STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

CAPITAL HOSPITAL CORPORATION, ) d/b/a CAPITAL REHABILITATION ) HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 91-5722

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) GULF COAST REHABILITATIVE ) SERVICES LIMITED, d/b/a NORTH ) FLORIDA INSTITUTE OF )

REHABILITATION, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, Eleanor M. Hunter, the designated Hearing Officer of the Division of Administrative Hearings, held a formal hearing in this case on January 27 - 31, and February 3, 1992, in Tallahassee, Florida.

APPEARANCES

For Petitioner, Michael J. Glazer, Attorney-at-Law Capital Hospital Stephen C. Emmanuel, Attorney-at-Law Corporation, Ausley McMullen McGehee

d/b/a Capital Carothers & Proctor Rehabilitation Post Office Box 391 Hospital: Tallahassee, FL 32302

For Respondent, Lesley Mendelson, Attorney-at-Law Department of 2727 Mahan Drive

Health and Tallahassee, FL 32308 Rehabilitative

Services:

For Respondent, Cynthia Tunnicliff, Attorney-at-Law Gulf CoastDouglas Hall, Attorney-at-Law Rehabilitative Carlton, Fields, Ward, Emmanuel, Services Limited, Smith and Cutler, P.A.

d/b/a North Post Office Drawer 190 Florida Institute Tallahassee, FL 32302 of Rehabilitation:

STATEMENT OF ISSUES

1. Whether Gulf Coast Rehabilitative Services Limited, d/b/a North Florida Institute of Rehabilitation submitted a valid letter of intent and partnership

   resolution to apply for a certificate of need to construct a 40-bed inpatient comprehensive medical rehabilitation hospital in Panama City, Florida, in Department of Health and Rehabilitative Services District II.

   
   

2. If the letter of intent and resolution are valid, whether the certificate of need application should be approved.

PRELIMINARY STATEMENT

On October 18, 1990, Gulf Coast Rehabilitative Services Limited ("Gulf Coast") submitted a letter of intent to apply for a certificate of need ("CON") to construct a 40-bed inpatient comprehensive medical rehabilitation ("CMR") hospital in Panama City, Bay County, Florida. Panama City is located in Department of Health and Rehabilitative Services ("HRS") District 2. With the letter of intent, Gulf Coast also submitted (1) a corporate resolution of the partnership, dated October 10, 1990, (2) a certificate of the partnership secretary, (3) certificate of the Secretary of State, and (4) a list of the partners.

On February 7, 1991, Gulf Coast submitted a second letter of intent. The second letter stated that it was to "replace the previous one as the previous Letter of Intent did not specifically state the attached list of general partners that are the controlling interest vested in the applicant, Gulf Coast Rehabilitative Services, LTD." Attached to the second letter was a secretary's certificate dated February 7, 1991, based on the original October resolution, and a list of partners, which differed from the list submitted with the first letter by including the name of one additional general partner and deleting a page that listed the names of limited partners. Thereafter, Gulf Coast submitted its CON application for the proposed project which is the subject of this proceeding.

HRS issued its notice of intent to approve Gulf Coast's CON application number 6573, on July 8, 1991. On August 8, 1991, Capital Hospital Corporation, d/b/a Capital Rehabilitation Corporation ("Capital Rehabilitation"), an existing District 2 provider of inpatient CMR services, timely filed a petition challenging the notice of intent to approve the application of Gulf Coast.

At the commencement of the formal hearing, the issue of the order of presentation, other than the stipulation that Gulf Coast would be first was unresolved. HRS was designated to present its case after Gulf Coast, followed by Capital Rehabilitation, with rebuttal allowed for both Gulf Coast and HRS.

Gulf Coast presented the testimony of Ron Samuelian; Gary Jennings; C. Dennis Evans, expert in architecture; Douglas L. Stringer, M.D., expert in neurosurgery; Michael Walker, M.D., expert in neurology; Royce Scofield, expert in accounting; Billy D. Cox; Janice Whittle; Ward Koutnik, expert in traffic engineering; Joyce Farr Carter, expert in health planning as it relates to certificate of need review; and Charles L. Roberts, expert in planning, development and operations of rehabilitation facilities; and, on rebuttal Michael X. Rohan. Gulf Coast's Exhibits 1 - 6, 8 - 10, and 12 - 17 were received into evidence. Ruling was reserved on the admissibility of Gulf Coast Exhibit 18, and the rebuttal testimony of Michael X. Rohan.

HRS presented the testimony of Elizabeth Dudek, expert in health planning, and HRS Exhibit 1, which was received into evidence.

Capital Rehabilitation presented the testimony of Mladen Antolic, M.D., expert in physical medicine and rehabilitation (physiatrist); Jerry Dabkowski, expert in traffic engineering; David Spahr, expert in health care facility design and construction, including design costs and construction costs; Michael Fenello, expert in rehabilitation health care facility administration; Terry Fowler, expert in health care finance; and Judith Horowitz, expert in health care planning. Capital Rehabilitation's Exhibits 1 - 5 and 7 - 18 were received into evidence, and official recognition was taken of Capital Rehabilitation's Exhibit 6.

The transcript was filed with the Division of Administrative Hearings on February 26, 1992. Originally due on March 30, 1992, after two Motions for Extension of time were granted, proposed findings of facts were filed on May 4, 1992. On June 16, 1992, Capital Rehabilitation filed a Motion for Delay in Entry of Recommended Order, citing pending negotiation between the parties, which was granted. On July 23, 1992, Capital Rehabilitation filed a status report stating that the negotiations had failed. Capital Rehabilitation also filed a Notice of Supplemental Authority on the issue of the financial feasibility of the Gulf Coast proposal, citing Suburban Medical Hospital, Inc.

1. Department of Health and Rehabilitative Services, and Baptist Hospital of Miami and South Miami Hospital, Inc., So.2d, 17 FLW D1338 (Fla. 3rd DCA May 26, 1992). On August 5, 1992, Gulf Coast filed a Notice of Supplemental Authority, citing South Broward Hospital District v. Department of Health and Rehabilitative Services and NME Hospital, Inc., d/b/a Hollywood Medical Center, DOAH Case No. 91-5698 (June 25, 1992).

   
   

   FINDINGS OF FACT

   
   

   1. Respondent, Gulf Coast Rehabilitative Services Limited ("Gulf Coast"), is a Florida limited partnership which owns North Florida Institute of Rehabilitation ("NFIR") in Panama City, Florida. NFIR is a licensed comprehensive outpatient medical rehabilitation facility, opened in 1986, and accredited by the Commission on Accreditation of Rehabilitation Facilities.

      
      

   2. Respondent, Department of Health and Rehabilitative Services ("HRS") is the agency responsible for administration of the certificate of need ("CON") statutes and rules.

      
      

   3. Petitioner, Capital Rehabilitation Corporation, d/b/a Capital Rehabilitation Hospital ("Capital Rehabilitation") is an existing 40-bed inpatient comprehensive medical rehabilitation ("CMR") hospital, with CON approval for an additional 30 beds, located in Tallahassee, Florida, in HRS District 2. Capital Rehabilitation Hospital is a wholly owned subsidiary of Rehabilitation Hospital Services Corporation, a wholly owned subsidiary of National Medical Enterprises. Capital Rehabilitation's primary service area is all of HRS District 2, with additional referrals from southwest Georgia and southeast Alabama.

      
      

   4. Two acute care hospitals are located in Panama City, both of which operate generally at 90% or above occupancy. They are Bay Medical Center ("Bay Medical") with 302-beds and Hospital Corporation of America Gulf Coast ("HCA") with 176 acute care beds. Panama City, Florida is also located in HRS District 2, acute care Subdistrict One. HRS District 2 encompasses fourteen counties from the eastern boundaries of the Madison and Taylor Counties to the eastern boundary of Walton County. The acute care subdistrict includes seven of those counties, Bay, Holmes, Washington, Jackson, Calhoun, Gulf and Franklin.

   5. The Rehabilitation Institute of West Florida ("West Florida") is a 58- bed inpatient CMR hospital, located in Pensacola, Florida, in HRS District 1. HRS District 1 encompasses Escambia, Santa Rosa, Okaloosa and Walton Counties.

      
      

   6. Gulf Coast, in the application at issue in this proceeding, proposes to construct a 50,804 square foot facility with 40 beds for inpatient CMR, at a total cost of $10,009,372. The proposed facility would be connected to the existing outpatient facility which is located on an approximately 10 1/2 acre site owned by Gulf Coast. With the existing facility on the site and two acres set aside for wetlands, Gulf Coast has 5 of the 7 buildable acres remaining. The service area proposed for Gulf Coast includes Bay, Gulf, Franklin, Calhoun, Holmes, Washington, and Jackson Counties in HRS District 2, and Walton and Okaloosa Counties in HRS District 1. Gulf Coast also expects to attract patients from southeast Alabama and southwest Georgia.

      
      

      Letters of Intent

      
      

   7. Gulf Coast submitted a letter of intent dated October 18, 1990, notifying HRS of its intent to file its application for the proposed 40-bed CMR hospital. Attached to this first letter of intent was a resolution of the partnership, dated October 10, 1990, reciting that approval to file the CON application was given by unanimous vote of the general partners at a meeting held on October 1, 1990. Finally, a list of partners was attached. HRS notified Gulf Coast that the letter of intent did not include a statement that the attached list of partners had a controlling interest in the applicant, as required by an HRS rule which became effective on January 31, 1991.

      
      

   8. On February 7, 1991, Gulf Coast submitted a second letter of intent which included a statement that the second letter will replace the first letter and a statement that the attached list of general partners held a controlling interest in the applicant. In January 1991, one additional person became a general partner in Gulf Coast, and was included in the list submitted with the February 7, 1991, letter. This additional partner and four others, who became general partners subsequent to February 7, 1991, did not participate in the authorizing resolution of October 1990.

      
      

   9. By letter dated March 5, 1991, HRS accepted the second letter of intent.

      
      

   10. The February 7, 1991, letter of intent was accompanied by a resolution stating that the partnership secretary, not the governing body of the applicant, authorized the applicant to incur the project expenses and to accomplish the project within the allowed time at or below the costs in the application.

       
       

   11. The October 18, 1990, letter of intent had an identical resolution of the secretary attached to it, but it also had one executed on October 10, 1990, which stated that the partnership authorized the applicant's actions, as required by Section 381.709(2)(c), Florida Statutes.

       
       

   12. HRS and Gulf Coast take the position that by combining the resolution submitted with the October letter of intent with the text and partnership list of the February letter, Gulf Coast submitted a valid letter of intent with the required resolution. Capital Rehabilitation takes the position that each letter must be taken as standing alone and independent of each other, particularly because Gulf Coast stated in the February letter that it replaced the October letter. Capital Rehabilitation also relies on Florida Administrative Code Rule 10-5.008(1)(h), which provides, in relevant part, that

       If rejected by the department, a letter of intent may not be amended or corrected but a new letter may be submitted if time allows.

       
       

       and, Rule 10-5.008(1)(b):

       
       

       Accompanying the letter of intent must be a certified copy of a resolution by the applicant's board of directors, or other governing authority if not a corporation.

       
       

       (emphasis added).

       
       

   13. Capital Rehabilitation submitted evidence proving that the 1990 and 1991 annual reports of the partnership, submitted to the Department of State and dated March 19, 1990, and October 24, 1990, respectively, included the name of another general partner, whose name does not appear on either list of partners provided by Gulf Coast to HRS.

       
       

   14. By the rebuttal testimony of the partnership secretary, who is custodian of the records, and Gulf Coast's Exhibit 18, Gulf Coast demonstrated that the filings with the Department of State were in error. The exhibit, a Withdrawal, Assignment and Indemnity Agreement, shows that the interest of the general partner, whose name was never given to HRS, was not required to be listed because the interest of that partner was terminated on April 4, 1989.

       
       

   15. Capital Rehabilitation objected to the testimony of the Gulf Coast rebuttal witness, because the secretary of the partnership was not listed on Gulf Coast's witness list. Gulf Coast asserted that its listing of "rebuttal witnesses as necessary" was sufficient.

       
       

   16. Capital Rehabilitation also challenged the introduction of Gulf Coast's Exhibit 18, the Withdrawal Agreement, which was not specifically listed on Gulf Coast's exhibit list, which stated "rebuttal exhibits as necessary." The parties agree that the applicable standard, established by the Florida Supreme Court in Binger v. King Pest Control, 401 So.2d 1310 (Fla. 1981), is whether it was reasonably foreseeable that the witness would be called to testify.

       
       

   17. The rebuttal witness, Michael Rohan, was set for deposition by counsel for Capital Rehabilitation, by notice dated November 20, 1991. Capital Rehabilitation's exhibit list included the following,

       
       

       21. All documents filed by Gulf Coast Rehabilitation Services, Ltd. with the Florida Department of State, including but not limited to its 1989, 1990 and 1991 Annual Reports.

       
       

       In addition, Capital Rehabilitation's pre-hearing statement of position included its allegation

       
       

       . . . that the letters of intent filed by NFIR were not in compliance with the applicable statutory and rule requirements . . .

       On this basis, Gulf Coast could reasonably foresee the need to call Michael Rohan, secretary of the partnership and custodian of its records, to respond to any discrepancies in those records. The description of Rohan as one of the "rebuttal witnesses as necessary" is inadequate to justify Gulf Coast's use of his testimony under Binger, supra.

       
       

   18. In the Binger case, an undisclosed privately hired accident reconstruction expert testified as an impeachment witness to contradict the testimony of another expert. As distinguished from that factual situation in this case, Rohan was known to and previously scheduled for deposition by Capital Rehabilitation. Gulf Coast's and Capital Rehabilitation's witness lists also include "any persons whose depositions were taken in this action." Because this description more narrowly includes Rohan, because Capital Rehabilitation cannot claim surprise or any unfairness in Gulf Coast's use of Rohan to explain documents submitted by the partnership, and because Capital Rehabilitation could have also called Rohan as a witness, the legal conclusion in the Binger case is not applicable to this case. The rebuttal exhibit and testimony are received into evidence and are considered in this Recommended Order.

       
       

       Numeric Need

       
       

   19. Using the formula in Florida Administrative Code Rule 10-5.039, HRS published its determination that no need exists for additional inpatient rehabilitation beds for the January 1996 planning horizon, for which Gulf Coast's application was filed. In fact, if the rule formula is used, Capital Rehabilitation's 40 beds which are full, at approximately 92% occupancy, would constitute a 5 bed surplus for the district. The rule also authorizes the consideration of other factors to determine need, including the historic, current and projected incidence and prevalence of disabling conditions and chronic illness in the district population, and trends in the CMR-bed utilization. See, Rule 10-5.039(2)(b)1, Florida Administrative Code. Gulf Coast proposed to demonstrate need using the incidence and prevalence rates for illnesses and diseases which usually result in a specific percentage of patients who seek rehabilitation services.

       
       

   20. Using incidence and prevalence rates, as did Capital Rehabilitation in its September 1990 CON application number 6369 for its additional thirty beds, the parties agree that there is a need for not fewer than an additional 19-21 beds in District 2.

       
       

   21. Gulf Coast, using the incidence and prevalence methodology, asserts that a need exists for as many as an additional 53 CMR beds in District 2.

       
       

   22. To calculate bed need, Gulf Coast used the same formula as Capital Rehabilitation. However, Gulf Coast used population figures, which include all of District 2, Walton County, and ten percent of its two million tourists a year, or 200,000 people. In equating population to need for CMR beds, Gulf Coast's analysis would provide approximately 20 beds for the district residents,

       28 more for 200,000 of two million tourists, and 5 for Walton County. The inclusion of Walton County population in computing District 2 bed need is inconsistent with Florida Administrative Code Rule 10-5.039(2)(b)1. which provides that

       
       

       (b) Other factors to be considered in determining a need for comprehensive medical rehabilitation services in addition to relevant statutory and rule criteria, include:

       1. Historic, current and projected incidence and prevalence of disabling conditions and chronic illness in the population in the Department service district by age and sex group.

       
       

       (emphasis added).

       
       

   23. Gulf Coast has not established that 200,000 tourists should be included within its population to compute need. Although the rule may be construed to include tourists, or seasonal residents, who are counted "in the population in the Department service district," Gulf Coast did not establish a basis to determine what, if any, percentage of injured tourists who are released from acute care hospitals may reasonably be expected to choose rehabilitation services in District 2. It is, in fact, reasonable to assume that tourists may seek CMR services closer to their permanent residences for all of the same reasons advanced by Gulf Coast regarding the inconvenience of Capital Rehabilitation's services to Panama City residents. In addition, if some tourists should be included, their average lengths of stay as tourists in the Panama City area is a factor not established, but necessary to compute accurately their impact on the need for CMR beds in the area. In order to support the addition of 28 beds for 200,000 tourists, Gulf Coast would have had to establish that the 2 million tourists stay an average of 36.5 days.

       Assuming, as Capital Rehabilitation demonstrated by illustration, that the 2 million tourists stay an average of 7 days, and that tourists should be added to the district population, then the total number of additional beds needed for tourists is 5, not 28.

       
       

   24. The only data provided by Gulf Coast on average lengths of stay for tourists was that 27,000 tourists stay approximately 5 months. Using that data,

       6 additional beds are needed for tourists in addition to the 20 needed for the district population, still less than the 40 beds Gulf Coast is requesting. Additional Standards and Criteria in Florida Administrative Code Rule 10-5.039

       
       

   25. Unit Size. As required by the CMR rule, Gulf Coast is proposing to construct a 40-bed facility.

       
       

   26. Occupancy Standards. In compliance with the CMR rule requiring a projected minimum first year occupancy of sixty-five percent (65%), Gulf Coast reasonably projects an occupancy rate of seventy percent (70%) in the first year. Gulf Coast's projected utilization is based on attracting patients from its primary service area, which includes all or part of the seven western counties in HRS District 2, which are in acute care subdistrict one, and from its secondary service area of Walton and Okaloosa Counties in HRS District 1, southeast Alabama and southwest Georgia. In addition, the average annual occupancy rate for the existing CMR beds in the district, those at Capital Rehabilitation, exceeds the eighty-five percent (85%) threshold used as an indicator of additional need in the rule. HRS has consistently used 85% as a threshold for existing providers in the numeric need methodology, not as an occupancy standard for new providers.

       
       

   27. Accessibility. With regard to geographic accessibility, Florida Administrative Code Rule 10-5.039(2)(c)3., provides, in relevant part,

       3. Accessibility. Applicants for comprehensive rehabilitation services should demonstrate that at least 90% of the target population resides within two hours driving time under average traffic conditions of the location of the proposed facility.

       
       

       HRS interprets the "target population" accessibility requirement as meaning that 90% of those in an applicant's service area, which may be all or part of a district. Accepting this interpretation as reasonable and applying it to the Gulf Coast proposal, the geographic accessibility standard is met. Gulf Coast's proposed service area is within two hours driving time under average traffic conditions of the Gulf Coast facility.

       
       

   28. Programs and Services. Gulf Coast has established that it will provide the required services by either its staff or by contractual arrangement. Gulf Coast also proposes to provide vocational rehabilitation services beyond those mandated in the rule.

       
       

   29. Transfer and Referral Agreements. Gulf Coast has letters of support from acute care hospitals in Panama City and Chipley. These letters, and a mutual assistance agreement with one of the hospitals, support a finding that the Gulf Coast will enter into the necessary transfer and referral agreements with acute care facilities.

       
       

       Criteria of Subsection 381.705(1)(a), Florida Statutes - State Health Plan

       
       

   30. The 1989 Florida State Health Plan is applicable and includes five preferences for CMR beds. The three criteria of the state health plan which are inapplicable to the proposed project are the preferences 1) for the conversion of underutilized acute care beds, 2) for projects at teaching hospitals, and 3) for hospitals which are disproportionate share providers of indigent care.

       
       

   31. The criterion of the state health plan which is not met is the preference for proposals for rehabilitation services not currently offered within the district.

       
       

   32. The one preference in the state health plan which the Gulf Coast proposal meets is the preference for existing comprehensive outpatient rehabilitation facility, or CORF, which will provide follow-up outpatient services.

       
       

       Criteria of Subsection 381.705(1)(a), Florida Statutes - District Health Plan

       
       

   33. At hearing, counsel for Capital Rehabilitation objected to testimony on and challenged the applicability of the District 2 health plan because HRS has failed to adopt by rule the elements of the plan proposed to be used as criteria for review of CON applications. See, Subsection 381.703(1)(b), Florida Statutes.

       
       

   34. Gulf Coast asserts that the use of the district plan as criteria in the CON review process is mandated by Subsection 381.705(1)(a).

       
       

   35. The Gulf Coast interpretation is rejected because that reading of Subsection 381.705(1)(a), would render Subsection 381.703(1)(b) meaningless.

       
       

       Subsection 381.705(1)(b) - accessibility, extent of utilization and adequacy of like and existing services within district; Subsection 381.705(1)(f) -

       accessibility in adjoining areas; Subsection 381.705(1)(h) - accessibility to all district residents; Subsection 381.705(2)(d) - problems in obtaining inpatient care.

       
       

   36. Gulf Coast asserts that inpatient CMR services available only at Capital Rehabilitation in Tallahassee, in District 2, and West Florida in Pensacola, in District 1, are not accessible under the statutory criteria as defined by HRS. Gulf Coast is currently the only facility between Tallahassee and Pensacola which provides complex interdisciplinary medical treatment and speech, physical and occupational therapies.

       
       

   37. Accessibility to Capital Rehabilitation, according to Gulf Coast, is affected adversely by Capital Rehabilitation's high occupancy rates. Gulf Coast asserts that access to both Capital Rehabilitation and West Florida is affected adversely by their geographic distances from Panama City.

       
       

       Accessibility Based on Occupancy

       
       

   38. Capital Rehabilitation, in its CON application for its approved additional 30 beds, submitted in September 1990, noted that it had been averaging over 93% occupancy, with a waiting time of 8.2 days. In fact, Capital Rehabilitation described its facility as ". . . operating at maximum capacity over the last 12 months," and included a waiting list ranging from a low of 6 patients in September 1989 to a high of 48 patients in September 1990.

       
       

   39. Capital Rehabilitation asserts that its 30 additional beds should be opened before another District 2 facility is approved. In projecting utilization of its additional beds, Capital Rehabilitation expected its 30 new beds to be 50% occupied in the first year. Assuming the continued accuracy of the project completion forecast on Table 26 of the 1990 CON application, these beds became available in July 1992. With continued 95% occupancy in the existing 40 beds, 50% occupancy in year one and 65% in year two in the 30 new beds, then overall occupancy is expected to be 76% in 1992-1993, and 83% in 1993-1994. Gulf Coast's application is for the January 1996 planning horizon.

       Table 26 in Gulf Coast's application shows that Gulf Coast anticipated opening in December 1993, if its CON application approval had become final agency action on July 8, 1991. With an approximate two and a half year time lag from final approval to initiation of service, Gulf Coast cannot expect to open before early 1995. See, Gulf Coast Exhibit 2 at p. 114.

       
       

   40. West Florida, the 58-bed CMR hospital in Pensacola, has experienced occupancy levels of approximately 67% in 1990. Capital Rehabilitation noted that West Florida is within two hours travel time of western Bay County. In addition, Capital Rehabilitation presented evidence that facilities in Alabama and Georgia also provide inpatient CMR services. West Florida does have the bed capacity to serve Panama City residents, if it is geographically accessible to them.

       
       

       Accessibility Due to Distance

       
       

   41. Gulf Coast, using Governor's Office projections, demonstrated the following population trends: (1) that 34% of the district population lives in Bay, Gulf, Holmes and Washington Counties; (2) that a 13% population increase is projected from 1991-1996 for Bay County; (3) that 10% of the Bay County population is over 65 years of age; (4) by contrast, an 11% population increase is projected for Leon County, and 7.5% of the Leon County population is over 65

       years of age. Gulf Coast also demonstrated that it would reasonably expect to serve a large number of military personnel and veterans in its area.

       
       

   42. The Associate Executive Director of the Big Bend Health Council and the Northwest Florida Health Council, local health councils for HRS Districts 1 and 2, respectively, testified that the map Gulf Coast included in its application, was taken from his agencies' travel time studies. The studies are based on 18 to 20 trips done by various staff members. Those studies demonstrated that 23% of the District 2 population, in portions of Holmes, Washington, Gulf and all of Bay County, is beyond two hours travel time of either West Florida or Capital Rehabilitation in 1985.

       
       

   43. Gulf Coast's expert also conducted a travel time study and concluded that the areas beyond two hours of either the Pensacola or Tallahassee facilities include all of Bay County, except a small portion in the northeast, most of Washington and Holmes and all of Gulf County. Gulf Coast concluded that well over 10% of the district population is beyond two hour access of CMR beds. Gulf Coast's expert's methods and conclusions are questionable due to its inclusion of stops for gas and food.

       
       

   44. Capital Rehabilitation's expert, who conducted a travel time study, found that a large portion of Bay County is within two hours of Capital Rehabilitation Hospital, and that significant portions of western Bay County are within two hours of West Florida. The conclusion was that virtually all of District 2 residents are within two hours of one or the other facility. This study was not conducted in compliance with recognized procedures, including having been based, in part, on one trip in which the driver left Tallahassee at 4:00 p.m.

       
       

   45. The most reliable, objective travel time information, was that provided by the Associate Executive Director of the local health councils for Districts 1 and 2. His conclusion that 23% of the District 2 population is more than two hours driving time under average traffic conditions from Capital Rehabilitation or West Florida is accepted. On this basis, the two existing facilities are geographically inaccessible for almost one fourth of the District

       2 population. Capital Rehabilitation asserted that the travel time standard in combination with the "target" population standard should be read to require that a facility be located within two hours average travel time of a least 90% of the total district population, not just the facility's target population. In fact, the wording of the proposed new CMR rule will adopt this interpretation. Given the deposition testimony of the HRS staff person responsible for the new CMR rule that the standard in the new rule will be different from, not a codification of the agency's current interpretation of the existing rule, the interpretation suggested by Capital Rehabilitation is rejected. Finally, Capital Rehabilitation was allowed to cross-examine the Associate Executive Director of the local health council on contradictory statements in the local health plan. For this limited purpose, statements in the local health plan are considered in arriving at this finding.

       
       

       Subsection 381.705(1)(b) - Quality of Care, Efficiency, Appropriateness of Like and Existing Health Care Services in the District and Subsection 381.705(2)(b) - Appropriate and Efficient Use of Existing Inpatient Facilities

       
       

   46. There was evidence of isolated complaints from Panama City doctors regarding Capital Rehabilitation's failure to timely provide them with discharge reports on patients, and of the disadvantages to patients' relatives having to travel between Panama City and Tallahassee.

   47. In spite of such isolated complaints, the evidence demonstrates that Capital Rehabilitation, the only inpatient comprehensive rehabilitation hospital in District 2, is providing excellent quality of care. Its ability to provide services efficiently, appropriately and adequately is compromised, as noted above, only by its current high occupancy levels and relative distance from extreme western portion of the District, the Panama City area. See, Findings of Fact 36-38 and 41-45.

       
       

       Subsection 381.705(1)(c) - Applicant Ability and Record on Quality of Care, Subsection 381.705(1)(l) - Construction Methods; and Subsection 381.705(2)(e) - Less Costly Alternatives

       
       

   48. The evidence demonstrates that the applicant provides good quality of care as an outpatient facility, and that it has the ability to do so as an inpatient facility.

       
       

   49. Capital Rehabilitation contends that Gulf Coast's construction costs are not reasonable and that Gulf Coast cannot provide quality rehabilitative programs and therapies in the spaces allocated on its schematic design. Gulf Coast has two patient lounges designated for one 20-bed wing, but none for the other; and no separately designated space for activities of daily living. Gulf Coast's total size and project costs are conceded to be adequate for a 40-bed CMR inpatient hospital. In some instances, Capital Rehabilitation also pointed out inconsistencies in Gulf Coast's proposed staffing patterns and schematic design, including seven offices for four speech therapists, six spaces for two social worker/psychologists, space for case management with no case managers, one community relations employee in an area capable of accommodating 5 to 6 people, and an x-ray suite despite its plan to provide that service initially by contract. The Gulf Coast application is not well prepared, but the sources relied upon in projecting construction costs are reliable and the resulting projection is reasonable. In addition, the excess spaces designated for non- existent positions support the conclusion that the redesignation of spaces on the next set of HRS-required construction documents can correct any defects in Gulf Coast's schematic design.

       
       

       Subsections 381.705(1)(b) and (d), Florida Statutes - Availability and Adequacy of Alternatives in the District; Subsection 381.705(2)(a) - Efficient Use of Other Inpatient Services; Subsection 381.705(2)(c) - Alternatives to New Construction

       
       

   50. Capital Rehabilitation is the only available inpatient facility in the district. As previously noted, its availability and adequacy for Panama City area residents is adversely affected by its current high occupancy and distance from the Gulf Coast target area. See Finding of Fact 47.

       
       

   51. Due to the difference in the needs for non-ambulatory rehabilitation patients, the intensity of the therapy provided in inpatient rehabilitation hospitals and the savings in avoiding readmissions to acute care hospitals, outpatient facilities are not an adequate alternative for some rehabilitation patients. Similarly, although a preference is given in the state health plan for the conversion of underutilized acute care beds, the Bay County acute care hospitals could not qualify for the preference due to their high occupancy rates. Capital Rehabilitation does indicate correctly that the acute care hospitals could be approved for a minimum size of 20 rather than 40 beds, but they are not applicants in this proceeding. Whether the acute care hospitals as CON applicants would be superior to the one at issue is speculative.

       Subsection 381.705(1)(e) - Economies From Operation of Joint Health Care Resources

       
       

   52. The proposal to establish an inpatient CMR hospital which is connected to an outpatient rehabilitation facility, in part, offers some of the advantages of providing joint health care services which use shared resources. For example, Gulf Coast has already spent $1,200,000 in equipment for its outpatient facility and will need an additional $760,000 in equipment to accommodate the demand as an inpatient facility. The total of almost $2 million is adequate.

       By contrast, according to Capital Rehabilitation, if Gulf Coast were proposing to construct a 40-bed inpatient facility without the existing outpatient component, it would spend from $25,000 to $30,000 per bed for equipment.

       
       

   53. The proposal by Gulf Coast may allow the use of equipment and staff in the area of greatest need at any given time.

       
       

       Subsection 381.705(1)(g) - Research and Educational Facilities

       
       

   54. No research or training programs are proposed in the Gulf Coast project. There was, however, testimony of a willingness to cooperate with the Florida State University Panama City campus, and to assist in establishing a physical therapy assistants program at a community college in the area.

       
       

       Subsection 381.705(1)(h) - Resources, Manpower and Management

       
       

   55. Gulf Coast currently employs many categories of professionals needed for an inpatient program. Gulf Coast demonstrated that its working conditions and desirable geographic locations are advantages in recruiting capable staff and management. Capital Rehabilitation asserts that Gulf Coast will need more than one public relations/marketing person. However, Capital Rehabilitation's experience is based on recruitment throughout District 2, while Gulf Coast will target approximately one-fourth of the district population. West Florida, however, which has a similar desirable coastal location, has been unable to recruit a medical director since 1989, even with the help of three consulting firms. Gulf Coast could be more successful than West Florida if its recruiters are instructed not to be xenophobic. 1/

       
       

       Subsection 381.705(1)(j) - Special Needs of Health Maintenance Organizations

       
       

   56. There was no evidence to show that health maintenance organizations are affected by Gulf Coast's proposal.

       
       

       Subsection 381.705(1)(h) - Funds to accomplish project; Subsection 381.705(1)(i)

       - immediate and long-term financial feasibility

       
       

   57. Capital Rehabilitation challenged the Gulf Coast pro forma, asserting that the bottom line would be losses of $800,000 in the first year and $200,000 in the second year rather than $157,760 loss in the first year and $288,702 profit in the second year. Inaccuracies, according to Capital Rehabilitation, include under estimated 1) deductions from revenue, 2) interest, 3) depreciation, 4) equipment and supply costs, and 5) staff requirements and salaries.

       
       

   58. Gulf Coast estimated deductions from revenue at 29% of its charges. Capital Rehabilitation estimates that Gulf Coast will not recover between 32 and 38% of its charges. Capital Rehabilitation's estimate of deductions from

       revenue in its pro forma for its 30-bed expansion ranged from 27% for its first year to 29% for its second year. In addition, Gulf Coast demonstrated that hospitals reasonably expect to receive more favorable Medicare and Medicaid reimbursements in the first years of operation. On this basis, Gulf Coast's estimated deductions for revenue and projected charges are reasonable.

       
       

   59. Gulf Coast failed to calculate depreciation based on the list of assets included in its CON application. Capital Rehabilitation objected that Gulf Coast impermissibly sought to amend its application at hearing by introducing testimony correcting the mathematical inconsistencies within the application. Recalculating the information provided and based on Capital Rehabilitation's experts testimony that Gulf Coast has some flexibility in determining whether items are capitalized or listed as non-capitalized minor equipment or facilities, Gulf Coast has established that its corrected estimated depreciation ($290,000 a year, rather than $265,000 in year one and $344,000 in year two) is reasonable.

       
       

   60. Similarly, Gulf Coast's calculation of interest on a total project cost at a specified interest rate (9 %) which is included in its application yields a result inconsistent with the total project cost ($10 million) which is also listed in the application at hearing. At hearing, the inconsistent was resolved by a witness recomputing interest. Corrected figures are $948,248 in year one, and $941.000 in year two at 9 %. However, with declining interest rates, as of the date of the hearing in this case, at 7 %, interest would be between $770,000-775,000 a year. Gulf Coast's corrected interest estimate is reasonable, given declining interest rates since the time the application was filed.

       
       

   61. Gulf Coast's proposed equipment costs are reasonable, based on Capital Rehabilitation's estimate of the need for $25,000 to $30,000 per bed, with equipment available at NFIR and additional equipment purchases by Gulf Coast totaling in excess of $1.9 million, or approximately $48,000 per bed. Assuming that some of the existing equipment is not appropriate for use for inpatients, Gulf Coast's per bed equipment costs significantly exceeds the necessary minimum estimated by Capital Rehabilitation.

       
       

   62. Supply costs, projected in Gulf Coast's pro forma, are higher in year one than year two. Capital Rehabilitation contends that supplies needed are always proportionate to the beds occupied and, it is therefore, impossible to have rising occupancy and decreasing supply costs. Gulf Coast has demonstrated that items, listed as supplies because the value is below that for capitalized equipment, and those purchased in the first year but continuing to be used in the second year, can account for decreasing second year costs.

       
       

   63. Projected salaries are based on those actually paid at Gulf Coast for most of the same categories of employees and are reasonable.

       
       

   64. Finally, with regard to financial feasibility, Capital Rehabilitation asserts that Gulf Coast cannot obtain 100% financing and has no partnership funds available to commit to the project. Gulf Cost does have letters of interest in the project, one for up to $14 million. In addition, the financial history of the partnership demonstrates its reliance on equity contributions of the partners, and that such contributions have been made.

       
       

   65. Given the testimony of Capital Rehabilitation's expert that first year losses are not atypical and the reasonableness of Gulf Coast's projected fill rate, Gulf Coast has demonstrated that its proposal is financially feasible in

       the immediate and long term. With corrected interest and depreciation, the project continues to be profitable in the second year.

       
       

       Subsection 381.705(1)(e) - impact on costs of providing services proposed; effects of competition

       
       

   66. Capital Rehabilitation estimates that it will lose $617,000. The projected decline in patient days is 3%, the total number of patient days attributable to the Panama City area. Capital Rehabilitation also believes it will experience difficulty in recruiting specialized staff.

       
       

   67. Capital Rehabilitation, in its 1990 CON application, described a well- developed recruitment program in conjunction with Florida State University and Florida A & M University. Gulf Coast will target the Panama City Community College and Florida State University campus in Panama City. The independent recruitment sources indicate the reasonableness of adequate staff being available to both facilities.

       
       

   68. Assuming a decline of 3% in Capital Rehabilitation's patient days, if Gulf Coast could be operational, in December 1993, as originally projected, the impact would be minimal on Capital Rehabilitation's 1993-1994 projected occupancy rate of 83% and would not affect the qualify of care provided at Capital Rehabilitation, given the fact that 85% occupancy is a prima facia numeric indicator that additional CMR beds are needed in a district.

       
       

       Subsection 381.705(1)(n) - Medicaid and medically indigent services

       
       

   69. Gulf Coast provides approximately 6% indigent care, and is willing to have its CON application conditioned on providing 7% charity care and 5% Medicaid.

       
       

       CONCLUSIONS OF LAW

       
       

       Jurisdiction

       
       

   70. The Division of Administrative Hearings has jurisdiction over this matter. Subsections 120.57(1), and 381.709(5), Florida Statutes.

       
       

       Criteria

       
       

   71. The applicant bears the burden of demonstrating its entitlement to the certificate of need. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985).

       
       

       Letter of Intent

       
       

   72. Combined Submittals. The second letter of intent submitted by Gulf Coast, when considered with the initial partnership resolution submitted by Gulf Coast constitute a valid combined submittal in compliance with applicable statutes and HRS rules. Deference is given to HRS' interpretation of its rules. Consistent with Florida Administrative Code Rule 10-5.008(1)(h), the letter rejected by HRS was not amended or corrected, but replaced by a new letter. A literal reading of Florida Administrative Code Rule 10-5.008(1)9b) would suggest that correct resolution should have been submitted "accompanying the [second] letter of intent . . ." In this instance, where no new resolution was adopted the same document would have been resubmitted, HRS' policy of using the initial resolution with the second letter is not inconsistent with the objectives of the

       statutes, rules or the decisions in Brookwood-Jackson County Convalescent Center

       v. Department of Health and Rehabilitative Services, 591 So.2d 1085 (Fla. 1st DCA 1992).

       
       

   73. Rebuttal Evidence. Gulf Coast's list of general partners submitted to HRS differs from the list submitted to the Secretary of State. The discrepancy prompted Gulf Coast to call a rebuttal witness and to introduce a rebuttal exhibit, which were not more specifically identified in its witness and exhibit lists. Capital Rehabilitation relies on Binger v. King Pest Control, 401 So.2d 1310 (Fla. 1981), in which the Florida Supreme Court required more precise notice of witnesses and exhibits ". . . that the parties reasonably foresee will be called to testify for substantive, collaborative, impeachment or rebuttal purposes..." While it is reasonably foreseeable, given the pleadings in this case, that Gulf Coast would have to explain any discrepancies in filings of partnership with the Secretary of State, the factual distinctions in this case dictate a different result from that in Binger. See, Findings of Fact 17 and

1. Therefore, the testimony of Gulf Coast's rebuttal witness and Gulf Coast Exhibit Number 18 are received into evidence. Based on the rebuttal testimony and evidence, Gulf Coast has demonstrated that the error in partnership lists exists in the documents submitted to the Secretary of State, not in those submitted to HRS.

   
   

   1. Additional partners. The fact that Gulf Coast added new general partners between the time it submitted its resolution with the first letter of intent and the second letter of intent is challenged by Capital Rehabilitation as an impermissible change in the applicant. See, Rule 10-5.008(1)(n), Florida Administrative Code.

      
      

   2. While the applicant must still be the partnership, there is no requirement that the partners remain the same. In addition, there is no evidence to demonstrate that the unanimous vote of the October 1990 partners has been rescinded or repudiated by the subsequent additional partners. Therefore, the resolution continues to represent the authorization of the applicant, the partnership.

      
      

      Financial Feasibility

      
      

   3. Capital Rehabilitation cites Suburban Medical Hospital, Inc. v. Department of Health and Rehabilitative Services, et al., 17 F.L.W. D1338 (Fla. 1st DCA 1992), for the proposition that Gulf Coast failed to establish short or long term financial feasibility. In the Suburban case, the proposed budget of the applicant failed to include funds to pay off a mortgage, and failed to establish that operating costs or projected revenues were reasonable. In addition, the only evidence of available financing was in the form of letters of interest from an investment firm and testimony that various individuals were interested in participating as private investors. In this case, Gulf Coast has not failed to include any operating costs, has established that its projections, as corrected, are reasonable, and has a history of reasonable reliance on partners capital contributions. Finally, no citation has been given to any HRS requirement that an applicant secure more than a letter of interest from a financial institution, even if the letter is authorized by an officer who is not solely authorized to approve such loans.

      
      

      Balanced Consideration of Criteria

      
      

   4. The applicant has established essentially three strong factors in support of its application. First, by objective testimony, that approximately

      one-fourth of the district population, within its target area, is more than two hours average travel time under average conditions from any inpatient CMR services. Second, Capital Rehabilitation's 70 beds are inadequate to meet the district's need for a minimum of 20 additional beds. Third, as an existing outpatient facility, it provides good quality of care, and in a less than artfully compiled application, that it can secure the staff, equipment, and funds to do so as an inpatient CMR facility, without a detrimental impact on the quality of care provided at Capital Rehabilitation.

      
      

   5. On the contrary, the strongest points are the applicant's failure to demonstrate numeric need for more than 25 to 27 of the 40 additional beds in the district, that the applicant only meets the state health plan for an existing comprehensive outpatient rehabilitative facility, and that the applicant will not lower health care costs as a competitor inpatient CMR facility.

      
      

   6. On balance, geographical inaccessibility for residents of the Panama City area, the limited capacity and limited impact on Capital Rehabilitation outweigh the absence of numeric need for additional District 2 CMR beds.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that a Final Order be entered approving certificate of need application number 6573 of Gulf Coast Rehabilitative Services Limited, d/b/a North Florida Institute, to establish a 40-bed inpatient comprehensive medical rehabilitation hospital in Panama City, Florida, conditioned upon the provision of 5% of total annual patient days to Medicaid patients and a minimum of 7% of total annual patient days to charity care patients.

DONE and ENTERED this 29th day of September, 1992, at Tallahassee, Florida.

ELEANOR M. HUNTER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1992.

ENDNOTE

1/ There was testimony that foreign medical school graduates in the field of rehabilitation (physiatry) outnumbered Americans through the mid-1980's.

Nevertheless, certain institutions seek "American-trained" medical directors, because of "cultural and language problems." (Tr. 569) The expression of such concerns was demonstrated to be unreasonable, particularly, in light of the testimony of Mladen Antolic, M.D. The credentials of Dr. Antolic, an expert in physiatry, graduate of the University of Zagreb Medical School, in Zagreb, Yugoslavia, were impressive. See, Capital Rehabilitation Exhibit 5.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5722

Rulings on Proposed Findings of Fact submitted by Capital Hospital Corporation, d/b/a Capital Rehabilitation Hospital.

1. Accepted in relevant part in Finding of Fact 1.

2. Accepted in Findings of Fact 1 and 6.

3. Accepted in Finding of Fact 2.

4. Subordinate to Finding of Fact 2.

5. Accepted in Finding of Fact 6.

6. Accepted in Finding of Fact 4.

7. Accepted in Finding of Fact 3.

8. Accepted in Findings of Fact 19, 25 and 26.

9. Accepted in Finding of Fact 19.

10. Accepted in or subordinate to Finding of Fact 7.

11. Subordinate to Findings of Fact 7-18.

12. Accepted in Findings of Fact 7-8.

13. Accepted in or subordinate to Finding of Fact 7.

14. Accepted in Finding of Fact 7.

15. Accepted in Finding of Fact 8.

16. Accepted in Finding of Fact 13.

17. Accepted in Findings of Fact 10-11.

18. Accepted in Finding of Fact 10.

19. Accepted in Finding of Fact 10.

20. Accepted in Finding of Fact 12.

21. Accepted in Finding of Fact 12.

22. Rejected in Conclusion of Law 72.

23. Accepted in Finding of Fact 12.

24. Accepted in Finding of Fact 8.

25. Accepted in Finding of Fact 8.

26. Accepted in Finding of Fact 8.

27. Accepted in Finding of Fact 8.

28. Subordinate in Finding of Fact 8.

29. Accepted in Finding of Fact 30.

30. Accepted in Finding of Fact 30.

31. Accepted in Finding of Fact 31.

32. Accepted in Finding of Fact 30.

33. Accepted in Finding of Fact 30.

34. Accepted in Finding of Fact 32.

35-38. Rejected as inapplicable in Findings of Fact 33-35

1. Accepted in Findings of Fact 36-50.

2. Accepted in Finding of Fact 3.

41-46. Accepted in or subordinate to Finding of Fact 47.

47. Accepted in Finding of Fact 3.

48-51. Accepted in or subordinate to Finding of Fact 47.

1. Accepted in Findings of Fact 38-39.

2. Accepted in Finding of Fact 27.

3. Accepted in Finding of Fact 27.

4. Accepted in Finding of Fact 45.

5. Accepted in Finding of Fact 45.

6. Accepted in Findings of Fact 42 and 43.

7. Accepted in Finding of Fact 44.

8. Accepted in Finding of Fact 43.

9. Subordinate to Finding of Fact 45. 61-62. Accepted in Finding of Fact 45.

1. Accepted in Findings of Fact 5 and 40.

2. Accepted in Finding of Fact 40.

3. Accepted in Finding of Fact 40.

4. Accepted in Finding of Fact 40.

5. Accepted in Findings of Fact 48 and 51.

6. Accepted.

7. Accepted in Finding of Fact 55.

8. Accepted in Finding of Fact 55.

9. Subordinate to Finding of Fact 51. 72-77. Subordinate to Findings of Fact 49.

1. Rejected in Finding of Fact 48.

2. Rejected in Finding of Fact 52.

3. Subordinate to Finding of Fact 52.

4. Rejected in conclusion in Finding of Fact 52.

82-87. Accepted or subordinate to Findings of Fact 55 and 67.

1. Accepted in Finding of Fact 64

2. Rejected in Conclusion of Law 76.

3. Subordinate to Finding of Fact 64.

4. Subordinate to Finding of Fact 64.

5. Subordinate to Finding of Fact 64.

6. Subordinate to Finding of Fact 64.

7. Accepted in Finding of Fact 64.

8. Accepted in Finding of Fact 64.

9. Accepted in Finding of Fact 64.

10. Accepted in Finding of Fact 64.

11. Accepted in Finding of Fact 64.

12. Accepted in Finding of Fact 64.

13. Rejected in Finding of Fact 64 and Conclusion of Law 76.

14. Rejected in Finding of Fact 64.

15. Rejected in Finding of Fact 64.

16. Accepted in Finding of Fact 24.

17. Accepted in Finding of Fact 21.

18. Accepted in Finding of Fact 19.

19. Accepted in Finding of Fact 22.

20. Subordinate to Finding of Fact 23.

21. Accepted in Finding of Fact 23.

22. Accepted in Finding of Fact 23.

23. Accepted in Finding of Fact 23.

24. Rejected in Finding of Fact 22.

25. Rejected in Finding of Fact 22.

1. Accepted in Findings of Fact 66 and 68.

2. Rejected in Finding of Fact 67.

3. Accepted in Finding of Fact 66.

4. Rejected in Finding of Fact 68.

5. Rejected in Finding of Fact 53.

6. Accepted in Findings of Fact 4 and 51. 136-148. Accepted in Finding of Fact 49.

1. Rejected in Finding of Fact 49.

2. Accepted in Finding of Fact 49.

3. Rejected in Finding of Fact 49.

4. Accepted in Findings of Fact 49 and 50.

5. Accepted in Finding of Fact 47.

6. Accepted in Finding of Fact 54. 155(a) Rejected in Finding of Fact 47. 155(b) Accepted in Finding of Fact 47. 155(c) Accepted in Finding of Fact 51. 155(d) Rejected in Finding of Fact 38.

1. Subordinate to Findings of Fact 26 and 65.

2. Accepted in Finding of Fact 26.

3. Rejected in Finding of Fact 26.

4. Rejected conclusion in Finding of Fact 55.

Rulings on findings proposed by the Department of Health and Rehabilitative Services:

1. Accepted in Finding of Fact 1.

2. Accepted in Findings of Fact 1 and 36.

3. Accepted in Finding of Fact 6.

4. Accepted in Finding of Fact 6.

5. Accepted in Finding of Fact 6.

6. Accepted in Finding of Fact 6.

7. Accepted in Finding of Fact 3.

8. Subordinate to Finding of Fact 7.

9. Accepted in Finding of Fact 7.

10. Subordinate to Finding of Fact 9.

11. Accepted in Finding of Fact 8.

12. Accepted in Findings of Fact 11 and 12.

13. Accepted in Finding of Fact 12.

14. Accepted in Finding of Fact 12 and Conclusion of Law 72.

15. Subordinate to Finding of Fact 7.

16. Accepted in Findings of Fact 8, 14, 15, and 16.

17. Accepted in Finding of Fact 14.

18. Accepted in Finding of Fact 32.

19. Accepted in Finding of Fact 42.

20. Accepted in Finding of Fact 45.

21. Subordinate to Findings of Fact 36 and 37.

22. Accepted in Finding of Fact 45.

23. Subordinate to Finding of Fact 27.

24. Accepted in Finding of Fact 51.

25, Accepted in part in Findings of Fact 38, 39, 45 and 68.

1. Accepted in part in Finding of Fact 40.

2. Accepted as true in relevant part in Findings of Fact 42 and 45.

3. Accepted in Conclusion of Law 79.

4. Accepted in Finding of Fact 19.

5. Accepted in Finding of Fact 19.

6. Accepted in Finding of Fact 26.

7. Accepted in Finding of Fact 26.

1. Subordinate to Finding of Fact 65.

2. Accepted in part in Finding of Fact 59.

3. Accepted in Finding of Fact 60.

4. Accepted in Finding of Fact 65.

5. Accepted in Findings of Fact 52 and 53.

6. Accepted in Finding of Fact 49.

7. Accepted in Finding of Fact 49.

8. Subordinate to Finding of Fact 49.

9. Accepted in Finding of Fact 49.

10. Subordinate to Finding of Fact 49.

11. Subordinate to Finding of Fact 49.

12. Accepted in Findings of Fact 6 and 49. 92-93. Accepted in Finding of Fact 49.

1. Subordinate to Finding of Fact 6.

2. Accepted in Finding of Fact 49.

3. Accepted in Finding of Fact 49.

4. Accepted in Finding of Fact 49.

5. Subordinate to Finding of Fact 49.

6. Subordinate to Finding of Fact 49.

101-102. Accepted or subordinate in Finding of Fact 69.

COPIES FURNISHED:

Lesley Mendelson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32308

Michael J. Glazer, Esquire Stephen C. Emmanuel, Esquire Ausley McMullen McGehee

Carothers & Proctor Post Office Box 391

Tallahassee, Florida 32302

Cynthia S. Tunnicliff, Esquire Carlton, Fields, Ward, Emmanuel,

Smith and Cutler, P.A. Post Office Drawer 190 Tallahassee, Florida 32302

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 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

AGENCY FOR HEALTH CARE ADMINISTRATION

CAPITAL HOSPITAL CORPORATION d/b/a CAPITAL REHABILITATION HOSPITAL,

Petitioner, CASE NO.: 91-5722 CON NO.: 6573

vs. RENDITION NO.: AHCA-92-46-FOF-CON

AGENCY FOR HEALTH CARE ADMINISTRATION and GULF

COAST REHABILITATIVE SERVICES LIMITED d/b/a NORTH FLORIDA INSTITUTE OF REHABILITATION,

Respondent.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Agency for Health Care Administration (AHCA). The Recommended Order entered September 29, 1992 by Hearing Officer Eleanor M. Hunter is incorporated by reference.

RULINGS ON EXCEPTIONS FILED BY AHCA

Counsel excepts to the Hearing Officer's conclusion that the district health plan should not be considered in evaluating the merits of the CON application because the plan was not adopted as a rule pursuant to Section 408.033(1)(b), Florida Statutes. 1/ Section 408.035(1)(a), Florida Statutes requires that both the district and state health plans be considered as criteria in evaluating CON applications. The requirement of Section 408.035(1)(a) is applicable even if the district plan has not been adopted as a rule. The exception is granted.

RULING ON EXCEPTIONS FILED BY PETITIONER

Capital Hospital Corporation (Capital) excepts to findings of fact 13 through 18 and the conclusion in paragraph 73 that Gulf Coast's rebuttal evidence was properly admitted. The Hearing Officer has wide discretion in ruling on evidentiary issues. There is no abuse of that discretion here. The exception is denied.

Capital excepts to finding of fact 27 that Gulf Coasts' application satisfies the geographic access standard in Rule 10-5.039(2)(c)3.

The criteria for geographic accessibility found in Rule 10-5.039(2)(c)3 requires that an applicant's "target population" be within 2 hours travel time of the proposed facility. For purposes of the accessibility requirement, the "target population" is the population in the applicant's proposed service area, which may include part or all of a district. Gulf Coast proposed a seven county service area which includes, Bay, Holmes, Washington, Jackson, Calhoun, Gulf and Franklin counties. Competent, substantial evidence supports the Hearing Officer's finding that these counties are within two hours driving time under average traffic conditions from the proposed Gulf Coast facility. The exception is denied.

Capital excepts to finding of fact 41 through 45 and to the conclusion that

90 percent of the district population must be within two hours of an inpatient CMR facility. Capital contends that the two hour drive time access standard is not required by Rule 10-5.039. That rule has been consistently interpreted to require a two hour drive time standard. Palm Beach-Martin County Medical Center vs. Department of Health and Rehabilitative Services, 8 FALR 4350 (June 23, 1986). The challenged findings of fact are supported by competent, substantial evidence and the Rule. The exceptions are denied.

Capital takes exception to finding of fact 26 again based on its disagreement with the agency's interpretation of a rule. Capital asserts that Rule 10-5.039(2)(a)2 required a new facility to project 65 percent occupancy in its first year and 85 percent occupancy in its second and subsequent years. The agency does not interpret the rule to require 85 percent occupancy in the second year of operation. The reference to the 85 percent occupancy standard in subsection (2)(a)2 is a mere description of one of the factors used in the numeric need methodology. The exception is denied.

In its fifth exception, Capital contends that finding of fact 30 is not supported by competent, substantial evidence because three of the five preferences in the state health plan which the Hearing Officer found to be inapplicable were not met by Gulf Coast's application. Capital relies on testimony by Elizabeth Dudek wherein she testified that Gulf Coast had not met three of the preferences in the State Health Plan.

The three preferences at issue are: (a) that preference be given to the applicant proposing to convert excess acute care beds in the district; (b) that preference be given to teaching hospitals; and (c) that preference be given to disproportionate share providers. Gulf Coast does not meet the first preference because it is not an existing hospital and; therefore, does not have any acute care beds to convert. As to the second and third preferences, Gulf Coast is not a teaching hospital or a disproportionate provider because it is not a hospital. Whether Gulf Coast has not met these preferences or they simply do not apply is a matter of semantics. The exception is denied.

Capital takes exception to the conclusion in finding of fact 49 that errors contained in Gulf Coast's schematics are not ground for denial of Gulf Coast's application. Capital asserts that Gulf Coast did not prove it schematics design to be reasonable because the Hearing Officer found errors and inconsistencies in the schematics. The reasonableness of schematics is not measured by the errors and inconsistencies in the specific floor plan. Instead, the schematics are evaluated on the following criteria: (1) whether the physical plant generally meets what is described in the application as being the project; (b) whether the spaces are sufficient to allow for the proposed program; (c) whether the applicant has considered life safety issues in their design proposal; and (d) whether the costs are reasonable for the proposal and the overall financial

feasibility of the proposal. The total square footage in the schematics can be altered during the construction phase and the project can still be licensed under the CON with a modification, provided the original scope and intent of the project remain unchanged. A reconfiguration of the spaces within the total square footage proposed is allowable and often occurs. I concur with the Hearing Officer. The exception is denied.

In exceptions 7 through 10, Capital excepts in whole or in part to findings of fact 52, 58, 61, and 64. The findings are supported by competent, substantial evidence; therefore, the exceptions are denied.

Capital excepts to the Hearing Officer's legal conclusion that Gulf Coast submitted a valid letter of intent. I concur with the Hearing Officer. The exception is denied. See Martin Memorial Hospital vs. Department of Health and Rehabilitative Services, 584 So2d 39 (Fla. 4th DCA 1991).

Finally, Gulf Coasts excepts to the Hearing Officer's conclusion that a balanced consideration of the review criteria justifies approval despite lack of numeric need. I concur with the Hearing Officer that the hardship of geographic inaccessibility for residents of the Panama City area outweighs the lack of numeric need. The exception is denied.

FINDINGS OF FACT

The department hereby adopts and incorporates by reference the findings of fact set forth ink the Recommended Order.

CONCLUSIONS OF LAW

The department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the ruling on the exceptions filed by the agency.

Based upon the foregoing, it is

ADJUDGED, that the application of Gulf Coast Rehabilitative Services Limited for certificate need 6573 be APPROVED.

DONE and ORDERED this 11th day of December, 1992, in Tallahassee, Florida.

Douglas M. Cook, Director Agency for Health Care

Administration

ENDNOTE

1/ The statutory citations of the Health Facility and Services Development Act, Section 381.701 through 381.715, were renumbered by Section 15, Chapter 92-33, Laws of Florida.

COPIES FURNISHED:

Michael J. Glazer, Esquire Stephen C. Emmanuel, Esquire AUSLEY, McMULLEN, McGEHEE CAROTHERS & PROCTOR

227 South Calhoun Street Post Office Box 391 Tallahassee, FL 32302

Lesley Mendelson, Esquire Department of Health and Rehabilitative Services 2727 Mahan Drive, Suite 103 Fort Knox Executive Center Tallahassee, FL 32308

Cynthia Tunnicliff, Esquire Douglas Hall, Esquire CARLTON, FIELDS, WARD EMMANUEL, SMITH & CUTLER

Post Office Drawer 190 Tallahassee, FL 32302

Eleanor M. Hunter Hearing Officer

DOAH, The DeSoto Building 1230 Apalachee Parkway

Tallahassee, FL 32399-1550 Wayne McDaniel (AHCA) Wendy Thomas

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above named people by U.S. Mail this 14th day of December, 1992.

R. S. Power, Agency Clerk Agency for Health Care Administration

325 John Knox Road Suite 301, The Atrium Tallahassee, FL 32303

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A 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 FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS

SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 91-005722CON

Orders for Case No: 91-005722CON