STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHARLOTTE COMMUNITY HOSPITAL ) INC., d/b/a FAWCETT MEMORIAL ) HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 90-5815

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

) ST. JOSEPH HOSPITAL OF PORT ) CHARLOTTE, d/b/a ST. JOSEPH ) HOSPITAL. )

)

Intervenor. )

)

RECOMMENDED ORDER

A hearing was held in this case before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings, in Tallahassee, Florida on January 15 through 18, 1991.

APPEARANCES

For Petitioner: John D.C. Newton, II, Esquire

Aurell, Radey, Hinkle & Thomas

101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302

For Respondent: Richard Patterson, Esquire

Department of Health and Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32308

For Intervenor: R. Terry Rigsby, Esquire

F. Philip Blank, Esquire

F. Philip Blank, P.A.

P.O. Box 11068 Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

The issue for consideration in this hearing is whether the Intervenor, St.

Joseph Hospital of Port Charlotte, should be issued Certificate of Need #6202 for the establishment of a cardiac catheterization laboratory at its facility in Port Charlotte, Florida.

PRELIMINARY STATEMENT

On August 17, 1990, Petitioner, Fawcett Memorial Hospital, (Fawcett), filed a- Petition for Formal Administrative Hearing contesting the Department of Health and Rehabilitative Services', (Department), intent to issue Certificate of Need, (CON), number 6202, to St. Joseph Hospital of Port Charlotte, (St.

Joseph), for the establishment of a cardiac catheterization laboratory at its facility in Charlotte County. The file was forwarded to the Division of Administrative Hearings by the Department on September 7, 1990, and after the parties' Responses to the Notice of Assignment and Initial Prehearing Order, on October 10, 1990, the undersigned, to whom the case had been assigned for hearing, entered an order granting St. Joseph's Petition to Intervene, and set the case for hearing in Tallahassee on January 15 through 18, 1991, at which time it was held as scheduled.

At the hearing, Petitioner presented the testimony of Paul P. Hinchey, Chief Operating Officer of St. Joseph and an expert in hospital administration; Allen C. Minor, the hospital's Chief Financial Officer and an expert in health care financing and reimbursement; and Dr. Ronald T. Luke, a consultant and expert in health care planning and finance. The Department presented the testimony of Elizabeth Dudek, the acting Director of the Department's Office of Health Facilities and Services, consultant, and an expert in health planning.

Fawcett presented the testimony of Thaddeus W. Parker, its project coordinator; Donald L. Larimore, President and Chief Executive Officer of Fawcett Memorial Hospital since 1988 and an expert in hospital administration; Daniel J. Sullivan, a consultant and expert in health care planning and finance; and Gary Karsner, Vice- President and Chief Financial Officer for Fawcett, and an expert in hospital finance.

Petitioner introduced its Exhibits 1 through 5 and 7 through 20. Fawcett Exhibit 6 was not admitted. St. Joseph introduced it's Exhibits A through S, and the Department introduced its Exhibits 1 through 5. In addition, the undersigned officially recognized Rule 10-5.011(1)e, F.A.C., and Section 381.705, Florida Statutes, 1989.

A transcript was provided and both Petitioner and Intervenor submitted Proposed Findings of Fact. The Department joined in the Proposed Findings submitted by the Intervenor, St. Joseph. All Proposed Findings of Fact are ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, the Department was the state agency responsible for the regulation and certification of health care facilities in this state and charged with the responsibility of issuing Certificates of Need, (CON), under the criteria set forth in Section 381.705 Florida Statutes and the Department's Rules.

2. St. Joseph Hospital is a 212 bed general acute care hospital located in Port Charlotte, Florida, within the jurisdiction of the Department's District

   VIII. It is a not for profit, tax exempt corporation owned by Bon Secours Health Systems, a multi-hospital system. It offers varied medical and surgical services, including obstetrics and pediatrics, and operates a 24 hour emergency room. The facility is accredited by the Joint Commission on Accreditation and Health care Organization, and its laboratory is accredited by the American College of Pathology.

   
   

3. Because St. Joseph opened a nursing home in Port Charlotte in 1975, Chapel Manor Nursing Home, Fawcett's predecessor, and at that time, the only nursing home in Port Charlotte, applied for and was issued a CON to convert from a nursing home to an acute care hospital and began operation as Fawcett Memorial Hospital that year. Fawcett is now a 254 bed general medical surgical acute care hospital providing a broad range of services with the exception of obstetrics and pediatrics, and is located directly across the street from St. Joseph. It offers diagnostic cardiac catheterization service only, implementing that service in August, 1989. Both Fawcett and St. Joseph have the same service area and utilize the same physicians on their medical staffs, which are practically identical.

   
   

4. St. Joseph offers a full array of cardiology services with the exception of cardiac catheterization. As a result, any St. Joseph patient requiring cardiac catheterization must be discharged from St. Joseph and transferred to another hospital in the area which provides that service. Between January 1989 and February, 1990, approximately 97 St. Joseph patients required transfer because of the fact that St. Joseph had no pertinent program. Because of this fact, and recognizing that the Department had determined there was a numeric need for an additional cardiac catheterization lab within the

   district, specifically based on the under-served indigent and Medicaid patients, in February, 1990, St. Joseph submitted a letter of intent to file a CON application for the establishment of an adult inpatient cardiac catheterization laboratory at its facility in District VIII. This letter of intent was based on proper Board Resolution, and was filed not only with the District but also with the local Health Council, and the required notice was published in a local paper.

   
   

5. Thereafter, in March, 1990, St. Joseph filed its CON application for the facility, along with the appropriate fee, with the Department, at the same time filing a copy with the local Health Council. The Department responded with an omissions letter, the requirements of which were met by St. Joseph in a timely manner, and the Department thereafter deemed the application complete. Notwithstanding Fawcett's allegations in the post hearing submission that St. Joseph's application was not complete, there was no evidence presented at hearing to so establish, and the Department deemed it both timely and ultimately complete. On on about July 17, 1990, the Department issued its State Agency Action Report and notified St. Joseph of its decision to approve the application. Approximately one month later, in a timely fashion, Fawcett filed its Petition challenging the Department's approval of St. Joseph's application.

   
   

6. St. Joseph projects implementation of service by the unit in December, 1992. The unit will encompass approximately 3,800 square feet and will be part of and companion to a larger construction project designed to expand St. Joseph's surgical capacity. It will be located in a proposed two-story addition to the south side of the existing hospital. Total cost of the project, including construction of the building and equipment, is estimated to be

   approximately $2.6 million, one hundred percent of which will be financed by debt. It is estimated that interest costs over the term of the financing will be an additional $2.25 million.

   
   

7. St. Joseph anticipates the charge for a cardiac catheterization will be

   $6,657.48 in 1993, and $7,123.50 in 1994. This is the same as the average charge for the procedure by existing providers in the district, adjusted for inflation in later years.

   
   

8. The facility will be open routinely from 7:00 AM to 2:30 PM, Monday through Friday. An on-call team will, however, be available 24 hours a day although cardiac catheterization, usually an elective procedure, should not require much in the way of emergency services. Dr. Victor Howard, a Board certified internist and cardiologist, who is already on staff at St. Joseph, is projected to be the medical program director for the new facility without additional compensation.

   
   

9. Cardiac catheterization is a relatively new diagnostic and therapeutic invasive procedure which involves the insertion of an extremely fine hollow tube through a blood vessel in the groin, up into the patient's heart. Because the patient faces danger from collateral problems such as bleeding, stroke, congestive heart failure and medication reactions, at least three staff members are required to assist the physician performing the catheterization. As with most procedures, the more it is done, the more proficient the individuals doing it become. By the same token, the medical staff assistants to the physician in charge must have specialized skills and training, and the Department rules require that in order to properly provide for therapeutic catheterization patients, an open heart surgery facility must be available within thirty minutes of the facility where the catheterization is being carried out. St. Joseph intends to rely on Medical Center Hospital in Punta Gorda, approximately ten miles away, as the required backup open heart facility. Medical Center is within the maximum thirty minute drive time criteria. It provides not only an open heart surgery program but also both diagnostic and therapeutic cardiac catheterizations. Diagnostic catheterizations, as opposed to therapeutic catheterizations, can be done on an outpatient basis.

   
   

10. Experience has indicated that staff assistant technicians, nurses and others, are frequently not reasonably available. As a result, there is continuing competition between hospitals providing the services requiring these individuals, and this competition is often severe. Nonetheless, Fawcett has, up to the present, been able to recruit and retain adequate numbers of experienced personnel without the necessity for paying a bonus over and above normal salary. By the same token, St. Joseph believes it, too, will be able to attract and retain sufficient numbers of qualified personnel to successfully operate its laboratory as approved. At the present time, St. Joseph has ten registered nurses on staff who have cardiac catheterization laboratory experience. The laboratory, if approved, will not open at St. Joseph until the second half of 1992. At that time, manpower requirements for the project call for 3.36 full time employees, (FTE's), and that number appears capable of being satisfied by the current staff, though a cardiovascular technician, (CVT), has not yet been hired for the lab. In addition, St. Joseph appears to have on hand adequate management and supervisory personnel. It projects salary and benefits expense of almost $140,000.00 in 1993 and almost $150,000.00 in 1994. Maintenance expense is expected to approximately $65,000.00 the second year of operation.

11. The proposed project has been enthusiastically received by the medical community in the service area. Because, in that area, the treating physician determines where the patient will be treated, support for the project by the area cardiologists is important as a positive factor for consideration. Because it has both the financial and personnel resources to provide the service, access to the service will be improved for the medically indigent and the facility's current cardiology program will be enhanced.

    
    

12. The Florida legislature has, by its passage of Section 381.705, Florida Statutes, laid the basic analytical framework to be used in determining whether the facility here in question is needed. Consistent with the terms of the enabling statute, the Department has promulgated Rule 10-5.011, F.A.C., to implement the provisions of the statute. The rule formula provides a showing of "need" if at least 300 procedures could be performed by the new program, based on the total number of catheterizations, diagnostic and therapeutic, projected for the District. Projections for Charlotte County alone indicate 180 additional catheterizations between 1989 and 1994. Consistent therewith, the Department has determined that within DHRS District VIII, the pertinent service district, there is a numeric need for one additional cardiac catheterization laboratory.

    
    

13. Need, however, goes beyond the question of numeric need. It is also a factual issue that requires an analysis of health planning principles and standards used within the ultimate goal of providing the best quality medical care for the citizens of this state in a sound, economically justified manner. In that regard, it is appropriate to evaluate need with an eye that looks toward avoiding unnecessary and costly duplication of services that are unnecessary.

    
    

14. Fawcett contends there is no need for an additional lab in District VIII, based on the underutilization of existing programs. The Department's rule, the use of which resulted in a determination of need for one additional unit, does not regulate capacity. District VIII consists of Sarasota, DeSoto, Glades, Hendry, Charlotte, Lee, and Collier Counties. Sarasota and Lee Counties each have three cardiac catheterization programs while Collier has one in its only hospital. Charlotte County has two, Fawcett and Medical Center. It has already been noted that Fawcett and St. Joseph are located across the street from one another. Medical Center, which is used for therapeutic catheterizations, is located not far from the other two, and all three are Medicaid providers. All three also serve generally the same service area and use, essentially, the same medical staff. Moreover, the three facilities' cardiology staffs are essentially identical. When evaluating the service availability, however, it must be noted that Charlotte County experienced the highest relative increase in population among all the District VIII counties during the decade of the 1980's, and projections are that it will continue to lead up through 1995. At the present time, Charlotte County has the highest percentage of residents over age 65, (34%), of any of the District VIII counties.

    
    

15. Looking at the proposed service in light of the pertinent State Health Plan, that for 1989, four preferences should be considered when evaluating the need for the proposed service. One deals with giving preference to those who propose to establish both cardiac catheterization and open heart surgical services. Since there is no established need for an open heart surgery service in the District, St. Joseph could not and does not plan to provide for one. Consequently, this preference is not pertinent here.

16. The second preference is for those applicants who propose to establish a cardiac catheterization program in a county without any existing program. Again, this is not pertinent to the current situation.

    
    

17. The third preference is toward applicants with a history of providing a disproportionate share of Medicaid and charity care. Here, St. Joseph is not a disproportionate Medicaid share provider, a point made by Fawcett. By the same token, however, neither is Fawcett. Fawcett did not, over the years, keep an accurate record of the number of patients to whom it provided free medical services, or of the value of those services. It claims it did not realize the importance of those numbers, concerning itself more with the provision of the service rather than with the recording of it. It was not, for most of its existence, however, a Medicaid provider, applying for and gaining that certification as of September l, 1989. Yet, during those non-certified, unrecorded years, it claims to have provided care to patients regardless of their ability to pay. While this claim is accepted as true, it is impossible to quantify it.

    
    

18. The fourth preference is given to applicants who agree to provide services to all patients regardless of ability to pay. St. Joseph has agreed to do so and has a history of providing care to the medically indigent. So does Fawcett, but Fawcett is not an applicant, so the preference issue does not, necessarily, apply. It is clear, however, that neither the existing providers nor the applicant are precluded or disqualified as a result of the application of these preferences.

    
    

19. Turning to the local, (District) Health Plan, which is also to be considered in the evaluation of the projects, the 1989 update of the District VIII Plan, that pertinent here, also provides for applicants to be evaluated in light of several preferences. One calls for an applicant to provide certain services, all of which are provided currently by St. Joseph. The second preference calls for the laboratory to be open no less than 40 hours a week and to provide a maximum waiting time of one month for simple, elective cases. The evidence presented indicates that the currently operating facilities meet this criteria, but also that St. Joseph will likely do the same if approved.

    
    

20. Another preference relates to the proposed program's impact on existing providers in the area. It is here that the parties disagree radically on whether or not such an impact exists. St. Joseph has taken the position that its program will have only minimal impact on the ability of Fawcett and other existing providers to continue to provide quality economic service. On the other hand, Fawcett projects a major negative impact on its services, and claims the Department apparently failed to consider, at the time it did its initial evaluation, whether or not St. Joseph's program would adversely impact on it's existing service.

    
    

21. Fawcett contends that its presently improving financial posture will be definitely impacted adversely by St. Joseph's implementation of the new service, if approved, in that its anticipated positive financial improvement will be reduced, if not destroyed, by the opening of St. Joseph's proposed program.

    
    

22. Evidence produced by Fawcett tends to indicate that by 1994, if current projections hold true, Charlotte County will experience an increase of only 180 diagnostic catheterizations per year. St. Joseph's projections indicate that in that timeframe it expects to perform 509 diagnostic catheterizations per year. Simple arithmetic, then, would reveal that if those

    figures are correct, 329 of the 509 projected diagnostic procedures would have to come from the number of procedures performed by both Fawcett and Medical Center.

    
    

23. Since approximately 75% of the current cardiac catheterizations performed in Charlotte County are performed at Fawcett, by far the greatest impact would be on that institution. The figures projected indicate a loss by Fawcett, then, of 232 procedures in 1993 and 318 in 1994. Medical Center's projected losses would be somewhat less, but nonetheless, such a reduction, if realized, would result in a loss of revenue to each of the existing providers from current income levels.

    
    

24. Fawcett experienced severe financial problems during the past several years prior to the incumbency of the present CEO. In 1987 and 1988, it had financial losses which were improved in 1989 to a result showing a marginal excess of revenue over expenses. For 1990, Fawcett expects to show a profit for the first time in several years. Its prior negative operating result, however, has had a negative impact on its debt to equity ratio which, itself, is significant in that it is used by lenders as an index or flag regarding the financial health of an institution which seeks to borrow money. Because of its poor financial condition in the past, Fawcett was unable recently to borrow money needed for 1990 capital projects, and it is the increasing profit margin, which Fawcett hopes will make it more competitive in the borrowing market, that is most threatened by the proposed initiation of St. Joseph's project.

    
    

25. The improved financial picture which Fawcett experienced in the most recent financial years has been directly attributed to the revenue earned by its cardiac catheterization program. In 1989, Fawcett determined that each cardiac catheterization patient contributed $1,927.00 to the hospital's financial health, and Fawcett contends that each patient taken from it by the opening of St. Joseph's proposed program will result in a financial loss to it. Utilizing the 1989 contribution margin projected to 1993 and 1994 reflects that if St. Joseph's program is approved, and if the anticipated numerical patient load is lost, the net financial loss to Fawcett would be in excess of $446,000.00 in 1993 and in excess of $612,000.00 in 1994. If these figures are inflated to 1993 and 1994 dollars, the loss could well be greater.

    
    

26. Fawcett contends that it is currently experiencing a healthy improvement in its financial position which it anticipates would be substantially and adversely affected by the loss of cardiac catheterization patients to St. Joseph if that facility's project were approved as proposed. No doubt there would be a negative impact, but the degree thereof is speculative.

    
    

27. Both the statute and the rule mentioned previously set forth criteria for the evaluation of these projects. One is the existence of an alternative to the service provided. Whereas St. Joseph contends there is no alternative diagnostic procedure preferable to cardiac catheterization, Fawcett contends there are several alternatives to St. Joseph's proposed project. Nonetheless, prior to its application, St. Joseph considered some alternatives. One was the setting up of a mobile laboratory on an interim basis. Since this could be used only by outpatients, it was determined not to meet the need of those patients requiring an inpatient procedure or of the physicians who would perform in it, and the anticipated $1.3 million cost was considered excessive for a short term fix. It is so found.

28. Another was the possibility of establishing the lab somewhere within the hospital's existing space, but a survey of the facility quickly revealed there is no available existing space. However, since a part of the service proposed by St. Joseph would include outpatient catheterization, this part of the need could be met by the laboratory established in Charlotte County by several cardiologists who practice on the staff of St. Joseph, and who recently established a facility in the county. By the same token, if a need for outpatient procedures is demonstrated, the existing inpatient program could, Fawcett contends, provide it. Finally, is the existence of under-utilized programs at Fawcett and the Medical Center which have existing excess capability which could be considered an adequate and available alternate to the St. Joseph program.

    
    

29. Turning to the question of financial feasibility, another evaluation criteria, there is no doubt that St. Joseph has the ability to borrow the capital to make the project financially feasible in the immediate future. St. Joseph's financial condition is sound. As might be expected, there is substantial difference in opinion as to the reasonableness of the pro forma projections submitted by St. Joseph's as evaluated by the Department. In fact, the parties agree to very little. St. Joseph contends that the patient mix estimated in the application is reasonable and based on its experience and that of Lee Memorial Hospital, and that the staffing level is appropriate and reasonable, and there is little to contest.

    
    

30. The major difference in positions is in the area of supply costs and the percentage of patients accounted for by Medicare. St. Joseph estimated a supply cost of $248.00 per admission in 1989 dollars, inflated by 7% per year up to 1993 and 1994, but Fawcett contends the actual supply cost in 1989 dollars is

    $492.00 per admission. Assuming, arguendo, that Fawcett is correct, the projected supply costs would then be increased by in excess of $85,000.00 in 1993 and almost $126,000.00 in 1994, and this would result in a reduction of projected income for the service in both years. Fawcett's evidence and argument here are not persuasive, however.

    
    

31. Fawcett also contends that St. Joseph's assumption that 58.9% of the cardiac catheterization patients would be Medicare, a figure which assumes that the Medicare patient utilization for catheterization would be the same as the facility as a whole, is not reasonable. Fawcett relies on the fact that St. Joseph is the sole obstetrics provider in Charlotte County and the majority of these obstetric patients are not Medicare patients. Considering that along with the fact that cardiac catheterization is a service which has a higher level of Medicaid utilization than St. Joseph presently provides, a more likely and reasonable predictor of the Medicare utilization of St. Joseph's program would be the Medicare utilization for the two existing catheterization programs. Fawcett's utilization in that regard is 64.6% and Medical Center's is 70.5%. Extrapolating from those figures, Fawcett contends a reasonable financial projection for St. Joseph's program would be 65% Medicare utilization. Since that type of service is reimbursed on the basis of DRG, the amount of income to the hospital is less, and the resultant contractual allowances, deductions from revenue, would be in excess of $61,000.00 in 1993 and more than $87,000.00 in 1994. Therefore, combining both the increase in projected supply costs and the decrease in projected income from Medicare, Fawcett contends that the projected number of catheterizations in 1994 and 1994, as modified using Fawcett's figures would result in a net reduction of approximately $210,000.00 in the former year and in excess of $126,000.00 in the latter. If those figures prove correct, St. Joseph's proposed program , it is suggested, would apparently not be feasible in the long term.

32. On the other hand, St. Joseph contends its utilization figures for 1993 and 1994 are reasonable in that it projects a volume slightly greater than one-half of the number of procedures accomplished by Fawcett in its first year of operation. St. Joseph's expert evaluated the use projections for the first two complete years of operation and the costs assumptions and found both to be reasonable. Nonetheless, he also accomplished calculations of profitability utilizing Fawcett's suggested increased costs figures, and utilizing three different approaches, ultimately concluded that even looking at the worst case scenario, St. Joseph's proposal would be financially feasible both in the short and the long term.

    
    

33. Independent analysis of the evidence leads to the conclusion that the projected staffing level and the salaries and benefits for that staff are reasonable. The anticipated reimbursements on the basis of the DRG's are reasonable. The projected utilization in the first and second years of operation are reasonable, and taken together, the evidence supports the conclusions drawn by St. Joseph's expert. It is so found.

    
    

34. Another area for consideration is the impact St. Joseph's program would have on Fawcett's existing program. Fawcett's program has now been in operation for several years and even with approval of St. Joseph's, will continue to operate without competition until the second half of 1992, after which St. Joseph's program would be in a start-up configuration for at least a year. As such, it will be well into 1993 and possibly into 1994 before St. Joseph's program can be considered to have its full impact vis-a-vis the Fawcett program. Fawcett's expert, who concluded that St. Joseph's program would have a serious adverse effect on Fawcett's ability to contribute to its improving financial picture did not consider the fact that Fawcett does not currently perform outpatient cardiac catheterization procedures, and any of that nature done by St. Joseph should have no impact on Fawcett. The expert also did not consider in his analysis of impact any population growth beyond 1990 or growth in the demand for diagnostic catheterization procedures.

    
    

35. Fawcett listed approximately $13.7 million in proposed capital expenses over the next five years which, it claims, will be adversely impacted by the effect of St. Joseph's proposed program on its cash picture. Many of the line items within this figure are much the same as normal routine replacement items, and only $3.5 million represent the cost of items specifically identified as needed to meet existing life safety code violations or for accreditation purposes.

    
    

36. No doubt there will be some impact on Fawcett's operation by the opening of St. Joseph's program, yet Fawcett has not demonstrated clearly that the impact will result in a return to the pre-1990 negative cash position which was shown to now be reversing. Even accepting Fawcett's expert's assumptions, the likelihood is great that Fawcett's equity balance would increase by over

    $900,000.00 from 1992 to 1993 and by over $800,000.00 from 1993 to 1994. So long as Fawcett's cardiac catheterization program performs more than 182 procedures per year, its current break-even point, no negative impact to the hospital's overall financial picture is likely to occur. Assuming that Fawcett's procedures were no more than one-half its 1990 admissions, at current rates, its program would render a positive contribution of more than $650,000.00 to the hospital's financial picture. This figure could not be considered as other than a viable financial contribution.

37. What is more, the implementation of the program at St. Joseph should not exert any upward pressure on the cost of other services rendered by St. Joseph, and should, by competition, moderate future price increases for this procedure at the two competing facilities.

    
    

38. As regards Medicaid and indigent care, St. Joseph has been a Medicaid provider since 1965 and has a history of providing service to indigent patients and under-served groups. In fact, the value of care rendered without cost to patients by St. Joseph has climbed from $418,000.00 in 1988 to a projected $1.5 million in 1991. By the same token, its commitment to Medicaid has increased to almost 4% in 1990, in addition to approximately 2% of uncompensated care that same year. The obstetric unit has been shown to operate $500,000.00 a year in the red because of the volume of indigent care provided. Nonetheless, St. Joseph agrees to accept a condition to its CON requiring it to provide 1.5% Medicaid and 2% charity care.

    
    

39. In comparison, Fawcett was not certified for Medicaid until late 1989 and its experience since that time has not been substantiated. This tends to underscore the Department's contention that Medicaid and charity patients are under-served within the Charlotte County area.

    
    

40. Other criteria outlined within the statute have not been shown by evidence presented, as being significantly affected one way or the other by the implementation of St. Joseph's proposed program. Several of the statutory criteria are, in fact, not applicable to the proposed project in this case.

    Much the same can be said for the criteria outlined in Rule 10-5.011(1), F.A.C., which tend to overlap to a substantial degree with the statutory review criteria.

    
    

41. Fawcett claims that the application filed with the Department by St. Joseph is "very incomplete" in that it omits significant information regarding project costs, capital expenses, source of funds, and a litany of other required information. It claims, therefore, that the Department could not have conducted any meaningful review of the application based upon the information provided. The Department's representative, Ms. Dudek, admits that most, if not all applications omit some information. That is the purpose of the omissions letter which is sent to an applicant after initial review. Not all information called for by the statute is deemed essential however. If an omission is considered immaterial, it will not cause the application to be denied, all other essential material being provided. There are primarily two criteria called for by the statute which are essential to Departmental approval. The first deals with the applicant's access to resources to develop and operate the project, and the second is that the applicant offer quality care. In this case, both were deemed to have been met as was stipulated to by Fawcett. In the instant case, the Department's representative concluded that St. Joseph's application was one of the most thorough and comprehensive, in terms of presentation and backup, to have been filed within the past few years.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

43. Fawcett seeks to prevent the Department's approval of St. Joseph's application for a CON to establish a cardiac catheterization laboratory in its Port Charlotte facility. The Department is the state agency empowered to issue,

    revoke or deny certificates of need for health care related projects in accordance with district plans, the state health plan, and state and federal statutes.

    
    

44. Inpatient cardiac catheterization programs, such as sought here, must be supported by a Department approved certificate of need. Section 381.706(1), Florida Statutes. Outpatient cardiac catheterization programs are not subject to CON review.

    
    

45. The basic procedure for the CON application process is outlined in Section 381.709, Florida Statutes, and provides for an initial Letter of Intent by the applicant, followed up by an application to the Department. Once the application is reviewed for completeness, the Department sends an omissions letter to the applicant requiring the omitted required information to be provided within a stated period of time. Once the application is deemed complete, it is reviewed and compared with competing applications, if any, and a preliminary determination is made, on the basis of the state agency action report, to either grant or deny the application. If, as here, the Department's preliminary determination is to approve an application, existing health care providers may then request an administrative hearing on the matter.

    
    

46. At this hearing, a "de novo?? proceeding, the applicant has the burden of proof to establish, by a preponderance of the evidence, that its project meets the statutory criteria and is entitled to the CON. Boca Raton Artificial Kidney Center, Inc. v. Florida Department of Health and Rehabilitative Services,

    475 So.2d 260, (Fla. 1st DCA 1985). At the hearing, the Hearing Officer is empowered to consider the Department's record made during its preliminary inquiry as well as any and all relevant additional evidence presented by the parties. Gulf Court Nursing Center v. Department of Health and Rehabilitative Services, 483 So.2d 700, 710, (Fla. 1st DCA 1985).

    
    

47. The criteria for evaluation of CON applications is found in Section 381.705(1), Florida Statutes, at subparagraphs (a) through (n). When, as here, the project involves the provision of a new inpatient service requiring a "capital expenditure", additional findings must be made in accordance with Section 381.705(2)(a) through (d), Florida Statutes.

    
    

48. The parties have stipulated that the provisions of Section 381.705(1)(c), (h) as to funding, and (m) have either been met or are otherwise not applicable. In addition, subsections 381.705(1)(d), (e), (f), (g), (j), and (k), and (2) (e), are not pertinent to the project proposed here. Consequently, only the following statutory criteria are pertinent. These are:

    
    

    381.705(1)

    1. The need for the health care facilities, ... 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.

    2. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services, ... in the service district of the applicant.

       The availability of resources,

       including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district.

       The immediate and long term

       financial feasibility of the proposal.

       1. The probable impact of the proposed project on the cost of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost effectiveness.

(n) The applicant's past and proposed provision of health services to Medicaid patients and the medically indigent.

385.701(2)

1. That less costly, more efficient, or more appropriate alternatives to such inpatient services are not available and the development of such alternatives has been studied and found not practicable.

2. That existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner.

   In the case of new construction,

   that alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable.

   That patients will experience

   serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service.

   The Department has, consistent with the authority delegated to it, promulgated Rule 10-5.011(1)(b), F.A.C., as well as Rule 10-5.011(1) (e), F.A.C.. The latter provision, which came out in July 1988, and was applied until such time as a Division of Administrative Hearings Hearing Officer, ruling in a rule challenge proceeding, declared certain portions of it invalid. The appeal of the Hearing Officer's Final Order is presently still pending before the First District Court of Appeals, and the rule, therefore, has not become void. (Section 120.56(3), Florida Statutes; Fla. R. App.P. 9.310(b)(2). In light of that determination, it is unnecessary to consider this application under the agency's non-rule policy provided for in MacDonald v. Department of Banking and Finance, 346 So.2d 569, (Fla. 1st DCA 1977).

   
   

   The rule in question, 10-5.011(1) (b) provides:

   
   

   1. The need that the population served or to be served has for the health services proposed to be offered ..., and the extent to which all residents of the district, and in particular low income persons, racial and ethnic minorities, women, handicapped persons, other underserved groups and the elderly, are likely to have access to those services.

   2. The extent to which that need will be met adequately under a proposed,

      reduction, elimination or relocation of a service, under a proposed substantial change in admissions policies or practices, or by alternative arrangements, and the effect of the proposed change on the ability of members of medically underserved groups which have traditionally experienced difficulty in obtaining equal access to health services to obtain needed health care.

   3. The contribution of the proposed service in meeting the health needs of members of such medically underserved groups, particularly those needs identified in the applicable local health plan and state health plan as deserving of priority.

   4. In determining the extent to which a proposed service will be accessible, the following will be considered:

1. The extent to which medically underserved individuals currently use the applicant's services, as a proportion of the medically underserved population in the applicant's proposed service area(s), and the extent to which medically underserved individuals are expected to use the proposed services, if approved;

2. The performance of the applicant in meeting any applicable Federal regulations requiring uncompensated care, community service, or access by

minorities and handicapped persons to programs receiving Federal financial assistance, including the existence of any civil rights access complaints against the applicant;

The extent to which Medicare,

Medicaid and medically indigent patients are served by the applicant; and

d. The extent to which the applicant offers a range of means by which a person will have access to its services.

Subsection (1)(e) of the rule, that under appeal at the current time, contains criteria to be used specifically for the evaluation of proposed cardiac catheterization projects. This rule imposes certain minimum requirements regarding staffing, equipment, accreditation, accessibility, and the availability of ancillary services. The evidence establishes that St. Joseph's proposed project would meet all of these requirements.

Met as well is the requirement in the rule for applicants for inpatient cardiac catheterization services in a facility not performing open heart surgery to "submit a written protocol as part of their certificate of need applications for the transfer of emergency patients to a hospital providing open heart surgery, which is within 30 minutes travel time by emergency vehicle under average travel conditions." This requirement has been met by the provision, contained in the protocol, for transfer of patients to Medical Center hospital which falls within the time and distance criteria.

One further requirement outlined in Rule 10-5.011(1)(e)8b, F.A.C., requires applicants "to demonstrate they will be able to reach an annual program volume of 300 admissions within two years after the program becomes operational." Evidence presented by St. Joseph tends to satisfy this requirement and has not successfully been challenged by Fawcett.

The Department has determined that, utilizing the provisions of Rule 10- 5.011(1)(e)8c, there is a numeric need for the proposed inpatient cardiac catheterization program in both the district and in Charlotte County, and this initial determination has been supported by the evidence produced by St. Joseph. The fact that unutilized capacity still exists within the service are is irrelevant here in light of the provisions of Rule 10-5.011(1)(e)1, F.A.C., which provides:

It is the intent of the Department to allocate the projected growth in the number of cardiac catheterization admissions to new providers regardless of the ability of existing providers to absorb the projected need.

In light of this provision, and the fact that St. Joseph is the only applicant for the established numeric need allowance, and all other hospitals within the service area are existing providers, the requirements of the rule appear to have been met in that regard.

St. Joseph has presented ample evidence at the hearing to demonstrate that its application complies with the relevant statutory and rule criteria pertinent for consideration in this case.

The evidence indicates a need for the facility being proposed. The Department has concluded there is a need for service to Medicaid patients and the medically indigent. (385.701(1)(a)). The existing facilities, at Fawcett and Medical Center, are adequate for current needs and, in fact, have excess current capacity. Projections by the Department, however, demonstrate a need in the future. (385.701(1)(b)). Notwithstanding Fawcett's claims to the contrary, it appears St. Joseph has adequate resources including manpower currently on staff and funds, or the access thereto, for start-up and operation. The facility will support such training programs as exist in the district and would be available to such training schools as exist or may exist in the future. (385.701(1)(h)). Again notwithstanding Fawcett's claims, the project is financially feasible in both the sort and long term. (385.701(1)(i)). The cost of providing the service proposed should foster competition and efficiency. (385.701(1)(1)). St. Joseph's past record of providing health services to the medically indigent has been consistent with Department and health plan goals. (385.701(1)(n)).

Less costly or more efficient or appropriate alternatives have been explored and determined to be either nonexistent or inappropriate here. (385.701(2)(a)). The programs operated by Fawcett and Medical Center appear appropriate and efficient. (385.701(2)(b)). Reasonable alternatives to new construction do not exist. (385.701(2)(c)). The Department has projected that at least a segment of the patient population, Medicaid and medically indigent patients, will have problems obtaining these services in the future without the proposed project. (385.701(2) (d))

With the exception of Fawcett's showing that approval of the instant application would have some adverse effect on its ability to improve its financial position to the degree it would without this program, it has failed to show that St. Joseph's proposal does not meet those criteria. Fawcett's evidence regarding the inaccuracy of St. Joseph's pro forma calculations of financial feasibility, both in the long and short term, is non-persuasive. The evidence is more than abundant to establish such feasibility in both time frames.

Taken together, the evidence submitted by all parties, digested and evaluated as it relates to the ultimate issue of need for and appropriateness of St. Joseph's proposed program, clearly indicates that the establishment of an inpatient cardiac catheterization laboratory at St. Joseph would fill a definite need within the medical community of Port Charlotte; that it would be financially feasible in both the short and long term; that its establishment is consistent with the goals of both the district and state health plans, and consistent with the needs of the unserved and under-served population, and that it is consistent with those statutory criteria deemed pertinent herein. All of this leads to the conclusion that the proposed program is beneficial and should be approved. This conclusion is not offset by the potential for a less than severe adverse impact on one existing provider's profit margin.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that a Final Order be entered by the Department approving St. Joseph's application for an inpatient cardiac catheterization laboratory, (CON #6202) for District VIII.

RECOMMENDED in Tallahassee, Florida this 4th day of April, 1991.

ARNOLD H. POLLOCK, 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 4th day of April, 1991.

APPENDIX TO RECOMMENDED ORDER CASE NO. 90-5815

The following constitutes my specific rulings pursuant to Sec 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

1. & 2. Accepted and incorporated herein.

3. & 4. Accepted.

5. & 6. Accepted.

7. - 10. Accepted and incorporated herein.

11. & 12. Accepted.

13. & 14. Accepted and incorporated herein.

1. Accepted.

2. Accepted and incorporated herein.

3. Accepted.

4. & 19. Accepted and incorporated herein.

20. & 21. Accepted and incorporated herein.

22. - 26. Accepted and incorporated herein.

27. - 34. Accepted.

1. Rejected.

2. - 39. Accepted.

40. - 42. Accepted and incorporated herein, except for the first sentence of Finding 41.

1. Rejected.

2. Accepted and incorporated herein.

3. & 46. Accepted.

1. Rejected.

2. Rejected.

3. - 51. Accepted and incorporated herein.

1. Accepted.

2. Accepted.

3. Not proven.

4. - 59. Accepted and incorporated herein.

1. Accepted that the loss of revenue will have an impact but the loss has not been shown to be substantial.

2. - 65. Accepted and incorporated herein.

66. & 67. Accepted.

68. - 76. Accepted incorporated herein in substance.

1. Rejected that the loss of revenue would "cripple" the health trend. It would adversely affect it but not cripple it.

2. - 83. Accepted and incorporated herein.

84. - 90. Accepted.

1. Accepted.

2. Accepted and incorporated herein.

3. - 97. Accepted that there are alternatives, but rejected that they are acceptable or adequate.

1. Rejected as too broad a statement.

2. Rejected as to the conclusion of waste.

3. & 101. Accepted.

1. Ultimate conclusion rejected. Need for level of education and experience accepted.

2. Accepted.

3. Underlying fact accepted. Balance is editorialization.

4. - 108. Accepted.

1. Accepted.

2. Not an appropriate Finding of Fact.

3. Accepted.

4. & 113. Accepted and incorporated herein.

114. - 116. Rejected.

1. Accepted.

2. & 119. Rejected.

120. & 121. Accepted and incorporated herein.

1. Rejected.

2. - 126. Accepted.

127. & 128. Accepted.

129. & 130. Rejected.

131. & 132. Accepted.

133. & 134. Rejected.

1. Not a Finding of Fact but a comment of the state of the evidence.

2. Accepted.

3. & 138. Accepted.

1. Accepted.

2. Rejected.

3. & 142. Accepted.

1. Rejected. St. Joseph was a Hill-Burton hospital.

2. Accepted.

3. Accepted that St. Joseph receives funds from taxes and other sources, but the conclusions that aid to Medicaid an the indigent "is to be expected" is an unjustified conclusion.

FOR THE RESPONDENT AND INTERVENOR:

1. - 3. Accepted and incorporated herein.

1. Accepted.

2. - 8. Accepted and incorporated herein.

1. Accepted.

2. - 13. Accepted.

14. - 16. Accepted and incorporated herein.

1. Accepted.

2. & 19. Accepted and incorporated herein.

20. & 21. Accepted.

22. - 24. Accepted and incorporated herein.

1. Accepted and incorporated herein.

2. - 28. Accepted and incorporated herein.

1. Accepted and Incorporated herein.

2. - 35. Accepted and incorporated herein.

36. - 41. Accepted and incorporated herein.

1. Accepted.

2. - 45. Accepted and incorporated herein.

46. & 47. Accepted.

48. & 49. Accepted and incorporated herein.

50. & 51. Accepted.

52. - 54. Accepted and incorporated herein.

55. - 58. Accepted.

59. & 60. Accepted and incorporated herein.

1. Accepted.

2. Accepted.

3. & 64. Not Findings of Fact but a comment on the state of the evidence.

65. & 66. Accepted and incorporated herein.

1. Not a Finding of Fact but a statement of party position.

2. Not a Finding of Fact but a comment on the evidence.

3. & 70. Accepted and incorporated herein.

71. & 72. Accepted and incorporated herein.

1. Accepted.

2. Accepted.

3. Not a Finding of Fact but a comment on the evidence.

4. Accepted.

5. - 80. Accepted and incorporated herein.

1. Accepted but irrelevant to the issues here.

2. Accepted but considered more a statement of party position and a comment on the evidence.

3. & 84. Accepted and incorporated herein.

1. Accepted.

2. Accepted.

3. Accepted.

4. Accepted.

5. Accepted.

6. Accepted.

7. Accepted and noted in the Conclusions of Law portion of the Recommended Order.

8. - 100. More proper as Conclusions of Law than as Findings of Fact, but accepted where pertinent.

COPIES FURNISHED:

John D. C. Newton, II, Esquire Aurell, Radey, Hinkle & Thomas Suite 1000, Monroe-Park Tower

P.O. Drawer 11307 Tallahassee, Florida 32302

Richard Patterson, Esquire DHRS

2727 Mahan Drive

Tallahassee, Florida 32308

R. Terry Rigsby, Esquire

1. Philip Blank, P.A.

   P.O. Box 11068 Tallahassee, Florida 32302

   
   

   Linda K. Harris

   Acting General Counsel

   Department of Health and Rehabilitative Services 1323 Winewood Blvd.

   Tallahassee, Florida 32399-0700

   
   

   Sam Power Agency Clerk DHRS

   1323 Winewood Blvd.

   Tallahassee, Florida 32399-0700

   STATE OF FLORIDA

   DIVISION OF ADMINISTRATIVE HEARINGS

   
   

   FAWCETT MEMORIAL HOSPITAL, )

   )

   Petitioner, )

   )

   vs. ) CASE NO. 90-5815

   )

   DEPARTMENT OF HEALTH AND )

   REHABILITATIVE SERVICES, )

   )

   Respondent. )

   )

   and )

   ) ST. JOSEPH HOSPITAL OF PORT ) CHARLOTTE, FLORIDA, INC., d/b/a ) ST. JOSEPH HOSPITAL, )

   )

   Intervenor. )

   )

   
   

   RECOMMENDED ORDER ON REMAND

   
   

   A hearing was held in this case in Tallahassee, Florida on September 23, 1991, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

   
   

   APPEARANCES

   
   

   For the Petitioner: John D. C. Newton, II, Esquire

   Aurell, Radey, Hinkle & Thomas

   101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302

   
   

   For the Respondent: Richard Patterson, Esquire

   Department of Health and Rehabilitative Services

   2727 Mahan Drive

   Tallahassee, Florida 32308

   
   

   For the Intervenor: F. Philip Blank, Esquire

   F. Philip Blank, P.A.

   P.O. Box 11608 Tallahassee, Florida 32302

   
   

   STATEMENT OF THE ISSUES

   
   

   The issue for consideration in this matter remainswhether St. Joseph Hospital should be issued a Certificate of Need to establish a cardiac catheterization laboratory at its facility in Port Charlotte, Florida.

   PRELIMINARY MATTERS

   
   

   On April 4, 1991, the undersigned entered a Recommended Order in this case which, inter alia, found excess capacity of existing providers to be irrelevant based on a provision of Rule 10

   by a Hearing Officer of the Division of Administrative Hearings to be invalid, but which was on appeal; and in which, based on the assumption that the rule was valid, the undersigned failed to make finding of fact on whether a non-rule policy was explicated.

   
   

   Thereafter, on May 14, 1991, the First District Court of Appeal issued its decision in which it held the questioned rule to be invalid. Subsequently, the Petitioner filed with the Department a Motion to Remand, and by Order dated July 8, 1991, the Secretary remanded the case to the Division for further fact finding and the issuance of an Amended Recommended Order.

   
   

   Upon receipt of the Order of Remand, the undersigned directed the parties to confer and determine acceptable dates for the rehearing, and based upon the parties response thereto, by Order dated August 1, 1991, set the matter for hearing in Tallahassee on September 23, 1991, at which time it was heard as scheduled.

   
   

   At the additional hearing, Petitioner presented the testimony of Daniel J. Sullivan, a consultant and expert in healthcare planning and finance and introduced Fawcett Exhibit 1. Fawcett Exhibit 2 for Identification was not admitted. Respondent, Department, presented the testimony of Elizabeth Dudek, Director of its Office of Health Facilities and Services, and St. Joseph Hospital presented the testimony of Ronald T. Luke, a consultant and expert in health care planning and finance.

   
   

   A transcript was filed and subsequent to the hearing, all parties submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

   
   

   FINDINGS OF FACT

   
   

   1. At all times pertinent to the matters in issue here, the Department of Health and Rehabilitative Services was the state agency responsible for issuing Certificates of Need for hospital services in Florida. The Petitioner, Fawcett Memorial Hospital was a hospital in the service area in issue currently operating a cardiac catheterization laboratory, and the Intervenor, St. Joseph Hospital has applied for and is the intended recipient of a Certificate of Need from the Department to establish and operate a cardiac catheterization laboratory in the service area as well.

      
      

   2. This matter was initially heard by the undersigned at a formal hearing held in Tallahassee, Florida on January 15

      evidence presented at that hearing, the undersigned entered a Recommended Order on April 4, 1991, in which were made numerous Findings of Fact regarding the need for and the appropriateness of the laboratory proposed by the Intervenor. Except as shown to be incorrect by inconsistentFindings of Fact herein, these Findings of Fact are adopted and incorporated herein as pertinent.

      
      

   3. The Department does not consider at all the capacity of existing providers as regarding numeric need. It does, however, consider that capacity as to: (1) how the applicant has shown its ability to generate the minimum volume, (300 per year); and (2) the impact of this on existing providers. When

      the Department was processing St. Joseph's application for a cardiac catheterization laboratory, it looked at the existing providers in the District and their volume. The Department also looked at the market share of each provider and considered St. Joseph's projections of anticipated volume to get its estimated activity.

      
      

   4. The Department found that all the older providers had achieved a minimum volume of 300 procedures per year and the new ones, even after being in business only 5 to 6 months were close to the 300 figure.

      
      

   5. In addition, the Department looked at the historical market share of each provider in the area and what services were currently provided to support the cardiac program. With regard to St. Joseph, that facility had an occupancy rate of 50%. The average within the District was approximately 55%. Charlotte County was at 50%, and the other two providers in that county were at 38% and 40% occupancy, respectively. It was obvious, that St. Joseph had a historically healthier occupancy than the other two providers in the area.

      
      

   6. Considering all factors, and all existing providers,as to what the utilization by each had been and the overall use of adult cardiac catheterization programs in the District, along with what new providers were doing and where the Department expected them to go, the Department concluded that St. Joseph demonstrated its ability to support the one additional program that the numeric need determination had shown to exist. The Department also concluded that the initiation of the program would not have an adverse impact on the existing providers, and that all existing providers would likely continue to surpass the minimum threshold of 300 procedures per year.

      
      

   7. In analyzing the potential adverse impact the Department does not specifically calculate what existing providers may expect to do because that depends on factors within the control of the provider. This includes such matters as how efficient the staff is, how many operating rooms or laboratories the provider has, and similar items of this nature which have a direct bearing on capacity. Consequently, the Department considers what any individual existing provider is capable of doing to be possibly, an infinite number.

      
      

   8. The Department looks at what a particular provider has done historically and calculates whether or not that provider has the ability to generate its projected volume. As to a proposed provider, the Department looks to see as well if the initiation of that program will still allow the existing provider to maintain at least the minimum number of procedures.

      
      

   9. When the Department's rule indicating the Departmentwill not consider the excess capacity of existing providers in terms of projecting need was found to be invalid, the Department revisited the issue and has not changed its position as to whether the Certificate of Need application submitted by St. Joseph should be approved. It has again concluded that it should be.

      
      

   10. The Department, on analyzing its calculation of need in this case, concluded that there is sufficient projected volume in the service area of the District to support an additional program. Based upon the Department's review of the application and the fact that the applicant had indicated it would increase access to Medicaid and charity patients; that it would create a quality program within the area; and would increase competition within the area; it concluded that approval of St. Joseph's application was appropriate and in the

       best interests of the public, and was consistent with the April 22, 1988 version of Rule 10D

       avoiding unnecessary duplication of services.

       
       

   11. This is not to say that the Department considers that existing providers do not provide quality care. There is no indication of any problem with quality of care in cardiac catheterization services within Charlotte County, nor is there any indication that Medicaid or indigent patients who need cardiac catheterization services are not receiving them.

       
       

   12. The April 22, 1988 version of the Rule also provides criteria for the evaluation of applications:

       
       

       in order to assure patient's safety and prevent staff physicians from unnecessarily duplicating services, and to achieve maximum economic use of existing resources, ... .:

       
       

       In evaluating an application consistent with that provision, the Department considers what existing providers are currently performing in terms of volume. It also considers how the applicant proposes to reach its proposed volume with respect to the resources it will use such as staffing, back

       heart equipment and the like.

       
       

   13. Taken together, the evidence here indicates, and Ms. Dudek, speaking on behalf of the Department concurs, the Department's policy today is no different than that which was stated in the Rule invalidated by the Hearing Officer. Applying those factors to the instant case, the Department concludes that the health care system in District 8 would be benefited by increased competition upon the granting of St. Joseph's application because, (a) The Department would be approving a program at a facility in an area where overall costs are among the lowest within the area; (b) the applicant has been turned to by physicians and patients for other services, and approval would open up its ability to do inpatient cardiac catheterization within the area; and, (c) the applicant/provider has historically provided service to a high percentage of Medicaid and indigent patients and approval of its application would open another avenue for Medicaid and indigent patients who make up a large percentage of cardiac catheterization patients. In short, approval of St. Joseph's application, in the Department's opinion, would provide a program of additional services by the lowest cost provider and would increase the abilityof physicians who use St. Joseph for other procedures to obtain a completely new and compatible service at that facility.

       
       

   14. The Florida Legislature, in passing the provisions of Chapter 381, Florida Statutes, has permitted providers of outpatient cardiac catheterization services to add laboratories without getting a Certificate of Need if the monetary threshold requiring one is not crossed.

       
       

   15. According to Dr. Ronald T. Luke, a consultant in health care planning and financing, the legislature has deregulated capacity as it relates to cardiac catheterization in two ways: (1) by deregulating the provision of outpatient cardiac catheterization, and (2) by having a capital expenditure threshold that is high enough to allow existing programs to add additional laboratories without a certificate of need. By doing this, the legislature has, in effect, indicated that once cardiac catheterization service exists in a facility, the capacity in terms of the number of labs that can be operated at

       that facility is unregulated. Based on that philosophy, Dr. Luke opined that one has to look beyond physical capacity and to him, this is what the Department's policy has done.

       
       

   16. The Department is concerned with the question of whether a new provider will be able to reach the threshold 300 procedure per year minimum within the two years authorized and whether that action will have any adverse impact on other existing or approved providers. The projections Dr. Luke calculated indicate that if St. Joseph were to achieve its existing marketshare in cardiology services, it would have no problem reaching the 300 catheterization procedure per year threshold within 2 years. As to the second part of the test, there would be sufficient procedures available in the District to insure that St. Joseph's achievement of its minimum would not adversely impact any existing program. Taken together, Dr. Luke concludes that the Department's policy merely states that if there is no adverse impact, the fact of additional physical capacity in existing providers will not prevent approval if there is a public reason for approval.

       
       

   17. In this case, St. Joseph's track record in other cardiology service of offering lower charges than either Fawcett or Medical Center is one positive factor for consideration supporting approval. Second, St. Joseph has an admirable record of providing substantially more Medicaid access and substantially more charity care access than does either of the other two facilities in Charlotte County. These factors constitute the public purposes which would be served by approval of St. Joseph's application.

       
       

   18. Without question, St. Joseph's facility would be a duplication of an existing service, but the question is whether that duplication is necessary because one or more public purposes are served by approval. Here, Dr. Luke states, several public purposes are served by the approval and this approval will not threaten the quality of the program at either Fawcett or Medical Center. Based on the above, he concluded the Department's policy is a rational one. He further believes it has been correctly applied in this case and it is so found. Mr. Sullivan, also an expert and consultant in health care planning and financing, testifying on behalf of Fawcett, an existing provider, both concurs with and disagrees with the conclusions drawn by the Department's representative, Ms. Dudek. He concurs that measuring capacity exactly in existing cardiac catheter providers is a difficult task. They are not specifically regulated and there is no reporting mechanism for utilization or capacity in terms of the number of labs. He disagrees, however, with the Department's stated intention not to consider capacity in allocating future growth to new programs. The statute provides new laboratories will not normally be approved in such a way as to create an unnecessary duplication of services, and Mr. Sullivan urges that unused capacity is important. Duplication should not be allowed unless there is a public purpose for it. This is consistent with the position taken by the Department and Mr. Luke.

       
       

   19. Mr. Sullivan has analyzed the situation to determine if any public purpose would be served by the approval of St. Joseph's laboratory and the only one he can see would be the resultant strengthening of St. Joseph's position in the community. It is always good to have a strong health care provider. Other than that, however, Mr. Sullivan contends it would be detrimental to any legitimate public purpose. He is of the opinion it is not good to allocate all growth to new providers. Volume and quality go hand in hand and if volume is limited in a program, improvement in quality is stifled. Mr. Sullivan also questions whether St. Joseph's prices are lower as was indicated by Dr. Luke and the Department. Admitting this may be so, he contends that, nonetheless, if

       price is kept low it will put pressure on the system and eventually raise prices rather than keep them low. Even if St. Joseph's prices are lower, price is not a significant factor in competition, he claims. Seventy percent of patients for cardiac catheterization in Charlotte County are on Medicare which pays a set fee regardless of the price charged by the provider. As for the remaining 30% covered by other than Medicare, the effect of lower prices would be minimal.

       
       

   20. Mr. Sullivan disagrees that comparison of St. Joseph's record of indigent service with other providers is valid. To his understanding, no one is denied service now. The doctors practicing at St. Joseph's facility will be the same as those who practice at Fawcett and Medical Center, and since it is the doctor who decides where the procedure will be performed, it is really a

       non

       
       

   21. On the basis of the above, Mr. Sullivan can find no public benefit to the health care system by approving this program. He disagrees the evidence shows there has been an increase in use and procedure numbers. He believes both Medical Center and Fawcett are flattening out in the numbers done and may do even less even without the approval of St. Joseph's program. It appears to him that utilization of existing providers is going down or at least flattening out. No direct evidence in support of that theory waspresented, however.

       
       

   22. As Mr. Sullivan sees it, measuring capacity is a difficult task, especially in outpatient clinics. This is consistent with the position taken by the applicant and the Department. Each of the facilities in Charlotte County tends to serve a different type of patient

       this is a factor which should also be considered. Further, there is a difference between capacity and excess capacity, (utilization). While capacity is finite and not affected by choice or use, excess capacity is affected by (1) the choice of the physician as to where the procedure will be done, and (2) the decision by the facility to seek procedures. Also, quality of care provided is related to the skill of the physician and his staff. Practice, therefore, is important and often the higher the utilization, the better the quality of care.

       
       

   23. Mr. Sullivan disagrees with the Department's intention to grant to a facility which already has the highest occupancy rate a new service which would further empty the other existing providers. This is his opinion, however, and is not supported by direct evidence or credited.

       
       

       CONCLUSIONS OF LAW

       
       

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

       
       

   25. This matter was remanded to the Hearing Officer by the Secretary of the Department. The Hearing Officer entered aRecommended Order in this case on April 14, 1991, and the Conclusions of Law as set forth in that Recommended Order are readopted and incorporated by reference except as inconsistent with the Decision of the First District Court of Appeal in Department of Health and Rehabilitative Services v. Florida Medical Center, 578 So.2d 351 (Fla. 1DCA 1991).

   26. In July, 1988, the Department promulgated Rule 10D

       F.A.C. dealing with the establishment of cardiac catheterization laboratories. The provision outlined in subparagraph (e) has been declared invalid by a Hearing Officer whose Final Order was upheld by the Court in the above decision.

       
       

   27. The rule, as re

       Department in the evaluation of proposed cardiac catheterization facilities and imposes minimum requirements for staffing, equipment accreditation, accessibility, and availability of ancillary services. There is little question that the project proposed by St. Joseph meets all the defined requirements.

       
       

   28. The rule also requires applicants for inpatient cardiac catheterization services in a facility at which open heart surgery is performed to submit a written protocol as a part of the application providing for the transfer of emergency patients to a hospital which does open heart surgery and which is located within 30 minutes travel time by emergency vehicle under average travel conditions. The application in issue here contains a protocol for transfer of patients from St. Joseph to Medical Center Hospital forany necessary open heart surgery and the latter facility falls within the time and distance criteria.

       
       

   29. An additional requirement of Rule 10D applicants to:

       
       

       demonstrate they will able to reach an annual program volume of 300 admissions within two years after the program becomes operational.

       
       

       The Department has concluded that St. Joseph will be able to meet this requirement and Petitioner has not presented evidence sufficient to disprove this determination.

       
       

   30. The rule which was declared invalid provided in part:

       
       

       It is the intent of the Department to allocate the projected growth in the number of cardiac catheterization admission to new providers regardless of the ability of existing providers to absorb the projected need.

       
       

       Since that rule provision has been declared invalid, the Department nonetheless continues to follow the same philosophy as a matter of incipient policy. An agency may utilize incipient policy but if it does it must elucidate its reasons for doing so and support its policy with competent substantial evidence. The burden of proof to support such a policy rests on the policy maker and the inquiry into the subject must always center on the record foundation for the policy, McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1DCA 1977). In supporting its incipient policy, the agency may present evidence of routine nature or it may utilize evidence which is within its particular expertise. In any case, however, the policy must be rationally applied to the particular circumstances of the case in issue. The evidence presented by the Department indicates that the rule language which was stricken by the Hearing Officer, as sustained by the Court, was no more than an attempt by the Department to formalize in rule form what has been its policy over several years prior to the promulgation of the rule. The evidence also demonstrates that legislative changes in the not too distant past have, in essence, deregulated

       outpatient cardiac catheterization programs and provide for an existing provider to add additional laboratories without CON review. That being the case, it is easy to conclude that excess capacity by existing providers can be spoken for by those providers without any reference to the review process. Allowing that to happen without some method of insuring a fair allocation of the market could effectively eliminate any new entry into the market place. Here, two of the three hospitals in the service area already have cardiac catheterization laboratories. Application of the policy would do no more than put all three facilities on an equal footing and would enhance competition in that the three providers would be competing with equal services.

       
       

   31. Having concluded that the Department is, in fact, relying on a

       non

       indicated a proper reason for using it. The Department has established and the applicant's expert confirms that St. Joseph is a fully qualified facility which generally provides more services to Medicaid, Medicare, and indigent patients than do the other two other facilities in the county. Furthermore, thereis evidence that the prices charged by St. Joseph are somewhat lower than those charged by the other two providers and though this was denied by Petitioner, no evidence in support of that denial was forthcoming. These factors alone would seem to be sufficient justification for the policy. It is, in addition, one of the only ways to insure that all pertinent and qualified providers have an opportunity to compete in the market place.

       
       

   32. On the other hand, Petitioner urges, and properly so, that as a general rule, the more procedures are done in a particular program, the more qualified the operators become, and Petitioner urges that the loss of procedures from its facility to that of the applicant could have a negative effect on the quality of service rendered at its facility because of the smaller number of procedures done and the smaller opportunity for practice. This argument is not, however, persuasive on the facts of this case. The evidence submitted by the Department and the applicant indicates that the projected growth in numbers of procedures available is such that minimum if any diminishment will occur in the number of procedures done by Fawcett or Medical Center as a result of the initiation of a new facility at St. Joseph. At worst it would appear that the growth in number of procedures done anticipated by Fawcett will be less than expected, but in no case is it anticipated that the total number of procedures done by any facility will be less, for any period of time, than that which is currently done and which supports the current level and quality of service provided.

RECOMMENDATION

Based on the foregoing supplemented Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that a Final Order be entered by the Department of Health and Rehabilitative Services approving St. Joseph Hospital's application for an inpatient cardiac catheterization laboratory at its facility is Charlotte County, Florida.

RECOMMENDED in Tallahassee, Florida this 6th day of November, 1991.

ARNOLD H. POLLOCK

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399

(904) 488

Filed with the Clerk of the Division of Administrative Hearings this 6th day of November, 1991.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

1. Accepted.

2.

1. Accepted.

2. Accepted and incorporated herein.

3. Accepted.

4. 
   

13. & 14. Accepted and incorporated herein.

15. Accepted.

16.

the possibility of lower charges from competition would be very, very small. The degree of reduction was not established.

20. & 21. Rejected as not proven by the evidence.

1. Accepted.

2. & 24. Accepted.

1. Accepted.

2. & 27. Accepted.

28. & 29. Accepted.

1. Not proven.

2. Rejected.

FOR THE APPLICANT AND THE DEPARTMENT:

1. Accepted and incorporated herein.

2. & 3. Accepted.

1. Accepted.

2. Not a proper Finding of Fact but a part of the Preliminary matters.

3. Accepted.

4. & 8. Accepted and incorporated herein.

9. Accepted.

10.

13.

16. & 17. Not Finding of Fact but a restatement of testimony.

COPIES FURNISHED:

John D. C. Newton, II, Esquire Aurell, Radey, Hinkle & Thomas

101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302

Richard A. Patterson, Esquire Department of Health and

Rehabilitative Services 2727 Mahan Drive

Tallahassee, Florida 32308

F. Philip Blank, Esquire

F. Philip Blank, P.A. Post Office Box 11068

Tallahassee, Florida 32302

John Slye General Counsel

Department of Health and Rehabilitative Services

1323 Winewood Blvd.

Tallahassee, Florida 32399

Sam Power Agency Clerk DHRS

1323 Winewood Blvd.

Tallahassee, Florida 32399

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should b e filed with the agency which will issue the Final Order in this case.

Docket for Case No: 90-005815

Orders for Case No: 90-005815