STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HILLSBOROUGH COUNTY HOSPITAL ) AUTHORITY d/b/a THE )

TAMPA GENERAL HOSPITAL; )

BAPTIST HOSPITAL; )

SOUTH MIAMI HOSPITAL, INC.; ) NAPLES COMMUNITY HOSPITAL; and ) ST. MARYS HOSPITAL, )

)

Petitioners, ) CASE NOS. 91-6791RP and ) 91-6792RP

) 91-6801RP

TAMPA GENERAL HOSPITAL; ) 91-6802RP

HEALTHSOUTH REHABILITATION ) 91-6803RP CORPORATION; and ADVENTIST )

HEALTH SYSTEM/SUNBELT, INC., )

)

Intervenors, )

)

vs. )

) FLORIDA DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, )

)

Respondent. )

)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Mary Clark, held a formal hearing in the above- styled case on December 9 and 10, 1991, in Tallahassee, Florida.

APPEARANCES

Hillsborough County Hospital Elizabeth McArthur, Esquire Authority, d/b/a The Tampa Aurell, Radey, Hinkle, General Hospital & Thomas

P. O. Drawer 11307 Tallahassee, FL 32302

Department of Health and Edward Labrador, Esquire Rehabilitative Services 2727 Mahan Drive, Ste. 103

Tallahassee, FL 32308

South Miami Hospital, Inc., Jean Laramore, Esquire d/b/a South Miami Hospital 7007 McBride Pointe

Tallahassee, FL 32308

Naples Community Hospital, W. David Watkins, Esquire Inc. and St. Mary's Oertel, Hoffman, Fernandez Hospital, Inc. & Cole, P.A.

P. O. Box 6507

Tallahassee, FL 32314-6507

Adventist Health System/ Stephen K. Boone, Esquire Sunbelt, Inc., d/b/a Boone, Boone, Klingbeil, Florida Hospital Boone & Roberts, P.A.

P. O. Box 1596

Venice, Florida 34284

Healthsouth Rehabilitation Susan Horowitz Maurer, Esq. Corporation Panza, Maurer, Maynard,

Platow & Neel, P.A.

3081 E. Commercial Blvd. Suite 200

Ft. Lauderdale, FL 33308 STATEMENT OF THE ISSUES

The issue in these consolidated cases is whether proposed amendments to Rule 10-5.039, F.A.C., relating to certificates of need (CON) for hospital inpatient comprehensive medical rehabilitation (CMR) services, are invalid exercises of delegated legislative authority, as defined in Section 120.52(8), F.S.

An ancillary issue raised by Intervenor, Healthsouth, is whether an intervenor may challenge portions of a proposed rule not specifically identified by an original petitioner.

In a prehearing stipulation filed on December 6, 1991, the parties stipulated that the following subsections of the proposed amendments remained at issue:

1. Subsection (2)(b): definition of charity care;

2. Subsection (2)(k): definition of specialty bed;

3. Subsection (5)(c): CMR bed need methodology;

4. Subsection (5)(d): existing CMR bed occupancy threshold;

5. Subsection (5)(e): existing provider expansion (at issue from perspective of whether proposed amendment unreasonably restricts expansion of existing CMR providers);

6. Subsection (5)(f)2: conversion of acute care beds for CMR expansion;

7. Subsection (5)(g): priority considerations for CON review;

8. Subsection (10): required utilization reports; and

9. Subsection (11): applicability of amendments. Also remaining at issue was the sufficiency of the economic impact statement.

The validity of the following additional provisions were raised only by intervenors, Continental Medical Systems of Florida, Inc. or Healthsouth:

1. Subsection (3)(c): 60-bed minimum unit size for freestanding facilities;

2. Subsection (5)(e): existing provider expansion (from perspective of whether proposed amendment unreasonably allows expansion of existing providers); and

3. Subsection (7)(b): CARF accreditation.

PRELIMINARY STATEMENT

Proposed amendments constituting a substantial rewording of Rule 10-5.039,

F.A.C. were published by the Department of HRS (HRS) in the Florida Administrative Weekly on October 4, 1991.

Thereafter, timely petitions challenging various portions of the proposed amendments were filed by the petitioners named in the above style. The cases were consolidated and set for hearing. A sixth petition, filed by Continental Medical Systems of Florida, Inc. in DOAH Case number 91-6878R, was dismissed as untimely in an order entered on December 3, 1991.

In that same order Continental's motion to intervene was granted and the hearing was rescheduled by stipulation of all parties.

At the commencement of the hearing, unopposed motions to intervene by Tampa General, Healthsouth, and Adventist Health System (Florida Hospital) were GRANTED.

Continental voluntarily withdrew its petition to intervene and Baptist Hospital voluntarily dismissed its petition to determine the invalidity of a proposed rule in DOAH Case number 91-6792R.

The following witnesses testified at the final hearing: a) Elfie Stamm, Health Services and Facilities Consultant Supervisor, HRS, called by all parties and qualified as expert in health planning; b) Eugene Nelson, called by Tampa General Hospital and qualified as expert in health planning; c) Michael Douglas Jernigan, called by Naples Community Hospital and qualified as expert in health care planning; d) Julia Bower (by deposition), called by St. Mary's Hospital, Inc.; e) Tom Davidson, called by Healthsouth and qualified as expert in health care planning.

The following exhibits were offered, and were accepted into evidence at the final hearing: Joint Exhibit Number 1 - Proposed New CMR Rule as published in the October 4, 1991, F.A.W., pages 4614-4618; Tampa General Number 1 - Excerpts from the 1989 Florida State Health Plan; Tampa General Number 2 - CV of Eugene Nelson; Naples Number 1 - (Composite Exhibit 1A-1E) Naples Community Hospital's occupancy rates, Collier County population growth rates, hospital occupancy rates by district, and number of CMR beds by district; Naples Number 2 - "Bed Sizes" chart; Naples Number 3 - Various occupancy levels for various size bed capacities graph; Naples Number 4 - 1991 CARF Standards Manual; Naples Number 5

- (Composite Exhibit) excerpt from State of Florida Hospital Uniform Reporting System Manual, Chapter V, Section D, Case Mix Data Reporting; St. Mary's Number

1 - Deposition of Julia Bower; Healthsouth Number 1 - CV of Thomas Davidson; Healthsouth Number 2 - Rehabilitation bed statistics by district; Healthsouth Number 3 - (Composite Exhibit) rehabilitation bed inventory by district,

projected population growth by district, and calculation of maximum bed need in future batches by district; HRS Number 1 - Licensed and approved CMR beds, August, 1991; HRS Number 2 - Hospitals with CARF accredited inpatient CMR programs, July, 1991; HRS Number 3 - Entire CMR rule development file, (composite exhibit), nineteen files [within HRS Number 3, the following Exhibits were marked: 3A - Use rates of various types of hospital beds; 3B - CMR bed need estimates based on 10-4-91 F.A.W. rule; 3C - Seasonal variation in CMR occupancy by quarter; 3D - Trends in number of acute care patient days per 1,000 population; 3E - Admissions, patient days, etc. for Districts 10 and 11; 3F - Utilization of CMR inpatient beds 1988-1990, by facility, by district; 3G - Total charges for inpatient CMR, pages 31-40]; and HRS Number 4 - Florida hospital bed utilization by quarter, January through December, 1990.

The transcript was filed on January 2, 1992, and the deadline for filing proposed orders and memoranda was extended to February 4, 1992.

Specific rulings on the findings of fact proposed by the parties are found in the attached appendix.

FINDINGS OF FACT

The Parties

(In their stipulation, the parties have stipulated to each Petitioner's standing and that of the intervenors)

1. Hillsborough County Hospital Authority (Tampa General) is an existing acute care hospital at Davis Island, Tampa, Florida. It provides a full range of health care services, from basic acute care services to sophisticated tertiary services.

   
   

   South Miami Hospital, Inc. (South Miami Hospital) is an acute care hospital in Dade County, Florida, and is an existing licensed and approved provider of comprehensive medical rehabilitation inpatient services (CMR).

   
   

   Naples Community Hospital is a not-for-profit hospital in Collier County, Florida, providing CMR services, among other services.

   
   

   St. Mary's Hospital, located in Palm Beach County, is a not-for-profit hospital providing CMR, among other services.

   
   

   Adventist Health System/Sunbelt, Inc. (Florida Hospital) has acute care facilities in Orlando, Altamonte Springs and Apopka, Florida, and is an existing provider of CMR services.

   
   

   HealthSouth Rehabilitation Corporation (Healthsouth) is an existing provider of CMR services, which currently owns and operates inpatient facilities in Florida.

   
   

   The Florida Department of Health and Rehabilitative Services (HRS) is the agency of the state designated by statute to administer the certificate of need (CON) program.

   
   

   Origin of the Rule

   
   

2. CMR is a sophisticated service involving a team of experts working to restore a patient's functions following a severe disability such as a stroke,

   brain injury, or spinal cord injury. Because this service requires highly- trained, highly qualified specialists, CMR is considered a referral service to be concentrated in a few facilities; it would not be desirable to have CMR services available in every facility, as distinguished from less sophisticated levels of rehabilitation services that are more readily available.

   
   

3. CMR was specifically designated by the legislature as a tertiary health service in 1987 revisions to the CON laws.

   
   

   "Tertiary health service" is defined as:

   ...a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost- effectiveness of such service.

   
   

   Section 381.702(20), F.S.

   
   

4. HRS developed its first CON rule addressing CMR services in 1982, wherein it adopted standards and a need methodology for review of CON applications for new or expanded CMR services. Rule 10-5.039, F.A.C.

   
   

5. When HRS first adopted its CMR rule, the services were newly developing in Florida, and there were only two existing providers. Given the lack of historic experience and data by which to judge the need for additional services in Florida, HRS adopted its rule based on standards that had been developed in other states, where CMR services were better established.

   
   

6. The original version of the CMR rule includes a need methodology which calculates numeric need for additional CMR hospital beds by allotting a fixed ratio of CMR beds to the number of projected acute care discharges for the projected population in a given HRS service district for the planning horizon year, five years into the future, so that the district's CMR beds will be utilized at the desired occupancy rate of 85%. Rule 10-5.039(2)(a), F.A.C.

   
   

7. The existing rule also includes a separate standard which requires existing CMR beds in the HRS service district to have achieved an average annual occupancy rate of 85% before more CMR beds will normally be approved. Rule 10- 5.039(2)(b)2., F.A.C.

   
   

8. The CMR rule also contains a geographic access standard, providing that CMR services should be available within two hours' drive time under normal conditions to 90% of the target population. Rule 10-5.039(2)(c)3, F.A.C.

   
   

9. CMR services have developed in Florida over the past decade so that there are now hospital providers of CMR services in each of the eleven HRS service districts; and with the exception of the Florida Keys, all areas in Florida are within the two-hour normal drive-time access standard.

   
   

10. Utilization of existing CMR beds has also grown over the years, although in many areas in Florida the average utilization is still below the desired minimum rate of 85%.

    
    

11. HRS reasonably interprets the CMR bed inventory and utilization data to indicate that CMR services are now available and accessible throughout the state of Florida. HRS has not been presented with any evidence, and no evidence

    was presented at the final hearing in this proceeding, to show that patients in need of hospital CMR services are experiencing problems accessing those services within the two-hour drive-time standard.

    
    

12. The development of CMR beds has exceeded the fixed rate contemplated by the existing need methodology because HRS has applied the existing rule flexibly, approving additional CMR beds in some instances despite the lack of numeric need. In some HRS districts, CMR beds are very highly utilized; and as a result, HRS approved a large number of CMR beds in the last CON review cycle despite the lack of numeric need.

    
    

13. HRS' proposed CMR rule amendments are the result of a need to take into account the current development of CMR services in Florida. Following internal discussion, HRS convened a work group in December 1990 composed of representatives of existing providers as well as those interested in developing CMR services. HRS also solicited and received comments from providers and from local health councils in the eleven HRS districts.

    
    

    HRS first published proposed amendments to the CMR rule in May 1991. A public hearing was held and challenges to the proposed amendments were filed. HRS then convened another public meeting to reconsider its proposed amendments, and as a result of the input, made some changes to the first published version of the amendments. Following those changes, HRS republished the proposed amendments in the fall of 1991, and those are the amendments at issue in this proceeding.

    
    

    Definitions - 10-5.039(2)(b) & (2)(k)

    
    

14. Although the definition of "charity care", as provided in proposed rule 10-5.039(2)(b), remained an issue to be litigated at final hearing, none of the challengers presented any evidence to show that the definition was unreasonable or an invalid delegation of legislative authority. The definition is specific and unambiguous. It details what constitutes charity care and distinguishes charity care from bad debt, discounts and other non-or partial payments.

    
    

15. Proposed rule 10-5.039(2)(k) defines the term "specialty beds" as follows:

    
    

    A category of hospital inpatient beds for which the department has promulgated a separate rule specifying need determination criteria, including burn unit beds, hospital inpatient general psychiatric beds, hospital inpatient substance abuse beds, Level II and Level III neonatal intensive care unit beds; and the comprehensive medical rehabilitation inpatient beds regulated under this rule.

    
    

16. This definition of specialty bed is consistent with other CON rules, for example, rules 10-5.040, 10-5.041 and 10-5.042, F.A.C., relating to psychiatric, substance abuse and neonatal intensive care services. It is also consistent with the hospital licensure statute which defines general beds as those for which the department has not adopted a specialty need methodology. Section 395.003(4), F.S., (1991). Contrary to the claim raised by Naples, the noninclusion of intensive care unit (ICU) beds does not offend the validity of this definition. A hospital license will state only the number of acute care

    beds, rehabilitation beds and other types for which HRS has adopted a specialty methodology.

    
    

    Proposed Need Methodology - 10-5.039(5)(c)

    
    

17. The proposed amendments include a revision to the need methodology to change it from the fixed-ratio calculation (target rate methodology) described in paragraph 6, above, to a utilization-based calculation. A utilization-based numeric need methodology applies the historic utilization rate of health service to the projected future population, and is a generally-accepted health planning tool for assessing need.

    
    

    Healthsouth's expert raised what he admitted was the "standard objection to utilization-based methodologies" (Davidson, Tr. 278, 304), that the proposed methodology would perpetuate existing referral patterns among the eleven HRS districts, and the resulting discrepancies in use of CMR services in those districts. However, he had no evidence that the existing referral patterns are inappropriate; instead, he suggested HRS had to prove that the existing patterns are appropriate. He also admitted the anomaly that in those districts with the lowest ratio of CMR beds to population, there is also the lowest average occupancies, and said that he would not advocate approving more beds in those districts to raise their bed ratio to that experienced in other districts, when there are already empty beds. HRS considered the disparity in use rates, and its investigation revealed no empirical data to explain the difference, other than existing physician referral patterns which it cannot change. The occupancy rate adjustment in the need methodology allows those districts where the use rate is low to increase the supply over time, hence the existing patterns are not necessarily perpetuated.

    
    

18. The Department developed a utilization based methodology because there currently exists sufficient bed capacity to meet the current need for CMR services. Likewise, use rates for CMR services differ from district to district. The demand approach model is entirely consistent with HRS' approach in other need methodologies.

    
    

19. Critics of the proposed need methodology for CMR services argue that it will not generate enough numeric need to allow for approval of new providers. However, that observation alone is insufficient to show that the new methodology is arbitrary, capricious, or otherwise invalid. In fact, the new methodology generates substantially more numeric need than that of the existing rule. If HRS had not recently approved 250 new CMR beds, the proposed methodology would show a net numeric need.

    
    

20. The need methodology critics also complain about the methodology's continued incorporation of 85% to adjust numeric need to the desired occupancy rate for CMR beds. No evidence was presented to HRS in its rulemaking process or in this final hearing to demonstrate that 85% is an inappropriate target for utilization of existing CMR beds. Instead, the evidence supported continued use of 85% as the desired occupancy standard, since CMR is a tertiary service, an expensive service and a lucrative service. HRS appropriately encourages existing providers to fill their beds to the maximum extent possible before approving new beds.

    
    

21. At most, the critics suggest that an 85% target utilization rate might be too high for individual facilities in HRS districts where there exists seasonal fluctuation for CMR utilization, particularly where the facility has a limited number of CMR beds. HRS investigated the seasonal variations for CMR

    services, and found that variation was insignificant in almost all of the HRS service districts, and was not experienced at the same times of the year for all facilities within those districts that did show a seasonal fluctuation. HRS reasonably concluded that the seasonal fluctuations for CMR which affect individual facilities are not appropriately addressed in a methodology of statewide applicability.

    
    

22. Even in the HRS districts where there are seasonal fluctuations, no evidence was presented that patients are experiencing serious problems accessing CMR services within a two-hour drive time. Instead, the critics could only assert that high utilization at specific facilities might mean that patients could not obtain CMR services at the facility of their choice.

    
    

23. If seasonal fluctuations at a particular facility were to translate into serious access problems for CMR patients, then HRS would consider that as a possible "not normal" circumstance justifying approval of more beds, notwithstanding a lack of numeric need or compliance with the occupancy standard.

    
    

24. HRS reasonably complied with the legislative directive that CMR services be regulated as tertiary health services, concentrated in a limited number of hospitals, in addressing numeric need for additional CMR services in its proposed rule. HRS also reasonably took into account the nature of CMR services, which are not acute, emergency services, but are scheduled services. Opponents to the numeric need methodology instead admit they simply disagree with the legislature.

    
    

    Threshold Occupancy Rate - 10-5.039(5)(d)

    
    

25. In its proposed rule, HRS establishes a threshold occupancy rate of 80 percent. Normally, no additional CMR beds will be approved unless the average annual occupancy rate of all existing CMR providers in the district is at 80 percent.

    
    

26. Because the significant factor in a utilization based methodology is population growth, a threshold occupancy is a necessary safeguard against overprojecting the need for beds. Also, a lower threshold allows for the appropriate achievement of the desired occupancy rate (85 percent) in the appropriate planning horizon year. Otherwise, future need could be stifled by an 85 percent threshold occupancy rate, as explained by HRS spokeswoman, Elfie Stamm.

    
    

27. Challenges to this provision were split: some argued it should be higher; others argued it should be lower, or that there should be no threshold occupancy rate. However, no expert was inclined to state that the proposed threshold occupancy rate was wrong. Likewise, critics agreed that a minimal occupancy threshold was necessary to ensure the maintenance of service levels, staff, and staff salaries by existing providers. A threshold occupancy rate helps ensure efficiency and protects existing CMR providers from undue harm which may be caused by the approval of a new CMR program.

    
    

28. Although the proposed threshold occupancy rate is more liberal than in the current rule, it appears to be reasonable and justified given the current expansion in utilization of CMR services. It provides a balance between the need for expansion and the need to avoid too hasty expansion. Although the difference in threshold occupancy rate and projected occupancy rate is a

    departure from HRS' methodologies for other services, it is a rational approach to a service in the state of flux.

    
    

    Facility-specific Provisions - 10-5.039(5)(e)

    
    

29. Subsection (5)(e) of the proposed rule contains a facility-specific provision allowing under certain circumstances, approval of a highly utilized existing provider for additional CMR beds regardless of available bed capacity within a district.

    
    

    Specifically, this provision authorizes more beds for facilities which experience at least 90 percent average occupancy for two recent consecutive quarters and meet one of two conditions: (1) the facilities' highly utilized beds are devoted to a specialty type of CMR not otherwise available in the district; or (2) the applicant is a disproportionate share provider with a history of providing Medicaid and charity care in its CMR beds.

    
    

30. Critics of the facility-specific expansion provision do not claim that facilities meeting the criteria in (5)(e) should not be allowed to expand. Instead, they assert simply that HRS should have written the provision differently so that more existing providers would qualify for expansion. If an existing provider does not satisfy (5)(e), however, that does not mean that HRS would not consider its application upon a showing of not-normal circumstances. HRS simply addressed in this provision those circumstances in which it would always find a bed award to be appropriate.

    
    

31. As to the first condition, critics claim that reference to specialty CMR services that are accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF) is ambiguous because CARF accredits comprehensive inpatient rehabilitation as one specialty category, as well as particular types of CMR, such as spinal cord injury or brain injury programs. However, in the context of a CON rule addressing the specialty service of CMR, HRS' stated intention that the condition apply to sub-specialties within CMR, and not to CMR generally, is clear.

    
    

32. If a CMR facility had an overall high occupancy rate but did not have a high occupancy rate in its specialty program, it would not satisfy the facility-specific expansion provision. However, it could convert some of its specialty beds to general CMR beds and level out the occupancy rates. There is no regulatory impediment to such a conversion, since HRS does not lock providers into the number of specialty CMR beds they operate. CARF accredits programs, not beds. Although CARF apparently requires a CMR provider to report the number of beds devoted to each program, it also appears that a CMR provider can simply notify CARF of changes in the size of its various CMR programs.

    
    

33. The evidence indicates that disproportionate providers should be considered for beds because it would help facilities in cost-shifting or supplementing the costs of providing care to Medicaid and indigent patients. Encouragement of the provision of services to Medicaid and indigent patients is a matter of state policy.

    
    

    Conversion of underutilized beds per Rule 10-5.039(5)(f)2.

    
    

34. The proposed rule requires general acute-care hospital applicants to normally convert general acute-care beds for CMR beds, if they cannot reasonably project a 75% annual occupancy rate for those acute-care beds within a five-year planning horizon.

    Although the provision calls for these projections to be based upon historical utilization patterns, the Department considers all factors presented by an applicant for projecting future occupancy. In making its decisions, the Department must adhere to generally acceptable health planning principles.

    
    

35. Florida has a significant problem with an excess amount of licensed acute-care beds. Currently, Florida has a surplus of over 5,000 acute-care beds. This excess capacity is not expected to be reduced until the year 2000. In order to reduce this excess capacity, the department gives preferences to hospitals proposing to convert underutilized acute-care beds. This is consistent with recommendations of the State Health Plan.

    
    

36. Conversion is a reasonable and flexible mechanism to reduce the excess number of acute care beds. The critics' charges that this provision would require conversion of intensive care beds and that providers are not allowed to convert other underutilized beds are not valid. A hospital may freely choose whichever kinds of general acute-care beds it wishes to convert; the Department, historically, has considered the conversion of other underutilized beds (for example, psychiatric beds) and this provision is not intended to halt this practice.

    
    

    Priority Considerations - 10-5.039(5)(g)

    
    

37. The proposed rule adds a provision giving priority consideration (preferences) to certain applicants who seek to add or establish CMR beds. These applicants include disproportionate share providers (Medicaid and charity care), providers proposing to serve Medicaid-eligible patients, and designated trauma centers.

    
    

    Preferences for disproportionate share providers and Medicaid providers are consistent with statutory certificate of need review criteria and the State Health Plan. See, Sections 381.705(1)(a), (h), (n), F.S. (1991).

    
    

    The preference given to designated trauma care centers is reasonable because these facilities are equipped to, and frequently do, treat patients with spinal cord injuries, strokes or other conditions which need follow-up CMR services. By this preference, the Department reasonably encourages the development and location of CMR services at facilities which have the necessary equipment and specialists to handle such patients.

    
    

    Generally, it is more cost effective to concentrate related services in the same facility.

    
    

    Utilization Reports - 10-5.039(10)

38. Proposed Rule 10-5.039(10) requires: Facilities providing licensed comprehensive medical rehabilitation inpatient services shall provide

    utilization reports to the department or its designee, as follows:

    1. Within 45 days after the end of each calendar quarter, facilities shall provide a report of the number of comprehensive medical rehabilitation inpatient services discharges and patient days which occurred during the quarter.

    2. Within 45 days after the end of each calendar year, facilities shall provide a report of the number of comprehensive medical rehabilitation inpatient days which occurred during the year, by principal diagnosis coded consistent with the International Classification of Disease (ICD-9).

       
       

39. Utilization data is an important ingredient in the planning of CMR services and the operation of the agency's CON program. HRS intends to designate the local health council as its designee for data collection. The department is authorized to require the submission of information from health care facilities in order to carry out its statutory responsibilities. Section 381.703(4)(b), F.S. (1991).

    
    

    Although other regulatory bodies besides the CON office of HRS might have the ability to mandate and collect the same data, none of them do so now; the form of data requested by this proposed rule provision is necessary for the rule's need methodology.

    
    

    10-5.039(11): Applicability of the Amended Rule

    
    

40. An applicability clause establishes that the amended rule shall not be applied retroactively. In other words, the Department does not intend to apply the proposed rule to applications pending in the review process or in litigation at the time the rule becomes effective.

    
    

41. This is consistent with the department's fixed need pool rules. Since the amended rule presents a new methodology quite different from the current rule, prospective application ensures predictability for a provider. None of the parties presented any evidence with respect to unreasonableness of applying the amended rule in a prospective manner.

    
    

    Economic Impact Statement

    
    

42. Pursuant to Section 120.54(2), Florida Statutes, HRS prepared an economic impact statement for the proposed rule. While the validity of HRS' economic impact statement was raised as an issue by several challengers, no evidence or testimony was presented to prove their challenge. Likewise, the challengers further failed to show how they were prejudiced by HRS' economic analysis.

    
    

    Issues Raised by Intervenor, Healthsouth

    
    

43. Intervenor, Healthsouth, in its petition and at hearing raised issues beyond the scope of the challengers' petitions filed prior to the statutory 21- day deadline.

    
    

    Evidence was received under advisement pending an opportunity for counsel for Healthsouth to present her legal arguments as to why it should be considered. Respondent, HRS, and other parties objected to evidence on new issues and those objections were preserved. As more fully addressed in the following conclusions, those issues are considered beyond the scope of this proceeding.

    
    

    Even had the issues specially raised by Healthsouth been timely, no competent evidence was presented to show the rule as a whole is invalid or that it unreasonably inhibits growth of free standing facilities.

44. Proposed Rule 10-5.039(3)(c), F.A.C. provides:

    
    

    (c) Minimum Number of Beds. A general hospital providing comprehensive medical rehabilitation inpatient services should normally have a minimum of 20 comprehensive medical rehabilitation inpatient beds. A specialty hospital providing comprehensive medical rehabilitation inpatient services shall have a minimum of 60 comprehensive medical rehabilitation inpatient beds. Hospitals with licensed or approved comprehensive medical rehabilitation inpatient beds as of the effective date of this rule are exempt from meeting the requirements for a minimum number of beds.

    (emphasis provided)

    
    

    There exist already in the state a significant number of free-standing rehabilitation facilities, because investor-owned facilities took the initiative in the beginning to file applications and obtain approvals. Those existing

    free-standing facilities and general hospitals will both benefit from the proposed rule which generates a greater bed need than the existing rule.

    
    

    HRS has appropriately determined that it is generally more cost effective to utilize existing facilities, through conversion or expansion, than to start with a new facility. This determination is not unique to CMR, but is consistent with the methodologies governing other health care services in the CON program.

    
    

    CONCLUSIONS OF LAW

    
    

45. The Division of Administrative Hearings has jurisdiction over this matter and the parties. Sections 120.54(4) and 120.57, F.S.

    
    

46. The parties stipulated that the petitioners and intervenors all have standing to challenge the proposed rule amendments, and that stipulation is accepted.

    
    

47. A proposed rule must be sustained unless the challengers meet their burden of proving that the proposed rule is an invalid exercise of delegated legislative authority. Section 120.54(4)(a), F.S. "Invalid exercise of delegated legislative authority" is defined in Section 120.52(8), F.S., as follows:

    
    

    [A]ction which goes beyond the powers, function, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54;

    2. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7);

    3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

    
    

48. The role of the Hearing Officer in a Section 120.54 hearing was described by the court in Agrico Chemical Co. v. State Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. denied,

    376 So.2d 74 (Fla. 1979), as follows:

    
    

    Thus, in a 120.54 hearing, the hearing officer must look to the legislative authority for the rule and determine whether or not the proposed rule is encompassed within that grant. The burden is upon one who attacks the proposed rule to show that the agency, if it adopts the rule, would exceed its authority; that the requirements of the rule are not appropriate to the ends specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation or that the proposed rule or the requirements thereof are arbitrary or capricious.

    * * *

    The requirement that a challenger has the burden of demonstrating agency action to be arbitrary or capricious or an abuse of administrative discretion is a stringent one indeed.

    * * *

    
    

49. In State Department of Health and Rehabilitative Services v. Framat Realty, Inc. 407 So.2d 238 (Fla. 1st DCA 1981), the court reversed a hearing officer's order invalidating a rule as beyond the department's statutory authority. In reversing, the court made clear that administrative rules must be upheld as long as the rule is within the range of permissible interpretations of the statute, and that it is inappropriate to go further to investigate whether the department's interpretation of the statute is the only possible interpretation or the most desirable one. The court found that great deference to an agency's policy choices that emerge from the formal statutory rule promulgation process was required by the Florida Administrative Procedures Act:

    
    

    ...[T]he APA plainly regards rules as a valuable end point in the agency's development of policy. Rules represent an agency's considered decision on issues left to the agency's decision by a substantive act of the legislature. If we are to regard seriously the incentives for rulemaking under the APA scheme, and if we are to credit the deliberative process that the legislature has prescribed for the development of agency policy, then surely an interpretative rule emerging from this process should be accorded a most weighty presumption of validity. Otherwise the elaborate statutory scheme, pressing for rulemaking and prescribing how is shall be accomplished with maximum public and private participation, has no productive purpose, and it has become only a snare for agency action, a device for the evasion, avoidance or

    postponement of effective agency action in its authorized field of responsibility.

    * * *

    407 So.2d at 341-42.

    
    

50. In this case, the Petitioners have failed to meet their burden of proving that the proposed amendments are invalid exercises of delegated legislative authority. HRS went through the prescribed process, received substantial input from the varying interests, and reasonably resolved the conflicting views based on its studied assessment of the issues. Reasonable persons may, and in this proceeding do, differ on the result.

    
    

51. CMR is a tertiary health service, and given the uncertainty in future growth of hospital-based CMR use, HRS was not overly conservative in amending its need methodology to increase the overall need projections while avoiding a flood of new beds. HRS' amended need methodology is a generally accepted health planning tool. The choice among reasonable ways to assess need is clearly one for HRS to make in the rulemaking process.

    
    

52. The claim that the rule discriminates against freestanding providers was not established; instead, it was shown that the rule would favor existing providers over new providers, either hospital-based or freestanding. To the extent that the rule favors existing providers, then that preference is in keeping with the statutory designation of CMR services as tertiary health services. The legislature established tertiary health services as a class of health care services within the CON regulatory scheme for which existing providers are to be favored. Tertiary health services are defined as those services which should be concentrated in and limited to a few number of providers. Section 381.702(20), F.S.

    
    

    In this regard, this rule challenge is similar to the recent unsuccessful challenge to HRS' proposed amendments to the open heart surgery CON rule.

    Humhosco, Inc., et al., v. Department of Health and Rehabilitative Services, DOAH Case Nos. 91-0863R, 91-0864R, and 91-0865R (DOAH Final Order by Hearing Officer J. Stephen Menton dated December 12, 1991). In the Humhosco rule challenge, the hearing officer noted that the way in which HRS proposed to assess need for new open heart surgery programs favored existing providers, but that preference was particularly appropriate for a tertiary level service. (Final Order, p. 67)

    
    

53. The petitioners failed to meet their burden of proving the invalidity of other challenged portions of the rule. The definition of specialty bed, and its use in the acute care bed conversion provision, is reasonable, consistent with other CON rules and with the licensure statute. The bed conversion provision itself is a reasonable effort by HRS to address the acute care bed glut.

    
    

    The proposed amendments also reasonably include preferences in CON review to disproportionate share providers, Medicaid and charity care providers and trauma centers. Those preferences are to some extent already called for in the State Health Plan and by CON review criteria. Section 381.705(1)(n), F.S.

    
    

54. The facility-specific expansion provision, as a codification of one kind of not-normal circumstance in which HRS would approve beds where no numeric need is shown, is not unreasonable simply because in the petitioners' view the expansion provision does not go far enough. Nothing in the rule precludes

    consideration of other not-normal circumstances to justify new beds where there is no numeric need.

    
    

55. HRS' data reporting requirement was also not shown to be unreasonable. Instead, HRS demonstrated its need for the data and the unavailability of the data from other sources. That other sources could require the data is irrelevant, since they are not in fact requiring the data that the CON office needs to effectuate its rule. This same issue was recently resolved in favor of HRS in another rule challenge case. Florida League of Hospitals, Inc., v. HRS,

    12 FALR 4126, 4142 (DOAH Final Order, September 28, 1990).

    
    

56. The challengers have also failed to meet their burden of proving that the economic impact statement is materially deficient or that it has impaired the fairness of the proceedings or the correctness of HRS' actions; indeed, no evidence or testimony was presented on this issue.

    
    

    The absence or insufficiency of an economic impact statement is harmless error if it is established that the proposed action will have no economic impact, or if it is shown that the agency fully considered the asserted economic factors and impact. Department of Health and Rehabilitative Services v. Wright,

    439 So.2d 937 (Fla. 1st DCA 1983); Florida-Texas Freight, Inc. v. Hawkins, 379 So.2d 944 (Fla. 1979). An agency is not required to specifically identify every possible detrimental effect of a proposed rule under every conceivable set of circumstances. The economic impact statement here put the petitioners on notice to investigate further and was not materially deficient. Department of Administration v. Herring, 530 So.2d 962 (Fla. 1st DCA 1988).

    
    

57. Although addressed herein, Intervenor's issues regarding the invalidity of the proposed rule as a whole and its impact on freestanding facilities are not properly within the scope of this proceeding.

Section 120.54(4)(b), F.S. provides:

(b) The request seeking a determination under this subsection shall be in writing and must be filed with the division within 21 days after the date of publication of the notice. It must state with particularity the provisions of the rule or economic impact statement alleged to be invalid with sufficient explanation of the facts or grounds for the alleged invalidity and facts sufficient to show that the person challenging the proposed rule would be substantially affected by it.

(emphasis provided)

Language in the timely filed petitions that their arguments "include, but are not limited to..." issues set forth in the petitions, lacks the requisite specificity for Intervenor, Healthsouth, to bootstrap its issues not raised prior to the 21-day deadline.

"An intervenor must accept the record and pleadings as he finds them and cannot raise new issues, although he may argue the issues as they apply to him as a party." National Wildlife Federation, Inc. v. J.T. Glisson, 531 So.2d 996 (Fla. 1st DCA 1988).

Nor may Healthsouth bootstrap its issues to petitions filed by an earlier party, Continental, one of which was voluntarily dismissed and the other involuntarily dismissed as untimely. See Humana of Florida, Inc. v. Department of Health and Rehabilitative Services, 500 So.2d 186 (Fla. 1st DCA 1986).

ORDER

Based on the foregoing, it is hereby, ORDERED:

The proposed amendments to Rule 10-5.039, F.A.C. are valid, and the petitions in the above-styled consolidated actions are dismissed.

DONE AND ORDERED this 28th day of February, 1992, in Tallahassee, Leon County, Florida.

MARY W. CLARK, 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 28th day of February, 1992.

APPENDIX TO FINAL ORDER

The following constitute specific rulings on the findings of fact proposed by the various parties.

The findings of fact proposed by the Department of Health and Rehabilitative Services and Tampa General are substantially adopted herein, with the exceptions of paragraphs 26 and 27 of Tampa General's proposed findings which suggest that the 80% occupancy standard is unreasonable. Those findings are rejected as inconsistent with the greater weight of evidence.

Findings of Fact Proposed by Naples

1. Adopted in substance in paragraph 1. 2.-4. Rejected as unnecessary.

5. Included in Preliminary Statement. 6.-18. Addressed in paragraphs 20-24, and

substantially rejected as contrary to the weight of evidence or irrelevant.

1. Adopted in paragraph 25.

2. Rejected as contrary to the weight of evidence.

3. Rejected as statement of testimony rather than a finding of fact.

22.-26. Adopted in substance in paragraph 29.

27. Rejected as unnecessary.

28.-32. Addressed in paragraphs 31 and 32 and generally rejected as contrary to the weight of evidence.

33. Addressed in Preliminary Statement. 34.-35. Rejected as unnecessary or irrelevant.

Ms. Stamm effectively justified the provisions in question.

36.-37. Adopted in substance in paragraph 32. 38.-47. Rejected as irrelevant or immaterial.

48.-50. Rejected as contrary to the more reasonable and plain interpretation of the rule.

1. Rejected as contrary to the weight of evidence or immaterial.

2. Rejected as contrary to the more reasonable interpretation of the rule.

53.-54. Rejected as immaterial or, as to the conclusion that the section is arbitrary and capricious, contrary to the weight of evidence.

1. Adopted in paragraph 34.

2. Adopted in paragraph 15.

3. Adopted in summary in paragraph 34.

4. Rejected as contrary to the evidence (as to the conclusion the rule does not "make sense".

5. Rejected as contrary to the evidence.

6. Rejected as unnecessary.

7. Rejected as contrary to the greater weight of evidence.

8. Adopted in part in paragraph 38; otherwise rejected as contrary to the evidence (as to the reports being "unnecessary and duplicative").

   63.-68. Rejected as unnecessary or irrelevant.

   
   

   Findings of Fact Proposed by St. Mary's Hospital

   
   

   1. Adopted in substance in paragraph 1.

   2. Adopted in preliminary statement.

3.-5. Adopted in substance in paragraph 29.

6. Adopted in paragraph 15. 7.-8. Rejected as unnecessary.

9.-10. Adopted in substance in paragraph 31. 11.-12. Rejected as contrary to the evidence or

irrelevant.

1. Rejected as unnecessary.

2. Addressed in preliminary statement.

3. Rejected as restatement of testimony and inaccurate characterization of the full testimony of witness, Stamm.

16.-23. Rejected as unnecessary.

24. Adopted in substance in paragraph 29. 25.-28. Rejected as unnecessary.

29. Rejected as contrary to the evidence.

30.-31. Rejected as unnecessary or contrary to the evidence.

32.-38. See number 55-61, in Naples' proposed findings, above.

39.-45. See number 62-68 in Naples proposed findings, above.

Findings of Fact Proposed by Florida Hospital

1. Adopted in paragraphs 1 and 2.

2. Adopted in paragraphs 4 and 13.

3. Adopted in paragraph 13.

4. Adopted in paragraph 17.

5. Adopted in paragraph 20.

6. Adopted in paragraph 25.

7. Adopted in substance in paragraph 28.

8.-9. Rejected as statement of testimony, rather than a finding of fact.

1. Adopted in paragraph 26.

2. Rejected as contrary to the weight of evidence.

3. Adopted in paragraph 37.

4. Rejected as contary to the weight of evidence (as to the conclusory statement about no correlation).

5. Adopted in part in paragraph 38, as to what the rule requires; otherwise rejected as a conclusion that is supported by the weight of evidence.

6. Adopted in substance in paragraph 3.

7. Adopted in substance in paragraph 11.

8. Rejected as unnecessary.

18.-19. Adopted in substance in paragraph 46.

1. Adopted in paragraph 29.

2. Rejected as unnecessary.

3. The conclusion as to reasonableness is adopted in Conclusions of Law number 9.

4. Rejected as unnecessary and cumulative.

Findings of Fact Proposed by Healthsouth

1. Adopted in paragraph 1.

2.-3. Adopted in preliminary statement.

1. Adopted in substance in paragraph 1.

2. Adopted in statement of the issues.

3. Adopted in paragraph 46.

4. Rejected as unnecessary.

5. Rejected as contrary to the law. The acute care general hospital will not be assured of a CON only on the basis of a need for 20 beds; this is not the only criteria.

6. Rejected as unnecessary.

7. Adopted in paragraph 46. 11.-13. Rejected as unnecessary.

1. Rejected as unnecessary (see paragraph 46).

2. Rejected as unsupported by the weight of evidence, or unnecessary.

3. Rejected as unnecessary.

4. Rejected as an incorrect characterization of the rule. It is not a requirement, but rather a means to expand when the need formula otherwise would limit expansion.

18.-20. Adopted in paragraphs 40 and 41.

21. Rejected as unnecessary.

No proposed findings were submitted by South Miami Hospital.

COPIES FURNISHED:

Elizabeth McArthur, Esquire

P.O. Drawer 11307 Tallahassee, FL 32302

Edward Labrador, Esquire 2727 Mahan Dr., Ste. 103

Tallahassee, FL 32308

Jean Laramore, Esquire 7007 McBride Pointe

Tallahassee, FL 32308

W. David Watkins, Esquire

P.O. Box 6507

Tallahassee, FL 32314-6507

Stephen K. Boone, Esquire

P.O. Box 1596 Venice, FL 34284

Susan Horowitz Maurer, Esquire 3081 E. Commercial Blvd., Ste. 200 Ft. Lauderdale, FL 33308

R. S. Power, Agency Clerk HRS

1323 Winewood Blvd.

Tallahassee, FL 32399-0700

John Slye, General Counsel HRS

1323 Winewood Blvd.

Tallahassee, FL 32399-0700

Liz Cloud, Chief

Bureau of Administrative Code The Capitol, Room 1802 Tallahassee, FL 32399-0250

Carroll Webb, Exec. Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, FL 32399-1300

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

Docket for Case No: 91-006791RP

Orders for Case No: 91-006791RP