STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BAPTIST HOSPITAL OF MIAMI, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 76-1771

) OFFICE OF COMMUNITY MEDICAL ) FACILITIES, )

)

Respondent, )

and )

)

MERCY HOSPITAL, )

)

Intervenor, )

and )

) SOUTH MIAMI HOSPITAL FOUNDATION, ) INC., d/b/a SOUTH MIAMI HOSPITAL,)

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, commencing on February 22, 1977, in Miami, Florida, and continuing on April 1, 1977, in Tallahassee, Florida. Pursuant to the stipulation of all parties, the hearing was officially closed on April 26, 1977 -- the date of receipt of the transcript.

APPEARANCES

For Petitioner: Richard R. Paige, Esquire

Paige and Catlin

Alfred I. DuPont Building Miami, Florida 33131

For Respondent: Eric J. Haugdahl, Esquire

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

For Intervenor Sheldon M. Simons, Esquire Mercy Hospital: Professional Building

3661 South Miami Avenue Miami, Florida 33133

For Intervenor Alex Hofrichter, Esquire

South Miami Carey, Dwyer, Cole, Selwood and Bernard Hospital: Post Office Box 450888

Miami, Florida 33145 FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following facts are found:

1. Petitioner Baptist Hospital is an accredited charitable, nonprofit full-service hospital located in the southern portion of Dade County, Florida.

   In the early part of 1974, petitioner was issued a certificate of need to construct and institute a radiation treatment facility. Due to general economic conditions and other priorities for expansion, petitioner did not make sufficient progress on the construction or institution of this project and the certificate of need expired.

   
   

2. In addition to the Veterans Administration Hospital in Miami, four hospitals in Miami presently have radiation therapy services. None of the four institutions are located in South Dade County. Radiation therapy is used primarily to treat cancer patients. Approximately 90 percent of those patients requiring such therapy are treated on an outpatient basis. Availability and accessibility of radiation therapy equipment may affect the cancer patient's physical, emotional and economic well being. Some, approximately 15 percent, may experience physical discomfort in travelling a long distance. The cost for transportation is an additional burden. There is often a delay of up to a week for nonemergency treatment. While such a delay presents no physical harm, it may have an adverse emotional effect upon the patient. Assuming a one-shift, eight hour day, a linear accelerator has a daily treatment capacity of forty, while the daily capacity for a Cobalt 60 is thirty. Testimony at the hearing indicated an optimum utilization of radiation therapy facilities of between 85 and 90 percent.

   
   

3. Its prior certificate of need having expired, petitioner reapplied in the Spring of 1976 for another certificate authorizing the construction of the radiation therapy facility at a cost of approximately $1,300,000.00. Four different financial statements were submitted in support of the proposal. The last statement was submitted to the respondent in August 1976, and contained projected income and expenses for the fiscal years ending September 30, 1978, 1979 and 1989. However, the testimony on behalf of petitioner at the hearing was to the effect that the proposed facility would not be operational until early 1980. It was not clear from the testimony where the funds for the project would be derived from. Petitioner's chief fiscal officer opined that funding would come either from reserves on hand for expansion, donations or possibly refinancing. He testified that earnings from the project would pay off the investment in eleven years. Repayments of principal were not reflected in the enumerated costs listed in petitioner's final financial statement.

   
   

4. Respondent referred petitioner's application to the Health Systems Agency of South Florida, Inc. (HSA) for initial consideration and recommendation. At the same time, the HSA had before it a similar application from the intervenor South Miami Hospital. In an analysis of petitioner's proposal, the HSA Staff pointed out the advantage of furthering geographic decentralization of existing facilities and the reduction of travel time for patients residing in South Dade, Monroe and Collier Counties. As disadvantages the Staff concluded that the community already had sufficient radiation therapy

   capacity to meet needs until 1985, and probably until 1990; that the incidence of cancer will be lower in the South Dade area since the majority of those living in the area are under 45 years of age; and that the program is not expected to become operational under 1978. Also, the Staff noted:

   
   

   "2. By the hospital's own calculations, direct revenues provide only 62 percent of costs in the second year of operation; with increased charges and an increase in patient load, revenue is expected to reach only 86 percent of charges after three years, and this does not include repayment of the principal." (Exhibit 8)

   
   

   This statement relates to petitioner's second financial analysis. Apparently, a third was submitted to the HSA, but the Staff analysis of this one pointed out that it "does not improve the financial feasibility of the proposed project and in fact raises additional questions. . ." (Exhibit 4)

   
   

5. The Review Committee reviewed the proposals of both petitioner and South Miami Hospital. By a vote of 8 to 2, with one abstention, the Committee voted that a new radiation therapy facility was needed in South Dade County and that one of the two proposals should thus be approved. The Committee voted against the proposal of South Miami by a vote of 7 to 2, with two abstentions. On the proposal of Baptist Hospital, the Committee voted 6 for, 5 against and 1 abstention to recommend approval. (Exhibits 4 and 11)

   
   

6. At the outset of the meeting before the Board of Directors of the HSA, the Staff reiterated its opinion that there was no community need for a new facility at this time and that petitioner's proposal was not economically feasible. The Board voted to deny the application of South Miami by a vote of

   25 to 2. By a vote of 19 to 6, with 1 abstention, the Board voted to deny the petitioner's proposal. (Exhibits 4 and 12). The HSA so notified respondent of its adverse recommendation, stating that its decision was based upon: (1) lack of need for additional radiation therapy capacity in Dade County at this time and (2) dissatisfaction with the financial aspects of petitioner's proposal. (Exhibits 3 and 4) It was stated that "the Board decided that excess capacity and cost containment outweigh the slight inconvenience of an additional 15 minutes of travel time." The HSA found the community would have an annual treatment capacity of 88,400, based on 8 hours a day, five days a week. The HSA projected that 71,280 treatments would be required in 1980, thus requiring only

   80.6 percent of available capacity. It was further projected that in 1985, Dade and Monroe County residents would need 77,760 treatments, or 87.9 percent of capacity. (Exhibit 3)

   
   

7. Respondent's medical facilities consultant conducted an independent survey and investigation as to the utilization of radiation therapy facilities in August of 1976. This survey indicated that 57,851 treatments were actually performed in Dade County in 1975. Using actual figures for 1976 and projecting these for 12 months, a total of 65,364 treatments were found for 1976. Respondent accepted the HSA's projected demand of 71,280 treatments by 1980. However, respondent adjusted the capacity of the existing machines down to 80,340, thereby arriving at a utilization rate of 88.7 percent. Projected to 1985, demand would be 77,760 annual treatments and, with capacity unchanged, utilization would be 96.8 percent. Respondent's consultant therefore concluded that there was no need indicated for increased treatment capacity above existing facilities until after 1980. (Exhibit 2)

8. By letter dated August 19, 1976, respondent notified petitioner that its proposed capital expenditure was not favorably considered. As grounds therefore, respondent found that there was ample capacity of existing units to meet the projected treatment need through 1980, with consideration for restudy before 1985. Respondent further found that geographic accessibility to existing facilities was not sufficiently detrimental to warrant another facility which would not be sufficiently utilized to effect cost containment. Finally, respondent noted that petitioner's financial projections, though submitted on three separate occasions, were still questionable. Respondent found that

   
   

   "Your dependence upon other ancillary services for associated revenues in the radiation treatment therapy services indicates inability of the radiation therapy services to be

   self-supporting even within a three-year period." (Exhibit 1)

   
   

9. Testimony before the HSA and the undersigned Hearing Officer indicates that there would be a substantial impact upon the radiation therapy operation at Mercy Hospital if another radiation therapy unit were established. Mercy's facilities are the closest facilities to petitioner. Mercy derives over 50 percent of its present outpatient load from South Dade County. If Mercy were to lose this 50 percent, they would be required to increase their rates from the present twenty dollars to thirty-five dollars, and to offset a revenue reduction of approximately a hundred thousand dollars per year.

   
   

   CONCLUSIONS OF LAW

   
   

10. An applicant for a certificate of need has the burden to clearly illustrate that its capital expenditure proposal is consistent with the federal and state plans, standards and criteria developed pursuant to the Public Health Service Act. 42 U.S.C. 1320a-1; 42 C.F.R. 100.101 et seq; F.S. 381.493-381.497;

    F.A.C. Ch. 101-1. Among the factors against which capital expenditure proposals are to be judged are the availability, accessibility and adequacy of services in the area's existing facilities; the extent of utilization of existing facilities and the likelihood that the proposed facility will be adequately funded. F.S. 381.494(5)(c); F.A.C. Ch. 101-1.03(c).

    
    

11. In this case, both the Board of Directors of the HSA and the respondent determined that geographic considerations did not outweigh the lack of need for additional radiation therapy capacity in Dade County. The respondent found that by the year 1980, the projected need for services would result in a utilization of the area's capacity of only 88.7 percent. The petitioner questioned the figures used by respondent regarding the 1980 projected need on the basis that the actual increase in the number of procedures performed between the years 1975 and 1976 was greater than the projected number between the years 1976 and 1980. Respondent's witness explained this by stating that just as he would not have taken the decrease in the number of actual treatments performed between the years 1974 and 1975 as a sole basis for his projections, he did not take the one year's performance between 1975 and 1976 and project it out infinitum. Also, respondent explained that it relied upon the HSA's figure of projected need for 1980 because the HSA's need figures for 1975 and 1977 fit significantly with that figure projected by respondent for 1976 based upon actual utilization for the first seven months of 1976.

12. Petitioner offered no evidence to illustrate that the 1980 projected need would exceed existing capacity. While one of petitioner's witnesses testified that he would anticipate an increase in treatments of 5 percent per year, such an increase (using actual figures from 1975) would only exceed by about 2,500 the 1980 figure projected by respondent. There was no testimony regarding the feasibility of operating more than one, eight-hour shift per day. It should also be remembered that the capacity as stated by the respondent does not take into account the facility at the Veterans Administration in Miami. It thus appears that respondent's determination that need will not exceed existing capacity before the year 1980 is supported by competent, substantial evidence and was not arbitrary, unreasonable or capricious. While petitioner has illustrated that it would be physically, economically and emotionally desirable for the patient to have a closer facility available, petitioner has not shown that this factor would outweigh the factor of cost containment which would be affected by the underutilization of existing facilities. In addition, there was an unrefuted showing that the installation of radiation therapy facilities at Baptist Hospital would adversely affect Mercy Hospital, resulting in a loss of approximately $100,000.00 per year and thus increased charges to patients.

    
    

13. The undersigned Hearing Officer further concludes that the petitioner has failed to demonstrate the financial feasibility of its proposed project. Petitioner was extremely vague as to how the project would be funded. It submitted four very different financial analyses in support of its application. While its last statement makes projections for the years 1978, 1979,& 1980, testimony at the hearing was to the effect that it would be 1980 before its program would be operational. An applicant for a certificate of need must adequately demonstrate that its capital expenditure proposal is economically feasible and can be accomplished without unreasonable charges for the services rendered. Petitioner has failed in its burden of proof in this respect.

    
    

14. While these issues were not raised at the hearing, it appears from the documentary evidence that petitioner timely submitted its capital expenditure proposal and that respondent timely complied with the procedural notification and review requirements of state and federal law.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited above, it is recommended that the respondent's determination to deny petitioner's application for a certificate of need to institute radiation therapy facilities at its hospital be AFFIRMED.

Respectfully submitted and entered this 9th day of June, 1977, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Art Forehand, Administrator

Office of Community Medical Facilities 1323 Winewood Boulevard

Tallahassee, Florida 32301

Richard R. Paige, Esquire Paige and Catlin

Alfred I. DuPont Building Miami, Florida 33131

Eric J. Haugdahl, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Sheldon M. Simons, Esquire Professional Building

3661 South Miami Avenue Miami, Florida 33133

Alex Hofrichter, Esquire Carey, Dwyer, Cole, Selwood

and Bernard

Post Office Box 450888 Miami, Florida 33145

Docket for Case No: 76-001771

Orders for Case No: 76-001771