STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA PSYCHIATRIC CENTERS, )

)

Petitioner, )

)

vs. ) CASE NO. 87-2046

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) FLORIDA RESIDENTIAL TREATMENT ) CENTERS, INC., )

)

Respondent. )

) SOUTH BROWARD HOSPITAL DISTRICT )

)

Petitioner, )

)

vs. ) CASE NO. 87-2401

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) FLORIDA RESIDENTIAL TREATMENT ) CENTERS, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled cases on February 17-19, and 22-24, 1988, in Tallahassee, Florida.

APPEARANCES

For Petitioner, Florida Psychiatric Centers:

Kenneth G. Oertel, Esquire Kenneth F. Hoffman, Esquire

M. Christopher Bryant, Esquire Post Office Box 6507 Tallahassee, Florida 32314-6507

For Petitioner, Broward Hospital District:

Reynold Meyer, Esquire

F. Philip Blank, P.A.

204-B South Monroe Street Tallahassee, Florida 32301

For Respondent, Department of Health Rehabilitative

Services:

Edgar Lee Elzie, Jr., Esquire MacFarlane, Ferguson, Allison & Kelly Post Office Box 82

Tallahassee, Florida 32302

For Respondent, Florida Residential Treatment Center, Inc: George M. Meros, Jr., Esquire

Rumberger, Kirk, Caldwell, Cabaniss & Burke

101 North Monroe Street, Suite 900 Tallahassee, Florida 32301

William E. Hoffmann, Jr., Esquire Deborah J. Winegard, Esquire

King and Spalding

2500 Trust Company Tower Atlanta, Georgia 30303

PRELIMINARY STATEMENT

At issue in these proceedings is whether the application of Florida Residential Treatment Centers, Inc. (FRTC), for a certificate of need (CON) to construct and operate a 60-bed intensive residential treatment facility in Broward County, Florida, should be approved.

At hearing, FRTC called as witnesses: Ronald T. Luke, accepted as an expert in health planning with special emphasis on mental health, health public policy analysis with special emphasis on mental health, health economics, development of need methodologies for health services, and survey research; Albert A. Joyner, Jr.; William S. Love, accepted as an expert in health care finance; Joseph C. Little; John J. O'Connor, accepted as an expert in staffing requirements of psychiatric programs, including residential treatment programs; Gregory L. Hughes, accepted as an expert in architecture and construction budgeting for psychiatric facilities; and Charles H. Brunt, accepted as an expert in psychiatry with special emphasis on children and adolescents. FRTC's exhibits 1-12 and 15 were received into evidence.

The Department of Health and Rehabilitative Services (Department) called as witnesses: Elizabeth Dudek, accepted as an expert in health care planning as it relates to certificate of need review in Florida; and Bruce A. Henderson. The Department's exhibits 1-3 were received into evidence.

Florida Psychiatric Centers (FPC) called as witnesses: Lawrence Levinson, accepted as an expert in construction costs, site preparation and the cost of construction supervision; Deborah J. Krueger, accepted as an expert in health care planning; and Franklin D. Goldberg; accepted as an expert in the administration of mental health services and hospital administration. FPC's exhibits 1-26, 28 and 29 were received into evidence. South Broward Hospital District (SBHD) called no witnesses, but its exhibits 1-5 were received into evidence.

The transcript of hearing was filed April 8, 1988, and the parties were granted leave until May 27, 1988, to file proposed findings of fact. FRTC, FPC, and SBHD timely filed proposed findings, and they have been addressed in the appendix to this recommended order.

FINDINGS OF FACT

The application and project

1. On October 15, 1986, Respondent, Florida Residential Treatment Centers, Inc. (FRTC), filed a timely application with the Respondent, Department of Health and Rehabilitative Services (Department), for a certificate of need to construct a 60-bed specialty hospital to be licensed as an intensive residential treatment program for children and adolescents in Broward County, Florida. On March 11, 1987, the Department proposed to grant FRTC's application, and petitioners, Florida Psychiatric Centers (FPC) and South Broward Hospital District (SBHD), timely petitioned for formal administrative review.

   
   

2. FRTC is a wholly-owned subsidiary of Charter Medical Corporation (Charter). Currently, Charter owns, operates or has under construction 85 hospitals within its corporate network. Of these, 13 are general hospitals, and

   72 are psychiatric hospitals. Notably, Charter now operates residential treatment programs in Newport News, Virginia, Provo, Utah, and Mobile, Alabama; and, is developing such a program in Memphis, Tennessee.

   
   

3. Within the State of Florida, Charter operates psychiatric hospitals in Tampa, Jacksonville, Fort Myers, Miami, and Ocala. In connection with the operation of these facilities, Charter has established satellite counseling centers to screen patients prior to admission and to provide aftercare upon discharge. Of 20 such centers operated by Charter, one is located in Broward County and two are located in Dade County.

   
   

4. The facility proposed by FRTC in Broward County (District X) will treat seriously emotionally disturbed children and adolescents under the age of 18. The patients admitted to the facility will have the full range of psychiatric diagnoses, with the probable exception of serious mental retardation and severe autism. FRTC will not treat patients who present themselves with a primary substance abuse diagnosis, nor will it admit patients who are actively dangerous. This distinguishes FRTC from an acute psychiatric hospital where actively dangerous patients requiring immediate medical intervention are often admitted.

   
   

5. The anticipated length of stay at FRTC will vary depending upon the patient's responsiveness to treatment, but is reasonably expected to range between 6 months to 2 years, with an average of 1 year.

   
   

6. The treatment programs to be offered at FRTC will be based upon a bio- psychosocial treatment model. This model assumes that the biological component of a patient's condition has been stabilized and that psychiatric medication will be administered solely to maintain this stabilized condition. The social component of the model is designed to resolve problems in interpersonal, family and peer relationships through educational groups, psychiatric co-therapeutic groups and family group therapy. The psychological component focuses primarily on developing personal understanding and insight to guide the patient toward self-directed behavior.

   
   

7. Among the therapies to be offered at FRTC are individual, family, recreational, group and educational. Group therapy will be designed to resolve interpersonal problems and relationships, and focuses primarily on building trust among group members. Some group therapy sessions will also cover specific issues such as sex education, eating disorders, self-image and social skills.

   The goal of recreational therapy will be to teach patients to play appropriately, showing them how to give, take and share, and to follow and to lead. Recreational activities will be available both on and off campus. The goal of occupational therapy will be to develop skills used in work. For a child whose work is school, this often involves using special education techniques. For teenagers, occupational therapy also develops work skills, and prepares them for vocational training or employment. Family therapy is crucial because the family is she core of child development. Families will be invited to spend days with their children at FRTC where they will learn behavioral management techniques, and participate in parent education activities and multifamily groups. The school component of the program includes development of an individualized educational plan for each child. School will be conducted 4-5 hours a day.

   
   

8. FRTC will utilize the level system as a behavioral management tool This system provides incentives for learning responsibility for one's own behavior and for functioning autonomously.

   
   

9. The typical progress of a patient at FRTC will be as follows. First, a team which includes a psychiatrist, social worker, psychologist and teacher will decide, based upon available information, whether admission is appropriate. If admitted, a comprehensive assessment will be conducted within 10 days, a goal- oriented treatment program will be developed for each patient, designed to remedy specific problems. Discharge planning will begin immediately upon admission. A case manager will be involved to assure that the treatment modalities are well-coordinated. Finally, FRTC will provide aftercare upon discharge.

   
   

10. Should any FRTC patients experience acute episodes, they will be referred to acute care psychiatric hospitals with which FRTC has entered into transfer agreements. Likewise, patients who require other medical attention will be referred to appropriate physicians Consistency with the district plan and state health plan.

    
    

11. While the local health plan does not specifically address the need for intensive residential treatment programs (IRTPs) for children and adolescents, it does contain several policies and priorities that relate to the provision of psychiatric services within the district. Policy 2 contains the following relevant priorities when an applicant proposes to provide a new psychiatric service:

    
    

    ... Each psychiatric inpatient unit shall provide the following services: psychological testing/assessment, psychotherapy, chemotherapy, psychiatric consultation to other hospital departments, family therapy, crisis intervention, activity therapy, social services and structured education for school age patients, and have a minimum patient capacity of 20 and a relationship with the community mental health center. Facilities should be encouraged to provide for a separation of children, adolescents, adults, and geriatric patient' where possible.

    Greater priority should be given to

    psychiatric inpatient programs that propose to offer a broad spectrum of continuous care.

    
    

    ... Applicants should be encouraged to propose innovative treatment techniques such as, complementing outpatient and inpatient services or cluster campuses, that are designed to

    ultimately reduce dependency upon short term psychiatric hospital beds. New facilities should be structurally designed for conducive recovery, provide a least restrictive setting, provide areas for privacy, and offer a wide range of psychiatric therapies.

    Applicants should be encouraged to offer intermediate and follow-up care to reduce recidivism, encourage specialty services by population and age, engage in research, and offer a full range of complete assessment (biological and psychological).

    
    

    Additionally, the local plan contains the following policies and priorities which warrant consideration in this case:

    
    

    POLICY #3

    
    

    Services provided by all proposed and existing facilities should be made available to all segments of the resident population regardless of the ability to pay.

    
    

    Priority #1 - Services and facilities should be designed to treat

    indigent patients to the greatest extend possible, with new project approval based in part on a documented history of provision of services to indigent patients.

    
    

    Priority #2 - Applicants should have documented a willingness to participate in appropriate community

    planning activities aimed at addressing the problem of financing for the medically indigent.

    
    

    POLICY #4

    
    

    Providers of health services are expected to the extent possible to insure an improvement of the quality of health services within the district.

    Priority #1 - Applicants for certificate of need approval should document either their intention or experience in meeting or exceeding the standards promulgated for the provision of services by the appropriate national accreditation organization.

    
    

    Priority #2 - Each applicant for certificate of need approval should have an approved Patient Bill of Rights' `as part of the institution's internal policy.

    
    

    POLICY #5

    
    

    Specialized inpatient psychiatric treatment services should be available by age, group and service type. For example, programs for dually diagnosed mentally ill substance abusers, the elderly, and children, should be accessible to those population groups.

    
    

    Priority #1 - Applicants should be encouraged to expand or initiate specialized psychiatric treatment services.

    
    

12. The FRTC application is consistent with the local health plan. FRTC's program elements and facility design are consistent with those mandated by the local plan for mental health facilities, and its proposal offers a wide range of services, including follow-up care. FRTC intends to provide a minimum of 1.5 percent of its patient day allotment to indigent children and adolescents, and will seek JCAH accreditation and CHAMPUS approval.

    
    

13. The state health plan addresses services similar to those being proposed by FRTC, and contains the following pertinent policies and statements:

    
    

    Mental health services are designed to provide diagnosis, treatment and support of individuals suffering from mental illness and substance abuse.

    Services encompass a wide range of programs which include: diagnosis and evaluation, prevention, outpatient treatment, day treatment, crisis stabilization and counseling, foster and group homes, hospital inpatient diagnosis and treatment, residential treatment, and long term inpatient care. These programs interact with other social and economic services, in addition to traditional medical care, to meet the specific needs of individual clients.

    STATE POLICIES

    
    

    As the designated mental health authority' for Florida, HRS has the responsibility for guiding the development of a coordinated system of mental health services in cooperation with local community efforts and input. Part of that responsibility is to develop and adopt policies which can be used to guide the development of services such that the needs of Florida residents are served in an appropriate and cost effective manner.

    
    

    Policies relating to the

    development of mental health services in Florida are contained in Chapter 394 and Chapter 230.2317, F.S. The goal of these services is:

    
    

    '... reduce the occurrence,

    severity, duration and disabling aspects of mental, emotional, and behavioral disorders.' (Chapter 394, F.S.)

    
    

    '... provide education; mental health treatment; and when needed, residential services for severely emotionally disturbed students.' (Chapter 230.2317, F.S.)

    
    

    Within the statutes, major emphasis has also been placed on patient rights and the use of the least restrictive setting for the provision of treatment.

    
    

    'It is further the policy of the state that the least restrictive appropriate available treatment be utilized based on the individual needs and best interests of the patient and consistent with optimum improvement of the patient's condition.' (Chapter 394.459(2)(b), F.S.)

    
    

    'The program goals for each component of the network are'... 'to provide programs and services as close as possible to the child's home in the

    least restrictive manner consistent with the child's needs.' (Chapter 230.2317(1)(b), F.S.)

    
    

    Additional policies have been developed in support of the concept of a 'least restrictive environment' and

    address the role of long and short term inpatient care in providing mental health services for severely emotionally disturbed (SED) children. These include:

    
    

    'State mental hospitals are for those adolescents who are seriously

    mentally ill and who have not responded to other residential treatment programs and need a more restrictive setting.' (Alcohol, Drug Abuse and Mental Health Program Office, 1982)

    
    

    'Combined exceptional student and mental health services should be provided in the least restrictive setting possible. This setting is preferably a school or a community building rather than a clinical or hospital environment.' (Office of Children Youth and Families, 1984)

    
    

    'Alternative, therapeutic living arrangements must be available to SED students in the local areas, when family support is no longer possible, so that they may continue to receive services in the least restrictive way possible.' (Office of Children Youth and Families, 1984)

    
    

    'SED students should not be placed in residential schools or hospitals because of lack of local treatment resources, either educational or residential.' (Office of Children Youth and Families, 1984).

    * * * Sufficient funding for the

    development of residential treatment and community support is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents. Community services have been shown to be effective in rapidly returning the majority of individuals to their productive capacity and reducing the need for costly long term, institutional mental health services.

    There is, therefore, a need to proceed as rapidly as possible with the development of publicly funded services

    in those districts which are currently experiencing problems resulting from gaps in services.

    * * *

    Services for Adolescents and Children

    
    

    An additional issue which has been identified as a result of increased pressures for development of hospital based programs is the need to differentiate between services for adults and those for children and adolescents. Existing policy supports the separation of services for children and adolescents from those of adults and requires the development of a continuum of services for emotionally disturbed children. The actual need for both long and short term inpatient services for children and adolescents is relatively small compared to that of adults but is difficult to quantify. Providers, however, continue to request approval for long and short term adolescent and children services as a means of gaining access to the health care market.

    
    

    Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses.

    
    

14. In addition, the following pertinent goals are contained in the state health plan:

    
    

    GOAL 1: ENSURE THE AVAILABILITY OF MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES TO ALL FLORIDA RESIDENTS IN A LEAST RESTRICTIVE SETTING.

    * * *

    GOAL 2: PROMOTE THE DEVELOPMENT OF A CONTINUUM OF HIGH QUALITY, COST EFFECTIVE PRIVATE SECTOR MENTAL HEALTH AND SUBSTANCE ABUSE TREATMENT AND PREVENTIVE SERVICES.

    * * *

    GOAL 3: DEVELOP A COMPLETE RANGE OF ESSENTIAL PUBLIC MENTAL HEALTH SERVICES IN EACH HRS DISTRICT.

    * * *

    OBJECTIVE 3.1.: Develop a range of essential mental health services in each HRS district by 1989.

    * * * OBJECTIVE 3.2.: Place all clients

    identified by HRS as inappropriately institutionalized in state hospitals in community treatment settings by July 1, 1989.

    
    

    RECOMMENDED ACTIONS:

    
    

    3.2a.: Develop a complete range of community support services in each HRS district by July 1, 1989.

    * * * OBJECTIVE 3.3.: Develop a network

    of residential treatment settings for Florida's severely emotionally disturbed children by 1990.

    
    

15. The FRTC application is consistent with the state health plan which emphasizes the trend toward deinstutionalization, and the importance of education, treatment and residential services for severely emotionally disturbed children and adolescents rather than the traditional approach of institutional placement. Deinstutionalization assures more appropriate placement and treatment of patients, and is less costly from a capital cost and staffing perspective. The FRTC application also promotes treatment within the state, and will assist in reducing out-of-state placements. Need for the proposed facility

    
    

16. The Department has not adopted a rule for the review of applications for IRTPs, and has no numeric need methodology to assess their propriety. Rather, because of the paucity of such applications and available data, the Department reviews each application on a case by case basis and, if it is based on reasonable assumptions and is consistent with the criteria specified in Section 381.705, Florida Statutes, approves it.

    
    

17. In evaluating the need for an IRTP, the Department does not consider other residential treatment facilities in the district, which are not licensed as IRTP's and which have not received a CON, as like and existing health care services because such facilities are subject to different licensure standards. Under the circumstances, the Department's approach is rational, and it is found that there are no like and existing health care services in the district.

    
    

18. While there are no like and existing health care services in the district, there are other facilities which offer services which bear some similarity to those being proposed by FRTC. These facilities include short-term and long-term residential treatment facilities, therapeutic foster homes and therapeutic group homes. These facilities are, however, operating at capacity, have waiting lists, and do not in general offer the breath or term of service proposed by FRTC.

    
    

19. There are also short-term and long-term psychiatric hospitals within the district that include within their treatment modalities services similar to those proposed by the applicant. The short-term facilities are not, however, an appropriate substitute for children and adolescents needing long-term intensive

    residential treatment and neither are the long-term facilities from either a treatment or cost perspective. Notably, there are only 15 long term psychiatric beds in Broward County dedicated to adolescents, and none dedicated to children.

    
    

20. In addition to the evident need to fill the gap which exists in the continuum of care available to emotionally disturbed children and adolescents in Broward County, the record also contains other persuasive proof of the reasonableness of FRTC's proposal. This proof, offered through Dr. Ronald Luke, an expert in health planning whose opinions are credited, demonstrated the need for and the reasonableness of FRTC's proposed 60-bed facility.

    
    

21. Dr. Luke used two persuasive methodologies which tested the reasonableness of FRTC's 60-bed proposal. The first was a ratio of beds per population methodology similar to the rule methodology the Department uses for short-term psychiatric beds. Under this methodology, approval of FRTC's proposal would result in 25.47 beds per 100,000 population under 18 in District

    X. This ratio was tested for reasonableness with other available data. Relevant national data demonstrates an average daily census of 16,000 patients in similar beds. This calculates into 24.01 beds per 100,000 at a 90 percent occupancy rate and 25.93 beds per 100,000 at an 85 percent occupancy rate. Additionally, Georgia has a category of beds similar to IRTP beds. The Georgia utilization data demonstrates a pertinent ratio of 27.05 beds per 100,000 population.

    
    

22. The second methodology used by Dr. Luke to test the reasonableness of FRTC's proposal, was to assess national utilization data for "overnight care in conjunction with an intensive treatment program." The national census rate in such facility per 100,000 population for persons under 18 was 21.58. Multiplying such rate by the district population under 18, derives an average daily census of 52. Assuming an optimal occupancy rate of 85 percent, which is reasonable, this demonstrates a gross need for 61 IRTP beds in District X.

    
    

23. Dr. Luke's conclusions not only demonstrate the reasonableness of FRTC's proposal, but corroborate the need for such beds within the district. This proof, together with an analysis of existing or similar services, existing waiting lists for beds at similar facilities, and the placement by the Department of 28 children from Broward County outside the county in 1986 for long-term residential treatment, demonstrates the need for, and reasonableness of, FRTC's proposal.

    
    

    Quality of care

    
    

24. The parties have stipulated that Charter and its hospitals provide quality short and long term psychiatric care. All of Charter's psychiatric hospitals are JCAH accredited, and Charter will seek JCAH accreditation and CHAMPUS approval for the proposed facility.

    
    

25. Based on Charter's provision of quality psychiatric care, its experience in providing intensive residential treatment, and the programs proposed for the Broward County facility, it is found that quality intensive residential treatment will be provided at the FRTC facility. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation.

    
    

26. The parties have stipulated that FRTC has available resources, including management personnel and funds for capital and operating expenditures, for project accomplishment and operation. The proof further demonstrates that

    FRTC will be able to recruit any other administrative, clinical or other personnel needed for its facility. 1/

    
    

    Accessibility to all residents

    
    

27. FRTC projects the following utilization by class of pay: Insurance

    66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. While this is an insignificant indigent load, FRTC has committed to accept state-funded patients at current state rates. FRTC's projected utilization by class of pay is reasonable.

    
    

28. The evident purpose of FRTC's application is to permit its licensure as a hospital under Section 395.002, Florida Statutes, and thereby permit it to be called a "hospital." If a residential treatment facility is licensed as a hospital it has a significant advantage over unlicensed facilities in receiving reimbursement from third party payors. Therefore, accessibility will be increased for those children and adolescents in need of such care whose families have insurance coverage since it is more likely that coverage will be afforded at an IRTP licensed as a "hospital" than otherwise.

    
    

    Design considerations

    
    

29. The architectural design for the FRTC facility was adopted from a prototype short-term psychiatric hospital design which Charter has constructed in approximately 50 locations. This design contains the three essential components for psychiatric facilities: administration, support and nursing areas. The floor plan allows easy flow of circulation, and also allows for appropriate nursing control through visual access to activities on the floor. This design is appropriate for the purposes it will serve, and will promote quality residential care.

    
    

30. As initially proposed, the facility had a gross square footage of 31,097 square feet. At hearing, an updated floor plan was presented that increased the gross square footage by 900 square feet to 32,045, an insignificant change. In the updated floor plan the recreational component was increased from a multipurpose room to a half-court gymnasium, an additional classroom was added, and the nursing unit was reduced in size to create an assessment unit.

    
    

31. The updated floor plan is an enhancement of FRTC's initial proposal, and is a better design for the provision of long-term residential care to children and adolescents than the initial design. While either design is appropriate, acceptance of FRTC's updated floor plan is appropriate where, as here, the changes are not substantial.

    
    

    Financial feasibility

    
    

32. As previously noted, the parties have stipulated that FRTC has the available funds for capital and operating expenses, and that the project is financially feasible in the immediate term. At issue is the long-term financial feasibility of the project.

    
    

33. FRTC presented two pro forma calculations to demonstrate the financial feasibility of the project. The first pro forma was based on the application initially reviewed by the Department. The second was based on the proposal presented at hearing that included the changes in staffing pattern and construction previously discussed. Both pro formas were, however, based on the

    assumption than the 60-bed facility would achieve 50 percent occupancy in the first year of operation and 60 percent occupancy in the second year of operation, that the average length of stay would be 365 days, and that the daily patient charge in the first year of operation would be $300 and in the second year of operation would be $321. These are reasonable assumptions, and the proposed charges are reasonable. The projected charges are comparable to charges at other IRTP's in Florida, and are substantially less than those of acute psychiatric hospitals. For example, current daily charges at Charter Hospital of Miami are $481, and FPC anticipates that its average daily charge will be $500.

    
    

34. FRTC projects its utilization by class of pay for its first year of operation to be as follows: Insurance (commercial insurance and CHAMPUS) 65.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 8 percent. The projection by class of pay for the second year of operation changes slightly based on the assumption that, through experience, the bad debt allowance should decrease. Consequently, for its second year of operation FRTC projects its utilization by class of pay to be as follows: Insurance (commercial insurance and CHAMPUS) 66.5 percent, private pay 25 percent, indigent 1.5 percent, and bad debt 7 percent. These projections of utilization are reasonable.

    
    

35. FRTC's pro forma for the application initially reviewed by the Department demonstrates an estimated net income for the first year of operation of $97,000, and for the second year of operation $229,000. The updated pro forma to accommodate the changes in staffing level and construction, demonstrates a $102,000 loss in the first year of operation and a net income in the second year of operation of $244,000.

    
    

36. The assumptions upon which FRTC predicated its pro formas were reasonable. Accordingly, the proof demonstrates that the proposed project will be financially feasible in the long-term.

    
    

    Costs and methods of construction

    
    

37. The estimated project cost of the FRTC facility, as initially reviewed by the Department, was $4,389,533. The estimated cost of the project, as modified at hearing, was $4,728,000. This increase was nominally attributable to the change in architectural design of the facility which increased the cost of professional services by approximately $7,500 and construction costs by

    $139,322. Of more significance to the increased cost of the project was the increase in land acquisition costs which raised, because of appreciation factors, from $750,000 to $1,000,000.

    
    

38. The parties stipulated to the reasonableness of the majority of the development costs and most of the other items were not actively contested. Petitioners did, however, dispute the reasonableness of FRTC's cost estimate for land acquisition and construction supervision. The proof supports, however the reasonableness of FRTC's estimates.

    
    

39. FRTC has committed to construct its facility south of State Road 84 or east of Interstate 95 in Broward County, but has not, as yet, secured a site.

    It has, however, allocated $1,000,000 for land acquisition, $200,281 for site preparation exclusive of landscaping, and $126,000 for construction contingencies. The parties have stipulated to the reasonableness of the contingency fund, which is designed as a safety factor to cover unknown conditions such as unusually high utility fees and unusual site conditions.

40. Totalling the aforementioned sums, which may be reasonably attributable to land acquisition costs, yields a figure of $1,326,281. Since a minimum of 6 acres is needed for project accomplishment, FRTC's estimate of project costs contemplates a potential cost of $221,047 per acre. In light of the parties' stipulation, and the proof regarding land costs in the area, FRTC's estimate for land acquisition costs is a reasonable planning figure for this project.

    
    

41. FRTC budgeted in its estimate of project costs $6,000 for the line item denoted as "construction supervision (Scheduling)." Petitioners contend that construction supervision will far exceed this figure, and accordingly doubt the reliability of FRTC's estimate of project costs. Petitioners' contention is not persuasive.

    
    

42. The line item for "Construction supervision (Scheduling)" was simply a fee paid to a consultant to schedule Charter's projects. Actual on site supervision will be provided by the construction contractor selected, Charter's architect and Charter's in-house construction supervision component. These costs are all subsumed in FRTC's estimate of project cost.

    
    

43. FRTC's costs and methods of proposed construction, including the costs and methods of energy efficiency and conservation, are reasonable for the facility initially reviewed by the Department and the facility as modified at hearing.

    
    

    The petitioners

    
    

44. FPC, a Florida partnership, received a certificate of need on May 9, 1986, to construct a 100-bed short term psychiatric and substance abuse hospital in Broward County. At the time of hearing, the FPC facility was under construction, with an anticipated opening in May 1988.

    
    

45. Under the terms of its certificate of need, the FPC facility will consist of 80 short-term psychiatric beds (40 geriatric, 25 adult, and 15 adolescent) and 20 short-term substance abuse beds. Whether any of the substance abuse beds will be dedicated to adolescent care is, at best, speculative. The principals of FPC have opined at various times, depending on the interest they sought to advance, that 0, 5, or 20 of such beds would be dedicated to adolescent care. Their testimony is not, therefore, credible, and I conclude that FPC has failed to demonstrate than any of its substance abuse beds will be dedicated to adolescent care and that none of its treatment programs will include children.

    
    

46. As a short term psychiatric hospital, FPC is licensed to provide acute inpatient psychiatric care for a period not exceeding 3 months and an average length of stay of 30 days or less for adults and a stay of 60 days or less for children and adolescents under 18 years. Rule 10-5.011(1)(o), Florida Administrative Code. While its treatment modalities and programs may be similar to those which may be employed by FRTC, FPC does not provide long-term residential treatment for children and adolescents and its services are not similar to those being proposed by FRTC. Notably, FPC conceded that if the patients admitted by FRTC require treatment lasting from 6 months to 2 years, there will be no overlap between the types of patients treated at the two facilities. As previously noted, the proof demonstrates that the length of stay at the FRTC facility was reasonably estimated to be 6 months to 2 years, with an average length of stay of 1 year. Under the circumstances, FPC and FRTC will not compete for the same patients. As importantly, there is no competent proof

    that FRTC could capture any patient that would have been referred to FPC or that any such capture, if it occurred, would have a substantial impact on FPC. Accordingly, the proof fails to demonstrate that FPC will suffer any injury in fact as a consequence of the proposed facility.

    
    

47. SBHD is an independent taxing authority created by the legislature. Pertinent to this case, SBHD owns and operates the following facilities in Broward County: Memorial Hospital of Hollywood, 1011 North 35th Avenue, Hollywood, Florida, and Memorial Hospital Share Program, 801 S.W. Douglas Road, Pembroke Pines, Florida.

    
    

48. Memorial Hospital of Hollywood is a general acute care hospital, with

    74 beds dedicated to short-term psychiatric care. These beds are divided between three units: two closed units for acute care (42 beds) and one open unit (32 beds). There is no unit specifically dedicated to the treatment of adolescents, and Memorial does not admit any psychiatric patient under the age of 14. When admitted, adolescents are mixed with the adult population.

    
    

49. From May 1987 through January 1988, Memorial admitted only 5-10 adolescents (ages 14-18). Their average length of stay was 12-14 days.

    
    

50. Memorial Hospital Share Program is a 14-bed inpatient residential treatment program for individuals suffering from chemical dependency. No patient under the age of 18 is admitted to this program, which has an average length of stay of 27 days.

    
    

51. SBHD contends that its substantial interests are affected by this proceeding because approval of FRTC's facility would result in the loss of paying psychiatric and residential treatment patients that would erode SBHD's ability to provide services to the indigent, and would, due to a shortage of nursing, recreational therapy and occupational therapists who are skilled and trained in the care of psychiatric patients, affect the quality of care at its facility and increase costs for recruiting and training staff.

    
    

52. Due to the paucity of competent proof, SBHD's concerns are not credited, and it has failed to demonstrate that its interests are substantially affected by these proceedings. Succinctly, SBHD offered no proof concerning any staffing problems it was encountering and no proof of any disparity that might exist between wages and benefits it offers its employees and those to be offered at the FRTC facility. In sum, it undertook no study from which it could be reasonably concluded that the FRTC facility would adversely impact its staffing or otherwise increase the cost of recruiting and training staff. Likewise, SBHD undertook no study and offered no credible proof that the FRTC facility would adversely impact it financially. In fact, the FRTC facility will not treat the same patient base that is cared for by SBHD.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

54. At issue in this proceeding is whether the application of FRTC to construct and operate a 60-bed intensive residential treatment facility for children and adolescents should be approved. The Department proposed to grant

    FRTC's application, and petitioners, FPC and SBHD, filed formal protests contesting the Department's decision. Accordingly, the threshold issue is whether petitioners have demonstrated standing to contest the Department's proposed action.

    
    

55. To demonstrate standing, a party must establish that its interests are substantially affected by the agency's decision. Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 2d DCA 1981). In the instant case, FPC and SBHD have failed to sustain their burden of showing that they have a substantial interest in the outcome of these proceedings.

    
    

56. In Agrico Chemical Co. v. Department of Environmental Regulation, supra, the court established the following standard to demonstrate standing:

    
    

    We believe that before one can be considered to have a substantial interest in the outcome of the proceeding he must show 1) that he will suffer injury in fact which is of sufficient immediacy to entitle him to a section 120.57 hearing, and 2) that his substantial injury is of a type or nature which the proceeding is designed to protect. The first aspect of the test deals with the degree of injury.

    The second deals with the nature of the injury. Id., at page 482.

    
    

57. FPC contended that is substantial interest were affected by these proceedings because it offers services similar to those proposed by FRTC, albeit of a shorter duration, and that, consequently, it could be expected to lose potential patients to the new facility. The proof failed, however, to support FPC's contention for a number of reasons. First, while FPC may employ the same accepted modalities of treatment as FRTC, the difference in patient profile will militate against any loss of patients to the new facility. Second, FPC did not present any evidence concerning the origin of its patients, or the potential origin of FRTC's patients, that would show that FPC's source of referrals might also refer patients to the proposed facility. The only evidence of potential injury to FPC is that it could provide similar treatment, although of a shorter duration, as that to be offered at FRTC, and that it is located in the same service district. This is not sufficient proof that it will treat the same type patient, that it would lose patients to FRTC, or that such loss would be substantial. Finally, in view of FPC's failure to quantify any loss, it is not surprising that it also failed to demonstrate that it would suffer any adverse impact to its program, or that any injury it might suffer was within the preview of Section 381.705, Florida Statutes. Accordingly, FPC failed to prove the fact of actual injury or the immediacy thereof, and that the injury was of the type or nature this proceeding was designed to protect. See: St. Francis Careunit

    v. Department of Health and Rehabilitative Services, 9 FALR 5910 (198?)

    
    

58. SBHD contended that its substantial interest were affected by this proceeding because approval of FRTC's facility would result in the loss of paying psychiatric and residential patients that would erode SBHD's ability to provide services to the indigent, and would, due to a shortage of nursing, recreational therapy and occupational therapists, affect the quality of care at its facility and increase costs for recruiting and training staff. The proof failed, however, to support SBHD's contention.

59. SBHD offered no proof of actual patients who have been served at its facilities, but who could be served by FRTC. Nor was there any proof that SBHD's current source of referrals might also refer patients to the proposed facility. SBHD undertook no analysis, and offered no proof to determine how many patient days it would lose if the FRTC facility were approved, or to demonstrate in any other matter what, if any, financial impact the FRTC project would have on its operations. Likewise, SBHD offered no proof of any disparity that might exist between wages and benefits it offers its employees and those to be offered at the FRTC facility. Succinctly, SBHD undertook no study from which it could be reasonably concluded that the FRTC facility would adversely impact its staffing or otherwise increase the cost of recruiting and training staff to any extent, much less an extent that could be quantified as substantial. Under the circumstances, SBHD has failed to demonstrate that its substantial interests are affected by these proceedings. 2/

    
    

60. Since FPC and SBHD failed to demonstrate standing, the Department's initial decision to grant FRTC's application should become final, making it unnecessary to reach the merits of that application. In the interests of administrative and judicial economy the merits will, however, be addressed.

    
    

61. Pertinent to this proceeding, Section 381.705, Florida Statutes, and Rule 10-5.011, Florida Administrative Code, establish the criteria which must be considered in evaluating applications for a certificate of need. 3/ Balsam v. Department of Health and Rehabilitative Services, 486 So.2d 1341 (Fla. 1st DCA 1986), and Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1984). The weight to be accorded each criteria and the consequent balancing of the criteria will vary, however, depending on the facts and circumstances of each case. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985). See also: Graham v. Estuary Properties, Inc., 399 So.2d 1374 (Fla. 1981).

    
    

62. The application of FRTC as originally submitted and as updated at hearing is grossly consistent with the criteria established by statute and rule. Under the circumstances, a consideration of those criteria and consequent balancing dictates that FRTC's application be approved.

    
    

63. While FRTC is willing to implement its project either as originally designed and staffed or in accordance with the updated design and staffing, it would prefer to implement the project as updated. The updated project is superior to that which was originally proposed, and since the modifications were not significant the CON should issue for the updated facility. The Department's existent rule 10-5.010(2)(b), Florida Administrative Code, does not preclude application amendment during the course of de novo review.

    
    

64. FRTC has stipulated that should a CON issue it would agree to construct its facility east of Interstate 95 or south of State Road 84 in Broward County, Florida. Accordingly, it is appropriate that the CON carry as a special condition this requirement.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that FRTC's application for certificate of need, as updated, be granted, subject to the special condition set forth in conclusions of law number 12.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th day of September, 1988.

WILLIAM J. KENDRICK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of September, 1988.

ENDNOTES

1/ At hearing, FRTC introduced a revised detail of its manpower requirements at the proposed facility. The changes did not, however, vary materially from those initially reviewed by the Department. Under either staffing pattern FRTC could provide quality residential care to its patients, and could recruit the necessary personnel. Notably, the Department does not require that revised manpower requirements be submitted for review when an approved applicant determines to staff a facility differently than originally approved.

2/ Recently, the Department has held that Section 38, Chapter 87-92, Laws of Florida, the savings clause applicable to the 1987 CON legislation, makes the CON statute in effect at the time a petition is filed govern the issue of standing in proceedings conducted pursuant to that petition. Palms Residential Treatment Center, Inc. v. Department of Heath and Rehabilitative Services, 10 FALR 1425 (1988). In addressing the issue of standing in this case, I have, consistent with the Department's announced position, utilized the law existent when the petition was filed. It is, however, worthy of note that were Section 381.709(5)(b), Florida Statutes (1987) applicable to the instant case I would likewise conclude that FPC and SBHD had failed to establish that an established program would be substantially affected by issuance of the CON, and additionally in the case of FPC that it failed to establish that it was an existing health care facility.

3/ Prior to hearing, FPC moved to continue the final hearing until such time as the Department promulgated a uniform need methodology for IRTPs. As authority therefore, FPC relied upon the provisions of Section 381.704(3), Florida Statutes, and the opinions rendered in A Professional Nurse, Inc. v. Department of Health and Rehabilitative Services, 519 So.2d 1061 (Fla. 1st DOA 1988), and Upjohn Healthcare Services, Inc. v. Department of Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986). The opinions rendered in A Professional Nurse and Upjohn are not, however, apposite to the instant case.

In this case, the Department has not proposed any rule methodology, but has elected to fulfill its standard setting responsibilities through a case-by-case adjudicatory approach. Under the circumstances of this case, the Department's

approach is reasonable, and the motion for continuance was denied. Florida Power Corp. v. State of Florida, Siting Board, 513 So.2d 1341 (Fla. 1st DCA 1987), and McDonald v. Department of Banking, 346 So.2d 569 (Fla. 1st DCA 1987). Where, as here, there is no pending rule and the parties have been accorded full opportunity to be heard, A Professional Nurse and Upjohn are not controlling.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-2046, 87-2401

FPC's proposed findings of fact are addressed as follows:

1. Addressed in paragraph 1.

2. Addressed in paragraphs 44 and 45.

3-4. Addressed in paragraphs 1, 2, 5, and 33.

1. Addressed in paragraph 7.

2. Addressed in paragraphs 39 and 40.

7-8. To the extent pertinent or necessary to the result reached, addressed in paragraphs 19, and 44-46.

9. To the extent pertinent or necessary to the result reached, addressed in paragraphs 19, and 47-52.

10-17. To the extent pertinent or necessary to the result reached, addressed in paragraphs 18-23, and 33.

18-23. Addressed in paragraphs 32-36.

24-28. These paragraphs are recitations of testimony and not findings of fact. The matters have, however, been addressed in paragraphs 32-36.

29-32. These paragraphs are recitations of testimony and not findings of fact. The matters have, however, been addressed in paragraphs 16-23.

33-35. These paragraphs are recitations of testimony and not findings of fact. The matters have, however, been addressed in paragraphs 19-20, and 44-46.

36. Addressed in paragraphs 5 and 9.

37-47. To the extent pertinent or necessary to the result reached, addressed in paragraphs 37-43.

SBHD's proposed findings of fact are addressed as follows

1. Addressed in response to FPC's proposed findings of fact. 2a. Addressed in paragraph 39.

2b-m. Addressed in paragraphs 19, 20, and 47-52

2n-q. Addressed in paragraphs 19, 20, and 47-52.

Paragraph 2h is rejected as not supported by competent or persuasive proof.

FRPC's proposed findings of fact are addressed as follows:

1. Addressed in paragraphs 2 and 3.

2. Addressed in paragraphs 1, 4 and 5.

3-7. To the extent pertinent, addressed in paragraphs 1 and 17. 8-10. To the extent pertinent, addressed in paragraphs 18-20.

1. Addressed in paragraph 28.

2. Addressed in paragraphs 11-15.

13-31. Addressed in paragraphs 16-23.

32-41. Addressed in paragraphs 4-10.

42-44. Addressed in paragraphs 24 and 25.

45-58. Addressed in paragraph 26 and footnote 1.

59-85. To the extent pertinent or necessary to the result reached, addressed in paragraphs 32-36.

86-94. Addressed in paragraphs 29-31, and 43.

94-104. Addressed in paragraphs 37-43.

105-10B. Addressed in paragraphs 19, and 44-46. 109-111. Addressed in paragraphs 47-52.

COPIES FURNISHED:

Kenneth G. Oertel, Esquire John Miller, Esquire

M. Christopher Bryant, Esquire Acting General Counsel OERTEL & HOFFMAN, P.A. Department of Health and Post Office Box 6507 Rehabilitative Services Tallahassee, Florida 32301 1323 Winewood Boulevard

Tallahassee, Florida

Edgar L. Elzie, Jr., Esquire 32399-0700

804 1st Florida Bank Building Sam Power, Clerk Tallahassee, Florida 32301 Department of Health and

Rehabilitative Services Reynold D. Meyer, Esquire 1323 Winewood Boulevard

E. PHILIP BLANK, P.A. Tallahassee, Florida

204-B South Monroe Street 32399-0700

Tallahassee, Florida 32301

George N. Meros, Jr., Esquire

101 North Monroe Street Suite 900

Tallahassee, Florida 32302

William E. Hoffman, Jr., Esquire Deborah J. Winegard, Esquire 2500 Trust Company Tower

25 Park Place

Atlanta, Georgia 30303

Gregory L. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

Docket for Case No: 87-002046

Orders for Case No: 87-002046