STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BOCA RATON ARTIFICIAL KIDNEY ) CENTER, INC., and ARTIFICIAL ) KIDNEY CENTER, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 84-2714

)

DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) WEST BOCA RATON ARTIFICIAL )

KIDNEY CENTER, )

)

Respondents. )

)

RECOMMENDED ORDER

This matter came on for hearing in West Palm Beach, Florida on May 21-22, June 27, 28 and July 1-3, 1985, before the Division of Administrative Hearings and its duly appointed Hearing Officer R. T. Carpenter. The appearances were as follows:

APPEARANCES

For Petitioners: C. Gary Williams, Esquire

AUSLEY, MCMULLEN, MCGEHEE, CAROTHERS & PROCTOR

Post Office Box 391 Tallahassee, Florida 32302

For Respondent/ E. G. Boone, Esquire Applicant: Stephen K. Boone, Esquire

E. G. BOONE, P.A. Post Office Box 1596 Venice, Florida 34284

For Respondent/HRS: Richard A. Patterson, Esquire

Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

This matter arose on the application of West Boca Raton Artificial Kidney Center (Applicant) for a Certificate of Need (CON) to construct a seven-station kidney dialysis clinic in South Palm Beach County. Following its initial intent to deny, Respondent HRS issued a preliminary CON for the requested facility.

Petitioners who provide similar health care services in South Palm Beach County objected, giving rise to these proceedings. The parties submitted

proposed findings of fact pursuant to Subsection 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly or indirectly herein, except where such proposed findings have been rejected as subordinate cumulative, immaterial, or unnecessary.

FINDINGS OF FACT

1. The proposed dialysis clinic 1/ would be located in West Boca Raton near "Century Village," a large condominium complex serving mainly the retired and elderly. The clinic would be owned and controlled by Neil Schneider, M.D., a nephrologist. The application is opposed by two nearby clinics which are owned and controlled by Ashok Patel, M.D., also a nephrologist.

   
   

2. The "Service Area" at issue was disputed by the parties. HRS District

   9 encompasses Palm Beach, Indian River, Okeechobee, Martin and St. Lucie Counties. Although this district has not been subdivided by either the local health council or HRS, a smaller "Service Area" must be defined for purposes of these proceedings.

   
   

3. Kidney dialysis patients are required to visit their dialysis facility three times each week for approximately four hours per treatment. Most patients are in poor health and unable to drive (or even be transported by others) for long periods. Thus, accessibility of the dialysis clinic is an important consideration in this health care field.

   
   

4. Either Palm Beach County or a South Palm Beach County "cachment" area 2/ constitutes an appropriate service area for purposes of this proceeding. Patients can drive from most locations in the county to existing dialysis clinics in 45 minutes or less. As noted above, however, much shorter driving times are desirable for these patients.

   
   

5. The HRS witness, who was qualified as an expert in health care planning, calculated a county-wide need for four additional kidney dialysis stations. She based her calculations on the mathematical formula set forth in Rule 10-5.11(18)(a), F.A.C., using information from "Network 19" quarterly report's 3/ and average patient census data for calendar year 1984.

   
   

6. The Network 19 representative, who was similarly qualified, calculated a need for five additional kidney dialysis stations in the proposed South Palm Beach County sub-area. His input consisted of the latest Network 19 patient data and projections for mid-1986.

   
   

7. Petitioners attacked the designation of a sub-area for this proceeding as well as the patient and general population estimates utilized. The identification of a sub-area is reasonable in this situation given the relative immobility of these patients. However, the sub-area need calculations should be cross checked and confirmed by county-wide figures. Given the similarity of conclusions, a number of four to five is found to be an appropriate "hard number" starting point in this proceeding.

   
   

8. Rule 10-5.11(18)(a), F.A.C. provides that "the base period. . . is one year from the date that the application is deemed complete by. . .[HRS]. Petitioners argue that the application was complete several years ago, and that it is improper to consider 1986 population data. This argument is rejected,

   however, as it is inconsistent with HRS practice and with common sense. Because of the years which CON cases often spend in processing, litigation and facility construction, one year from the date of final hearing has been recognized as the most appropriate period for these determinations.

   
   

9. Petitioners identified some relatively minor errors in input data and calculations. These errors would not, however, significantly change the so called "hard numbers" stated above.

   
   

10. Both the Applicant and Petitioners presented additional expert testimony of health care consultants. Not surprisingly, their conclusions tended to reduce the need on one hand (Petitioners) and increase it on the other (Applicant). Although their testimony is incorporated in those considerations discussed below, it is rejected as to modification of the data utilized and generated by the HRS and Network 19 witnesses.

    
    

11. The strongest argument favoring grant of the application concerns Petitioners' restrictive policies. This argument was well supported by the testimony of area nephrologists who have practiced in or attempted to utilize Dr. Patel's clinics, by the testimony of former employee, by patients of Dr. Patel's clinics and by documents setting forth these policies.

    
    

12. One nephrologist (Dr. Krause) was refused admission to Petitioners' staff because he was not admitted to the staff of the local community hospital. However, that hospital also had a closed staff policy which, in "Catch 22" fashion, seriously limited this nephrologist's ability to practice his specialty. Petitioners argue that such hospital staff privileges are needed so that the nephrologist can follow his patient to the hospital in the event of emergency. This argument ignores the nephrologist's responsibility for his patients, and is not a proper basis for denial of staff privileges.

    
    

13. Additionally, Petitioners denied staff privileges altogether to another nephrologist (Dr. Sonneborn) when he set up his practice in Boca Raton in 1976, on the claim that the Boca Raton facility was a closed unit. Here, it should be noted that Petitioners' two dialysis clinics are the only units in the South Palm Beach area. Because of patient immobility, this has resulted in something of a monopoly. Without staff privileges at a convenient dialysis clinic, Dr. Sonneborn was literally unable to practice nephrology, and turned these patients over to Dr. Patel.

    
    

14. Area nephrologists also complained of being required to sign a contract with Petitioners as a condition of gaining staff privileges at either of Dr. Patel's clinics. Although such a contract is not customarily required, this in itself was not shown to be a restrictive measure. However, some of the conditions of the contract were, indeed, restrictive. For example, the contract required that only bona fide residents of Palm Beach County under the care of local physicians could be admitted. This effectively excluded seasonal and transient patients (except when Petitioners found it convenient to waive the restriction).

    
    

15. Petitioners also refuse to admit new "hepatitis positive" dialysis patients to either facility. Many dialysis patients acquire hepatitis or show hepatitis positive on their blood tests. Special handling of such patients is required, but to exclude them altogether is in the words of one such patient- witness "mean-spirited" (TR 738). The Applicant (Dr. Schneider), on the other hand, has a reputation at his existing clinics for accepting transients and hepatitis positive patients.

16. The Applicant proposes to continue such policy at the proposed clinic if the C.O.N. is granted. However, the initial operating instructions prepared for this proposed clinic appear to prohibit hepatitis patients. Therefore, any

    C.O.N. issued as a result of this proceeding should require acceptance of hepatitis positive patients.

    
    

17. Patients without coinsurance have also been refused by Petitioners. This is the patient who has only the 80 percent Medicare cost coverage and lacks the insurance or private resources to pay the remaining 20 percent of the clinic dialysis charge. In fairness however, Petitioners have occasionally taken "undesirable" patients such as indigents without basic Medicare coverage and prisoners.

    
    

18. The quality of care at Petitioners' facilities is generally satisfactory. There was a large turnover in staff nurses about two years ago, and more recently, some inadequacies in supplies. Although these problems have apparently been corrected, the lack of "crash carts" for emergency treatment of patients who experience cardiac arrest is a significant and continuing deficiency. Petitioners' contention that nearby hospital paramedics can be called on in cardiac arrest situations is not an adequate response. In fact, one patient died in Petitioners' clinic from cardiac arrest. This patient's chance of surviving would have been greater had such emergency facilities been available.

    
    

19. The proposed seven station facility was shown to be financially feasible. Even with as few as four stations, the unit was expected to be profitable by its second year of operation. Petitioners question the patient acquisition assumptions of the proposal and may well be correct that these are overly optimistic. However, Dr. Schneider has extensive experience in operating other South Florida clinics profitably, and has more than adequate personal financial resources to see the new facility through its initial loss period.

    
    

20. The rate set by Medicare is $122 per patient treatment in South Palm Beach County. This provides a steady, predictable and secure source of revenue to the dialysis clinic. Thus, financial feasibility in this health care specialty is a near certainty, particularly in a high growth area such as South Palm Beach County. It should also be noted that the opening of the proposed clinic will have no impact on health care costs, since these costs are effectively controlled by Medicare.

    
    

21. The Applicant seeks additional stations for hemo dialysis training and CAPD training. While these are worthwhile goals, it was not shown that a real need for such special stations exists in this area. Neither is there any medical school connection which would support additional stations.

    
    

22. The Applicant also seeks to justify additional stations on the basis of hepatitis treatment which requires isolation, and an allowance for the large number of tourists and transients present during the winter months. These visitors were not included in the statistics which support the four to five stations discussed previously.

    
    

23. Petitioners argue that their existing South Palm Beach County Clinics are under-utilized and that they will be injured if this application is granted.

    As of March 31, 1985, these facilities had utilization rates of only 54 percent (Boca Raton) and 72 percent (Delray). Although these units remain profitable, this is significantly below the 80 percent "optimum," or industry utilization standard. Additionally, there are three kidney dialysis centers in North Palm Beach County whose utilization rates are in excess of 100 percent.

    
    

24. Although Petitioners, because of their restrictive policies, may be partially responsible for their low utilization rates, county-wide utilization figures do, in fact, indicate a greater need for additional facilities in North Palm Beach County than in the Applicant's proposed sub-area. However, there was no evidence that any of the existing facilities are seeking to expand so as to meet additional Palm Beach County dialysis needs. Therefore, the "unmet" need for additional stations must be considered as available for award to this Applicant.

    
    

    CONCLUSIONS OF LAW

    
    

25. Rule 10-5.11(18)(a), F.A.C. provides essentially a mathematical formula on which to calculate the need for additional kidney dialysis stations in a given service area. The Applicant has shown a need under this formula for an additional four to five stations.

    
    

26. Subsection 381.494(6)(c), Florida Statutes (1984 Supp.), lists numerous factors to be considered in the review of a Certificate of Need application. To the extent they are applicable to this specific proposal, these factors have been discussed herein. In reaching a decision as to the grant, partial grant or denial of the application, a balancing of these factors is required.

    
    

27. The South Palm Beach County clinic utilization rates indicate that no new facility is required in the proposed sub area. However, this area is a rapidly growing one, and an increase in patient census is reasonably anticipated so as to offset current under-utilization.

    
    

28. There are, additionally, a number of important considerations which support the grant of a new facility. The special accessibility needs of elderly patients, the lack of competition and the restrictive policies of the existing clinics favor at least partial grant of this application.

    
    

29. The Applicant made a strong case for serving the hepatitis positive patient, and any Certificate of Need issued should specifically require such service. There was some indication of need to provide additional stations for tourists/transients and, arguably, for training purposes. However, the need for such stations at this time must be measured against the under-utilization of the existing facilities, which is not solely attributable to restrictive policies. Thus, a balancing of all factors supports the award of a five station rather than a seven station Certificate of Need.

    
    

30. As a final matter, the Applicant's premature opening of its clinic should not be rewarded. Use of July, 1986 projected population statistics is premised on an opening at approximately that time. Therefore, the Certificate of Need, if issued, should require a clinic opening date no sooner than July 1, 1986. Further, the Applicant should not be able to circumvent the number of stations authorized through early activation of additional stations (by avoiding the HRS regulatory cost threshold).

RECOMMENDATION

From the foregoing it is

RECOMMENDED that HRS issue a Certificate of Need to the West Boca Raton Artificial Kidney Center authorizing the opening of a five-station kidney dialysis clinic on or after July 1, 1986, with the specific requirement that this clinic accept hepatitis and hepatitis positive patients, and that it agree to add no new stations without HRS approval prior to July 1, 1988.

DONE and ENTERED this 18th day of September, 1985 in Tallahassee, Florida.

R. T. CARPENTER, 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 18th day of September, 1985.

ENDNOTES

1/ This facility was already open and operating at the outset of hearing. The only evidence relating to the existence of this facility which was admitted is that involving actual construction costs as opposed to less reliable preliminary estimates.

2/ The sub-area proposed by the applicant is that portion of South Palm Beach County bordered on the north by Boynton Road, on the east by the Atlantic Ocean, on the south by the Palm Beach/Broward County line and on the west by the "conservation area."

3/ The Florida End Stage Renal Disease (ESRD) Network 19 is a federally funded agency established in 1977 as part of a national program of the Health Care Financing Administration ("HCFA") to oversee and coordinate the ESRD program.

Network 19 is within the organizational structure of the federal Health and Human Services Department and is a nonprofit organization. It provides HRS with need projections for kidney-dialysis and kidney transplantation facilities within the state; it monitors the quality of care rendered to dialysis patients and follows up on any complaints these patients may have. From the Network's inception in 1977 until 1984, it provided HRS with formal recommendations as to the need for new ESRD facilities in Florida. Beginning in 1984, HCFA reduced funding to Network 19 so that it was no longer able to provide formal need recommendations to HRS. However, Network 19 has continued to provide need projections and other data to HRS on an ad hoc basis, and the two agencies are negotiating a contract whereby HRS would provide funding to Network 19 for the data it produces.

COPIES FURNISHED:

C. Gary Williams, Esquire AUSLEY, MCMULLEN, MCGEHEE, CAROTHERS & PROCTOR

Post Office Box 391 Tallahassee, Florida 32302

E. G. Boone, Esquire Stephen K. Boone, Esquire Post Office Box 1596 Venice, Florida 34284

Richard A. Patterson, Esquire Assistant General Counsel Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32301

David Pingree, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 84-002714

Orders for Case No: 84-002714