STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOSPITAL CORPORATION OF AMERICA, ) d/b/a GULF COAST PSYCHIATRIC ) PAVILION, )

)

Petitioner, )

)

vs. ) CASE NO. 83-239

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE )

SERVICES, )

)

Respondent. )

) PSYCHIATRIC HOSPITALS OF AMERICA, ) INC., d/b/a CENTRAL PANHANDLE ) PSYCHIATRIC HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 83-538

) STATE OF FLORIDA, DEPARTMENT OF ) HEALTH AND REHABILITATIVE )

SERVICES, )

)

Respondent, )

and )

) HOSPITAL CORPORATION OF AMERICA, ) d/b/a GULF COAST PSYCHIATRIC ) PAVILION, )

)

Intervenor. )

)

RECOMMENDED ORDER

A formal hearing was held in this matter before Marvin E. Chavis, duly designated Hearing Officer of the Division of Administrative Hearings on December 7-9, 1983, in Panama City, Florida, and on December 21, 1983, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Thomas Sheehan, Esquire Hospital Thomas M. Beason, Esquire Corporation of 118 North Gadsden Street America: The Perkins House, Suite 100

Tallahassee, Florida 32301

For Petitioner: William B. Wiley, Esquire Psychiatric Gerald B. Sternstein, Esquire Hospitals of 666 Lewis State Bank Building America, Inc.: Tallahassee, Florida 32301

For Respondent: Theodore E. Mack, Esquire

Office of the General Counsel 1323 Winewood Boulevard

Tallahassee, Florida 32301 ISSUES AND BACKGROUND

This case concerns the issue of whether the two Petitioners as competing Certificate of Need applicants should be granted Certificates of Need to construct and operate psychiatric health care facilities in Panama City, Florida. Psychiatric Hospitals of America, Inc., hereafter referred to as PHA, proposes a 50-bed specialty psychiatric hospital with a 15 bed crisis stabilization bed unit. Hospital Corporation of America, hereafter referred to as HCA, proposes a 60-bed psychiatric pavilion to be operated in conjunction with its existing facility, Gulf Coast Community Hospital. The applications of both Petitioners were originally denied by the Department of Health and Rehabilitative Services in December 1982 and both Petitioners appealed the respective denials. Those appeals were consolidated in this case for a comparative hearing on the merits.

At the formal hearing, the Petitioner, PHA, called as witnesses, Maurie Pressman, M.D., Martha Lindeman, John Mason, M.D., A. Gary Muller, Steven DeRosa, Michael J. Boling, Carl Massara, and F. D. Goldberg. The Petitioner, HCA, called as witnesses, Thomas McClure, Nat Winston, M.D., Rodney Van Pelt, Kent Miller, Ron Schwartz, Edward Johnson, Charles Rogers, and Elbert Garner. The Respondent, Department of Health and Rehabilitative Services, called as its witness, Mr. Thomas Porter. The Department offered and had admitted into evidence two exhibits. PHA offered and had admitted 16 exhibits. HCA offered and had admitted into evidence 18 exhibits. Helen Ingram, County Commissioner for Bay County and member of the District IIA Mental Health Board, appeared as a public witness and Clo Haddaway, a former member of the District IIA Mental Health Board, submitted a written statement which was marked as Hearing Officer Exhibit No. 1.

Subsequent to the final hearing, counsel for the Petitioners and counsel for the Respondent submitted proposed findings of fact and conclusions of law for consideration by the Hearing Officer. To the extent that those proposed findings of fact and conclusions of law are inconsistent with this order, they were rejected as being unsupported by the evidence or as unnecessary to the resolution of this cause.

FINDINGS OF FACT

1. PHA and HCA submitted applications for a Certificate of Need to construct and operate psychiatric care facilities in Panama City, Bay County, Florida. PHA proposes a 50-bed freestanding specialty psychiatric hospital and HCA proposes a 60-bed psychiatric pavilion which will be operated in conjunction with its existing acute care hospital, Gulf Coast Community Hospital.

   
   

2. Upon initial review of the two applications, the Department of Health and Rehabilitative Services (thereafter referred to as HRS) denied both applications based upon no demonstrated need in the district to be served. As a

   result of a statutory change and revised HRS rule on July 1982, the two applications were reconsidered because under the new methodology there was need for a psychiatric facility in Bay County. HRS concluded that PHA was the preferable applicant. This decision was based primarily upon PHA's demonstrated, as well as stated, commitment to provide Baker Act and indigent care at its facility.

   
   

3. HCA contended at the final hearing that PHA's appeal of the initial denial had not been timely filed with HRS. The letter of denial from HRS to PHA was dated December 10, 1982, and the green receipt card from the U.S. Postal Service has a date of delivery of December 15, 1982. The date entry was not made by the recipient, Mr. Dee Goldberg and is in a different color ink than the entry "in person" in the "Date of Delivery" block of the card. The decision to deny the PHA application was published in December 17, 1982, issue of the Florida Administrative Weekly. The request for hearing filed by PHA is dated January 14, 1983, and has an HRS received stamp dated January 17, 1983. Because HRS has no formal procedure for clocking in requests for hearing, it cannot be determined what specific date the request was actually received by HRS. HRS accepted the request for hearing and processed the appeal as timely filed.

   
   

4. In April 1983, HRS adopted Rule 10-5.11(25), (26) and (27), Florida Administrative Code. Those sections establish criteria and standards for short- term and long-term psychiatric and substance abuse inpatient services. Under the methodology established in that rule, there is now demonstrated need for at least 75 short-term psychiatric beds within the subdistrict where PHA and HCA propose to construct a facility. There is also a need for 13 short-term substance abuse beds. There presently exists a short-term psychiatric facility at Bay Memorial Hospital which has 22 beds. Subtracting the 22 beds from the calculated need, there exists a demonstrated need for 53 short-term psychiatric beds. PHA's Proposal for 5 short-term psychiatric beds and HCA's proposal for

   40 short-term psychiatric beds are both within the demonstrated need. PHA proposes 15 substance-abuse beds and HCA proposes 20 substance abuse beds. Both applications exceed the demonstrated need of 13 substance abuse beds.

   
   

5. PHA presently operates four psychiatric hospitals. Two of these hospitals are located in Pennsylvania and the remaining two are Horizon Hospital in Tampa, Florida, and Dodge Hospital in Miami, Florida. Both Florida PHA facilities are private psychiatric hospitals and both receive Baker Act funded patients. Horizon Hospital serves as the Baker Act inpatient facility for District V and is the medical service or program model upon which PHA has based its present application.

   
   

6. HCA owns and operates 389 hospitals with 55,637 beds in 41 states and 5 foreign countries. Its subsidiary, HCA Psychiatric Company, presently supervises 24 psychiatric facilities. HCA owns and operates one freestanding psychiatric hospital, Lakeland Manor, located in Lakeland, Florida.

   
   

7. PHA proposes to construct a facility containing 35 short-term psychiatric beds, 15 short-term substance abuse beds, and a 15 bed crisis stabilization unit which does not require a Certificate of Need. The 35 short- term psychiatric beds will consist of 10 beds dedicated to adolescent care, 20 beds dedicated to adults and psychiatric patients, and 5 intensive beds. The facility will have specialized programs for children and adolescents, substance abusers, and the elderly, as well as general adult programs. The facility will have a locked unit capable of managing violent and dangerous patients.

8. The HCA proposal includes 40 short-term psychiatric beds and 20 substance abuse beds. The 40 short-term beds will consist of 12 beds dedicated to adolescents and 28 beds dedicated to adults and geriatric patients. HCA will have three specialized programs in its facility and will have a locked unit.

   
   

9. PHA projects a construction cost of $50.00 per square foot with a total project costs of $4,180,000. PHA has not identified the specific site where its facility would be constructed but has allocated $250,000 for land costs. A 99 bed psychiatric facility, Dodge Hospital, in Miami is being constructed at a cost per square foot similar to the cost projected for this facility. The total cost per square foot of the PHA facility will be $108.72. The total cost per bed will be $83,600.

   
   

10. HCA projects a construction cost of $69.57 per square foot with a total facility cost of $4,394,451. The HCA facility will be constructed on the campus of Gulf Coast Community Hospital and will be connected by a single connecting corridor. The total cost per square foot of the HCA facility will be

    $126.87. The total cost per bed will be $73,240.85.

    
    

11. By stipulation, all parties agreed that both projects are feasible in the short term and both applicants can secure start-up financing for their projects. It was also stipulated that both applicants will be able to secure personnel to staff their projects.

    
    

12. For the first two years of operation, PHA projects an occupancy rate of 70 percent and 90 percent respectively. The total patient days anticipated are 13,700 in 1985 and 16,425 in 1986. This results in an average daily census of 37.5 and 45 in those two years. In its projections, PHA assumed that it would perform some or all of the Baker Act services now being provided by Bay Memorial Medical Center. PHA projects a charge of $295 per day in the first year increasing to $315 in the second year and expects net patient revenues to be roughly $221.80 per day in the first year and $235.10 the second year. PHA projects total operating expense of $194.19 per patient day in the first year and $203.17 per patient day in the second year.

    
    

13. HCA projects an occupancy rate of 55 percent in 1985 and 70 percent in 1986 with 12,045 and 13,140 total patient days for those two years respectively. This will give an average daily census of 33 and 36 for those two years. These figures are conservative and more realistically could be 60 percent and 75 percent respectively. HCA for the first year of operation projects a charge of

    $250 per patient day increasing approximately 8 percent in the second year to

    $270 per patient day. HCA projects net patient revenues for the first year of

    $235 per day and $250 for the second year. The expected total operating expense for the HCA facility will be $230.48 per patient day in the first year and

    $229.16 per patient day in the second year.

    
    

14. The subdistrict in which these two facilities would be located is a rural area which is economically depressed with a large indigent population. The District II Mental Health Board passed a resolution requesting that the new facility be required to make a commitment to provide care to indigent and Baker Act patients. At present the 22-bed unit operated by Bay Medical Center is the only psychiatric or mental health facility in the six counties in subdistrict

    IIA. 40 percent of the patients utilizing this facility are Baker Act patients. Bay Medical intends to stop providing psychiatric care as soon as another facility is available to provide these services to the entire community including Baker Act patients. This unit had an occupancy rate in 1980/1981 of

    78.8 percent. Bay Medical Center does not have full services to provide to all

    psychiatric patients in the community and with better programming would expect higher occupancy. The Bay Medical Center Unit has no therapeutic programs and does not accept patients below the age of 12.

    
    

15. PHA has made an unconditional commitment of 10 percent of its patient days to Baker Act and indigent cases. PHA has an established track record at its Horizon Hospital facility in providing good quality Baker Act care and in providing psychiatric services to the indigent. At the present time, Medicaid reimbursement is not paid to stand-alone psychiatric hospitals. In addition to Baker Act, PHA's application allows for 8.3 percent bad debts with some indigent care included in this bad debt. PHA intends to accept all emergency patients regardless of ability to pay.

    
    

16. HCA by letter to HRS dated October 13, 1983, stated its willingness to become the Baker Act receiving facility in the Panama City area if a contract can be developed and funds are available as a result of Bay Medical ceasing to provide such service. HCA's original application did not include a commitment to providing Baker Act care. HCA projects a 5 percent bad debt factor which includes some indigent care. HCA also projects that 5 percent of its patient days will be Medicaid. Gulf Coast Community Hospital's Medicaid participation was 2.7 percent in 1980 and 2.5 percent in 1981. The 1983 Medicaid participation for Gulf Coast as of October were approximately 3.4 percent. In 1981 and 1982, Bay Medical Center experienced 6,988 and 6,529 Medicaid patient days respectively. For the same period of time, Gulf Coast Community Hospital experienced 1,208 and 1,316 Medicaid Patient days. Both hospitals serve the Panama City area. The present admission policy at Gulf Coast Community Hospital includes the ability to pay and financial arrangements. The most recent pro formas filed by HCA in October 1983, do not include adjustments for Baker Act participation nor a specific allocation of patient days to indigent care.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this action.

    
    

18. In evaluating the need for additional psychiatric health care facilities in the Panama City are, Rules 10-5.21(25), (26) and (27), Florida Administrative Code, are controlling. There is a demonstrated need under the rule for 53 short-term psychiatric beds and 13 substance-abuse beds. Both applications are well within the need for short-term psychiatric beds. However, the 15 substance-abuse beds sought by PHA and the 20 substance-abuse beds requested by HCA, both exceed the projected need of 13 beds.

    
    

19. HRS, in reviewing the two applications, compared cost of construction, costs per bed, financial capability, operating expenses, staffing, program narratives and project justification. A review of these criteria reveals that both projects are consistent with the criteria contained within Section 381.494(6)(c), Florida Statutes, as well as Rule 10-5.21(25), (26), and (27), Florida Administrative Code. There are advantages and disadvantages to each proposal when comparing the various costs, utilization, and financial projections. These advantages and disadvantages essentially balance each other and render the two applications very close.

    
    

20. The major difference in the two applicants is in the area of care for the indigent and Baker Act patients. One of the criteria contained within Rule 10-5.11(3)(a), Florida Administrative Code provides:

    The need that the population served or to be served has for the health or hospice services proposed to be offered or changed, and the extent to which all residents of the district, and in particular low income persons, racial

    and ethnic minorities, women, handicapped persons, other undeserved groups and the elderly, are likely to have access to those services.

    
    

    Specifically, with regard to short-term psychiatric beds, Rule 10-5.11(25)(e)(3) provides:

    
    

    (25)(e)3. In order for the Department to ensure that short term hospital inpatient psychiatric service needs

    of all segments of the population in a given service area are adequately met, the applicant shall indicate the

    percentage of patient days allocated to:

    1. Indigent clients

    2. Medicaid clients

    3. Baker Act funded clients

    4. Private pay patients

    5. Other

       
       

       It is concluded that PHA is the applicant which will best serve the specific needs of the Panama City area for psychiatric care.

       
       

21. The Panama City area is a rural, economically depressed area with a large indigent population. The local Mental Health Board considers the need for availability of psychiatric care to the entire community to be paramount and has expressly recommended that HRS condition the Certificate of Need that is granted for psychiatric care upon providing care to indigent as well as Baker Act patients. The only psychiatric facility servicing the six county area in Subdistrict IIA intends to cease providing mental health care as soon as another provider is available and they can legally cease to provide such service. That facility is presently the Baker Act facility for the subdistrict. Regardless of whether the existing facility continues to provide mental health care, there will be a very real and significant need for Baker Act and indigent care in this area in the future.

    
    

22. From the beginning of the application process, PHA made a firm and unconditional commitment to provide Baker Act and indigent care. Such a commitment is consistent with PHA's policies and experience at its Horizon Hospital facility in Tampa, Florida. PHA has an established track record of effectively and willingly providing Baker Act services to a Florida community and of accepting indigent patients regardless of their ability to pay. PHA allocated 1,370 patient days or 10 percent of its total projected patient days to indigent/Baker Act care.

    
    

23. HCA has expressed a willingness to become the Baker Act receiving facility if Bay Medical ceases to operate as the Baker Act facility and if a contract can be developed. This commitment was not made in the initial application, but was contained in a letter provided to HRS in October 1983. HCA did allocate 5 percent of its patient days to Medicaid. However, this

    percentage is significantly higher than the historical Medicaid utilization of Gulf Coast Community Hospital where HCA's proposed psychiatric pavilion would be located. For the years 1981 and 1982, Bay Medical Center had 6,988 and 6,529 Medicaid patient days while Gulf Coast Community Hospital experienced 1,208 and 1,316 patient days for the same period. Both hospitals provide service to the Panama City area.

    
    

24. HCA also projected 5 percent of gross revenues as bad debts which would include some indigent care. However, in its most recent projections, none of its 12,045 and 13,140 patient days for the first and second year of operation were allocated to indigent care. Although HCA indicates a willingness and desire to serve the entire community, the evidence did not establish a firm demonstrated commitment to Baker Act and indigent care. The evidence did establish such a commitment from PHA.

    
    

25. In the instant case, the evidence demonstrated a clear need for a new psychiatric health care facility in the Panama City area. The specific bed need is for 75 short-term psychiatric beds and 13 substance abuse beds. Subtracting the existing 22 short-term psychiatric beds at Bay Medical Center, a need for 53 short-term psychiatric beds remains. HRS has concluded after its full review of the two applications that the PHA application for 50 beds should be granted. However, when combining the 35 short-term psychiatric beds with the 13 needed substance abuse beds, PHA's facility would be less than the 50 bed minimum which Rule 10-5.11(25)(d)7 states a separate freestanding psychiatric facility should have. Balancing the need for a facility with a strong commitment to Baker Act and indigent care and the substantial need for short-term psychiatric beds against the impact of licensing 15 substance abuse beds rather than the 13 demonstrated by the HRS methodology, it is concluded that the PHA application for 35 short-term psychiatric beds and 15 substance abuse beds should be granted.

    
    

26. Based upon the evidence relating to PHA's filing of its appeal, HCA moved for a summary disposition of this matter. Under the evidence presented, neither the specific date the notice of denial was received nor the specific date the appeal was received by HRS was established. The appeal was clearly filed within 30 days of the publication of the notice of denial in the Florida Administrative Weekly. HRS accepted the appeal and processed it and considered it timely filed. The evidence failed to establish that the PHA appeal was not timely filed. The motion for summary disposition is therefore denied.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the application of HCA for a Certificate of Need to construct a 60-bed psychiatric pavilion in Bay County, Florida, be DENIED. It is further recommended that the application of PHA for a Certificate of Need to construct a 50-bed freestanding psychiatric hospital be GRANTED.

DONE AND ORDERED this 26th day of June, 1984, in Tallahassee, Florida.

MARVIN E. CHAVIS

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 June, 1984.

COPIES FURNISHED:

Thomas M. Beason, Esq.

MOYLE, JONES & FLANIGAN, P.A.

Suite 100, The Perkins House

118 North Gadsden Street Tallahassee, Florida 32301

William B. Wiley, Esq. MCFARLAIN, BOBO, STERNSTEIN,

WILEY & CASSEDY, P.A.

666 Lewis State Bank Building Tallahassee, Florida 32301

Theodore E. Mack, Esq. Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 83-000239

Orders for Case No: 83-000239