STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RAINBOW COMMUNITY HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 83-013

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

and )

)

NME HOSPITALS, INC., d/b/a ) SEVEN RIVERS COMMUNITY HOSPITAL, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on August 23-24, 1983, at Dunnellon, Florida.

APPEARANCES

For Petitioner: F. Philip Blank, Esquire and

Robert Weiss, Esquire

241 East Virginia Street Tallahassee, Florida 32301

For Respondent: Jay Adams, Esquire

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

For Intervenor: C. Gary Williams, Esquire

Post Office Box 391 Tallahassee, Florida 32301

By Petition filed December 22, 1982, Rainbow Community Hospital, Inc. (Rainbow or Petitioner), by and through its attorney, requests an administrative hearing to contest the Department of Health and Rehabilitative Services denial of its application for a certificate of need to construct a 64-bed osteopathic hospital in Dunnellon, Florida. As grounds therefor it is alleged that Petitioner's application is consistent with the criteria outlined in Sections

381.493 through 381.499, Florida Statutes.

At the hearing Petitioner called 11 witnesses, Intervenor called seven witnesses, Respondent called one witness, and 15 exhibits were offered into

evidence. Objection to Exhibit 4 was sustained and the other exhibits were admitted, some, however, for limited purposes.

The parties' proposed findings of fact, to the extent they are incorporated herein, are adopted; otherwise, they are rejected as unsupported by the evidence, unnecessary to the resolution of the issues, or a mere recitation of the testimony presented at the hearing.

FINDINGS OF FACT

1. Petitioner is a nonprofit corporation presently owned by three osteopathic physicians who propose to construct a 64-bed osteopathic hospital in Dunnellon, Florida, at a cost of $12,500,000. The hospital, as proposed, would be a teaching hospital getting its rotating interns and externs for short periods from Suncoast Hospital, an osteopathic teaching hospital at Largo, Florida. The number of students at the Southeast College of Osteopathy in the Miami area is increasing each year and the expectation is that by 1983 a total of 120 students will be enrolled per class. There are presently five osteopathic teaching hospitals in Florida and additional teaching facilities will be required to accommodate the students and graduates of the Southeast College of Osteopathy. Although Petitioner's stated intent is to become a teaching hospital, before this can become a reality it is necessary for Petitioner to have qualified people heading up all of its departments and receive approval of the American Osteopathic Association.

   
   

2. Financing of the proposed hospital will be by tax exempt revenue bonds issued by the Marion County Industrial Development Authority (Exhibit 1). Alternatively, conventional financing is under consideration (Exhibits 2 and 7).

   
   

3. The site for the proposed hospital has been selected but not secured. Negotiations for this site are delayed pending the outcome of these proceedings. No evidence regarding plans or construction costs was presented other than general testimony that construction costs are in line with the proposed expenditures.

   
   

4. Once constructed, the hospital would be managed by Osteopathic Hospitals of America, Inc., a professional management corporation. The proposed fee for such services, excluding the salary of the administrator and comptroller, is $225,000 per year. Pro forma revenue and expense data presented show the hospital to be financially feasible if the patient mix and population projected are attained. However, the expenses listed did not include the management fee or costs of administrator and comptroller. The costs of free emergency room service for patients 65 and over for the first six months, which is proposed by Petitioner, are not included in this pro forma data and the percentage of Medicaid patients is different than that experienced by the other five hospitals in this service area. All of these factors would lower the estimated profits of Petitioner.

   
   

5. Dunnellon is in District III, which includes some 16 counties in Northwest Central Florida. Using the methodology prescribed by Rule 5- 10.11(23), Florida Administrative Code, and projecting the population through 1988 (five years planning horizon), there is a need for 24 additional beds in District III.

   
   

6. Dunnellon is located in the southwest part of Marion County near the county line. The other hospitals in Marion County, which was formerly designated a subdistrict, are Munroe Regional Medical Center and Marion

   Community Hospital, both of which are located in Ocala, some 23 miles from Dunnellon. However, this is a rural area and driving time from Dunnellon to either of these hospitals in Ocala is approximately 30 minutes.

   
   

7. Rainbow proposes to serve the population living within 30 minutes driving time of Dunnellon. The accessibility standard commonly applied by HRS for rural areas is that 90 percent of the population should be within 45 minutes of a hospital. In addition to Marion Community and Munroe Regional in Ocala, Citizens Memorial Hospital in Inverness, some 17 miles distant; Seven Rivers Community Hospital near Crystal River, some 13.5 miles distant; and Memorial Hospital in Williston, some 23 miles distant, are all serving patients in the service area proposed by Rainbow and are within 45 minutes travel time from Dunnellon. These hospitals encircle the location proposed for Rainbow. In addition, Oakhill Community Hospital located near Spring Hill has been approved as a 96-bed hospital and will be opened in 1984. This new hospital will also obtain patients from Rainbow's proposed service area. Munroe Regional hospital has been issued a certificate of need for 78 additional medical/surgical beds which will come on line in the near future.

   
   

8. There are no osteopathic hospitals in District III. Residents of this area who desire treatment at an osteopathic hospital generally go to the Tampa Bay area. One potential user of Rainbow who lives in Ocala, presently uses an osteopathic hospital in Largo when she or her family needs hospitalization. She is a member of Jehovah Witnesses, and as such is opposed to blood transfusions. Allopathic physicians generally will not guarantee no blood transfusions if they are the admitting physician for surgical procedures. There are more than 200 families who are members of Jehovah Witnesses in the proposed service area.

   This witness acknowledged, however, that this is a decision of the doctor and not of the hospital.

   
   

9. In the proposed service area there are 11 osteopathic physicians, five of whom specialize in emergency medicine and practice in Ocala, one is a cardiologist in Lake County, and five are in family practice, with one in Citrus County and two each in Lake and Sumter Counties (Exhibits 8 and 9). Of those practicing in the proposed service area who testified they would practice at Rainbow if placed in operation, two are admitted to the staff at Seven Rivers Community Hospital and one is also on the staff at Munroe Regional Medical Center. No osteopathic physician testified that he was treated differently than an allopathic physician in being admitted to the staff of any hospital serving the proposed service area. All of these hospitals have open admissions and any physician, either allopathic or osteopathic, who meets the requirements for staff privileges is admitted.

   
   

10. Numerous osteopathic physicians testified that they would consider moving their practice to Dunnellon if Rainbow is approved. Eighty-seven percent of osteopathic physicians are in family practice. None of those currently practicing in the proposed service area who testified in these proceedings is unable to take additional patients. Some could double their patient load without being overworked. In short, there are presently not enough patients in the proposed service area who desire osteopathic treatment to justify immigration of additional osteopathic physicians which an osteopathic hospital is presumed to attract.

    
    

11. Williston Memorial Hospital is a 40-bed nonprofit hospital. In 1982 it obtained nearly 20 percent of its patients from Dunnellon. Losing these patients would create serious financial problems for this hospital whose occupancy rate in 1982 was 60 percent.

12. Seven Rivers Community Hospital is a 75-bed hospital, of which 67 are acute care and eight are ICU-CCU, located 13.5 miles from the proposed Rainbow Hospital. Its occupancy rate in 1982 was 70 percent. To date the occupancy rate in 1983 has been 81.3 percent. Many of Seven Rivers employees live in the Dunnellon area. Some of these employees would quit to work at Rainbow if approved. Seven Rivers takes Medicaid patients only on an emergency basis and transfers them to a nonprofit hospital as soon as possible. Accordingly, its protest to the competition Rainbow would provide is given less weight despite the obvious loss of patients that would result if Rainbow is opened.

    
    

13. In 1982 Citrus Memorial Hospital in Inverness had an occupancy rate of

    68 percent. Opening of Rainbow would take some patients that would otherwise go to Citrus.

    
    

14. Oakhill Community Hospital near Spring Hill has been authorized as a 96-bed hospital which will open in 1984. The opening of Oakhill will take some patients that would otherwise go to Seven Rivers Community Hospital from the service area proposed to be served by Rainbow.

    
    

15. None of the hospitals serving the area proposed to be served by Rainbow had an occupancy rate as high as 80 percent in 1982 and only Munroe Regional Medical Center in Ocala approached 80 percent occupancy.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

17. This hearing proceeded as a de novo hearing with the application reviewed in accordance with Sections 381.494(2) and 381.494(6), Florida Statutes. Subparagraph (2) is applicable only to osteopathic facilities and provides:

    
    

    When an application is made for a certificate of need to construct or to expand an osteopathic facility, the

    need for such facility shall be determined

    on the basis of the need for and availability of osteopathic services and facilities in

    the community. (Emphasis added.)

    
    

18. Only one potential patient testified to a need for osteopathic facilities in the proposed service area. Since there are no osteopathic facilities in District III, the availability of such facilities is not existent and if need is shown for the acute care beds requested the application should be granted.

    
    

19. Numerous osteopathic physicians testified that they would utilize the facilities proposed if the application is granted. The one witness who testified she and her family would use the proposed facilities presently goes outside the service area to another osteopathic facility for treatment only because the allopathic physicians would not perform surgery on this witness or her family without permission to give blood transfusions to the patient if deemed necessary. This witness acknowledged the decision to operate or not without the availability of a blood transfusion was the physician's decision and not the hospital's. No explanation for her not using one of the osteopathic

    physicians in the service area was given. From the evidence submitted, no need for osteopathic facilities was shown.

    
    

20. Need for osteopathic facilities are subjected to the same criteria as is the need for other health facilities. Section 381.494(6)(c), Florida Statutes, provides applications for certificate of need determinations for health care facilities shall be reviewed in context with the following criteria.

    
    

    1. The need for the health care facilities and services being proposed in relation to the

       applicable health systems plan, annual implemen- tation plan, and state health plan adopted pur- suant to Title XV of the Public Health Service Act, except in emergency circumstances which impose a threat to the public health.

       
       

21. Need for acute care beds is determined in accordance with Rule 10- 5.11(23), Florida Administrative Code. Using that bed methodology a need for 24 acute care beds in District III is projected for 1988. The application far exceeds this number and, as noted above, no need for osteopathic beds was shown.

    
    

    2. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, adequacy of like and existing health care services and hospices in the applicant's health service area.

    
    

22. There are currently five hospitals which are accessible to the population living in the service area proposed by Petitioner. These hospitals are not being utilized to the optimum at present, provide similar type care to that proposed by Petitioner, and are adequate for the proposed service area.

    
    

    3. The availability and adequacy of other health care facilities and services and hos- pices in the applicant's health service area, such as outpatient care and ambulatory or home care services, which may serve as alter- natives for the health care facilities and services to be provided by the applicant.

    
    

23. No evidence was presented regarding the availability of other health care facilities other than the hospitals above-noted which are adequate for the proposed service area.

    
    

    1. Probable economies and improvements

       in service that may be derived from operation of joint, cooperative, or shared health care resources.

       
       

       No evidence of such economics was presented.

       
       

    2. The need in the applicant's health service area for special equipment and ser-

    vices which are not reasonably and economically accessible in adjoining areas.

24. The only special equipment and services proposed by Petitioner is osteopathic manipulation and equipment used in conjunction therewith. No evidence was presented that the physical therapy available in the service area is not adequate.

    
    

    6. The need for research and educational facilities, including, but not limited to, institutional training programs for doctors of osteopathy and medicine at the student, internship, and residency training levels.

    
    

25. There will be a need for additional training facilities for the graduates of Southeast College of Osteopathy when the first class graduates this year and for subsequent graduates. Obviously, Petitioner could not perform this function sooner than 1987 if the application is approved because of the construction and outfitting period before the hospital can be opened and the time required to obtain the necessary qualified staff and receive approval of the American Osteopathic Association. Furthermore, there is no assurance Petitioner would obtain the necessary certification or even choose to do so after the certificate of need was granted.

    
    

    7. The availability of resources, includ-

    ing health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operations;

    the effects the project will have on clinical needs of health professional training programs in the service area; the extent to which the services will be accessible to schools for health professions in the service area for training purposes if such facilities are avail- able in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the pro- posed services will be accessible to all residents of the service area.

    
    

26. Opening of the proposed facility would have an adverse impact on Seven Rivers Community Hospital in regard to staffing personnel that would have to be replaced if they transferred to the proposed facility. Otherwise, no major obstacles to providing health manpower or management personnel was presented. There are no osteopathic hospitals in District III, so there are no osteopathic training facilities in the service area. Training in rural medicine could be provided at the proposed facility. Much of such training is conducted in offices and clinics in rural areas. There is no such training available in the proposed service area. While the proposed facilities would be available to all residents of the proposed service area, the need for these facilities was not demonstrated.

    
    

    8. The immediate and long-term financial feasibility of the proposal.

    
    

27. The pro forma statement submitted by Petitioner would indicate the project will be financially feasible both immediately and long-term. However, this pro forma statement omitted significant cost factors such as management fees and salaries, and provided for a patient mix at variance with that

    experienced by other hospitals in the service area. These factors cast serious doubts as to the immediate financial feasibility of the application.

    
    

    9. The special needs and circumstances of health maintenance organizations.

    
    

28. This is not an application for a health maintenance organization so this provision is inapplicable.

    
    

    1. The needs and circumstances of those entities which provide a substantial portion

       of the services or resources, or both, to indi- viduals not residing in the health service

       area in which the entities are located are

       in adjacent health service areas. Such entities may include medical and other health professions, schools, multidisciplinary clinics, and specialty services such as open heart surgery, radiation therapy, and renal transplantations.

       
       

       This section is not applicable.

       
       

    2. The probable impact of the proposed project on the cost of providing health ser-

    vices proposed by the applicant, upon considera- tion of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improve- ments or innovations in the financing and delivery of health services which foster com- petition and service to promote quality assurance and cost-effectiveness.

    
    

29. The probable impact of the proposed project on the cost of providing health services would be to increase the cost of such services in the proposed area due to the lowering of the occupancy rates of the other hospitals in the proposed service area.

    
    

    12. The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction.

    
    

30. No evidence was submitted to indicate the cost of the proposed facility other than the estimated cost of $12,500,000 for building and outfitting the facility. This cost is in line with costs for construction in the proposed service area.

From the foregoing it is concluded that Petitioner has failed to prove, by a preponderance of the evidence, that a need for a 64-bed osteopathic hospital exists in Dunnellon, Florida, or that a need for more than 24 additional acute care beds will exist in District III before 1988. It is therefore

RECOMMENDED that the application of Rainbow Community Hospital, Inc., for a certificate of need to construct a 64-bed osteopathic hospital in Dunnellon, Florida, be denied.

ENTERED this 26th day of October, 1983, at Tallahassee, Florida.

K. N. AYERS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 26th day of October, 1983.

COPIES FURNISHED:

F. Philip Blank, Esquire and

Robert Weiss, Esquire

241 East Virginia Street Tallahassee, Florida 32301

Jay Adams, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Building 1, Suite 406

Tallahassee, Florida 32301

C. Gary Williams, Esquire Post Office Box 391 Tallahassee, Florida 32301

David H. Pingree, Secretary Department of Health and Rehabilitative Services 1321 Winewood Boulevard Tallahassee, Florida

Docket for Case No: 83-000013CON

Orders for Case No: 83-000013CON