STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHARTER MEDICAL OF )

ORANGE COUNTY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 89-1358

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

and )

) HEALTH MANAGEMENT ASSOCIATES, INC. )

)

Intervenor. )

) CHARTER MEDICAL OF ORANGE )

COUNTY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 89-1366

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES and ) ORLANDO REGIONAL MEDICAL CENTER, )

)

Respondent. )

) PSYCHIATRIC INSTITUTE OF ) ORLANDO, INC., d/b/a LAUREL OAKS ) HOSPITAL, )

)

Petitioner, )

)

and )

) HEALTH MANAGEMENT ASSOCIATES, INC. )

)

Intervenor, )

vs. ) CASE NO. 89-1368

) STATE OF FLORIDA, DEPARTMENT of ) HEALTH AND REHABILITATIVE SERVICE ) ORLANDO REGIONAL MEDICAL CENTER, )

)

Respondent. )

) PSYCHIATRIC INSTITUTE OF ) ORLANDO, INC., d/b/a LAUREL OAKS ) HOSPITAL, )

)

Petitioner, )

)

and )

) HEALTH MANAGEMENT ASSOCIATES, INC. )

)

Intervenor, )

vs. ) CASE NO. 89-2039

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES and )

CHARTER MEDICAL OF ORANGE )

COUNTY, INC., d/b/a CHARTER )

HOSPITAL OF ORLANDO )

)

Respondent. )

) ORLANDO REGIONAL MEDICAL )

CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 89-2041

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES and )

CHARTER MEDICAL OF ORANGE )

COUNTY, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled cases on October 11-13, 16-20, and 23, 1989, in Tallahassee, Florida.

APPEARANCES

Charter Medical Stephen A. Ecenia and

of Orange County, Inc. Micbael J. Cherniga of

("Charter") Roberts, Baggett, LaFace & Richard

101 East College Avenue Tallahassee, FL 32301

Orlando Regional Medical James M. Barclay of Center ("ORMC") Cobb, Cole & Bell

315 South Calhoun Street Tallahassee, FL 32301

and

Steven R. Bechtel of Mateer, Harbert & Bates

225 East Robinson Street Orlando, FL 32802

State of Florida, Department Edgar Lee Elzie of

of Health and Rehabilitative MacFarlane, Ferguson, Services ("HRS") Allison & Kelly

Suite 804, First Florida Bank Building Tallahassee, FL 32401

Psychiatric Institute of C. Gary Williams and Orlando, Inc., d/b/a R. Stan Peeler of

Laurel Oaks Hospital Ausley, McMullen, ("Laurel Oaks") McGehee, Carothers

& Proctor

227 S Calhoun Street Tallahassee, FL 32301

and

John Brennan, Jr. of Bonner & O'Connell

Suite 1000, 900 17th St.

DC 20006

Health Management Robert S. Cohen of

Associates, Inc. Haben & Culpepper

("HMA") 306 North Monroe St.

Tallahassee, FL 32301 STATEMENT OF THE ISSUES

The issue for determination is whether Charter Medical of Orange County, Inc. (Charter) is entitled to Certificate of Need #5691 and Orlando Regional Medical Center (ORMC) is entitled to Certificate of Need #5697, both for short term psychiatric beds in Orange County, Florida, HRS District 7.

In their pre-hearing stipulation, filed on October 5, 1989, the parties agreed to the following:

1. Construction costs in the applications are reasonable.

2. Facility designs in the applications meet applicable rules and regulations.

3. Fixed and movable equipment costs in the applications are reasonable.

4. Each applicant has the ability to recruit administrators and administrative personnel.

5. Staffing levels for administrative personnel (such as administrators, controllers, marketing personnel and their assistants) and their salaries, are reasonable.

6. It is stipulated all applicants have the availability of resources to finance the projects proposed in their applications and funds for capital and operating expenditures for the proposals contained in their applications. This stipulation does not affect whether the projects are financially feasible nor does it preclude any party putting on evidence criticizing or attacking the pro forma financial statements contained in any of the applications.

7. The letters of intent and certificate of need applications were timely filed.

8. All applicants meet statutory publication requirements for certificate of need applications.

9. All parties have standing and it is stipulated that the substantial interests of all petitioners and intervenors are affected by the applications under consideration in this case and that established programs existing health care providers will be substantially affected by the issuance of a certificate of need to a competing proposed facility or program within HRS planning District VII.

10. The parties have stipulated as follows with regard to the applicability of the provision of subsection (1) of section 381.705, Florida Statutes:

    1. Subsections (1)(a), (1)(b), (1)(c) , (1)(d) , and (1)(e) aid applicable and are at issue.

    2. Subsections (1)(f) and (1)(g) are not applicable or have been met.

    3. Subsection (1)(h) contains

       several clauses separated by semi- colons. The first such clause is at issue except as stipulated above. Clauses 2 and 3 are applicable but not at issue. The remaining clauses in subsection (1)(h) are applicable and are at issue.

    4. Subsection (1)(i) is applicable and is at issue.

    5. Subsections (1)(j) and (1)(k) are not applicable or have been met.

    6. Subsection (1)(1) is applicable and is at issue.

    7. Subsection (1)(m) is but is not at issue.

    8. Subsection (1)(n) is applicable and is at issue.

11. The parties have agreed that subsection (2)(e) of Section 381.705 is not applicable or has been met and that subsections (2)(a), (2)(b), (2)(c), and (2)(d) are applicable and are at issue.

12. The parties have agreed that the rule

    criteria in Rule 10-5.011 (b)[sic] F.A.C. are applicable and are at issue.

13. The parties reserve the right to demonstrate that their application Is superior to the others and thus these stipulated items may still serve as a basis for comparative issues.

The alleged improprieties in the manner that Charter's application was approved by HRS, raised by Laurel Oaks, are not deemed relevant in this proceeding; and evidence related to that issue in Laurel Oaks Exhibit #11 (deposition of John Robert Griffin) has not been considered.

PRELIMINARY STATEMENT

In September of 1988, eight applications for certificates of need (CON) were filed with HRS in response to a fixed need pool identifying the need for

140 short-term psychiatric beds in HRS District 7.

In January 1989, HRS issued its State Agency Action Report (SAAR) granting the alternate/partial approval of First Hospital Corporation in its application #5690, granting ORMC's application #5697, granting Brookwood Medical Center's (AMI) application #5699, and granting the application of HCA West Lake Hospital in #5701. The SAAR denied the remaining applications, including that of Charter Medical of Orange County, Inc. in #5691.

On March 10, 1989, HRS amended its SAAR to provide for approval of Charter Medical of Orange County, Inc.

The result of the two agency actions was a total of eighteen separate petitions for formal hearings by the applicants and by existing facilities opposed to the approvals.

The cases were consolidated for hearing in an order dated March 24, 1989.

Those cases were: 89-1358, 89-1359, 89-1360, 89-1361, 89-1362, 89-1363, 89-

1364, 89-1365, 89-1366, 89-1367, 89-1368, 89-2035, 89-2036, 89-2037, 89-2038,

89-2039, 89-2040, and 89-2041.

By the time the final hearing commenced, only the above-styled parties and Florida Hospital and Park Care remained in the case. First Hospital Corporation of Florida withdrew its application and dismissed its challenge to the approval of Charter Medical's application. All challenges to West Lake's and AMI's approvals were withdrawn and Final Orders granting those CON's have been issued.

At the commencement of hearing Florida Hospital withdrew its petitions, and on October 18, 1989, Park Care, Inc., withdrew its petitions. This left challenges by Laurel Oaks and HMA to the proposed approvals of Charter Medical and ORMC.

Charter presented the testimony of six witnesses and its Exhibits 1-14 and

16 were received in evidence. Composite Exhibit 15, pages 3, 4 and 5, was also received in evidence. The remainder of Exhibit 15 was proffered. Testifying for Charter were: Jack A. Morgenstern, Robert P. Collins, Ronald T. Luke, John

M. Southern, David Anthony Mobley and Wimberly Tredwell.

ORMC presented the testimony of six witnesses and its Exhibits 1-17 were received in evidence. Testifying for ORMC were: Catherine Canniff-Gilliam, Philip C. Rond, Bruce J. Hoeksema, Robert Roy Wright, Lillian T. Saavedra and Paul Alan Goldstein.

HRS presented the testimony of Sharon Gordon-Girvin and introduced no exhibits.

Laurel Oaks presented the testimony of Daniel J. Sullivan and its Exhibits 1-4 and 6-11 were received in evidence. Exhibit 5 was proffered.

HMA presented the testimony of two witnesses and its Exhibits 1 and 2 were received in evidence. Testifying for HMA were Gregory Paul Roth and Cynthia Rector.

The transcript was filed on November 13, 1989; the parties proposed recommended orders were filed on December 15, 1989. Those have been carefully considered in the preparation of this recommended order and specific rulings on the proposed findings of fact are found in the attached appendix.

FINDINGS OF FACT

I The Parties

1. Charter Medical of Orange County, Inc., (Charter) is a wholly-owned subsidiary of Charter Medical Corporation, founded in Macon, Georgia in 1969. The parent corporation operates approximately 92 hospitals throughout the country, including Florida. Most of its hospitals are psychiatric or substance abuse facilities.

   
   

2. Orlando Regional Medical Center (ORMC) is a 1,119- bed, nonprofit medical system comprised of four divisions. In downtown Orlando it operates a 630-bed tertiary care hospital and a 255-bed Arnold Palmer Hospital for women and children. A Sand Lake campus is located 10 miles southwest of Orlando, off I-4, and includes medical/surgical beds and 32 licensed short-term psychiatric beds. ORMC's St. Cloud Campus in Osceola County, south of Orlando, includes 84 medical/surgical beds.

   
   

3. The Department of Health and Rehabilitative Services (HRS) is the state agency responsible for implementing and enforcing the certificate of need program pursuant to Sections 381.701-.715, F.S.

   
   

4. Psychiatric Institute of Orlando, Inc., d/b/a Laurel Oaks Hospital, (Laurel Oaks) is a subsidiary of P1A Psychiatric Hospitals, Inc., which is a subsidiary of National Medical Enterprises (NME). P1A owns approximately 50

   psychiatric hospitals throughout the county, including (30-bed Laurel Oaks, in southwest Orange County, a short-term psychiatric and substance abuse facility for children and adolescents

   
   

5. Health Management Associates, Inc., (HMA) is a health management company which owns or operates 16 hospitals in the southeastern United States, including four psychiatric hospitals in Florida. HMA's Crossroads University Behavioral Center is a 100-bed free-standing psychiatric hospital in northeast Orange County. Its 60 adult beds and 40 adolescent beds opened in January 1989 as a licensed long-term facility, but it has been operating continually as a short-term facility.

   
   

   1. The Applications

      
      

6. Charter proposes to develop a new free-standing 60- bed psychiatric hospital (40 beds for adults, 10 beds for adolescents and 10 beds for children). It plans a wide range of treatment modalities utilizing a multi-disciplinary team approach, tailored to the age and needs of the patient.

   
   

7. Although no specific site has been selected, several have been identified in southwest Orange County. Charter anticipates the total cost for the project will be $7,783,000.

   
   

8. Charter's patients will be primarily commercially insured (71%), with 15% Medicare and 4% indigent. Charter has committed to serve this share of indigent for the first two years of operation. As a specialty hospital, Charter is not eligible to accept Medicaid patients.

   
   

9. ORMC proposes to build a 60-bed free-standing facility on a 7.2 acre site within 40 acres it already owns at Sand Lake and adjacent to its existing Sand Lake Hospital, for a total project cost of $6,678,935.

   
   

   No new licensed beds are required as ORNC will transfer its 32 short term beds from the sixth floor of the Sand Lake Hospital and will convert 28 of its licensed medical/surgical beds from its downtown hospital.

   
   

   The 60 beds will consist of 30 adult and 30 adolescent short term beds. Since the existing 32 beds are primarily adult beds, ORMC's project will be adding adolescent beds to the inventory in District 7.

   
   

10. Proximity to Sand Lake Hospital will facilitate shared services, including engineering, dietary and laundry. ORMC also expects the joint use of therapists at its psychiatric facility and its existing brain injury rehabilitation unit at Sand Lake.

    
    

11. Because the facility will be added to ORMC's general hospital license, it can and will accept Medicaid patients. ORMC has committed to serve 20% Medicare, 8% Medicaid and 8% indigent patients.

    
    

12. ORMC will likely seek an outside management firm to operate its psychiatric facility.

    
    

    1. The Review

       
       

13. On August 23, 1988, HRS published a need for 140 short-term psychiatric beds in District 7.

    Its SAAR issued in January 1989, recommended approval of a total of 137 beds. When the SAAR was amended in March 1989, to include the Charter approval, the total surged to 197 approved beds.

    
    

    Even after First Hospital withdrew its application for 55 beds, the total approved exceeded the published need for the 1993 horizon year by two beds.

    
    

    1. Numeric Need

       
       

14. The short-term psychiatric bed need rule is found at Rule 10- 5.011(1)(o) , F.A.C.

    
    

    "Short-term" is defined as an average length of stay of 30 days or less for adults, and 60 days or less for children and adolescents under 18 years.

    
    

    A favorable need determination will not normally be given to an applicant unless a bed need exists according to sub-paragraph (1)(o)4 of "the rule".

    
    

15. Rule 10-5.011(1)(0)4, F.A.C. provides as follows:

    
    

    1. Bed allocations for acute care short term general psychiatric services shall be based on the following standards:

       1. A minimum of .15 beds per 1,000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health

          These beds shall be designated as short term inpatient hospital psychiatric beds.

       2. 20 short term inpatient hospital beds per 1,000 population may be located in specialty hospitals, or hospitals holding a general license. The distribution of these beds shall be based on local need, cost effectiveness, and quality of care considerations.

       3. The short term inpatient

          psychiatric bed need for a Department service district shall be projected 5 years into the future based on the most recent available January or July population estimate prior to the beginning to the respective batching cycle. The projected number of beds shall be based on a bed need ratio of

          .35 beds per 1,000 population. These beds are allocated in addition to the total number of general acute care hospital beds allocated to each Department District under Paragraph 10-5.011(1)(m). The net need for short term psychiatric beds shall be calculated by subtracting the number

          of licensed and approved beds from the number of projected beds. The population estimates are based on population projections by the Executive Office of the Governor.

       4. Occupancy Standards. New

          Facilities must be able to project an average 70% occupancy rate for adult psychiatric beds and 60% for children and adolescent beds in the second year of operation, and must be able to project an average 80% occupancy rate for adult beds and 70% for children and adolescent short term psychiatric inpatient hospital beds for the third year of operation.

       5. No additional short term inpatient hospital adult psychiatric beds shall normally be approved unless the average annual occupancy rate for all existing adult short term inpatient psychiatric beds in a service district is at or exceeds 75% for the preceding

          12 month period. No additional beds for adolescents and children under 18 years of age shall normally be approved unless the average annual occupancy rate for all existing adolescent and children short term hospital inpatient psychiatric beds in the Department district is at or exceeds 70% for the preceding 12 month period.

       6. Hospitals seeking additional short term inpatient psychiatric beds must show evidence that the occupancy standard defined in paragraph six is met and that the number of designated short term psychiatric beds have had an occupancy rate of 75% or greater for the preceding year.

       7. Unit size. In order to assure specialized staff and services at a reasonable cost, short term inpatient psychiatric hospital based services should have at least 15 designated beds. Applicants proposing to build a new but separate psychiatric acute care facility and intending to apply for a specialty hospital license should have a minimum of 50 beds.

          
          

16. The parties do not dispute that application of the formula yields a need for 140 beds, the total published in the applicable fixed need pool.

    Nor do the parties dispute that the occupancy standard was met, since HRS uses the lower standard of 70% as a threshold for determining whether need should be published.

    
    

    The parties agree that approval of both Charter's and ORMC's applications results in an excess of two beds over the published need.

    
    

17. There is substantial dispute as to whether that excess is justified, and as to the composition of the beds as "speciality hospital" or "general hospital" beds.

    
    

18. The only provision in agency rules or policy for exceeding bed need calculations is when "not normal" or "special" circumstances exist in the District.

    
    

    HRS' Policy Manual for the Certificate of Need program, dated October 1, 1988, provides in Section 9-6 B. (3):

    
    

    If a qualified applicant exist but the proposed project exceeds the beds or services identified in the fixed need pool, the department may award

    beds or services in excess of the pool when warranted by special circumstances as defined in rule 10- 5.011(1)(b), 1-4, F.A.C. and,

    specifically for nursing homes Rule 10-5.011(1)(K)2.j. F.A.C.

    (Laurel Oaks Exhibit #10, P. 9-2)

    
    

    The referenced sections of Rule 10-5.011(1)(b), F.A.C., relate to the enhancement of access--primarily economic access and access by underserved groups.

    
    

19. Access is addressed in Part VII, below.

    
    

    No evidence was presented regarding special problems of access in District

    7.

    
    

    Rather, HRS asserts that its excess approval was based on "rounding up" the

    numbers of beds, and on the favorable occupancy rates in the district.

    
    

20. In its SAAR, HRS calculated the following occupancy rates by age cohort in the district:

    
    

    Adult 75.8%

    Child/Adolescent 74.8%; and in Orange County:

    Adult 57.4%

    Child/Adolescent 100.

    
    

    The adult rate is therefore slightly above the 75% minimum in the district, and substantially below the minimum in Orange County. The child/adolescent rate is above the 70% minimum in both the district and county.

    HRS appropriately does not utilize occupancy in beds other than licensed short term psychiatric bed in calculating its rates as it would be difficult to compute the number of available beds (medical/surgical, long term psychiatric, etc.).

    
    

21. The rule specifies that a minimum of .15 beds per 1000 population "should" be allocated to hospital1s holding a general license and that .20 beds per 1000 population may be located in either speciality hospitals or hospitals holding a general license.

    
    

    Of the 140 beds needed in District 7, 75 may be located in a speciality hospital under this formula. 30 speciality beds were awarded to West Lake and are unchallenged. The Charter application for 60 speciality beds exceeds by 15, the 45 speciality beds left to be allocated.

    
    

    1. The State and Local Health Plans

       
       

22. The State Health Plan is dated 1985-1987. Goal 1 is the only portion of the plan that is relevant in this review. It essentially reiterates the need methodology described above, regarding the .35 beds per 1000 population and the 70% and 75% annual occupancy thresholds.

    
    

23. The applicable local health plan is the 1988 local health plan for District 7. This plan divides the district into "planning areas": Brevard, Osceola, Seminole and Orange -- the four counties within the district. Planning areas, unlike subdistricts, are more in the nature of guidelines and do not carry the same legal weight as subdistricts.

    
    

24. Both applicants are committed to submit data to the local health councils, as provided in recommendation #2. Both applicants have committed to provide a fair share of care to the underserved, although ORMC's commitment is substantially greater and has a proven record to support it.

    
    

25. Recommendation #5 provides that no new short-term psychiatric or substance abuse beds shall be approved until all existing beds in the planning area are operating at or above 75% occupancy for the most recent twelve months for which data is available from the local health council. This criteria is barely met when adult and children/adolescent occupancy is combined, and is not met by the occupancy rate for adult beds in Orange County.

    
    

    1. Financial Feasibility

       
       

26. The pro formas of both applicants, which are no more than best guess estimates, are generally reasonable, based upon the experience of the applicants' existing programs.

    
    

27. Charter's proposal makes no provision for management fees, although such fees are remitted to the parent company by its subsidiaries and are reported to the Health Care Cost Containment Board. Charter anticipates that it would not incur additional corporate overhead to support this facility if it is built.

    
    

28. In recent years ORMC's psychiatric unit has lost money in its operation when overhead is factored into the cost. Its Program Director, Jeffrey Oppenheim, reasonably anticipates the new facility will make a profit, as it

    will serve a better mix of age cohorts and will offer a more desirable setting than its limited facility now located on the sixth floor of a medical/surgical hospital.

    
    

29. The financial feasibility of both applications depends on the programs' ability to attract patients. That ability is not seriously questioned. Both applications have substantial experience in operating financially efficient health care programs.

    
    

    1. Quality of Care and Accessibility

       
       

30. No evidence was presented to challenge either applicant's ability to provide quality care.

    
    

    Nor, however, was the quality of care of existing alternative programs at issue.

    
    

31. Geographic access in District 7 is not a problem, and none suggests that the access standard in Rule 10-5.011(1)(o)5.g., F.A.C., is not met (travel time of 45 minutes or less for 90% of the service area population).

    
    

32. Charter's inability to provide Medicaid services and its time-limited commitment to serve even 4% indigents amount to only minimal contribution to the economically underserved population.

    
    

33. In the past, ORMC has been a receiving facility for Baker Act patients and it anticipates it will again when the psychiatric program has its new quarters.

    
    

    It is only one of two hospitals in Orange County eligible to provide Medicaid services and is the fifth highest provider of charity and Medicaid in the State of Florida, according to Medical Health Care Cost Containment Board data.

    
    

    1. Impact on Existing Facilities and Competition

       
       

34. Positive competition among providers already exists in District 7. There are eleven existing short term psychiatric programs in the four-county area, including both speciality and general hospitals, and adult, children and adolescent programs. Only three obtained an occupancy rate of more than 75% for the fiscal period ending June 1988.

    
    

    1. The Availability of Health Manpower

       
       

35. There is a shortage of nurses, qualified social workers and counsellors in District 7. HMA has experienced problems in recruiting staff at its Orlando facility.

    
    

    Competition for these staff has caused salaries to rise, and consequently the cost of providing services has risen. Turnover results when staff are attracted to new facilities, causing training problems and affecting quality of care.

    
    

36. Charter has the corporate resources to conduct effective recruiting, but has no experience recruiting in the Orlando area.

    ORMC, a large diverse facility, with good opportunity for lateral and upward mobility, has experienced few problems staffing its programs.

    
    

    1. The Availability of Alternatives

       
       

37. Eight of eleven District 7 short term psychiatric facilities have operated below 75% occupancy in the last two years. These under-utilized facilities are plainly alternatives for new projects proposing the same services. Neither applicant is proposing novel or innovative services in psychiatric care.

    
    

38. That licensed long term psychiatric facilities such as HMA, are operating short term programs does not justify the approval of new short term beds, but rather suggests these programs could be converted, with little or no capital outlay, into short term programs.

    
    

39. Conversion of under-utilized acute are beds to short term psychiatric beds is also an alternative in District 7. Acute care bed occupancy rates in each county of District 7 failed to reach 60% in the most recent 12-month period of available data.

    
    

40. The criterion of Rule 10-5.011(1)(o)5.f., F.A.C. favors the conversion of under-utilized beds in other hospital services unless conversion costs are prohibitive.

    
    

41. There has been a trend in the last several years away from inpatient care and toward less restrictive treatment modalities. Both applicants acknowledge this trend with their inclusion of partial hospitalization programs in their plans.

    
    

42. ORMC has no reasonable alternative to building a new facility if it is to maintain its inpatient psychiatric program. There is an increasing demand for the medical surgical beds it currently occupies on the sixth floor of Sand Lake Hospital. There is no appropriate space in its downtown facilities.

    
    

    1. Balancing the Criteria Comparative Review and Summary

    
    

43. As reflected above, not all of the relevant statutory and rule criteria have been met by these applicants. There remains, however, the planning horizon numerical need for additional short term psychiatric beds.

    
    

    While that need could likely be met with the utilization of beds that are not licensed for the provision of short term care, such a solution frustrates state licensing requirements.

    
    

44. Three alternative dispositions exist: to deny both ORMC and Charter applications, leaving an unmet need in this cycle for 86 beds; to grant one application only; or to approve both and exceed the need by two beds.

    
    

45. HRS argues that the two-bed difference is of little consequence and that the excessive number of specialty beds if Charter is approved is irrelevant, as no general hospital is currently competing for the beds.

    
    

    It is not possible to conjecture that appropriate general hospital applicants will participate in a near future cycle, but it is certain that if those beds are awarded in this cycle to a specialty hospital, they will not be available in a future cycle.

    Nothing requires that all beds identified in a fixed pool must be awarded in that cycle. The converse follows when, as here, other considerations weigh against approval of additional beds.

    
    

46. Between the two applicants, ORMC more consistently meets the rule and statutory criteria.

    
    

    Although it still proposes a substantial capital outlay, (ORMC) relies on conversion of existing licensed beds and results in less impact on other existing programs.

    
    

    Its contribution to the underserved population is more substantial; it proposes more needed adolescent, rather than adult beds; and it does not violate the .15/.20 general hospital, specialty hospital bed balance. That balance needs to be maintained in this case to insure competition among Medicaid providers.

    
    

47. In summary, the evidence supports approval of ORMC's application and denial of Charter's.

    
    

    CONCLUSIONS OF LAW

    
    

48. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this proceeding pursuant to Section 120.57(1),

    F.S. and Section 381.709(5), F.S.

    
    

49. Both Laurel Oaks and HMA have standing to initiate or intervene in this proceeding. They proved that they are established programs which will be substantially affected by the issuance of certificates of need to the competing proposals of ORMC and Charter, both located within the same county and, therefore, same planning district. Section 381.709(5)(b), F.S.

    
    

50. HRS Rule 10-5.008(2)(a), F.A.C., provides that when HRS has published its fixed need pool, as required,

    
    

    those pools shall not be changed or adjusted in the future regardless of any future changes in need methodologies, population estimates, bed inventories, or other factors which would lead to different projection of need, if retroactively applied.

    
    

    The pools are fixed at the time of publication. PIA Psychiatric Hospital, Inc. d/b/a Orange Psychiatric Institutes v. DHRS, 11 FALR 3848, 3865 (Final Order, June 15, 1989)

    
    

51. Rule 10-5.011(1)(o), F.A.C. provides the numeric need methodology for short term psychiatric beds. Under that methodology and as published in the fixed need pool, there is numeric need for 140 short term psychiatric beds in District 7, in the relevant planning horizon.

    
    

    The 30-bed conversion at West Lake and 24-bed conversion at AMI, approved without objection, reduce the pool to 86 beds. Thus, Charter's application for

    60 beds and ORMC's application for 60 beds (including 28 "new" psychiatric beds) exceed the total by two beds.

52. Bed need computed under the rule and published as a fixed need may be exceeded when "not normal circumstances" exist in the District. The parties failed to prove that those "not normal circumstances", financial and geographic accessibility, exist in District 7. Rule 10-5.011(1)(b) 1-.4, F.A.C.

    
    

53. HRS and the applicants argue that a two-bed excess is "close enough", and should be waived when the alternative is the unmet need for 58 new beds in the District. This argument implies that the fixed need pool might be exceeded anytime the excess is still less than the number of beds that would otherwise be left in the pool unapproved. No rule provides this, and HRS does not have an established policy in this regard.

    
    

54. Other circumstances must be examined.

    
    

    Approval of Charter's application for 60 beds in a specialty hospital would result in a 15-bed excess of specialty beds in District 7 under the .15/.20 ratio in Rule 10-5.011(1)(o) 4. A. and b., F.A.C.

    
    

    The requirement in the rule is that "`a minimum of .15 beds per 1000 population should be located in hospitals holding a general license to ensure access to needed services for persons with multiple health problems."

    
    

    In the past, HRS has interpreted "should" as mandatory when there are competing general hospital and specialty hospital applications. Charter Medical-Orange County, Inc. v. Department of Health and Rehabilitative Services, 11 FALR 1087, 1094. (Final Order, February 2, 1989)

    
    

    In this case HRS argues that since no general hospital applicant is competing for the excess beds, assuming that ORMC's application is approved, the approval of specialty beds is preferable to allowing the "need" to remain unmet.

    
    

55. "Need" is not determined by the rule methodology alone, but rather by a balanced consideration of all relevant statutory and rule criteria. Department of Health and Rehabilitative Services v. Johnson and Johnson, 447 So 2d 361 (Fla 1st DCA 1984); Balsam v. Department of Health and Rehabilitative Services, 486 So 2d 1341 (Fla 1st DCA 1986).

    
    

    In this case, careful weighing of the applicable criteria results in a conclusion that both applications should not be granted and that ORMC's is the more meritorious proposal.

    
    

56. Notwithstanding the numerical "need" for 140 beds in District 7, there are a substantial number of existing short term programs which are underutilized, and it is the high utilization rates of facilities such as Laurel Oaks (100%, for children and adolescents), which positively affect the District's overall occupancy rate.

    
    

    Short term psychiatric patients are routinely served in beds that are licensed as long term beds, and the trend is toward conversion of those beds, as witnessed in West Lake's application.

    
    

    Competition for limited manpower resources will increase the cost of psychiatric health care.

    
    

57. ORMC's application will have less impact on existing facilities, both in competing for patients and for staff, as it includes the transfer of existing

beds to a new facility. The "new" beds will serve adolescents, the population most in need. It will have no impact on the total hospital bed inventory for the district as it seeks conversion of acute care beds.

ORMC's commitment to the underserved indigent population is proven and substantial. Approval of its application will not violate the .15/.20 ratio and will insure a choice for Medicaid patients in the Orange County area.

ORMC adequately demonstrated that it must construct a new facility to maintain its psychiatric program; its program in a new facility will be financially feasible and will enhance rather than disserve the psychiatric health care community in District 7.

RECOMMENDATION

Based on the foregoing, it is hereby, RECOMMENDED

That a Final Order be entered denying CON number 5691 to Charter Medical of Orange County, Inc.; and granting CON #5697 to Orlando Regional Medical Center.

DONE AND RECOMMENDED this 15th day of February, 1990, in Tallahassee, Leon County, Florida.

MARY CLARK

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 15th day of February, 1990.

APPENDIX TO THE RECOMMENDED ORDER

IN CASES NO. 89-1358,89-1366.89-1368,89-2039 & 89-2041

The following constitute rulings on the findings of fact proposed by each party: Charter Medical of Orange County, Inc.

1. Adopted in substance in paragraph 1.

2. Adopted in substance in paragraph 2.

3. Adopted in paragraph 3.

4. Adopted in paragraph 4.

5. Adopted in paragraph 5.

6.-17. Adopted in statement of the issues.

18. Adopted in paragraphs 6 and 7. 19.-36. Rejected as unnecessary, except as summarized in

paragraph 6.

37. Addressed in paragraph 30.

38.-5O. Rejected as unnecessary, except as summarized in paragraph 36.

51.-57. Rejected as unnecessary, except at summarized in paragraph 7.

58.-6I. Adopted in paragraph 16.

62.-69. Rejected as unnecessary and contrary to the methodology in the rule.

70. Adopted in substance in paragraph 16. 71.-77. Rejected as unnecessary.

78. Rejected as contrary to the evidence and law. "Not normal" does not include high occupancy rates in several facilities.

79.-8I. Adopted in summary in paragraph 21.

82.-83. Rejected as immaterial. The evidence in this case supports maintenance of the balance, notwithstanding past practice.

84. Adopted in paragraph 15. 85.-103. Rejected as unnecessary.

104. Rejected as contrary to the law and evidence. 105. &

106. Adopted in paragraph 22.

107.-109. Adopted in paragraph 23. 110. & 111. Rejected as

unnecessary. 112. & 113. Adopted in paragraph 24.

1. Rejected as unnecessary.

2. Adopted in substance in paragraph 25. 116.-149. Rejected as unnecessary.

150. Adopted in substance in paragraphs 26 and 29. 151.-161. Rejected as unnecessary.

162.-164. Adopted in substance in paragraph 27. 165.-171. Rejected as unnecessary.

172. Rejected as contrary to the evidence.

173.-180. Rejected as immaterial and unnecessary.

181. Adopted in paragraph 5.

182.-190. Rejected as unnecessary.

1. Adopted in substance in paragraph 43.

2. Rejected as contrary to the evidence. 193.-198. Rejected as unnecessary.

199. Rejected as contrary to the evidence. 200.-206. Rejected as unnecessary.

1. Rejected as contrary to the evidence.

2. Rejected as unnecessary.

3. Adopted in paragraph 8.

210.-213. Rejected as unnecessary.

214. Adopted by implication in paragraph 33.

215.-218. Rejected as unsupported by the weight of evidence.

1. Rejected as unnecessary.

2. & 221. Rejected as contrary to the weight of evidence.

222. Adopted in summary in paragraph :28. 223.-238. Rejected as unnecessary.

Orlando Regional Medical Center

1. Adopted in paragraph 2.

2. Adopted in paragraph 9.

3.-7. Rejected as unnecessary.

1. Adopted in paragraph 9.

2. Rejected as unnecessary.

3. Adopted in substance in paragraph 42.

4. Rejected as unnecessary.

5. Adopted in substance in paragraph 42.

6. Adopted in summary in paragraph 12.

7. Adopted in paragraph 1.

8. Rejected as ummaterial.

9. Adopted in paragraph 6.

10. Adopted in paragraph 4.

11. Adopted in paragraph 15.

12. Addressed in the preliminary statement.

13. Adopted in paragraph 14.

14. Rejected as unnecessary.

22.-24. Adopted in summary in paragraph 16.

1. Adopted in paragraph 15 and conclusion of law #7.

2. Adopted in substance in paragraph 21.

3. Adopted in paragraph 15.

4. Rejected as unnecessary.

29 & 30. Adopted in paragraph 9.

1. Adopted in paragraph 20.

2. Adopted in paragraph 22.

3. Rejected as unnecessary.

4. Adopted in paragraph 23.

5. Adopted in paragraph 23.

36 & 37. Adopted in paragraph 24.

1. Adopted in paragraph 11 and 33.

2. Adopted in paragraph 8.

3. Adopted in paragraph 11.

41 & 42. Rejected as unnecessary.

1. Adopted in summary in paragraph 25.

2. Rejected as unnecessary.

3. Rejected as cumulative and unnecessary.

4. Rejected as unnecessary.

5. Adopted in summary in paragraph 26. 48.-52. Rejected as unnecessary.

1. Adopted in paragraph 10.

2. Rejected as contrary to the weight of evidence (the finding as to no alternatives). The finding regarding Park Place is unnecessary.

3. Rejected as cumulative and unnecessary.

4. Adopted in paragraph 42.

5. Rejected as cumulative and unnecessary.

6. Adopted in paragraph 9.

7. Adopted in paragraph 7.

8. Adopted in paragraph 36.

9. Rejected as cumulative and unnecessary.

10. Adopted in paragraph 30.

63.-66. Rejected as unnecessary.

67. Adopted in paragraph 47.

The Department of Health and Rehabilitative Services

1. & 2. Addressed in Preliminary Statement.

1. Adopted in paragraphs 6. and 9.

2. Adopted in paragraph 24.

3. Adopted in paragraph 20.

4. Adopted in paragraph 36.

7.-9. Rejected as contrary to the weight of evidence.

1. Adopted in paragraph 30.

2. Rejected as contrary to the weight of evidence.

3. Rejected as unnecessary.

4. Adopted in paragraph 26.

5. Rejected as contrary to the evidence.

6. Adopted in paragraph 33.

7. Adopted in substance in paragraph 32.

8. Adopted by implication in paragraphs 30 and 34.

9. Rejected as contrary to the evidence.

10. Adopted in summary in paragraph 13.

11. Adopted in paragraph 15.

12. Rejected as contrary to the weight of evidence.

13. Rejected as contrary to the evidence. The policy is found in HRS' Policy Manual.

14. Rejected as immaterial.

15. Adopted in paragraph 21.

16. Rejected as unnecessary.

26 & 27. Adopted by implication in 23.

1. Rejected as unnecessary.

2. Rejected as contrary to the evidence.

3. Rejected as immaterial.

4. Rejected as unnecessary.

5. Rejected as contrary to the evidence.

33 & 34. Rejected as unnecessary.

1. Adopted in summary in paragraph 46.

2. Rejected as contrary to the evidence, and immaterial (as to the ratio).

3. Rejected as contrary to the definition "not normal" and immaterial.

38 & 39. Rejected as argument.

1. Adopted in paragraph 16.

2. Adopted in paragraph 20.

3. Rejected as unnecessary.

43 & 49. Rejected as argument.

Laurel Oaks Hospital

1. Adopted in paragraph 1.

2. Adopted in paragraph 2.

3. Adopted in paragraph 3.

4. Adopted in paragraph 4.

5. Adopted in paragraph 5.

6. Rejected as unnecessary.

7. Adopted in paragraph 13.

8. & 9. Addressed in Preliminary Statement.

10. Adopted in paragraph 18.

11.-21. Rejected as unnecessary and immaterial.

1. Adopted in paragraph 6.

2. Adopted in paragraph 8.

3. Adopted in paragraph 7.

4. Adopted in paragraph 9.

5. Adopted in paragraph 11.

6. Adopted in paragraph 9.

7. Adopted in paragraph 10.

8. Adopted in paragraph 11.

1. Adopted in paragraph 9.

2. Adopted in paragraph 14.

3. Rejected as unnecessary.

4. Rejected as contrary to the evidence. The term is "should", not "shall".

5. Adopted in paragraph 15.

36 Adopted in paragraph 13.

37.-40. Adopted in paragraph 16.

41 & 42. Adopted in paragraph 18.

43 & 44. Rejected as immaterial and unnecessary. 45.-47. Rejected as argument and unnecessary.

48 & 49. Adopted in paragraph 21.

1. Rejected as unnecessary.

2. Adopted in substance in paragraph 16.

52 - 54. Rejected as unnecessary.

55 & 56. Adopted in summary in paragraph 20. 57.-61. Rejected as unnecessary or argument.

62.-65. Adopted in summary in paragraphs 20 and 23.

66 & 67. Adopted in paragraph 22.

68. Adopted in paragraph 23.

69.-72. Rejected as unnecessary or cumulative.

73 & 74. Adopted in substance in paragraph 24.

75. Rejected as contrary to the evidence. 76.-78. Rejected as unnecessary.

1. Rejected as contrary to the evidence.

2. Adopted in paragraphs 30 and 31.

3. Adopted in paragraph 37.

82.-85. Rejected as unnecessary.

86. Adopted in paragraph 30.

87 & 88. Rejected as unnecessary.

1. Adopted in paragraph 34.

2. Adopted in paragraph 41.

3. Adopted in paragraphs 38 and 39.

92.-95 Rejected as immaterial and unnecessary.

1. Adopted in substance in paragraph 39.

2. Adopted in paragraph 35.

3. Adopted in paragraph 30.

4. Rejected as cumulative.

5. Rejected as contrary to the evidence. 101-112. Rejected as unnecessary.

1. Adopted in paragraph 27.

2. Rejected as unnecessary.

3. Adopted in paragraph 35.

116-121. Rejected as cumulative or unnecessary. Health Management Associates1 Inc:. (HMA)

1. & 2. Adopted in paragraph 6.

1. Adopted in paragraph 1.

2. Adopted in paragraph 6.

5.-6. Rejected as unnecessary. 7.-11. Adopted in paragraph 9.

1. Adopted in paragraph 10.

2. Adopted in paragraph 12.

3. Rejected as unnecessary.

4. Adopted in paragraph 16.

5. Adopted in paragraphs 15 and 23.

6. Adopted in paragraph 25.

7. Adopted in paragraph 16.

8. Adopted in paragraphs 16 and 18.

20 Adopted in paragraph 19.

1. Adopted in paragraph 15.

2. Adopted in paragraph 21.

23 & 24. Rejected as unnecessary.

25 & 26. Adopted in paragraph 5. 27.-51. Rejected as unnecessary.

52. Adopted in paragraph 35.

53.-55. Rejected as unnecessary.

COPIES FURNISHED:

Stephen A. Ecenia, Esquire Michael J. Cherniga, Esquire Roberts, Baggett, LaFace

& Richard

101 East College Avenue Tallahassee, FL 32301

James M. Barclay, Esquire Cobb, Cole & Bell

315 South Calhoun Street Tallahassee, FL 32301

Steven R. Bechtel, Esquire Mateer, Harbert & Bates

225 East Robinson Street Orlando, FL 32802

Edgar Lee Elzie, Esquire MacFarlane, Ferguson, Allison

& Kelly

First Florida Bank Building, Suite 804 Tallahassee, FL 32401

C. Gary Williams, Esquire

R. Stan Peeler, Esquire

Ausley, McMullen, McGehee, Carothers & Proctor

227 South Calhoun Street Tallahassee, FL 32301

John Brennan, Jr., Esquire Bonner & O'Connell

900 17th street, Suite 1000

Washington, D.C. 20006

Robert S. Cohen, Esquire Haben & Culpepper

306 North Monroe Street Tallahassee, FL 32301

John Miller, General Counsel HRS

1323 Winewood Blvd.

R. S. Power, Agency Clerk HRS

1323 Winewood Blvd.

Tallahassee, FL 32399-0700

Docket for Case No: 89-001358

Orders for Case No: 89-001358