STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ST. JOSEPH'S HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 83-1280

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on August 24, 1983, in Tampa, Florida. The issue for determination in this proceeding is whether St. Joseph's Hospital, Inc. is entitled to a Certificate of Need for the licensing of 54 additional medical/surgical beds at its facility in Tampa, Florida.

APPEARANCES

For Petitioner: Ivan Wood, Esquire

Wood, Lucksinger & Epstein

One Houston Center, Suite 1600 Houston, Texas 77010

For Respondent: Steven W. Huss, Esquire

Assistant General Counsel Department of Health and

Rehabilitative Services

1323 Winewood Boulevard, Suite 406

Tallahassee, Florida 32301 INTRODUCTION

In support of its position that St. Joseph's Hospital, Inc. is entitled to a Certificate of Need for the licensing of 54 acute care medical/surgical beds, petitioner presented four witnesses and its Exhibits 1 through 9 and 11 were received into evidence. Testifying on behalf of the petitioner were Sister Marie Celeste Sullivan, the Administrator of St. Joseph's who was accepted as an expert in the field of hospital administration; Barbara Myres-Fernandez, petitioner's Vice President for Planning and Marketing who was accepted as an expert in the area of health planning; Carolyn Ann Munton, petitioner's Vice President for Patient Affairs who was accepted as an expert in the field of nursing and nursing administration; and William C. Tapella, petitioner's Vice president of Fiscal Services who was accepted as an expert in the area of hospital accounting and finance.

Testifying on behalf of the respondent Department of Health and Rehabilitative Services (HRS) was Thomas F. Porter, a Medical Facilities Consultant Supervisor with HRS who was accepted as an expert in the field of health care planning. Respondent's Exhibits 1 through 5 were received into evidence.

Subsequent to the hearing, both parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed findings of fact are not incorporated into this Recommended Order, they are rejected as being either not supported by competent substantial evidence adduced at the hearing, irrelevant or immaterial to the issues in dispute or as constituting conclusions of law as opposed to findings of fact.

FINDINGS OF FACT

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

1. Based upon an agreement between the petitioner and the respondent, and a later addendum, petitioner received Certificate of Need Number 1460 in February of 1981 granting the petitioner the authority to construct 126 additional general medical/surgical beds but to only license and operate 72 of such beds. The instant proceeding involves petitioner's application for a Certificate of Need to license and operate the remaining 54 beds which have been previously constructed under Certificate of Need Number 1460.

   
   

2. St. Joseph's Hospital is a 649-bed full service major referral hospital in Hillsborough County owned and operated by the Franciscan Sisters of Allegheny. Its services include a comprehensive community mental health center, a comprehensive pediatric unit with 88 beds, a radiation therapy center, a 60- bed community cancer center, cardiac catheterization, cardiac surgery and a large and active emergency room. It serves a considerable number of indigent patients and participates in the Medicaid and Medicare programs.

   
   

3. Petitioner is now requesting permission to license the regaining 54 beds which were authorized to be constructed pursuant to Certificate of Need Number 1460. The project involves no additional construction or renovation inasmuch as all 126 beds previously authorized have been completed. No capital expenditure will be required in order to place the 54 beds into operation.

   
   

4. If the Certificate of Need is granted, petitioner intends to create two specialty medical/surgical units: a 32-bed cardiac surgical unit to accommodate patients from the open heart surgical program and a 22-bed medical unit for psychiatric patients requiring medical treatment. There currently are no other beds available in the hospital to convert for use for the psychiatric patient or for the cardiac surgical unit. Petitioner has been operating, on occasion, at occupancy levels in excess of 90 percent. At times, it has been necessary to place non-emergency patients in the emergency room and have them remain there until beds become available. There are sometimes up to 40 patients on the waiting list for elective surgery. Due to the shortage of empty beds, petitioner cannot now admit new members to its medical staff. Steady operation of the hospital at occupancy levels exceeding 90 percent can have an adverse effect upon the efficiency of the nursing staff and the quality of care offered to patients. Because the bulk of projected growth in Hillsborough County is expected to occur in the center and northwestern area of the county, it is anticipated that the pattern of utilization of petitioner's facility will continue.

5. While the licensing of the 54 additional beds involves no capital expenditure on petitioner's part, it is estimated that, if petitioner is not permitted to license these beds, a total yearly loss of over $3.8 million will be experienced. This figure is the sum of lost net revenues from the beds in the amount of $87,339 and lost net ancillary revenues in the amount of $2.36 million, as well as the absorption of $232,750 in yearly depreciation costs and

   $1.14 million in committed indirect costs. Petitioner anticipates a loss per patient day, calculated at 100 percent occupancy, of $16.82 if the licensing of the beds is not approved. This would result in an increase of current patient charges by 9.1 percent in order to maintain petitioner's budgeted profit margin.

   
   

6. Petitioner is located in HRS District VI which, at the time of the hearing, was composed of Hillsborough and Manatee Counties. Some 81 percent of all beds in the District are located in Hillsborough County. As of the time of the hearing, the District had 3,899 licensed acute care beds, with 606 additional beds having been approved but not yet operational. The generally accepted optimum utilization rate for acute care beds is 80 to 85 percent. For District VI, the overall utilization rate is below the optimum level. In Manatee County, utilization of acute care beds is at 78.3 percent. In Hillsborough County, the utilization level is at 77.4 percent, with the major referral hospitals experiencing a higher level of utilization than the smaller community hospitals.

   
   

7. Rule 10-5.11(23), Florida Administrative Code, contains the governing methodology for determining acute care bed needs of the various Districts. Applications for new or additional acute care hospital beds in a District will not normally be approved if approval would cause the number of beds in that District to exceed the number of beds calculated to be needed. Application of the Rule's formula to District VI results in a total acute care bed need of 3,622 projected for the year 1988. Given the 4,505 existing and approved beds in the District, there are 883 excess beds in District VI under the Rule's formula methodology for projecting need. The 1982 Health Systems Plan adopted by the Florida Gulf Health Systems Agency makes no bed need projections for other specialty medical/surgical beds," but shows no need for medical/surgical beds.

   
   

8. Rule 10-5.11(23), Florida Administrative Code, provides that other criteria may result in a demonstration of bed need even when the formula approach illustrates no need for beds. When additional beds are approved pursuant to other criteria, those beds are counted in the inventory of existing and approved beds in the area when applying the bed need formula to review future projects. The formula methodology does account for the inflow and outflow of patients in a specific area. While Rule 10-5.11(23) permits the Local Health Councils to adopt subdistrict bed allocations by type of service, the Council for District VI had not adopted its local health plan as of the date of the hearing in this matter. The Rule itself simply addresses the need for general acute care bed needs in the future.

   
   

   CONCLUSIONS OF LAW

   
   

9. As clearly indicated in the statement of legislative intent which prefaces the Certificate of Need law in Florida, the question of need for additional facilities and services is to be evaluated in terms of the community at large. Section 381.493(2), Florida Statutes. While institution-specific goals and problems are to be considered in evaluating the factors of cost containment and quality of care, it is the community need which must be met and

   provided for in health care planning. The potential impact of additional beds or services on the community must be considered in evaluating the factors of need, cost containment and quality of care. If there is no community need for additional beds in a health service area, and beds are added to a facility, other facilities experiencing less than optimal utilization would lose patients, thereby affecting patient charges and the quality of care to its patients.

   
   

10. Here, there is no doubt that the licensing of the additional 54 beds at St. Joseph's is a project which is financially feasible and which would generate income for St. Joseph's `hospital. It has also been demonstrated that St. Joseph's could utilize additional beds. These factors must now be balanced against the need in the District for additional beds and the impact of adding beds upon the community at large.

    
    

11. Pursuant to the HRS need formula for acute care beds, as found in Rule 10-5.11(23) Florida Administrative Code, there is an 883-bed excess in District VI over the projected bed need for 1988. While the rule provides that other criteria may result in a demonstration of bed need, the only factor demonstrated in this proceeding for the approval of an additional 54 beds was the

    institution-specific need of St. Joseph's Hospital. Standing by itself, this factor is not sufficient to justify the licensing of 54 beds in a community which is already overbedded by 883 beds. It must be assumed that an addition of beds in a community which is already overbedded cannot have a positive effect upon cost containment in the community at large and upon one of the controlling purposes of the Certificate of Need law; to wit: the elimination of unnecessary duplication of health services within the community. The addition of beds at St. Joseph's could very well drain patients away from existing facilities which now operate at less than optimum occupancy levels, resulting in increased charges for acute care beds throughout the entire District.

    
    

12. There are numerous exceptions or criteria which can be demonstrated to illustrate bed need in a community even when the formula methodology for determining need shows an excess of beds. These exceptions include such factors as the need for research and educational facilities in an area, the need for specialty equipment or services and geographic accessibility. Petitioner has simply not demonstrated in this proceeding that any factor other than its institution-specific need and desire would justify the approval of additional licensed acute care hospital beds in the community at this time. It is contended by petitioner that it is unfair to include within the inventory of existing beds those beds permitted under an exception to the formula methodology for determining bed need. This argument fails to recognize that such beds are available to residents of the community and that the mathematical formula does account for patient migration in and out of the community.

    
    

13. In summary, Rule 10-5.11(23), containing the formula methodology for determining bed need, illustrates no need for additional beds in District VI at this time. The Local Health Council has not identified any need in the District for additional acute care beds. Petitioner has failed to demonstrate that there are other criteria or exceptions which show a community need for additional beds or that the addition of beds at St. Joseph's would have a positive impact upon the health service area in terms of cost containment, quality of service or other factors to be considered under the Certificate of Need law.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of St. Joseph's Hospital, Inc. for a Certificate of Need to license 54 acute care medical/surgical beds be DENIED.

Respectfully submitted and entered this 10th day of November, 1983, in Tallahassee, Florida.

DIANE D. TREMOR, 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 10th day of November, 1983.

COPIES FURNISHED:

Ivan Wood, Esquire David Pingree

Wood, Lucksinger & Epstein Secretary

One Houston Center Department of Health and Suite 1600 Rehabilitative Services Houston, Texas 77010 1323 Winewood Boulevard

Tallahassee, Florida 32301

Steven W. Huss, Esquire

1323 Winewood Boulevard, Suite 406

Tallahassee, Florida 32301

Docket for Case No: 83-001280

Orders for Case No: 83-001280