STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
NAPLES COMMUNITY HOSPITAL, )
)
Petitioner, )
)
vs. )
) AGENCY FOR HEALTH CARE ADMINISTRATION, )
) CASE NO. 92-1510
Respondent, )
and )
)
SOUTHWEST FLORIDA REGIONAL )
MEDICAL CENTER, INC., )
)
Intervenor. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William F. Quattlebaum, held a formal hearing in the above-styled case on October 6-9, 1992, in Tallahassee, Florida.
APPEARANCES
For Petitioner: W. David Watkins, Esquire
Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507
Tallahassee, Florida 32314-6507
For Respondent: Thomas Cooper, Esquire
Agency for Health Care Administration 2727 Mahan Drive
Tallahassee, Florida 32308
For Intervenor: John D.C. Newton, II, Esquire
Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000
101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
STATEMENT OF THE ISSUE
Whether the application of Petitioner Naples Community Hospital, Inc. for a Certificate of Need to add a total of 35 beds to Naples Community Hospital and North Collier Community Hospital should be approved based on peak seasonal demand for acute care beds in the relevant subdistrict.
PRELIMINARY STATEMENT
By Petition for Formal Administrative Proceeding filed on February 6, 1992 with the Department of Health and Rehabilitative Services ("DHRS") (now the Agency for Health Care Administration), Naples Community Hospital, Inc. challenged the DHRS denial of CON application No. 6797. The DHRS forwarded the petition to the Division of Administrative Hearings. Southwest Florida Regional Medical Center petitioned for and was granted leave to intervene in the case.
The case was subsequently transferred to the undersigned Hearing Officer.
Petitioner Naples Community Hospital, Inc., presented the testimony of eight witnesses and offered exhibits numbered 1-11 and 13 into evidence.
Respondent Agency for Health Care Administration presented the testimony of two witnesses and offered into evidence six exhibits. Intervenor Southwest Florida Regional Medical Center presented the testimony of four witnesses and offered into evidence exhibits numbered 1-32, 35, 37-40, and 43-47. All exhibits were admitted into evidence. One Hearing Officer's exhibit was also admitted.
A transcript of the hearing was filed on November 5, 1992. Upon joint motions, the deadline for filing proposed recommended orders was twice extended. The Petitioner filed a proposed recommended order and a memorandum of law directed to certain issues raised during the hearing. The Respondent and Intervenor filed a joint proposed order. All submissions were considered in the preparation of this Recommended Order. The proposed findings of fact contained therein are ruled upon either directly or indirectly as reflected in this Recommended Order, and in the Appendix which is attached and hereby made a part of this Recommended Order.
FINDINGS OF FACT
Naples Community Hospital, Inc., ("NCH") holds the license for and operates Naples Community Hospital ("Naples"), a 331 bed not-for-profit acute care hospital, and North Collier Community Hospital ("North Collier"), a 50 bed acute care hospital. NCH also operates a 22 bed comprehensive rehabilitation facility and a 23 bed psychiatric facility. NCH is owned by Community Health Care, Inc., "(CHC").
Both Naples and North Collier are located within Agency for Health Care Administration ("ACHA") district 8 and are the only hospitals within subdistrict
2 of the district. Naples is located in central Collier County. North Collier is (as the name implies) located in northern Collier County approximately 2-3 miles from the county line.
NCH's primary service area is Collier County from which approximately 85-90 percent of its patients come, with a secondary service area extending north into Lee County.
Neither Naples nor North Collier are teaching hospitals as defined by Section 407.002(27), Florida Statutes (1991).
NCH is not proposing a joint venture in this CON application.
NCH has a record of providing health care services to Medicaid patients and the medically indigent. NCH proposes to provide health care services to Medicaid patients and the medically indigent. Neither Naples nor North Collier are currently designated by the Office of Medicaid as disproportionate share providers.
NCH has the funds for capital and initial operating expenditures for the project. NCH has sufficient financial resources to construct and equip the proposed project. The costs and methods of the proposed construction are reasonable.
The Agency for Health Care Administration ("AHCA") is the state agency charged with responsibility for administering the Certificate of Need program.
Southwest Florida Regional Medical Center ("Southwest") is a 400 bed for-profit acute care hospital located in Fort Myers, Lee County. Lee County is adjacent to and north of Collier County.
Southwest is owned by Columbia Hospital Corporation ("Columbia"), which also owns Gulf Coast Hospital in Fort Myers, and two additional hospitals in AHCA District 8.
Southwest's primary service area is Lee County. Although Southwest asserts that it would be negatively impacted by the addition of acute care beds at NCH, the greater weight of the credible evidence fails to support the assertion.
The primary market services areas of NCH and Southwest are essentially distinct. However, the facilities are located in such proximity as to indicate that secondary service areas overlap and that, at least during peak winter season periods, approval of the NCH application could potentially impact Southwest's operations. Southwest has standing to participate in this proceeding.
Southwest offered evidence to establish that it would be substantially affected by approval of the NCH application. The NCH length-of-stay identified in the Southwest documents is inaccurate and under-reports actual length-of-stay statistics. The documentation also includes demographic information from a zip code (33912) which contributes an insignificant portion of NCH patients, and relies on only two years of data in support of the assertion that utilization in the NCH service area is declining.
Southwest's chief operating officer testified that he considers Gulf Coast Hospital, another Columbia-owned facility, to offer more competition to Southwest that does NCH.
Further, a physician must have admitting privileges at a hospital before she can admit patients to the facility. Of the physicians holding admitting privileges at Southwest, only two, both cardiologists, also have admitting privileges at NCH. Contrary to Southwest, NCH does not have an open heart surgery program. Accordingly, at least as to physician-admitted patients, approval of the NCH application would likely have little impact.
On August 26, 1991, NCH submitted to AHCA a letter of intent indicating that NCH would file a Certificate of Need ("CON") application in the September 26, 1991 batching cycle for the addition of 35 acute care beds to the Naples and North Collier facilities. The letter of intent did not specify how the additional beds would be divided between the two facilities.
The determination of the number of beds for which NCH would apply was solely based on the fact that the applicant had 35 observation beds which could be readily converted to acute care beds. The observation beds NCH proposes to
convert are equipped identically to the acute care beds at NCH and are currently staffed. The costs involved in such conversion are minimal and relatively insignificant.
Included with the letter of intent was a certified corporate resolution which states that on July 24, 1991, the NCH Board of Trustees authorized the filing of an application for the additional beds, authorized NCH to incur related expenses, stated that NCH would accomplish the proposed project within time and budget allowances set forth in the application, and that NCH would license and operate the facility.
By certification executed August 7, 1991, the NCH secretary certified that the resolution was enacted at the July 24, 1991 board meeting and that the resolution did not contravene the NCH articles of incorporation or bylaws.
Article X, Sections 10.1 and 10.1.3 of the NCH bylaws provides that no CON application shall be legally effective without the written approval of CHC.
On September 26, 1991, NCH filed an application for CON No. 6797 proposing to add 31 acute care beds to Naples and 4 acute care beds to North Collier. The CON application included a copy of the NCH board resolution and certification which had been previously submitted with the letter of intent as well as the appropriate filing fee. NCH published appropriate public notice of the application's filing.
As of the date of the CON application's filing, CHC had not issued written approval of the CON application prior to the action of the NCH Board of Directors and the filing of the letter of intent or the application.
On October 2, 1992, four days prior to the administrative hearing in this case, the board of CHC ratified the actions of NCH as to the application for CON at issue in this case.
The CHC board has previously ratified actions of the NCH in such fashion. There is uncontroverted testimony that the CHC board was aware of the NCH application and that no reservation was expressed by any CHC board member regarding the CON application.
Although NCH's filing of the CON application without appropriate authorization from its parent company appears to be in violation of the NCH bylaws, such does not violate the rules of the AHCA. There is no evidence that the AHCA requested written authorization from the CHC board.
After review of the application, the AHCA identified certain deficiencies in the application and notified NCH, which apparently rectified the deficiencies. The AHCA deemed the application complete on November 8, 1991.
As required by statute, NCH included a list of capital projects as part of the CON application. The list of capital projects attached to the application was incomplete.
The capital projects list failed to identify approximate expenditures of $370,000 to construct a patio enclosure, $750,000 to install an interim sprinkler system, $110,000 to construct emergency room triage space, and
$125,000 to complete electrical system renovations.
At hearing, witnesses for NCH attempted to clarify the omissions from the capital projects list. The witnesses claimed that such omitted projects were actually included within projects which were identified on the list.
When identifying the listed projects within which the omitted projects were supposedly included, the witnesses testified inconsistently. For example, one witness testified that the patio project was included in the emergency room expansion project listed in the application. Another witness claimed that the patio enclosure was included in an equipment purchase category.
Based on the testimony, it is more likely that the patio enclosure was neither a part of an emergency room expansion nor equipment purchase, but was a separate construction project which was omitted from the CON application.
Similarly inconsistent explanations were offered for the other projects which were omitted from the capital projects list. The testimony was not credible.
The capital projects omitted from the list do not affect the ability of NCH to implement the CON sought in this proceeding. The parties stipulated to the fact the NCH has sufficient financial resources to construct and equip the proposed project.
As part of the CON application, NCH was required to submit a pro forma income statement for the time period during which the bed additions would take place. The application failed to include a pro forma statement for the appropriate time period.
Based on the stipulation of the parties that the costs and methods of the proposed construction are reasonable, and that NCH has adequate resources to fund the project, the failure to include the relevant pro forma is immaterial.
Pursuant to applicable methodology, the AHCA calculates numeric acute care bed need projections for each subdistrict's specific planning period. Accordingly, the AHCA calculated the need for additional acute care beds in district 8, subdistrict 2 for the July, 1996 planning horizon. The results of the calculation are published by the agency.
The unchallenged, published fixed need pool for the planning horizon at issue in this proceeding indicated that there was no numeric need for additional acute care beds in district 8, subdistrict 2, Collier County, Florida, pursuant to the numeric need methodology under Rule 59C-1.038 Florida Administrative Code.
The CON application filed by NCH is based on the peak seasonal demand experienced by hospitals in the area during the winter months, due to part-time residents. NCH asserts that the utilization of acute care beds during the winter months (January through April) results in occupancy levels in excess of
75 percent and justifies the addition of acute care beds, notwithstanding the numerical need determination. Approval of the CON application is not justified by the facts in this case.
The AHCA's acute care bed need methodology accounts for high seasonal demand in certain subdistricts in a manner which provides that facilities have bed space adequate to accommodate peak demand. The calculation which requires that the average annual occupancy level exceed 75 percent reflects AHCA consideration of occupancy levels which rise and fall with seasonal population
shifts. The applicant has not challenged the methodology employed by the AHCA in projecting need.
Peak seasonal acute care bed demand may justify approval of a CON application seeking additional beds if the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand experienced by NCH has not adversely affected patient care and there is insufficient evidence to establish that, at this time, such peak demand poses a credible threat of potential negative impact on patient outcomes in the foreseeable future.
There is no dispute regarding the existing quality of care at Naples, North Collier, Southwest or any other acute care hospital in district 8. The parties stipulated that NCH has the ability to provide quality of care and a record of providing quality of care.
In this case, the applicant is seeking to convert existing beds from a classification of "observation" to "acute care". The observation beds NCH proposes to convert are equipped identically to the acute care beds at NCH. Approval of the CON application would result in no net increase in the number of licensed beds.
NCH offered anecdotal evidence suggesting that delays in transferring patients from the Naples emergency room to acute care beds (a "logjam") was caused by peak seasonal occupancy rates. There was no evidence offered as to the situation at the North Collier emergency room.
The anecdotal evidence is insufficient to establish that "logjams" (if they occur at all) are related to an inadequate number of beds identified as "acute care" at NCH facilities. There are other factors which can result in delays in moving patients from emergency rooms to acute care beds, including facility discharge patterns, delays in obtaining medical test results and staffing practices.
NCH asserted at hearing that physicians who refer patients to NCH facilities will not refer such patients to other facilities. The evidence fails to establish that such physician practice is reasonable or provides justification for approval of CON applications under "not normal" circumstances and further fails to establish that conditions at NCH are such as to result in physicians attempting to locate other facilities in which to admit patients.
The rule governing approval of acute care beds provides that, prior to such approval, the annual occupancy rate for acute care beds in the subdistrict or for the specific provider, must exceed 75 percent. This requirement has not been met.
Applicable statutes require that, in considering applications for CON's, the AHCA consider accessibility of existing providers. The AHCA- established standard provides that acute care bed accessibility requirements are met when at least 90 percent of the residents in an urban subdistrict are within a 30 minute automobile trip to such facilities. At least 90 percent of Naples residents are presently within a 30 minute travel time to NCH acute care beds.
The number of acute care beds in the subdistrict substantially exceed the demand for such beds. Additional beds would result in inefficient utilization of existing beds, would further increase the current oversupply of beds, would delay the time at which need for additional beds may be determined
and, as such, would prevent competing facilities from applying for and receiving approval for such beds.
The financial feasibility projections set forth in the CON application rely on assumptions as to need and utilization projections which are not supported by the greater weight of the evidence and are not credited. Accordingly, the evidence fails to establish that the addition of 35 acute care beds to NCH facilities is financially feasible in the long term or that the income projections set forth in the CON application are reasonable.
As to projections related to staffing requirements and costs, the beds are existing and are currently staffed on a daily, shift-by-shift basis, based on patient census and acuity of illness. There is reason to believe that the staffing patterns will remain fairly constant and accordingly the projections, based on historical data, are reasonable.
Generally stated, where there is no numeric or "not normal" need for the proposed addition of 35 acute care beds in the relevant subdistrict, it could be predicted that the addition of acute care beds would exacerbate the oversupply of available beds and could cause a slight reduction in the occupancy levels experienced by other providers. In this case, the market service areas are sufficiently distinct as to suggest that such would not necessarily be the result. However, based on the lack of need justifying approval of the CON application under any existing circumstances, it is unnecessary to address in detail the impact on existing providers.
The state and district health plans identify a number of preferences which should be considered in determining whether a CON application should be approved. The plans suggest that such preferences are to be considered when competing CON applications are reviewed. In this case there is no competing application and the applicability of the preferences is unclear. However, in any event, application of the preferences to this proposal fail to support approval of the application.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. Section 120.57(1), Florida Statutes.
The statutory review criteria which govern this proceeding were previously found in Chapter 381, Florida Statutes, but have been transferred and renumbered without substantive change to Chapter 408. However, the new section numbers are not yet codified in the Florida Statutes, accordingly, the review criteria will be identified by the previous section numbers. Likewise, the relevant rule criteria were formerly found in Rule 10-5.038, Florida Administrative Code, but have been transferred to Rule 59C-1.038 without material change. Because Rule 10-5.038 is no longer codified in the Florida Administrative Code, references to the rule are set forth by the new number.
Naples Community Hospital, Inc., has the burden to demonstrate that it is entitled to the certificate of need. Florida Department of Transportation v.
J.W.C. Co., 396 So.2d 778 (Fla. 1st DCA 1981), Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services, 475 So.2d 260 (Fla. 1st DCA 1985). A balanced consideration of applicable statutory and rule criteria must be made. Humana, Inc. v. Department of Health and Rehabilitative Services, 469 So.2d 889 (Fla. 1st DCA 1985). Such consideration requires that
varying weight be accorded each criterion depending on the facts of each case. Collier Medical Center, Inc. v. Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA 1985). Based upon consideration of the applicable criteria as related to the facts of the case, the applicant has not met the burden of establishing that it is entitled to award of the CON.
Rule 59C-1.038, Florida Administrative Code, sets forth the rule methodology related to numerical computation of acute care bed need. The rule provides for allocation of district need by subdistricts. After the mathematical calculation is completed for the district, a subdistrict bed allocation adjustment is made. Based on the rule provisions, applications for acute care beds will "not normally" be approved for a subdistrict unless the average occupancy rate for all existing acute care hospital beds in that subdistrict is at or exceeds 75 percent. An exception exists for an existing hospital which permits approval of additional acute care beds where a facility's occupancy rate exceeds 75 percent.
In this case the unchallenged numeric need for additional acute care beds during the planning horizon is zero. The application filed in this case seeks approval of acute care beds based on "not normal" circumstances related to peak seasonal demand for services.
Seasonal demand is accounted for by the use of an annual average occupancy rate in computing acute care bed need and is not sufficient, without extraordinary conditions not present in this case, to justify approval of an application. Approval of such applications may be appropriate where the lack of available beds poses a credible threat of potentially negative impact on patient outcomes. The peak seasonal demand currently experienced by NCH does not pose a credible threat of potential negative impact on patient outcomes or will not likely do so in the reasonably foreseeable future.
Section 381.705(1), Florida Statutes, identifies the specific review criteria which the AHCA considers in CON application determinations. A review of the criteria indicates that, on balance, the application should be denied.
Section 381.705(1)(a), Florida Statutes, requires consideration of the need for the health care facilities and services and hospices being proposed in relation to the applicable district plan and state health plan, except in emergency circumstances which pose a threat to the public health. As to the provision of care to disadvantaged persons, while NCH has a history of providing such care and will continue to do so in the future, the addition of unneeded acute care beds will not be of positive impact. As to the remaining District and State plan objectives, the project does not meet the goals expressed in the plans.
Section 381.705(1)(b), Florida Statutes, requires consideration of the availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant. Approval of the NCH application would not positively impact quality of care, efficiency of care, appropriateness or utilization of facilities. While it may be suggested that additional beds will always increase availability of care, such fails to account for the impact of additional beds in a situation where, for the great majority of each year, facility occupancy levels are indicative of excess capacity. Further, based on the AHCA determination of accessibility, existing health care services are accessible.
Section 381.705(1)(c), Florida Statutes, requires consideration of the ability of the applicant to provide quality of care and the applicant's record of providing quality of care. This criterion is met by NCH but is not sufficient to justify approval of this CON application for additional acute care beds.
Section 381.705(1)(d), Florida Statutes, requires consideration of the availability and adequacy of other health care facilities and services and hospices in the service district of the applicant, such as outpatient care and ambulatory or home care services, which may serve as alternatives for the health care facilities and services to be provided by the applicant. No need has been established which would result in approval of this application because existing services are available and adequate.
Section 381.705(1)(e), Florida Statutes, requires consideration of probable economies and improvements in service that may be derived from operation of joint, cooperative, or shared health care resources. Because this proposal does not involve joint, cooperative, or shared health care resources, there are no probable economies or service improvements anticipated.
Section 381.705(1)(f), Florida Statutes, requires consideration of the need in the service district of the applicant for special equipment and services which are not reasonably and economically accessible in adjoining areas. This application does not provide for special equipment or services not already available in the service area.
Section 381.705(1)(g), Florida Statutes, requires consideration of the need for research and educational facilities, including, but not limited to, institutional training programs and community training programs for health care practitioners and for doctors of osteopathy and medicine at the student, internship, and residency training levels. This application does not satisfy this criterion.
Section 381.705(1)(h), Florida Statutes, requires consideration of the availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district.
Based on the evidence and the stipulation, NCH has the fiscal and staff resources for project accomplishment and operation. The proposed services will likely be accessible to all residents of the service district. The fact that NCH has the resources and that the beds would likely be available to residents is insufficient, without demonstrated need, to justify approval of the application. The project will not effect clinical needs of health professional schools or training programs in the service district.
Section 381.705(1)(i), Florida Statutes, requires consideration of the immediate and long-term financial feasibility of the proposal. The financial feasibility of the project is a reflection of need, absent which, feasibility is doubtful. In this case, there is no need, and approval of the application would exacerbate the existing excess bed capacity.
Section 381.705(1)(j), Florida Statutes, requires consideration of the special needs and circumstances of health maintenance organizations. This is inapplicable to this proceeding.
Section 381.705(1)(k), Florida Statutes, requires consideration of the needs and circumstances of those entities which provide a substantial portion of their services or resources, or both, to individuals not residing in the service district in which the entities are located or in adjacent service districts. Such entities may include medical and other health professions, schools, multidisciplinary clinics, and specialty services such as open-heart surgery, radiation therapy, and renal transplantation. This application does not address this criterion.
Section 381.705(1)(l), Florida Statutes, requires consideration of the probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness.
Adding beds to an already excessive inventory could delay the point at which occupancy levels would support a determination of numerical need, which in turn would preclude competing facilities from seeking approval of the needed additional beds. Otherwise stated, approval of this application will not increase competition, but would likely decrease competition. Additionally, the cost of carrying underutilized beds fails to promote cost-effectiveness.
Section 381.705(1)(m), Florida Statutes, requires consideration of the costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction. The construction costs involved in this proposal are minimal, however, such does not support approval of the application.
Section 381.705(1)(n), Florida Statutes, requires consideration of the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Although NCH is not a Medicaid disproportionate share provider, it does have a record of providing care to cited populations. Approval of this application will not substantially impact provision of such care. Even if this criterion were satisfied, it is not a sufficient basis to justify approving this application.
Attention has been directed to the corporate resolution filed by NCH as part of the letter of intent and application filed in this case. Sections 381.707(4) and 381.709(2), Florida Statutes, require that, included with a letter of intent and an application, must be a certified copy of a resolution by the board of directors of the applicant, or other governing authority if not a corporation, authorizing the filing of the application, authorizing the applicant to incur the expenditures necessary to accomplish the proposed project, certifying that the applicant will accomplish the proposed project within the time allowed by law and at or below the costs stated if the certificate is issued, and certifying that the applicant shall license and operate the facility.
In this case, this requirement was met by the applicant. The failure of the corporate parent to have issued written approval of the NCH CON application in apparent violation of NCH bylaws, does not negate the applicant's compliance with this section. Nothing in the bylaws requires that such written approval be issued prior to the filing of the application. In any event, the subsequent ratification by the CHC board cured the defect. While there may be other legal issues raised by the apparent violation of bylaws, such are outside the jurisdiction of the Hearing Officer in this proceeding.
Attention was also directed to the NCH identification of capital projects and expenditures related to the financial statement included in the application. Section 381.707(2), Florida Statutes, requires as part of an application for a CON submission of a "statement of the financial resources needed by and available to the applicant to accomplish the proposed project." The cited section further provides that the statement shall include:
A complete listing of all capital projects,... applied for, pending, approved, or underway in any state at the time of application....This listing shall include the applicant's actual or proposed financial commitment to those projects and an assessment of their impact on the applicant's ability to provide the proposed project.
A detailed listing of the needed capital expenditures, including sources of funds.
A detailed financial projection, including a statement of the projected revenue and expenses for the period of construction and for the first 2 years of operation after completion of the proposed project. This statement shall include a detailed evaluation of the impact of the proposed project on the cost of other services provided by the applicant.
As to the required listing of capital projects and expenditures, NCH's application failed to include a complete listing of capital projects and expenditures underway at the time the letter of intent and application were filed. However, prior to the hearing, the parties stipulated that NCH had the fiscal resources to complete the project, which has minimal costs. Accordingly, as to the issue of whether NCH is financially capable of completing the proposed project, the failure to clearly identify all such projects is immaterial.
As to the required detailed financial revenue and expense projection for the period of construction and for the first 2 years of operation after completion of the proposed project, the documentation included in the application is not persuasive. The revenue projections rely on assumed need for the project. Because no need has been established for the project, the revenue projections are not reliable and this requirement has not been met.
RECOMMENDED that a Final Order be entered DENYING the application of Naples Community Hospital, Inc., for Certificate of Need 6797.
DONE and RECOMMENDED this 19th day of March, 1993 in Tallahassee, Florida.
WILLIAM F. QUATTLEBAUM
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 19th day of March, 1993.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-1510
To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties.
Petitioner
The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:
3-4, 6-8, 16-20, 29-36, 38, 41, 44, 47, 49-61, 80, 88, 95-96, 100, 104, 108,
117-119, 122-125, 127, 134-138. Rejected as unnecessary.
15. Rejected as irrelevant. Peak seasonal demand is accounted for by the numeric need determination methodology. There is no credible evidence which supports a calculation of three years of four month winter occupancy to reach a
12 month average occupancy rate.
21-27, 37, 42-43, 62-64, 66, 97, 99, 101-103, 105-107, 109, 120-121, 126.
Rejected as not supported by the greater weight of credible and persuasive evidence.
28. Rejected as not supported by the greater weight of credible and persuasive evidence and contrary to the stipulation filed by the parties.
Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the transfer of patients from emergency room to acute care beds is delayed due to numerical availability of beds.
Rejected as not supported by greater weight of credible and persuasive evidence which fails to establish that the alleged lack of acute care beds is based on insufficient number of total beds as opposed to other factors which affect bed availability.
Rejected as immaterial and contrary to the greater weight of the evidence
Rejected as immaterial and contrary to the greater weight of the evidence which fails to establish reasonableness of considering only a four month period
under "not normal" circumstances where the period and the peak seasonal demand are included within the averages utilized to project bed need.
86. Rejected as cumulative.
114. Rejected as unsupported hearsay.
Respondent/Intervenor
The Respondent and Intervenor filed a joint proposed recommended order. The proposed order's findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:
6, 45, 51, 53, 59-67, 69-70, 94-113. Rejected as unnecessary.
16. Rejected as to use of term "false", conclusion of law.
58. Rejected as not clearly supported by credible evidence.
71-93, 114-124. Rejected as cumulative.
COPIES FURNISHED:
Douglas M. Cook, Director
Agency for Health Care Administration 2727 Mahan Drive
Tallahassee, Florida 32308
Sam Power, Agency Clerk
Agency for Health Care Administration The Atrium, Suite 301
325 John Knox Road Tallahassee, Florida 32303
Harold D. Lewis, Esquire
Agency for Health Care Administration The Atrium, Suite 301
325 John Knox Road Tallahassee, Florida 32303
W. David Watkins, Esquire
Oertel, Hoffman, Fernandez, & Cole Post Office Box 6507
Tallahassee, Florida 32314-6507
Edward G. Labrador, Esquire Thomas Cooper, Esquire
Agency for Health Care Administration 2727 Mahan Drive
Tallahassee, Florida 32308
John D.C. Newton, II, Esquire
Aurell, Radey, Hinkle, Thomas & Beranek Monroe Park Tower, Suite 1000
101 North Monroe Street Post Office Drawer 11307 Tallahassee, Florida 32302
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 ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the Final Order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
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AGENCY FINAL ORDER
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STATE OF FLORIDA
AGENCY FOR HEALTH CARE ADMINISTRATION
NAPLES COMMUNITY HOSPITAL,
Petitioner,
CASE NO.: 92-1510
vs. CON NO.: 6797
RENDITION NO.: AHCA-93-71-FOF-CON
STATE OF FLORIDA, AGENCY FOR HEALTH CARE ADMINISTRATION,
Respondent,
and
SOUTHWEST FLORIDA REGIONAL MEDICAL CENTER, INC.,
Intervenor.
/
FINAL ORDER
This cause came on before me for the purpose of issuing a final agency order. The Hearing Officer assigned by the Division of Administrative Hearings (DOAH) in the above-styled case submitted a Recommended Order to the Agency for Health Care Administration (AHCA). The Recommended Order entered March 19, 1993, by Hearing Officer William F. Quattlebaum is incorporated by reference.
RULING ON EXCEPTIONS FILED BY AHCA AND SOUTHWEST FLORIDA REGIONAL MEDICAL CENTER INC. (SOUTHWEST)
As to finding of fact one, counsel for AHCA requests that the word unit be substituted for facility on the grounds that facility implies that rehabilitation and psychiatric care is provided in free standing facilities, not units within the hospital. The request is granted.
AHCA and Southwest except to finding of fact 24. The finding is supported by competent, substantial evidence; therefore, the exception is denied.
AHCA and Southwest except to paragraphs 25, 76, and 77 wherein the Hearing Officer concluded that the corporate resolution of Naples Community Hospital, Inc. (NCH) complied with Sections 381.707(4) and 381.709(2), Florida Statutes (1991), and the applicable rule. In summary, the Hearing Officer found the resolution to be satisfactory because its content conformed to the statute even though the resolution was defective because it failed to comply with NCH's corporate bylaws which required approval of NCH's corporate parent.
I disagree with the Hearing Officer. Merely reciting the required statutory language is not sufficient. The resolution's content must be consistent with the facts. Brookwood-Jackson County Convalescent Center vs. HRS, 591 So2d 1085 (Fla. 1st DCA 1992)(resolutions rejected because certifications that applicants would license and operate the facilities proved to be untrue). An invalid resolution is necessarily inconsistent with the statute because it is not what it purports to be. University Community Hospital, Inc. vs. HRS, 13 FALR 2362, 2375 (Final Order May 30, 1991)(rejecting resolution that tracked exactly the statutory language because resolution was not adopted on the date certified).
Humhosco Inc. vs. HRS, 561 So2d 388, 391 (Fla. 1st DCA 1990), characterized as "self-evident" the "importance of action by the board of directors of the applicant formally authorizing the filing of a CON application." What is "self- evident" is that CON applicants, through the resolution and certification requirements, must make an actual commitment to a project before applying for a CON. To confirm this commitment, the agency by rule requires each applicant's certification to contain a statement that its resolution is "still in full force" and does not "in any manner contravene" its articles of incorporation or bylaws. Rule 59C-1.008(1)(e)(2), F.A.C.
NCH's resolution purporting to commit NCH to implement its proposal was not approved by the corporate parent at the time the application was submitted for review. NCH certified that its resolution was consistent with its bylaws, but that certification is obviously incorrect given the Hearing Officer's findings. NCH's invalid resolution fails to satisfy the requirements of the CON law.
Sections 381.707(4), 381.709(2), Florida Statutes (1991); Section 59C- 1.008(1)(e)(2), F.A.C. The Hearing Officer's conclusion to the contrary must be rejected.
The Hearing Officer's findings in paragraph 33 and 79 are not challenged as being factually incorrect, (AHCA exception 4 and Southwest exception 3), but as irrelevant to the issue of whether NCH's application complied with the requirement for a complete list of capital projects. See Section 381.707, Florida Statutes (1991). The Hearing Officer's finding in paragraph 28 that the list was incomplete is accepted. There is no claim that the parties opposing approval of the application were precluded from fully
addressing whether NCH substantially complied with the capital projects requirement. The parties' stipulation regarding NCH's financial resources is relevant; thus, the exception is denied.
The Hearing Officer's conclusion that NCH's failure to include the "period of construction" in its pro forma is harmless error is challenged in AHCA exception 5 and Southwest exception 3. The Hearing Officer based his conclusion on the parties' stipulations that the projected costs are reasonable and that NCH has the resources to fund the project. Also relevant is that NCH seeks to convert 35 observation beds to the 35 acute care beds. The Hearing Officer found that the observation beds are equipped identically to acute care beds at NCH and are currently staffed. The cost of conversion is minimal. See Finding of Fact 17. I concur with the Hearing Officer that the error is harmless. The exception is denied.
Counsel for AHCA excepts to the Hearing Officer's legal conclusion in paragraph 42 that conversion of the observation beds to acute care beds would not result in an increase in the number of licensed beds. The Hearing Officer's conclusion is rejected. If the project were approved and carried out 35 acute care beds would be licensed that are not currently licensed.
Counsel for AHCA excepts to the Hearing Officer's comment in paragraph
52 that the applicability of the preferences in the state and local plans is unclear because there were no applications competing for acute care beds in the batching cycle. The exception is granted. All applications are reviewed for consistency with the state and local plans.
The Hearing Officer's conclusion that the lack of a valid corporate resolution committing the applicant to the proposed project could be cured four days before the final hearing is challenged (AHCA exception 8, Southwest exception 2). The resolution requirement is necessarily temporal and must be met in advance of Letter of Intent and application filing. CON law requires an applicant's commitment at the front-end of the CON process. An applicant cannot retroactively cure an invalid resolution, via ratification or otherwise, after the filing deadline has passed.
In Humhosco Inc. vs. HRS, 561 So2d 388 (Fla. 1st DCA 1990), a defective resolution was attached to the Letter of Intent. A corrected resolution was later filed with the application. The court held that the subsequent submission of a conforming resolution did not cure the defect in the initial resolution.
In University Community Hospital, Inc. vs. HRS, 13 FALR 2362 (HRS, 1991), UCH, certified that its resolutions were enacted on January 12, 1990. In fact, no resolution was adopted on that date. UCH had tries to "ratify and confirm" its "prior approval" after its application was filed, but the agency concluded that the retroactive project approval was untimely under the statute.
The Hearing Officer's conclusion that the NCH's invalid resolution could be cured four days before the final hearing is rejected.
Counsel challenges the Hearing Officer's conclusion in paragraph 79 that the failure to identify certain projects in its application was immaterial because of the parties' stipulation that NCH is capable of completing the project. The exception is denied. See the Ruling On Exception 4.
RULING ON EXCEPTIONS FILED BY NAPLES COMMUNITY HOSPITAL, INC., (NCH)
NCH excepts in whole or in part to Findings of Fact 27, 28, 30-32, 34, 38,
40, 43-45, 48, 49, and 52. The findings are supported by competent, substantial evidence; therefore, the exceptions are denied. NCH also excepts to the same Findings of Fact which were restated in the Conclusions of Law section of the Recommended Order. The exceptions to the Conclusions of Law are denied.
FINDINGS OF FACT
The agency hereby adopts and incorporates by reference the Findings of Fact set forth in the Recommended Order. Certain legal conclusions placed under "Findings of Fact" have been modified in the Ruling On Exceptions.
CONCLUSIONS OF LAW
The agency hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order except where inconsistent with the Ruling On Exceptions.
NCH seeks approval of its proposal to convert 35 observation beds to acute care beds at its two facilities in Collier County.
The applicable need formula for hospital, acute care beds is found in Section 59C-1.038, F.A.C. 1/ All parties stipulated to the lack of numeric need in the appropriate subdistrict; thus, the rule mandates denial unless there are sufficient "not normal" circumstances. 2/ The need formula generates a numerical prediction of beds needed for the planning area five years into the future. The need formula is a mathematical calculation utilizing specified statistical data. Because no statistics based formula can account for all possible contingencies, subsection 7(e) of Section 59C-1.038, F.A.C. gives the agency authority to approve additional beds despite a lack of formula or numeric need if an applicant can prove sufficient "not normal" circumstances.
Not normal circumstances are not susceptible to rule definition, because they fall outside the range of the accepted statistical predictors. As noted by the Hearing Officer in paragraphs 40 and 58 "not normal" circumstances may exist if high seasonal demand causes a shortage of beds which "poses a credible threat of potentially negative impact on patient outcomes". Adoption of the Hearing Officer's conclusion does not suggest that such circumstances are the only way "not normal" circumstances can be established.
Subsection (7)(e) of the rule addresses the issue of "not normal" circumstances. A requirement under (7)(e) is that the applicant-hospital must have an average annual occupancy exceeding seventy-five percent (75 percent). NCH did not meet this requirement. See paragraph 46 of the Recommended Order.
I conclude that NCH has not demonstrated the existence of "not normal" circumstances which would justify approval of its proposal.
Based upon the foregoing, it is
ADJUDGED, that the application of Naples Community Hospital, Inc. for CON 6797 be DENIED.
DONE and ORDERED this 6th day of June, 1993, in Tallahassee, Florida.
Douglas M. Cook, Director
Agency for Health Care Administration
ENDNOTES
1/ In certificate of need law, a great deal of importance is attached to a calculation of need or lack thereof under a rule formula. A lack of numeric need under the rule formula establishes a rebuttable presumption of no need. Humhosco vs. Department of Health and Rehabilitative Services, 476 So2d 258, 261 (Fla. 1st DCA 1985).
2/ When there is no numeric need under the rule formula, a CON application may nevertheless be approved if there are "not normal" circumstances justifying approval. The decision on whether to approve on the basis of "not normal" circumstances is a conclusion of law and thus a matter of agency discretion so long as the decision is based on competent, substantial evidence. Humana vs.
Department of Health and Rehabilitative Services, 492 So2d 388, 392 (Fla. 4th DCA 1986); Federal Property Management vs. Department of Health and Rehabilitative Services, 382 So2d 475, 477 (Fla. 1st DCA 1985).
COPIES FURNISHED:
W. David Watkins, Esquire OERTEL, HOFFMAN, FERNANDEZ
& COLE
Post Office Box 6507 Tallahassee, Florida 32314-6507
Edward Labrador, Esquire Senior Attorney
325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131
John D. C. Newton, II, Esquire AURELL, RADEY, HINKLE,
THOMAS & BERANEK
Monroe-Park Tower, Suite 1000
101 North Monroe Street Tallahassee, Florida 32302
William F. Quattlebaum Hearing Officer
The DeSoto Building 1230 Apalachee Parkway
Tallahassee, Florida 32399-1550
Liz Dudek (AHCA/CON) Elfle Stamm (AHCA/CON)
Alberta Granger (AHCA/CON) AHCA Legal
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing has been furnished to the above named people by U.S. Mail this 7th day of 1993.
R. S. Power, Agency Clerk State of Florida, Agency for Health Care Administration
325 John Knox Road
The Atrium Building, Suite 301 Tallahassee, Florida 32303
(904)922-3808
NOTICE OF RIGHT TO JUDICIAL REVIEW
A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.
| Issue Date | Proceedings |
|---|---|
| Jun. 08, 1993 | Final Order filed. |
| Mar. 19, 1993 | Recommended Order sent out. CASE CLOSED. Hearing held 10/6-9/92. |
| Jan. 08, 1993 | Naples Community Hospital, Inc.`s Proposed Recommended Order; Petitioner`s Memorandum of Law filed. |
| Jan. 08, 1993 | The Joint Proposed Recommended Order of The Agency and Southwest filed. |
| Dec. 22, 1992 | Notice of Appearance and Substitution of Counsel (Labrador) filed. |
| Dec. 11, 1992 | Unopposed Motion for Extension of Time filed. |
| Nov. 19, 1992 | (Intervenor) Agreed to Motion to Extend Deadline filed. |
| Nov. 12, 1992 | Letter to WFQ from John D.C. Newton, II (re: filing PRO) filed. |
| Nov. 10, 1992 | Letter to WFQ from John D. C. Newton, II (re: typographical error that contained in Mr. Newton`s ltr of November 9, 1992) filed. |
| Nov. 05, 1992 | Final Hearing Transcript (Volumes 1 - 8) filed. |
| Oct. 09, 1992 | CASE STATUS: Hearing Held. |
| Oct. 05, 1992 | (Intervenor) Notice to Produce filed. |
| Oct. 05, 1992 | Motion of Non-Party for Protective Order w/attached Subpoena filed. (From W. David Watkins) |
| Oct. 05, 1992 | (Petitioner) Motion for Protective Order filed. |
| Oct. 02, 1992 | (Petitioner) Response to Motion for Summary Recommended Order w/Exhibit-A filed. |
| Oct. 02, 1992 | (Intervenor) Notice to Produce filed. |
| Oct. 02, 1992 | Joint Prehearing Stipulation filed. |
| Oct. 01, 1992 | Southwest Florida's Motion to Compel Naples w/Exhibits A&B filed. |
| Sep. 30, 1992 | (Intervenor) Agreed to Motion to Revise Prehearing Schedule filed. |
| Sep. 29, 1992 | Subpoena Ad Testificandum filed. (From W. David Watkins) |
| Sep. 29, 1992 | Southwest Florida's Notice of Taking Depositions filed. |
| Sep. 28, 1992 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Sep. 28, 1992 | Southwest Florida's Motion for Summary Recommended Order filed. |
| Sep. 28, 1992 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Sep. 25, 1992 | Letter to John D.C. Newton, II from W. David Watkins (re: agreement reached on pending Motion to Compel) filed. |
| Sep. 23, 1992 | Southwest Florida's Notice of Taking Deposition filed. |
| Sep. 23, 1992 | (Intervenor) Notice of Filing and Service of Exhibits to Southwest Florida`s Motion to Compel Naples w/Exhibits A&B filed. |
| Sep. 18, 1992 | (Intervenor) Agreed to Motion to Revise Prehearing Schedule; Southwest Florida's Motion to Compel Naples; Notice of Taking Corporate Deposition filed. |
| Sep. 16, 1992 | (Petitioner) Notice of Taking Deposition Duces Tecum filed. |
| Sep. 09, 1992 | Southwest Florida Regional Medical Center, Inc.'s Objections to Interrogatories of Naples Community Hospital, Inc. filed. |
| Sep. 09, 1992 | Southwest Florida Regional Medical Center's Response to Naples Community Hospital, Inc.'s First Request for Production of Documents filed. |
| Sep. 09, 1992 | (SW Fl Regional Medical Center) Motion for Protective Order filed. |
| Sep. 04, 1992 | Notice of Service of Naples Community Hospital, Inc.`s Response to Southwest Florida Regional Medical Center, Inc.`s First Set of Interrogatories filed. |
| Sep. 01, 1992 | (Intervenor) Notice of Position of Naples Community Hospital Re Extension of Time filed. |
| Aug. 31, 1992 | (Intervenor) Motion to Extend the Time During Which to Respond to Request for Production of Documents and Interrogatories; Response of Southwest Florida Regional Medical Center to Naples' First Request for Admissions; Request for Oral Argument filed. |
| Aug. 06, 1992 | Response of Naples Community Hospital to Southwest Florida's First Request to Produce filed. |
| Aug. 05, 1992 | Notice of Service of Southwest Florida`s First Set of Interrogatories to Naples filed. |
| Jul. 31, 1992 | Notice of Service of Petitioner, Naples Community Hospital, Inc.`s First Request for Admissions, Request for Production of Documents, and Interrogatories to Intervenor, Southwest Florida Regional Medical Center, Inc. filed. |
| Jul. 06, 1992 | Southwest Florida's First Request to Produce to Naples filed. |
| Jun. 22, 1992 | Letter to WFQ from John D. C. Newton, II (re: reopening discovery) filed. |
| Jun. 19, 1992 | Order Granting Motion to Amend Prehearing Schedule sent out. |
| Jun. 18, 1992 | Motion of Southwest Florida Regional Medical Center, Inc. to Amend Pretrial Schedule filed. |
| Jun. 16, 1992 | Second Notice of Hearing sent out. (hearing set for 10/6-9/92; at 9:30am; in Tallahassee. |
| Jun. 15, 1992 | Order Granting Continuance sent out. (hearing date to be rescheduled as provided on the forthcoming notice of hearing) |
| Jun. 12, 1992 | (Petitioner) Unopposed Motion for Continuance filed. |
| May 20, 1992 | Order Establishing Prehearing Procedure sent out. |
| May 20, 1992 | Notice of Hearing sent out. (hearing set for July 7-10, 1992; 9:00am; Tallahassee) |
| Apr. 14, 1992 | Order Granting Intervention sent out. (petition to intervene in caseno. 92-1510 granted; petition to intervened in case no. 92-1511 is denied, as moot) |
| Mar. 25, 1992 | (Naples Community Hospital, Inc.,) Response to Order of Consolidation and Prehearing Order filed. |
| Mar. 16, 1992 | Southwest Florida Regional Medical Center's Petition to Intervene in Case No. 91-1511 (Lee Memorial) filed. |
| Mar. 16, 1992 | Southwest Florida Regional Medical Center's Petition to Intervene in Case No. 92-1510 (Naples) filed. |
| Mar. 10, 1992 | Order of Consolidation and Prehearing Order sent out. (Consolidated cases are: 92-1510 & 92-1511) |
| Mar. 09, 1992 | Notification card sent out. |
| Mar. 04, 1992 | Notice; Petition for Formal Administrative Proceeding filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 06, 1993 | Agency Final Order | |
| Mar. 19, 1993 | Recommended Order | Peak seasonal demand is insufficient to support approval of Certificate Of Need application unless potential for negative impact on patient outcome exists. |
