STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RECOMMENDED ORDER

The final hearing in this case was held on September 28-30, October 1-2 and 5-8, 1987 in Tallahassee, Florida before Donald D. Conn, Hearing Officer, Division of Administrative Hearings. The parties were represented as follows:

Petitioners: Michael Glazer, Esquire

Post Office Box 391 Tallahassee, Florida 32302

and

John T. Brennan, Jr., Esquire

900 Seventeenth Street, Northwest, Suite 600

Washington, DC 20006 (Manatee Palms)

Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302 (Manatee Memorial Hospital)

Respondents: John Rodriguez, Esquire

1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 (Department of Health and Rehabilitative Services)

Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302 and

William Hoffman, Esquire Deborah Winegard, Esquire

2500 Trust Company Tower, 25 Park Place Atlanta, Georgia 30303

(Florida Residential Treatment Center)

The issue in this case is whether certificate of need (CON) application 4825 for specialty hospital licensure as an Intensive Residential Treatment Program (IRTP) filed by Florida Residential Treatment Center (FRTC) should be approved by the Department of Health and Rehabilitative Services (Department). Palms Residential Treatment Center, Inc., d/b/a Manatee Palms Residential Treatment Center (Manatee -Palms) and Manatee Hospitals and Health Systems, Inc., d/b/a Manatee Memorial Hospital (Manatee Memorial) oppose the Department's intent to issue this CON and have requested a formal administrative hearing.

At the hearing, FRTC called 12 witnesses and introduced 25 exhibits, and the Department called 1 witness in support of the CON application. Manatee Palms called 4 witnesses and introduced 10 exhibits, and Manatee Memorial called

11 witnesses and introduced 29 exhibits in opposition to FRTC's CON application. The transcript of the final hearing, consisting of 14 volumes, was filed on October 26, 1987, and the parties were thereafter allowed to file proposed findings of fact, conclusions of law and memoranda. A ruling on each timely filed proposed finding of fact is included in the Appendix to this Recommended Order.

Preliminary Procedural Matters

At the commencement of the hearing, the parties presented argument on FRTC's Motion in Limine filed on September 17, 1987 and Motion to Dismiss Manatee Palms and Manatee Memorial For Lack of Standing filed on September 21, 1987.

With regard to the Motion in Limine, it was evident that FRTC asked for basically two rulings. The first ruling requested by FRTC was that evidence at final hearing be limited to those matters which relate to FRTC's ability to comply with licensure standards since FRTC argues that the issue in this case is whether licensure of an IRTP as a specialty hospital is consistent with the CON

criteria, rather than whether the application itself meets those criteria. No convincing statutory or rule provisions were cited to support FRTC's position that the CON criteria should be applied differently, and the issues limited, in this case. The Department did not support FRTC's request on this point. What we have in this case is an application for a CON, nothing more and nothing less. The intentions of the applicant to proceed with construction, with or without a CON, are purely speculative. Therefore, the first request in FRTC's Motion in Limine was denied.

The second request was to limit consideration of bed need to the inventory of intensive residential treatment programs licensed as specialty hospitals in the Department's District VI. Since FRTC has applied for a CON for specialty hospital licensure as an IRTP, the existence, or non-existence, of IRTP licensed beds in District VI is relevant to the issues in this case, and the inventory of beds should be properly limited to those which are licensed in District VI. Unlicensed residential treatment beds which may exist within District VI have not been reviewed for consistency with CON criteria, and no determination has therefore been made as to whether they meet such criteria. They should not be included in the inventory of beds against which any need established by the applicant should be compared because unlicensed beds are not, in fact, what the applicant seeks to offer at its facility. The second request in the Motion in Limine was therefore granted.

Regarding the Motion to Dismiss for Lack of Standing, it was found that Petitioners had well pled standing in their requests for hearing and the Motion to Dismiss was therefore denied. FRTC renewed this Motion to Dismiss at the conclusion of the hearing, and as more specifically set forth below, the Renewed Motion to Dismiss for Lack of Standing is denied.

Based upon the request of Manatee Palms and FRTC the following co-counsel, who are not members of The Florida Bar but who are practicing lawyers in other states, were accepted as qualified representatives: John T. Brennan, Jr., William Hoffman and Deborah Winegard.

FINDINGS OF FACT

The Parties

1. FRTC is a wholly-owned subsidiary of Charter Medical Corporation which proposes to construct and operate a 60 bed intensive residential treatment program (IRTP) in Bradenton, Florida, which is located in the Department's District VI.

   
   

2. The Department is the state agency with the authority and responsibility to consider CON applications.

   
   

3. Manatee Palms is an existing residential treatment center in Manatee County, Florida which opened in January, 1987 and is currently operating without a CON. It provides services similar or identical to those proposed by FRTC. Manatee Palms was developed by, and is a subsidiary of, Psychiatric Institutes of America. Its primary service area extends beyond District VI from Orlando to Naples. Manatee Palms is a sixty bed facility providing psychiatric, substance abuse and educational services for juveniles up to 18 years of age, and is licensed by the Department as a child caring facility, as a provider of services to the Department, and for subspecialties involving drug and alcohol programs. It is accredited by the Joint Commission on Accreditation of Hospitals as a residential treatment center. The average length of stay for patients is six

   months. Occupancy rates have been consistently above projections and have been as high as 97 percent in May, 1987.

   
   

4. Manatee Memorial is a full-service acute care hospital and an existing provider of short-term psychiatric services in Bradenton, Florida, with 25 licensed short-term psychiatric beds, nine of which comprise a children's and adolescent unit. It is the Manatee County contract provider of in-patient psychiatric services to the medically indigent, and provides approximately 91 percent of the indigent care in Manatee County. Manatee Memorial does not have, and has never sought, a CON as an IRTP, but does have earlier-batched applications pending for additional short and long term psychiatric beds. Its average length of stay is 35-40 days, and its utilization rate is approaching

   100 percent. Manatee Memorial provides services similar or identical to those proposed by FRTC, and its program also utilizes a "levels system" similar to that used by FRTC.

   
   

   The Application and Project

   
   

5. On September 15, 1986 FRTC filed a Letter of Intent notifying the Department of its intent to file a CON application for an IRTP for children and adolescents in Bradenton, Florida.

   
   

6. On October 14, 1986 FRTC filed CON application number 4825 to obtain specialty hospital licensure as an IRTP. This application was initially approved by the Department on March 10, 1987, after the filing of a completeness response on or about December 23, 1986 at the request of the Department.

   
   

7. Manatee Palms and Manatee Memorial timely filed petitions for formal administrative hearings challenging the Department's intent to issue the CON.

   
   

8. The project at issue in this case is a 60 bed IRTP situated on a 9.35 acre site. The proposed building will have total gross square footage of approximately 32,000 and has been adapted from a prototype short-term psychiatric hospital design which has been used in approximately 50 locations. The floor plan submitted by FRTC provides for 28 semi-private rooms, three of which are designed to accommodate the handicapped, and one 4- bed assessment unit. Additionally, reasonable and sufficient space is provided for five classrooms, occupational therapy, a gymnasium, three group rooms, three day rooms, a seclusion area, three consult rooms, laundry and storage rooms, a nurses' station, dining room, and an administrative wing. A parking area,

   multi-purpose court, pool, activities field and drainage retention area are also provided. The parties have stipulated that the building will be energy efficient. Total project cost is reasonably estimated at $4,303,020. As a result of design modifications, the square footage of the project has increased by approximately 1,000 gross square feet and project costs have increased by approximately $69,000 from FRTC's completed application. The Department's Deputy Assistant Secretary for Regulation and Health Facilities, John Griffin, testified that for a project of this size these changes are not considered to be "amendments" to the application.

   
   

   The changes in facility design identified at hearing represent refinements and permissible modifications, rather than application amendments. There is no architectural significance to the changes. Rather, they make the design more appropriate for an IRTP. Specifically, a multi-purpose area was converted to a half-court gymnasium, the occupational therapy and interior mechanical spaces were slightly increased for more storage area, a seclusion room was deleted, the

   nurses' station was reduced, a 4-bed assessment unit was added, and other minor changes were made.

   
   

9. FRTC proposes to offer 24-hour psychiatric services to children and adolescents under the age of 18, who are severely emotionally disturbed, and who are admitted voluntarily, after screening, with a history of prior treatment. Its program elements will include occupational therapy, recreational therapy, group and individual therapy, nursing care, an educational component, psychological testing, counseling and family therapy. The FRTC program will be initiated as a locked intensive program whose goal is to return the patient to his family and to life in a natural setting. Patients who are severely retarded, autistic, or with an active diagnosis of substance abuse will not be admitted.

   
   

10. The average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years.

    
    

11. There are no licensed intensive residential treatment programs (IRTP) for children and adolescents in Manatee County, Florida or in the Department's District VI, which includes Manatee County as well as Hardee, Highland, Hillsborough and Polk Counties. There are also no licensed IRTPs in adjoining Districts V and VIII.

    
    

    Stipulations

    
    

12. The parties have stipulated that FRTC has the ability to recruit physicians for this project, and also has funds available for FRTC's capital and operating expenditures.

    
    

13. In addition, the parties have stipulated that review criteria concerning the need for research and educational facilities, the extent to which the services will be accessible to schools for health professional, and the special needs and circumstances of health maintenance organizations are not applicable to this CON application.

    
    

    Non-Rule Policy For IRTP

    
    

14. The Department currently has no rule governing the approval of IRTP applications for a CON.

    
    

15. However, since February 1987 the Department has followed a non-rule policy which presumes there is a need for at least one licensed IRTP of reasonable size in each Departmental service district, and which does not consider the existence of unlicensed residential treatment beds in a district in determining if the presumed need has been met. No changes or revisions in this non-rule policy of the Department are under review. The Department applied this non-rule policy in initially approving the CON application.

    
    

16. Based upon the testimony of John Griffin, the Department's Deputy Assistant Secretary who administers the CON program and is responsible for health planning, an IRTP applicant does not have to establish "need" in a particular service district where it wants to locate a facility because the non- rule policy presumes there is a need for one IRTP of reasonable size per district. The applicant must, however, establish that there is not presently a licensed IRTP in the district and that it proposed to establish an IRTP of reasonable size.

17. Griffin was not able to explicate this non-rule policy based upon health planning concerns, considerations or factors. Sharon Gordon-Girvin, Administrator of the Department's Office of Community Medical Services and Facilities, was also unable to articulate or explicate a health planning basis for this policy. Rather, the only basis enunciated at hearing by the Department for this non-rule policy was its statutory interpretation of Sections 395.002(8) and 395.003(2)(f), Florida Statutes, as renumbered by Section 34, Chapter 87-92, Laws of Florida.

    
    

    Need And Consistency With State And Local Health Plans

    
    

18. There are no licensed IRTPs in District VI. Manatee Palms is a residential treatment center for children and adolescents located in Manatee County, but it is not licensed by the Department as an IRTP.

    
    

19. Relevant issues identified in the District VI Local Health Plan are stated as follows:

    
    

    As a general policy, the least restrictive, most cost effective setting and programs should be used. The State of Florida, as a major purchaser of mental health and substance abuse services, can

    continue to lead the way by encouraging the development of non-hospital alternatives and by purchasing

    services from them preferentially.

    
    

    Another important issue in psychiatric care is the trend toward hospitalization of children who have behavior and conduct disorders, and who should

    more appropriately be served through non-hospital alternatives. . .

    At the present time, the severe emotionally disturbed or emotionally handicapped (SED/EH) child or adolescent is served in a broad range of programs. There are crisis stabilization units (CSUs) for stabilizing the adult client in acute crisis. Currently CSU services for children and adolescents are not adequate throughout the District.

    Intensive residential, day/night program, group and foster homes are for the client requiring close supervision.

    
    

20. Relevant policies set forth in the District Local Health Plan are as follows:

    
    

    The multi-modality approach as expressed in the community mental health (and substance abuse) system

    should be considered a model of

    programming, staffing, facility requirements, costs, etc., against which applications

    for inpatient services should be reviewed.

    
    

    Review of applications for inpatient psychiatric and substance abuse services should include comment from the Alcohol, Drug Abuse and Mental Health Program Offices of DHRS.

    
    

    No additional psychiatric and/or substance abuse beds should be granted approval unless the capacity of current hospital providers is being fully utilized (75 percent occupancy rate annual).

    
    

    Additional psychiatric and/or substance abuse beds should be through conversion of existing beds.

    
    

21. The State Health Plan sets forth the following relevant policies and statements:

    
    

    The goal of (mental health) services is (to) . . . provide educational; mental health treatment; and when needed, residential services for severely emotionally disturbed students.

    
    

    It is the intent of the Legislature that the least restrictive means of intervention be employed based on the individual needs of each patient within the scope of available services . . .

    The program goals for each component of the network are . . . to provide programs and services as close as possible to the child's home in the least restrictive manner consistent with the child's needs.

    
    

    Sufficient funding for the development of residential treatment and community support services is necessary if the state is to fulfill its commitment to providing services for long term mentally ill persons. These services provide, in the long run, a more humane and cost effective means of meeting the mental health needs of Florida residents.

    
    

    Continued development of long and short term inpatient hospital programs for the treatment of adolescents and children is contrary to current treatment practices for these groups and is, therefore, inappropriate without local data to support

    the need for these services. Such development can contribute to inappropriate placement, unnecessary costs of treatment, and divert scarce resources away from alternative uses.

    
    

22. In addition, the following relevant goals are contained in the State Health Plan:

    
    

    Promote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services.

    
    

    Bring about changes in third party reimbursement policy for psychiatric and substance abuse care which would promote the development of the most appropriate, cost-effective treatment settings . . .

    
    

    Develop a network of residential treatment settings for Florida's severely emotionally disturbed children by 1989 . . . Develop residential placements within Florida for all SED children currently receiving treatment in out of state facilities by 1990.

    
    

23. The FRTC application is consistent with the above cited relevant portions of the state and local health plans. It is consistent with the State Health Plan which reflects and emphasizes the trend toward deinstitutionalization and the current emphasis on education, treatment and residential services for severely emotionally disturbed students rather than what has been the traditional approach to treatment in an institutional setting, a generally more costly approach from a capital cost and staffing perspective. The FRTC application promotes treatment within the State and will assist in reducing out of state placements.

    
    

24. Through the report and testimony of Ronald T. Luke, Ph.D., J.D., and despite the testimony of Jay Cushman, both of whom were accepted as experts in health planning, FRTC established the need for, and reasonableness of, its 60 licensed IRTP beds in District VI, with 50 percent occupancy in the first year and 60 percent in the second year, using two bed need assessment methodologies. First, using the ratio of licensed IRTP beds in other service districts to population ages 0-17 years old, a range of .07 to 1.33 beds per 1,000 population is identified. Using 1991 population projections for District VI, the 60 bed FRTC facility would result in a bed to population ratio of .17 per 1,000 population aged 0-17 years. Since there are no licensed beds in the current inventory, no adjustment of this ratio must be made to account for existing beds. Thus, the FRTC application is within the range of ratios of currently licensed IRTPs in other districts, and is therefore reasonable. Second, a utilization methodology identifies an intensive residential treatment bed need of 90 in 1987 to 95 in 1991, with target occupancy rates of 90 percent. This methodology is based upon 1987 and 1991 population projections. Using a census rate per 100,000 population of 21.58 which is appropriately and reasonably derived from national data for residential treatment patients aged 0-17, an average daily census of 74 in 1987 and 78 in 1991 is derived. Thus, FRTC has

    established a need for its facility in District VI, given its projected occupancy levels, and given that there are no licensed beds currently in the District. It is important to recognize that the bed ratio analysis is based upon licensed intensive residential treatment beds in Florida, and is therefore clearly relevant and credible to the issues in this case. The utilization methodology supports and confirms the need found thorough the bed ratio analysis, although it is noted that this methodology, by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need. It is, however, persuasive and credible in confirming the bed ratio analysis.

    
    

    Accessibility To All Residents

    
    

25. FRTC projects only 1.5 percent indigent care and 8 percent bad debt. Its projection for private pay patients is 25 percent and for insurance covered care is 65.5 percent. This is a marginal and insignificant indigent load. There is no provision for services to state-funded patients. FRTC's projected utilization by class of pay is reasonable.

    
    

26. The clear purpose of this application is to enable FRTC to become licensed as a hospital under Section 395.002, Florida Statutes, and thereby enable it to be called a "hospital". It was established through the testimony of Dwight Hood, who was accepted as an expert in health care finance and health care third party payments, that if a facility is licensed as a hospital it has a significant advantage for reimbursement from third parties who more readily reimburse for care in a licensed facility than in an unlicensed residential treatment center. Therefore, accessibility will be increased for those children and adolescents in need of this care whose families have insurance coverage, since it is more likely that payments under such third party coverage will be made at an IRTP licensed as a "hospital" than otherwise.

    
    

    Quality of Care

    
    

27. The applicant has clearly demonstrated its ability to provide quality care to its patients, based upon the testimony of C. Hal Brunt, M.D., Robert Friedel, M.D. and G. L. Tischler, M.D., who were accepted as experts in psychiatry, and notwithstanding the testimony of Howard Goldman, M.D., and Glen Lewis, M.D., who were also accepted as experts in psychiatry. FRTC is a wholly owned subsidiary of Charter Medical Corporation which has experience in the operation and management of a residential treatment center, Charter Colonial Institute in Virginia, and also has extensive experience in providing quality health care at five hospitals in Florida, including Charter Hospital of Tampa Bay. The treatment program at FRTC will be adapted to local community needs.

    
    

28. In providing quality care, FRTC will assign patients to the correct level of care within the facility by insuring that they are seen by a psychiatrist within 24 hours of admission, and by having each case reviewed by an independent utilization review committee, completing appropriate patient assessments and developing integrated treatment programs which are regularly updated, making appropriate treatment outcome assessments, and providing for continuity of care for patients leaving the IRTP through the development of a community-wide continuum of care. Charter has six out-patient counselling centers located within two hours of the FRTC proposed facility. It is both reasonable and appropriate to structure psychiatric treatment and care in a hospital setting within a "levels system" that rewards and reinforces desired behavior, and FRTC will utilize a "levels system" in its highly goal oriented patient treatment programs.

29. Quality of care is not dependent upon a hospital's environment and physical facilities, according to Dr. Goldman. The floor plan proposed by FRTC is functional and is a proto- typical design used by Charter in approximately fifty locations, although not as an IRTP. The criticisms of the floor plan and facility design to which Maxine Wolfe, Ph.D., and Glen Lewis, M.D., testified do not establish that the applicant will be unable to provide quality care in this facility. While the Petitioners might design a facility differently, and specifically provide for a different orientation of the nurses' station relative to the patient wings, a different location for the dining room, more rooms where a patient can have privacy, and more opportunity for individualized treatment, these preferences do not establish that FRTC's floor plan and design will impair the quality of care rendered at this proposed facility. It is also noted that Dr. Wolfe testified critically about residential treatment in general, and expressed the opinion that residential treatment in a hospital is not beneficial and that children should never be treated in a large facility of any kind under any circumstance. Her testimony clearly establishes her bias and impairs her own credibility and the weight to be given to her testimony in this case.

    
    

    Availability and Adequacy of Alternatives

    
    

30. Although there are no licensed IRTPs in District VI residential treatment and/or psychiatric services are currently available to children and adolescents through Manatee Memorial (9 beds), Manatee Palms (60 beds), Glenbeigh (14-16 beds), Sarasota Palms (60-70 beds), Sarasota Memorial Care Center (30 beds), Children's Home in Tampa (68 beds) and Northside Center in Tampa (12 beds).

    
    

31. The average of length of stay at the significant majority of these facilities is up to 90 days, and they also attract patients from outside District VI. FRTC proposes to serve patients who require an average length of stay of a year. Some of these facilities serve patients with a dual diagnosis that includes substance abuse whereas FRTC will not. Therefore, these facilities do not offer adequate alternatives for the patients which FRTC is seeking to serve. Further, it was not established that outpatient or ambulatory services represent an adequate and appropriate alternative to an IRTP.

    
    

    Availability of Resources

    
    

32. The total project cost of $4,303,020 will be funded through an equity contribution from Charter Medical Corporation and through a conventional loan.

    
    

33. Assuming a 50 percent occupancy rate (30 beds) in its first year of operation, the proposed facility will have a staff of 43 positions, 27 of which will represent personnel who will be direct nursing or staff support for the patients, including social workers, psychologists, staff registered nurses, mental health workers, patient care coordinator, nursing supervisors, occupational and recreational therapists and special education teachers. A part-time medical director will also be available. This results in a ratio of

    1.4 positions per patient. In comparison, Manatee Palms has a 1.8 staffing ratio based on a census of 55 patients. FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients.

    
    

34. FRTC will recruit personnel through direct advertising, community contacts, posted notices, job fairs, and school visits. It will compete with

    unlicensed residential treatment centers, as well as short and long term psychiatric hospitals, in attracting staff for its facility.

    
    

35. Although only six mental health workers are identified in FRTC's list of manpower requirements, and it would be beneficial to the level of treatment and care to increase this number, nevertheless, the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation.

    
    

36. Staff salaries proposed by FRTC are reasonable and realistic, although its proposed salaries for nurses and mental health workers are higher than that available at Manatee Memorial. Existing facilities may have to increase their salaries to the levels proposed by FRTC to continue to retain and attract qualified staff, particularly nurses and mental health workers.

    
    

37. Recruitment difficulties have been experienced in the District VI area for nurses, social workers, mental health workers and occupational therapists. However, it appears that FRTC will be able to attract qualified applicants for all positions due to the level of salaries offered and quality of care provided.

    
    

    Financial Feasibility

    
    

38. Net revenues from the first year of operation are projected to be

    $100,000, which represents 2.3 percent of the capital expenditure as a return on investment. In the second year of operation, net revenues are projected to be

    $302,000, a 7 percent return on investment. Both years show a fair return on investment, and the pro forma establishes the financial feasibility of this project.

    
    

39. In preparing the pro forma for this project, William S. Love, who was accepted as an expert in health care finance, used the reasonable assumption of

    50 percent occupancy in the first year of operation and 60 percent in the second year. Despite the testimony of Jay Cushman, who was accepted as an expert health planner, it was not established that FRTC's location will preclude these occupancy rates. Love also assumed patient revenues of $300 per day and an average length of stay of one year. Utilization by class of payor was estimated to be 65 1/2 percent insurance, 25 percent private pay, 8 percent bad debt and 1 1/2 percent indigent care. It was assumed there would be no Medicare or Medicaid. Assumptions regarding patient revenues and utilization by class of payor are reasonable based on the testimony of Love, Luke and Dwight Hood, as well as a survey of insurance benefits available through employers, and despite the testimony of Christopher Knepper, who was accepted as an expert in health care finance.

    
    

    Knepper's testimony is applicable to unlicensed residential treatment centers rather than an IRTP. Therefore, his criticism of the pro forma as underestimating bad debt and overestimating the private pay portion is not persuasive since it disregards the fact that a licensed IRTP, due to its status as a specialty hospital, will have an increased ability to attract patients with insurance and with an ability to pay deductibles and other unreimbursed costs for care. It was established that a residential treatment center licensed as a specialty hospital has a significant advantage in terms of an improved payor mix over unlicensed facilities because of its recognized status with insurance companies.

    
    

    In addition, Knepper's testimony at hearing concerning the financial feasibility of this project conflicted with estimates made during discovery, and

    his explanation of such discrepancy was not credible. This conflict in Knepper's position at hearing and during discovery reduces the weight to be given to his testimony.

    
    

    FRTC assumed it would not be subject to the indigent care tax, but even if it were subject to the tax this would only add $29,000 in expenses, and therefore not affect the financial feasibility of the project.

    
    

40. A management fee will be charged by Charter Medical Corporation, although this is not separately shown on the pro forma. It is the position of FRTC that this fee is associated with home office costs which will exist without regard to this facility. However, this fee, as well as additional construction costs of approximately $70,000, will not affect the financial feasibility of this project since salary costs associated with administration, as well as data processing costs have been separately shown and included on the pro forma as expenses, even though they are sometimes included in a management fee.

    
    

41. FRTC's estimate of gross patient revenue of $300 per day for the first year of operation is substantially higher than other facilities offering like services.

    
    

42. Net revenues per day during the first year of operation are estimated to be $265.30. Total direct expenses are estimated to be $198.70 for the first year, with total expenses per patient day estimated at $250.50 in the first year. A 7 percent inflation factor was used for the second year of operation, and this is a reasonable inflation factor.

    
    

    Impact On Costs and Competition

    
    

43. As previously noted, salary estimates for nurses and mental health workers for this project are above those provided at Manatee Memorial, and therefore could reasonably be expected to increase salaries in these categories for some facilities in the area.

    
    

44. The all inclusive charge of $300 per day proposed by FRTC is greater than Manatee Palm's average gross charge of between $270 - $280 per day.

    
    

45. It is likely that paying patients, including patients with insurance coverage, who would otherwise be treated at Petitioners' facilities, will be treated at FRTC if this application is approved. However, the extent of such a loss in paying patients due to FRTC is unclear since Manatee Palms is recently receiving greater acceptance by insurers for reimbursement purposes, and Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC.

    
    

    Reasonableness of Costs

    
    

46. The equipment cost estimate of $360,015 is reasonable. This finding is based on the testimony of Susan Hickman, who was accepted as an expert in health care facility equipment. The equipment and beds are appropriate for an IRTP of this size. The total cost of $707,897 for telephones, signage, graphics, interior design and equipment is also reasonable.

    
    

47. The construction cost estimate of $2,010,823 is reasonable. This finding is based on the testimony of Patrick A. Regan, who was accepted as an expert in health care facility construction budgeting. Due to the conservative nature of the cost figures, a 2 1/2 percent contingency is adequate, rather than

    the normal 5-6 percent contingency. The contingency could be used for unbudgeted items such as stucco siding and hard ceilings. FRTC owns the facility site, which was purchased for $664,000.

    
    

    CONCLUSIONS OF LAW

    
    

48. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this cause. Section 120.57(1), Florida Statutes.

    
    

49. The first issue that must be addressed is Petitioners' standing. Petitioners have clearly shown that they will suffer injury in fact if FRTC's CON is approved due to FRTC's enhanced ability to attract patients with insurance coverage and also FRTC's ability to attract qualified staff due to higher salaries it proposes to offer. In addition, Petitioners' substantial interest is within the "zone of interest" which this proceeding was designed to protect. Psychiatric Institutes of America, Inc. v. Department of Health and Rehabilitative Services, 491 So.2d 1199 (Fla. 1st DCA 1986); Agrico Chemical Co.

    v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 2d DCA 1981); pet. for rev. den., 415 So.2d 1359 (Fla. 1982). Numerous cases have held that facilities of one type can be substantially affected by, and therefore have standing to challenge, the CON application of a different type of facility. St. Francis Parkside Lodge of Tampa Bay v. Department of Health and Rehabilitative Services, 486 So.2d 32 (Fla. 1st DCA 1986). See also Baptist Hospital, Inc. v. Department of Health and Rehabilitative Services, 500 So.2d 620 (Fla. 1st DCA 1987).

    
    

50. FRTC urges that Manatee Palms should be dismissed for lack of standing due to Section 381.709(5)(b), Florida Statutes, which took effect on October 1, 1987 and which states:

    
    

    Existing health care facilities may initiate or intervene in such administrative hearing upon a showing that an established program will be substantially affected by the issuance of a CON to a competing proposed facility or program within the same district . . . (Emphasis supplied).

    
    

    Since Manatee Palms is an unlicensed residential treatment program that does not currently have a CON, FRTC argues it is not a "health care facility" and therefore cannot initiate or intervene in this case. See also Section 381.706(1)(b), Florida Statutes, effective October 1, 1987.

    
    

51. It is well settled that the law in effect at the time of the hearing and decision in a case must be applied. Although this hearing began on September 28, 1987, it concluded on October 8, 1987, after Sections 381.701- 381.715, Florida Statutes, took effect as enacted by Chapter 87-92, Laws of Florida. This new CON law is now in effect and governs the decision in this case. State of Florida v. Hospital Dist. of Hardee County, 201 So.2d 69 (Fla. 1967); Griffith v. Florida Parole and Probation Comm., 485 So.2d 818 (Fla. 1986); Turro v. Department of Health and Rehabilitative Services, 458 So.2d 345 (Fla. 1st DCA 1984). Yet by the very terms of Section 38, Chapter 87-92, Laws

    of Florida, the enactment of these new statutory provisions governing CONs has not abated any administrative proceeding pending on July 1, 1987:

    
    

    Section 38. (1) Nothing contained in

    ss. 381.701-381.715, Florida Statutes, is intended to repeal or modify any of the existing rules of the Department of Health and Rehabilitative Services, the existing composition of the local health councils and the statewide Health Council, or the state health plan, or any of the local district health plans, unless, and only to the extent that, there is a direct conflict with the provisions of ss. 381.701-381.715, Florida Statutes. The rules of the Department of Health and Rehabilitative Services in effect on July 1, 1987, which implement the provisions of ss. 381.493- 499, Florida Statutes, shall remain in effect and shall be enforceable by the department until such rules are repealed or amended by the department, and no judicial or administrative proceeding pending on July 1, 1987, shall be abated as a result of the provisions of ss. 381.701- 381.713(1),(2),(3), 381.714-381.715,

    Florida Statutes. (Emphasis added).

    
    

    To grant FRTC's Motion of Dismiss Manatee Palms For Lack of Standing based upon Section 381.709(5)(b) would abate the proceeding initiated by Manatee Palms which was pending on July 1, 1987, and such action is specifically proscribed by Section 38, above.

    
    

52. FRTC urges that since the Department has amended certain rules which implemented Sections 381.493-381.499, Florida Statutes, and since these amendments became effective on November 17, 1987, the prohibition on abatement of proceedings no longer applies. It is the position of FRTC that Section 38, above, only preserved actions pending on July 1, 1987 as long as the Department's rules implementing the former statutory sections were in effect. However, there has been no request by any party in this case that official recognition be taken of any rule amendments, and therefore there has been no opportunity for any party to examine and contest such material. See Section 120.61, Florida Statutes. There is nothing in the record of this proceeding to support FRTC's assertion that these rules have been amended.

    
    

53. Nevertheless, even if it is assumed, arguendo, that relevant rules implementing the former statutory provisions governing CON applications have been amended or repealed, this does not alter the effect of the prohibition on abatement of proceedings set forth by Section 38. The highlighted portion of Section 38, shown above, consists of two independent clauses, separated by a comma. The first clause states that rules in effect on July 1, 1987 shall remain in effect until amended or repealed by the Department. The second clause states that proceedings in effect on July 1, 1987 shall not be abated as a result of statutory changes in the CON law. There is no indication, by the terms of Section 38, that the second clause is dependent upon the first, and the use of a comma to separate these clauses would appear to indicate that the

    legislature intended that they be viewed separately and independently. FRTC's argument that the second clause becomes a nullity when the Department amends its rules is not supported by the plain meaning of Section 38. Further, such an interpretation would mean that a party's standing in a proceeding pending on July 1, 1987, which was preserved by the abatement prohibition of Section 38, could thereafter be divested by the Department through the rulemaking process, even though in this case there has been no request that the product of that process be officially recognized.

    
    

54. The enactment of Chapter 87-92 was not intended to abate or extinguish the standing of a party in a proceeding that was in process on July 1, 1987. A retrospective construction of statutes is not favored, particularly when the vested rights of parties are destroyed or adversely affected. 49 Fla. Jur. 2d.

106. The standing of Petitioners vested with the enactment of the non-abatement provision Section 38, and cannot thereafter be retrospectively removed by rule of the Department.

1. In this proceeding, FRTC seeks to be licensed as a specialty hospital pursuant to Sections 395.002(8) and 395.003(2)(e), Florida Statutes, and such licensure cannot be obtained without it first being granted a CON. Section 381.704(2), Florida Statutes, as created by Chapter 87-92, Laws of Florida. The applicant bears the ultimate burden of demonstrating its entitlement to a CON. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Since this is a de novo proceeding, it is the position of the parties at the time of hearing that is relevant in determining whether the applicant has met its burden. Therefore, evidence offered to update and to make minor revisions in the application concerning square footage and cost, but which does not amend the application, is relevant and has been considered. McDonald

   v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977); Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985).

   
   

2. In determining if there is a need for the proposed facility, a balanced consideration of all statutory and rule criteria must be made. Department of Health and Rehabilitative Services v. Johnson & Johnson, 447 So.2d

   361 (Fla. 1st DCA 1984); Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985). The weight given to each individual criteria is not fixed, but varies depending on the facts of each case. 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).

   
   

3. The fact that no rule exists setting forth a need methodology in IRTP cases must be addressed in order to determine what criteria must be applied in performing the required balanced consideration, and also whether such consideration can be given at all, absent a rule. While the existence of non- rule policy has been recognized, it must be clearly explicated by the agency or party seeking to rely thereon. McDonald v. Department of Banking and Finance,

   346 So.2d 569 (Fla. 1st DCA 1977); Florida Medical Center v. Department of Health and Rehabilitative Services, 463 So.2d 380 (Fla. 1st DCA 1985). This is a heavy burden, and the non-rule policy does not have the presumption of validity which is afforded formally promulgated agency rules. Barker v. Board of Medical Examiners, 428 So.2d 720 (Fla. 1st DCA 1983). The non-existence of a need methodology rule is not fatal to an application for a CON if incipient,

   non-rule policy can be sufficiently explicated at hearing. In this case, like that in Upjohn Healthcare Services, Inc., v. Department of Health and Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986), the Department did

   not offer evidence and expert testimony at hearing to elucidate the non-rule policy applicable here, and therefore the Department's non-rule policy cannot be relied upon or considered in determining if this application should be approved. Florida Medical Center, Id; Anheuser Busch v. Department of Business Regulation, 393 So.2d 1177 (Fla. 1st DCA 1981).

   
   

4. We now turn to the statutory criteria found at Section 381.705(1), formerly Section 381.494(6)(c), Florida Statutes, to determine whether FRTC, supported by the Department, has established its entitlement to the CON it seeks. Upon review, it is concluded that FRTC has met its burden of proof, and is therefore entitled to approval of the CON which is here at issue. FRTC has established that sufficient manpower is available to staff the facility, despite shortages in nursing and mental health worker personnel, that it has the financial ability to construct and support the facility, that its financial position is extremely sound, that it will provide quality care and adequate staffing patterns, that project cost estimates are reasonable, that the project is consistent with State and Local Health Plans, and that there exists a need for the facility based upon an analysis of the ratio of licensed beds to population, as confirmed and supported by a utilization methodology.

   
   

5. Specifically, FRTC's application satisfies Section 381.705(1)(a), formerly Section 381.494(6)(c)1., Florida Statutes, which requires analysis of need for the project in relation to the Local and State Health Plans. The application does satisfy these plans because it promotes services which are less restrictive than in-patient hospitalization in an acute care facility, increases the availability of services in the District for children and adolescents in need of close supervision or crisis stabilization, assists in providing a coordinated continuum of care for patients in need of mental health and substance abuse services, and reduces the need for patients to obtain treatment out-of-state. The applicant has shown that the ratio of licensed IRTP beds to population in District VI will be within the range of bed ratios existing in other parts of the State where licensed IRTPs are located. Since there are no licensed beds in the current inventory, the bed ratio derived by comparing FRTC's beds to population has not had to be adjusted. A utilization methodology developed by FRTC based upon national data supports and confirms the need found through the bed ratio analysis.

   
   

6. Section 381.705(1)(b), formerly Section 381.494(6)(c)2., requires assessing the project against the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services. Section 381.705(1)(d), formerly Section 381.494(6)(c)4., requires examination of existing alternatives to the IRTP.

   FRTC has established that it will provide quality care and adequate staffing for patients at its facility. While there are beds in District VI serving severely emotionally disturbed children, it was not established how many of these beds serve patients from District VI, or that outpatient or ambulatory surgical centers offer adequate alternatives. Some of these beds are unlicensed, such as those of Manatee Palms. There are no licensed IRTP beds in District VI. Therefore, adequate alternatives to the FRTC facility have not been shown to exist within District VI. FRTC's facility will be more accessible to patients with insurance coverage due to its status as a specialty hospital and resulting ready acceptance for reimbursement purposes.

   
   

7. Section 381.705(1)(h), formerly, Section 381.494(6)(c)8., can be broken down into two distinct subparts relevant to this application. First, it requires assessment of availability of resources, including manpower and funds, to start up and operate. The FRTC application satisfies this component.

   Additionally, the pro formas do adequately demonstrate sufficient revenues to cover reasonably anticipated operating expenditures, and do establish the profitability of the facility in the first two years of operation. Second, this section encourages accessibility of the proposed services to all residents of the service district. The proposal satisfies this criteria because the IRTP would be no less accessible, in terms of geographic, financial, and service considerations, than any other hospital or unlicensed residential treatment facility within the district. In fact, as previously noted, its accessibility for patients with insurance coverage will likely increase due to approval of this application since it will then be able to establish itself as a "hospital11 and insurance reimbursement is more likely at such a facility than at an unlicensed residential treatment center.

   
   

8. Section 381.705(1)(i), formerly Section 381.494(6)(c)9., requires that the applicant demonstrate immediate and long-term financial feasibility of the proposal. The proposal meets this criteria, because it has been established that the IRTP would be profitable in its first two years of operation based upon the reasonable and appropriate assumptions upon which its pro forma is based.

   
   

9. An examination of the impact of the project on the cost of providing the services to be offered by the applicant, and corresponding consideration of "the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost- effectiveness" is required by Section 381.705(1)(1), formerly Section 381.494(6)(c)12. The project can reasonably be expected to initially increase some costs of health services because it will have an inflationary impact upon some salary costs. It can also reasonably be expected to attract patients with insurance coverage who would otherwise go to existing facilities for care.

These factors will likely have a negative impact on Petitioners in the short- term. Section 381.705(1)(m), formerly Section 381.494(6)(c)13., requires examination of the costs and methods of establishing the physical plant and equipment. The applicant did satisfy this criterion because it adequately accounted for all such project costs. The applicant also did adequately and fully address projected salary expenses, and its estimate of these expenses is reasonable.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Department enter a Final Order approving FRTC's application for CON 4825.

DONE AND ENTERED this 22nd day of December, 1987 in Tallahassee, Florida.

DONALD D. CONN

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 22nd day of December, 1987.

APPENDIX TO RECOMMENDED ORDER, CASE NOS. 87-2036, 87-2049

Rulings on the Joint Proposed Findings of Fact filed by FRTC and the Department:

1 Adopted in Findings of Fact 1, 27. 2-4 Adopted in Finding of Fact 6.

5 Rejected as irrelevant and unnecessary.

6-9 Adopted in Findings of Fact 8, 29, but otherwise rejected as cumulative and unnecessary.

10-11 Adopted in Finding of Fact 8.

1. Adopted in Finding of Fact 47.

2. Adopted in Findings of Fact 8, 47.

3. Adopted in Finding of Fact 8. 15-16 Adopted in Finding of Fact 46,

1. Adopted in Finding of Fact 27.

2. Adopted in Finding of Fact 28, but otherwise rejected as irrelevant and unnecessary.

3. Adopted in Findings of Fact 9, 10 but otherwise rejected as unnecessary.

4. Rejected as irrelevant and unnecessary. 21-22 Adopted in Finding of Fact 9.

1. Adopted in Finding of Fact 28, but otherwise rejected as unnecessary.

2. Rejected as unnecessary.

3. Adopted in Findings of Fact 9, 10, 27.

4. Adopted in Finding of Fact 9.

27-30 Adopted in part in Findings of Fact 27, 28, but otherwise rejected as unnecessary.

31 Adopted in Finding of Fact 9.

32-34 Adopted in Findings of Fact 27, 28, but otherwise rejected as unnecessary.

1. Adopted in Finding of Fact 12.

2. Rejected as unnecessary.

3. Adopted in part in Finding of Fact 33, but otherwise rejected as unnecessary.

4. Adopted in Findings of Fact 33, 35.

5. Adopted in Finding of Fact 34.

6. Adopted in Finding of Fact 37.

7. Adopted in Finding of Fact 12.

8. Rejected as unnecessary.

9. Adopted in part in Finding of Fact 39, but otherwise rejected as unnecessary.

10. Adopted in Finding of Fact 40.

11. Adopted in Finding of Fact 42.

12. Adopted in Finding of Fact 39.

13. Adopted in Finding of Fact 40.

14. Adopted in Finding of Fact 38.

15. Adopted in Finding of Fact 39.

50-57 Adopted in Findings of Fact 26, 39, but otherwise rejected as cumulative and unnecessary.

58 Rejected as unnecessary.

59-61 Adopted in Finding of Fact 15, but otherwise

rejected as irrelevant, unnecessary or as a conclusion of law.

62 Adopted in Finding of Fact 16.

61 Adopted in Findings of Fact 6, 15, 16.

1. Rejected as unnecessary and irrelevant.

2. Rejected in Finding of Fact 17.

3. Rejected in Finding of Fact 17, but adopted in part in Finding of Fact 26.

4. Rejected as irrelevant and unnecessary.

5. Rejected as unnecessary.

69-72 Adopted in part in Finding of Fact 24, but otherwise rejected as irrelevant since the Department's non-rule policy was not explicated and therefore cannot be relied upon.

1. Rejected as unnecessary and irrelevant since the "reasonableness" of the facility's size is not at issue, the Department having failed to explicate its non-rule policy.

2. Adopted in Finding of Fact 24, but otherwise rejected as cumulative and unnecessary.

3. Adopted in Findings of Fact 9, 31, but otherwise rejected as unnecessary.

4. Rejected in Findings of Fact 24, 33, 35, 39.

5. The proposed average length of stay of one year is found to be reasonable in Finding of Fact 10.

6. Adopted in Findings of Fact 21, 22.

79-81 Adopted in Findings of Fact 19, 23, but otherwise rejected as unnecessary and cumulative.

1. Rejected as irrelevant and unnecessary.

2. Adopted in Findings of Fact 11, 18, but otherwise rejected as unnecessary.

3. Adopted in Finding of Fact 31.

4. Rejected as unnecessary.

5. Adopted in part in Findings of Fact 11, 26 but otherwise rejected as unnecessary.

87-88 Adopted in Finding of Fact 3.

1. Rejected as irrelevant and unnecessary.

2. Adopted in Findings of Fact 3, 44, but otherwise rejected as unnecessary and cumulative.

3. Rejected as simply a summation of testimony and therefore unnecessary.

4. Adopted in part in Finding of Fact 4, but otherwise rejected as unnecessary.

5. Rejected as simply a summation of testimony and not a Finding of Fact.

6. Rejected as unnecessary and simply a summation of testimony.

95-96 Rejected as irrelevant, unnecessary and in part simply a summation of testimony.

97-98 Rejected as a summation of testimony and otherwise as speculative and irrelevant.

99 Rejected as simply a summation of testimony. 100-103 Rejected as irrelevant.

104 Rejected as a summation of, and argument on, the evidence rather than a Finding of Fact.

Rulings on the Proposed Findings of Fact filed by Manatee Palms:

1. Adopted in Findings of Fact 1, 27.

2. Adopted in Finding of Fact 2.

3. Adopted in Finding of Fact 3.

4. Adopted in Finding of Fact 4.

5. Adopted in Finding of Fact 5.

6. Adopted in Finding of Fact 6, but otherwise rejected as irrelevant.

7. Adopted in part in Finding of Fact 7.

8. Rejected as unnecessary, and as simply a statement of position.

9-11 Rejected as unnecessary and as otherwise covered in preliminary procedural matters.

1. Adopted in Finding of Fact 8.

2. Adopted in Finding of Fact 5, but otherwise rejected as unnecessary.

3. Adopted in Finding of Fact 8.

4. Adopted in Findings of Fact 9, 31, but otherwise rejected as simply a summation of testimony and position of the parties.

5. Adopted in Finding of Fact 8.

6. Adopted in Findings of Fact 10, 25, 39, 44.

7. Adopted in Finding of Fact 14, but rejected in Finding of Fact 24.

8. Adopted in Finding of Fact 17, but rejected in Finding of Fact 24.

9. Rejected in Findings of Fact 21, 22, 23.

10. Rejected as simply argument and a statement of position rather than a Finding of Fact.

11. Adopted in part in Findings of Fact 25, 39.

12. Rejected in Findings of Fact 21, 22, 23. 24-26 Rejected in Findings of Fact 19, 20, 23.

1. Adopted in Findings of Fact 19, 44, but rejected in Finding of Fact 23.

2. Rejected in Findings of Fact 23, 24.

3. Adopted in Finding of Fact 17.

4. Adopted in Findings of Fact 16, 17.

5. Adopted in Finding of Fact 17.

6. Rejected as unnecessary.

7. Adopted in Finding of Fact 17.

34-42 Rejected as irrelevant and unnecessary. This is a de novo proceeding through which final agency action will be taken, and therefore preliminary agency findings are irrelevant to a determination of the issues in this case which must be decided based upon evidence presented at hearing.

1. Rejected as simply a statement of position without any citation to the record.

2. Adopted in Finding of Fact 24. 45-46 Rejected in Finding of Fact 24.

47-48 Adopted and rejected in part in Finding of Fact 24. 49-60 Rejected in Finding of Fact 24.

1. Rejected as simply a conclusion of law.

2. Rejected as without citation to the record and as simply a statement of position rather than a Finding of Fact.

3. Rejected as irrelevant.

4. Adopted in part in Finding of Fact 3.

5. Adopted in Finding of Fact 3.

66-70 Rejected as unnecessary and cumulative, since it

is established that services are similar or identical to those proposed by FRTC.

1. Adopted in Findings of Fact 3, 44.

2. Rejected as unnecessary and cumulative.

3. Adopted in Finding of Fact 3, but otherwise rejected as cumulative and unnecessary.

4. Rejected in Findings of Fact. 26, 39 and otherwise as irrelevant.

5. Rejected as irrelevant and otherwise not based on competent substantial evidence.

6. Rejected as irrelevant.

7. Adopted in Finding of Fact 30.

8. Rejected as simply a statement of position, without citation to the record.

9. Rejected as simply a conclusion of law.

80-81 Adopted in part in Finding of Fact 8, but otherwise rejected as not based on competent substantial evidence.

82 Rejected as unnecessary.

83-84 Rejected in Findings of Fact 33 and 35, and otherwise as irrelevant.

1. Rejected as simply a conclusion of law.

2. Rejected in Finding of Fact 34.

3. Adopted in Finding of Fact 37.

4. Adopted in Findings of Fact 34, 36. 89-90 Rejected in Findings of Fact 35, 37.

1. Rejected as simply a conclusion of law.

2. Adopted in Finding of Fact 39.

3. Rejected as irrelevant.

4. Rejected in Findings of Fact 38, 39, 42.

5. Adopted in Finding of Fact 39.

6. Rejected as irrelevant.

7. Adopted in part in Finding of Fact 39, but otherwise rejected as irrelevant and unnecessary.

98-100 Adopted in Finding of Fact 39.

101-102 Adopted in Findings of Fact 38, 39.

103-109 Rejected in Finding of Fact 39, and otherwise as not based on competent substantial evidence.

1. Rejected in Findings of Fact 26, 29.

2. Rejected in Finding of Fact 39.

3. Rejected in Finding of Fact 35, and otherwise as irrelevant.

4. Rejected in Findings of Fact 38, 39, 42.

5. Adopted in Finding of Fact 39.

115-117 Adopted and rejected in part in Finding of Fact 40, but otherwise rejected as irrelevant.

1. Adopted and rejected in part in Findings of Fact 8, 40, but otherwise rejected as not based on competent substantial evidence.

2. Rejected in Findings of Fact 38-42.

3. Rejected as a conclusion of law.

4. Rejected as not based on competent substantial evidence.

5. Adopted in Findings of Fact 34, 37.

6. Adopted in Finding of Fact 36.

7. Rejected as not based on competent substantial

   evidence.

8. Adopted in part in Finding of Fact 45.

9. Rejected as not based on competent substantial evidence and without citation to the record.

10. Rejected as a conclusion of law.

128-129 Rejected as simply a comment on the evidence and not a Finding of Fact.

1. Adopted in part in Finding of Fact 8.

2. Rejected in Finding of Fact 47.

3. Rejected as irrelevant.

4. Adopted in part in Finding of Fact 8, but otherwise rejected as irrelevant and not based on competent substantial evidence.

5. Rejected as simply a statement of position and argument.

Rulings on Proposed Findings of Fact filed by Manatee Memorial: 1-2 Adopted in Finding of Fact 1.

3-4 Rejected as irrelevant.

5 Adopted in Findings of Fact 8, 29.

6-7 Rejected as irrelevant to a determination of the issues in this case.

8-10 Adopted in Finding of Fact 3.

1. Adopted in part in Findings of Fact 34, 36, 45.

2. Adopted in Finding of Fact 2.

13-22 Adopted in Finding of Fact 4, but otherwise rejected as irrelevant or unnecessary.

1. Rejected in Finding of Fact 24 and otherwise rejected as not based on competent substantial evidence.

2. Rejected as cumulative and unnecessary.

3. Adopted in Findings of Fact 34, 36.

4. Rejected as speculative and not based on competent substantial evidence.

5. Rejected as irrelevant.

6. Adopted in Finding of Fact 6.

7. Adopted in Findings of Fact 1, 5, 10, but rejected in in Finding of Fact 44.

30-32 Adopted in Finding of Fact 6.

33 Adopted in Finding of Fact 7. 34-39 Rejected as unnecessary.

1. Adopted in Finding of Fact 15.

2. Adopted in Finding of Fact 14.

3. Adopted in Finding of Fact 17. 43-45 Adopted in Finding of Fact 16.

1. Rejected as unnecessary and irrelevant. Since Mr. Griffin is the highest level departmental representative who testified at hearing, his statement of the non-rule policy is presumed to be correct.

2. Rejected in Finding of Fact 16.

3. Rejected in Finding of Fact 16 and otherwise as unnecessary and irrelevant.

49-51 Rejected as irrelevant since this is a de novo hearing by which final agency action will be taken.

1. Rejected as simply a conclusion of law.

2. Rejected in Findings of Fact 21-23.

3. Adopted in Finding of Fact 39.

58-60 Rejected in Findings of Fact 21-23 and otherwise as irrelevant.

61-63 Rejected in Findings of Fact 19, 20, 23.

1. Adopted in Finding of Fact 30, but rejected in Finding of Fact 31.

2. Rejected in Finding of Fact 39 and otherwise as irrelevant.

3. Adopted in Finding of Fact 25 and rejected in Finding of Fact 26.

4. Rejected in Findings of Fact 26, 39, 42.

5. Adopted in part in Findings of Fact 38, 39, 44.

6. Rejected in Findings of Fact 24 and 39.

7. Rejected as speculative, and not based on competent substantial evidence.

71-79 Rejected in Findings of Fact 26, 38, 39 and otherwise rejected as not based on competent substantial evidence.

80-83 Rejected in Findings of Fact 33, 35.

1. Rejected in Findings of Fact 33, 35, 38, 39, 42.

2. Rejected in Findings of Fact 39, 40.

3. Rejected in Findings of Fact 38-42.

4. Rejected in Finding of Fact 37.

5. Adopted in Finding of Fact 33.

6. Rejected in Finding of Fact 33.

7. Rejected in Finding of Fact 35.

8. Rejected in Findings of Fact 27, 33, 35.

9. Rejected in Finding of Fact 37.

10. Rejected as unnecessary.

94-95 Rejected in Finding of Fact 37.

96 Adopted in Finding of Fact 36.

97-100 Rejected in Findings of Fact 28, 29. 101-102 Adopted in Finding of Fact 8.

103-105 Rejected in Finding of Fact 29.

106 Rejected in Finding of Fact 8.

107-109 Rejected in Findings of Fact 27, 28, 29 and otherwise not based on competent substantial evidence.

110 Rejected as irrelevant.

111-112 Rejected in Finding of Fact 9.

1. Rejected in Findings of Fact 9, 27, 28, 29.

2. Adopted in Finding of Fact 8. 115-116 Rejected as irrelevant.

1. Adopted in Finding of Fact 8.

2. Adopted in Finding of Fact 47.

3. Adopted and rejected in Finding of Fact 47.

4. Adopted in Finding of Fact 8 and rejected in Finding of Fact 47.

5. Rejected as irrelevant.

6. Adopted and rejected in Finding of Fact 47.

7. Adopted in part in Findings of Fact 3, 4.

8. Adopted in Findings of Fact 25, 39, 45.

125-127 Rejected as speculative and not based on competent substantial evidence.

128-130 Rejected as irrelevant and unnecessary.

COPIES FURNISHED:

John Rodriguez, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

Michael J. Glazer, Esquire Post Office Box 391 Tallahassee, Florida 32302

Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire Post Office Box 11068 Tallahassee, Florida 32302

William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Co. Tower

25 Park Place

Atlanta, Georgia 30303

Fred W. Baggett, Esquire Stephen A. Ecenia, Esquire Post Office Drawer 1838 Tallahassee, Florida 32302

John T. Brennan, Jr., Esquire

900 Seventeenth Street, N.W., Suite 600

Washington, DC 20006

Gregory L. Coler, Secretary Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

John Miller, Acting General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700

Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Fl 32399-0700

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

PALMS RESIDENTIAL TREATMENT CENTER, INC., d/b/a

MANATEE PALMS RESIDENTIAL TREATMENT CENTER,

Respondents.

/ MANATEE HOSPITALS and HEALTH SYSTEMS, INC., d/b/a MANATEE MEMORIAL HOSPITAL,

Respondents.

/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Department of Health and Rehabilitative Services (HRS). A copy of that Recommended Order is attached hereto.

RULING ON EXCEPTIONS FILED BY MANATEE HOSPITALS

and HEALTH SYSTEMS, INC. d/b/a MANATEE MEMORIAL HOSPITAL (MMH)

1. MMH excepts to the second ruling on the Motion in Limine in the second paragraph, page 4, that the consideration of numeric need for an intensive residential treatment facility be limited to the intensive residential treatment facilities (IRTF) licensed as specialty hospitals. MMH maintains that by

   limiting consideration of numeric need to the type services proposed, the Hearing Officer disregarded the statutory criteria requiring consideration of like and existing services. This argument is rejected. The Hearing Officer specifically addressed the criteria of like and existing services at pages 17, 18, 30, and 31 of the Recommended Order. Exception number one (1) is denied.

   
   

2. MMH excepts to finding 8 insofar as it states that the changes in the facility design identified at hearing "represent refinements and permissible modifications, rather than application amendments".

   
   

   HRS contrues Rule 10-5.008(3), formerly Rule 10-5.08(7), as barring amendment of CON applications during 120.57 proceedings. The language of the Rule is clear and it makes no exception for 120.57 proceedings. The de novo review contemplated under Section 120.57, Florida Statutes is a quasi judicial discovery and trial of the application investigated and reviewed by HRS, not a trial of new or amended application submitted during the 120.57 proceedings. In other words the application which received initial free form review at HRS is the application which receives de novo review at the Division of Administrative Hearings. Hialeah Hospital, Inc. vs. HRS, 9 FALR 2363.

   
   

   MMH asserts that Florida Residential Treatment Centers, Inc., (FRTC), substantially amended its CON application and that the Hearing Officer erred in considering the amended application. I conclude that the error, if any, is harmless. Exception number two (2) is denied.

   
   

3. MMH excepts to finding 10 wherein it states that the average length of stay for patients is reasonably projected to be one year, with a range of from 6 months to two years. This finding is supported by competent, substantial evidence in the record; therefore, exception number three (3) is denied.

   
   

4. MMH excepts to the finding in paragraph 15 regarding the non-rule policy of the department. The -department's policy is that the absence of an IRTF facility in a district is relevant to accessibility which is a statutory criteria to be considered in reviewing an application. A CON would not be approved on the basis of this single criteria any more than it would be approved on the basis of any other single criteria. Exception number four (4) is granted. See the ruling on FRTC exception number two (2).

   
   

5. MMH excepts to the finding contained in paragraph 16 regarding the testimony of John Griffin. Exception number five (5) is granted; see the ruling on exception number four (4)

   
   

6. MMH takes exception to the finding in paragraph 23 that the FRTC application is consistent with the State Health Plan. This finding is supported by competent, substantial evidence in the record; therefore, exception number six (6) is denied.

   
   

7. MMH excepts to finding 24, that FRTC established need. This finding is supported by competent, substantial evidence in the record; therefore, exception number seven (7) is denied.

   
   

8. MMH excepts to finding 25 that the projected utilization by class, of pay is reasonable. This finding is supported by competent, substantial evidence in the record; therefore, exception number eight (8) is denied.

   
   

9. MMH excepts to the findings in paragraph 26 to the extent that the Hearing Officer finds accessibility will be increased in the district. This

   finding is supported by competent, substantial evidence in the record; therefore, exception number nine (9) is denied.

   
   

10. MMH excepts to the findings in paragraph 29 that Dr. Wolfe expressed a biased opinion. It is the function of the Hearing Officer to judge the credibility of witnesses. Heifetz vs. Department of Business Regulation, 475 So2d 1277 at 1281 (Fla. 1st DCA 1985). Exception number ten (10) is denied.

    
    

11. MMH excepts to finding 31 insofar as it states that the average length of stay at the majority of other facilities offering residential treatment in District 6 is up to 90 days. This finding is supported by competent, substantial evidence in the record; therefore, exception number eleven (11) is denied.

    
    

12. MMH excepts to finding 31 insofar as it states that the facilities identified in paragraph 30, including Manatee Memorial, Manatee Palms, Glenbeigh, Children's Home in Tampa, and Northside Center in Tampa do not offer adequate alternatives for the proposed FRTC facility. This finding is supported by competent, substantial evidence in the record; therefore, exception number twelve (12) is denied. Furthermore, it is noted that the petitioners' facilities are experiencing very high rates of utilization and for that reason cannot be considered as an alternative facilities. See page 6 of the Recommended Order.

    
    

13. MMH excepts to finding 33 insofar as it states that a part time medical director will be available at the facility proposed by FRTC. This finding is supported by competent, substantial evidence in the record; therefore, exception number thirteen (13) is denied.

    
    

14. MMH excepts to finding 33 insofar as it states that "FRTC has proposed a reasonable and adequate staffing pattern and ratio to treat 30 patients."

    This finding is supported by competent, substantial evidence in the record; therefore, exception number fourteen (14) is denied.

    
    

15. MMH excepts to finding 35 insofar as it states in that "the staffing patterns proposed by FRTC will allow it to render quality care to patients at its facility, based upon 50 percent occupancy in its first year of operation." This finding is supported by competent, substantial evidence in the record; therefore, exception number fifteen (15) is denied.

    
    

16. MMH excepts to finding 38 insofar as it states that "the pro forma establishes the financial feasibility of this project." This finding is supported by competent, substantial evidence in the record; therefore, exception number sixteen (16) is denied.

    
    

17. MMH excepts to finding 39 insofar as it states that the 50 percent occupancy projection for the first year of operation and the 60 percent occupancy for the second year were reasonable. This finding is supported by competent, substantial evidence in the record; therefore, exception number seventeen (17) is denied.

    
    

18. MMH excepts to finding 39 insofar as it states that it was not established that FRTC's location will preclude the occupancy rates projected by it. This finding is supported by competent, substantial evidence in the record; therefore, exception number eighteen (18) is denied.

19. MMH excepts to finding 39 insofar as it suggests that FRTC's assumptions regarding patient revenues and utilization by class of payor were reasonable. This finding is supported by competent, substantial evidence in the record; therefore, exception number nineteen (19) is denied.

    
    

20. MMH excepts to the failure of the Hearing Officer in paragraph 39 to credit Christopher Nepper's testimony regarding the reasonableness of FRTC's financial assumptions. It is the function of the Hearing Officer to judge the credibility of witnesses. Heifetz vs. Department of Business Regulation, 475 So2d 1277 at 1281. Exception number twenty (20) is denied.

    
    

21. MMH excepts to finding 40 insofar as it states that the failure of FRTC to include the management fee or additional construction costs of approximately $70,000 in the pro forma will not affect the financial feasibility of this project. This finding is supported by competent, substantial evidence in the record; therefore, exception number twenty-one (21) is denied.

    
    

22. MMH excepts to finding 45 insofar as it states that "Manatee Memorial's estimates of patient losses were based upon impact from both Manatee Palms and FRTC." This finding is supported by competent, substantial evidence in the record; therefore, exception number twenty-two (22) is denied.

    
    

23. MMH ,excepts to finding 47 insofar as it states that the construction cost estimate of $2,010,823 is reasonable. This finding is supported by competent, substantial evidence in the record; therefore, exception number twenty-three (23) is denied.

    
    

24. MMH excepts to finding 47 insofar as it states that a 2 percent construction contingency is adequate and that it could be used for unbudgeted items such as stucco siding and hard ceilings. This finding is supported by competent, substantial evidence in the record; therefore, exception number twenty-four (24) is denied.

    
    

25. See rulings on Manatee Palms exceptions.

RULING ON EXCEPTIONS FILED BY FLORIDA RESIDENTIAL TREATMENT CENTERS, INC. (FRTC)

1. FRTC excepts to the Hearing Officer's ruling that the petitioners have standing. Exception number one (1) is denied.

   
   

2. FRTC excepts to finding number 17 regarding an HRS policy decision that at least one licensed IRTP should be authorized for each service district. I have concluded that an application will be approved only when approval is justified on the basis of a balanced weighing of all criteria. The lack of such a facility in a district is relevant to accessibility, an important statutory criteria. Section 381.705(1)(b), Florida Statutes (1987).

   
   

3. FRTC excepts to finding 24 insofar as it states:

   
   

   "It is noted that this (utilization methodology), by using national data, is not based upon licensed beds in Florida, and would therefore not be sufficient, in itself, to establish need."

   The finding is support by competent, substantial evidence; therefore, the exception is denied.

   
   

4. The exceptions to the conclusions of law restate the exceptions already made. See ruling on exceptions 1 through 3.

RULING ON EXCEPTIONS FILED BY PALMS RESIDENTIAL TREATMENT CENTER, INC. d/b/a MANATEE PALMS RESIDENTIAL TREATMENT CENTER (MANATEE PALMS

1. Manatee Palms excepts to finding 8 to the effect that the total project cost for this facility has been reasonably estimated. The finding is supported by competent, substantial evidence; therefore, exception number one (1) is denied.

   
   

2. Manatee Palms excepts to finding 23, that the application is consistent with the State and Local Health Plans. The finding is supported by competent, substantial evidence; therefore, exception number two (2) is denied. Regarding the alternative of converting existing beds at Manatee Palms, the Hearing Officer found that occupancy rates at Manatee Palms have exceeded projections and were as high as 97 percent in May 1987. (See Recommended Order, Finding of Fact #3).

   
   

3. Manatee Palms excepts to finding 23, that the FRTC application is consistent with the State and Local Health Plans. The finding is supported by competent, substantial evidence; therefore, exception number three (3) is denied.

   
   

4. Manatee Palms excepts to the conclusions of law in the Recommended Order to the effect that this application is consistent with the State and Local Health Plans. The finding is supported by competent, substantial evidence; therefore, exception number four (4) is denied.

   
   

5. Manatee Palms excepts to the first portion of finding 24 dealing with the use of the ratio of licensed IRTP beds in other districts as a basis for the decision in this case. The finding is supported by competent, substantial evidence; therefore, exception number five (5) is denied.

   
   

6. Manatee Palms excepts to the second part of finding 24 dealing with the use of utilization data. The finding is supported by competent, substantial evidence; therefore, exception number six (6) is denied.

   
   

7. Manatee Palms excepts to that part of finding 24 of the Recommended Order dealing with need, reasonable size and utilization of the proposed FRTC facility. The finding is supported by competent, substantial evidence; therefore, exception number seven (7) is denied.

   
   

8. Manatee Palms excepts to finding 31 which concludes that existing facilities do not offer adequate alternatives. The finding is supported by competent, substantial evidence; therefore, exception number eight (8) is denied. Regarding Manatee Palms contention that it serves as an alternative, it's very high occupancy rates rebut the contention.

   
   

9. Manatee Palms excepts to findings 33 and 35 regarding the adequacy of the staffing pattern for the proposed facility. The finding is supported by competent, substantial evidence; therefore, exception number nine (9) is denied.

10. Manatee Palms excepts to findings 38 through 42 dealing with the financial feasibility of the proposed project. The finding is supported by competent, substantial evidence; therefore, exception number ten (10) is denied.

    
    

11. Manatee Palms excepts to finding 39 regarding insurance reimbursement. The finding is supported by competent, substantial evidence; therefore, exception number eleven (11) is denied.

    
    

12. Manatee Palms excepts to finding 47 dealing with the reasonableness of the project costs. The finding is supported by competent, substantial evidence; therefore, exception number twelve (12) is denied.

    
    

13. Manatee Palms excepts to the conclusion of law that the application satisfies the criteria contained in Section 381.705(1)(a), (b), (d), (h), (1), and (m), Florida Statutes (1987). The finding is supported by competent, substantial evidence; therefore, exception number thirteen (13) is denied.

    
    

14. Manatee Palms maintains that the Hearing Officer failed to address certain applicable criteria. Exception number fourteen (14) is denied.

    
    

15. Manatee Palms maintains that the Hearing Officer failed to consider the criteria found in Section 381.705(1)(n), Florida Statutes (1987), dealing with the provision of health care services to the medically indigent. While provision of services to the indigent is an important criteria, it is but one of the criteria which must be weighed. This criteria was considered; therefore, exception number fifteen (15) is denied.

    
    

16. Manatee Palms excepts to the overall findings of fact, conclusions of law and recommendation recommending approval of this project proposed by FRTC. Exception number sixteen (16) is denied.

    
    

17. Manatee Palms suggests that if this project is approved, the certificate of need issued to FRTC should be conditioned upon treatment of patients with psychiatric disorders only and which require an average length of stay of one year for treatment. Manatee Palms relies on Section 381.710(1)(a), Florida Statutes (1987), which allows HRS to issue a CON based on statements of intent expressed by the applicant. The Office of Community Health Services and Facilities shall determine whether the requested conditions are material to FRTC's proposal and if so, whether such conditions could be effectively monitored. If the answer is affirmative to both, the CON shall be so conditioned.

FINDINGS OF FACT

1. The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order except where conclusions of law were placed under the heading, findings of fact.

   
   

   CONCLUSIONS OF LAW

   
   

2. The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the rulings on the exceptions.

Based upon the foregoing, it is

ADJUDGED, that Florida Residential Treatment Center's application for CON 4825 for a 60 bed intensive residential treatment center in Bradenton, District 6, be approved. See the ruling on Manatee Palm's exception number seventeen

(17) for conditions which may be placed on the certificate of need.

DONE and ORDERED this 15th day of February, 1988, in Tallahassee, Florida.

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

by Assistant Secretary for Programs

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

COPIES FURNISHED:

Donald Conn, Hearing Officer DOAH, The Oakland Building 2009 Apalachee Parkway

Tallahassee, Florida 32301

John T. Brennan, Jr., Esquire 900 Seventeenth Street

Suite 600

Washington, DC 20006

Jean Laramore, Esquire Anthony Cleveland, Esquire Bruce A. Leinback, Esquire LARAMORE, GETZOFF, &

CLEVELAND, P. A.

Post Office Box 11068

325 North Calhoun Street Tallahassee, Florida 32302

John Rodriguez, Esquire Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, Florida 32308

William Hoffman, Esquire Deborah Winegard, Esquire 2500 Trust Company Tower

25 Park Place Atlanta, GA 30303

Michael Glazer, Esquire AUSLEY, MCMULLEN, McGEHEE,

CAROTHERS & PROCTOR

227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302

Nell Mitchem (PDDR) Fred W. Baggett, Esquire

Stephen A. Ecenia, Esquire ROBERTS, BAGGETT, LaFACE

& RICHARD

101 East College Avenue Post Office Drawer 1838 Tallahassee, Florida 32301

FALR

Post Office Box 385 Gainesville, Florida 32602

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 17th day of February, 1988.

R. S. Power, Agency Clerk Assistant General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407

Tallahassee, Florida 32399-0700 904/488-2381

Docket for Case No: 87-002036

Orders for Case No: 87-002036