STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OSCEOLA REGIONAL HOSPITAL, INC., d/b/a OSCEOLA REGIONAL MEDICAL CENTER,

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent.

/

Case Nos. 13-0163CON

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its designated Administrative Law Judge, R. Bruce McKibben, held the final hearing in the above-styled case on August 28-29, and September 9-13, 2013, in Tallahassee, Florida.

APPEARANCES

For Petitioner Osceola Regional Hospital, Inc., d/b/a Osceola Regional Medical Center:

Richard M. Ellis, Esquire Rutledge, Ecenia and Purnell, P.A.

119 South Monroe Street, Suite 202 Tallahassee, Florida 32301

For Respondent Agency for Healthcare Administration: Richard J. Saliba, Esquire

Lorraine Novak, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUES

This proceeding initially involved certificate of need (CON) application number 10168 filed by Rockledge HMA, LLC, d/b/a Wuesthoff Medical Center -- Rockledge (Wuesthoff), wherein Wuesthoff sought to add a 14-bed Comprehensive Medical Rehabilitation (CMR) unit to its existing acute care hospital in Brevard County (District 7); and CON number 10169 filed by Osceola Regional Hospital, d/b/a Osceola Regional Medical Center (Osceola) wherein Osceola sought to add a 28-bed CMR unit to its existing acute care hospital in Osceola County (District 7). The CON Applications submitted by Wuesthoff and Osceola were comparatively reviewed with the application of Nemours Children’s Hospital (CON 10167) wherein Nemours sought to establish a new inpatient CMR unit in District 7.

On December 7, 2012, the Agency for Health Care Administration (“AHCA”) preliminarily approved the CON application submitted by Nemours and denied all other co-batched applications. Each of the denied applicants filed a Petition for Formal Administrative Hearing to contest the denial of its application. The matters were consolidated into a single proceeding at DOAH. The denied applicants did not challenge the initial approval by AHCA of Nemours’ application, allowing the approval to stand without further proceedings. Wuesthoff and Osceola’s administrative proceedings were consolidated into a

single case. At the final hearing, Wuesthoff and Osceola presented evidence and testimony to support the approval of their respective CON applications. An intervenor, HealthSouth of Sea Pines Limited Partnership, d/b/a HealthSouth of Sea Pines Rehabilitation Hospital (HealthSouth), presented evidence in opposition to the Wuesthoff CON application. HealthSouth did not oppose Osceola’s application. Subsequent to the final hearing, Wuesthoff filed a notice of voluntary dismissal of its petition for formal administrative hearing. The voluntary dismissal rendered HealthSouth’s intervention moot. Wuesthoff’s proceeding was then severed from this previously consolidated matter.

The issue remaining in this matter is whether the CON application filed by Osceola in AHCA District 7 satisfies, on balance, the applicable statutory and rule review criteria sufficiently to warrant approval and, if so, whether the application should be approved.

PRELIMINARY STATEMENT

On December 11, 2012, AHCA published its decisions on batched CON applications for hospitals seeking comprehensive medical rehabilitation services in the September 2012 batching cycle. Notification was published in the Florida Administrative Register, Volume 38, Number 88. Osceola’s CON application was denied by AHCA. Osceola timely filed a petition for formal administrative hearing to contest the decision.

At the final hearing, Osceola called two witnesses:

Glenn Romig, chief financial officer; and Eugene Nelson, health care consultant. The testimony of Dr. Muhammad Shaukat,

Dr. Jauvid Ayadi, and Stephanie Wells was admitted via deposition transcripts. Osceola’s Exhibits 1-7, 8 (pages 6-7 and 36-37),

10, 12, 14, and 15 were admitted into evidence. AHCA called one witness: Jeff Gregg, director of the Florida Center for Health Information & Policy Analysis. AHCA’s Exhibit 1 was admitted into evidence.

Upon completion of the final hearing, the parties advised that a transcript of the proceeding would be ordered. The parties, by rule, have ten days from the date the transcript is filed at DOAH to submit Proposed Recommended Orders (PROs).

However, the parties requested until November 27, 2013, to file their PROs; this request was granted. The Transcript was filed at DOAH on September 27, 2013. Each party timely submitted a PRO and both were considered in the preparation of this Recommended Order.

FINDINGS OF FACT

Stipulated Facts (As set forth in Prehearing Stipulation)

1. On July 20, 2012, AHCA published a fixed need pool of zero for CMR beds in District 7.

2. Osceola timely submitted a Letter of Intent for its CON proposal.

   
   

3. Osceola timely submitted its initial CON application and Omissions Response.

4. AHCA reviewed the [co-batched] applications and issued a State Agency Action Report (SAAR) preliminarily approving the CON application filed by Nemours Children’s Hospital and preliminarily denying the application filed by Osceola.

5. Osceola filed a Petition for Formal Administrative Hearing to challenge the denial of its application. The parties stipulated to the final approval of Nemours Children’s Hospital’s application which was severed from this case for final approval.

6. Osceola is a general acute care hospital located in Osceola County, Florida, AHCA Health Planning District 7.

7. Osceola has a history of providing health care services to Medicaid patients and the medically indigent, and has proposed the amounts of Medicaid and indigent care as stated in its application.

8. AHCA stipulates that Osceola’s proposal meets the statutory review criteria set forth in section 408.035(1)(c), (d), (f), (h), and (i), Florida Statutes.

   The Program at Issue

   
   

9. AHCA is the state agency responsible for, inter alia, managing the certificate of need program whereby health care providers may seek approval for certain regulated health care services. One such health care service is comprehensive medical

   
   

   rehabilitation (CMR), a level of comprehensive in-patient rehabilitation for persons with certain designated diagnoses and treatments. In furtherance of its duties, AHCA develops and publishes a need calculation for new CMR beds in each of the 11 service districts around the State twice a year. Interested applicants for new CMR beds may apply by filing a CON application in response to the published need. In the event there is no need found by AHCA, an applicant may seek approval for new CMR beds by way of “not normal” circumstances.

10. AHCA has seen an unusually large number of applications for CMR beds in the recent past which allege special circumstances or a not normal situation. This fact has greatly concerned the regulators as they wonder whether citizens are having difficulty accessing services they need. The Agency has not found any evidence to justify such a concern.

11. As set forth in Florida Administrative Code Rule 59C- 1.002(41), “Tertiary health service” means:

    1. health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost effectiveness of such service. Examples of such service include, but are not limited to, organ transplantation, specialty burn units, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that

       
       

       the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. . . .

       
       

12. CMR beds are, by rule, deemed a tertiary health service. As such, CMR beds are regulated by AHCA so that the service remains “limited to, and concentrated in, a limited number of hospitals . . . .” Id. The reason for establishing services as tertiary is to focus more attention, money, staff and resources to that particular service so that the service retains a higher quality.

13. Persons who need CMR services are generally patients who are discharged from an acute care hospital after treatment for a specified ailment or event. In order to qualify for placement in a CMR bed, a patient must require substantial rehabilitation. At least 60 percent of all patients in a CMR unit must have a primary diagnosis within one of 13 medical conditions, often referred to as CMS-13 categories, established by the Center for Medicare and Medicaid Services. Those conditions include active polyarticular rheumatoid arthritis, amputation, brain surgery, burns, congenital deformity, fracture of femur, hip or knee joint disease, spinal cord injury, stroke, and systematic vasculidities with joint inflammation. Patients with those conditions very often need extensive rehabilitation before resuming normal activities of daily living.

    
    

14. Osceola argues that inasmuch as some data show that CMR services are used more locally than regionally, CMR service is not actually a tertiary service. However, absent a challenge to the rule identifying CMR as a tertiary service, Osceola’s arguments are not compelling. CMR services may be less “tertiary” than some other services, but they are still by rule a tertiary service for regulatory purposes.

15. AHCA health planning District 7 comprises Brevard County, Orange County, Osceola County, and Seminole County. There are four existing and two approved providers of CMR services in District 7. One of them, HealthSouth, is in Brevard County. Florida Hospital, Orlando Regional Medical Center, and Winter Park Memorial Hospital have CMR beds located in Orange County. The two approved programs, totaling 63 CMR beds at Central Florida Regional Hospital and HealthSouth Seminole, will

    be located in Seminole County. There are no existing or approved CMR beds in Osceola County. There are 67 counties in Florida; only 29 of them have a CMR program. Of the 219 acute care hospitals in Florida, only 36 have a CMR unit.

16. The average annual occupancy of the 173 CMR beds in District 7 for calendar year 2011 was deemed by AHCA to be 62.17 percent. Part of AHCA’s occupancy calculation included a 53.35 percent occupancy rate in Orlando Regional Hospital’s CMR unit. However, only 34 of Orlando Regional’s 53 licensed CMR beds were

    
    

    operational during that period of time. AHCA’s calculation is therefore somewhat skewed. However, with two CMR facilities currently being under-utilized and two new programs having been approved in District 7, AHCA’s determination of no need appears justified.

17. In this proceeding, there was no published need for new CMR beds in District 7 for the September 2012 batching cycle. The bed need calculation by AHCA resulted in a finding of a net need of minus 94 beds, rounded up to zero. AHCA’s occupancy calculation error would not have changed the finding of zero need. Faced with a finding of no need, Osceola attempted to prove a need for its proposed project by way of “not normal” circumstances.

    Osceola

    
    

18. Osceola is a JCAHO-accredited general acute care hospital located in Kissimmee, Osceola County, Florida. It has

    257 licensed beds, consisting of 247 acute care beds and 10 Level II neonatal care beds. Osceola provides comprehensive inpatient and outpatient services, including adult open-heart surgery, interventional cardiology, neurosurgery, and orthopedic surgery. It is accredited as a chest pain center and is certified as a primary stroke center. The hospital is a subsidiary of Hospital Corporation of America (HCA), the second largest provider of inpatient rehabilitation services in the nation. HCA has over

    
    

    1,200 Medicare certified inpatient rehabilitation beds located in over 50 hospitals from Alaska to Florida. There are seven HCA comprehensive inpatient rehabilitation programs in Florida.

19. Osceola proposes to establish a 28-bed CMR unit at its hospital plant in Kissimmee. Osceola would locate its CMR unit in a “multi-purpose patient tower” that is currently under construction. If its application is approved, Osceola would add a fourth floor on the tower to house the CMR unit.

20. Osceola’s geographic service area is primarily Osceola County; its secondary service area includes two zip codes in southern Orange County and one zip code in Polk County. Its patient population is elderly: of the hospital’s 18,000 total annual acute care discharges, approximately 7,200 are patients age 65 and older; of those, roughly 5,200 reside in Osceola County.

21. Osceola sets forth eight bases which it believes justify the approval of its proposed project. Each of those will be discussed in detail below.

22. Number 1 -- Osceola County is the most populous county in Florida without any existing or approved CMR beds. -- That information does not establish a need for CMR beds in Osceola County; it merely establishes a geographical fact. Notwithstanding its geographic location, there are CMR services available in the general service area.

    
    

23. Number 2 -- The population of Osceola’s primary service area is larger than several other Florida counties which already have licensed and approved CMR programs. Of 29 counties in Florida with licensed or approved CMR beds, 10 of those have fewer residents than Osceola’s service area. -- Again, this is a statement of information that in no way establishes need for a new program, in and of itself. It merely establishes that Osceola is located in a highly populated area vis-à-vis other locations in Florida.

24. Number 3 -- There has not been a published need for new CMR beds in several years. CMR providers can add beds by way of the CON exemption process, so it is unlikely a need will arise under the existing formula. CMR service delivery is becoming more localized. -- These facts do not establish a need for additional CMR services in Osceola County. They merely describe some aspects of CMR services. AHCA contends that some CMR services are provided by hospitals to essentially their own patients and no one else. Other CMR providers are not so limited as to their patients.

25. Number 4 -- The CMR CON rule has not been amended since 1995. -- This fact does not establish need for new CMR services in Osceola County.

26. Number 5 -- Osceola believes that data show that CMR units primarily serve their own acute care discharges and other

    
    

    residents of their home county. -- This is another tertiary services argument that, absent a challenge to the existing rule, is irrelevant in this CON proceeding.

27. Number 6 -- There are gaps between the age-adjusted rates of acute care discharges to CMR in District 7 hospitals and the State as a whole. -- Inasmuch as there are no established criteria for “age-adjusted rates of acute care discharges in CMR” facilities, this statement does not establish a need for new CMR beds in Osceola County. Each area of the State may be different, so there could be many reasons for this alleged gap.

28. Number 7 -- There is a difference between the expected and actual discharges to CMR beds from District 7 hospitals and primary service area/secondary service area residents. -- There was no persuasive testimony at final hearing to explain this difference in expected versus actual discharges, nor why such an unexpected difference creates a need for new CMR beds in Osceola County.

29. Number 8 -- The purported shortfall in CMR utilization (as evidenced by the difference between expected versus actual discharges) represents a “suppressed demand that will drive utilization of the 28-bed unit” proposed by Osceola. Thus, concludes Osceola, its proposal will not have a significant adverse impact on any existing provider. That is, Osceola believes its patients who are not currently utilizing CMR

    
    

    services will use the service once it is provided by Osceola.

    
    

    -- Osceola’s contention that it will meet the needs of only its own patient base does not establish a need for new CMR beds in the District.

30. None of the “not normal” allegations made by Osceola in its application establish a condition which would warrant approval of a new CMR program in the Osceola County area of District 7.

31. Osceola demonstrated that provision of rehabilitative services in settings other than CMR beds, e.g., nursing homes, is “lesser in every sense” than what a patient could expect in a CMR setting. In nursing homes, there may be fewer hours of rehabilitative care, rendered by less qualified individuals, using equipment and a physical plant less suited to rehabilitation. That is, care could potentially be better at a CMR unit for Osceola’s patients. These facts, however, fall far short of establishing a need for services; certainly a CMR might provide better services, but the necessary services do exist in the District.

32. Osceola also established facts showing that its patients have to travel further than some other patients in Florida to access comprehensive medical rehabilitation in a CMR unit. Osceola’s physicians expressed frustration that their patients might receive better care in a CMR unit, but none

    
    

    testified that their patients were not now receiving adequate care. Osceola established a strong desire for its own CMR unit and showed that the unit would be financially lucrative. None of those facts is a basis for approving new CMR beds in Osceola County absent a bed need under the existing rule.

33. Osceola also contends that its “not normal” arguments are essentially the same arguments set forth by Central Florida Regional Hospital in CON application No. 10128. That CON application was approved by AHCA, allowing a 13-bed CMR unit at the hospital in Seminole County, which is also part of AHCA District 7. However, the facts surrounding the approval of that CON application are not before the Administrative Law Judge in the present action. Whether or not that application was similar or not is not dispositive of the decision in the present case. As AHCA’s counsel so aptly put it, citing an old Native American adage, “You never step in the same river twice.” Just because the facts in the prior case constituted a not normal situation, the same is not necessarily true in the instant matter.

34. Osceola has the ability to provide quality care and has a record of providing quality care to its patients. Osceola has the resources necessary to accomplish the creation of a CMR unit at its hospital.

    
    

35. The CMR unit proposed by Osceola could be financially feasible in the short term and long term. The cost and methods of construction are reasonable.

36. Osceola has a history of providing services to Medicaid and medically indigent patients and its proposal for provision of services to those groups in the CMR is reasonable. Osceola has previously provided and is expected to continue providing services to Medicare and Medicaid-eligible patients.

37. Despite satisfying many of the review criteria which govern whether an application should be approved, Osceola did not demonstrate the need for a 28-bed CMR unit at its hospital in District 7.

    CONCLUSIONS OF LAW

    
    

38. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. §§ 120.569, 120.57(1), and 408.039(5), Fla. Stat. (Unless specifically stated otherwise herein, all references to Florida Statutes will be to the 2013 codification.)

39. As the applicant, Osceola has the burden of proving, by the preponderance of the evidence, entitlement to a CON. Boca Raton Artificial Kidney Ctr., Inc. v. Dep't of Health & Rehab.

    Servs., 475 So. 2d 260 (Fla. 1st DCA 1985); § 120.57(1)(j), Fla.

    
    

    Stat.

    
    

40. The award of a CON to an applicant must be based on a balanced consideration of all applicable and statutory rule criteria. Balsam v. Dep't of Health & Rehab. Servs., 486 So. 2d 1341 (Fla. 1st DCA 1986). "[T]he appropriate weight to be given to each individual criterion is not fixed, but rather, must vary on a case-by-case basis, depending upon the facts of each case." Collier Med. Ctr., Inc. v. Dep't of Health & Rehab. Servs., 462 So. 2d 83, 84 (Fla. 1st DCA 1985).

41. An administrative hearing involving disputed issues of material fact is a de novo proceeding in which the Administrative Law Judge independently evaluates the evidence presented. Fla. Dep't of Transp. v. J.W.C. Co., 396 So. 2d 778, 787 (Fla. 1st DCA 1981); § 120.57(1), Fla. Stat. The Agency's preliminary decisions on CON applications, including its findings in the SAAR, are not entitled to a presumption of correctness. Id.

42. Pursuant to the Agency's comprehensive medical rehabilitation rule need methodology, the Agency determined that there is no need for a new CMR program in District 7 for the applicable planning horizon. The need calculation was actually for a negative 94 beds, rounded up to zero.

43. The statutory review criteria are set forth in subsections 408.035(1)(a) through (j), Florida Statutes. As shown by the Findings of Fact herein, Osceola generally satisfies the criteria and could be approved if there was a numeric need

    
    

    under the fixed need pool or if there was a showing of special circumstances warranting a new CMR program in District 7.

44. There being no numeric need for a new CMR program in this case, Osceola must establish the existence of special circumstances or a “not normal” situation.

45. Regarding the statutory review criteria in subsections 408.035(1)(a) through (j), Florida Administrative Code Rule 59C- 1.039(4)(f) states:

    (f) Other Factors to be Considered in the Review of Certificate of Need Applications for Comprehensive Medical Rehabilitation Inpatient Services.

    
    

    1. Applicants shall provide evidence in their applications that their proposal is consistent with the needs of the community and other criteria contained in:

       
       

       1. Local Health Council District Health Plans, including the Certificate of Need Allocation Factors Reports; and

          
          

       2. the State Health Plan.

          
          

    2. Applications from general hospitals for new or expanded comprehensive medical rehabilitation inpatient beds shall not normally be approved unless the applicant converts a number of acute care beds, as defined in Rule 59C-1.038, F.A.C., excluding specialty beds, which is equal to the number of comprehensive medical rehabilitation inpatient beds, unless the applicant can reasonably project an annual occupancy rate of 75 percent for the applicable planning horizon, based on historical utilization patterns, for all acute care beds, excluding specialty beds. If conversion of the number of acute care beds which equals the number of

    
    

    proposed comprehensive medical rehabilitation inpatient beds would result in an annual acute care occupancy exceeding 75 percent for the applicable planning horizon, the applicant shall only be required to convert the number of beds necessary to achieve a projected annual 75 percent acute care occupancy for the applicable planning horizon, excluding specialty beds.

    
    

46. The publication of fixed need is not determinative, and creates a rebuttable presumption as to need. Here, the published need of zero creates a rebuttable presumption of no need. An applicant, however, may present evidence to rebut the presumption and demonstrate special circumstances that warrant approval of a CON in the absence of published need. See Humhosco, Inc. v. Dep't of Health and Rehab. Servs., 476 So. 2d 258, 261 (Fla. 1st DCA 1985)(This was a hospital case wherein the court indicated that a lack of numeric need under the rule formula establishes a rebuttable presumption of no need); Humana, Inc. v. Dep't of Health and Rehab. Servs., 469 So. 2d 889, 891 (Fla. 1st DCA 1985), a hospital case; and Balsam v. Dep't of Health and Rehab.

    Servs., 486 So. 2d 1341 (Fla. 1st DCA 1986) a hospital case.

    
    

47. In the present case, Osceola failed to prove the existence of any special circumstances which would warrant the approval of a new CMR program in Osceola County, District 7.

RECOMMENDATION

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

RECOMMENDED that a final order be entered by the Agency for Health Care Administration denying CON application No. 10169 filed by Osceola Regional Hospital, Inc., d/b/a Osceola Regional Medical Center.

DONE AND ENTERED this 10th day of December, 2013, in Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2013.

COPIES FURNISHED:

Richard M. Ellis, Esquire Stephen A. Ecenia, Esquire

Rutledge, Ecenia and Purnell, P.A.

119 South Monroe Street, Suite 202 Tallahassee, Florida 32302

Richard J. Saliba, Esquire Lorraine Novak, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Stuart Williams, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 13-000163CON

Orders for Case No: 13-000163CON