STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WUESTHOFF HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 88-1220

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) JESS PARRISH MEMORIAL )

HOSPITAL, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held on December 5-8, 14-16, and 22-23, 1988, and January 30, 1989, in Tallahassee and Brevard County, Florida, before Robert D. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: C. Anthony Cleveland

W. David Watkins

Oertel, Hoffman, Fernandez & Cole, P.A. Post Office Box 6507

Tallahassee, Florida 32314-6507

For Respondent: John Rodriguez Department of 1323 Winewood Boulevard Health and Building One, Room 407

Rehabilitative Tallahassee, Florida 32399-0700 Services

For Respondent: William B. Wiley Jess Parrish Darrell White

Memorial McFarlain, Sternstein, Wiley & Cassedy Hospital Post Office Box 2174

Tallahassee, Florida 32316-2174 STATEMENT OF THE ISSUES

The issue in this case is whether the Department of Health and Rehabilitative Services should grant a certificate of need to Jess Parrish Memorial Hospital for the conversion of 16 medical/surgical beds into 16 adult short-term psychiatric beds.

PRELIMINARY STATEMENT

By Application for Certificate of Need dated September 14, 1987, Jess Parrish Memorial Hospital requested that the Department of Health and Rehabilitative Services grant a certificate of need for the conversion of 16 medical-surgical beds to 16 adult short-term psychiatric beds at a cost of

$46,100.

By letter dated October 5, 1987, the Department of Health and Rehabilitative Services requested additional information that had been omitted from the application. By response dated November 9, 1987, Jess Parrish Memorial Hospital supplied the requested responses to omissions. By letter dated November 18, 1987, Jess Parrish Memorial Hospital provided additional information desired by the Department of Health and Rehabilitative Services.

By letter dated January 25, 1988, the Department of Health and Rehabilitative Services informed Jess Parrish Memorial Hospital of its intent to issue the requested certificate of need for the conversion of the 16 beds.

By Petition for Formal Administrative Hearing filed February 23, 1988, Wuesthoff Hospital challenged the intent to award the certificate of need to Jess Parrish Memorial Hospital and requested a formal hearing.

At the hearing, Wuesthoff Hospital called 11 witnesses and offered into evidence 47 exhibits. Jess Parrish Memorial Hospital called 10 witnesses and offered into evidence 63 exhibits. The Department of Health and Rehabilitative Services called one witness and offered into evidence three exhibits.

All exhibits were admitted into evidence except Jess Parrish Exhibits 21, 29, 30, 31, 35-38, 48, 52, and 54 and Wuesthoff Exhibit 32. Portions of the prefiled testimony were stricken at the hearing; these rulings are reflected in the transcript and exhibits containing the testimony.

Ruling was reserved concerning matters proving or predicated upon the existence of an agreement between Jess Parrish Memorial Hospital and Circles of Care, Inc. for the operation of the proposed facility; all objections to such evidence are now overruled. All other objections as to which ruling was reserved are overruled.

The transcript was filed on February 10, 1989. Each party filed a proposed recommended order. Treatment accorded the

proposed findings of fact is detailed in the appendix.

FINDINGS OF FACT

1. Background

   
   

   1. On July 31, 1987, the Department of Health and Rehabilitative Services (HRS) published in the Florida Administrative Weekly an announcement of the fixed need pools for the subject batching cycle, which pertained to the planning horizon of July, 1992. According to the notice, the fixed need pool, which was calculated pursuant to Rules 10-5.008(6) and 10-5.011(m), (n), (o), and (q), Florida Administrative Code, was adjusted according to the occupancy rate thresholds as prescribed by said rules. The net adjusted need for short-term psychiatric beds in District 7 was zero.

   2. By letter to HRS dated August 12, 1987, the North Brevard County Hospital District, doing business as Jess Parrish Memorial Hospital (Jess Parrish), provided notice of its intent to apply for a certificate of need to convert 16 beds from medical/surgical to psychiatric.

      
      

   3. By Application for Certificate of Need dated September 14, 1987, Jess Parrish requested that HRS grant a certificate of need for the conversion of 16 medical/surgical beds to 16 adult short-term psychiatric beds at a cost of

      $46,100.

      
      

   4. Jess Parrish is a tax-exempt organization whose board of directors have been authorized by law to levy ad valorem taxes in a special tax district in north Brevard County for the support of the hospital. The main hospital is located at 951 North Washington Avenue in Titusville, which is in north Brevard County. Brevard County is located in HRS District 7.

      
      

   5. By letter to Jess Parrish dated October 5, 1987, HRS requested additional information. By response dated November 9, 1987, Jess Parrish supplied the requested responses to omissions. By letter dated November 18, 1987, Jess Parrish provided additional information desired by HRS.

      
      

   6. By letter dated December 22, 1987, Wuesthoff Hospital (Wuesthoff) informed HRS that it objected to the above-described application because of absence of need. The letter states that Wuesthoff maintained an occupancy rate of 74% during the past year in its 25 short-term psychiatric beds. Wuesthoff is located in Rockledge, which is in central Brevard County.

      
      

   7. By letter and State Agency Action Report dated January 25, 1988, HRS informed Jess Parrish of its intent to issue the requested certificate of need for the conversion of the 16 beds.

      
      

   8. By Petition for Formal Administrative Hearing filed February 23, 1988, Wuesthoff challenged the intent to award the certificate of need to Jess Parrish and requested a formal hearing.

      
      

2. The Application and Approval Process

   
   

   1. The application for the certificate of need states that Jess Parrish has a total of 210 beds, consisting of 172 medical/surgical beds, 10 obstetric beds, 20 pediatric beds, and

      8 intensive care unit beds.

      
      

   2. The application contains all elements required by law, including a resolution authorizing the application and financial statements.

      
      

   3. The application and omissions response state that Jess Parrish admitted about 100 psychiatric patients in fiscal year ending 1987. The omissions response adds that Jess Parrish would offer the following programs for its short-term psychiatric patients: continual evaluation, screening, and admissions; individual, family, and group therapy; occupational, recreational, and vocational therapy; psychological and psychiatric testing and evaluation; day hospital and day clinic; family and friends education and support groups; and specialized treatment programs for geriatric psychiatric patients.

      
      

   4. The omissions response reports that the only facility with adult

      short-term psychiatric beds within 45 minutes of Jess Parrish is Wuesthoff. The omissions response states that Wuesthoff had experienced the following occupancy

      rates in its adult short-term psychiatric program: 1984--59%; 1985--66%; 1986-- 7l%; and first three quarters of 1987--71%.

      
      

   5. The omissions response acknowledges that Jess Parrish and Circles of Care, Inc. (Circles of Care) had jointly prepared the application and that Jess Parrish "plans to employ by contract, Circles of Care, Inc. to operate and manage our unit" if the application is approved.

      
      

   6. The omissions response includes a letter to HRS dated November 10, 1987, from James B. Whitaker, as president of Circles of Care. The letter describes the 12-year relationship between the two parties, which began when Circles of Care leased its first 12 beds from Jess Parrish between 1974 and 1980. Mr. Whitaker states that the two parties thus "work[ed] out a management agreement; for the new sixteen bed unit that Jess Parrish has requested."

      
      

   7. In the State Agency Action Report, HRS notes that the project does not conform with Policy 4 of the applicable District 7 Local Health Plan. This policy provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rate for all existing facilities in the planning area equals or exceeds the following rates: adult--75% and adolescents/children--70%.

      
      

   8. HRS reports a similar discrepancy as to the occupancy standard in the State Health Plan, which incorporates at Objective 1.2 the same 70%/75% standards.

      
      

   9. HRS states in the State Agency Action Report that the 1986 occupancy rates for short-term psychiatric beds, which averaged 69.98% in Brevard County, were 87% at Circles of Care, 70.6% at Wuesthoff, and 14% at a new facility, C.

      P. C.--Palm Bay. In addition, for the first six months of 1987, the report states that the occupancy rates, which averaged 63.5% in Brevard County, were 76% at Circles of Care, 71.5% at Wuesthoff, and 43% at C. P. C.--Palm Bay.

      
      

   10. In calculating numeric need under the rule, HRS concludes that there was a net need for a total of 547 beds in the district, consisting of 312 in specialty hospitals and 235 in general hospitals. Addressing the provision of the District 7 Local Health Plan focusing upon need at the county level, HRS finds that there was a net need for a total of 38 beds. Recognizing the "sub- standard utilization" of existing short-term psychiatric beds, HRS states that the application was justified "mainly because of the enhanced access to services that the project would provide."

       
       

   11. All of the other criteria were fully satisfied with one irrelevant exception, and the State Agency Action Report concludes:

       
       

       Although the district and county utilization of short-term psychiatric beds falls below the 70% [sic) adult standard, this project merits a Certificate of Need because there exists numeric need in the service area and because the project affords greater access and availability to psychiatric services for underserved groups.

3. Need

   
   

   1. District and State Health Plans

      
      

      1. Part 3 of the 1985 District 7 Local Health Plan, published by The Local Health Council of East Central Florida, Inc., sets forth policies and priorities for inpatient psychiatric services. Policy 1 establishes each of the four counties of District 7 as a subdistrict for purposes of planning inpatient psychiatric services.

         
         

      2. Policy 3 of the 1985 District 7 Local Health Plan provides a specific methodology to allocate beds when the numeric need rule methodology indicates a need for inpatient psychiatric beds. A minimum of .15 beds per 1000 projected population should be allocated to hospitals holding a general license. A total of .20 beds per 1000 projected population may be located in specialty hospitals or hospitals holding a general license. The population projections are for five years into the future.

         
         

      3. Policy 4 of the 1985 District 7 Local Health Plan provides that additional short-term inpatient psychiatric beds may be approved when the average annual occupancy rates for all existing facilities in the planning area equal or exceed 75% for adult facilities and 70% for adolescents/children facilities. The policy concludes:

         
         

         Additional beds should not be added to the health system' until the existing facilities are operating at acceptable levels of occupancy. Good utilization of existing facilities prior to adding beds aids in cost containment by preventing unnecessary duplication.

         
         

      4. The 1988 District 7 Local Health Plan, although inapplicable to the subject proceeding, refers to the pending application of Jess Parrish. The plan states:

         
         

         [T]he residents of District 7 appear to be well-served by the existing providers with only a few exceptions. First, residents of north Brevard County (Titusville area) currently have no access to any certified, short-term, inpatient psych services in less than 22 miles. In many driving situations this distance takes longer than 30-45 minutes to traverse. . . . If [the CON that has been tentatively approved] is sustained through litigation and the unit is finally opened availability of these 16 beds should ameliorate, to a large degree, the potential geographic access problems for north Brevard adult/geriatric patients at least.

         
         

      5. Objective 1.1 of the 1985-1987 State Health Plan states that the ratio of short-term inpatient hospital psychiatric beds to population should not exceed .35 beds to 1000 population. Objective 1.2 states that, through 1987, additional short-term psychiatric beds should not normally be approved unless

      the service districts has an average annual occupancy of 75% for existing and approved adult beds and 70% for existing and approved adolescents/children beds.

      
      

   2. Numeric Need Pursuant to HRS Rules

      
      

      1. Net Need

         
         

         1. Rule 10-5.011(1)(o)4., Florida Administrative Code, sets forth the HRS numeric need methodology. The rule provides that the projected number of beds shall be determined by applying the ratio of .35 beds to 1000 population to the projected population in five years, as estimated by the Executive Office of the Governor.

            
            

         2. The relevant projected population for District 7 is 1,564,098 persons. Applying the ratio, the gross number of beds needed in District 7 is 547. The total number of existing and approved short-term psychiatric beds in District 7 in 1987 was 410. There is therefore a net need for 137 short-term psychiatric beds in District 7.

            
            

         3. The relevant projected population for Brevard County is 441,593 persons. Applying the ratio, the gross number of beds needed in Brevard County is 155. The total number of existing and approved short-term psychiatric beds in Brevard County in 1987 was 117. There is therefore a net need for 38 short- term psychiatric beds in Brevard County.

            
            

         4. A minimum of .15 beds per 1000 population should be located in hospitals holding a general license, and .20 beds per 1000 population may be located in specialty hospitals or hospitals holding a general license. The calculations disclose that, for District 7, there is a net need of 73 beds in the former category and 65 beds in the latter category. As to Brevard County, the respective numbers are 41 and 4.

            
            

         5. Rule 10-5.011(1)(o)4.d., Florida Administrative Code, provides that new facilities for adults must be able to project a 70% occupancy rate for the first year and 80% occupancy rate for the third year.

            
            

         6. Jess Parrish projects that its short-term psychiatric program will experience a utilization rate of 66% at the end of the first complete year of operation and 82% at the end of the third complete year of operation. These projections are reasonable and substantially conform with the requirements of the rule.

            
            

         7. Rule 10-5.011(1)(o)4.e., Florida Administrative Code, provides that no additional short-term inpatient beds shall normally be approved unless the average annual occupancy rate for the preceding 12 months in a "service district" is at least 75% for all existing adult short-term inpatient psychiatric beds and at least 70% for all adolescents/children short-term inpatient psychiatric beds.

            
            

         8. HRS considered the 70%/75% occupancy standards in making the July, 1987, announcement of a zero fixed need pool for short-term psychiatric beds in Brevard County. The determination of zero fixed need was a reflection that, although numeric need existed, the occupancy standards had not been satisfied.

            
            

         9. The incorporation of the occupancy standard into the July, 1987, fixed need calculation represented a deviation from nonrule policy deferring computation of the occupancy levels until the application-review process. The

            prior announcement of a fixed need pool on February 27, 1987, stated that a number of beds were needed even though the occupancy situation in District 7 was about the same. Subsequent announcements likewise deferred consideration of the occupancy standard.

            
            

         10. HRS has explicated its nonrule policy of excluding occupancy standards from the calculation of numeric need when publishing fixed need pools. Unlike the relatively simple task of determining the relevant population projection and multiplying it by the proper ratio, application of the occupancy standards, especially at the time in question, required numerous determinations and calculations. By attempting to incorporate the occupancy standards into the calculations upon which the fixed need pool were based, HRS increased the potential for error, which occurred in this case, rather than increased the reliability of the information.

             
             

         11. Although adequate reason exists for revising the July, 1987, published fixed need pool, Rule 10-5.008(2)(a), Florida Administrative Code, prohibits revisions to a fixed need pool based upon a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied.

             
             

         12. However, the revision of the July, 1987, fixed need pool does not represent a change in need methodologies, population estimates, bed inventories, or other factors leading to a different projection of need, if retroactively applied. The revision to the fixed need pool, which did not represent a change in need methodology or underlying facts, was a result of three legitimate considerations.

             
             

         13. First, HRS revised the fixed need pool to implement its policy decision to limit the fixed need pool to the numeric need calculation and reserve the calculations of occupancy standards to the application-review process. This consideration does not involve a change in the methodology of determining numeric need or applying occupancy standards.

             
             

         14. Second, HRS revised the fixed need pool to correct earlier, erroneous calculations. This consideration does not involve a change in the underlying facts, but merely in the computations based upon the same facts.

             
             

         15. Third, HRS revised the fixed need pool to reflect developing policy in the application of the occupancy standards. HRS decided to apply the more liberal 70% occupancy standard to facilities serving both adults and adolescents/children, exclude from the determination of occupancy levels any facilities serving only age cohorts not served by the applicant, and restrict the 75% occupancy standard to facilities serving adults only. HRS made these changes, which it felt would not harm existing providers, in recognition of the failure of data provided by health-care suppliers to distinguish between adult and adolescents/children admissions and patient days. These considerations approximate a change in methodology, but the revision resulting from such considerations does not violate the rule because HRS already has shown that consideration of the occupancy standards should not take place until after publication of the fixed need pool.

             
             

         16. In the present case, two facilities in District 7 serve only adolescents/children. These facilities are C. P. C.-- Palm Bay and Laurel Oaks, which is in Orange County. Eliminating their occupancy rates, the district occupancy rate in the year ending June 30, 1987, was 71.9%. Removing the

             occupancy rate of C. P. C.--Palm Bay from Brevard County, the county occupancy rate during the same period was over 75%.

             
             

         17. Under the revised policies, Brevard County had a net need of 38 short- term psychiatric beds, applicable occupancy standards in the county and district were satisfied, and the July, 1987, publication of a fixed need pool of zero did not preclude the finding of need under other than "not normal"

             circumstances.

             
             

4. Accessibility

   
   

   1. Financial Accessibility

      
      

      1. The primary service area of Jess Parrish is north Brevard County. A higher percentage of the population of this area lives below the poverty level than does the population of any other sub-region of Brevard County. According to the 1980 Census data, the applicable percentages of area residents living below the poverty level were 12.7% in north Brevard County, 10% in central Brevard County, 8.4% in south Brevard County, and 9.6% in Brevard County overall.

         
         

      2. Partly as a reflection of the different sub-regions and partly as a reflection of the commitment of Jess Parrish to provide access to underserved populations, Jess Parrish provides considerably more services to Medicaid patients than does either of the other major general hospitals in central and south Brevard County. In 1987, 11.5% of the admissions and 8.9% of the patient days at Jess Parrish were Medicaid. The respective numbers are 7% and 6% for Wuesthoff and 5.8% and 3.9% for Holmes Regional Medical Center, which is in Melbourne.

         
         

      3. A key component of financial accessibility is the effect of the proposed program on Circles of Care. About 55% of the patients of Circles of Care are indigent. Another 17% of its patients earn between the minimum wage and $15,000 annually.

         
         

      4. Circles of Care has participated in all phases of the application process on behalf of Jess Parrish. The approval of the new program would not have an adverse effect on Circles of Care. To the contrary, the new program at Jess Parrish would provide Circles of Care with more treatment options, especially with respect to indigent patients, whose need for short-term psychiatric services has proven at times difficult to meet. These options are especially valuable at a time when there is no net need in Brevard County for any more short-term psychiatric beds in specialty hospitals, such as Circles of Care.

         
         

      5. The 52 psychiatric beds licensed to Circles of Care are in two different units contained within a single hospital facility located in Melbourne, which is in south Brevard County. Sheridan Oaks is a 24-bed, private unit, which cannot accept many Baker Act patients without adversely affecting the other patients and the psychiatrists who refer private-pay patients to this unit. The other unit is a public Baker Act receiving facility with 28 beds, for which Circles of Care receives state funds. Unlike Sheridan Oaks, the public receiving facility employs the psychiatrists who work there. About 85-90% of all Baker Act patients in Brevard County come through this public receiving facility, whose occupancy rate was 98% in the year ending June 30, 1987.

      6. In addition to these units, Circles of Care operates a mental health outpatient clinic in Titusville, an outpatient/inpatient treatment center in the Rockledge/Cocoa area, numerous social clubs throughout Brevard County for the chronic mentally ill, and numerous public education and awareness programs concerning the treatability of mental illness.

         
         

      7. Another limitation of being a specialty hospital is that Circles of Care does not qualify for Medicaid reimbursement. Jess Parrish, as a general hospital, qualifies for such reimbursement and projects in its application that 39% of its patient days will be Medicaid and 9% of its patient days will be indigent.

         
         

   2. Geographic Access

      
      

      1. Jess Parrish is located at the north end of Brevard County, which runs about 80 miles north-south. Wuesthoff is about 25 miles south of Jess Parrish, and Titusville is about 40 miles north of Melbourne. Intercity north-south traffic uses Interstate 95, which is west of the above-described cities, and

         U.S. Route 1, which runs through the center of each of these cities.

         
         

      2. Rule 10-5.011(1)(o)5.g., Florida Administrative Code, provides that short-term inpatient psychiatric services should be located within a maximum travel time of 45 minutes under average travel conditions for at least 90% of the population of the service area. This criterion is presently met without the addition of short-term psychiatric beds at Jess Parrish.

         
         

      3. This factor is outweighed, however, by another factor in this case. Jess Parrish projects about half of its patients will be indigent or Medicaid, and north Brevard County has a disproportionate share of the county's impoverished residents. Average travel conditions for these persons require public transportation, which, in north Brevard County, is limited to Greyhound/Trailways and local taxi companies. Exclusive of time waiting for the bus and traveling to and from the bus stations, the time for the 25-mile trip between Titusville and Rockledge, of which there are three or four trips daily (excluding off-hour trips), ranges from 25-35 minutes. There is evidence in the record that mentally ill bus passengers do not always make it to their intended destinations by way of intercity buses. The use of available public transportation is therefore problematic, but in any event adds considerable time to the travel time to Wuesthoff for those individuals who do not own a motor vehicle.

         
         

5. Effect on Wuesthoff

   
   

   1. The effect of the conversion of medical/surgical beds to short-term psychiatric beds will have no material effect on Wuesthoff, even though it did reduce the number of short-term psychiatric beds from 30 to 25 in 1986. The occupancy rate for Wuesthoff's short-term psychiatric unit in 1987 was 70.6%.

      
      

   2. The prime service areas of Wuesthoff and Jess Parrish as to psychiatric admissions do not substantially overlap. Although Jess Parrish may be expected to draw more patients from Wuesthoff's prime service area following commencement of the new operation, many of Jess Parrish's patients will be from the indigent and Medicaid payor classes for which the competition is not intense.

      
      

   3. The addition of a 16-bed short-term psychiatric unit at Jess Parrish will not materially influence the availability of qualified personnel for

      Wuesthoff. It appears that Jess Parrish will be able to staff the relatively small 16-bed unit without employing significant numbers of professional employees of Wuesthoff.

      
      

   4. Some of the relatively few patients whom Wuesthoff can be expected to lose to Jess Parrish involve referrals from Titusville-area physicians, psychiatrists, and psychologists, who will place their patients in the closer facility once it is opened. The negative impact upon Wuesthoff is outweighed in these cases by gains for the patients in continuity of care and community support.

      
      

6. Financial Feasibility

   
   

   1. The short-term financial feasibility is good. Jess Parrish has available to it sufficient funds to undertake the relatively modest capital outlay in constructing the facility, which will consist of about 8000 square feet on an existing floor of the hospital.

      
      

   2. The long-term financial feasibility is generally good. The financial projections are based on reasonable assumptions, which are largely derived from the actual experience of Circles of Care. The projections accurately estimate revenue sources and expenses. Jess Parrish reasonably projects an adequate supply of patients from a combination of sources, including Circles of Care, existing patients whose diagnoses include psychiatric components, and numerous health-care professionals in north Brevard County.

      
      

   3. The financial projections contemplate a material contribution by Circles of Care, but project no compensating expenditures. However, this deficiency is largely offset by the likelihood that the financial participation of Circles of Care will be restricted to a share of any excess of revenues over expenses of the new project, possibly excluding reimbursement of fairly minor expenses. If that is the case, the effect of any management agreement would be only to reduce the excess of revenues over expenses enjoyed by Jess Parrish from the operation of the short-term psychiatric unit. The management agreement would not expose Jess Parrish to losses that would not have otherwise existed but for the agreement to make payments to Circles of Care. Under these circumstances, the omission of the information, although material, does not seriously cast into doubt the long-term financial feasibility of the project.

      
      

7. Quality of Care

   
   

   1. The quality of hospital care offered by Jess Parrish is excellent. The quality of the various psychiatric services offered by Circles of Care is also excellent. Both facilities are accredited by the Joint Commission on the

      Accreditation of Hospitals. The issue in this case involves the quality of care to be expected in the 16-bed short-term psychiatric unit for which Jess Parrish seeks a certificate of need.

      
      

   2. Circles of Care and Jess Parrish have agreed that Circles of Care will be responsible for recruiting most of the personnel for the new program and will employ the program's medical director, who will be responsible for treatment decisions. In addition, Circles of Care will advise Jess Parrish as to the adoption of policy, which will remain ultimately the responsibility of Jess Parrish. Jess Parrish will employ the head nurse and all other full-time professional staff working in the unit.

   3. The tentativeness of the arrangement between Circles of Care and Jess Parrish is partly explained by the desire of both parties to avoid the time and expense of negotiating an agreement in every detail prior to obtaining final approval of the certificate of need. In addition, both organizations were devoting substantial time to the subject litigation, for which Circles of Care was paying a portion of the expenses.

      
      

   4. In the final analysis, the failure to work out the agreement, although not a positive feature of the application, is not a serious problem for two reasons. First, Circles of Care and Jess Parrish have a long history of mutual cooperation. The relationship began when Jess Parrish leased Circles of Care 16 hospital beds for psychiatric use. Although the arrangement ended several years ago when Circles of Care constructed its Melbourne facility, the two organizations have since cooperated in several less intensive ways.

      
      

   5. Second, although Circles of Care has superior expertise in the area of mental health, Jess Parrish qualifies by itself to operate the proposed facility. Circles of Care has already provided much of the necessary technical information required for the preparation of budgets and pro formas. Recruiting would probably take somewhat longer without Circles of Care, but the modest construction budget obviously does not involve significant debt service, so that the delay would not be costly. Perhaps the most significant loss from a quality-of-care perspective would be the medical director, whose expertise will be critical. Again, this would be largely a problem of delay only, as Jess Parrish would have to find a replacement, although it appears likely that the director may be Dr. David Greenblum, who is already a member of the active medical staff at Jess Parrish.

      
      

   6. Given the quality of care provided by Jess Parrish in the past, there is no basis for any concern that, in the unlikely event that the parties fail to negotiate an agreement, Jess Parrish would jeopardize its reputation as a quality 200-bed general hospital in order to commence prematurely a 16-bed

      short- term psychiatric unit.

      
      

8. Other Factors

1. The record does not demonstrate that there are less costly, more efficient, or more appropriate alternatives to the inpatient services proposed in the subject application.

   
   

2. There are no crisis stabilization units or short-term residential treatment programs available in Brevard County. The proposed project will have a measurable impact only upon Circles of Care, whose existing inpatient facilities will be enhanced, and Wuesthoff, whose existing inpatient facilities will not be materially affected. In general, these existing services are being used in an appropriate and efficient manner.

   
   

3. On the other hand, the beds that Jess Parrish seeks to convert are underutilized in their present designation. The medical/surgical beds at Jess Parrish have been utilized at a rate of less than 60% over the past three years.

   
   

4. There are no feasible alternatives to renovation of the existing facilities. The costs and methods of proposed construction are reasonable and appropriate.

   
   

5. The approval of the application will foster healthy competition in the area of short-term psychiatric services and promote quality assurance.

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes.

   
   

7. Jess Parrish must prove by a preponderance of the evidence that it is entitled to the certificate of need for which it has applied. Florida Department of Transportation v. J. W. C. Company Inc., 396 So. 2d 778 (Fla. 1st DCA 1981).

   
   

8. In deciding whether to issue a certificate of need, HRS must weigh all of the criteria under the relevant statutes and rules. See, e.g., Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1986).

   
   

9. Jess Parrish has proven that there is numeric need for 16 adult short- term psychiatric beds, especially in north Brevard County, and that the beds should be allocated to a general hospital.

   
   

10. The July, 1987, publication of a fixed need pool of zero is not the final word on the matter, as HRS implicitly acknowledges by advocating in this case a revision to the published fixed need pool. Jess Parrish, in effect joined by HRS, challenged the calculation and proved that it was inaccurate in three respects. First, it deviated from HRS nonrule policy by including occupancy calculations rather than a simple calculation of numeric need. Second, it erroneously calculated the relevant occupancy figures. Third, it applied occupancy standards that were too conservative for the facilities in question.

    
    

11. After establishing that there is a net need for 38 beds in Brevard County and that the July, 1987, announcement and Rule 10-5.008(2)(a) are no bar to showing numeric need, Jess Parrish proved that the occupancy thresholds have been met. Jess Parrish and HRS successfully explicated nonrule policy in three respects: first, that facilities devoted entirely to adolescents/children should be excluded from the occupancy calculation; second, that the more relaxed 70% standard should be used for facilities not devoted entirely for adults; and third, that the more conservative 75% standard should be reserved for adults- only facilities.

    
    

12. Under the circumstances, it is unnecessary to consider whether Jess Parrish proved need under the "not normal" provisions.

    
    

13. Jess Parrish proved that the other criteria applicable to the subject application generally militate in favor of granting the certificate of need.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order granting the application of Jess Parrish for a certificate of need to convert 16 medical/surgical beds to 16 short-term adult psychiatric beds.

DONE and ENTERED this 30th day of June, 1989, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1989.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-1220

Treatment Accorded Proposed Findings of Jess Parrish 1-6 Adopted or adopted in substance.

7-8 Rejected as irrelevant.

9-10 Adopted or adopted in substance.

11 Rejected as recitation of testimony and subordinate. 12-13 Adopted or adopted in substance.

1. Rejected as irrelevant.

2. Adopted to the extent of the finding in the Recommended Order that there likely will be an agreement between Circles of Care and Jess Parrish. Rejected as unsupported by the evidence that such an agreement exists already. Also rejected as unnecessary insofar as the application can stand on its own without the participation of Circles of Care.

15a Adopted or adopted in substance. 15b-15c Rejected as irrelevant.

15d-15g Adopted in substance, although certain proposed facts rejected as subordinate. However, the first sentence of Paragraph 15f is rejected as against the greater weight of the evidence.

15h Rejected as recitation of testimony.

16-18 Adopted or adopted in substance except that all but the last sentence of Paragraph 18g. is rejected as against the greater weight of the evidence and legal argument.

19 First sentence adopted.

19 (remainder) -22. Rejected as subordinate and recitation of evidence.

1. Generally adopted, although most of the facts are rejected as subordinate in the overall finding and cumulative.

2. Adopted except that sixth sentence is rejected as against the greater weight of the evidence and the seventh sentence is rejected as subordinate.

3. Adopted in substance.

4. First sentence adopted. Remainder rejected as irrelevant.

5. Rejected as irrelevant.

6. Adopted.

   28a Rejected as unsupported by the greater weight of the evidence.

   28b-28d Adopted or adopted in substance.

7. and 31 Rejected as subordinate.

8. Rejected as unnecessary.

32-50 Adopted or adopted in substance.

Treatment Accorded Proposed Findings of HRS 1-11 Adopted or adopted in substance.

1. & 14 Rejected as irrelevant.

2. & 15-16 Adopted.

17 Rejected as unnecessary.

18-74 See rulings on Paragraphs 16-50 in preceding section.

Treatment Accorded Proposed Findings of Wuesthoff 1-3 Adopted or adopted in substance.

1. Rejected as irrelevant.

2. Rejected as against the greater weight of the evidence and legal argument.

6-10 & 12 Adopted or adopted in substance.

11 Rejected as against the greater weight of the evidence.

1. Rejected as recitation of testimony and cumulative.

2. Rejected as cumulative except that second sentence is adopted.

3. Rejected as recitation of testimony.

4. Rejected as cumulative, subordinate, and legal argument.

5. Rejected as cumulative except that second sentence is adopted.

6. First clause rejected as against the greater weight of the evidence. Remainder rejected as irrelevant.

7. Rejected as cumulative and subordinate. 20-23 Rejected as irrelevant and unnecessary.

1. Rejected as against the greater weight of the evidence.

2. Rejected as irrelevant and unnecessary.

3. Rejected as cumulative.

27-28 Rejected as irrelevant and unnecessary.

29 Rejected as legal argument. 30-32 Rejected as irrelevant.

33-41 Rejected as against the greater weight of the evidence and subordinate.

42 and 51 Rejected as recitation of evidence.

43-45 Rejected as against the greater weight of the evidence.

46 Rejected as legal argument. 47-50 and 52-54 Rejected as subordinate.

55 Rejected as against the greater weight of the evidence.

56-59 Rejected as irrelevant.

60-66 Rejected as subordinate and recitation of testimony. 67-69 Rejected as against the greater weight of the

evidence.

70-73 Rejected as against the greater weight of the evidence and subordinate.

74-78 Adopted.

79 Rejected as against the greater weight of the evidence.

80-82 Adopted.

83-85 Rejected as against the greater weight of the evidence.

86 Rejected as subordinate and against the greater weight of the evidence.

87-91 Adopted or adopted in substance.

92 Rejected as against the greater weight of he evidence.

93-94 Rejected as subordinate.

1. Rejected as against the greater weight of the evidence.

2. Rejected as irrelevant.

97-98 Rejected as against the greater weight of the evidence.

1. Rejected as irrelevant.

2. Rejected as subordinate.

101-102 Rejected as against the greater weight of the evidence.

1. Rejected as partly cumulative and partly legal argument.

2. Rejected as against the greater weight of the

COPIES FURNISHED:

1. Anthony Cleveland

W. David Watkins

Oertel, Hoffman, Fernandez & Cole, P.A. Post Office Box 6507

Tallahassee, Florida 32314-6507

John Rodriguez

1323 Winewood Boulevard

Building 1, Room 407

Tallahassee, Florida 32399-0700

William B. Wiley Darrell White

McFarlain, Sternstein, Wiley & Cassedy, P.A. Post Office Box 2174

Tallahassee, Florida 32316-2174

Stephen M. Presnell

MacFarlane, Ferguson, Allison & Kelly Post Office Box 82

Tallahassee, Florida 32302

Sam Power, Clerk

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

John Miller, General Counsel

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

WUESTHOFF HOSPITAL,

Petitioner,

CASE NO.: 88-1220

vs. CON NO.: 5279

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and JESS PARRISH MEMORIAL HOSPITAL,

Respondents.

/

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.

RULING ON EXCEPTIONS FILED BY

JESS PARRISH MEMORIAL HOSPITAL (JESS PARISH)

Jess Parrish excepts to the Hearing Officer's conclusion that its application need not be considered under the "not normal" provision of the numeric need rule found at Section 10-5.011(1)(o), Florida Administrative Code. The Hearing Officer found numeric need only by rejecting the published fixed need pool where there was no need.

Under the fixed pool rule, the department does not alter the published fixed pool unless an error is brought to its attention during a grace period that will allow the department to notify interested parties through publication. Any errors not corrected in the grace period are corrected in the next fixed pool batching cycle.

The grace period is triggered by a letter of intent which extends the filing deadline for competitive letters of intent. Correcting fixed pool errors during the grace period allows other applicants to compete for the same pool of beds. Correcting errors after this grace period would not give prospective applicants adequate notice of the need, and they would be unable to timely compete in the batch.

Because the numeric need is zero for the appropriate planning horizon, Jess Parrish's application must be evaluated under the "not normal" provision.

First, Jess Parrish established that Medicaid, Baker Act, and indigent patients in Brevard County do not have adequate economic access to short term psychiatric services. Specifically, as found by Hearing Officer Meale, a higher percentage of the population of Jess Parrish's primary service area lives below the poverty level than does the population of any other sub-region of Brevard County. (See, Recommended Order at 15, Finding of Fact No. 42). Consequently, as found by Hearing Officer Meale, "Jess Parrish provides considerably more services to Medicaid patients than does either of the other major general hospitals in Central and South Brevard County." (Id., Finding of Fact No 43).

Significantly, Hearing Officer Meale adopts in substance Jess Parrish's Proposed Finding of Fact No. 25 which discussed this economic accessibility problem as a "not normal" factor demonstrating need for Jess Parrish's project. Jess Parrish's Proposed Finding of Fact No. 25 states as follows:

Medicaid, Baker Act, and indigent patients in Brevard County do not have adequate access to short term psychiatric services, nor medical care in general. In fact [Circles of Care] has had significant problems in the past finding a willing referral source for Medicaid patients in Brevard County. This is due, in part, to the fact that physicians generally do not like to accept Medicaid patients.

(Citations to the record omitted).

(Proposed Recommended Order of Jess Parrish at 29, Finding of Fact No. 25).

Jess Parrish's project will improve financial accessibility for Medicare, Baker Act, and indigent patients given its connection with Circles of Care, the major provider of psychiatric services to the indigent in Brevard County. (Recommended Order at 15-16, Findings of Fact 44-48). As noted by Hearing Officer Meale, ". . . the new program at Jess Parrish would provide Circles of Care with more treatment options, especially with respect to indigent patients, whose need for short-term psychiatric services has proven at times difficult to meet." (Recommended Order at 16, Finding of Fact No. 45). Further, Jess Parrish addresses this "not normal" economic accessibility problem by projecting in its application to provide 39% of its patients days to Medicaid patients and 9% to indigent patients. [See, Recommended Order at 17, Finding of Fact No. 48; Proposed Recommended Order of Jess Parrish at 41, Finding of Fact NO. 48 (adopted or adopted in substance by Hearing Officer Meale)].

Second, Jess Parrish established that this project should be approved to help alleviate geographic accessibility problems experienced by indigent and Medicaid patients in North Brevard County in obtaining short-term psychiatric services. While Hearing Officer Meale found that the travel time standard set forth in Rule 10-5.011(1)(o)5.g., Florida Administrative Code, is presently met, he went on to find as follows:

This factor is outweighed; however, by another factor in this case.

Jess Parrish projects about half of its patients will be indigent or Medicaid, and North Brevard has a disproportionate share of the county's impoverished residents.

Average travel conditions for these persons require public transportation, which, in North Brevard County, is limited to Greyhound/Trailways and local taxi companies. Exclusive of time waiting for the bus and traveling to and from the bus stations, the time for the 25 mile trip between Titusville and Rockledge, of which there are three or four trips daily (excluding off-hour trips), ranges from 25-35 minutes. There is evidence in the record that mentally ill bus passengers do not always make it to their intended destinations by way of intercity buses. The use of available public transportation is therefore problematic, but in any event adds considerable time to the travel time to Wuesthoff for those individuals who do not own a motor vehicle.

The Jess Parrish proposal addresses the economic and geographic access problems experienced by Medicaid and other indigent patients in North Brevard

County. Thus, I conclude that the application should be approved despite lack of numeric need under the "not normal" provision of the rule.

1. Jess Parrish excepts to the Hearing Officer's finding in Finding of Fact No. 23 that the 1988 District 7 Local Health Plan is inapplicable to this proceeding.

   
   

   In this case, the 1988 District 7 Local Health Plan was utilized by Jess Parrish to offer up-to-date substantiation of the facts argued in its application, other than those relating to numeric need, which warrant approval of its application under the "not normal" provision of the rule. Given the above purpose, the 1988 Local Health Plan is relevant.

   
   

2. Jess Parrish points out that it presented uncontroverted evidence that due to delay caused by this litigation and inflation, its project costs increased from $46,100 to $50,000, but that the Recommended Order made no finding of fact regarding the increase. In the appendix, the Hearing Officer adopted, or adopted in substance, Jess Parrish's proposed finding 10 and the department's proposed finding 8 regarding the increased project costs. Thus, the project costs are found to have increased by $3,900 due to litigation delay and inflation.

RULING ON EXCEPTIONS FILED

BY WUESTHOFF HOSPITAL (WUESTHOFF)

1. Wuesthoff excepts to findings of fact 11, 14, 19, 22, 30, 42, 43, 44, 45, 46, 51, 52, 53, 54, 55, 57, 58, 60, 61, 62, 63, 64, 65, 66, 67, and 68. These findings are supported by competent, substantial evidence; therefore, the exceptions are denied.

   
   

2. The balance of Wuesthoff's exceptions to the findings of fact pertain to the Hearing Officer's finding of numeric need for the Jess Parrish proposal. The Hearing Officer's finding of numeric need is a conclusion of law and is rejected for the reasons given in the ruling on the Jess Parrish exceptions. Likewise, the findings based on the finding of numeric need are rejected.

   
   

3. Wuesthoff excepts to the Hearing Officer's adverse rulings on its proposed findings of fact. Wuesthoff, in effect, reargues the weight and materiality of all the evidence presented at the final hearing. At this level of review, the department has no authority to reweigh the evidence. Heifetz vs. Department of Business Regulation, 475 So2d 1277 (Fla. 1st DCA 1985). See also Britt vs. Department of Professional Regulation, 492 So2d 697 (Fla. 1st DCA 1986). The exception are denied.

   
   

4. Wuesthoff's exceptions to the conclusions of law have been resolved by the rulings on the Jess Parrish exceptions and Wuesthoff's other exceptions, further elaboration is not necessary.

FINDINGS OF FACT

The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except where inconsistent with the rulings on the exceptions.

CONCLUSIONS OF LAW

The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the rulings on the exceptions.

Based upon the foregoing, it is

ADJUDGED, that Jess Parrish Hospital's application for certificate of need number 5279 be approved.

DONE and ORDERED this 3 day of August, 1989, in Tallahassee, Florida.

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

by Deputy Secretary for Programs

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED 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:

Robert E. Meale Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

C. Anthony Cleveland, Esquire

W. David Watkins, Esquire OERTEL, HOFFMAN, FERNANDEZ, &

COLE, P.A.

P. O. Box 6507 Tallahassee, FL 32314-6507

William B. Wiley, Esquire Darrell White, Esquire McFARLAIN, STERNSTEIN, WILEY

& CASSEDY, P. A.

600 First Florida Bank Bldg. Post Office Box 2174 Tallahassee, FL 32316-2174

INFORMATION COPIES:

Richard Patterson, Esquire

%John Rodriguez, Esquire Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, FL 32308

FALR

Post Office Box 385 Gainesville, FL 32602

Janie Block (PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 9th day of Aug, 1989.

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

Docket for Case No: 88-001220

Orders for Case No: 88-001220