STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNIVERSITY COMMUNITY HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 91-5720

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

)

and )

) HUMANA OF FLORIDA, INC., d/b/a ) HUMANA WOMEN'S HOSPITAL TAMPA, ) and HILLSBOROUGH COUNTY HOSPITAL ) AUTHORITY, d/b/a TAMPA GENERAL ) HOSPITAL, )

)

Intervenors. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a formal hearing in the above- styled case on December 3-6, 1991, at Tallahassee, Florida.

APPEARANCES

For Petitioner: Cynthia S. Tunnicliff, Esquire

W. Douglas Hall, Esquire Post Office Drawer 190 Tallahassee, Florida 32302

For Respondent: Richard Patterson, Esquire

2727 Mahan Drive

Tallahassee, Florida 32308

For Intervenor James C. Hauser, Esquire Humana: Post Office Box 508

Tallahassee, Florida 32302

For Intervenor John Radey, Esquire Tampa General: Post Office Drawer 11307

Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

Whether Petitioner should be granted CON No. 6606 to convert 10 medical/surgical beds to 10 neonatal intensive care beds to create a Level II neonatal intensive care unit (NICU).

PRELIMINARY STATEMENT

By Application for CON dated March 21, 1991, University Community Hospital (UCH) seeks authority to install a Level II NICU through the conversion of 10 existing medical/surgical beds. By letter dated May 7, 1991 (Exhibit 5), UCH was advised by the Department of Health and Rehabilitative Services (DHRS) that its Application was deemed complete and that a State Agency Action Report (SAAR) ruling on the application will follow. By letter dated July 8, 1991 (Exhibit 6), UCH was advised that its Application was denied for reasons contained in the attached SAAR and of UCH's right to challenge the decision by filing a petition for an administrative hearing.

Grounds for denying the Application included:

1. Need methodology for Level II NICU did not show a need for additional beds in District VI;

2. Need not supported by local health council plan or state health plan, primarily for failure to meet the preferences established

   in these plans;

3. Project does not increase availability or access (geographical and financial) and improve quality of care in District VI;

4. Project projected admissions to the proposed NICU were deemed unrealistically high;

5. UCH obstetrics hospital was not opened at the time of the application and could not meet the rule requirement of 1000 live births in the prior calendar year;

6. The occupancy rate of existing providers in District VI did not reach 80 percent;

7. Due to the unrealistically high patient pro- jections and the effect the proposed unit,

   if granted, would have on existing providers, the project was deemed to be not financially feasible immediately or for the long term; and,

8. The application failed to address the needs of a health maintenance organization, will unfairly impact on existing providers, will not foster competition to promote quality assurance and

cost effectiveness, failed to show no less costly, more efficient alternatives to the proposed project, and failed to show patients needing Level II NICU care are unable to obtain same.

By Petition for Formal Administrative Hearing dated August 6, 1991, UCH requested a hearing to challenge the denial of CON No. 6606, Humana and Tampa General petitioned to intervene, and these proceedings followed. At the commencement of the hearing, it was noted by the Hearing Officer that the prehearing stipulation required by Order entered September 11, 1991 had not been

submitted, and the parties then stipulated that subsections 381.705(1)(a), (b), (d), (h), (i), (j), (l), and (n), Florida Statutes, were the only review criteria challenged in these proceedings.

Thereafter, Petitioner called Bridget Shaw, who prepared the application; Sandra Williams, accepted as an expert in health care finance; Scott Hopes, accepted as an expert in health care planning; Keith Kanarek, accepted as an expert in neonatology; and Henry Hyatt, accepted as an expert in obstetrics.

Respondent called Alfie Stamm, accepted as an expert in health care planning; and Alberta Granger, accepted as an expert in health care planning. Tampa General Hospital called Paul Powers, accepted as an expert in health care finance; Howard E. Fagan, accepted as an expert in health care planning and health care finance; and Patrick J. McCarthy, accepted as an expert in obstetrics and gynecology. Humana called John Manieri, accepted as an expert in hospital finance; and Daniel J. Sullivan, accepted as an expert in health care planning and health care finance. Thirty-two exhibits were offered into evidence, and all were admitted with the exception of Exhibit 12 to which objection, on grounds it was not on the list of exhibits to be offered into evidence as required by the prehearing order, was sustained. Exhibit 32 was the deposition of Donna Koslowski taken November 25, 1991. The Hearing Officer took official notice of all statutes and applicable rules published in the Florida Administrative Code and the final orders and recommended order in DOAH Case Nos. 90-7682 and 90-6496.

Proposed findings have been submitted by the parties. Treatment accorded those proposed findings is contained in the Appendix attached hereto and made a part hereof.

FINDINGS OF FACT

1. UCH is a licensed acute care hospital with 404 authorized beds. A number of these beds were transferred to the Women's Center, which was exempted from CON review by DHRS. (Exhibit 8) The Women's Center involved the expenditure by UCH of some $11,000,000 to construct and equip a separate building adjacent to the existing hospital. The Women's Center was completed and became operational in September 1991. Accordingly, at the time the Application for NICU beds was submitted through the processing of the Application by DHRS, no births were experienced at this facility.

   
   

2. For the first two months the Women's Center was operational, the Women's Center experienced 107 births of which 1 required transfer to a hospital providing Level II neonatal intensive care services.

   
   

3. At the time the batching cycle for the September 27, 1990 deadline and January 1993 planning horizon was published (Exhibit 18), the NICU inventory was in litigation, and DHRS did not publish a fixed bed need pool for that batching cycle. Instead, in Florida Administrative Weekly, Vol. 16, No. 34, dated August 24, 1990 (Exhibit 18), an estimated inventory of existing beds was used in the bed need formula calculation. This showed for District VI zero need for additional NICU Level II beds. Subsequent to the issuance of the State Agency Action Report (SAAR), in this case litigation was complete, and DHRS entered a Final Order on September 15, 1991 establishing the bed inventory for neonatal intensive care beds Level II and Level III in District 6. That Order increased the NICU Level II bed inventory by 15 beds by adding four beds to Lakeland Regional Medical Center (LMRC) NICU and 11 beds to Winter Haven's NICU. These additions increased the NICU Level II inventory in District VI from the 61 shown on Exhibit 18 to 76. The SAAR (Exhibit 6) used an inventory of 77 Level II NICU

   beds in District VI to determine no need after application of the bed need formula showed a need for 70 Level II NICU beds in District VI. Changing the inventory from 77 to 76 NICU beds does not affect this conclusion.

   
   

4. Occupancy rates used in the bed need calculation were taken from the reports hospitals are required to submit to local health councils. In some instances in the batching cycle here involved, the hospitals had failed to report to the local health councils their occupancy rate for the period required by the bed need formula, and DHRS contacted these hospitals in District VI for the data needed.

   
   

5. Petitioner contends that the occupancy rate data relied upon by DHRS in calculating the need for NICU beds for the 1993 planning horizon is inaccurate and that more reliable data is obtained from using different reports that the hospitals are required to submit to the Hospital Cost Containment Board (HCCB). Petitioner's expert witness opined that the information hospitals are required to submit to the HCCB provides a more accurate method of determining the occupancy rate of the Level II NICU beds at each hospital. Petitioner also contends that at the time the Level II occupancy rates were provided to DHRS there was no finite definition, by rule, of the differences between Levels I, II and III NICUs, and the hospitals did not submit accurate data. However, credible evidence was presented that a proposed definition of Levels I, II and III NICUs had been promulgated to all of the hospitals and, when enacted as a rule, this proposed definition was adopted verbatim or nearly so.

   
   

6. Intervenors' witnesses pointed out that the hospital reports to HCCB are based on DRG's (diagnostic related groups), and the same DRG is frequently used on a Level I, II or III NICU admission. Accordingly, from those reports to the HCCB an accurate determination of the Level II occupancy rate cannot be made. Furthermore, the patient, during the hospital stay, is frequently moved from Level III to Level II to Level I care, and this data cannot be obtained from the reports submitted to the HCCB. Accordingly, it is found that the reports submitted by hospitals to the local health councils provide more accurate occupancy rates than can be gleaned from the reports submitted to the HCCB, and the occupancy rate utilized by DHRS to calculate NICU bed need is correct.

   
   

7. The average occupancy rate for District VI hospitals providing NICU Level II beds was approximately 70 percent during the most recent 12 months prescribed for this batching cycle. Although discrepancies were noted in the patient days at Humana and Tampa General during this period, when these discrepancies were corrected, the district occupancy rate remained in the vicinity of 70 percent.

   
   

8. Rule 10-5.042(3)(d), Florida Administrative Code, provides that regardless of bed need shown (by using the bed need formula) the establishment of new Level II NICU beds within a district shall not normally be approved, unless the average occupancy rate for Level II beds in the district equals or exceeds 80 percent for the most recent 12 month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed bed need pool. Petitioner submitted no evidence to demonstrate a not normal situation existed to waive the 80 percent average District VI occupancy rate required before additional Level II NICU beds will be approved. Petitioner principally relied upon the admissions in Hillsborough County to demonstrate an 80 percent occupancy rate. However, the rule specifically refers to a district rate rather than to a subdistrict or one-county rate.

9. In several areas, Petitioner's estimates used to determine the anticipated number of patients to be served in the proposed NICU are not realistic. To determine the ratio of Level II patients to the number of births, Petitioner relied on data from Lakeland Regional Medical Center (LMRC) as a comparable hospital. However, LMRC is not comparable to UCH in patient payor mix. In excess of 40 percent of LMRC obstetrical cases are Medicaid patients, while UCH projects only 6 percent Medicaid births. A lower income payor such as Medicaid patients have a much higher ratio of ill babies at birth than do more affluent mothers who generally receive better prenatal care. Consequently, the percentage of births needing Level II care in the payor mix expected at UCH is more comparable to the percentage experienced by Humana Women's Hospital, an Intervenor herein. At Humana the percentage of births requiring Level II care is on the order of 6 percent as compared to 15.6 percent at LMRC. This lower ratio is more consistent with UCH experience in its first two months of operations where out of 107 births only 1 required transfer to a Level II NICU.

   
   

10. Some question was raised regarding the accuracy of Petitioner's estimate of 1500-1700 births during the first full year of operation. While it would be expected that admissions to a new facility would be lower the start-up year than in subsequent years, hard evidence to support the proposed number of births or a lessor number was not presented. In either case, Petitioner has failed to meet the birth requirement of a minimum of 1000 live births for the most recent 12 month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed need pool needed to qualify for this CON. Petitioner presented no evidence to support the not normal conditions that would provide an exemption to this requirement in Rule 10-5.042(6), Florida Administrative Code, other than the fact that it is patently obvious that a hospital that commenced operations 6 months after submitting its CON application could not demonstrate 1000 live births in the 12 months preceding its application.

    
    

11. The protesting providers of Level II neonatal care are both located within one hour driving time of the site of UCH as is All Children's Hospital in St. Petersburg. The other hospitals in District VI providing Level II neonatal care, to wit Manatee Memorial Hospital, Winter Haven Hospital and LMRC, are also within two hours driving time of UCH which is the geographical access guideline established by rules for NICUs.

    
    

12. Although UCH contends that its application meets all eight preference items prescribed by the state health plan, the evidence presented established its application conclusively meets only one of these preferences, number 6. Absent a showing of need for the proposed facility as found in finding 6 above, granting this CON will increase the excess NICU beds in District VI and adversely impact existing providers. This includes Tampa General which is a disproportionate share provider (of Medicaid and indigent care).

    
    

13. It appears from the evidence presented, that in constructing the Women's Hospital, space for an NICU was provided in the plans and, while awaiting a CON to provide a 10 bed Level II ICU, the space is used for storage. No structural changes will be required to operate a NICU at this location, and costs are related primarily to the equipment that will be needed. Whether the installation of a NICU in this space will improve the physical plant of the Women's Center depends on from which advantage point one looks. From Petitioner's point of view, the NICU would improve the physical plant and comply with Preference 3 of the state health plan.

14. Based upon the premise that the proposed NICU beds will be used at an occupancy rate of 70 percent or greater, the conversion of 10 acute care beds currently operating at less than 50 percent occupancy to NICU beds, the overall occupancy rate will increase and Preference 4 would be met. However, no credible evidence was presented that the proposed 10 bed Level II NICU will operate at 70 percent capacity. If initial utilization of Level II care continues and less than 1 percent of UCH live births require Level II care, this Preference will not be met.

    
    

15. Although Petitioner did not address Preference 5 in its application, the SAAR notes that HCB reports show of the three hospitals with a grouping of "05" UCH has lower gross revenues per adjusted admission.

    
    

16. Petitioner meets Preference 6.

    
    

17. Preference 7 of the State Health Plan pertains to applicants who propose to provide neonatal intensive care services to Children's Medical Services (CMS) and non-CMS patients who are defined as charity care patients. Although UCH proposes to provide 6 percent Medicaid and 5 percent indigent care, past history does not support this level of indigence or low pay care.

    
    

18. Under Preference 8 of the State Health Plan, preference is given to applicants who propose to serve substance abuse, pregnant and postpartum women, and coordinate their services with other appropriate social agencies. Although UCH stated in its application that it has developed a referral relationship with the Teen Mom's Program, it did not specifically address coordination of its services with substance abuse, pregnant and postpartum women.

    
    

19. The local health plan for District VI provides preference shall be given to an applicant who provides the department with documentation that they provide, or propose to provide, a disproportionate share of Medicaid and charity care patient days in relation to other hospitals in the subdistrict. UCH is not a disproportionate share provider and does not propose to become one. Accordingly, it does not comply with this preference item in the district health plan.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

21. In these proceedings, Petitioner has the burden of proving entitlement to the CON it seeks by a preponderance of the evidence and must show the criteria in Section 381.705, Florida Statutes, have been met. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977).

    
    

22. Pursuant to Section 381.701, et seq., Florida Statutes, health care providers are required to obtain a certificate of need prior to offering neonatal intensive care services which are defined as tertiary services. Section 381.702(2) defines "tertiary health service" to mean a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and costs, should be limited to, and concentrated in, a limited number of hospitals.

    
    

23. Rule 10-5.042, Florida Administrative Code, defines neonatal intensive care unit bed Levels I, II and III, and subparagraph (3) thereof establishes

    criteria for determining bed need for these NICUs. The bed need rule for Level II beds provides a formula for computing district need. Other provisions of this rule establish an average occupancy rate district wide of 80 percent before new Level II beds will normally be approved, and provides that hospitals applying for Level II neonatal intensive care services shall not normally be approved unless the hospital had a minimum service volume of 1000 live births for the most recent 12 month period ending 6 months prior to the beginning date of the quarter of the publication of the fixed need pool.

    
    

24. The viability of UCH's application rests upon its contention that the district wide occupancy rate grossly exceeded the rate utilized by DHRS in computing the bed need. Therefore, a greater numerical need exists than was developed from the data used by DHRS to compute the bed need for this batching cycle. The facts surrounding the determination of the occupancy rate during the appropriate period has been determined adversely to the applicant in the above findings. No evidence was presented that an access problem, either geographical or financial, exists to result in a not normal situation which would permit the granting of this CON despite the no need calculation.

    
    

25. Similarly, the data used by DHRS to calculate the occupancy rate in District VI has been found to be reliable at an occupancy rate of approximately

    70 percent which existed during the designated period is deemed accurate. Since this is below the 80 percent required for authorizing additional Level II beds and no not normal circumstances exist to authorize a deviation from this requirement, the application must also fail on this ground. Finally, the 1000 birth requirement was not met. This too requires denial of the application.

    
    

26. With respect to the preference items in the state and local health plans, these preference items are useful primarily in selecting an applicant from competing applicants in the same batching cycle. If an applicant meets all statutory review criteria listed in Section 381.705 and no other applicant is seeking the same beds there would appear to be no need to refer to these preference items. Here, there was but one applicant for Level II NICU beds.

    
    

27. Absent a need for the proposed Level II beds in District VI, the availability and accessibility of Level II care at other hospitals in District VI, the less than 80 percent occupancy rate of existing providers, the adverse financial impact the granting of this CON would have to existing providers, and the failure of the applicant to meet the minimum birth requirements, the application should be denied.

    
    

28. From the foregoing, it is concluded that UCH has failed to show that it satisfies the review criteria contained in Section 381.705, Florida Statutes.

RECOMMENDATION

It is, therefore, recommended that a Final Order be entered denying the application of University Community Hospital for Certificate of Need No. 6606 to establish and operate a 10 bed Level II neonatal intensive care unit.

RECOMMENDED this 16th day of January, 1992, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings The Desoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 1992.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5720

Proposed findings submitted by Petitioner are accepted, except as noted below. Those not noted below and not contained in Hearing Officer findings were deemed not necessary to the conclusions reached.

22. Accepted as the testimony of Hopes, but not as a fact.

1. Accepted only insofar as not in conflict with HO #5.

   
   

2. Rejected.

32. Rejected.

34-35. Accepted insofar as not inconsistent with HO #7.

36. Same as 34.

1. Accepted as testimony of witnesses. However, ultimate finding in HO #7 is that when these numbers were corrected, no change in bed need resulted.

   
   

2. Rejected.

42. Rejected that Hopes utilization statistic more accurately reflects true utilization of NICU beds.

53-55. Rejected.

56. Rejected as outside the time period here involved.

58-59. Rejected.

62. Rejected insofar as inconsistent with HO #10.

1. Rejected.

   
   

2. Second sentence rejected as in conflict with HO #9.

75. Ultimate sentence rejected.

85. Rejected.

92. Accepted, except for the connotation that these patients have geographical access problems to existing facilities.

95. Accepted merely as the testimony of this witness who is currently an employee of UCH.

97-118. Although these preference items were discussed in HO findings #12-19, absent a comparative review these preferences were not considered in determining that a need for 10 more Level II NICU beds did not exist in District VI.

Proposed findings submitted by Respondent and the Intervenors are accepted. Those not included in HO findings were deemed unnecessary to the conclusions reached.

COPIES FURNISHED:

Cynthia S. Tunnicliff, Esquire

W. Douglas Hall, Esquire Post Office Drawer 190 Tallahassee, FL 32302

Richard Patterson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Tallahassee, FL 32308

James C. Hauser, Esquire Post Office Box 508 Tallahassee, FL 32302

John Radey, Esquire

Post Office Drawer 11307 Tallahassee, FL 32302

Sam Power Clerk

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, FL 32399-0700

John Slye General Counsel

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, FL 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA

DEPARTMENT TO HEALTH AND REHABILITATIVE SERVICES

UNIVERSITY COMMUNITY HOSPITAL,

Petitioner,

vs. CASE NO. 91-5720

CON NO. 6606

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Respondent,

and

HUMANA OF FLORIDA, INC., d/b/a HUMANA WOMEN'S HOSPITAL TAMPA, and HILLSBOROUGH COUNTY HOSPITAL AUTHORITY, d/b/a TAMPA GENERAL HOSPITAL,

Intervenors.

/

FINAL ORDER

The Department of Health and Rehabilitative Services, having received a Recommended Order from the Division of Administrative Hearings and a Notice of Withdrawal of Application and Voluntary Dismissal from Petitioner, and being otherwise well advised in the premises, decides as follows:

On January 16, 1992, Hearing Officer Ayers entered a Recommended Order in the above-styled case. A copy of the Recommended Order is attached hereto.

Then on January 21, 1992, Petitioner filed the Notice of withdrawal of Application and Voluntary Dismissal. A copy of the Notice is also attached hereto. Since Petitioner abandoned its challenge by the voluntary dismissal, HRS' preliminary action becomes effective as final agency action. John A. McCoy

Florida SNF Trust v. HRS, So.2d. (Fla. 1st DCA Case No. 91-273, Opinion filed November 6, 1991, Reh. den. December 17, 1991) [16 FLW D2830].

WHEREFORE, Petitioner's certificate of need application number 6606 is hereby DENIED and the above- styled case is DISMISSED.

DONE and ORDERED this 8th day of 1992, in Tallahassee, Florida.

Robert B. Williams Secretary

Department of Health and Rehabilitative Services

By Deputy Secretary for Human Services

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH THE FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA RULES OF APPELLATE PROCEDURE.

Copies furnished to:

Cynthia S. Tunnicliff, Esq.

W. Douglas Hall, Esq. Post Office Drawer 190 Tallahassee, FL 32302

James C. Hauser, Esq. Post Office Box 508 Tallahassee, FL 32308

John Radey, Esq.

P. O. Drawer 11307 Tallahassee, FL 32302

Richard A. Patterson, Esq. Department of Health and Rehabilitative Services Regulation & Health Facilities 2727 Mahan Drive

Tallahassee, FL 32308

K. N. Ayers, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

Wayne McDaniel (PDDR) Legal Office (PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished by U. S. Mail, this 13 of February , 1992, to the above-named people.

R. S. POWER, Agency Clerk Assistant General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, FL 32399

(904) 488-2381

Docket for Case No: 91-005720

Orders for Case No: 91-005720