STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LAKELAND REGIONAL MEDICAL ) CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 92-3645RP

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

and )

) WINTER HAVEN HOSPITAL, INC., )

)

Intervenor. )

)

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 July 20, 1992, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Robert A. Weiss, Esquire

John M. Knight, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House, Suite 200

118 N. Gadsden Street Tallahassee, FL

For Respondent: Richard A. Patterson, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 103

Tallahassee, FL 32308

For Intervenor: Kenneth F. Hoffman, Esquire

Patricia Renovitch, Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

2700 Blairstone Road Post Office Box 6507 Tallahassee, FL 32314

STATEMENT OF THE ISSUE

The issue for resolution is whether proposed amendments to Rule 10- 5.042(14)(a) and (f), F.A.C. constitute an invalid exercise of delegated legislative authority, as asserted by petitioner.

PRELIMINARY STATEMENT

On May 29, 1992, the Department of Health and Rehabilitative Services (HRS, predecessor to respondent agency, published notice of the proposed amendments to Rule 10-5.042, F.A.C., in Volume 18, No. 22, Florida Administrative Weekly. A challenge to the proposed amendments was filed by Lakeland Regional Medical Center, Inc. Winter Haven Hospital, Inc. (Winter Haven) filed a petition to intervene which was granted without objection.

At final hearing, the only witness was Elfie Stamm. Lakeland Exhibit Nos.

1, 2, and 3, and DHRS Exhibit No. 1 were received in evidence. Official recognition was taken of the Hearing Officer's Recommended Order and DHRS' Final Order in Lakeland Regional Medical Center, Inc. v. Department of Health and Rehabilitative Services, 13 FALR 4533, and Rule 10-5.042, F.A.C. Petitioner's motion to amend its petition was granted over objection.

A transcript was filed and after an extension of deadline the parties' proposed final orders were filed on August 31, 1992. The findings of fact proposed by respondent and intervenor are substantially adopted here.

Petitioner's proposed findings are addressed in the attached appendix.

FINDINGS OF FACT

1. In 1987, the department began to develop a rule to govern certificates of need ("CON") for Level II and Level III neonatal intensive care services in hospitals (hereinafter referred to as "NICU"). That process ultimately led to the department's publication of Proposed Rule 10-5.011(1)(v), F.A.C. (now renumbered as Rule 10-5.042, F.A.C.) on November 3, 1989. (Joint Prehearing Stip., p.4).

   
   

2. All pertinent provisions of the NICU Rule were upheld in a final order issued by DOAH in June, 1990, and affirmed by the District Court of Appeal, First District, in St. Mary's Hospital, Inc. v. Department of Health and Rehabilitative Services, 12 FALR 2727 (DOAH, June 12, 1990, aff'd, Baptist Hospital v. Department of Health and Rehabilitative Services, 578 So.2d 1004 (Fla. 1st DCA 1991). (Joint Prehearing Stip. p. 4).

   
   

3. The NICU Rule became effective on August 6, 1990. (Joint Prehearing stip., p. 4).

   
   

4. Paragraph 14 of the NICU Rule addresses the entitlement of hospitals to implement, or to continue to operate Level II or Level III NICU services. Paragraph 15 prescribes the process for creating an inventory of those hospitals authorized under the NICU Rule to provide Level II or Level III NICU services. Paragraph 15 provides that the department publish a preliminary inventory of those hospitals it has determined meet the entitlement criteria contained in Paragraph 14. It provides further that hospitals be allowed to contest the preliminary inventory. (Rule 10-5.042, F.A.C.).

   
   

5. The department published a revised preliminary inventory on September 21, 990, in the Florida Administrative Weekly, authorizing Winter Haven to

   operate an 11 bed Level II NICU Unit. (Joint Prehearing Stip., p.4). Winter Haven was included in the inventory based on its documentation that the agency had approved construction plans for creation of NICU beds in an expansion project.

   
   

6. On August 6, 1991, Hearing Officer Veronica Donnelly issued a recommended order in Lakeland Regional Medical Center, Inc. v. Department of Health and Rehabilitative Services, DOAH Case Nos. 90-7682 and 90-7683, regarding Lakeland's challenge to Winter Haven's inclusion in the preliminary inventory. Among other things, the Hearing Officer recommended that the department enter a final order excluding Winter Haven from the inventory of facilities authorized to provide Level II NICU services. (Joint Prehearing Stip., p.4).

   
   

7. The Hearing Officer's recommended order concluded Winter Haven had not demonstrated that it complied with the grandfathering provisions of subparagraph

   14 of the NICU Rule. It further concluded that DHRS lacked the authority to adopt a policy which conflicted with the plain meaning of the NICU Rule.

   
   

8. On September 23, 1991, the department issued its final order. (Joint Prehearing Stip. p.5).

   
   

9. DHRS' final order concurred with the Hearing Officer's recommendation that Winter Haven was not entitled to be included in the inventory of Level II NICU beds pursuant to the criteria contained in the NICU Rule. Nonetheless, the final order held that the department was estopped from excluding Winter Haven from the inventory on the theory of equitable estoppel, and, therefore, ordered that the final inventory include 11 Level II NICU beds at Winter Haven. The final order found that Winter Haven relied on representations by the department over a five-year period to establish its Level II NICU unit, hire employees and commence operation. (Lakeland composite exhibit #2).

   
   

10. On October 14, 1991, Lakeland filed a notice of appeal appealing the portion of the final order requiring that the final inventory include 11 Level II NICU beds at Winter Haven. (Joint Prehearing Stip., p. 5).

    
    

11. As a result of the Hearing Officer's recommended order, the department initiated the current rulemaking proceedings which culminated on December 27, 1991, when DHRS published the first version of the proposed amendments to Rule 10-5.042(14)(a) and (f) in Volume 17, No. 52, Florida Administrative Weekly. On March 13, 1992, however, the department withdrew those proposed rule amendments. (Joint Prehearing Stip., p. 5).

    
    

12. On March 13, 1992, DHRS published a second version of the proposed amendments to Rule 10-5.042(14)(a) and (f) in Volume 18, No. 11, Florida Administrative Weekly, which were substantially identical to the first version. On May 29, 1992, the department withdrew the second version of the proposed rule amendments. (Joint Prehearing Stip., p. 5).

    
    

13. On May 29, 1992, DHRS published a third version of the proposed amendments to Rule 10-5.042(14)(a) and (f) in Volume 18, No. 22, Florida Administrative Weekly, which were substantially identical to the first and second versions of the proposed amendments, and which are the subject of Lakeland's challenge in this proceeding. (Joint Prehearing Stip., pp. 5-6).

    
    

14. At the time the department proposed the rule amendments that are at issue in this proceeding, there were only three providers of which the

    department was aware, i.e., Alachua General Hospital, Winter Park Hospital, and Winter Haven, who had construction plans deemed approved by the department allegedly authorizing neonatal intensive care beds prior to October 1, 1987. (Joint Prehearing Stip., p. 6).

    
    

15. Alachua General Hospital and Winter Park Hospital were included in the preliminary inventory of Level II NICU beds. Their inclusion in the inventory was either not challenged, or was challenged and subsequently dismissed.

    
    

16. Alachua General Hospital and Winter Park Hospital were also included in the final inventory of Level II NICU beds. Their entitlement to be included in the final inventory is final and is not subject to further appeal.

    
    

17. The department is not currently aware of any other providers, who have construction documents approved by the department prior to October 1, 1987, as a basis for being included in the inventory under the proposed amendments. (Joint Prehearing Stip., p. 6).

    
    

18. Elfie Stamm is responsible for rule development, special studies, and the development of fixed need pools at the department. Ms. Stamm was responsible for the development of the NICU Rule and the proposed amendments. She also was responsible for evaluating the information submitted to the department by providers seeking to be included in the inventory of the NICU beds under the NICU Rule.

19 . The proposed amendments merely authorize one additional basis for "grandfathering in" neonatal intensive care services at hospitals. (Ex. 1; Proposed Amendments, Florida Administrative Weekly, Volume 18, No. 22, May 29, 1992, pp. 3061-3062). The amendment is intended to allow the agency, under specified conditions, to acknowledge a type of prior departmental authorization for neonatal intensive care services which is not specified in the current rule.

1. The proposed amendments represent the agency's current policy adopted in October of 1990, or within about two months of the effective date of the NICU rule.

   
   

2. Knowledge about the problem first came to light within two months of the August 1990 effective date of the new NICU rule when Alachua General Hospital sought grandfathering under the new rules because of its approved construction documents.

   
   

3. The agency believed that the construction plans that it had approved for Alachua General came under its rule. The department considered it consistent with the grandfathering provision for hospitals which had indicated on their licensure application that they provide the services.

   
   

4. Also soon coming forward for grandfathering because of approved construction documents were Baptist Hospital in Pensacola, Winter Park Hospital in Orlando, and Winter Haven Hospital in Winter Haven, Florida. Alachua General and Winter Park were considered grandfathered.

   
   

5. Because Baptist had not produced sufficient evidence that it had approved construction documents, it was denied. If Baptist can prove it had approved construction documents it might later be grandfathered.

6. When the department promulgated the existing rule, had it been aware of the issue involving documents approved for NICU construction, it would have specifically written into the rule the provision it is now promulgating.

   
   

7. The already existing grandfathering provision includes facilities and providers which had not received anything from the agency in the way of approval, including those which had not received a CON, and had no recorded NICU services on their license application. The current rule includes hospitals which had no contact with the department, no approvals, no construction plans, and no licensure application.

   
   

8. If grandfathering a provider which established the service without any approvals of any kind is appropriate, and is now part of the rule, the department considers it should approve a hospital which affirmatively obtained approval construction documents for this service.

   
   

9. Such facilities have proceeded in good faith, approved by the same agency that issues certificates of need, so the department believes that they should be authorized to provide the service. The department's Office of Plans and Construction had by 1987 specific construction standards for Level II and Level III NICU beds and still does. The Office of Plans and Construction in the past approved specific levels of care for NICU. In 1987 there were published standards for plans and construction that covered Level II and III neonatal care beds.

   
   

10. The department, in its preparation of this amendment, did not analyze all factors listed under Section 381.704(3), F.S., because that statute refers to the development of need methodologies and the subject amendments are not a need methodology. They are used to establish an inventory of existing beds which inventory is a factor in the need methodology.

    
    

11. NICU services are tertiary health care services, services which are intensive and complex, and generally present a certain degree of risk in the delivery of the service. As a result, tertiary health care services are regionalized. NICU services, therefore, are not necessarily available in every hospital which provides obstetrical services to its patients.

    
    

12. There was no competent evidence that the proposed rule amendments will cause disruption in services. Those grandfathered in under this policy are already on inventories and in operation, including Winter Haven. Ms. Stamm testified she could not conclude from existing evidence that disruption would occur, and to the contrary, increased competition might be a result, along with the potential for improvement in service.

    
    

13. Based on department experience, it is not likely that any hospitals remain with approved construction plans from prior to October, 1987, which would be able to come forward now to seek approval, although as found above, it remains possible.

    
    

14. Any grandfathered facility (under the proposed amendments) must meet all licensure requirements for NICU beds, and must meet all requirements of the NICU rule within one year (Rule 10-5.042(14)(i), F.A.C.;). Medical quality is protected under licensure rules.

    CONCLUSIONS OF LAW

    
    

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

    
    

16. The parties have stipulated that the petitioner and intervenor have standing to challenge the proposed rule amendments, and that stipulation is accepted.

    
    

17. 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:

    
    

    1. 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.

       
       

18. 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.

    * * *

    
    

19. 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 plausible 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 had prescribed for the development of agency policy, then surely interpretive 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 it 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.

    
    

20. In this case, the petitioner has failed to meet its burden of proving that the proposed amendments are invalid exercises of delegated legislative authority.

    
    

21. This is the full text of the proposed amendments: (Underlined portions denote the new language.)

    
    

    10-5.042 Neonatal Intensive Care Services.

    (14) Providers Authorized by the Department to Operate Level II and Level III Neonatal Intensive Care Services. Providers shall be authorized by the department to implement, or to continue to operate Level II or Level III neonatal intensive care services if they are found to be in compliance with the conditions

    specified in paragraphs (14)(a), (14)(b), or (14)(f) below.

    (a) Providers Holding a Valid Certificate of Need or Providers with Approved Construction Documents. Providers which have obtained a certificate of need for provision of services regulated under this rule or providers with construction documents approved by the department prior to October 1, 1987 which show neonatal intensive care beds shall be restricted to the total number of neonatal intensive care unit beds by level of care for each certificate of need or construction document approval was granted unless the provisions of paragraph (14)(d) authorize greater number. The authorization in this paragraph based on construction document approval shall not apply to a provider who initiated and subsequently terminated neonatal intensive care services prior to October 1, 1987.

    (f) Providers Not Authorized Under Certificate of Need. Construction Document Approval, or Licensure Provisions. Providers claiming to have provided Level II or Level III continuously since then, but which were not authorized by certificate of need or construction document approval consistent with paragraph (14)(a) or by license consistent with paragraph (14)(b), will be authorized to provide Level II or Level III neonatal intensive care services provided the conditions of subparagraphs (14)(f)1. or (14) (f)2., below, are met.

    
    

22. The proposed rule amendments are supported by facts and logic.

    
    

23. They are reasonably related to the purposes of the enabling legislation and should be sustained. General Telephone Co. of Florida v. Florida Public Services Commission, 446 So.2d 1063, 1067 (Fla. 1984). The proposed amendments promote consistency and fairness. Administrative due process (for the CON program) "requires agency consistency among like petitioners or respondents." Central Florida Regional Hospital v. DHRS, 582 So.2d 1193, 1196 (Fla. 5th DCA 1991); North Miami General Hospital v. Office of Community Medical Facilities, DHRS, 355 So.2d 1272, 1278 (Fla. 1st DCA 1978). Failure to institute these amendments would perpetuate inconsistency and harm to regulated facilities. Lakeland Regional Medical Center, Inc. v. DHRS, 13 FALR 4533, 4542 (DHRS 1991).

    
    

24. "Grandfathering" in facilities is reasonable and rational for the reasons above stated. The provision at issue is at least as reasonable and rational as the existing grandfathering provisions already upheld. St. Mary's Hospital, Inc. v. DHRS, 12 FALR 2727, 2752-2754 (DOAH 1990). In that decision, the hearing officer properly distinguished between inventory (grandfathering) and need assessment methodologies (Id. at 2753-2754), as the agency has done here, and the agency need not have made findings under Section 381.704(3), F.S. In another rule the agency included facilities known as Intensive Residential

    Treatment Facilities (IRTFs) in the category of psychiatric hospitals even though IRTFs were approved under unwritten agency policies without regard to the availability of other psychiatric hospitals. That rule was also sustained.

    Florida League of Hospitals, et al. v. DHRS, 12 FALR 4126, 4132, 4142-4146 (DOAH 1990).

    
    

25. The proposed rule amendment codifies agency policy of the last few years. The agency was required to codify through rulemaking its corrections to existing rules. Boca Raton Artificial Kidney Center, Inc. v. DHRS, 493 So.2d 1055 (Fla. 1st DCA 1986). In doing so, the agency is complying with the rulemaking requirements of Section 120.535, F.S., passed in 1991 but effective March 1, 1992.

Based on the foregoing, it is hereby ORDERED:

Proposed amendments to Rule 10-5.042(14)(a) and (f), F.A.C., are valid exercises of delegated legislative authority and the petition of Lakeland Regional Medical Center is DISMISSED.

DONE and ENTERED this 28th day of October, 1992, at Tallahassee, 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 October, 1992.

APPENDIX

The following constitute review of the findings of fact proposed by the petitioner.

1. Adopted in paragraph 15.

2. Adopted in paragraph 16.

3. Adopted in paragraph 17.

4. Rejected as immaterial. The agency, nonetheless, had ample factual basis for the amendments.

5. Adopted in substance in paragraphs 20 and 21.

6. Rejected as contrary to the weight of evidence. The department in promulgating the existing NICU rule did surveys of hospitals to determine existing services. Ms. Stamm believed these surveys were general enough to have elicited the existence of approved construction documents.

7. Rejected as contrary to the evidence. The agency considered the information it already has in conjecturing that it is unlikely that other facilities will qualify under the additional "grandfather" criteria.

8. and 24. Rejected as unnecessary.

1. Adopted in paragraph 25.

2. Rejected as unnecessary.

3. Text of the rule is in paragraph 34.

4. - 51. Rejected as unnecessary.

1. Adopted in inclusion of text of rule in paragraph 34.

2. - 54. Rejected as unnecessary.

1. Rejected as contrary to the weight of evidence.

2. - 57. Adopted by inclusion of the test of the rule.

58. Rejected as immaterial.

COPIES FURNISHED:

Robert A. Weiss, Esquire John M. Knight, Esquire

Parker, Hudson, Rainer & Dobbs The Perkins House, Suite 200

118 N. Gadsden Street Tallahassee, FL

Richard A. Patterson, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 103

Tallahassee, FL 32308

Kenneth F. Hoffman, Esquire Patricia Renovitch, Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

2700 Blairstone Road Post Office Box 6507 Tallahassee, FL 32314

Sam Power, Acting Agency Clerk

Agency for Health Cost Administration 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Liz Cloud, Chief

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

Carroll Webb, Executive 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: 92-003645RP

Orders for Case No: 92-003645RP