the proposed
location of the Manasota facility. Demoqraphics of the Proposed Service Area
Sarasota County ranks second in the state in the percentage of its population which is 65 years of age or older.
Projections show that by 1990 approximately 31% of its population will be 65 years of age or older, and 14% of the population will be 75 years of age or older. It will, at that time, rank first in the state as to the percentage of its population in excess of
74 years of age.
Between 1980 and 1985, Sarasota County, which comprises most of the applicant's primary service area, increased in population approximately 40,000 persons. The county is expected to grow by an additional 43,000 persons between 1985 and 1990. Southern Sarasota County (above census tracts), between 1980 and 1985, grew by approximately 28,000 persons. Between 1985 and 1990, the southern portion of the county, will increase by an additional 33,000 persons, for growth rates of 33% and 32% respectively.
Between 1980 and 1985, the population of southern Sarasota County in the 65 to 74 age group grew by about 5,000 persons, as did the population of the 75 and older age group. Between 1985 and 1990 it is projected that Sarasota County residents between the ages of 65 and 74 will increase by 5,700 persons and those in the county age 75 and older will increase by approximately 6,000 persons.
Northern Charlotte County, adjacent to the southern Sarasota County primary service area of the applicant, increased by approximately 16,000 persons between 1980 and 1985. This same area is projected to increase by an additional 17,000 persons between 1985 and 1990. Approximately 7,000 of those additional persons will be 65 years of age or older.
Much of the population growth in Sarasota County is due to in-migration from other areas. Approximately 43% of the immigrants to Sarasota County come from the midwestern area of the United States. This is somewhat significant because the greatest percentage of osteopathic medical schools and osteopathic physicians and acute care facilities are located in what is generally described as the midwestern United States. It may be expected that elderly immigrants from those areas might have somewhat more of a predisposition to use osteopathic acute care facilities and physicians in Sarasota County. It has not been proven, however, what percentage of the population growth of Sarasota County is attributable to in-migration from all areas of the state and nation.
It has thus been demonstrated that the primary service area of the applicant has experienced significant population growth since 1980, but that that population growth will continue at the same or a lesser rate between 1985 and the horizon year of 1990. Indeed, it was established that the population growth rate
of elderly persons age 65 and older, who tend to use acute care hospital services more intensively than other age cohorts of the population, will actually decline between the years 1985 and 1990. It has also been proven that between 1980 and 1985 (especially since 1983), the utilization rate for Sarasota County hospitals and District VIII hospitals as a whole, has declined markedly and will continue to do so through 1990, in spite of and counter to the population growth. This is a result of such factors as the advent of "DRG" methods of medic re reimbursement, professional review organizations and consequent shifts in the provision of many health care services to an "outpatient" basis. These changes in the Medicare reimbursement system, of course, are directly related to the segment of the population aged 65 and older, which provide the majority of all acute care hospital admissions from the general population. Because the population growth rate will decline for the age 65 and older age group, the trend of declining occupancy and utilization in the face of population growth will continue through l990
The Need for the Facilities
Section 381.494(6)(c)(1), Florida Statutes.
HRS has not adopted, by rule, a bed need methodology for determining need for osteopathic acute care hospitals. The normal bed need determination methodology embodied in Rule 10- 5.11(23), Florida Administrative Code, is not used for determination of bed need and need for osteopathic facilities because Section 381.494(2), Florida Statutes, requires that need for osteopathic facilities be determined separately from general acute care facilities. South Dade Osteopathic, supra at 5684. Thus, osteopathic bed need must be determined by development of agency policy in light of the general statutory criteria contained in Section 381.494(2), Florida Statutes, and Subsection
(6) of that provision. HRS policy has been to consider whether the proposed facility will be osteopathic; whether a demonstrated need exists for additional osteopathic acute care beds; and whether similar services or facilities exist and are available in the area where the proposed facility is to be located. The court in Gulf Coast Hospital, Inc. v. Department of Health and Rehabilitative Services, 424 So.2d 86, 90 (Fla. 1st DCA 1982) defined "osteopathic facilities" as those maintained for the purpose of:
. the cure and treatment of patients in accordance with the principles of osteopathy, the teaching and the study of osteopathic medicine, and the association in practice of doctors of osteopathy, including osteopathic specialists, with support from staff personnel suitably trained in the principles
and philosophy of osteopathy. The management and control of the facility so as to actively further all of the above activities rather than to merely tolerate them, must be in the hands of osteopaths or those sympathetic to that school of medicine.
Manasota has proposed in its application to construct and operate a 100-bed osteopathic acute care facility with patients being treated in accordance with the principles of osteopathy in a facility meeting the above definition. The preponderant evidence reveals however, that Manasota is not truly an "osteopathic" applicant.
AmeriHealth's president, Mr. White, established that AmeriHealth would soon be appointing its own board of directors for Manasota, with no assurance given that osteopathic membership would be retained. None of the officers, directors or shareholders of AmeriHealth have any experience in ownership or operation of osteopathic facilities. Mr. White established that the proposed hospital would have an open staff, but it was not shown what percentage of the staff would be osteopaths and what percentage would be M.D.'s. Mr. White intends to staff the hospital from the existing medical community in Sarasota County. There would be no recruitment of physicians from outside that area unless it became impossible to staff the hospital with Sarasota County doctors. Mr. White would seek advice from "the medical community here" in establishing needed specialties and credentials.
AmeriHealth intends to assure the viability of the proposed hospital by following the practice it employed at its Richmond Hospital of obtaining physicians in the community as investors in the hospital. It was not shown, however, what percentage of the investor-physicians the Applicant seeks would be D.O.'s and what percentage would be M.D.'s. In this connection, Dr. Fred Miller, M.D., testifying for Manasota, established that the promoters of the project intend that the staff physicians would be existing physicians in the Venice area. There are six or seven D.O.'s in the Venice area, and approximately 120 M.D.'s. In this regard, Dr. Norman Ross attended a meeting at Dr. Miller's office concerning organization of Manasota. All the doctors at the meeting were M.D.'s, except for the two D.O.'s who had an ownership interest in Manasota. Mr. White assured the physicians attending the meeting that the source of physicians for the new hospital would be physicians who had already developed practices in the Venice area who could "swing their admissions" to the new hospital. Dr. Ross was also assured that the vast majority of the staff physicians would be M.D.'s. Dr. Navarro attended this or a similar meeting and, was
assured by a promoter and owner of Manasota that there would not be a heavy influx of osteopaths to town because they intended to get investor-physicians in the community to staff and support the hospital. When Dr. Navarro questioned Dr. Oliva, D.O., one of the directors of Manasota, concerning how he would build an osteopathic hospital without osteopaths, Dr. Oliva explained that "the rules did not require them to have a majority of osteopaths."
The intent to staff the hospital largely with M.D.'s is borne out by the fact that the promoters of the hospital offered limited partnerships in the facility to Venice area M.D.'s first. Since Manasota's own witness, Dr. Snyder, D.O., showed that it would take 50 to 75 physicians to staff such a hospital, and since Manasota's principals see no need to recruit physicians from other areas, and have primarily sought support from M.D.'s who make up 95% of the physician population in the county, it is quite unlikely that the project would actually operate as an osteopathic hospital. In this regard, the four Sarasota osteopaths testifying for existing hospitals would definitely not use the proposed facility and feel it is not needed.
The preponderant evidence thus establishes that the vast majority of staff physicians will be M.D.'s. The proposed facility has been promoted primarily to M.D.'s and the majority of Sarasota County D.O.'s testifying will not use the facility. Thus, Manasota has not demonstrated it is controlled or in the hands of osteopaths or those sympathetic to that school of medicine. It has not shown it can meet the definition of an osteopathic facility even as described by some of its own medical experts. Dr. Oliva, Dr. Lewis, Dr. Kudelko and Dr. David Lowery, (D.O.'s) opined that the majority of the medical staff and department heads would have to be osteopaths for it to truly be an osteopathic facility. This will clearly not be the case at Manasota.
Manasota proposes to be accredited by the American Osteopathic Association (AOA), but also proposes to be accredited by the association which accredits allopathic facilities. The AOA accreditation manual requires osteopathic hospitals to identify themselves as such on buildings and letterheads, unless they are of mixed staff. Manasota proposes a mixed M.D. and D.O. staff. Likewise, nothing in the AOA accreditation requirements mandates any particular composition of the governing board or the medical staff. The Applicant has thus not proven that it will meet any record definition of an "osteopathic" hospital, nor that it will operate as such.
Assuming arguendo that it would be osteopathic, the question of whether a demonstrated need exists for additional
osteopathic acute care beds and an osteopathic acute care facility and the question of whether similar services or facilities exist and are available in the area of the proposed facility must be addressed.
In this connection, although there are no osteopathic facilities currently operating in District VIII, Gulf Coast Osteopathic Hospital has had its Certificate of Need approved by final order of HRS for 60 beds with its request for 120 beds being currently on appeal. It will be located in Lee County, some 68 miles from the approximate location of the applicant. Mr. Konrad, having established that osteopathic hospitals are regional in nature, and that a two-hour travel time more or less is appropriate as a standard for access to an osteopathic facility, the service areas of Gulf Coast and Manasota will overlap. It is therefore found that an osteopathic acute care facility is legally in existence and will be operationally available for osteopathic physicians and patients in District VIII and Sarasota County in the near future.
Over-bedded, under-utilized acute care facilities are available represented by existing hospitals whose need for more patients is discussed elsewhere in this Recommended Order. It is undisputed amongst the parties that there is no difference between the way allopathic and osteopathic physicians and hospitals practice in terms of the health care services rendered their patients, except for the emphasis, in the osteopathic realm, of manipulation therapy for patients and the increased emphasis on a holistic view of patients by osteopathic physicians in terms of determining a proper treatment regimen. In any event, acute care patients can be fungibly treated in osteopathic or allopathic hospitals by either osteopathic or allopathic physicians. It is thus found that the services rendered by the existing allopathic facilities are like and similar services to those proposed by the applicant.
There was no testimony establishing that patients wishing osteopathic care from osteopathic physicians are not receiving it. Indeed, Drs. Furci and Nestor, osteopathic physicians in Sarasota, and Dr. Chirillo, who practice in southern Sarasota County, established that doctors are currently able to treat their patients with adequate quality of care, in an osteopathic manner, in existing hospitals. Sarasota County has a significant population of 20 osteopathic physicians. Their patients desiring osteopathic acute care services are currently receiving them despite the lack of an operating osteopathic hospital. Indeed, many of those physicians could accept more patients in their practices. Some close their offices at noon due to lack of patients. The number of osteopathic physicians per 1,000 persons in the District VIII population, when compared
to the state and national averages for osteopaths per 1,000 population, reveals that there is no shortage of osteopathic physicians in District VIII.
A number of the osteopaths practicing in Sarasota County testified on behalf of Manasota. Doctors James and Donald Blem and Dr. Chirillo are osteopaths practicing in southern Sarasota County and northern Charlotte County. Dr. James Them supports the application in that he would prefer to practice in an osteopathic hospital with osteopathic specialists on staff with whom he could consult. He prefers the continuity of care available if he had a situation where he could refer his patients upon admission to an osteopathic specialist, rather than having to refer patients to allopathic specialists. He also supports the teaching aspect of the Manasota application. Dr. Chirillo supported the application of Manasota essentially because it would be a teaching hospital and he feels that there is a need to train osteopathic physicians, but acknowledged that no additional acute care beds are needed in Sarasota County and District VIII. Dr. Donald Them supported the hospital's application for similar reasons. None of the three doctors would transfer all their patient admissions to the Manasota Hospital, should it be built, however. Indeed, Dr. James Them did not feel some of his patients would want to go to the Manasota facility because of the travel distances involved. Drs. Them and Chirillo are on the staff of Venice Hospital, and have no difficulty in getting their patients admitted to that hospital. They have full privileges and can practice osteopathic medicine there, including manipulation therapy. They know of no patients in Sarasota County going without acute care services because there is not an osteopathic hospital in the county. The osteopathic physicians in the county have no trouble getting staff privileges at existing facilities and each is generally practicing as he chooses without restriction, other than specialization. Osteopaths will practice with allopathic physicians at Englewood Community Hospital. Three osteopaths are on its charter Medical staff. One of these was chosen as the president elect of the ECH medical staff. The osteopaths at that facility are being provided with any needed equipment.
Drs. Furci, Bipman, Yonkers, and Nestor, osteopaths testifying for the existing hospitals, all feel that they can treat their patients in a proper osteopathic manner. All are on the staffs of Doctors or Memorial Hospitals in Sarasota. They believe osteopaths in the area have enough acute care beds for their patients and there are always empty beds. All found no need for any additional beds, osteopathic or allopathic. In the words of Dr. Mervin Lipman, D.O., of Sarasota, "we don't need any more hospital beds period. We are up to our ears in hospital beds today."
In short, the low utilization of acute care hospitals in the district and the county, among other factors, reveals that there are available, accessible mixed staff hospitals to serve the needs of patients of allopathic or osteopathic doctors.
Manasota's proposal is, in part, consistent with the 1985-87 state health plan. That plan states at Volume 2, Pages
22 and 23:
in short, the dynamic nature of health care calls for a planning approach which attends to overall development patterns rather than viewing specific health problems in isolation.
Three interrelated policy guides were adopted as part of the 1985-87 State Health Plan:
A holistic concept of health is espoused which views man's well-being as a function of the complementary interaction of mind, body, and environment. The holistic concept of health places emphasis on promotion of well- being and prevention of illness.
The resources available for organized health care activities are limited and must, therefore, be utilized to their greatest effect.
Given a holistic concept of health and finite health resources, priority should be placed on increasing resources for effective health promotion and primary care while containing total health care costs.
In that Manasota proposes to be an osteopathic teaching hospital and the osteopathic philosophy comports with the holistic concept of health espoused above, the Manasota proposal is consistent in part with the 1985-87 State Health Plan. Neither the state nor the District VIII Health Plans specifically address need for osteopathic beds and for osteopathic hospitals and services, but rather treat all acute care services, osteopathic or allopathic, together. The State Health Plan emphasizes the growing problem and societal expense caused by excess acute care beds in the state, and states that "the combined effect of ambulatory surgery, HMO's, DRG's and other innovations could reduce acute fewer acute care beds will be needed state-wide than existed in 1984.
Mr. Konrad, Manasota's own expert health planning witness, conceded that that projection may be accurate and would apply equally to allopathic and osteopathic facilities. Goal no.
3 at page 83 of the state health plan states the policy that efficient utilization of acute care services should be promoted. Objective 3.1 of that goal expresses the intent that all non federal hospitals, considered together, should attain an average occupancy rate of at least 80 per cent by 1989. District VIII currently has a district-wide occupancy rate for the last six months of 1985 of only 63.9%. Thus, approval of an additional acute care hospital would not conform with objective 3.1 of the state health plan, and, given the declining occupancy and use rates, even if the Manasota application were not approved, District VIII will not be in compliance with this objective by 1989. Due to the continuing decrease in patient days, decrease in average length of stay and decrease in admissions projected to 1989, the occupancy rate for 1989 for District VIII is likely to be less than 69%.
The Department of Health and Rehabilitative Services (HRS) has not adopted a rule setting forth an osteopathic acute care bed need methodology. The policy of HRS, in this case at least, is to use the so-called "Wellington Methodology" in determining osteopathic bed need. Ms. Dudek, the sole HRS witness, collected data for this methodology from a number of·a
33 sources. She used data concerning numbers of admissions by osteopathic physicians from July, 1984 through June, 1985, and the total number of patient days by osteopathic physicians from the local health councils in Broward, Dade, Duval, Volusia, Hillsborough, Orange and Pinellas Counties. Those counties were chosen because they contain osteopathic hospitals. Ms. Dudek considers such data important when reviewing applications for acute care osteopathic beds in areas like District VIII where no such facilities exist. The department ascertained the number of licensed osteopathic physicians residing in District VIII from the Department of Professional Regulation, and used the latest population projection issued by the Governor's Office. This data was used in three formulas, the results of which were then averaged to determine the department's position as to osteopathic acute care bed need for District VIII in the horizon year of 1990. HRS used these three formulas because, by Ms. Dudek's admission, it felt no single formula was best.
The first of the formulas is population based. It multiplies the number of osteopathic admissions to hospitals per 1,000 population, multiplied times the projected 1990 population for District VIII. It then multiplies that number by the average length of stay per osteopathic admission and divides the result by 365 days, further dividing that result by 80 per cent utilization to project the total number of osteopathic beds
supposedly needed in 1990. Shown mathematically, that formula is as follows: [8.6 x (907, 804/1,000) 6.9]/[365 x .80] = 184 beds.
The second formula is termed "physician based" and multiplies the admission rate per osteopathic physician by the number of osteopathic physicians licensed in District VIII. It then multiplies that number by the average length of stay per admission and divides the result by 365 days, once again divided by 80% utilization, to project the number of osteopathic beds putatively needed in 1990. That formula is depicted mathematically as follows: [53.1 x 67 x 6.9]/[365 x .80] = 84 beds.
The third formula, also physician based, multiplies the number of osteopathic physicians in District VIII times the number of patient days per osteopathic physician (taken from the counties from which data was collected, not District VIII), divides the resulting number by 365 days; and then multiplies that by 80% utilization to project the number of beds needed in 1990. That formula is depicted mathematically as follows: [67 x369.2]/[365 x .80] = 85 beds.
The Department averaged the results of these three formulas to arrive at its position that there is a gross osteopathic acute care bed need for 1990 of 118 beds. It then subtracts the 60 beds already approved for Gulf Coast Hospital, by Final Order, for a net need of 58 osteopathic beds.
Formulas 2 and 3 above are essentially identical in that they are composed of the same variables and produce the same effective result, absent rounding of numbers. It is thus apparent that it is not truly valid to include both formulas 2 and 3 in the averaging calculation since they contain the same information. They would improperly weight the result (and HRS' position) in favor of the physician-based data. This is especially true in light of the fact that HRS concedes itself that no single formula used is more accurate than the other. If the results of the population based formula number 1 is averaged with only one of the other methods, the result is a gross osteopathic bed need for District VIII of 134 beds for 1990. When the 60 beds already approved for Gulf Coast Hospital are subtracted from this total, a net osteopathic bed need for 1990 of 74 beds results.
Ms. Dudek acknowledged that, in reaching the agency's position she espoused at hearing, she had not considered the other applicable statutory criteria, but merely employed her "need methodology" to determine bed need results. She acknowledged however, that her data itself showed that admissions- at osteopathic facilities in the counties she
surveyed were declining. Further, in employing her formula she did not determine how many physicians were available and would actually use the facility in the Sarasota County service area, nor how many of their osteopathic patients would be admitted to existing hospitals as opposed to the Applicant' s. Her formula assumed that the osteopaths would send all their patients to an osteopathic facility in District VIII. Indeed, a number of the physicians who would seek to become staff numbers at Manasota also testified that they would not necessarily refer all their patient admissions to that facility. The D.O. specialists who expressed a desire to become staff members would admit few patients because they would not have primary care practices.
The evidence establishes that osteopaths as close as the City of Sarasota would not seek to use this facility. It is thus illogical to assume that physicians further away in District VIII would attempt to use it. Ms. Dudek also apparently assumed that the data regarding admissions per osteopathic physician and per one-thousand population obtained from other areas of the state would automatically apply in the service area involved in this application. There was no proof that that would be the case. Further, her formulas take into account the optimal 80% occupancy rate which the record clearly reflects does not prevail in District VIII. The average occupancy for District VIII acute care facilities is substantially less than that and will decline through 1990.
In short, there is no basis in fact to support some of the HRS assumptions with regard to its bed need methodology since some of those assumptions were not shown to apply to District VIII and since it did not include in its assumptions certain data regarding osteopathic admissions which was available for District
VIII. Since its formula assumptions are thus flawed and since HRS did not evaluate the remaining statutory criteria, its conclusion that there should be approval of a 60-bed osteopathic hospital (or any other number of beds) is rejected.
Testifying on behalf of Manasota, Mr. Thomas Konrad, an expert in health planning, opined that a need exists for the Manasota project. Mr. Konrad believes there is no acceptable mathematical need calculation for osteopathic beds, but feels it reasonable that the district, with two large population centers in Lee County and Sarasota Counties, could support two osteopathic hospitals. He based this on his general proposition that osteopathic acute care facilities should be placed in populous areas with high acute care utilization rates based upon the age characteristics of the population. Sarasota has a relatively large population base and will be the 14th most populous county in the state in 1990, with a large percentage of
elderly persons who utilize acute care services at a higher rate than the general population.
Mr. Konrad performed a "reality check" to test the efficacy of his position by calculating the osteopathic acute care bed to population ratios for the populous counties in which osteopathic hospitals are located, which have similar demographic characteristics to Sarasota County. His analysis showed that the state-wide osteopathic hospital bed to population ratio is .313 beds per 1,000 population. If the 100-bed Manasota facility were approved, the ratio for Sarasota County would be .351 beds per 1,000 population. Mr. Konrad acknowledged that he has never before employed the osteopathic bed to population test used in this case. The test contains a fallacy in that Mr. Konrad did not adjust the bed to population ratio by any occupancy standard, but rather his approach necessarily embodies the assumption that either the beds are needed in those counties he surveyed, merely because they are in existence or approved, or alternatively, he failed to consider the occupancy rates in those counties vis-a- vis the present or projected occupancy rates in Sarasota County and District VIII. It is apparent from his testimony that he did not take into account the recent occupancy rates and trends for osteopathic hospitals in the counties included in his analysis. In fact, the osteopathic hospitals in the surveyed counties experienced a collective occupancy rate of approximately 43 per cent, rather than the optimal 80%, in 1984, which represented a 10% decrease since 1982. Between 1983 and 1985 the patient days per osteopathic physician in those counties decreased by almost 28%. The test used by Mr. Konrad does not present a true picture of need for District VIII since it does not take into account whether the figures upon which it is based represent excess osteopathic bed capacity and does not take into account the utilization rates in those counties, much less the presently existing and projected utilization rate for Sarasota County and District VIII as that might relate to an appropriate bed to population rates.
The utilization rate at Gulf Coast is unknown because it has not had an opportunity to get into operation and the utilization rate at the allopathic hospitals which are like, existing facilities and services, is substantially lower than 80% and declining. Manasota will admittedly compete for the same declining patient day pool with those existing allopathic facilities. Thus, Mr. Konrad's general opinion that the two populous centers of District VIII involved could support two minimum-sized osteopathic hospitals, as tested by his osteopathic bed to population ratio method of analysis, was not established to be a valid test for osteopathic acute care bed need for District VIII and Sarasota County.
In light of this and in consideration of the other above findings, there has been shown to be no need for additional osteopathic (or other) acute care beds or facilities in Sarasota County or District VIII.
Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Facilities in the District
There presently are no acute care osteopathic hospitals operating in District VIII nor do any have dedicated portions of their facilities devoted solely to the practice of osteopathic medicine, although each of the acute care hospitals involved have varying numbers of osteopaths on their staffs. Gulf Coast Hospital, however, will construct and operate its approved facility in the immediate future and thus, at least 60 osteopathic beds are approved and not yet utilized as available osteopathic services in the district. Gulf Coast Hospital has not had the opportunity to get into operation, attain its market share and a favorable utilization experience so as to become available as yet. Given that Gulf Coast will be constructed 68 miles from Manasota in Lee County, much closer than the two-hour regional travel time standard established above, it is obvious that an osteopathic acute care hospital will soon be available and accessible to District VIII patients.
Osteopathic acute care services are presently available in District VIII, notwithstanding the fact that the Gulf Coast facility is not yet open. Sarasota County osteopathic physicians have staff privileges at area hospitals and by their own testimony, are able to treat their patients in a fully osteopathic manner at existing Sarasota County acute care facilities. Venice Hospital is supportive of the practice of osteopathic medicine. Dr. James Them, D.O., is on the staff at Venice with full privileges and has no difficulty in getting his patients admitted. He can practice osteopathic medicine there in an unimpeded way, including the use of manipulation tables provided by the hospital. He acknowledged that the patients in Sarasota County are not denied acute care services because of the lack of an osteopathic hospital. Drs. Donald Them, D.O., and Joseph Chirillo, D.O., of the Venice staff are of a similar opinion. The other area D.O.'s testifying are able to treat their patients in a proper osteopathic manner at existing facilities and they would not seek staff privileges at Manasota.
Although several osteopaths testified that they desired the availability of osteopathic specialists in an osteopathic facility to render consultation and referral of their patients with attendant continuity of care more facile, and to avoid, in some instances, duplication of tests in the referral process with
allopaths, they did not demonstrate that their patients suffer from any lack of adequate care in existing facilities. The advent of the Manasota facility would not necessarily alleviate this "physician inconvenience" purportedly caused by referring patients to allopathic specialists, inasmuch as Manasota will be a mixed staff hospital, such that many of the specialists on its staff are likely to be allopathic physicians anyway. All of the Sarasota County osteopathic physicians can handle additional patients and have had osteopathic patients adequately cared for in existing facilities, at which they have full privileges.
Osteopathic physicians have no difficulty gaining staff privileges and admitting patients at existing facilities.
Indeed, at the new Englewood facility, three osteopaths are on the staff and one was chosen by his peers as president-elect of the medical staff. Osteopaths at Englewood will be provided with any needed equipment. In short, with the advent of the 100-bed Englewood facility, the 60-120 bed Gulf Coast facility, together with the existing hospitals which have substantial unused capacity, osteopaths practicing in Sarasota, Charlotte County, and District VIII have enough beds between now and 1990 for their patients at facilities at which they may freely practice osteopathic medicine.
These like and similar services are available because both allopathic and osteopathic physicians and hospitals draw from the same limited patient pool. There is no essential difference between the way allopathic and osteopathic primary care physicians, surgeons, and specialists practice in terms of the services rendered acute care hospital patients. The primary difference only lies in the use of manipulative therapy, with attendant manipulation tables which are used in the osteopathic setting. This service is already available at the existing hospitals. The difference in philosophy between osteopathic and allopathic practice is manifested more at the out-patient primary care level. At the primary treating physician level the patient is looked at holistically in the sense that, in addition to treating the illness or condition the patient is presented with, the osteopath seeks to ascertain and correct causes of the illness rooted in other systems of the body or the patient's environment or family circumstance. The allopathic physician tends to be oriented toward treating the specific problem by dealing with the involved bodily system only. There is, at any rate, very little difference in the way allopathic and osteopathic physicians practice at the acute care hospital level, in caring for their patients. Thus, all persons desiring osteopathic acute care services are able to receive them in District VIII, despite the lack of an additional osteopathic hospital. In view of the number of osteopaths per thousand population in District VIII, as compared to state and national
averages in evidence, there is no shortage of osteopathic physicians in District VIII. Given the low utilization of existing acute care hospitals in the district and in Sarasota County, including Gulf Coast, which has not had the opportunity to fill any of its beds, there are like, existing, available, accessible, mixed staff hospitals in Sarasota County and in District VIII providing adequate acute care services, including osteopathic of the type proposed.
The quality of existing hospitals in the district has not been placed at issue. No testimony or evidence concerning quality of care about Memorial or Doctors Hospitals has been adduced. The Englewood Hospital, as of the time of the hearing, had not yet opened. Dr. Raymond McDearmott, M.D., was presented to criticize quality of care at the Venice Hospital. Dr. McDearmott, however, did not have admitting privileges and was limited in his experience to working in the emergency room at Venice. He has been engaged in a dispute with Venice's administration concerning his operation of the emergency room, which may culminate in litigation. This adversarial attitude toward Venice, together with his failure to describe specific instances of inadequate care, entitles his testimony to scant consideration. There is no competent evidence to indicate that existing hospitals are not providing adequate quality care.
Likewise, the efficiency of existing facilities was largely not addressed, with the exception of Venice Hospital. Manasota contended that Venice Hospital was not operating efficiently because of an alleged excessive amount of administrative expenses. That contention was predicated upon data submitted to the Hospital Cost Containment Board by Venice Hospital which was reported by the board and indicated that administrative expenses at Venice exceeded those of other hospitals in the cost containment board "reporting group" of which Venice is a member. It was established, however, that that information had either been filed with or reported by the Hospital Cost Containment Board in error, and that indeed, the error was corrected on the Board's own volition. The administrative expenses at Venice Hospital for the reporting period in question, were at approximately the mid-point for hospitals-in its reporting group. Thus, it has not been established that Venice or any of the other hospitals in Sarasota County or District VIII, are operating inefficiently, aside from their problems with under-utilization and unused capacity.
It has also been proven that the existing hospitals are "like" facilities which are accessible. Indeed, 95% of the population of District VIII is within 20-miles or less of an existing acute care hospital. The Gulf Coast osteopathic facility will be well within the proven two hour accessibility
standard for osteopathic hospitals, since it will be 68 miles from the proposed location of the Manasota facility. The existing hospitals are underutilized. There has been no showing that existing hospitals are inaccessible to residents of the county and the district.
Concerning the issue of extent of utilization of like and existing facilities, witnesses Konrad, Beechey, Shanika, Zaretsky, Schwartz and Porter acknowledged the declining utilization of acute care hospitals in Sarasota County and District VIII, and the continuing nature of that decline. In District VIII, occupancy of acute care hospitals has decreased significantly from 1983 through 1985, such that the composite occupancy rate for the district was 67.2% in 1983, 60.9% in 1984 and 52.4% for 1985. The dramatic changes occurring in the health care industry since 1983 have caused the severe declines in inpatient utilization. The primary reason has been the change, beginning in 1983, to the Medicare prospective payment system as opposed to the former cost-based reimbursement system. The new system is otherwise known as the "DRG" system. Thus, Medicare reimbursement is now based on a Fla. rate reimbursement based upon the type of illness, diagnosis or treatment. The effect of this change has been to sharply decrease the average length of stay of Medicare patients in hospitals, as well as to decrease Medicare admissions. Medicare admissions are decreasing through increased emphasis on utilization review by professional review organizations mandated by the Medicare system. This results in more procedures, such as some surgery, being performed on an outpatient basis. Inpatient utilization concomitantly declines. These factors, coupled with the growth of home health services, and the imminent impact of preferred provider organizations (PPO's) and health maintenance organizations (HMO's) in Sarasota County and District VIII, have and will impact hospital occupancy rates significantly to an increasing degree. Mr. Conrad and Mr. Schwartz both showed that these factors which depress hospital utilization impact utilization of osteopathic and allopathic facilities in the same way. In fact, since osteopathic facilities have historically experienced higher average lengths of stay than allopathic facilities, the DRG method of prospective reimbursement has and will have a greater impact on osteopathic hospitals.
Hospital utilization in District VIII is still declining. Even though the population is increasing significantly, hospital occupancy is decreasing. During 1980 the population of Sarasota County was 205,846 from which 292,500/ patient days were generated. In 1985 the projected population for Sarasota County was 242,875 and the projected number of patient days was down to 273,486. Thus, the population of the county increased by 37,000 during that five year period, yet the
number of patient days decreased by approximately 19,000. Thus, the hospital use rate is decreasing more rapidly than the population is increasing, and it has not been shown that patient days will increase in relation to the population through the year 1990. The increasing influence of the above-mentioned alternatives to inpatient care will continue to cause a drop in the hospital use rate for Sarasota County in the future. Indeed, the 1985-87 state health plan, in evidence, predicts that the combined effect of outpatient surgery and other delivery systems will result in an additional 15 per cent decline in hospital admissions by 1989. The current decline in utilization rate in Sarasota County hospitals has not yet been affected by the advent of HMO's and PPO's, but those prepaid health insurance organizations are in the offing and will cause further declines in utilization.
If present trends continue, as has been proven to be likely, and the Manasota Hospital application is approved with its proposed 100 beds, hospital occupancy in Sarasota County will decline to approximately 40% in 1990. Approval of the applicant's facility would result in occupancy rates as low as 35 to 38% for Venice, Englewood and Manasota Hospitals, since Manasota, with a large number of M.D.'s on its staff will draw its patients and patient days from the same pool as the existing hospitals and thus share an insufficient number of patients with them. In order for all hospitals in District VIII to operate at the optimum of 80% utilization, as many as 1,344 acute care beds would have to be eliminated from the existing licensed and approved beds. Even if no additional beds are approved, the most realistic projection of hospital utilization in District VIII for 1990 is 44.6%.
The average occupancy for acute care beds in District VIII during 1983 averaged 67.2%. By 1985 the occupancy rate was down to 52.4%. Accordingly, in view of the significantly low district-wide and county occupancy and the continuing downward trend, the legislatively mandated goal of hospital cost containment underlying Section 381.494, Florida Statutes, will not be furthered by the approval of additional hospital facilities in District VIII and Sarasota County, including that proposed by Manasota.
Manasota's Abilitv to Provide Qualitv CareSection 381.494(6)(C)(3), Florida Statutes
Inasmuch as the Manasota facility has not been found needed for a variety of reasons enunciated herein, the issue of its ability to provide quality health care will not be addressed in depth. It is quite likely that Manasota, if it got into operation, overcoming the operational and legal impediments
discussed herein, could provide quality health care. Its management team is made up of Mr. Gerald White and other former managers of Health Corporation of America, all of whom have substantial health care managerial expertise.
The Availability of Alternative Sources of Care -Section 381.494(6) (c)4, Florida Statutes
There are less costly, more efficient and appropriate alternatives to the proposed Manasota project for District VIII and Sarasota County. The existing acute care hospitals are like and existing facilities offering similar health care services which are severely under-utilized. The osteopaths testifying both for and against the Manasota application acknowledge that there are plenty of hospital beds to admit their patients in Sarasota County, and that they can be satisfactorily, osteopathically treated at existing hospitals. Those D.O.'s supporting the application of Manasota acknowledged that they will continue to send their patients to existing facilities as well. Thus the existing acute care hospitals (as well as the future Gulf Coast facility), are appropriate alternatives to the Manasota facility, and since they are greatly under-utilized, or in the case of ECH and Gulf Coast, not yet utilized, they need more patients and more revenue to become more efficient, enabling them to deliver health care services in a less costly manner the public. If Manasota's hospital were approved, utilization would decline still further, generating even more excess acute care capacity. Unused capacity has a significant fixed cost increment which will have to be borne by the health care consuming public. This is wholly aside from the capital expenditure in excess of fifteen million dollars needed to place the Manasota facility in operation. This would be an unnecessary cost for the consumers of District VIII to bear in view of the lack of need for it.
Probable Economies in Service Derived from Joint or Shared Resources-Section 381.494(6)(c)5, Florida Statutes
Manasota does not propose to operate joint, cooperative or shared health resources in conjunction with its proposed hospital. This criteria is not really at issue in this case and no party offered proof with regard thereto.
Need in the District for Special Equipment and Services not Accessible in Adjoining Areas-Section 381.494(6)(c)6, Florida Statutes
This criterion is not applicable in this proceeding. Manasota will not offer specialized equipment or services of a type not already available in Sarasota County or the district.
The Need for Research and Educational Facilities Including Institutional and Community Training Programs for Practitioners and for Doctors of Osteopathy and Medicine at the Internship and Residency Training Level-Section 381.494(6)(c)7, Florida Statutes
Manasota proposes an osteopathic teaching hospital. It called Dr. Arnold Melnick to testify regarding the need for additional osteopathic teaching hospitals in Florida. Dr. Melnick is the Dean of the Southeastern College of Osteopathic Medicine (SECOM) in North Miami Beach. He was accepted as an expert in the fields of medical education and osteopathic medicine.
Dr. Melnick established that the emphasis in osteopathic medical education is to train general or family practitioners. This aspect of medical education and practice comports with the holistic philosophy of osteopathic medicine which emphasizes treatment of a patient by looking at the patient's entire physical and environmental circumstance, rather than being specific disease, condition or system oriented. Because of the emphasis on training for ability to diagnose and treat all aspects of a patient's medical circumstance, osteopaths tend to be in general practice and family practice rather than specializing such that approximately 87% of osteopaths are in general. Only 4% of the osteopathic profession are primary care specialists in the areas of pediatrics, obstetrics and internal medicine. Dr. Melnick established that because of the holistic philosophy, there is not a significant need for more osteopathic specialists. This is also the reason that internships for osteopaths are required to be one year "rotating" internships. Osteopathic interns in teaching hospitals must rotate for a month or more through each of a teaching hospital's medical departments, such as pediatrics, obstetrics, and the like so that their training will be designed to give them a broad knowledge of many areas of medical practice. Contrastingly, with allopathic internships, interns concentrate in the area of their chosen specialty with a view toward moving on toward a residency in that specialty. It is for this reason that osteopathic teaching hospitals must offer a sufficient number of different medical practice departments so that interns may be given broad training in all the medical practice fields they will be required to know to be competent general or family practitioners, in keeping with the osteopathic philosophy of medical practice.
Thus, although osteopathic practice is characterized by a vast majority of family practitioners, specialists are required·
to train osteopathic physicians. The AOA accreditation requirement dictates that certified osteopathic trainers must be present in the various departments. Dr. Melnick established that
an osteopathic teaching hospital should not be smaller than l00 beds, must have at least three outstanding osteopathic internists, at least two osteopathic surgeons, an osteopathic pediatric specialist, as well as an obstetrics-gynecology specialist. Manasota presented testimony of osteopathic specialists consisting of a surgeon, a pathologist and an opthamologist from Suncoast Hospital in Largo, Florida who are willing to move to Sarasota County and become staff members if the hospital is built. Manasota, however, has not established that it will have the specialists required for an appropriate quality osteopathic teaching hospital. It did not show how it would obtain the required number of internal medicine specialists, surgeons, a pediatrician nor a specialist in obstetrics and gynecology. In fact, Manasota will not have an obstetrics department.
Both Dr. Melnick and Mr. White established that a teaching hospital needs more FTE staff members than a non- teaching hospital. The proposed 3.4 FTE's will be less than necessary for a teaching hospital to adequately operate. There is currently a shortage of nurses and other technical staff employees in Sarasota County, as evidenced by the difficulty Venice has had hiring and retaining people in these positions due to the advent of the Englewood facility and its competing recruitment. There is a substantial likelihood that Manasota will have difficulty obtaining sufficient staff members to be a bona fide quality teaching hospital, especially since it proposes to hire osteopathically trained nurses and technicians. It did not establish where it intends to recruit them. In view of the fact that Manasota proposes to recruit its medical staff locally, it has failed to establish where it will obtain the required number of D.O. specialists as certified trainers for each of its departments.
There are eight osteopathic teaching hospitals in Florida. The most recent graduating class from SECOM consisted of 40 osteopathic physicians. All of them were placed in suitable intern programs in and out of Florida. It was not shown that all of these 40 interns would have remained in Florida even had there been an additional osteopathic teaching hospital. The college will be graduating 100 osteopathic physicians per year by 1987. It was not established that all of the internships they will require must be at Florida hospitals.
In this connection it was shown that a 100-bed osteopathic teaching hospital could accommodate eight interns, but only if that hospital was operating at 80% capacity. If the same hospital had only a 57% occupancy it could accommodate 5.7 interns. Thus by Manasota's own utilization projections it could accommodate only about five interns, even if it could obtain the
required number of osteopathic specialists as trainers. Further, such interns typically receive stipends of from $18,000 to
$20,000 per year. Although Manasota could obtain approximately
$3,000 per year per intern from a grant program established by the legislature, it did not demonstrate in its financial evidence that it has provided for the necessity of $75,000 per year for intern salaries. In short, it has not been proven that Manasota genuinely can establish its facility as an osteopathic teaching hospital in accordance with Dean Melnick's own, requirements.
Availabilitv of Resources, Manpower, Management Personnel and Funds for Operating and Capital Expenditures; Effects on Clinical Needs of Training in the District for Health Care Professionals; Accessibility to Schools in the District for Health Care Training; Alternative Uses of Resources for Other Health Services; Accessibility of the Facility to all Residents of the District; Section 381.494(6)(c)8, Florida Statutes
In terms of manpower availability, the Applicant intends to have an open staff of M.D.'s and D.O.'s, purportedly recruited from the existing medical community in Sarasota County. Manasota will only seek to recruit physicians from outside that area if unable to staff the hospital from existing physicians with practices in Sarasota County who could "swing" their patients from existing hospitals to Manasota's facility, discussed above. The potential physician-investors, referenced above, were assured by Manasota's principals, that the vast majority of the 20 or 30 physicians needed to staff the facility would be M.D.'s from the Venice and Sarasota area. The doctors attending these promotional meetings were told there would not be a heavy influx of osteopathic physicians to Venice to staff the hospital. There are between 100 and ll0 M.D. physicians in the Venice area. There are 20 osteopathic physicians in Sarasota County. Three support the application and would seek privileges at Manasota, four of them would not and do not feel the hospital is needed. The remainder did not testify nor indicate any interest in staff privileges. The testimony of the osteopathic physicians from other areas (Dade City and Pinellas County), as well as Dr. Melnick, as found above, established that for a hospital to be osteopathic in philosophy and operation, at least 52% of its governing body should be osteopathic physicians, as well as the majority of its department heads and staff. Only four of these doctors expressed a desire to join Manasota's staff. There is therefore simply no competent, substantial evidence of record to establish that a majority of the staff physicians will be osteopathic physicians, nor that the majority of the department heads will be osteopaths. In fact, the evidence does not reflect clearly how many staff positions Manasota proposes to obtain to operate the hospital, nor that a sufficient number of M.D.'s and D.O.'s can be obtained locally in
the face of the staff privileges offered at existing hospitals. If an influx of physicians will be required from outside areas to staff the hospital, while this might provide adequate physicians to staff the hospital, it would not serve to increase hospital utilization, they would bring no patients with them. In fact, with the utilization rate decreasing, the pool of patient days available to render the hospital and medical practices feasible is continuing to shrink and if more physicians are added to the Sarasota County market, health care costs can only rise as doctors and the hospitals must raise charges in order to render their practices financially feasible when there are not enough patients in relation to the number of doctors or beds available. Better alternative uses of the resources represented by the increased charges would involve not building such a facility in such a shrinking patient market, but rather allowing existing hospitals a chance to improve their utilization experience first with their already constructed and financed excess capacity.
The 3.4 full time staff equivalents (FTE's) per occupied bed based upon witness Sucher's projections are insufficient to staff an acute care hospital such as this. Indeed, as shown by Mr. White, a teaching hospital may require up to 5.6 FTE's. A minimum of 3.8 FTE's per occupied beds would be needed to staff an acute care facility such as that proposed by Manasota as shown by Mr. Schwartz, and as a teaching hospital an even higher staff ratio would be necessary. If Manasota adjusted its FTE staff to meet only the minimum 3.8 FTE standard, its costs for staffing would be $450,000 more than that proposed in its pro forma expense statement. Indeed, if it actually proposes to be a teaching hospital, its staffing requirements and concomitant expense would increase on the order of one million dollars more than that proposed in its pro forma. In connection with this, the staff proposed to be needed in certain departments was understated. For instance, 16 to 18 employees would be needed to staff a laboratory in a 100-bed hospital and Manasota only allocated 8. Similarly, it only proposes to have 3 FTE's to staff its pharmacy. This is an insufficient number of employees to staff a pharmacy seven days a week, 24 hours a day as Manasota proposes to do. Finally, although Manasota proposes to have an osteopathically trained staff of nurses and other technicians, it did not demonstrate where it would be able to recruit such staff members trained in osteopathic principles of nursing and other disciplines. Thus the Applicant has not proven the availability of sufficient manpower and related resources to feasibly operate the project.
The issue of availability of funds for capital and operating expenditures for accomplishment and operation of this project is treated with more specificity infra., however, it should be pointed out that Manasota has significantly understated
land purchase, site development, working capital and other capital costs by more than two million dollars, and otherwise understated the magnitude of resources the project will require.
Although the facility will be readily accessible to the population of south Sarasota County, in view of the above findings there is no accessibility difficulty for acute care patients, both allopathic and osteopathic, at the present time, in the county and District VIII, especially with the advent of the Gulf Coast Osteopathic Hospital and the recently opened Englewood facility. The considerations in the above statutory criteria regarding health care training and education needs are dealt with to the extent they are relevant in this proceeding in the findings concerning Manasota's proposed posture as an osteopathic teaching hospital.
Financial Feasibility
Mr. Randy Sucher and Dr. Elton Scott, testified as financial experts on behalf of Manasota. Mr. Sucher testified that the projected utilization of a proposed facility is the "cornerstone" of a financial feasibility study, and financial forecast. Mr. Sucher conceded that the financial feasibility study done in this case was much less detailed and thorough than had been done in his experience when he was employed by an accounting firm to perform feasibility studies for hospital clients, especially in the area of evaluating patient demand. Mr. Sucher largely relied on the demand and utilization study performed by Dr. Scott. The frailty in the study lies in the method employed by Dr. Scott to study demand and project
utilization, which lacks specificity. He determined his position regarding patient demand for Manasota's project largely by attending meetings and interviewing physicians, most of whom are M.D.'s in Sarasota County. He then projected utilization by determining the admission rate per 1,000 population in south Sarasota County which is Manasota's primary service area. He arrived at a figure of 102 admissions per 1,000 population, determined by merely considering the admissions to Venice Hospital as reported in the 1983 hospital cost containment board data. He applied that admission figure to the population figures for south Sarasota County for 1985. He performed no patient origin studies for Venice Hospital, so it was not established whether all of those admissions originated from the same south Sarasota County origin area represented by his population figure. The results of his interviews with physicians do not indicate hat all the patients admitted by those physicians to Venice Hospital, came from the south Sarasota County service area proposed for Manasota. There is thus no way to determine from this record if the patient admission figures relied upon by Dr. Scott correlate with the actual admissions to Venice and from the relevant
primary service area population. Thus, even though Dr. Scott's data showed 102 admissions for Venice per 1,OO0 population, when only looking at the census tract population areas for south Sarasota County, it was not established that those admissions were not drawn from a much larger population base representing more of Sarasota County and possibly north Charlotte County. If so, that would result in a much lower admissions per 1,000 population figure for Venice Hospital, as that relates to the number of patient admissions Manasota could expect to capture from Venice. Dr. Scott's utilization assumptions were not verified by any patient origin studies for Venice Hospital, which might show, for instance, that significant numbers of its admissions come from areas from which Memorial and Englewood will draw patients. Thus, the 22 per cent share of Venice's admissions that Scott opines Manasota will attract, have not been verified by a showing that those patients are from origin areas or physicians more likely to be attracted to Manasota as opposed to Venice, Englewood or Memorial, if Manasota is built.
In this connection, no in-depth physician analysis study or market analysis study was done by Dr. Scott or Mr. Sucher. Instead, they relied upon general discussions at interviews with three local osteopathic physicians and 12 to 15 M.D.'s as well as three or four out-of-district D.O.'s and, according to Mr. Sucher,: "from that, we just kind-of got a composite feeling that we could generate 'x'." Dr. Scott and Mr. Sucher also relied in part upon a 1983 informal survey conducted by a Manasota shareholder of an indefinite number of Sarasota County physicians. Some of these, including the four Sarasota D.O.'s discussed above, now have privileges at other Sarasota area hospitals and will not admit patients to Manasota. The three D.O.'s who support the application will not refer all their patients to Manasota and the osteopathic physicians from the St. Petersburg area, who indicated a desire to join Manasota's staff, are not all "admitting physicians," some of them being specialists who only engage in hospital practice and would provide no patient admissions. As found above, Manasota did not prove that it could adequately staff the hospital with M.D.'s and
D.O. s. If it obtains doctors from other areas, they will not
have a local patient base from which the hospital can gain the admissions necessary to achieve a feasible revenue posture.
Neither Dr. Scott or Mr. Sucher took into account the market share that Englewood would obtain, including its share of admissions from Venice Hospital. Englewood is a new, 100-bed acute care facility located in Sarasota County, closely proximate to the Manasota proposed location and to Venice's location. A significant portion of its staff physicians are located in Venice. The primary service areas of all three hospitals substantially overlap. It is not reasonable to conclude that
Manasota will not compete with Englewood for patients, as well as with Venice. Thus, Dr. Scott and Mr. Sucher's estimate that 22% of its admissions could be obtained from the patient pool enjoyed by Venice at the present time, is over-stated as that relates to Manasota's projected patient utilization and revenue. All three hospitals will compete for the same pool of patients, as will Memorial. Englewood is likely to claim a substantial number of the patient admissions originating in this area, and thus it is unrealistic to ignore the market share that Englewood is likely to obtain. Manasota is not likely to realize the admissions it projects obtaining from the Venice area and thus its utilization will be significantly lower than projected, as will its revenues.
Patient days will continue to drop through 1990 because the use rate is dropping more rapidly than the population is increasing. Manasota will thus have to obtain most of its patient days from the admissions enjoyed by existing hospitals, which already have low and declining utilization. It has simply not been established that Manasota will be able to capture sufficient patient days from them to ensure its financial feasibility. Assuming arguendo, that its utilization projections are accurate, the revenue and expense projections based thereon are inaccurate and not supportive of finanical feasibility. "Contractual adjustments" represent the differences between what the hospital charges and what is actually reimbursed by Medicare and other reimbursement schemes. The contractual adjustment represents a deduction from gross revenue. A significant issue was raised by all parties through their financial experts, concerning the portion of the contractual adjustment related to capital cost pass-through. Mr. Beachey, and other witnesses for existing hospitals, opined that capital cost pass-through, whereby a hospital is reimbursed for its cost of capital through the DRG reimbursement system, will be eliminated entirely phased out in steps such that the increment of DRG reimbursement represented by capital cost pass-through should be eliminated from Nanasota's revenue figures. Mr. Beachy feels the ultimate federal regulations enacted will call for a phased reduction in capital cost pass-through. All experts, both for the Applicant and the protestants, agreed that the capital cost pass-through is very likely to be reduced or eliminated in future years. The dispute amongst the experts concerned whether new facilities, either CON approved, under construction, or opening in the year the regulation becomes effective, will have their capital cost pass-through reimbursement entirely eliminated. Because all the opinions are based upon conjecture and speculation regarding what the Congress will do in this regard, they are rejected.
The Applicant's pro forma statement of revenues (in evidence) is predicated, in part, upon the assumption that DRG Medicare reimbursement will increase five per cent a year through
fiscal year 1989-1990. This assumption is rejected in favor of Mr. Beachey's expert testimony. Mr. Beachey established that the Medicare reimbursement increase for 1986 will only be one-half of one per cent, and that for 1987 one house of congress has agreed to a one half per cent increase in the reimbursement rate, and the other to a one per cent increase. While the ultimate 1987 rate is speculative, Mr. Beachey established that for that and future years it is not likely to be on the order or magnitude of 5%. Mr. Beachey, in an abundance of caution (favorable to the Applicant), opined that at best there might be a 3% annual increase in Medicare reimbursement after 1986, rather than the 5% postulated by the Applicant (even though the 1986 increase is only one-half per cent. His opinion is clothed with substantial probability of reliability and is accepted. The Applicant projects a 5% deduction to revenue for bad debts. Mr. Beachey established that this is more likely to be 8%. That was indeed the figure used by the Applicant in its own application, also in evidence. Mr. Sucher's pro forma statement also projected Manasota providing 3% Medicaid, while the application itself, in evidence, indicates Manasota will obtain 5% of its revenue based upon reimbursement for Medicaid care. These resulting contractual adjustments, which are deductions from revenue, coupled with the necessary adjustment for the increased increment for bad debt, which was established, reveal that, because of these adjustments alone, the Applicant will experience a loss of
$414,000 for its first year of operation, and a $1,012,000 loss
for the second year. These loss figures do not reflect Mr. Beachey's opinion that an increased number of FTE's are necessary over the 3.4 FTE's projected by Mr. Sucher, which would reduce revenue by $512,000, nor his opinion that declines in "capital cost pass-through" would reduce revenue by $700,000 the first year and $430,000 the second year. This latter opinion was rejected for the reasons mentioned above, and his opinion regarding the additional FTE staff required is rejected because of Mr. Beachey's lack of expertise regarding adequate staffing patterns and levels.
The Applicant failed to account for indigency tax assessments of $155,000 and $188,000 for 1988-1990. That assessment is designed to enhance reimbursement for indigent care for hospitals in the state. Although Mr. Sucher and Dr. Scott opined that the amount of the assessment would be reimbursed, an accounting "wash," the preponderant, expert testimony reveals that there is no direct reimbursement payment related to the amount paid into that fund. In any event, the amounts of such possible reimbursements are not proven. Additionally, the Applicant did not account in its expenses for real estate taxes which will amount to $155,000 per year. These expense increases and concomitant revenue deductions are reflected in the above found loss figures.
The Applicant will have to increase its charges by a substantial amount to offset these net losses. The revenues would have to be increased on the order of 36% the first-year of operation and 35.9% the second year. It is important to remember that only 26% of the Applicant's patient mix would be private paying or insurance reimbursed patients, who could absorb these increased charges. Concerning staff salaries and benefit expense, the Applicant proposes 3.4 FTE's per occupied bed. A number of the expert witnesses, both for the protestant hospitals and the Applicant, established that that is an insufficient level of staffing for a 100-bed hospital. Mr. Sucher acknowledged that he had no personal experience in determining staffing patterns and staffing a hospital, although in his capacity as an expert in hospital finance, he had dealt with the financial implications of staffing. Mr. Sucher admitted that his 3.4 FTE figure was a rough estimate, which primarily included only nursing and administrative staff, and did not take into account laboratory staff and other technical positions. Mr. White himself finds that teaching hospitals, require a range of from 3.7 to 5.6 FTE's per occupied bed. Mr. Schwartz established that the non-teaching hospitals in the area have a minimum of 3.8 FTE's per occupied bed which is the minimum accepted for a facility such as Manasota's. Indeed, the testimony of Dr. Melnick and Mr. White shows that a higher staffing rate would be needed since Manasota proposes to be an osteopathic teaching hospital. Thus, the appropriate staff ratio (and concomitant salary and benefit expense) for Manasota would have to be substantially higher than
3.8 FTE's per occupied bed. If the FTE ratio were, however,
raised to the minimum level of 3.8 FTE's, the expense figure for salaries and benefits would increase by $450,000. Given Mr.
White's, Mr. Schwartz's and Dr. Melnick's testimony that a higher level of staffing is needed at a teaching facility, this expense figure might be much higher. If, for example, a modest increase in staffing to account for Manasota's obligations as a teaching hospital operation necessitated a raise in the FTE ratio to only
4.2 FTE's per occupied bed, the total additional expense over that attributable to the projected 3.4 FTE's would be on the order of $900,000. Even that figure would be on the lower end of the range normal for teaching hospitals. These additional staffing expense adjustments would increase the above loss figures by a minimum of $450,000 and likely much more.
In addition to the above understated expense items, the Applicant failed to account for payment of federal income tax. The Applicant also failed to provide for payment of insurance which Mr. Sucher acknowledged would cost between $400,000 and
$600,000 per year. Payments for utility expense were also not accounted for and Mr. Sucher acknowledged those would cost approximately S300,000 per year. Payments for sales taxes and
contract services such as laundry service, which will be a substantial expense, were not accounted for, nor were principal payments on the approximate 14 million dollar debt. The Applicant did not allow for marketing expenses, even though Mr. Sucher and Mr. White acknowledged that an aggressive marketing strategy would be used to obtain a feasible level of admissions. Mr. Sucher testified that a great deal of these expenses generally fell under the heading "supply and other" in the pro- forma statement but, in consideration of these and many other non-itemized expenses such as kitchen or food service, supply
purchases, and drug purchases which were not depicted in the pro- forma statement as to amount, it was not established that the general category for supply and other expenses was sufficient to cover all of these expenditures.
Capital Costs
The Applicant has additionally understated some of the capital costs involved in the project. Foremost among these, as Mr. Sucher admitted, the proposed $15,587,000 capital cost attributable to the project did not include a required 1.5 million dollars in working capital. Manasota also included only
$500,000 for land acquisition. One of the sites under consideration however, would cost approximately $1,250,000. Manasota's own witness regarding real estate values established that the required 7 to 10 acre site in south Sarasota County, would cost on the order of a million dollars, exclusive of real estate commissions, legal fees, and other preliminary site costs.
Although Manasota has proposed to be an osteopathic hospital, no provision was made in its proposed equipment costs for manipulative therapy tables. Ms. Usher, Manasota's equipment expert, opined that such a table would cost from $150 to $8,000. Indeed, Dr. Snyder, D.O., established that equipping a department of manipulative therapy could cost as much as $100,000. The equipment list does not provide for other items of equipment normally present in operating an acute care hospital, such as an incinerator or two-way radio communication equipment. Some items, such as televisions and a computer system, are optional to some extent, and the record does not reflect whether some items such as a telephone system might be included in the overall capital costs for the facility, even though not listed on the equipment list. It is noteworthy, however, that Manasota has not provided for any expenditure for kitchen or dining room equipment, which could cost as much as $250,000 to $350,000.
This unprovided for equipment is essential for functioning as an
acute care hospital.
The inclusion of these items would boost the capital costs of the project to approximately $17,837,000, without
considering the cost of the osteopathic manipulation tables and unknown construction contingencies, dependent on site selection, such as acceleration and deceleration traffic lanes, extension of utility lines and service, and, potentially, a package sewage treatment plant. The contingency fund of $400,000 described by Mr. Henry, was not shown to be adequate to cover these costs.
Short-Term Financial Feasibility
Manasota retained Morgan, Schiff and Company, Inc. as its financial adviser and broker for this project approximately three months prior to hearing. Mr. Thaddeus Jaroszewicz represented that corporation in testifying regarding financiability of the project. Neither Mr. Jaroszewicz nor Morgan Schiff have participated in the financing of a health care facility prior. Mr. Jaroszewicz stated that it was necessary to have an understanding of the health care industry in which a client operates in order to evaluate the reasonableness of cash flow projections provided to him by the client. Although Mr. Jaroszewicz has some understanding of the economics of the health care industry, due to his lack of experience with health care clients, his expertise is somewhat limited. Given his experience in the financial markets, Mr. Jaroszewicz is confident he can raise the 90% debt financing, probably through banking institutions. However, he based his opinion on the financial projections provided him by Manasota, which for reasons expressed in the other findings herein, have been shown to be inaccurate in projecting financial feasibility. The capital costs, for reasons found herein, are understated as well, such that the true capital costs of the project will approach 18 million dollars, instead of
$15,587,000 which Mr. Jaroszewicz assumed. All of these factors,
coupled with the fact that AmeriHealth, Inc., through its purchase of Richmond Metropolitan Hospital, the pending purchase of Antauga Medical Center and Smith Hospitals in Alabama from HCA, the Savannahs Hospital Project in Indian River County, Florida, together with its pending half-million dollar lease of a facility in Lockhart, Texas, has committed all its resources and indeed is heavily "leveraged" in seeking to accomplish these purchases. AmeriHealth owes in excess of 11.3 million dollars on the 14 million dollar Richmond Hospital purchase. Regarding the HCA Alabama facilities purchase, AmeriHealth will assume 5 to 6 million dollars in HCA debt and incur new debt totaling 8 million dollars. Additionally, it will give 2.3 million dollars in subordinated notes back to HCA for the remainder of the financing. Upon completion of an expansion project at the Antauga Hospital there will be an additional 8 million dollars in debt assumed by AmeriHealth. The Savannahs Hospital Project in Indian River County will involve an additional 9.5 million dollars in debt. That financing has not closed. AmeriHealth is additionally involved in purchasing Ambulatory Surgical Centers
which will cost $450,000 to $750,000 each. AmeriHealth's net worth is approximately 4.7 million dollars.
As of September 11, 1985, the HCA acquisitions had not closed because AmeriHealth was unable to secure acceptable financing. Citibank, the proposed lender, was requiring strict liquidity requirements and capital expenditure requirements on AmeriHealth before it would finance the project. AmeriHealth found these requirements unworkable so that it was unable to close the HCA transaction and had to ask for extensions of time on the closing date. AmeriHealth has not yet been able to obtain acceptable financing for that purchase. AmeriHealth is thus a fledgling company which has leveraged all its assets. It will likely have substantial difficulty obtaining financing for the Manasota project.
In view of the fact that Mr. Jaroszewicz had not had the benefit of doing his own analysis of the Applicant's proposed financial projections, and in view of the other evidence that has shown that revenues have been overstated and expenses and capital costs understated, it must be concluded that if a lender was aware of this negative cash posture, obtaining of satisfactory financing would be quite doubtful. In this regard it is understood that if a CON were actually granted financing might be arranged. It must be proven that the financial projections are indeed accurate and that indeed, the project will be financially feasible on a short and long term basis for that to happen, however. Such has simply not been proven to be the case.
Special Needs of Health Maintenance Organizations (HMO's)-Section 381.494(6)(c)10, Florida Statutes
This provision is not at issue in this proceeding. There is no evidence regarding special needs of HMO's.
Needs and Circumstances of Entities Which Provide a Substantial Portion of Services to Individuals Not in the District or Adjacent Districts-Section 381.494(6)(c)11, Florida Statutes
If Manasota were approved and could feasibly operate as a teaching hospital, it would be available to provide internship and residency programs to students from SECOM and other medical schools. Additionally, Manasota would be available to provide osteopathic health care services to individuals in adjacent districts. However, the preponderant evidence of record does not reveal that osteopathic health care services in adjacent districts are not already being met, especially given the under utilization of osteopathic hospitals in Pinellas and Hillsborough Counties, approximately an hour's drive to the north.
Probable Impact of Project on Cost of Providing Health Services, Effects of Competition on Innovations in Financing and Delivery of Health Services which Foster Competition Section 381.494(6)(c)12, Florida Statutes.
That portion of this criterion concerning innovations in financing and delivery of health services which foster competition, etc., is not truly at issue. There was no evidence to indicate that any innovations in financing and delivery of health services are proposed other than that Manasota proposes to be an osteopathic teaching hospital, and proposes to charge 10% lower rates. As found above, the Gulf Coast Osteopathic Hospital will be substantially less than two hour's travel time from Manasota's site, and thus Manasota will not truly be an innovative health service in the district. Even if Manasota were approved, it is highly unlikely, in view of the above findings, that it can deliver its health services more cost-effectively. The probable impact of the project on cost of health services and the effects of resultant competition on the supply of health services, must be addressed.
In this regard, Memorial is a full-service, acute care hospital, competing for the pool of patients in the primary service areas of Venice, Englewood and the proposed Manasota facility. Memorial is licensed for 788 beds, but as of October, 1985, only 590 beds were in service and staffed, due to a steady decline in utilization. Memorial's total patient days for 1985 were the lowest it has experienced since 1973, 15% less than its peak year of 1982.
Memorial would experience substantial adverse financial impact if the Manasota project were approved. Memorial, in 1984, obtained 1,458 patients from the south Sarasota County area, including the cities of Osprey, Venice, Nokomis and Northport, in the primary service area proposed by Manasota and also served by Venice and Englewood. If the Manasota Hospital is approved, Memorial will lose approximately half of those patients. This would result in a reduction of gross revenues of approximately
$3,579,000 and a concomitant reduction in its net operating revenue margin of $1,382,000. A reduction of this magnitude would reduce Memorialt's overall operating margin to 1.2%. A 2% operating margin, which Memorial will experience for 1985, is the absolute minimum safe level at which a hospital can operate in a financially viable manner. With a 1.2% operating margin, Memorial will be unable to maintain necessary working capital, nor maintain favorable bond financing ratings with bond rating agencies. If its bond rating worsens, its cost of bonded indebtedness will correspondingly rise. In order for Memorial to maintain its 2% operating margin, it would have to increase prices by at least 2.6%. The only other alternative would be to
raise its tax levy as a public hospital board by approximately 28%. Either eventuality would result in a significant increase in health care costs to the Sarasota County community.
Venice Hospital has 312 licensed beds. Its average annual occupancy was 71% in 1985, but will decline to 55.8% for the 1986 fiscal year. The declining utilization will be caused by the continuing effects of the DRG reimbursement system, and the other factors enumerated above. The average length of stay and projected utilization at Venice will continue to decline at least until 1990. The 55.8% occupancy rate projected for 1986 includes only the impact on Venice's utilization of the opening of the ECH, not Manasota. Even so, its projected operating revenue for 1986 will be only $589,150. The patients that Manasota will obtain will come from the same pool of patients served by Venice and the declining utilization rate, even in the face of increasing population, reveals that there are not enough patients for Venice to operate cost-effectively, especially if Manasota is opened. The loss of patients to Manasota will cause a loss of gross revenues for Venice of $10,287,200, strictly from inpatient revenues, not taking into account outpatient losses. Venice has already laid off personnel and will have to continue to do so to compensate for revenue losses from the downturn in its utilization. Venice will have to close additional nursing units and beds and further reduce staff on account of the competitive effects of the ECH opening. Even after reducing a reasonable percentage of such variable costs, Venice will suffer a net operating revenue loss of approximately $4,020,119 if Manasota is opened. If this eventuality occurs, Venice will be forced to face either bankruptcy or likely closing of entire wings and drastic reductions of present services. This would diminish access to health care services in the area, and quite likely result in declination of quality care.
Dr. Scott acknowledged that Manasota would take a significant number of patients from Venice, but minimized its effect by opining that Venice could make up for the loss by operating more efficiently, believing that its recent bond refinancing resulted in unnecessary additional financing costs to Venice, that Venice had an excessive amount of administrative expenses. The above findings reflect, however, that the bond refinancing did not result in any significant increase in debt cost to Venice, and yielded several million dollars more capital funds for Venice. Dr. Scott's figures for Venice's purportedly high administrative costs was shown by Mr. Shanika to be in error.
Thus, if Manasota Hospital meets its own projections, which are over-stated, it will draw approximately 2,415 patients from Venice, causing it to operate at a loss, and destroying the
feasibility of its programs and endangering its quality of care. Since Venice is already operating as a relatively efficient hospital, it cannot make up those losses by becoming more efficient. Venice's operating revenue would fall to the break even point if it only lost 309 patients. If Manasota drew anywhere near 2,415 patients from Venice, charges would have to be increased on the order of 40% to compensate for the loss.
Englewood is a fledgling 100-bed acute care facility scheduled to open in November, 1985, and has thus not yet had an opportunity to obtain adequate utilization of its beds and services and to secure a positive operating ratio. Dr. Scott recognized the potential impact on Englewood of the Manasota opening, particularly with respect to physicians located in the Englewood area who might swing all or part of their admissions to Manasota. If any of Englewood's staff physicians, such as Dr. Chirillo, who testified in support of Manasota, swung all or part of their patient bases to Manasota, it would have a substantial deleterious effect on the patient days and revenue for Englewood. This would result in a diminution of service at Englewood or in some cases a discontinuance of certain services.
Under present projections, Englewood will not realize profit for approximately 5 years, but if the Manasota facility is built, that time will be significantly extended. Manasota will have a significant adverse impact on Englewood's utilization and financial viability by taking patients away from it before it has an opportunity to reach a profitable operating situation.
Englewood has already experienced problems in hiring sufficient qualified staff members. It has experienced counter offers to prospective staff members made by other hospitals, such that in order to obtain qualified staff, Englewood has had to raise the salaries it offers. If Manasota opened, the additional competition for staff members would likely cause salaries for staff to be bid upwards still further, as well as causing technically trained staff members to become even scarcer. This situation could cause significant cost increases to all facilities involved and to the health care consuming public.
Manasota seeks to staff its facility largely with physicians in Sarasota County who could swing their admissions to the new hospital. There is only one pool of patients and patient days for the four contending facilities to divide amongst them, however. Osteopathic patients come from the same patient pool as those treated by M.D.'s, in that all are acute care patients. Since there is no unserved need for more acute care beds in Sarasota County, or District VIII, inpatient utilization of the three existing facilites will necessarily decrease by the advent of Manasota. Manasota also projects 1,200 outpatient surgeries
its first year. These patients must come from Venice, Englewood or Memorial. These facilities depend on outpatient surgeries as an important source of revenue and profit which is used to offset areas of service which do not operate as favorably. The loss of these patients to Manasota by the existing facilities, which are already competing for a shrinking patient market in terms of declining patient days and utilization, will inevitably lead to higher patient charges and to shrinking availability of services.
The cost to the community will be significant. Under- utilized facilities are more costly to the community. As utilization declines due to the above-found causes, future patients will be forced to absorb the cost of excess beds. The more patients who utilize a service which represents a capital expenditure, the lower the unit cost will be to the health care consumer. The construction of unneeded facilities, representing excess capacity, results in capital expenses borne by the public increasing at a greater rate than the numbers of patients or patient days from which off-setting revenues must come. The patients and the community will then have to bear a higher unit cost for health care services represented by this excess capacity. While Manasota contended, as partial justification for its facility, that there are a number of hospitals-in the state with occupancy rates in the low forty percentile range, which still generate significant profits, this point ignores the high cost the health consuming public must pay for 50 to 60% unused capacity at such hospitals. Hospitals can only reduce their variable costs attributable to unused bed capacity and typically, 40% of the costs of unused capacity are fixed costs which are not covered by any revenue and which cannot be reduced by staff and service reductions. Such fixed costs must be passed on to the public through higher rates and through the government reimbursement systems. Indeed, as established by Dr. Zaretsky, the cost of 100 excess beds to the Sarasota County community would amount to $3,674,349 in aggregate added annual costs, expressed in 1983 dollars. Even without the advent of the Manasota facility, there are already considerably more than 100 excess beds in Sarasota County. If the capital cost "pass through" scheme is eliminated in whole or in part, the hospitals would have to absorb or pass on to consumers more costs through inFla.ed rates and possible increases in Medicare and Medicaid reimbursement. To the extent that existing facilities are unable to raise charges sufficiently, they will have to absorb the differences, incur losses or cut back on services and quality of care. If a hospital is approved for an area that is not currently a monopoly, with existing hospitals already competing for patients, especially if the hospitals are operating below capacity, than the added competition is destructive. It dilutes the patient volume each hospital depends upon for adequate revenue coverage of costs. This results in inefficiency in the
health care system since hospitals have fewer patients to spread the fixed costs among.
Thus it has been established that approval of Manasota as an additional competitor in this market will result in significant added health care costs to the community.
Cost and Methods of Construction, Etc.-Section 381.494(6)(c)13, Florida Statutes
Aside from the capital cost understatements reflected in the above findings, the construction costs, methods of construction and provisions for energy conservation dictated by the south Florida environment where the hospital will be built, have been shown by the Applicant to be reasonable and appropriate. Because of the indefinite site location in the south Sarasota County area, however, the funds set aside in the pro forma of $35,000 for site preparation costs, and the $400,000 contingency fund related to construction, have not been established to be adequate to cover all site preparation work and such potential offsite construction costs as additional traffic lanes, signals and utility service extensions.
Available, Less Costly, More Efficient Alternatives Section 381.494(6)(d)(1), Florida Statutes.
There are available less costly, more efficient alternatives to the acute care inpatient services proposed by the Applicant. The existing inpatient facilities, including Gulf Coast Osteopathic Hospital, can or will provide, inpatient services similar to those proposed. The existing facilities are providing them in an appropriate, efficient manner to the extent they are able, given their under-utilization.
Existing Facilities Are Being Used in an Appropriate, Efficient Manner-Section 381.494(6)(d)2, Florida Statutes
It has not been established that existing inpatient facilities are being used in an efficient manner, in terms of adequate use of their present capacity. Rather, the record reflects that existing hospitals are under-utilized with the added health care costs and inefficiencies that entails, which Manasota would aggravate.
Alternatives to New Construction such as Modernization and Sharing-Section 381.494(6)(d)3, Florida Statutes
The Applicant has not established that alternatives to the proposed construction have been considered and implemented to the maximum extent possible. The existing facilities are viable
alternatives to the proposed new construction, in that they have substantial amounts of unused capacity and can provide additional acute care services as needed without expansion. Many of the osteopathic physicians testifying acknowledged that their patients can be treated in an appropriate, efficient manner in existing facilities.
Patients Will Experience Serious Problems Obtaining Inpatient osteopathic Care in the Absence of the Proposed Facility-Section
381.494 (6)(d)4, Florida Statutes.
The Applicant has not established that patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of Manasota. Osteopathic acute care services are available in District VIII, notwithstanding the absence of another identifiable osteopathic facility, for the reasons delineated above.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to these proceedings. Section 120.57(1), Florida Statutes.
Section 381.494(2), Florida Statutes, provides:
When an application is made for a Certificate of Need to construct or to expand an osteopathic acute care hospital, the need for such hospital shall be determined on the basis of the need for and availability of osteopathic services and osteopathic acute care hospitals in the district.
Relying on the predecessor to this provision, the court in Gulf Coast Hospital v. Department of Health and Rehabilitative Services, 424 So.2d 86 (Fla. 1st DCA 1982) ruled that the need for osteopathic facilities must be considered separately from the need for allopathic facilities.
The continued viability of the Gulf Coast decision is questionable in view of the subsequent decision in Farmworker Rights Organization v. Department of Health and Rehabilitative Services, 430 So.2d 1 (Fla. 1st DCA 1983). The court in that case held that the Florida Certificate of Need law must be applied consistently and in accordance with the federal health planning law and the federal regulations on the same subject.
The federal statutory provision dealing with the consideration of "need" provides at 42 USC Section 300N-6(F)
When an application is made by an osteopathic or allopathic facility for a Certificate of Need, the need shall be considered on the basis of the need for and the availability in the community of services and facilities for osteopathic and allopathic physicians and their patients.
The federal statutory provision concerning osteopathic need thus is substantially similar to the Florida provision. The federal regulation on this issue promulgated by the Secretary of the United States Department of Health and Human Services, appears at
42 CFR, Section 123.412(a)(21) and merely repeats that statutory provision. However, in the analysis and comments on the regulations, the Secretary specifically rejects the suggestion of a commentator that the need for allopathic and osteopathic facilities should be considered separately, stating that:
Congress did not intend. to require that the planning agencies look at each of these types of medical care as separate systems. Rather, it sought to ensure that the planning program not discriminate against osteopathic facilities and practitioners, and did so by requiring that planning agencies, where appropriate, consider the need for and availability of osteopathic facilities and services. 45 bed FED Register REG. No. 205 at 69772 (October 21, 1980).
Accordingly, in considering the need for a proposed osteopathic facility, while the bed need formula contained in Rule 10-5.11(23), Florida Administrative Code is not applicable, according to the Gulf Coast opinion and South Dade Osteopathic Medical Center v. Department of Health and Rehabilitative Services, supra., and cannot be used as a basis for denial of an osteopathic hospital application, the fact remains that HRS must still consider the need for, existence of and availability of all acute care facilities and services including osteopathic ones, under the various criteria of Section 381.494(6)(c)and (d). Indeed, the Gulf Coast decision itself states:
Certificates of Need for osteopathic hospitals are subject to the same myriad of requirements, including financial feasibility, which pertains to other facilities licensed by HRS.
In Osteopathic Medical Center of Ocala v. Department of Health and Rehabilitative Services, et al., supra., it was determined:
There is absolutely no difference between an acute care bed 'located in an osteopathic acute care hospital' and an acute care bed 'located in an allopathic acute care hospital'. The acute care hospitals in the service district of the applicant can be relevant as pertaining to the criteria of the existence of like services found in Section 381.494(6) (c)2 and 12, Florida Statutes.
The reality that, as a result of the implementation of DRG's, hospital occupancy rates are declining in all hospitals cannot be ignored when evaluating the need for either osteopathic acute care hospitals or allopathic acute care hospitals.
Thus, it is deemed that applications to construct osteopathic hospitals, although they are to be evaluated on the basis of the need for and availability of osteopathic services and hospitals in the district are still required to comply with the "myriad of requirements" any hospital has to comply with in order to obtain a Certificate of Need. Then, assuming they comply with those requirements in a sufficient manner, the application cannot be defeated on the basis that the acute care bed inventory in the district as determined by the department's rule methodology indicates a need for no more acute care beds, so long as that applicant shows an unfulfilled need or lack of availability of osteopathic services or osteopathic acute care hospitals in the district.
It must be remembered in considering compliance with all the statutory criteria which the Gulf Coast case itself mandates, that Section 381.494(6)(c), Florida Statutes requires HRS to "...review applications for Certificates of Need.." in context with the criteria contained in Section 381.494(6)(3)(c)1-
13 and that the issue of "need" therefore is determined from consideration of all applicable statutory criteria and need is not in itself a separate criterion. Rather it is more in the nature of an ultimate conclusion reached after all those criteria have been weighed and evaluated vis-a-vis an application. In that connection, two of the criteria which any applicant, osteopathic or allopathic, must be confronted with, is that contained in Section 381.494(6)(c)2 and 12, Florida Statutes, which, in view of the above findings and authority requires consideration of existing acute care hospitals as "like and existing services," the extent of utilization of which is
relevant and must be considered. Thus, the operating circumstances of the existing hospitals in the service district of an osteopathic applicant, in terms of their utilization, patient market share and the competitive effect on them as suppliers of health services posed by the advent of an applicant's hospital, must be considered when determining the need for a new osteopathic hospital.
Since applicants for Certificates of Need to construct osteopathic hospitals have the opportunity to be evaluated on the basis of the need for and availability of osteopathic services and hospitals in the district, it first must be determined whether this proposal is, in fact and law, a proposal to construct an "osteopathic" hospital.
In this regard, Manasota maintains that it will operate its hospital in accordance with the principles of osteopathy supported by osteopathic specialists. It proposes an open medical staff, but with management and control of the facility in the hands of osteopaths or those sympathetic to that school of medicine so as to further such activities rather than merely tolerate them, in accordance with the Gulf Coast opinion, supra. In reality, most of its medical staff would be composed of M.D.'s. In view of the above findings of fact and preponderant evidence, however, which reveal that Manasota has not proven that it will have a majority of its staff and department heads composed of osteopaths, nor will otherwise have management and control of its facility "in the hands of osteopaths" or those sympathetic to that school of medicine and its failure to show adherence to the other indicia of an osteopathic teaching hospital, it cannot be concluded that Manasota meets any record definition of a "osteopathic" hospital. See, Osteopathic Medical Center of Ocala, Inc. v. Department of Health and Rehabilitative Services, supra.
Section 120.57(1) proceedings are de novo proceedings intended to formulate final agency action, not to review preliminary action taken with regard to an application. McDonald
v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977). The Applicant has the burden of proving entitlement to a license and the Certificate of Need is a license within the meaning of Section 120.52(1), Florida Statutes. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). The case of Department of Health and Rehabilitative Services v. Johnson and Johnson, 447 So.2d 361 (Fla. 1st DCA 1984) stands for the proposition that need for a proposed facility must be based upon a balanced consideration of all statutory and rule criteria. A balanced consideration of the criteria applicable in this case dictates that the proposed hospital should not be approved.
Although neither the statutory or regulatory criteria involved herein, nor the state and local health plans of record, contain any methodology or specific statement regarding measurement of need for osteopathic hospitals, beds or services, both those plans express serious concern about excess acute care beds, which condition prevails in District VIII. The state health plan establishes an 80% minimum occupancy standard to be achieved before new beds should be approved and it is undisputed that 80% occupancy is the optimal level for acute care hospitals. Whether this 80% level is applied to all acute care hospitals or just to the pending new Gulf Coast osteopathic facility, the standard would dictate that no new facilities be approved due to the dearth of adequate occupancy and utilization in the district. This is especially indicated where no credible methodology has been developed to measure and project osteopathic need and the utilization of osteopathic and other hospitals, both in the district and in other areas of the state (made of record for comparative analogy purposes), has declined so significantly. Indeed, it would violate the state health plan to allow another osteopathic hospital to be constructed in District VIII before the Gulf Coast Osteopathic Hospital has had an opportunity to get into operation and secure sufficient utilization to render it a viable facility. The availability of the existing allopathic acute care hospitals in the district, operating at far below the 80% optimum level, is relevant to consideration of the need for the proposed facility with regard to the criteria at Section 381.494(6)(c)2 and 12, Florida Statutes. South Dade, supra,; osteopathic Medical Center of Ocala, supra.
The Gulf Coast Hospital will shortly become an appropriate, adequate, available, reasonably accessible osteopathic hospital within the district. The 30-minute driving time standard contained in Rule 10-5.11(23)(i)1, Florida Administrative Code has been shown by the testimony of witness Konrad and by decisional law, to not be applicable in determining need for osteopathic hospitals. Under any of the theories and methodologies presented for determining osteopathic need, osteopathic hospitals are regional in nature and will typically be at distances greater than 30-minutes driving time from substantial numbers of osteopathic patients. Two hours is an appropriate driving time standard for location and need determination related to osteopathic hospitals. See, South Dade, supra. The evidence demonstrates that, given the low extent of utilization in the district, that the Gulf Coast facility and the other mixed-staff acute care hospitals in Sarasota County and. District VIII will continue to be available and accessible to acute care patients of allopathic and osteopathic physicians. It has further been demonstrated that osteopathic hospital facilities within adjoining service districts are available and
accessible to patients residing in Sarasota County and that there are a number of facilities that are greatly under-utilized in the Pinellas and Hillsborough County area substantially within the appropriate driving time accessibility standard.
Even if this were genuinely an osteopathic application, the availability of allopathic acute care hospitals being relevant for the reasons denoted above, it is critically important to note that existing acute care facilities in Sarasota County and District VIII are substantially under-utilized and the projected population growth will not appreciably improve the situation because of recent declines in the usage rate which will outstrip population increases. The patient days Manasota would obtain must come from a finite and decreasing pool of available patient days in the county and district. Any additional loss of patient days by the already under-utilized hospitals as a result of the advent of Manasota, will have a substantial adverse impact on their continued financial and operational viability and will significantly increase health care costs.
The existing, under-utilized health care facilities, which are of mixed staff, used and supported by M.D.'s and osteopaths, are "like" facilities to that proposed by the Applicant, and are available and accessible to acute care patients in District VIII and Sarasota County.
The Applicant possesses the management expertise to provide quality health care, assuming it could adequately staff its hospital and assuming it could achieve sufficient utilization and capital resources to become financially viable, which was not established. The quality of care to be provided by the Applicant was not genuinely at issue, however.
There are ample available and adequate health care facilities and services in the district aside from existing acute care hospitals such as outpatient clinics, home health care and ambulatory surgical facilities, in addition to the hospitals, to serve as alternatives to the health care services proposed by the Applicant. No evidence was introduced to show that any osteopathic patients are not being served by the existing mixed staff hospitals or could not be served by Gulf Coast. The evidence of record does not reflect that the Applicant would create any economies or improvements in service in the District through the 090 of joint, cooporative or shared health care resources. The evidence, indeed, demonstrates that the cost of health care services and resources will increase significantly as a result of the introduction of the Applicant's
facility.
The Applicant did not propose to offer any special equipment or services not reasonably and economically available in adjoining areas. Indeed, this criteria is not genuinely at issue in this case.
The Applicant proposes to install an osteopathic teaching hospital. Even if this application could be deemed truly to involve an osteopathic hospital, a need for research and educational facilities of this type in the district was not proven. Moreover, in view of the above Findings of Fact on this subject matter, the Applicant did not establish that it could attract sufficient staff specialists and otherwise operate a sufficient number of the varied specialty departments required of an osteopathic teaching hospital.
The Applicant, for the reasons delineated in the above Findings of Fact, and the evidence of record, did not demonstrate that it had available sufficient resources, including administrative, technical and nursing staff, and medical staff, as well as sufficient capital funds to adequately provide for construction and accomplishment of the project as well as necessary working capital. Anticipated revenues were proven not to be sufficient to cover necessary expenses such that the project can operate with a positive operating margin.
As illustrated by the above Findings of Fact and the, competent, substantial evidence of record, the project will not be financially feasible, both in the short and long term. Given the fact that the present assets of AmeriHealth are essentially already collateralized to their fullest extent, and given the fact that the bank AmeriHealth primarily looks to for financing has currently imposed significant conditions and restrictions (other than the contingency of a grant of the CON) on potential
,financial commitments to the Applicant, such that a number of other hospital purchases have not been successfully consummated, it is highly doubtful that the Applicant can obtain the necessary financing at terms favorable enough to allow it to construct and operate this project. Mr. Jaroszewicz's opinion as to the financibility of the project was predicated on the basic assumption that the Applicant's financial projections as to capital costs, revenues and expenses were reasonable and accurate. This was shown not to be the case. Because of this and the other frailties attendant to Mr. Jaroszewicz's opinion, as well as the other reasons delineated in the above Findings of Fact, it is concluded that the project is not financially feasible on a short term basis.
The Applicant has failed to establish that the proposed project is financially feasible on a long term basis. Expenses are greatly understated and revenues are excessively
optimistic given the dearth of occupancy and the low utilization rate the Applicant will experience. The Applicant considerably overstated the likely increases in Medicare DRG reimbursements, even assuming that there is no reduction in the Medicare capital reimbursement. The Applicant did not, in its utilization projections, give serious consideration to the impact of increasing use of outpatient services, nor to the effect on utilization caused by PRO's and the impact of the Englewood Hospital's imminent opening, as well as the Gulf Coast Osteopathic Hospital's opening in the fairly near future. The Applicant based its projected patient admissions and expected utilization experience on a "composite feeling" obtained from interviews with a relatively small number of local and extra district physicians, some of whom testified at hearing that they would not use the facility at all, and many of whom will not swing all their patient admissions to the proposed facility.
Thus, for this and other reasons found above, the Applicant's
projection of utilization and revenue is excessively optimistic. Additionally, the Applicant failed to account for numerous significant expenses, ranging from the large Florida Indigency Assessment, real estate taxes, insurance expenses, excessive staffing costs over projections, to name a few. The Applicant thus failed to prove that the project will be financially feasible in its operations over the near and long term.
Additionally, the Applicant has not proven the efficacy of its capital expenditure cost projections. The evidence establishes that the Applicant has understated costs for essential items of construction and equipment, including osteopathic therapy equipment, kitchen and dining service equipment, and failed to prove that adequate provision had been made in its capital cost projections for such things as utility services, appropriate site preparation and engineering costs and adequate provision for traffic access. Moreover, the Applicant failed to make sufficient allowance for land acquisition costs.
The criteria concerning the special needs of HMO's is not at issue in this proceeding. No evidence concerning the needs of HMO's was adduced by any party. Aside from its proposal to operate an osteopathic teaching hospital, the need for which and the Applicant's operational and financial capability to operate which has not been proven, the Applicant did not propose nor prove an intent or ability to provide a substantial portion of its services or resources to individuals not residing in District VIII.
In view of the Findings of Fact and evidence of record concerning the impact of this project on the cost of providing health services in the district and the Sarasota County community and the effects of competition on the supply of health services
if the proposed facility were built, it has been established that the proposed project will cause significant increase in health care costs. The advent of the proposed hospital will substantially increase costs to Medicare, Medicaid and indigent care programs, which will be passed on to taxpayers. The significant increase in excess acute care hospital capacity posed by the construction of the hospital will significantly increase capital and operating costs which will be borne by the health care consuming public in District VIII and Sarasota County. A combination of declining utilization and the exacerbation of the already high degree of excess idle capacity posed by the installation of the project, will cause significant increases in these costs which cannot be covered by revenuea without substantial increases in hospital charges, reductions in needed services, or both. Thus, for the reasons found above, the application and proposed project has not been proven to meet any of the criteria at issue in Section 381.494(6)(c), Florida Statutes.
Inasmuch as this project involves the construction of a new acute care facility, the Applicant must meet the criteria of Section 381.494(6)(d), Florida Statutes. In this connection, it has been demonstrated that less costly, more efficient and appropriate alternatives to the proposed hospital are present in the form of the existing mixed-staff, acute care hospitals in
`District VIII and Sarasota County. Existing inpatient facilities are under-utilized and therefore, not being used efficiently. The evidence of record establishes that the osteopathic physicians can practice and their patients be adequately treated in an osteopathic manner in these facilities. Moreover, the recently approved Gulf Coast Hospital will be available within a reasonable travel distance to patients desiring to be treated in a purely osteopathic hospital.
Alternatives to the proposed construction exist in the form of utilization of the presently severely, under-utilized acute care hospitals. In light of this, approval of the project and the application pursuant to the criteria of Section 381.494(6)(d) cannot be justified given the above Findings of Fact and the competent, substantial evidence of record.
Manasota's Motion for Summary Recommended Order attacking the standing of the existing hospitals, parties to this proceeding, is denied. The approval of the Manasota project would result in a reduction in the operating margin of the exiting hospitals, to the extent that they will not be able to operate in a financially viable manner. Their continued ability to provide cost-efficient quality of care, will be severely damaged and possibly destroyed by the applicant's proposed project. Exiting acute care hospitals, situated as those opposing the Manasota application in this proceeding, have been
held to be substantially affected and their abilities to maintain their financial viability, and ability to provide quality health care, have been held to be a matter within the zone of interest to be protected under Chapter 381, Florida Statutes. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985); NME Hospitals, Inc. d/b/a Delray Community Hospital v. Department of Health and Rehabilitative Services, 7 FALR 4414, 4416 (Fla, 1st DCA August 20, 1985). In that last case, it was held that hospitals in the same HRS service district where a proposed hospital facility would be located, were substantially affected by the decision to grant a CON to the applicant for the proposed facility. In Palm Beach-Martin County Medical Center v. Department of Health and Rehabilitative Services, 7 FALR 5613 (Final Order November 4, 1985) an existing facility was held to have standing to contest the issuance of a Certificate of Need for a Satellite hospital because the loss of patients for the existing facility would have an adverse economic impact, even though it would not "imperil the continued financial feasibility of Jupiter Hospital." Existing allopathic hospitals have standing to participate in administrative proceedings in opposition to applications for Certificate of Need for osteopathic hospitals. South Date, supra; Osteopathic Medical Center of Ocala, supra; and Suncoast/Metropolitan General Hospital v. Department of Health and Rehabilitative Services, DOAH Case No. 82-1745 (Final Order August 15, 1983). Inasmuch as "cost containment is the purpose and objective of the Certificate of Need process…"; Bio-Medical Applications v. Department of Health and Rehabilitative Services,
370 So.2d 19, 25 (Fla. 2nd DCA 1979), this application should be
denied. Aside from the issue of whether the application and Applicant is truly "osteopathic" or not, there is no question given the above Findings of Fact and evidence of record, that it will cause a significant increase in health care costs which are not justified by attendant benefits to the health consuming public in District VIII and Sarasota County. The evidence does not reflect that that health care market, or an identifiable portion of it is unserved or underserved at the present time. It cannot have been th legislative intent in enacting the special osteopathic consideration embodied in Section 381.494(2), Florida Statutes, to override the entire intent and purpose of Chapter 381, Florida Statutes, as even the Gulf Coast opinion indicates.
Accordingly, having considered the foregoing Findings of Fact, Conclusions of Law, the competent, substantial evidence of record, the candor and demeanor ot the witnesses and the pleadings and arguments of the parties, it is, therefore RECOMMENDED:
That the application of Manasota Osteopathic General Hospital, Inc. for a Certificate of Need authorizing establishment and operation of a 100-bed osteopathic teaching hospital in HRS District VIII and Sarasota County, Florida be DENIED.
DONE and ENTERED this 26th day of June, 1986 in Tallahassee, Florida.
P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 1986.
COPIES FURNISHED:
John D. C. Newton, II, Esquire CARSON & LINN, P.A.
253 East Virginia Street Tallahassee, Florida 32301
William E. Williams, Esquire FULLER & JOHNSON, P.A.
Post Office Box 1739 Tallahassee, Florida 32302
Robert A. Weiss, Esquire
118 North Gadsden Street Suite 101
Tallahassee, Florida 32301
Ken Davis, Esquire DAVIS, JUDKINS & SIMPSON
Post Office Box 10368 Tallahassee, Florida 32302
E. G. Boone, Esquire Robert Klingbeil, Esquire Post Office Box 1596 Venice, Florida 34284
W. David Watkins, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507
Tallahassee, Florida 32314-6507
Theodore C. Eastmore, Esquire WILLIAMS, PARKER, HARRISON,
DIETZ & GETZEN
Post Office Box 3258 Sarasota, Florida 33578
Harden King, Esquire Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
William Page, Jr., Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
VENICE HOSPITAL, INC.,
Petitioner,
vs. CASE NO. 85-0045
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, and MANASOTA OSTEOPATHIC GENERAL HOSPITAL, INC.,
Respondents.
/ HCA OF FLORIDA, INC., d/b/a DOCTORS-HOSPITAL OF SARASOTA,
Petitioner,
vs.
DEPARTMENT OF HEALTH AND
REHABILITATIVE SERVICES, CASE NO. 85-0047
Respondent,
and
MANASOTA OSTEOPATHIC GENERAL HOSPITAL, INC. AND ENGLEWOOD COMMUNITY HOSPITAL,
Intervenors.
/
DOCTORS' OSTEOPATHIC MEDICAL CENTER, INC. d/b/a GULF COAST HOSPITAL, INC.,
Petitioner,
vs. CASE NO. 85-0050
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,
Respondent.
/ SARASOTA COUNTY PUBLIC
HOSPITAL BOARD d/b/a, MEMORIAL HOSPITAL, SARASOTA,
Petitioner,
vs. CASE NO. 85-0051
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and MANASOTA OSTEOPATHIC GENERAL HOSPITAL,
Respondent.
/
FINAL ORDER
This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above styled case submitted a Recommended Order to the Department of
Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto. Exceptions to the Recommended Order were filed.
RULING ON MOTIONS
HRS has traditionally allowed 23 days from the date of execution of a recommended order in which to file exceptions. The Recommended Order herein was executed June 26, 1986
exceptions were filed with HRS General Counsel on July 21, 1986; which was the first workday following the 23rd day, which fell on a Saturday. HRS's duly promulgated rules clearly state that exceptions to recommended order shall be filed with HRS within 10 days of service of the recommended order and that where
particular hearing processes are set forth in Chapter 10 F.A.C. the model rule is not adopted. Rules 10-2.31 and 10-2.35, F.A.C. HRS has been chastised by the First District Court of Appeals for not following its own rules. Rule 10-2.35(3) F.A.C. states that "failure to timely file shall constitute waiver of the opportunity to file exceptions" The exceptions filed by Manasota were clearly untimely pursuant to HRS's duly promulgated
Rule. Being untimely, the opportunity to file is deemed waived and the exceptions will not be addressed in this final order.
FINDINGS OF FACT
The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order.
CONCLUSIONS OF LAW
The Department hereby adopts and incorporates bye reference the conclusions of law set forth in the Recommended Order, with the following exceptions:
The 4th sentence in the first full paragraph on page 60 of the Recommended Order, where it is stated "Two hours is an appropriate driving time standard for location and need determination related to osteopathic hospitals" is deleted from this Final Order.
Based upon the foregoing, it is
ADJUDGED, that the application of Manasota Osteopathic General Hospital, Inc., for a Certificate of Need authorizing establishment and operation of a 100 bed osteopathic teaching hospital in District VIII and Sarasota County, Florida is denied.
DONE and ORDERED this 22nd day of October 1986, in Tallahassee, Florida.
WILLIAM J. PAGE
Secretary
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE
OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED
Copies Furnished to:
P. Michael RuffE. G. Boone, Esquire
Hearing Officer Robert Klingheil, Esquire Division of Administrative P. O. Box 1596
Hearings Venice, Florida 34284 The Oakland Building
2009 Apalachee Parkway W. David Watkins, Esquire Tallahassee, Florida 32301 Oertel & Hoffman, P.A.
P. O. Box 6507
John D.C. Newton, II, Esquire Tallahassee, Florida
Carson & Linn, P.A. 32314-6507
253 East Virginia Street
Tallahassee, Florida 32301 Theodore C. Eastmore, Esquire
Williams, Parker, Harrison, William E. Williams, Esquire Dietz & Getzen
Fuller & Johnson, P.A. P. O Box 3258 Tallahassee, Florida 32301 Sarasota, Florida 33578
Robert A. Weiss, Esquire John Rodriguez, Esquire
118 N. Gadsden Street Assistant General Counsel
Suite 101 Department of Health and
Tallahassee, Florida Rehabilitative Services Winewood Blvd.
Ken Davis, Esquire Building One, Room 407
Davis, Judkins & Simpson Tallahassee, Florida
P. O. Box 10368 323990-700
Ken Davis, Esquire Tallahassee, Florida 32302
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U. S. Mail this 23 day of October, 1986.
R. S. Power, Agency Clerk Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407
Tallahassee, Florida 32399-0700 904/488-2381
================================================================= AGENCY AMENDED FINAL ORDER
=================================================================
STATE OF FLORIDA
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
VENICE HOSPITAL, INC.,
Petitioner,
vs. CASE NO. 85-0045
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, and MANASOTA OSTEOPATHIC GENERAL HOSPITAL, INC.,
Respondents.
/ HCA OF FLORIDA, INC., d/b/a DOCTORS-HOSPITAL OF SARASOTA,
Petitioner,
vs.
DEPARTMENT OF HEALTH AND
REHABILITATIVE SERVICES, CASE NO. 85-0047
Respondent,
and
MANASOTA OSTEOPATHIC GENERAL HOSPITAL, INC. AND ENGLEWOOD COMMUNITY HOSPITAL,
Intervenors.
/
DOCTORS' OSTEOPATHIC MEDICAL CENTER, INC. d/b/a GULF COAST HOSPITAL, INC.,
Petitioner,
vs. CASE NO. 85-0050
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,
Respondent.
/ SARASOTA COUNTY PUBLIC
HOSPITAL BOARD d/b/a, MEMORIAL HOSPITAL, SARASOTA,
Petitioner,
vs. CASE NO. 85-0051
DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and MANASOTA OSTEOPATHIC GENERAL HOSPITAL,
Respondent.
/
AMENDED FINAL ORDER
This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above styled case submitted a Recommended Order to the Department of
Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto. Exceptions to the Recommended Order were filed.
RULING ON MOTIONS
The Motion to Correct and Amend Final Order filed by Manasota Osteopathic General Hospital, Inc., (Manasota) is granted.
RULING ON OBJECTIONS
1.
FINDINGS OF FACT
The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order.
CONCLUSIONS OF LAW
The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order, with the following exceptions:
The 4th sentence in the first full paragraph on page 60 of the Recommended Order, where it is stated "Two hours is an appropriate driving time standard for location and need determination related to osteopathic hospitals" is deleted from this Final Order.
Based upon the foregoing, it is
ADJUDGED, that the application of Manasota Osteopathic General Hospital, Inc., for a Certificate of Need authorizing establishment and operation of a 100 bed osteopathic teaching hospital in District VIII and Sarasota County, Florida is denied.
DONE and ORDERED this 19nd day of November 1986, in Tallahassee, Florida.
WILLIAM J. PAGE
Secretary
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED
Copies Furnished to:
P. Michael RuffE. G. Boone, Esquire
Hearing Officer Robert Klingheil, Esquire Division of Administrative P. O. Box 1596
Hearings Venice, Florida 34284 The Oakland Building
2009 Apalachee Parkway W. David Watkins, Esquire Tallahassee, Florida 32301 Oertel & Hoffman, P.A.
P. O. Box 6507
John D.C. Newton, II, Esquire Tallahassee, Florida
Carson & Linn, P.A. 32314-6507
253 East Virginia Street
Tallahassee, Florida 32301 Theodore C. Eastmore, Esquire
Williams, Parker, Harrison, William E. Williams, Esquire Dietz & Getzen
Fuller & Johnson, P.A. P. O Box 3258 Tallahassee, Florida 32301 Sarasota, Florida 33578
Robert A. Weiss, Esquire John Rodriguez, Esquire
118 N. Gadsden Street Assistant General Counsel
Suite 101 Department of Health and
Tallahassee, Florida Rehabilitative Services Winewood Blvd.
Ken Davis, Esquire Building One, Room 407
Davis, Judkins & Simpson Tallahassee, Florida
P. O. Box 10368 323990-700
Ken Davis, Esquire Tallahassee, Florida 32302
Informational copy to:
Nell Mitchem (PDCFD)
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U. S. Mail this 20th day of November, 1986.
R. S. Power, Agency Clerk Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407
Tallahassee, Florida 32399-0700
904/488-2381
| Issue Date | Proceedings |
|---|---|
| Jun. 26, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 23, 1986 | Agency Final Order | |
| Jun. 26, 1986 | Recommended Order | Petitioner did not prove it would really operate as osteopathic hospital in terms of Doctors' Osteopathic staff and Doctors' Osteopathic control of management can consider utilization at all osteopathic hospitals in determining need. |
