STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FAMILY CENTER HOSPITAL )

OSTEOPATHIC, INC., )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, ) CASE NO. 83-2244

)

Respondent, )

and )

) DOCTORS' OSTEOPATHIC MEDICAL ) CENTER, INC., d/b/a GULF COAST ) HOSPITAL, INC., NAPLES COMMUNITY ) HOSPITAL and LEE MEMORIAL HOSPITAL,)

)

Intervenors. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on January

21 and 22, 1986, in Fort Myers, Florida. The issue for determination in this proceeding is whether the Petitioner is entitled to a Certificate of Need to construct and operate a 100-bed osteopathic acute care hospital in Lee County.

APPEARANCES

For Petitioner: Claude H. Tison, Jr., Esquire

McFarlane, Ferguson, Allison & Kelly

215 Madison Street Post Office Box 1531 Tampa, Florida 33601

For Respondent: R. Sam Power, Esquire

Office of General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Building 1, Room 407

Tallahassee, Florida 32301

For Intervenor, John D. C. Newton, II, Esquire Doctors': Carson & Linn, P.A.

Cambridge Centre

253 East Virginia Street Tallahassee, Florida 32301

For Intervenor, W. David Watkins, Esquire Naples: Oertel & Hoffman, P.A.

Post Office Box 6507 Tallahassee, Florida 32314-6507

For Intervenor, Ivan Wood, Jr., Esquire Lee: Wood, Lucksinger & Epstein

One Houston Center, Suite 1600 Houston, Texas 77010

INTRODUCTION

In support of its application for a Certificate of Need to establish a 100- bed osteopathic acute care hospital in Ft. Myers, petitioner presented the testimony of Stephen Moys, accepted as an expert in the field of architecture, particularly in the area of hospital design; Dareld Ray Morris, an osteopathic physician and petitioner's president; Deborah Simmons Kolb, accepted as an expert in the filed of health care planning; Gregory L. Gresham, accepted as an expert in accounting; and Arnold Melnick, D.O., Dean of the Southeastern College of Osteopathic Medicine. Received into evidence were petitioner's Exhibit 1, the schematic floor plans for petitioner's proposed facility; Exhibit 2, a report concerning the osteopathic bed need in District VIII, and Exhibit 3, consisting of only pages 42, 43, 44 and paragraphs (a)(2) and (f)(4) of page 68 of the Amended Certificate of Need application.

At the conclusion of the petitioner's case-in-chief, intervenor Naples Community Hospital moved for a summary recommended order denying the application, and the respondent HRS and remaining intervenors joined in the motion. After hearing oral argument, the undersigned announced her intent to grant the motion based upon petitioner's failure to prove it met the statutory criteria for approval of its application.

Subsequent to the hearing, all parties were afforded the opportunity to submit proposed findings of fact and proposed conclusions of law. Only the intervenors Doctors' Osteopathic Medical Center, Inc., d/b/a Gulf Coast Hospital, Inc., and Naples Community Hospital, Inc., availed themselves of that opportunity by the filing of a joint proposed recommended order. The proposed findings of fact submitted by these parties have been accepted, except as otherwise noted in the attached Appendix.

FINDINGS OF FACT

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

1. HRS District VIII includes Sarasota, DeSoto, Charlotte, Glades, Lee, Hendry and Collier Counties. There are presently no existing and operating osteopathic hospitals within District VIII. However, there are two applications now pending for new for new osteopathic facilities within the District. One is in Sarasota and one is on behalf of the intervenor Doctors' Osteopathic Medical Center, Inc., d/b/a Gulf Coast Hospital, Inc. (Gulf Coast), which seeks to build and operate a 120-bed acute care osteopathic hospital to be located in south lee County. That application has proceeded through the administrative hearing process, received a Recommended Order for approval of 120 beds, a Final Order for approval of 60 beds and is currently on appeal.

2. The intervenor Naples Community Hospital is an existing allopathic acute care hospital located in Collier County, which is immediately south of Lee County. The intervenor Lee Memorial Hospital is an existing allopathic acute care hospital located in Lee County and has approval to construct and operate a satellite facility in south Lee County.

   
   

3. The petitioner Family Center Hospital Osteopathic, Inc., proposes to construct and operate a 100-bed full service, osteopathic teaching hospital in southwest Lee County. A particular site has not yet been selected or acquired. If the proposed facility was established, it would be in competition with allopathic hospitals for patients and staffing.

   
   

4. The petitioner's original application for a Certificate of Need was submitted to HRS in the summer of 1982. That application was prepared by a health planning consulting firm, no member of which testified in this proceeding. The original application was amended prior to the hearing with regard to the need for osteopathic beds in the area, the financial projections and the architectural design of the facility.

   
   

5. Petitioner intends to retain a full-time management firm to be responsible for managing the proposed facility. No firm commitments have been made and no tentative price quotations have been received for such an arrangement.

   
   

6. Petitioner proposes to construct a two-story 90,000 square foot building with ancillary services on the first floor and patient areas on the second floor. The patient areas include a 15-bed obstetrical until, a 10-bed pediatrics unit, an 8-bed ICU/CCU and the remaining beds would be medical- surgical beds. The architect had no knowledge of the location of the site proposed, and thus no site plan has been developed. While the average construction cost per square foot of a health care facility in Florida is approximately $115 or $120, that cost can vary depending upon site development requirements, construction materials, floor coverings, wall coverings and the like. These details have not yet been determined The fact that the proposed facility is to be teaching hospital was not taken into account in the schematic design.

   
   

7. An accountant, who had no prior experience with projecting financial feasibility for a health care facility was retained by the petitioner to prepare a projected financial statement for the proposed facility. His opinion that the project would be financially feasible within the second year of operation was based primarily upon occupancy projections made by a health planner, the itemization and costs associated with manpower, salaries, equipment, supplies, etc., as projected in the original application and conversations with a "Mr. Becker" relating to bond financing. He compared his estimates and projections with other Certificate of Need applications in the Lee County area. The accountant was unaware of whether nor not the applications relied upon for comparison purposes had been update or revised at some subsequent time. He also received data concerning revenues of a "select group" of hospitals as published in a Hospital Cost Containment Board report for 1984, but made no determination of that Board's grouping of hospitals for comparative purposes. No independent investigation of the accuracy of the contents of the original application was performed by the accountant or anyone on his behalf. Although the accountant adjusted the manpower requirements as originally projected to conform with his perception of the occupancy projections, he was unaware of the minimum staffing requirements imposed upon hospitals by state and/or federal regulations. The witness candidly admitted that he did not consider it within his expertise to

   determine the manpower or equipment requirements for the proposed facility. He is unaware of whether or not the bond financing proposed for this project is available. There was no showing that petitioner had sufficient funds available to make expenditures for project development or other pre-opening expenses, estimated to be over $400,000.00. His revenue projections did not take into account the existence of other osteopathic beds in the area.

   
   

8. By utilizing alternative methodologies which took into account both statewide and district wide statistics regarding osteopathic utilization rates, the number and distribution of osteopathic physicians, and population projections; the petitioner's health care planner concluded that there is a gross need in the year 1991 for 144 osteopathic acute care hospital beds in District VIII. Assuming that there are no other osteopathic hospitals in District VIII, the health care planner was of the opinion that there is a net need for the same number of beds in that District. She further concludes that the proposed osteopathic hospital would obtain 90% of the osteopathic patients of Lee County, 50% of the osteopathic patients in other District VIII Counties and an occupancy rate of approximately 73% for the second year of operation. She admits that if Gulf Coast is awarded a Certificate of Need for 60 beds or

   120 beds and/or if the Sarasota applicant is awarded a Certificate of Need, the net bed need of 144 would be reduced accordingly and the projected market share and occupancy rates would be affected.

   
   

9. Petitioner presented no evidence concerning its ability to adequately staff its proposed facility. Likewise, no evidence was presented as to petitioner's ability to obtain funds for capital expenditures or for the operation of the facility. The impact of the proposed project upon the cost of providing health services was not addressed by the petitioner.

   
   

10. There is a need for research and educational facilities to train doctors of osteopathic medicine at the student, internship and residency levels. Both Manasota Osteopathic General Hospital in Sarasota and Gulf Coast Hospital in fort Myers have indicated their desires to become teaching facilities.

    
    

    CONCLUSIONS OF LAW

    
    

11. Having been awarded a Certificate of Need to construct and operate an osteopathic acute care hospital to be located in the same immediate vicinity as the petitioner's proposed osteopathic hospital, Gulf Coast Hospital has standing to participate in this proceeding. As existing allopathic facilities serving patients in the Fort Myers area, from which the petitioner expects to draw patients and staffing for its proposed hospital, both Naples Community Hospital and Lee Memorial Hospital also have standing to participate in this proceeding. Each of the intervenors cold be substantially affected by the establishment of a 100-bed osteopathic hospital as proposed by the petitioner.

    
    

12. An applicant for a Certificate of Need bears the burden of demonstrating by competent, substantial evidence that it meets the statutory and regulatory criteria for approval. These criteria are found in Section 381.494(6)(c), Florida Statutes, and Chapter 10-5.11, Florida Administrative Code.

    
    

13. A review of the applicable criteria, along with the evidence submitted by the petitioner in this case, leads to the conclusion that petitioner has failed to demonstrate its entitlement to a Certificate of Need for the establishment of a 100-bed osteopathic acute care hospital in Lee County. The petitioner failed to demonstrate in this proceeding that it has the ability to

    proved quality of care or that there are adequate or available resources, including manpower and funds, to accomplish the proposed project. The petitioner presented no evidence that it had investigated the possibility of joint, cooperative or shared services with other existing or planned facilities or that the effects of competition had been taken into account at all. There was no evidence that alternative, less costly or more effective methods of construction had been investigated. Indeed, there was insufficient evidence to establish the projected costs or methods of construction of the proposed facility. The immediate financial feasibility of the project was not demonstrated. The testimony concerning the long-term financial feasibility of the proposed hospital can not be accepted inasmuch as it was based upon calculations and projections regarding expenses for salaries, supplies, depreciation, amortization and interest which are not supported or substantiated by any competent evidence in the record of this proceeding.

    
    

14. While the gross osteopathic bed need projected by the petitioner's health care planner can be accepted as reasonable, the impact of the intervenor Gulf Coast Hospital in the immediate vicinity of petitioner's facility must be taken into account in determining both the net need for beds in that community and the financial feasibility of petitioner's proposed project. This was not done by either petitioner's health care planner or petitioner's accountant. A review of HRS' rules containing methodologies for determining the need for other health care services demonstrates that "approved" beds or services must be added to the inventory of existing beds or services when calculating the net need for additional beds or services. Gulf Coast's application for a Certificate of Need has been "approved," at least in part, by a Final Order. Absent a stay of that Final Order, that approval must be accounted for in determining the net need for osteopathic beds and the financial feasibility of petitioner's nearby proposed facility.

    
    

15. In summary, the petitioner failed to demonstrate by competent, substantial evidence that it meets the statutory and regulatory criteria for approval of a Certificate of Need to construct or operate a 100-bed osteopathic acute care hospital in Lee County. The need for petitioner's facility has not been demonstrated and even if there were a need for additional osteopathic beds, it has not been established that petitioner has the ability to meet the need in a responsible and effective manner.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited herein, it

is

RECOMMENDED that petitioner's application for a Certificate of Need be

DENIED.

Respectfully submitted and entered this 7th day of May 1986 in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 7th day of May 1986.

APPENDIX

The proposed joint findings of fact submitted by Doctors' Osteopathic Medical Center, Inc., d/b/a Gulf Coast Hospital, Inc., and Naples Community Hospital have been approved and/or incorporated in this Recommended Order, except as noted below.

Paragraph 7: Rejected as unnecessary to the issues in this proceeding.

Many of the proposed findings of fact contain recitations of a lack of evidence regarding certain criteria. Where these have not been included in the factual findings, they are included in the Conclusions of Law, where pertinent.

COPIES FURNISHED:

Claude H. Tison, Jr., Esquire MCFARLANE, FERGUSON, ALLISON & KELLY

Post Office Box 1531 Tampa, Florida 33601

R. Sam Power, Esquire Office of General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Building 1, Room 407

Tallahassee, Florida 32301

John D. C. Newton, II, Esquire CARSON & LINN, P.A.

Cambridge Centre

253 East Virginia Street Tallahassee, Florida 32301

W. David Watkins, Esquire OERTEL & HOFFMAN, P.A. Post Office Box 6507

Tallahassee, Florida 32314-6507

Ivan Wood, Jr., Esquire WOOD, LUCKSINGER & ESPTEIN

One Houston Center Suite 1600

Houston, Texas 77010

William Page, Jr., Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 83-002244

Orders for Case No: 83-002244