STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SOUTH BROWARD HOSPITAL DISTRICT ) d/b/a MEMORIAL HOSPITAL, )
)
Petitioner, )
)
vs. ) CASE NO. 91-5698
)
DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES and ) NME HOSPITALS, INC. d/b/a )
HOLLYWOOD MEDICAL CENTER, )
)
Respondents. )
)
RECOMMENDED ORDER
A hearing was held in this case in Tallahassee, Florida on February 17 - 25, 1992 before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.
APPEARANCES
For the Petitioner: R. Terry Rigsby, Esquire
F. Philip Blank, Esquire Blank, Rigsby & Meenan, P.A. 204-B South Monroe Street Tallahassee, Florida 32301
For the Department: Thomas R. Cooper. Esquire
2727 Mahan Drive, Suite 103
Tallahassee, Florida 32308
For NME Hospitals : C. Gary Williams, Esquire
Michael Glazer, Esquire Ausley, McMullen, McGehee,
Carothers & Proctor
227 South Calhoun Street Tallahassee, Florida 32302
STATEMENT OF THE ISSUES
The issue for consideration in this matter is whether Respondent, NME's application for a Certificate of Need to provide comprehensive medical rehabilitation beds in Department District X should be approved.
PRELIMINARY MATTERS
In March, 1991, both Petitioner, South Broward Hospital District, d/b/a Memorial Hospital, (Memorial), and Respondent, NME Hospitals, Inc., d/b/a Hollywood Medical Center, (HMC), filed applications for Certificates of Need,
(CON), with the Department of Health and Rehabilitative Services, (Department), for the provision of comprehensive medical rehabilitation, (CMR), beds within Department District X. On June 28, 1991, the Department indicated its intention to approve both applications.
Both Memorial and HMC requested formal hearing to challenge the Department's stated intention to approve both applications and these petitions were forwarded to the Division of Administrative Hearings for appointment of a Hearing Officer. However, prior to the commencement of a consolidated hearing on those Petitions, HMC dismissed its challenge to the preliminary approval of Memorial's application, and that file was closed. Memorial's challenge to the intended approval of HMC's application still stands, and its standing to challenge HMC is based on the fact that it is an existing provider of CMR services.
By Notice of Hearing dated October 1, 1991, Eleanor M. Hunter, the Hearing Officer to whom the case was originally assigned, set the matter for hearing commencing on February 17, 1992 and the case was convened by the undersigned as scheduled. At the hearing, HMC presented the testimony of Daniel J. Sullivan, a consultant in health care management and an expert in health care planning, financial planning, and financial feasibility; Dr. Jay S. Mendelsohn, a physiatrist and specialist and expert in physical medicine and rehabilitation; Dr. Jeffrey A. Crastnopol, an orthopedic surgeon; Dr. Jose Muniz, a specialist in internal medicine; Holly Lerner, Chief Operating Officer for HMC and an expert in hospital administration; Dr. Jubran Hoche, a neurologist; Scott L. Hopes, a health care consultant and expert in health care planning; Paul D. Echelard, administrator and Chief Executive Officer, Pinecrest Rehabilitation Hospital, and an expert in rehabilitation hospital administration; and Ben F. King, Vice-President for Finance, Florida Region, Eastern Division of NME, and an expert in health care finances. HMC also introduced NME Exhibits A through N and P through X. NME's Exhibits O and Y were not admitted.
Memorial presented the testimony of Madeline Hellman, Administrative Director for rehabilitative services at the South Broward Hospital District's Memorial Hospital and an expert in CMR operations including quality of care; Edward J. Maszak, Director of Financial Planning for the South Broward Hospital District; Thomas R. Bayless, President of Future Health, Incorporated, a health care consultant firm and an expert in health care finance; and Sharon Gordon- Girvin, a health care consultant and expert in health planning and CON administration. Memorial also introduced Memorial Exhibits 1 through 6 and 8 through 10.
The Department presented the testimony of Morgan R. Gibson, a review consultant for the Department's Office of Community Medical Facilities and an expert in health planning, and Elizabeth Dudek, the Department's Director of the Office of Community Health Facilities and Services, and an expert in health planning and CON review. The Department also introduced HRS Exhibits 1, 2, and
4. HRS Exhibit 3 for Identification was not offered into evidence.
A transcript was provided and subsequent to its filing, all parties submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.
FINDINGS OF FACT
At all times pertinent to the allegations contained herein, the Department was the state agency with the authority to and the responsibility
for evaluating and approving CON applications for health care facilities in this state.
Department District X is a single county district which encompasses the whole of Broward County, Florida. Broward County consists of two distinct service areas for health care providers; the north and the south. Facilities located in the northern part of the county, for which the dividing line is accepted as State Road 84 and Interstate 595, which run east/west across the county, primarily serve the northern area of the county. By the same token, those providers located south of the dividing line are primarily in service to residents in the southern portion of the county.
Legitimate basis exists for the distinction between the north and south county segments. The county is divided into two taxing districts which generally follow the service district boundaries and these taxing districts are utilized to provide and reimburse for health care services. In addition, physician practice patterns show generally that physicians stay, refer, and admit to facilities within that portion of the county where they live and practice. There is little medical intercourse between the sections. A third basis for distinction is the fact that generally patients follow physicians, and will normally present for treatment at those facilities located in the section in which they reside and their practitioner locates.
At the present time, of the five providers which offer CMR services in Broward County, (District X), four are located in the northern section of the county, and the fifth, Memorial, is located in the south. Memorial currently has 22 of the 213 existing and approved CMR beds in the District. This constitutes approximately 10% of the total number or approved and existing beds in the District while 32% of the population of the District resides in that service area. By the same token, if one considers the number of CMR beds per 100,000 population, the number in the north service area is approximately 4 times that in the south.
Petitioner, Memorial, is a 618 bed acute care regional public hospital providing numerous specialized acute care services to District X as well as adjoining areas in the southeast region of the state. It is operated by the South Broward Hospital District, a taxing entity created by the Florida Legislature in 1947, and has a history of being a disproportionate share provider of medical services to the indigent through Medicare and Medicaid programs as well as other charity care programs. In fact, Memorial provides the sixth highest level of indigent care in this state.
Memorial currently has provided CMR services since 1985 and operates a
22 bed CMR unit. It also offers open heart surgery, neurosurgery, pediatric cardiac catheterization, pediatric trauma, pediatric open heart surgery, and pediatric oncology and hematology. The facility has recently submitted a letter of intent to the Office of Emergency Medical Services requesting to be designated as a regional adult trauma center.
HMC is a 334 bed acute care hospital also located in the southern service area of District X, in a six story building containing approximately 300,000 square feet and an adjacent five story medical office building. It also offers a broad range of general acute care services as well as specialized programs in the treatment of diabetes, laser surgery, eating disorders and oncology. It also provides intensive care, coronary care, and progressive care beds, though all may not be considered as active tertiary care services.
HMC has a large medical staff consisting of over 400 physicians representing almost all medical specialties. More than 90% of the staff are board certified and the rest are board eligible. The medical staff of HMC and Memorial tend to overlap almost in its entirety. HMC's medical staff also includes five physicians who specialize in physical medicine and rehabilitation, (physiatry), all of whom are board certified except for one who has recently taken the board examination.
HMC is a subsidiary of NME Hospitals, Inc., a national publicly held health care company which owns, manages or operates more than 150 acute care, rehabilitation, and pediatric hospitals throughout the United States and overseas. NME has a rehabilitation division which specializes in comprehensive rehabilitation services. This division would manage the CMR unit at HMC if approved. HMC is accredited by the Joint Commission of Accreditation of Health Care Organizations and maintains extensive quality assurance activities.
On March 11, 1991, HMC filed a Letter of Intent to apply for a CON to convert 30 existing acute care medical surgical beds to 30 CMR beds. Somewhat later, but still during March, 1991, both Memorial and HMC filed applications for a CON for CMR beds. Memorial's application sought the addition of 4 CMR beds to its existing 22 bed unit. Both applications were preliminarily approved by the Department.
Thereafter, both Memorial and HMC filed Petitions in opposition to the preliminary approval of the other applicant's application. HMC ultimately dismissed its Petition in opposition to Memorial's 4 beds, and that application is not in issue here. Prior to hearing, the parties agreed that the provisions of Section 381.705(1)(m), Florida Statutes, as they relate to costs of construction and construction methods and itemization and costs of equipment of HMC and its application are not in issue. Memorial, however, did not waive its right to challenge the plan and design of the plan as to quality care considerations in HMC's application.
The parties also agreed that Section 381.709(2)(c), Florida Statutes, was in issue but that sup-paragraphs a, b, and d of that section were not. The Hearing Officer's resolution of Petitioner's objections on this matter established that the Letter of Intent was timely filed in the appropriate place and the proper notice published.
HMC's Letter of Intent included therewith a resolution of the NME Board of Directors which was accompanied by a certificate as to its accuracy. The corporate resolution certificate, dated March 5, 1991, indicating the resolution was enacted on February 19, 1991, was executed by Mr. McKay, Vice President and Assistant Secretary of NME Hospitals, Inc. Memorial questioned Mr. McKay's authority to sign the certificate as custodian of the corporate records. The evidence presented indicated, however, that Mr. McKay is a keeper of the corporate seal and custodian of corporate records pertinent to the eastern region of NME Hospitals, Inc., and as such he was an appropriate custodian of the records and competent to execute the certificate. The issue as to the date on the certificate appears to be no more than a scrivener's error. The errors which exist are harmless. The documentation contains all certification necessary for a valid Letter of Intent.
Daniel J. Sullivan, a consultant in health care management, did a need analysis study of the Broward County District for HMC to determine whether a CMR facility was needed within the District and if so, where. He first looked at the planning area and what services were available, both those in existence and
those approved but not yet on line. He also looked at utilization of CMR services in the area and trends toward service utilization, geographic distribution of existing services, the fixed need pool, relevant Department rules relating to numeric need and other factors, and in that connection, any other unusual factors bearing on need.
Mr. Sullivan's study clearly established to his satisfaction that HMC does not serve all of Broward County - only, primarily, those patients residing in Hollywood, Hallendale, and Dania, all of which are in the southeast corner of Broward County. The secondary service area goes down into Dade county and up to Ft. Lauderdale. The data for this study and the need analysis comes from the Hospital Cost Containment Board, (HCCB), and is considered to be reliable. Mr. Sullivan also did an analysis of areas served by other providers in the county and determined that Memorial's service area is similar to that of HMC. North Broward Medical Center serves the very northeast part of the county. Holy Cross Hospital serves the lower north to northeast part of the county. Based on this, he concluded that facilities in the northern part of the county serve the northern county area. Only Petitioner and HMC serve the southern part of Broward to any measurable extent.
Utilization of CMR beds is very high district-wide, both historically and currently. Occupancy in the District for the relevant period was 91.21% county-wide, with Memorial Hospital having an occupancy rate of 99.32%. This is not, in Sullivan's opinion, a historical aberration. The same trend goes back to the mid 1980's. In 1989 for example, utilization was at 89% and it has gone up since that time. In Sullivan's opinion, the system is now near capacity and the occupancy rate remains high.
Both Holy Cross and North Broward Medical Center have 20 new beds each as of the last quarter of 1991. When those beds came on line, the utilization rate still remained very high NBMC's new program was at about 75% occupancy after less than one year operation. These north county beds will be used by north county patients and will not, for the most part, be available to south county residents.
Rule 10-5.039, F.A.C., is the Department's rule regarding need determination, and it contains a numeric need formula for projecting future needs for service ((2)(a)). The Department publishes a fixed need pool every six months to identify need. The last one published before this application showed a zero bed need in the fixed need pool. Mr. Sullivan believes, however, this is not an accurate predictor of bed need since the realities of the market place are not related to the Department's fixed need pool.
Mr. Sullivan's calculations show a gross bed need in 1990 of 88 beds considering the existing 213 licensed and approved beds. Since these are running at an occupancy rate higher than 90%, this shows the rule grossly underpredicts the need for the service. In fact, the Department has prepared State Agency Action Reports, (SAAR), in both the NBMC and St. Joseph applications and the Memorial application which reflects this trend.
Mr. Sullivan believes the need formula is not a good predictor of future needs because it assumes, incorrectly, that the number of patients needing the service is directly related to acute care hospital discharges. Historically, however, this has not been the case. Since 1986, the ratio of CMR discharges to acute care discharges has grown and has never closely approximated the rule's standard ratio of 3.9.
Other factors are provided for in subparagraph (2)(b) of the rule. The District's population trends show a relatively older population, (more than 20% of the population is over 64 years old), and by 1996 that percentage will increase somewhat. Since July, 1989 approximately 33% of the people with the top ten conditions utilizing CMR services were from South Broward County.
Extrapolating this indicates a net need of 11 beds if an 85% occupancy rate is experienced. Since the actual occupancy rate remains, in fact, higher than 85%, Mr. Sullivan believes this method is accurate. A modification of this need, relating to discharge rates, was done in the Omissions Response herein which shows a need, by 1996, of 39 beds, not including the 4 beds approved for Memorial.
As to population, the elderly are most at risk for conditions requiring CMR care since they, by far, experience the largest percentage of strokes and orthopedic related conditions. With the elderly and very elderly percentage of the total population increasing, this would tend to drive the need for CMR services and beds. Mr. Sullivan calculated need for the purposes of the application for the southern portion of the District along, utilizing a method which, though not officially recognized, uses the same criteria for analysis used in the District analysis. Doing so, he concluded there would be a 1990 need for 53 additional beds. Utilizing the 17(a) method to project into the future, he calculates a 1996 need for 57 beds.
Concerning subparagraph (2)(B)3 of the rule, considering the growth rate of CMR admissions per 1,000 population, (from 1.41 to 2.24 during the period 1986 through 1990), at HMC, Mr. Sullivan also concluded that the growth rate would be plus or minus 4.5% over the next 5 years. He also concluded that the length of stay will remain at 21 days over the next 5 years and feels this is conservative when compared to the rest of the state and the 28 day figure used in the rule. There is some pressure to have patients discharged as soon as possible which impacts on length of stay. Considering all these factors, Mr. Sullivan expects a District X need as a whole of 65 beds in 1996, not including the 4 beds approved for Memorial. This would result in an actual 61 bed need by 1996. All this means that if the number needed is the same for the South County and the County as a whole, then the number is acceptable and all the need is in the South County.
As to trends in the utilization by third-party payees, this factor has driven the growth. Medicare and insurance companies recognize the efficacy of CMR services as opposed to the fragmented treatment otherwise provided. They consider that every dollar spent on CMR saves money for the health care system.
Subparagraph (c)1 of the rule requires a unit have at least 20 beds. In the instant application, HMC is seeking 30 beds and this clearly meets the rule criteria.
The occupancy standard of 65% in the first year, as outlined in sub- paragraph (c)2 of the rule, is estimated to be met easily, and the 85% requirement for existing providers will also be met.
All together, there appears to be a high demand for CMR services in Broward County in general and in the south half of the county in particular, and it is reasonable to assume that the 30 beds for HMC, as well as the additional beds sought by Memorial, could be approved without adversely affecting any existing providers. Regarding the rule's accessibility standard which requires 90% of the target population to reside within 2 hours diving time of the
proposed facility, this is clearly met since all of Broward is within 2 hours driving time of both HMC and Memorial.
Turning to the provisions of Section 381.705, Florida Statutes, specifically (1)(a), (b) and (2)(a),(b) and (d), all are highly interrelated. While geographic availability may not be of concern, the availability of empty beds is of great concern. Historically, the District has operated well above the 85% occupancy rate for over 3 years. The system currently is clearly inadequate and the existing alternatives, home care and outpatient services, do not replace the services in issue but supplement and are follow-ons to inpatient CMR care.
Concerning economies of shared service, Mr. Sullivan feels certain economies will accrue as a result of this conversion if approved. Existing space will be used and can share administrative and overhead expenses; the contractor to be used to accomplish the project is qualified and experienced and knows how to economize. Impacts on competition will be minimal if any, given the high level of need. As to any impact on HMC, the sharing of costs and services between the integrated portions of the facility would generate economies. At the present time there is no existing competition other than the beds at Memorial. If HMC is granted its certificate and becomes an existing provider, the resultant competition should be beneficial to both institutions.
There are no alternatives to this service which are less costly or more efficient. Any alternatives would be either more expensive or inappropriate. The facilities are currently being used in a very efficient manner and this would not change.
If the application is not approved, according to Mr. Sullivan there are and will be patients who are in need of and who will be denied CMR services in South Broward County. He believes the 1989 Florida State Heath Plan and the District's 1990 Health Plan, those applicable here, are consistent with this application. The preferences called for in the plans will be met and satisfied. HMC agrees to accept Medicaid patients and has committed 1% of its service to the indigent.
It should be noted that Memorial's projected need for CMR beds is identical to that of this applicant, and this tends to indicate Memorial also feels there is a need for additional beds in the south county. It's application was filed subsequent to the initial approval of the 30 beds in issue here.
It is immaterial at this point that District X has more CMR providers and more licensed CMR beds than any other district in the state. Also not controlling is the fact that under the state's bed need methodology, as outlined in the rule, there is a 125 bed excess projected by 1996 for District X.
It must be noticed here that CMR services are defined by rule as tertiary health services which are generally specialized services using specialized equipment and personnel. They should be centralized in a centralized location to encourage better utilization of resources. HMC is a community hospital which does not now have any other tertiary hospital services but Dr. Jay S. Mendelsohn, a psyiatrist testifying on behalf of HMC claims that the majority of rehab problems are not so specialized as to require tertiary services and are mainstreamed.
Dr. Mendelsohn, a specialist in physical medicine and rehabilitation, as a physiatrist, coordinates care on a rehabilitation unit including actual
treatment, nursing care, and social work relative to the patient's condition. A physiatrist sees, on an inpatient basis, patients with such infirmities as stroke, hip fractures, multiple sclerosis, multiple trauma, and other similar conditions. The patients are usually those with neuromuscular or musculoskeletal problems, though he does, on occasion, see those with arthritis complications.
Dr. Mendelsohn has privileges at several hospitals in Broward County including both Memorial and HMC. He practices mostly at Memorial where he was, from 1985 through 1991, Medical Director of the rehabilitation unit. His associate, Dr. Novick, is the current Medical Director.
CMR patients are usually referred for this service by other physicians. Hip fractures and strokes are primarily from orthopaedic surgeons and neurologists, but internists, family practitioners, and physicians practicing in other disciplines also refer as appropriate.
To Dr. Mendelsohn's knowledge, South Broward County is somewhat unique. Physicians there generally stay in that area and do not practice or draw patients from north of I-595. Another group practices primarily in the northeast portion of the county and a third group practices in the northwest county. Most physicians use the hospitals in the area in which they practice.
In the south county, patients needing inpatient rehabilitation can at present, from a practical standpoint, go only to Memorial Hospital since it has the only rehabilitation beds available in the area. His experience indicates substantial difficulty in getting patients admitted to that unit since it generally fills its rehabilitation beds with patients primarily from it own patients already admitted to other services. Patients from other hospitals or from the community normally have great difficulty getting admitted, and this problems has existed for quite some time, (over 5 years). He has encouraged Memorial's staff to apply for more rehabilitation beds.
If a Memorial patient is unable to get into the rehabilitation unit at Memorial, that patient then has to obtain the needed rehabilitation treatment on an acute care ward. Patients at other facilities often are not admitted at all, and this situation affects the course of treatment and reduces the amount and the beneficial effects of therapy by approximately one-half.
The providers in the northern part of the county are not a good source of therapy to patients from the southern portion of the county because:
Since south county physicians normally do not go to the north portion of the county, the patient has to have a different physician who is not familiar with either the patient or the condition and who must, therefore, do repeat tests and other diagnostic procedures.
The patients' families find it harder to visit the patients in the north part of the county and therefore do not visit as frequently. Family visits are important to the success of the therapy.
When the patient goes home, his family does not know how to help out because they did not receive the training they would have ordinarily have received had they been able
to visit in the inpatient facility more frequently.
Older patients' spouses often do not drive or, if they do, find the extra distance to the north portion of the county too much to travel.
As a result of all the above, the continuity of care concept, which is important from a medical care standpoint, is adversely affected.
Patients needing treatment at HMC's facility, if approved, would be much like those treated at the currently existing Memorial facility. Dr. Mendelsohn is familiar with Rehabilitation Hospital Services Corporation, which will be contracted with to run the HMC facility if approved. To his knowledge, the quality of care provided by it is good and comparable with that provided elsewhere.
Dr. Mendelsohn anticipates he would refer 5 to 10 patients a week from his and his associate's practice to HMC's CMR facility if approved. He feels he could keep the 30 beds filled without taking any patients from Memorial's unit which would still remain operating at capacity. The 21 day stay average at Memorial is shorter than he would expect to see. This is consistent with Sullivan's conclusion, supra. If more beds were available, the stay at both facilities would probably be longer. This is in part because now the patient is getting therapy on the acute care ward while waiting to get into the rehab unit. This pretreatment would be accomplished on the CMR unit if the space were available. As a result, then, the opening of HMC's CMR unit would, in his opinion, in no way adversely affect Memorial's ability to keep its unit full. Dr. Mendelsohn's comments are not biased by the fact that he is a financial investor in the corporation which will operate HMC's unit.
Within the pertinent medical community there is a great deal of frustration and anger over the inability to get patients into a rehabilitation center and keep them there for the appropriate length of time. The alternatives to the proposed facility, such as inpatient treatment on other services or in other hospital facilities in the county, or in nursing homes, are not as good. By the same token, outpatient care is not as good because of the unavailability of sufficient treatment due to Medicare and other financial restraints.
The difficulties experienced by physicians practicing in the southern Broward County area who desire to admit their patients for CMR service is typified by that of Dr. Jeffrey A. Crastnopol, an orthopedic surgeon practicing in Hollywood since 1984, and a member of the staff at Memorial, HMC, and other hospitals in the area. Dr. Crastnopol sees a wide range of patients from children to the elderly. His practice deals mostly with trauma in children, sports trauma, and trauma related to bone brittleness in the elderly. Almost all his patients live within the southern Broward area. All hospitals where he is on staff are in that area as well.
Dr. Crastnopol has chosen not to take patients from outside his geographical area because he has sufficient patients from in his area to keep him busy. In his experience, of all the other orthopedists he knows, none practicing in the southern Broward area is on staff in any of the hospitals in the northern Broward area. Most are on staff at both Memorial and HMC.
Most of Dr. Crastnopol's patients are elderly, suffering hip fractures; pelvic, lumbar and spinal fractures; herniated discs; and the
complications of arthritis as well as other symptoms. He and his associate saw between 10 and 15 patients with these conditions in the two weeks prior to the hearing. Of that number, he referred at least 3 for inpatient rehabilitation at Memorial and has an additional 4 or 5 other patients now in acute care services who will need CMR services.
His trauma cases usually go to the emergency room first or the patient will call him or their primary care physician. The patients frequently request a particular hospital but, if a patient is already admitted to Memorial, he would try to keep that patient there for rehabilitation services. If the patient is at HMC, and if there were a rehab unit there, he would try for admission at that facility.
At the present time, only Memorial has rehab beds available for Dr. Crastnopol to refer to and he often has trouble getting a bed for a patient there since it is usually full. The wait for an opening may be from 4 to 5 days or the patient may not be admitted at all. The delay is controlled by physiatrists at Memorial and though they try to be accommodating, frequently patients from outside that facility cannot be admitted. When that happens he then has to consider other institutions further away or nursing homes with less than full rehabilitation services.
According to his experience, patients at Memorial will almost always be admitted to Memorial's rehab unit. Patients at HMC may not, and he, as well as all other physicians testifying, indicate there is a difference in the waiting lists. Dr. Crastnopol believes the best thing for the patient is for the doctor to be able to treat these injuries in a rehab unit. To transfer to one where he cannot come is not as good. He believes that patients on rehab units recover faster than those who are in alternative treatment plans.
He also contends that home care and outpatient care are not suitable alternatives to inpatient care, especially for the elderly. He agrees with Dr. Mendelsohn that the northern Broward facilities are generally too far from the families of patients from the south. Since he is not on staff up there, he would not be able to provide the continuity of care which he, and all other physicians testifying, feel is so important.
Dr. Crastnopol contends that from a clinical standpoint there is need for additional rehab beds in south Broward County. HMC provides a good service, and he has no doubt that it would provide a rehab service of the highest quality if its unit were approved. He would refer patients to it. He treats Medicaid and indigent patients, and in all fairness to Memorial, that installation has never tried to dissuade him from admitting that category of patient to its facility.
Dr. Crastnopol took time from his busy practice to travel to Tallahassee to testify here because he feels there is a need for the service applied for. He, too, is an investor in the limited partnership which owns the building in which the hospital is situated, but in no way would this interest prejudice or bias his testimony. At the present time, only between 30 and 40% of his patients are treated at HMC, whereas between 60 to 70% are treated at Memorial.
Similar testimony came from Dr. Jose M. Muniz, an internal medicine specialist practicing in Hollywood, Florida for the past 17 years. Dr. Muniz is on staff at both HMC and Memorial and serves as Chief of Staff at HMC. He is also on the utilization review and quality assurance committees there.
As with Dr. Crastnopol, his patients are mainly older, 70% of whom are over 65. The other 30% are adult to middle age. Ninety-eight percent of his patients come from Hollywood and the south Broward area. As a result, Dr. Muniz has no hospital affiliation in the north Broward area.
Dr. Muniz refers to rehabilitation patients who experience bone fractures and strokes, and he sees patients at both hospitals. He has had some referral problems at Memorial.
He feels very strongly about the necessity for continuity of care and asserts it is important for him to continue to see his patients in a rehabilitation unit because they still have an underlying medical problem which he must continue to treat. It is not good for his patients to go far afield for rehabilitation service due to a lack of availability in the immediate area. He cannot continue to treat the patient who thereby feels abandoned, and the family also has additional difficulties in getting to see the patient.
Nursing homes, while an alternative to a rehab unit, are not, in Dr. Muniz' opinion, an acceptable one. They have neither the staff nor the equipment to provide the appropriate treatment, and in his opinion, placing a patient who needs rehabilitative services in a nursing home is no more than warehousing that patient.
HMC's application has a high level of support in the local medical community. A second rehab unit has been sought by numerous physicians in the area, and Dr. Muniz believes there is a definite need for additional rehabilitation beds to satisfy the need for rehab availability after the acute care condition has been stabilized. He is satisfied that if HMC gets its rehabilitation unit, its quality of care will be as high as that in the other services already provided there.
Dr. Jubran Hoche, a Board certified neurologist at Memorial, HMC, and other facilities in the southern Broward area, often has patients who need inpatient rehabilitation services. Most are elderly stroke victims and younger patients with multiple sclerosis, a demographic consistent with prior evidence considered. He sees between 2 and 3 such patients per week.
He begins to evaluate his stroke patients for rehabilitation when they stabilize, somewhere between 7 and 10 days after suffering their stroke. He has found rehabilitation beneficial to recovery and currently refers such patients to Memorial from all facilities where he is on staff. He often has trouble getting beds there, however, and over the years has found that patients already in Memorial have a priority over outsiders when it comes to getting into the inpatient CMR unit. Patients from other facilities face a waiting list and as a result, many are transferred outside the southern part of the county for inpatient rehabilitation. This is not a good alternative because it interferes with the beneficial continuity of care cycle and raises numerous other problems.
Noting that Memorial plans to open a satellite facility in southwest Broward County and shift beds there, he contends that this will still increase the need for CMR beds in the county. There is already a clear need for more inpatient CMR beds in south Broward. In his experience, HMC provides a good quality service and would provide the same in any approved CMR unit to which he would refer patients from those who presently he cannot get into Memorial's unit. As with the other physicians who testified here, he has taken the time
from his practice to travel to Tallahassee on HMC's behalf because of his sincere concern with continuity of care.
Testimony in the form of depositions from Drs. Klotz, Bennett, Petti, and Moskowitz, and Mr. Jensen support and reiterate, fundamentally, the direct testimony of the above physicians and administrators.
According to Holly Lerner, Administrator and Chief Operating Officer at HMC for several years, NME Hospitals, Inc. is a wholly owned subsidiary of National Medical Enterprises, an international health care corporation. The local facility is a six story hospital with approximately 300,000 square feet in addition to an adjacent office building. Over 400 physicians are on staff from most medical specialties including 5 physiatrists. HMC practices on an open staff basis meaning any qualified physician can apply. Almost all physicians on staff currently are Board certified and there is an internal requirement that all be at least Board eligible. The hospital is accredited by appropriate accrediting agencies.
HMC is located approximately 1 mile from Memorial Hospital. It has an active quality assurance program, and any inpatient rehabilitation unit approved would be subject to the same quality review.
HMC pays property and indigent care taxes to the taxing authorities. In contrast to Memorial, however, it gets no funds from those taxing authorities for treating indigent patients. It has a Medicare contract and has never turned away a patient because of an inability to pay.
If the requested rehab unit is approved, the hospital's current outpatient physical therapy program will move off-site. The new inpatient rehab unit will have physical therapy capability on site. Management of the facility will be by an experienced firm well qualified to run it. All services required for physical therapy by Department rule are currently available and will continue to be provided. The new unit, if approved, will seek CARF accreditation. All variable services are currently provided and will continue to be provided. All optional services, except therapy for children, will be provided.
HMC now has transfer agreements with Memorial and various nursing homes within the area. It also has a rehab agreement with Sunrise Hospital and a contract with the state to treat patients at a Medicaid contract rate. If at all possible, management intends to continue this on an inpatient basis.
Discussions have been held with the Dean of a nearby osteopathic medical school to have a residency and intern program at the hospital and though it is still in negotiation, the parties have, in essence, formulated a tentative agreement to effectuate this development.
Though disputed by Memorial, manpower requirement estimates are considered adequate to properly staff the facility if approved and the personnel costs are also considered reasonable even with cost of living increases over the next 5 years. In that regard, overhead staff has surveyed salaries within the area and tried to stay at the 70% level. HMC's salary levels are somewhat lower than that of Memorial but, nonetheless, HMC has had no difficulty in getting and retaining qualified support staff. Petitioner's evidence in opposition was not persuasive.
According to Paul Echelard, Administrator and Chief Executive Officer of Pincrest Rehabilitation Hospital, and Florida Vice President of Rehabilitation Hospital Service Company, (RHSC), a subsidiary of NME which manages rehab hospitals throughout the country and which will operate the rehab unit at HMC, inpatient rehabilitation assesses an individual who has had a debilitating injury, after medical stabilization, for improvement potential, and helps improve his living capabilities. Inpatient rehabilitation helps to restore both motor and cognitive functions. The minimum requirements for a CMR program include 3 hours per day of speech therapy, occupational therapy, and physical therapy, 5 days a week. The actual program administered is tailored to the patient's individual needs. If, for example, the patient cannot take 3 hours per day, it may be less, if such reduction is documented.
RHSC operates 31 rehab hospitals ranging from 60 to 101 beds. The contract management division also operates hospitals for others. All are accredited except those which have not yet been open the required 6 months. The management company brings the expertise of NME's rehab division, which has access to hundreds of experts in numerous fields, and provides program management, program development, and program education.
Program Management involves the day to day running of the program. Rehabilitation programs and staffing are different from acute care functions. Management personnel are supplied. Program development defines the methodology to be followed in each type of case. It works with the staff, with physicians, and with the community to develop programs designed to fit the needs of that facility and that community. The program education division provides information on benefits of rehabilitation in areas where such is not well known. It educates hospitals in the area as well as physicians and the community. For these services, the company charges a fee of $105.00 per patient per day which includes the salary of the medical director of the rehab unit and several other supervisory personnel.
Though one might see complex, high level cases at HMC, where there is a need for a lot of high level supplemental medical treatment or procedures, the patient probably will not be treated at HMC. If HMC's program is approved, transfer agreements will be entered into with Sunrise or Pinecrest Rehabilitation Hospitals to take care of those patients whose conditions are too severe or too complex for the inpatient CMR unit at HMC.
South Florida's normally more elderly population generates a higher need for medical rehab services. Also, medical science now saves people who, before, would not survive their basic illness, and these people generate a greater need for medical rehab services.
The utilization of rehab services has increased significantly since 1988 as the result of Medicare, and due to an increased awareness of the service by physicians. Also, insurance companies now recognize the benefits of dollar savings of rehab over acute care treatment.
Another factor involves the implementation of DRG's which exempted rehab, among other areas, from the DRG limits. With this development, however, services and personal criteria for inpatient rehabilitation patients were developed to insure against abuses. Not all hospitals can meet these criteria, but the number of providers has grown fivefold due to the recognition of the health and financial benefits to society.
In Mr. Echelard's opinion, the payer projections by categories of payer found in the application are reasonable and based upon the applicant's experience. The personnel costs are in addition to the $105.00 per day fee charged by RHSC. The assumed 65% utilization figure for the first year can easily be accommodated by the staff which is more than adequate to meet the requirements of good quality of care. Much the same can be said for the second year with the increase in both patient census and full-time employees. The salaries projected in the application are generally reasonable, though a few may be somewhat low.
RHSC would help to recruit personnel for HMC's facility. It has a national recruiting program and sends recruiters to universities and conferences across the country. All RHSC facilities are open to serve as clinical training facilities. They advertise widely for personnel though they do not "head hunt" at other hospitals. As a result, Mr. Echelard feels HMC would have no trouble getting enough qualified personnel, and it is so found.
Turning to the unit itself, from a physical standpoint Mr. Echelard has no trouble with the currently existing physical therapy unit being geographically separated from the bedroom area. In fact, this may be beneficial as it tends to simulate the real world and may increase patient mobility skills. He considers the proposed layout to be acceptable and to meet accreditation standards. The proposed patient charges of $1,078 per day is considered reasonable and closely approximates the $1,050 per day charged at Pinecrest as well as other competing providers.
Sharon Gordon-Girvin, a health care consultant and formerly the chief of the Department's Office of Community Health Services, reviewed HMC's instant application for Memorial. HMC's application describes it as a provider of primary and secondary services, a general description of a normal acute care hospital. It has no licensed tertiary services.
Five hospitals in Broward County are licensed to offer CMR services. They include Petitioner, Holy Cross, North Broward Regional Medical Center, St. Johns Hospital and Sunrise . Only one of these, Memorial, is in the south Broward region. District X, with the 5 providers offering a total of 213 CMR beds, has more CMR beds than districts in the rest of the state with the exception of Dade County. Other districts have greater population with fewer licensed beds, but it must be noted that without information on demographics, that statistic is of little import.
Under the pertinent Department rule, the planning horizon for CMR beds is 5 years into the future. Bed need determination is provided for in Rule 10- 5.039, F.A.C., and consistent therewith, the Department did a projection of bed need for 1996 which showed a new need of 88. Because the number of existing beds exceeded that figure it determined the need to be zero.
Even if there is a zero need, however, the rule provides 4 other factors for consideration, (Rule 10-5.039(2)(b)1-4), but in her opinion, HMC's application is not consistent with these 4 factors.
One of these deals with historic, current and projected incidents of illness. This witness does not believe there is adequate evidence or discussion in the application of any historic incidents of disease sufficient to support any future prevalence. There is no data as to sex or group of patients. The second deals with trends by categories. Here the application, she feels, contains no detail of payment trends shown as to categories of payor. As to the
third criterion, dealing with existing and projected inpatients in need of rehabilitation services, the application does contain some information in its Exhibit 17. The fourth criterion relates to availability of specialized staff, and the application discusses how the staff will be recruited, but not the availability of qualified personnel to fill the positions. In that regard, it is well recognized, she contends, that this type of staff is in short supply.
Other evidence of record would tend to confirm this opinion.
Ms. Gordon-Girvin indicates that the 1989 State Health Plan is pertinent to this application. This plan contains 5 preferences to be used in evaluating applications. These include:
Conversion of excess acute beds. Here, the application conforms but Ms. Gordon-Girvin cannot say if the per diem costs would be lower by conversion.
Specialty rehab services not currently found in the District. Here, no services not already available were proposed.
Teaching hospitals. This is not truly a statutorily mandated teaching hospital even though evidence shows staff may be made available as faculty at the osteopathic medical school with which HMC plans a collaboration.
A disproportionate share of charity care. Here, Ms. Gordon-Girvin feels that HMC is not such a provider and that its application is not consistent with this preference.
Existing comprehensive outpatient rehab facility. This, again, is not met by the applicant.
These preferences are, it must be noted, not mandatory for approval.
The 1990 Broward Regional Health Plan is also applicable, and it outlines 3 priorities in its review criteria. These are:
The applicant agrees to cooperate and provide data on utilization. In this regard, HMC's application is consistent.
Unserved populations. Here, Ms. Gordon-Girvin contends that the instant application does not meet the preference since it is not for construc- tion of a new facility.
Situations where the institution's occu- pancy is greater than 85%. Here, clearly HMC does not meet this criteria because it does not have a history of 85% occupancy.
Again, however, these are merely guidelines to apply among competing applications and are not preconditions to approval.
Ms. Gordon-Girvin points out that the need for CMR services is not considered on a less than district-wide basis, since the rule directs an evaluation of tertiary services on a district-wide basis, and, therefore, the breaking down of the district into north and south services areas is
inappropriate. She asserts that in her opinion, the existing rule based on need is not an adequate predictor of need within a district. Instead, she feels the methodology used in Exhibit 17 to the application and omissions response is reasonable. However, she disagrees with HMC's calculations therein because, while the model is credible, the wrong data (the length of stay from 1984, rather than the actual current length of stay) was used. She feels district experience for length of stay (21 days) should be used.
Ms. Gordon-Girvin also feels that the methodology used on Application Exhibit 18 is also not appropriate because the variables were not kept constant. It used some date from the sub-area which should not be done because of the rule requirement to treat tertiary services on a district-wide basis. She does not explain, however, that if the rule shows a need for 88 beds and there are already 173 beds licensed, the rationale for a subsequent approval of those excess beds. In that regard, then, the question she does not answer is, if one aspect of the rule is disregarded, cannot another also be disregarded with equal validity?
HMC has urged the calculation as set forth in Exhibit 20 of its application, but Ms. Gordon-Girvin does not agree with that because it uses a constant rate of increase in the admissions rate. It also does not ground its assumptions on any existing realities. The initial figure for admissions in 1991, she opines, is overstated, and it, too, does not use accurate real information. If the 3,009 figure were corrected to an "actual" figure, it would result in a net loss of 27 beds and an increase of only 9 additional beds by 1996. She contends that Exhibit 20 is not consistent with the existing rule methodology, because the proposed facility to open in 1993, not 1996. As a result, she sees no need to compute the need in 1996.
As to her disagreement with the 4.5% growth in annual admissions, she claims the actual rate shows a decrease from 1990 to 1991. Therefore, the table containing that growth assumption is not justified. She also disagrees with Exhibit 21 because it is applied to a subdistrict and her other objections, (no historical basis for utilization numbers), are also pertinent here.
Accepting that the current rule is not a good predictor, she looked at the dispersion of population and beds and determined that there are about twice as many elderly in the northern part of the county as there are in the south. Applying this to the southern area, there should be a total of 46 beds there. Therefore, she asserts, that while there is a need for new beds in District X, all should be in the south, but not as many as requested. If the 30 beds applied for by HMC are approved as well as those approved for Memorial, this would result in 56 beds or 10 too many. In her opinion, based on the incidence model with some adjustment, the actual need is for somewhere between 5 and 20 beds district-wide which should all be located in the south county. Her reasoning and conclusions, however, are not persuasive.
Ben F. King, Vice-President for Finance of the Florida Region, Eastern Division of NME, and an expert in health care finances, is satisfied from his familiarity with the application in issue here that the project is financially feasible in both the short and long term. The proforma submitted by HMC in the application, and amended in the omissions response, refers, among other things, to patient day projections. These are converted to revenue by taking the days listed and multiplying by the charge for room and board for each year, and he is satisfied that the rates listed are reasonable.
The listed revenues are not what is actually collected, however. They are reduced by deductions for Medicare, Medicaid, indigent, and write-offs (discounts) for health maintenance organizations and insurance companies. In year 1, Medicare contractual is calculated based on reimbursement founded not on cost but on DRG (diagnostic related grouping). This results in no additional reimbursement for patients already in the hospital on an admitting DRG. Therefore, the first year revenues are much lower than in the second and subsequent years. Moving on to year 2, however, the operator gets paid for costs of operation of the unit. Medicare tracks the per-diem costs and income from the hospital, and to be conservative in the preparation of this pro forma, HMC took the existing reimbursement rate of slightly more than $700.00. In calculating reductions, indigents are assumed to be a 100% write-off. Private payments are considered to be a 50% write-off, HMO's a 20% write-off, and insurance an 11% write-off. Mr. King considers all these to be reasonable and consistent with the current experience not only of HMC and NME but of other providers as well.
In Broward County, indigent patients are funneled to the county hospitals which receive tax funding for that purpose. This is different from other counties which contract with hospitals to provide indigent care.
HMC calculates its revenue estimate in what it considers a conservative manner. Taking off the contractual allowances for Medicare and Medicaid and the other write-offs results in a reduction of more than 50% of gross revenue, and from that figure is taken the expenses, depreciation, interest, etc. to get to the net revenue figure.
All the expense categories and the factors they include are considered reasonable by Mr. King. The salary and wages figure includes an add- on of 20% for benefits, which is above the figure for salary and wages found in Table 11 of the application. Supplies includes the provision of housekeeping services, laundry and linen, and dietary services. These, too, he considers reasonable. RHSC's management fee of $105.00 per day includes the personnel provided, the marketing services, the management services, and manuals. This is considered a valuable benefit and the fee is considered comparable with other units. The personnel sent to do the actual work are RHSC employees and not hospital employees.
The indigent care assessment is 1.5% of net revenue and is a tax paid to the state. Contract costs are ancillary expenses for ancillary services such as laboratory, pharmacy, etc., already provided by the hospital. The cost listed in the pro forma is only for additional patients generated on the unit in issue. General and administrative - other expenses (joint venture rent, recruitment, insurance, utilities, property taxes, maintenance, education, etc.) are also deducted, and taken together, the above results is an operating revenue net loss for the first year.
Depreciation and amortization are self explanatory as is interest expense which is calculated at 10%. Interest rates are anticipated to drop in the future, however, and this will help the picture.
The net loss projected for the first year does not necessarily mean that the project is not financially feasible since financial feasibility is calculated over a 5 year basis. In the second year of operation, revenues are projected to increase by 6.5%, a figure considered to be reasonable. Expenses were inflated at 5% except for those not fixed to inflation (indigent care assessment and the joint venture rent).
NME has the funds to commit the initial capital and working capital for the first year. The 1989 and 1990 NME financial statements submitted with the application are those most current to filing. These statements, along with the 1991 capital budget, show more than $750,000.00 committed to the start-up of HMC's program.
Much of the information presented by Mr. King in his testimony comes from the pro forma and the amendment thereto. Primarily, the difference is only in the amount provided for RHSC's management fee. Any other inconsistencies or errors shown to exist are, for the most part, minor. The entire project is based on 30 beds. The figures assumed for both revenue and expense are reasonable, considering the "other" factors testified to by the physicians and noted previously. This is so notwithstanding the fact that HMC has experienced only a 30% use rate in its acute care beds. However, in light of these other factors, there may not be any correlation between acute care and rehab either from the Medicare or other standpoints.
According to Madeline Hellman, Administrative Director of Rehab Services for Memorial, CMR is a high intensity program as well as a high cost program because it uses a large number of professionals to treat the patient in a multi-disciplinary program.
Memorial's existing unit has 22 beds in semiprivate rooms. It has an admissions process designed to insure that appropriate patients only are admitted. These patients are made up of a high percentage of stroke, orthopedic, and spinal cord and head injury patients. Memorial's program is a program accredited by the state and the unit is accredited by CARF, a national certifying organization dealing with quality of care.
The average length of stay on Memorial's unit is presently just under
25 days which constitutes an increase over time due to the more complicated types of cases taken in. In 1991 the occupancy rate was between 98 and 99%. Memorial gets referrals from both in-house and other facilities. The patients are evaluated by the medical director for the potential to go through the rehab process. If inpatients at Memorial, they are evaluated by the therapy staff and a meeting is held to decide on admission. If the patient comes from another facility, he/she gets priority behind Memorial's patients.
In order to be admitted, a patient must have a rehab diagnosis; be able to withstand the 3 hour sessions; be motivated; and have the potential to improve his/her own independence. The refusal to admit a patient does not necessarily indicate a Memorial was too full to accept that patient. It may just be the patient is not an appropriate candidate for rehab, or the patient may die or recover without rehab before getting through the admission process. Some may be referred to nursing home placement instead. Ms. Hellman's figures reflect that in 1990, approximately 42% of those referred to Memorial's unit were admitted. Approximately 35% of those referred were deemed inappropriate. Only 4% were refused admission due to bed unavailability. Many of the non- admittees went home without treatment, went to home care, or came back as outpatients.
This witness examined Memorial's admissions records and determined that in 1990/1991, Dr. Hoche, who testified on behalf of HMC's application, referred 9 patients to Memorial of whom 6 were admitted. One went to another facility by choice, 1 was not appropriate, and 1 was not accounted for. Neither Dr. Klotz nor Dr. Pettie referred any patients during that period. Dr.
Moscowitz referred 1 in 1990 who was admitted. One patient was referred in 1991 but was not admitted because the patient was not an appropriate candidate. Dr. Bennett referred 1 in 1990 but the patient was not an appropriate candidate. In 1991 he referred 2 but both went to nursing homes instead. During this period Dr. Mendelsohn was the medical director. Dr. Crastnopol referred 12 patients in 1990. Four were admitted; 2 were referred to other facilities; 2 were not considered appropriate candidates, and 2 were not accounted for. In 1991 he referred 17 patients, 8 of whom were admitted. Two of the remainder went to another facility by choice; 1 was refused due to no room; 1 went home; and the rest were unaccounted for. Dr. Manning referred 1 in 1990 who was admitted.
Admittedly, according to Ms. Hellman, there is a waiting period of from 1 to 5 days from referral to admission - on the average, probably 3 days. This has decreased somewhat since the summer of 1991.
The situation depicted by Ms. Hellman's figures differs radically from that described in the testimony of the physicians to whom she refers. On balance, the physicians' recollections and impressions of the situation are deemed of greater probative value than the bare statistics.
Memorial staff salaries went up 9% last year across the board and are anticipated to go up again this year. The ancillary staff devotes 75% of its time to patient care and the other 25% to administration. This extra non- patient time is considered in assessing staffing to insure there is enough staff to do the full therapy load. There is a great deal of competition in the market for both nurses and therapists. A shortage exists which is nationwide and requires heavy recruitment efforts. At Memorial, no contract labor is used to assist in the unit. Benefits constitute an additional 24 - 25% of the salary cost and is not included in Memorial's determination of the salary and wage costs.
Ms. Hellman reviewed HMC's proposed staffing as outlined in its application and feels that after taking out 25% clerical time and weekends, the social worker, for example, will only be able to handle 65% of the beds. Speech therapy would require additional people to take up the extra time on other therapies. Taken together, it is her opinion that the staff proposed by HMC is insufficient to provide a quality program.
As to salaries, she feels the amount designated by HMC is low. The salaries proposed would be enough to get only new graduates and would force a high turnover. A CMR unit requires an experienced staff, (at least half of the therapy staff), to provide a quality program. Ms. Hellman is of the opinion this cannot be accomplished at the salaries proposed by HMC. In regard to both salaries and staffing level, however, Ms. Hellman's negative comments are offset by those in support of the application, and there is insufficient evidence to the negative to support a finding by a preponderance of the evidence as required that the proposed staffing levels and salaries are insufficient.
HMC's 30 bed unit would compete directly with Memorial's existing unit. They are less than a mile apart and use many of the same physicians.
They attract the same patients. In addition, Ms. Hellman does not believe HMC's unit will offer any new service not already offered by Memorial, nor will it operate services not already present or offered by existing providers in District X. It is her confirmed opinion that if HMC's unit is approved, it will be difficult for both facilities to attract and retain an adequate professional staff.
The majority of patients that Memorial cannot accommodate are referred to Sunrise Hospital, also located in Broward County, which offers a good CMR program. Total referrals in 1990 exceeded 800 patients, and in 1991, in excess of 600 patients. The referral log maintained by Memorial does not include patients who were not referred because their physician felt there was no room anyway. Memorial's records supposedly indicate that in the last two years, only 80 to 90 referrals to its unit came from other institutions. The records were not introduced into evidence, however.
Edward J. Maszak, Director of Financial Planning for Memorial, and an expert in health care financing and third party reimbursement, noted that Memorial is a disproportionate share provider under both Medicaid and Medicare. It is a taxing authority which uses funds received in taxes for the care and treatment of indigent patients. It gets $20 million in tax revenue but gives
$23 million worth of indigent care in addition to taking $27 million of bad debt write-off. About $10 million of the indigent care cost is funded out of operations.
The Hospital Cost Containment Board, (HCCB), statistics submitted by HMC for 1989- 1991 reflect no deduction for charity care in either the 89-90 or 90-91 time-frame. Mr. King, testifying for HMC, indicated there was no advantage to reporting charity care to the HCCB, and it is for that reason that the statistics show no deduction. Mr. Maszak disagrees with Mr. King on this point, and states that to the extent it provides any charity care at all, a facility can raise the prices it charges to some degree.
Mr. Maszak reviewed HMC's application and the "incidental cost analysis" basis for the financial pro forma, and in his opinion, HMC's application does not contain a true feasibility study. The projected statement of revenue and expense in the omissions response reflect incremental costs only and do not include the actual, full costs. In a financial statement one looks at a lot of other revenue factors including operating projections and total margins, cash flows and the like, none of which are included in HMC's financial information. The financial feasibility study done by HMC here is not, in Mr. Maszak's opinion, consistent with generally accepted practices and standards.
Memorial's CMR unit has lost money over the last 3 years due to the fact that it provides about 70% of its care to Medicare patients. Under that system reimbursement does not fully meet costs. Therefore, the loss has to be covered by income from other payees, (cost shifting). This is not specific to Memorial only, however. Most hospitals experience the same problem. As a result, it is hard to make up the losses from Medicare, Medicaid, and HMO operations from the 9% of patient mix representing full pay patients. In Mr. Maszak's opinion, if HMC gets its approval, in year 3 it would be subject to the same problems experienced by Memorial.
Mr. Maszak asserts that with the new beds, HMC's overhead cost allocation will, under Medicare rules, increase by 19% in the first year and by 25% in the second year. This will add at least $570,000.00 additional costs in year 1 and $800,000.00 additional costs in year 2 to expenses. In year 2 the cost will be shifted to Medicare so the expense item in that year will be more by slightly more or less than $200,000.00. With regard to specific defects in HMC's proposal, Mr. Maszak points, with regard to managed care plans, to the HCCB documents which show that the HMC writes off about 65% of its revenue from HMO's. This was for 1991. Pinecrest, for example, wrote off somewhere around 38.5% that year. He believes, therefore, that HMC's figures are inaccurate.
Regarding charges for CMR services in District X, HMC's 1993 charges, using its own projections, would be $1,077.00 per day. Sunrise would charge
$1,765.00 per day, and Pinecrest, $1,683.00 per day. Memorial will charge
$557.00 per day; Holy Cross, $747.00; and North Broward, $564.00 per day. Based on these figures, Mr. Maszak concludes that HMC's HMO estimated income is unreasonable. He contends it will be much less than estimated and more comparable to that of the other providers starting at a discount from $557.00, plus or minus, per day. Mr. Maszak is of the opinion that the insurance estimate indicated by HMC also is unreasonable. The 4% estimated by Mr. King is too low by far, and there are no national HMOs for HMC to contract with for rehab services in District X, he contends.
He also believes that as to the salaries and benefits, in 1991 Memorial showed 57.8 full time employees, (FTEs), with an average nursing salary of $27.4 thousand per year. In that regard, benefits as a percent of salary was 32.2%. Sunrise showed an average nursing salary of $29.4 thousand with benefits at 27%. Pinecrest reflected $27.7 thousand and 41% respectively. Based on this, Mr. Maszak believes that the HMC projection of $22.5 thousand for salaries and benefits of 20% are far below current salaries at other NME facilities. It is unreasonable to assume, he asserts, that a provider can start up a competing unit in an open area and attract staff at those figure. Taken together, he considers that the difference between Memorial and HMC's salary figures is a $4 thousand difference for a total of $125 thousand low for HMC without considering inflation for 2 years to 1993.
Turning to the issue of payor mix, according to Mr. Maszak, Medicare is reflected at 65% by HMC, but the HCCB data shows only 58% for 1991. The County reports for Memorial showed a rate of 60%. Mr. Maszak believes that HMC's estimate overstates a patient days percentage by 5% which could result in an overstatement of income revenue. Therefore, he believes the entire rehabilitative program, as suggested by HMC, is not feasible in the short term because of a number of expenses which are not figured in. He admits that HMC's current financial position is fair. It is reported to be slow in paying its bills and lost $1 million last year alone. In addition, the interest due NME has not been paid and is increasing. These claims were not supported by actual evidence, however. In addition, 65% of the population in the service area is under Medicare which limits increases to 3.2 % per year. Notwithstanding that, expenses are going up at a higher rate, (5%), and, therefore, he contends, HMC's program is not feasible as well over the long run.
According to Mr. Maszak, the opening of HMC's facility would also affect Memorial's status. The staff is much the same for both facilities and many of the physician's on staff at Memorial are also investors in the HMC facility. If HMC gets its unit, Maszak feels many patients will be referred to that facility by its investors instead of to Memorial where they would now go. Based on the number of projected patients, however, this really should not result in a reduction in Memorial's numbers.
The rehab service is not the only consideration, however. In addition, the admitting services , (neurology, neurosurgery and orthopedics), would also be impacted. Considering various potential scenarios, from a loss of all HMC business in all services, and no reduction of expense, through others including loss of all services with some expense reduction, loss of rehab only with some expense reduction, to a loss of 50% of all services with some expense reduction, the loss impact on Memorial would extend from a low of $264.5 thousand to $3.1 million. The most likely loss figure, he estimates, would be somewhere around $800 thousand. Therefore, approval of HMC's project, he
contends, would have a large impact on Memorial's, operation because of its ongoing expansion plans and their attendant expenses, plus the recent sale of
$40 million in revenue bonds. As to the latter, the underwriters of that issue are already unhappy with Memorial's financial picture. Any loss of income might likely result in a need to raise prices, but Memorial is constrained in that regard by the dictates of the HCCB. A second option is to raise taxes in the District, but there the District only has .4 of a mill leeway before reaching its limit of 2.5 mills. A third option is to cut services, but with the economy as it is, and the high level of charity care already being provided, that would be hard to do.
Thomas R. Bayless, President of Future Health, Incorporated, a health care consultant and an expert in health care finance, also reviewed HMC's application and omissions response, its audited financial reports, the HCCB reports for HMC and others, and other documents. He believes the cost projections outlined in HMC's omissions response do not account for all contract costs. Thirty new beds would have a greater impact on costs than is estimated. The amount shown on the HCCB cost report for the whole hospital is more than the estimated costs for the whole hospital including the rehab unit in year 1. Mr. Bayless believes that the $366,308.00 figure for the unit in year 1 should be more than $1 million. In year 2 he sees it as $1.3 or $1.4 million as opposed to the $512,602.00 projected.
By the same token, the general and administration costs reported at over $6 thousand for the whole hospital in 1991, with the 19% increase for the year, would be over $1 million and a great increase in year 2 over the
$394,941.00 projected. Therefore, since all costs were not included to the appropriate degree, he contends in reality there would be a significant
increase in the cost of operation of the rehab unit which would result in a much larger net loss than was projected, (plus or minus $2 million) in year 1. In year 2, due to the commencement of reimbursement from Medicare, the impact would be less. Nonetheless, the net income profit would not be as great as projected and might instead result in a loss of some $300 thousand to $400 thousand.
Taken together, he concludes that expenses and some allowances are significantly understated. For example, the "other deductions" figure of
$477,108.00 should be higher due to the percent of HMO discount which, in Bayless' estimate, should be 60% rather than the 20% utilized. This nearly doubles the amount of the deduction. He also disagrees with HMC's indicated deduction for rent, corporate overhead, salaries and wages, and other expense items, all of which, he believes, should be increased. The "benefits" aspect of salaries should be increased as well since the 20% projected is, in his opinion, insufficient. Memorial's figure, at 24.8%, is the standard for the area, he contends.
Making those changes, the year 1 net loss for HMC's operation would be almost $3 million rather than $485,739.00. By the same token, year 2, even with Medicare cost reimbursement would result in a loss of almost $700 thousand rather than a profit of almost $1.4 million as projected. In further years out, ( years 3 - 5 ), due to the limits imposed by TEFRA and projected cost increases of 5%, the loss would be compounded somewhat. This would constitute a continuing loss and Mr. Bayless believes the project is not feasible in either the short or the long term, especially considering the fact that the hospital has been losing money without this unit and, it appears, will continue to do so. The hospital has been living on an infusion of money from the parent corporation, and this does not, to him, appear to be an appropriate use of capital.
Mr. Bayless contends that most of what he said about the unit projections applies as well to the consolidated hospital rehabilitative unit projections. The losses from the operation of the rehab unit and the other defects show a loss of $7 million in year 1 and almost $6 million in year 2. Year 3 would also show a loss of almost $6 million.
As another problem, Mr. Bayless opines that the statute requirement to provide information on costs during construction and the effect of the project on the applicant's and others' operations was not met. Considering the parties' respective positions, however, it is found that though subject to some debate, HMC's projections as to patient revenue, expenses, and its ability to attract a quality work force without seriously damaging Memorial's ability to provide quality care have not been shown to be unsupportable. They are, therefore, accepted.
Morgan Gibson, a review consultant with the Department's Office of Community Medical Facilities, and an expert in health planning, reviewed the instant application in early 1991. When the application was deemed complete, he initiated the formal comparative review of this application and of Memorial's request for 4 beds; did an analysis; and completed the required State Agency Action Report, (SAAR), for each. A fixed need pool was published for this cycle, (January, 1996), showing a "0" numerical need.
Gibson's review indicated the project was consistent with the 1990 District X Comprehensive Health Plan which establishes various priorities for the award of CONs. Priority 1 relates to an applicant who demonstrates a willingness to publish information. Both applicants met this priority.
Priority 2 relates to applicants who agree to construct additional facilities to provide service to the unserved public. Here, neither application involved new construction, but both applicants were willing to provide charity care with HMC's to be at 1%. Priority 3 applies to those applicants who have a history of operating at greater than 85% utilization. HMC's hospital alone could not meet this level, but the proposed unit was projected to meet it by year 2.
Priority 1 of the 1989 Florida State Health Plan relates to facilities which will convert excess beds to comprehensive beds. HMC proposes to do this which is cost effective and gets more beds to the patients. Priority
2 of this plan relates to those who propose specialty services not currently offered. HMC's answer was vague but it agreed to provide a wide range of rehab services, and the fact that it does not focus on a single specialty does not make it less desirable. Priority 3 relates to teaching hospitals. HMC is not a teaching hospital but it has agreed to affiliate with a school of osteopathic medicine in the area. Priority 4 relates to those facilities with a history of providing a disproportionate share of charity and Medicaid. HMC does not now do this but has agreed to provide 1% charity care. Priority 5 relates to those facilities showing a willingness to provide outpatient follow-up rehabilitation services, and HMC has agreed to do this.
Mr. Gibson concluded that the HMC project would increase availability and access to services and would improve quality of care. He also reviewed the application against the Rule 10-5 criteria. Existing rehabilitation beds in the area are highly utilized, (Memorial is at a figure close to 100% and is the only provider in the service area). Because of this, he considered the establishment of new beds in South Broward to be better than forcing patients to go to existing beds in the North Broward area.
He found that the 30 beds proposed by HMC met the unit size minimum of 20 beds and the projected utilization met the standard of 65% for the first year and 85% for the second year. He concluded that the utilization rates in the district support the program. All but one provider are operating at above 90%. In that regard, since there are only 22 beds currently existing in the south portion of the county, and all providers but one are utilized at over 90%, the new unit could not help but improve the availability to the service in the District. It is so found.
The local health council data revealed to Mr. Gibson that while admissions generally decreased by 4.5% from 1985 to 1989, rehab admissions went up 189.4% in the same period. This indicated to him a potential need and increasing utilization. He also concluded that the information provided by HMC was reasonable and not fairly disputable.
In that regard, Mr. Gibson concluded that HMC presented information to justify the beds regardless of the rule methodology showing "0" need. The supporting factors for this conclusion were: (1) the high current utilization;
(2) the relationship of rehab admissions to discharges; (3) the service pattern;
(4) the existing waiting period; (5) the elderly population in the service area;
(6) the potential rehabilitation discharges; (7) the conversion of underutilized acute care beds; and (8) the maldistribution of beds between the north and south part of the county.
Taken together, Mr. Gibson concluded that the addition of 30 new beds by HMC would have a positive effect, not an adverse one, on the provision of service in the community. HMC indicated its intention to seek CARF accreditation, and it appeared to meet the other quality of care standards.
CARF accreditation is important. All the facilities operated by the proposed management corporation are accredited by CARF.
In addition, Mr. Gibson saw no adequate alternative to the program. Maintaining the status quo was obviously not effective. Neither was building a new facility. As a result, the conversion of underutilized beds appeared to be the most appropriate resolution of the problem. He also concluded that the proposed plan was reasonable. There was a demonstrated need for additional beds and it appeared this project would meet that need without the necessity to expend millions of dollars to create a new facility. The project did not involve cooperative services or shared facilities, but this is not a disqualifier. By the same token, there is no teaching facility currently available. Neither factor really applies to this project, however.
Mr. Gibson determined that HMC had the financial resources to accomplish the proposed project. Its financial statement showed that it and its parent company both were in good financial health. The project cost could easily be met by existing resources. The applicant indicated that staffing levels would be met and the retaining of a management company to operate the facility was a plus factor.
Before rendering his opinion, Mr. Gibson consulted with the Department's financial consultants, and based on the applicant's projections and assumptions, if the utilization levels of 65% and 85% for years 1 and 2 respectively were met, the project would be financially feasible in both the short and the long term. Mr. Gibson concluded that the utilization projections were reasonable based on current utilization of existing beds.
As to fostering competition and cost effectiveness, Mr. Gibson determined that based on the current high utilization rate, the new beds should have no impact on existing services provided by Memorial in the south and the other existing providers in the north.
With regard to charity care, HMC admitted that up until this time it had reported little or no charity care provided. Because HMC admitted that, however, Mr. Gibson was willing to accept its assertion as to what it proposed to do in the area in the future.
Turning to the criteria outlined in Section 381.705(2), Florida Statutes, Mr. Gibson found: (1) there was, practically, no less costly or more appropriate alternative to the proposed service; (2) the existing service was being utilized efficiently; (3) there were no reasonable alternatives to conversion; and (4) there was some showing of a shortage of available service and no showing of serious problems existing in providing those services. Based on all the above, Mr. Gibson recommended both this application and Memorial's application be approved conditioned on the provision of a certain percentage of charity care.
Mr. Gibson admits there is, on balance, a general shortage of rehabilitation personnel, but cannot say whether or not there is a shortage in Broward County. His conclusion that staff was available to HMC was based on several other factors such as the management contract and the proposed recruitment - all representations by the applicant and not based on his own experience. By the same token, he did not test any of the tables for revenues, costs, salaries, etc. Here again he relied on representations by the applicant.
In addition to those aforementioned statutory criteria Mr. Gibson evaluated this application against the Section 381.707 criteria as well, and determined it was complete. It is clear, however, that his evaluation was not done in great detail, nor did he attempt to verify much of the other information submitted in support of the 381.705 criteria.
The financial aspects of the project were analyzed by an in-house departmental CPA, Mr. Bell. Gibson's involvement was limited to examining the projected admissions, utilization, charges and the like, and based on those, he relied on Mr. Bell's determination they are reasonable and his opinion on feasibility. Nonetheless, Gibson drew his own positive conclusion of feasibility which was cited above. There appears to be no legitimate reason to reject any of the findings of conclusions drawn by Mr. Gibson. Therefore, they are accepted.
Elizabeth Dudek, the Chief of the Department's Office of Community Medical Facilities, met with Mr. Gibson, Mr. Bell, and the architect after reading both the applications and the SAAR and, thereafter recommended the project be approved. After considering the application, the projected utilization, the existing inventory, the state and local health plans, the area where the facility was to be located, and at the provisions of the pertinent statutes and rule, she believed the project proposed was justified. She concluded both HMC and Memorial should be awarded the beds requested. Her reasons therefore conform to the findings of Mr. Gibson regarding existing providers and the high utilization rate. The trade patterns support a division of service between the north and the south. She determined that because this application did not meet all preferences and priorities as outlined in the various health plans did not necessarily mean it should be denied. By the same token, the fact that comprehensive rehab services are considered by the
Department to be a tertiary service does not mean that the service must be provided only in teaching hospitals.
Ms. Dudek recognizes that Section 381.707(2)(d) requires a detailed statement of income and revenue which includes the two year pro forma assumptions, Table 25, and the list of capital projects. Her review of the matters provided by the applicant and the audit and source of funds referenced led her to the conclusion that requirement was met. There is no basis shown upon which to reject that conclusion or to conclude otherwise.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.
An applicant for a CON has the responsibility of establishing that the project is consistent with the criteria contained in the Florida Statutes and the rules of the Department. Balsam v. Department of Health and Rehabilitative Services, 486 So.2d 1341 (Fla. 1DCA 1986).
Section 381.709(2)(c), Florida Statutes, relating to the required Letter of Intent preceding the filing of an application for a CON requires that:
The letter of intent shall contain a certified copy of a resolution by the board of directors of the applicant, ... authorizing the filing of the application described in the letter of intent; authorizing the applicant to incur the expenditures necessary to accomplish the pro- posed project; certifying that if issued a certificate, the applicant shall accomplish the proposed project within the time allowed by law at or below the costs contained in the application; and certifying that the applicant shall license and operate the facility.
In the instant case, Petitioner challenged the effectiveness and appropriateness of the certification of that letter of intent. After an evidentiary hearing on the matter and after full argument by all parties, the undersigned concluded that the certifying officer had the authority to certify the corporate resolution and properly did so, and that, therefore, the requirements of the statute were met.
The required contents of any CON application are outlined in Section 381.707, Florida Statutes, which, among other things, calls for the application to contain a statement of the financial resources needed and available to the applicant to accomplish the proposed project including a complete listing of all the applicant's capital projects, a detailed list of the needed capital expenditures, and a detailed financial projection including projected revenues and expenses for not only the period of construction but also for the first two years of operation after completion of the proposed project.
Having considered the evidence presented by both sides, and in the light of the relative positions of the parties and the interests each has in the outcome of this proceeding, it is concluded that Petitioner has failed to establish that HMC's estimates, projections and assumptions, as contained in the
pro forma financial statement, are either incorrect or unsupportable. It was previously concluded that HMC's proposed project is financially feasible in both the short and long term, and the statutory requirement is met.
Section 381.705, Florida Statutes, provides the review criteria under which the Department is to determine the approvability of the application for CON. Prior to the hearing, the parties agreed that Section 381.705(1)(m), relating to the costs and methods of the proposed construction, and itemization and costs of equipment proposed for the project were not in issue. The remaining criteria were considered, however.
Section 381.705(1)(a) requires review of the need for the health care facilities and services in relation to the applicable district and state health plans. Review of this application clearly reveals that the proposed facility is consistent with both plans and though all indicated priorities of the plans may not be met, in the overall, the application is consistent.
The applicant's project is also consistent with Section 381.705(1)(b) in that there is a showing of an inadequacy in availability of like, existing services in the immediate service area of the applicant. While the statute provides for a showing in the service district, both the Department and the applicant here have established a legitimate basis for treating District X, Broward County, in two parts and not as a whole. The evidence clearly establishes that in the southern portion of the county, the service area from which both Petitioner and the applicant draw and will draw their patient base, there is an inadequacy of available CMR inpatient beds.
Though somewhat questioned from a financial standpoint, there can be little doubt that the applicant has ability to provide quality of care and the record of RHSC, the company chosen by the applicant, to operate its facility if approved, clearly demonstrates a consistent compliance with CARF and other accreditation standards. (Section 381.705(1)(c))
It is also clear that there is a paucity of available other health care facilities in the service area to furnish the service applied for. The several physicians testifying on behalf of the applicant both in person and by deposition consistently and uniformly relate a difficulty in obtaining inpatient comprehensive rehabilitative care for those of their patients deemed most needy of this service in a timely fashion. All refer to the importance of the continuity of care factor which, under the existing situation, has been significantly and adversely impacted. While alternatives to the requested service do exist within the service area, these alternatives, such as nursing homes, outpatient care and the like, have been clearly determined by the professionals to be inadequate and unsatisfactory alternatives. Consequently, for all intents and purposes, there is insufficient availability and an inadequate source of other health care facilities and services which could serve as alternatives to the health care facility and service to be provided by the applicant. Section 381.705(1)(d).
Depending upon how considered, there may or may not be economies or improvements in service derived from the operation of joint, cooperative or shared health care resources. If one considers the conversion of existing and underutilized acute care beds in the HMC facility as a shared resource, without question economy will be served and improvements gained by the conversion of those beds to a more usable service. On the other hand, if one looks at this criteria as relating only to the sharing of a facility by the applicant and Petitioner or other providers, there would be no benefit gained since no sharing
of a facility would exist and this criteria would not be pertinent. Section 381.705(1)(e).
As to the need in the service district for special equipment or services not reasonably and economically accessible in adjoining areas, this is not pertinent here. The evidence of record clearly demonstrates that the available service in another section of the service district, the northern portion of the county, is not appropriate, and consistent therewith, it is concluded that any other available service in another service district adjoining the applicant's would not be appropriate as well. Section 381.705(1)(f).
The need for research and educational facilities has not been established. However, applicant has indicated ongoing negotiations with a school of osteopathic medicine in the area for the use of this facility as a training opportunity for their students, and any such use could not help but be beneficial not only to the students but to the hospital and the medical community as well. Section 381.705(1)(g).
There appears to be no question regarding the availability of resources other than that involving health manpower. Much debate and conflicting evidence was presented regarding whether or not, due to the demonstrated shortage of qualified rehabilitation therapists, the applicant would be able to, at the salaries and benefits it proposes, attract a therapy staff sufficient in number and in experience to provide a quality service. A collateral factor was whether or not the applicant's efforts in that regard might have an adverse effect on Memorial's ability to attract and maintain a quality, experienced staff. Again, here, as in other areas, the evidence is in equipoise and the testimony, far from being independent, is quite partisan. The information available is clearly slanted to the position of the testifying party who, in each case, has a clear relationship to one of the litigants. Taken together, however, it would appear, and it was so found, that some difficulty in recruiting and retaining quality personnel might be experienced. That difficulty is not insurmountable, however, and the competition between the applicant and the existing provider will be healthy to the service profession and should not have a substantial adverse impact on either operation. Section 381.705(1)(h).
A serious conflict exists regarding the immediate and long term financial feasibility of the proposed project and here again, the evidence was partisan. As might be expected, HMC's consultant and experts outlined a positive projection consistent with the requirements of the statute. After a small estimated loss during the first year of operation, the applicant projects a healthy and viable operation which is financially feasible not only in the short but in the long term as well. Equally as might be expected, however, Memorial's experts accepted little of HMC's representation, claiming that inappropriate figures were utilized in the calculations; incorrect estimates were made; and unjustified assumptions considered to the extent that rather than showing a healthy financial picture and financial feasibility, the operation was considered doomed to far less success both in the short and long term.
Nonetheless, having evaluated the application, the documentation submitted therewith, the testimony of the experts for the application, and the testimony of those experts in opposition thereto, it is again concluded that the weight of the evidence clearly establishes the likelihood that the project is feasible in both the short and long term. Section 381.705(1)(i).
Neither the special needs and circumstances of health maintenance organizations nor the need and circumstances of medical schools, clinics or specialities have been shown to be likely to experience an adverse impact as a result of the establishment of this project. To the contrary, several of the other facilities in the area, most specifically those physicians who practice medicine in specialties which provide a large percentage of the candidates for the service under consideration here will unquestionably experience a greater access to what is considered by them to be a worthwhile, beneficial, and needed service. Sectiona 381.705(1)(j) and (k).
It is unlikely from a review of the evidence that the approval of applicant's service will have any negative impact on the costs of providing health services in the area. The service area has already shown an almost 100% occupancy rate for this service. In addition, a substantial potential excess patient base has also been shown to exist in those patients who cannot currently get reasonable access to a rehab bed because of the lack of availability. Therefore, it is unlikely that any financial impact will be felt by any currently existing providers, and it is unlikely that the cost to the patient will be materially affected since an additional market is neither being sought nor created. Merely excess patient inventory will be provided for. Section 381.705(1)(l).
With regard to the applicant's past and proposed provision of health care services to Medicaid and the indigent, the records, as provided by the HCCB, indicate little if any Medicaid or indigent care furnished by HMC in its past operation as an acute care hospital. However, there is some evidence by HMC that though its past participation was slight, there was some, but no reason could be seen to memorialize it. The Department considers the applicant's frank admission of a former minimal participation as a positive factor in assessing its believability when it asserts that in the future it will devote at least 1% of its revenue to indigent care. Absent any evidence to indicate that such is not likely, there is no reason to dispute or to discredit the applicant's assertion and the Department's acceptance of it is justified. Section 381.705(1)(n).
Taken together, then, it is concluded that in the main, this application is consistent with and conforms to the criteria outlined in the statute. By the same token, the review criteria set out in Rules 10-5.030 and 10-5.039, F.A.C., are also met. Application of the Department's bed need methodology formula results in a showing of zero bed need. The rule also provides, however, for approval of an application for CMR beds if, notwithstanding the zero bed need shown, there are other factors which support and justify approval of the beds applied for. Here, clearly, there is such a showing.
Each of the doctors who testified for HMC, including some who travelled to Tallahassee to testify because of their belief in the need for this project, referred to a continuing inability to get appropriate patients into the existing facility in a timely and medically satisfactory manner. A priority toward admission to patients already in Memorial Hospital has been shown and it cannot be said that this priority is either inappropriate or improper. However, all of the doctors who testified experienced some substantial difficulty in having their patients, who were not already patients at Memorial but who nonetheless needed inpatient rehabilitation services, admitted to Memorial's service in a timely manner. This had, in their consensus, a serious adverse affect on what all considered to be of great importance, continuity in care of the patient.
Considering the age group from which the majority of rehab patients come, and the inherent difficulties in mobility and other factors relating to that age group, it is clear that additional beds are needed in a location convenient to those patients and their families which will promote, rather than hinder, not only the physicians, but also the patients' families ability to visit, treat and support those patients' ongoing rehabilitation.
No doubt the case on behalf of the applicant is somewhat overstated. By the same token, however, Memorial's case is opposition thereto was equally overstated. Taken together, however, the evidence clearly demonstrates a practical if not formulaic need for these additional beds. Even Ms. Gordon- Girvin, the Petitioner's independent expert, concluded there was some need for additional beds if not in a number equal to that requested by both Memorial and HMC.
Subsequent to the hearing herein, Respondent, NME, filed a Motion For Attorney's Fees And Costs, seeking reimbursement from Petitioner on the basis that Memorial's Petition was filed for a frivolous purpose "to harass, cause unnecessary delay, and needlessly increase the cost of securing approval of HMC's CON application" under the provisions of Sections 120.57(1)(b)(5) and 120.59(6), Florida Statutes.
Section 120.57(1)(b)(5) provides that a party's signature on a pleading shall constitute a certification that he has read it and that, to the best of his knowledge and belief, it is not filed for any improper purpose. If a pleading is signed in violation of this requirement, the Hearing Officer shall impose an appropriate sanction which may include costs and attorney's fee.
Section 120.59(6) provides that a prevailing party in an action filed under Section 120.57(1) may recover costs and attorney's fees from a non- prevailing party who has been determined by the Hearing Officer to have participated in the proceeding for an improper purpose. The term, "improper purpose" is defined in the statute as:
... primarily to harass or to cause unneces- sary delay or for frivolous purpose or to needlessly increase the cost of licensing or securing approval of an activity.
Movant points out that Petitioner herein has, itself, applied for a CON to provide an identical service and has gone on record as stating, in support of its own application, that even with approval of HMC's application, a need for additional service would still exist. It also claims that Petitioner filed its challenge "without any prior attempt to quantify the need for additional rehabilitation beds at any place other than [its own]." It further claims that Petitioner's challenge was filed "solely to maintain an existing monopoly on service."
In addition to the above, Movant claims that Petitioner's pleadings, aliunde the petition, were obfuscatory and designed to delay the proceedings as well as increase costs, and some of its evidence and arguments presented at the hearing were spurious, superficial, inconsistent with other statements it had made and positions it had taken, and otherwise not credible.
Ordinarily, attorney's fees and costs should be awarded only where the Hearing Officer finds clear and convicing evidence of an improper purpose.
Here, Petitioner's argument on the basic issue of need, either numeric or otherwise justified, was determined to be non-controlling, but it was cogent and basically is support of Petitioner's position in opposition to HMC's application. Witnesses were presented whose expertise was not in issue, and whose views of the matter, while not considered dispositive by the Hearing Officer, were nonetheless reasonable.
Petitioner had standing to contest both the need for the service and the applicant's ability to provide it successfully. That its arguments and evidence in support of its position were not found to be persuasive, they were, by the same token, neither spurious nor superficial, and the Hearing Officer cannot, under the state of the evidence in this case, find clear and convincing evidence that Petitioner's challenge was filed to harass, increase costs of the application, or cause delay while maintaining a monopoly on the service in the area.
Based on the foregoing Findings of fact and Conclusions of Law, it is, therefore recommended that NME Hospitals, Inc.'s application for a Certificate of Need, Number 6643, for a 30 bed inpatient comprehensive medical rehabilitation unit at Hollywood Medical Center be approved, but that its Motion For Attorney's Fees and Costs be denied.
RECOMMENDED this 2nd day of June, 1992, in Tallahassee, Florida.
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 2nd day of June, 1992.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5698
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 and incorporated herein. | |
2. - | 4. | Accepted and incorporated herein. |
5. | Accepted and incorporated herein. | |
6. | Accepted. | |
7. & | 8. | Accepted and incorporated herein |
9. | Accepted and incorporated herein except for last sentence of first |
paragraph which is rejected as contra to the evidence. The second paragraph is accepted but is considered irrelevant to the issues.
& 11. Accepted and incorporated herein.
Accepted.
Not a Finding of Fact but a restatement of testimony.
First and third sentences are restatements of terstimony. Second and fourth sentences are accepted.
Accepted.
Accepted.
Accepted and incorporated herein.
Accepted and incorporated herein.
Accepted and incorporated herein.
Rejected. Not a Finding of Fact but argument.
Accepted as to witness' testimony but not as to an an evaluation of its worth.
All but the last sentence is a restatement of the witness' testimony. Last sentence is accepted as Petitioner's position.
First two sentences accepted and incorporated herein. Balance, though a restatement of testimony is fundamentally accurate and consistent with the evidence.
Though consistent with Petitioner's position, and perhaps factually accurate,this ppoposed Findings is rejected as overlooking the "other basis" provisions of the need rule.
Accepted as an accurate statement of the factors involved, but this position was rejected in the Findings of Fact portion of the Recommended Order.
- 28. Rejected as contra to the weight of the evidence.
All but last sentence accepted and incorporated herein. Last sentence rejected.
Accepted and incorporated herein.
Rejected as argument and contra to the weight of the evidence.
Rejected as argument.
- 37. Accepted as an accurate restatement of the evidence, but rejected as to the ultimate factual conclusions drawn.
38. - 40. See next above which is reiterated here.
& 42. Accepted as to the testimony presented but rejected as to the efficacy of the analysis.
Accepted as to content but not as to analysis.
& 45. Contents accepted as an accurate restatement of the testimony but conclusions drawn are rejected.
Rejected.
First paragraph accepted. Second paragraph rejected as speculation.
Accepted and incorporated herein.
Accepted.
First sentence accepted. Remainder rejected as speculative with no historical basis.
FOR THE RESPONDENT, NME:
- 8. Accepted and incorporated herein.
Accepted and incorporated herein.
- 14. Accepted and incorporated herein.
- 19. Accepted and incorporated herein.
Accepted and incorporated herein.
Accepted and incorporated herein.
& 23. Accepted and incorporated herein.
Accepted.
Accepted and incorporated herein.
Not a finding of fact but a comment on the evidence.
27. | - | 29. | Accepted | and | incorporated | herein. |
30. | Accepted | and | incorporated | herein. | ||
31. | Accepted. | |||||
32. | - | 34. | Accepted | and | incorporated | herein. |
35. | - | 37. | Accepted. | |||
38. | - | 40. | Accepted. | |||
41. | & | 42. | Accepted | and | incorporated | herein. |
43. | Accepted. | |||||
44. | - | 46. | Accepted | and | incorporated | herein. |
47. | & | 48. | Accepted | and | incorporated | herein. |
49. | Accepted. | |||||
50. | - | 52. | Accepted. | |||
53. | & | 54. | Accepted | and | incorporater | herein. |
55. | Accepted. | |||||
56. | - | 58. | Accepted | and | incorporated | herein. |
59. | Accepted. | |||||
60. | Accepted | and | incorporated | herein. | ||
61. | - | 63. | Accepted. | |||
64. | - | 68. | Accepted | and | incorporated | herein. |
69. | - | 75. | Accepted | and | incorporated | herein. |
76. | Accepted | and | incorporated | herein. | ||
77. | Accepted. | |||||
78. | Accepted. | |||||
79. | Accepted. | |||||
80. | Accepted | and | incorporated | herein. | ||
81. | & | 82. | Accepted. | |||
83. | - | 86. | Accepted | and | incorporated | herein. |
87. | Accepted | and | incorporated | herein. | ||
88. | Accepted. | |||||
89. | Accepted | and | incorporated | herein. | ||
90. | Accepted. | |||||
91. | Accepted | and | incorporated | herein. | ||
92. | Accepted | and | incorporated | herein. | ||
93. | Accepted | and | incorporated | herein. | ||
94. | - | 97. | Accepted | and | incorporated | herein. |
98. | - | 100. | Accepted | and | incorporated | herein. |
101. | & | 102. | Accepted. | |||
103. | - | 106. | Accepted | and | incorporated | herein. |
107. | Accepted | and | incorporated | herein. | ||
108. | Accepted | and | incorporated | herein. | ||
109. | Accepted. | |||||
110. | Accepted. | |||||
111. | - | 114. | Accepted. | |||
115. | Accepted | and | incorporated | herein. | ||
116. | Accepted. |
117. & 118. Accepted but more a comment on evidence than finding of fact.
119. | & | 120. | Not a finding of fact but a comment on evidence. |
121. | Accepted. | ||
122. | - | 125. | Not findings of fact but comments on the evidence. |
126. | Accepted. | ||
127. | Not a finding of fact. | ||
128. | Accepted. | ||
129. | Not a finding of fact but more an argument. | ||
130. | Accepted. | ||
131. | Accepted. | ||
132. | - | 133. | Accepted and incorporated herein. |
134. | & | 135. | Accepted. |
Not a finding of fact but argument.
Accepted.
Not a finding of fact.
Accepted.
- 148. Not findings of fact but argument.
149. & 150. Accepted.
151. Not a finding of fact but argument.
FOR THE RESPONDENT, DHRS:
1. | Accepted | and | incorporated | herein. | |
2. | - 4. | Accepted | and | incorporated | herein. |
5. | - 11. | Accepted | and | incorporated | herein. |
12. | - 15. | Accepted | and | incorporated | herein. |
16. | - 19. | Accepted | and | incorporated | herein. |
20. | Accepted. | ||||
21. | - 23. | Accepted | and | incorporated | herein. |
24. | Accepted | and | incorporated | herein. | |
25. | - 28. | Accepted | and | incorporated | herein. |
29. | - 35. | Accepted | and | incorporated | herein. |
36. | - 40. | Accepted | and | incorporated | herein. |
41. | Accepted. | ||||
42. | Accepted | and | incorporated | herein. | |
43. | Accepted. | ||||
44. | - 46. | Accepted | and | incorporated | herein. |
47. | & 48. | Accepted | and | incorporated | herein. |
49. | Accepted. | ||||
50. | - 52. | Accepted | and | incorporated | herein |
53. | - 61. | Accepted | and | incorporated | herein. |
62. | & 63. | Accepted. | |||
64. | Accepted | and | incorporated | herein. | |
65. | Accepted. | ||||
66. | Accepted | and | incorporated | herein. | |
67. | Accepted. | ||||
68. | - 75. | Accepted | and | incorporated | herein. |
76. | & 77. | Accepted | and | incorporated | herein. |
Not a finding of fact but a restatement of evidence.
Accepted.
- 84. Accepted and incorporated herein.
Accepted.
Accepted and incorporated herein.
Accepted and incorporated herein.
& 89. Accepted and incorporated herein.
Accepted.
Accepted and incorporated herein.
Accepted and incorporated herein.
Accepted and incorporated herein.
COPIES FURNISHED:
R. Terry Rigsby, Esquire
F. Philip Blank, Esquire Blank, Rigsby & Meenan, P.A. 204-B South Monroe Street Tallahassee, Florida 32301
Thomas R. Cooper, Esquire Department of Health and
Rehabilitative Services 2727 Mahan Drive - Suite 103
Tallahassee, Florida 32308
C. Gary Williams, Esquire Michael Glazer, Esquire Ausley, McMullen, McGehee,
Carothers & Proctor
227 South Calhoun Street Tallahassee, Florida 32302
John Slye General Counsel DHRS
1323 Winewood Blvd.
Tallahassee, Florida 32399-0700
Sam Power Agency Clerk DHRS
1323 Winewood Blvd.
Tallahassee, Florida 32399-0700
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 be filed with the agency which will issue the Final Order in this case.
| Issue Date | Proceedings |
|---|---|
| Dec. 30, 1992 | Notice of supplemental authority filed. |
| Jun. 29, 1992 | Final Order filed. |
| Jun. 02, 1992 | Recommended Order sent out. CASE CLOSED. Hearing held February 17-25, 1992. |
| May 28, 1992 | HMC`s Response to Memorial`s Motion to Strike HMC`S Notice of Filing Interrogatory Answers filed. |
| May 19, 1992 | South Broward Hospital District`s Motion to Strike Notice of Filing Interrogatories; Memorial`s Response to Hollywood Medical Center`s Motion for Attorneys` Fees filed. |
| May 13, 1992 | Transcript (Volume-10) filed. |
| May 12, 1992 | Petitioner`s Motion for Extension of Time filed. |
| May 07, 1992 | HMC`S Memorandum of Law in Support of Its Motion for Attorneys` Fees and Costs; NME Hospitals, Inc. d/b/a Hollywood Medical Center`s Notice of Filing of Interrogatory Answers w/Notice of Service of Answers to First Set of Interrogtories & NME Hospitals, I |
| Apr. 30, 1992 | Letter to AHP from T. Rigsby (re: Motion for Attorneys` Fees) filed. |
| Apr. 24, 1992 | Respondent HRS` Proposed Recommended Order filed. |
| Apr. 24, 1992 | Petitioner`s Proposed Recommended Order w/Appendix to Petitioner`s Proposed Recommended Order filed. |
| Apr. 24, 1992 | (Respondent) Motion for Attorney`s Fees and Costs filed. |
| Apr. 24, 1992 | Hollywood Medical Center`s Proposed Recommended Order filed. |
| Apr. 10, 1992 | Order Granting Extension Of Time sent out. (Motion for Extension of Time Granted) |
| Apr. 03, 1992 | (Respondent) Motion for Extension of Time filed. |
| Mar. 30, 1992 | Transcript (Volumes 1-11) filed. |
| Feb. 17, 1992 | Final Hearing Held 2/17-25/92; for applicable time frames, refer to CASE STATUS form stapled on right side of Clerk's Office case file. |
| Feb. 14, 1992 | (Petitioner) Notice of Filing Deposition filed. |
| Feb. 14, 1992 | CC Letter to R. Terry Rigsby from C. Gary Williams (re: Motions or papers relating to application content issues) filed. |
| Feb. 14, 1992 | Deposition of Milton E. McKay; Deposition of Marcus Powers; Deposition of Robert J. Greene; Notice of Filing Deposition (2); Petitioner`s Motion for Summary Recommended Order w/Exhibits A-E filed. |
| Feb. 13, 1992 | CC Letter to Jay Mendelson from R. Terry Rigsby (re: cancellation of deposition) filed. |
| Feb. 12, 1992 | Order sent out. (RE: Rulings on Motions). |
| Feb. 12, 1992 | HMC`S Motion to Compel Production of Documents; Continued Deposition of Edward Maszak filed. |
| Feb. 12, 1992 | Order sent out. (RE: Rulings on Motions). |
| Feb. 10, 1992 | HMC`S Motion to Compel Production of Documents; HMC`S Notice of Intent to Use Summary Data filed. |
| Feb. 10, 1992 | CC Letter to Jay Mendelsohn from R. Terry Rigsby (re: taking deposition) filed. |
| Feb. 10, 1992 | (NME Hospitals) Notice of Hearing (Motion hearing set for 2/11/92; 9:30am; Tallahassee) filed. |
| Feb. 06, 1992 | Petitioner`s Motion to Compel Production of Documents filed. |
| Feb. 06, 1992 | HMC`S Motion to Strike Amended Witness List and Motion in Limine; Notice of Taking Deposition; HMC`S Response to South Broward Hospital District`s Motion for Protective Order w/Exhibits A-C filed. |
| Feb. 05, 1992 | (NME Hospital) Notice of Taking Deposition filed. (From C. Gary Williams) |
| Feb. 05, 1992 | (HME Hospital) Amended Notice of Deposition Duces Tecum filed. (From C. Gary Williams) |
| Feb. 05, 1992 | Amended Notice of Deposition Duces Tecum filed. (From Terry Rigsby) |
| Feb. 04, 1992 | (NME) Motion to Strike or for Clarification filed. |
| Feb. 04, 1992 | (NME Hospitals) Notice of Taking Deposition Duces Tecum filed. |
| Feb. 04, 1992 | South Broward Hospital District`s Notice of Witness List Amendment filed. |
| Feb. 03, 1992 | Memorial's Position w/cover ltr filed. |
| Feb. 03, 1992 | HMC`S Notice of Exhibit List Amendment filed. (From C. Gary Williams) |
| Feb. 03, 1992 | South Broward Hospital District`s Motion for Protective Order and Supporting Memorandum of Law w/Exhibits A&B filed. |
| Feb. 03, 1992 | CC Letter to R. Terry Rigsby from R. Stan Peeler (re: HCCB identifying patient numbers regarding Memorial's rehab unit) filed. |
| Jan. 31, 1992 | Corrected Order Granting in Part and Denying in Part Motion to Compel sent out. |
| Jan. 31, 1992 | Joint Prehearing Stipulation w/Exhibits A&B +Memorial Witness List & Memorial Exhibit List filed. |
| Jan. 31, 1992 | (Petitioner) Notice of Deposition Duces Tecum filed. |
| Jan. 31, 1992 | (Petitioner) Notice of Deposition Duces Tecum filed. |
| Jan. 30, 1992 | (South Broward Hospital District) Notice of Taking Deposition Duces Tecum filed. (From Timothy G. Schoenwalder) |
| Jan. 28, 1992 | (Petitioner) Second Amended Notice of Depositions Duces Tecum filed. |
| Jan. 27, 1992 | (Respondent) Notice of Taking Deposition filed. |
| Jan. 24, 1992 | Amended Order Granting in Part and Denying in Part Motion to Compel (and Correcting Reference to Request No. 42 to Request No. 43) sent out. |
| Jan. 24, 1992 | Order Granting in Part and Denying in Part Motion to Compel sent out. |
| Jan. 24, 1992 | Order Closing File sent out. (91-5699 closed). |
| Jan. 24, 1992 | Case No/s:91-5698 & 91-5699 unconsolidated. |
| Jan. 24, 1992 | (Petitioner) Notice of Hearing; Notice of Taking Deposition filed. |
| Jan. 24, 1992 | Order Granting in Part and Denying in Part Motion to Compel sent out. |
| Jan. 23, 1992 | (Petitioner) Notice of Hearing filed. |
| Jan. 23, 1992 | (Petitioner) Motion to Compel filed. |
| Jan. 23, 1992 | (Petitioner) Notice of Hearing filed. |
| Jan. 23, 1992 | (Petitioner) Notice of Postponement of Deposition filed. |
| Jan. 21, 1992 | Notice of Taking Deposition DUCES TECUM; Amended Notice of Taking Depositions DUCES TECUM filed. |
| Jan. 21, 1992 | Motion for Protection filed. |
| Jan. 17, 1992 | (Petitioner) Notice of Filing w/Affidavit of Annemarie Block; Affidavit of Faith Quincoces filed. |
| Jan. 13, 1992 | Notice of Canceling Deposition Duces Tecum and Re-Noticing Deposition Duces Tecum filed. (From Gary Williams) |
| Jan. 13, 1992 | Notice of Rescheduling Depositions Duces Tecum filed. (From Gary Williams) |
| Jan. 10, 1992 | (South Broward Hospital District) Response to Motion to Compel and Motion to Dismiss Case Number 91-5699 w/Exhibits A&B filed. |
| Jan. 09, 1992 | (Respondent) Amended Notice of Hearing filed. |
| Jan. 08, 1992 | (Respondent Notice of Deposition Duces Tecum filed. |
| Jan. 08, 1992 | (Respondent) Notice of Hearing filed. |
| Jan. 07, 1992 | (Petitioner) Notice of Hearing filed. |
| Jan. 06, 1992 | (NME Hospitals, Inc., d/b/a Hollywood Medical Center) Motion to Compel w/Exhibits A-D filed. |
| Jan. 06, 1992 | (NME Hospitals) Notice of Depositions Duces Tecum filed. |
| Dec. 23, 1991 | Order Dismissing Intervenor (Holy Cross Hospital) sent out. |
| Dec. 23, 1991 | Notice of Production From Non-Party filed. (From C. Gary Williams) |
| Dec. 23, 1991 | Response to NME Hospital, Inc.`s Request for Production of Documents to South Broward Hospital District; Notice of Service of Answers to First Set of Interrogatories; Response to NME Hospital, Inc.`s Request for Admissions to South Broward Hospital Distri |
| Dec. 20, 1991 | HMC`S Response to Memorial Hospital`s Request for Production of Documents; HMC`S Notice of Service of Answers to Memorial Hospital`s Interrogatories; HMC`S Response to Memorial Hospital`s Request for Admissions filed. |
| Dec. 19, 1991 | (Intervenor) Notice of Voluntary Dismissal; Holy Cross Hospital Inc.`s Response to NME Hospitals, Inc., d/b/a Hollywood Medical Center`s Request for Admissions filed. |
| Nov. 21, 1991 | South Broward Hospital District, d/b/a Memorial Hospital`s Request for Admissions to NME Hospitals, Inc. d/b/a Hollywood Medical Center filed. |
| Nov. 21, 1991 | South Broward Hospital District, d/b/a Memorial Hospital`s Request for Production of Documents to NME Hospitals, Inc., d/b/a Hollywood Medical Center; South Broward Hospital District d/b/a Memorial Hospital`s Notice of Service of Interrogatories to NME H |
| Nov. 20, 1991 | NME Hospital, Inc., d/b/a Hollywood Medical Center`s Request for Production of Documents to Holy Cross Hospital, Inc.; NME Hospitals, Inc. d/b/a Hollywood Medical Center`s Notice of Service of Interrogatories to Holy Cross Hospital, Inc. filed. |
| Nov. 20, 1991 | NME Hospitals, Inc., d/b/a Hollywood Medical Center`s Notice of Service of Interrogatories to South Broward Hospital District, d/b/a Memorial Hospital; NME Hospitals, Inc., d/b/a Hollywood Medical Center`s Request for Admissions to Holy Cross Hospital, In |
| Nov. 20, 1991 | NME Hospitals, Inc. d/b/a Hollywood Medical Center`s Request for Admissions to South Broward Hospital District, d/b/a Memorial Hospital; NME Hospitals, Inc. d/b/a Hollywood Medical Center`s Request for Production of Documents to South Broward Hospital Dis |
| Oct. 16, 1991 | Order Granting Intervention (for Holy Cross Hospital) sent out. |
| Oct. 01, 1991 | Notice of Hearing sent out. (hearing set for Feb 17-21 & 24, 1992; 10:00am; Tallahassee) |
| Sep. 23, 1991 | (Petitioner) Response to Prehearing Order filed. (From C. Gary Williams) |
| Sep. 09, 1991 | Order of Consolidation and Prehearing Order sent out. (91-5698 & 91-5699 consolidated). |
| Sep. 06, 1991 | Notification card sent out. |
| Sep. 04, 1991 | Petition to Intervene; Notice; Petition for Formal Administrative Hearing filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 25, 1992 | Agency Final Order | |
| Jun. 02, 1992 | Recommended Order | Evidence of long waits and tranfers out of service area supports non-formula finding of need for comprehensive rehabilitation unit in district where method shows none |
