STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LAWNWOOD MEDICAL CENTER, INC., ) d/b/a LAWNWOOD REGIONAL MEDICAL ) CENTER, )

)

Petitioner, )

vs. ) CASE NO. 93-4908

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and MARTIN ) MEMORIAL MEDICAL CENTER, INC., )

)

Respondents. )

and )

)

PALM BEACH BEACH GARDENS )

COMMUNITY HOSPITAL, INC., )

)

Intervenor. )

) PALM BEACH GARDENS COMMUNITY ) HOSPITAL, INC., d/b/a AMI PALM ) BEACH GARDENS MEDICAL CENTER, )

)

Petitioner, )

vs. ) CASE NO. 93-4909

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and MARTIN ) MEMORIAL MEDICAL CENTER, INC., )

)

Respondents. )

) ST. MARY'S HOSPITAL, INC., )

)

Petitioner, )

vs. ) CASE NO. 93-4910

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and MARTIN ) MEMORIAL MEDICAL CENTER, INC., )

)

Respondents. )

and )

) JFK MEDICAL CENTER, INC., and ) PALM BEACH GARDENS COMMUNITY ) HOSPITAL, INC., )

)

Intervenors. )

)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, the Hearing Officer designated by the Division of Administrative Hearings, on March 7-11, 14-18, and 22-25, 28,

and April 5-8, and 11-13, 1994.

APPEARANCES

For Petitioner, John Radey, Attorney Lawnwood Medical Center, Jeffrey Frehn, Attorney Inc., d/b/a Lawnwood Elizabeth McArthur, Attorney

Regional Medical Center: 101 North Monroe St., Suite 1000

Post Office Drawer 11307 Tallahassee, Florida 32302

For Petitioner, W. David Watkins, Attorney St. Mary's Hospital, Inc.: Kenneth Hoffman, Attorney

2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507

For Petitioner/Intervenor, Michael J. Cherniga, Attorney Palm Beach Gardens David C. Ashburn, Attorney Community Hospital, Inc.: 111 South Monroe Street

Suite 2000

Tallahassee, Florida 32302

For Intervenor, Robert A. Weiss, Attorney JFK Medical Center, Inc.: Armando Bassarate, Attorney

John M. Knight, Attorney

The Perkins House, Suite 200

118 North Gadsden Street Tallahassee, Florida 32301

For Respondent, Byron B. Mathews, Jr., Attorney Martin Memorial Medical Michael Weber, Attorney

Center, Inc.: Albert Shay, Attorney

201 South Biscayne Boulevard Suite 2200

Miami, Florida 33131

For Respondent, Lesley Mendelson, Attorney Agency For Health Care Agency for Health Care Admin. Administration: 325 John Knox Road, Suite 301

Tallahassee, Florida 32303-4131 STATEMENT OF THE ISSUES

Which, if any, of the applications meet the statutory and rule criteria for the issuance of a certificate of need to operate an adult open heart surgery program in AHCA District 9.

PRELIMINARY STATEMENT

In February 1993, the Agency For Health Care Administration ("AHCA") calculated and published a need for one additional adult open heart surgery program in AHCA District 9. The need determination was not challenged.

In July 1993, AHCA published its preliminary decision to issue CON 7243 to authorize Martin Memorial Medical Center, Inc., to establish the additional District 9 adult open heart surgery program. The unsuccessful competing applicants, Good Samaritan Hospital, Inc. ("Good Samaritan"), St. Mary's Hospital, Inc. ("St. Mary's"), and Lawnwood Regional Medical Center, Inc. ("Lawnwood"), timely filed administrative challenges to the agency's preliminary decision. In addition, JFK Medical Center, Inc. ("JFK") and AMI-Palm Beach Gardens Medical Center, Inc. ("Palm Beach Gardens") timely filed petitions to intervene in the proceedings. JFK opposes the application filed by St. Mary's. Palm Beach Gardens opposes the establishment of any of the proposed programs.

Good Samaritan voluntarily dismissed its petition prior to the hearing.

At the final hearing, Lawnwood Medical Center presented the testimony of Robert P. McGuire and James T. Howell, M.D., of AHCA; Ernest J. Peters, expert in civil engineering; John R. Finnegan; Darryl Weiner, expert in health care finance, including financial feasibility analysis; W. Eugene Nelson, expert in health care planning; Stephen Burgin; Mern F. Henry, R.N., expert in nursing and nursing administration; and Jon Trezona, expert in hospital administration. By depositions, Lawnwood also presented the testimony of Joseph Moore; Bettye Daugherty; William Robert Bird, expert in health care equipment planning, including equipment cost estimating; Elbert Garner, expert in health care construction and construction cost estimating; Fleming Smith, Jr., expert in health care architecture and design; Charlie F. Matthews; Jay Berger, M.D., expert in cardiology referral patters in Okeechobee County; Samuel Sadow, M.D., expert in cardiovascular surgery; Shaik Kuddus, expert in cardiology; and Jon Trezona, expert in hospital administration.

Lawnwood's exhibits 1 - 39 were received in evidence, except exhibit 24 (which was the same as Martin's exhibit 36). The parties were also given the opportunity to supplement the record by May 1, 1994, if necessary for an understanding of Martin's exhibits 21 and 22. No Motions to supplement were filed.

St. Mary's Hospital presented the testimony of James Whittle, M.D., expert in cardiology; Michael Stein, M.D., expert in cardiology and internal medicine; Louise DeVivo, expert in cardiac catheterization laboratory management and operation; Martin Brown, expert in health care finance; Gaylord Snyder; Terry Kaari, expert in nursing and operating room administration; Peter Gilstad, expert in health care architecture and construction cost estimating; Jay Cushman, expert in health care planning; Howard Watts, expert in hospital administration; and, by depositions, the following: Julia Bower-Brown, expert in health care planning; Donald Chester, expert in hospital fund raising; Kathi Morris, expert in quality assurance and quality assessment; Michael Smith, M.D., expert in trauma surgery; Robert Broadway, expert in hospital administration; Joan Kilcullen, expert in nursing and nursing administration; Yvonne Best, expert in nursing and nursing administration; Roberto Acosta, M.D., expert in cardiology; Dennis Pupello, M.D., expert in cardiovascular surgery; and Charles Celano, M.D., expert in cardiology.

St. Mary's exhibits 1 - 6, 10 - 23, and 25 - 27 (pages 2, 4, 6, 8 and 9) were received in evidence. St. Mary's exhibits 7 - 9 were not moved into evidence, and exhibits 24 and 27 (pages 1, 3, 5 and 7) were not received in evidence.

Martin Memorial Medical Center presented the testimony of Howard S. Helfman, M.D., expert in cardiology and cardiac catherization laboratory medical management; Carl C. Gill, M.D., expert in open heart surgery; Robert H. Lovic, expert in health care finance; Christine Shalloway, expert in health care facility design and health care facility construction cost estimating; Christopher Coffey, expert in health care planning; Judith L. Horowitz, expert in health care planning and finance; and Richmond M. Harmon, expert in hospital administration. Martin Memorial presented portions, designated on the record, of the depositions of Jon Trezona, Shaik Kuddus, Joseph D. Moore, June Vernon, Samuel Sadow; Bettye Daugherty; and the entire depositions of Charles Heineman, expert in hospital equipment planning; Albert E. Gardner, expert in anesthesiology; Michael O'Grady, expert in hospital administration; Edward Maas, expert in hospital administration; Margo Kelly, expert in health care planning; Robert Blews, M.D., expert in cardiology; Edward Evans, expert in perfusion services; Phyllis Sippel, expert in nursing and nurse management; Salvatore Donohue, M.D., expert in medical staff affairs physician recruitment, and quality assurance; Heather Wood, expert in surgical nursing; Linda Ferguson; Charles Celano, M.D., expert in cardiology and cardiology referral patters in Indian River County. An Order ruling on Lawnwood's objections to portions of the deposition of Edward Maas was entered on May 1, 1994. Lawnwood's objections to portions of the depositions of Michael O' Grady and Charles Celano were resolved by Order of June 7, 1994.

Martin Memorial's exhibits 1 - 10, and 12 - 69 were received in evidence.

Martin's exhibit 11 was not moved into evidence.

Palm Beach Gardens Medical Center presented the testimony of Katherine McMaster, R.N., expert in nursing administration; Duana Stabile, expert in hospital administration; Rick D. Knapp, expert in health care accounting and financial feasibility; and Virginia Lamb, expert in health planning. Palm Beach Gardens' exhibits 1-15 were received in evidence.

JFK Medical Center presented the testimony of Richard Cascio, expert in health care finance; Marvin Erbesfeld, M.D., expet in cardiovascular surgery; Janine Cacciatore, R.N., expert in critical care nursing and administration of critical care programs; Michael Cochran, R.N., expert in cardiac surgery program administration and nursing; and Mark Richardson, expert in health care planning; and by deposition, Mary Huser, R.N.

JFK's exhibits 1 - 6 and 8 were received in evidence. JFK's exhibit 7 was not received in evidence.

AHCA presented the testimony of Elizabeth Dudek, expert in health care planning, and exhibits 1 and 3 - 10, which were received in evidence. Official recognition was taken of Rule 59C-1.030, Florida Administrative Code.

The parties, in their Joint Prehearing Stipulation, agreed to one fact, that "[t]he unchallenged, published fixed need pool for the planning horizon at issue in this proceeding stated that there was a numeric need for one additional adult open heart surgery program in AHCA District 9." The transcript of the final hearing was received on May 23, 1994. Following the granting of a motion for extension of time, proposed recommended orders were received on August 22, 1994.

Pending motions, for resolution in this Recommended Order, include Palm Beach Gardens' Motion For Summary Recommended Order Against Martin Memorial, Martin Memorial's Motion For Summary Recommended Order Dismissing Lawnwood,

Lawnwood's Motion For Summary Recommended Order Dismissing Martin Memorial, Palm Beach Gardens' Additional Motion For Summary Recommended Order, and Martin Memorial's Motion For Sanctions. See, Findings of Fact 60 - 62 and Conclusion of Law.

FINDINGS OF FACT

1. The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws in Florida.

   
   

2. On February 5, 1993, AHCA published a need for one additional adult open heart surgery program in District 9. AHCA defines open heart surgery as a "tertiary health service" which, due to complexity, cost, and the relationship between volume and quality of care should be concentrated in a limited number of hospitals. Rule 59C-1.002(66), Florida Administrative Code.

   
   

3. District 9 is located generally along the southeast coast of Florida and includes Palm Beach, Indian River, Martin, St. Lucie, and Okeechobee Counties. Palm Beach is the county at the southern end of District 9. The parties have referred to the counties other than Palm Beach, as the four northern counties. Martin County is north of Palm Beach, and St. Lucie, Okeechobee, and Indian River are further north.

   
   

4. The applicants in this proceeding, seeking to establish an additional District 9 adult open heart surgery program, are Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center, Inc. ("Lawnwood"), St. Mary's Hospital, Inc. ("St. Mary's"), and Martin Memorial Medical Center, Inc. ("Martin Memorial").

   
   

   Lawnwood Regional Medical Center

   
   

5. Lawnwood is a 335-bed for-profit hospital located in Ft. Pierce, in St. Lucie County. Lawnwood has CON approval for the construction of an additional

   18 skilled nursing beds and 10 level II NICU beds. In addition to the 335 licensed beds, Lawnwood has 16 unlicensed bassinets for a total of 351. Lawnwood's 335 licensed beds include 60 psychiatric beds, located one and a half blocks away from the main Lawnwood building, at a facility called Harbor Shores. Lawnwood has 260 general acute care beds. When Lawnwood filed its application, its parent corporation was HCA, Inc., a subsidiary of the Hospital Corporation of America. HCA was also the parent corporation of the Medical Center of Port St. Lucie, the only other hospital in St. Lucie County, and of Raulerson Hospital in Okeechobee County. After the application was filed and prior to hearing, a subsidiary of Columbia Health Care Corporation merged with HCA. As a result of the merger, the administrator of Lawnwood also serves as the market manager assigned to coordinate the services offered at the three hospitals.

   
   

6. Lawnwood is classified by the State as a disproportionate share provider of Medicaid-reimbursed services for financially needy patients. In 1993, 21 percent of its total patient days were attributable to Medicaid and 4 percent to charity.

   
   

7. Lawnwood operates an outpatient cardiac catheterization ("cath") laboratory and, in 1992, received CON approval to perform inpatient cardiac caths in a lab which was scheduled to open in October 1994. The outpatient lab opened in 1988 at Lawnwood. In 1989, 561 cardiac cath lab procedures were performed at Lawnwood, 494 in 1990, 362 in 1991, and 468 procedures in 1993.

   Although 602 procedures were reported to the local health council in 1993, these were performed on 468 patients, which is the number consistent with reporting methods of other cath labs. As a result of the diagnostic caths, 45 patients were referred for open heart surgery, and 98 for angioplasties. Of the 45 patients referred for open heart surgery, 26 were actually scheduled for the procedure.

   
   

8. Lawnwood proposes to establish an adult open heart surgery program for a total project cost of $4.99 million. The project includes construction of two dedicated operating rooms, renovations to provide a 4-bed dedicated recovery room, and conversion of 12 acute care beds to construct a 12-bed cardiovascular intensive care unit ("CVICU").

   
   

   St. Mary's Hospital

   
   

9. St. Mary's is a 430-bed not-for-profit hospital, which has been operated 55 years by the Franciscan Sisters, currently through a parent organization called the Allegheny Health System. St. Mary's is the largest hospital in District 9, and the largest provider of womens' and childrens' medical services in the district. St. Mary's is a designated regional perinatal intensive care center with level II and III neonatal intensive care units, and is the designated level II trauma center for the northern area of Palm Beach County.

   
   

10. Like Lawnwood, St. Mary's is recognized by the State as a disproportionate share provider of services to Medicaid reimbursed and indigent patients. It is approximately sixth in the state in the provision of services to financially needy patients.

    
    

11. St. Mary's cardiac cath lab began operation in February 1988. There were 267 inpatient and 116 outpatient cardiac caths at St. Mary's lab in 1991,

    240 and 118 respectively in 1992, and 171 and 115 respectively from January to November 1993. St. Mary's operates a 10-bed coronary care unit.

    
    

12. St. Mary's proposes to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. The project will include renovations to two existing operating rooms and to a recovery room area.

    
    

    Martin Memorial Medical Center

    
    

13. Martin Memorial is a 336-bed not-for-profit acute care hospital, with an additional 17 nursery/bassinets which are not required to be in the total licensed beds. The ultimate parent corporation for the Martin Memorial facilities and its foundation is Martin Memorial Health Systems, a not-for- profit corporation with a volunteer community board of directors. Martin Memorial's beds are divided between two campuses, with 236 beds in Stuart, and

    100 in Port Salerno. The Port Salerno hospital opened in September, 1992 and is approximately 8 miles south of Stuart. Included in the 236 beds at Martin Memorial in Stuart are 5 level II neonatal intensive care beds, 23 intensive care unit beds, 45 ventilator, telemetry or other monitored beds, and 134 medical/surgical beds.

    
    

14. Martin Memorial's existing cardiac services include a cardiac cath lab which opened in 1989 and, that year, reported 250 procedures. Caths at Martin reached the highest volume, 905 in 1991, followed by 799 in 1992, and 867 in 1993.

15. Martin Memorial proposes to establish an adult open heart surgery program in Stuart for a total project cost of $3,594,720. Martin's project includes a newly constructed open heart surgery suite adjacent to the cardiac cath lab and, as a back-up, renovation of an existing operating room. As a part of an approved, separate CON application, Martin proposes to renovate and expand to accommodate a 13-bed surgical intensive care unit ("SICU") with four private rooms dedicated as a cardiovascular intensive care unit ("CVICU"). The expenses associated with the four CVICU rooms are included in the total open heart surgery project costs.

    
    

    Existing Open Heart Surgery Providers In Or Adjacent To District 9

16. All of the existing adult open heart surgery programs in District 9 are in Palm Beach County, at Delray Community Hospital ("Delray"), JFK Medical Center, Inc. ("JFK"), and AMI Palm Beach Gardens Community Hospital, Inc. d/b/a Palm Beach Gardens Medical Center ("Palm Beach Gardens"). The same services are also available in the adjacent districts to the north in District 7 at Holmes Regional Medical Center in Brevard County, and to the south in District 10 at AMI North Ridge General Hospital in Broward County. In addition, established referral patterns exist from District 9 to Miami Heart Institute in Dade County and Holy Cross Hospital in Broward County. All residents of District 9 have access to open heart surgery within two hours average drive time, which exceeds the geographic access standard of Rule 59C-1.033(4)(a), Florida Administrative Code.

    
    

17. Delray is located in southern Palm Beach County and is a level II trauma center for that area.

    
    

18. JFK is a 369-bed not-for-profit hospital located in Atlantis, Florida, approximately midway between Boca Raton and West Palm Beach, in north central Palm Beach County. The corporation which owns and operates JFK, also is the parent of a fund-raising foundation, and other subsidiaries, some of which are for-profit corporations. JFK has had an open heart surgery program since 1987. JFK's two operating rooms are equipped and sized identically, and located in close proximity to the two room cardiac cath lab and the intensive care unit. JFK has the capacity to perform up to 1000 cases annually, while actual annual volumes at JFK have ranged from 350 to 370 cases.

    
    

19. Palm Beach Gardens is a 204-bed for-profit hospital located in the northern part of Palm Beach County. It operates the oldest open heart surgery program in the district, having started in 1982 or 1983. In fiscal year 1992- 1993, there were 477 open heart surgery patients at Palm Beach Gardens, of which

    173 resided in the four northern counties of the District. Palm Beach Gardens has 11 operating suites, 7 capable of being used for open heart surgeries, and 4 dedicated solely to open heart surgeries. The current capacity of Palm Beach Gardens is 900 open heart procedures a year. By adding staff, Palm Beach Gardens could reach a volume of 1100 cases a year.

    
    

20. While Palm Beach Gardens has excess capacity in its operating rooms, at the peak of its seasonal demand, delays occur in scheduling non-emergency surgeries due to inadequate capacity in its 24-bed intensive care unit. Occupancy levels in the 24 beds were 112.5 percent in 1993, according to

    Treasure Coast Health Council data. Although Palm Beach Gardens also suggested that an 8-bed overflow unit supplemented the 24 beds, accounting reports do not reflect billings for their use as intensive care services.

    
    

    Comparison of Applicants and Applications Subsection 408.035(1)(a) -- need in relation to state and local plans

    
    

21. The 1989 state health plan, Healthy Floridians, includes six preferences for the review of open heart surgery applications.

    
    

22. The first preference favors applicants establishing programs in counties with a population over 100,000 and a higher percentage than statewide average of 18.8 percent elderly persons. All the experts in health planning testified that the term "elderly" in this preference means persons 65 years of age and older, which is consistent with the age group with the greatest demand for open heart surgery. St. Mary, Lawnwood, and Martin meet the preference. The 1993 population of Palm Beach County was 900,000, St. Lucie's was 162, 598, and Martin's was 108,089. The population age 65 and over as a percentage of total population was 24 percent in Palm Beach, 21.2 percent in Lawnwood, and

    27.5 percent in Martin County.

    
    

23. The second state preference is for applicants who can demonstrate the ability to perform at least 350 annual procedures within 3 years of initiating an open heart program. Lawnwood reasonably projected a total of 314 open heart surgery procedures in year one, 350 in year two, and 386 in year three. Lawnwood's utilization projections are conservatively based on the assumption that, by the third year, 70 percent of its open heart patients will come from St. Lucie and Okeechobee Counties, which are already in its primary service area. Martin Memorial's expert questioned Lawnwood's projected open heart volumes from Martin and Indian River Counties, based on its acute care and cath lab patient origins. In addition, traditional referral patterns show Indian River patients going north to Brevard and Orange Counties, while Martin County patients go south to Palm Beach, Broward, and Dade Counties. Considering the acute care and cath lab competition within the four northern counties, the absence in that area of any competition for an open heart surgery program, the relative success of Lawnwood's outpatient cath lab despite its limitations and competition, and its affiliation with Port St. Lucie and Raulerson hospitals, Lawnwood established the reasonableness of its projected utilization. Lawnwood also reasonably expects to reverse some of the 73.5 percent out-migration for open heart surgery by residents of the northern four counties. See, Findings of Fact 27, infra.

    
    

24. Martin Memorial's projections of 249 cases in year one, 317 in year two, and over 350 in year three are also reasonable. Martin Memorial's underlying assumptions, that its open heart surgery market share will at least equal that of its acute care, that it will keep some patients previously referred from its cath lab, and that, it, like Lawnwood, would reverse some district out-migration, are also reasonable. Martin Memorial referred 172 patients from its cath lab for open heart surgery in 1993, in contrast to 45 from St. Mary's, and 41 from Lawnwood. Martin Memorial's projections are based on 1991-1992 use rates which declined in 1993. Despite the one year decline and some expert predictions of a continuing downward trend in use rates, Martin Memorial's projections are bolstered by the fact that its open heart surgery primary service area includes Port St. Lucie, which contains 40 percent of the population of St. Lucie County and is the fastest growing area of District 9. That area, which is closer to Stuart, but is located in the St. Lucie County

    community in which Lawnwood has an affiliate hospital, supports both the projections of Lawnwood and Martin Memorial, and could be served by an open heart surgery program at either facility. Although Martin Memorial's projected volumes are higher than and inconsistent with other projections made by Martin Memorial, the reasonableness of the projections was established.

    
    

25. St. Mary's projected 171 open heart surgeries in year one, 265 in year two, and 363 in year three. The projections are based on the use of a gravity model designed to determine potential volume "attracted" to the program by using the size of the hospital and the proximity of patients as factors. The model used a zip code level analysis to take into consideration the fact that St. Mary's expects a sub-county primary service area, as a result of sharing the county with the three existing District 9 providers. The projected utilization was reduced, by St. Mary's expert, to take into consideration an expected start- up factor. There is, however, substantial expert testimony that the variables and/or the weight attributed to each variable included in this gravity model are inadequate to explain actual or potential volumes. There is substantial evidence that the size of a hospital is not reliable enough to be one of only two variables in a model. For example, JFK although larger than Palm Beach Gardens, only exceeded 350 cases in 1991-1992 by 16, when smaller Palm Beach Gardens with an older open heart surgery program reached 499 cases. The model also fails to consider actual physician referral patterns. St. Mary's projections and its ability to exceed 350 cases also depend on its ability to attract Medicaid patients over and above the patients projected by the gravity model. See, Findings of Fact 35, infra.

    
    

26. The volume of diagnostic cardiac caths at St. Mary's is low and has declined over the past three years. In part, the volume is low because there is no open heart surgery back-up available in the event the diagnostic cardiac cath indicates that need. Cath patients suspected of needing more invasive procedures are diverted by referring physicians to hospitals with angioplasty and open heart programs. But that explanation of St. Mary's volumes apparently is incomplete, since, by contrast Boca Raton Community Hospital and Martin Memorial, which also have no open heart surgery back-up, have had more steadily increasing cardiac cath volumes. The fact that St. Mary's cath volumes are low and its open heart surgery projections unreliable is also attributable to the fact that St. Mary's is located 11 miles north of JFK and 5 1/2 miles south of Palm Beach Gardens, therefore, at a competitive disadvantage with these established programs.

    
    

27. The third state health plan preference applies to proposals, for improving access for persons currently leaving the district. With almost half of Palm Beach County open heart surgery patients receiving the service outside the county, St. Mary's claims to be in the best location to reverse that trend if geographical access is the problem. St. Mary's also points to the convenience of access to its hospital, which is 2 miles from Interstate 95, the main north-south transportation corridor through the district. Approval of St. Mary's proposal will not, however, reverse out-migration to the extent that it is attributable to factors such as seasonal residency, established physician referral practices from northern areas of District 9 to providers in adjacent districts, and managed care contractual arrangements. Lawnwood is located in the largest, fastest growing, and most centrally located county of the northern four counties. St. Lucie County is adjacent to each of the other three northern counties, with Martin to the south, Okeechobee to the west, and Indian River to the north. The level of "out-migration," defined as those patients leaving the district to receive the service, increases dramatically from south to north in District 9, from 55 percent in Martin, 70 percent in St. Lucie, 80 percent in

    Okeechobee, to 100 percent in Indian River County. Considering growth in western St. Lucie County, the needs of St. Lucie and Okeechobee County residents, and the alternative to out-migration provided for both Indian River and Martin County residents, the Lawnwood location is superior to that of Martin Memorial in terms of the ability to improve access to the service. See, also Findings of Fact 23-24, supra.

    
    

28. The fourth state preference for applicants with a history of providing disproportionate share Medicaid and charity care favors the applications of St. Mary's and Lawnwood, in that order. Martin Memorial argues that it also meets the disproportionate share criteria, which the preference requires, although it has not been designated by the State, which the preference does not require. Relying on the criteria in subsection 409.911(2), Florida Statutes, Martin claims to meet or exceed the disproportionate share requirements for 1990, despite the agency's reliance on 1989 data. Assuming, arguendo, that Martin is entitled to the preference, the comparative ranking of St. Mary's first, Lawnwood second, and Martin third remains the same. In addition, the preference looks at a history of disproportionate service, as does subsection 408.035(1)(n), in part, which Martin failed to establish. For 1991, St. Mary's provided 15.8 percent of total District 9 Medicaid, Lawnwood provided 11.7 percent, and Martin Memorial, 1.7 percent. Martin Memorial established that it treated a larger number of Medicaid patients with circulatory diseases as a proportion of Medicaid patients in Martin County, as compared to St. Lucie County residents treated at Lawnwood. However, the absolute number of circulatory disease Medicaid patients treated at Lawnwood was approximately two and half times the number treated at Martin Memorial. Statistical indicators, including per capita income and low income patients diagnosed with circulatory diseases, demonstrate that residents of St. Lucie and Okeechobee Counties are less affluent, and more medically needy than those in Palm Beach and Martin Counties.

    
    

29. The fifth state preference favors the applicant offering a service with the highest quality of care at the least expense. The preference includes an explanation that larger facilities usually have more available resources to meet the preference. As the largest hospital with the lowest cost per case by the second year of the program, $22,659, St. Mary's best meets the preference. Martin's projected cost is $26,909 and Lawnwood's is $27,085. Martin Memorial's expert calculated total expenses per case at $23,221 for Martin Memorial,

    $22,615 for St. Mary's, and $23,645 for Lawnwood. St. Mary's projected charges of $50,600 in year one and $53,100 in year two. Lawnwood projected charges of

    $55,199 in year one, and $58,133 in year two. Martin Memorial projected charges of $55,594, in year one, $58,955 in year two. Total project costs were estimated at $2,166,351 for St. Mary's, $3,594,720 for Martin Memorial, and

    $4,995,039 for Lawnwood. Using either set of cost data or the projected charges, St. Mary's best meets this preference based on size, the lowest total project costs, and the lowest projected charges for open heart surgery services. Martin Memorial and Lawnwood have, as described by one expert, remarkably similar costs, and the same is true of projected average charges per case.

    
    

30. The final state preference favors applicants who will include protocols for the use of innovative therapeutic alternatives to surgery for appropriate patients, including streptokinase and tissue plaminogen activator therapies. Lawnwood and Martin Memorial currently use streptokinase. St. Mary's performs emergency angioplasties, and uses streptokinase therapy. All three applicants meet the preference for providing and/or planning to provide alternative therapies to open heart surgery.

31. The first District 9 local health plan allocation factor gives a priority for established cardiac cath programs. Based on expert testimony, a cardiac cath program exceeding 150 annual procedures is established. All the applicants exceed the minimum volume and, therefore, comply with the allocation factor. Martin Memorial has the highest volume in an operational inpatient and outpatient lab and, meets the allocation factor better than Lawnwood and St. Mary's.

    
    

32. The other District 9 factor favors applicants with a documented commitment to provide services regardless of patient's ability to pay. Lawnwood projects 2.51 percent Medicaid and 1.5 percent charity care in year two. St. Mary's projects providing 5 percent Medicaid and 3.5 percent charity care in year two. Martin Memorial projects 2 percent Medicaid and 1.9 percent charity care in year two. St. Mary's best meets the factor, followed by Lawnwood, and then Martin Memorial. More Medicaid residents live in the primary service area of Lawnwood than that of Martin Memorial. Martin has filed CON compliance reports demonstrating difficulty in meeting prior CON Medicaid conditions due to the demographics of its service area.

    
    

    Subsections 408.035(1)(b) - availability, quality of care, efficiency, accessibility, extent of utilization of like and existing programs; 408.035(2)(b) - appropriate and efficient use of existing inpatient facilities; and 408.035(2)(d) - serious problems in obtaining care without proposed new program(s).

    
    

33. With the exception of seasonal excess demand for Palm Beach Gardens' ICU beds, the evidence demonstrates there is excess capacity in existing District 9 providers. Geographic access to existing providers in or adjacent to the district is also reasonable. The quality of care at existing providers is excellent.

    
    

34. St. Mary's asserts that its proposal will best assist in alleviating access barriers to open heart surgery for low income persons with limited geographic mobility. One expert estimated that 38 District 9 Medicaid patients needed, but did not receive, open heart surgeries in 1991, based on the use rates for commercially insured patients. In general, the highest density of population with a demand for invasive heart therapies and open heart surgeries is concentrated in southern and central Palm Beach County. However, expert testimony established that Medicaid patients are underserved for reasons, other than the policies of the existing providers. The evidence does not show that St. Mary's proposal can overcome these financial barriers.

    
    

35. St. Mary's is a level II trauma center, and maintains that trauma patients in need of open heart surgery are at risk of death from having to wait for transfers. Transfers of patients from St. Mary's to Palm Beach Gardens or JFK for open heart surgery take from three hours to three days, averaging 8 to

    12 hours, in approximately 30 percent of the cases. From May 1991 through January 1994, over 2600 trauma patients were treated at St. Mary's. Expert testimony, after review of medical records, indicates that from one to six patients needed open heart surgery, an insufficient number to constitute a not normal circumstance for the establishment of an open heart program at St. Mary's.

    
    

36. Palm Beach Gardens' position that an additional adult open heart surgery program is not needed in District 9 is rejected. Open heart surgery use rates are not increasing nationally or in Florida. However, District 9

    population is increasing, as is open heart surgery utilization for District 9 as a whole, and for Palm Beach, St. Lucie and Okeechobee Counites, while remaining static in Martin County and decreasing in Indian River.

    
    

37. Palm Beach Gardens and JFK have demonstrated that in Palm Beach County, an additional open heart surgery program is not needed, and would be detrimental to existing programs. See, Findings of Fact 51-52.

    
    

    Subsection 408.035(1)(c) - quality of care

    
    

38. The applicants, like the existing providers, are accredited by the Joint Commission on Accreditation of Healthcare Organizations. All of the applicants provide excellent quality care, as indicated by their accreditations and proposals, compromised only by their ability to achieve the projected volumes. See, Findings of Fact 23-26.

    
    

    Subsection 408.035(1)(d) - alternatives or outpatient facilities and 408.035(2)(a) - alternatives to inpatient services

    
    

39. There are no alternatives or facilities other than acute care hospitals in which open heart surgeries can be performed. The criterion is inapplicable to this case.

    
    

    Subsections 408.035(1)(e) - economies of joint or shared facilities and 408.035(2(k) - modernization or sharing arrangements as alternatives to new construction.

    
    

40. Martin Memorial is a part of a network of hospitals planning a more formalized affiliation to attract managed care contracts. Lawnwood is a part of a large corporate group, which can offer experience in establishing an open heart surgery program. Neither of these arrangements entitles the applicants to special consideration under the statutory criterion, as it has been construed by AHCA. In this case, each applicant is a separate acute care hospital. An alternative arrangement for a shared program was considered by Martin Memorial, but there is no showing that any proposal which improves access for the northern four counties could avoid the necessity for new construction.

    
    

    Subsection 408.035(1)(f) - needs for equipment and services not accessible in adjoining areas

    
    

41. There is no evidence that any applicant proposes to provide a service not readily available in adjoining areas. On the contrary, each applicant proposes to offer an alternative within the district for residents who currently use providers in adjoining areas. See, Finding of Fact 27.

    
    

    Subsection 408.035(1)(g) - need for research and educational programs

    
    

42. There is no evidence that any of the applicants will meet research or educational needs, or is a teaching hospital. AHCA has strictly construed the statutory criterion to apply to teaching hospitals.

    
    

    Subsection 408.035(1)(h) - availability of resources, including staff, management, and funds for capital and operating expenditures, including personnel required in Rule 59C-1.033(5)(b).

43. The Cleveland Clinic has expressed an interest in providing surgeons for Martin Memorial's program, but no agreement has been formalized. Martin Memorial was criticized for not having a full-time infectious disease specialist, inadequate pulmonary and nephrology specialists, and for being unable to perform transesophageal echocardiology, all of which are necessary to support an open heart surgery program. St. Mary's was criticized for not planning to have nurses assigned exclusively to its open heart surgery team. Lawnwood has been unable to attract full-time coverage in thoracic, orthopedic, and neurosurgery. Despite these specific criticisms, each applicant has successful recruitment mechanisms and affiliations which will be enhanced by the presence of an open heart surgery program. The applicants' staffing and equipment proposals are reasonable. Both St. Mary's and Lawnwood are subsidiaries of larger organizations which include hospitals with open heart surgery programs.

    
    

    Subsection 408.035(1)(i) - immediate and long term financial feasibility

    
    

44. St. Mary's has the ability to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. St. Mary's provided a pro forma of expected revenues and expenses to establish financial feasibility based on two factors which were challenged, the average length of stay ("ALOS") and the mix of payer classifications for patients. St. Mary's projected 10.3 days as the ALOS. JFK's experts suggested that a 13-day ALOS is more reasonable, particularly for a new program. JFK's actual experience was an ALOS of 16.1 days in 1988, 14.5 days in 1992, and 12.6 days by the year ending June 1993. Mature programs generally have lower ALOS than newer ones. Currently, ALOS in the District are 10.9 for Palm Beach Gardens, 12.5 for Delray, and 14.5 for JFK. JFK's assertion that St. Mary's initial ALOS will more likely be 13 days not 10.3 is reasonable. The fact that the ALOS will be longer than that projected in the pro forma means that expenses for the care of each patient will be greater, while revenues will not increase proportionately. Revenues are limited in fixed Diagnostic Related Group ("DRG") reimbursement categories, such as Medicare and managed care, which are the dominant payer groups, in contrast to the more flexible per diem reimbursement of commercial insurers.

    
    

45. St. Mary's failed to include revenues and expenses for the construction period, anticipating only capital expenditures and start-up costs for implementing a new service. St. Mary's pro forma was based on a first year payer mix which includes 12.4 percent managed care and 11.6 percent commercial insurance in 1995. At JFK, the open heart surgery payor mix was 33 percent managed care and 9 percent commercial in 1993. St. Mary's underestimated the proportion of patients in the DRG-based managed care category, as compared to the per diem arrangements typical of commercial insurance.

    
    

46. Taking into consideration increased expenses of $251,000 in year one and $409,000 in year two, due to adjustments from 10.3 to 13 days in the ALOS, and reduced revenues of $350,000 in year two, St. Mary's proposal is not financially feasible. The conclusion is also compelled by St. Mary's failure to establish the reasonableness of its utilization projections for the program. See, Finding of Fact 25.

    
    

47. Martin Memorial has the funds necessary to establish an open heart surgery program for $3,594,720. Its pro forma shows revenues and expenses for the construction period, which are identical with or without the open heart surgery program. Martin Memorial's pro forma is flawed by double counting revenues from patients currently spending some time and revenues at Martin

    Memorial prior to transfers for open heart surgery. Revenues associated with pre-transfer stays must be deducted from revenues for open heart surgeries of average total lengths of stay. The amounts of over-stated revenues were not calculated by Palm Beach Gardens expert, and other criticisms of Martin Memorial's pro forma are rejected.

    
    

48. Lawnwood, like St. Mary's, failed to include any construction period revenues and expenses in its pro forma. Lawnwood, as a separate legal entity, does not have the funds to establish its open heart surgery program, without relying on its parent, Hospital Corporation of America. The commitment of funds, represented by a letter dated April 30, 1993, indicated the source as either internally generated cash or available lines of credit. Lawnwood demonstrated its financial feasibility, in part, by showing that its open heart program's break-even point, at which expenses and revenues would be equal is 182 cases, well below projected utilization. See, Findings of Fact 23.

    
    

    Subsection 408.035(1)(j) - special needs and circumstances of health maintenance organizations

    
    

49. The applicants do not propose to provide any different or special services for health maintenance organizations, nor is any applicant in this batch itself a health maintenance organization, as required by AHCA's interpretation to the statutory criterion. NME Hospitals, Inc., d/b/a West Boca Medical Center v. HRS, DOAH Case Nos. 90-7037 and 91-1533 (F.O. 4/8/92).

    
    

    Subsection 408.035(1)(k) - substantial, specialty services to non-residents of the service district

    
    

50. Although the applicants propose to provide open heart surgery, which is one of the specialty services listed in the statute, they do not project that they will serve residents of other districts. The applications are not distinguishable on the basis of Subsection 408.035(1)(k), Florida Statutes.

    
    

    Subsection 408.035(1)(l) - impact on costs and effects of competition with existing providers.

    
    

51. If St. Mary's proposal is approved and, as St. Mary's projects, two- thirds of its patients come from existing district providers, the program at JFK will be adversely affected. As the result of JFK's loss of approximately 106 cases, its net income could also be reduced up to $2.6 million. By contrast, programs at Lawnwood or Martin Memorial would have a negligible impact on JFK.

    
    

52. The existing program at Palm Beach Gardens would suffer an adverse impact from the approval of programs at either St. Mary's or Martin Memorial. The adverse impact of a program at Martin Memorial is greater. Palm Beach Gardens could lose from 128 to 142 cases in the first year and from 179 to 198 cases in the third year in the worst case scenarios, depending on whether the use rate declines or remains constant. In addition, the further development of the VHA Network proposed by some District 9 hospitals, including Martin Memorial, as a means to attract managed care contracts, would enhance referrals to an open heart surgery program at Martin Memorial. Reasonable estimates of the financial loss to Palm Beach Gardens range between $2.8 and $3.1 million, although Palm Beach Gardens, with $9 million in annual income, would still be profitable. While the numeric calculations required in Rule 59C-1.033(7)(c), Florida Administrative Code, indicate that there will be enough total open heart surgeries to allow each of the existing providers to continue to exceed 350 operations, Palm Beach Gardens would be disproportionately, adversely affected

    by a program at Martin Memorial, as would JFK by a program at a St. Mary's. As the lowest volume provider, JFK is also at greater risk of dropping below the

    350 minimum level established as indicative of the quality of care.

    
    

    Subsection 408.035(1)(m) - costs and methods of construction

    
    

53. With total project costs of $4.99 million, Lawnwood's proposal to construct two new, dedicated operating rooms is the most expensive. Martin Memorial's cost of $3.59 million includes new construction of one and renovation of another operating room. St. Mary's low project cost of $2.16 reflects the fact that renovations rather than new construction is planned. The advantages of new construction, however, are that the size of the operating rooms will exceed general state requirements, and comply with recommendations developed specifically for open heart surgery. See, Findings of Fact 58, infra.

    
    

    Subsection 408.035(1)(n) - past and proposed service to Medicaid and medically indigent patients

    
    

54. Based on history and proposed service, the applicants rank, in order, St. Mary's, Lawnwood, and Martin Memorial in complying with the criterion. See, Findings of Fact 28 and 32, supra.

    
    

    Subsection 408.035(1)(o) - continuum of care in multilevel system, including acute, skilled nursing, and home health care

    
    

55. The applicants failed to distinguish their proposals on the basis of this statutory criterion.

    
    

    Other Criticisms of the Applications

    
    

56. St. Mary's has a 16-bed intensive care unit, 4 of those beds will require no additional equipment to be used to provide post-operative care for open heart surgery patients. The 4 beds are located adjacent to the intended open heart surgery operating suite. The proposed 4-bed ICU was criticized for being too crowded, and inadequately designed to allow adequate patient observation and monitoring, and for not being dedicated solely to open heart surgery patients. The 16-bed unit has experienced over 90 percent occupancy rates, but some of those patients have required the staffing, but not the equipment available in the intensive care unit. St. Mary's acknowledged potential capacity problems, but has the ability to create additional step-down unit beds to relieve the ICU unit, when necessary. In addition, outpatient surgeries were scheduled to be performed in a separate facility beginning in July 1994.

    
    

57. While some clinicians may prefer a separate ICU, there was no evidence of any requirements that open heart surgery patients receive post-operative care in a separate ICU, nor that the lack of a specialized unit means a lack of staff capable of caring for such patients.

    
    

58. St. Mary's project involves the renovation of a total of 1731 square feet, 764 net square feet of that in the main operating room on the first floor. The back-up operating room at St. Mary's is 480 square feet, below the American College of Cardiologists' recommendation and 1992 Federal Guidelines of a minimum of 600 and up to 800 square feet. Despite the term "back-up," expert testimony established the need for regular use of both operating rooms, one for regularly scheduled procedures and one for emergencies which occur within the cardiac cath lab or the post-operative intensive care unit. The size of St.

    Mary's back-up operating room meets state requirements for operating rooms, which do not differentiate on the basis of the type of surgery. St. Mary's also demonstrated that open heart surgeries are performed in comparably sized or smaller operating rooms at JFK.

    
    

59. The space allocated to Lawnwood's 4-bed open heart surgery recovery room was criticized as inadequate to accommodate the equipment and personnel required to monitor and, if necessary, to revive post-operative patients. The space allocated complies with state licensure requirements. Reconfiguration of the beds and equipment in the space is permissible, if necessary, in final construction documents which must be approved by AHCA. Lawnwood's proposal was also criticized because the CVICU will be located three stories above the surgical area and recovery rooms. There was no evidence that the location of the CVICU violated licensure requirements or compromised the quality of care. The use of restricted elevator access between the surgical/recovery area and the CVICU is reasonable.

    
    

60. AHCA favored the applications of both Lawnwood and Martin over that of St. Mary's due to their locations outside Palm Beach County. Having been told by staff that it was then a "toss up" between the two, AHCA's Division Director selected Martin Memorial. The Division Director, Dr. James Howell, is a former Deputy District Administrator for AHCA District 9 and former County Health Director for Palm Beach County. In explaining his decision, Dr. Howell testified as follows:

    
    

    Q. Ultimately, sir, you recommended to Ms. Dudek that Martin be approved rather than Lawnwood; isn't that correct, sir?

    A. Yes, sir. In our mutual discussions we had

    a discussion about two. To be straightforward, the reason that I'd recommended Martin was that Martin is a long-term community hospital with local community responsiveness or local community board of directors, as far as I know, and that AHCA owned - now I believe, it's part of the Columbia system, was in St. Lucie County and

    was a newer hospital, and that, you know, I felt more comfortable with giving the first CON in the area to a group that had a long heritage and commitment to the area, even though I can tell you I can't say anything negative about AHCA in dealings with them.

    Q. Or Columbia?

    A. Or Columbia; right. I can't say anything. That's not meant to be prejudicial with them. They did a good job with us, with maternity/child health.

    Q. You did approach this batch, did you not, sir, with a bias towards Martin Memorial because you knew the institution had been there a long, long time and was a very stable institution; isn't that correct?

    A. That is quite correct, yes, sir.

    
    

    See, Transcript, p. 251. The court reporter's references to "AHCA" are corrected and understood, in this context, to refer to HCA or Hospital Corporation of America. The statutory and rule criteria, on balance, demonstrate that open heart surgery programs at Martin Memorial or Lawnwood are

    more likely to improve access, to meet projected volumes, and to be financially feasible. Of these two, however, Lawnwood is better situated to reverse district out-migration, and has to be preferred, under the state and local health plans and subsection 408.035(1)(n), Florida Statutes, for its history of providing a disproportionate share of its services to Medicaid and charity patients. Finally, the most significant distinction between the applicants is that the quality of care at existing providers, as measured by their volumes of open heart surgeries, will not be adversely affected by the approval of a new program at Lawnwood.

    
    

    Application Content

    
    

61. AHCA accepted Martin Memorial's application, although two different letters of intent for mutually exclusive open heart surgery programs were filed simultaneously by Martin Memorial, one for a program shared with Indian River Memorial, and one for a separate program. Martin Memorial's application also, arguably exceeds the scope of its Board approval by including renovation of a portion of the surgical intensive care unit ("SICU"). AHCA accepted Martin Memorial's proposal to allocate the cost of 4 of 13 SICU beds to the open heart surgery project. As a practical matter, Martin Memorial's witnesses concede, the 4 beds cannot be constructed independently. The Board separately authorized the filing of an expedited CON for the SICU construction and renovations. In an Additional Motion For Summary Recommended Order Palm Beach Gardens' submitted correspondence between AHCA and Martin Memorial attempting to establish that the separate SICU CON has expired.

    
    

62. AHCA accepted Lawnwood's application without a construction period pro forma, and without identification of the ultimate parent corporation of the subsidiary, Lawnwood Medical Center, Inc.

    
    

    CONCLUSIONS OF LAW

    
    

63. The Division of Administrative Hearings has jurisdiction over these proceedings, pursuant to subsections 120.57(1) and 408.039(5)(b), Florida Statutes.

    
    

64. An applicant bears the burden of proving its entitlement to a certificate of need based upon a balanced consideration of the criteria. Boca Raton Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative Services, 475 So.2d 360 (Fla. 1st DCA 1985); Department of Health and Rehabilitative Services v. Johnson & Johnson, 447 So.2d 361 (Fla. 1st DCA 1984).

    
    

65. Martin Memorial's Motion For Summary Recommended Order Dismissing Lawnwood, filed on December 30, 1993, alleged that the contents of Lawnwood's letter of intent ("LOI") and CON application materially fail to comply with statutory and regulatory requirements, particularly Rule 59C-1.008(1)(f)(2), which is as follows:

    
    

    (f) Identification of Controlling Interest. The letter of intent must identify the names of those with controlling interest in the applicant. The following provisions apply:

    (2) For an applicant which is a corporation not publicly held, a listing of each person with

    10 percent or more ownership interest will satisfy this requirement provided the applicant identifies itself as a non-publicly held corporation. A list

    of the person or persons will not be construed by the agency to be an identification of the con- trolling interest of the applicant unless so described by the applicant.

    
    

    Lawnwood Medical Center, Inc., identified itself as a non-profit corporation, a wholly-owned subsidiary of Hospital Corporation of America, a publicly held, for-profit corporation. From audited financial statements and Securities and Exchange Commission Form 10-K, it appears that Lawnwood is elsewhere, and more accurately could have identified itself as a wholly-owned subsidiary of HCA,

    Inc., a Delaware Corporation and wholly-owned subsidiary of Hospital Corporation of American ("HCA"), which is a wholly owned subsidiary of HCA-Hospital Corporation of America ("Holdings"). In response, Lawnwood relies on the language of Rule 59C-1.008(1)(f)2 as requiring the disclosure of the owner of the applicant, but not the owner of the applicant's owner. This construction of the requirement is consistent with that of AHCA, is reasonable, and therefore, must be accepted.

    
    

66. Martin Memorial asserts that Lawnwood failed to comply with 408.037, Florida Statutes, which provides that an application shall include:

    
    

    (2) A statement of the financial resources needed by and available to the applicant to accomplish the proposed project. The statement shall include:

    * * *

    (c) 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.

    
    

67. Lawnwood claims no obligation to report revenues and expenses during the period of construction because there will be none. During construction, there will be capital expenditures and start-up costs, but no revenues and expenses associated with the operation of the open heart surgery program. The interpretation of the statutory requirement is consistent with AHCA's, is reasonable, and accepted. Martin Memorial's Motion For Summary Recommended Order Dismissing Lawnwood is denied.

    
    

68. Lawnwood's Motion For Summary Recommended Order, of February 24, 1994, questions Martin Memorial's compliance with Subsection 408.039(2), Florida Statutes, requiring a letter of intent to include a certified copy of a resolution of the applicant's board of directors authorizing the filing of the application, the incurring of project expenditures, and certifying that the applicant shall license and operate the facility. Lawnwood argues that Martin Memorial's Board, which passed two mutually exclusive resolutions on January 28, 1993, one authorizing the establishment of an adult open heart surgery program by Martin Memorial, the other authorizing the establishment of an adult open heart surgery program to be shared by both applicants, Martin Memorial and Indian River, never made an unconditional commitment. Citing Naples Community Hospital v. AHCA, 15 F.A.L.R. 2615, DOAH Case No. 92-1510 (F.O. 6/6/93) and University Community Hospital v. AHCA, 14 F.A.L.R. 1899, DOAH Case No. 91-1510 (F.O. 4/14/92). AHCA distinguishes factually its Orders in the Naples and UCH

    cases, AHCA accepts alternative letters of intent and encourages applicants to explore various options, particularly for joint or shared programs. Therefore, Lawnwood's Motion For Summary Recommended Order is denied.

    
    

69. On November 9, 1994, Palm Beach Gardens Community Hospital, Inc. filed an Additional Motion For Summary Recommended Order Against Martin Memorial Medical Center, Inc. and Request For Official Recognition. In the Additional Motion, Palm Beach Gardens seeks to establish that CON 7388 for the construction of the 13-bed SICU has been terminated. On December 12, 1994, Lawnwood filed a Notice of Supplemental Authority in support of Palm Beach Garden's Request For Official Recognition that the SICU CON has terminated. The correspondence indicates that Martin Memorial was unable to delay the SICU CON construction timetable to coincide with the open heart surgery construction schedule, and that Martin Memorial informed AHCA that it could not separately build 9 of the

    13 beds in the SICU. AHCA advised Martin Memorial to terminate its CON and apply again for the expedited issuance of the SICU CON after it receives an open heart surgery CON. Because the Additional Motion involves factual issues which could necessitate reopening the record in this proceeding, the Additional Motion is denied.

    
    

70. In response, Martin Memorial filed a Motion For Sanctions, claiming the Palm Beach Gardens' pleading is frivolous, and a Motion To Strike and/or Response To Palm Beach Garden's Additional Motion For Summary Recommended Order. The Motion to Strike alleges that the issue of the validity of SICU CON was resolved at final hearing and is not properly the subject of new evidence. In addition, Martin Memorial notes that the SICU CON was approved by AHCA on an expedited basis, and that it was AHCA which suggest that Martin Memorial withdraw the SICU CON at this time and refile after approval of the open heart surgery CON. Martin Memorial also notes that when it refiles the SICU CON application, AHCA's decision in the expedited case is not subject to Section

    120.57 challenge from existing providers or competing applicants. Palm Beach Gardens' Additional Motion is not facially a pleading justifying sanctions, pursuant to subsection 120.57(1)(b)5. Therefore, Martin Memorial's Motion For Sanctions is denied.

    
    

71. St. Mary's and Lawnwood failed to show not normal circumstances for the approval of either of their programs, by failing to show any financial barriers in District 9 which would be alleviated by their programs.

    
    

72. St. Mary's has not demonstrated that its open heart sugery proposal is financially feasible, as required by subsection 408.035(1)(i), Florida Statutes.

    
    

73. Palm Beach Gardens and JFK presented credible evidence that, to varying degrees, their existing open heart surgery programs will be adversely affected by the establishment of competing programs at Martin Memorial and St. Mary's, and to a significantly lesser degree by the establishment of a new program at Lawnwood.

    
    

74. Lawnwood's application best meets the criteria for approval of a new District 9 adult open heart sugery program in terms of those factors related to its location, including the demographics and extent of outmigration from St. Lucie and immediately adjacent Counties. Lawnwood also best meets the criteria related to the type of institution and the details of the proposed project, including its history of Medicaid and charity service, and reasonable projections of volume and financial feasibility.

75. Based on a balanced consideration of the criteria, the application of Lawnwood is superior to that of Martin Memorial, which is superior to that of St. Mary's.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration enter a Final

Order issuing Certificate of Need 7245 to Lawnwood Medical Center, Inc., denying

Certificate of Need 7244 to St. Mary's Hospital, Inc., and denying Certificate of Need 7243 to Martin Memorial Medical Center, Inc.

DONE AND ENTERED this 13th day of March, 1995 in Tallahassee, Leon County, Florida.

ELEANOR M. HUNTER

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 13th day of March, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4908

To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact:

Petitioner, Lawnwood's Proposed Findings of Fact.

1. Accepted in Findings of Fact 2.

2. Accepted in Findings of Fact 3.

3. Accepted in Findings of Fact 16.

4. Accepted in Findings of Fact 4.

5. Accepted in Findings of Fact 5.

6-12. Accepted in or subordinate to Findings of Fact 27.

13. Accepted in Findings of Fact 13.

14-20. Accepted in or subordinate to Findings of Fact 27.

1. Accepted in or subordinate to Findings of Fact 16 and 19.

2. Accepted in Findings of Fact 24.

23-39. Accepted in or subordinate to Findings of Fact 27. 40-47. Accepted in or subordinate to Findings of Fact 34. 48-61. Accepted in or subordinate to Findings of Fact 28.

62-64. Accepted in relative terms or subordinate to Findings of Fact 27. 65-70. Accepted in or subordinate to Findings of Fact 28.

71-73. Accepted in part or subordinate to Findings of Fact 24 and 28.

74-86. Accepted in part or subordinate to Findings of Fact 2, 23 and 27.

87. Issue not reached.

88-94. Accepted in or subordinate to Findings of Fact 23.

95. Rejected in part and accepted in part in Findings of Fact 24. 96-100. Accepted in Findings of Fact 23.

101-105. Accepted in general in Findings of Fact 24. 106-111. Accepted in Findings of Fact 47.

1. Accepted in general in Findings of Fact 22-29.

2. Accepted in Findings of Fact 22.

3. Accepted in Findings of Fact 23.

4. Accepted in Findings of Fact 27.

5. Accepted in Findings of Fact 28.

6. Accepted in relevant part in Findings of Fact 28.

7. Accepted in Findings of Fact 29.

8. Accepted in Findings of Fact 30.

120-122. Accepted in or subordinate to Findings of Fact 31.

123-131. Accepted in or subordinate to Findings of Fact 5, 43, and 48. 132-133. Accepted in or subordinate to Findings of Fact 43.

134-146. Accepted in or subordinate to Findings of Fact 48.

1. Accepted in or subordinate to Findings of Fact 45, 48 and conclusions of law 66.

2. Accepted in or subordinate to Findings of Fact 48.

139-141. Accepted in or subordinate to Findings of Fact 29. 142-147. Accepted in or subordinate to Findings of Fact 48. 148-152. Accepted in Findings of Fact 8 and 53.

1. Accepted in Findings of Fact 43.

2. Subordinate to Finding of Fact 53.

155-164. Accepted in or subordinate to Findings of Fact 59. 165-173. Accepted in or subordinate to Findings of Fact 43.

174. Accepted in or subordinate to Findings of Fact 38 and 43. 175-176. Accepted in Findings of Fact 7.

1. Accepted in or subordinate to Findings of Fact 38 and 43.

2. Accepted in or subordinate to Findings of Fact 53.

3. Accepted in or subordinate to Findings of Fact 43. 180-181. Accepted in Findings of Fact 38.

182-187. Accepted in Findings of Fact 61.

188. Rejected in Findings of Fact 61.

Petitioner, Palm Beach Gardens' Proposed Findings of Fact.

1-3. Accepted in Findings of Fact 16-19.

1. Accepted in Findings of Fact 5 and 8.

2. Accepted in Findings of Fact 13 and 15.

3. Accepted in Findings of Fact 9 and 12.

4. Accepted in preliminary statement.

5. Accepted in Findings of Fact 3.

6. Accepted in Findings of Fact 3 and 16.

10-15. Accepted in or subordinate to Findings of Fact 61.

1. Rejected in conclusions of law 69.

2. Rejected in Findings of Fact 53.

3. Rejected in Findings of Fact 2 and 27.

19-25. Accepted in or subordinate to Findings of Fact 16 and 33.

26. Accepted in or subordinate to Findings of Fact 34.

27-44. Accepted in or subordinate to Findings of Fact 52.

45-48. Accepted in or subordinate to Findings of Fact 18-19 and 27-28. 49-52. Accepted in or subordinate to Findings of Fact 51 and 52.

53. Accepted in general in Findings of Fact 27.

54-55. Accepted in or subordinate to Findings of Fact 33. 56-60. Accepted in or subordinate to Findings of Fact 34.

61. Rejected "substantially" in Findings of Fact 52.

62-72. Accepted in or subordinate to Findings of Fact 16, 27, and 33. 73-76. Accepted in or subordinate to Findings of Fact 27.

77-84. Accepted in or subordinate to Findings of Fact 52.

85-92. Accepted in or subordinate to Findings of Fact 27,28 and 34. 93-103. Accepted in or subordinate to Findings of Fact 28.

104-105. Accepted in Findings of Fact 31.

106. Accepted in Findings of Fact 32.

107-109. Accepted in or subordinate to Findings of Fact 28 and 32. 110-111. Accepted in Findings of Fact 22.

112-125. Accepted in or subordinate to Findings of Fact 23.

126. Accepted in or subordinate to Findings of Fact 5. 127-141. Accepted in Findings of Fact 23 and 24.

142. Rejected in Findings of Fact 7 and 23.

143-145. Accepted in or subordinate to Findings of Fact 7 and 23. 146-151. Issue not reached.

152-158. Accepted in or subordinate to Findings of Fact 24. 159-160. Accepted in Findings of Fact 27.

161-162. Accepted in Findings of Fact 28.

1. Accepted in part in Findings of Fact 28.

2. Accepted in or subordinate to Findings of Fact 29.

165-167. Accepted in or subordinate to Findings of Fact 29. 168-169. Accepted in Findings of Fact 30.

170. Accepted in Findings of Fact 21-30.

171-172. Rejected in general in Findings of Fact 47.

173. Accepted in Findings of Fact 47.

174-184. Rejected or subordinate to Findings of Fact 47.

185-187. Rejected or subordinate to Findings of Fact 43 and 47. 188-193. Accepted in Findings of Fact 47.

194-199. Subordinate to Finding of Fact 47.

200. Accepted in Findings of Fact 29.

201-208. Accepted in or subordinate to Findings of Fact 52.

209. Rejected.

210-218. Accepted in or subordinate to Findings of Fact 52.

219. Rejected conclusion as to "substantial" in Findings of Fact 52. 220-229. Accepted in or subordinate to Findings of Fact 52.

230. Rejected conclusion as to "substantial" in Findings of Fact 52.

Petitioner, St. Mary's, Proposed Findings of Fact.

1-3. Accepted in or subordinate to Findings of Fact 9.

1. Accepted in Findings of Facts 3 and 22.

2. Accepted in or subordinate to Findings of Fact 9.

3. Accepted in or subordinate to Findings of Fact 12.

4. Accepted in or subordinate to Findings of Fact 10.

5. Accepted in or subordinate to Findings of Fact 27.

6. Accepted in Findings of Fact 2.

10-12. Accepted in or subordinate to preliminary statement and Finding of Fact 12.

13-14. Accepted in or subordinate to Findings of Fact 58. 15-17. Accepted in or subordinate to Findings of Fact 43. 18-24. Accepted in Findings of Fact 30.

25-26. Rejected in Findings of Fact 44-46. 27-29. Accepted in Findings of Fact

30. Rejected in Findings of Facts 44-46.

31-32. Accepted in or subordinate to Findings of Fact 44. 33-35. Accepted in or subordinate to Findings of Fact 43.

36. Accepted in or subordinate to Findings of Fact 56.

37 Accepted in or subordinate to Findings of Fact 9.

1. Accepted in Findings of Fact 38.

2. Accepted in or subordinate to Findings of Fact 58.

3. Accepted in or subordinate to Findings of Fact 60.

41-44. Accepted in or subordinate to Findings of Fact 56 and 57. 45-54. Accepted in or subordinate to Findings of Fact 35.

55. Rejected in Findings of Fact 35.

56-57. Accepted in or subordinate to Findings of Fact 34.

58. Conclusion rejected, although access is limited by comparison to commercially insured patients, See, Findings of Fact 34.

59-66. Accepted in or subordinate to Findings of Fact 34. 67-73. Accepted in Findings of Facts 9, 28 and 32.

1. Accepted in Findings of Fact 9.

2. Accepted in Findings of Fact 32.

3. Accepted in Findings of Fact 34.

4. Rejected as significant benefit in Findings of Fact 34.

5. Accepted (as both interests can be better accomplished) in Findings of Fact 27.

6. Accepted in or subordinate to Findings of Fact 25. 80-81. Rejected in Findings of Fact 25.

1. Accepted in Findings of Fact 25.

2. Rejected in Findings of Fact 25.

3. Rejected in Findings of Fact 25.

4. Rejected as valid in Findings of Fact 34. 86-88. Accepted in Findings of Facts 27 and 36.

89-91. Accepted in part or subordinate to Findings of Fact 26.

1. Rejected in Findings of Fact 26.

2. Rejected in Findings of Fact 25 and 26.

3. Accepted in Findings of Fact 22.

4. Rejected in Findings of Fact 25-26.

5. Rejected in general in Findings of Fact 27.

97-98. Accepted in or subordinate to Findings of Fact 28.

1. Accepted in Findings of Fact 29.

2. Accepted in Findings of Fact 30.

3. Rejected conclusion in Findings of Fact 35.

4. Accepted in Findings of Fact 31 and 32. 103-104. Accepted in Findings of Fact 27.

105. Accepted in Findings of Fact 37.

106-107. Rejected in Findings of Fact 51.

1. Accepted in or subordinate to Findings of Fact 51.

2. Accepted in Findings of Fact 35.

3. Rejected in Findings of Fact 47.

4. Rejected in Findings of Fact 48.

5. Rejected in Findings of Fact 24.

Intervenor, JFK Medical Center, Inc.'s Proposed Findings of Fact.

1. Accepted in Findings of Fact 9.

2. Accepted in Findings of Fact 18.

3. Accepted in or subordinate to Findings of Fact 12.

4-6. Accepted in or subordinate to preliminary statement. 7-9. Accepted in or subordinate to Findings of Fact 2.

1. Accepted in or subordinate to Findings of Fact 16-19.

2. Accepted in Findings of Fact 27.

3. Accepted in relevant part in Findings of Fact 16 and 27. 13-19. Accepted in or subordinate to Findings of Fact 34.

1. Accepted in Findings of Fact 18

2. Accepted in Findings of Fact 35.

3. Accepted in Findings of Fact 19.

23 Accepted in relevant part in Findings of Fact 33.

24. Accepted in Findings of Fact 36.

25-27. Accepted in or subordinate to Findings of Fact 33. 28-31. Accepted in or subordinate to Findings of Fact 27.

32-34. Accepted in or subordinate to Findings of Fact 27 and 34. 35-44. Accepted in or subordinate to Findings of Fact 35.

45-48. Accepted in or subordinate to Findings of Fact 25. 49-50. Accepted in or subordinate to Findings of Fact 26.

51. Accepted in or subordinate to Findings of Fact 25. 52-57. Accepted in Findings of Fact 44-46.

58. Subordinate to Finding of Fact 44-46.

59-66. Accepted in or subordinate to Findings of Fact 51. 67-75. Accepted in or subordinate to Findings of Fact 59. 76-78. Rejected in Findings of Fact 59.

79-80. Accepted in or subordinate to Findings of Fact 25. 81-82. Rejected in or subordinate to Findings of Fact 57. 83-84. Accepted in or subordinate to Findings of Fact 52.

85. Accepted in Findings of Fact 43.

86-89. Accepted in or subordinate to Findings of Fact 58.

Respondent, AHCA's Proposed Findings of Fact.

1. Subordinate to Findings of Fact 7.

2. Accepted in Findings of Fact 11 and 26.

3. Accepted in or subordinate to Findings of Fact 14.

13,14. Accepted in or subordinate to Findings of Fact 6, 28 and 32.

15. Accepted in or subordinate to Findings of Fact 10, 28 and 32. 16,17. Accepted in or subordinate to Findings of Fact 28 and 32.

1. Accepted in Findings of Fact 21-30.

2. Accepted in Findings of Fact 22.

20,21. Accepted in part in Findings of Facts 23 and 24.

1. Accepted in Findings of Fact 24.

2. Accepted in or subordinate to Findings of Fact 25, 26 and 27.

3. Accepted in Findings of Fact 27.

4. Accepted in Findings of Fact 28.

5. Subordinate to Findings of Fact 29.

6. Accepted in Findings of Fact 5, 9 and 13. Rejected conclusion in terms of other indicators in Findings of Fact 29.

7. Accepted in or subordinate to Findings of Fact 5, 9, 13 and 29.

8. Accepted in Findings of Fact 29.

30-33. Accepted in or subordinate to Findings of Fact 23-26.

1. Accepted in Findings of Fact 30.

2. Accepted in Findings of Fact 27 and 34-37.

36-37. Accepted in or subordinate to Findings of Fact 27.

38. Accepted in Findings of Fact 35.

39-42. Accepted in or subordinate to Findings of Fact 32 and 34.

1. Accepted in Findings of Fact 18.

2. Accepted in Findings of Fact 51.

3. Accepted conclusion in Findings of Fact 52. 46-48. Accepted in Findings of Fact 23-26 and 38.

1. Accepted in Findings of Fact 14 and 24.

2. Accepted if last line changed from "St. Mary's" to "Lawnwood" in Findings of Fact 27, 36 and 37.

51-52. Accepted in Findings of Fact 40 and 61.

1. Accepted in Findings of Fact 42.

2. Accepted in Findings of Fact 29.

3. Accepted in Findings of Fact 48.

4. Accepted in Findings of Fact 44-46.

5. Accepted in Findings of Fact 47.

6. Accepted in Findings of Fact 29 and 51.

Respondent, Martin Memorial's Proposed Findings of Fact.

1. Accepted in Findings of Fact 2.

2. Accepted in preliminary statement.

3. Accepted in or subordinate to Findings of Fact 13.

4. Accepted in or subordinate to Findings of Fact 9.

5-6. Accepted in or subordinate to Findings of Fact 5.

1. Accepted in or subordinate to Findings of Fact 7, 11 and 14.

2. Accepted in or subordinate to preliminary statement and Findings of Fact 19.

3. Accepted in or subordinate to preliminary statement and Findings of Fact 18.

4. Accepted in preliminary statement and Finding of Fact 1.

5. Accepted in Findings of Fact 3 and 16.

6. Accepted in or subordinate to Findings of Fact 23 and 24.

7. Accepted in or subordinate to Findings of Fact 20.

14-15. Accepted in or subordinate to Findings of Fact 14.

1. Accepted in or subordinate to Findings of Fact 15.

2. Subordinate to Finding of Fact 13.

3. Accepted in Findings of Fact 12.

4. Accepted in relevant part or subordinate to Findings of Fact 8 and 49. 20-21. Accepted in Findings of Fact 61.

1. Accepted in Findings of Fact 62.

2. Accepted in preliminary statement and Finding of Fact 2.

3. Accepted in Conclusions of Law 74.

4. Accepted in Findings of Fact 52.

5. Accepted in Findings of Fact 38.

27-28. Rejected conclusion that program is superior in terms of quality of care in Findings of Fact 38.

29-30. Accepted in or subordinate to Findings of Fact 43.

1. Accepted in general or subordinate to Findings of Fact 43.

2. Rejected in or subordinate to Findings of Fact 59. 33-34.. Accepted conclusion in Findings of Fact 43.

35-37. Accepted in or subordinate to Findings of Fact 23-26.

38-40. Conclusion rejected in substantial part in Findings of Fact 23. 41-43. Accepted in substantial part in Findings of Fact 24.

44. Accepted in Findings of Fact 47.

45-48. Accepted in or subordinate to Findings of Fact 48. 49-50. Rejected in Findings of Fact 66 and 67.

51-52. Accepted in or subordinate to Findings of Fact 29.

1. Rejected conclusion in part in Findings of Fact 23 and 24.

2. Accepted in Findings of Fact 27.

55-59. Accepted in or subordinate to Findings of Fact 28 and 34.

60. Conclusion rejected in Findings of Fact 32. 61-62. Accepted in Findings of Fact 27.

63. Rejected in general in Findings of Fact 23 and 27.

64-65. Rejected as to alternatives for "residents most likely" to the extent that is inconsistent with need in relation to state plan, in Findings of Fact 27.

1. Accepted in Findings of Fact 51 and 52.

2. Accepted in or subordinate to Findings of Fact 52.

3. Rejected in Findings of Fact 52.

69-70. Accepted in or subordinate to Findings of Fact 52.

1. Accepted in Findings of Fact 22 and 30.

2. Rejected conclusion in Findings of Fact 23 and 24.

3. Accepted except last sentence in Findings of Fact 27. 74-75. Accepted in Findings of Fact 28.

76-77. Accepted in or subordinate to Findings of Fact 29.

1. Rejected conclusion or subordinate to Findings of Fact 29.

2. Accepted in Findings of Fact 32.

80-82. Accepted in or subordinate to Findings of Fact 31.

COPIES FURNISHED:

W. David Watkins, Esquire

2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507

(Counsel for St. Mary's Hospital)

Michael J. Cherniga, Esquire David C. Ashburn, Esquire

Greenberg, Traurig, Hoffman, et al. Suite 2000

111 South Monroe Street Tallahassee, Florida 32302

(Counsel for Palm Beach Gardens Community Hospital)

Elizabeth McArthur, Esquire

101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302

(Counsel for Lawnwood Medical Center)

Leslie Mendelson, Esquire Senior Attorney

Agency for Health Care Administration

325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131

Byron B. Mathews, Jr., Esquire

201 South Biscayne Boulevard Suite 2200

Miami, Florida 33131

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

The Perkins House, Suite 200

118 North Gadsden Street Tallahassee, Florida 32301

R. S. Power, Agency Clerk

Agency for Health Care Administration Atrium Building, Suite 301

325 John Knox Road Tallahassee, Florida 32303

Harold D. Lewis, Esquire The Atrium, Suite 301

325 John Knox Road Tallahassee, Florida 32303

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.

Docket for Case No: 93-004908CON

Orders for Case No: 93-004908CON