STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
COLUMBIA HOSPITAL CORPORATION OF ) SOUTH BROWARD, d/b/a WESTSIDE ) REGIONAL MEDICAL CENTER, )
)
Petitioner, )
)
vs. ) Case No. 01-2891CON
)
AGENCY FOR HEALTH CARE ) ADMINISTRATION and SOUTH BROWARD ) HOSPITAL DISTRICT, d/b/a MEMORIAL ) HOSPITAL MIRAMAR, )
)
Respondents. )
) TCC PARTNERS, INC., d/b/a )
CLEVELAND CLINIC HOSPITAL, )
)
Petitioner, )
)
vs. ) Case No. 01-2892CON
)
AGENCY FOR HEALTH CARE ) ADMINISTRATION and SOUTH BROWARD ) HOSPITAL DISTRICT, d/b/a MEMORIAL ) HOSPITAL MIRAMAR, )
)
Respondents. )
RECOMMENDED ORDER
These consolidated cases were heard by David M. Maloney, Administrative Law Judge of the Division of Administrative Hearings, on November 5-7, 9, 15-16, 19-21, 26, 27 and
December 3-5, 2001, in Tallahassee, Florida.
APPEARANCES
For Petitioner Columbia Hospital Corporation of South Broward, d/b/a Westside Regional Medical Center:
Stephen A. Ecenia, Esquire
Rutledge, Ecenia, Purnell & Hoffman, P.A.
215 South Monroe Street, Suite 420 Post Office Box 551
Tallahassee, Florida 32302-0551
For Petitioner TCC Partners, Inc., d/b/a Cleveland Clinic Hospital:
C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen
227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302
Robert A. Weiss, Esquire
Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200
118 North Gadsden Street Tallahassee, Florida 32301
For Respondent South Broward Hospital District, d/b/a Memorial Hospital Miramar:
F. Philip Blank, Esquire Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A.
204 South Monroe Street Post Office Box 11068
Tallahassee, Florida 32302-3068
George N. Meros, Jr., Esquire Michael E. Riley, Esquire Gray, Harris & Robinson, P.A. Post Office Box 11189 Tallahassee, Florida 32302
For Respondent Agency for Health Care Administration:
Gerald Pickett, Esquire
Agency for Health Care Administration 2727 Mahan Drive
Building Three, Suite 3431 Tallahassee, Florida 32308-5403
STATEMENT OF THE ISSUE
Whether the Certificate of Need application of the South Broward Hospital District (CON 9459) to establish a 100-bed hospital in Health Planning District 10, Broward County, should be granted by the Agency for Health Care Administration?
PRELIMINARY STATEMENT
In early 2001, the South Broward Hospital District ("SBHD" or the "District") filed a certificate of need application with the Agency for Health Care Administration ("AHCA" or the "Agency"). The application, designated CON 9459 by AHCA, seeks establishment of a new 100-bed acute care hospital to be know as Memorial Hospital Miramar ("Memorial Miramar") in southwestern Broward County.
The Agency approved the application and the decision was published in the Florida Administrative Weekly. Within 21 days of the publication, on July 11, 2001, Columbia Hospital Corporation of South Broward d/b/a Westside Regional Medical Center ("Westside") filed a Petition for Administrative Proceedings with AHCA to contest the decision to issue CON 9459 to SBHD.
The petition was referred to the Division of Administrative Hearings together with related petitions filed by Hollywood Medical Center and Cleveland Clinic Florida Hospital, d/b/a Cleveland Clinic Hospital ("Cleveland Clinic"). The cases were assigned DOAH Case Nos. 01-2890CON, 01-2891CON and 01-2892CON.
By order of the undersigned, the administrative law judge designated by the Division of Administrative Hearing to conduct the proceedings, the three cases were consolidated.
On August 30, 2001, Cleveland Clinic Florida Hospital filed a Notice of Transfer of Interest to TCC Partners, Inc., d/b/a Cleveland Clinic Hospital and Motion for Substitution of Party. The notice and motion followed the relocation in early July 2001, of Cleveland Clinic's 150-bed acute care hospital within Broward County and a change in ownership of the hospitals to TCC Partners, Inc., d/b/a Cleveland Clinic Hospital. An order granting the motion was issued on September 5, 2001. Six days later, Hollywood Medical Center voluntarily dismissed its petition in DOAH Case No. 01-2890. The two remaining consolidated cases proceeded on the days listed above to final hearing.
At hearing, SBHD presented the testimony of Anthony C. Krayer; Zeff Ross, expert in hospital administration and operations; J. E. Piriz, expert in hospital administration; C. Ken Heltage, expert in hospital administration; Edward L.
Hengtgen, Jr., expert in health care architecture including building cost estimates; Matthew Muhart, expert in health care financing and accounting; Armand Balsano, expert in health planning; Leigh Kerr, expert in land use planning; Hugo J. Finarelli, Ph.D., expert in health planning, including assessment of need for acute care hospitals; Frederick Michael Keroff, M.D., expert in hospital emergency services; David D. Donzalla, expert in emergency medical services; Beverly Greenberg, M.D., expert in primary care medicine; Miguel Venerero, M.D., expert in OB/GYN medical services. Exhibits of SBHD identified as "District Exhibits 1-55" were admitted into evidence with the exception of District Exhibit 15 (rejected), Exhibit 30 (withdrawn),
Exhibit 31 (ruling reserved) and Exhibit 39 (marked but not offered).
The Agency for Health Care Administration presented the testimony of Jeff Gregg, CON Bureau Chief and an expert in health care planning. It presented two exhibits identified as AHCA Exhibits 1 and 2. Both were admitted into evidence.
Westside presented the testimony of James Petkas, expert in health care finance and health care system financial operations; Scott Hopes, expert in health planning; and William Craig Holloway, expert in health care architecture. Exhibits offered by Westside identified as Westside Exhibits 1 through 41 were admitted into evidence with the exception of Westside Exhibit 15
(rejected) and Westside Exhibit 37 (withdrawn). Westside Exhibit 41, the deposition testimony of Sheila Taylor was received in evidence with ruling reserved as to the expertise of the witness. After review of the deposition, Sheila Taylor is accepted as an expert in nurse recruitment.
Cleveland Clinic presented the testimony of John David Zegeer (misspelled in the transcript as Zigeer), expert in transportation planning and traffic engineering;
Patricia Greenberg, expert in health care planning and health care finance; David Pettit, expert in health care finance; and Patrick Brilliant, expert in hospital administration. Cleveland Clinic offered exhibits marked as Cleveland Clinic Exhibits 1-18, and 20-36. All were admitted into evidence.
Official recognition was taken of excerpts from prior CON applications filed by Cleveland Clinic Florida Hospital and from the record made at trial in University Community Hospital v.
DHRS, 472 So. 2d 756 (Fla. 2d DCA 1985).
The filing of the transcript of the final hearing was completed on December 21, 2001. Following the issuance of an order extending the time for the filing of proposed orders until February 25, 2002, proposed recommended orders of the parties were filed on time. This Recommended Order follows.
FINDINGS OF FACT
The Parties
AHCA
The Agency for Health Care Administration is the state agency with the authority to review and issue Certificates of Need in Florida.
SBHD, the Applicant
The applicant in this proceeding is South Broward Hospital District ("SBHD" or the "District"). Created by the Legislature in 1947 "at the request of voters to meet the healthcare needs of the South Broward community" (District No. 2, Vol. 1, pg. 7), SBHD is a special taxing district. The District receives tax revenues in order to support SBHD as the
health care provider of last resort in South Broward County with a long demonstrated history of serving medically indigent patients.
Id. From its inception in 1947 to today with the support of local tax revenue, the mission of SBHD has remained unchanged: to provide health care to all residents of the community regardless of ability to pay.
There are three acute care hospitals in the "Memorial Health Care System" operated by SBHD: Memorial Regional, Memorial Pembroke Pines and Memorial West. These three hospitals make the District the dominant provider of health services in
south Broward County. The District's market share of admissions to hospitals located in south Broward County is 85%. The other 15% of hospital admissions are to Hollywood Medical Center. (These percentages do not account for admissions of South Broward County residents to hospitals outside of the borders of SBHD.)
Memorial Regional Hospital, a Medicaid disproportionate provider, is located 13.6 miles from the proposed Miramar hospital site. Without question, the predominant provider of care to indigent patients in south Broward County, Memorial Regional is licensed for 489 acute care beds.
Memorial Regional had an acute care occupancy rate of 76.5% in 2000. From time-to-time in recent years, it has experienced unacceptably high occupancies particularly within individual units. It presently has patient care units that often operate above capacity, resulting in patient flow problems within the hospital.
Memorial West Hospital, located 5.7 miles from the proposed Miramar site, is currently licensed for 164 acute care beds. It had an acute care occupancy rate of 88.9% in 2000.
Memorial West currently operates 14 "labor-delivery- recovery" observation beds ("LDR" beds) that are not among the hospital's licensed beds. The hospital has recently received a CON for 36 additional beds to be utilized for acute care and further authorization via a CON exemption to add another 16 beds
licensed for acute care provided certain occupancy levels are achieved. These additional 52 licensed beds are projected to become operational in 2002. Furthermore, Memorial West is adding
36 additional LDR beds and 20 acute care observation beds and doubling the size of its emergency room. When the expansion is complete, Memorial West will have 216 acute care beds, 20 acute care observation beds and 50 LDR beds.
As matters stood at the time of hearing, peak occupancies in some departments at Memorial West such as obstetrics, routinely exceeded 100%. With the additional beds slated for opening in 2002, demand for acute care services in southwest Broward County will continue to produce high occupancy rates at Memorial West. It is reasonably projected that the growth in demand for acute care services in southwest Broward County with the additional beds will cause Memorial West to operate at 87% occupancy in 2005 and 99% occupancy in 2010 unless the hospital proposed by SBHD for Miramar is built.
Memorial West opened in 1992 as a 100-bed hospital, in part fulfilling SBHD's vision to expand services into what was then projected to be a rapidly growing southwest part of the county, a suburban area more affluent than the District as a whole. Approved by AHCA's predecessor, SBHD's strategy in opening Memorial West was to gain access to this more affluent
suburban market in order to help off-set the rising care of indigent care. The strategy has worked.
Memorial West has made a profound contribution to the financial success and viability of the District. In 2001, Memorial Hospital West accounted for almost half of the District's bottom line profit. The profitability of Memorial West has allowed the District to continue to provide growing levels of indigent care, while at the same time decreasing tax millage rates. In fact, the millage rates levied by the District have decreased three times since Memorial West opened. During this same period of decreasing millage rates, the District has been able to increase its ratio of uncompensated care to tax revenues from 3-1 to 5-1.
The District's third hospital, Memorial Hospital Pembroke was leased by the District for the first time in 1995. Now leased until June 2005 from HCA, Inc., HCA announced its intention at hearing to re-take the facility so that the District will lose Memorial Pembroke as one of its hospitals at the expiration of the lease. Licensed for 301 beds, Memorial Pembroke is located 10.6 miles from the proposed Miramar site.
Memorial Pembroke's occupancy rate from July 1999 to June 2000 was 26.2%. This low rate of occupancy is due, at least in part, to significant physical plant constraints and deficiencies. Although licensed for 301 beds, the physical plant
can only reasonably support 149 beds. When its daily census reaches 140 patients, the hospital's operational and support systems begin to fail.
Prior to 1995, Memorial Pembroke was operated by a series of for-profit owners. Just as it does now, Memorial Pembroke suffered from chronically low utilization under all prior management. Before the District leased the facility from Columbia-HCA, the hospital had become stigmatized in the community; many patients and physicians were reluctant to use it. Due to a number of factors (some tangible, such as an out-of-date physical plant - others intangible) that stigma continues today.
The District has invested considerable management and financial resources to improve the quality of care, the condition of the facility and the community reputation of Memorial Hospital Pembroke. Because the hospital serves as a "safety valve" for the high utilization at the District's other hospitals, especially Memorial West, Memorial Pembroke's census between 1995 and 2000 has been on the rise. Nonetheless, the facility continues to be regarded as a "second tier" hospital and to suffer a stigma within the community.
Whatever the source of the stigma afflicting Memorial Pembroke, it is unlikely that occupancy rates at Memorial Pembroke will dramatically improve unless significant and substantial investment is made in the hospital. It does not make
sense for SBHD to make such an investment since it will lose the facility in three years. Whether HCA will make the investment required to cure the facilities utilization woes remains an open question. (See paragraphs 103 and 104, below.)
Through the three hospitals in the Memorial Healthcare system, Regional, West and Pembroke, and a number of clinics that are off-campus, the District provides a full range of health care services to residents of south Broward County. These include: general acute care; tertiary care; adult and pediatric trauma care under trauma center designation; a specialty children's hospital designated by the state as a Children's Medical Services provider for children with special needs for cardiac care, hematology and oncology, and craniofacial services; outpatient services; and primary care services.
The District is the only provider, moreover, of many health care services within the boundaries of the South Broward Hospital District, all of Broward County south of SW 36th Street. (The North Broward Hospital District includes all of Broward County north of SW 36th Street.) These services include obstetrics, pediatrics, neonatal intensive care, adult and pediatric trauma at a Level I trauma center, and teen pregnancy prevention and education. Consistent with its mission, the District also operates the only system of primary care clinics for the indigent in the South Broward Hospital District.
The District is clearly the safety net provider of acute care hospital and other services for south Broward residents. In 1999, the District provided 5.9% of its total revenue or approximately $63 million in charity care and 5.4% or approximately $58 million to Medicaid recipients. During the same time period, Cleveland Clinic in terms of total revenue provided 1% charity care and 1.8% to Medicaid recipients while Westside provided 0.6% charity and 2.3% Medicaid. In dollars worth of care devoted to indigent and Medicaid patients, SBHD provides over ten times more Medicaid and indigent care than Cleveland Clinic and Westside combined.
Tax revenues, although supportive of the District's ability to maintain its mission, do not come close to compensating the District in full for the care it provides to charity and indigent patients. In fact, the District expends five dollars in uncompensated care for every dollar of tax revenue it receives. Still, as a significant source of income to the District, these tax dollars contribute to SBHD's robust
financial health.
Cleveland Clinic
Cleveland Clinic Hospital is owned by TCC Partners, a partnership between the Cleveland Clinic Foundation and Tenet Healthcare Systems.
Originally located in northeast Broward County in Pompano Beach, Cleveland Clinic obtained approval in 1997 to relocate its 150 beds to Weston near the intersection of I-75 and Arvida Parkway. Operation at the site of the relocation began in July of 2001. The new site is within one of the ten-zip codes SBHD has chosen as the proposed primary service area for its new hospital in Miramar, but it is outside the South Broward Hospital District. The new site of Cleveland Clinic is in the North Broward Hospital District, 1.5 miles to the north of the boundary line between the two hospital districts that divides Broward County into two distinct health care markets.
Cleveland Clinic has an established history as a regional and national tertiary referral center. It is also an advanced research and education facility that benefits from the outstanding reputation of the Cleveland Clinic Foundation and the hospitals under its umbrella.
Cleveland Clinic is not a typical community hospital.
It follows a distinctive model of medicine based on a multi- disciplinary approach and a closed medical specialty staff. The medical staff is open to community primary care physicians but not to community specialists or sub-specialists. All of the specialists on its staff are salaried employees of the Cleveland Clinic. This means that physician specialists who are not
employees of the Clinic do not have privileges to admit or treat patients at the Cleveland Clinic Hospital.
The Cleveland Clinic offers tertiary acute care services, such as kidney transplantation and open-heart surgery. It also provides specialty services in colorectal surgery, voiding dysfunction and limb reattachment. Among its specialty programs are an adult spine program, an acute stroke program, an epilepsy clinic, and an orthopedic center of excellence in sports medicine.
At the time of hearing and since opening, Cleveland Clinic's average daily census has been approximately 44 patients.
Westside
Founded 26 or so years ago in what was then considered western Broward Count from the standpoint of population (hence its name), Westside is a 204-bed acute care hospital. Slightly less than nineteen miles from the proposed Miramar site, the site of the hospital is "now somewhat central [to Broward County]" (Westside No. 39, p. 8), given the location of the population today and the growth that has occurred to the west of Westside. Westside, like Cleveland Clinic, is in the North Broward Hospital District. It is located in the City of Plantation on West Broward Boulevard.
Among the variety of acute care services offered by Westside is open heart surgery ("OHS"). The OHS program,
implemented two years ago has increased the hospital's occupancy rate to a near 70%. (In 2000, the hospital had an acute care occupancy rate of 69.3%). The occupancy rate is expected to increase as the open heart surgery program expands and matures. Recent capacity constraints in the ICU, for example, led to a capital project to expand the unit "about a year and a half ago." (Id. at 13).
With regard to questions about whether the hospital had experienced capacity constraints or "bottlenecks" in units, Michael Joseph, the chief executive officer of Westside, answered
this way:
We did in tele, and that's when we did the overflow on the fifth floor. So at this time we are -- in the peak season of March, from time to time, sure. But on the annualized basis, we are in the 75 percent occupancy level. And sometimes there [are other issues] that all hospitals go through.
(Id., at 14). At the time of Mr. Joseph's deposition, October 23, 2001, for the most recent year the average daily census has been "in the 175 range." (Id.) At present, therefore, Westside's occupancy is close to ideal.
Westside is financially strong. It had strong financial performance in 2000 and at the time of hearing was expected to perform strongly in 2001.
Replication of West
Faced with both the potential loss in 2005 of Memorial Pembroke and the high occupancies at Memorial Regional and Memorial West, SBHD began investigating the opportunity to replicate the Memorial West model of success.
During the investigation, the District came to believe what it suspected from obvious signs: there is a large and growing population to be served in the Miramar area. Although land was limited, the District was able to purchase within the City of Miramar a 138-acre parcel. The parcel is the site of the subject under consideration in this proceeding as detailed in CON Application 9459: SBHD's proposed project.
SBHD's Proposed Project
The District proposes to construct a 100-bed acute care hospital at the intersection of SW 172nd Avenue and Pembroke Road. The site is a large one. It has sufficient land available to serve ultimately as a "health park" with medical office buildings, outpatient facilities, and additional health care related facilities typical of a modern medical campus. If, on the other hand, the District decides it is in its best interest to "sell off balances" (tr. 486) of the property, it retains that option.
The hospital will provide basic acute care services and be composed of 80 adult medical/surgical, 8 pediatric, and 12
obstetric beds. On the third floor, the hospital will have 28 observation status beds, in addition to its 100 licensed beds.
The design of the hospital is cost efficient. It meets all license and life safety code requirements. All patient rooms are private and meet the square footage requirements of AHCA's license standards. The hospital design, costs, and methods of construction are reasonable.
The project has several goals. First, it is intended to provide increased access to affordable and quality health care for the residents of southwestern Broward County. Second, the project will allow Memorial Regional and Memorial West the opportunity to decompress and operate at reasonable and efficient occupancies into the foreseeable future without the operational problems caused by the current over-utilization. Third, the project will replace the loss of Memorial Pembroke. Finally, the project will give the District a second financial "engine that drives the train" (tr. 141) in the manner of Memorial West. The project will enable the District to maintain its financial strength and viability and continue to serve so effectively as the safety net provider for the indigent in South Broward County.
Stipulated Facts
In their prehearing stipulation, filed on October 31, 2001, the parties stipulated to the following:
On January 26, 2001, AHCA published a fixed need pool for zero additional acute care beds in District 10, Broward County, for the January 2001 batching cycle.
The South Broward Hospital District ("SBHD" or "District") timely and properly filed a Letter of Intent, initial CON Application, and Omissions Response in the batching cycle.
On May 16, 2001, AHCA filed a Notice of Intent to issue the CON together with a State Agency Action Report ("SAAR") recommending approval of the CON for the proposed hospital.
AHCA's Notice of Intent to approve the CON for the proposed hospital was challenged by Cleveland Clinic and Westside. Hollywood Medical Center ("HMC") also filed a petition challenging the preliminary approval but later withdrew as a party from these proceedings.
Broward County has been divided by the Florida Legislature into two hospital taxing districts. The SBHD includes all areas of the county south of SW 36th Street, and the North Broward Hospital District ("NBHD") includes all areas north of the demarcation line.
SBHD, Cleveland Clinic, and Westside each have a history of providing high quality of care. All of SBHD's hospital facilities are JCAHO accredited. Accordingly, the quality of care provided by these parties is not at issue in this proceeding except as it may be impacted by staffing issues.
The proposed staffing and salary projections included on Schedule 6 of CON Application No. 9459 are reasonable and are not in dispute, although the parties specifically preserved the right to present evidence concerning the SBHD's ability to recruit the staff projected, and whether the projected salaries will cause or accelerate the loss of staff at existing hospitals.
The parties agree that the SBHD has available management personnel and funds for capital and operating expenditures. However, Petitioners assert
that the District's use of such resources for this project is neither wise nor prudent and is not in keeping with appropriate health planning principles.
The parties agree that the SBHD has a history of providing health care services to Medicaid patients and the medically indigent. (Section 408.035(11), Florida Statutes.) However, Petitioners do not agree that proposed Miramar Hospital can meet the levels of charity care proposed in the application for the Miramar Hospital.
With regard to Schedule 1 of the Application, the parties stipulate that the Land Costs (lines 1-11) are reasonable and are not disputed; and the Project Development Costs (lines 26-31) are reasonable and not disputed.
The parties agree that Schedule 3 of the Application (sources of funds) is reasonable and not disputed.
The SBHD does not contest Petitioners standing in this proceeding.
At hearing, the parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital. The parties also stipulated that the SBHD has in place the staff recruitment and retention programs described at pages 132-139 of the CON application.
The stipulation at hearing did not preclude either Westside or Cleveland Clinic from presenting evidence with respect to the impact of the SBHD's recruitment on other programs and other hospitals.
No Numeric Need
As indicated by the AHCA Bed Utilization Data for CY 2000, the occupancy rate in Broward County was 48.42%. There is, moreover, a surplus of 1,786 beds. This surplus has been increasing over time and has grown by nearly 60 beds between the January 2001 and July 2001 planning horizons.
The hospitals within the District's proposed primary service area had an occupancy rate of 53% in the July 2001 planning horizon and a surplus of 456 beds, a number "somewhat proportionate to the distribution of patient days as well as licensed beds within the district." (Tr. 1639.) If the 152 non- functional beds at Memorial Pembroke are deducted from the surplus then the surplus is 304 beds.
Not surprisingly therefore, the Agency's fixed need formula for acute care beds produced a fixed need of zero beds in Health Planning District 10 for the January 2001 batching cycle. (Broward County composes all of Health Planning District 10).
The fixed need pool of zero was published by the Agency in January of 2001. Again in July 2001, AHCA published a fixed need for zero acute care beds in Health Planning District 10.
In light of the zero fixed need pool, SBHD bases its application for the proposed Memorial Hospital Miramar on "not normal circumstances."
Not Normal Circumstances
"Not normal circumstances" are not defined or limited by statute or rule. Nonetheless, a number of "not normal" circumstances have been recognized repeatedly by AHCA . These recognized "not normal circumstances" are generally grouped into categories of access, quality and cost-effectiveness. None of them are present in this case. "There [are] no financial access, geographic access or clinical access circumstances [in this case] that rise to the level of not-normal circumstances." (Tr. 1633). Nor are there any quality or cost-effectiveness deficiencies claimed by the District in its application.
The District bases its claim of "normal circumstances" on eight factors. They are: 1) explosive population growth; 2) a mal-distribution of beds within the health planning district;
the effects of not having a hospital facility in the area proposed; 4) continued and projected high occupancies at nearby hospitals; 5) inability to expand inpatient capacity at the nearby hospitals with high occupancy rates; 6) the limited functionality and uncertain future of one of the hospitals that might serve the area where the new hospital is proposed to be located; 7) the increasing retraction of access for residents to other hospitals; and, 8) the need to assure that the applicant will remain a strong competitor able to fulfill its unique role and mission that would be served by granting the application.
Population Growth
Broward County is one of the fastest growing counties in the United States. "According to the census 2000 data, [over the last decade] it was the fastest growing county in all of the United States based on total population gain . . . ." (Tr. 617.)
The population growth was spurred in the latter part of the previous decade by the devastation wreaked by Hurricane Andrew in 1992. The hurricane's south Dade County victims used insurance proceeds to move to southwest Broward County. This migration helped to produce growth in southwest Broward County at a faster rate than the county as whole in the decade of the nineties.
Growth in pockets of southwest Broward during this period of time has been phenomenal. For example, Pembroke Pines population increased 109 percent between 1990 and 2000. For the same time period, the population of Miramar (now the second fastest growing municipality in Florida) increased 78 percent. This growth was more than just steady during the 10 years before 2000; as the decade proceeded, the growth rate accelerated.
In short, it is not a misnomer to describe the population increase in southwest Broward County and the Miramar area during the last decade as "explosive." (Tr. 626) With its attendant residential and commercial development, it has
transformed southwest Broward County from a rural community into a suburban one.
Population growth in southwest Broward County is expected to continue into the future. Substantial land in the area is under development or is available for residential development. By 2006, the population is projected to grow to 337,000, from the 2000 population of 289,000. This rate, while not comparable to the explosive rate in some pockets of the county in the last decade, is not insignificant. By way of contrast, the projected growth rate of 16.7% over the next five years in southwest Broward compares to a projected rate for the county as a whole of 8.4% and for Florida of 7.1%.
In and of itself, the projected population growth in southwest Broward County is not a "not normal" circumstance. However one might characterize the projected growth rate in southwest Broward County, moreover, the acute care hospital bed need rule takes population into account in its calculations and projections.
But, the bed need formula does not take into account the significant number of beds at Memorial Pembroke that are not functional. Nor does it take into account that Cleveland Clinic is not a typical community hospital. Nor does it take into account other factors such as that Memorial West and Memorial Regional are experiencing capacity problems or the division of
the health planning district into two hospital taxing districts recognized as distinct medical markets, a recognition out of the ordinary for health planning districts in Florida.
A geographical fact pertinent to arguments made by Cleveland Clinic and Westside with regard to the location of the population is that Memorial Miramar's proposed primary service area is divided by Interstate 75, a north-south primary travel corridor.
On a percentage basis, there is faster population growth projected for areas west of I-75. But for the foreseeable future, the actual number of people populating the area west of I-75 will remain less than the number east of I-75. The area west of I-75, with the exception of one zip code in which a retirement center has been built, has a younger projected population that should produce lower use rates and average lengths of stay in hospitals than the area east of I-75.
The support these facts lend to the District's opponent's arguments that bed need is greater east of I-75 than west is diminished by the absence of any hospitals west of I-75 in the South Broward Hospital District and the presence of four hospitals in the hospital district east of the interstate.
Distribution of Beds
Consistent with the recognition by the Legislature, AHCA, and its predecessor state agency, north and south Broward
County are two distinct medical markets demarcated by the division of the county into two hospital districts.
There are 3.52 beds per 1000 population in the North Broward Hospital District, 2.35 in the south. A greater number of under-utilized acute care beds are located in the northern half; a greater percentage of highly utilized hospitals are located in the southern half.
Of the four hospitals located in south Broward County, both Memorial Regional and Memorial West had average annual occupancies in excess of 80% in the calendar year 2000. By contrast, of the 13 hospitals located in the northern half of the County, none had occupancy in excess of 80%, and only one had an average annual occupancy in excess of 70%.
These statistics point toward an over-distribution within the health planning district of beds in the north and an under-distribution in the south. At the same time, beds are distributed between the two hospital districts in approximate proportion to the number of patient days experienced by each. In 2000, NBHD had 71% of the patient days for District 10 and 73% of the acute care beds. As one might expect, therefore, the relationship between patient days and acute care beds during the same period was similar for the SBHD: 28.9% of the patient days for District 10 and 27% of the beds.
An analysis of bed to population ratio is only meaningful when occupancy rates are also considered. Occupancy rates are mixed in the south part of the county: very high for some, especially Memorial West, and very low for Memorial Pembroke. This breadth of this disparity is unusual.
Effects of No Hospital in Miramar
Thirty to 60 minutes to reach an acute care hospital is a reasonable driving time in an urban area. There are five existing acute care facilities within 30 minutes of southwest Broward County. In fact, most of the residents in Memorial Miramar's proposed service area are within 15 minutes or less of an existing acute care facility.
Nonetheless, without a hospital in Miramar, residents must leave their immediate community to gain access to acute care services.
As a matter of sound health planning, "[n]ot every city, town or hamlet can or should have its 'own' hospital." So correctly posit Cleveland Clinic and Westside. See pgs. 13-14, Cleveland Clinic and Westside PRO. But as the City Manager of Miramar wrote, "[t]he addition of a new hospital is one of the last missing links in the City [of Miramar]'s master plan . . . The city is looking to build the best possible future for its residents." District Ex. 2, Attachment G. A new hospital in Miramar would not only be a featured complement of the City of
Miramar's plans for the future, it would also enhance access to acute care services and address access concerns caused by skewed utilization among the SBHD hospitals due to the unusual state of affairs at Memorial Pembroke and the high demand at West.
Of great concern is that residents of southwest Broward County in need of emergency services are sometimes not able to gain access to those services at Memorial West, the closest available hospital. Memorial West operates the third busiest Emergency Department in Broward County with 65,000 visits in 2001. In Calendar Year 2000, Memorial West's emergency room went on diversion 123 times, averaging 7.7 hours per diversion. In the first months of 2001, the hospital went on diversion 89 times, with an average diversion time of 16.3 hours.
These diversions have a dual effect. They mean that patients wait longer for beds. They also mean that providers of emergency medical services in ambulances are forced out of the community for extended periods of time unable to render services within the community that may be needed during that time.
Diversions at Memorial West are becoming more and more problematic. Wait times are getting longer; the total time on diversion is growing.
At first blush, the problems appear to be less significant at Memorial West than they might be elsewhere in District 10 because of its low "emergency room visits to hospital
admissions" ratio. The Health Planning District average shows that about 20% of emergency room patients are admitted to the hospital. At Memorial West, the ratio is 8.7%, the lowest in the County. While normally this might reflect that patients visiting Memorial West have a lower acuity than patients visiting emergency rooms district-wide, the lower ratio for Memorial West is due, at least in part, to the high volume of pediatric patients seen at West who are transferred to Joe DiMaggio's Children's Hospital.
The pediatric transfers, in the words of Frederick Michael Keroff, M.D., a Board-certified emergency physician who has worked in hospital emergency departments in South Florida for
24 years,
create a false sense of what is actually being seen on the adult side of the emergency room department. On the adult side . . . [the ratio] varies somewhere between 12 and
16 and a half percent which is comparable with any other facility. . . . [W]hen you mix in such a large pediatric population into the adult population, obviously it dilutes out the number and drops [the ratio] down
. . . .
(Tr. 2568.)
A solution to emergency room diversion at Memorial West and an alternative to the construction of Memorial Miramar proposed by Cleveland Clinic and Westside is more SBHD urgent care centers in the Miramar area.
SBHD operates seven urgent care centers. Of these seven, the proposed Miramar PSA has only one.
Additional urgent care centers more readily accessible in the 10 zip code area that comprises Memorial Miramar's PSA might reduce the number of visits to the ER at Memorial West. But they might not.
Patients don't self-triage when they are presented with a problem. They go to the hospital. [Triage is a medical decision.] Patients usually come to the hospital, even [with] urgent care centers down the block, because they don't know what the problem is and they allow the hospital to make the decision about what the problem is.
(Tr. 2571.) Additional urgent care centers would not solve the problem created when diversion is a result of the lack of acute care beds for Memorial West ER patients who need to be admitted to the hospital for treatment beyond that provided in the ER.
Cleveland Clinic hospital is not likely to offer much of an alternative. Because of the closed nature of the Cleveland Clinic specialty staff, it will not be a hospital of choice for community physicians in the South Broward Hospital District. Nor will it be a hospital of choice for patients able to elect the hospital at which to seek emergency services. It is apparent from the demand on Memorial West, despite the number of beds and other emergency departments within acceptable reach, that a Memorial West-type facility is what the residents of southwest
Broward County prefer and opt for even if it means they have will have to wait for emergency services.
In cases of patients transported from southwest Broward County via ambulances forced to go to Cleveland Clinic in Weston to deliver patients in need of emergency services, the transport presents difficulties of their own. It is not efficient management of emergency services due to their very nature to require ambulances to leave their service areas.
There are no clear solutions to the problems emergency room diversions present for patients, their families, physicians, and the emergency medical system in general in southwest Broward County other than construction of new acute care hospital in Miramar. Construction of a new acute care hospital in Miramar will help to alleviate the high occupancies and emergency room diversions currently experienced at Memorial West. It will reduce disruptions to Miramar residents and will provide an easily accessible alternative to southwest Broward County residents, thereby enhancing access to emergency services.
High Occupancy Rates at West and Regional
The current and reasonably-projected high occupancies at Memorial West and Memorial Regional are extraordinary circumstances for a health planning district with as many excess beds as District 10.
The calculation under AHCA's formula for hospital bed need for the January 2001 batching cycle yielded an excess of 1,717 beds. Calculation by the Agency using the same formula for the July 2001 batching cycle showed an excess of 1,786 beds or 59 more excess beds than just six months earlier. The import of these results was described at hearing by Scott Hopes, Westside's expert health planner:
Obviously when you have a situation like this, the default is a zero published fixed need which is what was published. But the importance here is that there are so many excess beds. And if you look also on the line [of Westside Ex. 23] that deals with occupancy rate, the occupancy rate is about
48 percent, and it hasn't varied much between the six-month period. In fact, the occupancy rate in Broward County has been under 50 percent for some quite sometime.
(Tr. 2076-7).
It is extraordinary that a health planning district with so many excess beds would also have two hospitals, Memorial West and Memorial Regional, with capacity problems.
Memorial West, by any standard, is a successful hospital. Since it opened in 1992, the inpatient volume there has tripled. Opening as a 100-bed facility, Memorial West now has 184 licensed beds, an expansion aimed to meet the demand for its services.
As alluded to elsewhere in this order, because there are often not enough available acute care beds at Memorial West,
some patients have to wait in the ER six hours or more. It is not unusual for more than 40 patients to wait at one time.
Despite these conditions, patients, when offered the opportunity for a transfer to another hospital, rarely accept the offer.
More often than not the patients do not wish to go. The reputation of Memorial Hospital West, the loyalty factor, if you will, to Memorial, to the medical staff, the patients want to remain at the facility.
(Testimony of Memorial West Administrator Ross, Tr. 152-3.)
Memorial West plans expansion but even with its current planned bed expansion, it is reasonable to expect it to reach unacceptably high occupancy rates by 2006 if Memorial Miramar is not built.
Furthermore, the only obstetric programs in south Broward are at Memorial West and Memorial Regional. Memorial West performed 4,400 births last year, and its obstetrics unit often operates in excess of 100% occupancy. The only constraint on additional births at West is the limited physical capacity of the facility. Memorial Regional experienced even more births last year than West with about 5,000 deliveries.
Memorial Regional is operating at or exceeding its functional capacity in other departments. The current medical/surgical occupancy at Memorial Regional is approximately 80% year round. Some units experience much higher occupancies. The intensive care unit's occupancy frequently exceed 100%, as
does the cardiac telemetry unit. In certain medical/surgical units, peak occupancy is as high as 125%.
Memorial Regional's capacity to handle its high patient volume is limited by certain factors. Semi-private rooms are limited to use by members of the same sex. As a tertiary facility, there are specialty patients who must be served by nurses trained in that patient's specialty, with appropriate monitoring equipment.
Without approval of Memorial Hospital Miramar, Memorial Regional will reach 85% occupancy by 2008 and 88% occupancy by 2010. These occupancy rates create an inefficient and untenable environment in which to deliver the mix of specialized and tertiary services offered by Memorial Regional.
The overcrowding at Memorial West and Memorial Regional is dramatic and continuing. There are simply more patients seeking care at these hospitals than the hospitals can serve appropriately. This overcrowding exists despite the excess of acute care beds within the health planning district. In sum, despite the plentiful nature of the number of acute care beds in the health planning district, a need exists to either decompress Memorial Regional and Memorial West by some means such as the proposed new hospital in Miramar or to expand one or both of the two hospitals by way of new construction or conversion of LDR and observation beds.
A decompression alternative to the new hospital is to transfer beds from existing hospitals to create a satellite hospital. Because of high occupancy rates at West and Regional and because Pembroke's lease will expire in 2005, transfer of existing beds is not a feasible option.
That leaves expansion, as the only alternative to a new hospital in Miramar. Cleveland Clinic and Westside argue there are ample opportunities at the two hospitals for expansion.
Expansion
New Construction
In pre-CON application evaluation, SBHD commissioned a study from Gresham, Smith and Partners, an architecture firm.
The firm studied the three Memorial facilities to determine whether expansion of the acute care bed complement at any of them was feasible. In a "Memorial Health System Facility Expandability and Master Plan Review Report" the firm concluded that it was clearly not feasible to expand either Memorial Pembroke or Memorial Regional and there were problems with expanding Memorial West.
With significant problems including its aged plant and its uncertain future, expansion at Memorial Pembroke would not be cost-effective. It would cost $31 million in capital improvements to maintain Pembroke's functional capacity at 149 beds. If the present location of nursing administration, hospice
and other necessary services were moved out of the hospital, the hospital's function could be expanded to 215 beds. No evidence was presented with regard to the advisability of moving those services or the additional costs associated with this alternative.
HCA's willingness to make the investment necessary to renovate the facility at Pembroke was not supported by any specifics. HCA's announced its intention, "to take the hospital back at the end of the lease and run it," (tr. 1511-2) but, in fact, the company has not taken any action to evaluate the potential for assuming operation of the hospital in 2005. Nor has it even begun the process it must go through before final decisions are made. The overarching intention to "re-take the hospital and run it," at this point in time, does not mean HCA will be willing to make the investment necessary to renovate the facility either during the term of SBHD's lease or afterward. It still needs to "do a very detailed discounted cash flow analysis to make a final decision on the investment needed and the return on that investment." (Tr. 1514.) Memorial Pembroke's uncertain future makes it an unlikely candidate for expansion. However unlikely such a result, with the problems that afflict Memorial Pembroke, there is, moreover, no guarantee that HCA's intended analysis will convince it even to continue operation of the hospital.
Memorial Regional has different problems from Memorial Pembroke. It takes up an entire block surrounded by residential property and parking garages. There is almost no opportunity for growth on the site. Of the few areas that could be expanded vertically, only one would be conducive to bed addition. "[I]t is so remote, it doesn't tie back to the main nursing care areas." (Tr. 482.) Expansion at Regional would also be plagued with concurrency problems and zoning issues.
Of the three hospitals, Memorial West presents the best option for expansion. A facility master plan for Memorial West provides for the addition of a patient tower on the north side of the facility ("the north tower"). The addition of the north tower could add as many as 50 beds to Memorial West at a cost substantially less than the construction of Memorial Miramar. Still, SBHD's architects, Smith and Gresham, concluded that expansion of the size necessary to alleviate the overcrowding at West was not cost-effective. The force of the Smith and Gresham opinion is tempered by the firm's standing to benefit financially to a much more significant degree if Memorial Miramar is built than if the planned-for tower is constructed to add 50 beds to Memorial West. But the opinion is not groundless.
Put simply, construction of an additional tower at West is no simple solution to its capacity problems. The tower was planned for maternal services but like the minimal opportunity
for expansion at Regional, it would be "remote from the rest of the nursing function . . . [it would, moreover] trigger huge upgrades to the infrastructure." (Tr. 480.) The hospital site is constricted already because of additions that have almost completely built out the campus. A new north tower would add inefficiencies in hospital operations because of the increase in travel distance for materials delivery and meeting the dietary needs of patients. Despite the master plan for growth, an improvement the size of the north tower would begin to turn West into another Memorial Regional: a huge hospital, overdeveloped for its site. The improvement, like every improvement thereafter, would require patient shuffles and disruptions in patient care. Like Memorial Regional, expansion at West, too, would have concurrency issues and could create a land use dispute with neighbors, the outcome of which is uncertain.
In light of these obstacles, SBHD prefers the option of constructing the new hospital in Miramar over expansion at West. There is, however, in the view of SBHD's opponents, another option for expansion of existing facilities: conversion of LDR and observation beds.
Expansion through conversion of LDR and Observation Beds
Cleveland Clinic and Westside contend that another option to relieve overcrowding is conversion of observation and
LDR beds to acute care hospital beds. But these beds are used to meet the need of observation and maternity service patients.
There are patients who need closely supervised medical care but whose care has not been determined to require admission to the hospital. Observation patients, sometimes referred to as "23 hour" patients, may suffer from various conditions, including chest pain, fever, abdominal pain, rectal bleeding or nausea.
Given the high number of births at Memorial West, many obstetrical patients present at the hospital in "false labor" or for antipartum testing, complications of pregnancy, or symptoms that should be treated as observation or on an inpatient basis.
It would be impractical for Memorial West to convert observation and maternity service beds, whether existing or still planned for, to inpatient acute care beds. If these beds were converted, Memorial West would find itself once again in its present straits of not enough beds for observation purposes particularly for obstetrical patients for whom there is little choice where to obtain obstetrical services in the South Broward Hospital District.
Limited Functionality and Uncertain Future of Memorial Pembroke
Memorial Pembroke has undergone seven ownership changes since it first opened. Perceived as a hospital where neither patients nor physicians want to go, it has suffered from a stigma
within the community. Even with recent gains in utilization, it achieved an occupancy rate of only 24% in calendar year 2000.
Pembroke suffers from physical and infrastructure limitations that reduce its functional bed capacity to 149 beds. Its mechanical and heating, ventilation and air conditioning systems are outdated and inadequate. For example, a primary generator is vented to the outside by a 6-foot hole in the ceiling. The electrical panels are at absolute capacity. The first floor has an outdated, plenum air return with no ducts in the ceiling. The generators have transfer switches that require them to be turned on manually. Facilities management personnel are reluctant to do so for safety reasons.
The semi-private patient rooms at Pembroke are too small for modern care and do not have adequate space for the monitors, IV equipment, pumps and other technology required by today's health care delivery system. Many rooms do not have showers. The hospital has a number of three bed wards woefully outdated by the standards of modern care.
It would cost $31 million in capital improvements to simply maintain Pembroke's functional capacity at 149 beds, to upgrade the facility to bring it into compliance with existing code and to otherwise modernize inadequacies.
Whether Pembroke will continue to operate after 2004 is unknown. While HCA stated its intention to do so, it has not
made a final decision to assume operations. It still needs to conduct a financial analysis sufficiently detailed to determine whether the necessary expenditures to bring the hospital up to par are practical.
Any capital investment by HCA in excess of $1 million requires the approval of HCA's national office, approval that has not yet been provided. The level of capital investment required at Memorial Pembroke is significant and it cannot be assumed that HCA will make this investment. (See paragraph 89, above.)
Increasing Retraction for Access in SW Broward
Of the three hospitals located within the ten zip codes that constitute southwest Broward County: Memorial West, Memorial Pembroke and Cleveland Clinic, each poses some manner of access impediment for the residents of the area. Memorial West is overcrowded. Memorial Pembroke's future is uncertain, its present clouded by significant physical plant problems and stigma that keeps its occupancy low. Cleveland Clinic's distinctive character, its closed specialty staff and its regional, national and international draw discourages utilization by southwest Broward residents seeking routine acute care hospital services at a community hospital.
The Cleveland Clinic medical staff is open to community primary care physicians. "[W]ith the qualification that if there's a specialty for some reason that is not
adequately manned, the clinic can go out and contract with community physicians to provide the services" (District No. 55,
p. 39), the Cleveland Clinic medical staff is not open to community specialists or sub-specialists. Its specialty and sub- specialty staff, therefore, is closed. The medical staff building, moreover, located on the campus is also closed to community practitioners even to those primary care physicians with privileges at the hospital to manage their patients care. Like the specialty medical staff, the building is restricted to Cleveland Clinic salaried specialists.
Due to the closed nature of the specialty staff at Cleveland Clinic, any patient admitted to the Cleveland Clinic hospital will be seen by a Cleveland Clinic physician. This sets up reluctance on the part of community physicians to use the Cleveland Clinic hospital. As expressed by the hospital's CEO, "it's sometimes difficult to convince a primary care physician that he needs to change his referral patients, so yes, there is some concern [about the willingness of community physicians to utilize the hospital]." Id., p. 40.
In multiple prior CON applications approved by AHCA, Cleveland Clinic projected that up to 30% of its patients would come from outside Broward County and that it would draw patients from throughout Broward County, rather than having a more
traditional, limited service area typical of a community hospital.
Patient origin data for Cleveland Clinic when at its old location in Pompano Beach shows the hospital, unique among Broward County hospitals, has a broad county-wide, regional and national draw. While all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 75% of patient admissions in 1999, 60 zip codes generated the first 75% of Cleveland Clinic's admissions. Similarly, while all other hospitals in Broward County can identify fewer than 25 zip codes that generate the first 90% of their patient admissions in 1999, the first 90% of patient admissions at Cleveland Clinic's hospital were generated by no less than 287 zip codes.
Cleveland Clinic presented evidence of its intention to be available to the local community. It has marketed in Broward County by means of newspaper and television advertisements and various community programs. It has also conducted outreach and training programs with the emergency medical service providers in the Broward County area, not only to improve the quality of care for the patients of Broward County but also to educate the emergency medical service providers about Cleveland Clinic.
The patient origin data for Cleveland Clinic's first three months of operation in Weston, however, verifies its
continued broad draw. This data shows that within Broward County, only 30% of patients originated within the 9 southwest Broward zip codes that Cleveland Clinic identifies as its "immediate service area"; the other 70% of its patients come from outside the immediate service area.
Cleveland Clinic is not a typical community hospital.
Its previous CON applications have been granted in part on its unique characteristics. Whether its image or persona will change with the move to Weston to attract more patients from southwest Broward County is an open question. Given its nature and the focus of the health care it is likely to deliver, however, it is not likely that it will be utilized regularly by residents of southwest Broward County seeking routine hospital care either because not their hospital of choice or because of community physician referral patterns.
h. Assurance that SBHD Can Fulfill its Mission
The final "not normal" circumstance relied on by SBHD relates to the affluence of the patients in southwest Broward County and the profits that are reasonably expected to be generated by virtue of the proposed hospital's location in this affluent area. The expected profits will both subsidize SBHD's charity care and support its ability to be competitive. The importance of SBHD remaining competitive and able to serve the
indigent in Broward County was explained at hearing by Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation:
[A]s a major indigent care provider for the State of Florida, [SBHD is] providing a service that extends far and wide that benefits everyone.
In our state we have indigent care concentrated in relatively few facilities … [I]t is a very important resource that needs to be nurtured and protected to the greatest extent possible because it is fragile and vulnerable.
We have many uninsured people in the state, somewhere between two and three million. It is reasonable to expect now with the economic downturn that we are going to be seeing an increase in uninsured people, so the value of hospitals that function as safety net providers is . . . very important.
(Tr. 1240-1).
This rationale supported the District's CON application for Memorial West. Because of SBHD's financial success to which Memorial West has been a major contributor, SBHD has achieved a significant degree of financial stability in this day of decreasing reimbursements, managed care, and increased health care costs. It is not contested that its financial position is sound. For fiscal year 2002, SBHD was running ahead of revenue and profit projections at the time of hearing.
Nonetheless, if hospitals are constrained and the payor mix becomes less favorable, financial conditions can change
quickly. Only three years ago, the District posted an $18 million debt.
The capacity constraints at Memorial West will limit its ability to generate additional profits. At the same time, the District must accept all charity care patients. This requirement coupled with capacity constraints has the potential for an unfavorable payor mix for the District.
The addition of Memorial Miramar will help to ensure that the District maintains its strong market position and will sustain a favorable payor mix. The profits expected to be generated by Memorial Miramar will ensure that the District can continue to provide care to the indigent without raising, and perhaps by lowering, the tax rate for the tax payers of Broward County.
The Proposed Primary Service Area
The District's proposed primary service area ("PSA") is a 10 zip code area in southwest Broward County. It excludes zip codes in Dade County that might have been included as well as the eight easternmost zip codes in south Broward County.
Usually a set of contiguous towns or minor subdivisions or zip codes that represent a substantial majority of a hospital's patients, there is no single way of defining a hospital's primary service area. Some health planners use a
region from which 75% of the patients come but a range of 60 to
80 percent is not unreasonable.
There are other approaches to defining primary service areas: zip codes, for example, in which a threshold level of market share was achieved or that account for a minimum percentage of the hospital's patients. While one method may be more usual than another, any of a number of ways of defining a PSA may be reasonable.
Cleveland Clinic's health planner, Ms. Patricia Greenberg sees Dr. Finarelli's PSA for the Miramar hospital as not rational from the perspective of health planning. The zip codes Dr. Finarelli chose include a number that are to the east of Memorial West. Ms. Greenberg asserts that it is unlikely that patients will drive from the east past Memorial West in order to reach Memorial Miramar. It would have made much more sense, in her view, for the PSA to have included three zip codes to the north of the PSA in western Broward County: zip codes 33327, 33326 and 33325. But these zip codes, entirely within North Broward Hospital District, are not South Broward Hospital District zip codes. Nor are three other zip codes that Ms. Greenberg sees for the Miramar PSA as more rational choices than zip codes east of Memorial West that Dr. Finarelli chose. Ms. Greenberg's other choices outside Dr. Finarelli's PSA are not
only not in the hospital district, they are not in AHCA Health Planning District 10. They are in Dade County.
Determinations of bed need do not always rise and fall on the selection of the primary service area. To the contrary, as Dr. Finarelli stated at hearing, "[h]ow and where the boundaries are drawn between the primary and secondary service area is less important [than] making sure that any analysis of bed need and demand incorporates both the primary and secondary service areas." (Tr. 724). This statement loses its potency, however, and the import of the choice of the primary service area is raised in light of the population-based bed need projections made by Dr. Finarelli within the PSA in support of the application.
Population Based Bed Need Projections within the PSA
Dr. Finarelli conducted a standard population based bed need analysis to determine the gross bed need within the PSA selected for the proposed hospital. His bed need calculations were computed separately for adult medical, surgical, pediatric and obstetric beds. The assumptions used by Dr. Finarelli were reasonable and appropriate. The level of detail in Dr. Finarelli's model was described by another of SBHD's expert health planners who testified in this case, Mr. Balsano and who has been qualified as an expert in health planning and health
care financial feasibility approximately 20 times over the last decade, as the most detailed model he had ever seen.
Dr. Finarelli's analysis accounted for the current and projected population as well as the current and projected hospital discharge rate per 1000 population within the PSA. Multiplying the population (in thousands) by the discharge rate yields the total number of current and projected hospital discharges by PSA residents for the planning horizon.
The total number of hospital discharges was then multiplied by an appropriate average length of stay ("ALOS") to determine the total number of current and projected patient days by PSA residents. The total patient days were divided by 365 (days in the year) to arrive at the current and projected hospital average daily census ("ADC"). Finally, the ADC was divided by the desired 75% occupancy rate to arrive at a gross bed need for the PSA.
The calculations result in a projected need in the 2006 planning horizon for a total of 457 acute care beds; including 386 adult medical surgical, 25 pediatric, and 46 obstetric beds. Based only on projected population growth within the PSA, there will be an incremental gross bed need for 75 acute care beds; 67 medical/surgical, 3 pediatric and 5 obstetric.
Existing Inventory and Bed Supply
The three hospitals located within the 10 zip code PSA have a total of 667 licensed acute care beds, existing or approved. Including the 36 approved and 16 conditionally approved beds at West, Memorial West has 216 beds. Memorial Pembroke has 301 and there are 150 licensed beds at Cleveland Clinic.
This total, however, is "simply not a reasonable or realistic measure of how many beds in those three hospitals are truly available to the residents of Southwest Broward
County . . . ." (Tr. 837-8.)
Patient origin statistics and representations made by Cleveland Clinic in its certificate of need applications bear out that it is not a typical community hospital. Appropriate to its mix of tertiary services and its focus on education and research, it has a broad service area reaching far beyond Broward County. Consistent with the nature of the hospital, in its first three months of operation at Weston, 35% of its patients came from outside Broward County and only 16% have come from southwest Broward County or the 10 zip code PSA used by SBHD in its application for the Miramar hospital.
Based on available data and information, it is reasonable to project that Cleveland Clinic will draw approximately 26% of its patients from within Memorial Miramar's
PSA. It is reasonable, therefore, to allocate 26% of Cleveland Clinic's 150 beds to meet the population based demand for adult medical surgical beds in the PSA, for a net contribution of approximately 40 beds.
With its functional capacity of 149 beds, it is not reasonable to consider all of the 301 beds at Memorial Pembroke. Fifty-four percent of its patients come from within the Memorial Pembroke PSA. The product of 149 beds multiplied by 54% is approximately 80 beds available to meet the population-based demand of the residents of southwest Broward County. There is, moreover, some doubt about whether any beds will be available at Memorial Pembroke after the expiration of SBHD's lease with HCA. Given the stigma Memorial Pembroke suffers and its uncertain future, an estimate of 80 beds is a reasonable projection for the number of beds at the hospital available to meet the needs of the residents of southwest Broward County.
With 65% of its patients coming from within the proposed PSA for the Miramar Hospital, Memorial West is the hospital of choice for the residents of the proposed PSA. With
186 adult medical surgical beds, 120 meet the needs of patients coming from Miramar's PSA.
Thus, there are approximately 240 adult medical surgical beds (120 at West, 80 at Pembroke and 40 at Cleveland Clinic) available to meet the projected need of 386 adult medical
surgical beds in the 2006 planning horizon. Subtracting the 240 beds from the 386 needed yields a net need of 146 beds to serve residents of the Miramar PSA. Although some patients will continue to seek services outside the PSA, Dr. Finarelli's projection that there is a sufficient net need to support the 80 adult medical surgical beds proposed at Memorial Miramar is reasonable.
Building Memorial Miramar will help reduce the percentage of people who leave the area for acute inpatient adult medical surgical services from its current level of about 50% to approximately 25%. This will improve access to health care for the residents of southwest Broward County.
Memorial West is the only provider of obstetrical services in southwest Broward County, and only one of two in all of south Broward (the other being Memorial Regional). Both Memorial West and Memorial Regional are operating above capacity in their obstetrical units. In calendar year 2000, Memorial West's 24-bed obstetric unit operated at 130% occupancy. Hollywood Medical Center recently closed its obstetric unit thereby increasing the pressure on Memorial Regional and Memorial West to provide services to area patients. With a projected gross need for 46 obstetric beds in the planning horizon, there is a net need for at least 22 more obstetric beds. The proposed 12-bed unit at Memorial Miramar will help to meet that need.
Memorial Hospital West's 6-bed pediatric unit is the only unit of its kind in southwest Broward County. The only other provider of pediatric services in all of south Broward is Memorial Regional's Joe DiMaggio Children's Hospital.
Dr. Finarelli reasonably projects that one-half of the pediatric patient beds needed in southwest Broward would continue to be filled by Joe DiMaggio's Children Hospital. This leaves a net need for at least 7 pediatric beds in southwest Broward; the proposed 8-bed unit at Memorial Miramar will fill that need.
Patient Days, Utilization and Market Share Projections
To project utilization and market shares for the proposed hospital, Dr. Finarelli used a geographic area comprised of 28 zip codes that represent the primary and secondary service areas of the proposed hospital. The areas are expected to account for 90% of the hospital's admissions.
The 28 zip codes were divided by Dr. Finarelli into four geographic clusters: the 10 zip code PSA or "Southwest Broward", 9 zip codes in "Other South Broward", 3 zip codes in "North Broward" and 6 zip codes in north Dade County or "Select North Dade."
Based on historical and current data and market trends, Dr. Finarelli assigned current and projected inpatient market shares in each zip code cluster to each hospital in south Broward County and to select hospitals in north Broward County
and north Dade County, with and without the existence of Memorial Hospital Miramar. He also assigned market shares and projected patient days separately by service category for adult medical/surgical, obstetric and pediatric services.
Dr. Finarelli's market share assumptions for the proposed hospital were as follows: for Southwest Broward County in the Adult Service Category, 6% and 18%, in OB, 7% and 20%, in Pediatrics, 7% and 20%, all for the years 2005 and 2010, respectively; for Other South Broward County, in the Adult Service Category, 0.3% and 1%, for OB, 0.3% and 1%, for pediatrics, 0% and 0%, all for the years 2005 and 2010, respectively; for North Broward in the Adult Service Category, 0.6% and 2%, for OB, 0.8% and 3% and for pediatrics, 0.8% and 3%, all for the years 2005 and 2010, respectively; and for Select North Dade, in the Adult Service Category, 0.8% and 2.5%, for OB, 1% and 3%, and for pediatrics, 0.8% and 2.5%, all for the years 2005 and 2010, respectively.
Taking into account available data and projected trends in each of the zip code clusters, these market share projections are reasonable.
Dr. Finarelli applied his market share assumptions to overall projections of hospital discharges for each zip code cluster to arrive at the projected number of discharges for the proposed hospital in its first and second year of operation. He
included an additional 9% to 10% in projected discharges to account for patients admitted from outside the 28 zip codes, such as patients from areas elsewhere in Broward, Dade, other parts of Florida and out of state. It is typical for hospitals in Broward County to receive approximately 10% of patients from outside of their primary and secondary service areas.
By multiplying the projected number of hospital discharges by a reasonable length of stay for each category of service, Dr. Finarelli arrived at his projections of patient days. His "average length of stay" assumption was less than the District average. These calculations demonstrate that Memorial Miramar will have total acute care utilization of 19,958 patient days in its first full year of operation, and 25,503 patient days in its second full year of operation.
Dr. Finarelli's projections of market shares, admissions and patient days for the new hospital appear to be reasonable.
The Statutory Criteria
Section 408.035, Florida Statutes, provides the review criteria for CON applications. The parties agree that subsections (3) and (4) are not in dispute.
Section 408.035(1) concerns whether the proposed project is supported by and consistent with the applicable district health plan (the "Plan"). The Plan contains
recommendations, preferences and priorities. The majority of the preferences and priorities contained in the Plan are not applicable to this application.
The Plan recommends that there should be a reduction of licensed beds in Broward County until a ratio of 4.0 beds per 1,000 population is less than 4.0 beds per thousand and/or an overall occupancy rate of 85% is achieved. Although the bed population ratio is less than 4.0 beds per thousand, the annual occupancy rate is below 50%. This criterion, quite obviously, is not met by SBHD. But its importance diminishes in light of the "not normal" circumstances in support of the application, particularly the overcrowding at Memorial West and Regional.
The Plan states that "priority consideration for initiation of new acute care services or capital expenditures shall be given to applicants with a documented history of providing services to medically indigent patients or a commitment to do so."
SBHD promises to provide 3.21% of gross revenue for charity care and 4.14% of its patient days for Medicaid patients at Memorial Pembroke. These figures are not unattainable. Memorial West provided 3.2% of its revenues toward charity care in the most recent year. The effect of the expiration of SBHD' lease without renewal at Memorial Pembroke may increase pressure on Memorial Miramar's charity care services.
On the other hand, in light of Memorial West's history in meeting its charity care commitment and the relative affluence of the Miramar's PSA, there is some question as to whether Memorial Miramar can meet the commitment contained in the application. West has fallen far short of its 7.0% commitment. Less than 1% of its admissions were charity care admissions between 1997 and 2000 and only 2.6% of its gross revenues were for charity care in 1999, for example.
Whatever West's experience bodes for Miramar's future, it is clear that SBHD has a documented history of providing services to the medically indigent. It is committed, moreover, to do so throughout the hospital district whether it achieves its commitment at Memorial Miramar or not. The preferences of the Plan related to the provision of care for the indigent is clearly met by SBHD.
Section 408.035(2) addresses the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the service district of the applicant. There is no problem with quality of care in the district. The extent of utilization of all the facilities in the district is not high. Nonetheless, there is an access problem that constitutes not normal circumstances. Memorial West, in particular, is overcrowded. A new hospital in Miramar will enhance access for the residents of the hospital
district who want to access one of the District's hospitals and so directly meets the criterion in Section 408.035(7), the "extent to which the proposed services will enhance access to health care for residents of the service district."
Section 408.035(5) addresses the needs of research and educational facilities including facilities with institutional training programs and community training programs for health care practitioners at the student, internship and residency training levels. The District's affiliation with medical schools provides some satisfaction with this criterion but on balance, SBHD receives little credit under this criterion.
Section 408.035(6), Florida Statutes is "[t]he availability, of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation."
The parties stipulated that SBHD has the ability to recruit and retain the staff needed for the proposed hospital.
Cleveland Clinic and Westside argue that SBHD's recruitment of staff will have a detrimental impact on existing providers.
A shortage of skilled nurses and other allied professionals exists nationally, in Florida and in Dade and Broward Counties. The nursing shortage has intensified in recent years due to the decline in the number of licensed nurses further
compounded by a drop in the number of nurses enrolled in nursing schools. As a result it has become increasingly difficult for hospitals to fill nursing vacancies.
In order to ensure adequate staffing in the midst of the nursing shortage, especially during the peak season of late fall and the winter months, Westside and Cleveland Clinic are forced to utilize "agency" or "pool" nursing personnel. These nurses command higher wages than non-agency nursing personnel.
The District's application projects a need for 128 registered nurses who will be full-time employees ("FTE"s). This need increases to 167. New hospitals are usually able to attract staff from other facilities who prefer to work with new equipment in a new setting.
Recruitment of personnel to staff the Miramar Hospital will come at the expense of existing providers such as Cleveland Clinic and Westside.
Subsection (8) of the Review Criteria is "[t]he immediate and long-term financial feasibility of the proposal."
The District has the financial resources to construct the hospital and meet start-up costs. There was no challenge to SBHD's demonstration of short-term financial feasibility.
Projections of revenues and expenses were based on SBHD experience at Memorial West and its other hospitals. These projections are reasonable.
Based on Dr. Finarelli's patient day projections, showing a net profit of $1.6 million in year 2, the project is feasible in the long-term.
Subsection (9) of the Review Criteria is "[t]he extent to which the proposal will foster competition that promotes quality and cost-effectiveness."
Aside from the impact the new facility will have on Cleveland Clinic and Westside's ability to recruit and retain staff, the evidence failed to show that either Cleveland Clinic or Westside would suffer significant impact if SBHD's application is approved.
No matter which experts projections of lost case volume are accepted, both Cleveland Clinic and Westside should generate substantial net profits.
The future of Memorial Pembroke, after the expiration of the current lease, is too speculative to factor into the impact to HCA.
Subsection (10) of the Review Criteria relates to the costs and methods of the proposed construction. The District satisfies this criterion. (See paragraph 34, above).
Subsection (11) addresses the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. As stated above, while there is legitimate doubt whether or not SBHD can meet the conditions it
proposes in its application, there is no question about its past provisions of services to Medicaid patients and the medically
indigent.
Rule Criteria
There are two rule criteria that relate to the application. Rule 59C-1.038, acute care bed priority considerations and Rule 59C-1030, additional review criteria.
Under the Rule 59C-1.038 there are two priorities, only the first of which (documented history of providing services to medically indigent patients or a commitment to do so) is applicable. Stated in the disjunctive, just as its corollary statutory criterion, SBHD clearly meets the criterion based on its documented history regardless of the case Cleveland Clinic and Westside present relative to doubts based on the history of condition compliance at Memorial West.
The criteria in Rule 59C-1.030 generally address the extent to which there is a need for a particular service and the extent to which the service will be accessible to underserved members of the population. The application did not identify an underserved segment of the population that is in need of the services proposed for Memorial Miramar. As for the remainder of the criteria under the rule, there is a need for the proposed project as concluded below in this order's conclusions of law.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings. Section 120.569, 120.57(1) and 408.039(5), Florida Statutes. By stipulation, Cleveland Clinic and Westside have standing to challenge the Agency proposed decision to approve CON Application 9459.
Relief Requested in Post-Hearing Memoranda of Law
The parties submitted post-hearing memoranda of law on February 25, 2002. The relief SBHD requests in its memorandum is denied with one exception. Consistent with an earlier ruling during hearing, under current CON law, it is concluded that the Agency is not required in this proceeding to assess the impact of granting SBHD's application on existing health care facilities that are located outside AHCA Health Planning District 10.
As to the relief requested by Cleveland Clinic and Westside, it is concluded that Mr. Kerr's testimony regarding the issue of "build out" beyond the 33028 and 33029 zip codes is stricken. Ms. Greenberg's testimony, as Cleveland Clinic and Westside point out, was focused on zip codes 33028 and 33029. Whatever testimony Mr. Hopes offered on the subject of build out was stricken following the sustained objection that "where future building is going to occur" was outside Mr. Hopes' expertise. (Tr. 2091.)
Burden and Balancing
An applicant for a certificate of need has the burden of demonstrating that its application should be granted. Boca Raton Artificial Kidney Center v. Department of Health and Rehabilitative Services, 475 So. 2d 260 (Fla. 1st DCA 1985). The award of a CON must be based on a balanced consideration of statutory and rule criteria. Department of Health and Rehabilitative Services v. Johnson and Johnson Home Health Care, Inc., 447 So. 2d 261 (Fla. 1st DCA 1984); Balsam v. Department of Health and Rehabilitative Services, 486 So. 2d 1341 (Fla. 1st DCA 1988). The weight to be given each criterion is not fixed but depends on the facts and circumstances of each case. Collier Medical Center Inc., 462 So. 2d 83 (Fla. 1st DCA 1985).
Determinations as to Not Normal Circumstances
A determination by the agency with authority over CON applications that "factors . . . do not reach the level of exceptional circumstances so as to justify a deviation from the rule methodology[] is a conclusion of law . . . ." Humana v.
Department of Health and Rehabilitative Services, 492 So. 2d 388, at 392 (Fla. 4th DCA ;1986) quoting with approval from Federal Property Management v. Department of Health and Rehabilitative Services, 482 So. 2d 474 (Fla. 1st DCA 1986). In other words, a determination of whether a CON application is supported by "not normal" circumstances or not, ultimately, is a conclusion of law.
A conclusion that "not normal" circumstances exist that justify approval of a CON application in the presence of a zero fixed need determination must be based on competent, substantial evidence but there is no limitation in rule or statute as to what types of circumstances constitute "not normal" circumstances.
Not Normal Circumstances
The District demonstrated that "not normal" circumstances support its application. The most significant of these circumstances is the overcrowding at Memorial West when there is such an excess of beds in the district. A finding of the existence of "not normal" circumstances is also supported by other circumstances. They are: the population growth likely to be occur in southwest Broward County in the near future; the division of the health planning district into two hospital districts that are distinct medical markets; the demand on Memorial Regional's acute care services; the status of SBHD as the only provider of obstetric services with the extremely high demand on the obstetrical units at West and Regional; the stigma attached to Memorial Pembroke, its significant number of beds that are not functional and its uncertain future; Cleveland Clinic's distinctive character in the health planning district with its closed medical specialty staff and its draw of patients outside of the health planning district so that its beds cannot be viewed as typical community hospital beds; and the assurance
granting the application will provide that SBHD will be able to continue to fulfill its mission of indigent care.
The weakest point in SBHD's case for "not normal" circumstances relates to expansion at Memorial West through the building of a North Tower with an addition of 50 beds. In considering the testimony of SBHD's architect, Edward L. Hentgen and the testimony of Westside's architect, William Craig Holloway, it is determined that the issue tips in favor of SBHD, but barely. If the standard were "clear and convincing" evidence, for example, SBHD's position on expansion at West would fail. Applying a "preponderance of the evidence" standard to the evidence on the issue presented on both sides, it is determined that expansion at Memorial West is not a reasonable alternative to approval of the proposed hospital.
Together all of these circumstances constitute "not normal" circumstances in support of SBHD's application.
The Selection of the PSA
The PSA that Ms. Greenberg would choose for Memorial Miramar is a reasonable one. Contrary to Dr. Finarelli's choice, however, it includes zip codes outside both the hospital district and the health planning district. The criticism that patients will not drive east past Memorial West was not borne out by the evidence. Dr. Finarelli's choice is not defeated by the
criticism of other health planning experts who testified in the case. The PSA employed by Dr. Finarelli is a reasonable one.
Balancing the Review Criteria
There are two findings related to CON review criteria that are the most weighty among the findings that are in favor of approval or support denial. Both of these findings are in favor of approval of the project.
First, the proposed project will enhance access of residents of southwest Broward County to acute care services, including emergency and obstetric care services. Enhancement of access is needed because of the "not normal" circumstances proven by SBHD.
Second, the project will provide a more favorable payor mix for SBHD that, in turn, will enable it to continue to fulfill its historic commitment to provision of care to the indigent within the South Broward Hospital District. As AHCA recognizes, this finding weighs heavily in favor of approving the project proposed by the application.
There are facts related to CON review criteria that weigh in favor of a denial of the application, the impact of approval on the ability of Westside and Cleveland Clinic to recruit and retain nurses during a nursing shortage, for example. Balancing the findings related to CON review criteria detailed in this order, however, produces the recommendation that AHCA
approve the project proposed by CON application 9459: a 100-bed acute care hospital located in southwest Broward County.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration grant South Broward Hospital District's CON Application 9459 to establish a 100-bed acute care hospital in southwest Broward County.
DONE AND ENTERED this 3rd day of July, 2002, 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 3rd day of July, 2002.
COPIES FURNISHED:
C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen
227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302
Stephen A. Ecenia, Esquire
Rutledge, Ecenia, Purnell & Hoffman, P.A.
215 South Monroe Street, Suite 420 Post Office Box 551
Tallahassee, Florida 32302-0551
Robert A. Weiss, Esquire
Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200
118 North Gadsden Street Tallahassee, Florida 32301
F. Philip Blank, Esquire Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A.
204 South Monroe Street Post Office Box 11068
Tallahassee, Florida 32302-3068
George N. Meros, Jr., Esquire Michael E. Riley, Esquire Gray, Harris & Robinson, P.A. Post Office Box 11189 Tallahassee, Florida 32302
Gerald L. Pickett, Esquire
Agency for Health Care Administration 2727 Mahan Drive
Building Three, Suite 3431 Tallahassee, Florida 32308-5403
William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive
Building Three, Suite 3431 Tallahassee, Florida 32308-5403
Virginia A. Daire, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive
Building Three, Suite 3431 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 should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Document | Summary |
|---|---|---|
| Sep. 24, 2004 | Opinion | |
| Sep. 24, 2004 | Mandate | |
| Sep. 30, 2002 | Agency Final Order | |
| Jul. 03, 2002 | Recommended Order | South Broward Hospital District demonstrated "not normal" circumstances and need for establishment of 100-bed acute care hospital in Miramar area of Southwest Broward County. |
