STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LEE MEMORIAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 89-1262

) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES AND ) SOUTHWEST FLORIDA REGIONAL ) MEDICAL CENTER, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on April 19, 1989, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Ivan Wood, Esquire

Four Houston Center 1221 Lamar, Suite 1400

Houston, Texas 77010-3015

For Respondent: Richard A. Patterson, Esquire

2727 Mahan Drive, Suite 103

Tallahassee, Florida 32308

For Respondent John D. C. Newton, II, Esquire Southwest FL Lu Ann Snider, Esquire Regional Medical 1711-D Mahan Drive

Center, Inc.: Tallahassee, Florida 32308

BACKGROUND

This matter came on for hearing on April 19, 1989 upon respondent/applicant, Southwest Florida Regional Medical Center Inc., filing a motion to dismiss the petition for formal administrative hearing filed on behalf of petitioner, Lee Memorial Hospital. As a ground, respondent contended that petitioner lacked standing to initiate this proceeding. Respondent, Department of Health and Rehabilitative Services, has joined in the motion. The issue is whether petitioner has standing to request a formal hearing to contest the proposed issuance of a certificate of need authorizing respondent/applicant to construct a new building at its health care facility in Fort Myers, Florida.

Having heard argument of counsel, and being fully advised in the premises, the following findings of fact are determined from the stipulated record and pleadings filed in this cause:

FINDINGS OF FACT

1. By application dated September 28, 1988 respondent/applicant, Southwest Florida Regional Medical Center, Inc. (SFRMC), filed an application with respondent, Department of Health and Rehabilitative Services (HRS), seeking the issuance of a certificate of need (CON) authorizing the expenditure of approximately $19.98 million to construct a new three story clinical and ancillary services building at its facility located in Fort Myers, Florida.

   
   

2. After the application was filed, and certain additional information was provided by SFRMC, HRS issued proposed agency action in the form of a letter on January 13, 1989 advising that it intended to issue SFRMC a CON.

   
   

3. On February 3, 1989, HRS published in the Florida Administrative Weekly a notice of its intent to grant the CON. After learning of this action, petitioner, Lee Memorial Hospital (Lee), filed a petition for formal administrative hearing seeking to contest the proposed agency action. That prompted this proceeding.

   
   

4. The state agency action report, which is a part of this record, reflects that the applicant proposes to:

   
   

   ... add 4 additional operating rooms to the existing 11; 16 new cardiac surgery recovery beds to the existing 16; and 8 new CCU beds to the existing 8 (by conversion of med/surg beds) in a new three story building that will be a replacement/expansion to the existing facility. The requested project will not constitute an increase in the licensed beds of the applicant's facility.

   
   

   The proposal does not request approval of any new services or change in the total number of beds that are licensed for the applicant's facility, but it does include redesignation of 8 existing medical/surgical beds to add to the 8 additional CCU beds requested. New space for Central Supply Services, as well (as) new and additional administrative, staff support areas, land public areas have been planned. (Emphasis added)

   
   

   These changes were sought by SFRMC to meet "(t)he need and demand for Cardiac services (that have) increased dramatically over the last seven years due to the community's growth, technological advancements and changing clinical practices."

   
   

5. According to the allegations in the petition, Lee operates a health care facility in Fort Myers, Florida, which is in the same health planning district as SFRMC. The petition goes on to aver that Lee provides a wide range of medical services and programs, including cardiac surgery and recovery, cardiac catheterization laboratories, CCU, and non-invasive diagnostic cardiology services as proposed in SFRMC's application. The petition alleges further that, due to the sheer size of the project and the "substantial change" in services that will occur, Lee is entitled to a hearing. Based upon these considerations, Lee alleges that its open heart surgery program will be substantially affected if the CON is issued.

6. HRS has authorized Lee to operate an open heart surgery program. However, by stipulation dated March 28, 1988 in DOAH Case No. 87-4755, it has agreed not to begin this program until at least April 1, 1990. If approved, SFRMC's building addition would not be completed until May 1, 1990, or one month after Lee's program begins.

   
   

7. The application reflects that SFRMC will increase its total square footage by 25%, operating room capacity by 57%, and SICU capacity by 64%. In all, the project will add approximately 68,000 square feet to the facility complex. In addition, operating expenses associated with the project will total in excess of $28 million per year. Finally, utilization of existing facilities will be enhanced by the new addition.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (1987).

   
   

9. To challenge proposed agency action, a party must plead sufficient factual allegations to show that the agency action will affect its substantial interests. This concept is so basic that a recitation of judicial decisions to that effect need not be repeated. As in so many other CON controversies, the narrow question here is whether a competitor has demonstrated standing to initiate a section 120.57(1) proceeding.

   
   

10. For purposes of ruling on the motion, the undersigned has accepted as true all well-plead allegations in the motion to dismiss. St. Francis Parkside Lodge v. Department of Health and Rehabilitative Services, 486 So.2d 32 (Fla. 1st DCA 1986).

    
    

11. Two statutes are relevant to this controversy. First, Subsection 381.706(1), Florida Statutes (Supp. 1988) provides that "all health-care-related projects, as described in paragraphs (a)-(n), shall be subject to review and shall file an application for a (CON)..." Lee contends that paragraphs (a), (c) and (h) apply to SFRMC's project. Those paragraphs read as follows:

    
    

    1. The addition of beds by new construction or alteration.

       
       

       (c) A capital expenditure of $1 million or more by or on behalf of a health care facility or hospice for a purpose directly related to the furnishing of health services at such facility; provided that a certificate of need shall not be required for an expenditure to provide an outpatient health service, or to acquire equipment, for which a certificate of need is not otherwise required pursuant to this subsection. The department shall, by rule, adjust the capital expenditure threshold annually using an appropriate inflation index.

       
       

       (h) The establishment of inpatient institutional health services by a health

       care facility, or a substantial change in such services, or the obligation of capital expenditures for the offering of, or a substantial change in, any such services which entails a capital expenditure in any amount, or an annual operating cost of

       $500,000 or more. The department shall, by rule, adjust the annual operating cost threshold annually using an appropriate inflation index.

       
       

       Secondly, Subsection 381.709(5)(b), Florida Statutes (1987) provides the following limitations on a competitor requesting a hearing on a CON application:

       
       

       ... Existing health care facilities may initiate or intervene in such administrative hearing upon a showing that an established program will be substantially affected by the issuance of a certificate of need to a competing proposed facility or program within the same district, provided that existing health care providers, other than the applicant, have no standing or right to initiate or intervene in an administrative hearing involving a health care project which is subject to certificate-of-need review solely on the basis of s. 381.706(1)(c).

       
       

12. In its motion to dismiss, SFRMC contends its application was subject to review only under paragraph (c) of subsection 381.706(1). Thus, it argues that, under the terms of subsection 381.709(5)(b), Lee is precluded from requesting a hearing. In support of this proposition, SFRMC has cited the case of Sarasota County Public Health Board d/b/a Memorial Hospital v. DHRS and HCA Doctors Hospital of Sarasota, 10 FALR 7033 (DHRS, November 21, 1988). 1/ In the alternative, SFRMC contends that, as a result of Lee's own stipulation, Lee will not offer or perform competitive services (open heart surgery et al) until at least April 1, 1990. As such, it argues that Lee has no "established program (that) will be substantially affected by the issuance of a (CON)" and is thus statutorily barred by subsection 381.709(5)(b) from initiating this proceeding.

    
    

13. In response to the first ground, Lee points out that paragraphs (a) and (h) apply to SFRMC's application, and thus the review process should not have been restricted solely to that of a capital expenditure under paragraph (c). More particularly, Lee contends that paragraph (a) applies because the project will result in "(t)he addition of beds by new construction or alteration" within the meaning of the law. In the words of Lee's counsel, after the project is completed, it will have "new, additional shelled space for beds that could then be wheeled in and used in addition to their total licensed capacity." (Transcript of hearing, pages 19-20). Put another way, while the number of licensed beds will not be changed, the facility will have a "design and built capacity" for a greater number. Next, Lee contends that paragraph (h) applies since SFMRC's proposal will constitute a "substantial change in...services." According to Lee, this is because of the sheer magnitude of the project and the increase in facility utilization rates that will occur, and the fact that the new addition will result in some $28 million in annual operating expenses. As to the second ground, Lee responds that SFRMC's application, if approved, will not be functional until May 1990, or one month after Lee's

    stipulation of inactivity ends. Thus, it reasons that SFRMC's second ground for dismissal is unavailing.

    
    

14. In determining the merits of the first ground for dismissal, it is noted initially that paragraph (a), which requires CON review for the addition of beds by construction or alteration, is distinguishable from paragraph (e), which requires CON review whenever there is "(a)ny change in licensed bed capacity." Secondly, counsel have cited no published rules or agency precedent that construe the intent and meaning of paragraph (a). Under these circumstances, it is appropriate to construe the statutory language using its common and ordinary meaning. See, e.g. Shell Harbor Group, Inc. v. Dept. of Natural Resources, 487 So.2d 1141, 1142 (Fla. 1st DCA 1986). The term "addition of beds" is unambiguous and requires CON review whenever an applicant adds beds to its facility through construction or alteration. Presumedly, and for purposes of illustration, this might occur whenever a facility had licensed, but not yet activated, beds and engaged in new construction or alterations to bring into service licensed but unused capacity. In this case, the record reveals that, although SFRMC intends to "add 8 new CCU beds to the existing 8", it will do so by converting eight medical/surgical beds to that use. Thus, it will not quantitatively "add" new beds for use in its facility, a factor the undersigned deems necessary in order to bring the statute into play. Lee's contention that SFRMC might, at some future point, place new beds in what is now empty or shelled space is speculative at best and would place a strained construction on the statute. Moreover, if Lee's argument was accepted, any project that resulted in empty or shelled space could be required by a third party to undergo CON review through an allegation that, at least theoretically, the unused space might be converted to space for beds. Therefore, it is concluded that paragraph

    (a) does not apply.

    
    

15. To resolve the question of whether the application constitutes a substantial change in services within the meaning of paragraph (h), reference to Rule 10-5.002(39), Florida Administrative Code (1987) is helpful. That rule defines the term "substantial change in health services" as follows:

    
    

    (39) "Substantial change in health services" means:

    1. The offering by a health care facility of a new institutional health service or a health service which has not been offered on a continuing basis by or on behalf of the health care facility within the 12-month period prior to the time such service would be offered, excluding obstetrical services; or

    2. Any change in the number of psychiatric, substance abuse, or comprehensive medical rehabilitation beds, provided by a health care facility, including a change from short- term to long-term, or from long-term to

       short-term; or

    3. The conversion of acute care beds in a health care facility to skilled or intermediate care nursing home beds or the conversion of skilled and intermediate care nursing home beds to acute care beds; or

    4. The termination of a health service.

    Since none of the changes contemplated by SFRMC fall within these definitions, it is concluded that paragraph (h) does not apply.

    
    

16. Because SFRMC's application is subject to review only under paragraph (c), the provisions of subsection 381.709(5)(b) come into play. That statute provides in relevant part that "existing health care providers, other than the applicant, have no standing or right to initiate or intervene in an administrative hearing involving a health care project which is subject to certificate-of-need review solely on the basis of s. 381.706(1)(c)." This being so, the motion to dismiss should be granted. Sarasota County Public Hospital Board, supra. Since it appears that petitioner cannot demonstrate standing under any viable theory, the dismissal is with prejudice.

    
    

17. In view of the above conclusion, it is unnecessary to reach the second ground in SFRMC's motion.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Southwest Florida Regional Medical Center's motion to

dismiss the petition of Lee Memorial Hospital be GRANTED and that Lee's petition for formal administrative hearing be dismissed with prejudice.

DONE AND ORDERED this 27th day of April, 1989, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 27th day of April, 1989.

ENDNOTE

1/ In that case, the applicant sought authority to construct a replacement facility some 2.7 miles southeast of its existing location. The project was estimated to cost over $30 million. In dismissing the protest of a competitor who was seeking a comparative review of its own application with that of HCA Doctors Hospital, HRS held the application was reviewable only under the criterion in subsection 381.706(1)(c) and therefore Memorial Hospital had no standing to request a hearing.

COPIES FURNISHED:

Ivan Wood, Esquire Four Houston Center 1221 Lamar, Suite 1400

Houston, TX 77010-3015

John D. C. Newton, II, Esquire 1711-D Mahan Drive Tallahassee, FL 32308

Richard A. Patterson, Esquire 2727 Mahan Drive, Suite 103

Tallahassee, FL 32308

R. S. Power, Agency Clerk Building One, Room 407 1323 Winewood Boulevard Tallahassee, FL 32399-0700

Docket for Case No: 89-001262

Orders for Case No: 89-001262