STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
HOLY CROSS HOSPITAL, INC., )
)
Petitioner, )
)
vs. ) CASE No. 87-2861
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent, )
and )
) ZACHARIAH P. ZACHARIAH, M.D., P.A., ) FLORIDA MEDICAL CENTER, ) NORTH RIDGE GENERAL HOSPITAL, ) NORTH BROWARD HOSPITAL DISTRICT and ) BROWARD GENERAL MEDICAL CENTER, )
)
Intervenors. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled case on October 6-9, 1987, in Tallahassee, Florida.
APPEARANCES
For Petitioner: Kenneth F. Hoffman, Esquire
Oertel & Hoffman, P.A. Post Office Box 6507
Tallahassee, Florida 32314
and
John A. Thabes, Esquire Saunders, Curtis, Ginestra & Gore Post Office Box 4078
Fort Lauderdale, Florida 33338
For Respondent: Lesley Mendelson, Esquire
Department of Health and Rehabilitative Services
1323 Winewood Boulevard
Building 1, Room 407
Tallahassee, Florida 32399
For Intervenor: Cynthia Tunnicliff, Esquire Zachariah P. Carlton, Fields, Ward, Zachariah, M.D. Emmanuel, Smith, Cutter,
and Kent, P.A. Post Office Box 190
Tallahassee, Florida 32302
For Intervenor: Michael J. Cherniga, Esquire North Ridge Robert McDonald, Esquire
Medical Center Roberts, Baggett, LaFace and Richards
Post Office Drawer 838 Tallahassee, Florida 32302
For Intervenor: Eric B. Tilton, Esquire Florida Medical Post Office Drawer 550 Center Tallahassee, Florida 32302
For Intervenor: Jonathan L. Rue, Esquire
North Broward Parker, Hudson, Rainer & Dobbs Hospital Dist- 1200 Carnegie Building
rict d/b/a 133 Carnegie Way
North Broward Atlanta, Georgia 30303 Medical Center
and Broward General Medical Center
PRELIMINARY STATEMENT
Petitioner, Holy Cross Hospital, Inc., contests the decision of the Respondent, Department of Health and Rehabilitative Services, to deny its application for a certificate of need to construct and operate an inpatient cardiac catheterization laboratory at its existing acute care hospital in Broward County, Florida.
At hearing Petitioner called as witnesses: Elizabeth Dudek; Gerald Gayla; Joshua Nemzoff, accepted as an expert in financial feasibility analysis of health care projects and comparative review of hospital costs and charges; and, Michael Jernigan, accepted as an expert in health care planning. Petitioner's exhibits 1-31 were received into evidence.
Respondent presented the testimony of Elizabeth Dudek which, with the agreement of the parties, was solicited by post hearing deposition. Ms. Dudek's deposition, together with exhibit 1 annexed thereto (the state agency action report), were received into evidence.
Intervenor Zachariah P. Zachariah, M.D., an expert in cardiology and cardiac catheterizations, testified on his own behalf and called Howard Fagin, accepted as an expert in health planning, health care economics and operational analysis, as a witness. Zachariah's exhibits 1-4 were received into evidence.
Intervenor North Ridge Medical Center called as witnesses: Rick Knapp, accepted as an expert in health care facility and health care system financial analysis, feasibility and reimbursement; and, Deborah J. Krueger; accepted as an expert in health planning. North Ridge's exhibits 2-10 were received into evidence.
Intervenor Florida Medical Center presented the testimony of Thomas Konrad, accepted as an expert in health planning. Florida Medical Center's exhibits 1-3 were received into evidence.
Intervenor North Broward Hospital District offered exhibits 1-9, and they were received into evidence.
The transcript of hearing was filed November 6, 1987, and the parties were granted leave until December 7, 1987, to file proposed findings of fact. The parties' proposed findings are addressed in the appendix to this recommended order.
FINDINGS OF FACT
Case Status
On October 15, 1986, Petitioner, Holy Cross Hospital, Inc. (Holy Cross), filed an application with the Respondent, Department of Health and Rehabilitative Services (Department), for a certificate of need to establish an inpatient cardiac catheterization laboratory at its existent acute care hospital in Broward County, Florida. On June 12, 1987, the Department published notice in the Florida Administrative Weekly of its intent to deny Holy Cross' application, and Holy Cross timely petitioned for formal administrative review.
Intervenors, Zachariah P. Zachariah (Zachariah), North Ridge Medical Center (North Ridge), Florida Medical Center (FMC), and North Broward Hospital District d/b/a North Broward Medical Center, and Broward General Medical Center (North Broward), current providers of cardiac catheterization services in Broward County, sought and were granted leave to intervene in this proceeding. The standing of these intervenors, with the exception of Zachariah, is not in dispute.
Background
Holy Cross is a private, not for profit, general acute care facility located at 4725 North Federal Highway, Fort Lauderdale, Broward County, Florida. Currently, Holy Cross operates 574 general acute care beds and 23 intensive rehabilitation beds. Holy Cross has, since 1974, operated an open-heart surgery program at its facility.
In 1974, Holy Cross sought leave of the Department to establish a cardiac catheterization laboratory at its facility. That application was denied. As a consequence of that denial, Holy Cross actively solicited physicians to establish such a program within its hospital.
In August 1976, Holy Cross negotiated a ten-year lease with Zachariah whereby it leased him 2,833 square feet of space on the third floor of the hospital for use as a cardiac catheterization laboratory. Zachariah purchased the necessary equipment, and has operated a cardiac catheterization laboratory at Holy Cross since 1976.
In March 1985, following Zachariah's expansion of his laboratory facilities, he and Holy Cross executed a new lease agreement to continue the operation of his laboratory within the hospital. This lease was for 6,956 square feet of space on the third floor of the hospital and was for a five year term commencing October 15, 1985, with a five year renewal option. Currently,
Zachariah has three cardiac catheterization laboratories within the space he leases at the hospital.
The proposed facility
Holy Cross proposes to renovate and dedicate, as a cardiac catheterization laboratory, 2,500 square feet of existing hospital space immediately adjoining Zachariah's existing catheterization laboratories. The physical renovations are estimated to cost $315,000 and equipment to cost
$600,000 for a total capital expenditure of $915,000.
The laboratory, as proposed, is capable of providing a range of angiographic studies and physiologic studies without the need to move patients to perform related procedures.
Holy Cross currently has the capability of providing immediate endocardiac catheter pacemaking in cases of cardiac arrest, and the proposed laboratory will likewise have such capability available to it. Currently, approximately 13 physicians practicing at Holy Cross possess such skills.
Holy Cross currently provides, and will continue to provide, a ranged of non-invasive cardiac or circulatory diagnostic services within its health care facility, including: hematology studies and coagulation studies; electrocardiography; chest x-ray; blood gas studies; clinical pathology studies and blood chemistry analysis; nuclear studies pertaining to cardiology; and echocardiography. Additionally, Holy Cross currently provides, and will continue to provide, the following services within its facility: pulmonary function testing; and microbiology studies.
As sited, the proposed cardiac catheterization laboratory will be readily accessible to the population of Broward County. Accessibility does not, however, present a problem in Broward County since all approved facilities are located strategically throughout the county.
The hours of operation for the proposed laboratory will typically be either 8:00 a.m. to 4:00 p.m. or 9:00 a.m. to 5:00 p.m., with the capability of rapid mobilization of the study team for emergency procedures 24 hours a day, 7 days a week.
Holy Cross is fully accredited by the Joint Commission of Accreditation of Hospitals (JCAH) for special care units, as well as its intensive and cardiovascular intensive care unit. The parties have stipulated that the staffing requirements proposed by Holy Cross are reasonable, and that it will be able to recruit the necessary staff.
Currently, Holy Cross maintains an ongoing program of staff education and skills upgrading. Additionally, Holy Cross maintains an ongoing educational program for the community whereby citizens Acre afforded the opportunity to learn what specialty services are provided by the hospital. These programs will continue to be provided by Holy Cross.
The proof established that Holy Cross can be reasonably expected to perform a minimum of 300 cardiac catheterizations annually within three years following its initiation of service. The proof further established that the average number of catheterizations performed each year by existing and approved laboratories performing adult procedures in the service area was greater than
600 and that, if the Holy Cross application is approved, the average volume of procedures performed by those laboratories would not be reduced below 600 procedures each year.
The service cost proposed by Holy Cross is comparable to similar institutions within the service area when patient mix, reimbursement mechanisms and cost accounting methods are taken into consideration.
Need determination
The Department has established by rule the methodology whereby the need for cardiac catheterization capacity in a service area shall be determined. Pertinent to this case, Rule 10-5.011(e) 12, Florida Administrative Code, provides:
Need Determination. The need for cardiac catheterization capacity in a service area shall be determined by computing the protected number of cardiac catheterization procedures in the service area. The following formula shall be used in this determination...(Emphasis added).
In the instant case, the proof established that between July 1985 and June 1986 7,017 cardiac catheterization procedures were performed in the service area. The population estimates from the Office of the Governor, dated January 1, 1986, demonstrate an adult population within the service area of 962,987 for January 1986, and 1,009,557 for July 1988. Utilization of this data in the methodology prescribed by the rule, calculates that 7,356.3 catheterization procedures will be performed in July 1988 (the horizon year). When divided by the 600 procedure standard, there is a need for 12.26 cardiac catheterization laboratories in the service area to support the projected number of adult procedures in July 1988.
At the beginning of the review cycle for the Holy Cross application the inventory of cardiac catheterization laboratories in the service area (Broward County) was as follows: Zachariah-3, Florida Medical Center (FMC)-3, North Ridge Medical Center-2, North Broward Medical Center-1, Broward General Medical Center-1, Plantation General Hospital-1, and Memorial Hospital-1, for a total of 12 laboratories. However, one of Zachariah's laboratories and one of Florida Medical Center's laboratories are backup laboratories, and no more than two laboratories are ever utilized or capable of being utilized at those facilities simultaneously.
Pertinent to this case, Rule 10-5.011(e)1, Florida Administrative Code, provides:
A cardiac catheterization laboratory is defined as a room or suite of rooms in a hospital which has the equipment, staff and support services required to perform angiographic and physiologic cardiac catheterization procedures, and which is customarily used to perform cardiac catheterization procedures. The number of cardiac catheterization laboratories in a hospital is equal to the number of patients
who can undergo the catheterization procedure simultaneously...
(Emphasis added).
Accordingly, the proof demonstrates that for purposes of calculating the need for cardiac catheterization capacity in Broward County under the rule methodology that there existed 10 cardiac catheterization laboratories in the service area for this review cycle. Therefore, there exists a numeric need for
2.26 additional cardiac catheterization laboratories in Broward County.
Consistency with State and Local Health Plans
Pertinent to this case, the local health plan, District X, provides, as its general policy number 3, that:
Services provided by all proposed and existing facilities should be made available to all segments of the residential population regardless of the ability to pay.
Priority #1 - Services and facilities should be designed to treat indigent patients to the greatest extent possible, with new project approval based in part on a documented history of provision of services to indigent patients.
Priority #2 - Applicants should have documented a willingness to participate in appropriate community planning activities aimed at addressing the problem of financing for the medically indigent.
With specific regard to cardiac catheterization, the local health plan contains the following pertinent recommendations:
Applicants proposing to initiate or expand cardiac catheterization...must make those services available to all segments of the population regardless of the ability to pay.
The provision of new cardiac catheterization surgery programs should not be approved unless they meet or exceed the standards and criteria set forth by HRS.
Holy Cross currently holds a Medicaid contract with the state, and proposes that its cardiac catheterization laboratory will be available to all persons in need and independent of their ability to pay. Holy Cross is not, however, an historic provider of significant indigent care, nor does it propose significant indigent care at its proposed laboratory. According to its application, the patient day percentage breakdown at its laboratory will be as follows: medicare-59.6 percent, medicaid-1.0 percent, insurance-36.0 percent, private pay-1.7 percent, and indigent-1.7 percent
The proof demonstrates that Holy Cross' basic policy is to serve in a Christian-like manner, and to serve the indigent with open arms, respect and caring. In application, however, Holy Cross' "approach" to indigent care is "if
they show up, we treat them." Clearly, Holy Cross does not actively promote the availability of its services to the indigent, and it offered no proof that it participated in any community planning activities aimed at addressing the problem of financing for the medically indigent.
There was no proof, however, that indigent patients in Broward County (District X) were being denied cardiac catheterization care, notwithstanding the fact that over one-half of the laboratories in the county, (Zachariah, FMC, and North Ridge) have provided little or no medicaid or indigent care within the past 2 years. Under the circumstances, Holy Cross' failure to dedicate more resources toward indigent care is less significant than it might otherwise be if such need existed. However, it must still be concluded that the Holy Cross application is not consistent with the local health plan since its proposal to provide the services regardless of ability to pay is, in view of its "approach" to serving that segment of society, an obligation that will rarely, if ever, be fulfilled. To the extent the Holy Cross application may fail to comply with statutory and rule criteria, as hereinafter discussed, it is also not consistent with the local health plan.
The state health plan devotes a section to cardiac catheterization, and the Holy Cross application conforms to the recommended minimum annual average of catheterization procedures, and the recommended physical proximity between open-heart surgical capacity and cardiac catheterization laboratories. The plan also provides as a goal, to assure the appropriate availability of cardiac catheterization and open-heart surgery services at a reasonable cost. As previously noted, the costs proposed by Holy Cross are reasonable. However, in view of Zachariah's existing facilities, the proposal does little of significance to enhance availability.
The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the service district.
The demand for cardiac catheterization services in the district has been increasing at a significant rate over the course of the past five years. Between 1982 and 1983 the number of cardiac catheterizations performed in the service area increased over 20 percent (from 4,162 to 5,009), between 1983 and 1984 there was an approximate decrease of 1 percent, between 1984 and 1985 there was an increase of 17.8 percent, between 1985 and 1986 there was an increase of
38.9 percent, and between 1986 and 1987 a projected increase of approximately 27 percent. Annualized data for 1987 demonstrates that 9,810 procedures will be performed in 1987.
The historic demand for catheterization services within the district is a reliable proxy, and demonstrates that the demand for such services will increase by at least 20 percent in the year 1988. Such increase will result in the need to accommodate an additional 1,962 procedures in the year 1988, or 981 procedures by Holy Cross' planning horizon of July 1988. Accordingly, by July 1988 the district should experience a demand for approximately 10,791 procedures.
During 1987, the existent facilities within the district were projected to perform the following number of procedures: Zachariah - 1,166, FMC
- 2,134, North Ridge - 2,382, Broward General Medical Center - 1,430, Plantation General - 702, North Broward Medical Center - 532, and Memorial Hospital - 1,464.
The maximum capacity of a cardiac catheterization laboratory is between 1,000 and 1,400 procedures annually, depending upon the mix of patients, the skills of the cardiologist, and the hours of operation of the laboratory. North Ridge's expert, Deborah Krueger, conducted a survey of existing facilities to discover what they considered to be the maximum number of procedures they could accommodate in each of their laboratories. While not wholly reliable, as hereinafter discussed, the responses regarding the maximum number of procedures that could be accommodated in each laboratory of the existing facilities was as follows: Zachariah - 1,000, FMC -1,250, North Ridge - 1,300, Broward General Medical Center - 1,040-1,248, Plantation General - 1,000, North Broward Medical Center - no response, and Memorial Hospital - no response.
Comparing the number of procedures projected for existing facilities in 1987 with the results of Ms. Krueger's survey could lead one to conclude that there is an unused capacity within the district to accommodate up to 2,584 additional procedures in 1988. Such conclusion is not, however, supported by the proof.
Notwithstanding Ms. Krueger's survey, the proof demonstrated that FMC is currently at capacity. North Ridge, which estimated it could perform 1,300 procedures per lab, is projecting 2,382 procedures in 1987, only 219 procedures less than its estimated maximum capacity. Yet, the North Ridge medical director is the only physician currently performing catheterizations at the hospital, and is sometimes doing up to 17 a day and working 12 hour shifts. Under the circumstances, to suggest that North Ridge is not currently at capacity is not credible.
The only facilities with available capacity are Zachariah, Plantation General, and North Broward Medical Center. These facilities have the capacity to handle an additional 1,600 procedures in 1988: Zachariah (834), Plantation General (298), and North Broward Medical Center (468). Accordingly, there exists excess capacity within the district for the relevant time frame.
As previously noted, there exists no accessibility problem within the district, and there is no proof that any patient has experienced any serious problem in obtaining catheterization services. There is, further, no dispute concerning the quality of care provided by existing facilities, and no issue raised concerning the efficiency and appropriateness of existing services.
The ability of the applicant to provide quality of care and the applicant's record of providing quality of care
Holy Cross has been a provider of a broad range of services within the district since 1959. The parties stipulated that the staffing requirements proposed by Holy Cross were reasonable, that it would be able to recruit the necessary staff, and that it had the necessary resources for project accomplishment and operation. Accordingly, no issue was raised concerning Holy Cross' ability to render quality care. Therefore, it is concluded that Holy Cross has provided, and will continue to provide quality care for its patients. Availability and adequacy of alternative services
There was no evidence that any alternative service (a non-inpatient catheterization laboratory) is available within the district to satisfy the need for inpatient cardiac catheterization.
Probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources.
Holy Cross and Zachariah have, since 1976, enjoyed a mutually beneficial arrangement, albeit one of landlord and tenant. At Holy Cross' request, Zachariah established a catheterization laboratory within the hospital's facility, and has since added two additional laboratories.
But for a limited number of physicians, Zachariah's laboratory enjoys significant support from and is generally accepted by the physicians on the Holy Cross medical staff. Holy Cross has certainly benefited from this arrangement by being able to provide catheterization services for its patients within the facility, and as a referral base for its open-heart surgery program.
Holy Cross does not contest the quality of care offered by Zachariah, nor does it point out any credible reason why their existing arrangement cannot continue to satisfy the needs of Holy Cross and the residents of the district as a whole.
Holy Cross' rationalization for its need to initiate inpatient catheterization services is that Zachariah's service is a "closed" laboratory, and that if it were permitted to establish such services its laboratory would be "open." An open laboratory, Holy Cross asserts, would increase accessibility and improve quality of care. Holy Cross' contentions, and the proof it advanced to support them, are not credited.
While the proof did establish that Zachariah's laboratory was closed, the proof also demonstrated that the laboratory proposed by Holy Cross would be closed. Further, quality of care, utilization, and accessibility are not favorably or unfavorably impacted within the district by virtue of whether a laboratory is classified as open or closed.
Holy Cross' proposal is, essentially, a duplication of an existing program, sited within its own facility, that has the apparent capacity to meet the needs of Holy Cross and the community at large. Under the circumstances, the cooperative arrangement between Holy Cross and Zachariah offers a more economical alternative than Holy Cross' proposal.
The need in the service district for special equipment and services not accessible in adjoining areas.
There was no proof offered that any need existed in the service district for special equipment and services which are not reasonably and economically accessible in adjoining areas.
The need for research and educational facilities.
No proof was offered concerning the need for any research or educational facilities. Further, no proof was offered that Holy Cross proposed any such programs, or that its services would be available to health professionals for training purposes.
Use of resources.
The Department asserts that the proposed project is a waste of hospital space, a valuable resource, that could be more appropriately utilized in light of Zachariah's existing facility than through dedication as a catheterization laboratory. No proof was offered, however, to demonstrate what other health service would be a more appropriate use of such resource.
The immediate and long-term financial feasibility of the project
The immediate financial feasibility of the project is not at issue since the parties have stipulated that Holy Cross has the available resources for project accomplishment and operation. At issue, however, is the long-term financial feasibility of the project.
Holy Cross premises its financial feasibility analysis on its projection that it will achieve 800 catheterization procedures in its first year of operation, and 850 procedures in its second year of operation. Holy Cross proposes a patient day percentage breakdown as follows: medicare - 59.6 percent, medicaid - 1.7 percent, insurance - 36.0 percent, private pay - 1.7 percent, and indigent - 1.7 percent. The rate per procedure advanced by Holy Cross is $1,000 during the first year of operation, and $1,050 during the second year of operation.
Based on the foregoing assumptions, the Holy Cross pro forma statement of revenue and expenses projected a $57,700 net income at the conclusion of its second year of operation. That pro forma contains, however, several errors which must be considered. First, its bad debt assumption of $12,000 was understated by $24,000. Second, its overhead allocation of $183,600 was overstated by 50 percent ($91,800). Third, its expense line item for supplies failed to reflect a 5 percent inflation factor which results in a supply expense of $223,000 instead of the $213,000 projected by Holy Cross. Fourth, Holy Cross inappropriately adopted a 40 year depreciation schedule, as opposed to 20 years, for its renovations resulting in an understatement of depreciation by $8,000 per year.
Adjusting the Holy Cross pro forma for the foregoing errors and omissions demonstrates that the proposed project will generate a net income of
$107,000 at the conclusion of its second year of operation if it can attain its projected 850 procedures. Whether Holy Cross can attain such level of service is, however, problematic.
By July 1988 there will be only 981 new cardiac catheterization procedures demanded within the district. Existing facilities with capacity will be competing for those procedures along with Holy Cross, and all facilities will be striving to maintain their share of the current market. Under the circumstances, it is not reasonable to conclude that Holy Cross can attain its projection solely from increased demand but, rather, that it must likewise compete with existing providers for a portion of their existing market share.
Zachariah, whose existing laboratories are located on the same floor and adjacent to the facility proposed by Holy Cross has the capacity to accommodate up to 834 additional procedures. There is no dispute regarding the quality of care offered by Zachariah, and his service enjoys significant support from the physicians on the Holy Cross medical staff. To penetrate the catheterization market, Holy Cross must therefore not only disrupt physician
referral patterns district wide, but must also disrupt such patterns within its own facility. Holy Cross did not, however, advance any plan to market its proposed service.
To demonstrate its ability to attract referrals, Holy Cross undertook a physician survey which, if accepted, would demonstrate that it could capture
269 to 327 procedures. Such survey was not, however, independently verified and was otherwise not a reliable indicator of project utilization. At best, it demonstrated interest in an alternative facility, but its utilization projections were merely speculative.
Holy Cross also pointed to the recent success of Plantation General as indicative of the reasonableness of its 850 procedure projection. Plantation General initiated its catheterization services in April 1985. Notwithstanding the fact that it was located in close proximity to FMC, had no open-heart surgery program, and had no referral base, Plantation General attained 759 procedures by the end of 1986. Juxtaposed with Plantation General, Holy Cross has a long-standing open-heart surgery program and broad physician referral base.
While the Holy Cross analogy is inviting, it is unpersuasive. While Plantation General may have been at 795 procedures by the end of 1986, its 1987 performance dropped to 702. Additionally, North Broward Medical Center initiated service in January 1986, and it is projected to only reach 532 procedures by the end of 1987.
On balance, the proof fails to demonstrate that Holy Cross can reasonably expect to attract the necessary referrals to reach its projection of 850 procedures, or any lesser number of procedures, that would render its project financially feasible in the long term.
Needs of entities providing service to individuals not residing in the service district.
There was no proof that Holy Cross provided a substantial portion of its services or resources to individuals not residing in the service district such as to demonstrate special needs and circumstances for its proposed project.
The probable impact of the proposed project
on the costs of providing cardiac catheterization services.
Holy Cross stipulated that all intervenors, except Zachariah, have standing to participate in this proceeding. Accordingly, it is established, except for Zachariah, that the initiation of the proposed service will substantially adversely impact the existing cardiac catheterization programs at those facilities. There was, however, no reliable proof that such competition would adversely affect the supply of catheterization services. Likewise, there was no competent proof that such competition would improve the delivery of health services.
Regarding Zachariah, the proof demonstrated that he would lose patients if the proposed service is initiated. While the magnitude of his loss could not be quantified because dependent on future events, it must be concluded that since Holy Cross would disrupt the existing referral patters he has established with Holy Cross' medical staff, Zachariah's program would be substantially adversely affected by the proposed project.
Costs of Construction.
The parties stipulated that the costs for construction and equipment are reasonable.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject of, these proceedings.
At issue in this proceeding is whether the application of Holy Cross to establish a new inpatient cardiac catheterization service should be approved. Holy Cross, as the applicant, has the burden of demonstrating its entitlement to the certificate of need. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985), and Florida Department of Transportation v. J.W.C. Company, 396 So.2d 788 (Fla. 1st DCA 1981).
Pertinent to this proceeding, Section 381.705, Florida Statutes (1987), and Rule 10-5.011(e), Florida Administrative Code, establish the criteria which must be considered in evaluating applications for a certificate of need. Balsam v. Department of Health and Rehabilitative Services, 486 So.2d 1341 (Fla. 1st DCA 1986), and Department of Health and Rehabilitative Services
v. Johnson and Johnson Home Health Care, Inc., 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. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985). See also, Graham V. Estuary Properties, Inc., 399 So.2d 1374 (Fla. 1981).
Rule 10-5.011(e)(6), Florida Administrative Code, provides:
...The Department will consider applications for cardiac catheterization laboratories in context with applicable statutory and rule criteria. The Department will not normally approve applications for new cardiac catheterization laboratories in any service area unless additional need is indicated, as calculated by the formula in subparagraph 12. below, and unless the application satisfies the requirements set forth in subparagraph
15. below.
Holy Cross has demonstrated numeric need, as calculated by the rule mandated methodology, and has further satisfied the requirements of subparagraph
12 of the rule by demonstrating that the average number of catheterizations performed per year by existing and approved laboratories performing adult procedures in the service area is greater than 600 and will not be reduced below that number if its laboratory is approved. Holy Cross has also demonstrated compliance with subparagraph 7 (Service Availability), subparagraph 8 (Service Accessibility), subparagraph 9 (Service Quality), and subparagraph 10 (Service Cost), of Rule 10-5.011(e), Florida Administrative Code. The Holy Cross proposal is not, however, totally consistent with the needs reflected in the local health plan and the Florida State Health Plan.
In addition to evaluating the consistency of the Holy Cross proposal with existing rules, consideration must also be given to the relevant criteria set forth in Section 381.705, Florida Statutes (1987). In this regard, the proof demonstrated that Holy Cross will not provide significant health care to medicaid and indigent patients, that excess capacity exists within the district, that continuing the existing cooperative arrangement between Holy Cross and Zachariah is a more reasonable use of health care resources than initiating a competing service within the same facility, that the proposed would not increase accessibility, and that the proposal was not demonstrated to be financially feasible.
Under the circumstances, notwithstanding a demonstration of numeric need, the Holy Cross application does not comport favorably with the relevant statutory and rule criteria.
Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered denying Holy Cross' application
for a certificate of need to initiate inpatient cardiac catheterization services.
WILLIAM J. KENDRICK
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 12th day of February, 1988.
ENDNOTES
1/ Holy Cross suggested that the reason there is not a large indigent dollar volume at Holy Cross was because the North Broward hospitals are public facilities known for their treatment of indigents. Accordingly, Holy Cross suggests that not many indigents present themselves for treatment at Holy Cross. While such may be the case, it demonstrates also that Holy Cross is not targeting such segment of society with information regarding its services.
2/ It is appropriate to consider the status quo only within the Holy Cross planning horizon. Applicants in subsequent batching cycles will vie to serve any succeeding demand, and the appropriateness of their proposals must be considered with regard to the status quo which exists within their planning horizon. Pertinent to this case, Humana-Bennett and Imperial Point filed in the batching cycle that occurred six months after that of Holy Cross. The availability and extent of utilization of existing facilities for the period of July 1988 through December 1988 would be germane to their applications since that is a portion of the period their proposals are designed to serve.
3/ Intervenors disputed the fact that demand for catheterization services would rise at such rate in succeeding years. They assert that the recent addition of three laboratories in Palm Beach County, the advent of mobile magnetic resonance imaging (MMRI), and the fact that Broward County's use rate is approaching the national average, militate against such a conclusion. Their assertions are, however, rejected as unpersuasive. Two of the Palm Beach facilities were opened in 1987, and yet the demand for catheterization services in Broward County continued to climb. Whether MMRI will adversely impact the demand for catheterization services beyond the Holy Cross horizon year is not relevant and is, at best, speculative since they have not yet come on line. What is apparent from the proof is that increased physician and patient awareness of catheterization services has driven up the demand for such procedures, and will continue to do so for the foreseeable future. While Broward's County use rate may be approaching the national level, its population of elderly exceeds the national level.
4/ In reaching these conclusions, I have ascribed only two laboratories to Zachariah and FMC. This conclusion is consistent with the proof that the third laboratory at each facility is used soley as backup, and that on no occassion are three laboratories operated simultaneiously. I have also considered the fact that Zachariah has agreed with the Department that his third laboratory will only be used for backup. Finally, the closed nature of Zachariah's laboratory, coupled with the fact that only he and one other physician practice there, compels the conclusion that only two laboratories can be operated simultaneously.
5/ One reason ostensibly advanced by Holy Cross for its laboratory was to recapture market share. Health planning is, however, of interest on a district basis, and is not institution specific. Notably, Holy Cross did not suggest that any market share it may have lost threatened its survival.
6/ The rate per procedure estimated by Holy Cross is an average rate based on the payor mix, and is a net figure after consideration of the DRG mix, the capital passthrough, and the indigent care tax.
7/ Intervenors also assert that salary expenses are understated, that the proforma should include a second year maintenance expense item on equipment, and that the medicare payor mix should be 68 percent. These assertions are rejected as contrary to the weight of the evidence.
8 While Holy Cross' ability to attain 850 procedures by its second year of operation is questionable, its ability to garner 800 procedures in its first year of operation is simply not possible. During its first year of operation personnel will have to be trained, community awareness of the laboratory will have to be attained, and established referral patters will have to be altered. No new catheterization service in Broward County was shown to have ever achieved such a level of operation in its first year. Holy Cross' contention that it can achieve 800 procedures in its first year of operation is not supported by the proof. However, since the examination of long-term financial feasibility is directed on a non-accrual basis at the second year of operation, such failure is not critical to Holy Cross.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-2861
Holy Cross' proposed findings of fact are addressed as follows: 1-3. Addressed in paragraph 28.
4-19. To the extent pertinent, addressed in paragraphs 29-35, 54, and 55. Otherwise rejected as subordinate or recitation of witness testimony and not a finding of fact.
20-31. To the extent pertinent, addressed in paragraphs 17-21, and footnote 4. Otherwise rejected as subordinate or recitation of witness testimony and not a finding of fact.
Rejected as contrary to the proof.
First sentence addressed paragraph 11. Remainder of paragraph, to the extent pertinent, addressed in paragraphs 22-26, 28-35, and 40-43. It is quite irrelevant that some unidentified patient who wanted a catheterization done by his own physician could not have it done in a facility near his home. Health planning is done on district basis, there is no access problem within the district, and Holy Cross stipulated there were no special circumstances in this case.
Addressed in paragraphs 15, 17-21, and conclusion of law paragraphs 4-
6.
35-45. Addressed in paragraphs 3, 8-16, and 22-27. 46-47. Rejected as argument.
48-56. Rejected as argument, recitation of testimony, subordinate, not
persuasive, and not supported by the proof. The referrals were speculative in number and dependent upon who was going to do catheterizations at the proposed laboratory. See paragraph 53 of findings of fact.
57-62 To the extent pertinent, addressed in paragraphs 28-35, otherwise rejected as subordinate, recitation of witness testimony, or argumentative.
63-64. To the extent pertinent, addressed in paragraph 17, otherwise rejected as subordinate, recitation of witness testimony or argumentative.
65-67 To the extent pertinent, addressed in paragraphs 24-26, otherwise rejected as subordinate or argumentative.
68. Addressed in paragraph 11. See also the response to petitioner's proposed finding of fact 33, supra.
69-79. Rejected as not shown to be relevant and argumentative. Holy Cross did not present evidence of substantially similar circumstances. Notably, this case is the first where the Department was presented with an application to establish a competitive laboratory in the same facility. As importantly, the law requires consideration of all criteria, and the Department is constrained to follow its pronouncement.
Rejected as not a finding of fact.
Addressed in paragraphs 6 and 38.
Rejected as not relevant.
83-89. To the extent pertinent, addressed in paragraphs 38-43. 90-94. Rejected as not relevant or argumentative.
95-97. Rejected as not relevant or argumentative. Holy Cross is free to build an outpatient laboratory without certificate of need approval. When it seeks approval for an inpatient facility, it must meet the statutory criteria. Notably, the financial feasibility of the proposed outpatient facility was not demonstrated. Accordingly, it cannot be concluded that the provision of both services would render the project financially feasible.
98. Rejected as not relevant.
99-102. To the extent pertinent, addressed in paragraphs 40-43.
Rejected as contrary to the proof.
Addressed in paragraph 47.
Rejected as contrary to the proof.
Addressed in footnote 8.
107-108. Addressed in paragraphs 51-56.
109-115. Addressed in paragraphs 48-50.
116-118. Rejected as a substantial change from its proposal and not supported by relevant proof. The Holy Cross proposal projected a $1,000 charge its first year of operation and a $1,050 charge its second year of operation.
According to Holy Cross, this was an average rate based on payor mix, and was net after consideration of the DRG mix, the capital passthrough, and the indigent care tax. Under the circumstances, the suggested comparison cannot be drawn.
119-123. To the extent pertinent, addressed in paragraphs 48-51, otherwise rejected as subordinate, argumentative, or not supported by the proof.
To the extent pertinent, addressed in paragraph 56.
Rejected as not supported by the proof. See also the response to petitioner's proposed findings of fact 95-97, supra. 126. Addressed in paragraph 16.
127-129. To the extent pertinent, addressed in paragraphs 16, otherwise rejected as recitation of witness testimony or subordinate.
Addressed in paragraph 16.
Rejected as recitation of testimony and subordinate.
Rejected as contrary to the proof.
133-137. To the extent pertinent, addressed in paragraphs 58-59, otherwise rejected as subordinate or argumentative.
138-139. To the extent pertinent, addressed in paragraphs 22-26. 140-142. Rejected as not a finding of fact.
The Department's proposed findings of fact are addressed as follows:
Addressed in paragraph 3.
Addressed in paragraph 1.
3-6. To the extent pertinent, addressed in paragraphs 4-6.
7-11. To the extent pertinent, addressed in paragraphs 41-42, otherwise rejected as subordinate.
Rejected as not relevant. See response to petitioner's proposed findings of fact 95-97.
Addressed in paragraphs 35 and 40.
14-18. To the extent pertinent, addressed in paragraph 24-26.
Addressed in the response to petitioner's proposed finding of fact 33.
Addressed in paragraphs 17-60.
21-23. Addressed in paragraphs 17-21 and 38-43.
24-26. Addressed in paragraphs 28-35.
Addressed in paragraphs 41-42.
Addressed in paragraphs 31-34.
Addressed in paragraphs 28-35.
Addressed in paragraphs 24-26.
Addressed-in paragraphs 3 and 4 Conclusion of law.
Addressed in paragraph 11.
33-36 Addressed in paragraphs 22-27, and footnote 3.
37-40. Addressed in footnote 8, and paragraphs 54-55.
Addressed in paragraphs 52-56.
Addressed in paragraphs 41-43.
Addressed in footnote 5.
Rejected as not relevant.
Addressed in paragraph 53.
Addressed in paragraphs 3 and 4, conclusion of law.
47-50. Addressed in response to petitioner's proposed finding of fact 69- 79, and footnote 2.
Addressed in paragraph 46.
Addressed in paragraph 43.
Addressed in paragraphs 28-35.
To the extent pertinent, addressed in paragraphs 38-43.
Addressed in paragraph 35.
Zachariah's proposed findings of fact are addressed as follows: 1-4. Addressed in paragraphs 4-6, 19-21.
5-9. Addressed in paragraphs 41-42.
10-11. To the extent pertinent, addressed in paragraphs 30, 38, and 39. 12-13. To the extent pertinent, addressed in footnote 5 and paragraph 40.
14. Addressed in paragraphs 17-21.
15-16. To the extent pertinent, addressed in footnote 5.
Rejected as not relevant.
Addressed in paragraphs 22-27.
19-27. Addressed in paragraphs 28-35. 28-37. To the extent pertinent, addressed in paragraphs 47-56, otherwise rejected as subordinate or recitation of testimony.
38-41. To the extent pertinent, addressed in paragraphs 58-59.
The proposed findings of fact of North Ridge are addressed as follows:
1. Addressed in paragraph 2.
2-7. To the extent pertinent, addressed in paragraphs 5-6, and 41-42.
Addressed in paragraphs 17-21, and footnote 4.
Addressed in paragraph 39.
Addressed in paragraphs 41-42.
To the extent pertinent, addressed in paragraph 1.
To the extent pertinent, addressed in paragraph 53.
Addressed in paragraph 7.
Rejected as not relevant or not necessary to result reached.
Addressed in paragraphs 41-42.
Addressed in paragraph 26 and response to petitioner's proposed findings of fact 69-79.
Addressed in paragraphs 3 and 4, conclusions of law. 18-21. Addressed in paragraphs 17-21.
22-25. Addressed in paragraphs 28-35.
26. Addressed in paragraph 11.
27-28. Addressed in paragraphs 22-26.
29. Addressed in paragraph 46. 30-31. Addressed in footnote 5.
32-33. To the extent pertinent, addressed in paragraphs 9, 19, 13, 14, 15,
36, and 41-42.
34-35. Addressed in paragraphs 51 and 52.
36-42. Addressed in paragraphs 51-56.
43-53. Addressed in paragraphs 47-50.
54. Not shown to be relevant.
55-57. Rejected as argumentative and not a finding of fact.
The proposed findings of fact of FMC are addressed as follows:
Addressed in paragraph 2.
Rejected as not a finding of fact.
To the extent pertinent, addressed in paragraph 35, and paragraph 3 and 4, conclusions of law.
4-5. To the extent pertinent, addressed in paragraph 26.
6-8. To the extent pertinent, addressed in paragraphs 22-27.
To the extent pertinent, addressed in paragraphs 41-43.
Addressed in paragraph 35.
Addressed in footnote 5.
To the extent pertinent, addressed in paragraph 53, otherwise rejected as argument.
13-14. Addressed in paragraph 58.
The proposed findings of fact of North Broward Hospital District are addressed as follows:
1-2. Addressed in paragraphs 1 and 2.
Addressed in paragraph 3.
To the extent pertinent, addressed in paragraph 58.
5-25. To the extent pertinent, addressed in paragraphs 16, 22-27, and 58, otherwise rejected as subordinate, argumentative, recitation of witness testimony, or speculative.
COPIES FURNISHED:
KENNETH F. HOFFMAN, Esquire OERTEL & HOFFMAN, P.A.
Post Office Box 6507 Tallahassee, Florida 32314
John A. Thabes, Esquire SAUNDERS, CURTIS, GINESTRA
& GORE
Post Office Box 4078
Fort Lauderdale, Florida 33338
Lesley Mendelson, Esquire Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Building 1, Room 407
Tallahassee, Florida 32399
Cynthia Tunnicliff, Esquire CARLTON, FIELDS, WARD, EMMANUEL,
SMITH, CUTLER, AND KENT, P.A.
Post Office Drawer 190 Tallahassee, Florida 32302
Michael J. Cherniga, Esquire Robert McDonald, Esquire ROBERTS, BAGGETT, LaFACE
and RICHARDS
Post Office Box 1838 Tallahassee, Florida 32302
Eric B. Tilton, Esquire Post Office Drawer 550 Tallahassee, Florida 32302
Jonathan L. Rue, Esquire PARKER, HUDSON, RAINER & DOBBS
1200 Carnegie Building
133 Carnegie Way Atlanta, Georgia 30303
Sam Power, Clerk Department of Health and
Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407
Tallahassee, Florida 32399-0700
Liz Cloud, Chief
Bureau of Administrative Code 1802 The Capitol
Tallahassee, Florida 32301
Carroll Webb, Executive Director Administrative Procedures Committee
120 Holland Building Tallahassee, Florida 32301
Gregory L. Coler, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
John Miller, Esquire Acting General Counsel 1323 Winewood Boulevard
Tallahassee, Florida 32399-0700
| Issue Date | Proceedings |
|---|---|
| Feb. 12, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Feb. 12, 1988 | Recommended Order | Notwithstanding numeric need application for cardiac catheter Certificate Of Need denied because not increase access or demonstrate financial feasibility. |
