STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOSPITAL DEVELOPMENT AND )

SERVICES CORPORATION d/b/a ) PLANTATION GENERAL HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 89-0923

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

)

Respondent, )

)

and )

)

FLORIDA MEDICAL CENTER, ) NORTH RIDGE MEDICAL CENTER and ) NORTH BROWARD HOSPITAL DISTRICT ) d/b/a BROWARD GENERAL MEDICAL ) CENTER, )

)

Intervenors. )

)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the assigned Hearing Officer of the Division of Administrative Hearings, on June 21 and 22, 1989, in Tallahassee, Florida.

APPEARANCES

For Hospital Development Jay Adams, Esquire and Services Corporation 1519 Big Sky Way d/b/a Plantation General Tallahassee, FL 32301 Hospital: and

Richard C. Bellak, Esquire FOWLER, WHITE, GILLEN, BOGGS, VILLAREAL & BANKER, P.A.

101 North Monroe Street Suite 910

Tallahassee, FL 32301

For Department of Health Richard A. Patterson, Esquire and Rehabilitative Department of Health and Services: Rehabilitative Services

2727 Mahan Drive

Tallahassee, FL 32308

For Florida Medical Eric B. Tilton, Esquire Center: 214B East Virginia Street

Tallahassee, FL 32301

For North Ridge Medical Michael J. Cherniga, Esquire Center: ROBERTS, BAGGETT, LAFACE

& RICHARD

101 East College Avenue Post Office Drawer 1838 Tallahassee, FL 32302

For North Broward Jack M. Skelding, Esquire Hospital District d/b/a PARKER, SKELDING, LABASKY Broward General Medical & CORRY

Center: 318 North Monroe Street Post Office Box 669 Tallahassee, FL 32302

STATEMENT OF THE ISSUE

The issue is whether the application made by Plantation General Hospital for certificate of need number 5736 for an open heart surgery program should be granted.

PRELIMINARY STATEMENT

A prehearing stipulation was filed by the parties at the opening of the hearing and supplemented by a separate stipulation from Broward General Medical Center. According to the stipulation, the following criteria found in Section 381.705(1) are not at issue: (e), (f), (g), (h), except for the availability of health manpower and the weight to be given to Plantation's proposed indigent and Medicaid utilization and (j), except to the extent that managed care is an element of competition. The criteria contained in Section 381.705(2)(a)-(d), are at issue. The criteria found in Section 381.705(2)(e) are not at issue.

With respect to the Department's rule governing certificates of need for open heart surgery programs, the provisions of Rule 10-5.011(1)(f)9 and 10 are not in dispute. It was agreed that all parties have standing.

FINDINGS OF FACT

1. General.

   
   

   1. Procedural background and description of the parties.

      
      

      1. Plantation General Hospital filed a letter of intent with the Department of Health and Rehabilitative Services (Department) and the local planning agency noticing its intention to file an application for a certificate of need for an adult open heart surgery program on August 28, 1988. Its application for certificate of need No. 5736 was filed on September 28, 1988. On October 10, 1988, the Department notified Plantation of omissions from its application, which were supplemented in a response filed November 14, 1988, and the Department deemed the application complete on November 16, 1988. The Department issued its notice of intent to deny the application on January 30, 1989, and Plantation requested a hearing on that denial. Florida Medical Center, North Ridge General Hospital and Broward General Hospital intervened in the proceeding. Broward General sought to intervene shortly before the hearing was to begin, and its participation was limited. By notice dated May 31, 1989,

         the Department announced that it had reconsidered its position and would support Plantation's application.

         
         

      2. Plantation General Hospital is a 264-bed general medical surgical hospital located in the City of Plantation, Broward County, Florida. It is owned by Hospital Development and Services Corporation which in turn is owned by Healthtrust, Inc. It offers acute care services, except for open heart surgery and burn treatment. It does not propose to perform pediatric open heart surgery. It does offer cardiac catheterization and other non-invasive cardiac services such as EKG, stress testing and other procedures. It also has services which would support an open heart surgery program such as radiology, pathology, anesthesiology, neurology, intensive care, and an emergency room.

         
         

      3. Plantation received a certificate of need in 1984 to operate a cardiac catheterization laboratory, which opened in April of 1985. It now performs a large number of catheterizations, so that there is pressure to offer an open heart surgery program. Diagnostic catheterizations often reveal that a patient could benefit from open heart surgery. Patients prefer to have surgery done at the hospital where the catheterization is done. Conversely, patients often choose a hospital for catheterization that has the capability to perform open heart surgery. Patients having therapeutic catheterization (angioplasty) must be served at a hospital approved to offer open heart surgery. Therapeutic catheterization itself sometimes triggers the need for immediate heart surgery.

         
         

      4. Plantation is currently constructing a new wing for its obstetrical patients and proposes to convert part of its present obstetric space for use by the open heart surgery program. The proposed open heart area would have a single operating room, a recovery area, a pump room for the heart-lung oxygenator pump, a sub-sterile storage area and a nurses' station. Existing beds near the proposed open heart area are monitored beds which could be converted to cardiovascular intensive care unit beds at a lower cost than would be the case for wholly new construction. That conversion would not require certificate of need review. The project Plantation General proposes involves the renovation of 2,229 square feet at a projected cost of $267,480. Equipment is projected to cost an additional $300,000. Plantation General anticipates the total project cost will be $599,970.

         
         

      5. Plantation is not a teaching or research hospital and does not propose to offer teaching or research as part of its open heart surgery program. The hospital does not contend that there is an unmet need for indigent open heart health services which its project would fill. It has historically provided some medical service to Medicaid patients and to the medically indigent. Plantation does not contend, however, that the level of its medical services historically provided to the medically indigent, the extent to which it proposes to provide open heart surgery to underserved population groups, or to Medicaid patients enhances its application. These items are neutral factors which have no impact on the need determination. The Intervenors acknowledged that Plantation would provide minimally appropriate open heart services for the indigent.

         
         

      6. Plantation General's owner, Healthtrust, Inc., has created a limited partnership to become the new owner of its hospital; Hospital Development and Services Corporation will serve as the general partner, and a number of doctors will be limited partners. The partnership offering is closed, and the approvals, transfers, and other activities created by the closing of the partnership are ongoing. It is anticipated that after receipt of all approvals

         and transfers the partnership will be deemed to have been in effect as of June 1, 1989.

         
         

      7. Florida Medical Center is a 459 bed acute hospital located in Fort Lauderdale, Broward County, Florida. It provides a full array of cardiac services, with the exception of heart transplants. It offers cardiac catheterization services, and was the first hospital to offer open heart surgery in Broward County.

         
         

      8. North Ridge Medical Center presented no testimony about its size or location because its standing had been stipulated. It provides a full array of cardiac services including cardiac catheterization and open heart surgery, but not heart transplants. North Ridge performs the largest volume of open heart surgery procedures in Broward County.

         
         

      9. Broward General Hospital is the largest facility of the four facilities operated by the North Broward Hospital District, an independent special taxing district. Broward General has 744 acute care beds, and is located in Fort Lauderdale, Florida. It operates an array of cardiac services, including cardiac catheterization, coronary angioplasty, cardiac electrophysiology studies, intra-aortic balloon pumping, and insertion of temporary and permanent pacemakers. Its physical plant consist of one open heart surgery suite, one cardiac catheterization laboratory, and cardiac and progressive care beds. On January 26, 1989, North Broward Hospital District entered into a contract with the Cleveland Clinic Florida which will permit the clinic to provide its cardiac services exclusively at Broward General.

         
         

      10. Broward General is in the process of expanding its open heart surgery suites from one suite to two, its catheterization labs from one to two, and adding 16 coronary care and 24 progressive care beds.

          
          

      11. Broward General has 29 staff cardiologists, three of whom are Cleveland Clinic Florida physicians who hold interim privileges. Eight cardiovascular surgeons are on its staff, two of whom are Cleveland Clinic Florida physicians.

          
          

2. Statutory Criteria for Evaluating Certificate of Need Applications.

   
   

   1. Consistency with the state health plan and local health plan. Section 381.705(1)(a), Florida Statutes.

      
      

      1. The Department is required to consider

         The need for the health care services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. Section 381.705(1)(a), Florida Statutes.

         
         

         Plantation General does not contend that there are emergency circumstances in Broward County which threaten the public health and require approval of its application. Prehearing stipulation, paragraph 12. There is no applicable state health plan because the last plan was specifically drafted to cover the period 1985-87. That last plan does contain a goal stating that it is the state's desire to "ensure the appropriate availability of . . . open heart surgery services at a reasonable cost" and the goal is implemented by an objective, number 4.2, which is "to maintain an average of 350 open heart

         procedures per program in each district through 1990." This objective is predicated upon the assumption that the Department will interpret subparagraph

         11 of Rule 10-5.011(1)(f), Florida Administrative Code, infra, to permit a new program if the existing programs, on the average, provide 350 open heart procedures per year. The correctness of that interpretation is discussed in Findings 60 and 61, as well as in the Conclusions of Law.

         
         

      2. The state health plan also states that applicants proposing cardiac surgery must make those services available to all segments of the population regardless of their ability to pay. Section 381.705(1)(n). The parties stipulated that Plantation has provided medical services to Medicaid patients and to the medically indigent and the extent to which Plantation proposes to provide open heart services is neither an enhancement nor detraction from its application.

         
         

      3. Currently five facilities in Broward County provide open heart surgery: Broward General, Florida Medical Center, North Ridge, Holy Cross, and Memorial Hospital. There are no facilities which have not yet opened, but which have obtained certificate of need approval for open heart surgery. During the period of July 1987 - June 1988, current providers had the following volume of procedures:

         
         

         Hospital Broward General		Number of Procedures 143
         Florida Medical	Center	382
         North Ridge		781
         Holy Cross		362
         Memorial		478
         Total Dividing the number of	procedures	2,146 by the five existing providers yeilds an

         average of 431 procedures per program. The average number of procedures therefore exceeds 350, which is consistent with the provisions of the old state health plan.

         
         

      4. The local health plan has three criteria which bear upon the application. It requires that the application be consistent with accreditation standards, the hospital must be willing to accept patients from all payor classes, and must comply with the Department's rules. It is stipulated that Plantation General has full accreditation and if approved will obtain accreditation for its open heart surgery program. Plantation accepts Medicare, Medicaid, private pay, and indigent patients. At page 70, its application states that the hospital will provide 2% of its open heart surgery to indigent patients, 67% of its patients will be Medicare patients and 31% will be private pay patients. The hospital has not projected any Medicaid utilization because open heart surgery is typically performed on older patients, and most of those patients will qualify for Medicare rather than Medicaid due to their age. No Medicaid open heart surgery was reported in HRS District X (Broward County) for the year preceding Plantation's application.

         
         

      5. The application is consistent with the last state health plan and the local health plan.

         
         

   2. Availability, utilization, geographic accessibility and economic accessibility of facilities in the district. Section 381.705(1)(b), Florida Statutes.

      1. Open heart surgery is available to all residents in Broward County within two hours normal driving time; it is therefore geographically accessible. Plantation does not propose to provide a substantial portion of its open heart services to individuals who reside outside of HRS Service District X (Broward County). Plantation does not contend that there is a pool of patients who are denied access to open heart surgery on financial grounds. The increased access to indigents which Plantation would provide is negligible (only about six surgeries per year), and the parties have stipulated that its commitment to provide services to the medically indigent neither enhanced nor detracted from its application.

         
         

      2. There is no evidence of any waiting list at facilities which provide open heart surgery which would be alleviated by the approval of Plantation General's application. Plantation's argument that service availability has been a problem for some patients at Plantation who need open heart or emergency angioplasty services is rejected. It can provide diagnostic catheterizations but not angioplasty because it lacks open heart surgery certification. With respect to emergency angioplasty, there is an inherent service availability problem when a hospital such as Plantation establishes a catheterization lab, when it is not approved to provide open heart surgery. Angioplasty can have the unfortunate side effect in a small number of cases of triggering an immediate need from open heart surgery. A patient must be immediately transferred, or the open heart surgery must be performed at Plantation, even though it is not approved for that service. Those problems are problems which Plantation knowingly assumed when it began its catheterization lab knowing that it was not approved for open heart surgery.

         
         

      3. It is not significant that at times of peak demand at Florida Medical Center there may be no beds available for a patient from Plantation who needs open heart surgery. Patients are commonly transferred to Florida Medical Center because it is the nearest hospital to Plantation. More than one half of its patients who were transferred went to Memorial Hospital, however, not Florida Medical Center. There is no evidence that another hospital in Broward County has not had a bed available for a patient from Plantation who needed open heart surgery when Florida Medical Center's unit was full.

         
         

      4. The issues of efficiency and the extent of utilization raise the question whether there is additional capacity in existing open heart programs which should be used in preference to opening a new program at Plantation General. This is related to the need calculation made in Rule 10-5.011(1)(f)8, Florida Administrative Code, discussed at Finding 60. An efficiency standard of

         350 procedures per year is found in Rule 10-5.011(1)(f)11a(I), Florida Administrative Code. That utilization standard is met by all facilities in Broward County except for Broward General, see, Finding 14, supra. It provided only 143 open heart procedures in the year July 1987-June 1988. Broward General has been providing open heart surgery for 16 years and has not yet approached the 350 procedures per year. Broward General is in the process of substantially expanding its cardiac program, through its association with the Cleveland Clinic, and the addition of a second open heart surgery operating room. That expansion could accommodate the volumes Plantation seeks to achieve.

         
         

      5. Florida Medical Center already has two open heart surgery rooms in operation and is adding a third. Based upon its current volumes and the fact that there is no reasonable likelihood of real future growth in the use rate for open heart surgery, Broward General and Florida Medical Center have existing

         capacity to serve the demand for surgeries which Plantation projects it would perform during its first two years of operation.

         
         

      6. North Ridge provides approximately 600 surgeries per year, and utilizes more than one operating room. It also has capacity to contribute to District X (Broward County), especially given the reduced demand in Broward caused by the reduction in Palm Beach County residents coming to Broward County for open heart surgery. Open heart surgery programs in Palm Beach County hospitals have recently come on line, and are providing surgery for Palm Beach County residents who formerly traveled to Broward.

         
         

      7. There is no evidence that existing open heart surgery programs lack the capacity to sufficiently handle future demand. There is no proof that existing facilities are being over utilized, which is consistent with the prior finding that there is no waiting list at any provider. All candidates for open heart surgery are currently being served. There is little overlap in the medical staffs of Plantation General and Broward General, and Plantation referred no cases to Broward General for open heart surgery in 1987 and only three in 1988, but the additional capacity of Broward General is an important consideration. Part of the reason for the certificate of need process is to control and reduce capital expenditures, and, through that control to indirectly reduce associated labor costs and other ancillary costs which arise from the proliferation of medical services. To the extent that other institutions, especially Broward General, could provide additional surgery through its approved open heart surgery program, restraining an increase in the number of providers will eventually have the effect of directing patients to hospitals with lower utilization. This might not be the case if there were proof that Broward General did not provide quality care, and residents voted with their feet and shunned the program to seek care elsewhere. The parties have stipulated, however, that there are no quality of care problems with any of the existing open heart surgery programs in the county, including Broward General. Efficiency considerations therefore weigh against approval of the Plantation General application. There are no geographic accessibility problems, nor any reason to believe that access to open heart surgery by medically indigent or other underserved populations would be enhanced by the Plantation General proposal.

         
         

   3. Ability of applicant to provide quality care. Section 381.705(1)(c), Florida Statutes.

      
      

      1. Plantation General is fully accredited by the Joint Commission on the Accreditation of Hospitals. It provides quality care in the services now available at Plantation General. Plantation intends to implement its open heart surgery program by forming a steering committee to direct its development, with responsibility to assure that the program will comply with all applicable rules and provide high quality services.

         
         

      2. In an effort to keep the cost of its program low, the Plantation General application has sought to minimize the renovations, expansions, and the equipment attributable to the program. This attempt at cost effectiveness has serious quality of care implications. It will be difficult to provide a quality open heart program operating at a reasonable surgical volume with a single operating room; the application also proposes only to have one oxygenator pump, which is inadequate. Plantation General is likely to encounter difficulty in finding a sufficient number of skilled personnel to provide a quality program.

      3. It assessing the adequacy of a single open heart surgery operating room, it is necessary to keep in mind that Plantation will also be providing therapeutic catheterization, or angioplasty, which requires immediate access to open heart surgery as a back up. The volume of angioplasties will affect the hospital's ability to schedule open heart surgery in its single operating room, for angioplasty cannot take place if there is no operating room available for open heart surgery should the patient require it. Plantation projects it will handle between 203 and 271 angioplasties in the first year its open heart surgery program will operate, and between 218 and 291 angioplasties in the second year.

         
         

      4. The average time for an angioplasty is 3 to 3.5 hours. The open heart surgery team and other staff also must be available on site while angioplasty proceeds in case they are needed.

         
         

      5. In terms of the staff necessary to perform open heart surgery, the Plantation application indicates that there will be one surgical team. Each team consists of two surgeons, one anesthesiologist, a circulating nurse, a perfusionist to operate the heart-lung oxygenator pump, and two scrub nurses. Plantation did not adequately explain how its staffing projections would enable the open heart surgery service to cover the projected number of surgeries and angioplasties, given the substantial overtime that would have to be incurred if both the open heart and angioplasty programs operate.

         
         

      6. In order to provide angioplasty coverage, by 1991-92, Plantation's open heart surgery schedule will have to provide 654 to 873 hours of angioplasty back-up coverage, based on a three hour average angioplasty. In turn, this means that 12.5 to 17 hours of such coverage will be necessary each week based upon an average time of 3 hours for each angioplasty.

         
         

      7. The cardiac surgeons on staff at Plantation will require about 5 1/2 hours to perform open heart surgery without including clean up or set up time.

         
         

      8. For Plantation's open heart surgery program during its second year of operation, its health care planner, Mr. Nelson, assumes six operations per week during the first three-quarters of the year and eight per week in the last quarter of the year. The normal operating hours for the program will be 8 to 9 hours per day. Thus, for the first three quarters of 1991-92, open heart surgery will occupy the time available in the single operating room at least three days a week. The 4 to 5 angioplasties still must be covered, which will require at least 2 days of the dedicated open heart surgery room's time. By the last quarter of the second year of operation, the open heart surgery suite will be utilized at least 4 days a week for actual surgery, leaving only one day available for the necessary angioplasty back up coverage. Thus, the single operating room proposed will require the hospital surgical staff to regularly work well beyond normal operating hours and will create substantial scheduling problems to accommodate both open heart surgery and angioplasties. What this means is that it is not likely that the configuration for the open heart surgery program proposed by Plantation will work out. Plantation will have to add staff, and probably renovate and equip another operating room.

         
         

      9. The Intersociety Commission on Heart Disease Resources guidelines recommend that an open heart program have two fully equipped open heart operating rooms, or a designated open heart operating room immediately adjacent to a general surgical suite which also has the necessary equipment in place to provide open heart surgery. Plantation's proposal would violate these

         guidelines because it has only a single operating room and only enough equipment in to handle one operating room. Plantation's witness, Mr. Webb, did testify that he has worked in two other facilities with only one open heart operating room, that the rooms were not dedicated solely to open heart, and no serious problems were encountered with these programs, but his testimony did not deal with the problems likely to be encountered by Plantation given its projected open heart volumes and likely angioplasty volumes. It may be true that after the open heart surgery program is implemented, additional operating rooms might be added without requiring additional certificate of need review, but it is improper for the institution to low-ball its application projections, on the assumption that it can later make &*an inadequate proposal sufficient by additional capital expenditures for construction or reconfiguration of operating rooms, acquisition of additional equipment or hiring additional staff. Such a piecemeal process defeats the purpose of certificate of need review; it causes a review of selected portions of a program, rather than the program as it will actually operate.

         
         

      10. Plantation's intention to purchase a single heart-lung oxygenator pump is a serious deficiency. A single pump is likely to suffer occasional mechanical breakdown, and no other pump will be available in an emergency. More importantly, the pump will certainly need routine maintenance, and the heavy schedule of use for the operating suite based upon the projected volumes of open heart and angioplasty cannot be maintained with a single pump. The pump should not be moved from room to room because of the increased risks of contamination caused by movement.

          
          

      11. With respect to the configuration of the overall unit, the operating suite will have four cardiovascular intensive care unit beds in its open heart surgery area. This is an adequate design, even though most of the cardiovascular intensive care beds will be on the third floor.

          
          

      12. Plantation General's ability to provide quality care is also questionable based upon the limited partnership it has formed with its doctors. Since the advent of diagnostic related groups (DRGs), the reimbursement to hospitals from federal sources has been limited to a flat fee arrangement. It is in the interest of the hospital to discharge patients as quickly as possible, to maximize the value of that payment. On the other hand, doctors refer, admit and discharge patients from the hospital, hospital administrators do not. Hospitals therefore seek ways to encourage doctors to share the hospital's financial incentives to make a profit within the payment constraints of diagnostic related groups. One way to do this is to have doctors share in the profitability of the hospital. Plantation General has formed a limited partnership with some of its doctors. Those limited partners must be on the active staff of Plantation. The general partner is Hospital Development and Services Corporation, the owner of Plantation General Hospital. The partnership will lease the hospital, and the limited partners will be paid, based on their units of ownership, upon the operating cash flow of the hospitals. If doctors refer more patients to the hospital, the cash flow will be greater and distributions should be larger. This arrangement is fraught with the potential for abuse which is highlighted in the prospectus for the limited partnership, which states:

          
          

          Prospective Payment System. The Social amendments of 1983 established a prospective payment system for Medicare and amended Section 1866(a)(1)(F) of the Social Security Act (the "Act") to specify that hospitals seeking reimbursement under the prospective

          payment system must enter into agreements with a utilization and quality control peer review organization ("PRO"). Section 1886(f)(2) of the Act specifies that the Secretary of the Department of Health and Human Services may deny payment or require a hospital to take corrective action if a PRO provides the Secretary of the Department of Health and Human Services with documentation that a hospital has attempted to circumvent the prospective payment system through unnecessary admissions or overutilization.

          
          

          Fraud and Abuse. The Act imposes criminal penalties upon persons who make or receive kickbacks,

          rebates in connection with the Medicare prog anti-fraud and abuse rules prohibit prov others from soliciting, offering, receiving o directly or indirectly, any remuneration in r either making a referral for a Medicare-covere or item or ordering any covered service Violations of these rules may be punished by up to $25,000 or imprisonment for up to five both. In addition, the Medicare a and Program

          Protection Act of 1987 makes it a civil offense to violate these prohibitions, punishable by exclusion from the Medicare and Medicaid programs.

          
          

          The Limited Partners are to receive cash distributions based upon the available cash flow, if any, of the Partnership generated through the provision of services to patients admitted to the Hospital by physicians, some of whom will be Limited Partners. The Limited Partners therefore may receive a greater amount of distributions if physicians admit a greater number of patients to the Hospital. Individual investors share in the Partnership's cash flow only in proportion to their respective investments in the Partnership and not in accordance with the number of referrals or admissions each makes. Arguably, therefore, the investors' sharing of Partnership profits would not be a prohibited kickback or rebate. The Third Circuit United States Court of Appeals has recently held that the fraud and abuse rules are violated if one purpose (as opposed to a primary or sole purpose) of a payment to a provider is to induce referrals. U.S. versus Greber, 760 F. 2d 68 (1985). The Greber case involved the payment of fees for alleged professional services. Although the Greber holding (i.e., the one purpose test) casts an extremely wide net, its application to the present facts is not clear.

          
          

          Although as stated above, the present arrangement, which involves the allocation of cash flow on the basis of ownership interests held, arguably is not objectionable on these grounds, it is clear that as the number of referrals and admissions increase, revenues and, potentially, available cash flow will increase.

          It is not inconceivable, therefore, that the

          Partnership's activities may be held to violate the anti-fraud and abuse rules and subject the Partnership and the Partners to criminal and civil sanctions. The federal government has announced a policy of scrutinizing and evaluating joint ventures among healthcare providers under the fraud and abuse rules, and this area of the law is in a state of rapid development and change. Because of the changing state of the law and the lack of clear authority, it is not possible to give a more precise analysis of the application of the fraud and abuse provisions to the Partnership.

          
          

          The hospital's limited partnership arrangement is also probably contrary to the Code of Ethics of the American College of Physicians. It states:

          
          

          The physician should avoid any business arrangement that might, because of personal gain, influence his decision in patient care. . . In the case of personal conflicts, the moral edict is clear, the physician must avoid any personal commercial conflicts of interest that might compromise his loyalty in treatment of patients. Collusion with nursing homes, pharmacists, or colleagues for personal financial gain is morally reprehensible. For a physician to own shares in a drug company or in a hospital in which he practices does not constitute an unethical behavior of itself, but it does make him vulnerable to the accusation that his actions are influenced by such ownership. The safest course would be to avoid any such potentially compromising situation.

          
          

          Unfortunately, the application here has the direct effect of promoting compromising situations of this type. Moreover, this type of arrangement has been the subject of a "special fraud alert" from the Office of the Inspector General of the U. S. Department of Health and Human Services. One of the factors that the Inspector General looks to is "whether investors are chosen because they are in a position to make referrals." Under the prospectus for the Plantation General limited partnership, only medical staff can become limited partners and "physicians expected to make a large number of referrals may be offered greater investment opportunity in the joint venture than those anticipated to make fewer referrals." (Tr. 520) Moreover, "investors may be required to divest their ownership interest if they cease to practice in the service area, for example, if they move, become disabled, or retire." (Id)

          
          

      13. While it is understandable that the owner of the hospital may find the limited partnership to be an attractive means to bond physicians to its profit motivation, this set-up creates inherent conflicts of interest which have serious implications for quality of care. This innovation should not be condoned through certificate of need approval.

          
          

   4. Availability of health manpower and the extent to which the proposed services will be accessible to all residents of the District. Section 381.705(1)(h), Florida Statutes.

      
      

      1. An applicant must demonstrate that there is adequate health manpower to meet the staffing needs of the project. There is a current nursing

         shortage nationally, and recent graduates from nursing school do not posses the training necessary to perform in an open heart operating room or critical care after surgery. One of the means Plantation proposes to fill its nursing positions is to use agency nurses, nurses provided by pool services from temporary placement agencies. (Tr. 70, Plantation's proposed finding 31).

         While such nurses may be valuable in other parts of the hospital, these sort of temporary nurses should not be used in an open heart program.

         
         

      2. Hospitals in general and open heart surgery programs in particular suffer an acute shortage of qualified nursing staff. Florida Medical Center has found it necessary to establish its own training program because it cannot find adequately trained nurses in Southeast Florida, including Dade, Broward, and Palm Beach Counties. Even North Ridge Hospital, which has a reputation for high staff retention, has a nursing turn-over rate of 20 to 25%. When Delray Hospital in Palm Beach County opened its open heart surgery program its program was under substantial pressure because of its high nursing turn-over rate, its inability to find nurses to cover a 24 hour period of time and nurse "burn out" from excessive overtime. The Broward County nursing shortage contributes substantially to increased health care costs because of the marketing and monetary incentives related to recruiting and retaining nurses. New open heart programs must raid nurses from competing programs, which exerts a upward pressure on nurse salaries. If the Plantation program were to be approved, the existing open heart programs would probably lose nurses, which has an adverse impact on the present system.

         
         

      3. None of the foregoing should be construed as a reason to deny nurses the economic advantages which arise from a nursing shortage. The issue is whether, taken as a whole, the benefits of the application justifies the upward pressure on health care costs implicit in the approval of an additional program when there is additional capacity in current providers. On balance here, there is inadequate reason to do so.

         
         

   5. Immediate and long term financial feasibility. Section 381.705(1)(i), Florida Statutes.

      
      

      1. Many of the elements of financial feasibility are not in dispute. The parties have stipulated that Healthtrust, the parent corporation for Plantation General, has access to $600,000 and will make those funds available if this application is approved. They also stipulated that if one operating room and one pump are adequate and appropriate, the $300,000 in equipment cost shown in Table 3 of the application adequately covers necessary equipment costs; that the 2,229 gross square feet to be renovated, as shown in the line drawing in the application, is adequate for creating the room shown in the drawing,(i.e., one operating room, one recovery room, a pump room, an observation room, a sub-sterile storage area, a scrub area, and a nurses station), and the renovations can be accomplished for $299,970. The parties also stipulated that Plantation General's bad debt projections, policy adjustments and contractual adjustments contained in is pro forma are reasonable if the gross revenue projection is accurate. The salary projections per full- time equivalent found on Table 11 for staff are reasonable but the parties did not agree that the number of positions or the distribution of staff is appropriate. The perfusionist charge is reasonable, and the depreciation cost is correctly stated in the application. The projections of the percentage of utilization by payor class found in the application is reasonable.

      2. The areas of contention are the long and short term feasibility of the project based upon Plantation's projected charges, and the accuracy of Plantation's projected expenses.

         
         

      3. Plantation projects it will perform 184 open heart surgeries in its first year of operation and 312 in the second year. The anticipated average charges are $34,860 in the year beginning July, 1990 and $36,603 in the year beginning July, 1991. These charges were calculated by an outside consultant who has no control over the actual charges which the hospital may establish if the program is implemented.

         
         

      4. The average charge was predicated upon an examination of Florida Health Care Cost Containment Board data pertaining to the DRGs for open heart surgery reported by the five Broward open heart providers during the third quarter of 1986. The charges ranged from a low of $29,063 at North Ridge to a high of $39,208 at Hollywood Memorial.

         
         

      5. The projection of average charges is inherently imprecise, but is useful to analyze whether, if Plantation charged patients an amount within the range of the average actual charges within the district, the project would be financially feasible. Plantation does not guarantee that its charges will be no more than the average charges. Its total income will vary based upon the mix of cases and the types of patients it serves. Based on the anticipated charges, Plantation calculated the incremental cost associated with the project. The incremental revenue to the hospital (that is, the revenue generated by the facility with the open heart surgery program as opposed to revenue that will be realized without the program) should be $6,414,240 in the first year and as much as $11,420,136 in the second year. This calculation is necessary in order to determine whether costs would exceed the likely charges, which would clearly affect the financial feasibility of the project. Plantation projected that these costs and deductions from revenue would be $2,919,293 the first year and

         $5,286,554 in the second year.

         
         

      6. It is quite likely that Plantation would perform 184 surgeries during the first year and it is reasonable to assume it could achieve the projected 312 surgeries in the second year.

         
         

      7. Plantation's average charges as set forth in the application may be low. Plantation General's charges are, on balance, about 20% higher than the charges at North Ridge. This would mean that the average charge for Plantation General's first year of operation would be $42,708 rather than $34,860. It might have been better if Plantation General had developed a charge comparison taking into account the cost per adjusted admission by using the case mix index published by the Florida Health Care Cost Containment Board. The failure to use that adjustment is not that significant given the inherent "softness" in the projection of patient charges. Plantation General's projected charges found in Finding 42 are reasonable.

         
         

      8. What is much more significant is the questionable nature of Plantation General's expenses. The Intervenors have argued that the applicant's cost projections fail to include costs associated with non-revenue producing Departments, such as pharmacy, laboratory, X-ray, nuclear medicine, respiratory therapy, EKG, cardiac catheterization and pathology, dietary and medical records. In essence, the Intervenors claim that the only expenses which are acknowledged by Plantation General are incremental costs from instituting the open heart program, but not the true cost.

      9. Plantation General presented the testimony of Mr. Tharpe, who prepared the cost analysis. He testified that he included the cost of supplies, laboratory and all other ancillary areas that provide services to patients by taking the projected income from the open heart surgery program, and comparing it to the projected income of the entire hospital. The actual 1988 hospital revenues were inflated by 5% a year to estimate the hospital's 1990-91 revenue. Open heart revenues would then constitute about 7% of total hospital revenues. He used this percentage to estimate the cost that would be associated with using non-revenue generating departments. This 7% ratio was not applied to fixed overhead cost such as the mortgage costs or the cost of hospital administration, because those costs would be incurred whether or not Plantation operated an open heart program. Neither did he apply the 7% ratio to other cost centers such as the obstetrics or pediatrics departments. In this way, Mr. Tharpe claimed he allocated the cost for all routine and ancillary areas which would provide services to open heart patients. This analysis is unpersuasive. Followed it to its logical conclusion, no new program would ever have to account for its share of the ongoing cost of the hospital imbedded in fixed overhead, such as mortgage, administration, power, or interest charges. It provides a convenient excuse for the hospital to understate expenses and thereby make a new service look more profitable, and therefore more likely to be financially viable in both the short and long terms. A better way to perform cost analysis is to use a step-down cost analysis. This procedure allocates overhead of non-revenue departments to revenue departments to get fully costed figures for delivering services within each hospital department. This step-down cost analysis is a generally accepted accounting procedure and is one required by Medicare. The statistical basis of step-down cost analysis avoids the inherent oversimplification in the assumption that costs are linear, i.e., that all costs and charges have the same relationship to each other within the hospital. Without necessarily accepting Mr. Newman's projection that the fully allocated cost of open heart surgery at Plantation General would be $22,800 per case and not $12,800 per case, the is persuasive that the expense projections of Plantation General are unrealistic, and understated. It is not possible, based on the record made, to determine what the actual expense would be. Due to this failure of proof, it is therefore impossible to determine whether the project is feasible in the long or short term. While open heart surgery is often a very profitable service, in the absence of persuasive evidence on the cost of providing open heart surgery services, it would be inappropriate to assume that the project would be sufficiently profitable that it would be financially feasible in the short or long terms.

         
         

   6. Needs and circumstances of facilities providing a substantial portion of their services to persons not residing in the service area. Section 381.705(1)(k), Florida Statutes.

      
      

      1. The prehearing stipulation states that this criteria is an issue, but it really is not. Although other hospitals such as North Ridge and Florida Medical Center provide services to patients from Palm Beach County, the effect of the project on them is not relevant under this criteria. This criteria focuses on the effect of the establishment of a new service at Plantation General on other providers located outside District X, Broward County. There is no proof that it will have any such effect.

         
         

   7. Probable impact of the proposed project on the cost of providing the service, including the effect on competition. Section 381.705(1)(l), Florida Statutes.

      1. The introduction of another provider of open heart surgery will provide the potential for additional price and non-price competition among providers of open heart surgery services. The major purchasers are really not the individuals who have surgery, but the managed care plans, such as HMOs and PPOs, which negotiate with hospitals on behalf of their subscribers. Plantation General currently has contracts with about 25 managed care plans and receives about 30% of its revenue from those plans. This is an indication that the market regards Plantation as a competitive provider. On the other hand, Florida Medical Center, which is its closest competitor geographically, is not actively seeking managed care contracts and has not added any for the last eighteen months. The addition of Plantation General would be consistent with the statutory directive to foster increased competition among health care providers. The Hearing Officer also accepts Dr. Zaretsky's testimony that even if all 184 surgeries which Plantation General projects it will perform during its first year were drawn from Florida Medical Center or, in the alternative, from North Ridge, neither hospital would suffer such a significant loss of revenue which should weigh against the approval of Plantation General's open heart surgery program.

         
         

      2. The analysis does not end there, however. Plantation General is likely to enter the market for open heart surgery with a substantial market share, a share equal to the number of surgeries it now refers out to existing providers. In that case, Florida Medical Center's number of open heart surgeries will fall below the 350 per year quality standard during both the first and second year of Plantation General's new program. Florida Medical Center will only stay above the 350 surgery standard if it increases its market share substantially, or if Plantation fails to meet its own market share projections. Both are unlikely. Based upon the Department's Rule 10- 5.011(1)(f)11b:

         
         

         No additional open heart surgery programs shall be approved which would reduce the volume of exis heart surgery facilities below 350 o

         procedures annually for adults . . . .

         
         

         Plantation General's program therefore conflicts with this portion of the Department's rule.

         
         

   8. Costs and methods of construction. Section 381.705(m), Florida Statutes.

   
   

   1. Based on the stipulation of the parties, the proposed renovations represent conventional construction methods that are not unreasonable. Neither the cost nor the methods of construction for the renovation of the 2,229 gross square feet have been put in issue. The costs are, however, understated to the extent that they do not provide for adequate construction, i.e., the need for a second operating room. See, Findings 31 and 32, above.

      
      

      1. Applicants past and proposed provision of services to Medicaid and indigents clients. Section 381.705(1)(n), Florida Statutes.

         
         

   2. According to the stipulation of the parties, the extent of Plantation General's commitment to make open heart surgery available to Medicaid or medically indigent neither enhances nor detracts from its project. (Stipulation at paragraph 25).

      
      

      1. Less costly, more efficient alternatives. Section 381.705(2)(a), Florida Statutes.

   3. There is no alternative to open heart surgery when it is medically indicated. It is more efficient to deny Plantation General's application and let existing providers absorb whatever increase there may be in the population seeking open heart surgeries. This is especially significant because the proposal would drop Florida Medical Center below the 350 surgeries per year and because Broward General is not currently operating with an existing current volume of 350 adult open heart surgeries per year. See, Rule 10- 5.011(1)(f)11.a.(I), b., Florida Administrative Code.

      
      

      1. Appropriateness and the efficiency of the existing facilities. Section 381.795(2)(b), Florida Statutes.

         
         

   4. The existing open heart surgery programs in Broward County have the capacity to perform additional open heart surgeries. See, Findings 20-22 above.

      
      

   5. The expansion of those facilities, especially in view of Broward General's failure to meet the 350 surgery minimum volume requirement of Rule 10- 5.011(f)11.a.(I), Florida Administrative Code, weighs against approval of the application. The denial of Plantation's application may have an effect on Broward General's number of surgeries, for a limitation on the number of providers should have the effect of directing more surgeries to Broward General. This assumption is inherent in the rule.

      
      

      1. Alternative to new construction. Section 381.705(2)(c), Florida Statutes.

         
         

   6. As with the preceding paragraph, the expansion of existing services such as that of Broward General is an alternative to the capital expenditures and related labor costs incident to the opening of an open heart surgery program at Plantation General.

      
      

      1. Problems facing patients in the absence of this proposal Section 381.705(2)(d), Florida Statutes.

      
      

   7. There is no evidence of any problem of geographic access, and no evidence that the opening of this program will improve, in any substantial degree, financial access to underserved populations, nor is there evidence of a need for additional programs because the existing programs are at capacity. That, from time to time, Florida Medical Center is unable to admit patients who doctors at Plantation General would like to transfer there does not show that there is a problem obtaining open heart surgery in the service district. Florida Medical Center is not the only other provider of open heart surgery. The problem which patients having catheterization at Plantation General face if they need open heart surgery is inherent in Plantation General's decision to

      establish the cardiac catheterization program when it did not also have approval for open heart surgery, and cannot be used to bootstrap the present application.

      
      

3. Rule Criteria for Evaluating Certificate of Need Applications.

1. Need. Rule 10-5.011(1)(f)2, 8, and 11, Florida Administrative Code.

   
   

   1. The rule on open heart surgery states, in part that:

      
      

      The department will not normally approve applications for new open heart surgery programs unless the conditions of sub-paragraphs 8. and 11. below, are met.

      There is no persuasive proof that the situation in Broward County is abnormal, due to an unavailability or inaccessibility to open heart surgery services.

      There is no over-crowding at existing providers, or some quality of care problem with an existing provider which causes potential patients to shun a program.

      Neither is there a monopoly in the district which should be broken up to provide consumers of health care choice and generate competition. The only circumstance which might be characterized as abnormal is the recognition that Broward General has had its program for a substantial time but has not yet achieved an annual volume of 200 open heart procedures, the volume which is the ordinary minimum for a quality program. See Rule 10-5.011(1)(f)5d., Florida Administrative Code

      . There is no testimony that the care offered by Broward General is inadequate, or that it is somehow inaccessible, which accounts for the low number of procedures.

      
      

   2. The rule provides a mathematical calculation for the need for additional open heart providers in a service area. Rule 10-5.011(1)(f)8., Florida Administrative Code. It calculates a base period: The twelve-month period beginning 14 months prior to the filing of the hospital's letter of intent. This is the period July 1, 1987, through June 30, 1988. During the base period, 2,146 open heart surgeries were performed in Broward County. (See, Finding 14.) The population of the county at the mid-point of this period, January 1, 1988, was 1,198,243 persons. This results in a use rate in Broward County of 179.1 open heart surgeries per 100,000 population. Based upon an anticipated opening of services in July 1990, the county population at that time is projected to be 1,247,226 persons. Multiplying the use rate by the projected population yields a need for 2,233 open heart surgeries in Broward County in 1990. This number is then divided by 350 procedures per facility to assess the number of facilities needed; there is a need for 6.4 open heart programs and there are presently five open heart providers. According to the formula in sub- subparagraph 8 one additional provider may be approved. This need assessment, however, is not controlling. Other portions of the rule place limits on the need for additional programs, even when the need calculation in subparagraph 8 supports adding a provider. Rule 10-5.011(1)(f)11, Florida Administrative Code, states in pertinent part:

      
      

      1. There shall be no additional open heart surgery programs established unless:

         
         

         1. The service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart surgery cases per year...,

      
      

      b. No additional open heart surgery program shall be approved which would reduce the volume of open heart surgery facilities below 350 open heart procedures annually....

      
      

      The text of the rule requires "each" provider to operate at 350 cases per year before another program is approved. There is no mention of any averaging of the total number of cases under sub-subparagraph 11a in determining whether the requirement is met.

      
      

   3. Averaging the number of open heart surgeries in each program makes little sense in the context of the entire rule. There would be no need

      for both sub-subparagraphs 11a(I) and b, for if there is a need in the district, each existing and approved open heart surgery program in a district must be handling 350 procedures on average.

      
      

   4. The 350 surgery standard in the rule was adopted based upon the National Health Planning Guidelines issued in March, 1978. These guidelines approved recommendations of the Intersociety Commission on Heath Disease Resources, which state:

      
      

      In order to prevent duplication of costly resources which are not fully utilized, the opening of new units should be contingent upon existing units operating and continuing to operate at a level of least 350 procedures per year.

      
      

      Those Guidelines also state that additional open heart surgery services should not be permitted unless existing services are operating at, and will continue to operate at a minimum of 350 surgeries per year.

      
      

   5. Sub-paragraph 11 of the rule is clear; each provider must operate at a level of 350 cases annually before another applicant will be approved. Plantation General's application fails in two respects: Broward General is currently providing less that 350 surgeries per year, and if Plantation is approved, both Broward General and Florida Medical Center will fall below the

      350 standard. Plantation General has failed to prove that any circumstances at Broward General are so abnormal that the "not normal" fail-safe provision of Rule 10-5.011(f)2., Florida Administrative Code, should come into play. Mr. Nelson, the health planner for Plantation General attempted to show that the opening of the program at Plantation should not cause the annual number of surgeries done at Florida Medical Center to fall below 350. That testimony was not as credible as the testimony of Ms. Lamb, or especially the testimony of Dr. Luke. Mr. Nelson's analysis assumed that the open heart surgery use rate would continue to increase at the same rate that it had increased in the past. This is not a reasonable assumption. It is likely that the use rate in Broward County will decline, not increase, for a number of reasons, including the prevention of heart disease through wellness trends, the increased use of alternative therapy such as angioplasties, and the affect that utilization reviews and cost containment measures have had on the number of open heart surgery. Moreover, Broward County has a higher use rate than the state average, which is also substantially higher than the use rate in Palm Beach County, although the populations of both counties are similar. The primary reason for Broward's high use rate has been that until recently Palm Beach County residents had to come to Broward County hospitals for open heart surgery. The opening of open heart surgery programs in Palm Beach County will continue to depress the Broward County use rate. Taken as a whole, the need methodology found in the rule, consisting of the need determination in Rule 10-5.011(1)(f)8, and the further cutoff provisions found in sub-subparagraphs 11a and b show that there is no need for an additional open heart surgery program in Broward County.

      
      

2. Service availability. Rule 10-5.011(1)(f)3, Florida Administrative Code.

   
   

   1. By use of a single operating room, Plantation General's proposed program is not capable of providing 500 open heart operations per year, as required by Rule 10-5.011(1)(f)3d, Florida Administrative Code. Theoretically the program could serve two cases per day, five days a week for 52 weeks a year, and thus handle a total of 520 cases. This ignores, however, the necessity to leave the single operating room available for open heart backup when angioplasty

      procedures are going on. The hospital projects and should achieve a substantial volume of angioplasty if the open heart program is approved. (See, Finding 26, above.) Even Plantation General, in its proposed recommended order, acknowledged "that it is most unlikely that Plantation could actually do 500 cases per year in a one operating room open heart program." (Proposed Finding 66.)

      
      

   2. Plantation General argues, however, that it is only necessary that the room have "the capacity to do that many [500] cases." Id. If Plantation had proposed to use the room solely for open heart surgeries, without also having to make its operating room available for its projected volume of angioplasty, Plantation General's argument might prevail. Because Plantation General does propose a substantial volume of angioplasties, the backup time necessary for those cases must be taken into account. The proposal it has made does not meet the rule requirement that its program be capable of providing 500 surgeries per year.

      
      

3. Service accessibility. Rule 10-5.011(1)(f)4, Florida Administrative Code.

   
   

   1. The rule requires that "open heart surgery shall be available to all person in need." Rule 10-5.011(1)(f)4d, Florida Administrative Code. The level of commitment to indigent care in Plantation General's application neither enhances nor detracts from its application. This has been stipulated by all parties. Travel time for surgery is not a problem in Broward County, and the service would meet the requirement for hours of operation. Rule 10- 5.011(1)(f)4a, and b, Florida Administrative Code. The single operating room with a single heart-lung oxygenator pump means that emergency procedures cannot be done within a maximum of 2 hours waiting time. An open heart operation takes more than 5 hours, an angioplasty takes 3 hours or more. Once the operating suite is committed to one of those procedures, no emergency procedure can be performed within 2 hours. The proposal fails to meet Rule 10-5.011(1)(f)4c, Florida Administrative Code.

      
      

4. Service quality. Rule 10-5.011(1)(f)5, Florida Administrative Code.

   
   

   1. The application meets the requirements of Rule 10-5.011(1)(f)5a that the hospital be accredited by the Joint Commission on the Accreditation of Hospitals. It has not met the requirement of Rule 10-5.011(1)(f)5b that "any applicant proposing to establish an open heart surgery program must document that adequate numbers of properly trained personnel will be available to perform in the following capacities...." The application only states that the necessary personnel will be available (Application, at 21-22), but does not reveal how Plantation General proposes to staff its program, especially with experienced nurses. Similarly, another subportion of the rule on service quality requires that "any hospital proposing or operating an open heart surgical program shall have a written plan specifying projected caseloads and projected space, support, equipment and supply needs for the open heart surgical procedures and patients." Rule 10-5.011(1)(f)5e, Florida Administrative Code. No such plan was included in its application; instead Planation proposes to draft its plan following the approval of its certificate of need. (Application at 22). This is improper, for the adequacy of the plan cannot be analyzed as the application is being considered. This is especially significant in terms of a plan for operating the program with a single heart-lung oxygenator pump. How the hospital expects to operate the program with no second pump for emergencies, or for use while the first pump is under ordinary maintenance is a significant deficiency. The application therefore fails to meet this portion of the rule.

5. Cost effectiveness. Rule 10-5.011(1)(f)6, Florida Administrative Code.

   
   

   1. It is likely that the charges made by Plantation General will be in line with those from other competitive providers of open heart surgery in the Broward County area. Market forces would prevent Plantation from charging more than the going rate. There is insufficient evidence, based on Plantation General's present charge structure, to find that its charges would be appreciably below the cost of other providers. There is no undertaking in its application to charge no more than the $34,860 per case found in Table 8 of its application. (Application page 71). The application meets Rule 10- 5.011(1)(f)6b, Florida Administrative Code.

      
      

6. Consistency with state and local health plans. Rule 10-5.011(1)(f)7, Florida Administrative Code.

1. The plan is consistent with the state and local health plans. See, Finding 16, above.

   
   

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction over this matter. Sections 120.57(1) and 381.709(5), Florida Statutes.

   
   

3. The applicant bears the ultimate burden of persuasion that it is entitled to a certificate of need. Boca Raton Artificial Kidney Center, Inc. vs. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985). In determining whether a certificate should be granted, a balanced consideration of all statutory and rule criteria must be undertaken. Department of Health and Rehabilitative Services vs. Johnson and Johnson, 447 So.2d 361 (Fla. 1st DCA 1984); Humana, Inc., vs. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985). The outcome of the need algorithm contained in the rule does not control the decision whether to granted a certificate of need. All criteria under the statute and rules must be examined. Balsam v. Department of Health and Rehabilitative Services, 486 So.2d 1341, 1349 (Fla. 1st DCA 1986).

   
   

4. Although the first part of the need algorithm contained in Rule 10-5.011(1)(f)8 shows numeric need for one additional provider, the mitigating portions of sub-sub-subparagraphs 11a(I) and (b) prohibit approval of a new program because existing providers do not provide at least 350 adult open heart surgeries per year, and if Plantation General is approved, an existing provider, Florida Medical Center, will not provide 350 surgeries per year. It would be improper to authorize a new program if all existing providers average 350 surgeries per year, but some providers were below 350 procedures per year. The Department has adopted this interpretation of the rule in recent decisions.

   See, e.g., Hillsborough County Hospital Authority vs. Department of Health and Rehabilitative Services, 12 FALR 785 (HRS 1990); Humana of Florida v. Department of Health and Rehabilitative Services, 12 FALR 823 (HRS 1990); Mease Healthcare

   v. Department of Health and Rehabilitative Services, 12 FALR 853 (HRS 1990).

   
   

5. It is true that some open heart surgery programs in Florida might never rise above the 350 standard, which could unfairly penalize applicants proposing additional services. The rule takes this into account, however, because its text allows an applicant to demonstrate unusual or abnormal circumstances and avoid the 350 surgery minimum. Rule 10-5.011(1)(f)2. Plantation General did not, however, carry its burden of persuasion that there are abnormal circumstances here. There is no evidence to explain why Broward

   General's program, which is apparently a quality program, has not yet reached the 350 surgeries which would permit the approval of an additional program. The Cleveland Clinic believes it is a quality program, and has associated with it.

   There are no problems with service availability, or accessibility from a geographic or financial standpoint which would be the basis for the Department to approve Plantation General's application despite the low number of surgeries at Broward General.

   
   

6. The applicant also has not demonstrated that like and existing health care providers cannot handle any increase demand Plantation General seeks to serve. The absence of any plan demonstrating how the open heart surgical program would operate, in tandem with an established and mature diagnostic cardiac catheterization program, is a substantial shortcoming. Rule 10- 5.011(1)(f)5e, Florida Administrative Code. Plantation General failed to prove that it could provide the necessary volume of open heart surgery (500 cases) in its one surgical suite with the limited equipment (a single heart-lung oxygenator pump), and with the demands on that suite to serve as backup for its cardiac catheterization program. Rule 10-5.011(1)(f)3d, Florida Administrative Code.

   
   

7. The failure of proof of financial feasibility is a significant deficiency in the application.

   
   

8. There is also substantial question about the quality of care the program will provide, in view of the financial tie-in which the proposed limited partnership will have with physicians making referrals to the open heart surgery program. Taken as a whole, the application made by Plantation General Hospital for a certificate of need to operate an open heart surgery program should be denied.

RECOMMENDATION

It is RECOMMENDED that the application of Plantation General for certificate of need No. 5736 to implement an open heart surgery program in HRS District X be denied.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of June, 1990.

WILLIAM R. DORSEY, JR.

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this

29th day of June, 1990.

APPENDIX

Rulings on findings proposed by the Petitioner, Plantation General Hospital.

the number of procedures at Memorial Hospital.

1. To the extent necessary, adopted in Findings of Fact

   12 and 13.

2. Adopted in Finding of Fact 15.

3. Adopted in Finding of Fact 67.

4. Adopted in Finding of Fact 15.

5. Rejected as subordinate to other findings.

6. Adopted in Finding of Fact 16.

7. Adopted in Finding of Fact 17.

8. Rejected for the reasons stated in Findings of Fact

   18 and 19.

9. Discussed in Findings of Fact 20 through 23.

10. Rejected because there is no service availability problem and the economic access of Plantation would add as minimal.

11. Generally adopted in Finding of Fact 24.

12. Rejected as argument.

13. Rejected for the reasons stated in Finding of Fact 32.

14. Rejected, the proposal to have only one heart-lung pump is a serious deficiency, especially due to the failure to have developed as part of the application the written plan required by Rule 10-5.011(1)(f)5d, Florida Administrative Code.

15. To the extent necessary, discussed in Finding of Fact 34.

16. Rejected for the reasons stated in Findings of Fact

    37 and 38.

17. Rejected for the reasons stated in Findings of Fact

    37 and 38. The testimony of Ms. Levine that staff could be hired without substantial difficulty is rejected.

18. Rejected as unnecessary.

19. Rejected as unnecessary, the prior application is not at issue.

20. It is true and no competing service would be required to shut down its operations do to the inability to hire skilled nurses. Otherwise rejected for the reasons found in Findings of Fact

    37 and 38.

21. Rejected, the salaries are reasonable, but the new program is likely to raid other programs and cause an upward pressure on salaries as explained in Finding of Fact 39.

22. To the extent necessary, discussed in Finding of Fact 37, especially as related to hiring recent nursing graduates or using agency nurses.

23. Rejected as unnecessary, see Finding of Fact 39.

24. Adopted in Finding of Fact 15.

25. Rejected as unnecessary.

26. Sentences 1 and 2 adopted in Finding of Fact 40.

    Dr. Lukes' testimony with respect to intending to spend 5 million dollars on the open heart program is not persuasive.

27. Adopted in Finding of Fact 40.

28. (As amended), generally adopted in Findings of Fact

    42 and 44.

29. The 184 surgeries is adopted in Finding of Fact 42; Plantation's evidence with respect to likely charges is accepted in Findings of Fact 42 and 46.

30. The Intervenors' argument has been accepted, see Findings of Fact 47 and 48.

31. Rejected for the reasons stated in Finding of Fact 48.

32. Rejected as unnecessary.

33. Rejected for the reasons stated in Finding of Fact 48.

34. Rejected for the reasons stated in Finding of Fact 48.

35. Discussed in Finding of Fact 48, but rejected.

36. Rejected as unnecessary.

37. Rejected because the question is not whether the intervenors proved that the proposed program is not financially feasible. The question is whether Plantation General proved that the program is financially feasible, and its proof is not persuasive.

38. Rejected for the reasons stated in Finding of Fact 49.

39. Accepted in Finding of Fact 50.

40. Adopted in Finding of Fact 50.

41. Rejected as unnecessary.

42. Adopted in Finding of Fact 50.

43. Generally accepted in Finding of Fact 50.

44. Rejected; the testimony of Mr. Knapp has not been accepted on Doctor Zaretsky's cost analysis.

45. Rejected, see Finding of Fact 35.

46. Rejected as unnecessary.

47. Adopted in Finding of Fact 52.

48. To the extent necessary, covered in Finding of Fact 53.

49. Sentence 1, adopted in Finding of Fact 54. The remainder rejected as unnecessary.

50. Discussed in Finding of Fact 54.

51. Discussed in Findings of Fact 20 through 22 and 55 and 56.

52. Adopted in Finding of Fact 57.

53. Rejected because there is insufficient proof patients would face serious problems in obtaining open heart surgery if Plantation's program is not approved. See Finding of Fact 19.

54. Not an issue.

55. Rejected as unnecessary.

56. Rejected as unnecessary.

57. Rejected for the reasons stated in Finding of Fact 64.

58. Adopted in Finding of Fact 17.

59. Rejected for the reasons stated in Finding of Fact 66.

60. Rejected as cumulative.

61. Rejected for the reasons stated in Finding of Fact 67, although Plantation would exceed 200 cases per year within 3 years of instituting service.

62. Rejected, see Findings of Fact 20-23.

63. Adopted as modified in Finding of Fact 68.

64. Adopted in Finding of Fact 69.

65. Adopted in Finding of Fact 60.

66. Adopted in Finding of Fact 14, final sentence rejected as unnecessary.

67. The averaging technique is rejected, see Finding of Fact 61.

68. Rejected for the reasons stated in Finding of Fact

    1. It is not clear what factors were used by Hollywood Memorial to justify its open heart program. It is a major indigent care provider, which Plantation General is not.

69. Rejected, see Findings of Fact 56 and 63.

70. Rejected for the reasons stated in Finding of Fact 63.

71. Rejected for the reasons stated in Finding of Fact

    1. Dr. Luke's testimony about the reduction in use rates was persuasive.

72. Rejected as unnecessary.

73. Rejected, it is not likely that the use rate in Broward County will continue to grow, or that a use rate for western Broward County should be separately calculated or analyzed.

74. Rejected for the reasons stated in Finding of Fact 63.

75. Rejected for the reasons stated in Finding of Fact 63.

76. Rejected because the drop below 350 is significant according to the text of the rule and is not entitled to more than "slight" weight; other factors also weigh against the application.

77. Rejected as unnecessary.

Rulings of findings proposed by North Ridge General Hospital. 1-3. Rejected as unnecessary.

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 1.

3. Adopted in Finding of Fact 1.

4. Adopted throughout the Findings of Fact.

5. Adopted in the preliminary statement.

6. Rejected as unnecessary.

7. Rejected as a restatement of the rule.

8. Rejected as a restatement of the rule.

9. Rejected as a restatement of the rule.

10. Rejected as a conclusion of law.

11. Adopted in Finding of Fact 60.

12. Adopted in Finding of Fact 60.

13. Rejected as a statement of argument.

14. Rejected as a statement of argument.'

15. Rejected as unnecessary, see also Finding of Fact 63.

16. Rejected as unnecessary.

17. Rejected as inconsistent with the Department's current view of law.

18. Rejected as unnecessary.

19. Adopted in Finding of Fact 62.

20. Rejected as unnecessary.

21. The projection of 184 cases is adopted in Finding of Fact 42. The use rate is discussed in Finding of Fact 63.

22. Rejected as unnecessary.

23. Rejected as unnecessary, see Finding of Fact 63. The testimony of Dr. Luke on the point was the most persuasive.

24. Rejected as unnecessary.

25. Rejected, see Finding of Fact 60.

26. Rejected as unnecessary.

27. Discussed in Finding of Fact 63.

31-56. Generally discussed in Finding of Fact 60 as it relates to the proper calculation of need under the rule. See also Finding of Fact 51 concerning Florida Medical Center falling below 350 surgeries.

1. Discussed in Finding of Fact 15.

2. Discussed in Finding of Fact 12.

3. Rejected as unnecessary.

4. Discussed in Finding of Fact 64.

5. Generally adopted in Findings of Fact 20 through 22.

6. Adopted in Findings of Fact 10 and 23.

7. Adopted in Finding of Fact 21.

8. Adopted in Finding of Fact 22.

9. Adopted in Finding of Fact 23.

10. Stipulated by the parties.

11. Adopted in Finding of Fact 17.

12. The quality of care was stipulated by the parties.

13. Rejected as unnecessary.

14. Rejected as unnecessary.

15. Rejected as unnecessary.

16. Rejected as unnecessary.

17. Rejected as unnecessary.

18. Adopted in Finding of Fact 3.

75-90. Rejected as unnecessary. The question of demand is resolved in Finding of Fact 19. While cardiologists at the hospital may wish to provide angioplasty, which requires open heart surgery, that desire is not relevant. See Finding of Fact 18. Similarly, the testimony of Dr. Honderick that a facility which offers cardiac catheterization should have the ability to render surgical intervention in case of a complication is not relevant. Plantation General knew when it establishes a catheterization lab,

Rulings on findings proposed by Florida Medical Center.

1. Covered in preliminary statement.

2. Covered in Finding of Fact 12.

3. Covered in Finding of Fact 1

4. Discussed in Finding of Fact 12.

5. Rejected as unnecessary.

6. Adopted in Findings of Fact 17 and 18.

7. To the extent appropriate, discussed in Findings of Fact 19 and 21.

8. Covered in Finding of Fact 19.

9. Adopted in Finding of Fact 23.

10-13. Discussed, to the extent appropriate, in Finding of Fact 46.

1. Rejected because although true, the magnitude of the income resulting from those DRGs was not explained sufficiently. The matter of charges is more significant in determining financial feasibility than efficiency here.

2. Implicit in Findings of Fact 44 and 46.

3. Implicit in Finding of Fact 23.

4. Adopted in Finding of Fact 17.

5. Rejected as unnecessary.

6. Adopted in Finding of Fact 17, but the second sentence is rejected as unnecessary in view of the

   stipulation.

7. Generally adopted in Findings of Fact 14, 32 and 64.

8. Adopted in Findings of Fact 18 and 23.

9. Implicit in Finding of Fact 23.

10. Adopted in Finding of Fact 23.

11. Adopted in Findings of Fact 6 and 35.

12. Adopted in Finding of Fact 35.

13. Adopted in Finding of Fact 35.

14. Adopted in Finding of Fact 33.

15. Rejected as unnecessary.

16. Adopted in Findings of Fact 37 and 38.

17. Adopted in Finding of Fact 48.

18. Adopted in Finding of Fact 42.

19. Rejected as unnecessary. The legal expense would be minimal.

20. Adopted in Finding of Fact 48.

21. Generally adopted in Finding of Fact 48.

22. Adopted in Finding of Fact 48.

23. Discussed in Finding of Fact 48.

24. Adopted in Finding of Fact 48.

25. Rejected as unnecessary.

26. Adopted in Finding of Fact 51.

27. Subordinate to Finding of Fact 63.

28. Adopted in Finding of Fact 51.

29. Rejected as unnecessary.

30. Rejected as unnecessary.

31. Rejected as unnecessary. It is stipulated that Florida Medical Center has standing.

32. Rejected as unnecessary.

33. Adopted in Finding of Fact 17.

34. Addressed in Finding of Fact 58.

35. Adopted in Finding of Fact 49.

36. Adopted in Finding of Fact 49.

37. Adopted in Finding of Fact 49.

38. Discussed in Finding of Fact 59.

39. Discussed in Finding of Fact 64.

40. Adopted in Finding of Fact 17.

41. Adopted in Finding of Fact 67.

42. Adopted in Finding of Fact 67.

43. Discussed in Finding of Fact 60. The division by

    350 is implicit in the structure of the rule to determine the number of programs.

44. The use rate proposed by Mr. Nelson has been rejected. The appropriate calculation is found at Finding of Fact 60.

45. Adopted in Finding of Fact 63.

46. Adopted in Finding of Fact 63.

47. Adopted in Finding of Fact 63.

48. Adopted in Finding of Fact 60.

49. Adopted in Finding of Fact 61.

50. Rejected as irrelevant.

51. Adopted in Findings of Fact 60 and 63.

COPIES FURNISHED:

Jay Adams, Esquire 1519 Big Sky Way Tallahassee, FL 32301

Richard C. Bellak, Esquire FOWLER, WHITE, GILLEN, BOGGS,

VILLAREAL & BANKER, P.A.

101 North Monroe Street Suite 910

Tallahassee, FL 32301

Richard A. Patterson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Tallahassee, FL 32308

Eric B. Tilton, Esquire 214B East Virginia Street Tallahassee, FL 32301

Michael J. Cherniga, Esquire ROBERTS, BAGGETT, LAFACE

& RICHARD

101 East College Avenue Post Office Drawer 1838 Tallahassee, FL 32302

Jack M. Skelding, Esquire PARKER, SKELDING, LABASKY

& CORRY

318 North Monroe Street Post Office Box 669 Tallahassee, FL 32302

Sam Power, Agency Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

John Miller, General Counsel Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Docket for Case No: 89-000923

Orders for Case No: 89-000923