STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
HEALTH CARE ADVISORS )
CORPORATION, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 86-4384
) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, )
)
Respondent, )
and )
) CHARTER HOSPITAL OF MIAMI, ) INC., GRANT CENTER )
HOSPITAL-MIAMI, and )
HIGHLAND PARK GENERAL )
HOSPITAL, )
)
Intervenors. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, W. Matthew Stevenson, held a formal hearing in this cause on October 20, 21 and 22, 1987, in Tallahassee, Florida. The following appearances were entered:
APPEARANCES
For Petitioner: H. Darrell White, Esquire
Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32316
For Respondent: Lesley Mendelson, Esquire
Department of Health and Rehabilitative Services
1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
For Intervenor: George N. Neros, Jr., Esquire Charter 101 North Monroe Street, Suite 900 Hospital of Tallahassee, Florida 32301
Miami, Inc.
William E. Hoffman, Esquire 2500 Trust Company Tower
25 Park Place
Atlanta, Georgia 30303
For Intervenor: No appearance Grant Center
Hospital-Miami
For Intervenor: No appearance Highland Park
General Hospital
The issue for determination in this cause is whether a Certificate of Need (CON) to operate a long-term psychiatric hospital in Dade County, Florida, should be issued to Petitioner, Health Care Advisors Corporation, Inc., (HCAC).
PROCEDURAL BACKGROUND
On April 15, 1986, HCAC filed a Certificate of Need (CON) application (#4584) with the Department of Health and Rehabilitative Services (DHRS) to construct a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS District XI. On August 29, 1986, DHRS denied the application, and notice of the denial was published in the Florida Administrative Weekly on September 12, 1986. On September 29, 1986, HCAC filed a petition for a formal administrative hearing to contest DHRS' denial of its application. On November 11, 1986, Charter Hospital of Miami, Inc., (Charter), formerly Dade County Psychiatric Hospital, Inc., petitioned for leave to intervene. On January 5, 1987, Grant Center Hospital-Miami and Highland Park General Hospital petitioned for leave to intervene. All three petitions for intervention were granted.
At the formal hearing, Petitioner HCAC presented the testimony of the following witnesses: Francis Gomez; Anthony Estevez; Mario Jardon; Nelson Rodney; and Walter Eugene Nelson. Petitioner's Exhibits 1 through 8 and 10 through 14 were duly offered and admitted into evidence. Ruling was reserved as to Tables 7, 8, 10 and exhibit III.D.1. of Petitioner's Exhibit 6, and Petitioner's Exhibit 9. After due consideration, those exhibits are admitted into evidence. Respondent DHRS presented the testimony .of Edward Meadows and Elizabeth Dudek. Respondent's Exhibits 1 and 2 were duly offered and admitted into evidence. Intervenor Charter presented the testimony of the following witnesses: Gary L. Fishman; Jack A. Morgenstern; William S. Love; Howard Fagin; and Susan P. Hickman. Charter's Exhibits 1-6 were received into evidence.
During the final hearing, Charter made a motion to dismiss the proceedings making two arguments: (1) the petition filed in the proceeding was filed by Health Care Advisors Corporation, which did not exist at the time the petition was filed; and (2) Anthony Estevez is the actual CON applicant, not Health Care Advisors Corporation. HCAC, at the close of testimony, moved to dismiss Charter claiming that Charter had not established that it would suffer injury in fact of sufficient immediacy to entitle it to be a party to the proceeding. Ruling was reserved as to both motions. After due consideration and a review of the memoranda of law concerning both motions filed by the parties, in view of the findings of fact made herein, both Charter's Notion to Dismiss the proceedings altogether and HCAC's motion to dismiss Charter from the proceedings are denied.
HCAC, DHRS and Charter have filed post-hearing Proposed Findings of Fact.
A ruling on each proposed finding of fact is made in the Appendix to this Recommended Order.
FINDINGS OF FACT
On April 1, 1986, a letter of intent was filed on behalf of Anthony J. Estevez to apply for a CON in the March 16, 1986, batching cycle for a 120-bed long-term psychiatric hospital in Dade County, Florida, HRS Service District XI. A long-term psychiatric hospital is defined in Rule 10-5.011(p), Florida Administrative Code, as a "category of services which provides hospital based inpatient services averaging a length of stay of 90 days." Subsequently, DHRS notified Mr. Estevez that his letter of intent was effective March 17, 1986; the application was to be filed by April 15, 1986; the application was to be completed by June 29, 1986; and the date for final department action was August 28, 1986.
On April 15, 1986, Mr. Estevez filed his CON application with DHRS (designated action #4854). Anthony J. Estevez' name appeared along with Health Care Advisors Corporation on the line of the application which requested "legal name of project sponsor." Mr. Francis A. Gomez, Mr. Estevez' authorized representative, had the responsibility for the preparation and submission of the application. Mr. Estevez signed the CON application as the project sponsor. HCAC Psychiatric Hospital of Dade County was meant to be the name of the proposed facility.
HCAC is an acronym for Health Care Advisors Corporation, Inc. HCAC was incorporated as of April 14, 1987, but the name had been reserved prior to that time. HCAC was initially intended to be a health care management corporation owned by Mr. Estevez. However, it is now anticipated that Flowers Management Corporation (Flowers) will manage the project under the HCAC corporate umbrella. Mr. Estevez owns 100 percent of the stock of HCAC and is also its sole director and sole shareholder. Mr. Estevez considered HCAC and himself to be one and the same for the purpose of the CON application.
HCAC initially proposed to construct in Dade County, Florida, a freestanding 120-bed long-term psychiatric hospital. HCAC proposed to divide those beds into three groups: (1) 75 beds for adults; (2) 30 beds for geriatrics; and (3) 15 beds for adolescents.
On May 15, 1986, DHRS requested additional information from HCAC regarding its CON application. On June 19, 1986, and June 23, 1986, HCAC in two separate filings provided DHRS with responses to its request for additional information which DHRS believed was omitted from the original application. The application was deemed complete effective June 29, 1986.
On August 20, 1986, Francis Gomez, Paul McCall, a health care consultant employed by HCAC at that time, and HCAC's attorney, met with Islara Soto of DHRS regarding the CON application. At this meeting, HCAC advised DHRS of its intent to orient the facility programmatically to meet the needs of the Hispanic population of Dade and Monroe Counties.
By letter dated August 29, 1986, DHRS notified Mr. Francis Gomez of its decision to deny CON application 4584. HCAC requested a formal administrative hearing to contest the denial.
At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to introduce evidence relating to a down-sized 105-bed long-term psychiatric hospital serving only adult and geriatric patients. Charter renewed its prehearing motion to exclude any evidence concerning a 105-bed facility.
(Approximately three or four weeks prior to the administrative hearing, HCAC had decided to go forward with a proposal for the 105-bed facility.) The undersigned ruled that HCAC would be allowed to present evidence concerning a down-sized 105-bed facility to the extent that such evidence related to a separate and identifiable portion of the original application.
HCAC's Proposal
The proposed building site for the facility, although not finally selected, is intended to be within the Northwest Dade Center cachement area which is in the northwest corner of Dade County.
The ownership of the proposed facility will be by Mr. Estevez and/or his family or wife.
The proposed area to be serviced by the facility is Dade and Monroe Counties (HRS Service District XI).
HCAC proposes to offer at its facility a psychiatric inpatient unit, patient support services, diagnostic/treatment services, ambulatory care, administrative services, environmental/maintenance, educational and training services, and materials management.
The HCAC facility will be managed by Flowers Management Corporation (Flowers), of which Mr. Estevez is a majority shareholder. Flowers was created approximately three and a half years ago for the purpose of providing management in the psychiatric field. Humana Hospital, a hospital chain, has selected Flowers to manage four of its facilities and is also considering Flowers for an additional two facilities. Those facilities are currently providing short-term psychiatric and substance abuse services.
Nelson Rodney will be responsible for the design and implementation of the treatment programs in the HCAC facility. Rodney is employed as Regional Vice President of Flowers and is responsible for the management of the Florida hospitals affiliated with Flowers, including a chemical dependency unit at Humana-Biscayne Hospital and a psychiatric unit at Humana West Palm Beach Hospital.
The HCAC facility is intended to provide specialty long-term psychiatric services for chronically mentally disturbed individuals requiring a 90-day or greater average length of stay. Many of the patients would be a danger to themselves and others and will require a very restrictive setting -- a locked facility. The programs proposed to be offered involve a range of inpatient diagnostic services, including an intensive diagnostic work-up done prior to admission for all patients. Each patient will have an individualized treatment plan updated every two weeks. The treatment program will include specialized therapy, such as art, music, milieu therapy and special education. There would also be specialized inpatient and outpatient treatment programs for family members and significant others. Discharge planning from the day of admission to assure continuity of care would be another aspect of the program.
The proposed HCAC facility would offer a community-like atmosphere. It would provide both open and locked units. Flower's therapeutic model encourages patient participation in daily activities and in the many decisions of what is occurring at the hospital.
One component of the project will be an initial screening process by a multi-disciplinary team who will employ a predetermined set of admissions criteria to assist in appropriate levels of care determination. The multi- disciplinary team would consist of a psychiatrist, psychologist, sometimes a neurologist, social worker, a family social assessment person, the patient, and others. The team will attempt to identify and admit only those patients who will have an expected length of stay greater than 90 days.
The HCAC facility would provide seminars and workshops to practitioners in the community as well as its own staff. In-service training will also be offered.
HCAC proposes to be flexible in the design of its treatment programs and allow new treatments to be utilized. A variety of therapies will be available to provide individualized treatment plans in order to optimize the chance of successful outcome in the patient's treatment.
Currently, Flowers affords an in-house program of evaluation. Peer review serves this function in order to assess quality of care rendered to patients in the facility.
The HCAC facility proposes to have an Hispanic emphasis. More than 50 percent of the staff will be bilingual. Upper management will consist of individuals who have an acute understanding of Hispanic culture and treatment implications of that culture. The facility will be more flexible in family visitation than is done in many facilities which is an important aspect of the Hispanic culture.
The facility as managed by Flowers would have the required "patient's bill of rights" and will also seek JACH accreditation, although these items were not discussed in the application.
The HCAC facility would offer each patient an attending psychiatrist who will be part of the multi-disciplinary team that will determine the individualized plan for each patient. Sufficient health manpower including management resources are available to HCAC to operate the project. Additionally, the facility will provide internships, field placements and semester rotations.
PROJECT AND CONSTRUCTION COSTS
HCAC's CON application, admitted into evidence as Petitioner's Exhibit 4, contains 26 tables concerning various aspects of the 120-bed project as well as Exhibit III.D.1., an operating pro forma. In response to a request for omissions by DHRS, HCAC submitted, among other things, a revised Table 7, revised Table 8, and a revised operating pro forma for the 120-bed project. The items making up HCAC's omission responses were admitted into evidence as Petitioner's Exhibit 5. In conjunction with its desire to complete a 105-bed facility only, HCAC submitted various new tables and a new operating pro forma (forecasted income statement), which were admitted into evidence as Petitioner's Exhibit 6.
Table 1 - Source of Funds
The estimated total project cost of the 120-bed facility would be
$6,469,500. The estimated project cost of the 105-bed facility would be
$5,696,940.
The financing of the project is contemplated to be done through NCNB bank which has expressed its willingness to finance the project. It is reasonable to assume that HCAC would and could obtain the necessary financing for the proposed facility.
Table 2 - Total Debt
Table 2 for both the 120-bed project and the 105-bed project shows that 100 percent of the project costs would be financed by debt at an interest rate of 13 percent. The 13 percent interest rate was projected in 1986 and is higher than current rates. It is reasonable to assume that 100 percent of the costs can be financed at 13 percent for either the 120-bed or 105-bed project.
Table 3 - New Purchase Equipment
HCAC initially projected that $750,000 would be needed to equip the proposed 120-bed facility. The projected expenditure for the 105-bed facility is $500,000.
The projected costs of $750,000 and $500,000 for the equipment needed for the 120-bed and 105-bed facility, respectively, are unreasonably low. For example, of the $500,000 projected for equipment costs for the 105-bed project,
$80,000 is for mini-vans, $15,000 is for the security system, $40,000 is for a computerized medical records system, and $40,000 for a computerized on-line nurse care program. This would leave $325,000 for all other necessary equipment. Pharmacy, laboratory services and x-ray equipment would be on contract.
The remaining $325,000 would be insufficient to equip the kitchen (which would require $80,000), furnish patient rooms (approximately $150,000) and equip the remainder of the 105-bed facility which would reasonably require housekeeping equipment, exam room equipment, chart racks for the nurses station, seclusion room beds, office furniture and equipment, laundry equipment, lockers or shelving, refrigerators, ice makers, day room furniture and lounge furniture. A more reasonable projection for equipment costs would be in the neighborhood of
$850,000 to $900,000.
Table 7 - Utilization by Class of Pay
Tables 7 and 8 of the original application which dealt with utilization by class of pay and effect on patient charges, were revised by HCAC in their responses to DHRS' Omissions Request. Table 7 reflects estimations of the net revenues which HCAC expects to capture from specific payor mixes, namely, contract/indigent, Medicare and insurance/private pay. There is no Medicaid reimbursement available for psychiatric care rendered in a freestanding psychiatric facility. The proposed payor mix for the 120-bed facility is, in patient days, as follows:
Year 1 -- Contract/Indigent 8.64 percent
(1989) Medicare 26.10 percent Insurance and Private
Pay 65.26 percent
Year 2 -- Contract/Indigent 8.48 percent
(1990) Medicare 26.15 percent Insurance and Private
Pay 65.37 percent
The proposed payor mix for the 105-bed facility is, in patient days, as follows:
Years 1 and 2 - Medicare 3.3 percent
Insurance and
Private Pay 90.7 percent Indigent 6.0 percent
The change in payor mix was not attributed to down-sizing of the facility, but rather was the result of HCAC's additional research and understanding of what the payor mix would most likely be. The change in payor mix does not represent a substantial change to the original application taken as a whole.
Francis Gomez, who prepared the Table 7 and was designated as an expert for HCAC in the area of health care facilities management and financial and marketing operations, conceded that HCAC's Table 7 for the 120-bed facility is not reasonable. The Table 7 for the 105-bed facility is also not reasonable.
HCAC's contractual allowances are not reasonable. HCAC projects 3.3 percent for Medicare and nothing for HMOs or PPOs. It is unreasonable for HCAC's proposal to make no provision for HMO and PPO type arrangements in view of its projection of 90.7 percent insurance and private pay. Because the proposed patient mix for the 105-bed project is adults and geriatrics, 20 to 25 percent would be a more reasonable Medicare projection.
HCAC's projected 90.7 percent insurance and private patient days is unreasonably high in view of the project's intended emphasis of serving the Hispanic population in HRS Service District XI. In 1980, 27.8 percent of the Hispanics in Dade County had incomes less than 150 percent of the poverty level. The 1987 United States Hispanic market study establishes that 20 percent of the Hispanic adults who are heads of households are either retired, students or unemployed. These groups of individuals would not reasonably fit into the insurance and private pay category in most cases. Thus, the 90.7 percent figure for insurance and private pay would have to be reduced significantly.
Table 8 - Effects on Patient Charges
HCAC's revised Table 8 for the 120-bed facility lists net revenues rather than gross charges for the specific services listed. In year one (1989), the table lists the following projected charges/rates: daily room charge -
$214.61; average daily ancillary charge - $25.00; contract/indigent - $125.00; and Medicare - $229.61. In year two (1990), the table lists the following projected charges: daily room charge - $223.19; average daily ancillary charge
- $26.00; contract/indigent - $130.00; and Medicare - $238.79. The Table 8 for the 105-bed facility reflects an all-inclusive gross charge of $300 per day in both years (1989 and 1990) for the daily room charge, Medicaid and Medicare.
The $300 per day figure would include ancillary charges but not physician fees. The projected patient charges fall within the range of charges currently in effect at psychiatric hospitals in Dade and Monroe Counties and are reasonable for both the 120-bed facility and the 105-bed project.
Table 10 - Projected Utilization
The financial feasibility of any proposed hospital is largely tied to the ability of the hospital to generate an adequate level of utilization.
Absent an adequate level of utilization, a facility will not generate sufficient revenues to meet expenses. Table 10 for both the 120-bed facility and the 105-
bed facility sets forth the projected utilization of the proposed facility, by month and year, in patient days, for the first two years of anticipated operation.
Table 10 for the 120-bed facility projects the facility will exceed 80 percent occupancy for two of the last three months of the second year and be at
80 percent occupancy at the end of that year. Eighty percent occupancy of 120 beds yields an average daily census of about 96 patients. Table 10 for the 105- bed facility projects that the facility will arrive at 92 percent occupancy at the end of the first year of operation and remain at 95 percent throughout the second year. Ninety-five percent occupancy of the 105-bed facility equals an average daily census of about 99 or 100 patients.
The Table 10 "fill-up" rates for both the 120-bed and 105-bed facilities are unreasonable and not practical to be achieved. There is presently an emphasis on providing psychiatric care in less restrictive settings, a trend favoring reduced lengths of stay and a trend in third-party payors to provide reimbursement for a shorter number of days. In addition, nationwide statistics show that only 4 percent of the patients admitted to psychiatric facilities require treatment longer than 90 days.
Table 11 - Manpower Requirements
For the 120-bed facility, HCAC projected in the Table 11 a staffing ratio of one full-time equivalent (FTE) per occupied bed of 1.625 for the first year of operation and 1.43 for the second year. For the 105-bed facility, HCAC projected in the Table 11 1.91 FTE per occupied bed ratio for the first year and
1.45 for the second year. The actual average of FTEs available for both facilities would be 1.8 to 2.0. The application figures are lower than the actual average because students and other non-paid personnel were not included. Thus, when all programmatic FTEs are included, the number of FTEs per occupied bed is higher than what is listed in the Table 11 for either project.
There is a relationship between the number and quality of staff personnel and a facility's ability to provide quality psychiatric care. The industry standard for FTEs is 1.8 to 2.0 FTEs per occupied bed. HCAC's proposed staffing for both the 120-bed and 105-bed projects are reasonable.
For both proposed facilities, HCAC projects 110.5 FTEs for the first year with a total annual salary of $1,932,000 which equals an average salary of approximately $17,400 per FTE. HCAC's projected total annual salary expense is unreasonably low. Specifically, the salary for the occupational therapist is too low and the nursing salaries are too low because of shortages.
Table 16 - Areas and Square Feet / Table 18 - Space Requirements
HCAC proposes a total 59,603 square feet of gross area for the 120-bed facility and a total of 56,050 square feet of gross area for the 105-bed facility. The decrease in size for the 105-bed facility is attributed to a reduction of the ground floor, a reduction of the second floor by removing the adolescent portion and an increase of ancillary services on the second floor for the geriatric population.
HCAC projects 168 feet of net living space in the patient's bedroom for both the 120-bed facility and the 105-bed facility. HCAC's proposal of total area and square feet requirements for both the 120-bed and 105-bed facility are reasonable for the delivery of quality psychiatric care within the proposed facilities.
There would be adequate land space for parking at HCAC's facility to forego the necessity of constructing a parking garage.
Table 19 - Nursing Unit Area Summary
HCAC proposes a total of 34,479 square feet of gross area for the nursing unit in the 120-bed facility and the 105-bed facility. The square footage figures under Table 19 for both the 120-bed facility and 105-bed facility are reasonable.
Table 25 - Estimated Project Costs
Project Advisors Corporation (PAC), of which Mr. Estevez is the Chief Executive Officer, will be responsible for the design and construction of the proposed facility. PAC is a design and construction company which employs a registered architect, several licensed general contractors, an engineer, two graduate architects and a registered graduate architect. The registered architect and basically 90 percent of the staff have previously been involved in the design and construction of health related facilities.
HCAC's projected total cost for the 120-bed facility is $6,469,500 and the projected total costs for the 105-bed facility is $5,696,940.
HCAC projected construction costs per square foot of $57.55 for the 120-bed facility and $60.00 per square foot for the 105-bed facility. Although the average construction cost of psychiatric facilities today is around $75 to
$95 per square foot, HCAC's projected costs are reasonable and reflect reasonable charges given the fact that PAC, the company which would construct the facility, is controlled by Mr. Estevez. The projected costs of land acquisition are also reasonable.
HCAC's projected equipment costs are contained in both Table 25 and Table 2. As previously discussed, the projected equipment costs for both projects are unreasonably low.
Table 26 - Project Completion Forecast
HCAC projects that construction for both the 120-bed facility and 105- bed facility would be completed approximately one year after DHRS' approval of the construction documents. The project completion forecasts for both projects are reasonable.
Exhibit III.D.1.- Operating Pro Forma/Forecasted Income Statement
Revised Exhibit III.D.1 sets forth the operating pro forma for the first two years of operation of the 120-bed facility (1989 and 1990). HCAC's pro forma for its 120-bed facility is not reasonable.
The supplies and other expenses depicted in the pro forma (year one at
$55.60 per patient day and year two at $58.10 per patient day) are unreasonably low. A more reasonable estimate would be approximately $100 per patient day.
The pro forma for the 120-bed facility does not include any estimate for the Hospital Cost Containment Board (HCCB) tax. Similar facilities in Florida pay an HCCB tax which is composed of one and a half percent of net revenue.
Utilizing the more reasonable estimate of $100 per patient day for supplies and other expenses, and including the appropriate HCCB tax, the total supplies and other expenses would increase approximately $1,100,000 and the HCCB tax would be approximately $85,000 in year one. Instead of showing a profit of
$395,012, HCAC would potentially lose approximately $785,000 in that year. In year two, the total supplies and other expenses would increase approximately
$1,400,000 and the HCCB tax would be approximately $115,000 to $117,000. Thus, in year two, instead of showing a profit of $919,036, HCAC would potentially lose approximately $617, 000.
HCAC's "forecasted income statement" for the 105-bed project is also not reasonable. Specifically, the contractual allowances, the allowance for bad debt, and the salaries, wages and fringe benefits are unreasonable. Contractuals include such things as Medicare, Medicaid, HMOs and PPOs, which all generate discounts which are considered contractual allowances. HCAC estimates its bad debt factor at 1.6 percent. A more reasonable projection would be 6 to
8 percent of gross revenue.
CONSISTENCY WITH THE DISTRICT XI HEALTH PLAN AND STATE MENTAL
HEALTH PLAN
The District XI local health council has produced the 1986 District XI Health Plan. The district plan contains the relevant policies, priorities, criteria and standards for evaluation of an application such as HCAC's.
HCAC's application is consistent with some of the applicable sections of the District XI Health Plan but inconsistent with the plan taken as a whole.
Policy No. 1 of the District XI health plan states that the district should direct its efforts toward a licensed bed capacity of 5.5 non-federal beds per thousand population ratio by 1989. Presently there are 11,294 beds in District XI which represents a number in excess of 5.5 non-federal beds. HCAC's application is inconsistent with this policy.
Policy No. 1, Priority No. 1, states that proposals for the construction of new beds in the district should be considered only when the overall average occupancy of licensed beds exceeds 80 percent. Priority No. 1 refers to certain types of beds, specifically, acute care general beds, short- term psychiatric beds and substance abuse beds. HCAC's application is not inconsistent with this priority because long-term psychiatric beds are not mentioned.
Policy No. 1, Priority No. 2 favors the encouragement of projects that meet specific district service needs through the conversion of existing beds from currently underutilized services. Because HCAC is not the operator of an existing hospital and it is not possible for HCAC to convert any beds from other services, HCAC's application is inconsistent with Policy No. 1, Priority No. 2.
Policy No. 1, Priority No. 3 would only be relevant in the case of an existing hospital but not in the case of a new hospital where no comparative hearing is involved. HCAC's application is not inconsistent with Policy No. 1, Priority No. 3.
Policy No. 1, Priority No. 4 allows for priority consideration for the initiation of new services for projects which have had an average occupancy rate of 80 percent for the last two years and which have a documented history of providing services to Medicaid and/or other medically indigent patients. HCAC's application is not entitled to priority consideration under Policy No. 1, Priority No. 4.
Policy No. 2 is a broad policy which provides that service alternatives should be available within the district to meet the needs of community residents, while at the same time maintaining an efficient level of utilization. This policy is necessarily tied to the demonstration of overall need for the facility. If HCAC can show need for the proposed facility, its proposal would be consistent with this policy.
Policy No. 2, Priority No. 1(f) (Psychiatric Bed Services) provides for priority consideration to be given to specific institutions which have achieved an 80 percent occupancy rate for the preceding year. HCAC's application is not entitled to priority consideration under Policy No. 2, Priority No. 1(f).
Policy No. 2, Policy No. 3(f) states that a CON applicant should propose to provide the scope of services consistent with the level of care proposed in the application in accordance with appropriate accrediting agency standards. In the case of psychiatric bed services the appropriate accrediting agency is the Joint Commission for Accreditation of Hospitals (JCAH). Although HCAC neglected to address its ability to comply with JCAH standards in its application, it has established its intent to seek JCAH accreditation. HCAC's proposal is consistent with Policy No. 2, Priority No. 3(f).
Policy No. 2, Priority No. 4 gives a preference to those applicants that propose innovative mechanisms such as various complimenting outpatient and inpatient services which are directed toward an ultimate reduction in dependency upon hospital beds. HCAC does not meet this priority because it has not proposed any mechanisms to complement outpatient services with inpatient services directed toward an ultimate reduction in the dependency on hospital beds.
Policy No. 2, Priority No. 5 gives a preference to applicants who have based their project on a valid marketing research effort and have placed it in the context of a long-range plan. HCAC does not meet this priority because there was no evidence that the project was based on a valid marketing research plan or placed in the context of a long-range plan.
Policy No. 2f Priority No. 6 states that existing facilities as well as applicants for new services should demonstrate a willingness to enter into cooperative planning efforts directed at establishing a system whereby duplication of specialized services is avoided while quality of such services is enhanced. HCAC presented no documentation of transfer agreements with other hospitals and did not substantiate its willingness to enter into cooperative planning efforts with letters of intent, referral agreements or memoranda of understanding.
Policy No. 3 provides that services in the community should be made available to all segments of the resident population regardless of the ability to pay. HCAC's proposal is consistent with this policy because a provision for services to indigent patients has been made.
Policy No. 3, Priority No. 1 provides that priority should be given to applications proposing services and facilities designed to include Medicaid (Baker Act) patients to the greatest extent possible based on documented history or proposed services. Although Medicaid does not reimburse for freestanding psychiatric services, and Baker Act is only available to short-stay facilities specifically chosen to receive a Baker Act contract, HCAC has not designed its project to include those patients to the greatest extent possible. Thus, HCAC's application is not consistent with Policy No. 3, Priority No. 1.
Goal I of the 1986 District XI Goals and Policies for Mental Health and Substance Abuse Services is applicable to HCAC's application. This goal favors mental health services in the least restrictive setting possible. Long- term institutional care may be the least restrictive setting possible in the continuum of mental health care for the treatment of certain more serious types of patients. The concept of "continuum of care" means the full breadth of services available within a community, from least restrictive to most restrictive, from least intensive to most intensive. There must be settings along the full continuum of psychiatric care for patients to receive the level of care they may need. HCAC's application is not inconsistent with Goal I.
Issues Relating to CON Recommendations and Priority for Inpatient Psychiatric Services (District XI Health Plan 1986, page 26). In this section of the district health plan, the Planning Advisory Committee states its recommendations and preferences for services for the comprehensive treatment of the mentally ill. The Committee recognizes that long-term hospitalization is a viable form of treatment for some mentally ill patients. However, the Committee expresses a preference for short hospital stays and applicants that project treatment modalities with an average length of stay under 20 days. In addition, the Committee emphasizes a preference for services to be obtained through the conversion of medical/surgical beds, because the district has a large surplus of such beds. Overall, HCAC's project is not consistent with the recommendations and priorities of the Planning Advisory Committee.
HCAC's proposal is inconsistent with the goals, objectives and recommendations of the State Health Plan taken as a whole. The State Health Plan contains an important and significant goal that no additional long-term hospital psychiatric beds should be added in the area until the existing and approved beds in the district have achieved an 80 percent occupancy level. The existing long-term hospital psychiatric beds in the district have an occupancy level at approximately 67 percent.
AVAILABILITY AND ADEQUACY OF ALTERNATIVES
There are available, accessible and appropriate facilities within the service district which can be utilized for the services proposed by HCAC that are presently underutilized. Currently, there are short-term psychiatric providers, a long-term provider, residential facilities, nursing homes and adult congregate living facilities that are available as alternatives in the service district, and in many cases are significantly underutilized. Although the services to be offered by the HCAC facility would be in excess of what is provided in an adult residential treatment facility, nursing home or adult congregate living facility, those facilities could serve as viable alternatives
in appropriate cases. In 1986, there were 6,513 existing nursing home beds in District XI and an additional 1,928 approved for opening. There are 24 adult congregate living facilities in District XI with 50 beds or more. The total number of beds for ACLFs in 1986 was 2,620. In addition, Grant Center Hospital has 140 existing and 20 approved long-term psychiatric beds; its occupancy rate is low.
THE ABILITY OF THE APPLICANT TO PROVIDE QUALITY OF CARE AND THE APPLICANT'S RECORD OF PROVIDING QUALITY OF CARE
The "Flowers Model," made a part of the application, is a description of how, from a clinical perspective, the proposal will be managed. Although Flowers does not presently operate any long-term psychiatric facilities, the Flowers Model is appropriate for a long-term psychiatric care facility. From a clinical and programmatic perspective, the HCAC facility would provide good quality of care.
PROBABLE ECONOMIES AND IMPROVEMENTS IN SERVICE WHICH MAY BE DERIVED FROM OPERATION OF JOINT, COOPERATIVE OR SHARED HEALTH
CARE RESOURCES
HCAC has not demonstrated that there will be any improvements in service which may be derived from operation of joint, cooperative or shared health care resources.
The Northwest Dade County proposed location of the HCAC facility would place the project within two hours travel of 90 percent or more of District XI population. Nevertheless, HCAC's facility would increase the number of people who would be within two hours of long-term adult psychiatric facilities by less than 1 percent. The patients in District XI will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the service proposed by HCAC. There is presently adequate and accessible long-term hospital inpatient services for District XI population based on the existing and approved facilities in District X (Southwinds Hospital, Florida Medical Center) and District XI (Grant Center).
There are two approved but not yet open long-term psychiatric facilities in District X, Broward County. Florida Medical Center holds a CON for 60 long-term adult psychiatric beds to be located in Lauderdale Lakes and Southwinds Hospital holds a 75-bed CON with 60 beds counted for long-term treatment of adult and geriatric patients to be located in Andy Town. In addition, there are 238 long-term state hospital beds at South Florida State Hospital in Broward County.
Although the need for long-term psychiatric beds is assessed on a district-wide basis, it is reasonable to consider psychiatric beds in Broward County (District X) as an alternative to HCAC's proposal because they are within two hours access of individuals within the two counties. Likewise, it is reasonable to consider approved beds because need is projected for a future date. Not counting approved beds would overestimate need and result in duplication of services.
FINANCIAL FEASIBILITY
HCAC has not demonstrated that the 120-bed project or the 105-bed facility is financially feasible in the short or the long term. The projection of revenues and expenses in the pro forma (120-bed project) and the forecasted income statement (105-bed project) were flawed to such an extent that financial feasibility of the project was not shown.
IMPACT ON COSTS AND COMPETITION
If HCAC's project were to be built, a likely result is increased charges for the provision of services in the area. HCAC's proposed facility would negatively impact the availability of psychiatric nurses. There is a shortage of psychiatric nurses in Dade County and it is difficult to recruit and hire R.N.s with psychiatric experience. In order to hire nurses in a time of shortage, hospitals must recruit staff from other facilities. Shortages can increase the cost of recruitment and the cost of salaries.
Charter is a hospital located in District XI and consists of 88 beds,
80 of which are licensed as short-term psychiatric beds and eight of which are licensed as short-term substance abuse beds. Short-term psychiatric inpatient care is defined in Rule 10-5.011(1)(o), Florida Administrative Code, as "a service not exceeding three months and averaging a length of stay of 30 days or less for adults." HCAC's proposed facility, if approved, would have a negative economic impact on Charter. It is very likely that many of the patients at the proposed HCAC facility would experience lengths of stay between 45 and 60 days. Charter treats a significant number of patients (approximately 15 percent) who stay longer than 30 days. Because of the difficulty of initially identifying patients who would require either short or long-term stays, many of Charter's patients could be lost to the HCAC project. Charter could suffer a loss of up to 657 patient days per year if HCAC's proposed facility is approved. This loss of patients would impair Charter's ability to have certain types of programs, equipment and staff.
PROVISION OF HEALTH CARE SERVICES TO MEDICAID PATIENTS AND THE MEDICALLY INDIGENT
HCAC's project does not propose a significant amount of indigent care and HCAC has no history of providing health care services to Medicaid patients and the medically indigent.
OCCUPANCY RATE FOR EXISTING LONG-TERM HOSPITAL PSYCHIATRIC BEDS
Grant Center Hospital is the only existing long-term psychiatric facility in District XI. It has 140 beds and specializes in treating children and adolescent patients. Its occupancy rate at the time of review for the preceding year was approximately 67 percent. The appropriate period to calculate occupancy rate of existing facilities in this case is July 1985 to July 1986 because this is the most recent 12-month period preceding application decision.
The occupancy rate of all psychiatric beds within District XI was below 80 percent.
HCAC'S PROPOSED NEED METHODOLOGY
At the hearing, W. Eugene Nelson testified on behalf of HCAC on the need for the proposed long-term adult psychiatric beds. Mr. Nelson was accepted as an expert in the field of health care planning, including psychiatric bed need assessment. Mr. Nelson performed his analysis in District XI using the Graduate Medical Educational National Advisory Committee (GMENAC) methodology. The need methodology proposed by HCAC is inappropriate to adequately and accurately predict need for long-term adult psychiatric beds in District XI.
The GMENAC study is a national study based on national data developed to determine physician requirements in 1990 for 23 medical specialities. GMENAC estimates the prevalence of certain psychiatric disorders among the general population and estimates the number of those persons who need care for their conditions in differing treatment settings ranging from outpatient services to 24-hour institutional care.
HCAC's methodology, utilizing the GMENAC study, predicted a gross need of 895 beds in District XI in the applicable horizon (July 1991). The total number of existing long-term psychiatric beds in the entire State of Florida is only 836 beds, and the majority of those beds are experiencing occupancy levels under 65 percent. Many of these long-term facilities have been around for a period of at least three years and are still experiencing low occupancy. Therefore, the low levels are probably not based on the fact that the facilities are in a start-up mode.
HCAC's bed need computation is as follows:
Adult Long Term Psychiatric Bed Requirements (Excludes Alcohol, Drug Abuse, Mental Retardation, Organic Brain Syndrome and "other" Conditions)
District XI: July 1991
Condition Admission | Rate | |
Schizophrenia & Other Psychoses | 99 | |
Affective Disorder Psychosis | 20 | |
Affective Disorder Neuroses | 60 | |
Neuroses and Personality Disorders 199 | 20 | |
Projected 1991 Population Age 18+ | 1,459,437 | |
Total Projected Admissions | 2,904 | |
Average Length of Stay | 90 | |
Projected Patient Days Target Occupancy | 80.00 | 261,385 percent |
Total Beds Required | 895 | |
Beds Currently Available | 438 | |
South Florida State Hospital (450 X .48) Residential Treatment Facilities | 216 233 | |
Net Beds Needed 496 | ||
The projected 1991 population for District XI for age 18 and above is 1,459,473. The population projections were received from the Office of the Governor. The anticipated admissions per 100,000 is calculated to be 199 for the conditions listed. The total projected admissions for 1991 is 2,904. The 2,904 projected long-term care admissions when multiplied by the average length of stay of 90 days generates 261,385 projected patient days in the 1991 horizon period in District XI. The 261,385 patient days is then divided by 365 days in the year, and then by 80 percent, the latter of which is contained in the rule as the optimum or desired occupancy for long-term psychiatric beds. This yields a total gross long-term psychiatric bed requirement for adults and geriatrics of 895 beds.
In performing his analysis, Mr. Nelson used Table 4, page 22 of the GMENAC Study which lists information for mental disorders requiring care by treatment setting. The prevalence rate of 199 admissions per 100,000 population was based on the study's projection of the mental disorders listed requiring a "24-hour" treatment setting. Nelson used a projected 90-day length of stay in his computations. There is nothing in the GMENAC document that sets forth the average length of stay of persons reflected in the 24-hour column. Therefore, it is misleading to assume that persons admitted subject to the 199 per 100,000 admissions rate will actually experience an average length of stay as long as 90 days. For HCAC's admission rate to be valid, all of the facilities in District XI would have to average a 90-day length of stay. This is an unreasonable assumption. Nationwide, only a small percentage of all psychiatric admissions experience a length of stay as long as 90 days.
In computing beds currently available in District XI, Mr. Nelson did not consider nursing home beds, adult congregate living facility beds, or the
135 long-term psychiatric beds that have been approved for two facilities in District X (Broward County). Nelson also did not consider whether short-term facilities were capable or willing to take additional patients for long-term treatment. Thus, the computation of beds currently available in the HCAC methodology is unreasonably low.
HCAC's need methodology generated a long-term psychiatric bed to population ratio of .61 per thousand. DHRS' rule for short-term psychiatric beds was a population ratio of .35 per thousand. Short-term care facilities have admission rates two to three times greater than long-term facilities and nationwide statistics establish that only 4 percent of all psychiatric patients stay longer than 90 days. It is not reasonable for the bed rate for long-term adult psychiatric beds to be higher than the rate for short-term psychiatric beds.
Mr. Nelson excluded organic brain syndrome diagnosis from his analysis and admission rate based on an assumption that many of those patients are in nursing homes. Nelson did not use nursing home beds in computing his need methodology because he believed that eliminating the organic brain syndrome category from the Table 4, page 22, 24-hour column in the GMENAC study eliminates the need for considering nursing home beds in the inventory. For that approach to be valid, the number of organic brain syndrome patients that go to long-term psychiatric facilities would need to cancel out the number of patients in other diagnostic categories who go to nursing homes. Nelson did not consult or review any data concerning the number or percentage rates of schizophrenics and other mentally ill patients in nursing homes or the number of organic brain syndrome people being treated in long-term psychiatric facilities. In addition, Nelson did not know what percentage, if any, of the GMENAC projected admissions were nursing home admissions.
In computing existing beds, Nelson listed two types of facilities previously existing in District XI which were applicable to his methodology: the state hospital (216 beds) and residential treatment facilities (233 beds). The correct number of beds available for adults from District XI in the state hospital is 238. The actual number of beds for residential facilities is 335.
Dr. Howard Fagin testified as an expert in health planning and feasibility analysis, including psychiatric bed need assessment and feasibility. In Dr. Fagin's opinion, Nelson's bed need methodology is incorrect and the conclusions drawn are wrong because Nelson used an inappropriate length of stay based on the GMENAC study and also incorrectly identified the applicable beds which should be considered for comparable facilities under the GMENAC study and, therefore, his total numbers in terms of gross and net beds needed are incorrect. Dr. Fagin's critique of Mr. Nelson's bed need methodology is persuasive and credible. HCAC has failed to show that its proposed need methodology could accurately project the need for long-term psychiatric beds in District XI.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. Section 120.57(1), Florida Statutes.
HCAC, as the applicant, has the burden of demonstrating that it is entitled to a Certificate of Need. See Florida Department of Transportation v.
J.W.C. Co., Inc., 396 So.2d 778, (Fla. 1st DCA 1981).
On April 15, 1986, HCAC filed a CON application with DHRS to construct a 120-bed long-term psychiatric hospital serving adolescents (15 beds), adults (75 beds), and geriatrics (30 beds). After initial review by DHRS, HCAC's CON application was denied and HCAC requested a formal administrative hearing pursuant to Chapter 120, Florida Statutes. At the formal hearing, HCAC indicated a desire to abandon its proposal to provide 15 beds dedicated to serve adolescent patients and sought to present evidence relating to a down-sized 105- bed long-term psychiatric hospital serving only adult and geriatric patients. HCAC's request for consideration of a 105-bed project was proper because the project represented a scaled-down version, and an identifiable portion of, the original 120-bed proposal. See Section 381.709(4)(b), Florida Statutes, which states in part that:
(b) Within 60 days after all the applications in a review cycle are determined to be complete, the department shall issue its State Agency Action Report and Notice of Intent to grant a certificate of need for the project in its entirety, to grant a certificate of need for identifiable portions of the project, or to deny a certificate of need. (emphasis added)
The application of HCAC in this cause is governed by Rule 10- 5.011(1)(p), Florida Administrative Code, the long-term psychiatric services rule, and the statutory criteria found at Section 381.705, Florida Statutes, (1987). Although Section 381.494(6)(c), Florida Statutes, contained the statutory review criteria in effect at the time the application and petition for
hearing were filed, the new statute, effective October 1, 1987, must control the disposition of Petitioner's application. See Turro v. Department of Health and Rehabilitative Services, 458 So.2d 345 (Fla. 1st DCA 1984); Bruner v. Board of Real Estate, 399 So.2d 7 (Fla. 1st DCA 1981).
A balanced consideration of all the statutory criteria must be made. Department of Health and Rehabilitative Services v. Johnson & Johnson Home Health Care, 447 So.2d 361 (Fla. 1st DCA 1984). The weight to be accorded each criteria and the consequent balancing of the criteria will vary, however, depending on the facts and circumstances of each case. See North Ridge General Hospital, Inc. v. NME Hospitals, 478 So.2d 1138 (Fla. 1st DCA 1985); Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985).
Based on a balanced consideration of all of the relevant criteria in the instant case, the Petitioner has failed to meet its burden of establishing that it is entitled to the granting of a Certificate of Need for either a 120- bed facility or a down-sized 105-bed facility.
REVIEW CRITERIA
Need for the proposed facility in relation to the applicable district plan and State Health Plan
The evidence established that the project proposed by HCAC is not entitled to any priority consideration by the district plan and does not foster any of the significant policies or goals of the district plan. Significantly, the district plan favors the conversion of underutilized medical/surgical beds to meet the need, if any, for new psychiatric bed services. HCAC's proposal calls for the construction of a new, freestanding facility. HCAC's proposal is inconsistent with the district plan taken as a whole.
HCAC's proposal does little to foster the goals, objectives and recommendations of the State Health Plan. The State Health Plan recommends that long-term inpatient psychiatric beds should not normally be approved unless the average annual occupancy for existing and approved long-term psychiatric beds in the district is at least 80 percent -- a condition which does not exist in District XI.
Availability, quality of care, and adequacy of like and existing health care services/Alternatives of care
There are presently a sufficient number of like and existing health care services in District XI and neighboring District X that are available, appropriate, accessible and significantly underutilized. The South Florida State Hospital, short-term psychiatric beds, adult congregate living beds and nursing homes can serve as an alternative for properly diagnosed and placed individuals.
Ability of the applicant to provide quality of care
HCAC established that its proposed facility would be able to provide quality programmatic and clinical services to individuals in need of long-term psychiatric care.
Possible economies and improvements in service that may be derived from operation of joint, cooperative or shared health care resources
The Petitioner has not demonstrated that its facility will result in any improvements in service that will be derived from the operation of joint, cooperative, or shared health care resources.
Immediate and long-term financial feasibility
HCAC has not established that its facility will be financially feasible in the short or the long term. HCAC has conceded that a number of its financial projections for its 120-bed facility are now unreasonable. HCAC's income projections for its 105-bed project are also unreasonable. The fill-up rate for year two (95 percent) is overly optimistic and not practical to be achieved; the salary projections are unreasonable; the bad debt estimate is too low; contractual allowances (Medicare, "NO, PPO) are unrealistic; and the proposed percent of insurance and private pay (90.7 percent) is too high. Further, where there is no need for a project, there is a question regarding the project's financial feasibility.
Rule 10-5.011(1)(p), Florida Administrative Code (Long Term Psychiatric Services)
Long-term psychiatric services refers to a category of services which provides hospital based inpatient services averaging a length of stay of 90 days. Rule 10-5.011(1)(p)(1), Florida Administrative Code. Applications for proposed long-term inpatient psychiatric beds must be reviewed according to relevant statutory and rule criteria.
Rule 10-5.011(3)(a), Florida Administrative Code, provides in part as follows:
3. ... A favorable need determination for long term hospital inpatient psychiatric beds will not normally be given to an applicant unless the following criteria and standards are met:
a. No additional long term psychiatric beds shall be added in a Department service district unless the average annual occupancy rate for all existing long term psychiatric beds in a Department district is at or exceeds 80 percent for the preceding year.
Grant Center is the only existing long-term psychiatric facility in District XI. It has 140 beds. Grant Center's occupancy rate at the time of review for the preceding year was approximately 67 percent. Thus, the average annual occupancy rate for all existing long-term psychiatric beds in District XI was below 80 percent for the applicable time period.
Not Normal Circumstances
HCAC has not established that its proposed 105-bed or 120-bed facility comes within the "not normal" exception found in Rule 10- 5.011(1)(p)(3), Florida Administrative Code. HCAC argues that the long-term psychiatric beds of Grant Center should not be considered toward the 80 percent occupancy standard because Grant Center is dedicated to serving children and adolescents. HCAC's argument overlooks the plain language of the occupancy standard of the rule which makes no distinction between long-term psychiatric beds dedicated to children, adolescents, adults or geriatrics. Compare Rule 10- 5.011(1)(o), Florida Administrative Code, where the short-term psychiatric bed need rule sets forth separate occupancy standards for adult beds and children and adolescent beds.
Assuming arguendo that a "not normal" circumstance did exist or that Grant Center's beds should not be considered under the occupancy standard of the rule, HCAC still has not shown a specific need for a definite number of long- term inpatient psychiatric beds equal to 90 or more. The need methodology utilized by HCAC was inappropriate to accurately project adult long-term psychiatric bed need requirements in District XI.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that CON Application No. 4854 by Health Care Advisors
Corporation, Inc. be DENIED.
DONE and ORDERED this 1st day of March, 1988 in Tallahassee, Leon County, Florida.
W. MATTHEW STEVENSON 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 1st day of March, 1988.
COPIES FURNISHED:
Lesley Mendelson, Esquire Assistant General Counsel Department of Health and
Rehabilitative Services Fort Knox Executive Center 2727 Mahan Drive, Suite 308
Tallahassee, Florida 32308
H. Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32302
William E. Hoffman, Esquire 2500 Trust Company Tower
25 Park Place
Atlanta, Georgia 30303
George N. Neros, Jr., Esquire
101 North Monroe Street Monroe-Park Tower
Suite 900
Tallahassee, Florida 32301
Donna H. Stinson, Esquire The Perkins House
Suite 100
118 North Gadsden Street Tallahassee, Florida 32301
R. S. Power, Esquire Agency Clerk
Department of Health and Rehabilitative Services
1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
| Issue Date | Proceedings |
|---|---|
| Mar. 01, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 01, 1988 | Recommended Order | Petitioner's application for Certificate Of Need is denied based on a balanced consideration of all relevant criteria. |
