STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
AMERICAN MEDICAL INTERNATIONAL, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 84-1819
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
and )
)
FLORIDA HOSPITAL, SOUTH SEMINOLE ) COMMUNITY HOSPITAL and ORLANDO GENERAL ) HOSPITAL, )
)
Intervenors. )
) WINTER PARK MEMORIAL HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 84-1872
) DEPARTMENT OF HEALTH AND REHABILITATIVE ) SERVICES, )
)
Respondent, )
)
)
FLORIDA HOSPITAL, SOUTH SEMINOLE )
COMMUNITY HOSPITAL and )
ORLANDO GENERAL HOSPITAL, )
)
INTERVENORS. )
)
RECOMMENDED ORDER
Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, duly designated Hearing Officer of the Division of Administrative Hearings, beginning March 4, 1985, in Orlando, Florida. The hearing concluded on Thursday, March 21, 1985.
APPEARANCES
For Petitioners Fred Baggett, Esquire American Medical Michael J. Cherniga, Esquire
International Inc., ROBERTS, BAGGETT, LaFACE & RICHARD University Community 101 East College Avenue
Hospital of Orlando, Post Office Drawer 1838 Inc., Sponsors of Tallahassee, Florida 32302 University Community and
Hospital of Orlando: Michael Von Eckhardt, Esquire,
as a non-attorney representative Corporate Counsel
American Medical International, Inc.
414 Camden Drive
Beverly Hills, California 90210
Winter Park Kenneth F. Hoffman, Esquire Memorial Hospital: OERTEL & HOFFMAN, P.A.
2700 Blair Stone Road, Suite C Tallahassee, Florida 32301
and
J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD &
WOODMAN, P.A.
Post Office Box 880
Winter Park, Florida 32790-0880
For Respondent Harden King, Esquire
Department of Assistant General Counsel
Health and Department of Health and Rehabilitative Rehabilitative Services Services: 1323 Winewood Boulevard
Building One, Suite 407 Tallahassee, Florida 32301
For Intervenors E. G. "Dan" Boone, Esquire Florida Hospital: Stephen K. Boone, Esquire
E. G. BOONE, P.A. Post Office Box 1596 Venice, Florida 34284
Orlando General Steven R. Bechtel, Esquire Hospital: Brain D. Stokes, Esquire
MATEER & HARBERT, P.A.
100 East Robinson Street Post Office Box 2854 Orlando, Florida 32802
STATEMENT OF THE CASE
American Medical International, Inc. (hereinafter referred to as "AMI"), filed an application for a certificate of need to construct a 175-bed acute care hospital to be located in Orange County, Florida. The application was denied by the Respondent, the Department of Health and Rehabilitative Services (hereinafter referred to as the "Department"). AMI timely requested a formal administrative hearing to review the Department's denial of its application.
Winter Park Memorial Hospital (hereinafter referred to as "Winter Park") filed an application for a certificate of need to construct of a 100-bed acute care hospital in Orange County, Florida, which was also denied by the Department. Winter Park also timely requested a formal administrative hearing to review the Department's denial of its application.
AMI's case, number 84-1819, and Winter Park's case, number 84-1872, were consolidated for comparative review by Order dated August 15, 1984. A third case, case number 84-1777, was also consolidated with these cases. On January 28, 1985, however, the Petitioner in case number 84-1777 voluntarily dismissed its case.
Florida Hospital and Orlando General Hospital (hereinafter referred to as "OGH"), existing acute care hospitals in Orange County, Florida, and South Seminole Community Hospital, an existing acute care hospital in Seminole County, Florida, intervened in both cases. South Seminole Community Hospital took no part in the hearing of these cases.
Subsequent to the filing of its Petition for Formal Administrative Hearing, AMI amended its application from a request for a 175-bed hospital to a request for a 100-bed
hospital.
Attached to this Recommended Order and incorporated herein is a list of the witnesses who testified on behalf of the parties at the final hearing of these cases and the areas of expertise, if any, they were accepted in. In addition to the witnesses who testified on behalf of the parties, six individuals testified as "public witnesses" during the proceedings. The names of those witnesses are also included on the list of witnesses as "public witnesses." The following exhibits were accepted into evidence: AMI Exhibits 1-28 and 30-34; Winter Park Exhibits 1-14; Florida Hospital Exhibits 1-2, 4-12 and 14; and OGH Exhibits 1-5. Written evidence presented at the hearing by public witnesses are identified as "Public Exhibits".
Following the completion of the hearing of these cases, Florida Hospital filed a Notice of Supplementing the Record in which it requested that certain documents be accepted into evidence or, in the alternative, that official recognition be taken of one of those documents. The Department and OGH both filed a Notice of Joinder in Motion and Notice of No Objection. Winter Park and AMI objected to the request. After due consideration of the request, Florida Hospital's request is denied. The documents "in question will not be received into evidence. Nor will any of the documents be officially recognized.
Official recognition of the following laws was taken during the hearing: Portions of the Internal Revenue Code of 1954, as amended, and the Treasury Regulations, pertaining to tax-exempt organizations; and, statutes, rules and regulations pertaining to developments of regional impact.
All of the parties participating in the hearing submitted proposed findings of fact pursuant to Section 120.57(1)(b)4, Florida Statutes (1984 Suppl.). OGH has also filed a Memorandum in Support of Proposed Findings of Fact, Conclusions of Law and Proposed Final Order of Intervenor, Orlando General Hospital. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate,
cumulative, immaterial or unnecessary.
STATEMENT OF THE ISSUES
The parties have stipulated that these cases are properly before the Division of Administrative Hearings for de novo review of the Petitioners' applications for a certificate of need and that this action is controlled by the provisions of Chapters 120 and 381, Florida Statutes, and Chapters 10-5 and 28-
5, F.A.C.
The parties have further stipulated that portions of Section 481.494(6)(c), Florida Statutes (1984 Suppl.), and its counterparts under Section 10-5.11, F.A.C., have either been met or are not applicable. The portions of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), which the parties have stipulated have been met or do not apply and the parties' summary of the content of those subsections are as follows:
(3) both applicants have the ability to manage and operate facilities such as those applied for; (6) need in the services district for special equipment and services not reasonably and economically accessible in adjoining areas; (7) need for research and training programs; (8) health and management manpower and personnel only. The remaining parts of (8) remain in issue; (10) special needs and circumstances of health maintenance organizations; (11) needs and circumstances of those entities which provide a special portion of their services or resources, or both, to individuals not residing in the service district.
The parties stipulated that the remaining portions of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), remain in issue.
Based upon the stipulations of the parties, the following issues require resolution:
Is there a need for a 100-bed acute care hospital in Orange County, Florida?
Do the Petitioners' proposals meet the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), which have not been stipulated to as having been met or as not being applicable?
If a need exists for only one proposal and both Petitioners meet the appropriate criteria, which of the Petitioners should be granted a certificate of need?
Should a certificate of need for a computerized axial tomography scanner (hereinafter referred to as a "CAT Scanner") be issued to AMI?
Does Florida Hospital and/or OGH have the requisite standing to take part as parties in these proceedings?
FINDINGS OF FACT
INTRODUCTION AMI
AMI is a publicly traded for-profit Delaware corporation which owned, managed or operated 103 hospitals in the United States and 29 hospitals outside the United States as of January, 1985. AMI also owns, manages or operates a number of other health care facilities, i.e., psychiatric care facilities and freestanding outpatient surgery centers. AMI also owns a number of subsidiary corporations which provide a variety of technologies and services in support of its hospitals.
In Florida, AMI owns 100 percent or a majority interest of 9 hospitals. In its proposed findings of fact AMI has indicated that it "operates" these 9 hospitals. The record supports this finding, although the record also supports a finding that the 9 hospitals are separate legal entities.
AMI initially filed a letter of intent to file a certificate of need application with the Department for a 175-bed hospital in Orange County, Florida, for review in the August 15, 1983, batching cycle. The letter of intent was rejected because it had not been timely submitted to the local health council.
On October 12, 1983, AMI filed a second letter of intent with the Department in which it informed the Department that AMI "or a to-be-formed wholly-owned subsidiary of AMI intends to file a Certificate of Need application for a 175-bed hospital to be located along Highway 50 in the vicinity of the University of Central Florida in Orange County, Florida." On October 19, 1983, seven days after the letter of intent was filed, Articles of Incorporation were filed for University Community Hospital of Orlando, Inc. (hereinafter referred to as "UCH, Inc."). UCH, Inc., is a for-profit Florida corporation. It currently owns no assets.
AMI's application, which was reviewed in the November 15, 1983, batching cycle, was denied by the Department. AMI subsequently reduced the number of beds it had requested in its application from 175 to 100 beds. No change in the application with regard to the services to be provided has been made by AMI. Based upon its amended application AMI has proposed to construct and operate a 100-bed "full-service" acute care hospital to be located in Orange County, Florida. The proposed 100 beds will consist of 84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposed hospital will include a separate outpatient unit, an on-site stationary CAT Scanner, a 24-hour a day emergency room and birthing rooms and will provide therapeutic and diagnostic inpatient services, and community outreach and wellness programs. Tertiary care services will not be provided at the proposed hospital but AMI intends to contract with existing providers of tertiary care services to provide those services to its patients.
AMI has projected that the total cost of its proposal will be
$19,698,831.00. This figure includes $566,700.00 for architectural and engineering fees, $6,268,747.00 for equipment, $1,025,000.00 for the acquisition of land, $10,095,000.00 for construction, $250,000.00 for start-up costs and
$1,285,385.00 for capitalized interest.
The proposed AMI facility will include separate entrances for outpatient surgery and the emergency room. The facility has been designed to take into account the trend in health care to provide outpatient and ambulatory services. Two of the four proposed operating rooms in the facility will be used primarily for outpatient surgery.
The 8 birthing rooms to be included in the facility are designed in recognition of the trend in health care to provide a room in which the family can participate in the birthing process. A delivery room will also be provided. Finally, classroom space will be provided in the facility for allied health services training and continuing education.
Winter Park.
Winter Park Memorial Hospital Association, Inc., is a not for-profit Florida corporation. It operates Winter Park, a 301 bed hospital in Winter Park, Orange County, Florida. The hospital provides a full range of medical services including a full-body CAT Scanner. Winter Park Memorial Hospital Association, Inc., qualifies for exemption from federal income tax under Section 501(a) of the Internal Revenue Code of 1954, as amended (hereinafter referred to as the "Code"), because it is an organization designated in Section 501(c)(3) of the Code.
On October 31, 1983, Winter Park filed its letter of intent to file an application for a certificate of need with the Department in the same batching cycle as AMI. In its application Winter Park proposed to build a 100-bed acute care hospital in Orange County, Florida. The proposed 100 beds will consist of
84 medical/surgical beds, 8 obstetric beds and 8 ICU/CCU beds. The proposal does not include a CAT Scanner.
Winter Park has projected that the total cost of its proposed facility will be $16,015,000.00. This amount includes $75,000.00 for project development, $50,000.00 for financing, $685,000.00 for professional services,
$10,395,900.00 for construction, $4,457,700.00 for equipment and $351,400.00 for other related cost.
Florida Hospital
Florida Hospital is a not-for-project hospital owned by Adventist Health Systems Sunbelt, a division of the Adventist Church. Florida Hospital presently consists of 3 campuses: the main campus in Orlando and satellite campuses in Altamonte Springs, Seminole County, Florida and Apopka, Orange County, Florida. In the 75 years since the hospital was begun it has grown from a 20 bed hospital to its present size of 959 beds.
Florida Hospital is a tertiary acute care hospital providing a full range of services including ambulatory surgery, a stationary full-body CAT Scanner, general inpatient medical and surgical services, obstetrics, pediatrics, psychiatric services, substance abuse treatment, open heart surgery, oncology and other services. Florida Hospital is involved in a number of teaching programs and internship programs. It is a teaching hospital with a number of positions dedicated to teaching, including a director of education.
Florida Hospital would be substantially affected if a certificate of need is granted to either Petitioner. Florida Hospital has standing to intervene.
OGH
OGH is a not-for-profit 171-bed hospital located in Orlando, Orange County, Florida. It was founded in 1941 and has operated as a not-for-profit facility since 1945. OGH is licensed by the State of Florida as an acute care general hospital. The services provided by OGH include obstetrics, outpatient services, general inpatient medical and surgical services, pediatrics, a mobile CAT Scanner and other services.
OGH would be substantially affected if a certificate of need is issued to either Petitioner. OGH has standing to intervene.
THE NEED FOR ACUTE CARE HOSPITAL BEDS. Section 10-5.11(23), F.A.C.
Pursuant to Section 381.494(6)(c), Florida Statutes (1984 Suppl.), the Department is responsible for determining whether health care facilities and services are needed in the State of Florida. To fulfill its responsibility with regard to acute care hospital beds, the Department has promulgated Section 10 5.11(23), F.A.C. Section 10-5.11(23)(b), F.A.C., provides the following Department goal:
The Department will consider
applications for acute care hospital beds in context with all applicable statutory and rule criteria. The Department will not normally approve applications for new or additional acute care hospital beds in any departmental service district if approval of an application would cause the number of beds in that district to exceed the number of beds calculated to be needed according to the methodology included in paragraphs (f),(g) and (h) below. A favorable Certificate of Need determination may be made when the criteria, other than bed need, as provided for in Section 381.494(6)(c), Florida Statutes, demonstrate need. An unfavorable Certificate of Need determination may be made when a calculated bed need exists but other criteria specified in Section 381.494(6)(c), Florida Statutes, are not met.
Based upon this Department goal, the need for acute care hospital beds is first determined by service district based upon the methodology included in Section 10-5.11(23)(f)-(h), F.A.C. (Hereinafter referred to as the "Formula"). For purposes of the Formula, acute care beds include general medical and surgical, intensive care, pediatric and obstetrical beds. Section 10 5.11(23)(c), F.A.C. The Petitioners are proposing to build a hospital with general medical and surgical, intensive care and obstetrical beds. Therefore, the Formula must be applied to determine if there is a need for their proposed hospitals.
Under the Formula, acute care bed need is to be determined five years in the future: 1990 in these cases. Generally, acute care bed need is determined under the Formula based upon two age cohort population projections,
statewide service-specific discharge rates, statewide service-specific lengths of stay, statewide service-specific occupancy standards and patient flow adjustments. See Section 10-5.11(23)(f), F.A.C.
The bed need for the service district determined in accordance with Section 10-5.11(23)(f), F.A.C., is adjusted based upon the service district's historical use rate and projected occupancy rate. Section 10-5.11(23)(g),
F.A.C. The historical use rate to be used under the Formula is for the three most recent years and is based upon utilization of hospitals located in the service district.
After applying the adjustment of Section 10-5.11(23)(g), F.A.C., one final adjustment is required to complete the determination of acute care bed need under the Formula. Section 10-5.11(23)(h), F.A.C. provides for an adjustment to reflect peak demand in the service district.
Based upon the evidence presented at the final hearing of these cases, application of the Formula results in a net acute care bed need of 89 beds or
146 beds, or an excess of 464 beds. These projections are all for the Department's District 7, which consists of Orange, Seminole, Osceola and Brevard Counties, The Petitioners are proposing to build new hospitals in Orange County.
The Formula projection of a net acute care bed need in District 7 of
89 beds is an outdated Department application of the Formula. The 146 net acute care bed need projection for District 7 is the Department's most current application of the Formula, dated March 12, 1985.
The Department's most recent application of the Formula is not based upon a proper application of the adjustment for the District 7 projected occupancy rate and historical use rate under Section 10-5.11(23)(g), F.A.C. In making this adjustment, the Department relied upon utilization data in determining the District 7 historical use rate from 1981, 1982 and 1983. Section 10-5.11(23)(g), F.A.C., requires that the historical use rate be based upon the most recent three years available. In these cases 1982, 1983 and 1984 utilization data was available to the Department. The fact that incorrect utilization data was used in determining the District 7 historical use rate was confirmed by Mr. Eugene Nelson, the Director of the Office of Community Medical Facilities of the Department, Mr. Steve Windham, the Executive Director of the Local Health Council of East Central Florida, Inc., and Mr. Lawrence W. Margolis, an expert health planner. Mr. Nelson also indicated that if 1982, 1983 and 1984 utilization data had been used by the Department in applying the Formula a more "contemporary picture of what's actually happening" would have be given.
Mr. Margolis did apply the Formula using the most current utilization data to calculate the historical use rate of District 7. Based upon the data used by the Department in its most recent projection of acute care bed need for District 7, but substituting the current utilization data of 1982, 1983 and 1984, an application of the Formula results in a projected total acute care bed need in 1989 for District 7 of 4,416 beds. There are currently 4,880 licensed and approved beds in District 7. Therefore, a proper application of the Formula based upon the most current data indicates that District 7 will have an excess of 464 acute care beds in 1989.
A finding that District 7 will have an excess of acute care beds in 1989 is supported by the trend toward reduced utilization of hospitals in
District 7. This reduction in hospital utilization, which began in 1982, has been evidenced by reductions in occupancy rates, average lengths of stay and admissions. This trend is likely to continue for an additional two to four years. The trend is sufficient to cause an excess in acute care beds despite increases in population. To add another 100 acute care hospital beds to Orange County would further reduce utilization.
The reduced utilization of hospitals could become worse when new hospital beds are opened by Florida Hospital (210 beds) and Holmes Regional Medical Center in Brevard County (81 beds). The opening of these beds could create a further excess of beds in District 7.
There are a number of factors which have contributed to the decline in the use of hospitals: (1) there has been an increase in the use of health maintenance organizations and preferred provider organizations; (2) the introduction of Diagnostic Related Groups, a method of reimbursement now being used by Medicare; and (3) there has been an increase in the use of outpatient medical services.
Health maintenance organizations in Orange County alone could decrease patient days in hospitals from 800 days per 1,000 population to 350 days per 1,000 population. Because of the introduction of Diagnostic Related Groups by Medicare, hospitals are trying to discharge patients as quickly as possible. Finally, there are 8 to 10 freestanding ambulatory surgery centers approved for Orange County which are, or will be, providing outpatient medical services. All of these factors have reduced hospital utilization in District 7.
The current trend of reduced utilization of hospitals was recognized by Mr. Mark Richardson, AMI's expert in health planning. Mr. Richardson therefore recommended that AMI reduce its application for a certificate of need to construct and operate a hospital in Orange County from 175 acute care beds to
100 beds, which AMI did.
Based upon the foregoing, it is concluded that District 7 will have an excess of at least 464 acute care beds in 1989 according to a proper application of the Formula of Section 10 5.11(23), F.A.C. Although insufficient evidence was presented at the final hearing to forecast the exact acute care bed need for District 7 under the Formula for 1990, it does not appear that there will be any need for acute care beds in District 7 in 1990 in light of the fact that the trend toward decreased utilization of hospitals will probably continue for 2 to
4 more years. In fact, the evidence supports the conclusion that District 7 will continue to have an excess of beds in 1990.
AMI has proposed findings of fact to the effect that there has been too much concern with "over-bedding" based upon computations such as those provided in the Formula. AMI further proposed findings of fact to the effect that a more rational approach to health planning "should be assuming adequate supply as opposed to considering a negative approach." These proposed findings of fact are rejected. The Department's rules and in particular, the Formula, are the law and will be followed in these cases. Whether "over-bedding" is over emphasized, the Formula clearly indicates that District 7 will be greatly overbedding in 1990.
In addition to requiring an application of the Formula to determine acute care bed need for each Department service district, Section 10-5.11(23), F.A.C., requires that local health councils adopt acute care service subdistricts as an element of their local health plans. Section 10-5.11(23)(d),
F.A.C. District 7 has been divided along county lines into four subdistricts: Orange, Seminole, Osceola and Brevard Counties. Section 10-17.008, F.A.C.
Prior to this proceeding AMI challenged the validity of Section 10- 17.008, F.A.C., the rule establishing subdistricts along county lines in District 7. The rule was upheld as valid in American Medical International, Inc. v. Department of Health and Rehabilitative Services, DOAH Case No. 83- 3092R, September 28, 1984. Therefore, Orange, Seminole, Brevard and Osceola Counties constitute the only recognized subdistricts in District 7 for purposes of allocating acute care bed need in District 7.
Section 10-5.11(23)(e), F.A.C., further provides that the district acute care bed need as determined by application of the Formula is to be allocated to each subdistrict established pursuant to Section 10-5.11(23)(d),
F.A.C. This allocation of acute care bed need to the subdistricts is to be made consistent with Section 381.494(7)(b), Florida Statutes (1984 Suppl.), which provides that the local health council is to develop a district health plan and submit it to the Department. Elements of the district health plan necessary in the Department's review of certificate of need applications are required to be adopted by the Department as a part of its rules. Section 381.494(7)(b), Florida Statutes (1984 Suppl.).
The Local Health Council of East Central Florida, Incorporated (hereinafter referred to as the "Council"), has developed a district health plan which includes the methodology it employs to allocate the District 7 acute care bed need to the subdistricts of District 7. That plan has also been submitted to the Department. The Department, however, has not adopted the district health plan for District 7 in its rules. This does not mean, however, that evidence pertaining to the Council's method of allocation is not relevant to, or should be ignored for purposes of, this proceeding.
Based upon the evidence presented at the final hearing, Orange County has an excess of acute care beds. This is true even if it is assumed that the Department's determination under the Formula that there is a need for 89 or 146 acute care beds in District 7 is correct. According to Mr. Windham, application of the Council's subdistrict allocation methodology to the Department's determination under the Formula that there is a need in District 7 for 89 acute care beds indicates that Orange County ",4 will have an excess of 81 acute care beds and that Seminole County will have an excess of 36 acute care beds.
Mr. Windham's application of the Council's methodology for allocating bed need to the subdistricts of District 7 was based upon the Department's application of the Formula without the benefit of the more current utilization data. Therefore, if the most current data had been used, the projected excess beds for Orange County would be even greater.
In light of the foregoing, it is clear that the Petitioners have failed to prove that there is any need under Section 10-5.11(23), F.A.C., for additional acute care beds in District 7 or in Orange or Seminole Counties. In fact, under Section 10- 5.11(23), F.A.C., there is a significant excess of acute care beds projected for Orange and Seminole Counties and District 7 as a whole. Winter Park has conceded this conclusion. AMI has in essence argued that any evidence as to the application of the Formula based upon the most current
utilization data should be ignored because the Department has not yet officially applied the Formula based upon such data. Mr. Margolis, an expert in health planning, was clearly capable of applying the Formula based upon the most current information. His conclusions were also supported by Mr. Nelson's and Mr. Windham's testimony. AMI has in essence also argued that any evidence as to how acute care bed need in District 7 under the Formula should be allocated to the properly designated subdistricts should be ignored because the Council's methods of allocation have not been adopted as part of the Department's rules.
Mr. Windham's unrebutted testimony, however, supports a finding that the Council's method of allocating the District 7 acute care bed need to the subdistricts is a reasonable method for health planning purposes.
The determination that there is no need for additional acute care beds in Orange County does not necessarily preclude the issuance of a certificate of need for a new hospital to either or both of the Petitioners. Section 10- 5.11(23)(b), F.A.C., provides that the Department will "not normally" approve an application if such an approval would result in acute care beds in excess of those needed as determined under the Formula. The rule goes on to provide that an application may be approved "when the criteria, other than bed need, as provided in Section 381.494(6)(c), Florida Statutes, demonstrate need."
Bed Need Based upon the Petitioner's Alternative to the Formula.
AMI has suggested in its proposed recommended order that there is a need for 146 acute care beds in District 7 based upon an application of the Formula. That finding of fact has been rejected, supra, because it was based upon the use of outdated utilization data. The Petitioner also failed to prove that there is a need for beds in Orange County based upon an application of the Formula.
Winter Park's position throughout this proceeding and AMI's alternative position has been essentially that the population of east Orange County where the Petitioners propose to locate their facilities and parts of Seminole County do not have adequate accessibility to acute care hospital beds.
In determining whether an application for a certificate of need should be issued for acute care hospital beds, Section 381.484(6)(c)2, Florida Statutes (1984 Suppl.), provides that the accessibility . . of like and existing health care services and hospitals in the service district of the applicant" should be considered. The Petitioners have attempted to prove that like and existing health care services are not accessible in portions of Orange and Seminole Counties and therefore there is a need for their proposed hospitals.
The Petitioners' Medical Service Areas.
AMI has identified and proposed to serve portions of Orange and Seminole Counties which purportedly have an access problem which it has designated as a "medical service area." AMI projects that the majority of its patients will be attracted from its medical service area (hereinafter referred to as an MSA) AMI's MSA consists of most of east Orange County and southeastern Seminole County. Generally, the MSA boundary runs south along most of the western shore of Lake Jessup in Seminole County, to and along Tuscawilla Road (Seminole and Orange County), to and along Highway 436 in Orange County, south to the Bee Line Expressway, east along the Bee Line Expressway to Highway 15, south along Highway 15 to the Orange-Osceola County line, east and then north along the Orange County line to the Seminole County line and along the Seminole County line north and then west to Lake Jessup.
Winter Park has also identified and proposed to serve a MSA very similar to, although a little smaller than, AMI's MSA. The difference in size amounts to only a difference of 1000 less population in Winter Park's MSA.
The portion of east Orange County included in the MSAs represents a distinct geopolitical and economic base.
Each of the Petitioners and Florida Hospital presented testimony by experts in the field of demographics. Frederick A. Raffa, Ph.D., for AMI, William J. Serow, Ph.D, for Winter Park and Stanley Smith, Ph.D., for Florida Hospital. Based upon their testimony, it is clear that the MSAs have experienced a great deal of population and economic growth since 1970 and that this growth will probably continue through 1990.
During the period 1980 to 1985, the rate of population growth for Orange and Seminole Counties was 16 percent (23 percent for Seminole County alone). The rate of growth in Winter Park's MSA during this same period was 32 percent. For the period 1985 through 1990 the projected rate of growth for Orange County is 12 percent. The projected rate of growth from 1985 through 1990 for Winter Park's MSA is 23.3 percent. These figures indicate that the rate of growth for Orange County and the MSAs is slowing down. The figures also show that the MSA rate of growth is twice that of Orange and Seminole Counties.
Looking at only the rate of growth of an area can be misleading. For example, a 50 percent rate of growth may not be as significant when applied to a population base of 10 as when applied to a larger population base.
In terms of actual growth, the evidence proves that Orange County's population growth in terms of additional people is greater than the population growth of the MSAs.
The evidence also establishes that population growth in the MSAs is projected to be greater for young adults and women of child bearing age (15 to
44 years of age), that there will be larger families and a greater number of children under 18 years of age in the MSAs than in Orange County as a whole and that the projected population of the MSAs will be newer to the area and generally more mobile than Orange County as a whole. Florida Hospital has suggested that "logic" leads to the conclusion that some of these projected trends will cause a decrease in utilization. No evidence was presented at the hearing to support such a finding of fact.
The evidence clearly establishes that population growth in the MSAs will be concentrated between the western boundary of the MSAs at Highway 436 and Alafaya Trail (Highway 419), which is located in the western portion of the MSAs, during the next five years. In fact, more than half of the projected growth of east Orange County will occur in a one and a half mile corridor between Highway 436 and Goldenrod. It will be 5 to 10 years before population growth will begin to expand into any area east of Highway 419.
Accessibility under Section 10-5.11(23)(i), F.A.C.
The Department has promulgated Section 10-5.11(23)(i)1 and 2, F.A.C., for purposes of determining accessibility:
Acute care hospital beds should be available and accessible within an automobile
travel time of 30 minutes under average
travel conditions to at least 90 percent of the population in an urban area subdistrict.
Acute care hospital beds should be available and accessible within a maximum automobile travel time of 45 minutes under
average travel conditions to at least 90 percent of the population residing in a rural area subdistrict.
The terms "urban area" and "rural area" are defined in Section 10- 5.11(23)(a)4 and 5, F.A.C., as follows:
Urban Area. Urban area means a county designated as all or part of a Standard Metropolitan Statistical Area, as
determined by the United States Bureau of the Census, and having 50,000 or more persons residing in one or more incorporated areas.
Rural Area. Rural area means a county not designated as all or part of a Standard Metropolitan Statistical Area, as determined by the United States Bureau of the Census, or a county so designated but having
fewer than 50,000 persons residing in one or more incorporated areas.
Orange County meets the definition of an "urban area." It has been designated as part of a Standard Metropolitan Statistical Area and has 50,000 or more persons residing in one or more incorporated areas. Orange County is not also a "rural area" as defined above as suggested by OGH although it does have some incorporated areas with less than 50,000 persons.
AMI has suggested in its proposed recommended order that Section 10- 5.11(23)(i), F.A.C., is to be used only by local health councils in determining subdistrict allocations of acute care bed need and where a subdistrict allocation reveals a surplus of beds in a subdistrict. Although Section 10 5.11(23)(i), F.A.C., is to be used in the manner suggested by AMI, Section 10- 5.11(23)(i), F.A.C., is not clearly limited to such use. This section of the rule is titled "Geographic Accessibility Considerations." Its provisions are applicable in determining whether a geographic accessibility problem exists in District 7 or in the subdistricts of District 7.
AMI, Winter Park and Florida Hospital presented testimony of expert traffic engineers: Mr. William A. Tipton for AMI, Mr. R. Sans Lassiter, P.E., for Winter Park and Mr. Sven Kansman for Florida Hospital. All three of these gentlemen based their travel studies on travel times to and from certain control points. The travel times were then averaged. Florida Hospital has suggested in its proposed recommended order that this method of determining travel times to and from control points and Mr. Tipton's testimony that "you probably wouldn't get as far in a given time going outbound [east" is significant because travel times from the MSAs west into Orlando, where the majority of the existing hospitals are presently located, would be shorter. This conclusion is reasonable. Therefore, travel times for the population of the MSAs to existing Orange County hospitals would be less than indicated by the traffic engineers. Also, the 30 minute contour lines on the traffic engineers' exhibits would extend farther into the MSAs.
The studies performed by all three traffic engineers were performed in the same general manner as to the speed of the test vehicles. Test vehicle drivers were instructed to drive at average speed employing the "average car method," the "floating car technique" or the "moving car method." All three methods are essentially the same.
The test runs were conducted in November and February by AMI'S expert, in the fall by Winter Park's expert and during the last two weeks of January by Florida Hospital's expert. January to March is the most congested time of the year in Orange County.
Only two of the traffic engineers testified that their tests were conducted under "average travel conditions" as required by Section 10- 5.11(23)(i), F.A.C.: Winter Park's and Florida Hospital's traffic engineers. These traffic engineers properly conducted their tests during off-peak and peak hours. Mr. Tipton, AMI's traffic engineer, conducted his tests only during the peak hours of 4:00 p.m. to 6:00 p.m. and only on week days (Monday to Thursday). According to Mr. Tipton, average travel conditions "doesn't mean anything" to a traffic engineer. Average travel conditions does mean something under the rule and to the other two traffic engineers. Mr. Tipton also indicated that the peak hours he conducted his tests during would not show "average travel conditions." Mr. Tipton also admitted that he averaged what amounted to the "worst case scenario" because it represented "real world conditions." Mr. Tipton's "real world conditions," however, is not the test of Section 10-5.11(23)(i)1, F.A.C. Mr. Tipton's tests have been given little weight because of his failure to take into account average travel conditions.
None of the exhibits prepared by the three traffic engineers and accepted in evidence (AMI'S composite exhibit 8, Winter Park's exhibit 11 and Florida Hospital's exhibit 10) are totally consistent with the requirements of Section 10-5.11(23)(i), F.A.C. AMI's composite exhibit 8 includes 30 minute contour lines representing Mr. Tipton's 30 minute drive times from only three hospitals in Orange County and one hospital in Seminole County and only shows the travel times to the east of those hospitals. Winter Park's exhibit 11 shows the 30 minute contour lines for seven hospitals in Orange County and two hospitals in Seminole County and generally only showns the travel times to the east. Florida Hospital's exhibit 10 shows the location of eight hospitals in Orange County, three in Seminole County and three in Brevard County but only shows the total 30 minute contour line for Florida Hospital's Orlando campus.
The test under Section 10-5.11(23)(i)1, F.A.C., is whether existing acute care hospital beds are available and accessible within 30 minutes by automobile by 90 percent of the subdistrict's population. In order for AMI and Winter Park to prove that acute care hospital beds are not available and accessible within 30 minutes in Orange County, they needed to prove that more than 10 percent of the population of Orange County cannot access on existing acute care hospital bed within 30 minutes by automobile. In order to prove this crucial fact it is necessary to show the travel time based upon average travel conditions of the entire population of Orange County to all existing acute care hospitals. AMI and Winter Park have failed to do so. The evidence fails to show that more than 10 percent of Orange County's population is more than 30 minutes by automobile from existing Orange County hospitals.
The evidence does not support a conclusion that there is an accessibility problem under Section 10-5.11(23)(i), F.A.C. Only 1 percent of the population of Orange County residing in the MSAs is located more than 30
minutes by automobile from existing hospitals in Orange and Seminole Counties. This is based upon the 1985 population and the projected 1990 population. In 1985 there are 4,232 people residing in the MSAs more than 30 minutes from existing Orange and Seminole County hospitals. By 1990, there will only be 5,276 people projected to live more than 30 minutes from existing hospitals.
These figures are maximum numbers. As indicated, supra, the evidence with regard to population growth in the MSAs proves that the projected population growth will be concentrated in the western portion of the MSAs--the portion of the MSAs closest to where existing hospitals are located. Most of the projected population growth through 1990 in the MSAs will clearly be within 30 minutes of existing hospitals. The projected 1990 population of 5,276 people who will reside more than 30 minutes from an existing Orange County or Seminole County hospital is well below 10 percent of Orange County's total projected population of 596,713.
Additionally, the people in the MSAs who reside more than 30 minutes from existing Orange and Seminole County hospitals are probably within 30 minutes of Jess Parrish Hospital in Titusville, Brevard County, Florida.
There are no natural obstacles in Orange County which impede or prevent access to existing health care facilities. Well over 90 percent of Orange County's population can access a hospital within 30 minutes driving time.
OGH has proposed findings of fact pertaining to the availability of motor vehicle and air ambulance services in Orange County. The accessibility test of Section 10-5.11 (23)(i), F.A.C., requires a consideration of automobile travel times under "average travel conditions," not emergency services. Therefore, these proposed findings of fact and OGH's proposed findings of fact as to the requirements of obtaining a trauma level designation are unnecessary.
The evidence also clearly establishes that there are acute care hospital beds available in Orange County. The average occupancy rates in District 7, Orange County and Seminole County for 1982, 1983 and 1984 were as follows:
1982 | 1983 | 1984 | |
District 7 | 71.8% | 70.34% | 61.71% |
Orange County | 69.5% | 68.68% | 60.80% |
Seminole County | 76.0% | 74.20% | 59.39% |
Florida Hospital and OGH have experienced similar declines in utilization similar to those evidenced by these figures. Florida Hospital's utilization rate dropped from 86.3 percent in 1982 to 78.6 percent in 1984 and OGH's rate dropped from 88.5 percent in 1982 to 44.4 percent in 1984.
There are currently 4,880 licensed and approved acute care hospital beds in District 7. Based upon the 1984 utilization rate for District 7, over 1,800 acute care beds were empty on an average day in District 7 during 1984; In Orange County, approximately 1,000 acute care beds were empty on average during 1984.
As indicated, supra, the decreasing acute care bed utilization rate is expected to continue for 2 to 4 years. Therefore, there are acute care hospital beds available in Orange County at existing hospitals and there will be in 1990.
Additionally, new acute care hospital beds have been approved for Orange County and Seminole County which are not yet open: 134 acute care beds
to be opened by Florida Hospital at its Orlando campus and 76 acute care beds to be opened by Florida Hospital at its Altamonte Springs campus. Also 81 new beds will be opened in Brevard County. These additional beds will further increase the number of available acute care hospital beds in Orange and Seminole Counties and in District 7.
Based upon the foregoing and the fact that there is a large number of unoccupied acute care beds available on average in Orange County, there is no geographic accessibility problem in Orange County or Seminole County under Section 10-5.11(23)(i), F.A.C.
Other Accessibility Considerations.
Despite the evidence with regard to geographic accessibility under Section 10-5.11(23)(i), F.A.C., the Petitioners have argued that accessibility to acute care beds is a problem in the MSAs.
Mr. Willard Wisler, Winter Park's administrator, although agreeing that "planning studies" indicated no need for additional acute care beds in Orange County, stated:
But our posture has been that they have been misallocated, and that the east Orange County [sic) is a greatly underserved area on the basis of the number of hospital beds that are available to the people that live there.
The evidence does establish that the majority of the hospitals in Orange County are located in the center of the County, in the City of Orlando, where the majority of the population is located and that there is only one hospital currently located in the MSAs. Currently, 6 percent of Orange County's acute care hospital beds are located in the MSAs at OGH while 19 percent of Orange County's population is located in the MSAs. The Petitioners have characterized this geographic distribution of acute care beds and population as a "maldistribution" of acute care beds.
The disparity between the precentage of population and acute care beds in the MSAs will increase in the future because the projected rate of growth in the MSAs is greater than that of Orange County. It is projected that by 1990 22 percent of the Orange County population will be located in the MSAs.
The centralization of acute care beds in Orange County, according to Mr. Van Talbert, Winter Park's expert health planner, constitutes irresponsible health planning: "It tends to perpetuate the old patterns of centralization, and I think that is inconsistent with contemporary thought in American society." Mr. Talbert also testified that the MSAs and particularly east Orange County, are greatly underserved based upon the number of hospital beds conveniently available to the people who live there.
Even if Mr. Talbert's conclusions are correct and even if there is a "maldistribution" of acute care beds as defined by the Petitioners, this does not mean there is an accessibility problem in the MSAs sufficient to conclude that additional acute care beds are needed in District 7, Orange County or the MSAs. The fact that 22 percent of the population of Orange County may reside in the MSAs by 1990 with only 6 percent of the County's acute care beds is not the test. Even if it is true that "contemporary planning may indicate that centralization of acute care beds is poor planning," the pertinent statutes and
rules only require a determination of whether acute care beds are available and accessible. The evidence in these cases clearly indicates that the population of the MSAs can access available acute care hospital beds in District 7. All the Petitioners have shown is that some residents of the MSAs "will be forced to make inconvenient drives to downtown hospitals," as stated in Winter Park's proposed recommended order. Likewise, AMI's proposed finding of fact that ",the realities of the situation reveal that the residents of the MSA and their physicians perceive serious access problems due to excessive travel distance, traffic congestion, the lack of convenience for patients who have to go to hospitals for tests, and the lack of convenience for families and friends having to make several trips a day to see a person in a hospital" does not prove there is an access problem. The perception of patients and physicians as to the inconvenience in accessing acute care beds does not prove there is an access problem sufficient to warrant a new hospital.
In conjunction with the Petitioners' position with regard to "maldistribution" of acute care beds, the Petitioners have proposed findings of fact to the effect that previous Department responses to shifts in population growth away from where hospitals are located have been to authorize new hospitals. New hospitals in Altamonte Springs and Longwood in Seminole County, and in southwest Orange County (Sand Lake) have been cited as examples. Although Mr. Talbert's testimony supports these proposed findings of fact to some extent, there is insufficient evidence to conclude why those hospitals were
authorized by the Department. If the evidence showed that additional acute care beds were needed in Seminole and Orange Counties when those hospitals were approved it would be consistent with the Department's rules to locate the additional acute care beds where population growth had occurred. In these cases, if there was an established need for an additional acute care hospital in Orange County, the evidence would probably justify placing it in east Orange County. The facts, however, do not indicate any need for additional acute care beds in Orange County.
Other MSA Considerations.
It is not essential to identify a MSA for purposes of considering an application for a new acute care hospital as suggested by AMI. As discussed, infra, the designation of a MSA by an applicant may be helpful for some purposes, but not to determine whether there is a need for a new hospital.
AMI has proposed a finding of fact that Orlando Regional Medical Center and Florida Hospital's Orlando campus, both of which are located in Orlando, are tertiary care facilities providing services of higher complexity for patients; they therefore attract a substantial number of referral patients in need of more extensive, complex services which are not available from primary care hospitals. The existence of these tertiary facilities has justified the allocation of more acute care beds to Orange and Seminole Counties in the past. Although these facts were proved at the hearing, the overriding fact remains clear that there is no need for additional acute care beds in Orange County.
AMI attempted to prove through Mr. Mark Richardson an expert in health planning, that there is a need for acute care beds in AMI's MSA based upon the characteristics of the MSA. Mr. Richardson testified that his projections were not based or contingent on the Formula of Section 10-5.11(23), F.A.C., and acknowledged the decline in utilization of acute care hospital beds in Orange County. Mr. Richardson did state that the Department's projection of a net acute care bed need of 89 beds under the Formula supported his projections. The projection of a need for 89 beds was clearly based upon
outdated data. Use of current utilization data indicates an excess of 464 acute care beds. Therefore, if application of the Formula resulting in a bed need of
89 beds supports Mr. Richardson's projections, an application of the Formula which results in an excess of 464 acute care beds must indicate that Mr. Richardson's projections are suspect.
Mr. Richardson's projections were clearly based primarily on the characteristics of AMI's MSA. Because of the narrow scope of Mr. Richardson's analysis, the trend in Orange County and District 7 as to reduced occupancy rates did not affect his projections. In particular, Mr. Richardson used an 80 percent occupancy rate for all beds except obstetric beds, for which he used a
75 percent rate. These occupancy rates are excessive when compared to the occupancy rates for District 7, and Orange and Seminole Counties. Additionally, Mr. Richardson failed to consider the effect of unopened acute care beds in Orange County on occupancy rates. On average, there are over 1,800 unoccupied acute care beds in District 7 and 1,000 unoccupied beds in Orange County. This does not include 134 acute care beds to be opened at Florida Hospital's Orlando campus, 76 acute care beds to be opened at Florida Hospital's Altamonte Springs campus or 81 acute care beds to be opened at Holmes Regional Medical Center in Brevard County. When opened, these additional acute care beds will further decrease occupancy rates in Orange County and District 7.
Even if Mr. Richardson's projections were totally accurate, such a finding would not be relevant to the question of whether there is a need for additional acute care beds in Orange County. That is the crucial question in these cases.
Mr. Richardson and AMI have attempted to justify Mr. Richardson's projections by suggesting that the Department does not consider itself precluded from assessing the need for acute case beds on an area within a subdistrict based upon Mr. Nelson's testimony. Mr. Nelson's testimony clearly does not support the use of a MSA to determine if there is a need for additional acute care beds in Orange County. Mr. Nelson, when asked whether an applicant could determine bed need based upon the character of a part of Orange County replied:
There's nothing to preclude an Applicant from doing that, from carving out what I would call an Applicant's service area, running their own calculations of bed need, and doing whatever they feel they want to do in that regard. And we're not ,precluded from looking at it, either.
But our position is that that has no official basis in determinations of bed need. We do look at those subdistricts but not to determine bed need.
We look at them to get a better understanding of an application, because we get a sense, from looking at the unique service areas, what they' re trying to accomplish. That would be number one.
Number two, and from having worked on
the private side, I know one of the reasons why this is done, this is an attempt to define a market share or market area and a percent of all the considerations of what the existing hospitals that are already in the
area have in the way of markets and market shares, and so on.
So on the second hand, looking at the subdistricts is very important, from the standpoint of helping us to assess the financial feasibility of these proposals, which is another criterion, of course, altogether, specifically in the longer term.
Because, you know, you have to know who
is getting patients from where in order to be able to fully understand that.
And I think the third way in which these subdistricts, these Applicants -- pardon the expression, subdistricts, that's not what these things are -- the Applicant's medical services areas are useful is in those cases where we may have a need helping us to decide where, within, let's say a subdistrict that need should be met.
For example, let's suppose in this case, we were showning a need of sufficient
magnitude to approve a hospital. But instead of having two applications within a few miles of each other, we had one for east Orange County, and one in west Orange County, and portions of other counties, each of which had carved out their own service area, then it would be very important for us, in that case, to look at these things very carefully, to consider them to help us determine which location was preferable.
But in terms of calculating bed need
from the Department's perspective, we don't put any stock in those whatsoever from that perspective. ,Emphasis added.
Based upon the above testimony, it is clear that MSAs may be looked at if an applicant uses one in order to provide a better understanding of the applicant's proposal, to assess financial feasibility and, where there is an established need for acute care beds, to decide where in the subdistrict the need is the greatest. MSAs are clearly not relied upon to determine the initial question of whether there is a need for acute care beds. To determine acute care bed need based upon a MSA without considering `the' entire subdistrict of Orange County is not appropriate. The Department, as the statute and rules require, determines need at the district level and allocates the district bed need to the subdistricts. In fact, the Department has ruled that it is improper to divide a district into subdistricts smaller than those designated by a local health council for purposes of determining need as pointed out by Winter Park in its proposed recommended order. Southeastern Palm Beach County Hospital District v. Department of Health and Rehabilitative Services, 5 F.A.L.R. 1091A (1983).
For purposes of determining whether there is a need for additional acute care hospital beds in Orange County, Mr. Richardson's testimony is of very little value.
STATUTORY CRITERIA.
Section 10-5.11(23)(b), F.A.C., provides that a certificate of need may be issued when the criteria, other than bed need, as provided in Section 38l.494(6)(c), Florida Statutes (1984 Suppl.), demonstrate need. The Petitioners have attempted to prove that there is an accessibility problem in Orange County which demonstrates acute care bed need under Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.). The facts do not support such a conclusion as discussed, supra.
This section of the Recommended Order contains findings of fact with regard to the other criteria contained in Section 381.494(6)(c) and (d) Florida Statutes (1984 Suppl.).
Consistency with the State and Local Health Plan: Section 381.494(6(c)1, Florida Statutes.
The applications of the Petitioners are only partly consistent with the State Health Plan and the Council's Local Health Plan.
The Council's Local Health Plan establishes the following occupancy levels for acute care beds which should be met before new acute care beds are approved:
TYPE OF BEDS OCCUPANCY LEVEL
Medical - Surgical 80%
Obstetrical 75%
As already discussed, occupancy levels for acute care beds in District 7, and in Orange and Seminole Counties were below 70 percent in 1984. The declining utilization of acute care beds will continue for the next 2 to 4 years and therefore it does not appear that the occupancy level goals in the Local Health Plan will be met by either applicant.
These occupancy level goals are intended to be used as checks on the bed need methodologies. The importance of existing occupancy levels in determining whether to add additional acute care beds to a district is recognized in Section 10-5.11(23)(g), F.A.C.
The Petitioners have projected that they will achieve an occupancy rate of 45-50 percent after one year of operation. South Seminole Community Hospital, which was opened in May of 1984 in Longwood, Seminole County, Florida, achieved only a 27 percent occupancy rate after 8 months of operation. In light of the fact that South Seminole Community Hospital is located in Longwood, it is doubtful the Petitioners will achieve their projected occupancy rate.
The Petitioners have projected that their proposed hospitals will achieve an 80 percent occupancy rate, which is an optimal occupancy rate. Their projections, based upon the findings of fact as to acute care bed need in Orange County and current occupancy levels, are highly unlikely to be reached. Especially in light of the fact that the average occupancy rate in Orange County was only 60.80 percent in 1984.
The proposals are also inconsistent with the Local Health Plan goal that a proposal be consistent with the state's acute care bed need methodology. Based upon an application of the Formula, using current data, District 7 and Orange County will have an excess of acute care beds in 1990.
Winter Park's proposal is consistent with several other portions of the Local Health Plan. Winter Park's facility will have an active outpatient program, its beds can be available within 24 hours and it will meet several priorities under the Local Health Plan such as being accredited and licensed, and being willing to serve indigents and other patients without regard to payment source. AMI's proposal also meets some of these goals.
The Local Health Plan also contains a provision to the effect that "needed" beds should be approved at existing hospitals unless the addition of a new hospital would substantially improve access by at least 15 minutes for 25,000 or more residents. Winter Park has suggested a finding of fact that this provision has been met. If there was a need for additional acute care beds in Orange County such a finding would be appropriate. There is, however, clearly no need for additional acute care beds in Orange County. This portion of the Local Health Plan therefore does not apply.
Finally, the Local Health Plan provides that applicants should be able to document community and provider support for their proposals. Community support for the proposals has been demonstrated. Provider support, however, has not been demonstrated. In fact, there is opposition from some providers to the proposed new hospitals, i.e., Florida Hospital and OGH.
The proposals are also partially consistent with the State's health plan. The evidence does not clearly establish, however, that the proposals are totally consistent with the goals of the State health plan. Mr. Talbert did testify that Winter Park's proposal is consistent with the goals of the State health plan. It was not clear, however, whether all of the goals were met. Also, Mr. Talbert's testimony was inconsistent with other evidence in this proceeding in some respects. For example, Mr. Talbert testified that one goal of the State health plan is to provide adequate access to acute care resources. The evidence clearly shows that adequate access is already available in Orange County. To the extent it can be inferred that Mr. Talbert's testimony also applies to AMI's proposal, the same problems exist. The evidence does not support a finding that AMI's proposal is totally consistent with the State health plan.
Based upon the foregoing, it does not appear that either proposal is totally consistent with the Local Health Plan or the State health plan.
The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization and Adequacy of Like and Existing Health Care Services in the Service District; Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.).
Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires that the availability, quality of care, efficiency, appropriateness, extent of utilization and adequacy of like and existing health care services in the service district be considered. The service district for this purpose is District 7. The designation of subdistricts in District 7 is specifically for purposes of allocating district bed need to the subdistricts. The parties, to the extent they addressed this criterion, presented evidence primarily for Orange County only, however.
The availability, accessibility and extent of utilization of like and existing acute care hospitals in Orange County has been discussed and findings of fact with regard thereto have been made, supra. To summarize, like and existing services in Orange County are available and accessible and are underutilized.
The Petitioners have not shown that like an existing services in District 7 do not provide quality of care or that they are not efficient, appropriate or adequate.
Winter Park has argued that like and existing services are not accessible. The evidence does not support such a finding of fact. AMI has argued that there are no like and existing services accessible in the MSAs. That is not the test. The determination to made under Section 381.494(6)(c)2,
Florida Statutes (1984 Suppl.), is whether there are like and existing services in the service district. The service district in these cases is all of District 7, not the MSAs.
There are currently seven acute care hospitals in Orange County: Florida Hospital, OGH, Orlando Regional Medical Center, Brookwood Hospital, Humana Lucerne, Winter Park Hospital and West Orange Memorial Hospital. Additionally, Orlando Regional Medical Center - Sand Lake is expected to be opened before 1990. These district. The evidence does not support a finding that some or all of these facilities or others in District 7 are not available, providing quality of care, efficient, appropriate, accessible, over utilized or adequate.
AMI and OGH spent an inordinate amount of time and effort presenting evidence on the issue of whether OGH is a like and existing service. The evidence supports a finding that OGH is a like and existing service. Even if OGH was not a like and existing service, such a conclusion would only be relevant if it were concluded that like and existing services must exist within the boundaries of the MSAs or that OGH was the only accessible acute care hospital to the residents of the MSAs. As stated, supra, the pertinent area is not the MSA but District 7 and there are clearly other acute care hospitals in District 7 and some of those hospitals are accessible.
If Orange County alone is the appropriate service area for purposes of applying this criterion, the evidence clearly proves that the Petitioners do not meet the criterion. The evidence proves that there are available, quality, appropriate, efficient and adequate like and existing health care services in Orange County and District 7.
The Ability of the Applicants to Provide Quality of Care; Section 381.494(6)(c)3. Florida Statutes (1984 Suppl.).
The parties have stipulated that this criterion has been meet.
113.. The Availability and Adequacy of Other Health Care Facilities and Services in the Service District which may Serve as Alternatives: Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.).
There are clearly other health care facilities in Orange County providing like and existing services. The evidence does not, however, establish that there are other health care facilities and services in Orange County which are alternatives to a 100 bed acute care hospital.
Transferring beds from existing facilities has been suggested as an alternative to the proposed new hospitals. This suggested "alternative" could be achieved as easily by approving a new hospital and closing some existing beds. The cost would be essentially the some. Transferring beds is not an alternative.
Use of existing beds which are not being occupied is not a viable alternative either, as suggested by OGH in its proposed findings of fact.
Probable Economies and Improvements in Service that may be Derived from Operation of Joint, Cooperative or Shared Health Care Resources; Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.).
AMI's proposed facility may eventually share some services with Brookwood Community Hospital in the area of administrative management. Brookwood Community Hospital (hereinafter referred to as "Brookwood") is a 157 bed general acute care hospital owned and operated by a limited partnership. The general partner and owner of 82.5 percent of the partnership is Brookwood Medical Center of Orlando, Inc., which in turn is owned by AMI. AMI presented its proposal assuming that there would not be any shared services with Brookwood.
Through AMI, UCH, Inc., can receive price discounts for its purchases, typically 15 percent to 20 percent lower than the lowest price available in the market generally.
UCH, Inc., will also be able to participate in Brookwood's preferred provider organization agreement. This could result in enhanced utilization of UCH, Inc., which could result in decreased health care costs.
Winter Park will share some resources with its new hospital. The resources to be shared include Winter Park's incinerator, CAT Scanner, cardiac catheterization ion laboratory, and certain personnel. Centralized accounting, centralized purchasing and some centralized management would also be employed.
Both proposals will have joint, cooperative or shared health care resources which would result in probable economics and improvements in service.
The Need in the Service District of the Applicant for Special Equipment and Services not Reasonably and Economically Accessible in Adjoining Areas; Section 381.494(6)(c)6, Florida Statutes (1984 Suppl.).
The parties have stipulated that this criterion does not apply.
The Need for Research and Educational Facilities: Section 81.494(6)(c) 7, Florida Statutes (1984 Suppl.).
The parties have stipulated that this criterion does not apply.
The Availability of Resources; the Effects on Clinical Needs of Health Professional Training Programs in the Service District: Accessibility to Schools for Health Professionals: the Availability of Alternative Uses of Resources: Extent Accessible to All Residents; Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.).
The parties have stipulated that Section 81.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met to the extent it deals with "health and management manpower and personnel only." The other factors to be considered under this criterion were not stipulated to.
The first factor to be considered is the availability of resources, including physicians and funds for capital and operating expenditures. The availability of funds will be discussed, infra. As to the availability of physicians, the weight of the evidence supports a finding that physicians are available to staff either of the proposed facilities. AMI proposed a finding of fact that ", unlike WPMH, AMI demonstrated that the major medical specialty areas will be represented by various physicians who will joint the UCH medical staff." AMI did demonstrate that various medical specialty physicians would be willing to work at UCH, Inc. It is also true that Winter Park did not demonstrate that all of the medical specialty physicians would be willing to work at its proposed facility. Despite these facts, several physicians testified that they would use Winter Park's proposed facility if it were approved instead of UCH, Inc., and Mr. Willard Wisler's unrebutted testimony establishes that Winter Park would have no difficulty staffing its proposed hospital.
Both Petitioners have established that physician resources are available for project accomplishment and operation.
The second and third factors to be considered are the effect the projects will have on clinical needs of health professional training programs in Orange County and, if available in a limited number of facilities, the extent to which services will be available to schools for health professionals in Orange County. The weight of the evidence does not establish that professional training programs are available in a limited number of facilities. In fact the evidence establishes that the University of Central Florida (hereinafter referred to as "UCF"), which is located in east Orange County, has fifty-two affiliation agreements with hospitals and other medical facilities. These affiliation agreements include agreements involving clinical training of radiology technicians at Florida Hospital and, in Brevard County, at Halifax Hospital. Approximately 32 radiology students are currently involved in hospital training programs.
AMI presented evidence proving the existence of a proposed "affiliation agreement" between its proposed hospital and UCF. AMI and UCF have in fact entered into an Agreement of Intent. The Agreement of intent essentially provides, in relevant part, that AMI's proposed hospital, if approved, would provide clinical training to UCF radiology technician students. Approximately three to six UCF students per semester would receive training at the new hospital.
The program with UCF will clearly have a positive effect on "clinical needs of health professional training programs" in Orange County. The agreement also provides for certain other benefits to UCF in the form of certain gifts. Those benefits, however, are not relevant in considering whether a certificate of need should be issued to AMI. The portion of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), at issue in this proceeding requires only that the effect on "clinical needs of health professional training programs" be considered. AMI's gifts will not meet the "clinical needs" of health professional training programs. AMI's proposed findings of fact with regard to its gifts to UCF are unnecessary.
Florida Hospital and Winter Park have proposed several findings of fact concerning AMI's motive in entering into the agreement with UCF. Those proposed findings are not supported by the evidence and are not relevant. Florida Hospital also has proposed findings of fact concerning whether a tertiary hospital would be a better facility for training, the effect of patient mix on training, the lack of any study by UCF to assess the benefits of the agreement and the fact that AMI's proposed facility will not be a teaching hospital or have full-time teachers. Those proposed findings are unnecessary. The fact is, the clinical training to be provided by AMI's facility will be a benefit to the clinical needs of health professional training programs in District 7.
Because of the substantial amount of gifts to be made to UCF, which will be paid for by patients of AMI's facility, the costs of AMI's clinical program will be substantial.
Winter Park is currently involved in meeting clinical needs of health professional training programs at a number of educational institutions, including UCF. Winter Park's involvement includes radiology and several other programs. Although no agreements have been entered into, programs to meet such clinical needs will be provided at Winter Park's new facility. Because Winter Park has not committed to make any gifts to educational institutions, the costs of its programs will probably be less than AMI's program.
The fourth factor to be considered is the availability of alternative uses of resources for the' provision of other health services. The evidence presented at the hearing does not establish that there are not alternative uses of resources. The petitioners failed to present evidence sufficient to conclude that there are not alternative uses for available resources.
Finally, the extent to which the proposed services will be accessible to all residents of the service district is to be considered. Both Petitioners are willing to accept all patients regardless of age, sex, race, color or national origin, and medically underserved groups.
The Petitioners have met most, but not all, of the requirements of this criterion.
Immediate and Long-Term Financial Feasibility; Section 1.494(6)(c)9. Florida Statutes (1984 Suppl.).
Immediate Financial Feasibility.
AMI's proposed facility will be financed by a 50 percent equity contribution from AMI to UCF, Inc., and 50 percent debt financing from AMI at a maximum interest rate of 12 percent amortized over 30 years. AMI has sufficient lines of credit to cover the amount needed for debt financing. AMI also has sufficient cash and unrestricted liquid assets (almost $300,000,000.00 by the end of its 1984 fiscal year) and generates enough capital ($300,000,000.00 to
$400,000,000.00 a year) to fund its equity contribution and the debt. AMI also has sufficient funds to provide working capital needs of UCF, Inc.
Exactly how Winter Park's proposed facility will be financed is less clear. Both of the Petitioners have suggested that the other has not proved that it has "committed" itself to funding their respective proposals. Although the evidence does raise questions as to whether AMI or Winter Park has finally committed the total funds necessary to complete their proposals, the weight of
the evidence supports a finding that both Petitioners are committed to funding their proposals. More importantly, the test is whether the Petitioners have available financing sources. University Community Hospital, et ala v.
Department of Health and Rehabilitative Services, 5 F.A.L.R. 1346-A, 1360-A (1983).
AMI clearly proved that its Executive Committee had approved its proposal. One of its witnesses, however, testified that the approval of capital expenditures of over $1,000,000.00 took approval of the full AMI Board of Directors. Winter Park clearly proved that its Board of Trustees had approved only $4,000,000.00 of the costs of its facility. Despite these facts, the evidence establishes that, although final approval of all the funds necessary to fund the proposals may not have been given, the funds necessary to insure the immediate, financial feasibility of both proposals are available.
Where the funds will come from in Winter Park's case and the total amount of funds needed by Winter Park is far from being crystal clear. Winter Park failed to take into account several expenses it will incur, including sewer capacity reserve fees (approximately $160,500.00), telephone lease costs ($20,000.00) and possibly some interest expenses. There may also be an underestimate of the cost of debt financing, depending upon whether tax-exempt loans are available to Winter Park. The costs of sewer capacity reserve and the telephone lease can probably be covered by the contingency funds projected by Winter Park. AMI's proposed findings of fact with regard to equipment costs underestimates are rejected as unsupported by the weight of all of the evidence. Even with the understatement of project costs, the evidence supports a conclusion that Winter Park's proposal is immediately financial feasible.
Winter Park currently has set aside "over $7,000,000.00" which can be applied to fund its proposal. (Although Winter Park has certain planned or ongoing capital improvements, the evidence does not prove that these improvements will be funded out of the funds set aside for the proposed new hospital, as suggested by AMI)'.
Winter Park also has lines of credit with Barnett Bank and Sun Bank of $5,000,000.00 each. Neither line of credit has been used in the past. The Sun Bank line of credit was recently renewed and is available for one year. The Barnett Bank line of credit is also good for only one year. Both lines of credit have been renewed in the past. These lines of credit will have to be renewed before construction of Winter Park's facility begins. Winter Park presented no evidence as to whether the lines of credit would be renewed by either bank, however. Therefore, the record does not contain evidence as to whether the lines of credit will be available.
Winter Park is also the sole beneficiary of the Winter Park Memorial Hospital Association Foundation, a not-for-profit foundation set upon to receive donations for the support of Winter Park. The Foundation "would make funds available to it [Winter Parka when needed." (Although testimony concerning Winter Park's alleged ability to "request" funds from the Foundation was struck, the quoted testimony was not objected to). The Foundation currently has
$2,000,000.00 which could be provided to Winter Park.
Finally, Winter Park has a commitment from Barnett Bank for a loan of
$9,181,648.00. The loan has been committed whether interest on the loan is tax- free or taxable to Barnett Banks. Whether the loan is tax-free will affect the immediate and long- term financial feasibility of the proposal. If the loan is not tax-free, additional interest expense will be incurred; instead of being
financed at a 7.696 interest rate, Winter Park will be charged approximately
11.5 percent interest if the loan is not tax- free. If the loan is tax-free, Winter Park may have failed to take into account costs associated with obtaining tax-free financing, i.e., underwriter's fees. AMI has proposed a number of findings of fact concerning additional costs associated with whether the Barnett Bank loan is tax-free. Those findings of fact are not relevant, however, in determining immediate financial `feasibility of Winter Park's proposal. The evidence establishes that the funds available to Winter Park are sufficient to cover Winter Park's projected costs and the costs it failed to include in its proposal (including the $1,20 0,000.00 of working capital which will be needed by the and of 1988).
Both proposals are financially feasible in the short-term.
Long Term Financial Feasibility.
The Petitioners have failed to prove that their proposals are financially feasible in the long run. The projections of the Petitioners with regard to expected gross revenue depends upon whether their utilization projections are correct. Based upon the conclusion that there is no need for the proprosed facilities it is unrealistic to expect the facilities to be financially feasible.
AMI's projections as to gross revenue depend on Mr. Richardson's need analysis for AMI's MSA. As discussed, supra, Mr. Richardson's projections were based upon unrealistic occupancy rates.
Winter Park's projected utilization is based upon Winter Park's historical experience with its MSA for 1983. Mr. Talbert's and Mr. John Winfrey's reliance on this data in light of the trend toward reduced utilization of hospitals in Orange County is misplaced. Determining utilization of Winter Park's proposed hospital in future years based on utilization of an existing hospital in light of the trend toward reduced utilization of hospitals is very suspect.
The fact that east Orange County is expected to grow in terms of population does not eliminate the concern with regard to utilization. Orange County has been growing since 1980 and before. Despite that growth, hospital utilization has declined.
As to the projected expenses of the proposed hospitals which effect the financial feasibility of the proposals, it appears that AMI's projections are reasonable. A number of questions concerning Winter Park's expenses were raised, however, by the evidence.
The evidence supports a finding that Winter Park has failed to take into account some expenses which will affect the long term financial feasibility of its proposal. Expenses not taken into account include phone lease expenses ($15,000.00 to $20,000.00), indigent care assessments ($58,000.00 in the second year of operation) and start-up costs ($22,680.00 a year). The evidence, however, also supports a finding that Winter Park's estimate of medicare contractual allowances was $318,900.00 too high and that depreciation expense was $130,000.00 too high. These overstatements of expenses are more than sufficient to cover the understatements of expenses discussed in this paragraph.
The primary problem with Winter Park's estimate of expenses is that Winter Park has projected interest expense at a tax- exempt rate of 7.6 percent.
The evidence does not prove that Winter Park can, however, obtain tax-exempt financing. Winter Park only presented evidence that Barnett Bank is willing to loan funds on a tax-exempt or taxable basis. Winter Park must, however, obtain approval of its proposed tax-exempt financing from the Orange County Health Facilities Authority. See Chapter 154, Florida Statutes (1983). No evidence that such approval could be obtained was presented at the hearing. Winter has therefore failed to prove that its estimated interest expenses can be achieved.
The evidence also shows that if Winter Park cannot obtain tax-exempt financing, it will have to borrow funds at an 11.5 percent interest rate. This rate of interest can be obtained, but the additional interest expense would result in a net loss for the second year of operation.
Based upon the foregoing, Winter Park has failed to prove that its proposal is financially feasible in the long-term.
Winter Park has proposed findings of fact to the effect that it could charge a higher rate for its services to cover understated expenses. No evidence was presented, however, that proves that Winter Park would be willing or committed to a higher charge for its services.
AMI's proposed findings of fact with regard to expenses for utilities, food and drugs, other operating expenses, incinerator costs and equipment costs are rejected. AMI's proposed findings of fact with regard to the goal of Winter Park to achieve an optimum profit margin of 5 percent to 7 percent are rejected because that goal does not apply to the proposed facility. The projected profit margin of the proposed facility is only seven-tenths of one percent. AMI's proposed findings of fact as to the years projections were made for (two years instead of five), the manner of making those projections (no balance sheet, no cash flow statements and no quarterly breakdowns) and the lack of a feasibility study are not necessary. AMI's remaining proposed findings of facts concerning "soft spots" in Winter Park's projections are also rejected.
Special Needs and Circumstances of Health Maintenance Organizations; Section 381.494(6)(c)10, Florida Statutes (1984 Suppl.).
The parties have stipulated that this criterion does not apply.
Needs and Circumstances of Entities which Provide Services or Resources to Individuals not Residing in the Service District or Adjacent Service Districts; Section 381.494(6)(c)11, Florida Statutes (1984 Suppl.).
The parties have stipulated that this criterion does not apply.
Probable Impact of the Proposal on the Costs of Providing Health Services; Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.).
The weight of the evidence clearly supports a conclusion that if either of the proposed hospitals is approved, the probable impact on the costs of providing health services would be negative. The only real question raised by the evidence is the degree of the negative impact.
It has already been found that there will be an excess of beds in Orange County in 1990 and that utilization rates are decreasing and will continue to do so. To add 100 acute care beds to an already over-bedded subdistrict can only further add to the number of excessive beds. Patients who would occupy 100 new acute care beds would have access to other hospitals in
Orange County if a new hospital is not approved. If it is assumed that patients could be attracted to a new hospital in the MSA's it necessarily follows that those patients will not use an existing, already underutilized, hospital in Orange County, Seminole County or the rest of District 7.
Additionally, the evidence clearly shows that some patients who currently use existing Orange and Seminole County hospitals would be attracted to a new hospital in the MSAs. AMI has suggested that such a loss of patients would be "minimal." Minimal or not, the loss of any number of patients would result in a loss of patient days and revenue to existing hospitals which are on average already underutilized. If patients are lost by existing hospitals, the ability to serve indigents could be adversely affected.
The projected population growth for the MSA's does not solve the problem either. Orange County has been experiencing population growth during the 1980's, as well as prior to 1980. Despite this population growth, utilization rates have been decreasing.
Even Mr. Richardson, AMI's expert health planner, admitted there would be an impact on existing hospitals. Mr. Richardson indicated that there would a "1.5 percent occupancy impact on the system" by 1990 based upon Mr. Margolis' analysis. Mr. Richardson indicated that such an impact would be "minimal." Whether a 1.5 percent impact is minimal is not the issue. The issue is what effect such an impact would have. The weight of the evidence clearly supports the finding that the impact would be negative and the citizens of Orange County would suffer the consequences of that "minimal" impact.
Florida Hospital's expert health planner, Mr. Margolis, was the most credible witness with regard to this criterion. His testimony proves that Florida Hospital and OGH could lose 5,400 to 6,000 patient days if a new 100 acute care hospital is approved. How much the dollar loss would be as a result of such a decrease in patient days is not clear. There was testimony that OGH could lose $1,000,000.00 to $3,500,000.00 in gross revenue. AMI has again suggested that the loss in patient days and revenue to OGH would be minimal and that OGH's testimony as to the amount of loss was misleading.
Mr. Patrick Deegan, who testified as an expert in finance for OGH, did fail to take into account any reduction in expenses which might be associated with a loss in revenue and also failed to take into account increases in revenue as a result of growth. Although these factors could influence the amount of projected losses in revenue, the fact remains that a new acute care hospital could and probably would have a negative impact on OGH.
AMI has also suggested that OGH could and should reduce its staff. This suggestion is based upon a comparison of OGH's staffing patterns and UCH Inc's proposed staffing. The record does not support AMI's proposed findings of fact. The record does not prove that UCH, Inc's, proposed staff will be at a more appropriate staffing level. Nor does the record establish that a reduction in staff at OGH would be detrimental, as suggested by OGH.
As to Florida Hospital, AMI also suggests that any impact to its campuses would be minimal, if any. It is true that there probably would be no impact on Florida Hospital's Apopka campus. Florida Hospital's Orlando campus,
however, gets 20 percent of its admission from the MSAs and its Altamonte Springs campus gets 3 percent of its admissions from the MSAs, as AMI points out in its proposed findings of fact. If any of those patients utilize a new hospital in the MSAs, Florida Hospital will lose patients and will be adversely affected.
AMI suggested several findings of fact with regard to the financial well-being of Florida Hospital, the addition of beds at its Altamonte Springs and Orlando campuses and its motives in intervening in these cases. These proposed facts do not support a finding that Florida Hospital would not be negatively affected by the opening of a new 100 acute care bed hospital in Orange County.
Finally, Winter Park has proposed findings of fact to the effect that a new Winter Park hospital in the MSAs will foster competition and thereby lower costs in Orange County for hospital services. The record does not support these proposed findings of fact in light of the excess of beds in District 7 and the underutilization of existing beds.
Based upon the foregoing, Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), has not been met by the Petitioners' proposals.
Costs and Methods of Construction; Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.).
The Petitioners only partially proved that Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), will be met. This section requires proof as to the costs and methods of construction, including methods of energy provision and the availability of alternative, less costly or more effective methods of construction. The Petitioners only proved that the costs of construction would be reasonable.
AMI's proposed facility will have 99,000 square feet. The total cost of construction will be $10,095,000.00 including $650,000.00 for site preparation, $8,161,000.00 for labor, materials, overhead and profit,
$406,000.00 for contingencies and $878,000.00 for inflation. Architectural and engineering fees will cost an additional $566,700.00.
AMI's costs of construction do not include the $236,800.00 cost of reserving sewage capacity or the costs of obtaining appropriate rezoning of its property. These costs will add to the total cost of construction and the total cost of the proposal. AMI's contingency funds are sufficient to cover these amounts. AMI's additional findings of fact concerning construction costs are cumulative or unnecessary for purposes of determining if this criterion has been met.
Winter Parks's proposed facility will have 98,763 square feet. Total cost of construction projected by Winter Park is $10,415,000.00, consisting of
$375,000.00 for site preparation, $9,000,000.00 for labor, materials, overhead and profit, $468,700.00 for contingencies and $552,200.00 for inflation. Winter Park's projections do not include the costs of reserving sewage capacity which will add approximately $150,000.00 in costs. This additional amount can be covered by the contingency amount. Although the evidence was contradictory, Winter Park did not inadvertently leave out the cost of an incinerator--there will be no incinerator at the new hospital.
Although the Petitioners presented testimony to the effect that their projected costs of construction are reasonable, no consideration was given to whether the proposed facilities would be developments of regional impact (hereinafter referred to as "DRI") under Chapter 380, Florida Statutes (1983), and the costs associated with such a determination. The evidence supports conclusion that there will be some costs associated with the determination of whether the proposals are DRIs. The additional cost, however, does not appear to be significant.
The Petitioners have failed to prove that the methods of construction are reasonable. They have also failed to prove that the provision of energy will be reasonable or that there are not alternative, less costly, or more efficient methods of construction available.
Section 381.494(6)(d). Florida Statutes (1984 Suppl.). In addition to considering the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), Section 381.494(6)(d), Florida Statutes (1984 Suppl.), requires findings of fact in cases of capital expenditure proposals for new health services to inpatients as follows:
That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable.
The existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner.
In the case of new construction, that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable.
That patients will experience
serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service.
In the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, that the addition will be consistent with the plans of other agencies of the state responsible for the provision and financing of long-term care, including home health services.
The facts concerning the first three items quoted are favorable to the Petitioners. The last one does not apply. The fourth item has not been proved to be true in this case.
Summary.
In summary, the evidence proves that an application of the criteria of Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate the need for either of the proposed facilities. The Petitioners
have only proved that they can provide quality of care, that there are not alternatives to their proposals, that they will have shared resources, that personnel are available, that they have the capital to create the facilities, that they will improve the clinical needs of health professional training programs, and that their proposals are `financially feasible in the short-run. The Petitioners, however, have failed to prove any need for the facilities.
Their proposals are not consistent with the local health plan or the State health plan. There are sufficient, underutilized existing hospitals to meet any need for hospital care and they will be adversely affected by the proposed facilities. The proposed facilities are not financially feasible in the long run.
THE NEED FOR A CAT SCANNER
AMI is also seeking a certificate of need for a CAT Scanner in this proceeding. The determination of whether such a certificate of need should be issued is governed by Section 10-5.11(13), F.A.C.
In order to qualify for CAT Scanner, AMI must first obtain approval of its proposed hospital. Because it has been concluded that a certificate of need for a new hospital should not be granted, AMI should not be granted a certificate of need for a CAT Scanner; it will not qualify under Section 10- 5.11(13), F.A.C.
In an abundance of caution, the following findings of fact are made as to whether a certificate of need for a CAT Scanner should be issued if AMI's application for a certificate of need for an acute care hospital is approved by the Department.
Section 10-5.11(13)(b), F.A.C., provides that a favorable determination will not be given to applicants failing to meet the standards and criteria of Section 10-5.11(13)(b)1-10, F.A.C. The evidence clearly establishes that AMI's CAT Scanner application meets the standards of Sections 10- 5.11(13)(b) 1-3 and 7-9, F.A.C. Section 10-5.11(13)(b)4, F.A.C., does not apply.
Section 10-5.11(13)(b)5, F.A.C., requires that an applicant document that there is a need for at least 1,800 scans to be accomplished in the first year of operation and at least 2,400 scans per year thereafter. Mr. Richardson testified that this standard is intended to apply to existing providers and that for a new hospital the need should apply to a five year horizon (1990 in this case). Mr. Richardson indicated that in 1990, this standard can be met.
The language of Section 10-5.11(13(b)5, is clear; there must be a need documented for the first year of operation and each year thereafter. In this case, the first year of operation will be 1987. AMI has not documented that there is a need for 1800 scans in 1987 or 2,400 scans per year thereafter.
Section 10-5.11(13)(b)6, F.A.C., requires that the applicant document that the number of scans per existing scanner exceeded 2,400 during the "preceding 12 months." The evidence establishes that during the 12 months preceding the hearing all of the fixed CAT Scanners located at hospitals except two were being used for more than 2,400 scans. Again, Mr. Richardson indicated that this standard should be applied to the 12 months preceding 1990. That is not what the rule specifies. The standard applies to the 12 months preceding the hearing. The two units that have not been used for 2,400 scans just started operation, however. Because the rule requires that in the first year of
operation only 1,800 scans need to be performed, those units should not be considered in determining if AMI meets this standard. Therefore, AMI meets the requirements of Section 10-5.11(13)(b)6, F.A.C.
The last standard, Section 10-5.11(13)(b)10, F.A.C., provides that extenuating circumstances pertaining to health care quality or access problems, improved cost benefit consideration or research needs may be considered. The facts do not support a finding that there are extenuating circumstances in this case. The facts do prove that any hospital such as the AMI proposed hospital should have access to a CAT Scanner. This need, however, can be met by a mobile CAT Scanner or by transferring patients to a facility with a CAT Scanner, although the latter alternative is less desirable.
The evidence clearly proves that there is not access problem with regard to obtaining the services of a CAT Scanner.
AMI has not met the requirements of Section 10-5.11(13)(b), F.A.C. Taking into account the factors to be considered under Section 10-5.11(13)(a)1- 8, F.A.C., also supports a finding that a certificate of need for a CAT Scanner should not be issued to AMI even if there is a need for its proposed hospital.
CONCLUSION
Based upon the foregoing, there is no need for a new 100-bed acute care hospital in Orange County, Florida. The Petitioners have failed to establish a need for a 100-bed acute care hospital under Section 10-5.11(23),
F.A.C. The Petitioners have also failed to establish a need for their proposals under Section 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.).
Finally, AMI has failed to establish a need for a CAT Scanner. AMI's application for a CAT Scanner fails to meet the requirements of Section 10- 5.11(13), F.A.C., or Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.).
COMPARISION OF THE APPLICANTS
Although the facts do not support the issuance of a certificate of need to either applicant, the following findings of fact are made in case it is ultimately decided that there is a need for a 100-bed acute care hospital in Orange County.
If a need exists sufficient to justify a 100-bed acute care hospital, that need exists almost the same for a hospital in AMI's MSA as in Winter Park's MSA. There is not a greater need for one of the proposals as compared to the other based solely on bed need in the MSA's or accessibility. Any difference in the ability to access either of the proposed hospitals is too insignificant to make any difference. Therefore, the determination of the "better" applicant depends upon an application of the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), other than bed need and accessibility.
Several of the criteria do not apply or have been stipulated to as having been met by both of the parties. Therefore, the following provisions are not applicable to a determination of which Petitioner should be granted a certificate of need: Sections 381.494(6)(c)3,4,6,7,10 and 11, Florida Statutes (1984 Suppl.).
A few of the criteria apply equally or with no significant difference to the Petitioners: Sections 381.494(6)(c) 1,5 and 12, Florida Statutes (1984 Suppl.).
Most of Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), has been met by the Petitioners with no significant difference. The facts support a conclusion that the support of clinical programs by Winter Park will be less costly because of the substantial gifts to be made by AMI in association with its support of clinical programs.
Section 381.494(6)(c)9, Florida Statutes (1984 Suppl.), requires that proposals be financially feasible. Winter Park has failed to prove that its proposal is financially feasible even if there is a need for a new hospital. AMI's proposed hospital would be financially feasible if there is a need for a new hospital.
Based upon the foregoing, AMI's proposal is the only one that should be approved. AMI's proposal is the only one that is financially feasible. If, however, Winter Park's proposal is ultimately found to be financially feasible, Winter Park's proposal is the better proposal. Based upon the weight of the evidence, Winter Park's proposal is the least costly in terms of the total cost of starting the facilities and in terms of the cost to patients.
AMI and Winter Park have proposed other findings of fact comparing their respective facilities. Those findings of fact are rejected. For example, AMI's proposed findings of fact concerning the capability of AMI to develop a new facility, Winter Park's motives in filing its certificate of need, and whether Winter Park's proposal is for a "satellite" hospital are not necessary. AMI's proposed findings of fact with regard to its Community Cost Analysis to the extent it involves OGH and Florida Hospital are unnecessary. Winter Park's proposed findings of fact concerning zoning and care to the medically underserved are also unnecessary.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes (1984 Suppl.).
To the extent that conclusions of law have been made under the Findings of Fact portion of this Recommended Order, they are incorporated herein.
These cases involve the question of whether a certificate of need for the construction of a 100-bed acute care hospital should be issued to AMI or Winter Park, or both, and whether certificate of need for a full-body CAT Scanner should be issued to AMI. These decisions are governed by the provisions of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), and the Department's rules promulgated under those Sections of Florida Statutes. In particular, the criteria applicable to these cases remaining in issue include Sections 38l.494(6)(c), 1,2,3,4,5,8 (except manpower and management personnel), 9,12,13 and (d), Florida Statutes (1984 Suppl.).
The hearing was a de novo proceeding. See Florida Department of Transportation v. J.W.C. Company, Inc., 296 So. So 2d 778 (Fla. 1st DCA 1981). The Petitioners bear the burden of proof as to their entitlement to a certificate of need. Id.
Under Section 10-5.11(23), F.A.C., bed need is to be determined on a district-wide basis. This rule also requires that sub-districts be established for purposes of allocating bed need. District 7, where the proposed hospitals would be located, has been divided along county lines. Section 10-17.008,
F.A.C. It is therefore appropriate to determine if any district bed need should be allocated to Orange County since the proposed hospitals would be located in Orange County.
Section 10.5.11(23)(e), F.A.C., provides that the district acute care bed need determined under the Formula is to be allocated to each subdistrict in accordance with a methodology adopted in compliance with Section 381.494(7)(b), Florida Statutes (1984 Suppl.). This has not been done. The evidence, however, supports a finding that there is no bed need allotable to Orange County.
Based upon the foregoing, it is concluded that bed need in these cases should be determined on a district basis and should be allocated to Orange County to determine if there is a need for additional beds in Orange County. It is not proper to determine bed need based upon only a portion of Orange County. The evidence clearly shows that there is no need for acute care hospital beds in District 7 or Orange County.
Section 10-5.11(23)(b), F.A.C., provides that approval of additional acute care beds should "not normally" be given if such an approval would result in acute care beds in excess of those needed as determined under the Formula. An application may be approved, however, if the criteria of Section 381.494(6)(c), Florida Statutes (1984 Suppl.), other than bed need, demonstrate a need. An application of the criteria of Sections 381.494(6)(c) and (d), Florida Statutes (1984 Suppl.), does not demonstrate a need for the proposed facilities.
Section 381.494(6)(c)1, Florida Statutes (1984 Suppl.), requires consistency with the applicable district health plan and the State health plan. Neither proposal is consistent with these plans.
Section 381.494(6)(c)2, Florida Statutes (1984 Suppl.), requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing health care services in the service district.
The Petitioners have argued that there is a need for their facilities based upon this criterion. In particular, the Petitioners have argued that like and existing services are not accessible. This determination is to be made based upon the accessibility of services in Orange County--not the accessibility only in the MSAs. Accessibility is to be determined pursuant to Section 10- 5.11(23)(i), F.A.C.
Section 10-5.11(23)(i), F.A.C., provides that acute care hospital beds should be available and accessible within an automobile travel time of 30 minutes to at least 90 percent of the population of the subdistrict under average travel conditions in urban areas. Orange County is an urban area. The Petitioners have failed to prove that there is an accessibility problem in Orange County or the MSAs under this rule.
The Petitioners have also failed to prove that acute care hospital beds are not available in Orange County or District 7.
The Petitioners have failed to prove that there is a need for hospital beds under this criterion.
Section 381.494(6)(c)3, Florida Statutes (1984 Suppl.), requires that the applicants must be able to provide quality of care. The parties have stipulated that this criterion has been met.
Section 381.494(6)(c)4, Florida Statutes (1984 Suppl.), requires that there be no health care facilities or services in the service district which may serve as an alternatives to the proposed facilities. The Petitioners have shown that there are not alternatives to their proposals.
Section 381.494(6)(c)5, Florida Statutes (1984 Suppl.), requires a consideration of the probable economies and improvements that may be derived from the operation of joint, cooperative or shared health care resources. The Petitioners have met this criterion.
Section 381.494(6)(c)8, Florida Statutes (1984 Suppl.), provides for a consideration of the availability of resources, the effect on clinical needs of health professional training programs, the extent to which the services will be accessible to schools for health professionals if such services are available in a limited number of facilities, the availability of alternative uses of such resources and the extent to which the proposed services will be accessible to all residents of the service district. The Petitioners have met most of this criterion; they have failed to prove, however, that there are no alternative uses for the resources to be used for their proposals.
Section 381.494(c)(6)9, Florida Statutes (1984 Suppl.), requires that the Petitioners prove that their proposals are financially feasible in the short-run and long-run. Both have proved immediate financial feasibility. AMI has proved long-term financial feasibility; Winter Park has not.
Section 381.494(6)(c)12, Florida Statutes (1984 Suppl.), requires consideration of the probable impact on the costs of providing health services. The facts indicate that the probable impact will be negative.
Section 381.494(6)(c)13, Florida Statutes (1984 Suppl.), requires consideration of the costs and methods of construction. The Petitioners have failed to prove that they meet this criterion.
Finally, Section 381.494(6)(d), Florida Statutes (1984 Suppl.), must be met. The Petitioners have failed to meet Section 381.494(6)(d)4; they do meet Section 381.494(6)(d)1-3; and Section 381.494(6)(c)5 does not apply.
In summary, the Petitioners have failed to prove that there is a need for their proposed hospitals.
AMI has also applied for a certificate of need for a full body CAT Scanner. In order to gain approval of its application, AMI must first prove that it is entitled to a certificate of need for an acute care hospital. AMI has failed to do so. It should therefore not be granted a certificate of need for a CAT Scanner.
If AMI is granted a certificate of need for its proposed hospital, Section 10-5.11(13), F.A.C., must be met. It does not appear that a need for a full-body CAT Scanner exists under Section 10-5.11(13) F.A.C., or Section 381.494(c) and (d), Florida Statutes (1984 Suppl.).
If a need for one of the proposed hospitals is ultimately found to exist, AMI's proposal should be approved because Winter Park's proposal is not financially feasible in the long-run. If, however, Winter Park's proposal is financially feasible, Winter Park's proposal should be approved because it is the less costly.
Florida Hospital and OGH have demonstrated standing to participate in these proceedings.
RECOMMENDATION
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:
That the certificate of need applications for a 100-bed acute care hospital and CAT Scanner filed by AMI, case number 84-1819, be denied. It is further
DONE and ENTERED this 26th day of July, 1985, in Tallahassee, Florida.
LARRY J. SARTIN
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 26th day of July, 1985.
COPIES FURNISHED:
Fred Baggett, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE &
RICHARD
101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32302
Michael Von Eckhardt, Esquire American Medical International, Inc.
414 Camden Drive
Beverly Hills, California 90210
Kenneth F. Hoffman, Esquire OERTEL & HOFFMAN, P.A.
Suite C
2700 Blair Stone Road Tallahassee, Florida 32301
J. P. "Rusty" Carolan, III, Esquire WINDERWEEDLE, HAINES, WARD &
WOODMAN, P.A.
P.O. Box 880
Winter Park, Florida 32790-0880
Harden King, Esquire Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301
E. G. "Dan" Boone, Esquire Stephen K. Boone, Esquire
E.G. BOONE, P.A.
P.O. Box 1596
Venice, Florida 34284
Steven R. Bechtel, Esquire Brain D. Stokes, Esquire MATEER & HARBERT, P.A.
100 East Robinson Street
P.O. Box 2854
Orlando, Florida 32802
David Pingree, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Blvd.
Tallahassee, Florida 32301
LIST OF WITNESSES AMI
NAME EXPERTISE
Jim Palmer
Phillip L. Coppage Hospital administration including staffing.
Thomas C. Wohlford Patient group and insurance programs in the health care industry.
J.D. Garland Health care facilities, including hospital construction management and budgeting and
cost estimating.
Manuel Viamonte, M.D. Radiology.
Dick Chadbourne Manpower staffing requirements for health care facilities.
Jan Stirrat Health care facility equipment planning and equipment cost budgeting.
Preston Thompson Physician relations and recruiting.
Joseph Akerman, M.D. Peter Hiribarnc, M.D.
Louis Trefonas, Ph.D. Need, development and operation of sponsored research projects at UCF.
Thomas S. Mendenhall, Ph.D. Need, development and
operation of health education and affiliation programs.
Alan Denner, M.D. Louis C. Murray, M.D. Joseph Sandberg, M.D. Myles Douglas, M.D.
Robert D. Fennell Corporate health facilities planning, processing, implementation and development.
Manuel J. Coto, M.D. Jerold J. Faden, M.D. Zivko Z. Gajk, M.D.
Don Steigman Hospital operations and administration.
William A. Tipton Traffic and transportation.
Neal B. Hiler Civil engineering and property site analysis.
Trevor Colbourn Ben E. Whisenant
Frederick A. Raffa, Ph.D. Demographics and
socioeconomic forecasting.
Nilo Regis, M.D.
Richard Pajot
Mark Richardson Health planning.
Richard Altman Hospital management engineering.
Walter Wozniak
Armond Balsano Health care facility financial feasibility and analysis and third- party reimbursements.
Rick Knapp Health care
facility financial feasibility
and analysis, third- party reimbursement and rate-setting for
health care facilities.
Richard Anderson
Edward E. Weller Real estate appraisal.
John Winfrey Health care accounting and financial feasibility analysis.
Van Talbert Health care planning.
Margo Kelly Financial management, analysis and feasibility.
WINTER PARK
NAME EXPERTISE
Katherine J. Brown Florida Hospital Cost Containment Board procedures; hospital costs and charges, data gathering and review; and hospital costs and charges comparisons.
Karl Schramm, Ph.D. Hospital cost and charges and comparisons thereof and health care financing, including the impact upon the health care consumer.
Willard Wisler Hospital administration
including staffing and operating hospitals.
John H. Roger Construction design and costs, including site preparation, and analysis thereof,
in central Florida; including health care facilities construction.
R. Sans Lassiter Traffic engineering, travel times and access in central Florida.
Richard Anderson
Sarah Mobley Equipment and cost of equipment.
William J. Serow, Ph.D. Demographics.
Van Talbert Health care planning.
John Winfrey Health care accounting and financial feasibility analysis.
Robert C. Liden Investment banking, including tax-exempt financing of health care facilities.
Lewis A. Siefert Hospital accounting and Medicare Reimbursement.
FLORIDA HOSPITAL
NAME EXPERTISE
Steven Windham Health planning.
W. Eugene Nelson Health planning, CON administration and transportation planning.
Ronald J. Skantz Radiology training and management.
Sven Kansman Traffic engineering and travel time studies.
John Crissey
Stan Smith, Ph.D. Demographics.
Gabriel Mayer, M.D. Physician.
Larry Margolis Health care planning, hospital administration, facility planning, HMO's and PPO's.
Scott Allen Miller Health care accounting and financial feasibility.
OGH
NAME EXPERTISE
Patrick J. Carson, D.O. Medical emergencies and operation of an emergency room.
Tracey Watson Michael Sherry
B. Jean Martell Walter J. Wozniak
Lawrence Kramer, O.D. Family practice.
Patrick Deegan Accounting, hospital finance and budgeting.
Andrea Walsh
DEPARTMENT
NAME EXPERTISE
W. Eugene Nelson Health planning, CON administration and transportation planning.
PUBLIC WITNESSES
Mike Baumann Bob Mandell Luddy Goetz Martin Goodman Yvonne Opfell Martin Lebnick
| Issue Date | Proceedings |
|---|---|
| Jul. 26, 1985 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jul. 26, 1985 | Recommended Order | Comparative review of acute care hospital Certificate of Need (CON) applications for Orange County. No numeric need proven. Subdistricting not authorized. |
