STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
ST. MARY'S HOSPITAL, INC., d/b/a ) ST. MARY'S PSYCHIATRIC PAVILION, )
)
Petitioner, )
)
vs. ) CASE NO. 86-4354
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
and )
)
BETHESDA MEMORIAL HOSPITAL, )
)
Intervenor. )
) BETHESDA MEMORIAL HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 86-4356
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
and )
) ST. MARY'S HOSPITAL, INC., d/b/a ) ST. MARY'S PSYCHIATRIC PAVILION, )
)
Intervenor. )
) HARBOUR SHORES HOSPITAL OF LAWNWOOD, )
)
Petitioner, )
)
vs. ) CASE NO. 86-4358
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
and )
) ST. MARY'S HOSPITAL, INC., d/b/a ) ST. MARY'S PSYCHIATRIC PAVILION; ) and BETHESDA MEMORIAL HOSPITAL, )
)
Intervenors. )
)
RECOMMENDED ORDER
Pursuant to notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on June 6-10, 1988, in Singer Island and on June 13-15 and 20, 1988, in Tallahassee, Florida.
Petitioner St. Mary's Hospital, Inc., d/b/a St. Mary's Psychiatric Pavilion (hereinafter "St. Mary's") was represented by Robert D. Newell, Jr., and Thomas
W. Stahl, Attorneys at Law, Tallahassee, Florida; petitioner Bethesda Memorial Hospital, Inc. (hereinafter "Bethesda") was represented by Chris M. Bentley, Attorney at Law, Tallahassee, Florida; Petitioner Harbour Shores Hospital of Lawnwood (hereinafter "Harbour Shores") was represented by John Radey and Elizabeth W. McArthur, Attorneys at Law, Tallahassee, Florida; and Respondent Department of Health and Rehabilitative Services (hereinafter "HRS") was represented by Leley Mendelson, Attorney at Law, Tallahassee, Florida.
St. Mary's, Bethesda and Harbour Shores each filed with HRS in the April, 1986, batching cycle an application for a certificate of need for short-term psychiatric beds in HRS District 9 for the January, 1991, planning horizon.
Harbour Shores seeks to expand its existing short-term psychiatric facility, while St. Mary's and Bethesda seek to initiate short-term psychiatric services. After review, HRS preliminarily denied the three applications, as well as other applications for short-term psychiatric beds filed in that batch. St. Mary's, Bethesda and Harbour Shores filed petitions contesting the preliminary denial of their applications. St. Mary's and Bethesda also intervened in each other's cases and the Harbour Shores case to facilitate a comparative review. The three cases, together with others that have since been closed based on severance or voluntary dismissals of the Petitioners, were consolidated for comparative review. Accordingly, the issue for determination herein is whether any or all of the three applications for a certificate of need for short-term psychiatric beds in HRS District 9 should be approved.
St. Mary's presented the testimony of John Fidler; Terry H. Allen; Edward
O. Holloway; William C. Brandenberg, III; Tom Porter; Howarth L. Lewis; Don Chester; Kathy Schwartz; Woodrin Grossman; Michael L. Schwartz; Elizabeth Dudek; and James E. Schiller. Additionally, St. Mary's Exhibits numbered 1, 3, 4, 6- 10, 12, 16, 18 and 21 were admitted in evidence.
Bethesda presented the testimony of Kenneth Peltzie; Robert B. Taylor, Jr.; Dr. Nathaniel Marion Weems, Jr.; Dr. Frederick Ludwig; Edward O. Holloway; James
E. Schiller; Dr. Carlos J. Tomelleri; Donald B. Morgan; Tom Porter; and A. Scott Parker. Additionally, Bethesda's Exhibits numbered 1-10 and 13-22 were admitted in evidence, and Bethesda adopted St. Mary's Exhibits numbered 3 and 4.
Harbour Shores presented the testimony of Frederick L. Stevens, Jr.; Ronald
Luke; Dr. Sureshchandra N. Desai; Randy McVay; Ed Jordan Johnson; and by way of depositions Dr. Renato R. Alcalde, Dr. Joseph J. Altieri and Dr. Carmen Ebalo. Additionally, Harbour Shores' Exhibits numbered 1-18, 20, page one of 21, and 22-26 were admitted in evidence.
HRS presented the testimony of Amy M. Jones and Elizabeth Dudek. Additionally, HRS's Exhibits numbered 2-4 were admitted in evidence.
All parties submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A ruling on each proposed finding of fact can be found in the Appendix to this Recommended Order.
FINDINGS OF FACT
Harbour Shores is a 60-bed psychiatric facility located in Fort Pierce, St. Lucie County, Florida. Harbour Shores began operation in October, 1985, pursuant to licensure as part of Lawnwood Regional Medical Center, a general acute care hospital. Harbour Shores is located near Lawnwood Regional Medical Center and functions as a part of that hospital.
Lawnwood Regional Medical Center, Inc., is a wholly owned subsidiary of Hospital Corporation of America (hereinafter "HCA"), a private, for-profit corporation. HCA Psychiatric Company manages and provides services to Harbour Shores pursuant to a management agreement. HCA Psychiatric Company has experience owning and/or operating approximately 54 psychiatric facilities, with 6,000 beds, nationwide. Services provided by HCA to Harbour Shores include a quality assurance surveying process to assure that the HCA facilities maintain high standards of care, continuing education and training seminars, professional staff including psychiatrists available to assist the individual facilities, computer services, and bulk purchasing.
The Harbour Shores 60-bed psychiatric facility is divided into two patient care units: a 24-bed adolescent unit and a 36-bed adult unit. Within the adult unit, Harbour Shores operates three distinct patient care programs: a therapeutic community open unit for higher functioning adult psychiatric patients, a senior adult program for elderly adult psychiatric patients, and an intensive treatment or acute care program for lower functioning, violent, or suicidal psychiatric patients who are in need of closer monitoring and more intensive treatment than the other higher functioning patients. All of the Harbour Shores beds fall in the short-term inpatient psychiatric category, with an average length of stay of three to four weeks.
The Harbour Shores facility is well-designed for the treatment of psychiatric patients. It is a one-floor design, with admissions and administrative spaces upon entry, the two separate patient care units for the adults and adolescents, each with separate entry, and ample program and activity space. Harbour Shores has a gymnasium, classrooms for the adolescents, occupational therapy and activities therapy rooms, seclusion rooms in each patient care unit, dining room and outpatient areas. There are courtyards and a swimming pool, outside of the patient care areas. All of these areas play an important clinical role in the treatment of the psychiatric patients. For example, the gymnasium has a basketball and volleyball court and exercise equipment such as punching bags. These activities are useful for getting rid of aggression in socially acceptable ways, instead of through physical confrontations. The activities and occupational therapy rooms, including a greenhouse, provide opportunities for development of job and social skills.
Harbour Shores is located in a pleasant, professional neighborhood, without security or crime problems that could hinder therapy of patients and the ability or willingness of family or others to visit and participate in therapy.
Harbour Shores' relationship with Lawnwood Regional Medical Center provides benefits to the psychiatric patients who need medical services not normally offered in a psychiatric hospital. Harbour Shores is able to quickly transport a psychiatric patient to the acute care hospital for emergency room
care, if necessary, or for diagnostic laboratory services. Harbour Shores and Lawnwood Regional Medical Center have a single medical staff, and a full array of medical specialists other than psychiatrists are available for consultation at Harbour Shores.
Harbour Shores seeks to provide a full continuum of care to its psychiatric patients. This goal is accomplished by the provision at Harbour Shores of a full array of short-term inpatient psychiatric services and also outpatient services. Harbour Shores also has in place transfer agreements for when the psychiatric facility or the Lawnwood acute care hospital are not appropriate for a patient, including an agreement with HCA Medical Center of St. Lucie and Indian River Estates in Vero Beach, a nursing home.
The typical adult patient coming to Harbour Shores generally goes through an admissions process first for screening to determine whether inpatient treatment, instead of outpatient care, is necessary. The patient and family are given an overview of the program, and then the patient is taken onto the unit where the initial nursing assessment is performed, usually by the charge nurse. The attending psychiatrist sees the patient within 24 hours of admission, and the preliminary treatment plan is formulated. That plan is revised in three days, based upon information gathered from the family and through observation and treatment. The treatment team who formulate the plan include the psychiatrist, who is in charge of the team, clinical social worker, unit coordinator, the charge nurse or attending nurse, psychologist and mental health technicians. Simultaneous with the formulation of treatment plans, the team formulates and revises the patient's discharge plan. After ten days, a master treatment plan is prepared, comprehensively addressing the patient's problem, changes in the previous treatment plan, discharge plan and follow-up care plan. After the patient is discharged, the psychiatrist will often follow up with the patient on an outpatient basis.
Harbour Shores has in place a number of quality assurance monitoring techniques to ensure that it will maintain a high level of quality care for its patients and will improve its care where improvement is possible. Harbour Shores has an ongoing quality assurance committee, and subcommittees, that meet regularly to assess patient care. Harbour Shores has accepted and implemented the recommendations of its committees. There is also a less formal quality assurance mechanism called patient care monitoring, whereby any time a staff member feels that there is a patient care problem, he or she can call up the staff group responsible for that patient, together with a professional not involved in that case, for a review and resolution of the problem. Harbour Shores provides very good overall quality of care to its patients.
Harbour Shores' quality care has been formally recognized through its achievement of Joint Commission on Accreditation of Healthcare Organizations (hereinafter "JCAHO") accreditation, a voluntary accreditation process based on many standards judged through formal surveys and information gathering. JCAHO accreditation is recognized as the standard in the industry. Harbour Shores has also been awarded membership in the National Association of Private Psychiatric Hospitals. Like JCAHO, it requires a facility to undergo a quality assurance survey. Becoming a member demonstrates a level of quality of a facility that is well-recognized in the industry.
One result of the careful monitoring of patient care at Harbour Shores was the recognition early on in its operation that the general open adult unit was not serving the combined needs of higher functioning and intensive treatment patients in the most beneficial way possible. The difference between general
short-term psychiatric care and intensive treatment in a psychiatric hospital can be analogized to the difference between an acute care hospital's general medical-surgical care and its critical care. Because of the extra care and monitoring required for the intensive treatment patients, they were consuming the open unit staff's attention to the detriment of the higher functioning patients, and they could also be disruptive and dangerous. The more acutely disturbed patients also tended to become more agitated with the higher levels of stimulation they experienced when they were mixed with higher functioning patients. Therefore, Harbour Shores began taking steps to follow the medical staff's recommendation to separate the two patient populations into distinct subunits.
In April, 1986, Harbour Shores filed a certificate of need application seeking approval for an addition of 30 beds to its facility: twelve beds to accommodate a separate intensive treatment unit and eighteen beds for a geriatric unit. At the final hearing, Harbour Shores sought approval of only its 12-bed intensive treatment unit. Harbour Shores did not offer evidence at hearing to support the 18-bed geriatric unit.
After submitting its application and before hearing, a period of 26 months, and while its certificate of need application was undergoing preliminary review and the administrative hearing process, Harbour Shores made stopgap changes to address, at least in part, the needs of its patients requiring intensive, critical care. Pursuant to a certificate of need exemption recognized by HRS in October, 1987, Harbour Shores added two patient therapy rooms and one activity room to serve an 8-bed area in which it placed intensive treatment patients.
The CON exemption was awarded because the capital expenditure was below the threshold dollar amount that would trigger CON review, and no new beds were being added. That project was an interim measure to relieve immediate problems in treating intensive treatment patients at Harbour Shores, independent of this CON project, although Harbour Shores prudently designed that addition to be convertible to patient rooms in the future. Part of Harbour Shores' proposal under review in this case involves a conversion of the added space to patient rooms, which is why the project is now required to undergo CON review. The addition will continue to serve as non-patient rooms unless and until a CON is granted.
The intensive treatment area that has been in operation since January, 1988, does not fully meet the needs of patients at Harbour Shores. While there is now some physical separation of patients and staff, it is not complete. Some of the remaining problems to be addressed include the need for a separate nurse's station, complete with charting area and secure medicine area, a separate seclusion room for the exclusive use of the intensive treatment patients, and direct access to and from the unit without passage through other units. Without a separate nurse's station, the staff cannot be exclusively focused on the intensive treatment unit, and there is incomplete separation of staff. Similarly, without its own seclusion room and direct access, the intensive treatment unit fails to achieve complete separation of patients. The intensive treatment patients now have to pass through the open adult unit to get to their unit and have to leave their unit if they are required to utilize the seclusion room which is on the general adult open unit. This is disruptive to both groups of patients.
Utilization of Harbour Shores has been steadily growing since its opening in October, 1985. Harbour Shores has experienced the typical start-up
phasing in of patients experienced by psychiatric hospitals. Thus, in 1986, when HRS reviewed utilization at Harbour Shores during 1985, it had only three months of data to consider, and the average utilization was 42 percent. Harbour Shores made progress in 1986, with an average utilization of 60 percent. In 1987, its adult unit achieved a 73.3 percent utilization rate, and it has been holding steady for the first five months of 1988.
Harbour Shores has a reasonable expectation that utilization of its facility, especially with respect to intensive treatment services, will materially increase because of its recent designation as a private Baker Act receiving facility.
The Baker Act, Part I of Ch. 394, Florida Statutes, is a legal procedure for involuntarily committing someone to a psychiatric facility for treatment. A psychiatric hospital must apply to and be approved by HRS before it can treat Baker Act patients. Designation of facilities to treat Baker Act patients is not a ministerial step, but rather, involves a lengthy application submission and site visit and survey by HRS. Baker Act patients are by definition involuntary, are generally more acutely sick than the voluntary patient, and are proportionately more in need of intensive treatment.
HRS District 9 consists of a large geographic area, stretching from Sebastian to the north to Boca Raton to the south, with the Atlantic Ocean as the eastern boundary. District 9 is divided into two subdistricts: subdistrict
1 includes the four northern counties: Indian River, St. Lucie, Okeechobee and Martin; and subdistrict 2 is Palm Beach County. Subdistricts 1 and 2 function primarily as distinct, separate markets for short-term psychiatric care.
Harbour Shores primarily serves patients from subdistrict 1, the four- county area surrounding the hospital--St. Lucie County, Indian River County to the north, Okeechobee County to the west and Martin County to the south.
Harbour Shores is the only designated private Baker Act receiving facility in subdistrict 1, and it is the only facility with licensed inpatient short-term psychiatric beds that is authorized to treat Baker Act patients.
The only other facility authorized to treat Baker Act patients in subdistrict 1 is the Indian River Community Mental Health Center (hereinafter "IRCMHC"), a public receiving facility. The IRCMHC received between 680 and 750 Baker Act patients in 1987. The IRCMHC is not licensed to provide short-term inpatient psychiatric services. It has 15 crisis stabilization beds, which do not serve the same needs as short-term inpatient psychiatric beds. Crisis stabilization beds provide a very short-term service, intended to stabilize emergency patients who are then referred to appropriate facilities. The average length of stay is typically less than one week.
The IRCMHC is not a reasonable alternative to provide all needed psychiatric services to Baker Act and other patients, in part because of the limited services that can be provided in crisis stabilization beds, and also in part because the Center is not in very good condition and is in a poor part of Fort Pierce, known for its crime and security problems. When patients or their families have a choice of facilities, it can be reasonably expected that they would choose Harbour Shores. The physical environment of a psychiatric facility plays a role in the patient's therapy, and the Harbour Shores environment is preferable.
Until shortly before hearing, another psychiatric hospital in subdistrict 1, the Savannas Hospital, was treating Baker Act patients by
referral from the IRCMHC with which it is affiliated, perhaps as many as 5500 patient days in 1987. However, in late May, 1988, the IRCMHC was notified by HRS to cease and desist from referring patients to the Savannas because the Savannas was not approved to serve Baker Act patients; instead, those patients were to be referred to Harbour Shores.
Harbour Shores has a working relationship with the IRCMHC, and they receive and give referrals back and forth. As the only authorized Baker Act inpatient psychiatric facility in subdistrict 1, Harbour Shores can reasonably expect to serve those Baker Act patients who were being improperly referred to the Savannas.
Harbour Shores' good start-up utilization of its eight intensive treatment beds of nearly 70 percent for the first five months of 1988 indicates the need for those eight beds, with the impact of the Baker Act population first beginning to be realized. Realization of the full Baker Act patient load would overload the intensive treatment unit.
If Harbour Shores captures only 50 percent of the subdistrict 1 Baker Act patient market as reflected by the IRCMHC's 1987 patient days, assuming no growth of Harbour Shores' 1987 adult patient census, it would achieve an adult average daily census of approximately 39.8 in the adult (including the intensive treatment) unit, while it currently only has 36 beds. Comparing the quality of Harbour Shores with the IRCMHC, Harbour Shores could capture as much as 80-90 percent of the area's Baker Act patients. Using a conservative 50 percent Baker Act patient projection and projecting no growth of the current adult patient census, Dr. Luke, an expert in health planning and design and operation of mental health programs, projected a need for 47 adult beds with an 85 percent occupancy rate, or 50 beds with an 80 percent occupancy rate.
Increased utilization of an expanded intensive treatment unit will also have a secondary impact of increased utilization of the rest of the Harbour Shores facility. Often, patients who are admitted to the intensive treatment unit will progress to a point where they qualify as higher functioning patients appropriate for transfer to the open unit. Establishment of a 12-bed intensive treatment unit that will be highly utilized should also increase utilization of the other 36 adult beds.
While it is physically possible for Harbour Shores to put the 12-bed intensive treatment unit in place without adding any new beds, that would not be feasible because it would reduce the number of beds in the rest of the adult unit. With the reasonable expectation that Harbour Shores would achieve increased utilization of its whole expanded facility with approval of this project, and reasonably utilize 48 adult beds, it would be most efficient for Harbour Shores to add beds while it is renovating the facility anyway for the intensive treatment unit so as to avoid piecemeal, disruptive construction projects. Approval of the expansion project will allow Harbour Shores to provide a higher level of quality care through better segregation of the different patient groups and will also allow for accommodation of the reasonably expected utilization of intensive treatment and general adult psychiatric services.
Harbour Shores has demonstrated that there is a need for its expansion project because of its unique position in subdistrict 1 as a Baker Act patient provider, the lack of alternatives for those patients, and the tendency of that patient group to need intensive treatment. Patients in the Harbour Shores service area will experience serious problems obtaining inpatient care of the
type proposed by Harbour Shores in the absence of the proposed project. Subdistrict 2, Palm Beach County, has been demonstrated to be a geographically distant, separate market for short-term psychiatric services and is not an appropriate alternative for patients in subdistrict 1 needing short-term, especially intensive, psychiatric services, in light of the state health plan's goal of community-based mental health services.
In addition to the special circumstance of need demonstrated at Harbour Shores, need for the additional beds is supported by the general need methodologies applied by HRS in its bed need rule for short-term inpatient psychiatric beds, Rule 10-5.011(1)(o), Florida Administrative Code, and by the local health council for HRS District 9 in its local health plan.
The HRS rule methodology calculates the need for short-term psychiatric beds in an HRS district by applying a formula of .35 beds per 1,000 population projected five years into the future. Since the applications were filed in April, 1986, in its preliminary review HRS looked to the most recent population projections issued in January, 1986, for five years into the future, January, 1991. The January, 1986, District 9 population projection for January, 1991, was 1,235,361, and .35/1,000 yielded a gross need of 432 beds. Licensed and approved short-term psychiatric beds at the time of application submittal according to HRS totaled 404 beds, yielding a net bed need for the district of
28 beds.
Some relevant facts external to the certificate of need applications at issue in this proceeding have changed since the applications were submitted and should be taken into account. One such fact is the more recent population projection issued for the January, 1991, planning horizon, released by the state in January, 1988. The revised District 9 population projection is 1,274,865, increasing the district bed need by 14.
Another external change involves an HRS settlement with an existing provider in subdistrict 2, JFK Hospital. This settlement recognized the historic use of beds at JFK in a manner different from their licensed designation; rather than 36 short-term psychiatric beds as licensed, JFK had for many years been utilizing 22 of those beds as substance abuse beds, a different HRS bed category, and only 14 beds as short-term psychiatric beds. The HRS final order agreeing to change JFK's license to align it with JFK's actual usage was issued in March, 1988. It is, however, appropriate to correct the HRS inventory in this case to recognize the actual use of beds since by 1984, well before the applications at issue in this case were filed, HRS knew that JFK was using 22 of its 36 short-term psychiatric beds for substance abuse treatment and that those 22 beds should not be carried in the short-term psychiatric bed inventory.
Additional adjustments to correct the inventory are appropriate. The Savannas Hospital's certificate of need generally indicates 70 short-term psychiatric beds; its license shows 50 short-term psychiatric beds and 20 substance abuse beds. The HRS inventory reflects the licensed bed breakdown.
However, the Savannas has been reporting to the local health council that it has actually been operating only 40 short-term psychiatric beds and 30 substance abuse beds. Therefore, 10 additional beds should be subtracted from the short-term psychiatric bed inventory. There have also been questions about another District 9 facility's bed use. The average length of stay for 26 of Lake Hospital's short-term psychiatric beds is reported by Lake Hospital to be between 250 and 300 days, by definition not short-term beds. HRS admits that its inventory of beds for District 9 is not as reliable as one would hope (or expect).
By making the first two adjustments (the original HRS calculation plus the JFK correction plus use of the updated population projections) to the HRS calculations, the total District 9 bed need is 64. By making all of the foregoing adjustments (the original HRS calculation plus the JFK correction plus use of the updated population projections plus the Savannas correction plus the Lake Hospital correction) to the HRS calculations, the total District 9 bed need is 100.
There is no statute, and HRS has no rule or policy regulating how beds should be allocated between subdistricts. The 1985 local health plan, as updated in 1986, recommended that the district bed need be allocated between the two subdistricts in proportion to their population, i.e., .35 beds per 1,000 population projected for each subdistrict.
After these applications were filed and deemed complete, the local health council approved its 1987 local health plan, in July, 1987. This new plan changed the recommended subdistrict allocation from the population-based method to a new utilization-based method. The utilization method seeks to equalize bed use in the two subdistricts in the future by applying historic utilization of existing beds to future population projections and assumes that the use pattern in each subdistrict will remain the same.
In 1987, there were no more than two short-term inpatient psychiatric providers at any one time in subdistrict 1. The IRCMHC had been operating 15 inpatient psychiatric beds at capacity for some time, showing a 106.83 occupancy rate for 1986; Harbour Shores was in its second year of operation; and the Savannas Hospital first opened in March, 1987, when it began operating the 15 beds that were transferred to it from the IRCMHC and then phased in the rest of its seventy beds during the year. Essentially all of the short-term psychiatric beds in subdistrict 1, then, were in a start-up phase, utilized less than they would naturally be after a normal period of operation.
Given the start-up nature of the subdistrict 1 facilities, and the corresponding 40 percent difference in use rate between subdistricts 1 and 2, it is reasonable to infer that the 1987 use rate for subdistrict 1 is artificially low, reflecting the historic forced outmigration of subdistrict 1 patients due to lack of nearby providers.
The only other theory for the dramatic difference in use rates in the two subdistricts, offered by St. Mary's need witness--that subdistrict 2's population is more elderly--is rejected. No evidence was presented to substantiate that a more elderly population has a higher use rate of psychiatric services.
The subdistrict allocation method in the 1987 health plan should not be applied in this case based on sound health planning principles of not changing the criteria in the middle of the application process. Further,
although the new methodology might in theory be a better measure of local needs by addressing actual use patterns, in this particular case, for the data base year of 1987, the methodology is inappropriate and would perpetuate disproportionate allocation between the subdistricts. Although it is HRS's position that the 1985 local health plan (as updated in 1986) is the version that should be applied in this case, the 1985 plan should not be applied either. The plan itself states that its allocation methodology is weak at best and must be revised. Further, the Executive Director, testifying on behalf of the District 9 Health Council, stated that the 1985 allocation methodology should not be used in this case. Accordingly, no subdistrict allocation is appropriate in this case.
At final hearing, Harbour Shores presented updated financial projections--pro forma statement of revenue and expenses, utilization projections, payor mix, charges and manpower salary requirements--to account for the passage of time from initial application submission and to address only the 12-bed portion of the original application for which approval is sought. The financial projections constitute an identifiable portion of the original projections, appropriately updated to take into account only factors external to the application.
The financial projections provide a reasonable basis upon which to assess the financial feasibility of the proposed expansion project, and Harbour Shores has adequately demonstrated that the 12-bed expansion proposal would be financially feasible. Additionally, the parties have stipulated that Harbour Shores has the resources to fund the project and its operation if it is approved. The project cost, as updated with revised construction cost estimates, is $1,079,165.
Projected utilization of the 12-bed unit is reasonable and conservative in light of the reasonable expectation of Baker Act patients who will use the intensive treatment unit. With the 12-bed expansion, Harbour Shores should easily achieve and exceed 70 percent utilization by the second year of operating a 72-bed facility, and 80 percent utilization by the third year. A reasonable projection from existing adult use and expected Baker Act utilization would be an adult average daily census of 39.8; an 80 percent facility-wide utilization would result with a minor increase in adolescent average daily census from 14.8 in 1987 to 17.8, or an adult increase in utilization.
The projected charges for the intensive treatment unit, while higher than charges for general psychiatric units, are reasonable in light of the higher level of service provided in the unit, including more staff. The reasonableness of the charge is confirmed by the fact that the projected charge is the same as the Harbour Shores current charge that it is receiving for its intensive care services, i.e., $680.
The projected patient mix by payor class is reasonable and reflective of the facility's actual experience. Harbour Shores includes a projection of 15 percent Medicaid patient days and 2 percent indigent days. The indigent care projection is reflective of true charity care, meaning those patients who present themselves for treatment with no means of pay. Harbour Shores has historically proven its commitment to providing care to medically indigent patients. Harbour Shores reasonably projects that it will serve a substantial percentage of those patients in its intensive treatment unit.
Projected manpower for the 12-bed unit will well-serve the needs of the intensive treatment patients, and Harbour Shores should have no difficulty recruiting and securing the projected needed staff at the indicated salary levels. The projected salaries are reasonable and consistent with Harbour Shores' experience.
The pro forma statement of revenues and expenses, taking into account the projected utilization, payor class breakdown and projected charges on the revenue side, and manpower salary requirements, depreciation and other expenses attributable to the 12-bed expansion, is a reasonable projection based on the facility's actual experience and future expectations; is a reasonable summary of the expected direct financial impact of the 12-bed expansion, and shows that the expansion project will be financially feasible. Additional financial benefits may accrue as a result of the secondary increase of utilization of the existing beds.
The proposed 12-bed expansion project will include some new construction to create an expanded facility that will be appropriate from an architectural standpoint for the treatment of psychiatric patients, including intensive treatment patients. The construction plan is an identifiable portion of the plan presented in the original application. The only changes to the original plan are the deletion of the new geriatric wing and a change from new construction to renovation for the new patient therapy wing constructed in 1987 pursuant to a CON exemption.
The construction changes necessary to accommodate the 12-bed intensive treatment unit include renovation of the central core of the facility where the classrooms are currently located for the addition of a nurse's station, creation of an entrance directly onto the unit from the central patient control corridor, creation of a charting and medicine work area directly on the unit, and installation of a separate group therapy room and a seclusion room dedicated to the intensive treatment patients. The project will also include construction of a new classroom building, required by the displacement of the existing classroom space.
Construction costs for the 12-bed expansion project have been updated to reflect expected 1989 costs. Harbour Shores reasonably projects those costs to be $628,466. Expending these costs will enable Harbour Shores to complete its project in a manner that will exceed minimum licensure standards in Chapter 10D-28, Florida Administrative Code, and will fall in the upper quadrant of construction quality typical in the industry.
Rule 10-5.08, Florida Administrative Code, as it existed when the letters of intent and applications were due for the batching cycle at issue in this case, established an application filing deadline of April 15, 1986, and an initial letter of intent deadline of 30 days before the application deadline, or March 16, 1986. However, paragraph (e) provided that where the
... initial letter of intent for a specific type of project has been filed with the department less than 38 days prior to the appropriate application filing due date ... a grace period shall be established to provide an opportunity for a competing applicant to file a letter of intent.
The grace period, where applicable, allows letters of intent to be filed up to
16 days prior to the application due date. In this case, if a grace period were applicable the deadline for letters of intent would be March 31, 1986. Harbour Shores filed its letter of intent on March 28, 1986, and St. Mary's filed its letter of intent on March 27, 1986. Bethesda has raised the issue of whether Harbour Shores' and St. Mary's letters of intent were timely filed.
Only one letter of intent related to an application that was included by HRS in the group of applications considered in the State Agency Action Report was filed with HRS 38 days or more before the application due date--the letter of intent filed by Martin Memorial Hospital. That letter of intent states that it is for 22 "short-term psychiatric/substance abuse" beds. There is no such combined category of beds. According to the State Agency Action Report, Martin Memorial's application was in fact for 22 substance abuse beds. As such, it was not a competing applicant with Harbour Shores or St. Mary's or Bethesda, and all other letters of intent were filed less than 38 days before the application due date. Accordingly, Harbour Shores' and St. Mary's letters of intent were timely filed.
Bethesda filed its application with HRS on April 15, 1986. Bethesda filed its response to the HRS letter of omission on June 30, 1986, and HRS deemed Bethesda's application complete effective June 30, 1986. By letter dated July 18, 1986, received by HRS prior to the August 6, 1986, public hearing, Bethesda submitted additional information reflecting its intent to utilize and renovate existing space in its hospital instead of utilizing construction of a new wing for its psychiatric unit, as originally proposed. These three submissions constitute Bethesda's application reviewed by HRS in the State Agency Action Report.
Bethesda's certificate of need application is for a 20-bed adult short-term inpatient psychiatric unit at Bethesda Memorial Hospital. Bethesda proposes to convert 20 existing licensed medical/surgical beds to short-term inpatient psychiatric beds. The beds will be placed in existing space, and there will be no new construction of space.
Bethesda is a 362-bed community medical/surgical hospital licensed as a general hospital. It is a not-for-profit hospital and has served the southern portion of Palm Beach County for almost 30 years. It is accredited by the JCAHO.
Bethesda has recognized from its beginning that the entire population of its service area needed to be served without regard to financial ability to pay, and the ability to pay is not a primary concern of the hospital when a patient is first admitted.
The evidence is undisputed that Bethesda is committed to and provides excellent quality of care and will continue to provide excellent quality of care in the proposed psychiatric unit.
The St. Mary's application seeks to place short-term psychiatric beds on a campus in the northern half of Palm Beach County, in West Palm Beach, and Bethesda Memorial Hospital is located in southern Palm Beach County, in Boynton Beach.
Bethesda is the only applicant that proposes to convert underutilized medical/surgical beds into 20 short-term psychiatric beds. This factor significantly distinguishes Bethesda's proposal from that of the other
applicants because there have been unused medical/surgical beds in Palm Beach County for approximately the last two years. Bethesda's proposal would take some of those unused resources and put them to more efficient and appropriate use.
Historically, Bethesda has been recognized as a cost-effective hospital, not only in Palm Beach County, but throughout the State. Bethesda's projected charge per patient day, including ancillaries, is $349. This charge is reasonable. Bethesda proposes a rate significantly lower than any other applicant, making Bethesda's proposal more cost effective and competitive for patients.
Bethesda's original proposed project cost was $85,000. That project cost has been updated to $88,100. This update was required primarily because of changes in the proposed floor plan necessitated by new licensure requirements imposed by HRS in Rule 10D-28.0816 adopted January 16, 1987, after the filing of Bethesda's application. The $3,100 increase in the total project cost is not a substantial change in the application.
The proposed construction cost of Bethesda for renovation of $37,100 is a reasonable estimate.
The movable equipment cost is a reasonable estimate.
The project development cost of $20,000 is reasonable.
In terms of project cost, the Bethesda application is significantly more cost effective than the St. Mary's application. The St. Mary's proposed project cost for 30 beds is $1,457,150. That is the equivalent of $48,571.67 per bed, contrasted against Bethesda's project cost of $4,405 per bed. Bethesda's project cost is also considerably lower than that of Harbour Shores.
The schematic floor plan of Bethesda's proposed unit was updated due to the HRS adoption of the licensure minimum standards, which were not in existence at the time of the original application and, therefore, the original schematic did not comply with those standards. In fact, there is no significant physical difference between the updated schematic and that contained in the original application. Indeed, the space already exists in essentially the same configuration as that proposed and was in existence at the time of the filing of Bethesda's application.
The proposed unit can reasonably be expected to meet licensure requirements.
The Committee on Health Facilities Construction of the American Institute of Architects has set standards for the design of psychiatric facilities. They are acceptable, reasonable standards. Those standards prescribe one seclusion room for 24 beds or major fraction thereof. Bethesda's proposed facility complies with that standard. HRS has no standard for seclusion rooms.
From the perspective of a practicing psychiatrist, the existing Bethesda facility with the proposed modifications meets the requirements for a facility for use in the treatment of inpatient psychiatric patients quite well.
It is likely that psychiatrists in the general area surrounding Bethesda will seek to admit patients to the unit when it is in place. In
addition, it is reasonable to assume that Bethesda Memorial Hospital itself will be a referral source to its psychiatric unit. The evidence also establishes that the South County Mental Health Center, Inc., a community mental health center, will be a significant referral source of patients to Bethesda's psychiatric unit.
Bethesda has sufficient funds committed to cover the cost of its proposed project. The Southeast Palm Beach County Hospital District has already committed and approved $85,000 in capital expenditure funds for Bethesda's project. Bethesda has sufficient operating funds to provide the remaining
$3,100. Indeed, Bethesda has sufficient operating funds to fund the entire project out of operating funds, if necessary.
The Southeast Palm Beach County Hospital District has historically not used ad valorem tax revenues to subsidize the operations of Bethesda. Funds generated by the District have been used primarily for capital expenditures for Bethesda. Bethesda does not anticipate receiving any operational revenues from the Southeast Palm Beach County Hospital District for patients that might be eligible or meet some criteria established by the District for reimbursement.
The projected utilization by class of pay, or payor mix, is consistent with the payor mix at Bethesda Memorial Hospital. It is reasonable to expect that the payor mix in the proposed psychiatric unit will be reflective of the payor mix at Bethesda. It was necessary for Bethesda to update its projected payor mix because the original projection reflected the 1986 payor mix of Bethesda and, primarily as a result of the extrinsic circumstance of the prospective pricing system, there has been a dramatic change in payor mix at Bethesda.
Bethesda's projections include a category entitled "Baker Act/Medicaid." This category has combined Medicaid patients and those patients who would otherwise qualify as Baker Act patients who are indigent based upon their ability to pay. In the 7.7 percent for the "Baker Act/Medicaid" category, there is included 1.2 percent for indigent patients without any source of funds.
It is reasonable to project that the Bethesda psychiatric unit will operate at 70 percent occupancy for the first year and 80 percent occupancy for the second year and beyond.
The manpower requirements projected by Bethesda are sufficient to properly staff the proposed psychiatric unit. Bethesda has projected reasonable annual salaries. It is very likely that Bethesda will be able to recruit necessary manpower to staff its proposed facility.
It was necessary for Bethesda to update its manpower requirements from these contained in its original application because of a management agreement entered into between Bethesda and Mental Health Management, Inc., on May 5, 1988. The updated manpower requirements reflect the staffing standard to be implemented by Mental Health Management, Inc., pursuant to the management agreement and the proposed treatment program. Mental Health Management, Inc., is a health care management firm that owns psychiatric and substance abuse hospitals as well as manages psychiatric and substance abuse hospital programs for client hospitals. It is a reputable and experienced management firm. No significant work, if any, was done on behalf of Bethesda by Mental Health Management, Inc., with regard to this project prior to the date of the management agreement.
Bethesda's project completion forecast is reasonable.
Bethesda is financially a healthy, viable institution.
It is reasonable for Bethesda to project gross patient revenues in its first year of $1,783,390 and in its second year of $2,038,160. Further, it is reasonable after considering deductions from revenue for Bethesda to project net revenue in its first year of operation of $1,392,186 and in its second year of operation of $1,591,069. Bethesda has reasonably projected that its total expenses in the first year of operation will be $1,286,090 and in the second year of operation will be $1,379,362. The net result is that in the first year of operation there will be projected incremental revenue over expenses of
$106,096 and in the second year of operation, incremental revenue over expenses of $211,707. In both the short term and long term, the psychiatric unit proposed by Bethesda is financially feasible.
South County Mental Health Center, Inc., a community mental health center, has had a successful working relationship with Bethesda since approximately 1974. It has been a positive relationship and one which should continue with the inception of a psychiatric unit at Bethesda. Indeed, the only problem that has existed between South County Mental Health Center, Inc., and Bethesda is the lack of a psychiatric unit at Bethesda. South County Mental Health Center, Inc., presently has many patients that are not being referred for psychiatric care because there is no facility that will take them. Bethesda would, at least in part, remedy that problem. South County Mental Health Center, Inc., would primarily utilize Bethesda instead of St. Mary's because St. Mary's is in the northern part of Palm Beach County and the Center is in the southern part as is Bethesda, although it would also utilize St. Mary's. There is presently no written agreement between Bethesda and South County Mental Health Center, Inc. However, this would not be a hindrance to a relationship between Bethesda and the Center because the Center presently has no written contracts with any providers and does not anticipate any working relationship being contingent on a written contract.
The service area of Bethesda Memorial Hospital includes from Southern Boulevard in Palm Beach County on the north to the Broward County line on the south, the Atlantic Ocean on the east and State Road 7 on the west.
Bethesda's proposed project is consistent with the 1985, 1986 and the 1987 local District 9 health plans.
The HRS rules governing amendment of applications in effect at the time the applications in this cause were filed allowed the submission of additional information without copying other applicants. HRS accepted Bethesda's July 18, 1986, application amendment letter and reviewed it as part of Bethesda's original application in its initial decision making set forth in the State Agency Action Report.
HRS has never required applicants to submit copies of their applications or any supplemental or amendatory information to other applicants after the completion date but prior to the public hearing on those applications. No applicant was prejudiced by the information submitted by Bethesda to HRS in July of 1986. Indeed, the information was published at the public hearing held by HRS on August 6, 1986. All applicants knew or should have known at least by August 6 that Bethesda had changed its application to reflect use of existing space for its psychiatric unit instead of use of new construction. Yet, no applicant took any action in response to this information, even though a
decision was not rendered by HRS in review of the applications until September 23, 1986, and any applicant could have changed its application up to five days prior to September 23, 1986.
The changes submitted by Bethesda did not change the scope of its application. The amendment did not change the type of beds sought, the number of beds sought, the service area for those beds, the conversion of unused medical/surgical beds to psychiatric beds, or any other matter of substance. Rather, with everything else remaining essentially constant, Bethesda merely stated its intent to place the proposed unit in existing underutilized space at a cost of $85,000 instead of constructing new space at a cost of $1,391,165. Such a change is not of such a substantial nature as to improperly prejudice other applicants.
There is a lack of availability in District 9 of other inpatient psychiatric services such as crisis stabilization units, short-term residential treatment programs and other inpatient beds whether licensed as a hospital facility or not.
Bethesda will be linked with South County Mental Health Center, Inc., as well as practicing psychiatrists, for the provision of outpatient services.
For fiscal year 1986, Bethesda gave $2,247,047 in charity care. That was 4.2 percent of its gross patient revenue for the year. In 1987, Bethesda increased its charity care to $3,615,324 which was 5.2 percent of its gross patient revenue. In fiscal 1986, St. Mary's provided $3,211,021 in charity which was 3.7 percent of its gross patient revenue. In 1987, St. Mary's provided $3,404,820 in charity care which was 3.8 percent of its gross patient revenue. As a function of percentage of gross patient revenue, Bethesda for fiscal years 1986 and 1987, provided more charity care than St. Mary' s.
The average net operating revenue per adjusted admission for fiscal years 1986 and 1987, for St. Mary's was $3,120. The average net revenue per adjusted admission for the same time period for Bethesda was $3,089.50. Thus, it appears that for the years 1986 and 1987, St. Mary's effective charges for patient operations were slightly higher than Bethesda's.
St. Mary's Hospital, Inc., is a 358-bed nonprofit acute care hospital located in West Palm Beach, Florida. The hospital is a wholly-owned subsidiary of St. Mary's Medical Center, Inc., which is owned by the Franciscan Sisters of Allegheny. The Franciscan mission is to provide quality health services to everyone, with a special emphasis on serving the poor and the disadvantaged. St. Mary's has been providing acute care to the medically indigent and traditionally underserved in Palm Beach County since 1938.
St. Mary's contracts with the Palm Beach County Health Department to provide Palm Beach County with acute care services for the medically indigent, from prenatal to adults.
Historically, St. Mary's has been the most heavily utilized hospital in the West Palm Beach area. St. Mary's has the largest market share of any hospital and serves Medicaid, uncompensated, and partially compensated patients in the area. St. Mary's has not, however, certified or committed to the provision of any specific percentage of care for Medicaid or indigent patients in this application.
St. Mary's admits and treats an increasing number of AIDS patients. Because of the need to isolate AIDS patients and because of the number of indigent patients that St. Mary's treats, St. Mary's often does not have beds available for private pay patients. During the peak season, St. Mary's is unable to admit some private pay patients and must physically turn them away. Because of St. Mary's reduced ability to admit private pay patients, St. Nary's does not have a broad-based revenue source with which to cross-subsidize the cost of providing care to indigent patients.
The 45th Street Mental Health Center is a not-for-profit corporation located in West Palm Beach which provides a full range of adult and older adult psychiatric services, serving primarily the indigent population. The 45th Street Center is a designated Baker Act receiving facility and, as such, it provides services without regard to the ability to pay.
St. Mary's has a long-standing working relationship with the 45th Street Center and is a contracting service to the 45th Street Center. St. Mary's staff evaluates patients at both the 45th Street Center and at the St. Mary's emergency room. St. Mary's and the 45th Street Center provide referrals to each other and transfer patients between the two facilities. From 50 to 75 patients are referred from the 45th Street Mental Health Center each month to St. Mary's for medical clearance.
An organized system of follow-up care exists for patients who are seen at both St. Mary's and the 45th Street Center. System protocol agreements exist between the two facilities. These agreements define the information that will be exchanged at a given clinical juncture and set forth procedures to ensure that all necessary medical and psychiatric follow-up care will take place.
The demand for indigent care has become so large in the last several years that indigent patients typically occupy all of the available bed capacity at the 45th Street Center. Because it is usually fully occupied, the Center cannot always be responsive to a request from St. Mary's to accommodate psychiatric patients. In March, 1988, the 45th Street Center turned away 51 people who were in need of psychiatric treatment but for whom there were no available beds.
St. Mary's filed its application for 30 short-term psychiatric beds in April, 1986. St. Mary's application was submitted by St. Mary's Hospital, Inc. The cover page of the application and the HRS CON remittance form clearly indicate that the applicant is St. Mary's Hospital, Inc. The letter from HRS to St. Mary's requesting responses to certain omissions from the application is addressed to St. Mary's Hospital, Inc., and was completed and returned by St. Mary's Hospital, Inc. The Board of Trustees of St. Mary's Hospital, Inc., adopted a Resolution authorizing the filing of the CON application by St. Mary's Hospital, Inc. The Resolution is signed by the Assistant Secretary of St. Mary's Hospital, Inc. The certification page at the end of St. Mary's application is signed by John Fidler, President of St. Mary's Hospital, Inc.
Prior to submitting its CON application, St. Mary's considered converting some of its existing medical/surgical beds to short-term psychiatric beds, rather than engage in new construction. The cost of renovations, together with the compromises which would exist in the recreational and programmatic areas needed for psychiatric treatment, resulted in St. Mary's decision that it would be more appropriate to build a separate psychiatric pavilion than to convert existing medical/surgical beds to psychiatric beds. The psychiatric pavilion will not be a free-standing facility.
The full services of St. Mary's acute care hospital will be available to the patients in the psychiatric unit. A continuum of care will be provided to the psychiatric patients through the use of St. Mary's existing psychiatrists, social workers, recreational therapists, psychologists, and other related therapy and support personnel. Clinical support personnel will be available to address the psycho-social problems of patients in the psychiatric unit. The psychiatric unit would be a distinct unit for reimbursement purposes, but would be licensed under St. Mary's hospital license.
St. Mary's proposed psychiatric unit will use the existing food services at St. Mary's and will not require the construction of a new kitchen. The existing kitchen at St. Mary's is immediately adjacent to the planned psychiatric unit. The existing kitchen and food preparation area is currently operating at only 40 to 60 percent of capacity and is adequate for the proposed psychiatric unit. St. Mary's offers a full range of dietary products and specialized menus.
The existing laundry facility at St. Mary's has sufficient capacity to support the planned psychiatric unit.
St. Mary's submitted updated information at the Final Hearing relating to its original application for 30 short-term psychiatric beds. Several factors contributed to St. Mary's decision to update its original application. When the original application was prepared in April, 1986, St. Mary's had a CON application pending before HRS for a 20-bed rehabilitation unit. St. Mary's received approval from HRS for a 20-bed rehabilitation unit after the filing of this application. A portion of the existing emergency room
space at St. Mary's intended for use by the psychiatric pavilion will be used as part of the 20-bed rehabilitation unit. Another factor was the promulgation of the new HRS minimum standards rule, which requires the addition of several service areas not required when St. Mary's submitted its original application.
The new HRS rule requires a separate head nurse's office, separate charting areas, and more square footage in the activity areas. In addition, the new rule requires a second occupational therapy area, natural light in the seclusion rooms, and requires public toilets to be handicapped accessible. Because of the nature of St. Mary's original schematic, it was impossible to add square footage to the design, and St. Mary's therefore developed a new schematic to incorporate the various changes required by the new HRS rule and by the new rehabilitation unit.
The JCAHO standards for hospital design specifically address the issue of having non-institutional architectural design in psychiatric units. The design of a psychiatric facility has a very definite affect on the patterns of behavior of psychiatric patients. The updated architectural schematic contained in St. Mary's application is highly conducive and therapeutically appropriate to a psychiatric program. The St. Mary's schematic is non- institutional in design and has a number of open spaces and clear vistas, with
immediate access to outdoor recreational areas. St. Mary's proposal is designed to provide security surveillance of the exits while at the same time providing privacy for personal interaction between patients and staff. The more vistas and the more access to sunlight and open spaces a facility has, the less likely it is that systemic institutional responses and behavior will be produced. The enclosed open courtyard contemplated in the St. Mary's design has the advantage of providing open space while also providing a high level of security. The proposal by St. Mary's would be in substantial compliance with the JCAHO standards of providing a therapeutic environment.
The proposed construction costs for St. Mary's psychiatric unit will be $85 per square foot. These costs are reasonable for the type of construction and design proposed by St. Mary' s.
The staffing proposed by St. Mary's is sufficient to operate a 30-bed short-term psychiatric unit and is sufficient to address the clinical needs of the projected patient population.
St. Mary's proposed admissions policy, clinical elements, and psychiatric program are appropriate for the treatment of psychiatric patients.
St. Mary's proposed gero-psychiatric program is a logical extension of the services currently being provided by the 45th Street Mental Health Center. The Center has a geriatric residential treatment service, funded by the Legislature and HRS, which serves a relatively high percentage of gero- psychiatric patients. Many of the patients at the 45th Street Center have both psychiatric conditions and medical complications, and the St. Mary's psychiatric unit would be available for patients discharged from the 45th Street Center.
The South County Mental Health Center, located 30 minutes from St. Mary's, will be willing to use St. Mary's proposed psychiatric unit.
The total cost of St. Mary's proposal is $1,457,150. St. Mary's has a Foundation responsible for raising money for the various St. Mary's corporations. The present donated Foundation Fund balance as of April, 1988, is
$12,486,566. Of the Fund balance, approximately $1.9 million is unrestricted and is available to construct the proposed 30-bed short-term psychiatric unit.
St. Mary's proposes a per diem patient charge of $368 per day for the first year of operation and $398 per day for the second year of operation. This is an increase from the patient charges contained in St. Mary's original application, but the increase is attributable to the fact that salary levels at both St. Mary's and in the hospital industry as a whole have increased over the last several years. St. Mary's projects ancillary charges of $70.72 per day for the first year of operation and $76.51 per day for the second year of operation. The proposed room rates for St. Mary's are reasonable based on a market survey of room rates in the Palm Beach County area.
The St. Mary's proposal is financially feasible on a long-term basis because there are adequate revenues to cover operating expenses.
St. Mary's will assure high quality of care at its proposed 30-bed psychiatric unit through the existing medical information system at St. Mary's. The medical information system coordinates quality assurance, medical records, utilization, and medical staff office functions. With the system, all patient records at St. Mary's are screened on a daily basis against set indicators of care. If certain criteria are met, that patient record is automatically referred to an Evaluation Committee. There are four separate Evaluation Committees at St. Mary's, each composed of physicians who conduct peer review. The recommendation of the Evaluation Committee is forwarded to the Medical Executive Committee, which has the authority to act based upon the recommendation of the Evaluation Committee. The patient record review process at St. Mary's is part of a quality assurance umbrella, which includes infection control, utilization review, and discharge planning. The purpose of utilization
review is to determine whether a given patient should be receiving the level of care being provided or if a lesser level of care could be provided on a more cost-effective basis. The quality assurance utilization review at St. Mary's is approved by the JCAHO.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter hereof and the parties hereto. Section 120.57(1), Florida Statutes.
Section 120.57(1) proceedings, such as these, are de novo proceedings intended to formulate final agency action, not to review prior action or action taken preliminarily. In this proceeding, the applicants have the burden of proving entitlement to a certificate of need. Fla. Dept. of Transportation v.
J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). The award of a certificate of need must be based upon a balanced consideration of all statutory and rule criteria. Dept. of Health and Rehabilitative Services v. Johnson & Johnson Home Health Care, Inc., 447 So.2d 361 (Fla. 1st DCA 1984). The weight to be given to each individual criterion is dependent upon the facts of each case.
During the Final Hearing Bethesda moved to dismiss the petition filed by St. Mary's for the reason that St. Mary's application was filed by St. Mary's Medical Center, Inc., and that the Petition for Formal Administrative Hearing was filed by St. Mary's Hospital, Inc. The evidence shows that the application filed by St. Mary's was in fact submitted by St. Mary's Hospital, Inc., and, therefore, St. Mary's Hospital, Inc., is both the applicant and a Petitioner in this consolidated proceeding. Accordingly, Bethesda's ore tenus motion to dismiss, joined in by Harbour Shores, is hereby denied.
Bethesda also raised the issue during the Final Hearing of whether Harbour Shores' and St. Mary's letters of intent had been timely filed thereby entitling them to file an application for a certificate of need in the April, 1986, batching cycle. It is specifically found that both Harbour Shores and St. Mary's timely filed their letters of intent as did Bethesda. The grace period provided under then-existing Rule 10-5.08 was in fact triggered since the first letter of intent for short-term psychiatric beds was filed less than 38 days prior to the appropriate application filing due date. The only letter of intent filed more than 38 days before the application due date was filed by Martin Memorial Hospital for substance abuse beds and not for short-term psychiatric beds, the specific type of project under consideration herein.
Bethesda filed its application which contemplated new construction on April 15, 1986, and filed its response to HRS' letter of omission on June 30, 1986. HRS deemed Bethesda's application complete on June 30. By letter dated July 18, 1986, Bethesda amended its application to reflect that existing space would be utilized rather than new construction. Its April 15 application together with its June 30 supplemental information together with its July 18, 1986, amendatory information became Bethesda's application for a certificate of need in this cause. The three filings were the application that was considered by HRS during the August 6, 1986, public hearing and which the subject of HRS' preliminary decision contained in its State Agency Action Report issued on September 23, 1986. The other applicants argued that the July 18 portion of Bethesda's application cannot be considered since it was not provided to the other applicants at the same time that it was filed with HRS and the local health council. Rule 10-5.08(7), Florida Administrative Code, provided that an applicant could submit further application information or amendments at any time
up to five days of the date on which a decision was due on that application, in this case, September 18, 1986. The only additional requirement was that in the case of written information or amendments, copies were to be sent to all parties. HRS failed to define the term "parties" in the rule but it is clear that the term "parties" is different than the word "applicants" used in other portions of the rule. There is no requirement, and never has been, that copies of additional information be afforded to other applicants. The other applicants became aware of the contents of Bethesda's application at the August 6, 1986, public hearing as Bethesda became aware of the contents of their applications at the public hearing on those applications. HRS considered all three of Bethesda's filings to comprise Bethesda's application, and any argument that the July 18 amendment to Bethesda's application is not part of Bethesda's application is without merit.
Each of the parties introduced various updates to their original applications. CON applicants are permitted to introduce evidence at hearing of changes which have occurred since the original filing of the application, provided such changes are extrinsic to the application and are based on factors outside the control of the applicant. Consequently, CON applicants are permitted to introduce evidence of such things as changes in interest rates and construction costs and changes in bed or service inventories which have occurred since the filing of the original application. In this case, the applicants introduced changed schematics based upon the fact that HRS amended its rules regarding the physical space requirements for psychiatric hospitals in January, 1987, after the applications were filed in this cause. HRS rule amendments were not within the control of the individual applicants.
St. Mary's also varied its schematic due to the fact that after it filed its application in this cause it received approval from HRS for a 20-bed rehabilitation unit which St. Mary's had applied for prior to April, 1986. The rehabilitation unit will occupy a portion of the existing space at St. Mary's that was intended for use by the psychiatric unit. St. Mary's also made a number of changes based upon such factors as increased salary levels in the health care industry. Bethesda also made some changes to its original three- part application by contracting for services with a psychiatric management company, which does not constitute a substantial change in Bethesda's application. Although an internal policy decision and not an extrinsic factor, the management contract has not changed any of the scope of the project. Harbour Shores "carved out" an identifiable portion of its application for presentation at the final hearing and appropriately revised its projections to reflect the reduced number of beds being sought.
The parties stipulated prior to the hearing that the criteria contained in Section 381.705(1), Florida Statutes, and Rule 10-5.011, Florida Administrative Code, are applicable to these proceedings. A witness for HRS further testified at the final hearing that the criteria contained in Section 381.705(1)(e), (f), (g), (h), (j), and (k) are not applicable in this cause.
Section 381.705(1)(a), Florida Statutes, involves the need for the proposed services in relation to the applicable district plan and state health plan. Specifically, the need for short-term psychiatric beds is determined by the need methodology contained in Rule 10-5.011(1)(o), Florida Administrative Code. In applying that methodology HRS determined there was a need for 28 beds in District 9 for the January, 1991, planning horizon. The evidence in this cause clearly shows that when the methodology is calculated using the updated population projection for the January, 1991, planning horizon and correcting the inventory to subtract 22 of JFK's beds and 10 of Savannas' beds and 26 of Lake
Hospital's beds, there is a need in District 9 for the January, 1991, planning horizon of 100 beds. Since this is a de novo hearing, the need methodology calculation must be made at the final hearing. Using the corrected population projection (a changed circumstance extrinsic to the applicants) enables the calculation to be made correctly and does not change the planning horizon as is argued by HRS. HRS assumes that the corrected population figures will always show an increase in need, a position which is based neither on logic nor on evidence presented at the final hearing. No subsequent batch of applications addresses the January, 1991, planning horizon, and later batched applicants should not be permitted to take advantage of an incorrect calculation made for a prior batch.
Similarly, HRS argues that its inventory count made at the time of the applications in this cause should be used even though its inaccuracy is uncontroverted. HRS argues that since it did not change JFK's licensure until shortly before the final hearing in this cause that all involved should pretend that JFK had 36 short-term psychiatric beds in use rather than 14. The evidence in this cause is uncontroverted that HRS knew in 1984, two years before the applications filed in this cause, that JFK was using its 36 short-term psychiatric beds so that only 14 of those beds were in use as short-term psychiatric beds while 22 of them were in use as substance abuse beds, a different category of service. To allow HRS to determine when it will correct an incorrect inventory of licensed and approved beds is inappropriate. Rather, it is appropriate and good health planning to use a correct number in calculating the need methodology. The evidence is uncontroverted that there are two other hospitals whose psychiatric beds are being erroneously inventoried by HRS at this time--Savannas (10 beds) and Lake (26 beds).
No rule or statute governs the allocation of needed beds between subdistricts. Section 381.705(1)(a), Florida Statutes, however, requires the consideration of the applicable district health plan. Although the 1985 District plan provided an allocation methodology, the plan itself noted that it was weak at best. Additionally, the Executive Director of the District 9 Health Council testified that the 1985 allocation methodology should not be used in this case. The plan having been considered, it has been found that application of it to this case would be inappropriate and would result in poor health planning. Accordingly, the 100 beds needed in District 9 should be awarded on a district-wide basis under the circumstances of this case.
Section 381.705(1)(b), Florida Statutes, requires consideration of the availability, quality of care, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district of the applicants, and Section 381.705(1)(d) similarly requires consideration of the availability and adequacy of alternative providers. Harbour Shores has demonstrated that for Baker Act patients in Subdistrict 1 there are no available, accessible, adequate existing providers. For those patients in need of short-term inpatient psychiatric services, there are no alternatives. Subdistrict 2 providers are too far away to achieve the state health plan's goal of community mental health service planning. Harbour Shores will not duplicate any existing services, but rather, will add to and complement the range of psychiatric services available in the service area. The evidence also shows that indigent patients in Subdistrict 2 are often denied access to short-term psychiatric beds because the existing beds in Subdistrict 2 are fully occupied and are unavailable for use. The addition of 100 new short-term psychiatric beds to District 9 should help alleviate the accessibility problem which currently exists in that District for those indigent patients in need of short- term psychiatric services. The evidence shows that the quality of care,
efficiency, appropriateness, and accessibility of the short-term psychiatric programs proposed by St. Mary's, Bethesda, and Harbour Shores will help alleviate the need for additional inpatient short-term psychiatric services. Therefore, the criteria contained in Subsections (b) and (d) are satisfied by the three applicants in this cause.
The undisputed occupancy rate for short-term psychiatric beds in District 9 is above the required 75 percent, established by Rule 10- 5.011(1)(o)4.e., Florida Administrative Code. Subsection (o)4.f also requires that applicants seeking additional short-term inpatient psychiatric beds must show that occupancy standards have been met by that facility. As to the facility-specific standard, when Harbour Shores' application was submitted, the facility had not been opened for a full year; hence, the standard could not have been applied. Harbour Shores' occupancy rate for its first three months of operation was 42 percent, reflecting a normal start-up status. For the year preceding the final hearing, Harbour Shores' adult beds were 73.3 percent occupied, slightly below the standard. However, Harbour Shores has amply demonstrated its proposed expansion is needed upon consideration of its new Baker Act status that is not reflected in historic occupancy rates. While Harbour Shores may not technically satisfy this rule criterion, it would be arbitrary and inconsistent with the required balanced consideration of all statutory and rule criteria to elevate this one numeric standard above all other criteria.
Section 381.705(1)(c) requires consideration of the applicants' ability to provide, and record of providing, quality care. All three applicants have amply demonstrated their track record of providing quality care and have the mechanisms in place to ensure that quality care will continue. Each of the applicants is currently accredited by the JCAHO. No evidence was offered by any of the parties to this proceeding contesting the quality of care offered by any of the other applicants. While St. Mary's proposal is a state-of-the-art, non- institutional design for psychiatric facilities, which relates to quality of care issues, Bethesda's proposal meets the requirements of Rule 10- 5.011(1)(o)5.f. which provides that development of new short-term hospital inpatient psychiatric beds should be through conversion of underutilized beds. St. Mary's has amply explained the factors it has considered which would prohibit such conversion at its facility, and Harbour Shores' proposal constitutes a non-institutional design.
Section 381.705(1)(i), Florida Statutes, addresses the immediate and long-term financial feasibility of the project, and it is found that all applicants meet this criteria. All applicants have the resources to construct or renovate the facilities in question. Additionally, St. Mary's and Bethesda's charges are similar and reasonable. Although Harbour Shores' charges are above the other two applicants, Harbour Shores' proposed charges for the additional beds it seeks are the same as those charges currently paid for its existing intensive treatment beds. The fact that Harbour Shores' utilization rate continues to increase reflects that those charges are reasonable for that facility.
Section 381.705(1)(1) requires consideration of the probable impact of the project on the costs of providing the proposed health services and the effects of competition. Since Harbour Shores reasonably projects that its expansion will be filled primarily by Baker Act patients who need short-term inpatient psychiatric services, there would be no duplication of existing services in Subdistrict 1 and, therefore, no affect on competition. Subdistrict
2 providers do not compete with Harbour Shores, and the project will not affect
them. There was no showing that any harm to existing providers would result by allowing Harbour Shores to expand. That expansion will complement the services provided by IRCMHC which has been operating its crisis stabilization beds at capacity. The other Subdistrict 1 provider of psychiatric services, the Savannas Hospital, withdrew its intervention in this case and did not oppose the Harbour Shores' application. Similarly, the initiation of short-term psychiatric services at St. Mary's and Bethesda will complement the services provided by the 45th Street Mental Health Center and by the South County Mental Health Center, Inc., which are also at capacity. No other service providers in Subdistrict 2 have opposed the applications filed by St. Mary's and Bethesda.
Section 381.705(1)(m), Florida Statutes, addresses the costs and methods of construction and the availability of alternatives. The applicants have satisfied this criterion. Harbour Shores combines renovation and new construction for its proposed addition; Bethesda will convert underutilized space for use as a short-term psychiatric unit; and St. Mary's has shown the factors it considered in choosing new construction, which factors are reasonable. The costs and methods of construction projected by all applicants are reasonable.
Section 381.705(1)(n), Florida Statutes, requires consideration of the applicants' past and proposed provision of service to Medicaid and indigent patients. All applicants have a track record for such provision and have committed to continue providing services to Medicaid and indigent patients. Harbour Shores commits to 15 percent Medicaid and 2 percent indigent care in its proposal. Bethesda projects a category of Baker Acts/Medicaid totalling 7.7 percent, which includes 1.2 percent indigent patients. St. Mary's commitment is less specific. Although St. Mary's presented evidence that it had 17 million dollars in uncompensated patient care in 1987, that category includes indigent care, bad debts, and the difference between its charges and what it was paid by third-party payors. The evidence is unclear as to the amount committed for true indigent care as that term is generally understood and as that term has been used by the other applicants in this cause. Yet, the evidence is clear that St. Mary's has historically been a provider of indigent services, and no evidence was presented to reflect that the commitment will change.
All applicants comply with the criteria set forth in Section 381.705(2), Florida Statutes. Lastly, although an HRS witness testified that the criteria in Section 381.705(1)(h), Florida Statutes, do not apply, one portion of that section does apply, the availability of manpower. All applicants have amply demonstrated that they can meet the manpower requirement.
HRS' position at the final hearing in this cause was that although there is a need for 28 beds in District 9, none of the applications should be granted because each applicant must meet every criteria. HRS fails to take into consideration a balanced consideration of all criteria in its evaluation. Further, HRS would apply the 1985 local plan and allocate beds between the two Subdistricts in District 9 so that, it argues, even though there is a need for beds in District 9, neither Subdistrict meets the allocation requirements, and no beds can be awarded. Since it has been found that there is a need for 100 additional short-term psychiatric beds in District 9 using correct figures in calculating the need methodology, all three applicants in this cause should have their applications granted.
If it were necessary to rank the applicants in the order in which beds should be awarded to them, such ranking would be difficult in this case since it is clear that all three applicants have proposed projects which are
financially feasible in both the short and long-term; all applicants would be accessible to Medicaid and indigent patients, and all applicants would provide a high quality of care. However, if ranked, Harbour Shores should be given priority due to its recent designation as a Baker Act facility in order that enough beds be available to receive and treat those patients. Bethesda should be given priority over St. Mary's only for the reason that it proposes to convert underutilized space so that its proposal is considerably less costly than St. Mary's, although St. Mary's proposal is reasonable for new construction.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered:
Granting Harbour Shores' application for a certificate of need for 12 short-term psychiatric beds;
Granting Bethesda's application for a certificate of need for 20 short-term psychiatric beds; and
Granting St. Mary's application for a certificate of need for 30 short-term psychiatric beds.
DONE and RECOMMENDED this 7th day of October, 1988, at Tallahassee, Florida.
LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 7th day of October, 1988.
APPENDIX TO RECOMMENDED ORDER CASE NOS. 86-4354, 86-4356, 86-4358
Harbour Shores' proposed findings of fact numbered 1-42, and 44-55 have been adopted either verbatim or in substance in this Recommended Order.
Harbour Shores' proposed findings of fact numbered 43, 56, 57, and 58 have been rejected as being unnecessary for determination of the issues in this proceeding.
Bethesda's proposed findings of fact numbered 1-4, 6-30, 32-47, 49, 51, 52, 64, 66, 69-71, 73-75, 78, and 83 have been adopted either verbatim or in substance in this Recommended Order.
Bethesda's proposed findings of fact numbered 48, 67, 76, and 77 have been rejected as being unnecessary for determination of the issues in this proceeding.
Bethesda's proposed findings of fact numbered 5, 54, 63, and 65 have been rejected as being contrary to the weight of the totality of credible evidence in this cause.
Bethesda's proposed findings of fact numbered 31, 50, 53, 55-62, 68, 72, and 80-82 have been rejected as not constituting findings of fact but rather as constituting argument of counsel or conclusions of law.
Bethesda's proposed finding of fact numbered 79 has been rejected as not being supported by the weight of the evidence in this cause.
St. Mary's proposed findings of fact numbered 1-3, 5-29, 34, 36-38, and 40-53 have been adopted either verbatim or in substance in this Recommended Order.
St. Mary's proposed findings of fact numbered 4, 30, 35, 39, 54, and 55 have been rejected as not being supported by the weight of the evidence in this cause.
St. Mary's proposed findings of fact numbered 31-33 have been rejected as being unnecessary for determination of the issues in this proceeding.
HRS' proposed findings of fact numbered 1, 2, 4, 6-9, 12-15, 20-22, 24, 32-34, 36-43, 45-48, 50-56, 59, 65, 67, 78-81, 85, 89, 99, and 101 have been adopted either verbatim or in substance in this Recommended Order.
HRS' proposed findings of fact numbered 3, 17-19, 35, 57, 58, and 62-
64 have been rejected as being unnecessary for determination of the issues in this proceeding.
HRS' proposed findings of fact numbered 5, 10, 11, 44, 49, 72, 74-77, 82-84, 95-97, 100, and 104 have been rejected as being subordinate to the issues in this proceeding.
HRS' proposed findings of fact numbered 16, 23, 25, 28, 29, 31, 66,
69-71, 73, 90, and 103 have been rejected as being contrary to the weight of the evidence in this cause.
HRS' proposed findings of fact numbered 26, 27, 30, 60, 61, and 86-88 have been rejected as not being supported by the weight of the evidence in this cause.
HRS' proposed findings of fact numbered 68, and 91-93 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony.
HRS' proposed findings of fact numbered 94, 98, and 102 have been rejected as being irrelevant to the issues under consideration herein.
COPIES FURNISHED:
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Robert D. Newell, Jr., Esquire Thomas W. Stahl, Esquire
102 South Monroe Street Tallahassee, Florida 32301
Lesley Mendelson, Esquire Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
Chris H. Bentley, Esquire 2544 Blairstone Pines Drive Tallahassee, Florida 32301
John Radey, Esquire
Elizabeth W. McArthur, Esquire
101 North Monroe Street Tallahassee, Florida 32301
Sam Power, Clerk Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
| Issue Date | Proceedings |
|---|---|
| Oct. 07, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 07, 1988 | Recommended Order | Once the department's calculation of need was corrected, sufficient need existed, and all applications for short-term psychiatric beds were granted |
