STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HCA WEST FLORIDA REGIONAL )

MEDICAL CENTER, )

)

Petitioner, )

vs. )

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, ) CASE NO. 88-1983

)

BAPTIST MANOR, INC., )

)

and )

)

ADVOCARE, INC., )

)

Intervenors. )

)

RECOMMENDED ORDER

This matter came on for hearing in Tallahassee, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Diane Cleavinger, on November 10 and 30, 1988. The parties were represented by counsel:

For Petitioner: Donna H. Stinson, Esquire

Moyle, Flanagan, Katz, Fitzgerald & Sheehan, P.A. The Perkins House, Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

For Respondent: Lesley Mendelson, Esquire

Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive, Suite 309

Tallahassee, Florida 32308

The specific issue addressed in this proceeding is whether a Certificate of Need should be issued to convert 8 acute care beds to extended care (ECF) beds at West Florida Regional Medical Center under the "not normal" or "special circumstances" criteria of Rule 10-5.011(k), Florida Administrative Code.

Petitioner and Respondent filed their proposed recommended orders on December 16, 1988, respectively. The parties' proposed findings of fact have been considered and utilized in the preparation of this Recommended Order except where such proposals were not supported by the weight of the evidence or were immaterial, cumulative, or subordinate. Specific rulings on the parties'

proposed findings of fact are contained in the Appendix to this Recommended Order.

FINDINGS OF FACT

The Application

1. West Florida Regional Medical Center is a 400-bed acute care hospital in Pensacola, Escambia County, Florida. The hospital is located in a subdistrict which has the greatest population aged 65 and over who are living in poverty. That group constitutes the population qualified for Medicare. Some 17 percent of Escambia County's population falls into the medicare category.

   
   

2. Prior to October, 1987, HRS had determined that there was a fixed pool need in the Escambia County area for 120 nursing home or extended care beds. Several hospitals in the Escambia County area applied for the 120 nursing home beds. Those beds were granted to Advocare (60 beds) and Baptist Manor (60 beds). The award of the 120 beds to Baptist Manor and Advocare is not being challenged in this action.

   
   

3. West Florida, likewise, filed an application for an award of nursing home beds in the same batch as Advocare and Baptist Manor. However, Petitioner's application sought to convert 8 acute care beds to nursing home or extended care beds. West Florida's claim to these beds was not based on the 120 bed need established under the fixed need pool formula. West Florida's application was based on the unavailability of appropriately designated bed space for patients who no longer required acute care, but who continued to require a high skill level of care and/or medicare patients.

   
   

4. The whole purpose behind West Florida's CON application stems from the fact that the federal Medicare system will not reimburse a hospital beyond the amount established for acute care needs as long as that bed space is designated as acute care. However, if the patient no longer requires acute care the patient may be re-designated to a skilled care category which includes nursing home or extended care beds. If the patient is appropriately reclassified to a skilled care category, the hospital can receive additional reimbursement from Medicare above its acute care reimbursement as long as a designated ECF bed is available for the patient. Designation or re-designation of beds in a facility requires a Certificate of Need.

   
   

5. Petitioner's application for the 8 beds was denied.

   
   

6. When the application at issue in this proceeding was filed Petitioner's 13-bed ECF unit had been approved but not yet opened. At the time the State Agency Action Report was written, the unit had just opened. Therefore, historical data on the 13 bed unit was not available at the time the application was filed. Reasons given for denying West Florida's application was that there was low occupancy at Baptist Hospital's ECF unit, that Sacred Heart Hospital had

   10 approved ECF beds and that there was no historical utilization of West Florida 13 beds. At the hearing the HRS witness, Elizabeth Dudek stated that it was assumed that Baptist Hospital and Sacred Heart Hospital beds were available for West Florida patients.

   
   

7. In 1985 West Florida applied for a CON to establish a 21-bed ECF unit. HRS granted West Florida 13 of those 21 beds. The 8 beds being sought by West Florida in CON 5319 are the remaining beds which were not granted to West Florida in its 1985 CON application.

8. In order to support its 1985 CON application the hospital conducted a survey of its patient records to determine an estimate of the number of patients and patient days which were non acute but still occupied acute care beds. The hospital utilized its regularly kept records of Medicare patients whose length of stay or charges exceeded the Medicare averages by at least two standard deviations for reimbursement and records of Medicare patients whose charges exceed Medicare reimbursement by at least $5,000. These excess days or charges are known as cost outliers and, if the charge exceeds the Medicare reimbursement by $5000 or more, the excess charge is additionally known as a contractual adjustment. The survey conducted by the hospital consisted of the above records for the calendar year 1986. The hospital assumed that if the charges or length of stay for patients were excessive, then there was a probability that the patient was difficult to place.

   
   

9. The above inference is reasonable since, under the Medicare system, a hospital's records are regularly reviewed by the Professional Review Organization to determine if appropriate care is rendered. If a patient does not meet criteria for acute care, but remains in the hospital, the hospital is required to document efforts to place the patient in a nursing home. Sanctions are imposed if a hospital misuses resources by keeping patients who did not need acute care in acute care bed spaces even if the amount of reimbursement is not at issue. The hospital, therefore goes to extraordinary lengths to place patients in nursing home facilities outside the hospital. Additionally, the inference is reasonable since the review of hospital records did not capture all non-acute patient days. Only Medicare records were used. Medicare only constitutes about half of all of West Florida's admissions. Therefore, it is likely that the number of excess patient days or charges was underestimated in 1986 for the 1985 CON application.

   
   

10. The review of the hospital's records was completed in March, 1987, and showed that 485 patients experienced an average of 10.8 excess non-acute days at the hospital for a total of 5,259 patient days. The hospital was not receiving reimbursement from Medicare for those excess days. West Florida maintained that the above numbers demonstrated a "not normal need" for 21 additional ECF beds at West Florida. However as indicated earlier, HRS agreed to certify only 13 of those beds. The 13 beds were certified in 1987.

    
    

11. The 13-bed unit opened in February, 1988. Since West Florida had planned for 21 beds, all renovations necessary to obtain the 8-bed certification were accomplished when the 13- bed unit was certified in 1987. Therefore, no capital expenditures will be required for the additional 8 beds under review here. The space and beds are already available.

    
    

12. The same study was submitted with the application for the additional eight beds at issue in these proceedings. In the present application it was assumed that the average length of stay in the extended care unit would be 14 days. However, since the 13 bed unit opened, the average length of stay experienced by the 13-bed unit has been approximately 15 days and corroborates the data found in the earlier records survey. Such corroboration would indicate that the study's data and assumptions are still valid in reference to the problem placements. However, the 15- day figure reflects only those patients who were appropriately placed in West Florida's ECF unit. The 15-day figure does not shed any light on those patients who have not been appropriately placed and remain in acute care beds. That light comes from two additional factors: The problems West Florida experiences in placing sub-acute, high skill, medicare

    patients; and the fact that West Florida continues to have a waiting list for its 13 bed unit.

    
    

    Problem Placements

    
    

13. Problem placements particularly occur with Medicare patients who require a high skill level of care but who no longer require an acute level of care. The problem is created by the fact that Medicare does not reimburse medical facilities based on the costs of a particular patients level of care. Generally, the higher the level of care a patient requires the more costs a facility will incur on behalf of that patient. The higher costs in and of themselves limit some facilities in the services that facility can or is willing to offer from a profitability standpoint. Medicare exacerbates the problem since its reimbursement does not cover the cost of care. The profitability of a facility is even more affected by the number of high skill Medicare patients resident at the facility. Therefore, availability of particular services at a facility and patient mix of Medicare to other private payors becomes important considerations on whether other facilities will accept West Florida' s patients.

    
    

14. As indicated earlier, the hospital goes to extraordinary lengths to place non- acute patients in area nursing homes, including providing nurses and covering costs at area nursing homes. Discharge planning is thorough at West Florida and begins when the patient is admitted. Only area nursing homes are used as referrals.

    
    

15. West Florida's has attempted to place patients at Bluff's and Bay Breeze nursing homes operated by Advocare. Patients have regularly been refused admission to those facilities due to acuity level or patient mix. West Florida also has attempted to place patients at Baptist Manor and Baptist Specialty Care operated by Baptist Hospital. Patients have also been refused admission to those facilities due to acuity level and patient mix.

16 The beds originally rented to Sacred Heart Hospital have been relinquished by that hospital and apparently will not come on line. Moreover the evidence showed that these screening practices would continue into the future in regard to the 120 beds granted to Advocare and Baptist Manor. The president of Advocare testified that his new facility would accept some acute patients. However, his policies on screening would not change. Moreover, Advocare's CON proposes an 85 percent medicaid level which will not allow for reimbursement of much skilled care. The staffing ratio and charges proposed by Advocare are not at levels at which more severe sub-acute care can be provided.

1. Baptist Manor likewise screens for acuity and does not provide treatment for extensive decubitus ulcers, or new tracheostomies, or IV feeding or therapy seven days a week. Its policies would not change with the possible exception of ventilated patients, but then, only if additional funding can be obtained.

   
   

   There is no requirement imposed by HRS that these applicants accept the sub-acute-patients which West Florida is unable to place. These efforts have continued subsequent to the 13-bed unit's opening. However, the evidence showed that certain types of patients could not be placed in area nursing homes. The difficulty was with those who need central lines (subclavian) for hyperalimentation; whirlpool therapy such as a Hubbard tank; physical therapy dither twice a day or seven days a week; respiratory or ventilator care;

   frequent suctioning for a recent tracheostomy; skeletal traction; or a Clinitron bed, either due to severe dicubiti or a recent skin graft.

2. The 13-bed unit was used only when a patient could not be placed outside the hospital. The skill or care level in the unit at West Florida is considerably higher than that found at a nursing home. This is reflected in the staffing level and cost of operating the unit.

   
   

   Finally, both Advocare and Baptist Manor involve new construction and will take approximately two years to open. West Florida's special need is current and will carry into the future.

   
   

   The Waiting List

   
   

3. Because of such placement problems, West Florida currently has a waiting list of approximately five patients, who are no longer acute care but who cannot be placed in a community nursing home. The 13-bed unit has operated at full occupancy for the last several months and is the placement of last resort. The evidence showed that the patients on the waiting list are actually subacute patients awaiting an ECF bed. The historical screening for acuity and patient mix along with the waiting list demonstrates that currently at least five patients currently have needs which are unmet by other facilities even though those facilities may have empty beds. West Florida has therefore demonstrated a special unmet need for five ECF beds.

   
   

4. Moreover, the appropriate designation and placement of patients as to care level is considered by HRS to be a desirable goal when considering CON applications because the level of care provided in an ECF unit is less intense than the level of care required in an acute care unit. Thus, theoretically, better skill level placement results in more efficient bed use which results in greater cost savings to the hospital.

   
   

5. In this case, Petitioner offers a multi-disciplinary approach to care in its ECF unit. The approach concentrates on rehabilitation and independence which is more appropriate for patients at a sub-acute level of care. For the patients on the awaiting proper placement on the waiting list quality of care would be improved by the expansion of the ECF unit by five beds.

   
   

6. Finally, there are no capital costs associated with the conversion of these five beds and no increase in licensed bed capacity. There are approximately five patients on any given day who could be better served in an ECF unit, but who are forced to remain in an acute care unit because no space is available for them. This misallocation of resources will cost nothing to correct.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. Section 120.57(1), Florida Statutes.

   
   

8. The evidence demonstrated that there is no additional need for nursing home beds beyond the 120 beds already awarded to Baptist Manor and Advocare. However, the above numerical need is based only on the fixed need pool formula utilized by HRS for certificate of need purposes. Petitioner did not seek to prove entitlement to a CON under the need disclosed by the fixed pool formula. Petitioner seeks to prove entitlement to a CON under an exception to the fixed pool formula.

9. Rule 10-5.011, Florida Administrative Code, contains a provision which allows an applicant to show need in addition to the amount disclosed by the fixed need pool. The exception to the fixed need pool is contained in subparagraph (j) and states:

   
   

   In the event that the net bed allocation is zero, the applicant may demonstrate that circumstances exist to justify the approval of additional beds under the other relevant criteria specifically contained in the Department's Rule 10-5.011. Specifically, the applicant may show that persons using existing and like services are in need of nursing home care but will be unable to access nursing home services currently licensed or approved within the subdistrict. Under this provision, the applicant must demonstrate that those persons with a documented need for nursing home services have been denied access to currently licensed but unoccupied beds or that the number of persons with a documented need exceeds the number of licensed unoccupied and currently approved nursing home beds. (Emphasis supplied.)

   
   

10. The above paragraph is often referred to as "the not normal circumstances" or "special circumstances" exception. The rationale for the exception is due to the fact that the methodology for determining the "fixed pool" need under Rule 10-5.011(k) is based upon licensed beds and occupancy. The "bed rate" for the elderly population, used for projecting need in the future, is the number of licensed beds divided by population, adjusted for occupancy. As such, this formula does not take into consideration patients who are in need of nursing home care, but do not occupy nursing home beds. The

    formula considers only nursing home beds and occupancy; not the health status of the population. Therefore, the population of persons in need, but denied access, is overlooked by the formula. The remedy is the above exception which recognizes that the fixed pool formula may not account for the entire need for nursing home beds in a community.

    
    

11. In this case, there is proof that patients with a documented need for nursing home services (those in need of particular types of skilled care) are denied access to currently licensed but unoccupied beds. If it were simply a matter of existing beds being filled the outstanding approvals would alleviate need. Here, however, patients with tracheostomies, subclavian lines, severe decubiti and other listed difficulties, are refused admission to existing nursing homes even when there are unoccupied beds.

    
    

12. Reasons given by HRS in denying the application are not persuasive. First, the ECF beds at Sacred Heart are not an available resource, because they do not exist. Second, beds at Baptist Specialty Care and other area facilities are not available, because these facilities regularly refuse admission to certain types of patients from West Florida even though those facilities have unoccupied beds. Third, there is now some history of the 13-bed unit which has consistently maintained a waiting list of at least five ECF qualified patients. West Florida has, therefore, demonstrated through patient records and experience

    that there are patients denied access to licensed but unoccupied nursing home beds.

    
    

13. Patients who no longer require acute care services should not be kept in an acute care setting. The multi-disciplinary approach to care provided in the ECF, concentrating on rehabilitation and independence is more appropriate for patients at a subacute level of care. Quality of care would be improved by expansion of the ECF unit by five beds.

    
    

    It is contrary to federal Medicare policy and contrary to HRS policy to keep patients in an acute care setting when they could be better treated in a less restrictive and less expensive environment. All West Florida needs to be able to more appropriately treat these patients, is approval from the Department; no costs or renovations are required; and it is not a new service.

    To deny the CON is to require patients who do not require acute care to remain in acute care, a result which reduces quality and cost-effectiveness.

    
    

14. There are no capital costs associated with the conversion of beds, and no increase in licensed bed capacity. There are approximately five patients on any day who could be better and more appropriately served in the ECF unit, but who must remain in acute care because the 13 beds are full. This is an obvious misallocation of resources, which will cost nothing to correct.

    
    

15. The Department suggests that the approved applicants, Advocare and Baptist Manor, may take some of the patients West Florida cannot place. Those beds will become available in approximately two years to fill the fixed pool need. The special circumstances need exists currently.

    
    

16. Although the testimony by the new applicants regarding types of patients to be served was somewhat equivocal, it was agreed by both that they would screen for acuity, and that their admission policies would not change. Additionally, their staffing and salaries do not indicate any concentration c? more skilled care. These factors, along with the undisputed testimony that West Florida is currently unable to place certain types of skilled patients, leads to the conclusion that the problem will not be solved by the additional beds.

    
    

17. Petitioner has quantified a need. The need demonstrated is for five additional ECF beds immediately. All of the above factors support the issuance of a CON for five ECF beds under Chapter 381, Florida Statutes, and Rule 10- 5.011, Florida Administrative Code.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services issue

a CON to Petitioner for five ECF beds.

DONE and ORDERED this 30th day of March, 1989, in Tallahassee, Florida.

DIANE CLEAVINGER

Hearing Officer

Division of Administrative Hearings 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1989.

APPENDIX

The facts contained in paragraph 1-29 of Petitioner's proposed Findings of Fact are adopted in substance, insofar as material.

The facts contained in paragraph 1, 2, 3, 4, 5, 6, 8, 12, 15, 16, 20, 27, 28, 29, 31 and 33 of Respondent's Proposed Findings of Fact are subordinate.

The first sentence of paragraph 7 of Respondent's Proposed Findings of Fact was not shown to be the evidence. Strict compliance with the local health plan was not shown to be an absolute requirement for CON certification. The remainder of paragraph 7 is subordinate.

The facts contained in paragraph 9, 10, 11 and 30 of Respondent's Proposed Findings of Fact were not shown by the evidence.

The first part of the first sentence of paragraph 13 of Respondent's Proposed Findings of Fact before the semicolon is adopted. The remainder of the sentence and paragraph is rejected.

The first sentence of paragraph 14 of Respondent's Proposed Findings of Fact was not shown by the evidence.

The remainder of the paragraph is subordinate.

The facts contained in paragraph 17, 26 and 32 of Respondent's Proposed Findings of Fact are adopted in substance, insofar as material.

The acts contained in paragraph 18 are rejected as supportive of the conclusion contained therein.

The first (4) sentences of paragraph 19 are subordinate. The remainder of the paragraph was not shown by the evidence.

The first (2) sentences of paragraph 21 are adopted. The remainder of the paragraph is rejected.

The facts contained in paragraph 22 of Respondent's Proposed Findings of Fact are irrelevant.

The first sentence of paragraph 23 is adopted. The remainder of paragraph 23 is subordinate.

The first sentence of paragraph 24 is rejected. The second, third, and fourth sentences are subordinate. The remainder of the paragraph is rejected.

The first sentence of paragraph 25 is subordinate. The remainder of the paragraph is rejected.

COPIES FURNISHED:

Lesley Mendelson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32308

Donna H. Stinson, Esquire MOYLE, FLANIGAN, KATZ,

FITZGERALD & SHEEHAN, P.A.

The Perkins House - Suite 100

118 North Gadsden Street Tallahassee, Florida 32301

Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

HCA WEST FLORIDA REGIONAL MEDICAL CENTER,

Petitioner,

CASE NO.: 88-1983

vs. CON NO.: 5319

DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES,

Respondent,

and

BAPTIST MANOR, INC.,

Intervenor,

and

ADVOCARE, INC.,

Intervenor.

/

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 THE DEPARTMENT

1. Counsel excepts to the Hearing Officer's factual findings that petitioner proved need under the special circumstances provision of the need rule in that there is competent, substantial evidence that the approved applicants will serve the same patients as petitioner proposes to serve. I conclude that the Hearing Officer's findings are supported by competent, substantial evidence; therefore, the exception is denied. Regarding the use of summaries of patient records, such use is authorized by the Evidence Code. Section 90.956, Florida Statutes (1987).

   
   

2. Counsel excepts to the consideration of evidence tendered by petitioner because the evidence was not included in the application. The exception is denied. Holmes Regional Healthcare, Inc. vs. State, 10 FALR 7040 (HRS 12/2/88).

3. Counsel excepts to the Hearing Officer's recommendation that 5 beds be authorized when petitioner sought approval for 8 beds. The exception is granted as there is no legal or factual basis for a partial approval. Thus, the issue is whether 8 beds should be approved.

   
   

4. Counsel excepts to the Hearing Officer's recommendation for approval because petitioner did not challenge the approved applicants in the appropriate batch. While there is logic to counsel's argument, neither the rules nor the statutes require that an applicant seeking approval on the basis of special circumstances challenge approved applications. The exception is denied.

FINDINGS OF FACT

The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order.

CONCLUSIONS OF LAW

The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order, except as noted in the ruling on exception number 3.

Based upon the foregoing, it is

ADJUDGED, that petitioner's application for CON 5319 be approved. DONE and ORDERED this 23rd day of May 1989, in Tallahassee, Florida.

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

by Deputy Secretary for Programs

COPIES FURNISHED:

Donna H. Stinson, Esquire MOYLE, FLANIGAN, KATZ, FITZGERALD & SHEEHAN, P.A.

The Perkins House - Suite 100

118 North Gadsden Street Tallahassee, FL 32301

Lesley Mendelson, Esquire Assistant General Counsel Department of Health and

Rehabilitative Services 2727 Mahan Drive

Fort Knox Executive Center Tallahassee, FL 32308

Diane Cleavinger Hearing Officer

Division of Administrative Hearings The DeSoto Building'

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

FALR

Post Office Box 385 Gainesville) FL 32602

Janie Block (PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was sent to the above-named people by U.S. Mail this 20th day of May, 1989.

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

NOTICE OF RIGHT TO JUDICIAL REVIEW

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.

Docket for Case No: 88-001983

Orders for Case No: 88-001983