STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FORT WALTON BEACH MEDICAL CENTER ) INC. d/b/a FORT WALTON BEACH ) MEDICAL CENTER, )

)

Petitioner, )

vs. ) CASE NO. 95-4171

)

AGENCY FOR HEALTH CARE ) ADMINISTRATION, and BAPTIST ) HOSPITAL, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

This case was heard by Eleanor M. Hunter, the Hearing Officer assigned from the Division of Administrative Hearings, from November 6-10, 13-17, and 28, 1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner, John Radey, Esquire Fort Walton Jeffrey Frehn, Esquire

Beach Medical Radey, Hinkle, Thomas and McArthur Center, Inc.: 101 North Monroe Street, Suite 1000

Tallahassee, Florida 32302

For Respondent, Michael J. Cherniga, Esquire Baptist David Ashburn, Esquire Hospital, Inc.: Greenberg, Traurig, Hoffman,

Lipoff, Rosen and Quentel, P.A. Post Office Drawer 1838 Tallahassee, Florida 32302

For Respondent, Richard Patterson, Esquire

Agency For Agency for Health Care Administration Health Care 2727 Mahan Drive

Administration: Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403 STATEMENT OF THE ISSUES

Whether the application of Fort Walton Beach Medical Center or that of Baptist Hospital should be approved to satisfy the need for one additional adult open heart surgery program in Agency For Health Care Administration District 1.

PRELIMINARY STATEMENT

The Agency For Health Care Administration ("AHCA") preliminarily approved the issuance of certificate of need ("CON") 8003 to Baptist Hospital, Inc.

("Baptist"), and preliminarily denied CON 8004 to Fort Walton Beach Medical Center, Inc. ("FWBMC"). Both hospitals applied for a CON to establish an additional adult open heart surgery program in AHCA District 1, for Escambia, Santa Rosa, Okaloosa, and Walton Counties. By timely filing a petition, FWBMC challenged AHCA's preliminary approval of the Baptist CON application. West Florida Regional Medical Center, Inc. ("West Florida") initially challenged AHCA's preliminary action but voluntarily dismissed that consolidated case on October 27, 1995.

At the final hearing, ruling was reserved on FWBMC's Motion For Summary Recommended Order dismissing Baptist's application. FWBMC described Baptist's proposal as a joint venture agreement between Baptist and Sacred Heart Hospital, requiring Sacred Heart to be a co-applicant, pursuant to AHCA rules. For the reasons discussed in the conclusions of law, FWBMC's Motion For Summary Recommended Order is denied.

The parties stipulated, prior to hearing, to the financial feasibility of the proposals if the ability to achieve the underlying volume projections is proven; to the ability to fund the projects; to the reasonableness of project costs, architectural designs, construction schedules, and non-physician staffing levels, availability, salaries, and benefits; to the ability to use circulatory assist devices; and to the adequacy of CON filing procedures and application contents.

Baptist presented the testimony of Joey Lee Trantham, M.D., expert in cardiology; Thomas A. Vassiliades, M.D., expert in cardiothoracic surgery; Ron Wolff, expert in health care administration; Franklin Fleischhauer, M.D., expert in cardiology and interventional cardiology; Frederick B. Graves, expert in health care administration; Daniel Lewis, expert in health services research; Michael King, expert in hospital financial management, financial planning, and financial analysis; Timothy J. Chambo, expert in hospital cardiovascular services administration; Ronald Luke, Ph.D., expert in health planning; Patrick Madden; Rick Knapp, expert in health care finance; Henk Koornstra, expert in traffic engineering; and Elizabeth Dudek, expert in health planning. Baptist's exhibits 1(a), 1(b), 2(a)-(e), 12(a), 12(c), 12(d), 12(f), 12(g), 12(h), 13(f) -

13(i), 17(a)-(c), 19, 36(a), 65, 66, 73-77, 84, 86-88, 95, 101 (page 36), and

116 were received in evidence. Ruling was reserved on the admissibility of Baptist's exhibit 102, the Daughters of Charity Database Elements and Definitions, which is received in evidence based on the description of the database provided in the Deposition of John Stewart.

FWBMC presented the testimony of David McClellan, expert in hospital administration; Ernest J. Peters, expert in travel time studies; Kevin P. Ryan, M.D., expert in cardiology; Rodney Powell, M.D.; Joe Davis, Jr., R.N., expert in nursing and nursing administration; Irene Stack, R.N., expert in nursing and nursing administration; Doreen Woods, expert in quality assurance; Eugene Nelson, expert in health planning; Armond Balsano, expert in health care planning and finance; and Stan Clark. FWBMC's exhibits 3-6, 8-10, 19, 22, and 24-27 were received in evidence.

Baptist and AHCA presented the testimony of Elizabeth Dudek, expert in health planning, health planning related to certificate of need, and the administration of the CON program, and AHCA's exhibit 1.

FINDINGS OF FACT

1. The Agency For Health Care Administration ("AHCA") is the state agency authorized to issue, revoke, or deny certificates of need ("CONs") for health care facilities and programs in Florida.

   
   

2. AHCA published a numeric need for an additional adult open heart surgery ("OHS") program in AHCA District 1. District 1 is approximately 90 to

   95 miles in length, from west to east, and includes Escambia, Santa Rosa, Okaloosa, and Walton Counties. Adjacent to Escambia County, north and further west, is the State of Alabama. Adjacent to Walton County and further east are (from north to south) Holmes, Washington, and Bay Counties, Florida, which are in AHCA District 2.

   
   

3. The adult population of the District 1 is distributed so that 49 percent is in Escambia, 17 percent in Santa Rosa, 28 percent in Okaloosa, and 6 percent in Walton County.

   
   

4. Fort Walton Beach Medical Center ("FWBMC"), in Fort Walton, Okaloosa County, and Baptist Hospital, Inc. ("Baptist"), in Pensacola, Escambia County, are competing applicants for an adult OHS CON. The parties stipulated to the need for one additional adult OHS program.

   
   

   Existing OHS Providers

   
   

5. In AHCA District 1, Sacred Heart Hospital ("Sacred Heart") and West Florida Regional Medical Center ("West Florida") are the only two hospitals currently authorized to operate adult OHS programs, and both are located in Pensacola, Escambia County. There are also OHS programs adjacent to District 1, in District 2 and in Alabama.

   
   

6. In 1991-1992, there were 507 OHS at West Florida, and 512 at Sacred Heart. Using the same quarters for the year for 1992-1993, OHS volumes declined to 447 at West Florida, and 408 at Sacred Heart. The following year (1993- 1994), volumes increased to 456 at West Florida, and 541 at Sacred Heart. The most recent data available from the local health council, for comparable quarters in 1994-1995, shows 483 procedures at West Florida and 743 at Sacred Heart, or a total of 1226.

   
   

7. Using county-specific use rates and county-specific market shares, the total estimated number of OHS in District 1 facilities will be approximately 1275 in 1996, 1297 in 1997, and gradually rising to 1360 in the year 2000. Absent approval of any additional programs, Sacred Heart is projected to perform 764 procedures in 1996 and 811 in the year 2000, with West Florida Regional projected to perform 512 in 1996 and 550 in the year 2000.

   
   

   Sacred Heart

   
   

8. Sacred Heart is a 391-bed not-for-profit hospital in Pensacola. The primary service area for Sacred Heart includes Escambia and Santa Rosa Counties. The secondary service area includes Okaloosa County, and Baldwin and Escambia Counties in Alabama. Sacred Heart is a disproportionate share provider. There has been an OHS program at Sacred Heart for over twenty years. Currently, three of the seven inpatient surgery operating rooms are used for OHS, with a heart- lung machine for each room. Sacred Heart also operates three cardiac catheterization ("cath") lab rooms, two primarily for caths and the third for electrophysiology studies.

9. The designation of a third OHS operating room in March 1995, eliminated the need to schedule cardiac caths and angioplasties for limited, specific slots of time, by assuring the availability of an operating room for OHS back-up for patients who "crash" or need immediate OHS during a cardiac cath lab procedure.

   
   

10. In 1993, a review of open heart surgery outcomes at Sacred Heart indicated higher than expected mortality rates. At that time mortality rates at Sacred Heart were statistically substantially above those at West Florida. When mortality rates were higher, the volume of OHS procedures at Sacred Heart was between 408 - 541, in contrast to current volumes in excess of 700 cases.

    Before 1993, two cardiovascular surgeons were on the Sacred Heart staff. Since the fall of 1993, two additional cardiovascular surgeons, affiliated with the Cardiology Consultants group, have been added to the staff at Sacred Heart, the more recent in the summer of 1994.

    
    

11. Cardiology Consultants, a group of fifteen cardiologists, and its affiliate group of two cardiovascular surgeons, Cardiothoracic Surgery Associates of Northwest Florida, are the primary referral sources for 75 to 80 percent of OHS cases at Sacred Heart. The group operates the cardiology program at Sacred Heart. Cardiology Consultant's referrals for OHS are made to its two affiliated cardiovascular surgeons and to the two other cardiovascular surgeons, who are in a separate group. Cardiology Consultants has established an outreach program to smaller community hospitals. Two of the group's cardiologists conduct monthly case management conferences in Fort Walton Beach. They review, with local cardiologists, the treatment and subsequent care of patients previously referred to the group. In addition, cardiologists from the group have regularly scheduled consultation hours at hospitals in Atmore, Brewton, and Baldwin, Alabama. One member of Cardiology Consultants practices full-time in Foley, Alabama, where an 82-bed hospital is located.

    
    

12. Although 100 percent utilization is unreasonable and impossible, Sacred Heart estimated that it had the capacity to perform 980 OHS a year and that the district had the capacity to perform 2,450 OHS a year, at a time when Sacred Heart had two cardiovascular surgeons and the district had five.

    
    

13. Sacred Heart supports the approval of a new OHS program at Baptist, provided that Sacred Heart manages the entire program for the first two years and that a monitoring process assures adequate volumes to maintain the quality of care at Sacred Heart.

    
    

    West Florida Regional Medical Center

    
    

14. West Florida, the only other OHS provider in District 1, is affiliated with the Columbia/HCA Health Care Corporation, as is the applicant, FWBMC.

    Until two years ago, West Florida served approximately 71 percent of OHS patients residing in Okaloosa and Walton Counties, as compared to 29 percent served at Sacred Heart. Sacred Heart, due to its and Cardiology Consultants' outreach, is gaining a greater share of the market.

    
    

15. West Florida, FWBMC, and Gulf Coast Community Hospital, in Panama City, are three of five Columbia/HCA Health Care Corporation hospitals in what is called the Columbia North Gulf Coast Network. The other two are Twin Cities Hospital, with 75 beds in Niceville, and Andalusia Hospital in Andalusia, Alabama. The Gulf Coast Network negotiates managed care contracts and purchasing agreements on behalf of the five Columbia hospitals in the area. In District 1, Columbia also owned a hospital in Destin, which is now closed.

    Bay Medical Center

    
    

16. Bay Medical Center is an independent, tax-exempt special district, authorized by the Florida Legislature in July, 1995, to operate an existing public hospital, and to meet the health care needs of residents of Panama City and the surrounding areas. Panama City is in Bay County, which is in AHCA District 2, immediately adjacent to southern Walton County. The hospital has

    353 licensed beds and is located approximately 2 miles from Gulf Coast Community Hospital. Bay Medical has approximately $43 million in long-term debt financed through tax-exempt revenue bonds.

    
    

17. Bay Medical provides cardiac cath, open heart surgery and angioplasty, obstetrics, and inpatient psychiatric services. As a full-service regional tertiary hospital, Bay Medical also has renal dialysis, neurosciences, a hyperbaric chamber, and radiation oncology. Approximately 97 percent of all indigent care services rendered in Bay County are provided by Bay Medical.

    Under a certificate of convenience from Bay County, Bay Medical operates an advanced life support transportation system for intra-hospital transfers. The transportation system received a subsidy of approximately $450,000 in 1994, having not reached sufficient volume to break even.

    
    

18. The staff at Bay Medical includes seven cardiologists and four cardiovascular surgeons. For the fiscal year ending September 30, 1995, 329 OHS cases and 2,447 caths (including 469 angioplasties) were performed at Bay Medical. In 1994, two OHS cases at Bay Medical originated in Okaloosa and Walton Counties, one from Point Washington and one from Crestview.

    
    

19. Until the 1995 legislation establishing the special district, Bay Medical Center was limited to doing business in Bay County. Bay Medical is now authorized to establish business entities or satellite clinics in neighboring southern Walton and Okaloosa Counties, including the beach communities located between Panama City and the Destin/Sandestin area. Destin is approximately 45 miles and Fort Walton is approximately 65 miles from Bay Medical.

    
    

20. With its existing OHS operating room and an additional one that was scheduled to be equipped for OHS in November 1995, Bay Medical has the capacity to double the 329 OHS cases and to accommodate an additional 300 angioplasties.

    
    

    Alabama Hospitals

    
    

21. Three OHS programs exist in Mobile, Alabama, within 45 miles of Pensacola, but few referrals are made from District 1 to the Mobile hospitals. When out-migration to Alabama occurs, the relatively few cases go either to a large university teaching hospital or to a veterans administration hospital, both in Birmingham.

    
    

    Con Applicants

    
    

    Baptist Hospital

    
    

22. Baptist is licensed to operate 601 beds, and 541 of those beds are located in Baptist Hospital ("Baptist"), Pensacola. The other 60 beds are located at Gulf Breeze Hospital, approximately 10 miles southeast of Pensacola in Santa Rosa County. The licenses for the two facilities were combined into a single license in April 1995. Baptist Hospital is a major acute care hospital and tertiary referral center, with an active oncology program providing infusion

    services, chemotherapy, and radiation therapy, and a wide range of psychiatric and substance abuse services. It is accredited by the Joint Commission for Accreditation of Health Care Organizations (JCAHO).

    
    

23. Baptist is a state-designated trauma center. Emergency ambulance transportation and life flight, covering northwest Florida and southwest Alabama, are provided by Baptist, consistent with its extensive outreach to physicians, clinics, and to a 55-bed Baptist Health Care hospital located in the town of Jay in Santa Rosa County.

    
    

24. Baptist is a disproportionate share provider under the state Medicaid and the federal Medicare programs. In District 1, Baptist provided care to the largest number of patients with AIDS for 1993 and 1994. Baptist offered to condition its CON-approval on providing 1.8 percent of total OHS to Medicaid patients and .9 percent to charity.

    
    

25. Baptist has a sophisticated cardiology program, providing a wide range of non-invasive, as well as diagnostic and therapeutic services, including inpatient and outpatient cardiac caths, echocardiography, and electrophysiology. Baptist was the first hospital in District 1 to offer electrophysiology, beginning in 1983. Baptist also offered angioplasty services before they were regulated. The general term "angioplasty" includes traditional coronary balloon angioplasty, arthrectomies, and stents. In traditional balloon or percutaneous transluminal coronary angioplasty ("PTCA"), an obstruction in an artery is opened by inflating a balloon-type device at the end of the catheter. As a grandfathered provider, Baptist continues to provide emergency angioplasties, which are typically performed on patients presenting to an emergency room with evidence of acute myocardial infarction (heart attack). Approximately 70 emergency angioplasties were performed at Baptist in 1995. In the year ending in June 1995, there were approximately 990 diagnostic cardiac caths at Baptist. One fourth to one third of all cardiac caths result in a finding that a follow- up interventional procedure is needed.

    
    

26. Cardiology Consultants also operate the cardiology program at Baptist, as a part of the Sacred Heart program. The unified Baptist/Sacred Heart cardiology department has a common medical staff, a single section chief, joint peer review, and shared on-call teams. Baptist/Sacred Heart cardiologists also staff Baptist's Jay affiliate and four smaller hospitals in Alabama. Services available through the outreach program include computerized EKG interpretation, multi-monitor scanning, and mobile cardiovascular ultrasound services. Baptist and Sacred Heart have licenses for cardiovascular information systems software, with common data elements, and report formats. If approved, Baptist would implement OHS services with quality assurance, case management, and other protocols used at Sacred Heart. The two hospitals' surgical team members will cross-train and eventually have the ability to operate at either facility with any of the cardiovascular surgeons on staff. Baptist has approval from an affiliate of Sacred Heart, the Daughters of Charity National Health System, to access its national cardiac database. Cardiology Consultants would recruit an additional cardiovascular surgeon for the Baptist OHS program.

    
    

27. Baptist proposes to renovate approximately 5700 square feet and to use two existing operating rooms in the surgical suite in the Pensacola hospital for OHS. Between the two operating rooms, an area which currently is a cystoscopy room would be used for perfusion services. Baptist proposes to add two beds to the 8-bed coronary ICU unit located on the first floor, adjacent to the operating rooms. A progressive care unit on the fourth floor will also serve OHS patients.

28. Baptist's proposal was criticized as a response to an institutional desire to complete the range of cardiac services available at Baptist, not a response to a community need for the service. Baptist was also criticized for its potential adverse impact on the OHS program at Sacred Heart, although Sacred Heart supports Baptist's proposal. Baptist's proposal relies on Sacred Heart for management services and Cardiology Consultants for volume monitoring. The only document stating the proposed terms of an agreement with Sacred Heart is a letter of May 1, 1995, from Sacred Heart's President and CEO. The letter requested written confirmation of the ground rules by Baptist, which has not been done. The State Agency Action Report, which gives the reasons for AHCA's preliminary approval of the Baptist application, includes a reviewer's statement that "Concern is raised regarding control and responsibility for the proposed open heart surgery program between the parties of the 'cooperative arrangement'. At the final hearing, AHCA's expert testified that she was not concerned about the details of the proposed agreement because it cannot affect the OHS program negatively.

    
    

    Fort Walton Beach Medical Center

    
    

29. FWBMC is a 247-bed hospital, with 170 medical/surgical beds, averaging

    52 percent occupancy, or approximately 128 patients. A 20-bed comprehensive medical rehabilitation unit and an 18-bed skilled nursing unit are CON-approved and under construction at FWBMC. Comprehensive rehabilitation services were scheduled to begin in February, 1996, and skilled nursing in the Spring of 1996. FWBMC has received, with its accreditation, letters of commendation from the JCAHO.

    
    

30. FWBMC is located 45 miles from the Gulf of Mexico in the center (from east to west) of Okaloosa County. The primary service area for FWBMC is Okaloosa County and the southern fringes of Santa Rosa and Walton Counties. The communities of Fort Walton Beach, including Eglin Air Force Base, Niceville, and Valparaiso, Santa Rosa Beach, Sandestin, Destin, Navarre Beach, Crestview, and DeFuniak Springs are in the service area. FWBMC does not include Bay County, which is southeast of Walton, in its service area.

    
    

31. Okaloosa County has a population of 157,000, which is growing, in part, by attracting retirees, including retired military personnel. Eglin Air Force Base is located on 724 square miles of federally owned land in the County. The Base hospital, located approximately 8 miles northeast of FWBMC, is a regional facility for approximately 20,000 active and 30,000 retired military personnel. Eglin Hospital operates 80 of its 155 beds and is a basic medical/surgical hospital, with small psychiatric and obstetrics units. Eglin provides significant outpatient clinic care. Eglin Hospital does not have OHS or cardiac cath. When a service is not available at Eglin Hospital, the patient receives a non-availability statement authorizing the patient to receive that specific service at another hospital. Eglin patients are most often referred to FWBMC for neurosurgery, psychiatric care, intensive care, coronary care and cardiac caths, and, when Eglin's capacity is exceeded, for obstetrical care.

    OHS cases from Eglin are referred to the two Pensacola providers.

    
    

32. In addition to FWBMC and Twin Cities, other hospitals in Okaloosa County are North Okaloosa Medical Center, with 115 beds, and Harbor Oaks, a psychiatric adolescent hospital. In Walton County, there is one hospital, Walton Regional in DeFuniak Springs.

33. Currently, at FWBMC, non-interventional diagnostic procedures include nuclear stress testing, and echocardiography, which is a type of ultrasound. Although transesophageal echocardiography, in which the patient swallows a probe that touches the back of the heart, gives far better resolution and a clearer picture of the heart, FWBMC has been unable to justify the maintenance of the probe due to low volumes of the procedure.

    
    

34. Five cardiologists are on staff at FWBMC. Two of them also work at North Okaloosa Medical Center, four of the five also see patients at Twin Cities Hospital in Niceville. The cardiologists performed approximately 700 cardiac cath lab procedures in 1995. Rule 59C-1.032(6)(a), Florida Administrative Code, requires cardiac cath labs to have written protocols for the transfer of patients by emergency vehicle to a hospital with OHS within 30 minutes average travel time. Emergency heart attack patients benefit most from having angioplasties within two hours of the onset of symptoms. In reality, however, the experience at FWBMC is that preparing the patient for transfer, waiting for the helicopter or ambulance, exchanging information between transferring hospital staff and transport personnel, and between transport personnel and receiving hospital staff, and actual travel time can take up to two and a half hours.

    
    

35. The only interventional cardiologist in Okaloosa County performed 28 PTCAs at West Florida in Pensacola, in 1994. American College of Cardiology and American Heart Association ("ACC/AHA") guidelines set an annual minimum of 75 therapeutic cath procedures for interventional cardiologists. The application and the testimony were in conflict on the issue of whether one or two cardiovascular surgeons would perform OHS at FWBMC when the program opens. Initially, case volumes would support only one cardiovascular surgeon, but at least two are needed to provide 24 hour coverage. Although Fort Walton's administrator testified that there would be two cardiovascular surgeons at some point, the application describes the need to recruit a surgical team consisting of one surgeon.

    
    

36. FWBMC plans to construct an operating room, dedicated to OHS, to renovate an adjacent operating room for OHS, and a middle room as a pump room, and to purchase the equipment necessary for the OHS program. The program protocols will be developed using the experiences of other Columbia affiliates, including West Florida, Miami Heart Institute, and Bayonet Point Hospital in Hudson, Florida.

    
    

37. The staff at FWBMC has the ability to apply an intra-aortic balloon pump assist. FWBMC also has an established thrombolytic protocol, and a team to evaluate the outcomes of patients with cardiovascular disease. Approximately 10 nurses at FWBMC have a minimum of three years experience with OHS critical care. Within the past two years, four nurses have been hired by FWBMC directly from OHS programs. The majority of ICU and CCU nurses are certified in cardiac life support. As a Columbia facility, FWBMC also has on-line access to other Columbia affiliates information systems, including other hospitals' policies, protocols, and volumes, and would utilize Columbia's resources for training and refresher courses for staff.

    
    

38. FWBMC is committed to providing three percent of OHS services for Medicaid and two percent for indigent patients. FWBMC also commits, as a condition for CON approval, to having charges set at 85 percent of the maximum allowable rate increase (MARI) adjusted average for existing providers' OHS charge.

39. FWBMC's proposal was criticized as being unable to attract the volumes projected, the cardiovascular surgeons needed for 24 hour coverage, or to provide OHS at the cost proposed. FWBMC was also criticized for the potential adverse impact on the OHS programs at Bay Medical Center and West Florida.

    
    

    Statutory Review Criteria

    
    

    Section 408.035(1)(a)-need for the service in relation to local and state health plan

    
    

40. The parties agree that the 1994 District One Health Plan Certificate of Need Allocation Factors to apply the review of their CON applications.

    
    

41. The District 1 health plan gives a preference to a CON applicant that best demonstrates cost efficiency, lower project costs, and lower patient charges. Baptist's total project costs are $1.58 million, FWBMC's are $2.2 million. Baptist's project is confined to the renovation of 5,700 square feet of existing space, as compared to FWBMC's combined renovation of 1,100 square feet and new construction of 1,600 square feet.

    
    

42. FWBMC commits, as a condition for the award of its CON, to set OHS charges at not more than 85 percent of the MARI, adjusted district average. In the application, FWBMC further explains that its proposed fixed rate structure will not exceed 85 percent of the adjusted district average for existing district providers' DRG charges, using a six percent annual inflation rate.

    
    

43. Using 1994 data for the World Health Organization's classification of Major Diagnostic Category-5 ("MDC-5"), a grouping of cardiovascular diseases, excluding OHS, Baptist demonstrated that charges per discharge were highest at FWBMC, followed in order by Baptist, West Florida, and Sacred Heart. Outside the district, Bay Medical's cardiology rates were approximately 16 percent lower than those at FWBMC. Baptist's expert concluded, therefore, that FWBMC's second pro forma year open heart revenue per case would be $75,314 per case, not

    $47,534 as projected in the CON application. By comparison the same methodology shows MDC-5 revenues per admission at West Florida and Baptist varying by only two percent. Baptist's second pro forma year revenue per case, using the same methodology, is $60,268, as compared to its CON projection of $61,441. Revenues per case for two different categories of inpatient cardiac caths, for the 12 months ending December 31, 1994, were $13,721 at FWBMC and $10,901 at Baptist in one category, and $11,219 at FWBMC and $9,186 at Baptist in the other.

    
    

44. Baptist also contends that charge master items, including procedures, ancillaries, and tests which are common to other MDC-5 categories cannot realistically be billed at a different rate when related to OHS. FWBMC asserts that its commitment to lower charges can be accomplished by adjusting the charge master for "big ticket" items included in OHS cases, such as the use of the OHS operating rooms or the daily charge for cardiovascular intensive care beds. Baptist's assertion that FWBMC cannot set charges to meet the commitment is rejected in view of a similar commitment having been offered by Baptist in a prior application, and the apparent implementation of a similar pricing formula at another Columbia facility, Tallahassee Community Hospital ("TCH"). Beyond stating that "big ticket" item pricing could be used, FWBMC, however, failed to explain any details for implementing charges in this case, in view of its higher MDC-5 charges, and its existing requests for amendments to the MARI. There was no evidence that the charge structure is comparable to that which existed at TCH, although a former TCH administrator now works at FWBMC.

45. Assuming arguendo that FWBMC can discount OHS charges by 15 percent, FWBMC concedes that lower patient charges will benefit directly only the payor groups which have reimbursement formulas related to actual charges. The direct benefit affects not more than 38 percent of the patients who are in a payor category which is declining with the rise in managed care. Indirectly, FWBMC noted, charges can be a starting point for negotiating managed care rates. FWBMC's lack of specificity on how it would set charges despite its higher MDC-5 charges, its limited benefit to patients due to shifts in payor mix, and the fact that an affiliate hospital is setting charges used to calculate the district average diminish the importance of the FWBMC pricing proposal as a community benefit in an OHS program. In addition, AHCA's expert noted, 1992 data indicated "that District 1 had on the whole lower average charges for OHS than the state." In general, the Baptist application better meets the first preference of the local health plan.

    
    

46. Based on Baptist's failure to address local health plan preference 2 in its CON application, and FWBMC's statement that the preference, related to the conversion of beds, is inapplicable, the preference is deemed inapplicable or not at issue.

    
    

47. Preference three for CON applications to convert existing capacity to expand existing or new services over CON applications seeking new construction, is better met by Baptist. FWBMC will construct an additional 1670 square feet and renovate 1100 square feet, and Baptist will renovate 5700 square feet of existing space.

    
    

48. Preference four, favoring joint ventures and shared services that mutually increase existing resource efficiency over unilateral CON applications, is of limited value in distinguishing between the applications of Baptist and FWBMC, because both are unilateral applications. Through the influence of Cardiology Consultants, more shared cardiology services currently exist between Baptist and Sacred Heart, and could continue for at least two years, subject to the terms of an proposed agreement which has not been negotiated or accepted by the Boards of Directors of the hospitals. West Florida and FWBMC also have the potential for cooperation due to their common ownership. Although AHCA's initial reviewer gave Baptist full credit for meeting the preference, AHCA's expert testified at hearing that she would not have given Baptist that credit.

    
    

49. Financial access is the concern embodied in preference five, for CON applicants demonstrating a commitment to the provision of services regardless of the ability of patients to pay; preference six, for CON applications specifying the greatest percentage of services to Medicaid and indigent patients; and preference seven, for applicants with the best history of Medicaid and indigent service. The preferences do not necessarily apply solely to assure the availability of OHS to Medicaid and indigent patients, most of whom are children or women below the age of 65, who are less likely to need OHS than older persons. In District 1, for example, an annual average of 2.8 percent of OHS patients are covered by Medicaid. One health planning expert described the preferences as rewarding a provider of charity services with an off-setting potentially profitable service, as demonstrated by the applicants' pro formas, although the trend towards managed care is limiting the ability of hospitals to do such "cost sharing". See, also, Subsection 408.035(1)(n), Florida Statutes.

    
    

50. Baptist is a disproportionate share Medicaid provider, FWBMC is not. FWBMC noted that it has served more patients in the self-pay category, which includes most uninsured patients who are ultimately categorized as bad debt or charity. In 1994, self-pay at Baptist was 5.85 percent and 9.98 percent at

    FWBMC. At FWBMC, Medicaid was approximately 12 percent, and charity care was approximately 1.7 percent of the total in 1994. By contrast, in 1994, Baptist's Medicaid patient days were 17 percent of its total, or 19 percent when Medicaid health maintenance organizations ("HMOs") are included. At the same time, charity care was 3.8 percent of the total at Baptist.

    
    

51. Baptist proposes to serve four Medicaid and six self-pay patients of the total number of 175 patients in year one, and four Medicaid and seven self- pay of the 227 patients in year two. FWBMC proposes to serve three percent Medicaid and two percent indigent of its projected total of 203 patients in year one, and of 221 patients in year two. Although the Baptist and FWBMC commitments are comparable in terms of combined total number of Medicaid and indigent patients, Baptist better meets the financial access preferences due to its commitment, combined with its history and status as a disproportionate share Medicaid provider.

    
    

52. Local health plan preferences which are inapplicable to or fail to distinguish between the CONs at issue are: 8, for bed expansions; 9, on bed distribution; 10 and 11, on bed occupancy rates; 12, related to subdistrict case loads; 13, for facility occupancy rate projections; 14, for pediatric unit conversion; 15, for ICU/CCU conversions; 16, 17, 18, 19, and 20, related to technology and major equipment applications.

    
    

53. Local health plan preference 21, for applicants demonstrating a history and willingness to serve AIDS patients, is met by both Baptist and FWBMC. Baptist served more HIV+/AIDS patients in 1994, having admitted 88 people with illnesses classified in the DRGs related to AIDS, for 808 of its total of 88,423 patient days. At the same time, FWBMC admitted 14 patients in the same DRGs for 185 of its total of 35,648 patient days. Mortality rates for AIDS, as an indicator of the incidence of HIV and AIDS, are considerably lower in Okaloosa than in Escambia County.

    
    

54. Baptist meets preference 22, as the District 1 hospital which has provided the greatest percentage of patient days to AIDS patients.

    
    

55. The first state health plan preference supports the establishment of OHS programs in larger counties within a district where the percentage of elderly is higher than the statewide average and the total population exceeds 100,000.

    
    

56. Although the populations of both Escambia and Okaloosa Counties exceed 100,000, neither exceeds the statewide average percentage of elderly (defined as residents age 65 and older). Escambia County had approximately 275,000 residents, compared to approximately 157,000 in Okaloosa County. The statewide percentage of the population 65 and over was 18.6 percent in 1995, but only 12 percent in Escambia, and 10 percent in Okaloosa.

    
    

57. The second state preference is given for new OHS programs clearly demonstrating an ability to perform more than 350 OHS procedures annually within three years of initiating the program.

    
    

58. There is a direct relationship between higher volumes of cases and better outcomes in OHS. Using a New York study, the ACC/AHA guidelines for cardiovascular surgeons set a minimum of 100 to 150 OHS cases a year in which the surgeon performs as the primary surgeon, and an institutional minimum of 200 to 300 cases for each OHS program. The institutional minimum set by AHCA for OHS programs in Florida is 350 OHS cases a year. Baptist projects that 175 OHS

    and 239 PTCAs will be performed at Baptist Hospital in the first year of operation, and 227 OHS and 243 PTCAs in the second year. The actual number of direct Baptist patient transfers (from bed to bed, without an interim discharge) for OHS was 116 in 1993, 129 in 1994, and 88 in the first 9 months of 1995.

    Because Baptist would be keeping most of the existing transfers and splitting the existing and growing Sacred Heart volume of over 800 cases projected by the year 2000, performed by the same cardiovascular surgeons who have the ability to re-direct up to 75 to 80 percent of that volume, Baptist demonstrated that it has the ability to reach 350 procedures within three years.

    
    

59. Most of the OHS performed at FWBMC would, in the absence of a FWBMC OHS program, be performed at West Florida. FWBMC projects that it will reach volumes of 203 OHS and 215 PTCAs in 1997, and 221 OHS and 234 PTCAs in 1998. The projections assume that FWBMC will be able to capture 76 percent of the OHS patients residing in Okaloosa and Walton Counties in year one and 80 percent in year two, which is the historical market share for West Florida. FWBMC would expect to keep most of its current acute transfer (bed-to-bed) patients for OHS

    or angioplasties, of which there were 167 in 1994, and 200 in the first 8 months of 1995. In addition, FWBMC expects to have an additional five percent in- migration, which appears to be a conservative estimate when compared to the current twelve to fourteen percent in-migration to District 1 for cardiac cath services, and twenty to twenty-five percent in-migration for OHS. The current in-migration is, however, to Pensacola not to Okaloosa County. In less than a year, from 1994 to the first ten months of 1995, Sacred Heart, as a result of its and Cardiology Consultants' out-reach programs, more than doubled its referrals from Fort Walton Beach, shifting referrals away from West Florida.

    The underlying assumption that FWBMC can attract over 75 percent of the Okaloosa/Walton resident market in year one and 80 percent in year two, based on West Florida's historical market, is rejected as not supported by the evidence. Although both FWBMC and West Florida are Columbia facilities, the new program at FWBMC will have no track record, will admittedly continue to transfer more complex cases, has not yet identified cardiovascular surgeons and, therefore, has no OHS referral relationships with cardiologists and primary care physicians in the district. Baptist estimates that FWBMC reasonably can expect to perform between a third and a half of the OHS from Okaloosa/Walton residents, resulting in 108 to 164 OHS in 1997, 110 to 167 in 1998. FWBMC did not demonstrate that it can reach 350 OHS cases within three years of initiating the program.

    
    

60. State health plan preference three for improved access to OHS for persons currently seeking services outside the district is not a significant factor in distinguishing between the applicants, due to the relatively small out-migration experienced in District 1. More out-migration does occur from Walton and Okaloosa than from Escambia and Santa Rosa Counties, which supports FWBMC's claim that its location better enhances accessibility within the district.

    
    

61. Preference four, for a hospital which meets the Medicaid disproportionate share criteria, and provides charity care, and otherwise serves patients regardless of their ability to pay, favors the Baptist application.

    
    

62. Preferencefive applies to an applicant that can offer the service at the least expense, while maintaining high quality of care standards. The health plan preference further suggests that the physical plant of larger facilities can usually accommodate the required operating and recovery room specifications with lower capital expenditures than smaller facilities, and that the larger hospital generally has the greater pool of specialized personnel. FWBMC presented evidence that other hospitals its size, for example Columbia-affiliate

    Bayonet Point in Hudson, Florida, operate successful OHS programs. Nevertheless, Baptist is entitled to the preference based on its size, renovation plans, project costs, and existing depth of specialized and tertiary services.

    
    

63. Preference six, favors hospitals with protocols for the use of innovative techniques as alternatives to OHS, such as PTCA and streptokinase therapy. Baptist, as a grandfathered provider and by virtue of protocols approved by AHCA does provide PTCA. Both Baptist and FWBMC offer streptokinase and other alternative thrombolytic therapies. FWBMC will be able to expand cardiac cath lab services to include PTCA, if approved for OHS. Beyond PTCA, the application and testimony do not indicate the scope of angioplasty procedures proposed by FWBMC.

    
    

64. On balance, Baptist's application better meets the need for an additional adult OHS program in relation to the applicable local and state health plans.

    
    

    Section 408.035(1)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the district; (1)(b) - accessibility to all district residents; (2)(b) - appropriate and efficient use of existing inpatient facilities, and (2)(d) - serious problems in obtaining inpatient care without the proposed service.

    
    

65. AHCA has established, by rule, that OHS is a tertiary service not intended to be available necessarily at every qualified hospital. Rule 59C- 1.033(4)(a), Florida Administrative Code, sets the objective of having OHS available to at least 90 percent of the population of each district within a maximum two hour drive under average travel conditions. With the existing providers in District 1, the access standard is met.

    
    

66. Because the geographic access standard of the rule is met in District 1, Baptist's expert asserts that geographic access is relatively insignificant in distinguishing between the applications in this case. That position is rejected as inconsistent with the statute. Although transfers are inherent in the concept of tertiary services, enhancing access to decrease transfers and the distance and time required for transfers is a valid basis for distinguishing between competing applicants. AHCA's expert testified that "assuming that everything else is equal, then . . . avoid[ing] more transfers . . . could be important."

    
    

67. Using weighted average travel times for residents, based on the 1995 adult (15 and over) population, Okaloosa County residents are 62.35 minutes from the closer of the two existing district OHS providers. That would be reduced to

    17.42 minutes if an OHS program is established at FWBMC. Walton County residents' average travel times would decrease from 79.7 minutes to 47.89 minutes with a program at FWBMC. For Santa Rosa residents, the improvement would be approximately one and a half minutes, from 25.85 to 24.43 minutes. If Baptist's application were approved, the travel time for Escambia County residents would improve from 15.8 to 11.17 minutes. Currently, 75 percent of district residents are within an hour of an OHS program. The establishment of a program at FWBMC would improve geographic access by increasing to 98 percent the number of district residents within one hour of an OHS program.

    
    

68. The establishment of an OHS program at FWBMC also will assist in alleviating the current mal-distribution of cardiac resources. The program

    would attract more interventional cardiologists to the eastern areas of district, where there currently is one, and would attract cardiovascular surgeons, where there are none.

    
    

69. County OHS use rates varied in 1994, from 1.72 discharges per thousand population in Okaloosa County to 2.12 in Escambia. Angioplasty use rates were

    1.84 for Escambia and 1.55 for Okaloosa residents. The difference is attributable to the relative accessibility of OHS in Escambia, the population difference of more people over 65 in Escambia, and the availability of fifteen cardiologists at Baptist and Sacred Heart, as compared to five at FWBMC.

    
    

70. There is no evidence of inefficiency or quality of care concerns at the existing providers, after the decline in 1993 mortality rates at Sacred Heart. The extent of utilization of the existing providers and the evidence regarding capacity demonstrates that available OHS capacity exists in District 1, and will continue to exist through the year 2000, based on all of the parties' projections.

    
    

71. Due the overlap in medical staff, referral sources, market shares, and physical proximity, the approval of a new program at Baptist is reasonably expected to have the greatest adverse impact on the volume of OHS performed at Sacred Heart. For the year ending in September 1995, approximately 564 cases were referred to Sacred Heart by Cardiology Consultants, 91 by Gulf Coast Cardiology, 44 by Fort Walton Beach Cardiology Group, and another 44 from various other sources. Using Baptist's current 43.8 percent share of the combined Baptist/Sacred Heart MDC-5 market, and the projected total volumes, Baptist would have 339 of the combined 776 OHS in 1997, and 355 of 811 in 2000. The remaining cases would leave Sacred Heart at or below 1993 levels, when its mortality rates were statistically significantly higher than those at West Florida, although there is no evidence that volume was the cause of the 1993 mortality rates. Sacred Heart witnesses testified that they assume that the minimum volume assured for Sacred Heart would be 350 cases, as referenced in the OHS rule, but the Baptist/Sacred Heart agreement has not been negotiated. Any minimum volume agreement is also directly dependent on Cardiology Consultants' ability to retain their share of the OHS market and their ability to allocate cases between the two hospitals. Baptist emphasized that the programs at Baptist and Sacred Heart ultimately will become competitors.

    
    

72. The establishment of an OHS program at FWBMC, Baptist asserts, will reduce OHS volume at West Florida below 350, and will redirect OHS patients from Bay Medical Center in Panama City, which has not reached the 350 minimum. The projected volume of OHS at Bay Medical was 332 procedures in 1995. The loss of Bay Medical cases, according to Baptist's expert, will occur because Columbia facilities, including Gulf Coast Community Hospital in Panama City, will refer patients to FWBMC. Baptist's expert relied on 1994-1995 (third quarter) data which demonstrated that more referrals were made to West Florida than to Bay Medical in some areas of District 1 which are closer to Bay Medical. However, the total number of Bay County residents receiving OHS in District 1 was nine, three at Sacred Heart and six at West Florida. Virtually no overlap exists between the service areas of Bay Medical and FWBMC, while substantial staff overlap exists between Bay Medical and Gulf Coast. All eight cardiologists on the staff of Gulf Coast are also on the staff of Bay Medical. It is not reasonable to conclude that the cardiologists will make referrals for OHS to more distant hospitals where they have no staff privileges. FWBMC projects that one quarter of one percent of its discharges will come from Bay County. In 1994, there were 3 OHS cases at Bay Medical from Okaloosa and Walton Counties. Baptist's assertions that referral patterns in Districts 1 and 2 are dictated by

    the presence of Columbia facilities in various communities, and that Bay Medical would be affected adversely by the establishment of an OHS program at FWBMC are rejected as not supported by the evidence.

    
    

73. An OHS program at FWBMC will reduce the volume of OHS cases at West Florida. Using FWBMC's estimates that it will have 203 OHS in 1997 and 221 in 1998, retaining many patients who would have required transfers to Sacred Heart and West Florida, with five percent in-migration, and assuming that the volume ranges from 483 to 550 cases at West Florida, then West Florida can remain marginally above 350 cases. The remaining volume is inadequate to provide the minimum 100 to 150 OHS for each of the four cardiovascular surgeons, to assure a high quality program without reducing the number of surgeons.

    
    

    Section 408.035(1)(c) - applicant's quality of care

    
    

74. Both Baptist and FWBMC provide high quality of care in existing programs, as reflected, in part, by their JCAHO accreditations. Baptist's application better documents its ability to establish a high quality OHS program, to the detriment of that at Sacred Heart. FWBMC does not document its ability to establish a quality OHS program, due to its size, relative lack of tertiary programs, lack of some supplementary diagnostic and therapeutic cardiac services, and failure to identify cardiovascular surgeons and interventional cardiologists who will perform OHS and angioplasties at FWBMC.

    
    

    Section 408.035(1)(d) - availability of alternatives to inpatient care

    
    

75. There are no alternatives to inpatient angioplasty and OHS care.

    
    

    Section 408.035(1)(e) - economics of joint, cooperative and shared health care resources

    
    

76. Baptist would benefit from duplicating the program at Sacred Heart and, presumably, from Sacred Heart's clinical management of the Baptist program for the first two years. The precise nature of Sacred Heart's contribution to the Baptist program is subject to the terms of an agreement which has not been negotiated and, therefore, is impossible to evaluate. FWBMC would also benefit from the experiences of other Columbia affiliates which are OHS providers. Although both applicants address quality of care benefits of cooperation, neither demonstrates any economic benefit.

    
    

    Section 408.035(1)(f) - district need for special equipment or services not accessible in adjoining areas

    
    

77. Baptist and FWBMC are proposing to provide equipment and services which are already available in District 1 and the adjoining areas.

    
    

    Section 408.035(1)(g) - need for medical research and educational and training programs; and (1)(h) - use for clinical training and by schools for health professionals

    
    

78. Neither Baptist nor FWBMC proposed to meet a need for research, educational, or training programs.

    
    

    Section 408.035(1)(h) - availability of personnel and funds

    
    

79. The parties stipulated that each applicant has the ability and means to fund the accomplishment and implementation of their projects. The parties

    also stipulated that proposed non-physician staffing is available and that staffing levels, salaries, and benefits are reasonable. FWBMC's physician recruitment proposals are unclear and too incomplete to conclude that it can adequately support an OHS and angioplasty program.

    
    

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

    
    

80. The parties stipulated that each proposal is financially feasible in the immediate and long term if the volume projections are proven. Baptist's volume projections are supported by the evidence that the OHS and angioplasty cases can be shifted from Sacred Heart to Baptist. FWBMC failed to show that it can achieve projected volumes by similarly shifting cases from West Florida due to distance, the absence of overlapping cardiology staff, increased competition from Sacred Heart, and the need to continue to refer complex cases to more established programs. Therefore, FWBMC's proposed OHS program is not found financially feasible in the long term.

    
    

    Section 408.035(1)(j) - special needs of health maintenance organizations (HMOs)

    
    

81. Neither Baptist nor FWBMC proposes to meet the special needs of HMOs.

    
    

    Section 408.035(1)(k) - needs of entities which provide substantial services to individuals not residing in the service district

    
    

82. Neither applicant asserted at hearing that its proposal is based on the provision of substantial services to non-residents. The parties did demonstrate that over 20 percent of OHS are performed on non-residents, many from surrounding areas in Alabama.

    
    

    Section 408.035(1)(l) - cost-effectiveness, innovative financing, and competition

    
    

83. FWBMC proposed an innovative system for charging for OHS services. The explanation of how one affiliate hospital implemented the alternative charging system and how FWBMC would do so was, however, incomplete and inadequate, when compared to evidence of its existing high costs for cardiology services and limited payor group benefit.

    
    

    Section 408.035(1)(m) - construction costs and methods

    
    

84. The parties stipulated that the project costs, schedules, and architectural designs are established and reasonable.

    
    

    Section 408.035(1)(o) - multi-level continuum of care

    
    

85. The parent corporations of both applicants include clinics, nursing homes, as well as other acute care facilities within their organizations.

    
    

    Section 408.035(2)(a) - less costly, more efficient alternatives studied and found not practicable; and 2(c) alternatives to new construction considered

    
    

86. The utilization of OHS and angioplasty programs at existing providers when compared to their available capacity, and the direct correlation between higher volumes and higher quality, indicate that the least costly, most efficient practicable alternative is to rely on existing providers to meet the need for OHS and angioplasty services in District 1.

87. On balance, the statutory criteria for evaluating CON proposals which focus on problems in existing services do not support the need for an additional adult OHS program at either Baptist or FWBMC. Criteria related to geographic access favor FWBMC. Criteria related to quality of care and long term financial feasibility (due to volume projections) favor Baptist.

    
    

    Rule Criteria

    
    

88. AHCA has promulgated Rule 59C-1.033, Florida Administrative Code, which imposes additional requirements on OHS programs.

    
    

89. By proposing to use the group of cardiovascular surgeons who currently perform OHS at Sacred Heart, Baptist demonstrated the ability to provide the range of OHS procedures required by rule, including valve repair or replacement, congenital heart defect repair, cardiac revascularization, intrathoracic vessel repair or replacement, and cardiac trauma treatment. FWBMC can recruit cardiovascular surgeons who are qualified to perform the required range of operations.

    
    

90. As stipulated by the parties, both Baptist and FWBMC demonstrated the ability to implement and apply circulatory assist devices, such as intra-aortic balloon assist and prolonged cardiopulmany partial bypass.

    
    

91. Both Baptist and FWBMC have the supporting departments needed for OHS, including existing hematology, nephrology, infectious disease, anesthesiology, radiology, intensive and emergency care, inpatient cardiac cath, and non- invasive cardiographics. Baptist has more historical experience with innovative cardiology services and a greater range of cardiographic services than FWBMC.

    
    

92. OHS programs must be available for elective surgeries 8 hours a day for 5 days a week, with the capability for rapid mobilization, within 2 hours,

    24 hours a day for 7 days a week. Baptist can meet the service accessibility requirement of the rule, but FWBMC failed to show that it can. FWBMC's inconsistency concerning the composition of its OHS team and initial low volumes result in uncertainty whether it can meet the requirements for hours of operation.

    
    

93. The residents of District 1 are well served by the existing OHS programs, which have the capacity to meet projected need through the year 2000. AHCA's expert testified that FWBMC's application essentially states that ". . . we are going to get patients who would otherwise have gone to the two existing programs; . . . There was no documentation or even discussion that patients requiring the service weren't able to get the service now, or were having to leave the district to do so." The same is true of the Baptist proposal. In this case, need arises solely from the numeric need publication, and the pool of patients treated in the cardiology department at Baptist, whose transfer to Sacred heart for OHS can be avoided if a program exists at Baptist.

    
    

94. At some level between AHCA's minimum of 350 and Sacred Heart's maximum capacity of 980 OHS cases, an additional OHS program is needed and Baptist is the provider which has better demonstrated its ability to operate an OHS program.

    
    

95. The major disadvantage in the approval of the OHS program at Baptist is the risk that approval is premature and, therefore, detrimental to the quality of OHS services at Sacred Heart absent the implementation of the safeguards proposed by Sacred Heart in the following letter:

    Sacred Heart Hospital Office of the President

    5151 N. Ninth Avenue P.O. Box 2700 Pensacola, FL 32513-2700

    
    

    May 1, 1995

    
    

    Mr. James F. Vickery President

    Baptist Health Care Corporation Post Office Box 17500 Pensacola, FL 32522-7500

    
    

    Dear Jim:

    Please accept this letter of support from Sacred Heart Hospital for your March 1995 Certificate of Need application to establish an adult open heart surgery services program in District I.

    Sacred Heart Hospital recognizes that there is a net need for an additional open heart surgery program in District I, and we believe that the most efficient and cost-effective way to develop such a program is using resources currently available at Baptist Hospital.

    Sacred Heart Hospital is willing to work with Baptist Hospital in the establishment of the

    ----proposed open heart surgery program, in a relationship which includes, but may not be limited to, the following:

    • the establishment of a cooperative program involving open heart surgery, angio- plasty and cardiac catheterization performed at both facilities;

    • the sharing of cardiology staff including open heart surgery team personnel in a manner which will result in the most efficient use of resources between the two hospitals and which will also assure that each member participates in a minimum volume of surgical cases necessary for the achievement of quality standards;

    • the coordination of other resources, including facilities and equipment, in an effort to avoid duplication to the greatest extent practical and feasible;

    • the provision of initial and on-going training of open heart surgery personnel at both facilities by Sacred Heart Hospital;

    • the provision of on-going oversight by Sacred Heart Hospital of utilization review and quality improvement programs, procedures and protocols for the cooperative cardiology program for a minimum of two years; and

    • the clinical management by Sacred Heart

    Hospital of the cooperative cardiology program for a minimum of two years.

    
    

    I am attaching a copy of the action taken by the Executive Committee of our Board of Directors at its meeting on April 28, 1995, if you are in need of such a document. In order to have a complete record of this proposal, to include your acceptance and agreement with the above plan, please con- firm in writing that it will be the ground rules with which we will begin and work towards a first-class Cardiology Program sponsored by our two institutions.

    
    

    Should your March 1995 application be approved by the Agency for Health Care Administration, we anticipate a productive working relationship that will benefit the residents of District I.

    Sincerely, Sister Irene

    President and CEO

    
    

    Enclosure

    
    

    There is no proof of record that Baptist responded or agreed to Sacred Heart's proposal, although Baptist relies on these conditions to support the approval of its application. See, Baptist's proposed findings of fact 34.

    
    

    CONCLUSIONS OF LAW

    
    

96. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding, pursuant to Subsections 408.039(5) and 120.57(1), Florida Statutes.

    
    

97. The applicant for a CON has the burden of proving entitlement based on 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).

    
    

98. FWBMC moved to dismiss Baptist's application as a proposal for a joint or shared service with Sacred Heart, which was not filed with Sacred Heart as a co-applicant. AHCA and Baptist take the positions that the Baptist/Sacred Heart proposal is not a shared service arrangement, and that the filing of a joint application is optional.

    
    

99. In Rule 59C-1.0085(4)(b), Florida Administrative Code, a shared services contract is described as one which occurs, if one applicant who has the service, enters a contractual arrangement to jointly offer the service. The rule requires that the parties to the contract contribute something - facilities, equipment, patients, management or funding. In Rule 59C-1.002(39), "shared service project" is defined as "the act of two or more health care facilities or health care providers entering into an arrangement to jointly offer an existing . . . health service for a pre-determined period of time."

    The review process for joint applications, as outlined in Rule 59C-1.085(4), is expedited ". . . where the health service being proposed is currently provided by one of the applicants." For the duration of the contract, the pre-existing provider retains the right to provide the service independently, but the newer provider is not authorized to offer the service separately unless its applications to dissolve or terminate the contract and for a CON for a new health service are approved. See, Rule 59C-1.008(5)(b), Florida Administrative Code.

    
    

100. AHCA's experience with shared services programs is based on two programs in Florida. One is at All Childrens Hospital and Bayfront Hospital, which are connected by a tunnel. Patients at both facilities receive cardiac caths or OHS procedures at All Childrens. The other shared services project, at Marion County and Munroe Regional Community Hospitals, began by having procedures done only at one location at a time, but subsequently evolved into two separate programs. Both arrangements pre-date the shared services rule.

     
     

101. The Baptist/Sacred Heart proposal is described, by AHCA's expert, as an agreement for "cooperation" on quality of care, training, and assuring minimum volumes, not a shared services project due to the intent to perform procedures at both locations and due to the absence of any division of revenues and expenses. The Baptist/Sacred Heart proposal is compared, by AHCA, to management agreements for certain hospital operations, which are not unusual.

     
     

102. AHCA's interpretation of a shared service is contrary to the express language of the rule. Sacred Heart, if nothing more, is clearly contributing patients as well as management services to the program, while Baptist will contribute facilities, equipment, and funding. "Management" is reasonably understood as a contribution of Sacred Heart staff to the Baptist program. The arrangement will last for a predetermined period of time of at least two years, as contemplated by the rule. The fact, therefore, that Baptist intends to have a separate, competitive program in the future does not exempt its proposal from the scope of the shared services definition. Nothing in the rule requires a division of revenues by Baptist and Sacred Heart for the arrangement to be included within that definition. AHCA also considers a joint application as typically a proposal to offer the shared service at one site, not on both hospital campuses, but that is also not required by its rule. The description of the Baptist/Sacred Heart relationship is consistent with the rules defining shared service projects.

     
     

103. Subsections of Rule 59C-1.008 related to the content of joint applications are as follows:

     
     

     (1)(e) For purposes of fulfilling the requirement of a certified copy of a resolution, the following will constitute a certified copy:

     * * *

     1. For persons applying together as joint applicants in the case of a joint venture, a statement, from each applicant, which meets the content requirements set forth [above].

     2. For persons applying together as joint applicants, a resolution with an original signature is required from each applicant.

        * * *

        (1)(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:

        * * *

        6. For persons applying as joint applicants, all persons applying must be identified by name and mailing address . . .

        * * *

        (1)(o) Persons applying under a joint venture agreement must each be named as applicants for the certificate of need, with each separately meeting all requirements for application.

        
        

104. These sections establish the required content of joint applications, but do not require the filing of a joint application whenever a CON proposal meets the definition of a shared service project or contemplates a joint venture. AHCA considers Rule 59C-1.0085 voluntary, allowing applicants to decide whether or not to file a proposal as a joint venture agreement. That interpretation is consistent with AHCA's shared services, letter of intent content, and application content rules. The joint application procedures were described by AHCA's expert as "basically a way to benefit from . . . an expedited review, in the case of adding a provider to an existing program." Baptist, instead chose batched review, to establish an OHS program which would not be limited to the contractual terms, including the duration, of an agreement with Sacred Heart. Baptist, by making this choice, also avoids the necessity of filing subsequent CON applications to continue providing OHS after the agreement terminates.

     
     

105. On the merits of the CON applications, Baptist better meets the criteria which are based on the size and type of institution it operates and, indirectly, on the relative size of the population in its service area - such as those related to renovation rather than new construction, service to Medicaid and indigent patients, care of AIDS patients, and for having an established group of cardiovascular surgeons capable of providing the full range of OHS services required by rule. Baptist also demonstrated its ability to attract patients in sufficient volume to meet its projections and to assure a high quality of care, but unfortunately to the potential detriment of Sacred Heart.

     
     

106. FWBMC better meets the need criteria related to geographic location - enhanced accessibility, and service to patients leaving the district, but unfortunately to the potential detriment of the competency of cardiovascular surgeons at West Florida.

     
     

107. Baptist failed to demonstrate a need for an additional adult OHS program in terms of criteria related to age of the population of the district, or the needs of patients who currently lack access to OHS. FWBMC failed to demonstrate that its OHS program would have the minimum volumes required to assure quality care, and to attract the surgeons needed to operate the program as required by the OHS rule.

     
     

108. Baptist is the superior applicant, but this is a close case on the issue of community need. In a recent case, AHCA rejected all of the applications in a batch, despite numeric need, because they failed to contribute to the health care delivery system, by controlling costs, ensuring quality, and

     enhancing access. See, e.g., Columbia Hospital Corporation of South Broward, etc. v. Agency for Health Care Administration, DOAH Case Nos. 94-1020 and 94- 1021 (R.O. 1/31/96).

     
     

109. Community need, in this case, is established by the absence of evidence to disturb the rebuttable presumption created by the published numeric need. See, Amisub (North Ridge Hospital), Inc., etc. v. AHCA, etc., DOAH Cases Nos. 94-1012 (R.O. 3/17/95), citing Balsam v. DHRS, 486 So.2d 1341 (Fla. 1st DCA 1986) and Humhosco v. DHRS, 476 So.2d 258 (Fla. 1st DCA 1985). See, also, Humana v. DHRS et al., 469 So.2d 889 (Fla. 1st DCA 1985).

     
     

110. In this case, where the fixed need pool indicates numeric need for an additional program, the parties stipulated to that need, and a superior applicant's proposal includes safeguards to protect the affected existing provider, the Baptist application merits approval only on conditions which include those safeguards. See, Amisub, supra (F.O. 6/9/95).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Fort Walton Beach Medical Center, Inc.,

be denied, and that the application of Baptist Hospital, Inc., be approved on condition that Baptist provide annually 1.8 percent of total open heart surgery patient days to Medicaid patients and .9 percent to charity, and that Baptist, prior to commencing an OHS program, enter into an agreement with Sacred Heart consistent with the terms proposed in the letter of May 1, 1995.

DONE AND ENTERED this 8th day of August, 1996, 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 8th day of August, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-4171

To comply with the requirements of Section 120.59(2), Florida Statutes, the following rulings are made on the parties' proposed findings of fact:

Petitioner, Fort Walton Beach's Proposed Findings of Fact.

1. Accepted in Findings of Fact 5.

2. Accepted in Findings of Fact 2.

3. Accepted in Findings of Fact 2 and 4.

4. Accepted in Findings of Fact 4, 26, and 95.

5. Accepted in Findings of Fact 4.

6. Accepted in or subordinate to preliminary statement and Findings of Fact 13.

7-10. Accepted in or subordinate to Findings of Fact 2-5. 11-13. Accepted in or subordinate to Findings of Fact 11,

34, and 68.

14-28. Accepted in or subordinate to Findings of Fact 65 - 76.

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

34 and 66 (with travel time distinguished from transfer times).

52. Rejected in Findings of Fact 73.

53-65. Accepted in or subordinate to Findings of Fact 5, 9- 11, 26, and 93.

66-72. Accepted in Findings of Fact 25-26, 70 and 93.

73-75. Accepted in or subordinate to Findings of Fact 9.

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

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

3. Accepted in Findings of Fact 24.

4. Rejected conclusion in first sentence of Findings of Fact 65-66.

5. Accepted in Findings of Fact 25, 70 and 93.

81-83. Accepted in or subordinate to Findings of Fact 26.

84. Accepted in Conclusions of Law 93 and 108-110.

85-88. Accepted in Findings of Fact 93 and Conclusions of Law 108-110.

89. Accepted in Findings of Fact 9, 12 and 13.

90-93. Accepted in or subordinate to Findings of Fact 2, 5, and 65-69.

1. Rejected Conclusions of Law in Findings of Fact 108-110.

2. Rejected first sentence in Conclusions of Law 108 and second sentence in Findings of Fact 64, 87, and 92.

96-97. Accepted in or subordinate to Findings of Fact 29. 98-102. Accepted in part to Findings of Fact 33, 34, 35

and 59.

1. Accepted in or subordinate to Findings of Fact 34 and 37.

2. Rejected in Finding of Fact 25 and 26.

3. Accepted, except first sentence in Preliminary Statement.

4. Rejected in part in Findings of Fact 35, and 88-92. 107-110. Accepted in part in Findings of Fact 57-59.

111-114. Rejected in Findings of Fact 59.

115. Accepted, but see No. 80.

116-118. Accepted in or subordinate to Findings of Fact 57.

119. Accepted in or subordinate to Findings of Fact 62. 120-121. Accepted in or subordinate to Findings of Fact 58.

122. Accepted, except last sentence in Findings of Fact 58. 123-125. Accepted in or subordinate to Findings of Fact 73.

126-128. Accepted in or subordinate to Findings of Fact 72. 129-137. Accepted in or subordinate to Findings of Fact 71. 138-143. Rejected conclusion in Findings of Fact 42-45.

144-154. Accepted in or subordinate to Findings of Fact 49-51 and recommended conditions.

155-174. Accepted in or subordinate to Findings of Fact 12, 13, 26, 28, 58, 71, 93 and 95 and Conclusions of

Law 98-104.

175. Rejected as inconsistent with testimony and rules. 176-178. Accepted in or subordinate to Findings of Fact 12,

13, 26, 28, 58, 71, 93 and 95 and Conclusions of

Law 98-104.

1. Rejected as inconsistent with testimony and rules.

2. Rejected Conclusions of Law in Findings of Fact 109.

Respondent, Baptist Hospital's Proposed Findings of Fact.

1. Accepted in Findings of Fact 2 and 4.

2. Accepted in Findings of Fact 22.

3. Accepted in or subordinate to Findings of Fact 24.

4. Accepted in Findings of Fact 22.

5. Accepted in or subordinate to Findings of Fact 27 and 47.

6. Accepted in Findings of Fact 29, 36, and 47.

7. Accepted in or subordinate to Findings of Fact 5 and 8.

8. Accepted in or subordinate to Findings of Fact 5 and 14.

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

10. Accepted in Findings of Fact 65.

11. Accepted in or subordinate to Findings of Fact 63.

12. Accepted in Findings of Fact 65.

13. Accepted, except last sentence, in Conclusions of Law 110.

14. Accepted in Preliminary Statement.

15. Accepted in preliminary statement and Findings of Fact 41-45.

16-23. Accepted in or subordinate to Findings of Fact 25. 24-33. Accepted in or subordinate to Findings of Fact 11

and 26.

1. Accepted in Findings of Fact 95.

2. Accepted in or subordinate to preliminary statement and Findings of Fact 71.

36-37. Accepted in or subordinate to Findings of Fact 11 and 26.

1. Accepted in Findings of Fact 95.

2. Accepted in or subordinate to preliminary statement and Findings of Fact 71.

3. Accepted in Findings of Fact 70.

4. Accepted in or subordinate to Findings of Fact 11 and 26.

5. Issue not reached.

43-46. Accepted in or subordinate to Findings of Fact 25.

47. Accepted in Findings of Fact 9.

48-49. Subordinate to Findings of Fact 11, 25, 26, and 95.

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

2. Accepted in or subordinate to Findings of Fact 92.

3. Accepted in or subordinate to Findings of Fact 49. 53-60. Accepted in or subordinate to Findings of Fact

29-39.

61. Accepted in preliminary statement and Findings of Fact 95.

62-73. Accepted in or subordinate to Findings of Fact 57-59.

74-99. Accepted in or subordinate to Findings of Fact 6 and

residents' decision.

142-149. Accepted in or subordinate to Findings of Fact 59.

150. Rejected word "gimmick" in Findings of Fact 42-45. 151-152. Accepted in or subordinate to Findings of Fact 59.

1. Accepted in Findings of Fact 58.

2. Accepted in or subordinate to Findings of Fact 58, 71 and 95.

3. Rejected in or subordinate to Findings of Fact 59 and 73.

4. Accepted in or subordinate to Findings of Fact 59 and 73.

5. Accepted in Findings of Fact 14 and 15. 158-159. Rejected in Findings of Fact 72.

160-161. Accepted in or subordinate to Findings of Fact 79.

COPIES FURNISHED:

Richard Patterson, Senior Attorney Agency for Health Care Administration

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

Michael J. Cherniga, Esquire David C. Ashburn, Esquire Greenberg, Traurig, Hoffman

Lipoff, Rosen and Quentel Post Office Box 1838 Tallahassee, Florida 32302

John Radey, Esquire Jeffrey Frehn, Esquire

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

R. S. Power, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

Jerome W. Hoffman, General Counsel Agency For Health Care Administration 2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

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: 95-004171CON

Orders for Case No: 95-004171CON