STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LAKELAND REGIONAL MEDICAL CENTER, )

)

Petitioner, )

and )

) HILLS BOROUGH COUNTY HOSPITAL ) AUTHORITY d/b/a TAMPA GENERAL )

HOSPITAL, ) CASE NO. 89-2157RU

)

Intervenor, )

)

vs. )

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

and )

) WINTER HAVEN HOSPITAL, INC., ) AND VENICE HOSPITAL, INC. )

)

Intervenors. )

)

FINAL ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on July 6, August 14-18, 21 and 22, and September 7, 8 and 28, 1989, in Lakeland, Tampa and Tallahassee, Florida.

APPEARANCES

For Petitioner: John H. Parker, Jr., Esquire

Jonathon L. Rue, Esquire

133 Carnegie Way

1200 Carnegie Building

Atlanta, Georgia 30303

For Intervenor: John A. Radey, Esquire Tampa General Jeffry L. Frehn, Esquire Hospital: Post Office Drawer 11307

Tallahassee, Florida 32302

For Respondent: Leslie F. Mendelson, Esquire

2727 Mahan Drive, Room 103

Tallahassee, Florida 32308

For Intervenor: E. G. Boone, Esquire Winter Haven Steven K. Boone, Esquire Hospital Post Office Box 1596

Venice, Florida 34284-1596

For Intervenor: Kenneth F. Hoffman, Esquire Venice Hospital Post Office Box 6507

Tallahassee, Florida 32314-6507 STATEMENT OF THE ISSUES

The narrow issue is whether the so called "averaging policy" used by the Department of Health and Rehabilitative Services is a rule, and if so, whether it has been adopted in accordance with all procedural and substantive requirements of Chapter 120, Florida Statutes (1987).

PRELIMINARY STATEMENT

This matter began on April 27, 1989, when petitioner, Lakeland Regional Medical Center, filed a "petition to determine the invalidity of illicit rule" wherein it alleged that respondent, Department of Health and Rehabilitative Services, was utilizing an illicit rule known as the "averaging policy" in its review and consideration of certificate of need applications involving open heart surgery programs. After being reviewed for facial compliance with Section 120.56, Florida Statutes (1987), the petition was assigned to the undersigned Hearing Officer on May 2, 1989. By notice of hearing dated May 3, 1989, the matter was set for final hearing on May 24, 1989, in Tallahassee, Florida. At the reguest of the parties, the matter was rescheduled to July 6, 1989, and was heard on a consolidated record with Case Nos. 89-1286 and 89-1287. Those cases involve an application by intervenor, Winter Haven Hospital, Inc., for a certificate of need to establish an open heart surgery program at its community hospital facility in Winter Haven, Florida. Continued hearings in those cases were held on August 14-18, 21 and 22 and September 7, 8 and 28, 1989.

On July 6, 1989, the undersigned denied a motion to dismiss the petition filed on behalf of Winter Haven Hospital, Inc. On the same date, the undersigned denied a motion for summary adjudication filed on behalf of petitioner. The bases for those rulings is set forth in the Conclusions of Law portion of this order.

In addition to LRMC exhibits 5-8, 13-17 and 21-23 offered and received in evidence, the parties agreed that all testimony and exhibits presented and received in Case Nos. 89-1286 and 89-1287 could be used in Case No. 89-2157RU as well.

The last volume of the transcript of hearing of the consolidated record was filed on October 5, 1989. Proposed findings of fact and conclusions of law were filed by the parties on November 2, 1989. A ruling on each proposed finding is made in the Appendix attached to this Final Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Petitioner, Lakeland Regional Medical Center (LRMC), is a 897-bed private, not-for-profit, general acute care hospital located at 1324 Lakeland

   Hills Boulevard, Lakeland, Florida. It is considered a major regional referral hospital and provides a wide range of tertiary services, including open heart surgery. The facility is located in District 6 and is one of six facilities in the district having an existing open heart surgery program.

   
   

2. Respondent, Department of Health and Rehabilitative Services (HRS), is the state agency charged with the responsibility of administering the Health Facility and Services Development Act, also known as the Certificate of Need (CON) law. On September 26, 1988 intervenor, Winter Haven Hospital, Inc. (WHH), filed with HRS an application for a CON seeking authority to establish an open heart surgery program at its facility in Winter Haven, Florida. After reviewing the application, on February 3, 1989, HRS published notice of its intent to issue the requested CON. If approved, this program would be in competition with similar programs operated by LRMC and intervenor, Hillsborough County Hospital Authority d/b/a Tampa General Hospital (TGH). Those two parties have initiated formal proceedings in Case Nos. 89-1286 and 89-1287 to contest the proposed grant of authority. Intervenor, Venice Hospital, Inc. (Venice), has a pending application for authority to establish an open heart surgery program in a separate administrative proceeding and has intervened in opposition to LRMC's rule challenge. It is noted that LRMC, WHH and TGH are located in District 6 while Venice is located in an adjoining, but separate, district. All parties have standing in this proceeding.

   
   

3. In order for HRS to grant a certificate of need, it is necessary for an applicant to satisfy all relevant rule and statutory criteria. In this vein, the agency has promulgated Rule 10-5.011(1)(f), Florida Administrative Code (1987), which contains certain criteria pertaining to open heart surgery programs. That rule provides in relevant part as follows:

   
   

   (f)2. Departmental Goal. The Department will consider applications for open heart surgery programs in context with applicable statutory and rule criteria. The Department will not normally approve applications for new open heart surgery programs in any service area unless the conditions of Sub-paragraphs 8.

   and 11., below, are met.

   * * *

   11.a. 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 or 130 pediatric heart cases per year, (Emphasis added)

   * * *

   
   

   The requirements of this rule, which are unambiguous, and other pertinent statutory and rule criteria, are to be applied by HRS to all applicants, including WHH, during the CON review process.

   
   

4. Although the rule itself is not being challenged by LRMC, subparagraph

   11.a. of the rule is at the heart of this controversy. Petitioner and TGH contend that the clear language of the rule requires that, absent the existence of not normal circumstances, HRS may not award a CON unless each existing and

   approved open heart surgery program in the service area is operating at and is expected to continue to operate at 350 procedures per year. Because there are now six approved and existing open heart surgery programs in the district, petitioner argues that the rule mandates that, before a new program can be authorized, each of the six programs must meet the required level of 350 procedures per year. They contend further that the particular policy applied by HRS to WHH's application is not apparent on the face of rule 10-5.011(1)(f)2. and thus it constitutes an unpromulgated rule.

   
   

5. In preliminarily approving WHH's application, HRS admits that it used a so-called averaging policy which it agrees may be described in the following manner:

   
   

   HRS has formulated and is applying in reviews of Certificate of Need ("CON") applications for new open heart surgery services a policy of general applicability that is uniformly and consistently applied, which calls for the averaging of the utilization of existing and approved adult open heart surgery programs in the applicable service area, and which deems subparagraph 11.a.(I) of Rule 10-5.011(1)(f), Fla. Admin. Code, to be met if the average utilization of all such existing and approved programs in that service area is at least 350 cases (the "Averaging Policy").

   Pursuant to its Averaging Policy, HRS will approve a CON application for a new adult open heart surgery program under Rule 10- 5.011(1)(f), Fla. Admin. Code, even if each existing and approved program in the proposed service area is not operating at a minimum of

   350 adult cases per year, and even if no "not normal" circumstances are presented in the application or found to exist in the State agency Action Report.

   
   

   Stated another way, HRS deemed subparagraph 11.a. to have been met in WHH's case because, after dividing the total number of procedures performed district wide by the number of existing and approved programs, there were an average number of procedures in excess of 350 for each program in the district. It used this averaging process even though two programs were not operational at the time the review process took place, and only two (LRMC and TGH) of the six programs had actually performed more than 350 procedures during the specified time period being measured. 1/ Thus, the averaging policy used by HRS allows approval of a CON application for open heart surgery even if only some programs in a district, rather than each, have the required 350 case volume.

   
   

6. The averaging technique has not been reduced to writing in a memorandum, manual or agency policy directive, and it has not been formally adopted as a rule. In this regard, HRS, but not WHH and Venice, has admitted that the policy is indeed a rule. The results of applying that "rule" are contained in the state agency action report issued by HRS and made a part of this record.

   
   

7. HRS has consistently and uniformly applied this averaging technique in every open heart surgery case except one since the rule was adopted in

   substantially its present form on February 14, 1983. 2/ It has been applied without discretion by those HRS personnel who have the responsibility of administering the CON law and regulations.

   
   

8. The proponents of the averaging policy argued first that the language in subparagraph 11.a. authorized its use. However, nothing in the language of the existing rule expressly refers to an averaging process. They also contended that when other provisions within the rule are read, the use of the policy becomes apparent. More particularly, they pointed to subsection (7) of the rule which requires that the provision of open heart surgery be consistent with the state health plan. That plan provides in part that one of its objectives is to maintain an average volume of 350 procedures at all programs in the state. However, the state health plan is not mentioned in subparagraph 11.a., subsection (7) does not track or mirror the averaging technique, and the same subsection does not alert the user of the rule to the fact that an averaging process will be applied.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Section 120.56, Florida Statutes (1987).

   
   

10. The narrow issue in this case is whether the challenged policy, action or statement of the agency constitutes a rule, and if so, whether it has been properly adopted under chapter 120. Thus, it is unnecessary to decide, as many of the parties urge, whether the policy constitutes a permissible interpretation of the rule or some other cited authority. That issue is dealt with in the companion 120.57(1) proceedings docketed as Case Nos. 89-1286 and 89-1287. 3/

    
    

11. Two earlier rulings in this case require a brief explanation. On July 6, 1989, the undersigned denied WHH's motion to dismiss the petition and LRMC's motion for summary adjudication. As to the motion to dismiss, WHH contended that LRMC's petition did not state a cause of action. Having accepted all allegations in the pleading as being true, the undersigned concluded that the petition stated a well-pled cause of action and thus the motion was denied. In LRMC's motion for summary adjudication, it contended that, according to the record attached to the motion, the so-called averaging policy was a rule that had not been formally adopted, and that it was therefore entitled to the entry of a final order under Rule 221-6.030, Florida Administrative Code (1987), declaring the policy invalid. Because the record as proffered at hearing on the motion did not adequately demonstrate that the policy was indeed a rule and thus raised a genuine issue of material fact as to that matter, the undersigned declined to grant the motion.

    
    

12. It is well-settled that in a rule proceeding, the burden is on petitioner to show by a preponderance of the evidence that the questioned policy or statement is an illicit rule. See, e.g., Agrico Chemical Company v. State, Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied 376 So.2d 74 (Fla. 1979).

13. To determine if the agency's action was invalid, it is necessary to first determine if the action constituted a rule within the meaning of Subsection 120.52(16), Florida Statutes (Supp. 1988). That subsection defines a rule as follows:

    
    

    each agency statement of general applicability that implements, interprets, or prescribes laws or policy or describes the organization, procedure, or practice requirements of an agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule.

    
    

    Therefore, if the agency action is found to be an agency statement of general applicability implementing or prescribing agency policy, it meets the statutory definition of a rule.

    
    

14. In addition to the statutory definition, the instructive advice contained in Balsam v. Department of Health and Rehabilitative Services, 452 So.2d 976 (Fla. 1st DCA 1984) bears repeating. In Balsam, the court provided further guidelines to be used in deciding whether agency action constituted a rule:

    
    

    Any agency statement is a rule if it purports in and of itself to create certain rights and adversely affect others, or serves by its own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law. Id. at 977-78.

    
    

    Besides the foregoing attributes, where the policy is implemented by subordinates with little or no room for discretionary modification, State Department of Administration v. Stephens, 344 So.2d 290 (Fla. 1st DCA 1977), the policy is considered to be a rule. With these broad guidelines in mind, the undersigned will determine the merits of LRMC's petition.

    
    

15. Although not reduced to writing in any agency statement, the agency's averaging technique is a policy of general applicability since, with one exception, it has been applied statewide in all open heart surgery applications since early 1983. Further, it has the direct and consistent effect of law, creates rights and adversely affects the interests of existing and approved open heart surgery programs within the same district. Also, it is followed without discretion by agency personnel who administer the CON law. Having all these attributes, it is concluded that the averaging policy is a rule within the meaning of subsection 120.52(16).

    
    

16. In light of the above conclusion, it is appropriate to briefly discuss the issue of whether an unwritten statement can constitute a rule. Although the parties have not addressed this issue, it is noted that virtually all published appellate opinions on the subject of illicit rules deal with written statements, and indeed one decision suggests that an unwritten statement cannot be a "statement of policy" within the context of an illicit rule challenge. Department of Corrections v. McCain Sales of Florida, Inc., 400 So.2d 1301, 1302 (Fla. 1st DCA 1981) (unwritten decision by agency to engage in a manufacturing program not a statement of policy). However, subsection 120.52(16) makes no distinction between an unwritten or written "agency statement," and the case of

    Straughn v. O'Riordan, 338 So.2d 832 (Fla. 1976) holds that one of the principal goals of the administrative procedure act was "the abolition of `unwritten rules' by which agency employees can act with unrestrained discretion to adopt, change and enforce governmental policy." Id. at 834, fn. 3. In Straughn, one such "agency statement" was an unwritten "rule of thumb" used by agency personnel to determine the size of cash bonds required from sales tax registrants to insure compliance with the sales tax law. Moreover, the case at bar is distinguishable from McCain for two reasons. First, the agency itself concedes that its averaging policy is one of general applicability that is uniformly and consistently applied in every open heart surgery case. Secondly, it acknowledges that the policy is a rule, although not an illicit one as LRMC contends. Given these distinguishing characteristics, the absence of a judicial decision which clearly resolves the issue, and the fact that the statutory definition of a rule is neutral on the subject, the undersigned concludes that the unwritten agency statement under consideration here is a rule. This seems especially appropriate since the agency policy in question clearly possesses all of the attributes of a rule.

    
    

17. The next issue is whether the policy has been adopted in accordance with all procedural and substantive requirements of chapter 120. To make this determination, one need only determine whether the policy is a mirror reflection of language in existing rule 10-5.011(1)(f)11.a. In other words, is the policy clearly expressed in the language of the rule? Such a requirement is essential in an illicit rule challenge because affected persons have a right to rely on published rules and to assume they mean what they say. While HRS contends that the averaging policy is a product of the rule and merely represents what it perceives to be a readily apparent interpretation of the rule, it is noted that subparagraph 11.a. does not contain the word "average," a necessary ingredient to sustain the agency's position. In the context of an illicit rule challenge, the word "average" is essential to the vitality of HRS's position since the rule uses the word "each" for purposes of determining program utilization yet the agency has used an averaging technique in making that assessment. Because the commonly accepted meanings of the words "each" and "average" are so at odds with each other, it cannot be concluded that an affected person could read the rule and reasonably assume that an average assessment of utilization would be made. Therefore, because the averaging technique is not apparent from the face of the rule itself nor from any other statute or rule cited by counsel, 4/ and the policy has not been adopted in accordance with the requirements of chapter 120, the policy is found to be illicit. Accordingly, the averaging policy is declared to be an invalid exercise of delegated legislative authority.

    Based on the foregoing findings of fact and conclusions of law, it is ORDERED that the petition of Lakeland Regional Medical Center is GRANTED,

    and the so-called averaging policy utilized by the Department of Health and

    Rehabilitative Services in open heart surgery cases in satisfying the requirements of subparagraph 11.a. of rule 10-5.011(1)(f) is declared to be an invalid exercise of delegated legislative authority.

    DONE AND ENTERED this 15th day of November, 1989, in Tallahassee, Leon County, Florida.

    
    

    Donald R. Alexander 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 15th day of November, 1989.

    
    

    ENDNOTES

    
    

    1/ Under the rule, HRS calculates need by taking the total number of procedures performed by all programs in the district during a historical year and projecting that number to a horizon year through population projections. This yields a total number of procedures expected during the horizon year. After dividing that number by 350 to obtain the number of programs needed, the existing and approved programs are then subtracted from this total leaving the demonstrated need.

    
    

    2/ The single exception cited by the parties occurred in the case of Lawnwood Regional Medical Center v. DHRS, 9 FALR 2646 (DHRS, May 19, 1987). The reasons why the exception was made in that particular case are not of record.

    
    

    3/ The agency may, of course, utilize nonrule policy on a case-by-case, ad hoc basis so long as the policy is supported by adequate proof.

    
    

    4/ Reference to subsection (7) of the rule, which requires the provision of open heart surgery to be consistent with the state health plan, is unavailing. This is because of the reasons given in finding of fact 8.

    
    

    APPENDIX

    
    

    Lakeland Regional Medical Center:

    
    

    1.	Substantially adopted in finding	of	fact	7.
    2.	Substantially adopted in finding	of	fact	5.
    3.	Substantially adopted in finding	of	fact	6.
    4.	Rejected as being unnecessary.
    5.	Substantially adopted in finding	of	fact	1.
    6-8.	Substantially adopted in finding	of	fact	2.
    9.	Substantially adopted in finding	of	fact	5.
    10.	Partially adopted in finding of fact 5.
    11.	Substantially adopted in finding of		fact	4.
    12-13.	Substantially adopted in finding of		fact	2.
    14.	Substantially adopted in finding of		fact	3.
    15.	Rejected as being unnecessary.

    16-17. Substantially adopted in finding of fact 3.

18. Substantially adopted in finding of fact 4.

19. Substantially adopted in finding of fact 7. 20-23. Substantially adopted in finding of fact 5.

24. Substantially adopted in' findings of fact 6 and 7. 25-28. Substantially adopted in finding of fact 5.

29. Rejected as being unnecessary.

30-31. Substantially adopted in finding of fact 8.

32-38. Rejected as being cumulative, subordinate or going to issues more pertinent to the section 120.57(1) cases.

Tampa General Hospital:

12-14. Rejected as being irrelevant.

Department of Health and Rehabilitative Services:

The agency relied upon its legal argument submitted in opposition to petitioner's motion for summary adjudication. Consequently, there are no proposed findings of fact upon which to rule.

Winter Haven Hospital:

8. Partially adopted in finding of fact 7.

9-13. Rejected since these findings go to issues more pertinent in the section 120.57(1) cases.

14. Substantially adopted in finding of fact 5.

15-16. Rejected since these findings go to issues more pertinent in the section 120.57(1) cases.

17. Substantially adopted in finding of fact 8.

18-20. Rejected since these findings go to issues more pertinent in the section 120.57(l) cases.

Venice Hospital, Inc.: Venice filed a memorandum containing only legal argument. Consequently, there are no proposed findings of fact upon which to rule.

COPIES FURNISHED:

John H. Parker, Jr. Esquire

133 Carnegie Way

1200 Carnegie Building

Atlanta, GA 30303

John A. Radey, Esquire

P. O. Drawer 11307 Tallahassee, FL 32302

Leslie F. Mendelson, Esquire 2727 Mahan Drive, Suite 103

Tallahassee, FL 32308

Kenneth F. Hoffman, Esquire

P. O. Box 6507 Tallahassee, FL 32314-6507

Carroll Webb, Esquire

Joint Administrative Procedures Committee Room 120, Holland Building

Tallahassee, FL 32399-1300

Liz Cloud, Chief

Bureau of Laws and Administrative Code Room 1802, The Capitol

Tallahassee, FL 32399-0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68. FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 89-002157RU

Orders for Case No: 89-002157RU