STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

RECOMMENDED ORDER

The final hearing in this case was held on May 15 through 18, 1989, in Tallahassee, Florida, before Donald D. Conn, Hearing Officer, Division of Administrative Hearings.

APPEARANCES

For Petitioners: Theodore C. Eastmoore, Esquire

A. Lamar Matthews, Jr., Esquire

P. O. Box 3258 Sarasota, FL 33577

and

Robert A. Weiss, Esquire The Perkins House

118 North Gadsden Street Tallahassee, FL 32301 (Memorial Hospital, Sarasota)

Charles A. Stampelos, Esquire

P. O. Box 2174 Tallahassee, FL 32316 (Medical Center Hospital)

For Respondents: Richard A. Patterson, Esquire

Fort Knox Executive Center 2727 Mahan Drive

Tallahassee, FL 32308 (Department of Health and Rehabilitative Services)

Kenneth F. Hoffman, Esquire

P. O. Box 6507 Tallahassee, FL 32314 (Venice Hospital, Inc.)

STATEMENT OF THE ISSUES

The issue in this case is whether Venice Hospital, Inc., (Venice) meets the statutory and rule criteria for a Certificate of Need (CON) to operate an open heart surgery program, and therefore, whether the Department of Health and Rehabilitative Services (Department) should approve its CON Application Number 5715.

PRELIMINARY STATEMENT

At the hearing, Venice called twelve witnesses, and introduced twenty-nine exhibits, while one of the exhibits offered by Venice was rejected; the Department called one witness and introduced two exhibits; five witnesses were called on behalf of Sarasota County Public Hospital Board, d/b/a Memorial Hospital, Sarasota (Memorial), which also had fourteen exhibits introduced, three rejected, and late-filed two depositions; and Adventist Health System/Sunbelt, Inc., d/b/a Medical Center Hospital (Medical Center) called one witness and introduced one exhibit. The transcript of the final hearing was filed on June 19, 1989, and the parties, thereafter, stipulated to the filing of posthearing memoranda and proposed recommended orders by September l, 1989. The Appendix to this Recommended Order contains a ruling on each timely filed proposed finding of fact.

Prior to the commencement of the final hearing, a Motion for Summary Adjudication was filed on May 4, 1989, on behalf of Memorial. A ruling on this Notion was reserved to allow Venice to file a Memorandum in Response, and to incorporate a ruling on said Motion in this Recommended Order. Therefore, Memorial's Motion for Summary Adjudication, and the Response thereto filed on behalf of Venice on September I, 1989, in which the Department has joined, have been considered, and a ruling denying said Motion is incorporated herein.

FINDINGS OF FACT

The Parties

1. Venice is a 342 bed general hospital located in Venice, Florida, which is in south Sarasota County and is a part of the Department's Service District

1. There are no subdistricts in District 8 for open heart surgery. The majority of patients served by Venice are from 50-55 years of age or older, and 22%-25% of patients admitted to Venice have a primary diagnosis of heart disease. If patients with heart disease as a secondary diagnosis are considered along with those who have this as their primary diagnosis, the total represents over 40% of all patients admitted at Venice. Of the cardiac catheterization patients treated at Venice in 1988, 78% were Medicare patients. Venice is a Medicaid provider, projecting 1.6% of its total revenue from Medicaid. It has a critical care center with 32 beds capable of invasive monitoring, multi-infusion of medications, pacemakers, Swans Ganz catheters, and care of post- catheterization patients. A separate 8-bed unit has been designated for use by open heart patients, with the same monitoring capability as the remainder of the unit.

   1. Memorial is an acute care hospital located in Sarasota, Florida, and is governed by the Sarasota County Public Hospital Board, which is elected to provide health care services to all residents of Sarasota County. It provides a full range of services, including an open heart surgery program, and is the largest provider of services to medically indigent and Medicaid patients in Sarasota County.

      
      

   2. Medical Center is a 208 bed not-for-profit hospital located in Punta Gorda, Florida, which has provided cardiac catheterization since 1985, and has been approved to initiate an open heart surgery program which is scheduled to open in late 1989. It has a 5% Medicaid payor mix. The primary service area for Medical Center is Charlotte County. Its secondary service area includes south Sarasota County.

      
      

   3. Both Memorial and Medical Center are also located in District 8, with Venice located between these facilities. Venice is approximately 35 miles to the north of Medical Center, and about 25 miles to the south of Memorial. There are two existing open heart programs in District 8, one at Memorial and the other at Southwest Regional Medical Center in Ft. Myers. In addition, there are two approved, but not yet operational, open heart programs, one at Medical Center and the other at Lee Memorial in Ft. Myers.

      
      

   4. The Department is the state agency which is responsible for administering Sections 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for Certificates of Need (CON) are filed, reviewed, and either granted or denied by the Department.

      
      

      The Application

      
      

   5. On or about September 27, 1988, Venice filed an application with the Department for a CON to implement an open heart surgery program at its hospital in Venice, Florida, with a capital expenditure of $665,500. This application was designated as CON Application Number 5715. The Department reviewed this application, and in October, 1988, forwarded an omissions letter to Venice. Venice responded to the omissions letter, and addressed not only the items noted by the Department in its omissions letter, but also provided additional materials, information, and corrections not requested in the omissions letter. Effective on November 14, 1988, the Department deemed Venice's application complete. A public hearing was held on this application at the request of Memorial on November 18, 1988. Thereafter, the Department reviewed and considered all material received from the applicant, as well as the information received at the public hearing, and prepared its State Agency Action Report (SAAR) noticing its intent to grant CON 5715. Memorial and Medical Center timely filed petitions to challenge the Department's notice of intent to issue this CON. Venice is relying upon its application which was deemed complete and reviewed by the Department in its SAAR, and not upon its original application that was filed prior to the omissions letter. Additionally, the applicant is not relying upon a "not normal circumstance" justification for its application, but rather urges that it meets the statutory and rule criteria for the issuance of this CON.

      
      

   6. The Department's CON Manual HRSM 235-1, dated October 1, 1988, is irrelevant to this proceeding since it has not been adopted by, or incorporated in, a rule, and was not applied in the batching cycle in which Venice's application was filed, or in the subsequent batch. It has not yet been applied

      to any hospital CON application. Therefore, the matters contained within this Manual concerning what is a permissible response to an omissions letter have not been considered.

      
      

   7. As part of its originally filed application, Venice included a document prepared by Ernst & Whinney entitled, "Audited Financial Statements and Other Financial Information, Venice Hospital, Inc., June 30, 1987." Through a clerical error in the copying process, page one of this twenty-four page document was omitted. At the time it filed its omissions response, Venice included this missing first page which is signed on behalf of Ernst & Whinney, and which states that the examinations contained therein were made in accordance with generally accepted auditing standards. It expresses the opinion that these financial statements present fairly the financial position of the applicant. An auditor's opinion letter is an essential part of the audited financial statement which must be included with the CON application. However, Venice provided this inadvertently missing page prior to its application being deemed complete.

      Thus, it was available to, and was reviewed by, the Department in the preparation of the SAAR on this application.

      
      

   8. Venice's application did raise concerns which it was seeking to address concerning availability and accessibility by addressing the current practice of transferring patients requiring open heart surgery to other facilities. Patient costs for such transport, as well as patient risk, inconvenience and comfort for the patient and family members, were all referenced in the application. Additionally, testimony at the public hearing held on November 18, 1988, which the Department considered in the preparation of its SAAR, dealt with concerns and problems arising from patient transport, including delay, risks to the patient from ambulance or helicopter transfers, and adverse effects which may occur on quality of care through this practice which is inconsistent with the concept of a continuum of care. The SAAR specifically notes that Venice contends its proposal will improve geographic access in its immediate service area, and that from July, 1987 through June, 1988, it transferred 144 of its cardiac patients from its facility for open heart surgery and an additional 125 were transferred for angioplasty procedures.

      
      

   9. The application did not specifically address or identify any adverse impact which its approval would have on existing providers. However, evidence on this issue is admissible at hearing since it is relevant to the issue of the standing of Memorial and Medical Center, and also because it is relevant to establish whether approval of this application would be consistent with statutory and rule review criteria, and provisions of the Local Health Plan that require assessment of any such impact. The SAAR notes that Venice did contend that approval of this CON will not affect the economy or quality of existing services in the District.

      
      

      Stipulations

      
      

   10. The parties stipulated that:

       
       

       1. The project is financially feasible in the short term;

          
          

       2. Venice has a record of providing quality care and this record is not an issue in this case;

          
          

       3. Other than for open heart services, other facilities are adequate and available to act as alternatives;

       4. The size and cost of construction for Venice's proposal are appropriate;

          
          

       5. Open heart surgery programs currently exist within a two hour drive time under average driving conditions for at least 90% of the District's population;

          
          

       6. The type and cost of equipment in the application are reasonable;

          
          

       7. If approved, Venice will provide the services required by Rule 10- 5.011(1)(f)3a and 3b, Florida Administrative Code, and does provide the services shown at paragraph 3c of said Rule.

          
          

          State Health Plan

          
          

   11. Objective 4.2 of the State Health Plan applicable to this application is to "maintain an average of 350 open heart surgery procedures per program in each district through 1990." (Emphasis Supplied.) The goal set forth in the State Plan relative to open heart surgery programs is to ensure the appropriate availability of such services at reasonable costs. Venice's application is not consistent with Objective 4.2. If Venice's application were to be approved, there would be five programs in the District. The number of procedures projected for 1990 is 1683, and if 1683 is divided by 5 programs, the result is an average of only 337 procedures per program. The two existing providers in District 8 are currently performing over 1600 procedures annually, and as is discussed below, it does not appear that Venice itself will be able to achieve an acceptable level of service at any time established by the record in this case. Approval of this application will also significantly and adversely impact the ability of the two approved programs to achieve an acceptable level of service.

       
       

   12. In the State Health Plan narrative, it is recognized that "quality of patient care is a primary concern in open heart surgery programs due to the potential consequences to the patient of poorly trained and/or skilled staff.11 In order to ensure quality, and in recognition of the relationship between the volume of open heart surgery procedures and quality, the State Plan references the Department's requirement, set forth by Rule, that a minimum of 200 adult procedures be performed within 3 years of initiation of an open heart program. The narrative also notes that a broad range of services must be provided to fulfill the requirements of an open heart surgery program. Venice's application is partially consistent with these narrative statements in the State Health Plan since the parties have stipulated that it has a record of providing quality care, and it offers a complete range of services with departments within the hospital where a broad range of diagnostic techniques and expertise are available. However, it was not established that a minimum of 200 adult open heart surgical procedures will be performed at Venice within three years of initiation of this program.

       
       

       Local Health Plan

       
       

   13. Even though an applicant does not include within its application every element in a Local Health Plan which is relevant to its application, the Department itself will look at the applicable Local Plan to determine if an application is consistent therewith.

       
       

   14. The applicable District 8 Health Plan recommends that "existing facilities should be afforded the opportunity for expansion before developing a

       new cardiac surgical center." However, if a numeric need for an additional program is shown, and if existing facilities do not seek to expand their existing programs to meet such need, an application for a new program would not be inconsistent with this portion of the Local Health Plan. Under the facts of this case where there are no competing applications from hospitals with existing open heart surgery programs, and where a numeric need for one additional program in District 8 is projected by the Department's need methodology, Venice's application is consistent with this recommendation.

       
       

   15. The Local Plan also recommends that preference be given to applications for new or expanded programs which clearly document the impact of the proposed new service on existing providers in the District and adjacent Districts. As found above, Venice did not specifically address any adverse impact its proposal would have on existing providers, and therefore, its application is not consistent with this recommendation.

       
       

       The Department's Need Methodology and the "35O Rule"

       
       

   16. Rule 10-5.011(1)(f)8, Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for additional open heart surgery programs It provides a formula by which the number of open heart procedures for the horizon year, in this case 1990, are to be estimated. Pursuant to the formula, there are projected to be 1683 open heart surgery procedures performed in 1990 in District 8. This number of projected procedures is then divided by 350 procedures in order to determine the number of programs which will be needed. See Rule l0-5.011(1)(f)11b. Using this methodology, the Department has identified the need for 4.8, rounded to 5, programs in the District in the horizon year. Since there are currently 2 existing and 2 approved programs in District 8, the Department and Venice have concluded that there is a projected numeric need for Venice's additional program in 1990.

       
       

   17. There is a direct relationship between the volume of open heart surgery procedures performed at a facility and the quality of care provided at such facility, with lower mortality rates generally at hospitals with higher volumes than those with low volumes. Therefore, in addition to its numeric need calculation, the Department has also developed a "350 standard" to address patient safety and quality of care concerns by ensuring that each existing and approved open heart surgery program achieves a volume sufficient to assure quality and efficiency prior to approval of a new program. Rule 10- 5.011(1)(f)11aI, Florida Administrative Code, prohibits the establishment of new open heart surgery programs unless:

       
       

       the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart cases per year.

       
       

   18. Memorial and Medical Center urge an interpretation and application of the 350 standard in a manner which would require each existing and approved program to actually operate at the level of 350 cases per year. Since approved programs are not yet operational, and therefore cannot operate at the 350 level, they argue that the intent of this standard, as set forth in the above-cited Rule, is to preclude the approval of any additional programs while there are approved programs, or existing programs which are not meeting the 350 standard. To the contrary, the Department and Venice urge that the 350 standard be applied

       by averaging the actual number of cases at existing programs, and the number of cases which are reasonably projected to be performed at approved programs. Under this interpretation, as long as the average between cases which are performed at existing, and which are reasonably projected to be performed at approved programs exceeds 350, then the further approval of an additional program is not prohibited.

       
       

   19. Having considered the testimony and evidence presented by the parties, and in particular the testimony of Eugene Nelson and Elizabeth Dudek, which is found to be more credible, consistent, and reasonable than the testimony of Michael Carroll and Harold Luft, it is found that the Department's interpretation and application of the 350 standard is reasonable and consistent with the terms of Rule 10- 5.011(1)(f)11aI. It is also noted that if the interpretation urged by Memorial and Medical Center were to be followed, it is inexplicable how there could presently be two approved, but not operational, open heart programs in District 8. The Department has consistently applied this

       350 standard since its adoption in 1983 by averaging caseloads at existing programs and reasonably projected caseloads for approved programs. To interpret this standard as urged by Memorial and Medical Center would impose a moratorium on new open heart surgery programs while there is an already approved, but not operational, program in a District, or while a newly operational program has not yet attained the 350 standard. There is no basis for this prohibitory interpretation which would not only reduce competition, but would also be inconsistent with sound health planning and the State Health Plan Objective 4.2, as discussed above.

       
       

       Quality of Care

       
       

   20. Venice is accredited by the Joint Commission on Accreditation of Health Care Facilities for special care units, and it has been stipulated that it has a record of providing quality care in its existing programs and departments.

       
       

   21. On average, hospitals performing greater than 200 open heart procedures per year have superior surgical outcomes than hospitals doing less than 200 procedures. Mortality rates are significantly lower at hospitals performing more than 200 procedures annually than at those performing less. It was established that there is a direct relationship between volume of open heart surgical procedures and quality of care at facilities with open heart surgery programs. Therefore, the existence of more open heart programs than are truly needed in an area may result in some existing programs not achieving sufficient volume to assure patient safety and quality of care. Certainly, not every hospital should have an open heart program, but as long as there is sufficient volume to assure quality, the competition among programs will encourage quality care, and result in an overall increase in the quality of care provided at all departments in a hospital with an open heart program.

       
       

   22. Rule 10-5.011(1)(f)5d, Florida Administrative Code, was adopted by the Department in order to set forth the minimum volume deemed necessary to assure quality of care, and provides, in part:

       
       

       There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution

       in which open heart surgery is performed for adults.

   23. Although Venice urges that it will be able to meet this threshold level within three years, it failed to establish by competent substantial evidence that it would actually attract the patients necessary to perform either the number of open heart procedures projected in its application, or this minimum number of 200 procedures required by the Department to assure quality of care in its third year of operation, given the current pattern of physician referrals in the area, its market share in relation to those of Memorial and Medical Center, and actual utilization levels for the existing District 8 programs at Memorial and Southwest Regional Medical Center, as is more fully discussed below. Without the assurance of sufficient volume to meet the 200 procedure threshold established by the Department by Rule, the validity of which is not at issue in this case, Venice has failed to show that it will be able to achieve and maintain a patient volume in its proposed program which will assure quality of care in its proposed open heart surgery program.

       
       

       Availability and Access

       
       

   24. While the addition of the Venice program would obviously increase the availability of services in the District, open heart surgery services are already reasonably available in District 8, especially in view of there being two approved programs which will become operational before 1990, the horizon year in this case, in addition to the two existing programs. The two hour travel time standard is already being met in District 8, as stipulated to by the parties. Geographic accessibility will not be appreciably or significantly increased by this proposal since Venice's facility lies approximately midway between Memorial and Medical, which are sixty miles apart. There is significant excess capacity in existing and approved open heart surgery programs in District

       8 during most of the year, especially at Memorial. Therefore, there is ready access to, and availability of open heart surgery services to patients in the District.

       
       

   25. Venice did not establish that approval of its application would enhance access to open heart surgery services for the medically indigent. Despite its assertion in its application that its program would be available to the underserved, there is no definite commitment to serve charity care patients as a percentage of total patient days or of total revenue. Venice has proposed to serve Medicaid patients at the level of 1.5% of total patient days, but Medicaid patients are currently receiving services through existing programs at substantially higher levels of commitment. The applicant has reserved the right to refuse non-emergency care to indigents.

       
       

   26. While it was established that unstable patients who have to be transferred from one hospital to another face increased risks, and that members of the medical staff at Venice feel that there are unacceptable delays in transferring patients who need open heart surgery from Venice to other facilities due to an asserted lack of available beds, it was not shown that such delays have actually jeopardized the safety of patients or resulted in a reduction in the quality of care received by patients to an unacceptable level. A delay in transferring a patient from one facility to another of from 6 to 8 hours is reasonable, and in line with experience nationally. The anecdotal evidence presented by Venice on this point was not competent and substantial, and in fact shows that the number of delays exceeding 8 hours has increased only slightly from 1986 to 1988, a condition that may be addressed in any event when the two approved programs become operational. Additionally, the applicant never formally shared any concerns about transfer delays with existing facilities in an effort to reduce such delays or to document extreme cases of delay. Transfer delays are exacerbated by seasonal increases in population in District 8, but

       there continues to be a reasonable likelihood that patient transfers can be accommodated, even during seasonal population increases, without adverse impacts to patient care. However, a large majority of open heart surgery cases are non- emergency that can be scheduled for surgery within 6 to 48 hours after diagnosis without any compromise in patient care. Emergency patients are given priority, and there are sufficient available beds to accommodate emergency patients, regardless of seasonal delays. Recent studies have shown that even emergency patients benefit from a delay of up to 24 hours in order to stabilize their condition rather than rushing them to surgery. In any event, such seasonal delays do not establish that there is a lack of available beds in District 8 which would require the approval of this application, especially with two approved programs already in the District which will become operational by 1990.

       
       

       Alternatives Considered

       
       

   27. Venice did not fully explore alternatives, including less costly alternatives, to a new program at its facility, such as a joint or shared program with an existing provider. In fact, a consultant retained by Venice recommended on September 8, 1988, that Venice pursue a joint program with Memorial, but Venice never approached Memorial to ascertain if its administrators or medical staff would be interested in such a joint effort, even though these two hospitals have previously cooperated in providing joint services in obstetrics, shared nursing services, and jointly provided emergency services to the Town of North Port. Memorial previously loaned Venice 24 nursing full time equivalent positions (FTE) to fully staff a 35 bed unit at Venice during a critical nursing shortage.

       
       

   28. There are existing or approved open heart surgery programs at Tampa General Hospital, Manatee Memorial Hospital in Bradenton, Memorial, Medical Center, and Southwest Regional Medical Center in Ft. Myers. In addition, there are additional approved programs at HCA Blake Memorial Hospital in Bradenton and at Lee Memorial in Ft. Myers. Venice did not consider these existing and approved programs as alternatives to its proposed new program. It was not established that Venice has attempted, or proposed to establish a joint open heart surgery program with any of these facilities, or to secure staff privileges for its cardiologists at Memorial, or any of these other hospitals.

       
       

   29. Regionalization of health care services for open heart surgery patients is being encouraged and reviewed by the Medicare program. Under this concept, primary care hospitals would treat common diagnoses and offer common treatments, while regional referral hospitals would provide specialized care and offer more complex services referred to as tertiary level services. Open heart surgery is a specialized, tertiary care service. Venice did not consider regionalization or establish why it would not be appropriate in District 8.

       
       

       Personnel Availability and Costs

       
       

   30. There has been a long-term shortage of nurses, particularly in intensive care and open heart surgery, which even Venice's expert in nursing administration recognized and acknowledged. This shortage is present in Sarasota County not merely for nursing staff, but also for technical support staff, and is particularly acute in operating room and critical care personnel. While Venice does have nursing staff with open heart surgery experience, it would have to recruit additional nurses to fully staff this new program.

       
       

   31. It is not always possible to fill open heart surgery or critical care nursing positions with trained personnel. Memorial presently has 32 registered

       nursing vacancies, including 5 open heart surgery and 3 open heart critical care RN positions, despite a full-time nurse recruiter and an aggressive recruiting program. Because of this critical shortage, Memorial has been forced to use "traveler" or temporary nurses in its open heart surgery unit. In contrast to Venice's lack of actual experience in attracting and training open heart surgery and critical care nurses, Memorial established that in Sarasota County, it takes

       6 to 8 months and costs $15,000 to $16,000 to train open heart surgery nurses, and 6 to 8 weeks to- train open heart critical care nurses.

       
       

   32. Venice will compete with Memorial and Medical Center in attracting open heart surgery nursing and technical staff. There has been a recent instance of a nurse leaving Venice to join Memorial, being trained as an open heart surgery nurse at Memorial, and then leaving to return to Venice. With the limited pool of available, trained open heart surgery nurses, and in view of the two approved open heart surgery programs in District 8 which need to be staffed and become operational prior to 1990, the implementation of the Venice program will have an adverse impact on the ability of existing and approved programs to attract and maintain trained open heart surgery nursing and technical staff, and can reasonably be expected to increase personnel costs for these providers.

       
       

   33. Venice proposes to add two cardiovascular surgeons to its medical staff prior to opening its open heart surgery program, and to retain a consulting firm to assist in recruiting these physicians. However, the consulting firm contacted by Venice has not agreed to accept this recruiting assignment. Memorial has been trying to recruit an additional open heart surgeon for over a year, without success. Venice has been trying to recruit a neurosurgeon, neurologist or cardiologist for almost a year, without success. It is, therefore, reasonable to infer that Venice will have difficulty recruiting two cardiovascular surgeons in less that one year.

       
       

   34. The salaries and benefits in Venice's application are generally reasonable, including the proposed salary for a perfusionist, although it did slightly underproject open heart surgery nursing salaries. However, its estimate of the number of additional positions, or FTE, which would be required throughout the hospital to accommodate the workload resulting from an open heart surgery program is incomplete. For example, an additional 3.5 FTE that would be needed for the clinical lab and donor center is not reflected in the application, although the costs associated therewith are included.

       
       

   35. Venice does have a record of successfully staffing critical care services, such as its open heart catheterization and thoracic surgery programs, without attracting staff from other hospitals in the District. It does propose to have a training program for open heart surgery personnel, and has an affiliation with nurse training programs at four universities.

       
       

       Financial Feasibility

       
       

   36. In its application, Venice projects that it will perform 125 open heart surgery procedures in its first year of operation, 175 in its second year, and 211 in its third year of operation. However, it is specifically found that these projections are not reasonable, based upon the testimony and evidence received. The testimony and exhibits prepared by Mark Richardson and Michael Carroll, who were accepted as experts in health planning, as well as the testimony offered by Rick Knapp, an expert in health care finance, was more credible and persuasive than, and outweighs the testimony and exhibits prepared by Eugene Nelson, an expert in health care planning, Dr. Henry W. Zaretsky, an

       expert in health care economics and planning, and Michael Rolph, who was accepted as an expert in health care finance and accounting.

       
       

   37. Initially, Venice relies upon the Department's Rule for determining the numeric need for additional programs, discussed above, and divides the Department's number of projected procedures in District 8 (1683) by 350 to arrive at the need for an additional program in 1990 by rounding 4.8 up to 5. However, Venice has conducted no analysis of market share or physician referral patterns to test the reliability of this projected need. Thus, this projection of numeric need is made in a vacuum, without any reference to the actual number of procedures already being performed, or actual market shares and referral patterns which are critical to an understanding of patient and physician preferences which have existed, and are likely to continue to be experienced, in the future. Venice's administration and members of its medical staff consider Memorial's open heart surgery program to be excellent and convenient to Venice's patients. It is unlikely that all five of Venice's cardiologists will refer all of their open heart surgery patients to Venice, and in fact, a member of Venice's medical staff who supports this application testified that he would only refer about half of his patients to Venice. Since most open heart patients are referred, and since there is no apparent dissatisfaction with the quality of Memorial's program, existing market share and referral patterns would likely continue and should have been considered in any meaningful analysis presented by the applicant.

       
       

   38. For the July, 1990 horizon in District 8, the Department's numeric need methodology projects that there will be 1683 open heart surgery procedures. With referral patterns in place and two existing providers with operational and well regarded programs, it is unlikely that Venice will have an automatic, equal share of the District's pool of open heart patients, or even that it will perform the 125 procedures in its first year, and 175 procedures shown on its pro forma for the second year of operation. In fact, the two existing providers, Memorial and Southwest Regional Medical Center, already performed 1637 procedures in 1988, leaving fewer than 50 procedures projected through the Department's numeric need methodology for the two already approved programs and Venice, if it were to be approved. Memorial has been performing over 600 procedures per year from 1986 through 1988, and has the capacity to perform up to 1,000 procedures annually. Thus, the existing and approved programs have more than sufficient capacity to absorb growth in open heart surgery volumes which are being projected.

       
       

   39. A second method Venice uses to justify its projected number of open heart procedures is to quantify the population of Venice's service area, and then apply the Department's open heart surgery use rate to that population. This assumes that virtually all of Sarasota County's population growth will occur in the south county area, which is an inaccurate assumption, and also assumes that Venice will capture all of the open heart surgeries in its service area, which is unreasonable given existing market shares and referral patterns. Memorial presently has a 42% market share of District 8 open heart surgery patients. To perform 200 procedures in its third year of operation, Venice would have to capture an 83% market share, and there is no basis to find that it would be successful in attracting this unreasonably high market share in its primary service area. In fact, Venice projects that it will only achieve a 45% and 61% market share in the first and second year of operation, respectively. Applying these percentages, Venice will perform 99 procedures in its first year, not 125, and 140 in its second year, not 175. It must be noted that Venice's consultant, which had recommended that it explore a joint or shared program with Memorial, had projected market shares of only 29% in the first year, 35% in the second

       year, and 45% in year three. Using these figures, Venice would only perform 63 procedures in its first year of operation, 81 in the second year, and 102 in the third. Given this level of operation in its second year of operation (81 procedures), the Venice program would lose $334,000 in its second year, and therefore, not be financially feasible.

       
       

   40. The third method used by the applicant to support its projection of the number of procedures it will perform, which is the basis of its assertion of financial feasibility, is based upon its assessment of cardiac catheterization volumes and applies a conversion factor to determine the number of open heart surgery procedures that will result. This analysis again assumes that it would receive a 100% market share, and does not take into account referral patterns and satisfaction with existing programs. In addition, while the growth of Venice's cardiac cath volume has stabilized, and may even be decreasing, this analysis incorrectly uses a l5%-16% annual growth rate in cardiac caths through 1990, which is unrealistic and not supported by the record.

       
       

   41. Venice relies upon the expert testimony of Eugene Nelson to establish that the use rate for open heart surgery has been increasing since 1985, and will continue to increase. The use rate increased over 53% between 1985 and 1988, and Nelson projects a continued 15.3% annual increase in the use rate through 1991. Under his projections the use rate per 100,000 population will be 235.79 in 1990, and 257.97 in 1991.

       
       

   42. Nelson's projected continued annual increase in the use rate of over 15%, and the use rates he projects for 1990 and 1991, are unreasonable. He has ignored the fact that annual increases in the use rate have been steadily decreasing from 17.5% between 1985 and 1986, to 13% between 1987 and 1988, as testified to be all health planners, and as even he acknowledged. Applying this decrease in the annual use rate increase, it would be increasing only 9% in 1990, and this would result in a total of 2108 procedures that could be projected to be performed in 1990. With the two existing programs in District 8 already performing 1600 procedures, a figure that will reasonably grow by 1990, there will be less than 444 procedures for the two already approved programs and Venice, if it were to be approved. Given this fact, which is even acknowledged by Venice, it is unlikely that Venice will be able to reach its projected number of cases in its first two years of operation in order to achieve financial feasibility.

       
       

   43. As recognized by Harold Urschel, Jr., M.D., who was called by Venice as an expert in cardiovascular surgery and open heart surgery programs, for the next five years open heart surgery volumes nationally will be "stable", although they "probably" will go up some. Open heart use rates have plateaued on a national level, with an average national use rate of l80~per 100,000 population. This use rate compares favorably with the Department's current use rate of 183 for District 8, and further questions the reasonableness of Nelson's projected use rates of almost 236 and 258 in 1990 and 1991, respectively. These use rates have stabilized and shown a marked decrease in their rates of increase due to the development of acceptable alternatives to open heart surgery, and close review of the necessity of this treatment by third party payors.

       
       

   44. As testified to by Nelson, there is a danger that an excess of open heart surgery programs in an area will exacerbate an already stabilized or flattened use rate, and may cause it to decline. He cited both the Miami and Jacksonville areas as examples of Districts in which there appear to be an excess of programs, with a resulting decline in the District's use rate, and inability of a substantial number of programs to even achieve the requisite

       level of 200 procedures per year to maintain quality of care. When it comes to open heart surgery programs, more is not necessarily better and may actually result in less, according to Nelson.

       
       

   45. Even applying Nelson's inflated use rate of 236 per 100,000 population in 1990 to the Venice service area population, the applicant will not achieve its projected number of procedures when the market share of 29% in 1990 predicted by Venice's consultant is considered. Applying its consultant's projected market shares, Venice will realize only 81 procedures in the first year, 98 in year two, and 126 procedures in the third year.

       
       

   46. Since Venice's pro forma bases its assessment of financial feasibility upon its projections of 125 procedures in year one, and 175 in year two, and since the applicant has not established the reasonableness of these projections, the long- term financial feasibility of this project has not been shown. Further, Venice has also failed to establish that it can reasonably be expected to achieve the level of 200 procedures in its third year, and therefore, it has also failed to show that it can achieve that minimum level which the Department, by Rule, requires to ensure quality of care.

       
       

   47. In other respects, the assumptions used by Venice in its pro forma are reasonable, including its 2% inflation factor for income, bad debt, payor mix and utilization by class of pay, projected charges, expenses, and depreciation.

       
       

       Effect on Competition and Costs

       
       

   48. There will not be a significant difference between the charges proposed by Venice and the actual charges at Memorial. The applicant projects that 80% of its open heart surgery will be reimbursed through Medicare, which reimburses on a fixed fee basis to which hospital charges have no direct relevance. Therefore, there would be no appreciable impact on costs in the health care community if this application is approved.

       
       

   49. As previously discussed, there would be greater competition among existing and approved programs in District 8 for trained open heart surgery and critical care nurses, which are in short supply. While Venice has projected open heart surgery nurses' salaries at a somewhat unrealistically low level, it can reasonably be expected that greater competition for trained personnel who are in short supply will eventually result in higher salaries and health care costs.

       
       

   50. If this application is approved, the cost to transport patients who require open heart surgery from Venice to another facility would be eliminated. This would mean that patients could avoid a $235 to $250 ambulance charge for transfer to Memorial, a $450 charge for ambulance transport to Tampa General, or a $1,000 to $1,300 helicopter charge for transport to Tampa General Hospital. This savings is not significant when compared to total charges for open heart surgery procedures.

       
       

       Impact on Existing and Approved Programs

       
       

   51. As discussed above, approval of the Venice application will adversely affect the ability of existing providers to attract and retain trained open heart surgery and critical care RNs due to the already existing shortage of personnel to fill these positions, and the fact that two already approved programs will become operational prior to Venice's program, if it were to be approved.

   52. Although Memorial has the capacity to perform 1,000 open heart surgery procedures annually, Venice's expert, Eugene Nelson, projects that if the Venice program is approved, Memorial will experience only a 12% growth between 1988 to 1991, and will only perform 771 cases in 1991. Curiously, he then concludes that this represents no impact on Memorial.

       
       

   53. The proposed primary service area for the Venice program and Memorial's primary service area completely overlap, and they are, therefore, competing for the same open heart surgery patients.

       
       

   54. Venice has been referring 85%-87% of its patients who require open heart surgery to Memorial. If Venice had its own open heart surgery program, the need for transfer and referral would be obviated. In the second year of operation, Venice projects on its pro forma that it will perform 175 cases. Using its own projection of 85%, 149 to 150 of these cases would have been transferred to Memorial, but for the Venice program. If the more realistic number of 81 procedures in the second year of operation for the Venice program is used, 69 cases which would have otherwise been transferred to Memorial would stay at Venice. Rick Knapp, who was accepted as an expert in health care finance, provided a reasonable estimate of financial impact upon Memorial, given these projected losses in patient referrals. He concluded that Memorial would experience a net income reduction of approximately $1.4 million if Venice's projection of 175 cases in its second year is correct, and Memorial lost 149 to

       150 referrals. Even Michael Rolph, who was called as an expert in health care finance by Venice, testified that Memorial would loose $2 million in net revenue if it lost 100 open heart surgery patients. If the more realistic figure of 81 cases in the second year were used, there would also be a net income loss for Memorial, but more importantly for purposes of this case, it was established through Knapp's testimony that Venice's program would lose $334,000, and not be financially feasible. It is, of course, recognized that Memorial would still experience a growth in its absolute number of open heart procedures due to population increases and increases in the use rate. However, any such increase in the absolute number of procedures performed at Memorial through growth does not obviate the fact that the total number of procedures it would have performed will be significantly reduced by the loss of referrals from Venice, if this application is approved. This is particularly noteworthy given its excess capacity.

       
       

   55. Memorial's most recent annual gross income was $160 million, with an operating margin (profit) of between $3.5 and $3.9 million. Therefore, losses which would result from the Venice program would not threaten the financial viability of Memorial, but would be significant in terms of its open heart surgery program.

       
       

   56. Jerry Sommerville, an expert in hospital finance, estimated that 9% of Medical Center's open heart surgery cases would come from the Venice area, which is included in Medical Center's secondary service area. If these cases are lost to Medical Center with the opening of the Venice program, Medical Center's projected 150 cases in 1990 would be reduced by 13.5, and in 1991 its projection of 200 cases would be reduced by 18. These reductions would result in a net revenue loss for Medical Center of $254,000 with a gross marginal loss of

       $62,800 in 1990, and a net revenue loss of $329,500 with a gross marginal loss of $95,200 in 1991. This represents a significant reduction in income for this open heart surgery program in its first years of operation. Medical Center's most recent annual profit margin was approximately $1 million.

       CONCLUSIONS OF LAW

       
       

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

       
       

   58. As the applicant for a CON, Venice bears the burden of establishing, by competent substantial evidence, its entitlement to a CON to operate an open heart surgery program. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Rainbow Community Hospital v. Department of Health and Rehabilitative Services, 453 So.2d 1200 (Fla. 1st DCA 1984). Specifically, it must meet the criteria set forth in Section 381.705, Florida Statutes, and Rule 10-5.011(1)(f), Florida Administrative Code, based on a balanced consideration of all matters enumerated therein. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services v. Johnson & Johnson,

       447 So.2d 361, 363 (Fla. 1st DCA 1984). The weight to be given to each criteria is not fixed, but varies depending on the facts of each case. North Ridge General Hospital v. NME Hospitals, 478 So.2d 1138 (Fla. 1st DCA 1985); Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985).

       
       

       Standing

       
       

   59. Venice asserts that both Memorial and Medical Center lack standing to challenge the issuance of CON 5715 based upon Section 381.709(5)(b), Florida Statutes, which states, in pertinent part:

       
       

       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. (Emphasis supplied.)

       
       

   60. In the case of Memorial, it has been clearly shown that it has an existing open heart surgery program which will be substantially affected if Venice's application is approved. Financial losses which would result for Memorial would be significant in terms of its open heart surgery program. Additionally, its ability to attract and retain experienced open heart surgery and critical care RNs would be adversely affected, especially in view of the already existing shortage in these critical positions, and the fact that two already approved open heart surgery programs will become operational prior to Venice's program, if it were to be approved. Memorial's primary service area completely overlaps with Venice's proposed primary service area, and therefore, they would be competing not only for experienced nursing personnel, but also for patients.

       
       

   61. Based on the record in this case, and as set forth in part in Findings of Fact 52-56, above, Memorial has shown that it meets the statutory requirements established in Section 381.709(5)(b), and that the injury which it would suffer if this application is approved is of sufficient immediacy to entitle it to maintain this action. Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 1st DCA 1981); Florida Medical Center v. Department of Health and Rehabilitative Services, 484 So.2d 1292, 1294

       (Fla. 1st DCA 1986); Baptist Hospital v. Department of Health and Rehabilitative Services, 500 So.2d 620 (Fla. 1st DCA 1986).

       
       

   62. This case is distinguishable on its facts from the case of North Ridge General Hospital, Inc. v. Delray Community Hospital, 7 FALR 2458 (HRS 1985), affirmed, North Ridge General Hospital, Inc. v. NME Hospitals, Inc., 478 So.2d 1138 (Fla. 1st DCA 1985), cited by Venice in support of its position that Memorial lacks standing. In the North Ridge case, it was found that a newly opened program in the same Service District as the CON applicant would not be impacted in its ability to obtain and maintain the minimum number of procedures required by the Department's rules, even though it would lose some patients, because there was an overwhelming need in that District for the services sought.

       
       

   63. No such overwhelming need in District 8 has been established in this case, and it was shown that a significant impact, both in financial terms and in the ability of Memorial to attract and maintain experienced nursing personnel, would result if Venice's application were to be approved. The rate of increase in open heart surgery procedures which Memorial could reasonably expect based upon its past experience and its capacity to perform 1000 procedures annually, would be significantly reduced if another program were to be approved in this District. The test for standing is not whether the impact on an existing program would be so severe and devastating as to reduce that program to a level below the acceptable standards established by the Department to maintain quality of care. Rather, the test is whether an existing program would be substantially affected by approval of a new program, and in this case it has been shown that Memorial has met this test.

       
       

   64. It has also been urged by Venice that Memorial lacks standing to challenge the procedural manner by which the Department processed, reviewed, and deemed its application complete. Based on Section 381.709(2)(d), Florida Statutes, Venice argues that the statutory scheme does not authorize participation of competitors until after a CON application is deemed complete. Seemingly, Venice would assert that the Department's determination of completeness is immune from challenge by existing providers, a position that is without merit and contrary to the very nature of a Section 120.57(1) de novo hearing. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977); NME Hospitals, Inc. v. Department of Health and Rehabilitative Services, 492 So.2d 379 (Fla. 1st DCA 1985), rev. den., 500 So.2d 544 (Fla. 1986); Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700 (Fla. 1st DCA 1986).

       
       

   65. With regard to Venice's challenge to Medical Center's standing in this case, the language of Section 381.709(5)(b) is clear, and specifically limits standing to existing providers which can establish that an "existing program" will be "substantially affected" by the approval of the CON at issue. The Department has applied the terms of this statute in prior final agency action according to their plain meaning to exclude providers with an approved CON from challenging a later batched CON application, since those CON approved facilities did not meet the "existing program" test. Palms Residential Treatment Center v. Department of Health and Rehabilitative Services, 10 FALR 7058 (HRS 1988); Charter Hospital of Pasco County v. Department of Health and Rehabilitative Services, 11 FALR 3174 (HRS 1989). Since the holder of a CON which has not yet begun operation of its CON approved program is not an existing provider, and since the evidence shows that Medical Center has not yet begun to operate its CON approved open heart surgery program, it is, therefore, concluded that Medical Center must be dismissed as a party due to its lack of standing. Nevertheless, Finding of Fact 57 is included above since it remains relevant to

       the issue of the impact of Venice's program, if approved, on programs which will be in existence at the time its proposed program would become operational.

       
       

       Completeness of Venice's Application

       
       

   66. It is urged by Memorial that Venice improperly raised issues at hearing with respect to quality of care, availability, accessibility, appropriateness, degree of utilization, adequacy and efficiency of open heart surgery programs which were not raised in its application. Memorial correctly points out that updates or corrections to applications are not allowed at final hearing if the change or update was under the control of the applicant and could have been included in its original application. However, these issues were all raised in Venice's completed application, and in the materials which the Department considered in the preparation of its SAAR. An applicant is not required to set forth in its application every piece of evidence, testimony, or argument upon which it intends to rely if a challenge is brought to its application, but must simply raise all issues which it contends support its application. In this case, Venice has raised these issues, and they have been discussed in the SAAR with sufficient specificity, to put any challenger on notice of the basis upon which the applicant presents, and the Department proposes to approve, this CON.

       
       

   67. Memorial also argues that Venice's application was incomplete and should not have been reviewed by the Department since it failed to address the Local or State Health Plans. However, this assertion is not supported by the record, and in fact, testimony from the Department's witness, Liz Dudek, established that the Department always does an independent review of every application's consistency with these Plans, regardless of what is, or is not, addressed in an application. Consistency with the State and Local Health Plans is a basic statutory requirement which every CON applicant must meet, and which is addressed in every SAAR. Therefore, there is no basis to preclude an applicant from attempting to show consistency when this issue is clearly presented in its application and in the SAAR, although perhaps not in the manner, or in as much detail, as would have been preferred by a challenger.

       
       

   68. The Department properly deemed Venice's application complete, and set forth its review and preliminary decision in its SAAR. As set forth in Finding of Fact 7, above, the Department's CON Manual, HRSM 235-I, is irrelevant to this proceeding since it was not adopted by, or applied in this batching cycle by the Department. In response to the Department's omissions letter, the applicant addressed not only the items noted by the Department, but also provided additional materials which were accepted prior to the Department's determination of completeness on November 14, 1988. See Finding of Fact 6. Nothing in this action by the Department has been shown to be contrary to any statutory requirements, or any provisions of rule or policy of the Department.

       
       

   69. Finally, Memorial argues for summary denial of this application based on the requirement of Section 381.707(3), Florida Statutes, that CON applications contain an audited financial statement of the applicant. However, the record shows that Venice did file a financial statement with its original application, but through a clerical error in copying, the first page, containing the auditor's opinion, was omitted. Venice noted this omission and corrected it by refiling the entire financial statement, with the first page, along with its response to omissions. The Department had the complete audited financial statement prior to its determination of completeness. See Finding of Fact 8. Therefore, there is no basis for summary denial since Venice complied with Section 381.707(3).

       The "350 Rule"

       
       

   70. Memorial argues that Rule 10-5.011(1)(f)11aI, Florida Administrative Code, the text of which is set forth in Finding of Fact 18, precludes the granting of additional CONs unless each existing and approved open heart surgery program is operating at the level of 350 cases per year. This position is based upon the plain meaning of the Rule, according to Memorial.

       
       

   71. It is clear, however, that programs which are "approved" and not yet operational, cannot perform 350, or any other number of cases in a year. The effect of Memorial's interpretation, then, would be to prohibit the approval of any additional open heart surgery programs in a Service District as long as there are any approved, but not yet operational programs, already in that District. If the Department had intended such a moratorium, it could have simply stated, by rule, that no new programs would be approved if there is an already approved, but not yet operational, program in a District. The testimony and evidence establishes that, in fact, this has not been the policy of the Department since this Rule was enacted in 1983. St. Mary's Hospital v. Department of Health and Rehabilitative Services, 9 FALR 6159 (DOAH 1987); St. Joseph's Hospital v. Department of Health and Rehabilitative Services, DOAH Case No. 88-4364 (Final Order filed June 23, 1989). For example, at the present time in District 8 there are two approved, but not yet operational programs, and one of these approved programs is Medical Center's. See Finding of Fact 20.

       
       

   72. The Department and Venice urge an interpretation of this Rule that would preclude the approval of an additional program if existing and approved programs in a District fail to achieve an average of 350 cases annually. Support for this position is found within another subsection of Rule 10- 5.011(1)(f) wherein it is stated that "the provision of open heart surgery in the service area shall be consistent with the needs reflected in the Local Health Plan and the Florida State Health Plan." See Subsection 7, Rule 10- 5.011(1)(f). Section 381.705(1)(a), Florida Statutes, also provides that CON applications are to be reviewed in relation to the State Health Plan. As found at Finding 12, above, the State Health Plan sets forth the Objective of maintaining "an average of 350 open heart surgery procedures per year". Therefore, the reading and interpretation of the "350 Rule" urged by Memorial would be inconsistent with Section 381.705(1)(a), and also the requirement of Subsection 7 of this same Rule, by being inconsistent with the State Health

       Plan. The Department's interpretation of its "350 Rule" is also consistent with the principles of sound health planning since it allows for the implementation of the State Health Plan.

       
       

   73. While it is axiomatic that words of common usage in a statute or rule should be given their plain meaning, it is also recognized that great deference must be given to an agency's interpretation of its own statutes and rules, and duly enacted rules of an agency should be interpreteted in a manner which will avoid absurd or illogical results. An agency's interpretation of its own rules or statutes must not be overturned unless clearly erroneous, unreasonable, or in conflict with some provision of the State's Constitution or the plain intent of the statutes. Carter v. Department of Professional Regulation, Board of Medicine, Case NO. 89-1227 (Fla. 1st DCA, Op. filed September 20, 1989); P. Crosby Associates v. State Board of Independent Colleges, 506 So.2d 490 (Fla. 5th DCA 1987); Department of Environmental Regulation v. Goldring, 477 So.2d 532, 534 (Fla. 1985); Gar-Con Development, Inc. v. Department of Environmental Regulation, 468 So.2d 413, 414, (Fla. 1st DCA 1985); Pan American World Airways, Inc. v. Florida Public Service Commission, et al., 427 So.2d 716, 719 (Fla.

       1983); Department of Health and Rehabilitative Services v. Framat Realty, Inc.,

       407 So.2d 238, 241 (Fla. 1st DCA 1981). The consistent interpretation given to this Rule by the Department since 1983 is reasonable, consistent with the State Health Plan, and avoids the illogical and unintended consequences of imposing a moratorium on additional CON approvals in a District that already has one approved, but not operational, program until that approved program becomes operational and achieves a 350 case level.

       
       

   74. Based upon the foregoing, it is concluded that there is no basis to summarily deny Venice's application based upon the prohibitory interpretation of the "350 Rule" urged by Memorial in this matter.

       
       

       Balanced Consideration of Criteria

       
       

   75. It is certainly clear that Venice's CON application meets the Department's numeric need methodology which projects 1683 open heart surgery procedures for District 8 in 1990. When this projection is divided by 350, a numeric need for 4.8 (rounded to 5) programs is established. Since there are two existing and two approved programs in this District, Venice and the Department urge the approval of CON 5715 as the fifth program in District 8.

       
       

   76. However, approval of a CON cannot result from the application of the Department's numeric need methodology in a vacuum. This is just one of the criteria that must be weighed and considered, and is no more important than any of the other criteria. There is a place for reality in the CON process. In this case, the facts show that, in reality, the two existing providers alone already performed 1637 procedures in 1988, leaving fewer than 50 additional procedures in 1990, based on the numeric need methodology projections, for the two already approved programs and Venice, if it were to be approved. If all five programs were to perform at the average of 350 procedures in 1990, Memorial and the other existing provider, Southwest Regional Medical Center, would be dramatically and significantly affected, since Memorial already performed over 600 and Southwest approximately 1000 procedures in 1988. Memorial has the capacity to perform 1000 procedures annually. Therefore, while a determination of numeric need may serve as a basis to initiate a review of this application, all criteria enumerated in Section 381.705(1)(2), Florida Statutes, must be balanced in arriving at a recommendation on CON 5715.

       
       

   77. Section 381.705(1)(a), Florida Statutes, requires that CON applicants demonstrate consistency with State and Local Health Plans. Venice's application is not consistent with Objective 4.2 of the State Health Plan, which provides that an average of 350 open heart surgery procedures per program be maintained. When factors beyond the mere facial application of the Department's numeric need methodology are considered, it becomes readily apparent that approval of Venice's application would also not be consistent with the additional State Health Plan narrative which stresses the importance of quality of care. It was not shown that Venice would reach a level of 200 procedures annually by its third year of operation. It would, therefore, be unable to achieve the volume of procedures which the Department has established in order to ensure quality of care. Venice did not clearly document the impact of its proposed new service on existing providers in the District, and in this regard has failed to follow this recommendation in the Local Health Plan. However, to the extent that there is a numeric need for an additional program and there are no competing applicants in this batching cycle, this application is consistent with the Local Health Plan's additional recommendation that existing facilities should be given an opportunity for expansion before considering new programs.

   78. Venice has failed to establish that approval of this application will increase the accessibility and availability of needed services in the District. Open heart surgery programs are already geographically and economically accessible and available, especially with two approved programs which will become operational prior to 1990. The two hour travel time standard is already being met in the District. Waiting times experienced by Venice patients who require a transfer for open heart surgery are not excessive, and do not present a danger to patients. Existing programs in the District are rendering quality care to open heart surgery patient. There is significant excess capacity in the Memorial program. Thus, approval of this application would be inconsistent with Sections 381.705(1)(b), and (2)(b) and (d), Florida Statutes.

       
       

   79. While the parties stipulated to Venice's record of providing quality care to its patients, the failure of the applicant to show that there is a reasonable likelihood of performing 200 procedures by its third year of operation results in the conclusion that Venice has not shown that its proposed open heart surgery program will render quality care. The Department has established a clear and specific standard to ensure quality of care, and has adopted that standard by Rule. See Rule 10-5.011(1)(f)5d. Quality of patient care is a particularly important criteria, and in this case the applicant has failed to show that approval would be consistent with this requirement of Section 381.705(1)(c). RHPF, Inc. v. Department of Health and Rehabilitative Services, 9 FALR 2048, 2063 (HRS 1987).

       
       

   80. Reasonable alternatives to the Venice program clearly exist in District 8, but the record establishes that Venice failed to fully explore or consider them. Venice's own consultant recommended that it pursue a joint program with Memorial, but Venice never pursued this recommendation. Regionalization of services or obtaining staff privileges for Venice's cardiologists at existing programs were also not considered. The applicant has not met the requirement that alternatives be studied and found not practicable as a criteria for the approval of its new program. Sections 381.705(1)(d),(e) and (2)(a) and (c), Florida Statutes.

       
       

   81. There is a long-standing shortage of trained and experienced open heart surgery and intensive care RNs and technical support staff in the District. Memorial has consistently experienced vacancies in these positions, despite aggressive recruiting efforts. Venice will be competing with Memorial and other existing providers for these critical personnel, and approval of an additional program in District 8 will have an adverse impact on the ability of existing and approved programs to attract and maintain these trained nursing and technical personnel. Increased competition for personnel in short supply can reasonably be expected to increase personnel costs. It was also shown that Venice will have difficulty in recruiting two cardiovascular surgeons in less than one year. Therefore, Venice has failed to establish that necessary personnel resources and health manpower are available for its proposed new program, as required by Section 381.705(1)(h).

       
       

   82. The parties stipulated that the Venice program would be financially feasible in the short-term, but the record fails to establish the program's long-term financial feasibility. The assumptions used by Venice in its pro forma are unreasonable, and are not supported by the record. The utilization projections upon which the financial feasibility of the Venice program depends are not credible. Existing market shares, referral patterns, and satisfaction with existing programs have not been taken into account. The applicant's inability to establish long- term financial feasibility also results in its inability to show that it will achieve 200 procedures by its third year, the

       service level required by the Department to ensure quality of care. Thus, Venice has failed to meet the criteria found at Section 381.705(1)(i).

       
       

   83. It has not been shown that approval of the Venice application will have a positive impact on the costs of providing open heart surgery. In fact, greater competition for limited trained personnel necessary to staff this program may actually increase personnel costs. There is no significant difference in charges proposed by the applicant and charges at existing programs, and in any event 80% of Venice's open heart surgery will be reimbursed by Medicare, which reimburses on a fixed fee basis. Transport fees would be eliminated for some patients if this application is approved, but this does not appear to be a significant savings in relation to total open heart surgery costs. Section 381.705(1)(1), Florida Statutes.

       
       

   84. Section 381.705(1)(n) requires an assessment of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Venice does propose a modest commitment to Medicaid and indigent patients in its application, but there is no extraordinary or significant commitment to either which would establish this criteria as a basis for approval.

       
       

   85. Notwithstanding the applicant's showing that approval of an additional program is needed under the Department's numeric need methodology, CON 5715 should be denied based upon a balanced consideration of the criteria found at Section 381.705, Florida Statutes, and in particular those criteria discussed above relating to quality of care, long-term financial feasibility, personnel availability and costs, and the impact which approval of this program would have on existing providers and health care costs.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Department enter a Final Order which:

(l) Denies Memorial's Motion for Summary Adjudication;

1. Dismisses Medical Center as a party due to a lack of standing; and

   
   

2. Denies Venice's CON Application Number 5715.

DONE AND ENTERED this 28th day of September, 1989 in Tallahassee, Florida.

DONALD D. CONN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Filed with the Clerk of the Division of Administrative Hearings this 28th day of September, 1989.

APPENDIX

(DOAH CASE NOS. 89-1412 & 89-1413)

Rulings on the Petitioners' Proposed Findings of Fact:

1. Adopted in Finding 6.

2. Adopted in Findings 6, 17.

3. Adopted in Finding 6.

4. Adopted in Finding 9.

5. Adopted in Findings 6, 9.

6. Rejected as a conclusion of law. 7-8. Adopted in Finding 1.

1. Adopted and Rejected in part in Finding 12.

2. Adopted in Finding 15; Rejected in Finding 16.

3. Adopted in Finding 17.

4. Rejected in Finding 41, as otherwise as irrelevant.

5. Adopted and Rejected in part in Findings 41, 42.

6. Rejected as irrelevant.

15-18. Adopted and Rejected in part in Finding 42.

19. Adopted in Finding 43. 20-21. Rejected in Finding 43.

1. Adopted in Finding 38.

2. Adopted and Rejected in Finding 53.

3. Adopted and Rejected in Finding 57.

4. Rejected in Finding 57.

5. Rejected in Finding 55.

6. Adopted and Rejected in Findings 55, 56.

7. Adopted in Finding 57.

8. Rejected in Finding 57.

9. Adopted and Rejected in Finding 57.

10. Rejected as irrelevant.

11. Adopted in Findings 12, 20 and 39; Rejected in Findings 53, 55 and 56.

12. Adopted in part in Finding 27, but otherwise Rejected as unnecessary.

13. Rejected as irrelevant and unnecessary.

14. Rejected in Finding 44.

15. Adopted in Finding 44.

16. Adopted in Finding 37; Rejected in Findings 38-47.

17. Rejected in Finding 41.

18. Rejected in Finding 25.

19. Rejected as irrelevant and unnecessary.

20. Rejected in Finding 26.

21. Adopted in Finding 21.

22. Adopted in Finding 43.

23. Adopted in Finding 34, but otherwise rejected as unnecessary.

24. Rejected in Finding 24.

25. Adopted in Finding 6.

26. Adopted in Finding 11.

27. Adopted in Finding 35.

28. Adopted and Rejected in part in Findings 34, 35. 50-54. Adopted in Finding 48.

55-61. Adopted in Finding 11.

1. Adopted in Finding 1.

2. Adopted in Finding 31.

3. Adopted and Rejected in part in Finding 35.

4. Adopted in Finding 36; Rejected in Finding 35 and otherwise as irrelevant and unnecessary.

5. Adopted in Finding 36; Rejected in Finding 33.

6. Adopted in Finding 35.

7. Rejected as cumulative and unnecessary.

8. Adopted in Finding 36.

9. Adopted in Finding 31.

10. Adopted in Finding 6.

11. Rejected as unnecessary.

73-75. Rejected in Finding 27 and otherwise as irrelevant.

1. Adopted in Finding 27.

2. Adopted in Finding 22.

3. Rejected in Finding 27 and otherwise as unnecessary.

4. Adopted in Finding 51.

80-81. Rejected in Findings 28, 29.

82-85. Rejected in Finding 49 and otherwise as irrelevant.

86. Rejected as not based on competent substantial evidence. 87-94. Rejected in Finding 49 and otherwise as irrelevant.

95. Adopted in Finding 22.

96-97. Rejected as irrelevant and unnecessary, and simply a summation of and argument on the evidence.

98. Adopted in Finding 11; Rejected in Finding 24.

Rulings on the Respondents' Proposed Findings of Fact:

1. Adopted in Finding 1.

2. Adopted in Finding 6.

3. Adopted in Finding 2.

4. Adopted in Finding 3.

5. Adopted and Rejected in part in Finding 17.

6. Adopted in Finding 17. 7-9. Adopted in Finding 18.

10. Adopted in Findings 18, 22. 11-12. Adopted in Finding 22.

COPIES FURNISHED:

Theodore C. Eastmoore, Esquire

A. Lamar Matthews, Jr., Esquire

P. O. Box 3258 Sarasota, FL 33577

Robert A. Weiss, Esquire The Perkins House

118 North Gadsden Street Tallahassee, FL 32301

Charles A. Stampelos, Esquire

P. O. Box 2174 Tallahassee, FL 32316

Richard A. Patterson, Esquire Fort Knox Executive Center 2727 Mahan Drive

Tallahassee, FL 32308

Kenneth F. Hoffman, Esquire

P. O. Box 6507 Tallahassee, FL 32314

R. S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700

John Miller, General Counsel 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Gregory Coler, Secretary 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Docket for Case No: 89-001412

Orders for Case No: 89-001412