STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DOCTORS SURGICAL CENTER )

OF MIAMI, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 84-2087

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

)

Respondent, )

and )

)

SURGICAL SERVICES, INC., )

SURGICARE III (Sponsor of ) Surgicare Outpatient Center ) of Coral Gables) and HUMANA ) INC. d/b/a BISCAYNE MEDICAL )

CENTER (Humana), )

)

Intervenors. )

) SAME DAY SURGICAL SERVICES OF ) DADE COUNTY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 84-2096

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

and )

)

SURGICAL SERVICES OF NORTH ) DADE, INC., SURGICAL SERVICES ) OF WEST DADE, INC., SURGICAL ) SERVICES OF MIAMI, INC., and ) HUMANA INC., d/b/a BISCAYNE ) MEDICAL CENTER (Humana), )

)

Intervenors. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled cases on August 5-6, 1985, at Miami, Florida.

APPEARANCES

For Petitioner, Milton Wallace, Esquire Doctors Surgical Douglas J. Snyder, Esquire Center of Miami: Wallace, Engels & Pertnoy

330 Biscayne Boulevard, Suite 600 Miami, Florida 33131

For Petitioner, Gary C. Matzner, Esquire Same Day Surgi- Jay Ziskind, Esquire

cal Services, Inc: Frank R. Olsavsky, Esquire

Suite 1200, Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156

For Respondent, Jay Adams, Esquire Department of Deputy General Counsel Health and Department of Health and Rehabilitative Rehabilitative Services Services: 1323 Winewood Boulevard

Building Two, Suite 406 Tallahassee, Florida 32301

For Intervenors, Steven A. Ecenia, Esquire Surgical Services, Michael J. Cherniga, Esquire Inc.; Surgical Roberts, Baggett, LaFace & Services of North Richard

Dade, Inc.; Surgi- 101 East College Avenue

cal Services of Tallahassee, Florida 32301 West Dade, Inc.;

and Surgical Services of Miami, Inc.

For Intervenor, James C. Hauser, Esquire Humana, Inc.: Messer, Vickers, Caparello,

French & Madsen Post Office Box 1876

Tallahassee, Florida 32302 PRELIMINARY STATEMENT

By Petitions filed June 13, 1984, Doctors Surgical Center of Miami, Inc. (Doctors) and Same Day Surgical Services, Inc., d/b/a Same Day Surgical Services of Dade County (Same Day) contest the Department of Health and Rehabilitative Services' (Department) denial of their applications for a certificate of need (CON) to establish a freestanding ambulatory surgical center (FASC) in Dade County, Florida. Subsequently, the Department determined that, while there was no numerical need for an additional FASC in Dade County, that special circumstances existed which would support the issuance of CON 3116 to Same Day, but that no such circumstances existed to support the issuance of CON 3115 to Doctors.

Intervenors, Surgical Services, Inc., Surgical Services of North Dade,

Inc., Surgical Services of West Dade, Inc., and Surgical Services of Miami, Inc. (Surgical Services), and Humana, Inc., d/b/a Biscayne Medical Center (Humana); opposed the issuance of CON 3115 to Doctors, but did not oppose issuance of CON 3116 to Same Day. Surgicare III, while granted leave to intervene, voluntarily withdrew from these proceedings prior to hearing.

At final hearing Doctors called, as witnesses: Elizabeth Dudek, CON Review Coordinator, HRS Office of Community Medical Facilities, an expert in health care planning; and Thomas Weiss, M.D., part owner of Doctors. Doctors' Exhibits 1-6 were received into evidence. However, Doctors' Exhibit 5 was received into evidence for the limited purpose of establishing that Doctors had filed an application for a CON and not for the truth of the matters contained in the application.

Same Day called, as witnesses: Jerry Zelman, M.D., part owner of Same Day; Elizabeth Dudek; Thomas J. Konrad, an expert in health planning; Steven Davis, a certified public accountant; and, Elton Scott, an expert in healthcare economics, finance, reimbursement, utilization and need. Same Day's Exhibits 1, 2, 6, 12, 18 and 26 were received into evidence. Humana called Ernest J. Peters, a registered professional engineer, and Niels P. Vernegaard, Director of Biscayne Medical Center. Humana's Exhibit 1 was received into evidence.

Surgical Services called Randy M. Phillips, president of Surgical Services, Inc., and Brenda C. Brinkman, an expert in surgical equipment planning.

The transcript of hearing was filed September 10, 1985. At the parties' request they were given until October 10, 1985, in which to submit proposed findings of fact and conclusions of law. The parties waived the requirement set forth in Rule 28-5.402, F.A.C., that a recommended order be entered within 30 days after the transcript is filed. Rule 22I-6.31, F.A.C.

Doctors, Same Day, Humana, and Surgical Services have submitted proposed findings of fact and conclusions of law. A ruling has been made on each proposed finding of fact in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Same Day (CON 3116) and Doctors (CON 3115) filed applications for a CON to establish a freestanding ambulatory surgical center (FASC) in Dade County, Florida, in the batching cycle that cloned December 15, 1983. Upon the Department's denial of their applications, Same Day and Doctors filed a timely request for a Section 120.57(1) hearing.

   
   

2. The Department has not formally adopted a rule which establishes a need formula for calculating and predicting the gross and net need for freestanding ambulatory surgical centers. However, the Department has developed, and consistently applied, a reasonable methodology for assessing the need for these facilities.

   
   

3. Under its methodology, the Department attempts to project, two years in the future, the number of outpatient surgical procedures that will not be accommodated at the county's existing and approved surgical facilities. The first step in calculating this future need is to establish the county's current total surgical use rate, hospital outpatient surgical use rate, and FASC surgical use rate. These use rates are an expression of the actual number of surgeries performed, in each category, for each increment of 1,000 county residents.

4. Utilizing the current total surgical use rate, the Department then projects the total surgical demand for the county according to its 1988 population projection. Thirty percent of total surgical demand, in accordance with industry standards, reflects the gross need for outpatient surgical services in 1988.

   
   

5. To establish the net need for outpatient surgical services, the Department subtracts from the gross need established for outpatient surgical services those procedures projected to be performed on an outpatient basis at existing hospitals and freestanding centers. This figure is calculated by applying the current outpatient surgical use rate of existing hospitals and freestanding centers to the county's 1988 population projection. The Department further subtracts, from the gross need, the number of surgical procedures which represent the break even point for approved but not opened freestanding centers. The result reflects need, or lack of need, for the county at the two-year planning horizon.

   
   

6. The Department's methodology, when applied to the facts of this case, establishes that there is no numerical need for an additional FASC in Dade County, Florida. The record is otherwise devoid of any proof which would establish a numerical need for a FASC in the county.

   
   

7. However, notwithstanding a lack of numerical need, the Department has established a policy that

   
   

   If "preexisting clinics," which have been performing surgical pro- cedures similar to those proposed

   to be performed in the applicant's facility, seeks licensure as ambulatory surgical facilities, they must document that the facility has been operating profitably, and has performed a sufficient number of procedures to exceed the calculated break even level of operation. Special consideration will be given to approval of the project, after assuring that all

   other criteria are satisfied.

   
   

   Same Day's CON Application

   
   

8. Same Day proposes to establish a FASC in Dade County, Florida, at a total cost of approximately $600,000.00. Same Day proposes to perform only non- emergency, elective outpatient surgical procedures. During the first three years of operation, Same Day will only perform ophthalmic surgical procedures. After three years, Same Day will operate as a general all-purpose FASC. It has been operating profitably during the most recent twelve-month reporting period, and the number of procedures performed exceeds the calculated break even level of operation. Same Day has held a Medicare Provider Number and Occupational License for over two years, and is a "preexisting," clinic entitled to special consideration for CON approval.

   
   

9. Same Day currently employs all personnel necessary to staff its proposed FASC. Same Day will encounter no difficulty in recruiting additional personnel should the need arise.

10. Jerry Zelman, M.D., Ophthalmologist and President of Same Day, is a leading ophthalmologist in Dade County. Dr. Zelman holds staff privileges at numerous Miami hospitals, is a member of an investigation and peer review board at a Miami hospital, and is a pioneer in outpatient ophthalmic surgical procedures and advanced ophthalmic surgical procedures. Same Day has established that it has the ability to provide quality of care in an FASC setting.

    
    

11. Same Day proposes to finance the FASC facility through a mixture of equity and commercial financing. Same Day currently possesses in excess of

    $200,000 worth of equipment, including operating room tables, lasers and microscopes, and has budgeted approximately $120,000 for additional equipment, as needed.

    
    

12. The Tower Bank of Miami is committed to Same Day to fund up to

    $600,000, 100 percent of the proposed project. Apart from bank financing, the principals of Same Day have sufficient personal resources to provide total funding for the project.

    
    

13. Same Day has established by competent substantial evidence that its proposed FASC will be financially feasible on an immediate and long-term basis, that the costs and methods of construction of the proposed facility are reasonable, and that its projected costs and charges for ambulatory surgical services are reasonable.

    
    

    Doctors' CON Application

    
    

14. Doctors proposes to establish an FASC in Dade County, Florida, comprised of two operating rooms for multi-specialty purposes, particularly ophthalmic surgery. Doctors has not selected or purchased a specific site in which to locate its proposed facility, but is tentatively interested in locating it in the northwest area of Dade County.

    
    

15. Dr. Weiss, one of two principals in Doctors, currently practices at southern Miami Beach, and the majority of his patients reside on Miami Beach. Northwest Dade County is not within Dr. Weiss' primary service area, and it is doubtful that he would utilize the proposed facility even if it were approved. Dr. Weiss' intent was to encourage other physicians to utilize the proposed facility, though he had not secured any commitments.

    
    

16. There are at least 31 acute care hospitals in Dade County which offer outpatient surgical services. Additionally, there are two freestanding centers in operation and an additional seven centers which are approved but not yet opened. There is no current, or projected, need for outpatient surgical services, or an access problem, in Dade County.

    
    

17. In addition to failing to establish need for its proposed facility, Doctors failed to offer any evidence to establish that it could provide quality of care; that it had available resources, including health manpower, management personnel, and funds for capital and operating expenditures, to accomplish its project; that its proposal had immediate and long-term financial feasibility; that its proposal would foster competition and serve to promote quality assurance and cost-effectiveness; and, that the costs and methods of the proposed construction were the most effective methods of construction.

    CONCLUSIONS OF LAW

    
    

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

    
    

19. Applicable statutory criteria for the evaluation of the CON applications of Same Day and Doctors are contained in Section 381.494(6)(c), Florida Statutes. The Department has promulgated no specific rules regarding the application of Section 381.494(6)(c), Florida Statutes, to freestanding ambulatory surgical centers. Accordingly, an evaluation to the CON applications of Same Day and Doctors is dependent upon existing statutory criteria and the Department's emergent agency policy.

    
    

20. The ultimate burden of persuasion rests upon the applicant to demonstrate, by competent substantial evidence, its entitlement to a certificate of need. Florida Department of Transportation v. J.W.C. Co., 396 So.2d 778 (Fla. 1st DCA 1981). Under existing statutory and policy criteria, Same Day has established its entitlement to the issuance of CON 3116. However, Doctors has failed to present competent evidence to demonstrate its entitlement to the Issuance of CON 3115.

    
    

21. Doctors' assertion that it is entitled to a CON by default because the Department's initial decision was rendered more than 45 days after its receipt of Doctors' application is without merit. Department of Health and Rehabilitative Services v. American Healthcorp of Vero Beach, 10 FLW 1548 (Fla. 1st DCA June 28, 1985).

    
    

22. Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order:

1. Granting the application of Same Day to establish a freestanding ambulatory surgical center in Dade County, Florida, with the condition that for its first three (3) years of operation it will only perform ophthalmic surgical procedures, but without limitation thereafter.

   
   

2. Denying the application of Doctors to establish a freestanding ambulatory surgical center in Dade County, Florida.

ENTERED this 17th day of December, 1985, at Tallahassee, Florida.

WILLIAM J. KENDRICK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1985.

APPENDIX TO RECOMMENDED ORDER, CASE NOS. 84-2087 & 84-2096

1. Doctors' proposed findings of fact are ruled on as follows:

   
   

   1. Adopted in paragraph 1.

   2. Not relevant. Addressed in paragraph 4, Conclusions of Law.

   3. Subordinate, or addressed in paragraphs 2-7.

   4. Not a finding of fact; not relevant.

   5. Adopted in paragraphs 2-7, or contrary to the facts as found in this Recommended Order.

   6. Not a finding of fact; not relevant.

      
      

2. Same Day's proposed findings of fact are ruled upon as follows:

   
   

   1. Adopted in paragraph 8.

   2. Adopted in paragraphs 9 and 10.

   3. Adopted in paragraph 9.

   4. Adopted in paragraph 8.

   5. Adopted in paragraphs 13 and 14.

   6. Adopted in paragraph 12.

   7. Adopted in paragraph 15.

   8. Adopted in paragraph 15.

   9. Adopted in paragraph 15.

   10. Adopted in paragraph 13.

   11. Adopted in paragraph 11.

   12. Adopted in paragraph 15.

   13. Adopted in paragraph 2, Conclusions of Law.

       
       

3. Humana's proposed findings of fact are ruled upon as follows:

   
   

   1. Adopted in paragraph 16.

   2. Rejected - not a finding of fact.

   3. Adopted in paragraph 16.

   4. Adopted in paragraph 17.

   5. Adopted in paragraph 18.

   6. Cumulative.

   7. Cumulative.

   8. Cumulative.

   9. Cumulative.

   10. Adopted in paragraph 18.

   11. Adopted in paragraph 18.

   12. Cumulative.

   13. Cumulative.

   14. Adopted in paragraph 2.

   15. Adopted in paragraphs 3-5.

   16. Adopted in paragraphs 3-5.

   17. Adopted in paragraphs 3-5.

   18. Adopted in paragraph 6.

   19. Cumulative.

   20. Adopted in paragraph 6.

   21. Cumulative.

   22. Cumulative.

4. Surgical Services' proposed findings of fact are ruled upon as follows:

   
   

   1. Adopted in paragraph 1, or not relevant.

   2. Rejected - not a finding of fact.

   3. Adopted in paragraphs 2-6.

   4. Adopted in paragraphs 2-6.

   5. Adopted in paragraphs 2-6.

   6. Adopted in paragraphs 2-6.

   7. Adopted in paragraph 16, or cumulative.

   8. Cumulative.

   9. Adopted in paragraph 17.

   10. Adopted in paragraph 19.

COPIES FURNISHED:

Milton J. Wallace, Esquire WALLACE, ENGELS & PERTNOY

Attorneys for Doctors Surgical Center of Miami, Inc.

330 Biscayne Boulevard Sixth Floor

Miami, Florida 33132

Douglas L. Mannheimer, Esquire CULPEPPER, PELHAM, TURNER

& MANNHEIMER

Attorneys for Department of Health and Rehabilitative Services

Post Office Drawer 11300 Tallahassee, Florida 32302-3300

Jay Adams, Esquire Deputy General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Building 1, Room 407

Tallahassee, Florida 32301

J. A. Ziskind, Esquire Frank R. Olsavsky, Esquire HAYT, HAYT & LANDAU

Attorneys for Same Day Surgical Services of Dade County, Inc.

Suite 1200 Datran Center

9100 South Dadeland Boulevard Miami, Florida 33136

Stephen A. Ecnia, Esquire Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LaFACE,

& RICHARD

Attorneys for Surgical Services, Inc., Surgical Services of West Dade, Inc. and Surgical Services of Miami, Inc.

Post Office Drawer 1838 Tallahassee, Florida 32302

James C. Hauser, Esquire MESSER, VICKERS, CAPARELLO,

FRENCH & MADSEN

Post Office Box 1876 Tallahassee, Florida 32302

David H. Pingree, Secretary Department of Health and

Rehabilitative Services 1321 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 84-002087

Orders for Case No: 84-002087