STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MANATEE MEMORIAL HOSPITAL, L.P., )

)

Petitioner, )

)

vs. ) Case No. 99-3321

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent, )

)

and )

)

L. W. BLAKE MEDICAL CENTER, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

This case was heard by David M. Maloney, Administrative Law Judge of the Division of Administrative Hearings, from February

3 through February 8, 2000, in Tallahassee, Florida.

APPEARANCES

For Manatee Memorial Hospital, L.P.:

Robert D. Newell, Jr., Esquire Newell & Terry, P.A.

817 North Gadsden Street Tallahassee, Florida 32303-6313

For L. W. Blake Medical Center, Inc.:

John D.C. Newton, II, Esquire Berger, Davis & Singerman, P.A.

215 South Monroe Street, Suite 705 Tallahassee, Florida 32301-6313

For Agency for Health Care Administration:

John F. Gilroy, III, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUE

Whether the application of Manatee Memorial Hospital, Inc. (CON 9170) to establish a 120-bed satellite hospital in eastern Manatee County should be granted?

PRELIMINARY STATEMENT

On August 5, 1999, the Agency for Health Care Administration (the "Agency" or "AHCA") notified the Division of Administrative Hearings that it had received a request for a formal administrative hearing from Manatee Memorial Hospital, L.P., Inc. ("Manatee Memorial"). The Agency requested the Division to assign the matter to an Administrative Law Judge to conduct all proceedings required by law.

Attached to the AHCA Notice was an Amended Petition for Formal Administrative Hearing. The Amended Petition challenged the decision of AHCA to preliminarily deny CON 9170,

an application . . . to relocate 120 acute care beds [from Manatee Memorial's main campus] by constructing a new satellite hospital which will accommodate 120 acute care beds at Lakewood Ranch in Manatee County in Subdistrict 6-3 of District 6 . . approximately 12 miles southeast from Manatee Memorial Hospital.

(Amended Petition for Formal Administrative Hearing, p. 2).

In response to the request, the Division of Administrative Hearings opened Case No. 99-3321 and designated the undersigned as the Administrative Law Judge to conduct the proceedings.

After an Initial Order was sent out on August 6, 1999, and receipt of the parties' response, the case was set for hearing from November 30 through December 3, 1999. L. W. Blake Medical Center, Inc. ("Blake") subsequently filed a petition to intervene which was granted over opposition. The case was continued at the behest of Blake and ultimately scheduled to commence on February 3, 2000.

In the meantime, on October 29, 1999, the Agency filed a "Notice of Change of Agency Position." The notice stated that it is (and would be) the position of the Agency at hearing that Certificate of Need Application No. 9170 meets on balance all applicable statutory and rule criteria and should be approved.

The case proceeded to hearing on February 3, 2000. Manatee Memorial Hospital, L.P., presented the testimony of Mike Marquez, an expert in the field of hospital administration; Noel Barrick, an expert in health care facility architecture; John Swart, a licensed real estate broker; Lynne Mulder, an expert in health planning and certificate of need rules and regulations; Don Pyskacek, an expert in architecture; Mary Lindamood, an expert in nursing and nursing administration, including nursing

recruitment, training, and retention; David Mulholland, an expert in traffic engineering; and Robert Beiseigel, an expert in health care financial analysis and health care financial feasibility. By deposition, Manatee Memorial also presented the testimony of Larry Lindsey, an expert in acute care hospital staffing. Manatee Memorial Exhibits numbered 1, 2, 3

(paragraphs 1 and 3), 4 through 11, 13 through 17, 17A, 18 through 23, and 23A were received into evidence.

L. W. Blake Medical Center, Inc. presented the testimony of Lindell Orr, an expert in hospital administration; Richard Baehr, an expert in health care planning and health care finance; Connie Boudreaux, an expert in nursing and nursing administration; and Patricia A. Jacobs, an expert in nurse and health care human resource management. By deposition (Blake Exhibit 4), Blake also presented the testimony of Peter Buerhaus, Ph.D. Blake Exhibits numbered 1 through 16 and 19 through 20 were received into evidence.

AHCA presented the testimony of Jeffrey Gregg, an expert in health planning, and James R. Gregory, an expert in hospital architecture and construction. AHCA Exhibit number 1 was received into evidence.

The final volume of the transcript was filed on March 17, 2000, making proposed orders due in the middle of April. Blake moved for an extension of time to file proposed orders to which

Manatee Memorial objected. Following a conference call on the motion, an Order was entered extending the time for filing proposed orders until May 15, 2000. The parties agreed to extend the time for filing until May 16, 2000, when proposed orders, in fact, were filed in a timely manner by all parties. Two days later, with no objection from AHCA and Manatee Memorial, Blake filed a corrected proposed order. This Recommended Order follows.

FINDINGS OF FACT

The Parties

1. Manatee Memorial Hospital, L.P.

   
   

   1. Manatee Memorial Hospital, L.P. ("Manatee Memorial") the applicant for Certificate of Need Number 9170, owns and operates Manatee Memorial Hospital. It acquired the hospital in 1995. Located at 206 Second Street East, Bradenton, Florida, Manatee Memorial is licensed at the site to operate 512 beds,

      403 of which are for acute care. Of the remaining 109 beds, 24 are classified as adult psychiatric, 11 as adult substance abuse, 31 as child psychiatric, while 10 are in a skilled nursing unit, and 6 are NICU level 2 beds.

   2. Manatee Memorial is a wholly owned subsidiary of Universal Health Services, Inc. ("UHS"). UHS is a publicly traded company which currently owns 77 health care facilities, among them 28 acute care hospitals in various states, including

      Wellington Regional Medical Center, a 120-bed hospital in Palm Beach County, Florida.

2. L. W. Blake Medical Center, Inc.

   
   

   1. Blake Medical Center is a 383-bed acute care hospital.

      
      

      With the exception of psychiatric care, Blake provides full care across the range of hospital services from obstetrics to open heart surgery. Opened in 1972, it is also located in Manatee County.

   2. Blake has provided acute care hospital services in Manatee County since 1972. Over the past 28 years, it has served the people of the county in other ways, too. The organization and its employees, for example, are actively engaged in community activities. Among many community activities, Blake supports the American Cancer Society, sports screening for local students, Legs for Life (a diabetes detection program), cardiac profiles, and Just for Girls, a mentoring program.

3. The Agency for Health Care Administration

1. The Agency for Health Care Administration is designated by statute as "the single state agency to issue . . . or deny certificates of need . . . in accordance with the district plans and present and future federal and state statutes." Section 408.034(1), Florida Statutes.

   Stipulated Facts

   
   

2. Manatee Memorial and Blake entered a prehearing stipulation that contained "stipulated facts and law" stated below in findings 7 through 36.

3. Manatee Memorial filed a timely and legally sufficient Letter of Intent for CON No. 9170 and subsequent Initial Application and Omissions response that were deemed complete by AHCA.

4. Manatee Memorial filed a timely and legally sufficient Petition for Formal Hearing to challenge the initial denial of its application for CON No. 9170. Blake filed a timely and legally sufficient Petition to Intervene.

5. Manatee Memorial is a disproportionate share Medicaid Provider.

6. Manatee Memorial has demonstrated a history of providing quality of care and the ability to operate an acute care hospital. Manatee Memorial has the health care and administrative expertise to provide acceptable quality care.

7. Manatee Memorial adequately demonstrated its history of serving persons who are HIV/AIDS infected.

8. Manatee Memorial adequately demonstrated its intent to serve HIV/AIDS infected persons at the proposed Lakewood Ranch facility.

9. Manatee Memorial and Blake are the only existing providers of acute care inpatient hospital services in Manatee County.

10. Manatee Memorial is JCAHO accredited, with commendation, for all services, including home health care services.

11. Manatee Memorial and Blake are currently Medicare and Medicaid certified.

12. Manatee Memorial has demonstrated a history of providing quality of care. Manatee Memorial has the health care and administrative expertise to provide quality of care.

13. The documents provided with the application indicate the ability to provide funding for the proposed Lakewood Ranch facility at the time of the application's filing.

14. The proposed Lakewood Ranch project, at the schematic stage, conforms to Chapter 59A-3, Florida Administrative Code, and other applicable codes, including the Americans with Disabilities Act.

15. The proposed construction cost of $133.74 per gross square foot compares favorably with the average cost of $138.45 for five new Florida hospitals completed since 1995.

16. Construction time of twenty-four months is approximate although optimistic for the proposed facility.

17. The approval of the proposed facility will reduce the bed count at Manatee Memorial's main campus. The reduction in bed count will allow the hospital to better organize its physical plant and free area to be demolished.

18. The documents provided with the application indicate the ability to provide funding for the proposed Lakewood Ranch facility.

19. During FY 1997, Manatee Memorial provided 12 percent of its total patient days to Medicaid patients and 3.5 percent of its total patient days to charity care and exceeded the district average for both Medicaid and charity care.

20. Manatee Memorial is party to an agreement with the County of Manatee that requires it to provide a certain level of indigent care and provides some compensation for providing that care.

21. Except for financing cost projections, the estimated project costs appearing on Schedule 1 are reasonable.

22. The costs of equipping the proposed Lakewood Ranch facility are reasonable.

23. Except for financing cost projections, the total project cost for the proposed Lakewood Ranch facility is reasonable.

24. The letters of support contained in the application are authentic and accurate duplicate copies of letters.

25. Manatee Memorial Hospital's past and proposed provision of services promotes a continuum of care in a multilevel health care system.

26. Prior to filing its Petition in this case, Blake had not developed specific patient origin studies and demographic, financial, marketing, program feasibility and service feasibility studies or projects that discuss, analyze, or document a need for additional or relocated acute care beds in Manatee County.

27. The Agency for Health Care Administration initially denied CON 9170. In the course of this litigation it filed a Notice of Change of Position.

28. Blake Medical Center has a demonstrated history of providing quality of care.

29. In 1995, 1997, 1998, and 1999, Blake Medical Center was named one of America's Top 100 Hospitals by AHCA.

30. Blake Medical Center is Accredited with Commendation by the JCAHO.

31. Manatee Memorial has satisfied the requirements of Section 408.039(2) and (3), Florida Statutes.

32. The following statutory criteria are not at issue in this case: Sections 408.035(1)(c), 408.035(1)(f), 408.035(1)(g), 408.035(1)(j), and 408.035(1)(k), Florida Statutes (1997).

    The Subdistrict and Manatee Memorial's Primary Service Area

    
    

33. Acute care health planning subdistrict 6-3 is comprised solely of Manatee County. Rule 59C-2.100, Florida Administrative Code.

34. No zip codes in Manatee Memorial's existing primary service area are outside Manatee County.

    Accreditation and Quality of Care

    
    

35. Manatee Memorial's JCAHO accreditation with commendation means it is rated in the top 15 percent or 16 percent of all JCAHO accredited hospitals.

36. Manatee Memorial is also accredited and affiliated with the American College of Surgeons Commission on Cancer. Its Breast Cancer Center is accredited under the Mammography Quality Standards Act and by the American College of Radiology. Its laboratory is accredited by the Commission on Laboratory Accreditation of the College of American Pathologists. It has been designated by HCIA as one of the top 100 orthopedic hospitals in the country. Manatee Memorial has received the Bradenton Herald's Reader's Poll Best Hospital award for five

    consecutive years.

    
    

37. Manatee Memorial is in partnership with Manatee County to deliver immunization, breast cancer screening and cancer screening in the workplace. As a result, the hospital and the

    county have been recognized by the National Association of Counties.

38. Manatee Memorial is the only hospital that belongs to the West Coast Health Care Coalition. The Coalition is a group of employers in Southwest Florida whose mission is to evaluate hospital charges, assess outcomes and provide education to employers and employees on healthy lifestyles.

39. Consistent with UHS' philosophical belief that hospitals are fundamentally community and local organizations, Manatee Memorial uses a citizen advisory board that directly participates in oversight of the medical staff organization, quality assurance and performance improvement plans.

40. Manatee Memorial provides and has documented its ability to provide continuing education to its staff and physicians.

    The Proposed Project

    
    

41. Manatee Memorial proposes to relocate 120 beds from downtown Bradenton to a new site within the planning subdistrict. Known as Lakewood Ranch, the site is approximately

    17 miles southeast of Manatee Memorial, along the I-75 corridor in Manatee County.

42. The proposal does more than relocate 120 beds. It also entails the delicensing of an additional 73 beds on the existing campus. The proposal, therefore, will not add any new

    beds to the subdistrict but will, in fact, result in a net loss of 73 beds in the subdistrict.

43. The goal of the project is twofold. First, it is to provide easily accessible, affordable health care to a rapidly growing population in eastern Manatee County. Second, the goal of the project is to "decompress" Manatee Memorial's existing campus in order to modernize it and make it safer and more efficient.

    Decompression

    
    

44. Notwithstanding the awards and accreditation for its operational excellence, Manatee Memorial has serious problems in the physical infrastructure of its existing campus.

45. The main campus is bounded by major roadways and the Manatee River. Further expansion is precluded by the lack of available land on or near the site. The absence of space on the campus currently requires Manatee Memorial to lease space off campus for various non-clinical support functions, such as accounting and bookkeeping.

46. The site is "in close proximity to . . . hurricane surge inundation zones." (Tr. 872). The entire hospital site is only 7 feet above sea level. All of the central plant operations (electrical switching gear, chillers, boilers, air handlers, and emergency generators) and parking lots are flood prone. In the event of a hurricane, the entire hospital would

    have to be evacuated. When the project was under consideration, "rebuilding 500 beds on [the] location . . . [never came up] as a viable alternative in . . . discussions with the architects" (Id.) because it would be so difficult to comply with rules governing hurricane surge zones.

47. The "main building," the "annex," and three "radial" wings are older multi-story buildings where the acute care beds and patient rooms are currently located. The oldest of these areas, the main building, was built approximately in 1953. For a hospital building, "it is a very old building." (Tr. 104). The annex was built in the late 1950's. Two of the three radials were built around 1961 and the third, the one closest to the river, around 1967.

48. None of these buildings meet minimum applicable requirements specified in the National Fire Protection Association's Life Safety Code, NFPA 101, 1994 Edition, Chapter 13. These fire safety issues at Manatee Memorial are substantial and serious. There is not only a lack of

    fireproofing of the facility structure but also a lack of fire- smoke compartmentation and deficiencies in vertical chases and the fire alarm system. Deficiencies in the shut-down mechanisms of the air-conditioning system pose the danger of rapid conflagration in case of even a small fire.

49. After acquiring the hospital in 1995, Manatee Memorial undertook a renovation of the substance abuse area. During the course of final inspection by AHCA, it was discovered that the prior owner had undertaken structural work in the hospital but did not submit the work to AHCA for review. The unapproved work substantially compromised the fire integrity in many areas of the hospital.

50. There is no question that a reduction in bed count will allow Manatee Memorial to better organize its physical plant and free more areas to be demolished. Relocation of the

    120 beds out of the facility and demolition of the north radial, "one of the poorly constructed areas in the facility" (Tr. 872) was well received by James R. Gregory, the Bureau Chief of AHCA's Office of Plans and Construction, because "it certainly solved the problem at hand . . . how to bring this very large and antiquated building into minimum standards with the Life Safety Code as soon as possible." (Id.)

51. Accordingly, the Office of Plans and Construction has approved a Fire Safety Evaluation System ("FSES") plan for Manatee Memorial's main campus. The plan is contingent upon the removal, whether by relocation or elimination, of the 120 beds Manatee Memorial proposes to relocate to the Lakewood facility and the de-licensure of additional beds.

52. As Blake astutely points out, elimination of the 120 beds is just as effective as relocation of the beds for commencement of the solution to the fire safety problems posed by Manatee Memorial's main campus.

53. At the same time, relocation of the 120 beds rather than elimination is consistent with the current trend in hospital design and planning, the result of changes in health care in the country not the least of which is due to technological advances: to decentralize beds by moving some existing beds in central urban facilities to smaller campuses in suburban areas.

54. These new-style smaller, suburban facilities are oftentimes referred to as health centers and "almost replac[e]

    . . . the civic centers or courthouses in these areas." (Tr. 873.) As Bureau Chief Gregory summed up,

    I would say generally the days of going downtown to the great white giant are over except for . . . large teaching institutions.

    . . . [T]he trend has . . . been to decentralize and to bring health care . . . out towards where the population centers are growing.

    
    

    (Tr. 874). Examples of these facilities in Florida include Florida Hospital at Lake Placid or Heartland of Florida near Haines City or Columbia Hospital of Lake City, all newly-

    constructed replacement facilities the size of the proposed facility in this case.

    The Radials

    
    

55. The radial wings at Manatee Memorial are called radials because they radiate out from the nursing station. The second floor of the radials consist of three or four-bed "wards." (Wards contain more than two beds.)

56. Although common thirty or forty years ago, wards are no longer recommended in any national hospital construction or operational standards because of the higher average intensity of acuity of patients hospitalized today. Patients with higher acuity are at greater risk of infection. Recognition of an inpatient's right to privacy also comes into play. Patients more often than not (much as airline passengers in the coach compartment with three seats on one side of an aisle would choose to be on the window or the aisle) will choose not to be a patient in a bed in the middle of a ward. For hospital patients, lack of direct access to a window, door, or bathroom facilities typically creates a high level of dissatisfaction with wards regardless of a hospital's quality of care.

57. The four bed wards at Manatee Memorial have no space for modern equipment, no windows to the outside, no bathrooms and no washing facilities. Although the three-bed wards are somewhat more accommodating than the four-bed wards, their

    bathing and sink facilities are not compliant with the Americans with Disabilities Act ("ADA").

58. Manatee Memorial considered modifying the wards to create semi-private rooms. All spaces, however, would have to be brought to current Life Safety and ancillary support standards, a requirement that would be impractical to meet. Creation of semi-private rooms, moreover, would result in an inefficient 20-bed floor. Modern hospital needs for efficiency make the design of a nursing station and associated acute care patient wing with less than 36 beds impractical and uncommon.

59. Because of the age of many of the inpatient areas only about 320 of Manatee Memorial's beds are accessible on a daily, operational basis. In the past, these 320 beds for the most part have been enough to serve the hospital's population. In 1999, for example, its average daily census was 196, and not once did the hospital need to resort to emergency bypass status because of a lack of beds. But at other times, the hospital has been perilously close to 100 percent occupancy. And on one occasion in the year 2000, Manatee Memorial was required to institute emergency bypass because it did not have enough beds in adequately designed spaces to receive patients.

60. The wards would be eliminated if Manatee Memorial's CON is approved.

    Main Building

    
    

61. Existing nursing stations on the third floor of the main building are located in exit corridors. Such a location would not be allowed under current standards. The stations were designed more than forty years ago, before the existence of information systems and high-tech monitoring equipment now regarded as essential.

62. The Agency will not permit Manatee Memorial to "grandfather" the various Life Safety and code deficiencies resulting from the age of Manatee Memorial's older patient care floors.

63. Nor will the completion of a Facility Safety Assessment System ("FSES"), now underway at Manatee Memorial, address any of the remaining Life Safety, structural, and ADA code deficiencies that AHCA requires to be remedied if any single renovation is made. For example, installation by the hospital of a window into a patient room that is presently windowless would involve bringing an entire area of the hospital into compliance with applicable codes. As Noel Barrick, Manatee Memorial's architect, explained at hearing, "[the window installation] would be connected to other things. Once you get into any area, AHCA is going to say [']you are playing with that area, you upgrade to meet new standards."['] (Tr. 129). In some instances, bringing into compliance areas adjacent to a

    simple renovation would not be possible. The patient rooms have 10-foot ceilings. (See Finding of Fact Nos. 69 to 79, below.) Patient bed areas with floor-to-floor heights greater than 10 feet are necessary in order to retrofit all of the required mechanical systems. As for some of the systems, it would be impossible to "get some of that ductwork in a 10 foot floor-to- floor height to meet those standards." (Tr. 130).

64. Because simple renovations would entail upgrading much greater areas of the hospital to meet standards, Mr. Barrick's architecture firm, hired by UHS as part of the due diligence inquiry conducted prior to UHS purchase of the hospital, recommended that Manatee Memorial be decompressed in the interests of cost effectiveness.

65. Floor-to-floor (i.e., height from finished first floor to finished second floor) must have at least twelve-foot, six- inch floor-to-floor height in order to accommodate ductwork, lights, sprinklers, electrical conduit, data lines, and medical gases necessary to meet the basic Life Safety and operational requirements for patient care areas. The floor-to-floor heights in the main building as well as other of the hospital's oldest buildings are only ten feet.

66. Without adequate floor-to-floor space, to accommodate those Life Safety and mechanical items needed and required by AHCA for patient areas, those floors cannot be renovated and

    used for patient care or brought into compliance with current Life Safety and mechanical standards.

67. The lack of floor-to-floor space has also necessitated construction of ramps between the various older buildings containing patient beds, and the surgical building and radials. These ramps must be and are routinely used by visitors and by staff to transport patients. None of these ramps meet ADA standards.

68. Manatee Memorial's architects considered demolishing the main building and radials entirely. The consulting architect's assessment goal was, however, to reclaim as much space as was available on Manatee Memorial's existing campus before considering the possibility of de-licensure or relocation of beds. Additionally, total demolition would require closing the entire hospital for one to three years, since buildings with patient care areas also contain functional and ancillary areas necessary for operation of the entire hospital.

69. Manatee Memorial's consulting architects have recommended that, on balance, it would be more cost effective and achieve a better result to decompress the main campus by relocating some beds and their ancillaries to a different site. This would create sufficient space on the main campus for modernizing and using, to the maximum extent possible, the main campus.

70. AHCA must review and approve, prior to construction, all new construction and renovation to healthcare facilities in Florida. Rule 59A-3.080(1), Florida Administrative Code. AHCA's Chief of Plans and Construction Review is a registered

    Florida architect. He does not favor renovation of all 512 beds on Manatee Memorial's existing site because of its location in a hurricane zone as discussed, above.

71. If 120 beds can be relocated to Lakewood Ranch, and 73 beds de-licensed, then Manatee Memorial can eliminate: 71 beds from the north and south radials which were built in the 1960's;

    56 beds from the annex, which was built in 1958; and 28 beds from the third floor main building which was built in 1953, leaving 319 beds on a decompressed campus for renovation.

72. One of the benefits of choosing to decompress by relocating beds is that all the renovations can be sequenced so the hospital is not closed during renovation.

73. The total cost for a three phase, 8-year plan which leaves 319 renovated acute care beds and all the tertiary services on the main campus is $43 million. Since Lakewood Ranch will cost $40 million to construct and open, the total cost for Lakewood Ranch's 120 beds and the 3 phase plan to renovate for 319 beds on the main campus is $83 million.

74. Assuming that taking the entire hospital out of service for a sufficient period of time to renovate 512 beds is

    desirable, and that such renovations are otherwise possible, the cost would be at least $97 million, or $14 million more than the alternative proposed by Manatee Memorial's architects.

75. Manatee Memorial has opted for a plan that will enable it to keep some of its beds in its inventory that would otherwise be casualties of much-needed modernization. Its decision is justified. There is not enough real estate on the main campus to accomplish work necessary to solve the fire safety issues, locate 512 beds and the support services for those beds such as emergency room, laboratory, surgery, and X- ray so that the beds and ancillary areas are designed to meet prevailing community standards for the delivery of health care. Decompression will allow more efficient renovation and use of the outdated radials and annex for business occupancy, to accommodate these non-clinical functions, instead of using them for institutional occupancy. At the same time, decompression by relocating some patient beds and ancillary support for the beds elsewhere will allow the highest and best, if not only, use of salvageable areas on the existing campus without interruption of service.

    Health Planning

    
    

    1. Relocation Need Criteria

       
       

76. Although AHCA has a rule to determine the need for new or additional beds, it does not have a rule specifying a

    methodology for evaluating a proposal to relocate existing licensed beds within the subdistrict.

77. The acute care bed need calculation methodology in Rule 59C-1.0384(4) and (5), Florida Administrative Code, therefore, is not applicable to these proceedings. Rule 59C- 1.038(6)(a), Florida Administrative Code, does contain a preference for applicants proposing a capital expenditure on acute care beds that have documented a history of providing services to medically indigent patients. The Agency interprets subpart (6)(a) to be applicable to acute care bed relocations. Manatee Memorial's proposal earns the preference.

    1. District and sub-district out-migration

    
    

78. Acute care district and sub-district boundaries are used by AHCA and health planners to define the geographic boundaries for inventory and bed need projections. Consistency in providing sufficient access within a subdistrict to accommodate the needs of patients originating within the subdistrict is a desirable health planning goal.

79. For purposes of reviewing the health planning aspects of the application, the relevant geographic health planning area is Manatee County, sub-district 6-3.

80. It is becoming more common for hospitals that have patient care areas that have aged (as in this case, by more than

    40 years) to relocate new beds to areas of new and rapid growth

    within the health planning subdistrict. The Agency has approved these efforts on at least four occasions in the relatively recent past. In some instances the entire hospital was relocated, as in the relocation of Sarasota Doctors Hospital in Sarasota County; in others, as in the proposal in this case, only some of the beds were relocated while the existing campus underwent renovation.

81. The existing acute care beds in Manatee County are not well distributed in relation to population growth in the sub- district. This poor distribution has resulted in considerable out-migration of acute care patients to Sarasota County for services, and, in turn, is a significant factor in the under- utilization of Manatee County hospitals.

82. Until Sarasota Doctors relocated, out-migration was significant back and forth between Sarasota and Manatee Counties, that is, for both the sub-districts represented by the two counties. After Sarasota Doctors' relocation from near Sarasota to eastern Sarasota County approximately 15 miles south of the Manatee County/Sarasota County line, however, the out- migration became primarily one way: from Manatee County to Sarasota County. In 1997, alone, while 312 Sarasota County District 8 residents sought acute care in Manatee County, approximately 5,000 Manatee County District 6 residents sought acute care in Sarasota County.

83. Between 1995 and 1997, Manatee County hospitals experienced an overall increase of 9.5 percent in admissions. For the same period, out-migration from Manatee County for acute care services increased 26.5 percent.

84. Currently, for every one person that comes from Sarasota County to be hospitalized in Manatee County, sixteen are leaving Manatee County to be admitted to a bed in Sarasota County. Out-migration patterns between Manatee County and Sarasota County contribute to the under-utilization of Manatee County hospitals.

85. This disproportionate level of out-migration from Manatee County is inconsistent with typical out-migration between planning areas. It is the result of a poor distribution of Manatee County acute care beds in relation to Manatee County population growth combined with the unappealing and deficient four bed wards and the problems with Manatee Memorial's aged buildings.

    Geographic Access

    
    

86. Manatee Memorial's existing campus is located at the junction of Routes 41 and 301 and the Manatee River. Blake is located about four miles west. Both Blake and Manatee Memorial are located in the Bradenton City limits.

87. Lakewood Ranch is outside the city limits.

    
    

    Approximately one-quarter mile north of University Parkway and

    just east of the Interstate 75 interchange, it is in south central Manatee County near the Manatee and Sarasota County boundary line.

88. Lakewood Ranch is a master planned community of approximately 5500 acres and involving 3 Developments of Regional Impact ("DRI"). Master planned communities are favored by the State of Florida because all aspects of daily living are included in the multi-use planning: homes, workplaces, shopping facilities, recreation facilities, worship, and medical facilities.

89. State DRI and master planned community requirements have made growth somewhat more predictable. Using periodic aerial photography and subdivision maps to conduct an inventory by actually counting rooftops over time, it is evident that in the last two decades there has been substantial residential, commercial, and office growth in the eastern part of the county along and to the east of the I-75 corridor. This growth commenced with the opening of the corridor 20 years ago. The pattern of substantial growth east of I-75 and much less growth west of the I-75 corridor in Manatee County is expected to continue. As one witness expressed,

    [T]he most substantial majority of new growth will happen along the I-75 corridor and east of 75, as it's currently doing, and I believe from the activity that we see, that it'll continue. One of the reasons for

    that is that if you look at a map or a similar aerial photo, to the west of I-75 you will see that it's substantially all built out and there's really very little land available.

    
    

    (Tr. 172). The population located along and east of the I-75 corridor is expected to increase by 28,000 persons between 1999 and 2004. The County, itself, has projected that the population in the area of the county in and around Lakewood Ranch has projected growth at a rate of 600 percent over the thirty years from 1990 to 2020.

90. Manatee County has created infrastructure to support residential development in eastern Manatee County, including 2 elementary, 3 middle and 1 high school.

91. The area is served by many major roads. They include University Parkway which runs east and west. It is six lanes running west of I-75 to the airport and four lanes to Lakewood Ranch Boulevard with plans to six-lane it. A time travel study conducted in accordance with DOT's Manual of Uniform Traffic Studies demonstrates that currently, during the peak hour traffic, the congestion on roads leading from large portions of Lakewood Ranch's primary service area east of I-75 to Manatee Memorial and Blake results in travel times in excess of 30 minutes to reach Blake and between 20 and 30 minutes to reach Manatee Memorial.

92. All the road improvements presently planned by Manatee County are east of I-75 and will not relieve any of the congestion west of I-75. In the absence of planned road improvements west of I-75, the congestion west of I-75 will increase as the result of development along the interstate's corridor and to its east.

93. The road system is one of the reasons out-migration from Manatee County to Sarasota County has increased and one of the reasons Manatee Memorial is feeling the impact of competition with Sarasota hospitals. At present, four hospitals offer more than adequate access to hospital services to the residents of eastern Manatee County: Manatee Memorial and Blake in Manatee County and two Sarasota County hospitals: Sarasota Memorial and Sarasota Doctors. All four compete to and do serve the patients in Lakewood Ranch's proposed service area. There is no evidence of capacity constraints at any of these hospitals.

94. Increasingly, physicians in Sarasota County serve patients in Manatee County and market their services to them. For instance, open heart surgeons practicing in Sarasota also have offices in Manatee County. The yellow pages for the Bradenton telephone directory reveal at least 183 physicians with Sarasota addresses. This does not include the many listings for groups or clinics. These physicians view eastern

    Manatee County as a market they serve and from which they seek to draw patients to their Sarasota offices.

    Indigent Care

    
    

95. Manatee Memorial is a disproportionate share Medicaid provider. During fiscal year 1997, Manatee Memorial provided

    12 percent of its total patient days to Medicaid patients and

    
    

    3.5 percent of its total patient days to charity care, exceeding the district averages for both Medicaid and charity care. Compared to Blake, Manatee Memorial has consistently provided significantly more Medicaid and charity days. In 1996, for example, Manatee Memorial shouldered a fraction above 87 percent, compared to Blake's 12.96 percent of the Medicaid patient days in the subdistrict. In that same year, Manatee Memorial provided over $10 million in charity care, while Blake provided less than $600,000.

96. While Blake and Manatee Memorial have the same kind of patients, their patient mixes are different. Blake takes many less Medicaid and charity care patients. This is due, in part, to location; Manatee Memorial's location (albeit only four miles from Blake's) attracts such patients. It is also due, in part, to the obligation Manatee Memorial has incurred by agreement with Manatee County to provide care to indigent Manatee County residents, an obligation which has as its source

    the hospital's former status as the county hospital. Blake is not a party to a similar agreement.

97. Under the terms of Manatee Memorial's agreement with the county there are three different ways for the hospital to be reimbursed for indigent care: reimbursement of 50 percent of the annual interest earned on a fund that's used for general health care purposes within the community, reimbursement at the prevailing Medicaid rate, or reimbursement under a special indigent care calculation. The hospital receives the lowest amount yielded by the three methods. At the time of hearing, at least since September of 1995, when its chief executive officer assumed his position, Manatee Memorial has only been reimbursed on the basis of the first of the three possibilities: 50 percent of the annual interest earned on the county's general health care fund.

98. The shortfall has been substantial. In 1999, inpatient and outpatient charges for care to indigents under Manatee Memorial's agreement with the County amounted to approximately $7.4 million. But Manatee Memorial was only reimbursed $1.5 million, resulting in a deficit of about $5.8 million. The inpatient shortfall alone was about $3.5 million. Over the past ten years, through August of 1999, the shortfall has totaled approximately $36 million worth of uncompensated care provided by Manatee Memorial.

99. On a cost basis, for every dollar of cost incurred to provide services to a County funded indigent in 1999, Manatee Memorial recovered only 70 cents from the County. There is no question that Manatee Memorial's contribution to care of Medicaid patients and indigents is both substantial and costly.

100. Blake's fear with regard to the impact on indigent care in Manatee County of granting the CON in this case and transferring 120 beds from their present location to eastern Manatee County was expressed by its Chief Executive Officer:

     [W]e'll do 120 now, then next year we will do another 120 until we have eventually moved the patient's right to have a hospital in that location [far to the] east and then we will have a shell of a hospital in a location [in which] there's a great need . .

     . for indigent care.

     
     

     (Tr. 524). But Blake conceded under cross-examination that simply granting the CON under consideration without more would leave a hospital adequate to handle the indigent care needs of the county at the location where the considerable bulk of those needs are presently met.

     Lakewood Ranch Design, Cost & Construction

     
     

101. The proposed 120-bed Lakewood Ranch project, at the schematic stage, conforms to Chapter 59A-3, Florida Administrative Code, and other applicable codes, including the Americans with Disabilities Act.

102. The proposed construction cost of $133.74 per gross square foot compares favorably with the average cost of $138.45 for five new Florida hospitals completed since 1995.

103. The design, cost, and time necessary to construct and equip the Lakewood Ranch 120-bed facility are reasonable. Financial Feasibility: short-term and long-term

104. Short-term financial feasibility for CON review refers to the ability of the applicant to provide or obtain sufficient capital to construct the project and to finance the project until it becomes financially self-sufficient.

105. To determine at what point the proposed project would become financially self-sufficient, Manatee Memorial used actual recent revenue, fixed and variable cost data, and adjusted service volumes from Manatee Memorial to model Lakewood Ranch's projected financial performance. It is reflected in Schedules 7 and 8 of the application. Manatee Memorial has demonstrated that, if projected utilization is achieved, the proposed project will become profitable in the second year of operation and continue to be financially self-sufficient on an ongoing basis.

106. UHS has provided a commitment letter in the application that states in pertinent part:

     This letter is to confirm the commitment of Universal Health Services, Inc. (UHS) to provide financing for the planned replacement and relocation of 120 acute care hospital beds for Manatee Memorial Hospital.

     UHS owns this hospital through a partnership, Manatee Memorial Hospital, L.P. (the applicant), which is comprised of partners which are wholly-owned subsidiaries of UHS.

     
     

     UHS anticipates that it will finance all future capital expenditures for Manatee Memorial Hospital, including this project, entirely from UHS's net cash flow from operations. Accordingly, UHS does not plan to assume any indebtedness to third parties to finance this project, or to pay interest on any such costs.

     
     

     Manatee Memorial has adequately evidenced UHS' commitment and ability to provide the necessary capital, using the ongoing net cash flow from UHS operations, until the proposed project becomes self-sufficient, even if it should take more than 3 years.

107. UHS does not take loans to build hospitals, but always uses current operating funds. Since UHS will fund the project from its own cash flow, Manatee Memorial appropriately did not indicate any financing costs on Schedule 1. The Lakewood Ranch hospital only becomes a depreciable asset after it becomes operational. Accordingly, Manatee Memorial captured Lakewood Ranch's costs of capital as interest on Schedule 8A. AHCA does not require pro forma projections for the main campus.

108. There have been no material changes in UHS' financial strength, or its commitment to the proposed project through the date of hearing. Manatee Memorial does not have any other

     capital projects planned or approved that would compromise its ability to undertake the proposed project. UHS continues to have ample cash flow, as well as access to credit facilities, sufficient to capitalize and fund start-up operations at Lakewood Ranch.

109. Manatee Memorial has projected that the first year of operation, after construction and licensure, will be January 1, 2004.

110. Manatee Memorial selected eight zip codes as the primary service area for the Lakewood Ranch project. These zip codes correspond to the sub-areas the Manatee County Planning Department uses to project growth for areas within 5-15 minutes driving time from Lakewood Ranch. The selection of these eight zip codes for the project's proposed service area is reasonable.

111. Manatee Memorial assumed it would derive at least 70 percent of its admissions during the first three years of operation from this primary service area. The assumption is consistent with the recent, actual experience of four hospitals in Broward, Collier, Sarasota, and Marion Counties that relocated or developed a satellite by relocating beds to an area of high growth similar to Lakewood Ranch.

112. Using the most currently available population projections provided by Claritas for the eight zip codes comprising Lakewood Ranch's primary service area, it appears the

     projected occupancy for the proposed facility in the third year of operation will be even greater than projected in the application.

113. Based on reasonable assumptions and methodology, Manatee Memorial will admit 2,600 patients to the Lakewood Ranch facility from its primary service area in 2004, the first year of operation. That equals 11,961 patient days. The hospital projects 17,220 patient days in the second year of operation and 21,812 days in the third year of operation. Out of the 4,742 total admissions in year three of operations at Lakewood Ranch, approximately 3,500 would be due to the projected Manatee County population increase.

114. In the first year of operation of the Lakewood facility, it is reasonable to project that the facility will lose slightly more than $900,000. In the second year of operation, it is reasonable to project a net profit of $3.1 million; and, at the end of the third year of operation, it is reasonable to project a profit of approximately $6.7 million. It is reasonable to expect utilization to increase beyond the third year of operation so "that the hospital [the Lakewood Ranch facility] should sustain profitability in the long run." (Tr. 475).

115. The project is financially feasible in the long term.

     
     

116. As an aside, it is reasonable to assume that Manatee Memorial's main campus will lose some patients to the Lakewood Ranch facility. The revenues for the campus will therefore be reduced if the project is approved. So will the main campus' expenses associated with those patients. It is reasonable to assume that the main campus' profit will be reduced if the project is approved. But, AHCA does not require pro formas to

     show projected financial impact on the main campus as part of the application for the Lakewood Ranch facility. That impact, therefore, whatever it may be, is not considered in this proceeding. On the other hand, the impact to Blake and to the hospitals in Sarasota County is to be considered.

     Impacts to Blake and hospitals in Sarasota County

     
     

     a. Sarasota Hospitals

     
     

117. The two hospitals in Sarasota County that will feel the most impact from approval of CON 9170 are Sarasota Doctors and Sarasota Memorial, particularly Sarasota Doctors. If the proposed facility becomes operational, much of the disproportionate share of out-migration from Manatee County to Sarasota County will be reduced because of Manatee County patients, particularly those residing in the eastern part of the county, choosing the proposed facility over Sarasota Doctors or

     Sarasota Memorial. The migration patterns for Districts 6 and 8 will adjust to a normal pattern.

118. Some of the loss of patients by the Sarasota hospitals will be mitigated by an increase in the population of Sarasota County. In any event, the continued success of Sarasota County hospitals is not dependent on the out-migration of Manatee County residents. In the case of Sarasota Doctors, the recapture of Manatee County patients by the proposed facility is appropriate in light of Sarasota Doctors' decision several years ago to relocate to the eastern part of Sarasota County near the Manatee County line.

119. Manatee Memorial's proposal will enhance competition.

     
     

     There will be an impact if it is approved to other competitors. But it will not put any other hospital in Manatee County or Sarasota County out of business or compromise their operations with the possible exception of making it more difficult to staff the hospitals as explained in paragraphs 126 to 129, below.

120. Blake calculated that the impact of approval of the application to Blake would be a loss of $1.6 million and $2.7 million in the first and third years of operation, respectively, of the Lakewood Ranch facility. The calculation did not consider that tertiary services that will not be provided at the new facility so that the calculation "is not exact but . . . is quite close." (Tr.698). Assuming the accuracy of Blake's

     calculation, the impacts do not weigh heavily in favor of denial of the application in the context of Blake's most recent net profit of approximately $18.5 million.

121. Blake's concern about the impact to it from the new facility was much more than the loss in dollars it poses. Blake is much more concerned about the competition posed by the need of its patients to be served by physicians and, in particular, staff who would be given privileges or employed by the new facility.

     Staffing

     
     

122. Staffing and operating three hospitals in Manatee County will require more staff than is presently required for Manatee Memorial and Blake because of the need for "core" staffing. Core staffing is the minimum number of people required to care for a hospital census. Any hospital must maintain a minimum level of core nursing staff regardless of the size of the census. For example, an emergency room must have two people on duty at all times as must a recovery room.

123. In addition, the Lakewood Ranch facility, as a hospital, should be distinguished from an outpatient facility. In contrast to an outpatient facility, essentially an "episodic" facility, the patients at Lakewood Ranch will have a much higher intensity of acuity. In other word, they will be sicker demanding much more intense care. Existing facilities could

     absorb the Lakewood Ranch facility's patients incrementally without having to add many staff, whereas a brand new facility is required to fully staff its facility.

124. The increased demand for staff, especially nursing staff, will substantially affect Blake. For one, it is likely that the facility will recruit current employees of Blake.

125. To make staffing matters more difficult for Blake, there is a shortage in health care personnel in Manatee County. Indicative of the shortage is Blake's 12 percent vacancy in its nursing staff at the time of hearing. The vacancy existed despite a comprehensive effort on Blake's part to keep and recruit nurses. The effort includes offering nurses on-site child care that is less expensive than rates in the community at large, paid critical care and operating room courses, reimbursement of continuing education expenses and payment for time spent in continuing education, a service excellence program, free parking, and competitive wages.

126. Blake also conducts extensive, ongoing recruitment of nurses. It includes international recruiting, advertising, targeting cities with high unemployment rates or recently closed facilities, recruitment at job fairs and local schools.

127. Blake competes not only with Manatee Memorial for nurses but also Sarasota Memorial and, to some extent, Sarasota Doctors Hospital. It monitors the salaries of those

     institutions and tries to at least match them. Blake also routinely obtains and reviews regional salary surveys. Bonuses in the market range from $5,000 to $10,000 recently offered by Manatee Memorial. Despite all its extensive recruitment efforts, typically it takes Blake 90 days to fill a nursing position.

128. Recruiting nurses is difficult and expensive.

     
     

     Recruiting an intensive care nurse, for example, costs upward of

     
     

     $60,000 in direct and indirect costs. Recruiting a surgical nurse costs $40,000.

129. The nursing shortage in Manatee County reflects a nationwide crisis in health care personnel. It is more severe than the cyclic shortages previously experienced. But, in all likelihood, the current shortage is also cyclic.

130. No nursing shortage, moreover, is forever. This is because the nursing labor market behaves like any free market. Ultimately, supply and demand are managed in a free market by offering higher wages and increasing the other benefits to address the profession. Eventually, the current shortage should be alleviated by an increase in wages. The current national shortage is expected to be at its worst in 2006.

131. The Lakewood Ranch staffing projections underestimate nurse staff needs by 8 to 10 employees. The underestimation in the context of the whole project is insignificant.

132. Still, approval of the application will make recruitment of nurses by Blake more difficult. It will not be easy for the Lakewood Ranch facility either although there will be many nurses in the area for whom the Lakewood Ranch facility will be the most convenient facility at which to work.

133. Like Blake, Manatee Memorial has developed a variety of strategies for recruiting, training and retaining nurses. It plans to use these at the Lakewood Ranch facility. Strategies include local open houses at the hospital, emphasis on a regional and national market, using the internet, and targeting military trained nurses through job fairs and affiliations with the University of South Carolina and the University of South Texas that allow UHS first access to students in nursing there.

134. While there are inefficiencies in staffing due to the need for core staff at both campuses should the application be granted, there are some counterbalancing efficiencies. For example, efficiencies flow from sharing the same governing board and some of the managerial staff, such as human resources director, risk managers, accounting functions and quality improvement functions.

135. There is little doubt that approval of the application will make it more difficult for Blake to staff its facility and will affect Blake financially in a substantial way. Approval of the Lakewood Ranch facility, at the same time, may

     have a slight counterbalancing effect. One of the main reasons nurses leave nursing is to seek a less physically demanding profession; modernization of facilities to make them less physically demanding should help to keep some nurses in their profession. Granting the application will lead to two modernized facilities: a renovated Manatee Memorial campus and a brand-new Lakewood Ranch facility.

     Local Health Plan Preferences

     
     

136. Local Health Plan Preference Number 1 affords a preference for applicants documenting that they provide or will provide a large percent of Medicaid and charity care in relation to other hospitals in the subdistrict. Manatee Memorial provides the most Medicaid and charity care in Manatee County, measured in both patient days and dollar volume, and has documented its willingness to do so at Lakewood Ranch. For example, in 1996, Manatee Memorial provided 87 percent of all the acute care inpatient Medicaid days in the subdistrict.

     Blake provided 12 percent. Manatee Memorial earns this preference.

137. Local Health Plan Preference Number 2 affords a preference to an applicant who can document a commitment to provide care and assure access for the community regardless of ability to pay. Manatee Memorial's continued commitment to provide care, regardless of the ability to pay, is evidenced by

     a formal resolution of the Manatee County Commission unequivocally supporting relocation of 120 beds to Lakewood Ranch. Manatee Memorial has demonstrated a commitment to provide patient access, regardless of ability to pay.

138. Local Health Plan Preference Number 3 relates exclusively to applicants seeking tertiary services, and is not applicable to this proceeding.

139. Local Health Plan Preference Number 4 is not applicable to this proceeding because the application under consideration is not for additional beds in a fixed-need pool, nor are additional beds being sought under "not normal circumstances".

140. Local Health Plan Preference Number 5A contemplates a preference when a transfer of beds will result in operating cost efficiencies. Manatee Memorial's sharing managerial staff, human resources, governance, administrative functions, and risk management will minimize operating costs achieving the economies contemplated by Local Health Plan Preference Number 5A.

141. Local Health Plan Preference Number 5B affords a preference for an applicant who has documented growth with demographic studies for an area where beds will be transferred. Manatee Memorial has fully documented that the proposed site is in an area of Manatee County that is rapidly growing, relative to the county as a whole.

142. Local Health Plan Preference Number 5C affords a preference for an applicant transferring beds and addresses the availability of professionals and medical personnel in the proposed area. The beds being relocated by Manatee Memorial are already licensed. Staffing them, however, will not be done without some difficulty.

143. Local Health Plan Preference Number 5D contemplates preference for applicants providing patient origin studies related to campus and the proposed transfer site. Local Health Plan Preference Number 5D is satisfied.

144. Local Health Plan Preference Number 6A contemplates a preference for applicants transferring beds and who have analyzed current occupancy and projected impact. Because of the mal-distribution of beds in relation to the population growth, and the inefficiency of Manatee Memorial's existing older patient areas, the occupancy rates at Manatee Memorial are not optimal. Relocation will improve utilization of Manatee Memorial by Manatee County residents. Manatee Memorial receives preference under this Local Health Plan Preference.

145. Local Health Plan Preference Number 6B affords a preference for applicants providing a copy of the existing charge structure at its hospital. Manatee Memorial stated that it does not anticipate any material changes to its existing

     charge structure, because of constraints placed upon it by payors and competition in the local market.

146. The preference in Local Health Plan Preference Number

     
     

     7 is awarded to Manatee Memorial. The parties have stipulated that Manatee Memorial has demonstrated intent to serve HIV/AIDS infected persons.

147. Local Health Plan Preference Number 8 affords a preference to applicants that analyze the need and impact of proposed project on existing providers when the need is not currently being met. Residents of District 6 and subdistrict 6-

     3 are not going without needed hospital services.

     
     

148. Local Health Plan Preference Number 9 affords a preference to applicants documenting a commitment to provide initial and continuing education of staff for patients receiving services. Manatee Memorial has earned this preference.

     CONCLUSIONS OF LAW

     
     

     Jurisdiction, stipulations, burden of proof and balancing

     
     

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

150. The parties stipulated that the following statutory criteria are not at issue in this case: Sections 408.035(1)(c),

     408.035(1)(f), 408.035(1)(g), 408.035(1)(j) and 408.035(1)(k),

     
     

     Florida Statutes, (1997).

     
     

151. Manatee Memorial has satisfied the requirements of Section 408.039(2) and (3), Florida Statutes (1997).

152. CON applicants carry the burden of proving that their applications meet the statutory and rule criteria for approval of the CONs that they seek. Boca Raton Artificial Kidney v. Department of Health and Rehabilitative Services, 475 So. 2d 260

     (Fla. 1st DCA 1985). The award of a CON must be based upon a balanced consideration of the criteria applicable by law, including the preferences expressed in the state and local health plans. Department of Health and Rehabilitative Services

     v. Johnson Home Health Care, Inc., 447 So. 2d 361 (Fla. 1st DCA 1988); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1988); Life Care Health

     Resources, Inc. v. Agency for Health Care Administration, 21

     
     

     F.A.L.R. 2739 (AHCA 1999).

     
     

     Blake's standing to intervene.

     
     

153. Standing for an existing provider to challenge a proposed project in a CON proceeding is governed by 408.039(5)(c), Florida Statutes, which has been construed to apply only to co-batched applicants and existing licensed providers who provide the same service being proposed in the

     same health planning district. First Hospital Corporation of

     Florida vs. Department of Health and Rehabilitative Services,

     
     

     589 So. 2d 310, 311 (Fla. 1st DCA 1991); Public Health Trust of Miami-Dade County, FL vs. Agency for Health Care Administration, 22 F.A.L.R. 402, 403 (1st DCA 1/5/00), 25 FLW D94a (1st DCA 1/5/00).

154. Section 408.032(5), Florida Statutes, defines "district" in the context of sections 408.035(1)(b), and 408.039(5)(b), Florida Statute, to be a health service planning district composed of specific counties. District 6 consists of Hillsborough, Manatee, Polk, Hardee, and Highlands Counties. Rule 59C-2.100(f)3, Florida Administrative Code, defines subdistrict 6-3 to be comprised solely of Manatee County.

155. Blake and Manatee Memorial are the only facilities providing acute care services in health planning subdistrict 6- 3, Manatee County. Lakewood Ranch, if it performs as projected, will likely cause Blake a loss of revenue of $1.6 million. This is a substantial adverse impact. More importantly, the addition of a Lakewood Ranch will substantially affect Blake by driving up salaries for staff and recruiting costs, and by reducing an already stressed labor pool for nurses. Blake has standing to intervene in this proceeding.

     Need

     
     

156. Manatee Memorial has demonstrated a need for the proposed project in relation to the applicable preferences in the District Plan. Section 408.035(1)(a), Florida Statutes.

157. The western portion of Manatee County is essentially saturated, in terms of population, and the significant and new growth is occurring in east Manatee County, along the I-75 corridor. Because both acute care hospitals in Manatee County are located within 4 miles of each other and in western Manatee County, the existing acute care beds in the County are poorly distributed in relation to population growth.

158. Manatee Memorial's main campus, although providing quality of care, is not as efficient, available, appropriate or accessible as would be a hospital in eastern Manatee County. Furthermore, Manatee Memorial is experiencing low utilization as a result of its inadequate and outdated physical plant and patient care areas. The inadequacy of Manatee Memorial's existing campus and extraordinary growth in eastern Manatee County has resulted in abnormal out-migration from the Manatee County service district by persons seeking acute care. The proposed project is necessary to decompress and renovate the main campus and simultaneously improve access in eastern Manatee County. Manatee Memorial has satisfied Section 408.035(1)(b) and (d), Florida Statutes.

159. Manatee Memorial has demonstrated that some economies and improvements in service will be derived from operation of a satellite campus that shares resources with the main campus. Blake, on the other hand, has demonstrated that there will be some inefficiencies. The case is close with regard to the efficiency criterion in Section 408.035(1)(e), Florida Statutes, but Manatee Memorial gets credit under the section because of the improvement in service that will be provided to residents of eastern Manatee County if the Lakewood Ranch facility is approved.

160. Notwithstanding a nursing shortage, Manatee Memorial has demonstrated that the resources, including health personnel and funds for capital and operating expenditures for project accomplishment and operation are, more likely than not, available. Manatee Memorial has satisfied the criteria in Section 408.035(1)(h), Florida Statutes.

161. Manatee Memorial has demonstrated the short-term and long-term financial feasibility of the proposal. Manatee Memorial amply demonstrated the adequacy of its parent, UHS to provide capital and start-up funds and operate the main campus before the project becomes profitable. Manatee Memorial has satisfied the criteria in Section 408.035(1)(i), Florida Statutes.

162. The methods of proposed construction of the Lakewood Ranch facility are appropriate and cost effective. Manatee Memorial has satisfied the criteria in Section 408.035(1)(m), Florida Statutes.

163. The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent has been well documented it clearly and substantially exceeds that of Blake. Manatee Memorial has satisfied the criteria in Section 408.035(1)(n), Florida Statutes.

164. The proposed project will promote a continuum of care in an existing multi-level health care system, and satisfies Section 408.035(1)(o), Florida Statutes.

165. As Blake points out, Manatee Memorial did not present evidence about the cost of renovating the existing campus to a bed level lower than its existing level that would make its renovation less costly or exploration of alternatives for keeping 512 beds without moving, 120 of them to eastern Manatee County. It is Manatee Memorial prerogative, however, to keep as many beds as possible in its inventory. And while the difficulty in renovating and keeping its full complement of beds at the main campus is some of the justification for the Lakewood Ranch proposal, it is by no means the sole justification. Manatee Memorial has considered other alternatives to relocating

     120 beds to Lakewood Ranch but none are practicable. Manatee

     Memorial has satisfied the requirement found in Section 408.035(2)(a) and (c), Florida Statutes.

166. Blake is being used in an appropriate and efficient manner. Section 408.035(2)(b), Florida Statutes.

167. Patients will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. They can continue to utilize Manatee Memorial's present campus, Blake, or the two Sarasota hospitals. Section 408.035(2)(d), Florida Statutes.

168. Section 408.035(2)(e), Florida Statutes, relates to the addition of beds for skilled nursing services and is not applicable in this case.

169. Blake failed to show that any revenue loss it might suffer would have a substantial, adverse affect on any existing program at Blake.

170. The proposed project entails no more than the relocation of existing hospital beds within a sub-district. At the same time, it produces a net reduction in hospital beds for the district as a whole. The nature of the applicant's proposal, a relocation of existing beds within the sub-district coupled with the de-licensing of 73 beds, answers Blake's argument that the project is premature. Whatever merit there might be to the argument that it is premature to build a new hospital in eastern Manatee County and add 120 beds to the

     district, an argument of pre-maturity withers in the context of a relocation of existing beds especially when tied to the de- licensing of beds that produces a net reduction of beds in the district.

171. Even though they have adequate access to hospital services now, residents in eastern Manatee County where the population is growing and where there is room for growth will enjoy an improvement in access to hospital services if the application is approved. In addition to solving serious problems at Manatee Memorial's existing campus, some of which involve patient safety, the proposed project is consistent with current trends in hospital design and planning. Manatee Memorial's proposal is supported by the existence of health care planning districts and sub-districts and the likelihood that the project, once operational, will restore normal out-migration patterns for Districts 6 and 8. Manatee Memorial is a worthy applicant because of the excellence of its care demonstrated in this proceeding and its remarkable record of caring for the indigent.

172. Blake has shown that it will suffer if the project is approved. While the direct financial impact is relatively inconsequential, the impacts to staffing, particularly with regard to nursing, will be major. In all likelihood, however, sufficient adjustments to those impacts will be made over time.

173. On balance, Manatee Memorial has clearly satisfied the greater weight of statutory and rule criteria. Its application to establish a 120-bed satellite hospital in eastern Manatee County should be granted.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is recommended that the application of Manatee Memorial Hospital, L.P. (CON 9170) be granted by the Agency for Health Care Administration.

DONE AND ENTERED this 14th day of September, 2000, in Tallahassee, Leon County, Florida.

DAVID M. MALONEY

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 14th day of September, 2000.

COPIES FURNISHED:

John F. Gilroy, III, Esquire

Agency for Health Care Administration 2727 Mahan Drive

Building Three, Suite 3431 Tallahassee, Florida 32308-5403

Robert D. Newell, Jr., Esquire Newell & Terry, P.A.

817 North Gadsden Street Tallahassee, Florida 32303-6313

John D.C. Newton, II, Esquire Berger, Davis & Singerman, P.A.

215 South Monroe Street, Suite 705 Tallahassee, Florida 32301-6313

Sam Power, Agency Clerk

Agency for Health Care Administration Building Three, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Julie Gallagher, General Counsel Agency for Health Care Administration Building Three, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions to this Recommended Order must be filed with the agency that will issue the final order in this case.

Docket for Case No: 99-003321CON

Orders for Case No: 99-003321CON