STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SHANDS TEACHING HOSPITAL )

AND CLINICS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 84-2090

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

and )

) ALACHUA GENERAL HOSPITAL, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

The final hearing in this case was held in Gainesville, Florida, on October 9-11, 1985. The parties requested thirty days after the filing of the transcript of the final hearing in which to file their proposed recommended orders. The complete transcript was not filed until January 23, 1986.

The issue in this case is whether Respondent, Department of Health and Rehabilitative Services ("Department"), should grant the application of Petitioner, Shands Teaching Hospital and Clinics, Inc. ("Shands"), for a certificate of need for a 20-bed comprehensive medical rehabilitation unit to be used in teaching and education programs by colleges of the University of Florida.

FINDINGS OF FACT

1. The Applicant.

   
   

   1. The buildings at Shands Teaching Hospital are owned by the State of Florida. Shands Teaching Hospital is itself a not for profit Corporation authorized by statute. The hospital was previously owned by the State of Florida and was part of the University, but in 1979 the hospital corporation became a not for profit corporation responsible for the management of the hospital. The structure was changed so that the management and the operation of the hospital could be improved to meet the changing needs of medical education, research and patient care.

      
      

   2. The Board of Shands is made up of three major elements. The Board includes individuals who hold office at the University, examples being the President of the University of Florida, the Vice President for Health Affairs, the Dean of the College of Medicine and others in similar capacities. There is also representation by the Chairman of the Board of Regents, or someone appointed by the Chairman of the Board of Regents. The Chief Executive Officer

      of Shands is on the Board and then there are public members nominated by the Board itself and appointed by the President of the University. All of the initial members of the public were appointed by the University of Florida President. The Board of Shands has voted to support this application.

      
      

   3. The Health Center includes six colleges and the hospital. The most important college for the purposes of this case is the College of Medicine. Shands has sharing arrangements with the VA Hospital.

      
      

   4. The hospital contracts for many services with the College of Medicine. The chairmen of the College's clinical departments are also the chairmen of the hospital departments. In order to be on the hospital staff you must be on the faculty of the College of Medicine. The Dean is on the Board of the Hospital, and the Chief of Staff of the Hospital is also an Assistant Dean in the College.

      
      

   5. Shands is a statewide resource for providing health care to Florida residents. Among its unique programs are:

      
      

      1. The crippled childrens' program, set up by the Children's Medical Services Program Office of HRS, with the assistant of a Shands' pediatrician, Dr. Gerold Shiebler. It is the only approved hospital in HRS District III for participation in the program.

         
         

      2. Treatment programs for extremely complex childrens' problems.

         
         

      3. One of only 4 hospitals certified in Florida to do heart surgery under the Children's Medical Services Program.

         
         

      4. The only facility in the Southeastern United States doing bone marrow transplantation in children.

         
         

      5. The only children's rheumatic fever and rheumatology programs in HRS District III, and the only facility in District III doing sickle cell screening.

         
         

      6. It is the keystone of regionalized medical services for children.

         
         

      7. Shands is one of the top centers in the entire United States for musculo-skeletal tumor surgery for children's musculoskeletal problems, including myelodisplasia, cerebral palsy and other gait and neuromuscular disturbances in children.

         
         

      8. Shands has been designated by the Governor's Advisory Council on Spinal Cord Injury as a spinal cord injury center.

         
         

      9. A large brain tumor microsurgery program receiving patients from around the country.

         
         

      10. The only Florida hospital offering a new internal radiation treatment.

          
          

2. The Proposed Project.

   
   

   1. Shands' application is for a certificate of need for a 20-bed comprehensive medical rehabilitation unit to be used in teaching and education programs by colleges of the University of Florida. The 20 proposed rehabilitation beds would be located on the tenth floor of an existing building

      at Shands. The tenth floor would be constructed along with the ninth and eleventh floors which have already been CON-approved. The gross square footage for the rehabilitation unit would be 35,500. In Shands' application, the estimated cost of the project was placed at $4.3 million.

      
      

   2. Shands' application proposes to designate eight of the 20 rehabilitation beds for pediatric services. Normally Shands does not allocate beds in advance for a particular service, since "political fallout negotiations for who gets what space" often changes the number of beds ultimately dedicated for a particular service or age group.

      
      

3. The Intervenor.

   
   

   1. Intervenor, Alachua General Hospital ("Alachua General") is a 453-bed full service hospital in Gainesville. Alachua General is an active participant in the Medicare and Medicaid funding programs. Alachua General is the only area provider for Baker Act patients and has been since the inception of Baker Act. Alachua General is the only provider of services to Alachua County indigent patients through its service agreement with Alachua County.

      
      

4. Criterion 381.494(6)(c)1. (The need for the health care facilities and services being proposed

   in relation to the applicable district plan and State health plan).

   1. District Health Plan.

      
      

      1. Alachua County is situated in HRS District III. One of the purposes of the Local Health Council (LHC) is to assist HRS to provide community and local planning since it has a closer hands on sensitivity to the local needs than HRS.

         
         

      2. The Board of Directors of the District III LHC is appointed by county commissioners. This LHC is comprised of many health professionals, including nurses, physicians, hospital administrators, and the Director of the VA medical center. No representatives of Alachua General are on the LHC.

         
         

      3. The applicable District III Plan provides review guidelines and recommendations intended for use by HRS in making certificate of need decisions. These recommendations "state specific steps which should be implemented to most appropriately meet the region's (District III) needs."

         
         

      4. The two recommendations in the District III Plan for rehabilitation services are as follows:

         
         

         1. One comprehensive medical rehabilitation inpatient facility should be located in District III.

         2. Any additional comprehensive medical rehabilitation beds should be added only when those added in the initial facility

         have achieved a 75 percent annual occupancy rate.

         
         

      5. These recommendations were formulated after extensive research and input from many sectors of the health care industry. Drafts of these recommendations underwent public review and comment prior to final adoption. Both Alachua General and Shands participated in this public review.

      6. Shands did not oppose these recommendations. Also, Shands did not ask for special consideration as a teaching facility. Shands was assured that this was not necessary since special consideration already was engrafted on the CON statute.

         
         

      7. The District Plan takes no cognizance of the statewide educational and training needs to be met in a major teaching hospital, nor of the occupancies which can be projected for a state wide health care and teaching resource such as Shands.

         
         

      8. These recommendations were adopted by the LHC in December 1984. The effect of these recommendations was to carry over through at least 1985.

         
         

      9. These recommendations address concerns about cost containment and the rational development of new sophisticated services. These recommendations were intended to control even if there was a net need of beds per Rule 10-5.11(24) since they encourage the development of one facility and then allow for utilization of that facility prior to consideration of future development.

         
         

      10. The LHC will reevaluate the single location recommendation once the one facility has generated utilization.

          
          

      11. HRS uses and relies on LHC recommendations in making certificate of need decisions even if such recommendations are not adopted as agency rules.

          
          

      12. Alachua General's 40-bed comprehensive rehab hospital has been approved but was still under construction at the time of the final hearing. There is no other existing rehabilitation facility in the District, so there was no evidence of occupancy of existing facilities. In circumstances where a need for more than one facility exists, HRS in the past has approved more than one application without waiting for occupancy levels to be met and has done so where facilities had been previously approved but not yet built and where facilities already existed but had not reached desired occupancy levels.

          
          

          For example, a 40-bed rehabilitation hospital, was approved in one district while at the same time a 24-bed new patient unit in an existing acute care hospital was approved, both of which were approved while an outstanding 60-bed freestanding facility that had been approved was not yet built or operated.

          That was in HRS District VIII. In HRS District IX, two facilities were approved two weeks apart for separate individual free standing rehab hospitals. Third, in District X, Broward County, approval for a new rehab hospital had been given, but the facility was not constructed or licensed, yet the Department approved conversion of nursing home beds at another facility to comprehensive rehabilitation hospital beds.

          
          

          In addition, on three occasions the Department granted certificates of need in districts where beds were licensed and operating, but had not yet attained 85 percent occupancy levels.

          
          

      13. Here, Alachua General projects that the required occupancy levels will be met at its facility (assuming no new beds are added at Shands).

          
          

      14. Were it not for the peculiar nature of Shands and its proposal, an application for new rehabilitation beds in District III at a facility other than Alachua General would not be in compliance with the District Health Plan. However, the District Health Plan does not by its terms address Shands and its proposal and cannot be read to strictly govern this case.

   2. State Health Plan

      
      

      1. The state health plan incorporates the methodology for determining need for comprehensive rehabilitation beds contained in Rule 10-5.11(24), Florida Administrative Code. Under the rule methodology, there is a need for 58 comprehensive rehabilitation beds by 1988.

         
         

      2. At this time, the only licensed or approved comprehensive rehabilitation beds in District III are the 40 beds approved for Alachua General.

         
         

      3. The state health plan also incorporates subparagraph (b)3.b of Rule 10-5.11(24), Florida Administrative Code. That subparagraph calls for 85 percent occupancy of all existing rehabilitation facilities in the district during the preceding calendar year.

         
         

      4. As previously discussed, in circumstances where a need for more than one facility exists, HRS in the past has approved more than one application without waiting for occupancy levels to be met and has done so where facilities have been previously approved but not yet built and where facilities already existed but had not yet reached desired occupancy levels.

         
         

5. Criterion 381.494(6)(c)3. (The ability of the applicant to provide quality care.)

   
   

   1. Shands generally has the ability to provide quality comprehensive rehabilitation care.

      
      

   2. Shands proposes to dedicate eight of the 20 rehabilitation beds for pediatric patients. This was not expressed or implied in its CON application, and Shands is not certain whether eight beds would in fact ultimately be designated for pediatric patients given the politics at Shands. Shands does not know how many rooms or patient rooms will be equipped for pediatrics at this point.

      
      

   3. If beds are dedicated to pediatric patients, several problems with quality care are presented. Pediatric comprehensive rehabilitation requires different kinds and modes of care and separate equipment and treatment areas. Shands' proposal would require dual commitment in terms of space, equipment, staffing, training and programming. Separate recreational areas, dining areas and therapy areas may be required. However, it is not necessary to totally segregate pediatric rehabilitation patients from adult rehabilitation patients by setting up units on different floors although this is typically done by hospitals treating pediatric and adult patients for communicable diseases.

      
      

   4. The Shands' proposal includes ample floor space (35,500 square feet) to enable Shands to resolve the problems presented by serving both an adult and pediatric rehabilitation patients in its proposed unit.

      
      

   5. Some of Shands' rehabilitation equipment for its proposed comprehensive rehabilitation unit on the tenth floor already has been purchased and is in use in occupational and physical therapy areas on the sixth floor of the same building. At least some of this equipment probably will remain where it is on the sixth floor.

   6. Ideally, occupational and physical therapy areas should be as close to the patients as possible. But Shands' plans are not unprecedented and need not seriously detract from the quality of rehabilitation care Shands will be able to give.

      
      

   7. The evidence was not clear whether there are bed rails and hand rails on the sixth floor to accommodate the needs of rehabilitation patients. However, if there are not, the evidence was sufficient to prove that Shands can and will accommodate the needs of its rehabilitation patients.

      
      

   8. On the other hand, integration of Shands' proposed rehabilitation unit into its acute care hospital will make available backup medical services as may be necessary for rehabilitation patients. Normally, an essential for patient eligibility for comprehensive rehabilitation treatment is sufficient recovery from acute care medical problems. Rehabilitation units normally do not accept a patient who has continuing or serious acute medical problems; needed minor treatment is normally administered at free standing rehabilitation hospitals by qualified medical specialists on staff. However, Shands and Shands' proposal is somewhat unique. First, being a tertiary hospital, Shands cares for patients who generally have more severely acute conditions and are more likely to require intensive medical care even during rehabilitation. In addition, Shands' proposal envisions beginning comprehensive rehabilitation at an earlier stage than normally begun at a freestanding hospital. The Shands rehabilitation unit would enable Shands to think in terms of comprehensive rehabilitation and actually begin comprehensive rehabilitation at the earliest possible date.

      These features of Shands' proposal will enable Shands to give even better quality care than a free standing rehabilitation hospital normally is capable of giving, especially to patients of the kind Shands cares for in its acute care hospital.

      
      

6. Criterion 381.494(6)(c)4. (The availability and adequacy of other health care facilities and services in the service district of

   the applicant, such as outpatient care and ambulatory or homecare services, which may serve as alternatives for the healthcare facilities and services to be provided by the applicant.)

   
   

   1. There is no available or adequate alternative that would meet a need for comprehensive rehabilitation beds.

      
      

7. Criterion 381.494(6)(c)8. (The availability of resources *** for project accomplishment and operation; effects on clinical needs of health professional training programs in the service district; accessibility to schools for health professions in the service district for training purposes; alternative uses of such resources for the provision of other health services; and accessibility to all residents of the service district.)

   
   

   1. The parties have stipulated that the staffing of Shands' proposed rehabilitation unit could be obtained and that the full time equivalent employees set out in the application was appropriate or at least not challenged. Manpower requirements are not an issue.

   2. Shands has the funds necessary for capital and operating expenditures. Shands has reserve funds available (working capital reserve) of between $8 and

      $9 million. In addition, there are between $5 and $8 million of other uncommitted funds available for construction.

      
      

   3. Shands' proposed project will enhance professional training programs in District III, meet clinical needs for those programs, and be accessible to schools for health professions in the service district for training purposes. The services will be available to all residents of District III and the State of Florida.

      
      

8. Criterion 381.494(6)(c)11. (The needs and circumstances of those entities which provide a substantial portion of their services or resources, or both, to individuals not residing in the service district in which the entities are located or in adjacent service district.)

1. Shands provides, and proposes to provide in its application, a substantial portion of its facilities and services to individuals not residing in the service district or in adjacent service districts, including both students and patients.

   
   

   1. Patients.

      
      

2. As previously mentioned, Shands is a tertiary acute care hospital, attracting patients with severely acute medical conditions from throughout the State of Florida and the southeast. Alachua General's 40-bed free standing comprehensive rehabilitation hospital can be expected to be used to meet primarily the need for comprehensive rehabilitation of patients with less severely acute medical conditions and residents of District III. Not many patients from outside District III needing rehabilitation from less severely acute medical conditions can be expected to go to Shands. There are 442 approved rehabilitation beds not yet on line in Florida. Also, existing rehabilitation beds are located in adjoining service districts. Referring an acute care patient to Shands for a short length of stay is not the same as a referral for a more complicated and lengthy rehabilitation treatment. Family participation is an integral part of the rehabilitation process, and preference to be near one's family is a factor. However, it still can be anticipated that substantial services will be rendered to patients from outside District III and the adjoining service districts who have more severely acute medical conditions and need comprehensive rehabilitation.

   
   

   1. Students.

   
   

3. Shands intends to use its comprehensive rehabilitation unit in part to start an educational residency program in physical medicine and rehabilitation ("PMR'). Students in other medical internship and residency programs including neurology, neurosurgery, orthopedic surgery, internal medicine, pediatrics and other disciplines also will benefit from exposure to PMR and the comprehensive rehabilitation unit. In addition, the allied medical specialties of medical technology, physican assistants, clinical and community dietetics, physical therapy, occupational therapy and rehabilitative services also are taught at the University of Florida College of Health-Related Professions. These students also would benefit from exposure to PMR and the comprehensive rehabilitation

   unit as part of their education. A substantial number of these students can be expected to be from outside District 111 and the adjoining service districts.

   Additionally, the populations whom they will ultimately serve after their education will be substantially outside District 111 and the adjoining service districts.

   
   

   1. Criterion Section 381.494(6)(c)7.

   (The need for research and educational facilities, including but not limited to institutional training programs and community training programs. for health care practitioners and for doctors of osteopathy and medicine at the student, internship, and residency training levels.)

   
   

4. Absence of a program in physical medicine and rehabilitation is a significant deficit in the overall quality of medical and medically related education at the University of Florida. At this time there are no PMR programs in the State of Florida.

   
   

5. There is a need for educational programs in PMR in Florida to meet the anticipated need for physiatrists (PMR specialists) in Florida in the future.

   
   

   1. Criterion Section 381.494(6)(c)6. (The

      need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas.)

      
      

6. Shands' proposal will not meet any need in District III for special equipment and services which are not reasonably and economically accessible in adjoining areas.

   
   

   1. Criterion Section 381.494(6)(c)12. (The probable. impact of the proposed project on costs. of providing health services proposed by the applicant.)

      
      

7. If eight of Shands' proposed twenty beds are designated for pediatric patients, only twelve will remain to compete with Alachua General's forty beds. Of those twelve, a substantial portion probably will be used by nonresidents of District III (although Alachua General will be sufficiently affected as an existing provider to have standing to intervene as a substantially affected party). Those which are directly competitive with Alachua General's forty rehabilitation beds will likely have a positive effect on the cost of providing comprehensive rehabilitative services in District III. There is sufficient need generated in District III to support the Alachua General facility and the directly competitive Shands beds without duplication of services. As a result, the competition will likely contribute to improvements or innovations in the financing and delivery of those health services and promote quality assurance and cost effectiveness.

   
   

   1. Criterion Section 381.494(6)(0)2. (The availability, quality of care, efficiency, appropriateness, accessibility, extent of

      utilization, and adequacy of like and existing health care services . . . in the service district of the applicant.)

      
      

      1. Patient Care.

         
         

8. Alachua General's free standing comprehensive rehabilitation unit will be just as available and accessible to District III residents at Shands proposed unit.

   
   

9. Alachua General will also be able to provide quality comprehensive rehabilitation appropriate to the medical needs of most of the patients residing in District III.

   
   

10. However, Alachua General does not serve pediatric patients, and there are no comprehensive rehabilitation services for pediatric patients in District III.

    
    

    In addition, a number of Shands' patients can be anticipated to be suffering from too severely acute medical conditions for it to be appropriate to refer them to Alachua General for comprehensive rehabilitation services, at least at first. It is recognized that comprehensive rehabilitation services generally only come into play after a patient is able to be released from an acute care hospital. But being a tertiary hospital and university hospital, Shands' patients do not all fit the norm. Without a Comprehensive rehab unit at Shands, those patients would be deprived of comprehensive rehabilitation services at an earlier and, in their case, more appropriate point in their recovery.

    
    

11. There is a need under the HRS rule methodology for fifty-eight comprehensive rehabilitation beds in District III. Alachua General's forty beds can be expected to be efficiently utilized. Occupancy rates in the second year of operation are expected to be between 75 and 85 percent. As a result, Alachua General will not be adequate or available to handle all of the need in District

    III. In addition, as a tertiary and university hospital, Shands might attract some patients not even accounted for in the rule methodology.

    
    

    1. Education.

    
    

12. Shands did not prove that it has fully explored the possibility of operating its educational and residency programs in PMR out of the Alachua General facility. The evidence was that it might be possible to create such a program and have it accredited. Alachua General made a proposal to Shands along those lines, but Shands has not responded.

    
    

13. Although there exists a possibility of using Alachua General's comprehensive rehabilitation beds to support Shands' education and residency programs in PMR, such an arrangement would not be ideal. Only one or two such programs exist in the United States. All other PMR education and residency programs are based at a teaching hospital. This enables the educators to control the educational and residency programs. It also allows more stability for planning purposes to know that the continued existence of the program does not depend upon the will of another institution. Finally, it allows the PMR students to have the benefit of being totally integrated into the medical educational institution and affords the other medical and health related students to have the benefit of being integrated into the PMR programs.

14. Alachua General's free standing comprehensive rehabilitation facility is located seven to nine miles from Shands. In addition to the disadvantages mentioned in the immediately preceding paragraph, the distance between the two facilities would pose significant logistical problems in operating Shands' education and residency programs in PMR out of the Alachua General facility.

    
    

15. Many educational and residency programs in PMR that are based at teaching hospitals are affiliated with other hospitals through which its students rotate for periods between three months and a year. It would be beneficial to Shands' educational and residency programs to affiliate with Alachua General to provide additional opportunities for Shands' students to rotate through the Alachua General facility. Alachua General would be the closest available facility for such purposes. Affiliation with Alachua General would enable Shands to expand its PMR programs in a reasonable way to be available to more students. And a rotation through the Alachua General facility would expose Shands' students to comprehensive rehabilitation provided in a different setting and to patients who have generally less severely acute medical conditions at the time of their rehabilitation than the patients at Shands.

    
    

    1. Criterion Section 381.494(6)(c)5. (Probable economies and improvements in service that may be derived from the operation of joint,

       cooperative, or shared health care resources.)

       
       

16. As just mentioned, there is the potential for Shands and Alachua General to share the use of their facilities to form an educational and residency program in PMR that would be stronger than such programs operated exclusively at either one or the other of those facilities.

    
    

17. In addition, at the Shands facility itself, Shands already has substantial equipment and services in physical and operational therapy on the sixth floor of the building in which the rehabilitation unit is proposed on the tenth floor. That equipment and those services can be integrated into the comprehensive rehabilitation unit.

    
    

18. Finally, as a tertiary acute care hospital, Shands will have substantial equipment and services of other kinds that would be available for use in treating comprehensive rehabilitation patients as might become necessary in the course of their rehabilitation. This potential for sharing services is significant since Shands can be expected to be providing comprehensive rehabilitation services to patients who are still suffering from more severely acute medical conditions than one would normally expect in a comprehensive rehabilitation unit.

    
    

    1. Criterion Section 381.494(6)(c)9. (The immediate and long-term financial feasibility proposal.)

    
    

    1. Immediate Financial Feasibility.

       
       

19. Shands has reserved funds available (working capital reserve) of between $8 million and $9 million dollars. In addition to that, there are between $5 and $8 million dollars in other uncommitted funds available for construction.

20. Shands estimates the cost of its proposed project at $4,320,000. This estimate is too low. Actually, a more reasonable estimate of what it will cost Shands to construct its rehabilitation unit on the tenth floor of its existing building would be approximately $5.5 million dollars, or approximately $275,000 per bed. This more accurate estimate adds a ten percent construction contingency factor, an additional 3.5 percent of construction costs for architects/engineering fees, a 2.5 percent of construction cost fee for construction supervision, and an additional $160,000 for elevators.

    
    

21. Shands' $160,000 equipment cost estimate normally would be low but is reasonable in this case since much of the equipment Shands plans to use in the proposed rehabilitation unit already has been purchased and is in operation on the sixth floor.

    
    

22. Normally, total project costs for a rehabilitation bed proposal should be in the range of $125,000 to $145,000 per bed, and within a maximum of

    $175,000 per bed.

    
    

23. However, in this case, Shands is building its unit on the tenth floor of an existing building in conjunction with the construction of the ninth and eleventh floors of the building. The difficulties of that type construction explain the high cost of construction of Shands' proposed project. In addition, Shands' proposed unit will take up approximately 35,500 square feet. This is approximately 500 square feet per bed larger than usual even for a teaching hospital needing oversized nursing stations as well as classrooms and support areas for the educational/training programs.

    
    

24. Given Shands' proposal to have a comprehensive rehabilitation unit in its teaching hospital, Shands had no choice but to add a floor to its present structure. And given that type of construction, Shands has little choice but to build the entire tenth floor. For these reasons, the cost and square footage of Shands' proposed project, while very high by all standards, is reasonable in this case. In addition, the additional square footage per bed will give Shands flexibility in accommodating pediatric patients within the proposed comprehensive rehabilitation unit.

    
    

25. Even with a $5.5 million dollar cost estimate, Shands' proposed project is immediately financially feasible. Shands could finance its proposed project through operations or by borrowing from the capital markets.

    
    

    1. Long-Term Financial Feasibility.

    
    

26. Financed over 30 years, the additional 1 to 1.2 million dollars of construction costs would result in approximately $35,000 per year additional cost of operation. If Shands operates at 85 percent occupancy, an additional charge of approximately $6 per patient day would pay the additional cost.

    
    

27. Shands' utilization estimates are based on an internal demand analysis. The internal demand analysis probably is somewhat unreasonably inflated. Shands projects an average length of stay for its rehabilitation patients of 52 days. It also projects a 125 day average length of stay for spinal cord injured patients. The average lengths of stay probably are overstated, but the internal demand analysis projects approximately 20 percent more demand than the proposed 20-bed unit could accommodate. In addition, it does not take into account any referrals for comprehensive rehabilitation

    services from any acute care hospitals other than Shands . Taken as a whole, the evidence was sufficient to prove that the demand for Shands' rehabilitation unit will result in enough utilization to keep the unit at least 85 percent occupied, especially if some of the beds are designated for pediatric patients.

    
    

28. Shands' financial pro formas do not include a line item for interest to be paid on project debt. If the project is financed by borrowing from the capital markets, an interest expense line item should be included in the pro forma. However, it is not clear at this time that Shands will borrow from the capital markets to finance its rehab project. If critical to the long term financial feasibility of the project, Shands could pay for the rehab project out of operations.

    
    

29. Given Shands' expected utilization, its comprehensive rehabilitation unit will be financially feasible in the long run if Shands charges approximately what it proposes to charge per diem for comprehensive rehabilitation services -- approximately $555 for January 1, 1999 and approximately $600 for January 1, 1990. The projected charges are reasonable and feasible.

    
    

    Section 381.494(6)(d).

    
    

30. As mentioned, it would be possible to accomplish part of what Shands proposes by using Alachua General's facilities. That alternative certainly would be much less costly and, in that sense, more efficient. But the findings do not demonstrate that it would be more appropriate.

    
    

    Using Alachua General's facility to meet the need for comprehensive rehabilitation beds in District III would leave pediatric patients without comprehensive rehabilitation. In addition, patients suffering from more severely acute medical conditions frequently admitted at Shands would be deprived of the opportunity to begin comprehensive rehabilitation at an earlier stage in their recovery. Alternatively, if those patients were transferred to Alachua General at earlier stages of recovery than normal, the transfer could be anticipated to result in acute medical situations which Alachua General is not equipped to handle. Even disregarding those special attributes of Shands' proposal, Alachua General only meets 40 of the 58 bed need for comprehensive rehabilitation beds in District III.

    
    

    Regarding the educational and residency program in PMR which Shands proposes, the alternative of using Alachua General as the base for those programs is a possibility but is less than ideal and fraught with difficulties.

    
    

    For these reasons, although the Shands project is very costly, it is appropriate under the circumstances to spend the money it will take to accomplish the project.

    
    

31. It is anticipated that Alachua General's 40 bed facility will be used in an appropriate and sufficient manner by the time Shands proposal would become operational.

    
    

32. There are no alternatives to new construction, for example, modernization or sharing arrangements, available in this case.

    
    

33. Pediatric patients and certain Shands patients suffering from more severely acute medical conditions will experience problems in obtaining care of the type proposed in the absence of Shands' proposed new services.

    P. Balanced Consideration of the Criteria.

    
    

34. Balancing all the criteria that have been considered, it is found that there is need and sufficient justification to grant Shands' application in this case. The cost of the proposal is very high and would be cause for denial of an application for comprehensive rehabilitation beds in other circumstances. In addition, there is the possibility that some of the need addressed by the proposed project could be met using Alachua General's 40-bed facility. But the special needs of a top quality educational and residency program in PMR, of some of Shands' patients suffering from more severely acute medical conditions and of pediatric patients justify the expenditure despite the high cost and other partial alternatives.

    
    

    CONCLUSIONS OF LAW

    
    

    1. General Governing Law.

       
       

35. Certificate of need applications are reviewed under Section 381.494, Florida Statutes (1985).

    
    

36. The decision in Department of Health and Rehabilitative Services vs. Johnson and Johnson, 447 So.2d 361, 363 (Fla. 1st DCA 1984) requires "a balanced consideration of all the statutory criteria." See also Humana, Inc., et al. vs. Department of Health and Rehabilitative Services, 469 So.2d 889, 891 (Fla. 1st DCA 1985). The appropriate weight afforded to each criterion is not fixed but varies on a case by case basis. Cf. Collier Medical Center, Inc. vs. Department of Health and Rehabilitative Services, 462 So.2d 83, 84 (Fla. 1st DCA 1985).

    
    

    1. Planning Horizon.

       
       

37. Under Gulf Court Nursing Center vs. Department of Health and Rehabilitative Services, 10 FLW 1983 (Fla. 1st DCA, August 20, 1985), clarified on rehearing, 11 FLW 437 (February 14, 1986), the planning horizon for determination of bed need under the methodology set out in Rule 10-5.11(24), Florida Administrative Code, is five years from the date on which Shands' application was complete or 1988. For that reason, as reflected in the Findings Of Fact, the comprehensive rehabilitation bed need in District III for purposes of this case is 58.

    
    

    1. Balanced .Consideration Of The Criteria.

    
    

38. As reflected in the Findings Of Fact, all of the applicable criteria under Section 381.494(6)(c) have been considered and weighed. As a result of this balanced consideration of the criteria, it was found and must be concluded that the evidence justifies granting Shands' application in this case on the condition that 8 beds are designated for pediatric patients. Likewise, Section 381.494(6)(d) has been considered, and Shands' application is approvable under those tests.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Health and Rehabilitative

Services, grant the application of Shands Teaching Hospital and Clinics, Inc., for a Certificate of Need for a twenty-bed comprehensive rehabilitation unit to

be used in conjunction with the teaching and education programs of colleges of the University of Florida on the condition that 8 beds are designated for pediatric patients.

RECOMMENDED this 10th day of April, 1986, in Tallahassee, Florida.

J. LAWRENCE JOHNSTON 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 10th day of April, 1986.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 84-2090 PARAGRAPH A - RULINGS ON SHANDS' PROPOSED FINDINGS OF FACT.

1. In part rejected as part irrelevant and in part a Conclusion of Law and in part covered by Findings 23 and 65 to the extent necessary.

2. Rejected as subordinate and unnecessary.

3. In part covered by Findings 5 and 48-49 and in part rejected as subordinate and unnecessary.

4. Accepted.

5. Accepted.

6. Accepted.

7. Accepted.

8. In part covered by and in part rejected as contrary to Finding 45.

9. Rejected as subordinate and unnecessary.

10. Accepted.

11. Rejected in part as contrary to the greater weight of the evidence, in part is argumentative and in part as Conclusion of Law.

12. Rejected as contrary to Finding 45 and the greater weight of the evidence.

13. Covered by Finding 1.

14. Covered by Finding 2.

15. Covered by Finding 3.

16. Covered by Finding 4.

17. Covered by Finding 5.

18. Rejected as contrary to the greater weight of the evidence.

19. In part covered by and in part rejected as contrary to Findings 9 through 22.

20. In part covered by and in part rejected as contrary to Findings 9 through 22.

21. Covered by Finding 25.

22. In part covered by Finding 15 and in part unnecessary

    and irrelevant. See Finding 19.

23. In part covered by Finding 20 to the extent necessary and not subordinate, cumulative or argumentative and in part rejected as contrary to the greater weight of the evidence. See Finding 20.

24. Rejected as contrary to the greater weight of the evidence.

25. Covered by Finding 21.

26. Covered by Finding 15.

27. Rejected as contrary to the greater weight of the evidence.

28. In part covered as necessary by and in part rejected as contrary to Finding 65.

29. Rejected as subordinate and not relevant or necessary except as covered by Findings 40, 48 and 65. Most of the internal demand generated at Shands already is included in the 58 bed need in 1988 generated by the rule methodology. $

30. The first two sentences are not contested and are accepted. The third sentence also is accepted and is covered as necessary by Finding 65.

31. Not contested and accepted.

32. Covered in part by Findings 27 and 36. The second sentence is not contested and is accepted. Otherwise rejected as subordinate, cumulative and unnecessary.

33. Covered by Finding 24.

34. Covered by Finding 35.

35. Covered as necessary by Finding 49.

36. Rejected as subordinate, irrelevant and unnecessary.

37. Rejected in large part as subordinate, cumulative and unnecessary. Covered as necessary by Findings 50-53 and 68.

38. In part covered by and in part rejected as contrary to Findings 45-53 and 68.

39. Covered by Finding 27.

40. Covered by Finding 35.

41. Covered by Finding 55.

42. Covered by Findings 42 and 43.

43. Covered by Findings 39-41.

44. Covered by Findings 36 and 57-67.

45. In part rejected as contrary to the greater weight of the evidence and in part covered by Findings 36 and 57- 67.

46. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67.

47. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67.

48. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67.

49. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67.

50. Rejected in large part as subordinate and unnecessary. Covered by Findings 36 and 57-67.

51. Covered by Finding 59.

52. In part covered by Finding 58 and in part rejected as subordinate and unnecessary.

1. Covered by Findings 60-62, in part rejected as

   subordinate and unnecessary.

2. Cumulative.

3. Rejected as subordinate and unnecessary.

4. Subordinate and unnecessary.

5. Subordinate and unnecessary.

6. Covered by Finding 64.

7. Covered by Finding 64.

8. Covered by Finding 42.

9. Covered by Finding 43.

10. Covered by Findings 36 and 37.

11. Covered by Finding 38.

12. Covered by Findings 39-41.

13. In part covered by and in part rejected as contrary to Finding 45.

14. Covered by Findings 45-53.

15. Covered by Findings 45-53.

16. Covered by Findings 45-53.

17. Covered by Finding 70.

18. Covered by Finding 71.

19. Rejected as subordinate and unnecessary.

20. Rejected as subordinate and unnecessary.

21. Rejected as subordinate and unnecessary.

22. Rejected. Whether Shands "meets all of the criteria" is not the question. See Finding 72.

RULINGS ON ALACHUA GENERALS' PROPOSED FINDINGS OF FACT

1. Covered by Finding 8.

2. Rejected as subordinate, irrelevant and unnecessary.

3. Rejected as subordinate, irrelevant and unnecessary.

4. Rejected as subordinate, irrelevant and unnecessary.

5. Rejected as subordinate and unnecessary.

6. Rejected as subordinate and unnecessary.

7. Rejected as subordinate and unnecessary.

8. Rejected as subordinate and unnecessary. 9.

10.

11.

1. Covered by Findings 6 and 7.

2. Covered by Findings 6 and 7.

3. Covered by Findings 6 and 7.

4. Covered by Findings 6 and 7.

5. Rejected as cumulative.

6. Subordinate to Finding 61 and unnecessary.

7. Rejected as contrary to Findings 30, 61 and 62.

8. Subordinate to Finding 61 and unnecessary.

9. Rejected as contrary to Finding 62.

10. Rejected as subordinate and unnecessary.

11. Rejected as subordinate and unnecessary. To the extent necessary covered by Finding 30.

12. Covered by Finding 60.

13. Rejected as subordinate and unnecessary.

14. Covered by Finding 58.

15. Rejected as unnecessary.

16. Subordinate to Finding 60.

17. Covered by Finding 58 and cumulative.

18. Covered by Finding 58.

19. Covered by Finding 58.

20. Covered by Finding 58.

21. Covered by Finding 58.

22. Covered by Finding 58.

23. Covered by Finding 59.

24. Covered by Finding 58.

25. Covered by Finding 58.

26. Covered by Finding 58.

27. Rejected in part as cumulative and in part as subordinate and unnecessary. Covered by Finding 58.

28. Rejected as subordinate and unnecessary.

29. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

30. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

31. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

32. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

33. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

34. In part covered by and in part rejected as contrary to Findings 28-31 and 59.

35. Rejected in part as subordinate in part as unnecessary and in part as contrary to Finding 45.

1. To the extent necessary, covered by Finding 45.

2. Rejected as cumulative, subordinate and unnecessary.

3. To the extent necessary, covered by Finding 40.

4. To the extent necessary, covered by Finding 40.

5. Subordinate to Finding 45.

6. Subordinate to Finding 45 and unnecessary.

7. Accepted, but unnecessary.

8. Rejected in part as subordinate and unnecessary and in part as contrary to Finding 45.

9. Accepted, but unnecessary.

10. Accepted, but unnecessary.

11. Rejected as subordinate and unnecessary.

12. Rejected as subordinate and unnecessary. 64A. Covered by Finding 9.

13. Covered by Finding 10.

14. Rejected in part as cumulative, in part as subordinate and in part as unnecessary.

15. Covered by Finding 11.

16. Covered by Finding 12.

17. Covered by Finding 13.

18. Covered by Finding 14.

19. Covered by Finding 16.

20. Covered by Finding 17.

21. Covered by Finding 18.

22. Rejected as cumulative and unnecessary.

23. Covered by Finding 19.

24. Rejected in part as Conclusion of Law and in part as subordinate and unnecessary.

25. Rejected in part as contrary to the greater weight of the evidence and in part as Conclusion of Law.

26. In part covered by Finding 46 and in part rejected as Conclusion of Law and irrelevant.

27. First sentence rejected as contrary to the greater weight of the evidence and the remainder covered by Finding 40.

28. To the extent necessary, covered by Findings 40 and 65.

29. Rejected as subordinate and unnecessary.

30. First two sentences rejected as cumulative, last sentence rejected as contrary to the greater weight of the evidence. See Findings 46-53 and 68.

31. In part covered by and in part rejected as contrary to Findings 50-53 and 68.

32. Rejected as subordinate and unnecessary.

33. Rejected as contrary to the greater weight of the evidence and Findings 46-49.

34. Rejected as Conclusion of Law, subordinate and unnecessary.

35. Rejected as subordinate and unnecessary.

36. Rejected as subordinate and unnecessary and as an attempt to illegally obtain comparison of Alachua General's later batched application with the Shands application.

37. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

38. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

39. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

1. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

2. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

3. In part covered by and in part rejected as contrary t9 Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

4. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

5. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

6. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

7. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

8. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

9. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

10. In part covered by and in part rejected as contrary to

    Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

11. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

12. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

13. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

14. In part covered by and in part rejected as contrary to Findings 50-53 and 68. Also in part rejected as subordinate and unnecessary.

15. Rejected as subordinate and unnecessary.

16. Rejected as subordinate and unnecessary.

17. Rejected as subordinate and unnecessary.

18. Rejected as subordinate and unnecessary.

19. Rejected as subordinate and unnecessary.

20. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68.

21. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68.

22. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68.

23. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68.

24. In part rejected as subordinate and unnecessary, in part covered by and in part rejected as contrary to Findings 50-53 and 68.

25. In part covered by and in part rejected by Findings 28 30.

26. In part covered by and in part rejected by Findings 28 30.

27. In part covered by and in part rejected by Findings 28 30.

28. In part covered by and in part rejected by Findings 28 30.

29. In part covered by and in part rejected by Findings 28 30.

30. In part covered by and in part rejected as contrary to Findings 31-34.

31. In part covered by and in part rejected as contrary to Findings 31-34.

32. In part covered by and in part rejected as contrary to Findings 31-34.

33. In part covered by and in part rejected as contrary to Findings 31-34.

34. In part covered by and in part rejected as contrary to Finding 66.

35. In part covered by and in part rejected as contrary to Finding 66.

36. Rejected as contrary to the greater weight of the

    evidence.

37. Rejected as cumulative.

38. In part covered by and in part rejected as contrary to Finding 65.

39. In part covered by and in part rejected as contrary to Finding 65.

40. In part covered by and in part rejected as contrary to Finding 65.

41. In part covered by and in part rejected as contrary to Finding 65.

42. Rejected as subordinate and unnecessary.

COPIES FURNISHED:

Kenneth F. Hoffman, Esquire Kenneth G. Oertel, Esquire Oertel & Hoffman, P.A. Suite C

2700 Blair Stone Road Tallahassee, Florida 32301

William C. Andrews, Esquire Scruggs and Carmichael

P. O. Drawer C Gainesville, Florida 32602

James C. Hauser, Esquire

Messer, Vickers, Caparello, French & Madsen

P. O. Box 1876

Tallahassee, Florida 32302

Harden King, Esquire Assistant General Counsel Department of Health and Rehabilitative Services Building 1, Suite 406

1323 Winewood Boulevard

Tallahassee, Florida 32301

William Page, Jr.

Secretary

Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 84-002090

Orders for Case No: 84-002090